## HAWAII'S ISLANO
MOKULELE FLIGHT SERVICES DBA MOKULELE AIRLINES, INC. PROPOSALTO PROVIDE ESSENTIALAIR SERVICES KAMUELA, HAWAII

Order2013-4-17 Served: April 25, 2013 Docket: DOT-OST-1997-2833 Dated: May 21, 2013 ···, ;Mokulele Airlines Proposal to Provide Essential Air Service to Kamuela Airport Mokulele Flight Services, Inc. dba Mokulele Airlines submits the enclosed proposal to provide essential air services tothe surrounding communities of Kamuela Airport located in Waimea, Hawaii, under Order 2013-4-17, dated April 25, 2013. Mokulele Airlines is a 135 FAA certified entitywith authorization to carry both passengers and mail. Operating underthis certificate, Mokulele Airlines has provided scheduled passenger service throughout the islands for seven consecutive years. Mokulele fulfillsthe four selection criteria for essential air service award: (1) service reliability; (2) contractual and marketing arrangements with a larger carrier atthe hub; (3) interline arrangements with a larger carrier atthe hub; and (4) communityviews. Proposal: In this proposal, Mokulele is offeringtwelve round trip departures weekly between Kamuela Airport and Honolulu International Airport and or Kahului Airport. Included in the proposed schedule are inbound and outbound traffic operatingseven days aweek. Our goal is to provide cost effective flights forthe residents of Kamuela and the surrounding communities with competitive fares on non-stopflights to Honolulu(OPTION ONE) and or Kahului(OPTION TWO). The timingand price ofthese flights afford the residents access to easy same daytravel to and from Kamuela. Every effort is made to insure thatthe flight schedule affords the traveler connectivity to international and mainland departures in Honolulu and Kahului. Mokulele Airlines operates its main hub in Kailua-Kana, Hawaii. To maximize our operating performance, we will include flights to and from Kailua- Kana, Hawaii and will operate them as part of this bid. Mokulele is poised to begin this service immediately upon acceptance ofthe proposal. Many ofthe residents of Kohala are familiar with the excellent service provided by Mokulele Airlines atthe Kona base and are enthusiastic aboutthe possibility ofenjoyingthese services atthe Kamuela Airport. We are in a position to offerthese flights to our passengers through global distribution networks assuring online access by traditional travel agents and online travel agencies such as Expedia and Orbitz. Experience: This is Mokulele Airlines' first bid on an essential air service proposal, underthe airline's new management. We are confident in our abilityto provide excellent service to Kamuela Airport. We feel that our excellent marketing programs, responsible management, customer service, new and wellmaintained aircraft, and our demonstrated operational excellence will build traffic in the Kohala Coast market. The anticipated tourism figures forthe Kohala Coast are on the rise but the T-100 data forthis marketforthe year 2012 shows a remarkable decline in passenger carriage from this airport. We are prepared to partnerwith the affected communities to make this aviable market. We have experience in returning under- serviced, neglected communities backto life. Through a marketing arrangement with Traavasa/Hana Hotels, we entered the Hana/Kahului market in 2012. We offered a competitive fare pricing structure thatwas not available from the previous operator. In operation for eight months, the Kahalui/Hana route is a real success story. In the first eight months of operation, Mokuleleflew 1,706 passengers compared to the previous operatorwho flew less thatfour hundred passengers in the firstten months of2012. Mokulele Airlines will repeat this success story with Kamuela/Waimea/Kohala Coast communities. Equipment: The proposed flights are offered aboard aCessna Grand Caravan operated by both a pilot and afirst officeronboard. The Cessna Caravan is a modern aircraft, still in production. Manufactured by one of the most recognized aviation companies in history, the Caravan is one ofthe largest and safest aircraft of its size and range. The aircraft comfortably seats nine passengers with a large cargo pod for baggage. The aircraft is equipped with modern avionics, fully integrated auto pilot, weather radar, and onboard weather. The aircraft are air conditioned and heated for passenger comfort. Reservations and connectivity: Flight reservations are made easy on Mokulele Airlines. Reservations can be made via ourwebsite at www.mokulelehawaii.com. Reservations made on this site are tracked byvery sophisticated, industry leading software which is certified SecureFiight, making it compliant withTSA regulations. Customers can also make reservations by telephone with our experienced, industry knowledgeable staff located in Hawaii. Mokulele Airlines offers global distribution integration, thus accommodating easy access to inventory by traditional travel agents and online travel agencies such as Orbitz orTravelocity. Mokulele Airlines is the only commuter airline in Hawaii with a code share partner operating interisland. This same affiliation carries the potential for bilateral interline ticketing with many majorcarriers. Mokulele has operated as a codeshare partnerwith Mesa Airline, Go! Since 2007. Mokulele also has interline agreements with Alaska Airlines and two international carriers. Underthe Mesa Airlines code, Mokulele can also offer interline ticketingto Mesa partners- American, Delta, and USAIR. Service: The Mokuleleticket counter in Kamuela will be staffed by professional, well trained personnel who will assist in both reservations and the boarding process. The counterwill be professionally marked with clearly readable signs identifying it as the Mokulele Airlines ticket counter. Personnel will assist boarding passengers in a professional and helpful manner.Passengers are required tocheck in30 minutes priorto departure in Kamuela. Check in times in forthe Honolulu return fight maybe longerdue toTSA requirements. Flights

