# Alternate Essential Air Service Proposal for Victoria, Texas

Presented By Public Charters, Inc. May 9, 2014May 12 , 2014

Jason Milewski, C.M.
, Managing Director Victoria Regional Airport 502 Chimney Rock Dr. Victoria, TX 77904

VIA Electronic Mail

Dear Mr. Milewski :
Public Charters, Inc. (PC) is pleased to present our proposal to provide Alternate Essential Air Service to the Victoria Regional Airport ( VCT ) under the pi lot program established by 49 USC 41745(a)(3)(f). Based upon the information that we have gathered
, we anticipate enplanements at VCT to increase by approximately 71% over 2012 levels in the f irst year of our proposed program.

You will find that PC’s proposal reflects the attributes of Essential Air Service as originally conceived by Congress, with non

- stop service to hub airport s that makes sense for all stakeholders, in a better class of equ ipment than has recently been available at VCT at a fiscally responsible level of subsidy
, and with the flexibility in scheduling and pricing to fine

- tune operatio n to best meet the needs of the airport and the local community.

We are committed to ensurin g c ontinuity of service to VCT . Not only will we carefully coordinate our commencement of service with the incumbent carrier, we will work with you to finalize contract provisions at both the local and Federal level that permit us to be “held in” pending a contract renewal or selection of a replacement carrier.
Alternate Essential Air Service gives the community an unprecedented level of control of the air carrier and the service that they provide. As many in Congress continue to press for Essential Air Service reform, VCT has a unique opportunity to use this procurement to help define the future of the program, making the best use of Federal dollars while obtaining a better and more appropriate level of service for the community.

We respectfully reques t selection as your air carrier and look forward to collaborating with you on the successful implementation of Alterative Essential Air Service at VCT

. Respectfully submitted this 12 th day of May 201 4
,

____________________________ PUBLIC CHARTERS, INC

. Jim Gallagher, President/CEO 201 Hangar Road Avoca, PA 18702 570

- 457

- 1950 (voice) 570

- 457

- 4113 (fax) j g@publiccharters.com (e

- mail)May 12 , 2014 Public Charters, Inc. Page 1



## About the O fferors

PC is a U.S. Charter Operator authorized pursuant to 14 CFR Part 380 to organize and
sell Public C harters as an Indirect Air Carrier. PC is authorized by the International Air Transportation Association (IATA) to use the two

- letter code “P1” and has distribution rights on
certain Global Distribution System ( GDS ) platforms including, but not limited to Sabre and
Amadeus , through certain online travel agencies , including but not limited to Priceline.com and Fly.com , and has an agreement to settle ticket sales , including sales of public charters flights, through the Airlines Reporting Corporation ( ARC )

. A copy of ARC’s press release regarding its arrangement with PC (reprinted from travelagentcentral.com ) is attached hereto as Exhibit A . PC owns proprietary web

- based software products that together address all aspects of ticket sales, distribution, e

- tick eting, baggage tracking, and interline communications. PC is TSA Secure Flight compliant, providing both domestic and international TSA clearances. PC also has direct experience in all aspects of air carrier station operations and management.

In 2012, PC received the first

- ever award under the Alternate Essential Air Service under the pilot program , providing services for the Manistee

- Blacker Airport in Manistee, Michigan (MBL) to Chicago Midway Airport (MDW). This Service is conducted between the mai n terminals at each airport with full TSA screening of passengers and baggage. All flights under this program are operated as public charters under 14 CFR Part 380. PC is the indirect air carrier and Corporate Flight Management, Inc. (CFM) is the direct 

### air carrier. CFM conducts all flights for the program on its 19

- passenger Jetstream aircraft. PC is presently negotiating an extension of this contract for a 4 year term.

