# TransportAzumah

Essential Air Service Proposal

McCook, NE (MCK) – Denver, CO (DEN)

March 2010TransportAzumah Essential Air Serv ice: McCook, NE to Denver, CO



## 1.0 Executive Summary

TransportAzumah proposes to provide air se rvice from McCook, NE to Denver, CO. The McCook essential air service is currently fl own by Great Lakes Aviation. This route will carry primarily connecting traffic to Denver for flights to other locatio ns. It is expected that 15,000 passengers will use the service in its first year with two round trip flights per day seven days per week.

McCook has the ability to service many more passengers than it is currently serving. However, most passengers do not use the curr ent air service because it is not a cost effective way of accessing the national air tran sportation system. Flights are priced in a similar manner to flights that are designed to carry primarily origin and destination traffic, but the purpose of this flight is to be a feeder. Thus, the market currently does not respond to the air service currently provided.

TransportAzumah will use the services of Charter Air Transport to fly this market. Charter Air Transport has already obtained co mmuter authority to fl y scheduled services in other markets and is fully qualified to provide the flyi ng in question. TransportAzumah will manage the service by providing schedules, fares, marketing, and other management tasks. It is expected that as regional cap acity is pulled down nationa lly, the cost of flying this market will decrease for both Charter Air Transport and TransportAzumah.

# 2.0 Company Summary

TAZ Airways will offer airline grade service from day 1. This is achieved by subcontracting the flying to Part 121 carrier s and using existing ai rline ground handling services whenever possible. Our company st ructure minimizes fixed costs and overhead in order to keep ticket prices affordab le and competitive with other airlines.

2.1 Company Structure & Ownership TransportAzumah’s operating authority will be structured as a Part 380 Indirect Air Carrier. The president is Joel Anabil ah-Azumah. Mr. Anabilah-Azumah has had experience in the transportation business for seven years. The company’s specialty is market planning and logistics.

2.2 Start-up Summary As part of the Essential Air Service program, the McCook-Denver route will be subsidized by the United States Department of Transportation. The service will be initiated using one Embraer EMB-120 ai rcraft seating 30 passengers in a 2+1 configuration.

The expected first year performance is provided below:

Flights Per Week 14 Subsidy $2,412,865.20
Passengers 15,000 Cost Per Passenger $160.86

Aircraft EMB-120 Seats Per Flight 30

Load Factor 70.81%

2.3 Company Location & Facilities

TransportAzumah is headquartered in Brookl yn, NY. An on-site station manager will be provided in McCook to coordina te operations locally. We ma y consider hiring the station manager from the current service provider if we were to displace them. Service will be provided from the MCK and DEN airports.

## 3.0 Services

3.1 Service Description

TransportAzumah will provide a reasonably pr iced regional air service in the McCookDenver corridor. It is expected that the peak travel flow will be towards Denver in the morning and towards McCook in the after noon. By providing a service into a major airport, we will provide McC ook with the ability to access th e national air transportation system in a timely fashion.

3.2 Competitive Comparison

Our main competitor for this route will be Great Lakes Aviation and the automobile. Currently, Great Lakes operates more than ha lf of the continental Essential Air Service network. The airline is known for having lo w operating costs and it has been operating

essential air services since 1980. Due to the collapse of seve ral regional airlines, Great Lakes has expanded its servic e area and volume of service provided. The aircraft of

choice for this airline is the Beechcraft 1900D 19 passenger airliner. The automobile is always a fierce competitor in EAS markets b ecause it has a more flexible schedule than a scheduled service. In addition, it can pr ovide access to any desired hub or other competitive airport if time is not of the essence.

TransportAzumah believes that it can grow the McCook – Denver market for several reasons. First, the primary purpose of this rout e is to feed connecting passengers and we have priced our fares so that this is feasible. Second, the lack of restrooms onboard the current air service unnerves potential customer s. While most customers do not need to use the bathroom on a flight, the availability of such facilities provides them comfort that they can use it if needed. Lastly, Transpor tAzumah’s goal in the essential air service program is to increase traffic substantially so that the subsidies expended benefits more passengers. The program has come under inte nse scrutiny because a substantial number of flights operate with very small numbe rs of passengers. McCook’s average of 5.6 enplanements per day indicates that th e current service methodology does not work.

The use of the Denver International Airpor t (DEN) as the hub access point will provide passengers easy access to the national air transportation system. Connecting passengers

will have their choice of dozens of carriers th at go to locations across the United States and the globe. Denver is curren tly a hub for three airlines of substantial size: Republic, Southwest, and United.

