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^ BEFOR ETH E DEPARTMEN T O FTRANSPORTATIO N

WASHINGTON , D C Essentia l Ai r

Servic e a t AKUTAN , ALASK

A Unde r 4 9 U.S.C . § 41731 , e t

seq . •c!^\RTMEN TO F :>-:vSPORTAT!O N - H TOPERATION S \' X 

### 9 A M 3

Docke t OST-2000-706 8

ESSENTIA LAI RSERVIC EPROPOSA LO F PENINSUL A AIRWAYS . INC . Correspondenc e wit hregar dt o thi s documen t shoul db e addresse dto :

Dann y Seybert , Presiden t Scott Bloomquist , Chie f Operatin g Office

r PENINSUL A AIRWAYS , INC . 610 0 Boein g Avenu e Anchorage , AK

9950 2 907-243-248 5 Rober t E . Coh n Patric k R . Rizz i HOGANLOVELL S U S LL P Columbi aSquar e 55 5 Thirteent hStreet , N W Washington , D C 2000 4 + 120 2 63 7 4999/565 9 robert.cohn@hoganlovells.co m patrick.rizzi@hoganlovells.co m Counse l fo

r Peninsul aAirways , Inc . Decembe r

7 , 201 0

. >DC ' - 0O472l,00(M0 2 - ):662S 4 v l

## BEFOR E TH E DEPARTMEN

T O F TRANSPORTATIO

N WASHINGTON , D C Essentia l Ai r

Servic e a t AKUTAN , ALASK A Unde r 4 9 U.S.C . § 41731 , e t

seq . Docke t OST-2000-706 8 Decembe r

7 , 201 0

ESSENTIA LAI RSERVIC EPROPOSA LO F PENINSUL A AIRWAYS . INC . Pursuan t

t o DO T Orde r

2010-11-3 , Peninsul aAirways , Inc . ("PenAir" ) hereb y submit s it s proposa l t o continu e providin g subsidize dessentia l ai r servic e a t Akutan , Alaska , fo r

atwo-yea r

perio dbeginnin g Ma y 1 , 2011 , throug hApri l 30 , 2013 . PenAi r

i s th e curren t

provide r

o f essentia l ai r

servic e a t

Akutan . PenAi r

ha s provide dreliabl e an dcost-efficien t essentia l ai r

servic e t o Akuta nfo r ove r eleve n years . PenAi r

wa s las t

selecte db y th e Departmen t o f Transportatio nt o provid e subsidize dessentia l ai r servic e a t

Akuta nb y DO T Orde r 2009-5-4 . PenAi r

wishe s t o b e re-selecte dt o provid e essentia l ai r servic e t o Akuta nfo r

a nadditiona l tw o yea r period . A s th e Departmen t

ha s consistentl y note di nth e past , "subsid y i s require d[a t Akutan ] becaus e o f

th e hig hcos t

o f operatin g t o Akutan , du e t o th e community' s extrem e isolation , 75 9 mile s fro mAnchorage" ; it s "extrem e isolatio nincrease s th e cos t o f servin g i t

becaus e i t

i s ver y distan t

fro man y carrier' s maintenanc e an dpilo t

"'D C - 0(M72I 00000 2 - 3 1M;«- IV |Proposa l o f Peninsul aAirways , Inc .

Pag e 2 base s an dheadquarters. " DO T Orde r 2009-5-4 , a t

2 ; DO T Orde r

2009-1-1 , a t

2 . Moreover , Akuta n effectivel y "require s servic e wit hseaplan e aircraft, " an di s "bes t serve dwit hth e Grumma n Goose " whic hi s uniquel y qualifie dt o "handl e th e mor e turbulen t

wave s [of

Akutan' s "les s protected " seaplan e base ] tha nothe r seaplan e aircraft whic htypicall y hav e float s attached. " DO T Orde r 2009-5-4 , a t

2 & n.2 . Th e Goos e i s areliabl e aircraft , bu t i t ha s bee nou t

o f productio nfo r

man y year s an d PenAi r mus t remanufactur e al l part s itself, wit hth e resul t bein g tha t

i t ha s hig h operatin g an dmaintenanc e costs . DO T Orde r 2009-5-4 , a t

2 & n.3 . Simpl y put , essentia l ai r

servic e t o Akuta n continue s t o requir e subsidy . Give n PenAir' s knowledg e about , an dlon g histor y of , servin g Akutan , PenAi r i s uniquel y positione dan dextremel y well-qualifie dt o mee t th e EA S missio n a t Akuta nan dshoul db e strongl y favore dfo r re-selectio ni nthi s proceedin g t o continu e providin g Akuta n wit hhigh-qualit y an dvitall y importan t essentia l ai r service . PenAir' s proposa l involve s th e operatio no f year-roun dessentia l ai r servic e t o Akuta nwit h1 1 weekl y nonsto p roundtri p flights betwee nAkuta nan dDutc h Harbor , usin g Grumma n G-2 1 Goos e aircraft configure dwit h9 seats . Thi s represent s th e sam e patter n o f servic e PenAi r

currentl y provide s unde r th e existin g EA S designation .

