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BEFORE THE

DEPARTMENT OF TRANSPORTATION

WASHINGTON, D.C.

_________________________________________ 

 )

Essential Air Service at )

)

MERCED, CALIFORNIA ) Docket OST-1998-3521

VISALIA, CALIFORNIA ) Docket OST-2004-19916

)

Under 49 U.S.C. §41731 et seq. )

_________________________________________ 

MOKULELE FLIGHT SERVICE INC., dba MOKULELE AIRLINES PROPOSAL TO PROVIDE 

ESSENTIAL AIR SERVICE TO THE COMMUNITIES OF MERCED AND VISALIA, CALIFORNIA

Correspondence with regard to this document should be addressed to:

Ron Hansen

CEO

Mokulele Airlines

73-350 U’u Street

Kailua-Kona, HI 96740

Telephone: 808-840-9002

Fax: 808-326-1266

Email: ron.hansen@mokulelehawaii.com

Mokulele Flight Service Inc., dba Mokulele Airlines (hereafter Mokulele) hereby proposes the following 

response to DOT Order 2014-5-9 to provide Essential Air Service to the communities of Merced and Visalia, 

California. Mokulele is pleased to offer three options for service.

Service Proposal

Mokulele proposes to operate three roundtrips each weekday between Visalia and either Los Angeles 

International Airport or Long Beach Airport. Additionally, Mokulele proposes to operate three roundtrips each 

weekday between Merced and Oakland International Airport. Should Mokulele be chosen to provide service to 

both communities, it would establish a maintenance and operations base at Visalia, CA. All Mokulele 

crewmembers would be based in Visalia, CA as well, in a two city scenario. This schedule would be supported 

by a dedicated aircraft for each city pair. A dedicated spare aircraft would be included were Mokulele to be 

chosen to provide service to both communities. Consequently, in the two city scenario, Visalia would receive a 

fourth weekday frequency northbound to Oakland International Airport via Merced. Two roundtrips would be 

offered in each primary city pair on Saturday and Sunday. These proposed flights would be operated on the 

dependable, 9 seat, Cessna Grand Caravan Aircraft. The attributes of which is detailed in the text below. 

While Mokulele desires to operate its flight non-stop to Los Angeles International Airport, it should be noted 

that space/gate availability and cost may result in these flights being operated to Long Beach Airport instead.
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Draft Flight Schedule

OASIS/MARKSUM MOKULELE AIRLINES 

SCHEDULE MWCALI6 (LOCAL) MARKET SUMMARY 

10/01/14 - 99/99/99

FROM TO DEP ARR FLT# EQP FREQ STP

LOS ANGELES VISALIA 0900 1030 106 CNA X67 0

LOS ANGELES VISALIA 1315 1445 109 CNA Daily 0

LOS ANGELES VISALIA 1730 1900 108 CNA Daily 0

VISALIA LOS ANGELES 0615 0745 105 CNA X67 0

VISALIA LOS ANGELES 1100 1230 111 CNA Daily 0

VISALIA LOS ANGELES 1515 1645 112 CNA Daily 0

MERCED OAKLAND 0705 0800 101 CNA X67 0

MERCED OAKLAND 1105 1200 103 CNA Daily 0

MERCED OAKLAND 1505 1600 104 CNA Daily 0

OAKLAND MERCED 0900 0955 102 CNA X67 0

OAKLAND MERCED 1300 1355 107 CNA Daily 0

OAKLAND MERCED 1700 1755 110 CNA Daily 0

OAKLAND VISALIA 1700 1900 110 CNA Daily 1 (Two City Scenario ONLY)

VISALIA OAKLAND 0600 0800 101 CNA X67 1 (Two City Scenario ONLY)

VISALIA OAKLAND 1000 1200 103 CNA 67 1 (Two City Scenario ONLY)

(Note: This is a Draft Schedule ONLY. The final selling schedule may vary. Also note that Los Angeles service may be operated to 

Long Beach Airport instead pending final agreements)
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Two City Scenario

Two City Scenario Two City Scenario Mokulele Airlines

Merced to Visalia to Visalia to Oakland Visalia Service California

Oakland Los Angeles (Visalia to Merced seg) Subttl System Totals

(1 Stop: VIS-OAK via MCE)

