1 

### 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 M erced 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 Oakla nd International Airport. Should Mokulele be chosen to provide service to both communities, it would establish a maintenance and operations base at Visalia , C A

. All Mokulele crewmembers would be based in Visalia, CA as well , in a two city scenario

. This schedule would be suppo rted by a dedicated aircraft for each city pair

. A dedicat ed spare aircraft would be included were Mokulele to be chosen to provide serv ice to both communities. Consequently , in the two city scenario, Visalia would receive a fourth weekday frequency north bound to Oakland International Airport via Merced. Two roundtrips would be offered in each primary city pair on Saturday and Sunday. Th ese 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.2

Draft Flight Schedule

OASIS/MARKSUM MOKULELE AIRLINES 16:31 06/24/14 SCHEDULE MWCALI6 (LOCAL) MARKET SUMMARY PAGE 2 10/01/14

- 99/99/99

FROM T O 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 O NLY)

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)34



### Company Background and Information



# B ased 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 expans ion 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 7 0 part

- time employees, most performin g 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 su bsidy) 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 a dding an additional subsidy

- free flight . (Exhibit B)5

Operat ing 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 Regulatio ns 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 re gion 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, progres sive 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

.6

 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 over sight 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.  Develop ment 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 sale s 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 mark eting, 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 Advan tages 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 inter

i sland 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.

C ustomers 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).7

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 syst em 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. Cancell ations 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, reservat ion 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 tele vision , radio, and print advertising.8

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 fl y 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.9

The Aircraft The proposed flights are offered aboard a Cessna Grand Ca ravan operated with both a captain and a
first officer onboard. The Cessna Caravan is a modern aircraft, still in pro duction. 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 p od for baggage. The aircraft is equipped with modern avionics, fully integrated auto pilot, and onboard
weather r adar . The aircraft are air conditioned and heated for passenger comfort.

Comfortable Interior Mokulele has outfitted all Caravans with a sing le 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 coc kpit
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.10

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 accompl ish 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 av erage 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 Available11

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

Service Option 1:

Service t o 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. Thi s 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. We ekend Service would consist of two roundtrips each weekend day. As subsidy compensation for ONLY that service, Mokulele would require $1,243,352.72

or r oughly $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 Lon g 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 o ver and above its EAS requirement in the Waimea

- Kohala marke t, due to increasing ridership

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

serv ice that has established it as a primary player in the tough Hawaiian inter

- Island market to the

mainland.12



### Exhibit A13



### 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 aft er 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 foc used 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 ti me 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 l onger 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, t axes 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 o f
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.