Essential Air Service at 

BEFORE THE 

DEPARTMENT OF TRANSPORTATION 

WASHINGTON, D.C. 

OFFICE OF THE SECRETARY 

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ATKA and 

NIKOLSKI, ALASKA 

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Docket DOT-OST-1995-363 

Under 49 USC§ 41731 et seq. ) 

__________ ) 

PROPOSALS OF SERVANT AIR, INC. 

TO PROVIDE ESSENTIAL AIR SERVICE 

AT ATKA AND NIKOLSKI, ALASKA 

Communications with respect to this document should be addressed to: 

Wes Osowski 

Servant Air, Inc. 

1619 Airport Way 

Kodiak, AK 99615-6977 

(907) 487-4400 

March 30, 2012 
BEFORE THE 

DEPARTMENT OF TRANSPORTATION 

WASHINGTON, D.C. 

OFFICE OF THE SECRETARY 

Essential Air Service at ) 

ATKA and ) Docket DOT-OST-1995-363 

NIKOLSKI, ALASKA ) 

Under 49 USC§ 41731 et seq. ) 

__________________) 

PROPOSALS OF SERVANT AIR, INC. 

TO PROVIDE ESSENTIAL AIR SERVICE 

AT ATKA AND NIKOLSKI, ALASKA 

Servant Air, Inc. herein submits its bid to provide Essential Air Service at Atka and Nikolski, 

Alaska for terms of up to four years. Atka and Nikolski are the most isolated small aircraft points 

in the US. Each point is distant from Dutch Harbor, the closest point receiving medium sized 

aircraft service to Anchorage, the connection point to the national transportation network. 

Historically these points have received service with twin-engine aircraft with nine or fewer seats. 

The historic service carrier, Peninsula airways, has declined to submit a service bid. The only 

other carrier providing any service at all at these points, Alaska Central Express, has also 

declined to submit a bid. 

OPERATIONAL CONSIDERATIONS 

Because of the long distances to be flown from Dutch Harbor, and the lack of aviation fuel at the 

destination points, turbine powered aircraft with a range of 1,000 miles or more are required to 
meet IFR alternate requirements. Both destinations have complex GPS instrument approaches 

which require offshore approaches which cannot be flown with a single engine aircraft. Servant 

has proposed service to both points using a Beechcraft King Air which has adequate passenger 

capacity for the markets, as well as sufficient cargo capacity for the current Peninsula Airways 

share of mail and freight going to the village. Backhaul cargo is de minimus. Alaska Central 

Express provides all-cargo service on a regular basis to Nikolski and Atka with its Beechcraft 

1900 aircraft. 

These points have been historically served by an aircraft stationed at Dutch Harbor (Unalaska), 

or by a 9-seat Metroliner or SAAB 340 as an extension of an Anchorage-Dutch Harbor service. 

Peninsula Airways sold the twin-turboprop it had stationed at OUT, and now operates Atka 

service with a SAAB 340 and Nikolski service with a Grumman Goose which is also used to 

provide EAS at Akutan. Penair discontinued service with its Metroliners after April, 2011. 

REVENUE FORECAST 

Revenue traffic available at Atka and Nikolski has continuously declined over the last five years 

due to population loss, declining commercial activity and introduction of all-cargo service by 

Alaska Central Express. Appendix A outlines the traffic history at the two points to establish the 

" 

total market and growth trends. Appendix B applies the growth trend and market share data for 

Penair to the historic traffic. Servant has adopted Penair fares and rates, and applied the yield 

amounts in the same fashion as Penair did in its 2010 bid. Servant intends to employ its 

standard tariffs which include some discount fares which slightly reduce the passenger yields. 

Traffic projections are carried out four years, with passenger and freight rates expected to 

increase 5% per year. 
Because the expense proposal is based on separate fixed monthly costs and variable operating 

costs, the revenue forecast is based on actual traffic carried per flight completed. Because of 

this change, the revenue forecast is similar to the three flights per week service proposal for 

Atka while only two flights are being proposed herein. Penair had a completion factor of about 

65%, so the historical traffic was actually carried on about two flights per week. 

