2 Hawaii air carriers compete for subsidized Lanai service

Apr. 4—The U.S. Department of Transportation issued a request for community comments Wednesday, while confirming receipt of proposals from Mokulele Airlines and Pacific Air Charters Inc.

Two air carriers already serving Hawaii have submitted proposals to provide federally subsidized essential air service at Lanai Airport.

If approved, it could become the first essential air service (EAS ) subsidy for Lanai since it qualified over 40 years ago.

Scott Faulk of the U.S. Department of Transportation EAS & domestic analysis division issued a request for community comments Wednesday, while confirming receipt of proposals from Southern Airways Express LLC, doing business as Mokulele Airlines, and from Pacific Air Charters Inc.

"We appreciate the U.S. Department of Transportation's commitment to ensure that reliable air travel will continue to be available for the people of Lanai and our statewide ohana, " Ed Sniffen, director of the Hawaii Department of Transportation, said in an email to the Honolulu Star-Advertiser. "This is a critical transportation route, and we are pleased that two air carriers with long histories of serving our islands have submitted proposals to provide air service that Lanai residents depend on, while keeping our communities connected."

One or more air carriers have served Lanai's EAS program since 1983 without subsidies ; however, in recent years, air carriers have met with challenges.

The U.S. Transportation Department issued an order Feb. 8 requesting EAS proposals with or without a subsidy, following a Dec. 8 letter from Mokulele Chief of Staff Keith Sisson giving a 90-day notice of intent to suspend unsubsidized EAS on Lanai.

Mokulele must continue EAS on Lanai until it or another air carrier begins service under a new EAS contract. It took over unsubsidized EAS on Lanai on Oct. 23, 2020, after 'Ohana by Hawaiian, operated by Empire Airlines, sought an exemption to allow Mokulele to provide subsidy-free EAS at Lanai.

"Rising costs and stagnant market demand have caused unsubsidized air service on the island to remain perpetually unprofitable, " Sisson said in the Dec. 8 notice.

The U.S. DOT now must weigh which proposal offers Lanai the best EAS option.

The proposal submitted by Mokulele Airlines CEO R. Stan Little said the air carrier flies over 100 daily flights and "has been the preferred island-­hopper for kamaaina for three full decades."

Mokulele Airlines was acquired by Southern Airways Corp. in 2019 and the proposal said the two combined carriers form "the largest commuter airline in the country."

Competitor Pacific Air Charters has been operating on-demand flights in Hawaii since 2004.

Since its inception, Pacific Air Charters' director of operations has been Patrick McNamee, a 50-year veteran of the airline industry, who has served as a commercial pilot, and president of the General Aviation Council of Hawaii.

Mokulele has proposed a no-subsidy option as well as lower subsidies for a two-to four-year contract.

Mokulele's Sisson said, "(Pacific Air Charters') subsidy request is one of the highest in the history of the EAS program. We are $4 million cheaper and our fares would be 25 % less—that's just an (attribute ) of our size and scale. There is just no substitute for having 22 aircraft in the (Hawaiian islands ) and over 200 employees, including close to 100 pilots."

However, Pacific Air Charters' proposal includes endorsements from Maui County Mayor Richard Bissen and state Rep. Mahina Poepoe, who represents Lanai and Molokai.

"Pacific Air Charters plays a significant role in the well-being and economic prosperity of our community, " Bissen's letter of support said. "Their continued focus on providing reliable air travel options ensures efficient connections, fosters economic growth, and strengthens our ability to navigate both everyday life and unforeseen emergencies. We encourage you to consider their proposal for federal subsidized air services proposal, and we appreciate their valuable contributions to our underserved regions."

Poepoe's letter of support said, "Currently, air transportation to and from Lanai and other rural areas in our district has reached a crisis level, especially for those traveling to access medical care. Frequent delays and cancellations result in patients missing important appointments, including surgeries and chemotherapy, impacting health outcomes.

