. - "-...., 'C.,- or

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Before the United States Department of Transportation ':''-:,I<ET O;;:R\T:ONS

June 2, 2014

zm Jt::: - 3 P 2: 03

Proposal to Provide Essential Air Service at

GREENVILLE, MISSISSIPPI

MUSCLE SHOALS, ALABAMA

TUPELO, MISSISSIPPI

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

~

Docket OST-299B 1856 ';;}00\ - 0";)0'\

Docket OST-2008-0209 goou - ::j-'i?'.,Co

Docket OST-2009-0305

Proposal of SeaPort Airlines, Inc.

to Provide Essential Air Service at

Greenville and Tupelo, Mississippi and Muscle Shoals, Alabama

By Order 2014-4-24, the U.S. Department of Transportation ("the Department") requested proposals

from carriers interested in providing Essential Air Service (EAS) at Greenville and Tupelo,

Mississippi and Muscle Shoals, Alabama no later than June 2, 2014 after an extension was granted

for Aerodynamics, Inc.

In response, SeaPort Airlines, Inc. respectfully submits the following proposals to provide subsidized

essential air service:

• Greenville, MS: 18 weekly roundtrips to Memphis International Airport requiring an annual

subsidy of $1,483,080

• Muscle Shoals, AL: 24 weekly roundtrips to Nashville International Airport requiring an annual

requested subsidy of $1,739,308.

• Tupelo, MS: 12 weekly roundtrips to Memphis and 18 weekly roundtrips to Nashville requiring

an annual subsidy level of $2,506,436,

Each proposal is submitted on a stand-alone basis and assumes award of a two year contract,

however at the discretion of the Department and each community, SeaPort would agree to a fouryear contract for no increase in annual subsidy above the levels outlined herein.

After this proposal is docketed, SeaPort Airlines will schedule a meeting with the communites,

explain our proposal in detail, and answer any questions. In the interim and throughout the carrier

selection process, questions regarding this proposal should be directed to:

Timothy Sieber

Executive Vice President

SeaPort Airlin~s, Inc.

7505 NE Airport Way

Portland, OR 97218

(971) 340-1716

tsieber@seaportair.com
SEAtPORT

====,AIRLINES

Discussion of Proposal

Company Introduction

SeaPort Airlines, Inc. is a FAA certified scheduled airline based in Portland, Oregon with over 30

years of experience in commercial aviation, In addition to Portland, the company has operational

bases at Memphis, Tennessee (MEM); San Diego, California (SAN); and Juneau, Alaska (JNU).

Our 221 professionals provide service to 21 cities across nine states with a fleet of 16 aircraft. This

month, the company will increase its fleet to 18 aircraft and add service to Great Bend and Wichita,

Kansas, The company's route map as of the date of this proposal is provided below:

•

SEA.tPDRT AIRLINES ~«~ ._ •••• O<HI_' •••••_ ••~

The primary focus of SeaPort Airlines is to provide affordable and reliable air service to small and

rural communities across America, Service to nine of the communities on our route map is provided

under the EAS program: Athens, Georgia; Pendleton, Oregon; EI Dorado, Hot Springs, and

Harrison, Arkansas; Salina and Great Bend, Kansas; Jackson, Tennessee; and Imperial/EI Centro,

California.'

1 As noted above, service EAS service to Great Bend, Kansas begins on June 16. 2014.

08T-2000-7856, 08T-2008-o209, 08T.2009-o305

June 2,2014

Page 12
SEA.tPDRT

====AtRLlNES

Once SeaPort Airlines is awarded an EAS contract and service is launched, we develop a

partnership with each community by participating in local events, donation of tickets, on-going

dialogue with airport management and community leaders, and presentations to civic clubs and

other similar organizations. We also have a reputation of being responsive to community needs,

affording them the opportunity to comment on schedule and fare changes before they become

effective. The most recent example occurred at Imperial/EI Centro, CA, where a departure time from

Burbank was moved 10 minutes later to better accommodate connections with a Southwest Airlines

flight from Sacramento.

