BEFORE THE 

DEPARTMENT OF TRANSPORTATION 

WASHINGTON, DC 

Essential Air Service at 

CRESCENT CITY, CALIFORNIA 

) 

) Docket DOT -OST -1997-2649 

) 

____________________________________ ) 

PROPOSAL OF PENINSULA AIRWAYS, INC. 

TO PROVIDE ESSENTIAL AIR SERVICE AT 

CRESCENT CITY, CALIFORNIA 

Correspondence with regard to this document should be addressed to: 

Danny Seybert, CEO 

Scott Bloomquist, President 

PENINSULA AIRWAYS, INC. 

6100 Boeing Avenue 

Anchorage, AK 99502 

February 17, 2015 

\\DC- 00472Ji000002 3339473 v4 

Robert E. Cohn 

Patrick R. Rizzi 

HOGAN LOVELLS US LLP 

Columbia Square 

555 Thirteenth Street, NW 

Washington, DC 20004 

202 637 4999/5659 

robert. cohn@hoga n lovells. com 

patrick.rizzi@hoganlovells.com 

Counsel for 

Peninsula Airways, Inc. 
BEFORE THE 

DEPARTMENT OF TRANSPORTATION 

WASHINGTON, DC 

Essential Air Service at ) 

CRESCENT CITY, CALIFORNIA 

) Docket DOT -OST -1997-2649 

) 

__________________ ) February 17, 2015 

PROPOSAL OF PENINSULA AIRWAYS, INC. 

TO PROVIDE ESSENTIAL AIR SERVICE AT 

CRESCENT CITY, CALIFORNIA 

Pursuant to DOT Order 2014-11-18 ("Order"), 1 Peninsula Airways, Inc. ("PenAir") 

hereby submits its proposal to provide subsidized, year-round essential air service 

("EAS") between Crescent City, California, and Portland, Oregon, for a period of two 

years, commencing on September 15, 2015. 2 PenAir's EAS proposal readily satisfies 

the requisite criteria set forth in the relevant Statute and the Order. It would offer 

superior benefits for passengers and businesses in the local community and its 

catchment area at a reasonable subsidy level. 

I. BACKGROUND. 

PenAir is an established airline with over 55 years of experience in providing 

reliable scheduled service, including EAS, to smaller communities. For many years, 

PenAir provided reliable and safe EAS for several communities in Alaska. 3 And, since 

2012, it has operated EAS to Plattsburgh (NY), Presque Isle (ME), and Bar Harbor (ME) 

By e-mail notification, dated January 13, 2015, the Department extended the deadline for the submission of 

~roposals to February 17, 2015. 

PenAir informed the community that, due to aircraft availability considerations, it could not commence EAS 

between Crescent City and Portland until September 15, 2015. As explained later in this proposal, the community 

encouraged PenAir to submit a bid and seemed receptive to PenAir's service proposal. 3 See,~. DOT Order 2009-5-4 (Akutan); DOT Orders 2004-6-20 and 2006-5-21 (Atka and Nikolski). 

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EAS Proposal of Peninsula Airways, Inc. 

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from its newest operational base in Boston, Massachusetts. 4 PenAir is based in Alaska, 

but plans to set up a new base of operations at Portland, Oregon, to support its 

proposed EAS for Crescent City, California, just as it has done in Boston to support its 

EAS network in the Northeast United States. 

II. PENAIR'S PROPOSAL OFFERS SIGNIFICANT CAPACITY AND WELLTIMED SCHEDULES TO/FROM PORTLAND, A MAJOR HUB FOR ITS 

CODESHARE PARTNER ALASKA AIRLINES. 

PenAir proposes 14 weekly nonstop roundtrips between Crescent City and 

Portland on a schedule of 2 roundtrips per day. PenAir would operate this service yearround using pressurized, multi-engine Saab 340 aircraft with 30 passenger seats (in a 

comfortable 2-by-1 seating configuration), a two-pilot cockpit crew, a flight attendant, inflight beverage/snack service, and an on-board lavatory. This service schedule will 

provide 420 weekly seats each way between Crescent City ("CEC") and Portland 

("POX"). As detailed in Exhibit KS-1, PenAir's CEC-PDX service would require an 

annual subsidy of $3,506,231 for the first year and $2,951,831 for the second year. 

