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## Before the United States Department of TransportatioD

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## May 8, 2012 · · '"

Proposal to Provide Essential Air Service at EXCURSION INLET, ALASKA KAKE,ALASKA Under 49 U.S. C. 41731 et seq. Docket DOT-OST-2002-12014 Docket DOT-OST-2008-0217



# Proposal to Provide Essential Air Service at Kake and Excursion Inlet, Alaska

By Order 2012-4-13, the Department requested proposals for essential air service (EAS) at a Kake and Excursion Inlet, Alaska. Pursuant to that Order, SeaPort Airlines, Inc. dba Wings of Alaska respectfully submits this timely proposal to provide subsidized essential air service to the communities of Kake and Excursion Inlet, Alaska. For both communities we are proposing service to Juneau, Alaska and each proposal is presented on a stand-alone basis. Correspondence regarding this proposal should be directed to: Timothy Sieber Vice President

- Strategy & Corporate Development SeaPort Airlines, Inc. 7505 NE Airport Way Portland, OR 97218 (971) 340-1716 tsieber@seaportair.comMay 8 , 2012


### Wings of Alaska Background
SeaPort Airlines , Inc

. is a FAA certified scheduled airline founded 30 years ago and doing business in Southeast Alaska as Wings of Alaska

. As of May 1, 2012 , the approximately 165 professionals operate an average of 100 daily departures to 20 cities in eight states. Wings of Alaska provides scheduled passenger service, freight, and charter service provided between Juneau and Skagway, Haines, Hoonah, Gustavus, and weekly flights to Excursion Inlet. The Wings of Alaska fleet is presently of comprised of three Cessna Caravans and three Cessna C207s

. The scale of SeaPort Airline, including operations conducted as Wings of Alaska , allows us to submit this proposal with economies of scale , operational and managerial experience , and a level of customer service that cannot be matched by any of our competitors in Southeast Alaska. 

### Planned Aircraft & Operational Reliability
Excursion Inlet Our proposal for Excursion Inlet assumes operation with the Cessna 207, the same aircraft type that we have reliably and safely served the market for numerous years
. As we have done in the past, when the landing surface at Excursion Inlet is unusable and Wings of Alaska cannot provide service in a safe manner, we will work with another carrier (such as Alaska Seaplane Service or Ward Air) to provide service utilizing amphibious aircraft. The table below, however, illustrates that such occurrences are infrequent. During the 12- months ending May 1 , 2012, a total of 85 flights were scheduled. During this period , Wings of Alaska maintained a completion factor of 87

. 1% at Excursion Inlet during the current contract period

. 

### Wings ofAlaska Operational Reliability Summary

- YE May 1, 2012 Flights Schedu led Operated on Postponed/Moved Outsourced Flyrng Schedu led Date to Another Day 85 74 6 5 100.0% 87.1% 7.1% 5

.9%

On only six days were flights moved to other than the scheduled day of operation and on only five occasions (less than 6%) during the past year was it necessary to out-source flying to an operator of amphibious aircraft

.

DOT OST-2002-12014 DOT-OST-2008-0217 Page 

### 12May 8 , 2012

At Kake, Wings of Alaska proposes service with Cessna Caravan aircraft

. Manufactured in the USA , the Caravan was originally designed in the 1980's to rep lace an aging fleet of pistonpowered aircraft , such as the Piper Chieftain

. This modern , turbine powered aircraft offers seating for 9-passengers and high level of dispatch reliability. Equally as important , compared to other 9
-passenger aircraft, the Cessna Caravan has unmatched capacity for freight and mail. Specifically, the Caravan 's cargo pod has capacity of 111 cubic feet and 1 ,090 pounds whereas the Piper Ch ieftain has capacity of 65 cubic feet and 700 pounds in its nose compartment and two wing lockers

. As was done when W ings of Alaska previously served Kake , when weather and loads allow, Cessna 207 aircraft will be substituted on the route , reducing the required subsidy by approximately 45% per departure. The annual subsidy ceiling in th is proposal is based on operations with the Cessna Caravan. Unparalleled Safety and Reliability Kake 's location approximately 100 miles south of Juneau requires a normal route of flight along Stephens Passage or Seymour Canal , including a 10 mile crossing over the waters of Frederick Sound

. The weather along the route is frequently marginal VFR , including some areas where radio commun ications are poor or not available. Whi le this route is operationally challenging , Wings of Alaska is well positioned to provide safer and more reliable air transportation than other operators we expect will submit proposals to serve Kake:

• SeaPort Airlines FAA Operation Specifications authorizes operations under Instrument Flight Rules (IFR) and we will, when weather conditions require , use this authority to ensure high levels of operational reliab ility at Kake

.
• Wings of Alaska is a participant in the FAA's Capstone Project Phase Two in Southeast Alaska , a safety program that concentrates on increasing safety through technology with systems such as GPS receivers , data link transceivers , ADS-B , Multi-Function Displays , Flight Information Services, moving maps, and terrain databases

.
• Wings of Alaska is an active participate in the Alaska Air Carrier Association's Medallion Foundation , a non- profit organization promoting aviation safety through systems enhancements by providing management resources, train i ng, and support to the aviation community. Finally, we note that in its 2010 proposal, the incumbent carrier serving Kake tried to say that their piston twin-engine aircraft was somehow "superior" to the modern, turbine-powered Cessna Caravan

. A review of that carrier's T

- 100 filings between September 2010 and December 2011 indicate that the piston-twin was operated only 13

.5% of the time. The rema ining 86

.5% of flights between Juneau and Kake were operated with single-engine aircraft , a statistic that negates any argument of twin-engine superiority the incumbent operator may attempt during this EAS cycle.

