### Order: 2014

- 1

- 22

Serve January 31, 2014



## UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

Issued by the Department of Transportation

on the 31 st 

### day of January , 201 4

ORDER TEMPORARILY SETTING SUBSIDY RATE

Summary

By this O rder, the Department is extending the service period for Schuman Aviation Company

Ltd. d/b/a Makani Kai Charters (“Makani Kai”)

, to provide Essential Air Service ( “ EAS ” )

operations at Kalaupapa, Hawaii

, from January 1, 2014

, through May 31, 2014

. Makani Kai

will continue to provide Kalaupapa with 12 round trips a week to Honolulu and 18 rou nd trips a

week to Molokai using nine

- seat Cessna Grand Caravan aircraft at an annual subsidy rate of

$ 923,509

. 1



### Background

By 2011

- 11

- 27 , issued on November 22, 2011 , the Department selected Makani Kai to provide

subsidized EAS at Kalaupapa

, with nine

- seat Cessna Grand Caravan aircraft

, 2 

### for the two

- year

period ending December 31, 2013, at an annual first

- year subsidy rate of $932,772, and a

second

- year subsidy rate of $923,509.

The complete public file for EAS at Kalaupapa may be accessed onlin e through the Federal

Dockets Management System at: http://www.regulations.gov by entering “DOT

- OST

- 2000

-

6773 ” in the “SEARCH for: Rules, Comments, Adjudications or Supporting Documents:” field.

As the end of the current rate term approached , the Department issued Order 2013

- 10

- 3, on

October 4, 2013, requesting proposals from air carriers interested in providing EAS at

Kalaupapa, with or without su bsidy support , for a new contract. Those proposals were due no

later than October 31, 2013. In response, the Department received four proposals, which are

currently under review . However, the Department has not yet completed the carrier

- selection

case, and Makani Kai’s rate to serve Kalaupapa ended December 31, 2013. T herefore, the

Department will extend Makani Kai’s contract until further Departmental action . We expect

1 Subsidy is calculated and distributed on a fiscal year basis, subje ct to the availability of funds.

2 In its original proposal, Makani Kai proposed using one of its Piper Chieftains as a substitute aircraft for the

Grand Caravan when operational needs required it. 

### Essential Air Service at

KALAUPAPA, HAWAII

Under 49 U.S.C. § 41731 et seq

. DOCKET DOT

- OST

- 200 0

- 6773

### 2

Makani Kai to continue to maintain its current level of service at Kalaupapa

, as detailed in

Appendix A

. Consistent with established program policy, we typically use a carrier’s

prospective proposal that was submitted during the competitive bid process to establish a

bridge rate until the carrier selection process has been complete d. After reviewing Makani

Kai’s proposed rate for a two

- year term , we have concluded that it appears reasonable for the

service at issue. We will therefore establish it as the final rate for the carrier’s hold

- in service at

Kalaupapa, until further Depart mental action.

This Order is issued under authority delegated in 49 CFR Part 1. 25 a( b ).

ACCORDINGLY,

1. The Department extends the contract for Schuman Aviation Company Ltd. d/b/a Makani

Kai Charters

, to continue to provide E ssential A ir S ervice at Kalaupapa, Hawaii

, from

January 1, 2014, through May 31, 2014 ;

2

. We set the rate of compensation for Schuman Aviation Company Ltd. d/b/a Makani Kai

Charters , for the provision of E ssential A ir S ervice at Kalaupapa, Hawaii , as described in

Appendix A ;

3. The Department direct s Schuman Aviation Company Ltd. d/b/a Makani Kai Charters to

retain all books, records, and other source and summary documentation to support claims for

payment, and to preserve and maintain such documentation in a manner that readily permits its

audit and examination by representatives of the Department. Such d ocumentation shall be

retained for seven years from the issuance date of this Order or until the Department indicates

that the records may be destroyed, whichever comes first. Copies of flight logs for aircraft sold

or disposed of must be retained. The c arrier may forfeit its compensation for any claim that is

not supported under the terms of this O rder;

4

. Docket DOT

- OST

- 200 0

- 6773 will remain open until further o rder of the Department; and

### 3

5

. The Depart ment will serve a copy of this O rder on the Admi nistrator of the Kalaupapa

Settlement

, Schuman Aviation Company Ltd. d/b/a Makani Kai Charters , and the service list of

this Docket.