Portland is a major destination, in and of itself, for Crescent City travelers and a 

gateway for connections to other destinations. A CEC Air Service Survey found that 

Crescent City businesses have more ties with offices in Portland than any other U.S. 

city (except Los Angeles which has the same number of office ties to Crescent City as 

4 See DOT Order 2012-3-2 (initial selection); DOT Order 2014-6-4 (re-selection). 

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EAS Proposal of Peninsula Airways, Inc. 

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Portland). 5 Indeed, more survey respondents wanted nonstop service to Portland than 

any other city/hub. 

During the business week, PenAir plans to overnight an aircraft at Crescent City, 

thereby providing Crescent City passengers with an early morning departure to, and an 

evening arrival from, Portland. This schedule will enable CEC passengers to make 

same-day, roundtrips to Portland. 

Portland is also a major hub for Alaska Airlines, PenAir's codeshare partner. 

Alaska Airlines has served Portland for over three decades and currently operates, on 

average, about 101 daily departures there. 6 PenAir's schedule is designed to facilitate 

convenient connections at POX with Alaska Airlines flights to/from numerous other 

destinations in the United States, including Los Angeles, Dallas, Seattle, San Francisco, 

and Sacramento. As a result, PenAir's service proposal offers Crescent City travelers 

not only convenient nonstop service to Portland, but also seamless, single check-in, 

single ticket, through-baggage, one-stop service to numerous destinations beyond POX 

on Alaska Airlines. Moreover, PenAir participates in Alaska Airlines' frequent flyer 

program, so passengers on PenAir's Crescent City flights could earn miles in that 

popular program. 

Another attraction of PenAir's proposed service to Portland is POX's relatively 

strong track record for on-time operations. For example, in November 2014, Portland's 

5 Portland surpassed Seattle, San Diego, Las Vegas, Phoenix, Denver, Honolulu, Dallas, St. Louis, Chicago, 

Washington, D.C., New York City, and Atlanta. 6 See http://www.alaskaair.com/contentlabout-us/newsroom/as-cities.aspx. 

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on-time arrival and departures rates were 79.3% and 85.6%, respectively. 7 That was 

8.5 and 10.3 percentage points higher, respectively, than San Francisco International 

Airport ("SFO"), CEC's current EAS hub. In December 2014, the difference was even 

more stark: POX's on-time arrival and departure rates were about 20 percentage points 

higher than SFO's. 8 Thus, PenAir's Portland service should be much more reliable than 

EAS to SFO. 

Ill. PENAIR HAS SUBSTANTIAL EXPERIENCE IN SAFELY AND RELIABLY 

SERVING SMALL COMMUNITIES. ITS SAAB 340 AIRCRAFT AND ITS 

RELATIONSHIPS WITH OTHER AIRLINES WILL PROVIDE ADDITIONAL 

BENEFITS FOR PASSENGERS ON THE CEC-PDX ROUTE. 

In selecting a carrier to provide subsidized essential air service, the Department 

considers five factors: (1) service reliability; (2) contractual and marketing arrangements 

with a larger carrier at the hub; (3) interline arrangements with a larger carrier at the 

hub; (4) community views; and (5) whether the carrier has included a plan in its 

proposal to market its service to the community, see 49 U.S.C. 41733(c)(1), as well as 

the relative subsidy requirements. See DOT Order 2014-11-18, at 3 n.4. PenAir 

satisfies each of these factors, and its proposal provides the Department, the 

communities, and the travelling public with substantial benefits at a reasonable subsidy 

level. 

See DOT Air Travel Consumer Report (issued January 2015), at 18 (Table 7). 8 POX's on-time arrival and departure rates were 73.8% and 79.5%, respectively, as compared to 

SFO's at 52.0% and 59.5%. See DOT Air Travel Consumer Report (issued February 2015), at 18 (Table 7). 

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EAS Proposal of Peninsula Airways, Inc. 