Our commitment to EAS communities is demonstrated by the fact that in every "Lower 48"

community that SeaPort serves in the EAS program, we have been re-selected for subsequent

terms at the end of our first contract period. This includes reselection during 2012 to four-year

contract renewals (rather than the standard two-years) at both Salina, Kansas and Pendleton,

Oregon, after both communities voiced their overwhelming support for SeaPort Airlines. Similarly,

we were selected for a four-year renewal at the Arkansas communities of EI Dorado, Harrison, and

Hot Springs, effective November 1, 2013.

Aircraft

SeaPort Airlines' proposal at Muscle Shoals, Greenville, and Tupelo contemplates operations

with Cessna Caravans which will allow us to offer safe, comfortable, and affordable air

transportation in a modern and economical aircraft.

Produced in the USA, the "Caravan" was originally designed in the 1980's to replace an aging

fleet of piston-powered aircraft, such as the De Havilland Otter and Piper Chieftain. Over 2,000

Caravans have been built logging a total of over 12.5 million flight hours. The Caravan is

certified for single-pilot operation, however SeaPort typically operates with both a Captain and

First Officer.

The large cargo pod on the Caravan allows for more baggage than can be accommodated on

older piston twins (Le., Piper Chieftain and Cessna 402) and allows us to segregate passenger

baggage for security purposes:

2 The cargo pod on the Cessna Caravan has a maximum capacity of 111 cubic feet and 1,090 pounds. In

comparison, the Piper Chieftain has a maximum capacity of 65 cubic feet and 700 pounds in its nose compartment

and two wing lockers.

OST-2000-7856, OST-2008-Q209, OST-2009-Q305

June 2, 2014

Page 13
SEAtPORT

====,A IA1INES

Proposed Service Patterns & Illustrative Flight Schedules

SeaPort Airlines proposes to provide 18 weekly roundtrips between Greenville and Memphis; 24

weekly roundtrips between Muscle Shoals and Nashville; and 12 weekly roundtrips between Tupelo

and Memphis along with 18 weekly roundtrips between Tupelo and Nashville. An Illustrative

schedule pattern for each community is shown below.

Illustrative Schedule for Greenville, Muscle Shoals, and Tupelo

Flight Depart Ani", Stops Freg Flight Depart Ani", Stops Freg

FROM: Greenville to Memphis FROM: Memphis to Greenville

4174 5:30am 6:25am 0 ExSun 4502 9:40am 10:35am 0 ExSun

4503 10:50am 11:45am 0 ExSat 4610 2:45pm 3:40pm 0 ExSat

4611 4:00pm 4:55pm 0 ExSat 4507 7:15pm 8:10pm 0 ExSat

FROM: Muscle Shoals to Nashville FROM: Nashville to Muscle Shoals

4501 6:30am 7:20am 0 ExSun 4715 9:50am 10:40am 0 ExSat

4716 11:00am 11:50am 0 ExSun 4717 12:20pm 1:10pm 0 ExSat

4718 1:30pm 2:20pm 0 ExSat 4505 3:05pm 3:55pm 0 ExSun

4506 3:05pm 3:50pm 0 ExSat 4612 7:15pm 8:05pm 0 ExSun

FROM: Tupelo to Memphis FROM: Memphis to Tupelo

4609 10:10am 10:55am 0 ExSat 4504 12:30pm 1:15pm 0 ExSun

4719 4:10pm 4:55pm 0 ExSat 4718 5:20pm 6:05pm 0 ExSun

FROM: Tupelo to Nashville FROM: Nashville to Tupelo

4608 6:40am 7:50am 0 ExSun 4715 8:40am 9:50am 0 ExSun

4504 1:30pm 2:40pm 0 ExSat 4719 2:45pm 3:55pm 0 ExSat

4720 6:20pm 7:30pm 0 ExSat ~7~L ___ J~.sQPrn _9~00pm 0 Ex$at

Note that the schedules presented assume that SeaPort is awarded the EAS contract at all three of

the communities herein. If awarded less than all three communities, schedules would need to be

slightly modified from those presented above in order to rotate aircraft in our Memphis maintenance

base..

