Order: 2014-10-2

Served October 9, 2014

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

Issued by the Department of Transportation

on the 9th day of October, 2014

ORDER TEMPORARILY EXTENDING CURRENT SUBSIDY

Summary

By this Order, the Department is extending the service period for SeaPort Airlines, Inc. 

(“SeaPort”) to provide Essential Air Service (“EAS”) operations at Jackson, Tennessee, from 

October 1, 2014, until further Departmental action, but no later than February 28, 2015.

SeaPort will continue to provide Jackson with 12 nonstop round trips per week to Nashville 

International Airport and six nonstop round trips per week to Memphis International Airport1

using nine-seat Cessna Grand Caravan aircraft at an annual subsidy rate of $1,115,210.2 

Background

By Order 2011-12-15, issued on December 22, 2011, the Department selected SeaPort to 

provide subsidized EAS at Jackson with nine-seat Cessna Grand Caravan aircraft for a one-year 

period through the end of the 12th month thereafter, at an annual subsidy rate of $1,149,703. 

SeaPort inaugurated service at Jackson on January 22, 2012, thus making the original expiration 

date January 31, 2013. By Order 2013-2-23, issued on February 25, 2013, the Department 

extended SeaPort’s contract at Jackson for an additional year, from February 1, 2013, through 

January 31, 2014, at a subsidy rate of $1,115,210, as described in SeaPort’s original proposal to 

serve Jackson, which was submitted to the Department in October of 2011. Additionally, by 

Order 2014-1-23, issued on January 31, 2014, the Department extended SeaPort’s service

obligation until September 30, 2014, at the same subsidy rate of $1,115,210. 

The complete public file for EAS at Jackson may be accessed online through the Federal 

Dockets Management System at: http://www.regulations.gov by entering “DOT-OST-2000-

7857” in the “SEARCH for: Rules, Comments, Adjudications or Supporting Documents:” field.

 1 SeaPort currently provides six additional round trips per week to Memphis on a subsidy-free basis. 

2 Subsidy is calculated and distributed on a fiscal year basis, subject to the availability of funds. 

Essential Air Service at

JACKSON, TENNESSEE

Under 49 U.S.C. § 41731 et seq.

DOT-OST-2000-7857
2

Legislative Changes

The Federal Aviation Administration (FAA) Modernization and Reform Act of 2012 (Public 

Law No: 112-95) amended 49 U.S.C. § 41731(a)(1)(B) to change the definition of “eligible 

place” for the purpose of receiving EAS. The amendment states that to be eligible, a 

community must maintain an average of 10 enplanements or more per service day, as 

determined by the Secretary, during the most recent fiscal year beginning after 

September 30, 2012. The legislation exempts locations in Alaska and Hawaii and communities 

that are more than 175 driving miles from the nearest large- or medium-hub airport. As 

Jackson is located 86 miles from Memphis International Airport, which is a medium-hub 

airport, it must meet the 10-enplanement-a-day threshold for EAS to continue after FY2013 or 

otherwise face termination of its eligibility to receive EAS, barring a waiver from the Secretary. 

By Order 2014-4-26, issued on April 24, 2014, the Department issued a show-cause Order 

directing interested parties to submit objections to the Department’s tentative findings that 

Jackson enplaned fewer than 10 passengers per day. In response to that Order, the Department 

received objections from the community, but none of those objections disputed our findings

that Jackson enplaned fewer than 10 passengers per day during FY 2013.

Therefore, by Order 2014-6-6, issued on June 24, 2014, the Department made final its tentative 

decision in Order 2014-4-26, thereby terminating the EAS eligibility of Jackson. On 

August 24, 2014, the McKellar Sipes Regional Airport submitted an application for a waiver on 

behalf of the community of Jackson. 

By Order 2014-9-21, issued on September 26, 2014, the Department granted the waiver petition 

submitted on behalf of Jackson. That Order states that Jackson’s compliance with 49 U.S.C. 

41731(a)(1)(B) will be re-assessed based on Fiscal Year 2015 data (October 1, 2014, through 

September 30, 2015). To ensure that Jackson does not suffer from a service hiatus, we must 

extend SeaPort’s current contract from October 1, 2014, until further Departmental action, but 

no later than February 28, 2015. Because SeaPort has been serving Jackson nearly three years, 

since January 2012, and with several extensions to its rate, the Department will issue a new 

request for proposals for service at Jackson. As stated in Order 2014-9-21, the Department 

plans to issue the request for proposals as soon as possible.

Decision

We will extend SeaPort’s service period until further Departmental action, but no later than 

February 28, 2015. Consistent with past practice, we will set this contract extension at an 

annual subsidy of $1,115,210, as described in SeaPort’s original proposal dated 

September 30, 2011, and further detailed in Appendix B of this Order. 

This Order is issued under authority delegated in 49 CFR Part 1.25a(b).

ACCORDINGLY,

1. The Department requires SeaPort Airlines, Inc., to continue to provide Essential Air Service

at Jackson, Tennessee, until further Departmental action, but no later than February 28, 2015;

2. We set the rate of compensation for SeaPort Airlines, Inc., for the provision of Essential Air 

Service at Jackson, Tennessee, as described in Appendix B; 
3

3. The Department directs SeaPort Airlines, Inc. to retain all books, records, and other source 

and summary documentation to support claims for payment, and to preserve and maintain such 

documentation in a manner that readily permits its audit and examination by representatives of 

the Department. Such documentation shall be retained for seven years from the issuance date 

of this Order or until the Department indicates that the records may be destroyed, whichever 

comes first. Copies of flight logs for aircraft sold or disposed of must be retained. The carrier 

may forfeit its compensation for any claim that is not supported under the terms of this Order;

4. Docket DOT-OST-2000-7857 will remain open until further order of the Department; and

5. The Department will serve a copy of this Order on the mayor of Jackson, the airport 

manager of McKellar-Sipes Regional Airport, SeaPort Airlines, Inc., and the service list of this 

Docket.