PC contracts with Corporate Flight Management (CFM) to provide aircraft, crews, f light operations, and aircraft maintenance CFM is a U. S. Direct Air Carrier (certificate number
FJTA920D ) authorized by the FAA to operate under 14 CFR Part 135. A copy of CFM ’s Air
Carrier certificate is attached hereto as Exhibit B

- 1. On January 14 , 20 1 4 , CFM received its commuter fitness from USDOT. A copy of CFM’s Commuter Air Carrier Authorization is
attached hereto as Exhibit B

- 2.May 12 , 2014 Public Charters, Inc. Page 2



### CFM presently operates 6 BAE “Jetstream” regional airliners (4 Jetstream 31/32 series
19

- passenger aircraft and 2 Jets tream 41 30

- passenger aircraft) in addition to the 20 other
turbine

- powered aircraft in its fleet. The company has a TSA

- approved full aircraft security program permitting operations into and out of “sterile” airport terminals

.

On the MBL

- MDW route duri ng the period beginning March 1, 2013 and ending March 31, 2014 MBL

- MDW program, PC and CFM have achieved a 9 8 .6 % flight completion rate

. During that period, there were two weather

– related events, one which resulted in a cancellation
and one which resu lted in a diversion. There were also five maintenance

- related events, three of which resulted in flight delays that were completed the following day and two of which were completed within 4 hours or less. There were no delays or cancellations due to crew issues.



## The P roposed S ervice

After consulting with representatives of VCT
, PC has elected to propose service to two hub airports. The Program will consist of one round trip per day (excluding Sundays ) between the Victoria Regional Airport (VCT) and Dall as

- Fort Worth International Airport (D FW ) with an intermediate stop on
b oth the outbound and return legs at the Austin

- Bergstrom International Airport (AUS )

. In addition, on the busier travel days of Monday, Wednesday , and Friday, PC proposes to operate a second round trip
between VCT and AUS

. Under PC’s proposed program, VCT would receive a total of 30 flight segments per week : 24 with the VCT

- AUS

- DFW

- AUS

- VCT routing and 6 with the VCT

- AUS

- VCT routing

. This Program will be provided as Alternate Essential Air Service (AltEAS) under the pilot program established by 49 USC 41745(a)(3)(f) and will be operated as public charters in accordance with 14 CFR Part 380.

T he service will be operated during every week of the year on the following days: Monday,
Tuesda y, Wednesday, Thursday, Friday and Saturday

. Each week, VCT will receive the equivalent of 9
round

- trips to AUS and 6 round

- trips to DFW

.

The gate

- to

- gate time for each flight segment between VCT and AUS is expected to be approximately 35 minutes ( roun ded to .6 hours). The gate

- to

- gate time for each flight segment between
AUS and DFW is expected to be approximately 66 minutes (expressed as 1.1 hours)

. The total gate

- to

gate time for one way travel between VCT and DFW is expected to be approximately 2 hours and 10May 12 , 2014 Public Charters, Inc. Page 3

minutes, including time on the ground at AUS. All operations will be conducted to and from the main terminal at each airport . All passengers, their baggage, and the aircraft will undergo full TSA screening at the main terminal at their trip’ s point of origin. The passenger check

- in location at each airport will be printed on the itinerary that we will provide to each passenger.


## Proposed Daily Flight Schedule

PC proposes a service pattern tailored to meet the needs of the community Figure 1 below is a

pro

- forma timetable for the proposed morning service Monday through Saturday of each week

. Figure 2 below is a pro

- forma timetable for the proposed afternoon ser vice on Mondays, Wednesdays, and Fridays
of each week

. All times in each figure a re local times. PC will continually monitor changes in the timetables for the connecting carriers at AUS and DFW . I n collaboration with VCT
, PC will adjust its
schedule , including

– if necessary

- the days on which the service operates, to best meet the c onnecting flight needs of its passengers. Also, please note that we propose service between the main terminals at each airport , which will require full TSA screening of passengers and baggage at VCT

.

Pro

- Forma Schedule: One

- Stop Service ( Mornings ) Dep a rt Arrive Stops Time VCT 6:00 AM AUS 6: 35 AM 0 .6 AUS 7: 0 5 AM DFW 8:10 AM 0 1. 1 DFW 12:30 PM AUS 1:35 PM 0 1.1 AUS 2:05 PM VCT 2:40 PM 0 .6

Figure 1 : Pro

- Forma Daily Flight Schedule: All Weekdays and Saturdays

Pro

- Forma Schedule: Non

- Stop Service ( A fternoons ) Dep art Arrive Stops Time VCT 3 :30 PM AUS 4 : 05 PM 0 .6 AUS 4 : 3 5 PM VCT 5 : 1 0 PM 0 .6

Figure 2 : Pro

- Forma Daily Flight Schedule: Mondays, Wednesdays , and Fridays

We will base the aircraft, crews, and maintenance technicians at VCT to ensure on

- time performance.

