### BEFORE THE DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C.

In the matter of Essential Air Service at HYDABURG, ALASKA Under49 U.S.C. 41731 

### et seq.

SERVICE PROPOSAL OF PACIFIC AIRWAYS, INC. DOCKET OST-1999-6245

Communications with respect to this document shouldbe addressed to: StephenS. Montanus Pacific Airways, Inc. P.O. Box 5158 Ketchikan, AK99901 smontanus@flvoacificairways.com May20, 2015

### BEFORE THE DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C.
In the matter of Essential Air Service at 

### HYDABURG,ALASKA Under49 U.S.C. 41731 

### et seq.
SERVICE PROPOSAL OF PACIFIC AIRWAYS, INC. DOCKET OST-1999-6245

Pacific Airways, Inc. herein submits its proposal to provide Essential Air Service at Hydaburg, Alaskapursuantto Order 2015-4-9 requesting proposals. Pacific Airways is an established carrier with a soundtrackrecord ofproviding safe andreliable air transportationto communities inthe sameregion and with the samerequirements and expectations as the community ofHydaburg. This proposal utilizes Departmenttraffic datafrom the previous three years and, for consistencywith theproposal term, expenses and revenues are based on a twelve-month period ending October 31st.

1

### Pacific Airways proposes a level rate for eitherthe two-yearterm or the four-year term. Thejustificationfor this levelrate is the delay in mail rate calculations catching up with actual operating expenses, as has been pointed out in previous year's proposals.


### Service and Reliability Pacific Airways has been in operation since April of2000 and a Certificated Air Carrier since December of2007. Overthe lastfifteen years the companyhas operated scheduled and on demand services throughout southern SoutheastAlaska. This has included uninterruptedyear-round service to the communities ofCraig, Hollis, ThomeBay, and Metlakatla. Additionally, we are the sole airline servicing the communities ofMeyers Chuck and Kasaan. Unlike our competitors, ourprimarybusiness focus is onproviding safe reliabletransportation for passengers, freight, and mail, ratherthan cruise line focused tour operations. Pacific's operation is basedin Ketchikan, Alaska and we are the only carrier in the marketthatprovides fully staffedyearround stations at all ourprimary destinations. We are also the only air service thatmaintains fully staffed facilities atboth the Ketchikan International Airport and the Ketchikan Waterfront.
Sinceits inception Pacific Airways has demonstrated an average on-time performance ratio ofover 93%, excluding weather delays, and an average dispatch reliability ofover 95%, excluding weather cancellations.
Our service is providedusing a fleet offour DeHavillandDHC-2 Beavers onfloats. These aircraftprovide a seating capacity ofsix and are ideally suitedfor the destinations 2

### we serve. Themajority ofour stations provide courtesy van service for delivery offreight and mail as well as passenger drop offand pickup.
We are an activeparticipant inthe Medallion SafetyProgram and the FAACapstone Program and were a founding participant in both programs.


### Hub InterlineArrangements Pacific is the onlycarrierbased in Ketchikan with a fully staffed year-round office and counterlocated at the Ketchikan International Airport. Wehavebuilt a strong partner relationship with AlaskaAirlines which includes direct coordination when either carrier is experiencing delays or cancellations, contract maintenance services for Alaska Airlines, and baggage expediting. We also maintain a through freight agreement with AlaskaAirlines for point-to-point freight transportation utilizingboth carriers. Delta Airlines has recentlyinaugurated service into Ketchikan and we have establishedthe samepassenger, freight, and baggage arrangements with them as well. Currently, no carrier inthe Ketchikan market provides a through ticketing arrangement withAlaska Airlines orDeltaAirlines. 

### CommunityMarketing Pacific Airway's fifteen years ofscheduled service to communities throughout Prince of Wales Island means that most ofthe residents ofHydaburg are already familiar with our operation. Many ofthe businesses and residents ofHydaburg already utilize our service out ofother communities such as Craig and Hollis. This existing familiarity makes the 3

### introduction ofour service a relatively simple matter. Marketing ofour service would includethe traditional routes ofradio and newspaper. Additionally, service wouldbe marketed through ourwebsite and social media sites. Pacific Airways maintains existing advertising accounts withthe local newspaper as well as local radio stations. These existing accounts would allow for quick and simple announcement ofinaugural service as well as ongoing marketing ofthe service.
In

### the month priorto beginning service, in addition to the marketing routes described above, Pacific would launch a direct mail campaign to all the residents ofHydaburg as well as the residents ofCraig, Hollis, and Ketchikan. During this time period management and operations staffwould schedule communitymeetings to answer residents questions and address the community's specific needs. 