DOT OST

-2002-12014 DOT-OST-2008-0217 Page 

### 13May 8, 2012


### Schedules & 

### Fares Frequencies & Seasonality In Order 2012-4-13, the Department requested frequency levels at Kake of 14 weekly roundtrips during the peak period and seven weekly roundtrips during the off-peak period

. At Excursion Inlet, the Department requested three weekly roundtrips during the peak period and one weekly roundtrip during off

-peak period

. Wings of Alaska's proposals herein are compliant with this request. For purposes of peak and off-peak seasonal adjustments , in both markets the months of May through September are deemed to be the peak period. The months of October through April are deemed to be off-peak

.

Wings of Alaska presently offers a simple fare structure that will extend to the Kake market and, if reselected , be continued at Excursion Inlet. The proposed fares for each market are illustrated on the table below:

Base Fare Fed Exc ise Tax 

### TOTAL One-Way Kake

- Juneau $116

.28

$8

.72 $125.00 Excursion Inlet

- Juneau Base Fare Fed Excise Tax 

### TOTAL $69.77 $5.23 $75.00 Round Trip $232

.56 $17.44 $250.00 $139.53 $10.46 $149.99 In addition to regular fares, Wings of Alaska periodically offers unique promotions that are intended to increase awareness of local air service , stimulate demand during off-peak periods, and help maintain positive opinions of the Wings of Alaska brand (see discussion below). If selected to provide Essential Air Service, these promotions would be extended to Kake and continued at Excursion Inlet. Illustrative Schedule Pattern Illustrated on the next page is a sample peak-period schedule for both Kake and Excursion Inlet, that shows how flights to/from each community would connect with those of the only major airline serving Juneau , Alaska Airlines

. In the case of Kake , the schedules allow for a same-day roundtrip travel to Juneau. It is important to emphasize that these schedules are preliminary and intended to illustrate how Wings of Alaska would serve each market. Final schedules will be developed when the Department awards the markets and only after consultation with each community

.

DOT OST-2002-12014 DOT-OST-2008-0217 Page 

### 14May 8, 2012



## Illustrative Schedule Overlay

0600 0924 SEA AS 176 AS 73 SIT 0605 0643 0715 0816 KTN AS 60 0725 0907 ANC AS 73 AS 68 SEA 0610 0739 0800 SEA AS 72

AS 61 SEA 0755 0923 AS 62 ANC 0800 0940 1010 1058 YAK AS 61 1020 1102 SIT AS 62

AS 75 SEA 1105 1235

AS 71 SEA 1400 1529 1613 1647 GST AS 71

1835 2015 ANC AS 77 AS 67 SIT 1827 1908 AS 66 YAK 1830 1915 2131 ANC AS67 2000 2319 SEA AS 66 AS 74 ANC 1855 2034 AS 69 KTN 2022 2117 AS 70 ANC 1955 2134 AS 79 SEA 2015 2145 2220 2258 SIT AS 70

A laska Airline schedule data sourced from nnovata , LLC for July 2012

. Alaska adjusts schedules at JNU seasonally

. 

## Superior Service for KAE and EXI Residents Global Distribution in All Major Reservation**S~stems** SeaPort Airlines (including all flights marketed as Wings of Alaska) is connected to all five major global distribution systems allowing ticket sales from anywhere via travel agents and on major online travel service such as Orbitz, Travelocity, Expedia, Kayak , Hipmunk, and CheapoAir.

DOT OST-2002-12014 DOT-OST-2008-0217 Page 

### 15May 8 , 2012

In addition to online travel agencies , customers have the option of making reservations online via the Wings of Alaska website , on the telephone , or at any airport ticket counter

. 1 As a result of recent migration to a new reservat ion platform , in the com ing months we will add the convenience of customers be ing able to check-in and/or change reservations online

. Complimentary Ground Shuttle at Kake Wings of Alaska is aware of the popularity of complimentary shuttle service between passenger home's and the Kake Airport as provided by the incumbent carrier

. If selected to provide EAS at Kake , Wings of Alaska will continue this service

. A Track Record of Building Community Partnerships Wings of Alaska prides itself on developing partnersh ips in each community that it serves
. This includes participation in local events , in-kind sponsorships and donations , partnering with local schools, community food drives, and advance notification and opportunity for input prior to schedule and fare changes

. These community partnerships serve both our own interests and those of the community by fostering a long-term, stable relationship that results in increased ridership and , in the case of EAS markets , can contribute to lower subsidy requirements over time

. Specifically at Kake, after selection we would immediately offer a 10% discount on charters by the high schoo l team travel ing to "away" games. This would be followed by inclusion in all programs that we conduct across our Southeast Alaska operations , as well as programs and events that are specific to community needs at Kake

. Marketing & Customer Engagement Strategy We have found that large mass-media advertising in small communities such as those served by Wings of Alaska is not particularly effective

. While we do a limited amount of radio and print advertising , Wings of Alaska generally employs a mix of promotional events and customer engagement using social media. Illustrated on the next page are some recent promotional activities undertaken by W ings of Alaska and which would be extended to include Kake if selected to provide EAS In that community

.

