## Before the United States Department of Transportation April 28, 2014

Proposal to Provide Essential Air Service at

KAKE, ALASKA

Under 49 U.S.C. 41731 et seq. Docket DOT

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## Proposal to Provide Essential Air Service at Kake, Alaska

By Order 2014

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- 15 , the Department requested proposals from carriers interested in providing essential air service (EAS) at Kake, Alaska

. Pursuant to that Order , SeaPort Airlines, Inc. dba Wings of Alaska respectfully submits this timely proposal to provide EAS at Kake , Alaska with an annual subsidy of $ 368,623

.

Soon after submitting this proposal to the Department, c opies will be provided to the City of

Kake , Organized Village of Kake (OVK), Kake City School District, and Alaska Division of

Statewide Aviation . We will offer to meet with these stakeholders, along with any interested citizens, to answer any questions in regard to our proposal

Correspondence re garding this proposal should be directed to:

Timothy Sieber

Executive Vice President SeaPort Airlines, Inc. 7505 NE Airport Way Portland, OR 97218 (971) 340

- 1716 tim@seaportair.comApril 28, 2014

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## About Wings of Alaska

SeaPort Airlines, Inc. is a FAA certified scheduled airline founded over 30 years ago and doing

business in Southeast Alaska as Wings of Alask a

.

Currently

, approximately 230 professionals operate an average of 1 40 daily departures to 2 1

cities in nine state s

. 1 Wings of Alaska provides scheduled service (passenger, freight and mail) between Juneau and Skagway, Haines, Hoonah, and Gustavus

. In addition, we operate charter flights throughout Southeast Alaska on a regular basis.

The company’s fleet is comprised of 17 aircraft, including two Cessna Caravans ( increasing to three during summer months ) and four Cessna 206/207s based at Juneau International Airport and assigned to Wings of Alaska. The company’s national reach and large fleet provides us the flexibility to reposition additional aircraft to Southeast Alaska over the summer

, ensuring that our obligations to local residents are not negatively impacted as we serve the seasonal tourist trade.

1 Service to Great Bend and Wichita, Kansas will be added in June 2014.April 28, 2014

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- 0217 Page | 3 Alaska Airlines Connections Enabled by World

- Class Reservation System

On March 23, 2014, the company completed the migration of passenger service systems to the Amadeus Altéa suite of airline IT solutions, providing our customers with the benefits of industry

- leading technology chosen by 100+ airlines around the world. 2

For customers in Southeast Alaska, the greatest benefit of Altéa is the new interline agreement between Wings of Alaska and Alaska Airlines, enabling the sale of tickets connecting any of our

communities in Southeast Alaska with the over 90 destinations o f Alaska Airlines. The capabilities of Altéa allow us to offer the convenience of connecting tickets directly on www.WingsOfAlaska.com . The “screen capture” below illustrates a sample of the options

offered in r esponse to a query for travel between Skagway and Seattle. If selected to provide EAS at Kake, options for connecting between Kake and Alaska Airlines destinations would be similarly displayed.

In addition to Wings of Alaska website, our flights (including connecting itineraries with Alaska Airlines) are available for sale anywhere in the world via travel agents and on major online travel

2 Among other carriers using the Altéa suite are Air France, KLM Royal Dutch Airlines, Lufthansa, Southwest Airlines (international services only), Korean Airlines, Qantas, and British Airways.April 28, 2014

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- 0217 Page | 4 service such as Orbitz, Travelocity, Expedia, Kayak , Hipmunk, and CheapoAir

. Customers may

also make reservati ons over the telephone or at any airport ticket counter.

The interline agreement also provides the convenience of through baggage check

- in. This means that Wings of Alaska customer baggage is automatically transferred to/from connecting flights of Alaska Airlines thus eliminating the need to claim and recheck baggage at Juneau International Airport.

