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## ... '.'~ '''R'(.\TIC'' " ,.'">:\)rlJ. J"\I ", Before the United States Department of Transportation 

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# O;;:R\T:ONS June 2, 2014 

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- 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 ByOrder2014-4-24, the U.S. DepartmentofTransportation ("the Department") requested proposals from carriers interested in providing Essential Air Service (EAS) at Greenville and Tupelo, Mississippi and Muscle Shoals, Alabama no laterthan June2, 2014 afteran extension was granted forAerodynamics, Inc. In response, SeaPortAirlines, Inc. respectfullysubmitsthefollowing proposalsto providesubsidized essential airservice:

• Greenville, MS: 18 weekly roundtrips to Memphis International Airport requiring an annual subsidyof$1,483,080

• Muscle Shoals, AL: 24 weekly roundtripsto Nashville International Airport requiring an annual requestedsubsidyof$1,739,308.

• Tupelo, MS: 12weekly roundtrips to Memphis and 18weekly roundtrips to Nashville requiring anannual subsidylevelof$2,506,436, Each proposal is submitted on a stand-alone basis and assumes award of a two year contract, however atthe discretion of the Department and each community, SeaPort would agree to a fouryearcontractfor noincrease inannual subsidyabovethe levelsoutlined 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 regardingthis proposal should bedirectedto: TimothySieber ExecutiveVice President SeaPortAirlin~s, Inc. 7505 NEAirportWay 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 basesat Memphis,Tennessee (MEM); San Diego, California (SAN); andJuneau,Alaska (JNU). Our221 professionals provide service to 21 cities across nine stateswith afleet of 16aircraft. This month, the companywill increase itsfleetto 18aircraft and add serviceto Great Bend andWichita, Kansas,The company's route mapasofthe dateofthis proposal is provided below:



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# SEA.tPDRT

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AIRLINES ._ •••• O<HI_' •••••

_ ••~ The primaryfocus of SeaPort Airlines is to provide affordable and reliable air serviceto small and rural communities acrossAmerica, Serviceto nineofthe communities onour route map isprovided under the EAS program: Athens, Georgia; Pendleton, Oregon; EI Dorado, Hot Springs, and Harrison, Arkansas; Salina and Great Bend, Kansas; Jackson, Tennessee; and Imperial/EICentro, California.'

1As 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

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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 recentexample occurred at Imperial/EICentro, CA, where adeparture time from Burbankwas moved 10minutes laterto betteraccommodate connections with a Southwest Airlines flightfrom 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 afour-year renewal attheArkansas communities of EI Dorado, Harrison, and HotSprings, 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 12weekly roundtrips between Tupelo and Memphis along with 18 weekly roundtrips between Tupelo and Nashville. An Illustrative schedule pattern foreach community isshown 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
Notethat the schedules presented assume that SeaPort isawarded the EAScontract atall three of the communities herein. Ifawarded less than all three communities, schedules would need to be slightly modified from those presented above inorderto rotate aircraft in our Memphis maintenance base

.. That said, ifselectedto provide EAS, SeaPortAirlineswill solicitcommentsfrom each communityon proposed flightschedules priorto makingthem availableforsaletothe 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 otherairlines serving Nashvilleand Memphiswill be monitored with adjustments to SeaPort schedules made as needed to optimize the convenience of connections. At Nashville and Memphis, travelers to/from each ofthe communities inthis proposalwill beableto access nearlyall ofthe major Legacyand Low-Costairline brands. The connectivity offered at both Memphisand Nashville isillustratedonthe mapsonthe nextpage.

OST-2000-7856, OST-2008-020S, OST-200S-030S June 2, 2014 Page 14\;, S.ltUll<..CItY~ 

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### Nonstop Destinations Served from Memphis - June 2014

Nonstop Destinations Served from Nashville - June 2014 ~\ 

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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, ifthey 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 isto 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 (ifpennitled) # FreeChecked 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 Flex4 FEE NO Flex
M Q 3or7 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 June2,2014 Page16

# SEAtPORT

===='A IR II NE S

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, KoreanAirlines, and others. SouthwestAirlines hasannounced itwill becomethe second UScarrier to befully hosted byAmadeus, when it migrates its domestic reservations to the system in2015 having alreadydeployedthe platfonmfor itsinternational service inJanuary2014. With this new system, SeaPort has unsurpassed capability compared to other regional airlines with respectto interline ticketing, offering optional services, through baggage check-in, Inter-AirlineThru Check-In (IATCI), SMS notificationsto customers, the abilityfor customers to make online changes to reservations, and (eventually) online check-in. Most importantly, however, Altea hasallowed SeaPortAirlinesto implement itsfirst 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 toeach largercarrier, hoping itwill increase Inaddition to the reservation platfonm,in early2014 SeaPortAirlines beganto offer rental cars and hotels on its website. SeaPort is to enhance this offering by early 2015 with a dynamic booking process for businesstrips and vacations thatwill allow customers to bookflights (including those of interline partners), rentalcar, and hotel inasingletransaction and allfrom asingle screen. Airport Terminals At Nashville International Airport, SeaPort Airlines operates in the main terminal.5 All flights are presently handled byAmerican Envoy, however, ifawarded serviceto Tupelo and Muscle Shoals, it is likely SeaPort would migrate to its own personnel, ensuring our customers are always provided with our in-houseSeaPortcustomerservice. At Memphis International, SeaPort presently operates from a private terminal for EAS service to three Arkansas communities andJackson, TN. SeaPort has developed a planwith Memphis airport officials andtheTransportation SecurityAdministration thatwill allow itto moveto the main tenminal Ifawardedthe EAScontractatTupelo and/orGreenville.

. 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 onlyallows one carrier tosell 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 tothefront ofthe tenninal. Flights departing toJackson 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 atTupelo, Greenville, and Muscle Shoals

T-100 Data: June 2012
- December2013

1.600

1.200
1,000

800
600 ------ SilverAirways replaces Delta Connection

-Tupelo -Grecnvile -Muscle Shoals SOURCI: DiJo NOTE: GrM!lTri!l!

onboards subtraetl!d fromTupeloonboarclsbeginningOCI~ 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 

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# SEA.tPDRT

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• 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 duetocrewshortages;

• A mix of marketing strategies aimed at rebuilding traffic in each of the EAS communities including traditional paid mediaplacement (print, radio, outdoor, etc,), customerengagement using social media, and community outreach through our full-time Manager
- Community Affairs;

• Faresas lowas $39from each city (eventhe highestfare foreach is lessthan $100), which should result in significanttraffic stimulation, but yet nottoo lowthat EAS subsidies exceed $200 perpassenger;

• Nashville isdominated bySouthwestAirlines, which placesdownward pressure onfares and encourages moreconnectingtrafficthanwouldthe pricingenvironment atAtlanta; 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 morecompetition. SeaPort Airlines looks forward to the opportunity to work with all three communities and rebuild customerconfidence and enplanement levelsattheir respectiveairports.

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 TrafficSef'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 June2,2014 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

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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 TrafficServicing 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

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# SEA.tPDRT
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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