### Qualifications Pacific Airways is fit, willing, and able to provide the service outlined in this proposal. Since receiving certification by the Department in 2007 as an Air Carrier, Pacific has been current and timelyin all required reporting. There has been no change in key personnel and no substantial changes in the company since the lastfitness review. Pacific is in full compliance with all federal statutes relating to a drug free workplace, antidiscrimination, and lobbying activities and required Department certifications can be found inAppendix B.



### 4

### Methodology Financial projections found in Appendix A were computedutilizing normalizedtraffic datafrom the previous three years. This data indicates that traffic volumes into and out of Hydaburg, Alaskahave remained generally stable inrecent years. There appears to be nothing foreseeable that would alter this level. Therefore a statistical average was used as a baseline to calculate traffic. This baselinetraffic was then applied to a three roundtrip perweek schedule pattern to compute projectedrevenues and expenses.
2014 traffic statistics for Hydaburg, as filed bythe currently selected carrier, include passenger and freight traffic traveling between Hydaburg and the Phoenix Logging camp in Grace Harbor. This camp is due to close inthe next several months. Therefore, this traffic was removed when calculatingthe initial traffic baseline. Operating expenses were calculated using the Department's methodologyfor determining mail rates. Direct operating expenses were calculatedbased on forecasted blockhours, traffic and departure related expenses were calculatedbased on forecasted departures, and capacityrelated expenses were calculated using a ratio ofall otherexpenses. The capacity related expense ratio is the average historic ratio experiencedbyPacific Airways. The revenue and expense projections were increasedby a rate of5% per annum for the entire four-year forecast period.

5

### WHEREFORE: Pacific Airways, Inc. proposes to provideEssential Air Service to the community ofHydaburg, Alaska at a frequency of3 roundtrips perweek at an annual subsidyrate of$85,226 per annum on a two-year term or $93,952 per annum on a fouryearterm. This service would be providedusing ourfleet offour DeHavillandDHC-2 Beaver seaplanes. Pacific Airways would support either a two-year orfour-year term for the subsidy, both options ofwhich have been supportedbythe Department inthe past. Respectfully submittedby, Pacific Airways, Inc.



# ~/~

**~Montanus** President Pacific Airways, Inc. May20, 2015



### 6__ j__ __________ ______!_ ---- ------- ---

Pacific Airways, Inc. Proposal - Essential Air Service at Hydaburg, Alaska Requested and Proposed Operations (Three Round-Trip Flights per Week.) Ketchikan to Hydabut·g Hydaburg to Ketchikan Total DIRECT EXPEi">l"SES .Pilot and Copilot Aircraft Fuel & Oil Hllll and Liability Insurance

---l Maintenance ofFlig1ltE'qjuipment

Depreciation/Rental ofHigltd Equipment TOH.L DIRECT EXPENSES INDIRECT EXPENSES l'riilffic Related Depa.rtu.re/Statien CapacityJAElnisi:ram·e TOT.>\L INDIRECT L'iil':E!\TSES TOBL OPERlt.TING EXE'fNSES PROFIT AT 5% i\t..!!.RGIN TOTiil. EJll'L'"I.iSES Annwtl. Avg. Block per Total Block Total Block Hours Depllrtures Segment (min) Time {min)

156 156 312 Block Hours 182 182 1&2 1&2 182 Deparrures 312 311 .,., **"~** 35 70 5460 5460 1092tl 91 91 1'82. Projected Costs -12 Months Ending 10/31

Cost!Hr 2016 211Jl7 2018 2019

ll:Ol 24.371.56 25$0.13

)6_91 28.567.25 29,995.61

0.8t'i 8.547.90 8,975.30

i{l_27 21.682.78 12,766.92

fU3 11,698.19 12,283.10

-- - ---- -- 99,611.06 Costn>epartnre===================================================================