Currently, air service at McCook is provided by a 19 passenger aircraft. TransportAzumah will use an Embraer EMB- 120ER turboprop to provide service.

Customers are used to this aircraft as Un ited Express operator SkyWest Airlines also operates the type in numerous turboprop mark ets. In the current configuration, this aircraft seats 30 passengers a nd 29 seats will be sold.Electronic ticketing will be provided via th e internet as well as over the phone. Customers will receive a receip t that will be scanned at the check in desk or gate. Ticketing will be straightforward and simple as trips are listed by date and time.

3.3 Sales Literature

TransportAzumah is in the process of prep aring market specific sales literature. Our

focus in the McCook area will be on reintr oducing the air service as an option to passengers that do not currently use it. It is estimated that most EAS markets only attract 1-2% of the potential passenge rs in their catchment area, so the most important point to convey to the passengers is to check McCook first for air service.

3.4 Fulfillment

TransportAzumah is expected to hire Charter Air Transport Inc. as our main direct air carrier. Charter Air Transport will provide Embraer EMB-120ER aircraft seating 30 passengers. The contract will be an ACMI (a ircraft, crew, maintenance, insurance) contract in order to minimize staffing require ments. Charter Air Transport currently flies

four EMB-120 aircraft and several Hawker busin ess jet for various clients and they have a good reputation in the airline industry. It is expected that our ground handling at Chico will be done by a fixed base operator.

3.5 Technology

The technology used to provide our services will be state of the art, but simple. The

Embraer EMB-120ER is a well known and reli able turboprop airliner. Passengers will

find the amenities and comfort similar to or su perior than the typical network carrier.

We are considering the use of a global distri bution system to distribute fares in this market. However, we would like to determin e which carriers our customers transfer to most so that a platform that is complementar y with that carrier’s ti cketing system can be used. Initially, a simple web ticketing platform will be used to collect passenger fares.

3.6 Future Services

Service on the McCook-Denver route will be prov ided by single class aircraft in a coach configuration. In the future, it is possible that larger airc raft could be added if demand exceeds projections. We would also evaluate the feasibility of an inte rline agreement with

another carrier at Denver.

## 4.0 Market Analysis Summary

The McCook-Denver route is a good route for an essential air servic e carrier because the market is underdeveloped. With fares ranging from $99 30 days out to a $259 refundable fare, demand is being crushed on this route by fares that are out of line with the purpose of the service. Currently, only 76 seats per day are provided at Mc Cook. The addition of TAZ Airways service will add 42 seats to the market each day. By providing substantially lower fares, the McCook-Denver route will experience a substantial increase

of traffic in the market.

A chart of the current market size is provided below:

Catchment Area Analysis

City / Town State Population

MCCOOK NE 7,994

INDIANOLA NE 642

BARTLEY NE 355
CAMBRIDGE NE 1,041
ARAPAHOE NE 1,028

OXFORD NE 876

STAMFORD NE 202

DANBURY NE 127

WILSONVILLE NE 118

BEAVER CITY NE 641

CULBERTSON NE 594

TRENTON NE 507

STRATTON NE 396

MAX NE
BENKELMAN NE 1,006

WAUNETA NE 625
IMPERIAL NE 1,982

HAYES CENTER NE 240

ELWOOD NE 761

FARNAM NE 223

MOOREFIELD NE 52

MAYWOOD NE 331

CURTIS NE 832

STOCKVILLE NE 36

DICKENS NE

ELSIE NE 139

WELLFLEET NE 76
GRANT NE 1,225

WALLACE NE 329

MADRID NE 265

ALMENA KS 469OBERLIN KS 1,994
NORTON KS 3,012
ATWOOD KS 1,279
ST FRANCIS KS 1,497

BIRD CITY KS 482

31,376

Current Service Usage – McCook, NE

Year Quarter Inbound

Pax Outbound

Pax Total

2006 4 609 616 1,225

2007 1 564 659 1,223

2007 2 746 794 1,540

2007 3 785 810 1,595

5,583 Total

2007 4 699 753 1,452

2008 1 400 403 803

2008 2 328 350 678

2008 3 532 479 1,011

3,944 Total

2008 4 436 457 893

2009 1 416 388 804

2009 2 468 408 876

2009 3 485 448 933

3,506 Total

Average daily enplanemen ts – 5.6 passengers / day

4.1 Market Segmentation

The McCook-Denver route has tw o distinct target markets and they are both attracted differently to this service. The business trav eler will appreciate the ability to make a day trip to many locations and back as well as the reasonable walk up cost. In this market, walk up fares can reach $259 one way at times. Our walk up fare will be no higher than $59. The leisure traveler will be attracted to the service by the competitiveness of the fares with driving to and pa rking at another airport.

