AIR EXCURSIONS, LLC ESSENTIAL AIR SERVICE BID JUNEAU

- KAKE JUNEAU

- EXCURSION INLET DOCKET 0ST

- 2008

- 0217 May 8 , 2012

Air Excursions, LLC hereby submits its bid to provide Essential Air Service between Kake, AK and it s hub of Juneau, AK , and additionally between Excursion Inlet and its hub of Juneau, AK . Air Excursions holds a certificate of public convenience and necessity to provide scheduled transportation of passengers, property and mail, and has operated scheduled service to five points around Juneau since March, 2010.

At Kake Air Excursions proposes to provide 14 round trips per week during the 21 week peak summer period, and 7 round trips per week during the 31 week off

- peak period. This is the same schedule as proposed by Wings in 2008, and opera ted for the last two years by Air Excursions . The aircraft to be us ed is a nine passenger all

- weather aircraft

. When loads or weather do not require, Air Excursions will use a five passenger aircraft at a lower subsidy need per flight.

Under the service pattern provided by Air Excursions, total traffic in the market has increased to its highest levels since compensated Essential Service began . Air Excursions recognized that a full service offering including school charters and other non

- scheduled servic e would stimulate market growth. It now offers over 30% more flights than Wings of Alaska did in calendar year 2009.Air Excursions is locally owned and managed, and 100% of its service is in the Juneau

area. Air Excursions has been in business for ov er 22 years, and has been locally owned for its entire existence. It hires local pilots, and maintains offices and maintenance facilities in both Juneau and Gustavus. Air Excursions will provide stable and consistent air service, and the Kake and Excursi on Inlet operation will be a much more significant part of its business than for any certificated competitor.

The key reason to choose Air Excursions is that its subsidy need is lower based on the lower operating costs of the Navajo and alternatively the Piper Cherokee 6. Even though the N avajo is faster than the Caravan on the route, it has a much lower capital cost and has lower total operating costs per hour. The faster flight speeds reduce costs per trip even more. In keeping with the current practi ce of Wings, Air Excursions proposes to substitute a smaller, single engine aircraft when the loads and operating conditions do not require the use of the Navajo. Experience over the route has resulted in reduced flight times compared to the 2010 bid. Ai r Excursions expects to save 5 minutes per roundtrip, or slightly over 5% of the total block time estimated in 2010.

The purpose of the peak and off

- peak service requirement is to recognize the need to encourage traffic and economic development in the are a through high quality air service. The Air Excursions proposal provides faster, multi

- engine and icing approved

0 500 1000 1500 2000 2500 3000 3500 4000 4500**F l** **i g** **h t** **s /** **P a** **s s** **e n** **g e** **r s**  

## KAKE P

**ASSENGERS & DEP**  **ARTURES**

Departures Passengersaircraft with plenty of capacity. Local ownership and control assures responsive

management, and there is a strong future commitment of a loc ally owned carrier.

Appendix A details the bid which assumes Kake commercial revenue of $413,543 in the first year and total operating expenses and return of $577 ,164 in the first year (YE June, 2013)

. In its previous bid, Air Excursions used the proposed charter rate for the Navajo Chieftain plus an estimated indirect expense of 68% of the charter rate. This yielded a total $726,892 for the year ended June, 2012 (second year of bid) . Using experienced unit costs for the Navajo and computed indirect and G&A expenses, Air Excursions estimates the YE June, 2013 expense total is $ 577,164 , and overall reduction of $149,728 compared to the YE June, 2012 estimated expenses

.

Air Excursions’ efficiency would c arry over to the Excursion Inlet route. During the summer, flights to Excursion Inlet land in the heart of the village. During the winter, when that runway is unavailable, service has been provided by a float plane which docks at the loading pier. Wings does not have any float aircraft in its fleet and has had to charter aircraft for the service. Air Excursions proposes to service the community with a Cherokee 6 during the longer 21 week summer period and with a Cessna 206 on floats (as necessary) durin g the winter. Air Excursions has the float aircraft in its fleet now and will be in complete operational control of the service year around

.

The subsidy need of $ 163,621 for YE June 2013 at Kake is 29 % less than the current contract for YE June, 2012 , and could be reduced further through substitution of aircraft as appropriate. The Excursion Inlet bid is 20 % lower than the current contract despite assuming a longer peak period (21 weeks)

. Air Excursions believes that it has shown that it is uniquely capable of providing a high level of service and customer satisfaction with a lower subsidy need, and has proposed a four year contract for service to Kake and Excursion Inlet as well as the two year period requested by the Department

.