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(1) Service Reliability and Experience. PenAir flew more than 226,200 

passengers and more than 95.8 million revenue passenger miles in 2014. It is familyowned and several hundred employees, the majority of whom have many years of 

service with the airline. PenAir has more than 55 years of operational experience in 

Alaska's harsh weather environment. It currently operates a fleet of 15 multi-engine 

passenger and all-cargo Saab aircraft, providing vital air service to 10 Alaska 

communities from Anchorage, as well as to 3 EAS communities in the Northeast from 

Boston. As a past subsidized EAS provider for certain communities in Alaska such as 

Nikolski, Akutan, and Adak, and as a current subsidized EAS provider for Plattsburgh 

(NY) and Presque Isle (ME), PenAir is very familiar with the Department's EAS Program 

and the vital importance of providing safe, reliable, and convenient EAS to small 

communities. Indeed, as the Department knows, PenAir was the very first recipient of 

an EAS subsidy when the Program began decades ago. 

Safety is PenAir's highest priority. PenAir was the first Part 135 U.S. air carrier to 

become a Part 121 air carrier. The FAA has awarded the Diamond Certificate of 

Excellence to PenAir for 14 consecutive years. PenAir's management, crews, 

mechanics, and dispatchers have relatively unparalleled experience with Saab 340 

aircraft in safely and reliably operating from both small, remote airports without control 

towers (~, Dutch Harbor, Alaska; Presque Isle, Maine) and major hubs (~, Ted 

Stevens Anchorage International Airport; Boston Logan International Airport), over 

water (~, the Bering Sea; the Atlantic Ocean), and in all types of weather, including 

the harsh winter weather often encountered in Alaska and the Northeast United States. 

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This experience will be of substantial value to PenAir, Crescent City, the local 

catchment area, and passengers traveling between CEC, a small airport on the Pacific 

Ocean, and POX, a major hub. 

As noted above, PenAir proposes operating its Saab 340 aircraft on this EAS 

route, an aircraft with which PenAir has more than 15 years of operational experience. 

The Saab 340 is well-suited for the proposed route between Crescent City and Portland. 

It is a dependable, multi-engine aircraft with a two-pilot cockpit crew, seats for 30 

passengers, a cargo capacity of 2,500 lbs., and a cruise speed of approximately 265 

knots. Each passenger on the Saab 340 has an aisle and/or window seat (i.e., no 

"middle seats"). In addition, the Saab 340 aircraft has significant passenger amenities 

for this category of aircraft: lavatory facilities, a pressurized cabin, a flight attendant, 

and in-flight beverage/snack service. PenAir has substantial experience operating 

these aircraft safely and reliably on much longer routes, and in typically harsher weather 

environments, than CEC-PDX. For example, PenAir regularly flies between Anchorage 

and Dutch Harbor (792 miles), between Anchorage and St. Paul Island (767 miles), and 

between Boston and Presque Isle (333 miles). 

(2) Contractual and Marketing Arrangements with a Larger Carrier at the 

Hub. As described above, Alaska Airlines - with its hub at POX - is, and long has 

been, a codeshare partner with PenAir. With this relationship, PenAir will carry the AS 

designator code on its CEC-PDX flights. Passengers will benefit from single check-in, 

single-ticket, through-baggage air travel, making it easier for passengers traveling 

between Crescent City and the numerous nonstop destinations served by Alaska 

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Airlines from its Portland hub. Such itineraries would be available on Alaska Airlines' 

website and certain major on-line travel booking sites. Seats for travel just between 

Crescent City and Portland could be purchased via PenAir's website, Alaska Airlines' 

website or booking sites. Passengers on PenAir's CEC-PDX flights would also be able 

to earn frequent flyer miles in Alaska Airlines' frequent flyer program, which frequent 

flyer miles can then be redeemed at certain levels for free travel or upgrades on flights 

offered not only by Alaska Airlines but also by its partners, Air France, American 

Airlines, British Airways, Cathay Pacific, Delta Air Lines, KLM, Korean Air Lines, LAN, 

PenAir, Fiji Airways, Aeromexico, and Emirates. 

(3) Interline arrangements with a larger carrier at the hub. In addition to its 

codeshare, interline, and frequent flyer relationships with Alaska Airlines, PenAir also 

has Electronic Interline Ticket Agreements with Delta Air Lines (and its regional carriers) 

and United Air Lines (and its regional carriers). These arrangements also facilitate 

single-ticket, single check-in, and through-baggage for travelers. 