That said, if selected to provide EAS, SeaPort Airlines will solicit comments from each community on

proposed flight schedules prior to making them available for sale to the public. As much as practical,

these comments will be incorporated into the final schedule and factoring any impact on flight

schedules. Furthermore, schedule changes of other airlines serving Nashville and Memphis will be

monitored with adjustments to SeaPort schedules made as needed to optimize the convenience of

connections.

At Nashville and Memphis, travelers to/from each of the communities in this proposal will be able to

access nearly all of the major Legacy and Low-Cost airline brands. The connectivity offered at both

Memphis and Nashville is illustrated on the maps on the next page.

OST-2000-7856, OST-2008-020S, OST-200S-030S

June 2, 2014

Page 14
\;,

S.ltUll<..CItY~

SEAtPDRT ====AtRlINES

Nonstop Destinations Served from Memphis - June 2014

Nonstop Destinations Served from Nashville - June 2014

~\

,?J

;

r

j

\;,

S~ltlltlce Ot'/'

While both Memphis and Nashville have a lower number of flights to connect with than does Atlanta.

the hubs proposed by SeaPort are not subjected on a regular basis to "flow control" due to airspace

congestion. This will allow SeaPort to operate at a higher level of schedule reliability than customers

in these markets have experienced over the past couple of years. This. combined with the pricing

strategy outlined below. should help to rebuild customer confidence in local air service at all three

OST-2000-7856, OST-2008-Q209. OST-2009-0305

June 2, 2014

Page 15
SEAtPORT

====AIRlINES

airports, but which is particularly important at Greenville and Muscle Shoals that are facing

termination of their EAS eligibility3

Fares & Pricing

All of SeaPort's fares are priced on a one-way basis, including all taxes and fees, and structured as

follows:

+ The highest price point (branded as "FULL Flex") provides our customers with total flexibility

to change their travel plans or, if they choose, obtain a full refund without incurring a service

charge.

+ The lowest price point (branded as "NO Flex") targets customers who are certain about their

travel plans. This fare requires an advance purchase of 14-days, is non-refundable, and

does not permit any changes from the original booked itinerary.

+ In between, SeaPort oilers a range of fares ("FREE 2 Flex" and "Flex 4 FEE") with price

points based on how much flexibility a customer has in their travel plans. Except for the two

highest price points, fares are also subject to capacity controls, meaning that the farther in

advance a reservation is made, the more likely a customer is to get a lower fare.

The table below summarizes the range of proposed ticket prices in each of the markets along with

the rules and restrictions applicable to each price point.

SeaPort Airlines Fare Families & Proposed Selling Fares at

Greenville, Muscle Shoals and Tupelo

FULL Flex 'FREE 2 Flex

Summary of Rules

Market Specific Fares

Booking Class

Typical Advance Purchase (Days)

Refundable

Change Fee (if pennitled)

# Free Checked Bags (Max 50 Ibs each)

Access to Express Security Lane

GreemAlie- Memphis (A\g Fare = $63)

Muscle Shoals. Nashlille (A\g Fare = $63)

Tupelo. Memphis (A\g Fare = $53)

Tupelo. Nashlille (A\g Fare = $66)

Y B

0 0

Yes No

SO $0

Two One

Yes No

S99 S79

S99 $79

$79 $59

$99 $79

Flex 4 FEE NO Flex

M Q

3 or 7 7 or 14

No No

$50 Not Pennitled

One One

No No

$59 $39

$59 $39

$49 $39

$59 $39

During the first 30 days of service, SeaPort Airlines would oller an introductory fare including all

taxes and fees) in all three communities. This fare will be available on every seat and every flight

during the period.