1 D C - 0OJ7 : l;00000 2 - J 166:8 4 V IProposa l o f Peninsul aAirways , Inc .

Pag e 3 PenAir' s proposa l require s subsid y i nth e amoun t o f $874,88 7 fo r

th e firs t yea r an d$918,63 1 fo r

th e secon dyear . PenAir' s expense s an dcost s wer e derive d fro mT-lO O report s fo r th e fou r

(4 ) quarter s endin g 12/31/0 9 throug h9/30/10 , th e mos t recen t fou r quarter s of

data . PenAi r

develo p it s projecte drevenue s base do n F Y 9/30/1 0 traffi c level s a s show no nAppendi x B t o DO T 2010-11-3. ' PenAi r continue s t o remai nfit , willing , an dable . Th e Departmen t recentl y determine dPenAir' s fitness i nDO T Orde r 2010-7- 9 i nconnectio nwit hth e Department' s re-selectio n o f PenAi r t o provid e subsidize dessentia l ai r servic e t o Atk aan dNikolsk i fo r

atwo-yea r

period .

' PenAir' s proposa l assume s tha t passenger/mail/freigh t

traffi c b e consisten t

wit hth e F Y Septembe r

30 , 201 0 level s show n o nAppendi x B of DO T Orde r

2010-11-3 .

x.'D C - 004721/00000 2 - )lf)628 4 v l

### Proposal o f Peninsul aAirways , Inc .

Pag e 4 I nconclusion , PenAi r

urge s th e Departmen t promptl y t o selec t

PenAi r t o continu e t o provid e Akuta nwit hsubsidize dessentia l ai r servic e fo

r th e two-year perio dbeginnin g May 1 , 2011 , throug hApri l 30 , 2013 , a t asubsid y rat e o

f $874,88 7 fo r Yea r 1 an d$918,63 1 fo

r Yea r 2 . Respectfull y submitted , Cff—h~ ^ — 

### Robert E . Coh n Patric k R . Rizz i HOGANLOVELL S U S LL P Columbi aSquar e 55 5 Thirteent hStreet , N W Washington , D C 2000 4 + 1 20 2 63 7 4999/565 9 Counse l fo

r Peninsul aAirways , Inc .

\'fX . - OO472I.0OIKW 2 - 3 I662II 4 v lPENINSUL A AIRWAYS , INC . Proposa l t o Provid e Essentia l Ai r Servic e T o Akutan , Alask a Docke t OST-2000-706 8 Effectiv e Perio d5/1/1 1 throug h4/30/1 3 Weekl y Roun dTrip s 1 1 Aircraft Typ e Grumma nG-2 1 "Goose " Bloc k Hours ^ 45 8 Weighte dDeparture s @ 8. 9 10,18 2 Wtd . Hrs . @ 8. 9 4,07 6 REVENUES3' » Passenger s 2,400 ® $126.0 0 $302,40 0 Mai l 125,00 0 lb s @ $.99 9 $124,87 5 Carg o 46,60 0 lb s @ $.5 1 $ 23.76 6 Tota l Revenu e $451,04 1 EXPENSES' ^ Flyin g Operation s $342,63 5 Fue l & Oi l $135,95 9 Insuranc e $ 60,90 7 Maintenanc e $444,68 4 Depreciatio n an dRental' ' $ 51.69 3 Direc t Expens e $1,035,87 8 Traffi c related ® 8.91 % o f revenu e $ 40,18 8 Departur e relate d@ $13.0 7 $133,07 9 Capacit y relate d@ $6.52/wtd . Hr . $ 26.57 6 Indirec t Expens e $ 199,84 3

5 2 week s x 2 2 flts./week

= 1144 . 114

4 fits, x 24 mins./flt . = 45 8 bloc k hours . PenAir' s proposal assume s that passenger/maii/freigh t

traffi c wil l b e consisten t

wit hth e F Y Septembe r 30 , 201 0 level s show no n Appendi x B o f DO T Orde r

2010-11-3 : Passenger s F Y 9/30/1 0 = 2,41 0 / Passenger s C Y 200 9 = 2,446 ; Mai l F Y 9/30/1 0 = 125,30 0 lbs . /

Mai l C Y 200 9 = 115,88 0 lbs. ; Freigh t F Y 9/30/1 0 = 46,60 0 /

Freigh t C Y 200 9 = 39,400 . Fare s are base do na

naverag e o f

al l ticket s sol di

nth e market . Th e mai l rate i s th e curren t rate . PenAir' s cost s wer e derive dfro mT-lO O report s fo

r quarter s endin g 12/31/0 9 throug h9/30/1 0 (i.e. , th e lates t

fou r quarters) . Thi s lin e ite

minclude s rental cost s associate dwit hPenAir' s rental o f

on e o f th e Goos e aircraf

t i t i s utilizing .

iVD C .004721.00000 2 - 316*21 4 v I

### Tota l Operatin g Expens e $1,235,72 1

Retur n@ 5 % $ 61,78 6 Interes t @ 2.3 % o

f Operatin g Expens e $ 28.42 1

Tota l Economi c Cos t

$1,325,92 8 Annua l Subsid y Nee d@ 100 % Completio n(Year 1 ) $ 874,88 7 Annua l Subsid y Nee d@ 100 % Completio n(Year 2 ) $ 918,631 ^ Rat e pe r Dutc hHarboi-Akuta nFligh t (Year 1 ) $ 764.7 6 Rat e pe r Dutc hHarbor-Akuta nFligh t (Year 2 ) $ 803.00 Weekl y Ceilin g (Year

1 ) $16,824.7 2 Weekl y Ceilin g (Year

2 ) $17,666.0 0

Yea r I Subsid y x 1.05,

"•D C - 004721.00000 2 - J16621 4 v l