### Before the United States Department of Transportation February 17, 2015

Proposal to Provide Essential Air Service at

CRESCENT CITY , CALIFORNIA

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

- 1997

- 2649



### Proposal of SeaPort Airlines, Inc. to Provide Essential Air Service at Crescent City , California

By Order 2014

- 11

- 18 , the U.S. Department of Tr ansportation (“the Department”) requested proposals from ca rriers interested in providing Essential Air Service ( “ EAS ” ) at Crescent City

, California no later than December 22 , 2014

. At the request of interested parties, on December 19, 2014 the Department extended the deadline for proposals until January 15, 2015. On January 13, 2015, the deadline was further extended until February 17, 2015.

SeaPort Airlines, Inc. respectfully su bmits this timely proposal to provide subsidized EAS at Crescent City that includes 3 7 weekly roundtrip flights as follows:

• 25 weekly roundtrips to Portland International Airport

• 12 weekly roundtrips to Sacramento International Airport

.
SeaPort will provide the above service using 9

- passenger Pilatus PC

- 12 aircraft. At the above level of frequency, approximately 34,600 annual seats would be availabl e in the market which is comparable to the number offered presently by SkyWest Airlines.

SeaPort Airlines is requesting subsidy in the amount of $7,691,469 per year and this proposal is being submitted on the basis of a four

- year term.

After this proposal is docketed , SeaPort Airlines will schedule a meeting with the community to 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:

Tim othy Sieber Executive Vice President

SeaPort Airlines, Inc. 7505 NE Airport Way Portland, OR 97218 (971) 340

- 1716 tsieber@seaportair.comOST

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- 2649 February 17, 2015 Page | 2 

# 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 )

.

Over 300 professionals provide service to 2 7 cities across ten states with a fleet of 21 aircraf t

. The company’s route map as of the date of this proposal is provided below: 1

The primary focus of SeaPort Airlines is to provide affordable and reliable air service to rural and underserved communities

. Service to 1 3 of the communities on our route map is provided under the EAS program: Muscle Shoals, Alabama; Tupelo and Greenvill e, Mississippi ; Pendleton, Oregon; El Dorado, Hot Springs, and Harrison, Arkansas; Salina and Great Bend, Kansas; Jackson, Tennessee; and Imperial/El Centro and Visalia, California.

1 Service to Greenville, MS begins on March 16 , 2015.OST

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- 2649 February 17, 2015 Page | 3 I ncreasing our presence in California is a strategic focus of SeaPort Airlin es . This strategy was lauched this past December with inauguration of our first international service, connecting San Diego International Airport with San Felipe, Baja California, Mexico. Earlier this month, SeaPort began providin g EAS at Visalia, California , offering service to both Burbank Bob Hope Airport (Los Angeles Basin) and Sacramento International Airport.

Once SeaPort Airlines is awarded an EAS contract and service is launch ed

, we develop a partnership wi th each community by participating in local events, donation of tickets, on

- going dialogue with airport management and community leaders, and presentation s to civic clubs and other similar organization s

.
We also have a reputation of being responsive to community needs, affording them the opportunity to comment on schedule changes before they become effective. The most recent example occurred at Imperial/El Centro, CA, where a departure time from B urbank was moved 10 minutes later to better accommodate connections with a Southwest Airlines flight from Sacramento.

Proposed Service Pattern s & Illustrative Flight Schedules

SeaPort proposes to to connect Crescent City to the national air transportation system via Portland International Airport (25 weekly roundtrips) and Sacramento International Airport (12 weekly roundtrips).

An Illust rative schedule is a s follows.

It is important to point out that the schedules shown are for illu strative purposes only. If selected to provide EAS at Crescent City, SeaPort Airlines will solicit comments from the community on proposed flight schedules prior to publishing them for sale to the public and, as much as practical, incorporate community comments into the final schedule.

As illustrated, such a schedule would to provide benefits to a wide cross

- section of travelers at Del Norte County Airport . Specifically:

• Service to two hubs, both providing strong connectivity with large network airlines and low

- fare airlines. As SeaPort Airlines demonstrated in other EAS markets, dual

- hub service patterns are similar to greater flight frequencies outlined above, as the increased customer options can result in more residents and visitors using their local airport. Flight # Depart Arrive Stops Frequency Flight # Depart Arrive Stops Frequency

TO: PORTLAND, OR FROM: PORTLAND, OR

5800 5:30am 6:55am 0 ExSun 5801 8:30am 9:55am 0 ExSun

5802 9:45am 11:10am 0 Daily 5803 1:45pm 3:10pm 0 ExSat

5852 1:30pm 2:55pm 0 ExSun 5853 4:15pm 5:40pm 0 Daily

5804 6:10pm 7:35pm 0 ExSat 5805 9:30pm 10:55pm 0 ExSat

TO: SACRAMENTO, CA FROM: SACRAMENTO, CA

5850 6:15am 7:30am 0 ExSun 5851 8:00am 9:15am 0 ExSun

5854 4:00pm 5:15pm 0 ExSat 5855 5:45pm 7:05pm 0 ExSat



### Illustrative Flight Schedule for Crescent City, CaliforniaOST

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- 2649 February 17, 2015 Page | 4 • At Portland, travelers will be able to access a growing portfolio of nonstop international destinations including Tokyo, Amsterdam, Frankfurt, and Reykjavik. 2

• Schedules to both Sacramento and Portland will permit same

- day return t rips from Crescent City, saving travelers time and money

.

