Order 2011-11-27

Served: November 22, 2011

 UNITED STATES OF AMERICA

 DEPARTMENT OF TRANSPORTATION

 OFFICE OF THE SECRETARY

 WASHINGTON, D.C.

Issued by the Department of Transportation

on the 22nd day of November, 2011

 ORDER SELECTING CARRIER AND SETTING SUBSIDY RATES

Summary

By this Order, the Department of Transportation (Department or DOT) selects Schuman 

Aviation Company Ltd. d/b/a Makani Kai Air Charters (Makani Kai) to provide subsidized 

Essential Air Service (EAS) with nine-seat Cessna Grand Caravans at Kalaupapa, Hawaii,1

for the two-year period beginning when the carrier begins full EAS, for a first-year subsidy 

rate of $932,772, and a second-year subsidy rate of $923,509.2

Background

Pacific Wings, LLC (Pacific Wings) provided subsidized EAS at the community from 2000-

2007. Beginning on April 1, 2007, Pacific Wings provided subsidy-free EAS at the 

community with a schedule generally consisting of at least 12 weekly nonstop round trips to 

Honolulu (or Molokai) with nine-seat Cessna Grand Caravan aircraft.

On December 6, 2010, Pacific Wings filed a 90-day notice of its intent to suspend its 

subsidy-free service at the community, effective March 6, 2011. Consequently, the 

Department, by Order 2010-12-30 issued December 23, 2010, prohibited Pacific Wings 

from suspending service and solicited proposals from carriers to provide EAS at Kalaupapa, 

with subsidy support if necessary. DOT requested that carriers file their proposals no later 

than January 27, 2011. On January 25, 2011, shortly before proposals from interested 

carriers were due, Pacific Wings withdrew its notice of intent to end its subsidy-free EAS at 

 1 See Appendix A for a map.

2 Such subsidy is calculated and distributed on a fiscal year basis, subject to the availability of funds.

Essential Air Service at

KALAUPAPA, HAWAII

Under 49 U.S.C. 41731 et seq.

Docket DOT-OST-2000-6773
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Kalaupapa. On January 27, 2011, Makani Kai and SeaPort Airlines, Inc. submitted 

proposals to provide subsidized EAS at the community.

Shortly thereafter, we suspended the carrier-selection case in light of Pacific Wings’ 

withdrawal of its notice of intent to discontinue service at Kalaupapa. After a review of 

Pacific Wings’ service at Kalaupapa and careful consideration of community concerns,

however, we later determined that it was in the public interest to proceed with the carrierselection case.

On April 7, 2011, by Order 2011-4-7, we solicited a second round of proposals for EAS at 

the community. In response to that Order, we received proposals from four carriers: Above 

It All Inc. d/b/a Molokai Air and Iolani Air (Above It All), Makani Kai, Pacific Wings, and 

Sovereign Air, Inc. (Sovereign).

When Congress established the EAS program in 1978, it established certain minimum air 

service standards. “Basic essential air service provided under [49 U.S.C.] section 41733 of 

this title is scheduled air transportation of passengers and cargo....” 49 U.S.C. § 41732. In 

order to provide scheduled air transportation under the EAS program, carriers must hold (1) 

the necessary operating authority from the Department to conduct scheduled air 

transportation and (2) the necessary safety authority from DOT’s Federal Aviation 

Administration (FAA) consistent with the carrier’s operating authority. 

The Department must ensure that EAS eligible communities receive their basic EAS, and 

that subsidized air service is provided when we determine that basic EAS will not be 

provided otherwise. 49 U.S.C. § 41733(c). Basic EAS is defined as two daily round trips, 

six days per week, with not more than one intermediate stop on each flight. It must include 

“flights at reasonable times considering the needs of passengers with 

connecting flights at the airport and at prices that are not excessive compared to the 

generally prevailing prices of other air carriers for like service between similar 

places.” 49 U.S.C. § 41732(b)(2). 

In selecting a carrier to provide subsidized EAS, the Department is required to consider four 

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; and (4) 

community views. 49 U.S.C. § 41733(c)(1). In addition, the Consolidated Appropriations 

Act, 2008, Public Law 110-161, states that when selecting a carrier to provide EAS, the 

Department may consider the relative subsidy requirements of the applicants. The absence 

of an applicant’s requisite operating authorities does not automatically disqualify that carrier 

from consideration or ultimate selection, contingent upon its receipt of all the necessary 

DOT and FAA approvals prior to starting service, but it may put the carrier at a competitive 

disadvantage to an operating carrier which already has the requisite operating authorities. 