### to and from Honolulu areoperated outofthe interisland terminal. Shuttle bus service operates continuously assuring easytransportationtothe international terminal. Conclusion: Mokulele's record forontime performance and reliability coupled withtheirdedicationtothe communitiesthattheyserve, make Mokulele an ideal candidateto provideessential air service

### tothe Kamuela Airport. Daily service betweenWaimea and Honolulu providesthis communitythe abilityto connectwith mainland as well as interislandflights. Ourbid assures thatthe proposed route is serviced reliably and cost effectively. The proposed schedule coincideswith 

### many daily departures

### tothe mainland and 

### other islands. We appreciatetheopportunityto respond toyour requestfor proposal. Respectfullysubmittedby:

Ron Hansen CEO/President Mokulele Flight Services dba Mokule[eAirlines, Inc. 73-350 U'u Street Kailua-Kana, Hl. 96740



### All correspondenceregardingthis proposal should be directedtoRon Hansen attheabove address

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1
I OVERVIEW Based in Kana, 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 expansion by providing greater efficiencies and operational controls. Mokulele is a "scheduled" Part 135 Air Carrier with 15 years of accident-free service. Mokulele operates more than 80 daily flights and carries 15,000 plus passengers monthly with its fleet ofeight Cessna Grand Caravans.
Current Operations Mokulele currently employs 70 full-time and 30 part-time employees, most performing collateral duties at the seven airports it currently serves. The employee group is non-union, primarily comprised of young, local residents eager to see the company prosper and grow in the island market. In December 2012, Mokulele relocated its call center from the mainland to Maui to provide Mokulele's passengers with an enhanced level of customer service by ensuring that their calls will be answered by local residents who are knowledgeable about Hawaii. Presently, Mokulele owns and operates eight new and late model Cessna Grand Caravans, each configured with nine passenger seats The aircraft maintenance departments are located at Kana and Kahului where it employs 12 licensed A&P mechanics on a 20 hour, seven day per week schedule. All maintenance except engine and prop overhaul is accomplished by Mokulele's maintenance department. Operating 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 No. MK9A559L and DOT Certificate of Public Convenience and Necessity for Interstate AirTransportation.
Routes and Airports Served Mokulele operates as a passenger carrier and code shares with Go Airlines with the intention of expanding the inter-line agreements with foreign and domestic airlines which serve Hawaii. The airports nowserved on the Mokulele route structure are: • Kana International Airport (KOA) • Kahului Airport (OGG)

