BEFORE THE 

DEPARTMENT OF TRANSPORTATION 

WASHINGTON, DC 

Essential Air Service at 

PRESQUE ISLE/HOULTON, MAINE 

PLATTSBURGH, NEW YORK 

) 

) 

) Docket DOT-OST-2000-8012 

) Docket DOT-OST-2003-14783 

) __________________________________ ) 

PROPOSAL OF PENINSULA AIRWAYS, INC. 

TO PROVIDE ESSENTIAL AIR SERVICE AT 

PRESQUE ISLE, MAINE, AND PLATTSBURGH, NEW YORK 

Correspondence with regard to this document should be addressed to: 

Scott Bloomquist, President 

PENINSULA AIRWAYS, INC. 

6100 Boeing Avenue 

Anchorage, AK 99502 

907-243-2485 

March 11, 2014 

\\DC· 004721/000002 • 5496900v8 

Robert E. Cohn 

Patrick R. Rizzi 

HOGAN LOVELLS US LLP 

Columbia Square 

555 Thirteenth Street, NW 

Washington, DC 20004 

202 637 4999/5659 

robert.cohn@hoganlovells.com 

patrick.rizzi@hoganlovells.com 

Counsel for 

Peninsula Airways, Inc. 

i : 
Essential Air Service at 

BEFORE THE 

DEPARTMENT OF TRANSPORTATION 

WASHINGTON, DC 

) 

) 

PRESQUE ISLE/HOULTON, MAINE 

PLAITSBURGH, NEW YORK 

) Docket DOT-OST-2000-8012 

) Docket DOT-OST-2003-14783 

) 

_________________ ) March 11, 2014 

PROPOSAL OF PENINSULA AIRWAYS, INC. 

TO PROVIDE ESSENTIAL AIR SERVICE AT 

PRESQUE ISLE, MAINE, AND PLATTSBURGH, NEW YORK 

Pursuant to DOT Order 2014-1-21 ("Order"), Peninsula Airways, Inc. ("PenAir") 

hereby submits its proposal to continue providing subsidized, year-round essential air 

service ("EAS") for two years between Presque Isle/Houlton ("PQI"), Maine, and 

Plattsburgh ("PBG"), New York, on the one hand, and Boston Logan International 

Airport, on the other hand. 1 

In June 2012, PenAir established an East Coast operation based in Boston and, 

as part of its East Coast system, began operating subsidized EAS between Boston and 

Plattsburgh/Presque Isle, as well as non-subsidized EAS between Boston and Bar 

Harbor during the High Season. PenAir has developed substantial knowledge and 

experience with the two communities operating these EAS flights during the past two 

years. Based on this experience, PenAir has crafted service and subsidy proposals to 

meet the service needs of the two communities and the operational needs of PenAir, 

with subsidy amounts necessary to fairly compensate PenAir for the EAS service. 

The Department granted PenAir's request for a one-week extension to submit its EAS proposal. 

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EAS Proposal of Peninsula Airways, Inc. 

Page 2 

PenAir is offering two EAS options for the Department's consideration: 

Option 1- This service and subsidy proposal is based on a schedule similar to 

the one PenAir currently operates at PQI and PBG. 

Option 2- This alternative service and subsidy proposal is based on the 

schedule Presque Isle has requested involving an early morning PQI departure and a 

late evening PQI arrival. 

PenAir's proposal to provide EAS to Plattsburgh and Presque Isle is indivisible. 

PenAir will only accept an award for subsidized service covering both Plattsburgh and 

Presque Isle. In addition, if PenAir's proposal to provide subsidized EAS at both 

Presque Isle and Plattsburgh for a two-year period is granted, PenAir also intends to 

provide non-subsidized essential air service between Bar Harbor, Maine, and Boston 

during the High Season2 for the same two-year period (as described herein), 

complementing Cape Air's year-round subsidized EAS. In the absence of an award at 

both Presque Isle and Plattsburgh for another two-year period, however, PenAir could 

not commit to continuing service to Bar Harbor. 