1&.55 5,181.60 6,076.98 6,380.83

6159 19,528.08 20_54:14.4'8 21_529.71 6,699.S.I 21,61)6.19

**20~·'0** 2.2;112..69 **23~&6..33** 24:355J)4 2.5)"83_43

41,58%:37 49,%1:79 52,4%.18 55,Q&9A9
ll33,636.Jl5 6,@l .. Sll l4llil',3ll7 .. 96 ll41{!!,3 ].7 .. 9>6 i',IB,ll5 .. **~{!'** ]47,333 .. 8:6 147,333.86 7,34!6.69 ]54,700.55 ]. 541,7{!>@.55 **7,735.~3** ll62A35 . .58: **~** "= [ **~·**

>

I **~** :r **~ ~**  .... **~ ~** 

**~** '< "' .... "'00 Pacific Airways, Inc. Pmposal - Essential Air Service at Hydaburg, Alaska Requested and Proposed Operations (fhree Round-Trip Flights per Week.)
TRAFFIC Passengers Freigltt Mail Total Per Unit KetChikan **tt~** Rate Hydaburg 130.00 15
0.85 3900
1.19 36000 Hydaburg fj) Ketclllkan 11 T Gtal ReTenne 6,110.00
400 3,655.00 5500 49,385.00 59,150.00 Projected Revenues -12 Mont11s Emling 10131
OPER.-\TING REVE:."'\'lJES Passeagers Fr-eight llaU TOTAL OPERATING REVE""'Ill.J"ES TOTAL EXPENSES PROPOSED **Sl...lBSID~** ROLl\i"D TRll'' **DiEF~-'rn:.IlJRES** PR.OPOS:En SUBSffitY PER **Dfll~.lffi.Th'RE** 2016 .2017 2618 6,110.00 6,415.50 6,736.28 3,655J)Q 3"!'837.75 4,019.64 49,385.00 51,854.25 54,446.96 59,150.00 62,l07.5J!lt 65.2 u.s:s l4Ml7.% 147 ,333.86· 154,700.55 81,167.96 85,2.26.36 8:9•,4-87.68

156 156 156
520.31 54-6 • .32 573.641 2-Gl9 7,073J)9 4.,131.12 :57,169.31 68:,473.52 162,435.5-8 9!3,962.1)6 156 @2 . .32 __ ,

### Appendix B - Compliance Certifications

Page Intentionally LeftBlank

9UNITED STATES OF AMERICA DEPART:.\IENT OF TRANSPORTATION OFFICE OF THE SECRETARY OFFICE OF AVIATIOI\ ANALYSIS TITLE VI ASSURANCE (Implementing Title VI ofthe Civil Rights Act of1964, as amended) ASSURA!'ICE CONCERNING NONDISCRIMINATION ON THE BASIS OF DISABILITY II" FEDERALLY-ASSISTED PROGRAMS AND ACTIVITIES RECEIVING OR BENEFITING FROM FEDERAL FINANCIAL ASSISTANCE (Implementing the Rehabilitation Act of 1973, as amended, and the Air Carrier Access Act of 1986) 49 CFR Parts 21 and 27 and 14 CFR Parts 271, and 382 

## PfiC-lfl(. AJfJ..dfiY::,; J)Jl:., (the Recipient) HEREBY AGREES THAT. (Name ofRecipient) 1 " I. As a condition to receiving any Federal tlnancial assistance from the Department ofTransportation. it

**\~>,:ill** comply: \\ith Title VI ofthe CiYil Rights Act of 196-L as amended. 42 U.S.C. 2000d--42 U.S.C. 2000d-4; all requirements imposed by or pursuant to: Title 49, Code ofFederal Regulations. Pan 21. Nondiscrimination in Federally-Assisted Programs ofthe Department ofTransportation--Effectuation ofTitle VI ofthe Ci\il Rights Act of 1964: and other pertinent directives so that no person in the United States shall. on the grounds ofrace. color. or national origin. be e:-;.cluded tl·om participation in. be denied the benetits of or be otherwise subjected to discrimination under any program or activity tbr which the Recipient receives Federal tinancial assistance from the Department of Transportation. -ll1is assurance is required by Title 49. Code ofFederal Regulations. section 2l.7(a) and Title 14. Code ofFederal Regulations. section 271.9tc). II. As a condition to receiving any Federal financial assistance from the Department ofTransportation, it will comply \\ith: section 504 ofthe Rehabilitation Act of 1973. as amended (29 U.S.C. 794); the Air Carrier Access Act of 1986 (49 U.S.C. 1374(c)): and all requirements imposed by or pursuant to Title 49. Code ofFederal Regulations, Part 27.

