Before the Department of Transportation Washington, D.C

BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C.

) Essential Air Service at ) KOLIGANEK, ALASKA ) Docket DOT-OST-2016-0011 NEW STUYAHOK, ALASKA ) Docket DOT-OST-2016-0010 ) under 49 U.S.C. § 41731 et seq. )

PROPOSAL OF HAGELAND AVIATION SERVICES, INC. DBA RAVN CONNECT TO PROVIDE ESSENTIAL AIR SERVICE AT KOLIGANEK AND NEW STUYAKOK, ALASKA

Communications with respect to this document should be addressed to:

David H. Pflieger, Jr. Jonathon Foglia Chief Executive Officer Zuckert, Scoutt & Rasenberger, LLP Ravn Air Group 888 17th Street NW 4700 Old International Airport Road Suite 700 Anchorage, AK 99502 Washington, DC 20006 907-266-8310 202-973-7932 [email protected] [email protected]

Counsel to Ravn Air Group

October 25, 2017

BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C.

) Essential Air Service at ) KOLIGANEK, ALASKA ) Docket DOT-OST-2016-0011 NEW STUYAHOK, ALASKA ) Docket DOT-OST-2016-0010 ) under 49 U.S.C. § 41731 et seq. )

PROPOSAL OF HAGELAND AVIATION SERVICES, INC. DBA RAVN CONNECT TO PROVIDE ESSENTIAL AIR SERVICE AT KOLIGANEK AND NEW STUYAKOK, ALASKA

Pursuant to Order 2017-9-15 (served September 21, 2017), Hageland Aviation

Services, Inc. d/b/a Ravn Connect (“Ravn Connect”) hereby presents its proposal to provide essential air service (“EAS”) with subsidy at Koliganek, Alaska (“KGK”) and New

Stuyahok (“KNW”) for a two-year period beginning May 1, 2018.

Ravn Connect and Corvus Airlines, Inc. d/b/a Ravn Alaska (“Corvus”) (together, the “Ravn Carriers”) operate safe, reliable, affordable and convenient scheduled air service throughout Alaska, and presently provide critical air transportation links at over 100 local communities throughout the State.1 Each of the Ravn Carriers holds the requisite DOT economic and FAA safety authorities necessary for its EAS proposal herein. Specifically,

Ravn Connect holds a certificate of public convenience and necessity to engage in interstate air transportation of persons, property and mail, as last re-issued pursuant to Order 98-7-6

(served July 8, 1998) and an associated FAA-issued air carrier certificate authorizing commuter passenger and cargo operations under 14 C.F.R. part 135.

1 Details of the Ravn Carriers’ safety practices and management are located on pages 5 and 6. Proposal of Hageland Aviation Services, Inc. d/b/a Ravn Connect; Dockets DOT-OST- 2016-0011 and 0010 October 25, 2017 Page 3

Attached, you will find a detailed introduction to Ravn Alaska and Ravn Connect, an outline of our subsidy request, and other information that demonstrates why Ravn

Connect is the best choice to provide Essential Air Service at Koliganek and Stuyahok,

Alaska. We look forward to working with the communities and their leaders in the coming days to further detail our proposal.

October 25, 2017

Proposal of Hageland Aviation Services, Inc. d/b/a Ravn Connect; Dockets DOT-OST- 2016-0011 and 0010 October 25, 2017 Page 4

I. Introduction

Our company was formed in 2009 when ERA Aviation, now Corvus Airlines, was acquired by the parent company of

Hageland Aviation and Frontier Flying Service. Hageland and Frontier had come together just the year before. In 2014, the company was rebranded as Ravn Alaska with all Part 121 passenger operations operated by Corvus Airlines doing business as Ravn Alaska and all

Part 135 passenger operations operated by Hageland Aviation doing business as Ravn

Connect. The Frontier Flying Services certificate is dedicated to all cargo services.

