1 

### BEFORE THE
DEPARTMENT OF TRANSPORTATION

WASHINGTON, D.C.

_________________________________________ _______ )

Essential Air Service at ) ) 

### SILVER CITY/HURLEY/DEMING, NEW MEXICO ) Docket OST

- 1996

- 1903 ) Under 49 U.S.C. §41731 et seq

. )

_________________________________________ _______)

MOKULELE FLIGHT SERVICE INC., dba MOKULELE AIRLINES

PROPOSAL TO PROVIDE ESSENTIAL AIR SERVICE TO THE COMMUNITY OF

SILVER CITY/HURLEY/DEMING, NEW MEXICO

Correspondence with regard to this document should be addressed to:

Ron Hansen
CEO
Mokulele Airlines
73

- 350 U’u Street
Kailua

- Kona, HI 96740 Telephone: 808

- 840

- 9002
Fax: 808

- 326

- 1266
Email: ron.hansen@mokulelehawaii.com

Mokulele Flight Service Inc., dba Mokulele Airlines (hereafter Mokulele) hereby proposes the follow ing response to DOT Order 2014

- 7

- 6 to provide Essential Air Service to the community of Silver City/Hurley/Deming, New Mexico (hereafter Silver City) . Mokulele i s pleased to offer one option for service.

Service Proposal

Mo kulele proposes to operate two roundtrips each weekday between Silv er City and the Albuquerque International Sunport Airport in Albuquerque, New Mexico Should Mokulele be chosen to provide this service

, it would establish a maintenance and operations base in Albuquerque

. All Mokulele crewmembe rs would be
based in Albuquerque as well

. This schedule would be suppo rted by a dedic ated aircraft. A single roundtrip
would be o ffered on Saturday and Sunday. These proposed flights would be operated on the dependable, 9 seat,
Cessna Grand Caravan Aircraft. The attributes of which is detailed in the text below.

Additionally Mokulele proposes to lower air fares in the Silver City marketplace. This proposal is based on an average selling fare of only $50 one way , well below what has been offered in the recent pass. Mokule le would
market this service via its own on

- line website and through its established links to the Global Distribution System. Additionally this service would be marketed via on

- line travel agencies like Expedia, ORBITZ and Travelocity.2

Draft Flight Schedule

OASIS/MARKSUM MOKULELE AIRLINES 16:31 09/02 /14 SCHEDULE MWABQ01 (LOCAL) MARKET SUMMARY PAGE 2 11/ 01/14

- 99/99/99

FROM T O DEP ARR FLT # EQP FREQ UENCY STOPS

ALBUQUERQUE SILVER CITY 630am 805am 101 C NA MON thru FRI 0

ALBUQUERQUE SILVER CITY 330pm 505pm 103 CNA MON thru FRI 0

ALBUQUERQUE SILVER CITY 1200 pm 13 5 pm 105 CNA SAT & SUN 0

SILVER CITY ALBUQUERQUE 825 am 1000 am 102 CNA MON thru FRI 0

SILVER CITY ALBUQUERQUE 5 25 pm 7 00 pm 104 CNA MON thru FRI 0

SILVER CITY ALBUQUERQUE 1 55 pm 3 30 pm 106 CNA SAT & SUN 0

(Note: This is a Draft Schedule ONLY. The final selling schedule may vary .)34



### Company Background and Information



# B ased in Kona, 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 expans ion by providing greater efficiencies and operational
controls. Mokulele is a “scheduled” FAA Part 135 Air Carrier with an excellent service record. Mokulele operates more than 120 daily flights and carries 20,000 plus passengers monthly with its fleet of nine NEW
Cessna Grand Caravan 208EX aircraft.

Current Operations

Mokulele currently employs 110 full

- time and 7 0 part

- time employees, most performin g collateral
duties at the nine airports it currently serves. The employee group is primarily comprised of young, local residents eager to see the company prosper and grow in the island market along with many who have been with Mokulele for 5 years or more.

Presently, Mokulele owns nin e new and five standard model Cessna Grand Caravans, each configured with nine passenger seats. The aircraft maintenance departments are located at Kona and Kahului where it employs 12 licensed A&P mechanics. The airline flies to one EAS (government subsi dy) route, awarded in July and started on time and one private

- subsidized route from Maui; all other routes are flown at

- risk. We’ve been so successful in our
EAS route that we will soon be a dding an additional subsidy

- free flight . (Exhibit B)5

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

.