1 Exception being Excursion Inlet , where there is no terminal and ground handling is conducted by pilots

.
DOT OST-2002-12014 DOT-OST-2008-0217 Page 

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# -- Wings of Alaska also maintains a strong presence on social media that facilitates a dynamic, two-way conversation with our customers through networking sites such as Facebook and Twitter. We have found social media to be an excellent tool for generating passenger referrals, sharing in our communities, and hearing how customers feel about their Wings of Alaska experience. If selected, we expect similar results in Kake. 

### Community Specific Proposals Proposals for Kake and Excursion Inlet are provided on the following pages
. Each proposal is provided on a stand-alone basis. The proposals are based on a two year term

. Notwithstanding the risk of higher costs, particularly those related to fuel, that could outpace traffic growth and reasonable fare increases, Wings of Alaska is offering the Department and both communities the option to contract the proposed annual subsidy for a four year period at no increase in annual subsidy beyond that level specified in this proposal. We believe this offer provides each community with the assurance of stable air service for an extended period and reduces the administrative burden on both the Department and ourselves

.

DOT OST-2002-12014 DOT-OST-2008-0217 Page 

### 17May 8, 2012


### SeaPort Airlines, Inc. dba Wings of Alaska Subsidy Requirement Calculation for Kake, Alaska Operating Projections KAE-JNU Sector Length (sm) Scheduled Departures Scheduled Block Hours Projected Completion Factor Projected Completed Departures Projected Completed Block Hours Passenger Projections Projected Passengers Passengers per Departure Projected A.e rage Fare Re.enue Passenger Miles (RPMs) Ava ilable Seat Miles (ASMs) Projected Load Factor Fina ncia I Projections Re.enues Passenger licket Re.enues Mail Re.enue (@$50 lb

.) Cargo Re.enue (@ $8

.0896/RlM + Fixed Rate) Total Re.enue Expenses Flight Operations Aircraft Lease Fuel & Oil Traffic Servicing & Marketing Insurance Maintenance Sub

-Total- Direct Indirect Total Expenses Projected Operat ing Profit/(Loss) Subsidy Calculations Operating Loss Economic Retum @ 5% !Required Subsidy Subsidy per Departure

- C208 Peak Period Weekly Ceiling Off Peak Period Weekly Ce iling Subsidy per Departure

- C207

DOT OST-2002-12014 DOT-OST-2008-0217 100 1 ,036 863.3 95

.0% 984 820.2

2 ,708 2

.8 $116

.28 270 ,810 885 ,780

30

.6%

$314 ,898

$55,546 $38,295 $408,739

$45 , 109 $102 ,859 $263,520

$38,393 $13,943 $209 , 143 $672,966

$63,457 $736,424 ($327 ,685)

$327 ,685

$36 ,821 $364,5061 $370 $9,852 $4,926

$206
Page 

### 18May 8, 2012



### SeaPort Airlines, Inc. dba Wings of Alaska Subsidy Requirement Calculation for Excursion Inlet, Alaska Operating Projections EXI-JNU Sector Length (sm) Scheduled Departures Scheduled Block Hours Projected Completion Factor Projected Completed Departures Projected Completed Block Hours Passenger Projections Projected Passengers Passengers per Departure Projected A-.erage Fare Re-.enue Passenger Miles (RPMs) AVc:lilable Seat Miles (ASMs) Projected Load Factor Financial Projections Re-.enues Passenger Ticket Re-.enues Cargo Re-.enue (@$50 lb.) Mail Re-.enue (@ $8.0896/RTM + Fixed Rate) Total Re-.enue Expenses Flight Operations Aircraft Lease Fuel & Oil Traffic Senncing & Marketing Insurance Maintenance Sub-Total

- Direct Indirect Total Expenses Projected Operating Profiti(Loss) Subsidy Calculations Operating Loss Economic Retum @ 5% !Required Subsidy Subsidy per Departure

- C207 Peak Period Weekly Ceiling Off Peak Period Weekly Ceiling

DOT OST-2002-12014 DOT-OST-2008-0217 32 186 77.5 95.0% 177 73.6

66 0.4 $69.77

2,112 28,272

7.5%

$4,605

$408 $1,006 $6,019
$4,049 $1,033 $9,939 $4.471 $1.473 $8,099 $29,063

$8,600 $37,663 ($31,644)

$31,644

$1,883 $33,5271 $190 $379 $1,138

Page 

### 19