Schuman Aviation Company, Ltd. dba Makani Kai Air

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1 1 Schuman Aviation Company, Ltd. dba Makani Kai Air Air Carrier Certificate MKHA108K D R A F T 130 Iolana Place Honolulu, Hawaii (808)

2 2 Schuman Aviation Company, Ltd 130 Iolana Place, Honolulu, HI (808) Fax (808) December 4, 2018 Scott Faulk Transportation Industry Analyst U.S. Department of Transportation Office of Aviation Analysis EAS & Domestic Analysis Division 1200 New Jersey Ave, SE Washington, DC RE: Proposal to Provide Essential Air Service at Kamuela, Hawaii Docket DOT-OST Dear Mr. Faulk, Makani Kai Air, a subsidiary of Schuman Aviation Company, Ltd., submits this proposal to provide essential air service to the communities surrounding Kamuela Airport on the Big Island of Hawaii, under Order , dated October 31, Makani Kai Air is an FAA Part 135 certified carrier, providing passenger service since In this proposal, Makani Kai Air is offering twelve round trip departures weekly between Kamuela Airport and Kahului Airport on Maui. The goal is to provide more cost-effective flights than are currently offered by the incumbent. The timing, exceptionally affordable price and unchanging flat rate of these flights will allow residents hassle-free travel to Kahului enabling easy connectivity to mainland and international departures. Makani Kai Air is ready to begin this service immediately upon acceptance of this proposal. We are confident in our ability to provide better service to Kamuela Airport and its surrounding communities and build the kind of loyal following as we have enjoyed in the other Hawaii markets we serve. Makani Kai Air s record of reliability, stable airfare, ever-growing customer base and on-time performance make the airline the winning choice to provide essential air service to Kamuela Airport.

3 3 Makani Kai Air (FAA Air Carrier Certificate MKHA108K), respectfully submits its bid for provision of Essential Air Service at Kamuela, Hawaii. The proposed four year service profile and pricing details are: Service Profile Details / Frequency Annual Subsidy YEAR ONE $200, YEAR TWO $200, YEAR THREE $200, YEAR FOUR $200, TOTAL Subsidy $800, Offering 12 weekly nonstop round trips between Kamuela (PHMU) and Kahului, Maui (PHOG). Flights between Kamuela and Maui will be flown primarily in nine passenger Cessna 208 Grand Caravans. Inclement weather may require the use of a nine-passenger twin-engine Piper Chieftain.

4 4 About Schuman Aviation Company Ltd Schuman Aviation Company, Ltd., established in 1996, comprises three lines of business: Magnum Helicopters, an aerial tour and charter company on the island of Oahu that operates three MD-500s and a Eurocopter A-Star, Hawaii Aviation Services, an FAA Part 141 repair station and Hawaii s authorized Cessna Service Center and Makani Kai Air, a scheduled air carrier operating six Cessna Grand Caravans and a twinengine Piper Chieftain serving the islands of Oahu, Molokai and Maui. Makani Kai Air will carry 65,000 passengers in The company is locally owned and founded on the sound principals of professionalism, hard work and excellent customer service. Being locally owned and operated is a more significant distinction in Hawaii than it is elsewhere. The Hawaii market has its own pace, priorities and eccentricities, as many mainland-owned businesses have discovered to their dismay. Those companies that adapt, thrive. History is littered with the names of businesses that came to the islands and did not give weight nor credence to the fact that life is different here. The Schuman name, dating back to the 1893 founding of Schuman Carriage Company on Oahu, has long been known for its understanding and appreciation of the culture and people of Hawaii. Through several generations, the Schuman family has focused on the long term, eschewing quick profits to ensure abiding, lifelong relationships. In this manner, the company has historically enjoyed growth and durability. Since its inception in modern times, Schuman Aviation Company has grown from a one helicopter tour agency with five employees to an operation with annual revenue of $12-million conducting up to 80 flights a day and employing 76 people. Magnum Helicopters is a successful aerial tour operation focusing on the island of Oahu. It caters to the niche market of those looking for something extra in a sightseeing tour, namely, having the doors off the aircraft. This allows for a better connection to the environment for the customer and permits unrivaled photography. Magnum Helicopters is featured weekly in the CBS reboot of Magnum P.I. as the iconic helicopter flown by Theodore T.C. Calvin. The company also handles the aerial filming for the show as well as the crime drama Hawaii Five-0. In addition, the company provides aerial support for countless commercials, feature films, television shows such as The Amazing Race, Hawaii Lifeflight and Lost and documentaries for National Geographic. Magnum is currently providing aerial filming for Legendary Pictures Godzilla Vs. Kong.