Finally, it is important to note that the other scheduled commuter air carriers in Southeast Alaska do not have reservation platforms with capabilities compa rable to those of Altéa. This means that only Wings of Alaska is able to offer Southeast Alaska residents the convenience of connecting service with Alaska Airlines. 3

Unparalleled Safety and Reliability

Kake’s location results in a route of flight along Stephens Passage or Seymour Canal

, including a crossing over Frederick Sound . The weather along this route is frequently marginal VFR and some portions of the route have poor or non

- existent radio communication

. Despite these operational challenges , Wings of Alaska is well positioned to provide the citizens of Kake with

safe and reliable air transportation :

• The company’s FAA Operation Specifications authorizes operations under Instrument Flight Rules (IFR) and we will, when weather conditions require, use this authority to ensure high levels of operational reliability at Kake.

• Wings of Alaska is a participant in the FAA’ s Capstone Project Phase Two in Southeast Alaska, a safety program that concentrates on increasing safety through technology with systems such as GPS receivers, data link transceivers, ADS

- B, Multi

- Function Displays, Flight Information Services, moving map s, and terrain databases. Aircraft in the fleet permanently assigned to Wings of Alaska and based at Juneau are Capstone

- equipped.

• Wings of Alaska is an active participate in the Alaska Air Carrier Association's Medallion Foundation, a non

- profit or ganization promoting aviation safety through systems enhancements by providing management resources, training, and support to the aviation community. Of the two air carriers with scheduled authority based at Juneau International Airport, only Wings of Alas ka has earned the Medallion Shield indicating achievement of all five cornerstones of the Medallion program along with engagement and support of the company’s safety culture among all employees, management and frontline alike.

3 Wings of Alaska respectfully requests that the benefits of the interline agreement to Kake residen ts be given favorable consideration when evaluating carrier proposals, and in a manner consistent with 49 U.S.C. §41733 (c) (1) which directs the Department to consider four factors when selecting a carrier to provide Essential Air Service: (1)

service rel iability; (2) contractual and marketing arrangements with a larger carrier at the hub; (3) interline arrangements with a larger carrier at the hub; and (4) community views.April 28, 2014

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- 0217 Page | 5 Full Cargo Service

Cargo service is offered on all scheduled flights of Wings of Alaska, including interline cargo transfers to/from Alaska Airlines. At Juneau, our large cargo warehouse includes walk

- in chillers and freezers for storage of perishable items awaiting pick

- up or ou tbound flight departure.

In addition to cargo, Wings of Alaska is an agent for both FedEx and UPS express shipments, and is contracted by the U.S. Postal Service for carriage of mail.

If selected to provide EAS at Kake , Wings of Alaska would offers a standard cargo rate of $.50 per pound with a minimum charge of $10 for shipments less than 20 pounds. Discounted cargo rates are offered to high volume shippers in most of our markets and we offer similar opportunities in the Kake market.

Customer Loyalty Rewarded With “Wings Wanderlust”

Wings of Alaska recognizes customer loyalty through our “Wings Wanderlust” frequent flyer program. This program

allows a customer who takes nine one

- way flights within a 24 month pe riod to earn a free one

- way ticket. A free roundtrip ticket is earned when a customer takes 16 one

way flights within a 24 month period.

There is no cost to join the program and no blackout dates

or limits on the number of seats available for earned free

travel.

Track Record of Building Community Partnerships

Wings of Alaska prides itself on developing partnerships in each community that it serves. This includes participation in local events, in

- kind sponsorships and donations, partnering with local

sch ools, community food drives, and advance notification and opportunity for input prior to schedule and fare changes. These community partnerships serve both our own interests and those of the community by fostering a long

- term, stable relationship that resu lts in increased ridership and, in the case of EAS markets, can contribute to lower subsidy requirements over

time.

Specifically at Kake, after selection we would immediately offer the school district a 15 %

discount on charters for team traveling to “away ” games. This would be followed by inclusion in all programs that we conduct across our Southeast Alaska operations, as well as programs and events that are specific to community needs at Kake.