EXPENSE FORECAST 

Service to Atka and Nikolski combined is a very low utilization service, averaging less than two 

block hours a day on average. Aircraft cannot be used in conjunction with other service, and 

serviced from an alternate base such as Anchorage or Kodiak would be prohibitively expensive. 

The standard practice for operations based at Dutch Harbor is to rotate crews in and out every 

two weeks. Local housing and a vehicle are provided for the crew, and they are paid an "away 

from base" per diem for perso11al expenses. Servant air will rent a hangar from Peninsula 

Airways, and ground handling will be contracted from Penair. 

Appendix C details the setup expenses to establish an operation in Dutch Harbor and the 

monthly fixed expenses for the station and crew. Because the operation is so variable 

depending on weather, volcano eruptions or other factors, crews will be paid a fixed monthly 

stipend based on their Kodiak wages, with a per diem allowance for personal expenses. For the 

first year of service, the fixed monthly expense level is $97,227. 

Appendix D lists the variable operating costs per flight by market. Primarily these are fuel, 

maintenance and ground handling costs which vary by flight or volume of cargo transported. 

Costs for both the Piper PA-31 Navajo and the Beechcraft King Air are shown. As noted below, 

Servant can begin service with the Navajo very quickly, even before the end of the current EAS 
period if acceptable to the Department and Penair. Once the King Air has been entered into 

service, all operations to both Atka and Nikolski will use that aircraft. Crew expenses are based 

on one pilot/mechanic, on supervising pilot who will supervise the entire operation including 

training, and one first officer. Either the supervising pilot or other captain will serve as the pilotin-command. Only two personnel will actually be on site in Dutch Harbor at any particular time. 

Peninsula Airways has offered maintenance personnel on a call-out basis, and an allowance for 

that has been included in the variable maintenance cost. 

NAVAJO SERVICE 

Servant intends to begin service to Nikolski as soon as agreeable. For the months in which 

Navajo service to Nikolski is operated, the fixed monthly expenses would be reduced by the cost 

of the second Captain and the First Officer and one half of the per diem pay. The variable 

operating cost per flight would be based on the Navajo rate. 

SUBSIDY NEED 

Two subsidy proposals are outlined in Appendix E. Total subsidy need is based on one-time 

setup costs amortized over either two or four years, the fixed monthly expenses plus the 

variable operating expenses assuming operation of the EAS requirement. Both operating 

expenses and revenue yields are assumed to increase 5% per annum. The setup costs would be 

amortized over the bid period and paid out equally per month. 

On a two year term, the total annual subsidy rate assuming completion of the EAS requirements 

is $1,783,346 for the first year and $1,847,730 for the second year. For the preferred four year 

term, the subsidy needs are $1,740,952, $1,805,336,$1,909,129 and $2,018,391 respectively. 
WHEREAS, Servant Air, Inc. respectfully submits its bid for Essential Air Service for Atka and 

Nikolski, and is prepared to negotiate a final rate as soon as possible. 

Respectfully submitted, 

Servant Air, Inc. 

March 30, 2012 
SERVANT AIR, INC. 

Appendix 

ESSENTIAL AIR SERVICE PROPOSAL FOR A 

Page 1 of 

ATKA AND NIKOLSKI, ALASKA 4 

Submitted March 30, 2012 

ATKA TO DUTCH HARBOR {UNALASKA) 