Objection of Pacific Wings

On April 20, 2011, Pacific Wings responded to Order 2011-4-7.3 Pacific Wings asserts that

because it is providing subsidy-free service at the community, the Department is legally 

 3 Pacific Wings’ complete response is filed in the Docket. (DOT-OST-2000-6773.)
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prohibited from paying another carrier to also provide service there. Pacific Wings further 

states that the findings used by the Department to justify a solicitation of a second round of 

proposals for EAS at the community are not supported by the facts or the law. Pacific 

Wings disagrees with the Department’s assertions that enplanements and flight completion

percentages at the community have decreased and that residents have complained about its 

service. Pacific Wings notes the Department’s reference to the “unique needs” of the 

community, and states that although it is not clear what the Department means by “unique,”

it believes DOT refers to the presence of Hansen’s Disease patients at Kalaupapa. The 

carrier notes that there has never been a complaint made that the service it offers is 

inadequate to transport the patients at Kalaupapa. Pacific Wings also asserts that Order 

2011-7-4 was issued solely in response to air fares, and states that air fares have been 

deregulated since 1978, even at EAS communities, and therefore the Department cannot use 

high air fares as a justification for soliciting a carrier to provide EAS. Pacific Wings argues

that air fares for the community’s patients, as well as most National Park Service (“NPS”)

and Hawaii Department of Health (“HDOH”) workers, are paid for by either the State of 

Hawaii or their employers, respectively, and therefore the cost of fares does not affect the 

residents’ ability to leave the island.

Pacific Wings further states that from 2007 through 2010, it has completed more than 1,800 

flights over the EAS minimum requirement. The carrier explains that it has consistently 

operated twice daily round trips between the community and Honolulu, with an intermediate 

stop in Molokai, and daily round trip service between the community and Kahului, with an 

intermediate stop in Molokai (or “topside”). Finally, Pacific Wings states that this schedule 

is well in excess of the EAS statutory minimum requirement of 12 round trips per week, and 

that the community not only receives 14 weekly round trip flights to Honolulu, but also 

receives round trip service to Kahului, for a total of 21 round trips per week, which is 75% 

more scheduled service than the statutory EAS requirement. 

Decision on Pacific Wings’ Objection

Kalaupapa is one of the most isolated communities in the EAS program. The community 

can only be accessed by airplane or walking a two and a half mile trail with 26 switchbacks 

up and down a 1,600 foot cliff. The community is a former Hansen’s Disease settlement 

located on a peninsula on the Island of Molokai, and is serviced by an annual barge that 

brings in a year’s worth of bulk supplies and equipment. The Kalaupapa patient population 

ranges in age from 69 to 87, and most of the residents are not able to use the trail. The 

Department originally recognized the unique nature of Kalaupapa and the needs of its 

residents in 1991, when it granted the community/State’s petition to be designated as a point 

eligible to receive small community air service under 49 U.S.C. Section 41736(a).4 In the 

“Wendell H. Ford Aviation and Reform Act of the 21st Century” (“AIR-21”),5 Congress 

amended the definition of an “eligible place” for EAS to include those communities 

designated by the Secretary to receive small community air service under Section 41736(a), 

after October 1, 1988 and before the date of enactment of AIR-21, making Kalaupapa 

eligible for subsidized EAS. 

 4 See DOT Orders 91-4-6 and 2000-2-24.

5 See Public Law 106-181.
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Pacific Wings contends that because it schedules 21 round trips a week at Kalaupapa, the 

community is receiving more than basic EAS (i.e., more than two round trips per day, six 

days a week). Pacific Wings’ argument, however, ignores the fact that basic EAS 

encompasses more than service level. For example, basic EAS also requires fares that are 

not excessive and flights at reasonable times. 49 U.S.C. § 41732 (b)(2). As explained 

below, Pacific Wings’ air fares are “excessive” as evidenced by a significant drop in 

enplanements, community comments, and a comparison of Pacific Wings’ fares at 

Kalaupapa to fares at locations in Hawaii with similar passenger levels.

As previously discussed, we reviewed Pacific Wings’ monthly data, which is submitted to 

the Department’s Bureau of Transportation Statistics (BTS). From 2007-2010, the carrier’s 

enplanements at the community have declined each year, from 3,206, to 3,135, to 2,035, to 

895, respectively. This is a significant decrease in the number of enplanements in the 

immediately preceding years, as evidenced in the following table:

Historical Enplanements

Kalaupapa, Hawaii

Year Ended Annual 

Enplanements

Percentage of 

Yearly Decrease 

in Annual 

Enplanements

Percentage of 

Decrease in 

Annual 

Enplanements 

Since 2007

31-Dec-2007 3,206

31-Dec-2008 3,135 2% 2%

31-Dec-2009 2,035 35% 37%

31-Dec-2010 895 56% 72%

Source: Bureau of Transportation Statistics (BTS), T-100 Market Data.

Pacific Wings states that it “believes” that there are now “few patients” who can travel by 

air at Kalaupapa, and that this accounts for the decrease in enplanements. However, the 

community, the State of Hawaii Department of Transportation (“HDOT”), HDOH, and NPS 

all claim that it is the excessive fares charged by Pacific Wings that have reduced demand,

making the flights unaffordable -- and not just for patients, but also for friends and family 

members, community residents, and employees at Kalaupapa National Historic Park. 