PC and CFM ha ve the flexibility to add non

- subsi dized flights on relatively short notice to AUS,
DFW , and other destinations and to bring in additional 19

- passenger Jetstream aircraft in order to
accommodate VCT ’s varying air transpor tation needs.May 12 , 2014 Public Charters, Inc. Page 4

In addition, if all of the flight segments of the proposed service individually average 15 or more enplanements for a period of 90 consecutive days , and the level of enplanements is consistent from flight to flight and is not attributable to seasonal or short

- term factors, the n VCT, PC, and CFM will evaluate the upgrading to an aircraft configured with 30 passenger seats.



## The Hub A irport

s

AUS
AUS is served by over 15 airlines offering nearly 40 daily non

- stop domestic destinations and 3

non

- stop international destinations

– including London, England

– as well as dozens of daily connecting flights. In addition, AUS offers access to low cost carriers such as AirTran, Frontier, JetBlue and
Southwest

.

AUS has 2 5 gates across the single co ncourse that comprise s its passenger terminal.



## DFW

D FW is served by over 24 airlines offering nearly 7 00 daily non

- stop domestic destinations and

numerous daily non

- stop international destinations, as well as hundreds of daily connecting flights. I t is a hub airport for American Airlines . In addition, D FW offers access to low cost carriers such as JetBlue
and Frontier

.

DFW has 195 gates across the 5 concourses that comprise its terminal.

We have been in contact with the marketing office s and grou n d handlers at both AUS and DFW, and are confident that we will have ticket counter, gate space, and ground support in place at well in advance of the commencement of our AltEAS operations.May 12 , 2014 Public Charters, Inc. Page 5



## The Aircraft and Crews

PC proposes operations using CFM ’s Jets tream 31/32 19

- passenger aircraft. The Jetstream is a pressurized twin

- engine turboprop airliner built and regulated to 14 CFR Part 25 standards. Figure 3 presents a layout of the Jetstream 31/32 cabin. Its crew compliment includes a Captain and First O fficer. Both crew members receive regular simulator training at Flight Safety International. The Jetstream 31/32 offers the largest cabin in the 19

- seat class of aircraft and have been proven to be both safe and economical in worldwide operation. It
is t he only 19

- seat airliner to offer galley and enclosed lavatory facilities

. F 

### igure 4 is a photograph of the passenger seats in one of the Jetstream
aircraft presently operated by CFM

.

CFM ’s Jetstream aircraft are fast, with a 265 mph “standard” cruise spe ed. They are also very fuel efficient, consuming approximately 11 5 gallons of fuel per flight hour ( less than half that of a comparable regional jet )

. With 19 passengers plus standard baggage, the Jetstream has a
maximum non

- stop range of over 60 0 statut e miles. AUS is appr oximately 103 statute air miles
from VCT and DFW is approximately 1 91 statute air miles from VCT. Therefore, both proposed hub airports are well within the Jetstream ’s non

- stop range.

The Jetstream’s average runway requirement is 3, 900 feet

– comparable to many general aviation aircraft

. Its 25 ,000
f oot service ceiling permit s CFM’s Jetstream aircraft to climb above most bad weather. The Jetstream aircraft are fully

- deice equipped for flying into known icing and has
freon air cond itioning for passenger comfort while on the ground. CFM’s Jetstreams are also equipped with advanced safety systems, including a Traffic Collision Avoidance System (TCAS I) and an Enhanced Ground Proximity Warning System (EGPWS). Figure 4 : CFM ’s Jetstream s Feature Leather Passenger SeatsMay 12 , 2014 Public Charters, Inc. Page 6



### In addition, t he Jetstr eam features a flight deck that is physically separated f rom the main passenger cabin, a pressurized cargo hold with 628 lbs. / 65 cubic feet of baggage capacity , and an exterior cargo pod with an additional 435 lbs. / 20 cubic feet of baggage capacity

. C FM’s
Jetstream have an average useful load of up to 4
, 5 00 pounds , with over 1,000 pounds dedicated to baggage/cargo space

.

