?- r /^ > ^ ^ ^ > ^L^ 

BEFORE THE 

DEPARTMENT OF TRANSPORTATION 

WASHINGTON, DC 

Essential Air Service at 

AKUTAN, ALASKA 

Under 49 U.S.C. § 41731, et seq. 

•c!^\RTMENT OF 

:>-:vSPORTAT!ON 

- H T OPERATIONS 

\'X 9 A M 3 

Docket OST-2000-7068 

ESSENTIAL AIR SERVICE PROPOSAL OF 

PENINSULA AIRWAYS. INC. 

Correspondence with regard to this document should be addressed to: 

Danny Seybert, President 

Scott Bloomquist, 

Chief Operating Officer 

PENINSULA AIRWAYS, INC. 

6100 Boeing Avenue 

Anchorage, AK 99502 

907-243-2485 

Robert E. Cohn 

Patrick R. Rizzi 

HOGAN LOVELLS US LLP 

Columbia Square 

555 Thirteenth Street, NW 

Washington, DC 20004 

+ 1202 637 4999/5659 

robert.cohn@hoganlovells.com 

patrick.rizzi@hoganlovells.com 

Counsel for 

Peninsula Airways, Inc. 

December 7, 2010 

. >DC' - 0O472l,00(M02 - ):662S4 v l 
BEFORE THE 

DEPARTMENT OF TRANSPORTATION 

WASHINGTON, DC 

Essential Air Service at 

AKUTAN, ALASKA 

Under 49 U.S.C. § 41731, et seq. 

Docket OST-2000-7068 

December 7, 2010 

ESSENTIAL AIR SERVICE PROPOSAL OF 

PENINSULA AIRWAYS. INC. 

Pursuant to DOT Order 2010-11-3, Peninsula Airways, Inc. ("PenAir") hereby 

submits its proposal to continue providing subsidized essential air service at 

Akutan, Alaska, for a two-year period beginning May 1, 2011, through April 30, 

2013. 

PenAir is the current provider of essential air service at Akutan. PenAir has 

provided reliable and cost-efficient essential air service to Akutan for over eleven 

years. PenAir was last selected by the Department of Transportation to provide 

subsidized essential air service at Akutan by DOT Order 2009-5-4. PenAir wishes 

to be re-selected to provide essential air service to Akutan for an additional two year 

period. 

As the Department has consistently noted in the past, "subsidy is required [at 

Akutan] because of the high cost of operating to Akutan, due to the community's 

extreme isolation, 759 miles from Anchorage"; its "extreme isolation increases the 

cost of serving it because it is very distant from any carrier's maintenance and pilot 

"'DC - 0(M72I 000002 - 3 1M;«-I V| 
Proposal of Peninsula Airways, Inc. 

Page 2 

bases and headquarters." DOT Order 2009-5-4, at 2; DOT Order 2009-1-1, at 2. 

Moreover, Akutan effectively "requires service with seaplane aircraft," and is "best 

served with the Grumman Goose" which is uniquely qualified to "handle the more 

turbulent waves [of Akutan's "less protected" seaplane base] than other seaplane 

aircraft which typically have floats attached." DOT Order 2009-5-4, at 2 & n.2. The 

Goose is a reliable aircraft, but it has been out of production for many years and 

PenAir must remanufacture all parts itself, with the result being that it has high 

operating and maintenance costs. DOT Order 2009-5-4, at 2 & n.3. Simply put, 

essential air service to Akutan continues to require subsidy. 

Given PenAir's knowledge about, and long history of, serving Akutan, PenAir 

is uniquely positioned and extremely well-qualified to meet the EAS mission at 

Akutan and should be strongly favored for re-selection in this proceeding to 

continue providing Akutan with high-quality and vitally important essential air 

service. 

PenAir's proposal involves the operation of year-round essential air service to 

Akutan with 11 weekly nonstop roundtrip flights between Akutan and Dutch 

Harbor, using Grumman G-21 Goose aircraft configured with 9 seats. This 

represents the same pattern of service PenAir currently provides under the existing 

EAS designation. 