The Department compared the fares Pacific Wings charges for flights to/from Kalaupapa to 

those in other Hawaii markets with relatively short stage lengths and modest traffic levels. 

Pacific Wings’ average fare for one-way travel from Kalaupapa to Hoolehua/Molokai, a 

nine mile flight, is $244, with an average yield of $27.11 per passenger mile. The average 

fare for one-way travel on Pacific Wings from Kalaupapa to Honolulu/Oahu, a 64 mile 

flight, is $248, with an average yield of $3.88.
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Year

From To

Miles Fare

Yield (per 

passenger 

mile) City State City State

2011 Kalaupapa HI Hoolehua/Molokai HI 9 $244 $27.11

2011 Kalaupapa HI Honolulu HI 64 $248 $3.88

Source: Fares above obtained from Pacific Wings’ website on September 12, 2011, for one-way 

travel on October 17, 2011.

By comparison, a non-Pacific Wings flight from Honolulu/Oahu to Lanai City, a 73 mile 

flight, has an average fare of $76, with an average yield of $1.04. A non-Pacific Wings 

flight from Honolulu to Kapalua/Maui, an 84 mile flight, has an average fare of $89, with an 

average yield of $1.05. A non-Pacific Wings flight from Honolulu/Oahu to 

Hoolehua/Molokai, a 54 mile flight, has an average fare of $70, with an average yield of 

$1.29. A non-Pacific Wings flight from Kona to Hoolehua/Molokai, a 119 mile flight, has 

an average fare of $101, with an average yield of $.85. Thus, Pacific Wings’ yields from 

Kalaupapa are significantly higher than the yields in comparable markets.6

Following HDOH’s submission of comments on this matter, and particularly to better assess 

its complaints about Pacific Wings’ increased fares, we obtained from HDOH historical data 

 6 Attached as Appendix E is a chart depicting DOT Origin Destination Survey Data (DB1B) on 2010 fares for 

non-subsidized flights within the State of Hawaii. The four examples included in the chart above (within the 

text of this Order) represent routes of relatively short stage lengths and modest traffic levels at the 

communities involved, as a comparison against service at Kalaupapa. However, the average yields generated 

by Pacific Wings’ flights at Kalaupapa exceed the average yields generated by all of the Hawaii flights 

reported. (See Appendix E.) 

Year Carrier Departure 

City State Arrival City State Miles Number of 

Passengers Avg. Fare

Avg. Yield 

(per 

passenger 

mile)

2010

Multiple 

Carriers 

(not 

Pacific 

Wings)

Honolulu/

Oahu HI Lanai City HI 73 520 $76 $1.04

2010

Multiple 

Carriers 

(not 

Pacific 

Wings)

Honolulu/

Oahu HI Kapalua/

Maui HI 84 490 $89 $1.05

2010

Multiple 

Carriers 

(not 

Pacific 

Wings)

Honolulu/

Oahu HI Hoolehua/

Molokai HI 54 170 $70 $1.29

2010

Multiple 

Carriers 

(not 

Pacific 

Wings)

Kona HI Hoolehua/

Molokai HI 119 40 $101 $0.85

Source: These are averages of fares obtained from DOT Origin Destination Survey Data (DB1B) for 2010. 
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on the fares it has paid for flights to/from Kalaupapa for residents’ medical trips.7 In 2007, 

fares paid on round trip flights from Kalaupapa to Honolulu ranged from $74.81 to $225. In 

2008, fares on the same flights ranged from $94.80 to $245.50. In 2009, fares ranged from 

$146.20 to $288.15. Finally in 2010, fares ranged from $222.15 to $503.55. This steady 

rise in fares, and significant jump in 2010, was accompanied by a significant drop in traffic, 

particularly in 2009 and 2010. As stated above, annual enplanements for Kaluapapa began 

to decrease in 2009 and plummeted in 2010. As Pacific Wings’ fares have increased, the 

number of enplanements has decreased.8 

We find no merit in Pacific Wings’ argument that the high fares it charges for Kalaupapa 

service do not matter because the State of Hawaii pays for patients’ air fares. In its 

response, Pacific Wings’ states that, “If the Department believes these patients are in need 

of subsidized air service to be able to afford to travel, the Department should know that the 

air fare for Kalaupapa patients as well as most workers (National Park and Health workers) 

is paid for by the State of Hawaii or their respective employer.”9 Neither the State nor its 

residents should have to pay excessive fares for EAS at Kalaupapa. Moreover, Pacific 