CFM has no accidents or violations and has been given a Platinum rating by the independent air
carrier evaluation firm ARG/US (se e Exhibit B

- 3 )

.

M aintenance has always been the key to C FM ’s reliable on time performance. As noted above,
we will base aircraft technicians in VCT along with the aircraft. We will provide our technicians with an inventory of spare parts and the suppo rt equipment necessary to keep the dispatch reliability of CFM’s
Jetstreams at 99% or better. The on

- site spare parts at VCT will be augmented by the over $ 5 million parts inventory maintained on hand at CFM’s headquarters in Smynra
, Tennessee

.



### As not ed above, CFM presently has 4 Jetstream 31/32 aircraft in its fleet, providing ample reserve capacity to address planned and unplanned requirements. CFM also operates 2 Jetstream 41 aircraft configured with 30 passenger seats that can replace or supplemen t the 19

- seat aircraft when necessary.



## Sales

Sales will be conducted using PC’s “ P1 ” IATA code through its proprietary computerized reservation system (CRS). PC’s CRS has “Type A” real time connectivity and has been certified
for E

- Ticketing on both th e Sabre and Amadeus GDS platforms . One of the features that GDS participation provides is access to information about all available connections at the Alt EAS hub airport s . GDS participation also makes fares available world

- wide, maximizing exposure for
VC T

.May 12 , 2014 Public Charters, Inc. Page 7



### In addition to GDS distribution, our flights will be available for purchase through a
number of Online Travel A gents and travel aggregators , as well as through our own web site. Figure 5 shows a screen capture from Cheapoair .com of a flight sold by PC under the MBL

MDW AltEAS program

. For the VCT AltEAS program, flights will display in a similar fashion.

Through GDS and internet distribution, we enable passengers or their travel agents to construct itineraries using multiple carriers by purchasin g tickets on each carrier separately through a single transaction

. Travel agents can use a special “segment select” function that enables then to build each segment of flight with different carriers on the same itinerary regardless if there is an existing interline agreement. Figure 6 shows a screen capture of a combined itinerary for a MBL

– MCO (Orlando, Florida) round trip with PC flights paired with both low cost and major air carriers.

Figure 5 : Sample PC Cheapoair Search Screen



### We receive com plete electronic information on all of our bookings, including multiple carrier itineraries. Our system is designed to identify such bookings and to provide the pertinent data to our upline and downline station personnel. Funds from all GDS and online sa les will beMay 12 , 2014 Public Charters, Inc. Page 8



### cleared through the Airline Reporting Corporation and remitted directly into the depository

escrow account required by 14 CFR Part 380. In addition, p assengers will protected by 14 CFR Part 380 bonding and escrow requirements applicable to bo th PC and CFM.

We will fully comply with the 14 CFR Part 380 provisions governing tour operator

participant contract s. S creen displays will disclose the information required by Part 380 and DOT guidance on advertising and i nternet sales . Also, as part of the purchase process,

p assengers or their travel agents will receive electronic copies of the Operator Participant
Contract and the C FM Contract of Carriage

.

Figure 6 : PC Combined Itinerary Generated by a Travel Agent with United and Frontier fo r a MBL

- MCO Round Trip



### CFM ’s Contract of Carriage for Alt EAS flights will incorporate all DOT regulations providing consumer protection that are applicable to commuter air carriers, meeting consumer expectations for scheduled service operations with airc raft having fewer than 60 passenger seats.

