BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C.

Transcription

1 BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C. Essen8al Air Service at: HARRISON, ARK. HOT SPRINGS, ARK. EL DORADO/CAMDEN, ARK. OST Under 49 U.S.C et seq. SOUTHERN AIRWAYS EXPRESS PROPOSAL TO PROVIDE SUBSIDIZED ESSENTIAL AIR SERVICE By Order , the Department requested proposals from carriers interested in providing EssenAal Air Service to the above-listed communiaes. Pursuant to that Order, Southern Airways Express, LLC ( Southern ) cordially submits this proposal to provide subsidized air service to the Arkansas ciaes of Harrison, Hot Springs, and El Dorado/Camden. Correspondence with regard to this document should be addressed to: R. Stanley LiUle Chief ExecuAve Officer Southern Airways Express 8869 Centre Street Southaven, Mississippi Telephone: s.liule@iflysouthern.com

2 Southern Airways Express hereby offers proposals to provide service to Harrison, Hot Springs, and El Dorado/ Camden, Arkansas. Our proposals are for a period of two years. Southern proposes to operate reliable, low-fare service using 9-passenger turboprop Cessna Caravan aircra_. Southern s management believes that this model is well-suited to serve the markets with properly-amed schedules and the ability to provide high levels of sustained reliability, a significant problem that a number of the ciaes have faced recently. In the preceding six month period that Southern has provided service to six EssenAal Air Service communiaes in the mid-atlanac region, controlled compleaon rates have exceeded 98% system-wide, with many communiaes experiencing 100% compleaon in any given month. Southern has adopted a flexible, community-focused approach to its proposals that not only provides low-fare service to important regional hubs, but is accompanied by flight schedules that have been tailored to provide maximum convenience and connecavity. It is criacal to successful enplanements that ciaes have full Ame-ofday coverage, with an early departure and a late return to accommodate same-day business travelers. All of our proposals include this coverage, meaning each city will have two crews per day operaang their flights. All of the service proposals have been designed to ensure conanued high levels of service reliability. Southern has built a reputaaon for consistent reliability and high levels of customer service. This has been achieved by working to ensure full levels of flight crew staffing, realisac aircra_ schedules, and retaining mulaple full-ame operaaonal spare aircra_. Southern s controllable compleaon factor of scheduled flights for all of 2016 has been over 98%. MARKETING & DISTRIBUTION Flights will be displayed in the major travel agent systems: SABRE AMADEUS WORLDSPAN GALILEO TRAVELPORT APOLLO TRAVELSKY/CHINA (Coming in 2017) And on the major online travel agencies websites: Expedia Travelocity Orbitz Kayak Priceline CheapRckets Plus, on the company s web site. Here, Southern has invested considerable capital in an industry-leading technology that facilitates connecaons between the company and all other carriers which publish their schedules in OAG and their fares in ATPCO, including the Low Cost Carriers that have become an Important element in the US airline industry. Even where interline agreements

3 are not available, such as with Southwest and Allegiant, this technology (debuang in Q4 of 2016) will assist passengers in making connecaons to/from Southern and desanaaons world-wide. Uniquely in the industry, Southern has full-ame, dedicated EAS markeang professionals who maintain a physical presence in each service community. Including weekly markeang calls and bi-weekly visits with airport officials, Southern execuaves are engaged with the airports in every aspect of the operaaon. We adapt to local needs and include extra, non-subsidized service when occasions permit (sports-related flights, special event flights, etc.) Southern prides itself on the relaaonships that it has built with its service ciaes, and we welcome any prospecave community to contact city and airport officials anywhere in our footprint to inquire about our reputaaon SERVICE PROPOSAL While specific flight Ames will be completed in coordinaaon with the community, Southern s service proposal provides for an early morning (5:45am 6:15am) departure allowing for early morning hub connecaons, and arriving back to the hometown as late as 10:00pm, similarly allowing for later evening inbound connecaons. Southern believes that the value of such schedule flexibility more than offsets the incremental staffing costs required, and will be a meaningful contributor to growing passenger enplanements. TWELVE (12) WEEKLY FLIGHTS TO DFW and SIX (6) WEEKLY FLIGHTS TO MEM Or EIGHTEEN (18) WEEKLY FLIGHTS TO DFW The DOT has opined this week that one daily round-trip to MEM is eligible for EAS funding, if selected by the community, so long as at least 12 roundtrips per week are scheduled to a medium/large hub, like DFW. Local fares would be set for effecaveness of add-on prices to flights to/from each respecave hub, generally in the $39 to $59 range each way, with an average fare in the $42 to $47. Southern has moved to an all-caravan fleet, each of which has a cargo capacity sufficient to carry two checked bags for each of the nine passengers, plus golf clubs and other parcels. The Caravan is the only nine-passenger aircra_ in the industry that can make this guarantee. Legacy Non-Stops from DFW ULCC Non-Stops from MEM & DFW versus STL