Routes and Airports Served

Market Opportunity 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 visualization , realism and solid knowledge of the Federal Aviation Regulatio ns 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 re gion and markets to be served; realization of the crucial importance of an organization’s personnel and their relationship to the company’s success and a total commitment to the overall mission and goals of the airline.  Implementing an intelligent, progres sive 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 to the traveling public

.6

 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 over sight and quality control that will ensure that Mokulele always lives up to its commitment to a high level of flight safety, customer satisfaction and convenience at a reasonable, highly competitive fare.  Growing the company based on need rather than growt h for growth’s sake. This requires being
aware of solid niche

- enlargement opportunities that will allow incremental, but always profitable expansion. Examples of this strategy include the expansion of service to Kapalua and Hana, Maui in 2012.  Development and implementation of code share and interline agreements with well

- established major airlines thus offering cost advantages to our clients.  Identifying and developing cost

- effective opportunities for new markets, new market concepts and expanded sales pot ential. 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
th e 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. Our customers love the personal attention given to them by our staff, shorter check

- in require ments, and customer initiatives such as free parking at most of our airports and shuttles to the other terminals at the larger airports. By providing frequent service at affordable fares, Mokulele is quickly growing to be Hawai’i’s premier inter

island c arrier.

Codesharing and Interline Agreements Codeshare and interline agreements provide our travelers with the additional protections of IATA agreements and single ticketing to many destinations covered by our codeshare and interline partners. Customers can purchase one ticket from Ho’olehua to Boise, Idaho, for example. Our systems are capable of both inbound and outbound codesharing and reciprocal frequent flyer benefits (including accrual and redemption).7

Modern Distribution

Custome rs are able to book a ticket on Mokulele using their favorite online booking tool, via most corporate travel portals, through traditional travel agents, and also through 3 a irlines. Mokulele uses
Radixx to power our reservation system and industry

- standa rd Type A messaging and electronic ticketing with all the major GDS’s.

The Mokulele website also allows for online changes & cancellations

– reducing the need to contact our reservations office or make a trip to the airport. Cancellations are mostly refu nded to a voucher, which
can also be redeemed online.

The private booking portal allows for tour operators, travel agents, and businesses to better manage their travel by providing real time reports, access to credit limits, reservation details, and cance l/change
abilities.

Creative Marketing Mokulele believes in reaching out to our customers using creative ads that help set the tone for their vacation. Mokulele uses a variety of direct

- contact methods

– ranging from social media, co

- op partnerships with our destinations, tourism board outreach programs, and emails. Mokulele also spends money on tele vision , radio, and print advertising.8

Smarter selling solutions As many costs rise, Mokulele is able to respond rapidly to the changing environment. By offering ONLY 9 seats per flight, we have the ability to make a profit on a flight with only 4 or 5 passengers on board

– and during peak times, we can add additional planes, ‘extra sections’, and fly 18 or 27 customers at the
same time!

The airline is also focused on its corporate sales program, which gives frequent users a private booking portal that has lower fares, relaxed fare rules, and free baggage allowances. The booking portal also allows for online changes & cancel lations

– alleviating the need to call into the reservations office.9

The Aircraft The proposed flights are offered aboard a Cessna Grand Ca ravan operated with both a captain and a
first officer onboard. The Cessna Caravan is a modern aircraft, still in pr o duction. Manufactured by one
of the most recognized aviation companies in history, the Caravan is one of the largest and safest
aircraft of its size and range. The aircraft comfortably seats nine passengers with a large cargo pod for baggage. The aircraf t is equipped with modern avionics, fully integrated auto pilot, and onboard
weather r adar . The aircraft are air conditioned and heated for passenger comfort.

Comfortable Interior Mokulele has outfitted all Caravans with a single seat

– per side configuration. This provides every guest on board with a window and aisle seat. Each airplane is air conditioned and most seats have a reading light and personal air vent. Each aircraft also has a secure bulkhead separating the cockpit
from the cabin

– giving our pilots an extra level of security, or may leave the doors open to provide our passengers with amazing views from the front of the aircraft.10

Track Record Under the current leadership team, the company has been able to grow to its highest levels in the entire history of the airline. Since the purchase by Transpac Holdings, the airline has nearly doubled in size while passenger traffic has grown 115%. The company saw a massive spike in traffic during 2013 when Mokulele upgraded its fleet, seeing an 88% increase in passenger traffic on only 60% growth.