Flights operated as public charters offer enhanced consumer protections when compared to tickets sold by traditional mainline, regional, and commuter air carriers:

 The funds from all ticket purchases for each f light are held in escrow at a USDOT

approved financial institution. Neither the direct or indirect air carrier can access the funds until the flight is complete

 Passenger refunds are protected by a pub lic charter payment bond. The bonding company can mak e refund payments to passengers if the carrier is unable to do so

 14 CFR Part 380 places significant restrictions on the cancellation of pubic charter flights. It specifically prohibits the cancellation of any flight within 10 days of its scheduled departu re other than for circumstances that make it physically impossible to perform the tripMay 12 , 2014 Public Charters, Inc. Page 9



###  All public charter programs are approved

– and adherence to the public charter regulations is monitored by

- the USDOT’s Special Authorities Division. Rule
infractions may lead to the termination of a carrier’s public charter program and denial of approval for future programs



## Program Phase

- in and Commencement of Service

The contract with the incumbent Essential Air Service provider is scheduled to end on September 3 0, 2014. PC ’s service would commence the following day. We expect to commence phase

- in activities and ticket pre

- sales approximately 60 days prior to our start date.
We will coordinate with the incumbent carrier to ensure a smooth transition. PC would co nsider an earlier start date in the event that the DOT, the incumbent ca rrier, and the co mmunity agreed

to an early termination of the existing contract, provided that PC would have at least 60 days for phase

- in.



## Projected Fares

W e have determined that an average one

- way fare to AUS of approximately $ 5 9 .00 and an

average one

- way fare to DFW of approximately $ 89 .00. The average all

- in price for a VCT

- AUS round trip would be $118.00 and the average all

- in price for a VCT

- DFW round trip would be $ 178 .00

. PC’s
standard fares will have limitations on the circumstances under which they will be refunded.



## Projected VCT Enplanements

Our analysis indicates that the combination of direct service from VCT to AUS and D FW , coupled with competitive one

- way and r ound trip fares, reliably delivered using aircraft configured and equipped with the amenities expected of regional carriers by the flying public
, could increase annual enplanements at VCT by approximately 71 % over 20 12 levels in the first year of AltEAS operations. Total traffic at the airport could conceivably exceed 10,000 passengers

.May 12 , 2014 Public Charters, Inc. Page 10



## Proposed Subsidy

Our proposed service will require an annual subsidy of $ 2,2 88 ,152 . This breaks down to a per

flight segment amount of $ 2, 217 or $ 14 6 per projecte d passenger (inbound and outbound). The details of our subsidy calculation appear in Attachment C hereto.

We believe this to be a fiscally responsible level of subsidy and one that maximizes the utility of
the service to the community and the flying public for each dollar spent.



## Interline Agreements

PC has held discussions with a number of major air carriers regarding the possibility of interline agreements

. We are also in discussions with current holders of interlines with major carriers regarding joint marketing efforts for several routes, including VCT

- AUS

- DFW and VCT

- AUS

.

The technical implementation of the interline arrangements will take some months to complete.
Until such time and prior to the final implementa tion of the interlines, we will use innovative approaches such as combining internet boarding pass printing technology with color coded baggage identification tags to facilitate the transfer of passengers and baggage to and from other carriers through ster ile terminal operations. Our station personnel will work one

- on

- one with the station personnel of the other carriers using these and other creative methods to provide seamless boarding and baggage handling for our connecting passengers until the interline s are fully implemented.

... rest of page intentionally left bla nkMay 12 , 2014 Public Charters, Inc. Page 11 Figure 7 “Scooter”

– an animated character developed by

PC for TV and web ads 

## Market Development

W e will initiate a number of marketing activities i ncluding, but not limited to:

 Local televised marketing campaigns (Figure 7 below shows a still from an animated TV and web campaign created by PC for va rious markets)

 Web marking campaigns by IP zip codes

 Trade campaigns (“Free Seats for Free Trades”) to promote local support , including 60 free seats per contract year to the Victoria Regional Airport A uthority for marking purposes

 “Flying Billboard” pr omotions to help local businesses use the aircraft to promote their products
and services

 Local promotions including discount coupons, promotional code savings campaigns, “Buy One Get One F ree ” purchase programs and travel vouchers to help raise enplanem ents

P C will put marketing people on the ground in the VCT market in order to put these promotional plans into action

.

In the future, the needs of the community may change. It is possible that t here may come a time
that AUS or DFW are no longer the b est airport s to be served from VCT . PC will conduct continual data analysis and maintain open lines of communication with all stakeholders to ensure that we provide service
to the hub that best meets the over

- all needs of VCT users. If a change of the hu b airport is warranted, we will carefully coordinate the selection of and transition to the new hub with the community and all stakeholder groups.