3 Order 2014-4-26

OST-2000-7856,05T-2008'{)209, 05T-2009-0305

June 2, 2014 Page 16
SEAtPORT ===='A IRIINES

Interline Connectivity & GDS Display

SeaPort Airlines tickets may be purchased by calling our toll-free reservation number, online at

www.SeaPortAirlines.com. at any travel agent connected to a major global distribution system

(GDS), or all of the major online travel agencies and meta-searchers such as Orbitz, Travelocity,

Expedia, Kayak, Hipmunk, and CheapoAir.

On March 23, 2014, SeaPort Airlines became the first US airline to be completely hosted on the

Amadeus Altea reservation platform. This system is one the top three distribution systems in the

world and is the same reservation system for such leading airlines as Air France/KLM, Qantas,

Emirates, Korean Airlines, and others. Southwest Airlines has announced it will become the second

US carrier to be fully hosted by Amadeus, when it migrates its domestic reservations to the system

in 2015 having already deployed the platfonmfor its international service in January 2014.

With this new system, SeaPort has unsurpassed capability compared to other regional airlines with

respect to interline ticketing, offering optional services, through baggage check-in, Inter-Airline Thru

Check-In (IATCI), SMS notifications to customers, the ability for customers to make online changes

to reservations, and (eventually) online check-in.

Most importantly, however, Altea has allowed SeaPort Airlines to implement its first bilateral interline

e-ticketing and baggage agreement.. That agreement with Alaska Airlines was activated on March

24, 2014, the day after the reservation migration was completed. The company has an ongoing

dialogue with multiple other airlines about incremental revenue that SeaPort customers would bring

to each larger carrier, hoping it will increase

In addition to the reservation platfonm,in early 2014 SeaPort Airlines began to offer rental cars and

hotels on its website. SeaPort is to enhance this offering by early 2015 with a dynamic booking

process for business trips and vacations that will allow customers to book flights (including those of

interline partners), rental car, and hotel in a single transaction and all from a single screen.

Airport Terminals

At Nashville International Airport, SeaPort Airlines operates in the main terminal.5 All flights are

presently handled by American Envoy, however, if awarded service to Tupelo and Muscle Shoals, it

is likely SeaPort would migrate to its own personnel, ensuring our customers are always provided

with our in-house SeaPort customer service.

At Memphis International, SeaPort presently operates from a private terminal for EAS service to

three Arkansas communities and Jackson, TN. SeaPort has developed a plan with Memphis airport

officials and the Transportation Security Administration that will allow it to move to the main tenminal

If awarded the EAS contract at Tupelo and/or Greenville. .

This plan calls for flights from our non-sterile EAS markets in Arkansas to be screened on arrival

(e.g., "reverse screening") at the now donmant international arrivals area. After being screened,

passengers would proceed upstairs to the concourse and baggage would either be transferred to

connecting flights (when on an online or interline itinerary) or delivered to baggage claim.

4 Bilateral agreements allow both participating carriers to make reservations and issue tickets on each other's flights. A unilateral

agreement only allows one carrier to sell and issue tickets.

5 Except for Jackson, TN where the Transportation Security Administration (TSA) has declined the request of both SeaPort and the

airport operator to reestablish security screening and requires Jackson arrivals to deplane outside of the secure area and be

shuttled to the front of the tenninal. Flights departing to Jackson leave from the main tennlna1.

OST-200G-7856. OST-2008-0209, OST-2009.Q305

June 2, 2014

Page i 7
SEAtPORT

====,AIRUNES

Passengers arriving from Greenville and Tupelo would proceed directly into the concourse,. having

been screened before boarding at their home airports. .