PenAir's EAS proposals readily satisfy the criteria set forth in the Statute and the 

Order, and would continue to offer substantial benefits for passengers and the local 

communities. 

The High Season covers the period approximately a week before Memorial Day and approximately a week 

after Labor Day. 

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EAS Proposal of Peninsula Airways, Inc. 

Page3 

I. PENAIR'S PRESQUE ISLE AND PLATTSBURGH PROPOSALS. 

Presque Isle. 

PenAir offers two seNice options for EAS to Presque Isle. 

Option 1: Under this proposal, PenAir would provide 19 weekly nonstop 

roundtrips between PQI and Boston with the following pattern of seNice: 3 roundtrips 

per weekday; 2 roundtrips on Saturday; and 2 roundtrips on Sunday, on the same or 

very similar schedules to those currently being operated at PQI. The annual subsidy 

under Option 1 for Presque Isle-Boston seNice would be$ 4.710.683. 

Option 2: Under this proposal, PenAir would provide 19 weekly nonstop 

roundtrips between PQI and Boston with the following pattern of seNice: 3 roundtrips 

per weekday; 2 roundtrips on Saturday; and 2 roundtrips on Sunday. As requested by 

Presque lsle,3 this schedule would provide an early morning PQI departure and a late 

evening PQI arrival each day. The annual subsidy under Option 2 for Presque IsleBoston seNice would be $ 5, 180,456. 

Plattsburgh. 

PenAir proposes to operate 12 weekly nonstop roundtrips between PBG and 

Boston with the following pattern of seNice: 2 roundtrips per weekday; 1 roundtrip on 

Saturday; and 1 roundtrip on Sunday, on the same or very similar schedules to those 

currently being operated at PBG. The annual subsidy for Plattsburgh-Boston seNice 

would be$ 2.714,074. 

3 Letter from S. Wardwell, Northern Maine Regional Airport, to K. Schlemmer, US DOT, March 1, 2014. 

I \DC • 0047211000002 • 5496900 v8 
EAS Proposal of Peninsula Airways, Inc. 

Page4 

The combined annual subsidy for EAS to Plattsburgh and Presque Isle under 

Option 1 totals$ 7,424,757 and under Option 2 totals$ 7,894,530. 

PenAir would operate these services year-round using a pressurized, multiengine Saab 340 aircraft with 30-33 passenger seats. 4 This service would provide 

about 90 passenger seats each way Monday-Friday for Presque Isle and 60-66 such 

seats per weekday for Plattsburgh. The Saab 340 has a two-person cockpit crew, a 

flight attendant providing on-board drink/snack services, and a lavatory. 

The chart below summarizes PenAir's subsidized EAS proposals for Presque Isle 

and Plattsburgh. 

Hub Frequencies/ Aircraft I OPTION 1 OPTION 2 

Schedule Pax Capacity Subsidy Subsidy 

Request Request 

Presque Isle Boston 19 weekly, 

Year-Round: Saab 340 $4,710,683 $5,180,456 

3x per per year per year 

weekday 30-33 pax 

2x on Saturday 

2x on Sunday 

Plattsburgh Boston 12 weekly, 

Year-Round: Saab 340 $2,714,074 $2,714,074 

2x per per year per year 

weekday 30-33 pax 

1 x on Saturday 

1x on Sunday 

TOTAL $7,424,757 $7,894,530 

ANNUAL SUBSIDY per year per year 

TOTAL SUBSIDY FOR $ 14,849,514 $ 15,789,060 

TWO-YEAR PERIOD 

PenAir is moving to commonality among its Saab 340 aircraft, thereby making its passenger aircraft 

interchangeable. One result of this fleet commonality initiative is that each Saab 340 will carry 30-33 passengers. 

This change will not affect the service proposal because, regardless of the seat capacity on the Saab aircraft serving 

Presque Isle, three daily weekday flights would be needed to meet the requirement for 67 seats per day each way. 

DOT Order 2014-1-21, at 3. 

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EAS Proposal of Peninsula Airways, Inc. 