Special Discuss ion of Proposed Hub Realignment

Over the past few years Silver City has suffered from infrequent and unreliable service to a hub airport the community does not desire

. Albuquerque is the business and medical center of the state of New

Mexico. Mokulele contends that this alternate service pattern featuring two weekday roundtrips to Albuquerque will enable to the comm unity to again use this vital link to the national transportation

system . Mo reover the inclusion of a new generation, reliable turboprop aircraft will restore the reliability this service has sorely lacked for so long. Finally, this proposal is based upon a se lling av erage fare of only $50 one way. This lower fare structure will further stimulate ridership as the community realizes it true traffic potential. 0 50000 100000 150000 200000 250000 300000

2009 2010 2011 2012 2013



### Mokulele Historical Performance

Passengers flown

Seats Available11

This proposal offers the community and the DOT the following possible scenario :

Service Option 1:

Service from Silver City, NM to Albuquerque, NM.

With this proposal, Mokulele offers a single dedicated CN

- 208B aircr aft dedicated to operating two weekday roundtrips in the Silver City, NM to Albuquerque, NM market . Week end Service would consist

of one r oundtrip each Saturday and Sunday

. It is Mokulele’s intent to charge an average fare of only $50 one way. We feel that the redirection of scheduled service back to the primary New Mexico business hub of Albuquerque, along with an aggressive pricing struc ture, will regain ridership that has been lost. As subsidy compensation for that service, Mokulele would require $1,499,878

, or roughly $1,225 per segment. This is offered for a two or four year term.

Conclusion

Mokulele is an established, Part 135 air carrier with a solid track record of frequent and reli able service. With this option , Mokulel e offers Silver City a service option that will build ridership with reasonable fares and dependable service

. Mokulele is an established Essential Air Service p rovider, recently announcing additional , subsidy free service o ver and above its EAS requirement in the Waimea

- Kohala

marke t, due to increasing ridership

. (Exhibit B) Mokulele looks forward to bringing the same commitment to quality air service and reason able pricing that has established it as a primary player in the tough Hawaiian inter

- Island market to the mainland. We look forward to serving these New Mexico

communities.12



### Exhibit A13



### Exhibit B

MOKULELE AIRLINES EXPANDS SERVICE BETWEEN

KAMUELA AND MAUI WITH THE ADDITION OF

A THIRD DAILY ROUNDTRIP FLIGHT



### New flight being added to meet the demand for service from Kamuela

which has exceeded EAS expectations.

Kailua

- Kona, HI

— June 26, 2014 ... Mokulele Airlines has announced that it is expanding its service
between Kamuela

- Waimea on the Big Island and Kahului, Maui by adding a third daily roundtrip flight to meet growing demand. Mokulele began offering service form Kamuela in September 2013 after being awarded the
Essential Air Service (EAS) contract from the Hawaii Department of Transportation. EAS is a government program designed to help ensure that smaller communities have access to commercial air service.

“Since winning the award, we’ve focused on delivering low fare, high

- quality f lights to the community by working directly with those who would use our service, and our boardings have reflected that,” explains Mokulele’s President and CEO Ron Hansen. Since Mokulele initiated the service, air traffic has grown more in Kamuela than in any other EAS market in the past two years. Mokulele expects to fly over 12,000 passengers in its first year of operation from Kamuela, compared to approximately 50 flown by the previous operator over a similar time period.

Mokulele will now offer 42 weekly flights between the two destinations, only 24 of which are subsidized by the EAS program. “The EAS program can truly help small communities when partnered with the right operator,” Hansen adds. “Because of the EAS program, we’re now able to increase flights, and hopefully grow Kamuela off of the EAS subsidy program by the end of our four

- year agreement. We’re doing whatever it takes to build traffic to the point the market is 100 percent self

- sustaining and no longer dependent on federal dollars.”

W ith the new flights, passengers can depart from Kahului at 8:35 am and arrive in Kamuela at 9:20 am. Maui

- bound passengers can depart Kamuela at 9:40 am and arrive in Kahului at 10:25 am. Fare start at $69 each way, taxes included, some restrictions apply and seats may be limited. Complete details and flight schedules can be found at
www.mokuleleairlines.com.

About Mokulele Airlines

Mokulele Airlines, flying the skies of Hawaii since 1994, was purchased by TransPac Aviation, Inc. in 2011 with a goal of providing high quality, low

- cost interisland air service. Mokulele , which is headquartered in Kailua

- Kona, now offers more than 120 flights a day connecting Oahu, Molokai, Lanai, Maui and the Big Island on its fleet of
nine

- passenger, turbine

- powered Cessn a Grand Caravans. For reservations & information, visit mokuleleairlines.com, facebook.com/ mokulele , contact your favorite travel agent or call 866

- 260

- 7070.