5 5 Hawaii Aviation Services (HAS) is authorized by the FAA to perform work on Cessnas, Pipers, Eurocopter A-Stars, McDonald Douglas helicopters as well as Lycoming, Turbomeca, Allison, and Pratt & Whitney engines. The company was recently granted the distinction of being an aircraft manufacturer, able to issue Supplemental Type Certificates. The company s Director of Maintenance, Travis Shilling, is Hawaii s only Designated Airworthiness Representative, with the authority to issue airworthiness certificates, special flight permits and export approvals for a wide variety of aircraft. HAS maintains Makani Kai Air s Caravans with a highly trained and vastly experienced staff complying with all FAA aircraft maintenance standards and high dispatch reliability. Makani Kai Air exists for the air transportation needs of the people of Hawaii, and they have responded in kind. The airline s success can be attributed to two primary factors: 1. A stable airfare that has not changed in over five years, providing customers the same competitive rate on every seat, on every flight, every day and 2. The wholesale acceptance of Makani Kai Air as the people s airline, the go-to carrier for the Molokai community. Passenger loads to and from Molokai averaged 87% over the past twelve months, and this without subscribing to the Global Distribution System (GDS). Makani Kai Air is an airline that, first and foremost, serves the island of Molokai, with as many as 20 round trips between that island and Oahu per day. Makani Kai Air also serves Maui, with up to ten daily round trip flights between Molokai and Maui. Makani Kai Air customers extoll our ontime performance, service excellence, convenience of use and, of course, the fixed $50 airfare. The airline has built its reputation as a safe, reliable and accommodating air carrier sensitive to the needs of the communities it serves. The no-hassle approach and on-time flight performance continue to win market share from our chief competitor, Mokulele Airlines. Our Locations Makani Kai Air s main location is 100 Kaulele Place off Lagoon Drive at the Honolulu Airport. Headquartered there is the airline s main terminal, reservations team and maintenance facility. The benefits of having operations on the airport s south ramp are numerous. First, customers are freed from the traffic congestion of the main side of the airport. Parking at Makani Kai Air is more convenient and less expensive than on the other side. And, most importantly, Makani Kai has no requirement for TSA inspections, obviating the need to stand in long lines and the general inconvenience of having one s self and one s possessions scanned. Each of our stations feature this quality, which eliminates the need to take off shoes and belts and does away with

6 6 restrictions on how much shampoo and other liquids passengers can bring. Other Makani Kai Air locations include service desks at Ho olehua, Molokai and at Kahului, Maui. The airline has secured FAA approval and State leases for operations at Hana and Kapalua on Maui, Waimea and Kailua-Kona on the Big Island, and at Princeville and Lihue on Kauai. The interior of Makani Kai Air s main facility in Honolulu was purpose designed and professionally executed. The terminal is an efficient, well-lighted and comfortable place, with great views of the runways, superb restroom facilities and incomparable passenger access to the aircraft. The absence TSA inspections means the lobby is a generally quiet and friendly place to relax before a flight. On Time Performance and Reliability Makani Kai Air wants to provide scheduled air service between Kamuela and Kahului, Maui, using nine-seat Cessna 208B Grand Caravans. The Caravan has proven to be an exceptionally reliable aircraft for Makani Kai Air s customers and has enjoyed a 99.9% on-time performance. This extraordinary record is due at least in part to Makani Kai Air s short routes, simple loading process and Hawaii s ideal weather conditions. FAA regulations stipulate that a single-engine aircraft such as the Caravan must remain within gliding distance to shore whenever carrying passengers over water. Weather can preclude a climb to high altitude and a safe descent into Kamuela, raising the potential for occasional delayed or cancelled flights. The twin-engine Piper Chieftain has no such altitude restriction. Makani Kai Air can safely fly below the weather on the way to service Kamuela, thus increasing schedule dependability. However, fog and vog (volcanic smog) can and occasionally does obscure the Kamuela Airport. In those rare instances, Makani Kai Air will land at Keahole Airport and transport passengers to Waimea via mini bus. Community Views Makani Kai Air solicited views from Waimea community members the last time the government put out a request for proposals for the EAS. Company representatives attended meetings of the Waimea Community Association and the North Hawaii Rotary Club to get a feel for what s important to the community. Dozens of Waimea area residents rendered their thoughts and described what they want in terms of regularly scheduled air service. Makani Kai launched a dedicated website ( to survey interested residents from Kona to Hawi.