Special Deals & Fee Waivers For Residents

Wings of Alaska of fers residents of Alaska special rates, higher free baggage allowance, and waiver of certain fees and service charges that apply to travelers from out of state. These deals and discounts, which would be offered in Kake if Wings of Alaska is selected to pro vide EAS, are summarized on the table on the next page.April 28, 2014

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- 0217 Page | 7 Marketing & Customer Engagement Strategy

To promote its services, Wings of Alaska generally employs a mix of advertising, promotional events and customer engagement using social media. Illustrated below are some recent promotional activities undertaken by Wings of Alaska and which would be extend ed to include Kake if selected to provide EAS In that community.April 28, 2014

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- 0217 Page | 8 Wings of Alaska is the Carrier of Choice in Southeast Alaska

For the reasons cited above, along with great customer service delivered by our employee team, Wings of Alaska is proud to say we are the carrier of choice for an overwhelming majority of air travelers in Southeast Alaska. The chart below validates this preference by ill ustrating the share of total passengers that each scheduled commuter air carrier carried in competitive local markets from Juneau for the year ending December 31, 2013. 4

Wings of Alaska would be honored to add Kake to its route system and is committed to providing the community with the same level of safety and service that earned, and allows us to maintain, our market leading position in Southeast Alaska.

4 Most recent 12

- month period of carrier T

- 100 data published by US DOT.April 28, 2014

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## Service Proposal

Aircraft

Wings of Alaska proposal is based on flights to Kake with turbine

- powered Cessna Caravan

aircraft that seat 9

- passengers. The Cessna Caravan also offers a large amount of capacity for freight and mail, including 111 cubic feet and 1,090 pounds in the cargo pod. Wings of Alaska Caravans have “quick change” interio rs, allowing for seats to be removed when passenger loads are 7 or less, with the resultant floor space used to carry additional cargo.

When weather and loads allow, Cessna 207 aircraft will be substituted on the route, reducing the required subsidy by approximately 45% per departure . The annual subsidy ceiling in this proposal is based on operations with the Cessna Caravan

.

When weather permits and anticipated load (factoring in passengers, mail, and cargo) will allow, Wings of Alaska proposes fly to Kake using a smaller Cessna 206/207, with a 44% lower subsidy rate per departure.

Complimentary Ground Shuttle at Kake

Wings of Alaska is aware that the incumbent EAS operator provides complimentary shuttle

service between the airport and home for customers in Kake. If selected to provide EAS at Kake, Wings of Alaska will continue to provide this service.

Frequenc y & Schedules

In Order 2014

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- 15 , the Department requested frequency at Kake consisting of 14 weekly roundtrips during the 21 week “ peak ” period and seven weekly roundtrips during the remaining 31 weeks of the year

. The operational and traffic projections, along with resultant subsidy request, is based on the Department’s request.April 28, 2014

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- 0217 Page | 10 Fares

In all of its markets, W ings of Alaska offers four types of fares that give customers the choice of realizing significant savings when travel plans are known in advance or paying a little extra for the convenience of complete flexibility to change flights and travel dates. Each o f the fare types

are summarized below:

 FULL Flex: This is highest price point but provides our customers with total flexibility to change their travel plans or, if they choose, obtain a full refund without incurring a service charge or fees.

 FREE 2 Flex: Lower than the FULL Flex fare, this fare permits unlimited changes to travel plans but is not refundable.

 Flex 4 FEE: Offering savings from the less restrictive FULL Flex and FREE 2 Flex fares, this

fare is non

- refundable and any changes to original travel plans require payment of a $50 service charge.

 NO Flex: This is our lowest fare and offers significant savings from the FULL Flex and FREE 2 Flex fares, but changes to flight dates and times are not permitted once a ticket is

sold.