YEAR MONTH ENDED PAX FRT MAIL PEQ's 

2007 9 264 421 6,283 297.52 

2007 12 321 437 6,759 356.98 

2008 3 332 506 6,506 367.06 

2008 6 330 448 7,464 369.56 

2008 9 302 375 7,388 340.82 

2008 12 317 1,211 7,250 359.31 

2009 3 282 2,754 7,376 332.65 

2009 6 311 4,517 6,854 367.86 

2009 9 387 5,546 5,979 444.63 

2009 12 351 4,990 5,547 403.69 

2010 3 361 4,456 5,265 409.61 

2010 6 332 5,072 4,353 379.13 

2010 9 288 8,529 4,849 354.89 

2010 12 286 8,514 4,237 349.76 

2011 3 300 7,525 3,877 357.01 

2011 6 282 5,626 3,322 326.74 

2011 9 260 1,946 2,707 283.27 
Appendix 

A 

Page 2 of 

DUTCH HARBOR (UNALASKA) TO ATKA 4 

MONTH 

YEAR ENDED PAX FRT MAIL PEQ's 

2007 9 297 30445 97555 937.00 

2007 12 313 37859 100917 1006.88 

2008 3 325 32578 95811 966.95 

2008 6 332 37255 117501 1105.78 

2008 9 299 51541 122226 1167.84 

2008 12 303 55412 128296 1221.54 

2009 3 290 55743 129304 1215.24 

2009 6 313 66898 113331 1214.15 

2009 9 290 55743 129304 1215.24 

2009 12 364 59027 116041 1239.34 

2010 3 361 60763 109882 1214.23 

2010 6 338 56726 103347 1138.37 

2010 9 294 47500 103599 1049.50 

2010 12 286 49071 104159 1052.15 

2011 3 286 53160 107955 1091.58 

2011 6 262 45755 101441 997.98 

2011 9 257 49481 97762 993.22 
Appendix 

A 

Page 3 of 

DUTH HARBOR (UNALASKA) TO NIKOLSKI 4 

MONTH 

YEAR ENDED PAX FRT MAIL PEQ's 

2007 9 268 43653 43419 703.36 

2007 12 276 52693 44404 761.485 

2008 3 248 82296 47078 894.87 

2008 6 203 74927 41942 787.345 

2008 9 154 61813 39716 661.645 

2008 12 162 49812 41442 618'.27 

2009 3 156 22453 41935 477.94 

2009 6 180 20711 45138 509.245 

2009 9 196 27676 44267 555.715 

2009 12 180 38660 37841 562.505 

2010 3 166 39959 29318 512.385 

2010 6 131 46440 22784 477.12 

2010 9 110 65543 21657 546 

2010 12 93 51609 17178 436.935 

2011 3 96 58033 16192 467.125 

2011 6 84 53780 15579 430.795 

2011 9 79 35521 18636 349.785 
Appendix 

A 

Page 4 of 

NIKOLSKI TO DUTCH HARBOR (UNALASKA) 4 

MONTH 

YEAR ENDED PAX FRT MAIL PEQ's 

2007 9 250 1768 6790 292.79 

2007 12 261 2189 7043 307.16 

2008 3 240 2200 7881 290.405 

2008 6 190 1213 5277 222.45 

2008 9 143 1224 4997 174.105 

2008 12 162 803 4877 190.4 

2009 3 158 865 4203 183.34 

2009 6 180 1024 5829 214.265 

2009 9 204 981 6778 242.795 

2009 12 182 2481 7806 233.435 

2010 3 161 2359 7343 209.51 

2010 6 122 2622 4823 159.225 

2010 9 95 2684 3605 126.445 

2010 12 76 1594 1837 93.155 

2011 3 84 2275 1772 104.235 

2011 6 77 1951 1654 95.025 

2011 9 75 1351 1413 88.82 
SERVANT AIR, INC. 