Although our brand is Scheduled Service Passengers, U.S. relatively new, our history in T100 Year Ending June 2017 Alaska is long. Our predecessor

companies introduced the first Ravn Alaska commercial helicopter services Alaska Air (Group), Group, 747,952 1,623,665 to Alaska in 1948. Charter Penair, 177,942 services to villages began in Grant Aviation, 1950. Our scheduled passenger Others, 111,118 339,885 Bering Air services have been operating Inc., 93,551 since 1983. Proposal of Hageland Aviation Services, Inc. d/b/a Ravn Connect; Dockets DOT-OST- 2016-0011 and 0010 October 25, 2017 Page 5

The Ravn Carriers transported over 700,000 passengers in the year-ending June

2017 or 24% of all scheduled intra-Alaska passenger traffic for that period, commanding the second largest carrier market share in the state. Further, Ravn Connect transported over

300,000 passengers between its ten regional hubs and dozens of remote villages across “the

Last Frontier.” Together, the Ravn Carriers operate in over 100 communities through

Alaska, from the North Slope to the Gulf of Alaska.

The top priority at Ravn Alaska and Ravn Connect is always the safety of our customers. Both Ravn Alaska and Ravn Connect are recognized as Medallion Shield carriers by the Medallion Foundation, which was founded in 2001 to reduce aviation Proposal of Hageland Aviation Services, Inc. d/b/a Ravn Connect; Dockets DOT-OST- 2016-0011 and 0010 October 25, 2017 Page 6 accidents by fostering a proactive safety culture and promoting higher safety standards through one-on-one mentoring, research, education, training, auditing and advocacy. The

Ravn Carriers are in the process of completing the IATA Operational Safety Audit

(“IOSA”) certification, an internationally recognized and accepted evaluation designed to assess the operational management and control systems of an airline. Ravn Alaska Part

121 operations use a Flight Operational Quality Assurance (“FOQA”) program and comply with FAR Part 5, Safety Management Systems (“SMS”). SMS entails a formal, top-down, organization-wide approach to managing safety risk and assuring the effectiveness of safety risk controls. FOQA is a voluntary program which allows airlines and pilots to share information so that the FAA can monitor national trends and target resources to specific initiatives. Both programs are being expanded to include Ravn Connect.

In addition to safety, the Ravn Carriers place great emphasis on operational excellence and customer service for our passengers. The Ravn Carriers are now being led by a newly appointed team of successful, seasoned, and highly experienced major airline executives who have successfully started and turned around many different airlines such as Virgin America, Hawaiian Airlines, Fiji Airways, Silver Airways, Era Aviation, and others. As experienced providers of intra-Alaska passenger and cargo air services, we have achieved superior service reliability levels. Ravn Connect is operated by airline experts with the same operational philosophy as Part 121 operations at Ravn Alaska, which has driven operational reliability. As the largest operator of village services in Alaska, Ravn

Connect also has the largest fleet of regional aircraft, giving us the most flexibility to allocate aircraft across the state to resolve controllable operational events. Proposal of Hageland Aviation Services, Inc. d/b/a Ravn Connect; Dockets DOT-OST- 2016-0011 and 0010 October 25, 2017 Page 7

We operate a variety of aircraft to meet the unique needs of each community we serve across

Alaska. Ravn Alaska flights operated by Corvus are performed by a fleet of 10 modern, fuel efficient Bombardier Dash 8 series

100 aircraft, offering seating up for up to 37 passengers. Ravn

Connect scheduled flights, operated by Hageland Aviation, are operated with Beech 1900C, the Cessna 208 Caravan, or Piper PA-31 Chieftains, all configured for 9 passenger seats. The company also maintains a fleet of 6-passenger Cessna C207 Skywagons, and all-cargo-configured Beech

1900C’s and Shorts 330 Sherpas.