4.2 Service Business AnalysisThe model of an indirect air carrier provides substantial flexibility in comparison to the standard Part 121 model. First, Part 380 carri ers do not have to re port their loads to the federal government. It allows us to protect our ridership information from other carriers. Second, the burden of operationa l support of the planes (mai ntenance, crew scheduling etc.) falls on the shoulders of the direct air ca rrier. This allows our staffing to be minimal and the jobs we must fill require no special technical know how in most cases. Part 380 rules also dictate that all passenger fares must be placed in escrow until the flight leaves. Although this creates an initial financial headache, our passeng ers can be confident in the fact that they are fully protected in case something happens that their flight cannot

operate.

## 5.0 Strategy & Implementation

In order to increase boardings on this rout e, TransportAzumah will have to be very aggressive with regards to its marketing a nd pricing strategy. The marketing program is designed to get the information into the hands of prospective customers by a continuous onslaught of local advertising. Repetition is th e key to brand awareness and we will make sure that our product information reaches our co re market quickly. The pricing strategy is designed to minimize the USDOT subsidy per pa ssenger and stimulating to the market. In particular, the lower walk up fare will allo w businesses to travel on short notice at an affordable price.

5.1 Marketing Strategy

The bulk of advertising for TransportAzumah will consist of inserts and advertising in newspapers. A repeated series of ads 1⁄4 page to 1⁄2 page in size will be run in local and regional newspapers to provide a steady stream of brand awareness. In addition, flyers would be distributed at major transportation centers used for airport access. Some limited additional marketing may be done through radio advertising, but the bu lk of advertising would be in print.

5.2 Sales Strategy

The fare structure for the McC ook-Denver route is as follows: Advanced Purchase: $29-49 Walkup Fare: $59 Average Fare Proposed By Curre nt Carrier in prior bid: $126.78

The TransportAzumah fee structure for th e McCook-Denver market is as follows: Fee Online Call Center Airport Convenience Fee $0 $15 $0 Priority Boarding Fee N/A N/A N/A

1 st Checked Bag $0 $0 $0

2 nd Checked Bag $15 $15 $35 Oversized Bag Fee ... ... $25 Overweight Bag Fee ... ... $1 per pound

Ticket Change Fee ... $25 $25Projected First Year Performance:

Total 97% Completion
Flights Per Week 14

Weeks 52 Total Flights 728 706

Travel Time MCK-DEN 0.92

Travel Time DEN-MCK 0.83

Hours 637 618 Passengers 15,000

Flight Operations $1,730,092.00 Departure Costs $282,464.00 Per Passenger Costs $75,000.00
Overhead $313,133.40 Total Expenses $2,400,689.40
Profit $120,034.47 Financing Costs $492,141.33 Total Compensation $3,012,865.20

Revenue Per Passenger $40.00
Total Revenue $600,000.00

Subsidy $2,412,865.20

Cost Per Passenger $160.86

Aircraft EMB-120 Seats Per Flight 30

Total Seats 21,185
Passengers 15,000

Load Factor 70.81%

Tickets will be sold over the phone and via the internet as well as at the airport. Initially,

tickets would be sold through our website at http://www.transportazumah.com using a well-known credit card processing company. If demand warrants, the system will be upgraded to a GDS compatible platform.

## 6.0 Service Schedule & Aircraft Information

6.1 Proposed Schedule

Monday – Saturday

Origin DpTime Dest ArTime FltDur Equipment Stops

MCK 8:30 DEN 8:25 0:55 EM2 0

MCK 16:00 DEN 15:55 0:55 EM2 0

Origin DpTime Dest ArTime FltDur Equipment Stops

DEN 13:30 MCK 15:20 0:50 EM2 0

DEN 20:00 MCK 21:50 0:50 EM2 0

Sunday

Origin DpTime Dest ArTime FltDur Equipment Stops

MCK 13:00 DEN 12:55 0:55 EM2 0

MCK 16:00 DEN 15:55 0:55 EM2 0

Origin DpTime Dest ArTime FltDur Equipment Stops

DEN 13:30 MCK 15:20 0:50 EM2 0

DEN 20:00 MCK 21:50 0:50 EM2 0

6.2 Aircraft InformationContact Information:

Joel Anabilah-Azumah

E-mail: jazumah@transportazumah.com

Phone: 866-641-4295