Wings’ argument fails to note that the State of Hawaii only pays for travel for residents’ 

medical care, and that travel for residents’ personal business, and the travel of their family, 

friends, and visitors who come to Kalaupapa, are paid by the individuals. HDOH also states 

that it has sustained budget restrictions as a result of lower State revenues, and increases in 

travel costs result in a negative impact upon service delivery. Furthermore, HDOH notes 

that high air fares greatly inconvenience residents at the community, as they extend their 

stays in Honolulu to consolidate medical visits to save on travel costs. HDOH notes that 

there was a substantial decrease in medical travel, from 107 round trips in 2009, to 71 in 

2010-11. Pacific Wings’ fares are, therefore, critically important to Kalaupapa residents and 

non-residents. If fares are too high for the residents to afford, the residents are effectively 

stranded.10 

 7 This information is included as Appendix F.

8 This decrease in demand has also resulted in an increase in the cancellation of flights. Pacific Wings’ 

argument that it completes the vast majority of its flights for which a ticket has been purchased ignores that its 

completion percentages for scheduled flights at Kalaupapa (including flights for which no ticket was sold) 

were low in 2007, increased for two years, but then went down again in 2010 – from 77.7 percent, to 95.2 

percent, to 96.1 percent, and then back down to 81.1 percent, respectively. Given the steadily decreasing 

number of enplanements in each of the past four years, and the dramatic drop in the past year, it is not 

surprising that Pacific Wings is canceling a considerable percentage of its scheduled flights for lack of 

demand. Contrary to Pacific Wings’ submission, we are not announcing a “new policy to insist that a nonsubsidized EAS carrier operate a flight with no passengers.” We are, however, noting the lack of demand for 

Pacific Wings’ service, which users have stated is due to its excessive fares. 

9 See letter from Counsel for Pacific Wings, Gregory S. Walden, to Assistant Secretary for Aviation and 

International Affairs, Susan L. Kurland, dated April 20, 2011. Docket DOT-OST-2000-6773.

10 We also find no merit in Pacific Wings’ contention that the Airline Deregulation Act prohibits DOT’s 

implementation of 49 U.S.C. Section 41732(b)(2). By this Order, DOT is not regulating the fares of an air 

carrier. Rather, we are implementing Congress’ mandate that an EAS community receive basic EAS, as 

defined in the EAS statute. 
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As for the effect high air fares have had on non-residents, NPS notes that it is having a hard 

time recruiting and keeping workers at Kalaupapa due to high fares. NPS further states that 

the high air fares isolate their employees from family and friends, and that due to this fact,

they have lost several employees. Finally, NPS states that Pacific Wings’ prices are keeping 

people from visiting the park, and that in the last two years almost no NPS visitors flew on 

Pacific Wings to access the park.11

Under the circumstances, we are exercising our statutory authority to review the adequacy 

of Kalaupapa’s EAS. We find that the fares are excessive when compared to the generally 

prevailing prices of other air carriers for like service between similar places. The excessive 

fares are contributing to a significant decrease in enplanements (and an increase in cancelled 

flights, similarly due to lack of demand). Consequently, Pacific Wings is not providing the 

community of Kalaupapa with its basic EAS, as defined in 49 U.S.C. Section 41731 et seq., 

and we reaffirm our decision to solicit proposals from air carriers to provide basic EAS to 

the community. We further note that the lack of basic EAS has caused significant problems 

to this unique community, given its extreme isolation, the lack of other forms of 

transportation, and the needs of its residents.

Proposals

The proposals and entire public docket, including community comments, regarding EAS at 

Kalaupapa may be accessed online via the Federal Docket Management System at 

http://www.regulations.gov, through a search on Docket Number DOT-OST-2000-6773. 

We have summarized each carrier’s proposal below.

Above It All

Above It All submitted a proposal to provide two nonstop round trips per day, six days a 

week, between Kalaupapa and Honolulu, and two nonstop round trips a day between 

Kalaupapa and Molokai, for an annual subsidy rate of $686,400. Above It All would 

provide service utilizing nine-seat Piper Chieftains and provide back-up service utilizing 

eight seat Gippsland Airvans. The carrier does not currently have the requisite operating 

authorities from either DOT or FAA to provide scheduled air service, although it states that 

it is in the process of submitting applications.

Makani Kai

Makani Kai proposes to provide two daily nonstop round trips between Kalaupapa and 

Honolulu, and three daily nonstop round trips between Kalaupapa and Molokai, utilizing 

nine-seat Cessna Grand Caravans, for a first-year subsidy rate of $932,772, and a secondyear subsidy rate of $923,509. On August 6, 2010, by Order 2010-8-1, DOT found the 

carrier fit to provide scheduled passenger service operating as a commuter air carrier. After 

receiving a copy of the Air Carrier Certificate and Operations Specifications, among other 

necessary items, on August 26, 2011, DOT made the carrier’s commuter authority effective 

(see Order 2011-9-1).