By:

SUSAN L. KURLAND

Assistant Secretary for

Aviation and International Affairs

(SEAL)

An electronic version of this document is available on line at

www.regulations.gov

### Appendix A

Schuman Aviation Company, Ltd. d/b/a Makani Kai

Annual Compensation Requirement for Essential Air Service at Kalaupapa, Hawaii

12 r ound t r ips p e r w ee k to Honolulu a nd 18 r ound t r ips p e r w ee k to Molokai

Estimated Annual Revenue: Kaluapapa Resident Prices

Between HNL & LUP $90,480 $ 72.50* Kaluapapa residents price for term of contract

Between MKK & LUP $79,560 $ 42.50* Kaluapapa residents price for term of contract

* plus FET Tax and Segment Fees.

Total Revenue $170,040



### Averaged Estimated Expenses over the course of the contract:

A ircraft $180,000.00

Insurance $96,000.00

Pilots $162,240.00

Fuel $228,150.00

Maintenance $117,000.00

Engine & Prop Reserve $97,500.00

State Landing Fees $15,974.40

Administration $85,000.00

Total Expenses $981,864.40

Operational Loss $(811,824 .00)

Departures per year: 3,120

TWO YEAR SERVICE PLAN

Subsidy requested 1 st 

### year $787,386.60

Estimated passengers 2800

Subsidy requested 2 nd 

### year $771,232.80

Estimated passengers 3000

FOUR YEAR SERVICE PLAN

Subsidy requested 1 st 

### year $ 751,040.00

Estimated passengers 2800

Subsidy requested 2 nd 

### year $ 730,848.00

Estimated passengers 3000

Subsidy requested 3rd year $ 710,656.00

Estimated passengers 3200

Subsidy requested 4 th 

### year $ 690,463.00

Estimated passengers 3400

### Appendix B

Sc 

### human Aviation Company Ltd., d/b/a Makani Kai Air Charters

E ss e n t ial Air S er vi c e t o b e P rovided at Kalaupapa, Hawaii

E ffec tive Pe r iod : January 1 , 2014 , until May 31 , 2014

S c h e dul ed S er vi ce : 12 r ound t r ips p e r w ee k to Honolulu; a nd 18 r ound t r ips p e r w ee k to Molokai

Ai rcr a f t : C e ssna G r a nd C ara v a n or Piper Chieftain , 9 s ea ts

Annual Compensation : $ 787,386

R a te p er El i g ible F l i g h t : $ 252 1



### W ee k l y C e ilin g : $ 1 5

, 120 2

The air c a rr i e r un d er st a nds t h a t it m a y f o rfe it its c omp e ns a tion f or a n y f li g hts th a t it do e s not op era te in c o n f o r m a n c e

with the t er ms a nd stipul a tions of the ra te Order

, i n c luding the s er vi c e pl a ns outlin e d in the Order a nd a n y oth e r

s i g ni f i c a nt e l e m e nts of the re qui re d s er vi ce , without p r ior a p p r ov a l. The air c arr i e r und e r st a nds th a t a n a i r cr a f t t a k e

o f

f a nd l a nding a t its s c h e du l e d d e stin a tion c onstitut e s a c ompl e t e d f li g ht; a bs e nt a n e x pl a n a tion suppo r ting subsi d y

e li g i b ili t y f o r a f l i g ht th a t h a s n ot b ee n c ompl e t e d, su c h a s cer t a in w ea th e r ca n ce ll a tions, o n l y c ompl e t e d f li g hts a r e

c onsid ere d e l i g ible f or su b si d y

. I n a ddition, if the air carr i e r d o e s not s c h e dule or o p era t e its f li g hts in f ull