Respectfully submitted, Mike Loverink, owner Air Excursions, LLCA ppendix A Page 1 of 3

PROJECTED OPERATING REVENUE

KAKE Traffic Type 2011 EAS Yield 2011 Rev. YE 6/13 YE 6/14 YE 6/15 YE 6/16 Passengers 2,044 $130.00 $265 , 720 $279 , 0 06 $292 , 956 $307 , 604 $322 , 984 Freight 76,694 $0.6000 $ 47 , 216 $ 49 , 577 $ 52 , 056 $ 54 , 659 $ 57 , 392 Mail 84,596 $0.9565 $ 80 , 914 $ 84 , 960 $ 89 , 208 $ 93 , 668 $ 98 , 351 TOTAL $393 , 850 $413 , 543 $434 , 220 $455 , 931 $478 , 727

EXCURSION INLET Traffic Type 2011 EAS Yield 2011 Rev. YE 6/13 YE 6/14 YE 6/15 YE 6/16 Passengers 30 $ 55.20 $ 1,656 $ 1,739 $ 1,826 $ 1,917 $ 2,013 Freight 2,763 $0.5000 $ 1,381 $ 1,451 $ 1,523 $ 1,599 $ 1,679 Mail 9,114 $0.6892 $ 6,282 $ 6,596 $ 6,925 $ 7,272 $ 7,635 TOTAL $ 9,319 $ 9,786 $ 10,274 $ 10,788 $ 11,328

ASSUMPTIONS:

1. All traffic based on EAS flights operated, excluding charters 2. Yields based on market experience 3. 2011 estim ated revenue increased by 5% per year for YE 6/13

- YE6/16Appendix A Page 2 of 3

**COMPUTATION OF SUBSIDY NEED**

**KAKE SERVICE OPERATIONS**  JNU

- KA E Average Block Time 1 way 45.5 minutes Total Annual Block Time 775.02 hours 1 /

**EXPENSE AND SUBSIDY NEED** ITEM YE 6/13 YE 6/14 YE 6/15 YE 6/16 Direct Expense PA

- 31 @$ 324.60 $264,149 $279,998 $296,797 $314,606 Indirect Expense $234,246 $ 248,301 $263,199 $278,991 G&A @ 10.29% $ 51,285 $ 54,362 $ 57,624 $ 61,081 **TOTAL EXPENSE $549,680**  **$582,661 $617,620**  **$654,678** Profit Margin (5%) $ 27,484 $ 29,133 $ 30,881 $ 32,734 **TOTAL INCLUDING R.O.I. $**  **577,164 $611,794**  **$648,501 $687,412**  **COMMERCIAL REVENUE $**  **413,543 $434,220**  **$455,931 $478,727**  **SUBSIDY NEED, TOTAL $163,621**  **$177,574 $192,570**  **$208,685 SCHEDULED DEPARTURES**  **1,022 1,022 1,022**  **1,022 SUBSIDY**  **PER PA -**  **31 DEPARTURE $**  **160.10 $ 173.75**  **$ 188.42**  **$ 204.19 SUBSIDY PER PA** 
**- 32 D**  **EPARTURE $**  **143.57 $ 156.23 $ 169.85 $ 184.51 CEILING PER WEEK**  **– PEAK**  **$4,482.80 $4,865.00 $5,275.76 $5,717.32**  **C EILING PER WEEK**  **– OFF** 
**- PEA**  **K $**  **2,241.40 $2,432.50 $2,637.88 $2,858.66** 

**_______________________________________________ 1**  **/ 100%**  **completion at with PA**
**- 31 Navajo aircraft** Appendix A Page 3 of 3

**COMPUTATION OF SUBSIDY NEED EXCURSION INLET SERVICE** 

**OPERATIONS** JNU

- EXI Average Block Time 1 way 25 minutes Total Annual Block Time 78.33 hours 1 /

**EXPENSE AND SUBSIDY NEED** ITEM YE 6/13 YE 6/14 YE 6/15 YE 6/16 Direct Expense PA

- 32 @$ 244.25 $ 19,132 $ 20,280 $ 21,497 $ 22,786 Indirect Expense $ 12,729 $ 13,492 $ 14,302 $ 15,160 G&A @ 10.29% $ 3,278 $ 3,475 $ 3,684 $ 3,905 **TOTAL EXPENSE $ 35,139**  **$ 37,247 $ 39,483 $ 41,851** Profit Margin (5%) $ 1,757 $ 1,862 $ 1,974 $ 2,093 **TOTAL INCLUDING R.O.I. $**  **36,896 $ 39,109 $ 41,457 $ 43,944**  **COMMERCIAL REVENUE $**  **9,785 $ 10,274 $ 10,788 $ 11,327**  **SUBSIDY NEED, TOTAL**  **$ 27,111 $ 28,835 $ 30,669 $ 32,617**  **SCHEDULED DEPARTURES 188**  **188 188 188 SUBSIDY PER PA** 
**- 32 DEPARTURE**  **$ 144.21**  **$ 153.38 $ 163.13 $ 173.49 CEILING PER**  **WEEK –**  **PEAK $ 432.63 $ 460.14 $ 489.39**  **$ 520.47 CEILING PER WEEK**  **– OFF** 
**- PEA**  **K $ 144.21 $ 153.38 $ 163.13 $ 173.49** 

**__________________________________________________ 1**  **/ 100% completion at with PA** 
**- 32 Cherokee Six aircraft, 21 week peak season**