"As a locally owned and managed company, Pacific Air Charters Inc. may be better positioned to understand the unique needs of our communities and expeditiously transition into essential air service provision, connecting residents to reliable air transportation sooner. However, I am generally supportive of any company that can reliably provide this service."

Pacific Air Charters' proposal offers two different route options, and requires a minimum total annual subsidy package of over $8.1 million to initiate 42 weekly round trips between Lanai City and Honolulu, and 21 weekly round trips between Lanai City and Maui. Its proposal requires a minimum service period of 24 months, with an inflation adjustment of 3 % for the second 12 months.

The bid is based on $101 fares per an estimated 44, 106 passengers annually riding on planes that are at least 75 % full.

Pacific Air Charters proposed dedicating twin-engine Tecnam P2012 Traveller aircraft to Lanai routes. The air carrier said it has four Travellers under lease, with more on order.

McNamee told the Star-Advertiser Wednesday that Pacific Air Charters earned support from Bissen and Poepoe because "we produced."

"Maui County has been traversed by these single-­engine caravans long enough, " he said. "Twin-­engine aircraft provide a significant safety advantage over single-engine aircraft. It's time for a two-engine airplane that is reliable, new, and with a local company actually operating them."

Mokulele's proposal offers an unsubsidized service option on its Tecnam P-2012 Traveller twin-engine aircraft. The unsubsidized frequency is 21 weekly round trips between Lanai and Maui and 42 between Lanai and Honolulu. Its plan is based on an estimated fare of $174 per 53, 438 annual passengers, on planes flying 92 % full.

Sisson told the Star-­Advertiser Wednesday, "We knew what a hardship it would be if the passengers were asked to pay what it cost for us to actually operate the flight, that's why we went through this process, to be able to get a subsidy and offer a $75 fare."

Sisson said National Transportation Safety Board statistics do not support Pacific Air Charters' aircraft safety claims. He said Mokulele was prepared to offer unsubsidized service on its three Tecnam planes ; however, he said subsidized proposals on other aircraft offer passengers more baggage room and lower fares.

Mokulele's subsidized service proposal for a passenger turboprop Cessna Caravan seeks $3.97 million during the first year for 21 weekly round trips between Lanai and Maui and 42 between Lanai and Honolulu. Its plan is based on an estimated fare of $74 per 53, 438 annual passengers, on planes flying 92 % full. Subsidies increase to over $4.06 million in year two, more than $4.17 million in year three, and over $4.27 million in year four.

Mokulele's subsidized service proposal for its Saab 340 aircraft seeks more than $3.52 million in compensation during the first year for seven weekly round trips between Lanai and Maui, and 14 between Lanai and Honolulu. Its plan is based on an estimated fare of $66 per 53, 584 annual passengers, on planes flying 83 % full. Subsidies increases to more than $3.6 million in year two, more than $3.70 million in year three, and over $3.79 million in year four.

While Cape Air had visited Hawaii and met with state DOT officials, ultimately the Massachusetts-­based carrier, which is one of the nation's largest commuter airlines, did not submit a proposal.

Sisson said, "When you look at other airlines that may have considered this, it's a huge undertaking to set up an operation separate from hubs that you already have much less one that is in the middle of the ocean. This would have been a major, major expense for a mainland airline just for a subsidy that has a 5 % profit margin by law."------FOR MORE INFORMATION :—Go to to view the proposals. Comments are due May 3 and should be sent to scott.faulk @dot.gov.

WEIGHING THE DECISION The federal government follows a selection process that considers community views, and prioritizes five factors in locations outside of Alaska, including :—Reliability in providing scheduled air service.—Having contractual and marking arrangements with a large carrier to ensure service beyond the hub airport.—Having interline agreements with larger carriers that allow passengers and cargo at the hub airport to be transported by the larger carrier (s ) through one reservation, ticket, and baggage check in.—Preferences of actual and potential users, with substantial weight put on the views of local elected officials.—Marketing plans.

Source : U.S. Department of Transportation EAS and Domestic Analysis Division