Swanson, Brian tos-n, T.^T^o^r^Zeoe-i^f-'S 

From: ' • l-^jFilAlKswanson. Brian (OST) 

Sent: . M 0!'bl^^i?j-&y , May 20, 2011 3:25 PM 

To: 'glenn.okimoto@hawaii.gov'; 'loretta.fuddy@doh.hawaii.gov'; 'Steve_Prokop@nps.gov' 

Cc: , •., 5 n z:} ^.B.-Stewart';'richard@makanikai.com';'Pacific Wings, Greg Kahlstorf";'Sovereign Air, Bob 

' ' ' ^^^ Karns;'AIan_Yamamoto@inouye.senate.gov';'Margaret_cummisky@appro.senate.gov' 

Subject: Soliciting Comments on HAS proposals at Kaiaupapa, Hawaii - Due June 15, 2011 

M l ; 

I would like to update you on the Essential Air Service (EAS) carrier-selection case for Kalaiipapa and give you an 

opportunity to submit comments, if you wish. 

As you are aware, on December 6, 2010, Pacific Wings, LLC (Pacific Wings), the incumbent EAS carrier, filed a 90-day 

noticcof its intention to suspend its subsidy-free service at Kalaupapa, effective March 6, 2011. Consequently, the U.S. 

Department of Transportation (DOT), by Order 2010-12-30 issued December 23, 2010, prohibited Pacific Wings from 

suspending service and solicited proposals from carriers to provide reliable EAS, with subsidy support if necessary, at 

Kalaupapa. Carriers were directed to file their proposals no later than January 27, 2011. Shortly before proposals from 

interested carriers were due. Pacific Wings, on January 25, 2011, withdrew its notice of intent to end its subsidy-free EAS 

at Kalaupapa. On January 27, 2011, Schuman Aviation Company Ltd. d/b/a Makani Kai Air Charters (Makani Kai) and 

SeaPort Airlines, tnc. submitted proposals to provide subsidized EAS at the community. 

In cases where a carrier proposes to provide EAS without subsidy and we determine that service can be provided reliably 

without subsidy, we typically do not proceed with a carrier-selection case. However, after careful consideration of" 

community concerns, and a review of enplanement levels and flight completion percentages by Pacific Wings at 

Kalaupapa, we determined thai it was in the public interest to proceed with the carrier-selection case. By Order 2011-4-7, 

we solicited a second round of proposals for EAS at the community. In response to that Order, we leceived proposals 

from four carriers: Pacific Wings; Above It All Inc. d/b/a Molokai Air and lolani Air (Above It All); Makani Kai; and 

Sovereign Air, Inc. (Sovereign). The next step in this process is to provide interested persons and the affected community 

with an opportunity to comment on the various carrier proposals. For your convenience, we have summarized each 

earner's proposal below. 

Before summarizing each carrier's propo.sal, we would like to point out several important statutory requirements imposed 

on the EAS program. When Congress established the EAS program in 1978, it established certain minimum standards. 

"Basic essential air service provided under [49 U.S.C] section 41733 of this title is scheduled air transportation of 

passengers and cargo..." 49 U.S.C. § 41732 (emphasis added). In order to provide scheduled air transportation under the 

EAS program, carriers must hold (1) the necessary operating authority from the Department of Transportation to conduct 

scheduled ?i\x transportation and (2) the necessary safety authority from DOT's Federal Aviation Administi-ation (FAA) 

consistent with the carrier's operating authority. Scheduled operations means "any common carriage passenger-carrying 

operation for compensation or hire conducted by an air carrier...for which the certificate holder or its representative offers 

in advance the departure location, departure time, and arrival location. It does not include any passenger-carrying 

operation that is conducted as a public charter operator under [14 CFR] [P]art 380..." I4CFR 139.5. 

\n selecting a carrier to provide subsidized essential air service, the Department is required to consider four factors: (I) 

service reliability; (2) contractual and marketing arrangements with a larger carrier at the hub; (3) interline arrangements 

with a lai*ger carrier at the hub; and (4) community views. 49 U.S.C. § 41733(c) (1). In addition, the Consolidated 

Appropriations Act, 2008, Public Law 110-161, provides that when selecting a carrier to provide EAS, the Department 

may consider the relative subsidy requirements, thus codifying a factor that we have considered since the inception of the 

program. The absence of an applicant's requisite operating authorities does not disqualify that carrier from consideration 

or ultimate selection, contingent upon its receiving all the necessary DOT and FAA approvals prior to starting service. 