Weekly Frequencies 3 8 3 8 1 4 5 2 90

Completion Factor 98% 98% 98% 98% 98%

Annual Departures 1,938 1,938 714 2,652 4,590

Block Time (in minutes) 0.9 1.3 0.8 1.08

Annual Block Hours 1,777 2,584 595 3,179 4,956

Stage length (statute miles) 9 8 174 9 1 152 129

Available Seat Miles (9 seats) 1,709,316 3,034,908 584,766 3,619,674 5,328,990

Enplaned Load Factor 36% 44% 26% 41% 43%

Enplaned Passengers 6,260 7,720 1,680 9,401 15,661

Onboard Load Factor (Only Applicable in Two City Scenario) 46% 44%

Onboard Passengers (Only Applicable in Two City Scenario) 7,940 7,720 1,680 9,401 17,341

Revenue Passenger Miles 778,138 1,343,360 152,897 1,496,256 2,274,394

Average Fare $67.44 $90.70 $137.21 $99.01 $ 86.39

$75 fare $100 fare $150 fare

Revenue:

Passenger $422,186.05 $700,227.59 $230,536.87 $930,764.46 $ 1,352,951

Thru Pax Revenue $0.00 $0.00 $0.00 $0.00 $ -

Ancillaries $3.50 $21,910.00 $27,021.60 $5,880.64 $32,902.25 $ 54,812

$444,096.05 $727,249.19 $236,417.52 $963,666.71 $ 1,407,763

Assumptions

Fuel Cost P/Gal $4.00

Fuel Burn Gallons P/Hr 48.00

Direct Expenses:

Ownership $134.40 Per Blk Hr $238,754.72 $347,279.59 $79,965.69 $427,245.28 $ 666,000

Flight Crew $105.00 Per Blk Hr $186,532.50 $271,320.00 $62,475.00 $333,795.00 $ 520,328

Fuel & Into Plane Fees $192.00 Per Blk Hr $341,088.00 $496,128.00 $114,240.00 $610,368.00 $ 951,456

Insurance $15.00 Per Blk Hr $26,647.50 $38,760.00 $8,925.00 $47,685.00 $ 74,333

Maintenance $168.00 Per Blk Hr $298,452.00 $434,112.00 $99,960.00 $534,072.00 $ 832,524

Miscellaneous/Reaccom $15.00 Per Blk Hr $26,648.00 $38,760.00 $8,925.00 $47,685.00 $ 74,333

Total Direct Expenses $1,118,122.72 $1,626,359.59 $374,490.69 $2,000,850.28 $ 3,118,973

Indirect Expenses:

Station Costs $187.23 per dept $362,857.96 $362,857.96 $133,684.51 $496,542.46 $ 859,400

Landing Fees $0.00 per dept $0.00 $0.00 $0.00 $0.00 $ -

Agent Bookings & Sales $9.10 per Pax $28,483.00 $35,128.08 $7,644.84 $42,772.92 $ 71,256

Web bookings & sales $4.15 per Pax $12,989.50 $16,019.95 $3,486.38 $19,506.33 $ 32,496

Marketing $3.35 per Pax $20,971.00 $25,863.53 $5,628.62 $31,492.15 $ 52,463

Set up costs / training $10,000.00 $10,000.00 $10,000.00 $ 20,000

General & Admin/Other 4.8% of Direct $53,669.89 $78,065.26 $17,975.55 $96,040.81 $ 149,711

Total Indirect Expenses $488,971.35 $527,934.78 $168,419.90 $696,354.68 $ 1,185,326

$1,607,094.06 $2,154,294.37 $542,910.59 $2,697,204.97 $ 4,304,299

Income (loss) ($1,162,998.02) ($1,427,045.18) ($306,493.07) ($1,733,538.26) ($2,896,536.27)

cost per hour $904.64 $833.71 $912.45 $848.44 $ 868.59

Profit Element (5% Return on Costs) $80,354.70 $107,714.72 $27,145.53 $134,860.25 $215,214.95

Subsidy Required ($1,243,352.72) ($1,534,759.90) ($333,638.60) ($1,868,398.51) ($3,111,751.23)

Subsidy per Enplaned Passenger ($198.62) ($198.79) ($198.57) ($198.75) ($198.70)

Visalia & Merced, CA

per passenger

Total Revenue

Total Operating Expenses
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Company Background and Information

Based in Kona, Hawaii, Mokulele was founded in 1998 as an inter-island airline offering service to 

seven destinations on five islands. The management team of Mokulele is highly experienced in the 

airline industry and has seized on the opportunity for expansion by providing greater efficiencies and 

operational controls. Mokulele is a “scheduled” FAA Part 135 Air Carrier with an excellent service record. 

Mokulele operates more than 120 daily flights and carries 20,000 plus passengers monthly with its fleet 

of nine NEW Cessna Grand Caravan 208EX aircraft. 