7 PAX 7 There were no surprises among the responses. The primary requirements for most individuals included safety, reliability and timeliness. The cost of airfares was another a key consideration. When looking at the first three requirements, it is evident that our competitor is equally well suited for the EAS. But Makani Kai Air has a distinct advantage when it comes to the cost of airfares. As of this writing, Mokulele charges between $74 and $127 for a seat on its Kamuela Kahului route. Over a seven-day period (November 15 21, 2018), Mokulele s average airfare on that route was $96. [source: Makani Kai Air intends to offer a lower airfare on that same route and institute a flat rate that does not change from day to day. There is evidence to suggest that Makani Kai Air s pricing model could increase the number of passengers on the Kamuela Kahului route. Additionally, Mokulele charges customers an additional $15 to call in a reservation rather than making the reservation online. Makani Kai s charge for call-ins is $10. Makani Kai Air s baggage costs are up to 75% less than those charged by Mokulele. Mokulele charges $25 for a second bag versus Makani Kai s $20 fee, a 25% premium. For the third bag, Mokulele charges $35, 75% premium over Makani Kai s $20 fee for that same third bag. These are important cost savings for the consumer. Passengers Love Makani Kai s Fixed-Rate Airfare Makani Kai s price structure may be the primary reason the company has continued to increase its market share at the expense of Mokulele. Passenger numbers provided by the Hawaii State Department of Transportation clearly show that, in 2018 alone, Makani Kai Air steadily gained ground and ultimately surpassed Mokulele on flights from Oahu to Molokai M o k u l e l e a n d 65% 60% 55% 50% 45% 40% HNL MKK makanikai mokulele 35% 30% JAN FEB MAR APR MAY JUN JUL AUG

8 PAX PAX 8 And from Molokai to Oahu MKK HNL 65% 60% 55% 50% 45% makanikai mokulele 40% 35% 30% JAN FEB MAR APR MAY JUN JUL AUG Passengers have also shown their preference for Makani Kai Air on the Molokai to Kahului (OGG) route. 65% 60% MKK OGG 55% 50% 45% makanikai mokulele 40% M a k a 35% 30% JAN FEB MAR APR MAY JUN JUL AUG

9 PAX 9 The same trend applies to flights from Maui to Molokai. 65% OGG MKK 60% 55% 50% 45% makanikai mokulele 40% n i 35% 30% JAN FEB MAR APR MAY JUN JUL AUG Why did it take until this year for Makani Kai Air to surpass Mokulele? Early in 2018, Makani Kai Air increased its carrying capacity by adding an aircraft on the flights between Oahu and Molokai and between Molokai and Maui this year. Based on the growth experienced since, it is reasonable to infer that Makani Kai Air s growth will continue as the airline adds additional aircraft to its fleet. This also is why Makani Kai Air believes that it will, given the EAS contract, increase the number of passengers flying between Waimea/Kamuela and Kahului. Passengers have voted with their wallets and their feet, abandoning Mokulele and indicating a strong preference to fly with Makani Kai Air, most likely due to the airline s fixed-rate airfare. Makani Kai Air operates the same aircraft and is on par with Mokulele when it comes to safety, reliability and timeliness. However, the ability of potential customers to pay the airfare is a genuine consideration. Makani Kai Air s highly competitive pricing and outstanding customer service make it the proper choice for the EAS contract, with the added benefit of likely increasing passenger count in the future.