# • Kapalua (JHM) 

# • Hana (HNM} 

# • Lana'i City Airport (LNY) 

# • Ho'olehua Airport (MKK) 

# • Honolulu lnt'l.Airport {HNL)
MarketOpportunity 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 vision, realism and solid knowledge ofthe Federal Aviation Regulations 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 region and markets to be served; realization ofthe crucial importance ofan organization's personnel and their relationship to the company's success and a total commitmentto the overall mission and goals ofthe airline.
• Implementing an intelligent, progressive 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 tothe traveling public.
• 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 oversight and quality control that will ensure that Mokufele always lives up to its commitment to a high level offlight safety, customer satisfaction and convenience at a reasonable, highly competitive fare.
• Growingthe 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 ofthis strategy include the expansion ofservice to Kapalua and Hana, Maui in 2012.
• Development and implementation of code share and interline agreements with well established majorairlines thus offering cost advantages to ourclients.
• Identifyingand developing cost-effective opportunities for new markets, new market concepts and expanded sales 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 marketing, 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 Advantages 

### • The current competitive environment for Mokulele Airlines is bright with very little competition. Mokulele Airlines is uniquely positioned to continue growing. Mokulele has the most daily flights from the following airports: Kana {KOA) 

### 12 1 

### Kahului Airport {OGG) 21, Kapalua (JHM) 

### 7, Hana (HNM) 2, Ho'olehua Airport (MKK) 14.
Sales and Marketing 

### Mokulele's growth strategy concentrates on building marketshare through the following actions:
• Code Sharing and InterlineAgreements - 

### Code sharing offers the passengers that begin theirflight on Mokulele a reduced fare when they transferto a code-sharing partner of Mokulele's to continue theirflighttothe final destination."Our entire trip over to Molokai to ride the mules down to Kalaupapa, beginning with aflawless flight, was so amazing and challenging for me. Not one to love heights, nothing during the flight caused me concern or angst. Your pilots did agreatjob!" -Cheryl B. "I wantto thankyou Lehua Wanda for helping me with my United flight issues. She is so wonderful and helpful. Iwouldn't be able to getto Maui without her help for over an hour. Big Hugs to her. Thankyou Manit "On 7 February Iflew from Molokai to Maui for adaytrip. Iflew my favorite airline, of course. Great service by the staffatthe counter and the pilots were outstanding. There is one more reason to like Mokulele
...you take great care ofour military personnel. Thanks for a greatflight. Iwill be flying with you again in another 10 days." - PaulS. "What do Ienjoy aboutflying for Mokulele?" "The people, the company, the planes, all the views
... It's all great." -Jordan B., pilot ''As aformer Navy P-3 Orion dude Ijustwanted to say what an amazingflight myfamily (especially very nervous-to-flywife) had with Chris flying us from Maui to Kona on Sunday 26 August. He is atremendous "stick" and really greased the landing, and his positive attitude and aloha spirit made the flight extremely memorable. Iwill absolutely be flying Mokulele again on my nexttripto Hawaii! Manythanks and please pass mygratitude and comments on to Chris and everyone in a leadership position with yourgreat company!"- Commander Dave "I need help to locate one ofyour employees named Jeremy. Back in March I lost my backpack offthe cliffs of Honolua Bay. To my surprise itwas mailed backto my home in NewYork by Jeremy. He lefta note with his business card but unfortunately I have lostthis information. want to contact him and thank him for his thoughtfulness. Alii need is an email."- AngelaGDS Connectivity Mokulele Airlines provides full global distribution connectivity. Mokuleleflights are listed on Apollo, Worldspan, Galileo,Travelport and Sabre. Mokulele Airlines flights are available for booking 

### by mosttravel agents and through popular online booking sites such as Expedia and Orbitz. Passengers can book directlywith Mokulele Airlines through ourwebsite atwww.mokulelehawaii.com. We also provide a call centerfortelephone bookings
. CODESHARE AND INTERLINE Currently, Mokulele Airlines codeshares flights with GO Airlines. Through this connection, passengers can book onward flights with a numberof interline carriers. RESERVATION Mokulele Airlines utilizes a sophisticated airline specific reservations system to initiate,track and report on reservations made through theirwebsite.

