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Tuesday, January 09, 2007 9:38 AM

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Pacific spreading Wings beyond Hawaii
By HARRY EAGAR, Staff Writer

KAHULUI – Maui-based Pacific Wings made a bid last week to capture the essential air service subsidy to fly passengers from Clovis and Silver City/Hurley/Deming in New Mexico to the regional hub at Albuquerque.

The bid to the U.S. Department of Transportation was $1 million under that from the current EAS provider, Great Lakes Aviation Ltd.

The current contract expires in May, and Pacific Wings President Greg Kahlstorf says he expects an award for a new contract to be made 30 to 45 days before then.

Kahlstorf says his business plan is the same as in Hawaii: Get the low-volume route

off federal subsidy and provide service on a commercial basis.

"In four years, at the most, we think we can get the community right-sized."

Last month, Pacific Wings wrote the DOT that it was abandoning the subsidy it has had to fly to Kalaupapa, Hana and Waimea, although it will continue similar service as a for-profit venture.

Kahlstorf says Pacific Wings went hunting for a high-capacity, very low-volume route it could capture, may apply the same business methods it has used in Hawaii and aim at ending the subsidy.

Clovis-Silver City was a likely candidate. Great Lakes is using a 19-seat plane but carrying only three or four passengers a day.

Pacific Wings flies a low-cost, nine-seat Cessna Grand Caravan.

Kahlstorf says any route that has traffic under 10 passengers a day is a target for his airline. "There’s a no-brainer."

He also claims that other airlines are content to milk the EAS subsidy, with no business development plans to make the routes pay-as-you-go.

Representatives of Great Lakes did not return calls from The Maui News.

Both airlines proposed charging around $90 one-way per trip, but their expenses and

other details were much different.

Great Lakes is expecting about 4,600 passengers per year from each city, and it is offering Albuquerque as one of several destinations.

Pacific Wings is projecting about half as many passengers. Kahlstorf says his estimate is based on actual boardings over the past five years. In the first year, he says, he cannot see any reason to expect a big jump in riders.

Congress has been providing around $60 million a year to subsidize scheduled air service in remote, rural areas that no commercial carrier has been serving.

Airlines bid for the subsidy, offering what they hope will be an attractive combination of frequent service at a low subsidy cost.

In the case of the Clovis-Silver City route, Pacific Wings expects to need subsidy to cover about three-quarters of annual expenses at first.

The bid includes a 5 percent return to the operator and requires a subsidy of $1.4 million per year.

Kahlstorf describes the route in eastern New Mexico as similar to the one Pacific Wings flies between Hana and Hilo, without subsidy, with six flights a day. (Pacific Wings gets a subsidy for its Kahului-Hana flights.)

Eastern New Mexico is remote and thinly populated, but it has tourist attractions, including Taos and a casino.

If Pacific Wings wins the subsidy, it will also add unsubsidized routes, for example to Taos.

The subsidized routes would be to Albuquerque.

EAS subsidies are not exactly free money. Bids are reopened every two years, and there is a fight in Congress every two years or so, as budget-cutters try to eliminate the subsidy program.

"Why would you want to go through that every two years?" asks Kahlstorf.

One of the beauties of entering a new market by getting an EAS contract is that if an airline can develop a good business and wean itself off subsidy, no other airline can apply for a subsidy in order to compete.

If a community has scheduled service, it is no longer eligible for EAS money.

Kahlstorf says he sees the Pacific Wings experience of business development toward getting off subsidy as the "value-added" product his company offers that gives it an advantage over other operators.

Harry Eagar can be reached at

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