 11 See letter from Superintendent Stephen Prokop, Kalauapapa National Historical Park, to Dennis DeVany, 

Chief of the EAS Division. June 14, 2011. Docket DOT-OST-2000-6773.
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Pacific Wings

Pacific Wings would continue to serve Kalaupapa on a subsidy-free basis with nine-seat

Cessna Grand Caravans and provide at least two round trips per day, six days a week. As 

more fully described above, the carrier currently provides two daily nonstop round trips (14 

a week) to Honolulu and one daily nonstop round trip (seven a week) to Molokai. 

Sovereign

Sovereign’s proposal consists of two options, both with a Kalaupapa-Molokai-Honolulu 

routing and utilizing seven-seat Cessna 414 aircraft. The first option consists of 22 round 

trips a week for an annual subsidy rate of $618,831. The second option consists of two 

round trips a day Monday-Saturday (12 round trips a week with no Sunday service) for an 

annual subsidy rate of $452,886. The carrier notes that two round trips on Sundays can be 

added to Option #2 for an additional $124,566 in annual subsidy (or for $577,452 in total 

annual subsidy). By Order 2011-2-3, dated February 3, 2011, the Department dismissed

Sovereign’s application for Commuter Air Carrier Authorization. Therefore, the carrier 

does not have the requisite operating authorities to provide scheduled air service from either 

DOT or FAA, and given DOT’s recent dismissal of its application, it does not have the 

prospect of receiving such authorities soon.

Community Comments

On May 20, 2011, we sent e-mails to key community stakeholders requesting their 

comments on the proposals. In response to our request, we received comments from NPS, 

HDOT’s Airports Division, HDOH, and several residents.

NPS described Kalaupapa’s geography, isolation, and demographics (including Hansen’s 

Disease patients), and the important role air service plays for the Kalaupapa National 

Historical Park. NPS highlights the importance of access to low air fares and details the 

impact that high air fares have had on visitation trends, Hansen’s Disease patients and their 

families, and its own employment recruitment efforts. According to NPS, it receives 

numerous complaints from disgruntled citizens wishing to visit Kalaupapa National 

Historical Park who cannot afford the cost of transportation. As stated above, because of 

high air fares, NPS states that the number of visitors in the last two years who flew on 

Pacific Wings to access Kalaupapa National Historical Park was almost zero. As a result, 

NPS encourages the Department to select an air carrier that provides affordable fares, 

regular service to Molokai, and a schedule that provides for morning departures and late 

afternoon arrivals.

HDOH also details the community’s remote and rural location and patient population. 

HDOH clarifies that it pays patients’ medical air travel costs only and not personal air travel 

costs, and states that high fares have reduced both medical travel and personal travel to and 

from the community. HDOH lists a carrier’s safety record, financial stability, aircraft type 

(the capacity to accommodate nine passengers), reliability, on-time performance, and ability 

to accommodate wheel chair restricted passengers as important considerations, along with a 

schedule that would accommodate an early morning departure and late afternoon arrival.

Similar to NPS and HDOH, HDOT highlights the community’s unique characteristics and 

needs. It states that EAS must include: reasonable fares, frequency of flights/available 

seats, and the ability to accommodate mobility impaired passengers.
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Letters from individual residents raise issues similar to those raised by NPS, HDOT, and 

HDOH, including the need for lower fares. 

Selection Decision

Based on the discussion above, and after careful consideration of this matter, including the 

comments of local officials, the Department has decided to select Makani Kai to provide 

EAS at Kalaupapa. Makani Kai will provide two daily nonstop round trips between 

Kalaupapa and Honolulu and three daily nonstop round trips between Kalaupapa and 

Molokai, utilizing nine-seat Cessna Grand Caravans, for a first-year subsidy rate of 

$932,772, and a second-year subsidy rate of $923,509.

Neither Above It All nor Sovereign currently has the requisite operating authorities to 

conduct scheduled air service. In addition, neither Above It All nor Sovereign has an

application pending before DOT or FAA to obtain the requisite operating authorities. As 

noted above, this puts their proposals at a competitive disadvantage because EAS must be 

scheduled air service. 

As summarized above, we find that Pacific Wings is not meeting Kalaupapa’s basic EAS 

requirements. Moreover, in selecting an applicant, the Department is required to consider, 

among other factors, “the preferences of the actual and potential users of air transportation at 

the eligible place, giving substantial weight to the views of the elected officials representing 

the users.” 49 U.S.C. § 41733(d). As explained above, the comments received by the 

Department indicate that the continuation of Kalaupapa’s current service is not supported by 

local officials, residents, and other actual or potential users of EAS at the community. 

As for Makani Kai, it is an applicant with the requisite operating authorities from DOT and 

FAA, whose proposal meets the EAS needs and preferences of the community and State. 

We select Makani Kai and encourage Makani Kai to fulfill its commitment to have its 

flights available for sale in a wide range of distribution channels as soon as possible.