Page 5 

The proposed annual EAS subsidies for Presque Isle (under Option 1) and 

Plattsburgh are modestly higher than the current subsidies for these routes by about 

$810,000 and $240,000, respectively. Notably, the increased subsidies are not due to 

increases in expenses, but are principally driven by the substantial decline in passenger 

traffic and passenger revenues in recent years: from 28,795 passengers (YE 30 2010) 

to 21,800 (YE 3Q 2013) at Presque Isle and from 17,091 (YE 30 2010) to 14,748 (YE 

30 2013) at Plattsburgh. DOT Order 2014-1-21. Indeed, under Option 1, PenAir's 

projected total operating expenses for PQI are about $300,000 lower than the expenses 

on which the previous EAS subsidy amount for 2012 was based. For Plattsburgh, 

expenses are only slightly (about $120,000) higher than the 2012 EAS projection. 

Notably, the unit costs used in calculating PenAir's subsidy request are firmly based on 

PenAir's actual expense data, as reported to the Department, for the YE September 

2013. 

The proposed subsidy for Presque Isle EAS under Option 2 is somewhat higher 

than under Option 1. In order to provide the EAS schedule requested by Presque Isle 

involving an early morning PQI departure and a late evening PQI arrival and to meet the 

FAA's new flight, duty, and rest time regulations under 14 C.F.R. Part 117 (and to 

accommodate training, sick leave, etc.), the Option 2 schedule would require PenAir to 

double-crew these PQI flights. That is, Option 1 can be operated daily, with one crew 

and one crew overnight; Option 2 will require two crews daily and two crew overnights. 

In addition to paying for an additional crew complement to handle the schedule, PenAir 

would have the added cost for overnight accommodations for the additional crew at 

PQI. 

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EAS Proposal of Peninsula Airways, Inc. 

Page 6 

On the other hand, the subsidies for Presque Isle and Plattsburgh are mitigated 

when the Department takes into account the subsidy-free Bar Harbor service that 

PenAir would offer as part of its package (described further below). 

II. PENAIR'S SUBSTANTIAL EXPERIENCE IN SAFELY AND RELIABLY 

SERVING SMALL COMMUNITIES WITH ITS SAAB 340 AIRCRAFT AND ITS 

CODESHARE AND INTERLINE RELATIONSHIPS WITH OTHER AIRLINES 

WILL CONTINUE TO PROVIDE SUBSTANTIAL BENEFITS FOR 

PASSENGERS ON THESE ROUTES. 

In selecting a carrier to provide subsidized essential air service, the Department 

considers several factors: (1) service reliability; (2) contractual and marketing 

arrangements with a larger carrier at the hub; (3) interline arrangements with a larger 

carrier at the hub; (4) community views of actual and potential users of the air ser\tice, 

and (5) whether the carrier has included in its proposal a plan to market its service to 

the community, see 49 U.S.C. § 41733(c)(1), as well as the relative subsidy 

requirements. See DOT Order 2014-1-21, at 2 n.4. PenAir's EAS proposal offers the 

Department, the communities, and the travelling public substantial benefits. 

Service Reliability and Experience. PenAir has been operating air service in 

the challenging weather environment in Alaska for more than half a century. In 2013, 

PenAir flew approximately 216,400 passengers ·and nearly 96 million revenue 

passenger miles. For YE September 2013, PenAir had more than 48,000 

enplanements on its "East Coast" network, of which 21,800 were for Presque Isle and 

14,748 were for Plattsburgh. PenAir is a family-owned carrier, has approximately 470 

employees, and operates an aii-Saab 340 fleet. As the Department knows, PenAir was 

the very first recipient of an EAS subsidy when the program began decades ago. It has 

1\DC- 004721/000002-5496900 v8 
EAS Proposal of Peninsula Airways, Inc. 

Page 7 

provided subsidized EAS to small communities in Alaska and currently provides such 

service to Presque Isle and Plattsburgh. 

