• --^ARTMEHTOF 

Before the United States Department of Transportation 

November 29, 2011 ' ;'-V "0 A 10:4 3 

Proposal to Provide Essential Air Service at 

Salina, Kansas 

Under 49 U.S.C. 41731 et seq. 

Docket DOT-OST-2002-11376 

SeaPort Airlines, Inc. 

Proposal to Provide Essential Air Service at 

Salina, Kansas 

By Order 2011-11-1, the Department requested proposals for Essential Air Service at Salina, 

Kansas due on November 29, 2011. 

Pursuant to that Order, SeaPort respectfully submits this timely proposal to provide subsidized 

essential air service to the Salina community for a two year term beginning April 1, 2012. 

Correspondence regarding this proposal should be directed to: 

Timothy Sieber 

Vice President - Strategy & Corporate Development 

SeaPort Airlines, Inc. 

7505 NE Airport Way 

Portland, OR 97218 

(971)340-1716 

tsieber(a)seaportair.com 
SEA>PDRT 

rA I R L I N fc S 

Background & Plan To Grow Salina Market 

SeaPort Airlines has been providing Essential Air Service (EAS) at Salina, Kansas since April 

19, 2010. During that time, we have been able to increase the number of passengers that utilize 

scheduled service at Salina Municipal Airport. 

SLN Monthly Passengers (Enplaned + Deplaned) 

November 2009 - October 2011 

600 

500 

400 

300 

200 

100 

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I I III I I II 

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• Great Lakes Airlines • SeaPort Airlines 

SOURCE: Salina Airport Authority and SeaPort Airlines internal reports 

Notably, in recent months SeaPort has been able to build traffic in Salina to levels that 

substantially exceed those of the previous operator. By implementing the planned product 

enhancements outlined in this document, we are confident that traffic will continue to grow at a 

rate that will meet (or exceed) the modest projections in this proposal. 

Aircraft 

For the past two years, SeaPort Airlines has served Salina with Pilatus PC-12's configured for 

9-passengers and two pilots. Our proposal is to continue serving Salina with PC-12 equipment 

that offers air conditioned and pressurized comfort. This aircraft operates at a cruising speed 

faster than any other 9-passenger aircraft currently in the EAS program and comparable to 

larger turboprop aircraft, such as the Embraer 120 Brasilia and Saab 340. 

Docket DOT-OST-2002-11376 

November 29, 2011 

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rA I R L I N t S 

Utilizing the PC-12, SeaPort has been able to "right size" capacity in rural communities such as 

Salina with optimal frequency levels that minimize traffic leakage and enable us to offer 

reasonable fares. 

Global Distribution & Interline Connectivity 

SeaPort has invested heavily in improving our distribution capabilities and is now in all five 

global distribution systems. This enables our flights to be available on all major online travel 

agencies and meta-searchers including: 

• Orbitz; 

• Travelocity; 

• Expedia; 

• Kayak; 

• Hipmunk; and 

• CheapoAir. 

SeaPort currently has an interline ticketing agreement with US Airways and is working toward 

securing agreements with other carriers that will facilitate single ticket itineraries from Salina to 

destinations around the world. We anticipate that these agreements will include industry 

standard interline e-ticketing (lET) and baggage check. To facilitate implementation of interline 

agreements with lET, SeaPort will be migrating to a new reservation platform early in the first 

quarter of 2012. 

The passenger forecast in this proposal reflects the Increased traffic that SeaPort 

expects to realize from the enhanced connectivity resulting from lET agreements. 

Pricing Model 

SeaPort Airlines employs a pricing strategy of reasonable and attractive fares that factor in 

ticket prices at other airports in the region (i.e., likely leakage points), total itinerary costs 

including connecting flights on other airlines, costs of other modes of transportation, and need to 

minimize subsidy levels and resultant taxpayer expenditures. 

We believe this approach to pricing in EAS communities provides good consumer value and is 

consistent with the overall objectives of the EAS program. SeaPort Airlines does not engage in 

"baiting" communities with low fares that are not sustainable. Such pricing schemes shift the 

true cost of air transportation from the consumer to the EAS program and we believe are 

inconsistent with the intent of the essential air service program to ensure reasonable access to 

the air transportation system for smaller communities. Equally as important, the resultant higher 

levels of subsidy required by offering unreasonably low fares can increase the risk of a 

community exceeding $200 per passenger subsidy if the projected passenger volumes are not 

achieved. Rather, we believe a more prudent approach is to invest in technology that enhances 

global connectivity as is being done with our new reservations system. 