c on f o r m a n c e with the Order f o r a s i g ni f i ca nt p e r iod, it m a y j e op ar di z e its e nti r e subsi d y c l a im f or t he p er iod in

qu e stion. I f the air c a rr i e r c ont e mpl a t e s a n y su c h c h a ng e s b e y ond the s c ope o f the Order du r ing the a ppli ca ble

p e r iod of th e se ra t e s, it must f i r st noti f y the O ff i c e of Avi a tion An a l y sis in w r iti n g a nd r ece ive w r itt e n a pp r o v a l f r om

the D e p a r tm e nt to be e nsu re d o f f ull c omp e ns a tion. S hould c i rc umst a n ce s w ar r a n t , the D e p ar tm e nt m a y l o c a te a nd

s e l e c t a re pl a ce m e nt air c arr i e r to p r ovide s er vi c e on th e se r out e s. The air c a rr i e r must c ompl e te a ll f li g hts th a t ca n

b e s a f e l y op era t e d; f l i g hts th a t ov e rf l y points f o r l ac k of t r a f f ic will not be c omp e ns a t e d. I n d e t er mi ning wh e t h e r

subsi d y p a y m e nt f o r a d e v i a ting f l i ght should be a djust e d or dis a llow e d, t he D e p a r tm e nt will c onsid e r the e x t e nt to

whi c h the g o a ls of the p r og ra m a r e m e t a nd the e x t e nt of acce ss to the n a tion a l a ir t ra nspo r t a tion s y s t e m p r ovid e d to

the c ommuni t y

.

I f the D e p ar tm e nt unil a t e ra l l y

, e ith e r p a r ti a l l y or c ompl e t e l y , t er min a t e s or re du ce s p a y m e nts f or s e r vi c e or c h a ng e s

s er vi c e r e qui re m e nts a t a sp ec i f ic lo c a tion p r ovid e d f or und e r this Order, th e n, a t the e nd of the p e r iod f or whi c h the

D e p ar tm e nt d o e s m a ke p a y m e nts in the stipul a t e d a mounts or a t the stipul a t e d s er vi c e l e v e ls, the air c a rr i e r m a y

cea se to p r ovide s er v i c e t o th a t sp ec i f ic lo c a tion without re g a r d to a n y r e qui re m e nt f or noti c e of su c h c e ss a tion.

Those a djustm e nts in the l e v e ls of subsi d y a nd/or s er vi c e th a t ar e mutu a l l y a g r ee d to in w r iting b y the D e p ar tm e nt

a nd air ca r r i e r do not c on s titute a tot a l or p ar ti a l re d u c tion or ce ss a tion of p a y m e nt.

Funds may not be available for performance under this Order beyond September 30, 2014

. The Government’s

obligation for performance under this Order beyond September 30, 2014 , is subject to the availability of funds from

which payment for services can be m ade. No legal liability on the part of the Government for any payment may

arise for performance under this Order beyond September 30, 2014 , until funds are made available to the

Department for performance. If sufficient funds are not made available for p erformance beyond

September 30, 2014 , the Department will provide notice in writing to the carrier.

S ubsi d y c ont r a c ts ar e su b j ec t to, a nd in c o r po r a te b y r ef e re n c e

, r e l e v a nt st a t ut e s a nd D e p ar tm e nt r e g ul a tions, a s th e y

m a y be a m e nd e d fr om time to tim e

. How e v er

, a n y su c h st a tut e s, r e g ul a tions, or a m e ndm e nts th ere to sh a ll not

op era te to c ont r o v er t the f o r e g oi n g p ar a g r a ph.

All claims for payment, including any amended claims, must be submitted within 9 0 days of the last day of the

month for which compensation is being claimed. For example, claims for service provided in July must be filed by

October 31 st ; August claims must be submitted by November 30 th , and so on.

1 Annual compensation of $ 787,386 , divided by 3,120 annu al departures ( 12 arrivals and 12 departures at Honolulu

and 18 arrivals and 18 departures at Molokai each week ) x 313 days x 0.99 (completion factor) = 3, 120

. 2 60 flights per week multiplied by $ 252 per flight.