AIR EXCURSIONS, LLC
ESSENTIAL AIR SERVICE BID
JUNEAU-KAKE
JUNEAU-EXCURSION INLET

DOCKET OST-2008-0217 May8, 2012

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Air Excursions, LLC hereby submits its bid to provide Essential Air Service between Kake, AK and its hub ofJuneau, AK, and additionally between Excursion Inlet and its hub of Juneau, AK. Air Excursions holds a certificate ofpublic convenience and necessityto provide scheduled transportation of passengers, property and mail, and has operated scheduled service to five points around Juneau since March, 2010.

At Kake Air Excursions proposes to provide 14 round trips per week duringthe 21 week peak summer period, and 7 round trips per week duringthe 31 week off-peak period. This is the same schedule as proposed by Wings in 2008, and operated forthe last two years by Air Excursions. The aircraftto be used is a nine passenger all-weather aircraft. When loads orweather do not require, Air Excursions will use afive passenger aircraft at a lower subsidy need perflight.

Underthe service pattern provided by Air Excursions, total traffic in the market has increased to its highest levels since compensated Essential Service began. Air Excursions recognized that afull service offering includingschool charters and other non-scheduled service would stimulate market growth. It now offers over 30% more flights than Wings ofAlaska did in calendaryear 2009.4500 4000 3500 3000 2500 2000 1500 1000 500 0 

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...,_Departures ---Passengers

Air Excursions is locallyowned and managed, and 100% ofits service is in theJuneau
area. Air Excursions has been in business forover 22 years, and has been locally owned for its entire existence. It hires local pilots, and maintains offices and maintenance facilities in both Juneau and Gustavus. Air Excursions will provide stable and consistent air service, and the Kake and Excursion Inlet operation will be a much more significant part ofits business than for any certificated competitor.

The key reason to choose Air Excursions is that its subsidy need is lower based on the loweroperating costs ofthe Navajo and alternativelythe Piper Cherokee 6. Even though the Navajo is faster than the Caravan on the 

### route, it has a much lowercapital cost and has lowertotal operatingcosts per hour. The faster flight speeds reduce costs pertrip even more. In keeping with the current practice ofWings, Air Excursions proposes to substitute asmaller, single engine aircraft when the loads and operating conditions do not require the use ofthe Navajo. Experience overthe route has resulted in reduced flight times compared tothe 2010 bid. Air Excursions expects to save 5 minutes per roundtrip, orslightly over 5% ofthetotal blocktime estimated in 2010.

The purpose ofthe peak and off-peak service requirement is to recognize the need to encourage traffic and economic development in the area through high qualityair service. The Air Excursions proposal provides faster, multi-engine and icing approvedaircraftwith plenty ofcapacity. Local ownership and control assures responsive management, and there is astrongfuture commitment ofa locally owned carrier.

Appendix A details the bid which assumes Kake commercial revenue of$413,543 in the first year and total operating expenses and return of$577,164 in thefirst year (YE June, 2013). In its previous bid, Air Excursions used the proposed charter rate forthe Navajo Chieftain plus an estimated indirect expense of68% ofthe charter rate. This yielded a total $726,892 forthe year ended June, 2012 (second year ofbid). Using experienced unit costs forthe Navajo and computed indirect and G&A expenses, Air Excursions estimates the YE June, 2013 expense total is $577,164, and overall reduction of $149,728 compared tothe YE June, 2012 estimated expenses.

Air Excursions' efficiency would carry overtothe Excursion Inlet route. Duringthe summer, flights to Excursion Inlet land in the heart ofthe village. Duringthe winter, when that runway is unavailable, service has been provided by afloat plane which docks atthe loading pier. Wings does not have any float aircraft in its fleet and has had to charter aircraft forthe service. Air Excursions proposes to service the community with a Cherokee 6 duringthe longer 21 week summer period and with a Cessna 206 on floats (as necessary) duringthe winter. Air Excursions has the float aircraft in its fleet nowand will be in complete operational control ofthe service year around.

The subsidy need of$163,621 for YE June 2013 at Kake is 29% less than the current contract forYE June, 2012, and could be reduced furtherthrough substitution ofaircraft
as appropriate. The Excursion Inlet bid is 20% lowerthan the current contract despite assuming a longer peak period (21 weeks). Air Excursions believes that it has shown that it is uniquely capable ofprovidinga high level ofservice and customer satisfaction with a lowersubsidy need, and has proposed afouryear contract forservice to Kake and Excursion Inlet as well as thetwo year period requested bythe Department.

Respectfully submitted,
Mike Loverink, owner
Air Excursions, LLCKAKE

Traffic Type Passengers Freight Mail TOTAL PROJECTED OPERATING REVENUE Appendix A Page 1 of3

2011 EAS Yield 2011 Rev. YE 6/13 YE 6/14 YE 6/15 YE 6/16 2,044 $130.00 $265,720 $279,006 $292,956 $307,604 $322,984 76,694 $0.6000 $ 47,216 $ 49,577 $ 52,056 $ 54,659 $ 57,392 84,596 $0.9565 $ 80,914 $ 84,960 $ 89,208 $ 93,668 $ 98,351 $393,850 $413,543 $434,220 $455,931$478,727

EXCURSION INLET

Traffic Type 2011 EAS Yield 2011 Rev. YE 6/13 YE 6/14 YE 6/15 YE 6/16 Passengers 30 $ 55.20 $ 1,656 $ 1,739 $ 1,826 $ 1,917 $ 2,013 Freight 2,763 $0.5000 $ 1,381 $ 1,451 $ 1,523 $ 1,599 $ 1,679 Mail 9,114 $0.6892 $ 6,282 $ 6,596 $ 6,925 $ 7,272 $ 7,635 TOTAL**~** 9,319**~** 9J86**~** 10,274**~** 10J88**~** 11,328

ASSUMPTIONS:



### 1. All traffic based on EAS flights operated, excluding charters 2. Yields based on market experience 3. 2011 estimated revenue increased by 5% peryear forYE 6/13-YE6/16Appendix A Page 2 of3

COMPUTATION OF SUBSIDY NEED KAKE SERVICE OPERATIONS JNU-KAE Average Block Time 1 way Total Annual Block Time

EXPENSE AND SUBSIDY NEED ITEM Direct Expense PA-31 @$324.60 Indirect Expense G&A@ 10.29% TOTAL EXPENSE Profit Margin {5%) TOTAL INCLUDING R.O.I. COMMERCIAL REVENUE SUBSIDY NEED, TOTAL SCHEDULED DEPARTURES SUBSIDY PER PA-31 DEPARTURE SUBSIDY PER PA-32 DEPARTURE CEILING PER WEEK- PEAK CEILING PER WEEK- OFF-PEAK 45.5 minutes 775.02 hours

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YE 6/13 YE 6/14 YE 6/15 YE 6/16 $264,149 $279,998 $296,797 $314,606 $234,246 $248,301 $263,199 $278,991 $ 51,285 $ 54,362 $ 57,624 $ 61,081 $549,680 $582,661 $617,620 $654,678 $ 27,484 $ 29,133 $ 30,881 $ 32,734**~5771164 ~6111794** **~6481501 ~687A12** **~4131543 ~4341220** **~4551931 ~4781727**  $163,621 $177,574 $192,570 $208,685 1,022 1,022 1,022 1,022 $ 160.10 $173.75 $ 188.42 $ 204.19 $ 143.57 $ 156.23 $ 169.85 $ 184.51 $4,482.80 $4,865.00$5,275.76 $5,717.32 $2,241.40 $2,432.50$2,637.88 $2,858.66



## !/ 100% completion atwith PA-31 Navajo aircraft