Disclosure Letter

In the island state of Hawaii, air transportation is integral to the quality of life; a fundamental building block for social and economic development that provides a crucial link to medical, educational, and government services.

Hawaii residents are fortunate to have a network of commuter air terminals linking rural population centers to the national air transportation network. These small terminals typically consist of one or two gates, and are ideally scaled and suited to the unique needs of remote island communities and the air transportation providers who serve them.

This infrastructure for rural air service delivery has enabled startup and rapid expansion of scheduled and on-demand Part 135 operations during a period when Hawaii’s Part 121 carriers have reduced flights, increased fares and terminated service to some markets.

During the past year, Hawaii’s three largest airlines have formed an unusual marketing cartel utilizing a series of code-sharing partnerships, computer reservation system displays and exclusive dealing arrangements to collectively monopolize and jointly market more than 95% of available passenger air transportation within the state.

In an apparent effort to facilitate this arrangement, the state has recently taken certain actions involving the airports which seem unreasonable, arbitrary and discriminatory. We believe these actions:

• inhibit the availability of quality, affordable air transportation services to small-and medium-sized Hawaii communities by significantly and abruptly changing the function and use of the state’s commuter air terminal network

• undermine the safety of rural air service passengers and providers

• suppress competition by frustrating and obstructing reasonable access by Part 135 operators to certain commuter airport facilities

• promote unjust economic discrimination against a class or between classes of air carriers

• unreasonably and unnecessarily delay or withhold signatory status from requesting carriers.

The Part 135 Regulated Operator’s Partnership (PROP) was formed to address these challenges to Hawaii’s rural air transportation network and the communities it serves. PROP is a coalition of locally owned and operated, scheduled and on-demand Part 135 carriers.

PROP recognizes that as an airport sponsor, the State of Hawaii may exercise its proprietary rights and powers; however, we also understand that these rights are circumscribed. We believe that the state’s actions must be reasonable, non-arbitrary, nondiscriminatory and justified. Furthermore, we submit that the state’s actions may not be used as a proxy for suppressing competition or catering to the interests of one carrier (or class of carriers) over another.

PROP has been unsuccessful in engaging Hawaii airport managers in a proactive dialogue concerning these matters, and it has become increasingly apparent that political interests may be exerting more influence over the state’s airports than the public employees responsible for running them.

Our concerns regarding the state Airports Division are compounded by its long and highly publicized history of violating federal airport grant rules, diversion of federal airport grant monies and criminal fraud indictments involving senior agency officials.

We are requesting your immediate intervention and assistance to protect and preserve air service for Hawaii’s small and medium sized communities, and to halt apparent mismanagement, abuse of authority, gross waste of monies and violations of law evident in the administration of Hawaii’s airports:

• We request that airport sponsors be prohibited, for a period of at least sixty (60) days, from implementing any changes to joint-use commuter terminal or rural airport spaces which:

• are not mandated by federal laws, rules, policies or executive orders applicable to similarly-situated airports

• change, limit or restrict the use or functionality of, or access to, any jointly-used gate, runway, apron, tarmac, waiting area, holdroom restrooms or any other public or secured space

• increase the level of Part 121 transport-category aircraft operations in areas occupied and used primarily by small (9 seats or less) Part 135 operators

• lack prior hearing or input by affected operators and communities.

• We request that airport sponsors be compelled to repeal any changes to joint-use commuter terminal or rural airport spaces since 01 OCT 04 which:

• have been implemented to accommodate the preferences of code-sharing partnerships between any two air carriers that dominate more than 50% of passenger traffic to the affected airport

• increase the level of Part 121 transport-category aircraft operations in areas occupied and used primarily by small (9 seats or less) Part 135 operators

• are not mandated by federal laws, rules, policies or executive orders applicable to similarly-situated airports

• change, limit or restrict the use or functionality of, or access to, any jointly-used gate, runway, apron, tarmac, waiting area, holdroom restrooms or any other public or secured space

• lack prior hearing or input by affected operators and communities.

• We request a review of the Kahului Airport Airline Competition Plan and subsequent updates filed with your office by the state of Hawaii. Our limited examination has identified apparent omissions, misrepresentations and conflicts that seem to compromise the legitimacy of the plan itself.

• We request a review of Part 121 airline marketing practices in Hawaii, and their effect on the availability of quality, affordable air service to small or medium sized communities, including:

• code-sharing partnerships
• computer reservation systems displays
• gate arrangements at airports
• reciprocal loyalty programs
• tandem pricing and/or price fixing

• We request that the US Department of Transportation investigate, and if appropriate, sanction the State of Hawaii for failure to address deficiencies repeatedly identified by your office in correspondence with the sponsor over a period of several years. Of particular concern are issues related to signatory carrier designation and status.

We believe that your intervention is urgently required because the airport sponsor is actively and rapidly making physical alterations to Hawaii’s commuter terminal network that will substantially and irreversibly change its nature and function. We believe this will adversely affect competition, viability of Part 135 operations, and our ability to effectively deliver service to Hawaii’s small and medium communities.

We would appreciate an opportunity to discuss these issues in detail at your earliest convenience.