## Business Structure

PC anticipates using the same structure with VCT that we successfully employ with MBL

. VCT would enter into an agreement with the Federal Government for the program funding. PC would enter inMay 12 , 2014 Public Charters, Inc. Page 12

to an agreement with VCT for the services. PC would then enter into a contract with CFM for direct air
carrier services and with other entities for v arious other functions to support the program. The safety and consumer protection regulations that govern the services that we will provide through this program dictate that certain functions may be performed only by the entity that is licensed or
otherwis e approved to do so. This means that CFM will be solely responsible for all flight operations and PC will be solely responsible for all ticket sales. The regulations permit PC to provide other functions
, such as customer service, gate agent service, and g round support directly through our PC or through subcontractors at each airport

. 

## Contractual Considerations

We believe that the service contract between VCT and PC (and the corresponding agreement between VCT and the Federal Government ) should reflect a s much as possible the terms and conditions applicable to traditional Essential Air Service. Upon notice that VCT wishes to procure PC’s services under the AltEAS program, we will provide model documents that can be used to effectively reflect the
featur es of traditional EAS in the agreements that establish and fund the proposed VCT

- DFW program while also satisfying the guidelines established by the DOT for AltEAS in Notice DOT

- OST

- 2004

- 18715

- 0001. Having successfully navigated the AltEAS contracting pro cess at the local and Federal level with our existing MBL

- MDW program, we can provide a significant amount of support in this area.

Furthermore, consistent with the AltEAS contract between PC and MBL, PC requires an initial cash deposit of One Hundred Fif ty Thousand Dollars ($150,000.00) from the AltEAS grant funds not less
than thirty (30) days prior to the start of service. 

## Proposed Contract Term

While there is no set term for an AltEAS program, PC believes that a four (4) year contract model
which is also acceptable under the traditional EAS program is appropriate for this program. We propose a
24 month base contract period with an additional 24 month option period to be exercised at the discretion
of VCT

. The base period and option period will each require the annual subsidy amount set forth herein.

W e understand how critical the continuity of air service is to the community. We therefore

propose that at the end of the term , PC continue to provide AltEAS on a month

- to

- month basis until such
time as a new contract is issued to us or a replacement carrier commences service. We propose that ourMay 12 , 2014 Public Charters, Inc. Page 13

subsidy for each such “hold

- in” month be 1/12 ($ 1 90,679 ) of the total annual subsidy amount set forth
herein. 

## Payment Terms for the Subsidy

Subject to the re quirement for the initial $150,000 deposit discussed above, PC proposes that the per flight subsidy be based on flights completed during each calendar month and paid in arrears to its public charter escrow account upon VCT ’s receipt of a report from PC det ailing that month’s flight operations

. The form and content of the report will be agreed to by the parties as part of the contracting

process. This payment protocol will ensure that the AltEAS funds are only paid for flight services
rendered.



## Other Contractual Terms and Conditions

There are a myriad of specific items
, such as r eporting a nd performance metrics
, that need to be agreed to in detail as part of implementing the proposed service. It is also advisable for us to have
contractual mechanisms that allow the i ncorporation of new regulations, such as e nhanced air traveler protections
, or changes to the over

- all EAS program that may be implemented in the current session of Congress. As noted above, upon notice that VCT wishes to procure PC’s services under the AltEAS program, we will provide model documents that address these various d etails. Again, having successfully the AltEAS contracting process at the local and Federal level with our existing MBL

- MDW program, we can provide a significant amount of practical guidance and support in working through these matters.May 12 , 2014 Public Charters, Inc. Exhibit A



## Exhibit AMay 1 2 , 2 014 Pub lic Charters, Inc. Exhibit B

- 1



## Exhibit B

- 1May 12 , 2014 Public Charters, Inc. Exhibit B

- 2



## Exhibit B

- 2May 12 , 2014 Public Charters, Inc. Exhibit B

- 2



## Exhibit B

- 2May 12 , 2014 Public Charters, Inc. Exhibit B

- 2



## Exhibit B

- 2May 12 , 2014 Public Charters, Inc. Exhibit B

- 3



## Exhibit B

- 3May 12 , 2014 Public Charters, Inc. Exhibit C



## Exhibit C