Safety is PenAir's highest priority. It was the first Part 135 U.S. air carrier to 

become a Part 121 air carrier. The FAA has also awarded the Diamond Certificate of 

Excellence to PenAir for 12 years. PenAir's management, crews, mechanics, 

dispatchers, and Saab 340 aircraft have relative!y unparalleled experience in safely and 

reliably operating from small, remote, single-runway airports and major hubs, over 

water, and in all types of weather, including harsh winter weather. This experience is of 

substantial value to PenAir, these EAS communities, and passengers on these routes. 

Indeed, despite the sometimes challenging weather environment in the Northeast, 

PenAir had a 97% completion rate for its Plattsburgh and Presque Isle services in 2013. 

The Saab 340. As noted above, PenAir proposes operating Saab 340 

aircraft on these EAS routes. It is an aircraft with which PenAir has more than 15 years 

of operational experience in the harsh Alaskan weather. The Saab 340 is well-suited for 

these routes. It is a dependable, multi-engine aircraft with seats for 30-33 passengers in 

a comfortable 2-by-1 seating configuration. It has a cargo capacity of 2,500 lbs. and 

cruises at approximately 265 knots. In addition, the Saab 340 aircraft has significant 

passenger amenities: lavatory facilities, a pressurized cabin, and a flight attendant. It 

also has a two-pilot cockpit crew. 

Relationships with Other Carriers. 

Codeshare: PenAir has a longstanding relationship with Alaska Airlines, 

including codesharing. Alaska Airlines places its designator code on PenAir's flights 

between Boston and Presque Isle/Plattsburgh, and, as such, these flights have high 

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EAS Proposal of Peninsula Airways, Inc. 

Page 8 

visibility not only on PenAir's and Alaska Airlines' websites, but also on third-party travel 

distribution systems such as Orbitz. Travelers on PenAir's Plattsburgh and Presque 

Isle flights can also earn and redeem frequent flyer miles as part of the Alaska Airlines 

frequent flyer program. Frequent flyer miles earned on PenAir's flights can be 

redeemed for free travel or upgrades on flights offered not only by Alaska Airlines but 

also by some of its partners, Air France, American Airlines, British Airways, Cathay 

Pacific, Delta Air Lines, KLM Airlines, Korean Air Lines, LAN, PenAir, Fiji Airways, Aero 

Mexico, and Emirates. 

Interline: PenAir has Electronic Interline Ticket and Baggage agreements 

with Alaska Airlines, Delta Air Lines (and its regional carriers), US Airways (and its 

regional carriers), and United Air Lines (and its regional carriers). These relationships 

allow for single check-in, single-ticket air travel, making it easier for passengers 

traveling from/to these EAS points to/from destinations beyond Boston. 

Marketing. PenAir will continue its local marketing efforts, in conjunction with 

the local communities, as part of its ongoing initiative to raise awareness and brand 

recognition about its services. 

Ill. IF SELECTED TO CONTINUE PROVIDING SUBSIDIZED EAS AT PRESQUE 

ISLE AND PLATTSBURGH FOR TWO MORE YEARS, PENAIR WOULD 

OFFER NON-SUBSIDIZED SERVICE TO BAR HARBOR DURING THE HIGH 

SEASON. 

If the Department awards the subsidized EAS for Presque Isle and Plattsburgh to 

PenAir for another two-year term, PenAir intends to operate 14 weekly nonstop 

roundtrips between Bar Harbor and Boston, without subsidy, for the High Season, using 

its 30-33 seat Saab 340 aircraft. PenAir's Bar Harbor service will continue to provide 

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EAS Proposal of Peninsula Airways, Inc. 

Page 9 

important and beneficial larger aircraft, High Season service, complementing Cape Air's 

smaller-aircraft, subsidized EAS service. Indeed, more than 9,500 passengers traveled 

on PenAir between Bar Harbor and Boston during the High Season in 2013. 

IV. CONCLUSION. 

PenAir's proposals fulfill the statutory prerequisites for EAS and offer superior 

benefits to passengers and these EAS communities. Accordingly, PenAir urges the 

Department to select it to provide essential air service for another two years between 

Boston, on the one hand, and Presque Isle and Plattsburgh, on the other hand, at the 

subsidy levels presented herein. 