4 Company History and Culture Southern Airways was born out of necessity. When Delta Air Lines de-hubbed Memphis, a vacuum in air travel was created in the Mid-South. Most of the popular non-stop desanaaons that residents of the metro area had enjoyed for years were no longer offered. In 2013 Southern took flight and became the preferred method of travel not just for the masses commuang to the Florida Gulf Coast, but also for some of the area s most affluent business travelers. Providing affordable, high-touch, first class, charter-style service to passengers that had given-up on short haul air travel (and instead turned to the automobile) became the model upon which Southern built its reputaaon. In short, Southern Airways has a proven track record of purng people on airplanes In early 2016, Southern Airways acquired Sun Air Express in a transacaon that created greater resources for the combined company. Sun Air had developed a network of communiaes in the Mid-AtlanAc region within the EssenAal Air Service program. Combining the companies immediately led to unparalleled synergies. The resources and improved aircra_ of Southern, along with the operaaonal leadership of Sun, created an air service provider that is successful at operaang both EssenAal Air Service routes as well as tradiaonal market-based flights between high-density areas and popular desanaaons. Southern brings a leadership mindset that is focused on business development, relaaonship-building, community involvement, and passenger saasfacaon to a Sun Air product that has a strong and well-established infrastructure in the region. The operaaonal excellence of Sun and the customer-centric mindset and superior markeang ability of Southern has created a dynamic new company that will be the model for EssenAal Air Service providers in the future. Unique among EAS bidders in this region, Southern Airways does not focus exclusively on subsidized flying it is but one part of our overall airline business model. In the last sixty days, we ve announced to much fanfare new routes connecang PiUsburgh and Harrisburg (for the first non-stop service in eight years) and between Memphis and Nashville (for the first non-stops in over three years). Thus, passengers from our Arkansas airports can connect to over 149 domesac ciaes and 58 internaaonal ciaes served by the legacy carriers, plus other ciaes served by Southern. Gulf Route Map DALLAS/ FT. WORTH HARRISON HOT SPRINGS EL DORADO ST. LOUIS JONESBORO BATON ROUGE MEMPHIS NEW ORLEANS JACKSON JACKSON NASHVILLE DESTIN KNOXVILLE ATLANTA CHARLOTTE JACKSONVILLE HILTON HEAD SAVANNAH Mid-Atlan0c Route Map Opera'ng or for sale Oct 2016 Expansion route 2017 PITTSBURGH MORGANTOWN JAMESTOWN/ CHATAUQUA FRANKLIN/ OIL CITY LATROBE BRADFORD DUBOIS June July August JOHNSTOWN ALTOONA HAGERSTOWN SCRANTON/ WILKES-BARRE HARRISBURG LANCASTER WASHINGTON- DULLES TRENTON BALTIMORE/ WASHINGTON INT L SALISBURY/ OCEAN CITY NEW HAVEN ATLANTIC CITY

