Proposal of Hyannis Air Service, Inc., dba Cape Air to provide subsidized Essential Air Service for: Augusta/Waterville and Rockland, Maine Docket DOT-OST-1997-2784 Each Non-Stop To/From Boston For a two- or four-year term NB: DOT refers to the Knox County Regional Airport as Rockland, so this proposal uses both names interchangeably Hyannis Air Service, Inc., dba Cape Air Attn: Andrew Bonney, 660 Barnstable Road, Hyannis, MA 02601, (508) 862-9719 June 23, 2014
Cape Air OVERVIEW 1
Cape Air has grown from a single aircraft and route in 1989 to America s largest commuter airline today Key facts Cape Air: Leading the pack nine at a time First route was Boston Provincetown, begun in October 1989 with one aircraft Today s fleet 76 Cessna 402s in four regions Three Britten-Norman Islanders Two ATR-42s in Micronesia Operating up to 550 flights daily In 2013 flew 728,000 passengers Stable, mature and growing company Photo courtesy Mark Garfinkel (August 7, 2000, Boston) 2
Cape Air 2014 Annual revenue of $120M Financially stable 44 airports served, 20 in EAS 83 aircraft Captain Krista Poppe Augusta based 3
Havre Glasgow Wolf Point Sidney Glendive Billings Massena Ogdensburg Saranac Lake Augusta Bar Harbor Rutland Lebanon Rockland Proud to be America s finest commuter airline! Kirksville Ft. Leonard Wood Quincy St. Louis Marion Owensboro Cape Girardeau Albany White Plains Manhattan Boston Providence New Bedford Provincetown Hyannis Nantucket Martha s Vineyard Cape Air Routes June 2014 Denotes seasonal service Micronesia Saipan Guam Rota San Juan St. Thomas Culebra Tortola Virgin Gorda Mayaguez Anguilla Vieques St. Croix Nevis Map inset not to scale
One of Cape Air s best features is interline connections with all of the legacy airlines plus JetBlue, giving Rockland and Augusta access to the world 5
Itineraries connecting between Cape Air and United are available on united.com 6
At joint cities Cape Air s connecting destinations appear on jetblue.com 7
Through Expedia and other OTAs, Cape Air connects EAS communities with most network airlines 8
Over more than 20 years in business Cape Air has invested in the airline features smaller communities need Feature Established Reliability Tickets sold through Expedia, Orbitz, Travelocity Interline e-ticketing with all legacy airlines Checked luggage transfer with all legacy airlines TSA security program 9
Cape Air proposes continued service with our fleet of 76 Cessna 402s 10
Cape Air takes environmental sustainability seriously by investing in fuel-saving aircraft technologies and powering its offices with solar panels 11
Cape Air has its own internal reservations center Cape Air s Reservations Call Center 800-CAPE-AIR (Where there is never a booking fee!) 12
The key to Cape Air s success is our friendly people Daffodil Daffy Day at Cape Air Reservations 13
And our mantra: Cape Air celebrates Valentine s Day in the Caribbean Make Our Customers Happy, And Have A Good Time Doing It! 14
Community Air Service for AUGUSTA AND ROCKLAND 15
Cape Air has been privileged to serve Rockland since 2008 and Augusta since 2010 Ceremonial ribbon cutting at Augusta, Maine December 1, 2010 16
Cape Air s ridership at Knox County Regional Airport continues to soar Knox County Regional Airport Enplanements 18,000 16,000 14,000 12,000 Predecessor 13,808 12,768 12,316 11,744 14,286 15,212 15,883 14,393 10,000 8,000 6,000 4,000 Transition year 2,000 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 17