ESSENTIAL AIR SERVICE PROPOSAL FOR Appendix B 

ATKA AND NIKOLSKI, ALASKA Page 1 of 1 

Submitted March 30, 2012 

COMMERCIAL REVENUE FORECAST 

6/13 6/14 6/15 

MARKET TRAFFIC YIELD TRFC 6/13$ TRFC 6/14$ TRFC 6/15$ 6/16FC 6/16$ 

DUT-IKO PAX $135.20 65 $8,788 $50 $7,098 $45 $6,708 $40 $ 6,260 

FRT $0.65 6000 $3,900 $5,400 $3,686 $4,860 $3,483 $4,374 $ 3,291 

MAIL $0.99 13000 $12,897 $10,850 $10,764 $9,750 $9,673 $8,500 $ 8,433 

$25,585 $21,547 $19,863 $ 17,984 

IKO-DUT PAX $135.20 65 $8,788 $50 $7,098 $45 $6,708 $40 $ 6,260 

FRT $0.65 0 $0 $0 $0 $0 $0 $0 $ 

MAIL $0.99 1200 $1,188 $1,000 $990 $900 $891 $800 $ 792 

$9,976 $8,088 $7,599 $ 7,052 

TOTAL REVENUE ~351561 ~291635 ~27A62 ~ 251037 

DUT-AKB PAX $244.80 257 $62,914 $252 $64,774 $247 $66,663 $242 $ 68,580 

FRT $1.91 25000 $47,750 $45,000 $90,248 $45,000 $94,760 $45,000 $ 99,498 

MAIL $1.85 98000 $181,216 $98,000 $181,216 $98,000 $181,216 $98,000 $ 181,216 

$291,879 $336,237 $342,639 $ 349,293 

AKB-DUT PAX $244.80 257 $62,914 $252 $64,774 $247 $66,663 $242 $ 68,580 

FRT $1.91 1900 $3,629 $1,900 $3,810 $1,900 $4,001 $1,900 $ 4,201 

MAIL $1.85 2500 $4,623 $2,500 $4,623 $2,500 $4,623 $2,500 $ 4,623 

$71,165 $73,207 $75,287 $ 77,403 

$363,045 $409,445 $417,926 $ 426,697 

ALL MARKETS $398,606 $439,080 $445,388 $ 451,733 
SERVANT AIR, INC. 

ESSENTIAL AIR SERVICE PROPOSAL FOR Appendix C 

ATKA AND NIKOLSKI, ALASKA Page 1 of 1 

Submitted March 30, 2012 MONTHLY 2YEAR 4 YEAR 

SETUP EXPENSES TOTAL AMORT AMORT 

Delivery to OUT Navajo $ 3,200 

King Air $ 27,000 

Crew Qualification $ 55,000 

Proving Runs $ 42,299 

Aircraft Conformity $ 12,000 

F.A.A. Compliance $ 15,000 

Barge Delivery 

Fuel Truck $ 5,000 

Furnishings/Fixtures $ 2,000 

Setup Expenses SubTotal $ 161,499 

Profit Margin $ 8,075 

SUBTOTAL $ 169,574 $ 84,787 $ 42,393 

MONTHLY FIXED EXPENSES 

Pilot/Mechanic 

Supervising Pilot $ 9,333 

Captain $ 6,067 

First Officer $ 4,667 

Crew Housing/Utilties $ 3,000 

Away from Base Allowance $ 3,500 

Telephone/Communications $ 450 

Vehicle/Gasoline/Insurance $ 900 

Personnel Rotation $ 7,906 

Hangar Rental $ 4,000 

Nikolski Agent $ 2,000 

Atka Agent $ 2,000 

Reservations/Communications $ 800 

D.O.T. Insurance $ 2,375 

Hull Insurance $ 5,000 

Aircraft Lease/Depreciation $ 30,000 

Contingency $ 3,100 

General & Administrative $ 7,500 

Group Total $ 92,597 

Profit Margin (5%) $ 4,630 

SUBTOTAL ~ 971227 

ANNUAL TOTAL ~ 111661725 
SERVANT AIR, INC. 