In addition to providing critical transportation links across the state, Ravn Alaska has always sought to be a strong corporate partner with the communities we are privileged to serve. Our 1,000 employees live throughout the state, from our headquarters in

Anchorage to our village agents across the state. We work closely with schools, hospitals, and the State of Alaska to facilitate travel both near and far. Our sponsorships include organizations important to Alaskans, including the American Red Cross, the American

Cancer Society, Alaska Schools Activities Association, the Alaska Federation of Natives,

Big Brothers Big Sisters of Alaska, the University of Alaska’ Nanooks and Seawolves Proposal of Hageland Aviation Services, Inc. d/b/a Ravn Connect; Dockets DOT-OST- 2016-0011 and 0010 October 25, 2017 Page 8 athletics programs, eight local Chambers of Commerce, and numerous events across the state.

The Ravn Carriers offer our passengers a combination of product attributes which are unmatched in Alaska. First, we are the only carriers that specialize in village service with connecting flight service available to Anchorage on a single ticket. We facilitate this service through providing Ravn Alaska service from many of our regional hubs to

Anchorage and by maintaining interline ticketing and baggage agreements with other carriers such as Alaska Airlines. In addition to Alaska Airlines, we maintain interline connections American Airlines, Delta Air Lines, United Airlines, and Pen Air to create worldwide reach with a single ticket. Second, Ravn Alaska utilizes the industry-leading

SabreSonic Reservations system while

maintaining our unique to Alaska village

agent service. This makes possible a wide

range of purchasing options for our customers, which includes purchases through our website, flyravn.com, online travel agents such as expedia.com, traditional travel agents, our call center, and airport and village

Ravn agents throughout Alaska. Third, Ravn Alaska offers FlyAway Rewards, our unique frequent flyer program designed to reward loyal customers. In addition to being the only frequent flyer program for rural communities that allows points to be redeemed for travel to Anchorage, FlyAway Rewards has two elite levels with additional benefits to reward our most frequent travelers. On certain routes, FlyAway Rewards members may choose to earn Alaska Airlines Mileage Plan miles instead of FlyAway Reward points. Proposal of Hageland Aviation Services, Inc. d/b/a Ravn Connect; Dockets DOT-OST- 2016-0011 and 0010 October 25, 2017 Page 9

II. Service Proposal

Ravn Connect offers two service proposal options linking Koliganek

(“KGK”) and New Stuyahok (“KNW”) with Dillingham, Alaska (“DLG”) for the consideration of the communities and Department of Transportation, described in Option

A and Option B hereto. In Option A, we respond directly to the service pattern described by the Department in the Order Requesting Proposals. Option B attempts to increase the utility of the Essential Air Service through offering more departures at each city at a similar subsidy level to Option A. To accomplish this, we utilize “wrap” flights, where each departure from DLG stops at both KGK and KNW before returning to DLG. Effectively, the single roundtrip to each community becomes shared between both communities, allowing each community two departures on weekdays instead of only one and roughly the same number of seats.

a. Service Pattern

i. Option A

Under Option A, Ravn Connect proposes to operate seven weekly scheduled roundtrip flights between DLG and KGK, and eight weekly between DLG and KNW for a two- year period beginning May 1, 2018 utilizing 9-seat Cessna Caravan aircraft. Subject to consultation with village leaders and residents, Ravn Connect proposes the schedule listed below: Proposal of Hageland Aviation Services, Inc. d/b/a Ravn Connect; Dockets DOT-OST- 2016-0011 and 0010 October 25, 2017 Page 10

Koliganek, Alaska (KGK) Day of Week Depart Arrive Stops Equipment Mo Tu We Th Fr Sa Su DLG KGK Mo Tu We Th Fr Sa Su 10:45 11:15 0 C208 Caravan

Day of Week Depart Arrive Stops Equipment Mo Tu We Th Fr Sa Su KGK DLG Mo Tu We Th Fr Sa Su 11:30 12:00 0 C208 Caravan (all times local)