Augusta State Airport ridership is at modern highs Augusta ridership 12,000 10,000 AUG closed May & Jun 8,000 572 6,000 4,000 2,000 9,581 6,279 6,033 8,150 6,698 8,477 8,183 7,961 5,792 8,223 8,906 8,970 8,045 6,629 7,105 7,671 11,026 9,289 11,000 Cape Air Predecessor 0 18
Access Boston Boston for connections Logan: to the world Access to the world for Rockland and Augusta 19
Boston Logan has Nonstop Domestic Service to 75 Destinations Note: Includes Seasonal Service, Source: OAG & Innovata Schedules
Boston Logan has Nonstop International Service to 35 Destinations Note: Includes Seasonal Service, Source: OAG & Innovata Schedules
Community Presence MARKETING & CTOS 22
Cape Air had a robust marketing program for Rockland and Augusta run by a full-time regional marketing manager Downeast Magazine ad
Cape Air s marketing efforts for the Maine communities are increasingly focused online and in broadcast channels, which we find most cost-effective Mainebiz.biz ad
Cape Air s unique city ticket office program puts an airline and airport presence in the downtown business district Key features Remote reservation office Rockland ticket office Routes local calls from Rockland and surrounding area codes Serves as a downtown billboard and reminder to locals and visitors alike that there is a commercial airport up the road! Brings jobs to Rockland
Augusta s city ticket office is located in the beautiful historic Post Office building
Since inception we have donated over $30,000 to the Rockland area; We also sponsor a ton of local events! Pen Bay Chamber Annual Meeting Sponsor Pen Bay Chamber Annual Dinner Sponsor ASTA Maine Trade Show Exhibitor Co-created a survey and distributed to passengers to identify trends in travel from airport City Ticket Office Open House Penobscot Bay, Kennebec Valley, Waterville, Mid-Maine, Penobscot Bay, Bar Harbor, Blue Hill, & Ellsworth Chamber Members City Ticket Office Open House Hosted EDC Meeting at Airport Friends of Rockland Harbor Lights Airport Wings & Wheels Pen Bay Chamber Festival of Lights Maine ASTA Travel Agent Expo Rockland Blues Festival Camden Film Festival Maine Home, Boats, and Harbors Trade Show Exhibitor/Donate Tickets Rockland Lobster Festival
Our community calendar has been equally busy at Augusta! Dube Travel 50 th Anniversary Maine ASTA Trade Show Mid Maine Chamber Golf Tourney Kennebec Valley Annual Chamber Dinner-Major Sponsor Mid Maine Chamber of Commerce Business Expo Sponsor ASTA Maine Trade Show Exhibitor Augusta Kiwanis Club Ladies Expo Waterville Chamber Mid Maine Chamber of Commerce Super Raffle St. Lawrence High School Cheer Team Kennebec Valley Humane Society Chandler Melason Benefit Augusta Downtown Alliance Events Whatever Family Festival
Essential Air Service PROPOSAL 29
Cape Air proposes to continue seasonally-adjusted frequency to right-size capacity with demand Seasonal Frequency Proposal Season Defined AUG RKD RKD w 6x Winter January - Wed. before Memorial Day 3 3 3 Spring Thu. before Memorial Day - Independence Day Weekend 4 4 4 Summer Independence Day Weekend - Tue. after Labor Day 4 5 6 Fall Wed. after Labor Day - Tue. after Columbus Day 4 4 4 Winter Wed. after Columbus Day - December 3 3 3 Standard Optional 30
Special Rockland Consideration Given the strong peak seasonality at Rockland, Cape Air proposes an option for 6 daily summer round trips Rockland load factor 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 79% 85% 85% 85% 83% 0% Nov-08 Feb-09 May-09 Aug-09 Nov-09 Feb-10 May-10 Aug-10 Nov-10 Feb-11 May-11 Aug-11 Nov-11 Feb-12 May-12 Aug-12 Nov-12 Feb-13 May-13 Aug-13 Nov-13 Feb-14 May-14 31