• Schedules to/from Por tland International Airport were constructed to optimize connectivity with Alaska Airlines, which offers more departures and nonstop destinations from PDX than any other airline

, and interline s with SeaPort allowing single

- ticket itineraries and baggage check

- in through to the customer’s final destination

.

• Two aircraft would overnight at Del Norte County Airport

, allowing an early morning departure to both Sacramento and Portland.

Finally, it is important to note that SeaPort has current operations at both Por tland and Sacramento. As such, SeaPort is well positioned to initiate service at Crescent City in a timely

manner.

Span of Service at PDX & SMF

The maps below illustrate s nonstop destinations served from Portland International Airport and Sacramento International Airport

. 3 Nonstop service operated by interline partner, Alaska Airlines, is differentia t ed by red lines.

Nonstop Destinations Served from Portland I nternational Airport June 2015

2 Frankfurt and Reykjavik are summer seasonal only.

3 Pu blished schedules for June 2015 as of February 10 , 201 5

.OST

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- 2649 February 17, 2015 Page | 5 Nonstop Destinations Served from Sac ramento International Airport June 2015

Aircraft

SeaPort Airlines’ proposal to provide EAS at Crescent City assumes operations using Pilatus PC

- 12 aircraft

.

The Pilatus PC

- 12 is a single

- engine turboprop manufactured by Pilatus Aircraft of Switzerland

. The aircraft, which seats nine passengers and is operated by a crew of two pilots, is pressurized and can cruise at over 300 mph. The speed of the aircraft makes it ideal for the segments the length of CEC

- PDX ( 275 sm) and CEC

- SMF ( 255 sm).

SeaPort Airlines has extensive experience operating the PC

- 12. Th i s aircraft was the platform that operations in Lower 48 were launch ed in June 2008, and remained part of the company’s fleet until February 2014. We anticipate no challenges returning this aircraft to our active fleet. To achieve this, SeaPort Airlines has retained an aircraft broker to source Pila tus PC

- 12s should we be awared the contract to provide EAS at Crescent City, California.OST

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- 2649 February 17, 2015 Page | 6 A total of three PC

- 12s are being sought: two for operating the schedule outlined above and one spare to ensure schedule integrity during scheduled and unscheduled m aintenance.

Fares & Pricing

SeaPort Airlines projections of traffic and revenue in this proposal assumed use of a low

- fare pricing model that allows for the customer’s fare from Crescent City to be an “add

- on” to the fare from the hub and still result in a reasonable overall travel cost.

The table illustrates the pri ce points SeaPort would offer at Crescent City to both Portland and Sacramento, along with the rules and restrictions applicable to the three basic fare families of
our company

.

Proposed Fares at Crescent City , California ( Both Portland, OR & Sacramento, CA)

During the first 30 days of service, SeaPort Airlines would offer an introductory fare of $49 ( including all government required taxes and fees) that would be available on every seat an d flight

. This strategy incentivizes the market to try SeaPort’s services for a reasonable price.

Additional Special Pricing & Products

In addition to the fares listed above, customers in Crescent City will have access to new
p roducts that SeaPort is rolling out over the next six months :

• Commuter Books that of fer 1 0 tickets at a discounted price and waiver of certain restrictions.

• Student stand

- by fares for $25 each

- way, based on available seats.

• N egotiated fares w ith local companies that allow them to realize progressive savings based on level of activity and/or share of their air travel budget committed to the local air service.

• D iscounted travel for economic development or quality of life purpose that benefit the community , such as transportation o f site selectors and recruitment of specialist doctors by the hospital. Fully Refundable Change For Fee No Refund or Changes
Fare (including all taxes & fees) $139 $99-$69 $49

Advance Purchase (Days before departure) 0 3-7 7-14

Refunds Permitted Not Permitted Not Permitted Fee to Change Itinerary $0 $25 Not Permitted Access to Express Security Lane at PDX & SMF Yes No No Stand-by For Earlier Flight Same Day $0 $0 Not Permitted # of Free Checked Bags (50 lbs each) 2 1 1 Fee for Oversize/Excess Checked Bags $35 $35 $35 Fee for Golf Bags (Regardless of # checked bags) $35 $35 $35 Service Fee for Booking at Airport/via Phone $0 $0 $25OST

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- 2649 February 17, 2015 Page | 7 Global Distribution & Interline Connectivity

SeaPort Airlines tickets may be purchased by calling our toll

- free reservation number, online at www.SeaPortAirlines.com, or any travel agent

. In addition, customers can also book using any of the major online travel agencies and meta

- searchers such as Orbitz, Travelocity, Expedia, Kayak, Hipmunk, and CheapoAir.