10 10 Kalaupapa EAS Another market in which Makani Kai Air demonstrates its strength over Mokulele is the tiny community of Kalaupapa on Molokai. Makani Kai Air won a two-year EAS contract for Kalaupapa in 2010 and won a four-year EAS contract for Kalaupapa in When the contract came up again for renewal, Mokulele bid zero dollars and won the contract. However, that is not the end of the story. Since winning the EAS for Kalaupapa, Mokulele has carried significantly fewer passengers to and from Kalaupapa as Makani Kai Air. In August, 2018, the last month with complete statistics compiled by the State of Hawaii DOT, Makani Kai Air carried 76% of the passengers between Honolulu and Kalaupapa and over 90% of the passengers between Hoolehua, Molokai and Kalaupapa. Marketing Plan If selected for the EAS contract, Makani Kai Air will launch a marketing and awareness campaign to encourage patronage and growth on the route. It is the company s belief that the passenger count can be increased when greater attention is given to cost control with the resultant consumer savings. The campaign will include but will not be limited to: Print advertising, primarily in West Hawaii Today and the Maui News Online advertising using Google AdWords and Makani Kai Air s own website Cable television ads focusing on the Waimea/Kamuela market extolling the advantage of more affordable airfares on the Waimea/Kamuela Kahului route Ease of Use Makani Kai Air brings travelers ease and convenience: our six million-dollar passenger terminal in Honolulu obviates the need for TSA security screening. This: Allows lower fares because there are no gate fees Increases consistency in arrival and departure times Allows faster turn-around of aircraft and eases the loading and unloading of passengers. Vastly improves the air transport experience by eliminating lines and security delays The comfortable and spacious air-conditioned passenger terminal offers other advantages: Plenty of convenient parking Rain-free access to aircraft on days of inclement weather Spotless, well-appointed ADA-compliant rest rooms

11 11 Passengers simply arrive 20 minutes in advance of departure, board the aircraft and fly. Although it is quick and easy to book reservations online through the company s website, experienced reservationists are on hand to fulfill flight requests and answer questions. The phones are answered 15 hours a day, seven days a week. Connectivity Makani Kai Air s proposed flight schedule coincides with many daily departures to the mainland from Kahului Airport on Maui. The schedule also makes it easy to connect to Molokai and Honolulu, and at competitive rates. Financial Stability - The carrier chosen for the EAS should be financially stable and able to provide air service for years to come. Schuman Aviation Company is a responsible corporate citizen, held in high regard within the Hawaii business community, and is recognized by Hawaii Business magazine as one of Hawaii s premier small businesses. The company is well managed, financially strong, has a low debt ratio and considerable reserves. Schuman s 30-year lease with the State on its Honolulu terminal is just one indicator that the company will be here for the long haul.

12 12 In Summary Makani Kai Air is a locally owned, Hawaiian grown company. Makani Kai Air is deeply rooted in the community, a company with Hawaii and its people in its heart. Here is a professional organization with accolades from countless customers over many years of sterling service, with the solid endorsement of the FAA and the communities of Honolulu, Molokai, Kalaupapa and Kahului. The company dedicates an enormous amount of time, energy and resource to its pilot training and the maintenance of its aircraft. Its highly trained employees are well compensated and service oriented. The philosophy is that of a winning organization. Not overnight, mind, but over the long haul. Makani Kai Air submits this proposal respectfully from a genuine desire to provide better service to people who deserve such service. The people of Waimea/Kamuela have told us they want us to be their air carrier. Should we be chosen to provide Waimea/Kamuela with the same cost-effective, on-time dependable service which we now provide the residents of Honolulu, Kalaupapa, Molokai and Maui, ridership will increase. It is entirely possible that the increase in passengers could be enough to someday allow subsidy-free air service without having to set fares at exorbitant levels. It is our fervent hope that the DOT takes a long look at the capabilities and commitment to unmatched levels of service offered by Makani Kai Air and make the right choice for the community. Sincerely, G. Richard Schuman President Diane Schuman CFO

13 13 Makani Kai Air s Honolulu Terminal is a Work of Art Makani Kai Air s Honolulu $6-million terminal is efficiently designed to facilitate the flying public. The 34,000 square foot facility features ample hangar space, a spacious and comfortable lobby with elegant restrooms, plenty of room for equipment, spare parts, a well-stocked employee lounge and other amenities. It is a pleasant, quiet and airy spot for travelers, with special attention given to spectacular views of the runways, easy, covered access to arriving and departing flights, a museum-quality display of Kalaupapa in the 1800 s, and a handy vending machine for snacks and beverages. Three large flat-screen displays play news, sports and other programming as well as the pre-boarding flight safety video. The restroom facilities are comparable to those in the finest resorts.

14 14 The hangar is split into two parts. One side is dedicated to Makani Kai Air and the other to Corporate Air, which offers freight charter services to FedEx. This cost-efficient arrangement allows for the operators to borrow parts from each other that may not be in stock, thus minimizing aircraft downtime. The reservations area is spacious as well, with four well-equipped bays for Makani Kai s professionally trained personnel. The flat screen displays are used for flight tracking and up-to-the-minute weather information. The large parking area features more than adequate parking with fees 50% less than on the other side of the airport.

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