**~ondiscrimination** on the Basis ofHandicap in Programs and Activities Receiving or Benefitting from Federal Financial Assistance. Title 14. Code ofFederal Regulations. Part 382. "\iondiscrimination on the Basis ofHandicap in Air Travel: and other pertinent directivesso that no otherwise qualitied person \Vith a disability. be excluded trom participation in. be denied the benefits

**ot~** be discriminated against by reason ofsuch handicap in the provision ofair transportation. or otherwise be subjected to discrimination under any program for \\hich the Recipient receives Federal financial assistance from the Department of Transportation. This assurance is required b) Title 49. Code ofFederal Regulations. section :27.9 and Title 14. Code ofFederal Regulations. sections 271.9(c) and 38:2.9. IIJ. It will promptly take any meaures necessary to etTecruate this agreement. The Recipient further agrees that it shall take reasonable actions to guarantee that it. its contractors and subcontractors subject to the Department ofTransportation regulations cited above. transferees. and successors in interest\\ill comply v.ith all requirements imposed or pursuant to the statutes and Depat1ment ofTransportation regulations cited abme. other pertinent directives. and the above assurances. IV. These assurances obligate the Recipient for the period during which Federal tinancial assistance is extended. The Recipient agrees that the Lnited States has a right to seekjudicial enforcement \Vith regard to an: matter arising under the statutes and Department ofTransportation regulations cited above. other pe11inem directives. and the al:x.J\'e assurances. V. These assurances are given for the purpose ofobtaining Federal subsidy under the Essential Air Service Program and are binding on the Recipient. contractors. subcontractors. transferees. successors in interest. and all other participants receiving Federal subsidy in the Essential Air Service Program. The person or persons whose signatures appear below are authorized to sign this agreement on behalfofthe Recipient. VI. In addition to these assurances. the Recipient agrees to llle: a summw·y 'ofall complaints tiled against it within the past year that allege violation(Sl by the Recipient of Title Vl ofthe Civil Rights Act of 1964, as amended. section 504 ofthe Rehabilitation Act of 1973. as amended. or the Air Carrier Access Act of 1986: or a statement that there have been no complaints filed against it. The summaf) should include the date the complaint was filed. the nature ofthe complaint. the statu:-. or outcome ofthe complaint!i.e.. \\hether it is still pending or hov .. it was resolved).



# ---;;j;qj;5 ··--·--- Date 

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# l

# f;

# c fl;f.-Aif{Y-!1

**11._~c-** Legal Name ofRecipient By: 

# #2='/}~ Signature ofAuthorized Official

### L':\"ITED STATES OF AMERICA DEPARTMENT OF TR;\NSPORTATION OFFICE OF THE SECRETARY OFFICE OF AVIATION

**Ai~AL**

### YSIS CERTIFICATION REGARDING DRl:G-FREE WORKPLACE

**REQCIREME~TS** 

### IN THE PERFORMA:.'\fCE OF St:BSIDIZED ESSENTIAL AIR SERVICE A. The subsidized essential air service carrier certifies that it will. or will continue. to provide a drugfree workplace by: (a) Publishing a statement notit)ring

**emplo~**ees that the unlawfulmanutacture. distribution. dispensing. possession or use ofa controlled substance is prohibited in the can·ier's \\orkplace. and specit) ing the actions that will be taken against employees for violation ofsuch prohibition: (b) Establishing an ongoing drug-free a\\areness program to inform emplo;ees about-- (l) The dangers ofdrug abuse in the \\orkplace: !2) The grantee's policy ofmaintaining a drug-free workplace: (3) An: available drug counseling. rehabilitation. and employee assistance programs: and (4) The penalties that ma) be imposed upon employees for drug abuse violations occurring in the workplace: (C) Making it a requirement that each employee to be engaged in the performance ofwork supported by the subsidy be given a copy ofthe statement required by paragraph (a): (dl Notit)·ing the employee in the statement required by paragraph (a) that. as a condition of employment supported by the subsid;. the employee will-- (1) Abide by the tenm ofthe statement: and (2) Not

