' -—f ' ::'-ft^RTMEMTOF 

HANSPORIATION 

BEFORE THE ^ .K^T OPERAIiONS 

DEPARTMENT OF TRANSPORTATION 

OFFICE OF THE SECRETARY /?ri v \U A ^: 1} 5 

WASHINGTON, D.C. 

Notice of 

Alaska Seaplane Service, LLC 

Under 49 U.S.C. 41734 and C.F.R. Part 323 

of intent to terminate Essential Air Service 

at Angoon and Tenakee, Alaska 

Docket OST-2006-25542 

ESSENTIAL SERVICE BID OF 

ALASKA SEAPLANE SERVICE, LLC 

TO PROVIDE ESSENTIAL AIR SERVICE 

AT ANGOON AND TENAKEE, ALASKA 

Communications with Respect to This Document Should Be Addressed to: 

Craig Loken, General Manager Hank Myers 

Alaska Seaplane Service, LLC MTC 

1873 Shell Simmons Drive, Suite 110 P.O. Box 7142 

Juneau, AK 99801 Bellevue, WA 98008 

(907) 789-3331 (425) 830-4265 

akseaplanes @ alaska.com hank@mtcworld.com 

October 13, 2010 
BEFORE THE 

DEPARTMENT OF TRANSPORTATION 

OFFICE OF THE SECRETARY 

WASHINGTON, D.C. 

Notice of 

Alaska Seaplane Service, LLC 

Under 49 U.S.C. 41734 and C.F.R. Part 323 

of intent to terminate Essential Air Service 

at Angoon and Tenakee, Alaska 

Docket OST-2006-25542 

ESSENTIAL SERVICE BID OF 

ALASKA SEAPLANE SERVICE, LLC 

TO PROVIDE ESSENTIAL AIR SERVICE 

AT ANGOON AND TENAKEE, ALASKA 

Alaska Seaplane Service, LLC (Seaplanes) hereby submits its bid to provide Essential 

Air Service to Angoon and Tenakee as requested in Order 2010-9-16. Seaplanes became 

the essential service carrier at Angoon and Tenakee in 2006 when Wings of Alaska 

withdrew its service from those points, and began providing Essential Service at the two 

points in 2009. Traffic in the markets had been declining for several years as the 

resource based economy in southeastern Alaska declined. There had been earlier growth 

relative to 1976 in the markets as a result of the Alaska Native Claims Settlement Act as 

well as development of fishing and tourism in the area. 

Since Seaplanes began Essential Service, traffic continues a slight decline, probably 

affected by the national economic pictures as well as lack of resource based jobs in the 

area. The traffic forecast by Seaplanes is remarkably close to experience. For CY 2010, 

Seaplanes predicted 3,063 in the JUN-AGN market, and the latest twelve months 

experience is 3,094 (1% more). In the JNU-TKE market. Seaplanes projected 1,185 

passengers, and the actual traffic was 1,053 (11% less). In total, passenger traffic and 

revenue were 2.4% under projections. Offsetting this decline in passenger traffic was an 

increase in freight traffic. Some of this is related to one-time project at Angoon. 

Additionally, Seaplanes has raised its freight rates by 10%. 

What has not happened, other than with freight rates, has been increases in yields for 

passengers and mail. While operating costs are up 8% compared to a year ago, passenger 

fares are the same, and a new online booking fare is lower than the yield projected. Mail 

rates are stable, with a slight decline in rates related to lower industry fuel rates. In 
summary. Seaplanes'has accepted the current traffic levels as a base, but does not see any 

increase in total traffic or yields over the next four years. 

As noted, operating unit costs are up 8% over 2009. Most of these costs are for items 

beyond the control of Seaplanes, but wages also continue to increase slightly. Indirect 

costs remain stable as a percentage of direct costs, and administrative expense are also 

consistent. The Craig and Aral Loken both work in the operation, but don't take salaries. 

The owner labor allowance reflects the levels agreed to in 2008 projected forward. The 

latest mail rate fuel cost adjustment reflect some softening in cost increases overall. 

Seaplanes assumes more moderate cost increases over the next four years. 2011 is 

projected at a 3% increase over 2010, with subsequent increases at 4%, 5% and 6% 

respectively for subsequent years. The standard 5% of operating expenses is assumed for 

interest and return. All units for service are used from the 2008 bid. 

Subsidy Need 

Appendix C computes the subsidy need for the proposed service level. Subsidy need 

increases over the four year requested term, reflecting level traffic and revenue combined 

with slightly increasing operating costs. The cost per departure ranges from $248.00 to 

$336.10. 

Four Year Term 

Alaska Seaplane Service requests a four year term for the subsidy contract, as it currently 

has at Pelican and Elfin Cove. While operations lost money after subsidy this year in 

those markets, part of the loss was due to continued traffic poaching from a noncertificated air taxi operator who temporarily relocated to Pelican from Sitka during the 

summer peak season. The overall benefit of having a reliable source of operating 

revenue for an extended period has been realized. While this bid is consistent with the 

request for two year service, all revenue, expense and subsidy need calculations through 

2014 are listed. Seaplanes strongly urges the Department to provide the stability the 

market needs in this period of challenge by awarding a four year term for the contract. 

Alaska Seaplanes has an unbroken record of providing reliable Essential Service from 

Juneau through continual traffic declines, adverse cost situations and a difficult operating 

environment without requesting subsidy level adjustment or service reductions. Loken 

family owned air carriers have served Juneau for 60 years through two generations. 

Since 2008, Seaplanes has improved its equipment and facilities. It now operates three 

fully amphibious deHaviland Beavers and a Cessna 180. All aircraft are Capstone system 

equipped. 

Summary 

Seaplanes now provides a high level of scheduled and extra-section service that exceeds 

previous single carrier levels. It has lower unit costs than competing carriers, and runs a 
smaller ground operation. The efficiencies Seaplanes brings to this operation results in 

lower subsidy needs and more flexible service. 

Respectfully submitted, 

Alaska Seaplane Service, LLC 

Craig Loken, Member 

October 13, 2010 
CERTIFICATE OF SERVICE 

I hereby attest that I have this day served a copy of the foregoing Bid of Alaska Seaplane 

Service, LLC upon the following persons by first class mail: 

Mayor (by registered mail) 

Angoon, AK 99820 

Mayor (by registered mail) 

Tenakee, AK 99825 

Honorable Sean Pamell (by registered mail) 

Governor 

State of Alaska 

P.O.Box 110001 

Juneau, AK 99811-0001 

Postmaster General 

attn: Assistant General Counsel, Transportation 

U.S. Postal Service 

475 L'Enfant Plaza West, SW 

Washington, D.C. 20260 

Hank Myers 

October 13, 2010 
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