Continued EAS Eligibility for Greenville, MS and Muscle Shoals, AL

As noted above, DOT has filed a notice of determination and intent to terminate EAS eligibility for

two of the markets contained in this proposal, Greenville and Muscle Shoals, based enplanements

average less than 10 days for the year ending September 30, 2013. SeaPort believes strongly that

the low number of enplanements was the response of both markets to less than favorable pricing

strategies by the current EAS operator, compounded by poor reliability due to congestion at Atlanta's

airport and the pilot shortage that is impacting most regional carriers.

Our belief is supported by the graph, illustrating the decline in passengers at all three of the airports

since October 2012.6,

Onboard Passengers at Tupelo, Greenville, and Muscle Shoals

T-100 Data: June 2012 - December2013

1.600

1.200

1,000

800

600

------ Silver Airways replaces Delta Connection

-Tupelo -Grecnvile -Muscle Shoals

SOURCI: DiJo

NOTE:GrM!lTri!l!onboards subtraetl!d from Tupelo onboarcls beginning OCI~ 2013

SeaPort's proposal specifically addresses the EAS eligibility challenge facing Greenville and Muscle

Shoals by:

• Offering a greater choice of both flight and departure times;

• Service to Nashville and Memphis, two airports with much lower levels of congestion than

Atlanta;

6 Silver Airways replaced Delta Connection service on October 1, 2012.

OST-200G-7BS6, OST-200B'()209, OST-2009'()30S

June 2, 2014 Page I B
SEA.tPDRT

====A1RLINES

• Operations conducted under FAR Part 135 which results in SeaPort not being severely

impacted by the pilot shortage as other airlines have been and, as a result, minimize

cancellations due to crew shortages;

• A mix of marketing strategies aimed at rebuilding traffic in each of the EAS communities

including traditional paid media placement (print, radio, outdoor, etc,), customer engagement

using social media, and community outreach through our full-time Manager - Community

Affairs;

• Fares as low as $39 from each city (even the highest fare for each is less than $100), which

should result in significant traffic stimulation, but yet not too low that EAS subsidies exceed

$200 per passenger;

• Nashville is dominated by Southwest Airlines, which places downward pressure on fares and

encourages more connecting traffic than would the pricing environment at Atlanta; and .

• While fares in Memphis have historically been among the nation's highest, with Delta's end

of hub operations there, recent DOT data shows a downward trend in fares as the market

has more competition.

SeaPort Airlines looks forward to the opportunity to work with all three communities and rebuild

customer confidence and enplanement levels at their respective airports.

OST-2000-7856, OST-2008-0209, OST-2009-0305

June 2,2014

Page 19
SEAtPORT ===='A1RLlNES

Subsidy Request Calculations

The following pages contain the calculations to support the requested levels of subsidy for SeaPort

Airlines to provide EAS at Muscle Shoals, Alabama and Greenville and Tupelo, Mississippi.

As noted on the cover page, each proposal is submitted on a stand-alone basis and assumes award

of a two-year contract. If desired by one or more the communities and approved by the Department,

SeaPort Airlines would agree to a four-year contract at the same level of annual subsidy

Respectfully submitted,

Timothy Sieber

Executive Vice President

SeaPort Airlines, Inc.

June 2, 2014

08T-2000-7856, 08T-2008-0209, 08T-2009-0305

June 2, 2014

Pagel 10
SEA.tPORT

===='AIRlINES

OST-2008-7856

Cessna Caravan, Two-Pilots

18 Weekly RTs: Greenville - Memphis

Proforma Data

Operating Projections

Average Sector Length (sm)

Scheduled Departures

Scheduled Block Hours

Projected Completion Factor

Projected Completed Departures

Projected Completed Block Hours

Passenger Projections

Projected Passengers

Passengers per Departure

Projected Average Fare

Revenue Passenger Miles (RPMs)

Available Seat Miles (ASMs)