5 The mouo of Southern Airways is Every Passenger, Every Flight, Every Day. That focus on the passenger experience can be seen through the countless tesamonials that passengers post onto our social media accounts. With over 20,000 Facebook followers in the Mid-South alone, Southern has leveraged its innovaave social media presence to create a dialogue with passengers. That dialogue has led to the highest levels of customer saasfacaon and enthusiasm. In addiaon to ualizing social media sites like Facebook, Instagram, YouTube, and Pinterest, Southern is also a big proponent of tradiaonal markeang and adverang. From custom, professionally- produced radio jingles to a naaonal-broadcast quality television commercial, Southern is commiued to community markeang on all levels. Links to Southern s Social Media SAes are listed below About Southern Airways Express Southern Airways Express is a Memphis (Southaven, Mississippi)-based commuter air carrier currently serving markets in Pennsylvania, Virginia, Maryland, West Virginia, New York, Tennessee, Georgia, Mississippi, and Florida. The airline has operated charters and scheduled service within a 14-state footprint for a number of years. The company is now the combined product of the original Southern Airways Express and the former Sun Air InternaAonal, having combined operaaons earlier this year. Since that Ame, Southern has focused on improving operaaons, upgrading technology, converang to an all-turbine fleet, and expanding the community-centric and high-touch personal service that has been the backbone of the company since its founding. OperaAonal improvements at the airline have been significant. For the Year to Date period, Southern (including the former Sun) is operaang at more than a 98% controllable compleaon factor (percentage of scheduled flights that are completed, excluding weather). W e F l y To M a k e Yo u r D a y

6 HARRISON (HRO): OPTION A 12 Weekly Round-trips to DFW 6 Weekly Round-trips to MEM Representa8ve Schedule DEPARTURES FROM HRO 6:00am to DFW 11:15am to MEM* 5:35pm to DFW ARRIVALS TO HRO 10:45 from DFW 5:05pm from MEM* 10:15pm from DFW *Includes non-subsidized conanuing service to/from Nashville and DesAn Opera8ng Revenues HRO-DFW $322,518 HRO-MEM $161, $483,536 Opera8ng Expenses Flying OperaAons $755,270 Fuel and Into Plane $647,338 Maintenance $426,816 Aircra_ $360,000 Indirect $554, TOTAL OPERATING EXPENSES 2,743,547 OperaAng Loss $2,260,011 Profit Element (5%) $ 137,177 COMPENSATION REQUIRED $2,397,188 COMPENSATION PER PAX $ 233 COMPENSATION PER DEPARTURE $1299 Annual Seats 16,594 Annual Passengers 10,288 Load Factor 62% Departures 1,844 Block Hours 3,503 Average Fare $47 CompleAon Factor 98.5%

7 HARRISON (HRO): OPTION B 18 Weekly Round-trips to DFW Representa8ve Schedule DEPARTURES FROM HRO 6:00am to DFW 11:15am to DFW 5:35pm to DFW ARRIVALS TO HRO 10:45am from DFW 5:05pm from DFW Opera8ng Revenues HRO-DFW $483, $483,536 Opera8ng Expenses Flying OperaAons $805,040 Fuel and Into Plane $738,192 Maintenance $490,776 Aircra_ $360,000 Indirect $554, TOTAL OPERATING EXPENSES 2,948,131 OperaAng Loss $2,464,595 Profit Element (5%) $ 147,406 COMPENSATION REQUIRED $2,612,001 COMPENSATION PER PAX $ 253 COMPENSATION PER DEPARTURE $ :15pm from DFW Annual Seats 16,594 Annual Passengers 10,288 Load Factor 62% Departures 1,844 Block Hours 4,056 Average Fare $47 CompleAon Factor 98.5%

8 HOT SPRINGS (HOT): OPTION A 12 Weekly Round-trips to DFW 6 Weekly Round-trips to MEM Representa8ve Schedule DEPARTURES FROM HOT 6:00am to DFW 11:15am to MEM* 5:35pm to DFW ARRIVALS TO HOT 10:45am from DFW 5:05pm from MEM* 9:35pm from DFW *Includes non-subsidized conanuing service to/from Nashville and DesAn Opera8ng Revenues HOT-DFW $250,897 HOT-MEM $ 83, $334,530 Opera8ng Expenses Flying OperaAons $606,570 Fuel and Into Plane $559,286 Maintenance $371,833 Aircra_ $270,000 Indirect $554, TOTAL OPERATING EXPENSES 2,361,812 OperaAng Loss $2,027,282 Profit Element (5%) $ 118,090 COMPENSATION REQUIRED $2,145,372 COMPENSATION PER PAX $ 269 COMPENSATION PER DEPARTURE $1163 Annual Seats 16,594 Annual Passengers 7,965 Load Factor 48% Departures 1,844 Block Hours 3,073 Average Fare $42 CompleAon Factor 98.5%