(4) Community Views. Although PenAir would not presume to speak for the 

community and it understands that the Department will directly solicit the community's 

views on the EAS proposals, PenAir has already received several letters, including from 

a California State Senator, the Mayor of Crescent City, and the Mayor of nearby 

Brookings (Oregon), encouraging PenAir to submit a proposal to provide EAS and 

receptive to PenAir's proposed aircraft, codeshare, and market/hub. 

(5) Marketing Proposal for CEC-PDX. If selected for this EAS, PenAir will 

implement a number of local marketing efforts, in conjunction with the local 

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communities, as part of an initiative to raise awareness and brand recognition about the 

CEC-PDX service. These local marketing efforts would include advertising in local print 

and radioffV media, social networking avenues, community involvement, and donation 

engagement. Similar initiatives have proved successful for PenAir in promoting its EAS 

in the Northeast United States. In addition, PenAir will seek to leverage Alaska Airlines' 

large market presence in Portland to promote its nonstop Crescent City-Portland 

service as well. And, as explained above, these flights would be available for purchase 

through PenAir's and Alaska Airlines' websites, as well as certain on-line booking sites 

that consumers frequently use to assist in their travel planning. 

IV. CONCLUSION. 

PenAir's proposal to operate CEC-PDX service with 14 weekly frequencies 

fulfills the statutory prerequisites for EAS and offers superior benefits to passengers, 

businesses, and agencies in Crescent City and its catchment area. Accordingly, PenAir 

urges the Department to select it to provide essential air service for two years between 

Portland, Oregon, and Crescent City, California, at the subsidy levels presented herein, 

beginning on September 15, 2015. 

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Respectfully submitted 

Robert E. Cohn 

Patrick R. Rizzi 

HOGAN LOVELLS US LLP 

Counsel to Peninsula Airways, Inc. 
CERTIFICATE OF SERVICE 

I hereby certify that a copy of the foregoing Proposal of Peninsula Airways, Inc., 

for EAS at Crescent City, California, has been served this February 17, 2015, upon 

each of the following addressees: 

Kevin Schlemmer, USDOT 

Kevin.Schlemmer@dot.gov 

Michael Martin, USDOT 

Michael. F. Martin@dot.gov 

Essential Air Service Program 

EAS@dot.gov 

Matthew Leitner 

Airport Director 

Border Coast Airport Authority 

mleitner@co .del-norte .ca. us 

\\f)('~ 00472!/000002 3339473 v4 

/PRR 
Scheduled Flights R(f@ 98% 

Scheduled Departures @ 98% 

Block Hours Per R/T 

Total Scheduled Block Hours 

Passengers Enplaned 

Average 0/W Fare 

Annual Revenue 

Cost Build-up from Unit Cost Rates 

Cost Item 

Ownership 2 Aircraft 

Maintenance 

Pilots 

FAs 

Traffic Related Expenses 

Departure Related Expenses 

Overhead Related Expenses 

Insurance 

Fuel 

Cost Driver 

Monthly 

Blk Hrs 

Blk Hrs 

Blk Hrs 

Passengers 

Departure 

Departure 

Monthly 

Blk Hrs 

Total Scheduled Completed Flight Opeerating Expenses 

Other Costs 

Aircraft Deposits OneTime 

Hanger Expense Monthly 

Start-up Expenses OneTime 

Total Non-Scheduled Flight Operating Expenses 

Total Annual Expense 

Margin@ 5% 

TOTAL COSTS 

Estimated Annual Payment + Margin 

714 

1428 

2.4 

1713.6 

24000 

$111.00 

$2,664,000.00 

EXHIBIT KS-1 

Year 1 

Unit Cost Annual Expense 

$32,000.00 $768,000 

$653.02 $1,119,016 

$310.00 $531,216 

$56.18 $96,268 

$41.05 $985,172 

$377.52 $539,093 

$79.36 $113,330 

$22,000.00 $264,000 

$516.06 $884,316 

$5,300,411 

128000 128000 

4000 48000 

400000 400000 

576000 

$5,876,411 

$293,821 

$6,170,231 

$3,506,231