1 DC - 0OJ7: l;000002 - J 166:84 VI 
Proposal of Peninsula Airways, Inc. 

Page 3 

PenAir's proposal requires subsidy in the amount of $874,887 for the first 

year and $918,631 for the second year. PenAir's expenses and costs were derived 

from T-lOO reports for the four (4) quarters ending 12/31/09 through 9/30/10, the 

most recent four quarters of data. PenAir develop its projected revenues based on 

FY 9/30/10 traffic levels as shown on Appendix B to DOT 2010-11-3.' 

PenAir continues to remain fit, willing, and able. The Department recently 

determined PenAir's fitness in DOT Order 2010-7-9 in connection with the 

Department's re-selection of PenAir to provide subsidized essential air service to 

Atka and Nikolski for a two-year period. 

' PenAir's proposal assumes that passenger/mail/freight traffic be consistent with the 

FY September 30, 2010 levels shown on Appendix B of DOT Order 2010-11-3. 

x.'DC - 004721/000002 - )lf)6284 vl 
Proposal of Peninsula Airways, Inc. 

Page 4 

In conclusion, PenAir urges the Department promptly to select PenAir to 

continue to provide Akutan with subsidized essential air service for the two-year 

period beginning May 1, 2011, through April 30, 2013, at a subsidy rate of $874,887 

for Year 1 and $918,631 for Year 2. 

Respectfully submitted, 

Cff—h~^ — 

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 for Peninsula Airways, Inc. 

\'fX . - OO472I.0OIKW2 - 3 I662II4 vl 
PENINSULA AIRWAYS, INC. 

Proposal to Provide Essential Air Service To Akutan, Alaska 

Docket OST-2000-7068 

Effective Period 5/1/11 through 4/30/13 

Weekly Round Trips 11 

Aircraft Type Grumman G-21 "Goose" 

Block Hours^ 458 

Weighted Departures @ 8.9 10,182 

Wtd. Hrs. @ 8.9 4,076 

REVENUES3'» 

Passengers 2,400® $126.00 $302,400 

Mail 125,000 lbs @ $.999 $124,875 

Cargo 46,600 lbs @ $.51 $ 23.766 

Total Revenue $451,041 

EXPENSES'^ 

Flying Operations $342,635 

Fuel & Oil $135,959 

Insurance $ 60,907 

Maintenance $444,684 

Depreciation and Rental'' $ 51.693 

Direct Expense $1,035,878 

Traffic related® 8.91% of revenue $ 40,188 

Departure related @ $13.07 $133,079 

Capacity related @ $6.52/wtd. Hr. $ 26.576 

Indirect Expense $ 199,843 

52 weeks x 22 flts./week = 1144. 1144 fits, x 24 mins./flt. = 458 block hours. 

PenAir's proposal assumes that passenger/maii/freight traffic will be consistent with the FY 

September 30, 2010 levels shown on Appendix B of DOT Order 2010-11-3: Passengers FY 9/30/10 = 

2,410 / Passengers CY 2009 = 2,446; Mail FY 9/30/10 = 125,300 lbs. / Mail CY 2009 = 115,880 lbs.; 

Freight FY 9/30/10 = 46,600 / Freight CY 2009 = 39,400. 

Fares are based on an average of all tickets sold in the market. The mail rate is the current rate. 

PenAir's costs were derived from T-lOO reports for quarters ending 12/31/09 through 9/30/10 

(i.e., the latest four quarters). 

This line item includes rental costs associated with PenAir's rental of one of the Goose aircraft it 

is utilizing. 

iVDC .004721.000002 - 316*214 v I 
Total Operating Expense $1,235,721 

Return @ 5% $ 61,786 

Interest @ 2.3% of Operating Expense $ 28.421 

Total Economic Cost $1,325,928 

Annual Subsidy Need @ 100% Completion (Year 1) $ 874,887 

Annual Subsidy Need @ 100% Completion (Year 2) $ 918,631^ 

Rate per Dutch Harboi-Akutan Flight (Year 1) $ 764.76 

Rate per Dutch Harbor-Akutan Flight (Year 2) $ 803.00 

Weekly Ceiling (Year 1) $16,824.72 

Weekly Ceiling (Year 2) $17,666.00 

Year I Subsidy x 1.05, 

"•DC - 004721.000002 - J166214 v l