9 HOT SPRINGS (HOT): OPTION B 18 Weekly Round-trips to DFW Representa8ve Schedule DEPARTURES FROM HOT 6:00am to DFW 11:15am to DFW 5:35pm to DFW ARRIVALS TO HOT 10:45 from DFW 3:05pm from DFW 9:15pm from DFW Opera8ng Revenues HOT-DFW $334, $334,530 Opera8ng Expenses Flying OperaAons $645,450 Fuel and Into Plane $637,910 Maintenance $424,105 Aircra_ $360,000 Indirect $554, TOTAL OPERATING EXPENSES 2,621,588 OperaAng Loss $2,247,233 Profit Element (5%) $ 131,079 COMPENSATION REQUIRED $2,378,312 COMPENSATION PER PAX $ 298 COMPENSATION PER DEPARTURE $1289 Annual Seats 16,594 Annual Passengers 7,965 Load Factor 48% Departures 1,844 Block Hours 3,505 Average Fare $42 CompleAon Factor 98.5%

10 EL DORADO (ELD): OPTION A 12 Weekly Round-trips to DFW 6 Weekly Round-trips to MEM Representa8ve Schedule DEPARTURES FROM ELD 6:00am to DFW 11:15am to MEM* 5:35pm to DFW ARRIVALS TO ELD 10:45am from DFW 5:05pm from MEM* 9:35pm from DFW *Includes non-subsidized conanuing service to/from Nashville and DesAn Opera8ng Revenues ELD-DFW $334,530 ELD-MEM $111, $446,040 Opera8ng Expenses Flying OperaAons $727,640 Fuel and Into Plane $581,672 Maintenance $386,716 Aircra_ $270,000 Indirect $554, TOTAL OPERATING EXPENSES 2,520,151 OperaAng Loss $2,074,111 Profit Element (5%) $ 126,007 COMPENSATION REQUIRED $2,200,118 COMPENSATION PER PAX $ 207 COMPENSATION PER DEPARTURE $1193 Annual Seats 16,594 Annual Passengers 10,620 Load Factor 64% Departures 1,844 Block Hours 3,196 Average Fare $42 CompleAon Factor 98.5%

11 EL DORADO (ELD): OPTION B 18 Weekly Round-trips to DFW Representa8ve Schedule DEPARTURES FROM ELD 6:00am to DFW 11:15am to DFW 5:35pm to DFW ARRIVALS TO ELD 10:45 from DFW 3:05pm from DFW 9:15pm from DFW Opera8ng Revenues ELD-DFW $446, $446,040 Opera8ng Expenses Flying OperaAons $645,450 Fuel and Into Plane $637,910 Maintenance $424,105 Aircra_ $360,000 Indirect $554, TOTAL OPERATING EXPENSES 2,621,588 OperaAng Loss $2,175,548 Profit Element (5%) $ 131,079 COMPENSATION REQUIRED $2,306,627 COMPENSATION PER PAX $ 217 COMPENSATION PER DEPARTURE $1251 Annual Seats 16,594 Annual Passengers 10,620 Load Factor 64% Departures 1,844 Block Hours 3,505 Average Fare $42 CompleAon Factor 98.5%

12 In conclusion, Southern Airways Express believes that its proposal will provide an unsurpassed level of service to the communiaes, and ensures that they have proper access to the naaonal air transportaaon network, offering cost-effecave opaons that meet the requirements of the EssenAal Air Service Program. Moreover, in the case of Hot Springs, should the MEM hub be upgraded to medium hub status in 2017 or 2018, Southern agrees to work with the community to realign its flight schedule/desanaaons in order to avoid violaang the $200 per passenger cap, if the community request such changes. Respecxully SubmiUed: October 14, 2016 R. Stanley LiUle Chief ExecuAve Officer Southern Airways Express, LLC