If selected t o provide EAS at Kake, Wings of Alaska would employ a similar fare structure in the

market. The table below summarizes the proposed price for each fare type, along with

summarized rules and restrictions:

FARE TYPE FULL Flex FREE 2 Flex Flex 4 FEE NO Flex

Booking Class/Fare Basis Code Y B Q M

Advance Purchase (days prior to departure) 0 0

- 3 3

- 7 7

- 14

Change Fee $0 $0 $50 Not Allowed

Refundable Yes No No No



### Fare Between Kake and Juneau

(all fares are one way, including taxes and fees) 

### $ 149 $ 129 $ 99 $ 7 9

Based on the above fares and assumptions with respect to percentage of customers using each fare type, Wings of Alaska projects that customers traveling between Juneau and Kake would pay an average of $ 108 each way, including all taxes and fees. For the customer, this will

translate into an average savings of 28% (e.g., $42) for each one

- way trip between Kake and

Juneau compared to fares of the incumbent carrier

. 5

5 On Apr il 18 2014, one

- way fare quote of $149.99 was obtained from Alaska Seaplanes website booking engine on April 18, 2014 for travel from Juneau to Kake on May 15 and from Kake on May 21, 2014.April 28, 2014

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## Subsidy Request & Supporting Calculations

For the provision EAS at Kake, Wings of Alaska is requesting annual subsidy of $ 368 ,623 and on the basis of being awarded two

- year contract

.

The requested subsidy level assumes a 9 7 % completion factor on 14 weekly roundtrips during the 21 week “peak” period and 7 weekly roundtrips dur ing the 31 week “off peak” period. The requested subsidy level also assumes the use Cessna Caravan 208 aircraft at a cost of $ 3 72 per departure. To ensure prudent use of EAS subsidies, when weather and anticipated load (factoring passengers, mail, and carg o) allow, Wings of Alaska would endeavor to utilize

Cessna 206/ 207 , with a lower cost per departure of $2 11 (savings to Department of approximately 44%). In this context, the subsidy requested represents a maximum annual amount and it highly likely that ac tual EAS billings submitted by Wings of Alaska would be proportionally lower.

The table on the next page summarizes the operating and economic assumptions that provide the basis for calculations supporting the requested level of subsidy in this proposal. We

encourage the Department and community to contact us if there are questions related to the subsidy requirement calculations or any other part of this proposal.

Respectfully submitted,

Timothy F. Sieber

Executive Vice President Seaport Airlines, Inc. d/b/a Wings of AlaskaApril 28, 2014

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- 0217 Page | 12 Operating Projections

KAE-JNU Sector Length (sm) 100 Scheduled Departures 1,022

Scheduled Block Hours 896.3

Projected Completion Factor 97.0% Projected Completed Departures 991 Projected Completed Block Hours 869.4

Passenger Projections
Projected Passengers 2,554
Passengers per Departure 2.6

Projected Average Fare $108.00

Revenue Passenger Miles (RPMs) 255,400 Available Seat Miles (ASMs) 892,206
Projected Load Factor 28.6%

Financial Projections

Revenues
Passenger Ticket Revenue $275,832
Cargo Revenue $25,357

Mail Revenue $52,645

Total Revenue $353,834

Expenses Flight Operations $47,817

Aircraft Lease $90,861

Fuel & Oil $204,220
Traffic Servicing & Reservations $48,895

Insurance $14,780

Maintenance $213,001

Sub-Total - Direct $619,573

Indirect $68,481
Total Expenses $688,054

Projected Operating Profit/(Loss) ($334,220)

Economic Return @ 5% $34,403

Required Subsidy $368,623.04

Subsidy per Departure - C208 $372
Peak Period Weekly Ceiling $10,412
Off Peak Period Weekly Ceiling $5,206
Subsidy per Passenger $144

Subsidy per Departure - C207 $207 

### EAS at Kake, Alaska Subsidy Requirement Calculation for SeaPort Airlines, Inc. dba Wings of Alaska