ESSENTIAL AIR SERVICE PROPOSAL FOR 

ATKA AND NIKOLSKI, ALASKA 

Submitted March 30, 2012 

VARIABLE OPERATIONAl EXPENSE- NIKOLSKI 

Piper PA-31 Navajo 

Fuel & Oil 

A/C Maintenance 

DUT Grnd Handling 

Beechcraft King Air 

Fuel & Oil 

A/C Maintenance 

DUT Grnd Handling 

VARIABLE OPERATIONAl EXPENSE- ATKA 

Beechcraft King Air 

Fuel & Oil 

A/C Maintenance 

DUT Grnd Handling 

Ground Handling @ Destination 

Atka 

Nikolski 

Penair Cargo Handling@ DUT 

TOTAl VARIABLE OPERATING EXPENSE 

Per B/H 

48 gph @ $8.30 

$396 

$300 per departure 

140 gph @ $7.30 

$ 658.00 

Per B/H 

130 gph@ $7.30 

$ 658.00 

B/H per Flight 

2.00 

1.63 

1.63 

B/H per Flight 

3.25 

3.25 

Appendix D 

Page 1 of 2 

$/Roundtrip 

$ 796.80 

$ 792.00 

$ 300.00 

$ 1,665.86 

$ 1,074.73 

$ 300.00 

$/Roundtrip 

$ 3,084.25 

$ 2,138.50 

$ 300.00 
Piper PA-31 Navajo RT's/Wk 

Fuel & Oil 2 

A/C Maintenance 2 

DUT Grnd Handling 2 

Beechcraft King Air 

Fuel & Oil 2 

A/C Maintenance 2 

DUT Grnd Handling 2 

VARIABLE OPERATIONAL EXPENSE- ATKA 

Beechcraft King Air RT's/Week 

Fuel & Oil 2 

A/C Maintenance 2 

DUT Grnd Handling 2 

Ground Handling@ Destination 

Atka $0.15/LB CARGO 

Nikolski $0.15/LB CARGO 

Penair Cargo Handling @ DUT 

TOTAL VARIABLE OPERATING EXPENSE 

$/Week 

$ 1,593.60 

$ 1,584.00 

$ 600.00 

$ 3,331.72 

$ 2,149.47 

$ 600.00 

Expense/Week 

$ 6,168.50 

$ 4,277.00 

$ 600.00 

$0.12/LB CARGO 

$/Year 

$ 82,867 

$ 82,368 

$ 31,200 

$ 173,249 

$ 111,772 

$ 31,200 

Expense/Year 

$ 320,762 

$ 222,404 

$ 31,200 

$ 19,110 

$ 3,030 

$ 17,712 

$ 930.440 

Appendix D I 

Page 2 of 2 
SERVANT AIR, INC. 

SUBSIDY NEED PROJECTION 

TWO YEAR CONTRACT 

Commercial Revenue (App B) 

Amortization of Setup Expenses (App C) 

Fixed Expenses (App C) 

Variable Expenses (App D) 

TOTAL EXPENSES 

SUBSIDY NEED 

YE 6/13 

$ 398,606 

$ 84,787 

$ 1,166,725 

$ 930,440 

$ 2,181,952 

$ 1,783,346 

YE 5/14 

$ 439,080 

$ 84,787 

$ 1,225,061 

$ 976,962 

$2,286,810 

$ 1,847,730 

Appendix E 

Page 1 of 2 
SERVANT AIR, INC. 

SUBSIDY NEED PROJECTION 

FOUR YEAR CONTRACT 

Commercial Revenue (App B) 

Amortization of Setup Expenses (App C) 

Fixed Expenses (App C) 

Variable Expenses (App D) 

TOTAL EXPENSES 

SUBSIDY NEED 

YE 6/13 

$ 398,606 

$ 42,393 

$ 1,166,725 

$ 930,440 

$ 2,139,558 

$1,740,952 

YE 6/14 

$ 439,080 

$ 42,393 

$ 1,225,061 

$ 976,962 

$2,244,416 

$ 1,805,336 

YE 6/15 

$ 445,388 

$ 42,393 

$ 1,286,314 

$ 1,025,810 

$2,354,517 

$ 1,909,129 

Appendix E 

Page 2 of 2 

YE 6/16 

$ 451,733 

$ 42,393 

$ 1,350,630 

$ 1,077,101 

$2,470,124 

$2,018,391