We shall make this selection at the community contingent upon the Department’s receipt of

properly executed certifications from Makani Kai that it is in compliance with the 

Department’s regulations regarding drug-free workplaces and nondiscrimination, as well as 

the regulations governing lobbying activities.

Carrier Fitness

49 U.S.C. Section 41737(b) requires that we find an air carrier fit, willing, and able to 

provide reliable service before we may subsidize it to provide EAS. Makani Kai recently 

made its commuter authority effective and will be subject to the Department’s continuing 

fitness requirements, and no information has come to our attention that would cause us to 

question the carrier’s fitness to provide EAS in this market at this time. We therefore 

conclude that the carrier is reliable and fit to conduct the operations proposed here.

Authority

This Order is issued under authority delegated in 49 CFR Section 1.56a (f).
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ACCORDINGLY,

1. We reject Pacific Wings’ objection to Order 2011-4-7, Order Requesting Proposals, and 

reaffirm our determination to proceed with the carrier selection process;

2. We select Schuman Aviation Company Ltd. d/b/a Makani Kai Air Charters to provide 

Essential Air Service at Kalaupapa, Hawaii, and establish the subsidy rates, as described in 

Appendix C, for 24 months after full EAS commences;

3. The Department directs Schuman Aviation Company Ltd. d/b/a Makani Kai Air Charters

to retain all books, records, and other source and summary documentation to support claims 

for payment, and to preserve and maintain such documentation in a manner that readily 

permits its audit and examination by representatives of the Department. Such 

documentation shall be retained for seven years from when EAS begins or until the 

Department indicates that the records may be destroyed, whichever comes first. Copies of 

flight logs for aircraft sold or disposed of must be retained. The carrier may forfeit its 

compensation for any claim that is not supported under the terms of this Order;

4. We find Schuman Aviation Company Ltd. d/b/a Makani Kai Air Charters, to be fit, 

willing, and able to operate as a commuter air carrier and capable of providing reliable 

essential air service at Kalaupapa, Hawaii; and 

5. This Docket will remain open until further order of the Department.

By:

SUSAN L. KURLAND

Assistant Secretary for

Aviation and International Affairs

(SEAL)

An electronic version of this document is available in the Federal Docket Management 

System (FDMS) at http://www.regulations.gov
Appendix A

AREA MAP
Appendix B

Schuman Aviation Company Ltd., d/b/a Makani Kai Air Charters

Provision of Essential Air Service at Kalaupapa, Hawaii

Calculation of Compensation Requirement

Estimated passengers 1st year: 2496

Departures: 2616

Flight Hours: 936

Estimated Annual Revenue:

HNL – LUP - HNL $234,000.00 $125.00*per passenger one way

LUP – MKK – LUP $121,680.00 $65.00* per passenger one way

* plus FET Tax and Segment Fees. Prices set for two years

* 50% discount for Kaluapapa residents. $62.50 & $32.50

Total Revenue: $355,680.00

Estimated Expenses:

Aircraft: $180,000.00 – Aircraft Lease 

Insurance: $96,000.00 - 50 Million Dollar Liability Coverage

Pilots: $162,240.00

Fuel: $228,150.00

Maintenance: $117,000.00 – Parts and labor

Engine & Prop Reserve: $97,500.00 – Set aside for engine and propeller overhauls

State Landing Fees: $15,974.40

Administration: $85,000.00

Total Expenses: $981,864.40

Operational Loss: $(626,184.40)

Subsidy requested 1st year $932,771.18

Subsidy requested 2nd year $923,508.92
Appendix C

Schuman Aviation Company Ltd., d/b/a Makani Kai Air Charters

Provision of Essential Air Service at Kalaupapa, Hawaii

Summary of Service To Be Provided

Effective Period: Beginning with the start of full EAS through the end of the 24th month 

thereafter.

Scheduled Service: 12 round trips a week to Honolulu; and

18 round trips a week to Molokai.

Aircraft type: Cessna Grand Caravan (nine-seat)

Intermediate stops and 

upline service:

No service to any intermediate or upline points are contemplated under 

the terms of the carrier’s proposal; accordingly, no such service may be 

provided on subsidized flights without prior Department approval.

Timing of flights: Flights must be well-timed and well-spaced in order to ensure full 

compensation.

Annual compensation: 1st year: $932,772

2nd year: $923,509

These rates assume an annual completion factor of 95 percent. A 

compensation ceiling is to be applied per calendar week such that 

service above that ceiling in one week cannot make up for service 

shortfalls in another week.

Subsidy Rate per 

Flight:

1st year: $3011

2nd year: $2982 

Weekly Compensation 

Ceiling:

1st year: $18,0603

2nd year: $17,8804

 1 Annual subsidy of $932,772 divided by 3,099 annual departures: 5 arrivals and 5 departures each week day and 

each weekend (60 flights/week) x 313 days x .99 (completion factor) = 3,099.

