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### BEFORE THE DEPARTMENT OF TRANSPORTATION

WASIllNGTON, D.C.

Essential Air Servi ce at 

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### ) OST-200S-204S4 ) ) 

### Victoria, Texas Under 49 U

.S.C. §41731 et seq.

SUN AIR INTERNATIONAL PROPOSAL TO PROVIDE SUBSIDIZED ESSENTIAL AIR SERICE

By Order 2014-3-6, the Department requested proposals from carriers interested in providing Essential Air Service to the community of Victoria, Texas. Pursuant to that order, Sun Air Express, LLC. ("Sun Air") cordially submits this proposal to continue to provide subsidized air service to that community.
Correspondence with regard to this document should be addressed to: David Hackett Chief Executive Officer Sun Air Express, LLC. d/ b/a Sun Air International 3201 Griffm Road, Suite 202 Ft. Lauderdale, FL 33312 Telephone: 954-660-9865 Fax: 954-894-0367 E-Mail: dhackett@gosunair.com


## Bid Summary Sun Air hereby offers a proposal to provide service to the community of Victoria, Texas from Houston Intercontinental International Airport for a two year period beginning October 1,2014

. Sun Air proposes to operate four daily round peak round trips, with reduced f requencies on weekends, a level of service that it believes adequately meets the capacity requirements for the community in light of historical and expected demand levels. Flights will be operated with Sun Air's 8 passenger Piper PA-31-350 Chieftain twin-engine aircraft

. Passenger seating is limitedto eight seats to allow for the company's policy of including First Officers on scheduled flights

. Sun Air's current management team took over responsibility for the company's operations in November, 2013 and since that time has made substantial improvements in performance, with thepercentage of controllable flights completed exceeding 98.5%. For the month-to-date period in

April, total completion factor (including weather) is over 99%

. Sun Air's operating plans are based upon having full-time back-up aircraft and an ample availability of reserve flight crews, which has been in place since early 2014. Sun Air is in the process of completing pre-operating and conformity inspections on an additional aircraft which will be available to further support the existing two planes. As the company has been operating in Victoria since late 2012, productivity and efficiency gains have been achieved, which in conjunction with additional planned cost reduction initiatives, will allow Sun Air to reduce its' proposed annual subsidy by almost $300,000 annually from current levels. This improvement, along with marketing efforts discussed below, should allow Victoria to regain compliance with the $200 per passenger subsidy cap. Flights are displayed in all the major travel agent systems, and also available for booking on the company's web site. Interline connections are available with most U.S. major airlines via Sun Air's contracted distribution capabilities

. While Sun Air is open to discussions with the community regarding proposed flight schedules, it believes that its current pattern of service provides adequate time of day and frequency coverage, such that it would continue to operate in a manner similar to what it currently does. The proposed subsidy amount and associated supporting information is included in Schedule 1 herein. 

### EAS Efu!ihilitv Discussion For the past year, Victoria's subsidy per passenger has exceeded the $200 per-passenger cap by a significant margin, as a result of passenger enplanement levels falling below projected and historical levels. While there are naturally a number of contributing factors to the decline in enplanements and resulting increase in per-passenger subsidy, the passenger enplanement shortfalls experienced in Victoria were most significantly the result ofthe following factors: 1. The community had lost all air service for a time prior to Sun Air being able to restart service, which created confusion about the airport's status in the marketplace; 2. Sun Air's reliability was poor, driving away the passengers that did know about the service. These reliability problems were in large part due to a chronic shortage of pilots during the period where FAA resources were severely constrained due to the mandated budget reductions from the sequester. At one point in time the airline went nine months without being able to complete a single pilot check ride. Prolonged periods of poor reliability will have a lasting impact on enplanement levels, which Victoria has seen first-hand.

The community surrounding Victoria, Texas has many economic strengths, including major heavy equipment manufacturing as well as a significant and growing oil-and-gas industry. It is a long drive to any major airport outside of Victoria, and there is no reason that the enplanement levels should not be dramatically higher.Sun Air's management has been working to rebuild the market, with a plan that incorporates

several key elements: 1

. Ensure highly reliable operations are conducted on a consistent, continuing basis such that potential travelers know they can rely on Victoria for their air travel needs. 2. Begin an aggressive community outreach program that re-introduces the airline and the airport. This includes a new and sustained advertising campaign, as well as direct communication to such major customer bases as large local corporations. Early responses have been clearly positive. The community wants and needs an airline service that meets their needs. 3. Improve the airline's ability to handle larger bags, a need that is somewhat more prevalent in Victoria relative to other markets due to the type of passengers that use the airport. Sun Air has already implemented several operational changes and expects to have aircraft baggage capacity enhancements implemented in the next several weeks

. The combination of Sun Air's efficiency and cost improvements, which have enable it to reduce its proposed subsidy by abnost $300,000 annually, along with real, sustained reliability improvements and the prospect of recapturing enplanement levels to historical norms will allow the operation to maintain subsidy levels below the $200 per passenger cap. Sun Air's management believes that there is potential well beyond its projected enplanement levels, and that over time a continuation of consistently reliable service will allow the passenger levels to continue to grow and further reduce the per-passenger subsidy amounts. Roughly ten years ago, enplanements were 30% greater than the projected levels included in this proposal, and the local economy has seen significant growth since that time.


### Service Proposal Sun Air's proposes to continue operating a total of twenty-four weekly round trips between Houston IAH and Victoria. This would provide for four weekday round trips and two each on Saturdays and Sundays.

Interline connections are available through major travel systems, including the ability for through-checking ofbaggage.


### About Sun Air International Sun Air Express, LLC d/ b/a Sun Air International is a Fort Lauderdale, FL based commuter air carrier currently serving markets in Pennsylvania, Virginia, Maryland and Texas. The airline has operated charters and limited scheduled service within Florida and the Bahamas for a number of years. New management was brought in near the end of 2013, and since that time has focused on improving operations and initiating a range of marketing activities.

### SCHEDULE 1

Annual Projected Operations

Passenger Revenue
Flight Operations 760,752 Maintenance 516,258 Sales& Service 776,202 Aircraft Ownership 162,000 Other Expenses 134,000 Total Operating Costs 2,349,213 Operating Profit/(Loss} $(1,879,517) Profit Element (5%) (117,461) Subsidy Required $(1,996,978)

ASMs 2,431,503 RPMs 1,313,012 Load Factor 54

.0% Block Hours 2,347 Annual Departures 2,471 Available Seats 19,768 Enplaned Passengers 10,675 Average Segment Fare $ 44

.00In conclusion, Sun Air believes that its proposal will provide excellent levels of service to the

community, and ensure that they have proper access to the national air transportation network, offering cost-effective options that meet the requirements ofthe Essential Air Service Program.
Respectfully Submitted: April 23,2014

David F. Hackett ChiefExecutive Sun Air Express, LLC d/ b/a Sun Air International