\\DC· 004721/000002. 5496900v& 

Respectfully submitted, 

Robert E. Cohn 

Patrick R. Rizzi 

HOGAN LOVELLS US LLP 

Columbia Square 

555 Thirteenth Street, NW 

Washington, DC 20004 

+1 202 637 4999/5659 

Counsel to Peninsula Airways, Inc. 
CERTIFICATE OF SERVICE 

I hereby certify that a copy of the foregoing Proposal of Peninsula Airways, Inc., 

has been served this March 11, 2014, upon each of the following addressees: 

Dennis DeVaney, USDOT 

Dennis.DeVany@dot.gov 

Michael Martin, USDOT 

Michaei.F.Martin@dot.gov 

Essential Air Service Program 

EAS@dot.gov 

Scott Wardwell 

Airport Director, Northern Maine Regional Airport 

swardwell@presqueisleme.us 

Chris Kreig 

Manager, Plattsburgh International Airport 

kreigc@co.clinton.ny.us 

Garry Douglas 

North Country Chamber of Commerce, President & CEO 

gfdoug@hotmail. com 

Brad Madera 

Manager, Hancock County-Bar Harbor Airport 

manager@bhbairport.com 

\\DC- 004721/000002- 5496900 v8 
PQI PBG OPTION 1 

Annual Flights 1,917 Note 1 1,211 

Fare $131 Note2 $84 

Block Time 1.6 Note3 1.2 

Annual Block Hours 3067.2 1453.2 

Passengers 23,306 Note4 15,515 

REVENUE $ 3,053,086.00 $ 1,303,260.00 

Per Hour 

FlOps Crew $324.40 $ 994,999.66 Notes $ 471,416.06 

Fuel $513.90 $ 1 ,576,234.08 NoteS $ 746,799.48 

Maintenance $612.90 $ 1 ,879,886.88 Notes $ 890,666.28 

Insurance $60.38 $ 185,197.54 Notes $ 87,744.22 

NC Depr/Rental $240.16 $ 736,618.75 Notes $ 349,000.51 

TOTAL DIRECT Expenses $ 5,372,936.93 $ 2,545,628.57 

FIA!tendant per hour $65.40 $ 200,594.88 Notes $ 95,039.28 

Traffic Related per pax $42.04 $ 979,784.24 Note 7 $ 652,250.60 

Departure Related per dept $349.97 $ 670,892.49 Note6 $ 423,813.67 

Capacity Related per dept $34.85 $ 66,807.45 Note6 $ 42,203.35 

Cost Increase Estimates @6% of $ 103,049.05 $ 67,096.06 

Traffic-, Departure-, and Capacity-Related, 

TOTAL INDIRECT Expenses $ 2,021,128.11 $ 1,280,402.96 

TOTAL OPERATING Expenses $ 7,394,065.04 $ 3,826,031.53 

Profit@5% $ 369,703.25 $ 191,301.S8 

[(Total Direct+ Indirect) x .OS) 

ECONOMIC COST $ 7,763,768.29 $ 4,017,333.10 

ANNUAL SUBSIDY $4,710,682.29 $2,714,073.10 

Note 1: PQI- 19 flights/wk x 2 directions x 52 weeks x .97 completion= 1,917; PBG- 12 flights/wk x 2 directions x 52 weeks x .97 completion= 1,211 

Note 2: Average Fare rounded based on average fare for year ending January 2014 

Note 3: Projected Block Time based on average block time for four quarters ending September 2013 

Note 4: Annual Passengers based on Annual Totals for YE January 2014 

Note 5: The per hour rates were calculated as follows: 

(Sum of Total Costs Reported for Each Category to USDOT for East Coast Network for QE 12/2012 + QE 03/2013 + QE 06/2013 + QE 09/2013) divided by Reported Block Hours Operated (5,556) 

Note 6: The per departure rates were calculated as follows: 