## l y 

## I 

# I MokuleleAirlines operates eight nine passenger Cessna Grand Caravan aircraft. The Grand Caravan aircraft is currently in production. Four ofthe eight aircraft are new, 

### offthe production line. The Cessna Grand Caravan enjoys a reputation for dependability and safety. The aircraft is in worldwide use, accumulating morethan 12 million hoursthroughoutthe worldwide fleet ofaircraft. The aircraft is air conditioned and heated assuring passenger comfort. The nine passenger Cessna includes a large cargo pod assuring comfort in the passenger cabin. The Cessna Grand Caravans are equipped with: 

### •!• Garmin G-100 avionics package 

### •!• GPS Traffic and terrain avoidance systems 

### •!• Onboard weather and weather radar 

### •!• Integrated auto pilot' J I 

### 'I :J 

# I Subsidy Request MokuleleAirlines would like to propose a series ofoptionstothe Departmentfortheir consideration. We have two core choices: Option #1 is flights into Honolulu International Airport, and Option #2 is for flights to Kahului. Each option will come with adiscount for a

### 4 yearcontractaward.

='-'-==-";



### ======"9**~~~~~~~~~~~~~** Mokulele proposes 24flights aweekto and from Honolulu and Waimea/Kamuela for asubsidy of$584,956.01 peryear. This comes to $477.91 per departure and $136.54 per passenger. Mokulele proposes 24flights aweekto and from Honolulu and Waimea/Kamuela- we feel a

### 4yearterm will allow Mokulelethe time needed to build traffic atWaimea/Kamuela to historical numbers.



### Year Annual 

### Subsidy Per Departure Per Passenger

Mokulele proposes 24flights aweek to and from Kahului and Waimea/Kamuela for asubsidy of$494,290.86 peryear. This comes to $403.83 perdeparture and $161.53 per passenger. This is the same service pattern as the incumbent operator. Mokulele proposes 24flights aweekto and Kahului and Waimea/Kamuela- we feel a 4yearterm will allow Mokulele the time needed to build trafficatWaimea/Kamuela to historical numbers.



### Year Annual Subsidy Per Departure Per Passenger 1 $494,290.86 $403.83 $161.53 2 $434,411.23 $354.91 $101.40 3 $417,310.26 $340.94 $85.23 4 $412,389.46 $336.92 $78.35,j**~**



# I i



# I 

# I**~** PROPOSED FlYING SCHEDULE- MOKULELE AIRLINES, INC. 

## Essential Air Services to Kamuela, Hawaii Order2013-4-17 Served: April25, 2013 Docket DOT-CST-1997-283 OPTION 1 MUE/HNL/MUE

This schedule is intended for illustration ofthe possible flying schedule and is subject to change based on operational requirements.

OPTION 2 MUE/OGG/MUE

This schedule is intended for illustration ofthe possible flight schedule and is subjectto change based operational requirements.Weekly Frequencies Completion Factor Annual Departures Block Time (in minutes) Annual Block Hours Stage length (statute miles) Available Seat Miles (9 seats) Load Factor Passengers Revenue Passenger Miles Average Fare Revenue:

Assumptions

Direct Expenses:

Total Direct Expenses· Indirect Expenses: Passenger

Fuel Cost P/Gal Fuel Burn Gallons P/Hr
Ownership Flight Crew Fuel & Into Plane Fees Insurance Maintenance Miscellaneous/Reaccom

Station Costs Landing Fees Agent Bookings & Sales

Web bookings & sales Marketing Mise Set up costs Itraining $3.50 55.00
$65.00 $75.00 $192.50