New Stuyahok (KNW) Day of Week Depart Arrive Stops Equipment Mo Tu We Th Fr Sa Su DLG KNW Su 12:30 12:50 0 C208 Caravan Mo Tu We Th Fr Sa Su 16:40 17:00 0 C208 Caravan

Day of Week Depart Arrive Stops Equipment Mo Tu We Th Fr Sa Su KNW DLG Su 13:00 13:20 0 C208 Caravan Mo Tu We Th Fr Sa Su 17:15 17:35 0 C208 Caravan (all times local)

ii. Option B

With Option B, Ravn Connect proposes to operate twelve weekly scheduled roundtrip “wrap” flights between DLG and both KGK and KNW. After departure from DLG, each flight would stop at both KGK and KNW prior to returning to DLG. We propose that these flights operate for two-year period beginning May 1, 2018 utilizing 9-seat Cessna

Caravan aircraft. Subject to consultation with village leaders and residents, Ravn Connect proposes the schedule listed below:

Proposal of Hageland Aviation Services, Inc. d/b/a Ravn Connect; Dockets DOT-OST- 2016-0011 and 0010 October 25, 2017 Page 11

Koliganek, Alaska (KGK) Day of Week Depart Arrive Stops Equipment Mo Tu We Th Fr Sa Su DLG KGK Mo Tu We Th Fr Sa 10:45 11:30 1 C208 Caravan Mo Tu We Th Fr Su 16:00 16:30 0 C208 Caravan

Day of Week Depart Arrive Stops Equipment Mo Tu We Th Fr Sa Su KGK DLG Mo Tu We Th Fr Sa 11:45 12:15 0 C208 Caravan Mo Tu We Th Fr Su 16:45 17:35 1 C208 Caravan (all times local)

New Stuyahok (KNW) Day of Week Depart Arrive Stops Equipment Mo Tu We Th Fr Sa Su DLG KNW Mo Tu We Th Fr Sa 10:45 11:05 0 C208 Caravan Mo Tu We Th Fr Su 16:00 17:00 1 C208 Caravan

Day of Week Depart Arrive Stops Equipment Mo Tu We Th Fr Sa Su KNW DLG Mo Tu We Th Fr Sa 11:15 12:15 1 C208 Caravan Mo Tu We Th Fr Su 17:15 17:35 0 C208 Caravan (all times local)

Proposal of Hageland Aviation Services, Inc. d/b/a Ravn Connect; Dockets DOT-OST- 2016-0011 and 0010 October 25, 2017 Page 12

b. Financial Requirement

Ravn Connect requests an Essential Air Service subsidy of $1,080,599 or

$1,096,572 annually to operate service to Koliganek and New Stuyahok, depending on which option is selected, as set forth below:

Option A Market Koliganek New Stuyahok Segment DLG-KGK DLG-KNW Total Roundtrips per Week 7 8 15 Estimated Completion Factor 95% 95% 95% Completed Departures 692 790 1482 Completed Block Hours 415 395 810

Passengers 1296 1718 3014 Load Factor 21% 24% 22% Average Net Fare $58 $58 $58

Passenger Revenue $75,168 $99,644 $174,812 Freight Revenue $19,071 $28,397 $47,468 Mail Revenue $194,899 $382,745 $577,645 Total Revenue $289,139 $510,786 $799,925

Variable Costs $490,336 $533,315 $1,023,651 Aircraft Ownership $260,429 $248,028 $508,457 Overhead & Interest $109,200 $104,000 $213,200 Startup Costs $22,833 $22,833 $45,667 Wrap Segment Expenses Total Expenses $882,798 $908,177 $1,790,975

Profit (Loss) Excluding Subsidy ($593,659) ($397,391) ($991,050)

Subsidy Revenue (to 5% margin) $637,799 $442,799 $1,080,599

Subsidy per Departure $876 $532 $693 Subsidy per Block Hour $1,537 $1,120 $1,334 Subsidy per Passenger $492 $258 $359