2 Annual subsidy of $923,509 divided by 3.099 annual departures: 5 arrivals and 5 departures each weekday and 

each weekend (60 flights/week) x 313 days x .99 (completion factor) = 3,099.

3 60 flights per week multiplied by $301 per flight.

4 60 flights per week multiplied by $298 per flight.
Appendix D

NOTE

The carrier understands that it may forfeit its compensation for any flights that it does not operate 

in conformance with the terms and stipulations of the rate order, including the service plans 

outlined in the order and any other significant elements of the required service, without prior 

approval. The carrier understands that an aircraft take-off and landing at its scheduled 

destination constitutes a completed flight; absent an explanation supporting subsidy eligibility 

for a flight that has not been completed, such as certain weather cancellations, only completed 

flights are considered eligible for subsidy. In addition, if the carrier does not schedule or operate 

its flights in full conformance with the order for a significant period, it may jeopardize its entire 

subsidy claim for the period in question. If the carrier contemplates any such changes beyond 

the scope of the order during the applicable period of these rates, it must first notify the Office of 

Aviation Analysis in writing and receive written approval from the Department to be ensured of

full compensation. Should circumstances warrant, the Department may locate and select a 

replacement carrier to provide service on these routes. The carrier must complete all flights that 

can be safely operated; flights that overfly points for lack of traffic will not be compensated. In 

determining whether subsidy payment for a deviating flight should be adjusted or disallowed, the 

Department will consider the extent to which the goals of the program are met and the extent of 

access to the national air transportation system provided to the community.

If the Department unilaterally, either partially or completely, terminates or reduces payments for 

service or changes service requirements at a specific location provided for under this order, then, 

at the end of the period for which the Department does make payments in the stipulated amounts 

or at the stipulated service levels, the carrier may cease to provide service to that specific 

location without regard to any requirement for notice of such cessation. Those adjustments in 

the levels of subsidy and/or service that are mutually agreed to in writing by the Department and 

carrier do not constitute a total or partial reduction or cessation of payment.

Subsidy contracts are subject to, and incorporate by reference, relevant statutes and Department 

regulations, as they may be amended from time to time. However, any such statutes, regulations, 

or amendments thereto shall not operate to controvert the foregoing paragraph.

Funds are not currently available for performance under this order beyond September 20, 2012. 

The Department’s obligation for performance under this order beyond September 20, 2012, is 

subject to the availability of appropriated funds from which payment for services can be made. 

No legal liability on the part of the Government for any payment may arise for performance 

under this order beyond September 20, 2012, until funds are made available to the Department 

for performance. If funds are not made available for performance beyond September 20, 2012, 

the Department will provide notice in writing to the carrier.

All claims for payment must be submitted within 60 days of the last day of service provided 

under this order.
Appendix E

DOT Origin Destination Survey Data (DB1B) on 2010 Fares for Non-Subsidized 

Flights within Hawaii

CO – Continental HA – Hawaiian YV – Mesa WP – Island Air Pacific LW – Wings NW - Delta

Year Ticketing

Carrier

Operating 

Carrier

Departure 

City State Arrival City State Miles Number of Passengers 

Avg. 

Fare

Avg. Yield 

(per 

passenger 

mile)