Projected Load Factor

Financial Projections

Revenues

Passenger Ticket Revenues

Ancillary RelA'lnues

Total

Expenses

Flight Operations

Aircraft Ownership/Lease

Fuel & Oil

Sales & Marketing

Traffic Sef'Jicing

Insurance

Maintenance

Sub-Total - Direct

Indirect

Total Expenses

Projected Operating Profil/(Loss)

Subsidy Calculations

Operating Loss

Economic Retum @ 5%

IReqUired Subsidy

05T-2000-7856, 05T-2008-0209, 05T-2009-0305

June 2,2014

122

1,872

1,716.0

99.0%

1,853

1,698.8

7,502

4.0

$63.00

915,244

2,034,901

45.0%

$472,626

$11,816

$484,442

$168,185

$294,000

$389,884

$25,000

$407,484

$30,579

$314,285

$1,629,417

$244,413

$1,873,830

($1,389,388)

$1,389,388

. $93,692

$1,483,0801

Page 111
SEA.tPORT

====AIRlINES

OST-2008-0209

Cessna Caravan. Two-Pilots

24 Weekly RTs: Muscle Shoals - Nashville

Proforma Data

Operating Projections

A\erage Sector Length (sm)

Scheduled Departures

Scheduled Block Hours

Projected Completion Factor

Projected Completed Departures

Projected Completed Block Hours

Passenger Projections

Projected Passengers

Passengers per Departure

Projected A\erage Fare

Re\enue Passenger Miles (RPMs)

Available Seat Miles (ASMs)

Projected Load Factor

Financial Projections

Re\enues

Passenger Ticket Re\enues

Ancillary Rel.enues

Total

Expenses

Flight Operations

Aircraft Ownership/Lease

Fuel & Oil

Sales & Marketing

Traffic Servicing

Insurance

Maintenance

Sub-Total - Direct

Indirect

Total Expenses

Projected Operating Profil/(Loss)

Subsidy Calculations

Operating Loss

Economic Retum @ 5%

IRequired Subsidy

OST-2000-7856, 05T-2008-0209. OST-2009-0305

June 2,2014

109

2,496

2.080.0

99.0%

2,471

2,059.2

8.878

3.6

$63.00

967.702

2,424.090

39.9%

$559.314

$13.983

$573.297

$203.861

$294.000

$472.586

$25.000

$501.736

$37.066

$380.952

$1.915.201

$287.280

$2.202,481

($1,629.184)

$1,629.184

$110,124

$1,739,3081

Page 112
SEA.tPDRT

====,AIRLJNES

OST-2009-0305

Cessna Caravan, Two-Pilots

18 Weekly RTs: Tupelo - Nashville

12 Weekly RTs: Tupelo - Memphis

Proforma Data

Operating Projections

Average Sector Length (sm)

Scheduled Departures

Scheduled Block Hours

Projected Completion Factor

Projected Completed Departures

Projected Completed Block Hours

Passenger Projections

Projected Passengers

Passengers per Departure

Projected Average Fare

Revenue Passenger Miles (RPMs)

Available Seat Miles (ASMs)

Projected Load Factor

Financial Projections

Revenues

Passenger Ticket Revenues

Ancillary Revenues

Total

Expenses

Flight Operations

Aircraft Ownership/Lease

Fuel & Oil

Sales & Marketing

Traffic Serlicing

Insurance

Maintenance

Sub-Total - Direct

Indirect

Total Expenses

Projected Operating Profil/(Loss)

Subsidy Calculations

Operating Loss

Economic Retum @ 5%

IRequired Subsidy

05T-2000-7856, 05T-2008-0209, 05T-2009-0305

June 2, 2014

139

3,120

3,120.0

99.0%

3,089

3,088.8

13,333

4.3

$60.81

1,855,954

3,869,649

48.0%

$810,818

$20,270

$831,088

$305,791

$294,000

$708,880

$25,000

$731,424

$55,598

$643,302

$2,763,995

$414,599

$3,178,594

($2,347,507) .

$2,347,507

$158,930

$2,506,4361

Page 113