$15.00 $185.00

$25.00

$60.00 $20.00

$8.80 $4.15 $2.50

2.0% Per Blk Hr Per Blk Hr Per Blk Hr Per Blk Hr Per Blk Hr Per Blk Hr

per dept per dept per Pax per Pax per Pax of direct Kamuela to Honolulu Option #1, Years 1 

### &2
24 99% 1224

1.1 1346 146 1608336

39% 4284 625464 $86.51 $93 fare $370,615.81

$29,988.00 $400,603.81

$87,516.00 $100,980.00 $259,182.00

$20,196.00 $249,084.00

$33,660.00 $750,618.00

$73,440.00 $24,480.00 $18,849.60

$8,889.30 $10,710.00 $15,012.36 $10,000.00Total indirect Expenses

Income (loss) 

### Profit element Subsidy requirement Subsidy per passenger Subsidy per departure General & Admin/Other 4.8% of Direct $36,029.66 $197,410.92 $948,028.92 ($547,425.11)

$37,530.90 

### $584,956.01 $136.54 $477.91Weekly Frequencies Completion Factor Annual Departures BlockTime (in minutes} Annual Block Hours Stage length (statute miles) Available Seat Miles (9 seats) Load Factor Passengers Revenue Passenger Miles Average Fare Revenue:

Assumptions

Direct Expenses:

Total Direct Expenses Indirect Expenses: Passenger Ancillaries

Fuel Cost P/Gal Fuel Burn Gallons P/Hr
Ownership Flight Crew Fuel & Into Plane Fees Insurance Maintenance Miscellaneous/Reaccom

Station Costs Landing Fees Agent Bookings & Sales

Web bookings & sales Marketing Mise Set up costs I training General & Admin/Other $4.00 per passenger

$3.50 55.00
$65.00 $75.00 $192.50

$15.00 $210.00

$25.00

$60.00 $23.00

$9.10 $4.15 $3.35

2.0%
4.8% Per Blk Hr Per Blk Hr Per Blk Hr Per Blk Hr Per Blk Hr Per Blk Hr

per dept per dept per Pax per Pax per Pax of direct of Direct 

### Kamuela to Kahului Option #2- Year 1
24 99% 1224 0.7 857 79 870264

28% 3060 241740 $63.26 $68 fare $193,562.79

$12,240.00 $205,802.79

$55,692.00 $64,260.00 $164,934.00

$12,852.00 $179,928.00

$21,420.00 $499,086.00

$73,440.00 $28,152.00 $13,923.00

$6,349.50 $10,251.00

$9,981.72 $10,000.00 $23,956.13I
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### '**Fe~eral** Avla$n
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# Air Carrier Certificate !
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# This 

# certifies that MOKULELE FLIGHT SERVICE, INC. 

## 73-350 UlU 

## DRIVE KAILUA-KONA, HAWAII 96740 1 

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•has metthe requirements ofthe Federal Aviation Act of 1958, as amended, and the rules, ; regulations, and standards prescribed thereunderforthe issuance ofthis certificate and**i~** 

### : heireby authorized to operate as an alr carrier and conduct common carriage operations in

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### ab~ordan~ with said Act and the rules, regulations, and standards prescribed thereunder 

## :aht:l the terms, conditions, and limitations contained in the approved operations specifications. 

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# certi~~ate is nottransferable and, unless soonersurrendered, suspended, or revoked,

## sh~ll contihue in effect indefinitely.
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Certificate number:**--=t~·lK""'9.;;.;;J.·.;;:;..20.;;.;;3:..:cN'---**

. Effective Date: Ja.:ma:::y 30, 2013

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## i !.ssued at: NP-13..,Honolulu, HI By Direction ofthe Administrator**~** (Signature)**R~gional Fligh~** **S~andards** Division Mar.. (Title) l'iast:ern Pacific Recr.i.on (Region/Office) ,,

...**~.**