2010 CO HA Hilo Hawaii Honolulu/Oahu Hawaii 216 10 $96.42 $0.45

2010 HA HA Hilo Hawaii Honolulu/Oahu Hawaii 216 775350 $86.97 $0.40

2010 YV YV Hilo Hawaii Honolulu/Oahu Hawaii 216 84130 $77.50 $0.36

2010 HA HA Hilo Hawaii Kahului/Maui Hawaii 121 38410 $94.02 $0.78

2010 YV YV Hilo Hawaii Kahului/Maui Hawaii 121 320 $114.68 $0.95

2010 YV YV Hilo Hawaii Lihue, Kauai Hawaii 318 320 $163.07 $0.51

2010 HA HA Honolulu/Oahu Hawaii Hoolehua Hawaii 54 20 $84.95 $1.57

2010 HA WP Honolulu/Oahu Hawaii Hoolehua Hawaii 54 80 $80.98 $1.50

2010 WP WP Honolulu/Oahu Hawaii Hoolehua Hawaii 54 30 $71.02 $1.32

2010 YV WP Honolulu/Oahu Hawaii Hoolehua Hawaii 54 30 $58.91 $1.09

2010 YV YV Honolulu/Oahu Hawaii Hoolehua Hawaii 54 10 $52.25 $0.97

2010 HA HA Honolulu/Oahu Hawaii Kahului/Maui Hawaii 100 1132680 $79.20 $0.79

2010 WP WP Honolulu/Oahu Hawaii Kahului/Maui Hawaii 100 740 $79.85 $0.80

2010 YV YV Honolulu/Oahu Hawaii Kahului/Maui Hawaii 100 80010 $74.01 $0.74

2010 HA HA Honolulu/Oahu Hawaii Kapalua/Maui Hawaii 84 10 $92.39 $1.10

2010 HA WP Honolulu/Oahu Hawaii Kapalua/Maui Hawaii 84 350 $100.09 $1.19

2010 WP WP Honolulu/Oahu Hawaii Kapalua/Maui Hawaii 84 130 $73.07 $0.87

2010 HA HA Honolulu/Oahu Hawaii Kona Hawaii 163 712370 $88.89 $0.55

2010 NW HA Honolulu/Oahu Hawaii Kona Hawaii 163 20 $75.34 $0.46

2010 WP WP Honolulu/Oahu Hawaii Kona Hawaii 163 40 $113.21 $0.69

2010 YV YV Honolulu/Oahu Hawaii Kona Hawaii 163 62740 $82.60 $0.51

2010 HA HA Honolulu/Oahu Hawaii Lanai City Hawaii 73 20 $87.23 $1.19

2010 HA WP Honolulu/Oahu Hawaii Lanai City Hawaii 73 290 $83.69 $1.15

2010 WP WP Honolulu/Oahu Hawaii Lanai City Hawaii 73 200 $68.33 $0.94

2010 YV YV Honolulu/Oahu Hawaii Lanai City Hawaii 73 10 $64.80 $0.89

2010 HA HA Honolulu/Oahu Hawaii Lihue, Kauai Hawaii 102 743590 $80.26 $0.79

2010 WP WP Honolulu/Oahu Hawaii Lihue, Kauai Hawaii 102 1140 $80.34 $0.79

2010 YV YV Honolulu/Oahu Hawaii Lihue, Kauai Hawaii 102 57640 $75.91 $0.74

2010 HA HA Kahului/Maui Hawaii Kona Hawaii 84 62750 $99.02 $1.18

2010 NW HA Kahului/Maui Hawaii Kona Hawaii 84 100 $58.30 $0.69

2010 WP WP Kahului/Maui Hawaii Kona Hawaii 84 40 $103.00 $1.23

2010 YV YV Kahului/Maui Hawaii Kona Hawaii 84 10980 $100.56 $1.20

2010 HA HA Kahului/Maui Hawaii Lihue, Kauai Hawaii 202 23400 $110.72 $0.55

2010 WP WP Kahului/Maui Hawaii Lihue, Kauai Hawaii 202 1410 $122.43 $0.61

2010 YV YV Kahului/Maui Hawaii Lihue, Kauai Hawaii 202 2910 $108.18 $0.54

2010 YV YV Kona Hawaii Hoolehua Hawaii 119 40 $101.25 $0.85

2010 WP WP Kona Hawaii Lihue, Kauai Hawaii 263 140 $125.29 $0.48

2010 YV YV Kona Hawaii Lihue, Kauai Hawaii 263 1800 $133.06 $0.51
Appendix F

Pacific Wings Airline Fees Paid by HDOH to Medical Patients

2006 2006 2007 2007 2008 2008 2009 2009 2010 2010

R/T 

Honolulu 

to 

Kalaupapa

R/T Kalaupapa 

to Molokai 

("Top-side")

R/T Honolulu 

to Kalaupapa

R/T Kalaupapa 

to Molokai 

("Top-side")

R/T 

Honolulu 

to 

Kalaupapa

R/T 

Kalaupapa 

to Molokai 

("Top-side")

R/T 

Honolulu 

to 

Kalaupapa

R/T 

Kalaupapa 

to Molokai 

("Top-side")

R/T 

Honolulu 

to 

Kalaupapa

R/T 

Kalaupapa to 

Molokai 

("Top-side")

January 190.61 $94.80 $288.15 $225.06

February 197.05 $95.00 $250.00 $225.25

March 184.15 $288.55 $225.25

April 225.00 *63.00 - 126.00 $99.38 $146.20 $501.89 $492.82

May *74.81 - 184.15 $90.00 $202.20 $492.82

June *63.00 - 126.00 $110.00 $492.82 $503.56

July 74.81 *63.00 - 126.00 $500.00 $492.82

August *74.81 - 197.05 *63.00 - 74.00 $503.55 $492.82

September *71.00 - 142.00 $245.50 $288.15 $492.82

October 184.15 *77.30 - 91.73 *73.00 - 83.00 $231.50 $501.05 $487.82

November *190.51 - 197.05 *82.82 - 221.05 *71.00 - 142.00 $139.00 $497.72 $487.82

December 184.15 94.80 *83.00 - 166.00 $138.00 $497.72 $487.82

Note: R/T airfare from Kalaupapa to Top Side flew with Molokai Air Shuttle @ the rate of $39.00 for year 2006 only 

Do not have figures from January - September, 2006

*Note: Pacific Wings fee varies from low - highest within the month.