(Sum of Total Costs Reported for Each Category to USDOT for East Coast Network forQE 12/2012 + QE 03/2013 + QE 06/2013 + QE 09/2013) divided by Reported Departures (4,111) 

Note 7: The per passenger rates were calculated as follows: 

(Sum of Total Costs Reported for Each Category to US DOT for East Coast Network for QE 12/2012 + QE 03/2013 + QE 06/2013 + QE 09/2013) divided by Reported Passengers for East Coast YE 09/13 (48, 159 pax) 
~~~--~-- "b "" ""'~ ... -~~~~~~-

PQI 

Annual Flights 1,917 Note 1 

Fare $131 Note2 

Block Time 1.6 Note3 

Annual Block Hours 3067.2 

Passengers 23,306 Note4 

REVENUE $ 3,053,086.00 

Per Hour 

FlOps Crew $324.40 $ 994,999.68 Notes 

Fuel $513.90 $ 1,576,234.08 Notes 

Maintenance $612.90 $ 1,879,666.66 Notes 

Insurance $60.36 $ 185,197.54 Notes 

A/C Depr/Rental $240.16 $ 736,616.75 Notes 

TOTAL DIRECT Expenses $ 5,372,936.93 

FIAttendant per hour $65.40 $ 200,594.66 Notes 

Traffic Related per pax $42.04 $ 979,764.24 Note 7 

Departure Related per dept $349.97 $ 670,892.49 Note6 

Capacity Related per dept $34.85 $ 66,607.45 Note6 

Cost Increase Estimates @6% of $ 103,049.05 

Traffic-, Departure-, and Capacity-Related, 

TOTAL INDIRECT Expenses $ 2,021,128.11 

COSTS for Additional Crews, $ 447,403.00 Note 8 

and Accommodations for 

Early/Late PQI Flights 

TOTAL OPERATING Expenses $ 7,841,468.04 

Profit@ 5% $ 392,073.40 

[(Total Direct+ Indirect) x .05] 

ECONOMIC COST $ 8,233,541.44 

ANNUAL SUBSIDY $ 5,180,455.44 

PBG 

1,211 

$84 

1.2 

1453.2 

15,515 

$ 1,303,260.00 

$ 471,418.08 

$ 746,799.48 

$ 890,666.26 

$ 87,744.22 

$ 349,000.51 

$ 2,545,628.57 

$ 95,039.26 

$ 652,250.60 

$ 423,813.67 

$ 42,203.35 

$ 67,096.06 

$ 1,280,402.96 

$ 3,826,031.53 

$ 191,301.58 

$ 4,017,333.10 

$ 2,714,073.10 

OPTION2 

Note 1: PQI- 19 flights/wk x 2 directions x 52 weeks x .97 completion = 1,917; PBG- 12 flights/wk x 2 directions x 52 weeks x .97 completion = 1,211 

Note 2: Average Fare rounded based on average fare for year ending January 2014 

Note 3: Projected Block Time based on average block time for four quarters ending September 2013 

Note 4: Annual Passengers based on Annual Totals for YE January 2014 

Note 5; The per hour rates were calculated as follows: 

(Sum of Total Costs Reported for Each Category to USDOT for East Coast Network for QE 1212012 + QE 03/2013 + QE 06/2013 + QE 09/2013) divided by Reported Block Hours Operated (5,556) 

Note 6: The per departure rates were calculated as follows: 

(Sum of Total Costs Reported for Each Category to USDOT for East Coast Network for QE 12/2012 + QE 03/2013 + QE 06/2013 + QE 09/2013) divided by Reported Departures (4,111) 

Note 7: The per passenger rates were calculated as follows: 

(Sum of Total Costs Reported for Each Category to USDOT for East Coast Network for QE 12/2012 + QE 03/2013 + QE 06/2013 + QE 09/2013) divided by Reported Passengers for East Coast YE 09/13 (48,159 pax) 

Note 8: The costs for the early/late PQI flights include the costs of additional crews, additional hotel accommodations, and training for the additional crews.