By:

SUSAN L. KURLAND

Assistant Secretary for

Aviation and International Affairs

(SEAL)

An electronic version of this document is available online at

www.regulations.gov
Appendix A

Operating Projections

Average Sector Length (sm)

Year 1

111

Year 2

111

Scheduled Departures 1,872 1,872

Scheduled Block Hours 1,487.2 1,487.2

Projected Completion Factor 98.0% 98.0%

Projected Completed Departures 1,835 1,835

Projected Completed Block Hours 1,457.5 1,457.5

Passenger Projections

Projected Passengers

5,899 6,489

Projected Average Fare $64.62 $65.92

Revenue Passenger Miles (RPMs) 654,789 720,268

Available Seat Miles (ASMs) 1,832,725 1,832,725

Projected Load Factor 35.7% 39.3%

SeaPort Airlines, Inc.

Option #2

6 Weekly Roundtrips: Jackson, TN – Memphis, TN

12 Weekly Roundtrips: Jackson, TN – Nashville, TN

Financial Projections

Revenues

Passenger Ticket Revenues $381,220 $427,729

Ancillary Revenues $9,188 $10,340

Total $390,408 $438,069

Expenses

Flight Operations $247,768 $250,537

Aircraft Ownership/Lease $164,640 $164,640

Fuel & Oil $405,319 $419,505

Traffic Servicing $163,318 $169,912

Insurance $29,149 $29,732

Maintenance $240,480 $245,290

Sub-Total - Direct $1,250,674 $1,279,615

Indirect $216,099 $199,698

Total Expenses $1,466,773 $1,479,313

Projected Operating Profit/(Loss) ($1,076,365) ($1,041,244)

Subsidy Calculations

Operating Loss $1,076,365 $1,041,244

Economic Return @ 5% $73,339 $73,966

Required Subsidy $1,149,703 $1,115,210

Subsidy per Departure $626.69 $607.89

Subsidy per Passenger $194.90 $171.86
Appendix B

 SeaPort Airlines, Inc.

Essential Air Service to be Provided at Jackson, Tennessee

Effective Period: October 1, 2014, until February 28, 2015

Scheduled Service: 12 nonstop round trips per week to Nashville International Airport and

6 nonstop round trips per week to Memphis International Airport

Aircraft: Cessna Grand Caravan, 9 seats

Rate per Eligible Flight 1: $608

Weekly Ceiling2: $21,888

The air carrier understands that it may forfeit its compensation for any flights that it does not operate in conformance

with the terms and stipulations of the rate Order, including the service plans outlined in the Order and any other

significant elements of the required service, without prior approval. The air carrier understands that an aircraft takeoff and landing at its scheduled destination constitutes a completed flight; absent an explanation supporting subsidy

eligibility for a flight that has not been completed, such as certain weather cancellations, only completed flights are

considered eligible for subsidy. In addition, if the air carrier does not schedule or operate its flights in full 

conformance with the Order for a significant period, it may jeopardize its entire subsidy claim for the period in 

question. If the air carrier contemplates any such changes beyond the scope of the Order during the applicable

period of these rates, it must first notify the Office of Aviation Analysis in writing and receive written approval from 

the Department to be ensured of full compensation. Should circumstances warrant, the Department may locate and 

select a replacement air carrier to provide service on these routes. The air carrier must complete all flights that can 

be safely operated; flights that overfly points for lack of traffic will not be compensated. In determining whether

subsidy payment for a deviating flight should be adjusted or disallowed, the Department will consider the extent to 

which the goals of the program are met and the extent of access to the national air transportation system provided to 

the community.

If the Department unilaterally, either partially or completely, terminates or reduces payments for service or changes 

service requirements at a specific location provided for under this Order, then, at the end of the period for which the

Department does make payments in the stipulated amounts or at the stipulated service levels, the air carrier may 

cease to provide service to that specific location without regard to any requirement for notice of such cessation. 

Those adjustments in the levels of subsidy and/or service that are mutually agreed to in writing by the Department 

and air carrier do not constitute a total or partial reduction or cessation of payment.

Funds may not be available for performance under this Order beyond September 30, 2014. The Government’s 

obligation for performance under this Order beyond September 30, 2014, is subject to the availability of funds from 

which payment for services can be made. No legal liability on the part of the Government for any payment may arise 

for performance under this Order beyond September 30, 2014, until funds are made available to the Department for 

performance. If sufficient funds are not made available for performance beyond September 30, 2014, the 

Department will provide notice in writing to the carrier. 

Subsidy contracts are subject to, and incorporate by reference, relevant statutes and Department regulations, as they

may be amended from time to time. However, any such statutes, regulations, or amendments thereto shall not 

operate to controvert the foregoing paragraph.

All claims for payment, including any amended claims, must be submitted within 90 days of the last day of the month 

for which compensation is being claimed. For example, claims for service provided in July must be filed by October 

31st; August claims must be submitted by November 30th, and so on.

 1 Annual compensation of $1,115,210, divided by 1,835 annual departures (36 weekly departures x 52 weeks x 98 

percent completion).

2 36 flights per week multiplied by $608 per flight.