SeaPort’s schedules an d availability are published in four of the top five top global distribution systems (GDS): Amadeus, Apollo

, Sabre, and Worldspan. Within the next three months, SeaPort’s distribution will be enhanced via a code

- share agreement with Hahn Air that results in availability being published in secondary GDSs throughout Asia, Europe, and the Middle East.

Interline A greements

In early 2014, SeaPort Airlines became the first US airline to be fully hosted on the Amadeus Altéa reservation platform. This advanced system is used by over 300 airlines across the globe, including leading airlines as Air France/KLM, Qantas, Emira tes, Korean Airlines, Lufthansa, and Avianca.

Altea provides SeaPort with unsurpassed capabilit ies relative to most independent regional airlines. This includes interline ticketing, baggage check

- in to the customers final destination

, Inter

- Airline Thru Check

- In (IATCI) allowing SeaPort agents to issue boarding passes on participating connecting airlines , SMS notifications advising customers of schedule changes and flight irregularities, ability for customers to make changes to reservations via the Intern et , and online check

- in.

The m ost important feature of Altéa for communitie s such as Crescent City

, however, is that it allows SeaPort Airlines to enter into bilateral interline e

- ticketing and baggage agreement s with other airlines

. 4 Presently, SeaPort has interline agreements with Alaska Airlines and Hawaiian Airlines. We anticipate completing an additional agreement with one of the “Big Three” major U.S. airlines by the end of 2015 and maintain an on

- going dialogue with a number of d omestic and international airlines regarding interline agreements.

SeaPort Airlines Website

In addition to r eservations

, SeaPort Airlines offe rs rental cars and hotels on its website. SeaPort is set to enhance this offering in 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. This will be included as par t of an overall makeover of the company’s website that will be designed for better functionality with mobile devices.

4 Bilateral agreements allow both participating carriers to make reservations and issue tickets on each other’s flights. A unil ateral agreement only allows one carrier to sell and issue tickets.OST

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- 2649 February 17, 2015 Page | 8 Sales & Marketing

SeaPort Airlines ’ proposal to provide EAS at Crescent City, California includes a commitment to spend $50,000 annually on ad vertising and promotional activities. In addition, the Port of Portland has committed to providing up to $10,000 in supplemental marketing funds that will be used to promote PDX as a connecting hub to Crescent City area travelers.

A dvertising

Advertising activities will focus on radio, print, online, and outdoor ( i.e. , roadside signs and
st adium boards) across the reasonable catchment area of Del Norte County Regional Airport

. On a limited basis, we may purchase commercials during local television news broadcasts.

Sales & Community Relations

Advertising will be supported by aggressive and **sustained** sales activities focused on companies and organizations in the Crescent City area with a need for reliab le and affordable travel options. The sales message would include explanation of the value proposition of flying compared to driving, connectivity possibilities, service enhancements, special fares (ie., commuter books and negotia ted corporate contracts), and the importance of local busines s es to support local air service. Co sts of sales activities (i.e., printing, travel, etc.) are not included in the $50,000 marketing communications budget.

The plans for advertising and community relations are preliminary in nature and would be developed into a comprehensive plan if awarded the EAS contract and only after consultation with the airport manager, Chamber of Commerce, and other economic and community development organizations

.OST

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# Subsidy Request Calculations

The following pag es provide projections and calculations to support the request of SeaPort Airlines for annual subsidy of $7,691,469 to provide EAS at Crescent City , California.

Respectfully submitted,

Timothy Sieber Executive Vice President SeaPort Airlines, Inc.

February 17, 2015OST

- 1997

- 2649 February 17, 2015 Page | 10 Proforma Data Operating Projections Average Sector Length (sm) 269 Scheduled Departures 3,848
Scheduled Block Hours 5,243.3

Projected Completion Factor 98.5%

Projected Completed Departures 3,790 Projected Completed Block Hours 5,164.7

Passenger Projections Projected Passengers 16,875 Passengers per Departure 4.5

Projected Average Fare $68.79

Revenue Passenger Miles (RPMs) 4,531,166 Available Seat Miles (ASMs) 9,159,673 Projected Load Factor 49.5%

Financial Projections
Revenues Passenger Ticket Revenues $1,160,850 Ancillary Revenues $29,021

Total $1,189,871

Expenses Flight Operations $774,703 Aircraft Ownership/Lease $1,152,000
Fuel & Oil $1,624,293 Sales & Marketing $50,000 Traffic Servicing $1,483,796

Insurance $108,458 Engine & Airframe Reserves $903,820

Maintenance $1,455,091
Sub-Total - Direct $7,552,160

Indirect $906,259 Total Expenses $8,458,420

Projected Operating Profit/(Loss) ($7,268,549)

Subsidy Calculations Operating Loss $7,268,549
Economic Return @ 5% $422,921

Required Subsidy $7,691,469

Subsidy per Departure $2,029.26 Subsidy per Passenger $455.79 Avg. Enplanements per Operational Day 27.0 

### 12 Weekly RTs: Crescent City - Sacramento

25 Weekly RTs: Crescent City - Portland OST-1997-2649