Current Operations

Mokulele currently employs 110 full-time and 70 part-time employees, most performing collateral 

duties at the nine airports it currently serves. The employee group is primarily comprised of young, local 

residents eager to see the company prosper and grow in the island market along with many who have 

been with Mokulele for 5 years or more.

Presently, Mokulele owns nine new and five standard model Cessna Grand Caravans, each configured 

with nine passenger seats. The aircraft maintenance departments are located at Kona and Kahului 

where it employs 12 licensed A&P mechanics.

The airline flies to one EAS (government subsidy) route, awarded in July and started on time and one 

private-subsidized route from Maui; all other routes are flown at-risk. We’ve been so successful in our 

EAS route that we will soon be adding an additional subsidy-free flight. (Exhibit B)
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Operating Certificate and Authority

Mokulele conducts business as a certified FAA Part 135, Scheduled Air Carrier. Refer to Exhibit A for 

copies of Mokulele’s FAA Air Carrier Certificate.

Routes and Airports Served

Market Opportunity

The following, in descending order of importance, are ten elements that will lead to the continued 

success of Mokulele Airlines:

 Employing an experienced, professional management team that combines visualization, realism 

and solid knowledge of the Federal Aviation Regulations relating to flight and legal 

responsibilities involved for companies engaged in scheduled passenger flights.

 The management team’s strengths include familiarity with the latest aviation, electronic and 

informational technologies; familiarity with the region and markets to be served; realization of 

the crucial importance of an organization’s personnel and their relationship to the company’s 

success and a total commitment to the overall mission and goals of the airline.

 Implementing an intelligent, progressive and aggressive marketing strategy that identifies 

Mokulele Airlines as a unique air carrier flying unique routes with a unique passenger clientele. 

It is a marketing philosophy that identifies Mokulele and its employees as sharper, smarter and

with a higher level of professionalism and operation standard than is the norm in the market, 

combined with highly competitive fare pricing.

 Presenting a friendly, cooperative, enjoyable yet highly professional safety-conscious flight crew 

to the traveling public.
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 Maintaining aircraft with a highly trained and knowledgeable staff equipped with spare parts 

and tooling, yields aircraft that comply with all FAA aircraft maintenance standards and high 

dispatch reliability.

 Establishing a high level of operational oversight and quality control that will ensure that 

Mokulele always lives up to its commitment to a high level of flight safety, customer satisfaction 

and convenience at a reasonable, highly competitive fare.

 Growing the company based on need rather than growth for growth’s sake. This requires being 

aware of solid niche-enlargement opportunities that will allow incremental, but always 

profitable expansion. Examples of this strategy include the expansion of service to Kapalua and 

Hana, Maui in 2012.

 Development and implementation of code share and interline agreements with well-established 

major airlines thus offering cost advantages to our clients.

 Identifying and developing cost-effective opportunities for new markets, new market concepts 

and expanded sales potential. This objective can be accomplished by maintaining an awareness 

of combining the core aviation business with ancillary marketing concepts and activities and 

ground-based operations that support, supplement, and complement the aviation elements of 

the business. These elements include such activities as aviation services, and other logical 

business pursuits both within and outside the immediate aviation business.

 Utilization of the latest electronic and informational technologies in sales and marketing, 

reservations, scheduling, resource planning and operational oversight. Technologies such as 

Internet marketing, reservations, operational oversight and flight tracking all contribute to 

reduced staffing requirements for Mokulele.

Competitive Advantages

The current competitive environment for Mokulele Airlines is bright with very little competition. 

Mokulele Airlines is uniquely positioned to continue growing. Our customers love the personal 

attention given to them by our staff, shorter check-in requirements, and customer initiatives such as 

free parking at most of our airports and shuttles to the other terminals at the larger airports. By 

providing frequent service at affordable fares, Mokulele is quickly growing to be Hawai’i’s premier interisland carrier.

Codesharing and Interline Agreements

Codeshare and interline agreements provide our travelers with the additional protections of IATA 

agreements and single ticketing to many destinations covered by our codeshare and interline partners. 

Customers can purchase one ticket from Ho’olehua to Boise, Idaho, for example. Our systems are 

capable of both inbound and outbound codesharing and reciprocal frequent flyer benefits (including 

accrual and redemption).
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Modern Distribution 

Customers are able to book a ticket on Mokulele using their favorite online booking tool, via most 

corporate travel portals, through traditional travel agents, and also through 3 airlines. Mokulele uses 

Radixx and SkyVantage to power our reservation system and industry-standard Type A messaging and 

electronic ticketing with all the major GDS’s.