The Proposals: 
Pacific Wings would continue to serve Kalaupapa on a subsidy-free basis with 9-seat Cessna Grand Caravans 

and provide at least two round trips a day, six days a week. The carrier curtently provides two daily nonstop 

round trips (14 a week) to Honolulu and one daily nonstop round trip (7 a week) to Molokai (topside). 

Above It All submitted a proposal to provide two nonstop round trips a day, six days a week, between Kalaupapa 

and Honolulu and two nonstop round trips a day between Kalaupapa and Molokai (or "topside"), for an annual 

subsidy rate of $686,400. Above It All would provide service utilizing 9-seat Piper Chieftains and provide backup service utilizing 8-seat Gippsland Airvans. The carrier does not currently have the requisite operating 

authorities from either the DOT or the FAA to provide scheduled air service, although it states that it is in the 

process of submitting applications. 

Makani Kai proposes to provide two daily nonstop round trips between Kalaupapa and Honolulu and three daily 

nonstop round trips between Kalaupapa and Molokai (or "topside"), utilizing 9-seat Cessna Grand Caravans, for 

a first-year subsidy rate of $932,71 J, and a second-year for $932,509. The DOT has found the carrier fit to 

provide scheduled passenger service operating as a commuter air carrier. However, the catrier has not yet 

provided the necessary information to make its commuter authority effective, including a copy of the Air Carrier 

Certificate and Operations Specifications from the FAA (See Order 2010-8-1, issued August 6, 2010). 

Sovereign's proposal comprises two options, both with a Kalaupapa-Mblokai-Honolulu routing and utilizing 7-

seat Cessna 414 aircraft. The first option consists of 22 round trips a week for an annual subsidy of $618,831. 

The second option consists of two round trips a day Monday-Saturday () 2 round trips a week with no Sunday 

service) for an annual subsidy of $452,886. The cartier notes that 2 round trips on Sundays can be added to 

Option #2 for an additional $124,566 in annual subsidy <or for $577,452 in total annual subsidy). By 

Order 2011-2-3, February 3, 2011, the Department dismissed the application of Sovereign for Commuter Air 

Carrier Authorization and therefore the earner does not currently have the requisite operating authorities to 

provide scheduled air service from either DOT or FAA. 

The propo.sals and entire public docket regarding EAS at the community may be acces.sed online through the Federal 

Docket Management System at http://www.rcgulations.gov, through a search on Docket Number DOT-OST-2000-6773. 

Please note that the average passenger fares shown in the proposals do not necessarily reflect the fare that passengers 

would actually pay, but, rather, are estimates for subsidy-calculation purposes. Most passenger travel beyond the hub 

destination on another airline and the passengers full through fare is prorated between the EAS carrier and the larger 

carrier for service beyond the hub. Also, the fare shown is net of certain charges such as Federal transportation security 

fees, excise or ticket taxes, and Passenger Facility Charges. Based on the cost elements incorporated in the carriers' 

computation summary, the carrier would have to realize passenger fares comparable to the averages shown in iheir 

proposals in order to achieve break-even or profitable operations without subsidy. 

You should also note that the earners' schedules may change to reflect changing conditions (t'.^., to better meet shifting 

connecting bank times at the hub). The Department does expect subsidized carriers to maintain well-timed and wellspaced flights in order to ensure full compensation. 

We request that you submit any comments you may have as soon as po.ssible, but in any ca.se no later than June 15, 2011. 

Please send your comments by fax to 202-366-7638 or by email to both (:lcnnis.dcvany(£!\iot.gov and 

hhan.swanson@dot.gov. Our rules require that you send your comments to the concerned carriers as well. If you have 

any questions, or need more lime to reply, please feel free to contact Brian Swan.son of my staff at 202-366-5392. 

Sincerely, 

Dennis J. DeVany 

Chief, Essential Air Service Division. X-53 

Office of Aviation Analysis