Consistent with our pricing model, SeaPort charges reasonable fees for ticket changes, pet 

travel, and unaccompanied minors.^ These fee levels reflect SeaPort's philosophy of building 

^ SeaPort's fee for ticket changes in EAS markets is $30, well below those charged by legacy carriers at neighboring 

airports, providing an attractive value proposition that encourages use of the local airport but does place additional 

financial burden on the EAS program by having to subsidize unreasonably low fares. 

Docket DOT-OST-2002-11376 PaQg i 3 

November 29, 2011 
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rA I R L I N E S 

customer loyalty through quality service at reasonable prices rather than opportunistically "nickel 

and diming" passengers at every possible turn. 

Marketing & Public Relations Strategy 

SeaPort's success in building traffic at Salina beyond those generated by the previous carrier is 

the direct result of a comprehensive marketing and communications relations strategy. SeaPort 

has invested heavily in marketing at SLN, including print, radio, and community events. 

In addition to the activities illustrated above, SeaPort Airlines focuses on community and 

customer engagement through extensive use of social media, including Facebook, Twitter, 

Linkedin, and Foursquare. This strategy has been successful and is now being imitated by 

other providers of EAS in rural communities. 

Docket DOT-OST-2002-11376 

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Service Proposal 

SeaPort Airlines is proposing to provide Salina with 18 well-timed weekly round trips to Kansas 

City International Airport, the same level of service as currently provided, at an annual subsidy 

rate of $1,490,479. Note that this represents a marginal reduction from the current subsidy level. 

Projected revenue and operating expenses that form the economic basis of this request are 

summarized on the table on the next page. Through a combination of appropriately sized 

aircraft, enhanced distribution and expanded interline connectivity, reasonable fare structure, 

and comprehensive marketing and community relations, SeaPort Airlines is confident that it will 

be able to continue building passenger at Salina Municipal Airport. This will ensure that Salina's 

per passenger subsidy level is below the $200 statutory limit. 

The proposal herein is based on the assumption of a two year term beginning April 1, 2012. 

Notwithstanding the risk of cost inflation in coming years (particularly related to fuel) 

that could possibly outstrip traffic growth and reasonable fare increases, SeaPort is 

offering the Department the option to contract the proposed annual subsidy for a four 

year period at no increase in annual subsidy. We believe this offer provides the community 

with the assurance of stable air service for an extended period and reduces the administrative 

burden on both the Department and ourselves. 

Respectfully submitted, 

Timothy Sieber 

Vice President - Strategy & Corporate Development 

SeaPort Airlines, Inc. 

Docket DOT-OST-2002-11376 p-ng I 5 

November 29, 2011 ^ ' 
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rA I R L I N E S 

SeaPort Airlines, Inc. 

18 Weekly Roundtrips: Salina, KS - Kansas City, MO 

Operating Projections SLN-MCI 

A\erage Sector Length (sm) 162 

Scheduled Departures 1,872 

Scheduled Block Hours 1,560.0 

Projected Completion Factor 97.5% 

Projected Completed Departures 1,825 

Projected Completed Block Hours 1,521.0 

Passenger Projections 

Projected Passengers 7,687 

Passengers per Departure 4.2 

Projected Average Fare $59.88 

Revenue Passenger Miles (RPMs) 1,245,294 

Available Seat Miles (ASMs) 2,661,142 

Projected Load Factor 46.8% 

Financial Projections 

Revenues 

Passenger Ticket Revenues $460,298 

Ancillary Revenues $13,809 

Total $474,106 

Expenses 

Flight Operations $140,400 

Aircraft Ownership/Lease $342,000 

Fuel & Oil $555,984 

Sales & Marketing $9,360 

Traffic Servicing $212,642 

Insurance $31,200 

Maintenance $335,400 

Sub-Total - Direct $1,626,986 

Indirect $244,048 

Total Expenses $1,871,034 

Projected Operating Profit/(Loss) ($1,396,927) 

Subsidy Calculations 

Operating Loss $1,396,927 

Economic Retum @ 5% $93,552 

[Required Subsidy $1,490,479] 

Subsidy per Departure $816.61 

Subsidy per Passenger $193.90 

Docket DOT-OST-2002-11376 p-ne | 6 

November 29, 2011 ^ '