The Mokulele website also allows for online changes & cancellations – reducing the need to contact our 

reservations office or make a trip to the airport. Cancellations are mostly refunded to a voucher, which 

can also be redeemed online.

The private booking portal allows for tour operators, travel agents, and businesses to better manage 

their travel by providing real time reports, access to credit limits, reservation details, and cancel/change 

abilities.

Creative Marketing

Mokulele believes in reaching out to our customers using creative ads that help set the tone for their 

vacation. Mokulele uses a variety of direct-contact methods – ranging from social media, co-op 

partnerships with our destinations, tourism board outreach programs, and emails. Mokulele also 

spends money on television, radio, and print advertising.
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Smarter selling solutions

As many costs rise, Mokulele is able to respond rapidly to the changing environment. By offering ONLY 

9 seats per flight, we have the ability to make a profit on a flight with only 4 or 5 passengers on board –

and during peak times, we can add additional planes, ‘extra sections’, and fly 18 or 27 customers at the 

same time!

The airline is also focused on its corporate sales program, which gives frequent users a private booking 

portal that has lower fares, relaxed fare rules, and free baggage allowances. The booking portal also 

allows for online changes & cancellations – alleviating the need to call into the reservations office.
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The Aircraft

The proposed flights are offered aboard a Cessna Grand Caravan operated with both a captain and a 

first officer onboard. The Cessna Caravan is a modern aircraft, still in production. Manufactured by one 

of the most recognized aviation companies in history, the Caravan is one of the largest and safest 

aircraft of its size and range. The aircraft comfortably seats nine passengers with a large cargo pod for 

baggage. The aircraft is equipped with modern avionics, fully integrated auto pilot, and onboard 

weather radar. The aircraft are air conditioned and heated for passenger comfort.

Comfortable Interior

Mokulele has outfitted all Caravans with a single seat – per side configuration. This provides every 

guest on board with a window and aisle seat. Each airplane is air conditioned and most seats have a 

reading light and personal air vent. Each aircraft also has a secure bulkhead separating the cockpit 

from the cabin – giving our pilots an extra level of security, or may leave the doors open to provide our 

passengers with amazing views from the front of the aircraft.
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Track Record

Under the current leadership team, the company has been able to grow to its highest levels in the entire 

history of the airline. Since the purchase by Transpac Holdings, the airline has nearly doubled in size 

while passenger traffic has grown 115%. The company saw a massive spike in traffic during 2013 when 

Mokulele upgraded its fleet, seeing an 88% increase in passenger traffic on only 60% growth.

Special Discussion of Merced, CA EAS Eligibility and Impact on Service Proposal

By DOT Order 2014-6-6 issued June 24, 2014, Merced, CA’s eligibility under the Essential Air Service 

program was terminated. That same order establishes a means by which a community may petition for 

restore its eligibility in a joint filing with an air carrier. We believe this proposal represents a means by 

which Merced may accomplish that goal. Over the past few years Merced has suffered from infrequent 

and unreliable service. Mokulele contends that this alternate service pattern featuring three weekday 

roundtrips to Oakland will enable to the community to reach its 10 passenger per day enplanement 

goal. Moreover the inclusion of a third aircraft, acting as a dedicated spare, in the two city proposal will 

restore the reliability this service has sorely lacked for so long. The proposal related to Merced is based 

upon a selling average fare of only $75 one way. This lower fare structure will further stimulate 

ridership as the community realizes it true traffic potential.

0

50000

100000

150000

200000

250000

300000

2009 2010 2011 2012 2013

Mokulele Historical Performance

Passengers flown

Seats Available
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This proposal offers the communities and the DOT the following possible scenarios:

Service Option 1:

Service to Visalia, CA ONLY (no Mokulele service to Merced, CA)

With this proposal, Mokulele offers a single dedicated CN-208B aircraft dedicated to operating three 

weekday roundtrips in either the Visalia, CA to Los Angeles International market or the Visalia, CA to 

Long Beach Airport market, pending final facility negotiations. Weekend Service would consist of two 

roundtrips each weekend day. As subsidy compensation for ONLY that service, Mokulele would require

$1,534,759.90, or roughly $791.93 per segment. This is offered for a two or four year term. This option 

is not available if Service Option 2 is selected.