**it~** the employer in vuiting ofhis or her conviction for a violation ofa criminal drug: statute occurring in the \\orkplace no later than tive calendar days atl:er such conviction: (e) Notif)'ing the agency in writing. within ten calendar days after receiving notice under paragraph 1 d1(2) from an employee or otherwise receiYing actual notice ofcomiction. Employers ofconvicted employees must provide notice. including position title. to the Office ofAviation Anal) sis. J\otice shall include the order number ofeach affected subsidized service: (f) Taking one ofthe following actions. \vithin 30 days ofrecehing notice under paragraph (d)C). \\ith respect to any emplo.vee who is s0 convicted-- (l) Taking appropriate personnel ::tction against such an employee. up to and including termination. consistent with the requirements ofthe Rehabilitation Act of 1973. as amended. or (2) Requiring such employee to participate satistactorily in a drug abuse assistance or rehabilitation program approved for such purposes by a Federal. Stare or local health. law enforcement. or other appropriate agency:i 

## I (gl Making a good faith effort to continue to maintain a drug-free \\orkplace through implementation ofparagraphs (a). tb). (cl. (d). (e) and (f). B. The subsidized essential air service carriermaL but is not required to. insert in the space prc)\'ided beiO\\ the site tor the performance of\\Ork done in connection''ith the specific grant. Places ofPerfonnance (street address. city. count). state. zip code). For the pro\ision ofessential air ser\ice. workplaces include outstations. maintenance sites. headquaners office locations. training sites and an:y other worksites where work is petiormed that is supponed b} the subsicl). 

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# 9990 j

Check [ ] ifthere are \\Orkplaces on file that are not identified here.

### UNITED STATES OF AMERICA DEPARTMENT OF TRA;\'SPORTATION OFFICE OF THE SECRETARY OFFICE OF A VIATIO:\

**~ ~AL** 

### YSIS CERTIFICATION REGARDNG INFLt:ENCING ACTIVITIES Certification for Contracts, Grants, Loans. and Cooperative Agreements The undersigned certifies, to the best ofhis or her knO\\ ledge and belie( that: (l) '\o Federal appropriated funds have been paid or \\ill be paid. b) or on behalfofthe undersigned. to an; person for influencing or anempting to influence an officer or emplo;.ee ofany agency, a IV!ember ofCongress. an officer or emplo_>ee ofCongress. or an employee ofa Member ofCongress in connection \'l-ith the a\\arding ofan) Federal contract. the making ofany Federa.l grant, the making ofan;. Federal loan. the entering into ofany cooperative agreement. and the extension. continuation. renewal. amendment. or modification ofany Federal contract. grant. Joan. or cooperative agreement. (2) Ifany funds other than Federal appropriated funds have been paid or will be paid to any person for influencing or attempting to influence an officer or employee ofany agency. a :V1ember ofCongress. an officer or emplo)ee ofCongress. or an emplo:ee ofa Member of Congress in connection \Vith this Federal contract. grant. loan. or cooperative agreement. the undersigned shall complete and submit Standard Form-LLL. "Disclosure Form to Report Influencing Acti\·ities.'' in accordance \\ith its instructions. (3) The undersigned shall require that the language ofthis certitication be included in the award documents for all subavvards at all tiers 1including subcontracts. subgrants. and contracts under grants. loans and cooperative agreements) and thar all subrecipients shall

**certit~** and disclose accordingly. This certification is a material representation oftact upon ''hich reliance \\as placed \\hen this transaction \\as made orentered into. Submission ofthis certification is a prerequisite for making or entering into this transaction imposed b) section 135:2. title 31. U.S. Code. Any person \Vho tails to file the required certitication shall be su[<ject to a civil penalty ofnot less than SI0,000 and not more than S100.000 tor each such failure.
Signature Title **~~** Date



### f'/JC/~lc 

## f}JW/jj/5; ;J;,(_, Air Canier Essential Air Service Poihtisl To Which Ce11itication Applies