Figures are annualized unless noted Proposal of Hageland Aviation Services, Inc. d/b/a Ravn Connect; Dockets DOT-OST- 2016-0011 and 0010 October 25, 2017 Page 13

Option B Segment Koliganek (shared) New Stuyahok KGK- KNW- DLG- Market Total DLG KGK KNW Roundtrips per Week 6 6 6 18 Estimated Completion Factor 95% 95% 95% 95% Completed Departures 593 593 593 1778 Completed Block Hours 356 178 296 830

Passengers 1296 843* 1718 3014* Load Factor 24% 16% 32% 26% Average Net Fare $58 $58 $58

Passenger Revenue $75,168 $0 $99,644 $174,812 Freight Revenue $19,071 $0 $28,397 $47,468 Mail Revenue $194,900 $0 $382,745 $577,645 Total Revenue $289,139 $0 $510,786 $799,925

Variable Costs $437,107 $172,321 $429,435 $1,038,863 Aircraft Ownership $217,910 $108,955 $181,592 $508,457 Overhead & Interest $91,371 $45,686 $76,143 $213,200 Startup Costs $22,833 $22,833 $45,667 Wrap Segment Expenses $163,481 $326,962 $163,481 Total Expenses $932,703 <<<>>>> $873,484 $1,806,187

Profit (Loss) Excluding Subsidy ($643,564) ($362,698) ($1,006,262)

Subsidy Revenue (to 5% margin) $690,199 $406,372 $1,096,572

Subsidy per Departure $1,106 $651 $586 Subsidy per Block Hour $1,941 $1,371 $1,321 Subsidy per Passenger $533 $237 $364

Figures are annualized unless noted

* Shared segment passengers are excluded from total to avoid double counting passengers that travel on two segments and pay no additional fare for travel on two segments vs. one.

Proposal of Hageland Aviation Services, Inc. d/b/a Ravn Connect; Dockets DOT-OST- 2016-0011 and 0010 October 25, 2017 Page 14

c. Mail and Freight Services

In addition to passenger services, Ravn Connect expects to transport mail and freight, under the appropriate Department guidelines and rates, similar to the mail and freight carried at villages throughout rural Alaska.

d. Other Conditions and Information

In order for Ravn Connect to service Koliganek and New Stuyahok with the schedule and economics described herein as well as the reliability that village customers demand, it is critical that we are able to quickly attain an operation at DLG with the appropriate economies of scale. Therefore, our proposal for service to each Koliganek and

New Stuyahok is subject to also being awarded Essential Air Service at both communities as well as being awarded EAS at Manokotak, Alaska.2

In establishing a regional hub at DLG for Ravn Connect related to the proposed

Essential Air Service, Ravn Alaska will strongly consider the addition of service between

DLG and Ted Stevens International Airport in Anchorage (“ANC”). In doing so, the Ravn

Carriers would seek to establish single ticket connecting service between Anchorage and both Koliganek and New Stuyahok.

III. Conclusion

Ravn Connect is fit, willing and able to provide EAS with subsidy at Manokotak.

We have a demonstrated commitment to providing safe, reliable, affordable and efficient

2 Pursuant to Order 2017-7-3, the Department requested proposals for Essential Air Service at Manokotak, Alaska (“KMO”), to which Ravn Connect responded with its proposal on October 5, 2017, containing a similar condition. See Docket DOT-OST-2015-0244. Proposal of Hageland Aviation Services, Inc. d/b/a Ravn Connect; Dockets DOT-OST- 2016-0011 and 0010 October 25, 2017 Page 15 air service throughout Alaska for decades. The payload capacities and passenger/cargo configurations of the aircraft to be used in furtherance of their EAS proposals meet the current market needs. For all the reasons detailed above, the Ravn Carriers urge the

Department to select Ravn Connect to operate EAS with subsidy at KGK and KNW for a two-year period, beginning May 1, 2018.

We look forward to visiting Koliganek and New Stuyahok in the coming days to discuss our proposal in detail with community leaders and residents.

October 25, 2017