Drivers Conforming Proposal Cape Air is delighted to propose continued Essential Air Service at Rockland and Augusta AUG RKD Stage (naut. miles) 129 135 Seats per Dpt 9 9 Sched. RTs/Day 3.3 3.6 Annual Actual Dpts 2,325 2,537 PDEW 16.0 20.3 Pax/Dpt 4.9 5.7 Load Factor 54% 63% Annual Passengers 11,647 14,828 Avg. Net Fare $73 $83 Passenger Rev $824,746 $1,193,801 See seasonal schedule on previous slide Economics Year 1 (see note) Year 1 AUG RKD Fuel $714,351 $792,722 Maintenance $731,060 $811,959 Pilots $215,268 $234,608 Ownership $175,973 $175,973 Stations $451,456 $545,577 Marketing $65,906 $68,648 Law enforcement officer $17,000 $72,000 De-icing $23,537 $25,684 General & Admin./Other $166,138 $197,179 Operating Expense $2,560,689 $2,924,350 Return of 5% $134,773 $153,913 Economic Expense $2,695,463 $3,078,263 Passenger Revenue $824,746 $1,193,801 Profit ($1,870,717) ($1,884,462) Subsidy Required $1,870,717 $1,884,462 Per Departure $805 $743 Per Passenger $166 $131 4-year option preferred Year 1 4-Year discount Subsidy Required $1,818,106 $1,831,464 Per Departure $782 $722 Per Passenger $161 $127 Notes: Cape Air prefers a four-year reselection See note on slide 34 regarding annual escalation factor Cape Air proposes to serve both Augusta/Waterville and Rockland, but is willing and able to operate either route without the other. 32
Drivers Rockland Alternative Option: 6x Peak Summer Because Rockland s summer load factors have been in the mid-80s, Cape Air proposes a summer increase to 6x daily RKD (6x summer only) Stage (naut. miles) 135 Seats per Dpt 9 Sched. RTs/Day 3.8 Annual Actual Dpts 2,657 PDEW 21.4 Pax/Dpt 5.9 Load Factor 65% Annual Passengers 15,586 Avg. Net Fare $85 Passenger Rev $1,265,789 See seasonal schedule on previous slide Economics Year 1 (see note) Year 1 RKD (6x summer only) Fuel $836,942 Maintenance $857,252 Pilots $247,303 Ownership $185,495 Stations $552,772 Marketing $68,648 Law enforcement officer $72,000 De-icing $25,684 General & Admin./Other $204,757 Operating Expense $3,050,853 Return of 5% $160,571 Economic Expense $3,211,425 Passenger Revenue $1,265,789 Profit ($1,945,636) Subsidy Required $1,945,636 Per Departure $732 Per Passenger $125 4-year option preferred Year 1 4-Year discount Subsidy Required $1,890,918 Per Departure $712 Per Passenger $121 Independence Day Weekend through Labor Day Weekend only Notes: Cape Air prefers a four-year reselection See note on slide 34 regarding annual escalation factor Cape Air proposes to serve both Augusta/Waterville and Rockland, but is willing and able to operate either route without the other. 33
To align revenue with costs over time Cape Air proposes a 4% annual escalation factor Annual subsidy including escalation Two-year reselection AUG RKD RKD (6x summer only) Year 1 $1,870,717 $1,884,462 $1,945,636 Year 2 $1,945,545 $1,959,840 $2,023,462 Four-year reselection Year 1 $1,818,106 $1,831,464 $1,890,918 Year 2 $1,890,830 $1,904,723 $1,966,555 Year 3 $1,966,463 $1,980,912 $2,045,217 Year 4 $2,045,122 $2,060,148 $2,127,026 34
Cape Air would be honored to be reselected at Rockland and Augusta! Cape Air offers the airline amenities small communities need: High-frequency non-stop service to/from Boston Logan; seasonally appropriate schedule Full interline connectivity, allowing same-ticket connections with the world Global distribution Ample fleet of back-up aircraft Robust marketing and local ticket offices in the downtown business districts Cape Air: Your Community Wings! 35
Thank you! Hyannis Air Service, Inc., dba Cape Air Attn: Andrew Bonney, 660 Barnstable Road, Hyannis, MA 02601, (508) 862-9719 36