Service Option 2:

Service to Merced, CA ONLY (no Mokulele service to Visalia, CA)

With this proposal, Mokulele offers a single dedicated CN-208B aircraft dedicated to operating three 

weekday roundtrips in the Merced, CA to Oakland International Airport market, pending restoration of 

the communities Essential Air Service eligibility. Weekend Service would consist of two roundtrips each 

weekend day. As subsidy compensation for ONLY that service, Mokulele would require $1,243,352.72

or roughly $641.56 per segment. This is offered for a two or four year term. This option is not available

if Service Option 1 is selected. 

Service Option 3:

Service to both Merced, CA AND Visalia, CA

With this proposal, Mokulele offers three CN-208B aircraft. With a dedicated spare, the two line aircraft 

would be deployed operating three weekday roundtrips in the Merced to Oakland International market 

(pending restoration of the communities Essential Air Service eligibility) as well as three roundtrips in 

the Visalia, CA to Los Angeles International market, or the Visalia, CA to Long Beach Airport market. 

Weekend Service would consist of two roundtrips each weekend day on the primary service routes. 

Additionally, Visalia would receive a daily, one-stop flight to Oakland International Airport via Merced in 

this proposal. As subsidy compensation for that level of service to each community, Mokulele would 

require $1,243,352.72, or roughly $641.56 per departure for Merced and $1,868,398.51, or roughly 

$704.52 per departure for Visalia. Total required subsidy compensation for Mokulele service to BOTH 

communities would be $3,111,751.23. This is offered for a two or four year term.

Conclusion

Mokulele is an established, Part 135 air carrier with a solid track record of frequent and reliable service. 

With these three options, Mokulele offers both Merced and Visalia service options that will build 

ridership. Mokulele is an established Essential Air Service provider, recently announcing additional, 

subsidy free service over and above its EAS requirement in the Waimea-Kohala market, due to 

increasing ridership. (Exhibit B) Mokulele looks forward to bringing the same commitment to quality air 

service that has established it as a primary player in the tough Hawaiian inter-Island market to the 

mainland. 
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Exhibit A
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Exhibit B

MOKULELE AIRLINES EXPANDS SERVICE BETWEEN

KAMUELA AND MAUI WITH THE ADDITION OF

A THIRD DAILY ROUNDTRIP FLIGHT

New flight being added to meet the demand for service from Kamuela

which has exceeded EAS expectations.

Kailua-Kona, HI — June 26, 2014 ... Mokulele Airlines has announced that it is expanding its service 

between Kamuela-Waimea on the Big Island and Kahului, Maui by adding a third daily roundtrip flight to meet 

growing demand. Mokulele began offering service form Kamuela in September 2013 after being awarded the 

Essential Air Service (EAS) contract from the Hawaii Department of Transportation. EAS is a government program 

designed to help ensure that smaller communities have access to commercial air service.

“Since winning the award, we’ve focused on delivering low fare, high-quality flights to the community by working 

directly with those who would use our service, and our boardings have reflected that,” explains Mokulele’s 

President and CEO Ron Hansen. Since Mokulele initiated the service, air traffic has grown more in Kamuela than in 

any other EAS market in the past two years. Mokulele expects to fly over 12,000 passengers in its first year of 

operation from Kamuela, compared to approximately 50 flown by the previous operator over a similar time period.

Mokulele will now offer 42 weekly flights between the two destinations, only 24 of which are subsidized by the 

EAS program. “The EAS program can truly help small communities when partnered with the right operator,” 

Hansen adds. “Because of the EAS program, we’re now able to increase flights, and hopefully grow Kamuela off of 

the EAS subsidy program by the end of our four-year agreement. We’re doing whatever it takes to build traffic to 

the point the market is 100 percent self-sustaining and no longer dependent on federal dollars.”

With the new flights, passengers can depart from Kahului at 8:35 am and arrive in Kamuela at 9:20 am. Maui-bound 

passengers can depart Kamuela at 9:40 am and arrive in Kahului at 10:25 am. Fare start at $69 each way, taxes 

included, some restrictions apply and seats may be limited. Complete details and flight schedules can be found at 

www.mokuleleairlines.com.

About Mokulele Airlines

Mokulele Airlines, flying the skies of Hawaii since 1994, was purchased by TransPac Aviation, Inc. in 2011 with a 

goal of providing high quality, low-cost interisland air service. Mokulele, which is headquartered in Kailua-Kona, 

now offers more than 120 flights a day connecting Oahu, Molokai, Lanai, Maui and the Big Island on its fleet of 

nine-passenger, turbine-powered Cessna Grand Caravans. For reservations & information, visit 

mokuleleairlines.com, facebook.com/mokulele, contact your favorite travel agent or call 866-260-7070.