### Before the United States Department of Transportation October 31 , 2013

Proposal to Provide Essential Air Service at

KALUAPAPA, HAWAII

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

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- 6773



### Proposal of SeaPort Airlines, Inc. to Provide Essential Air Service at Kaluapapa, Hawaii

By Order 2013

- 10

- 3 , the U.S. Department of Transportation (“the Department”) requested proposals for Essential Air Service (EAS) at Kaluapapa, Hawaii no later than October 31 , 201 3

.
In response, SeaPort Airlines, Inc. respectfully submits this proposal to provide subsidized essent ia l air service that connect s Kaluapapa with Honolulu , Oahu and Kaunakakai, Molokai . This proposal is for a two

- year period at an annual subsidy rate of $ 952,018

.
After this proposal is docketed , SeaPort Airlines will contact the Kal u a papa community to schedule a meeting with the community, 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 Airlines, Inc. 7505 NE Airport Way Portland, OR 97218 (971) 340

- 1716 tsieber@seaportair.comOST

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# Description of Proposed Service

Company Introduction

SeaPort Airlines , Inc. is a FAA certified scheduled airline based in Portland, Oregon with 30 years of experience in commercial aviation

. In addition to Portland , Oregon (PDX)

, the company has operational bases at Memphis , Tennessee ( MEM ) ; San Diego, California (SAN); and Juneau , Alaska ( JNU )

. Upon award of the EAS contract to serve Kaluapapa, SeaPort would open an additional base at Honolulu I nternational Airport (HNL).

Our s killed 200 professionals provide service to 21 cities across nine states with a fleet of 1 5 aircraf t. The company’s route map as of October 31, 2013 is provided below:

A primary focus of SeaPort Airlines is to provide affordable and reliable air service to small and rural communities across America. S ervice to eight of the communities on our route map is provided under the EAS program : Athens , Georgia ; Pendleton, Oregon; El Dorado, Hot Springs, and Harrison

, Arkansas; Salina, Kansas; Jackson, Tennessee; and Imperial/El Centro, California.

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

- goingOST

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- 6773 October 31, 201 3 Page | 3 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 o pportunity to comment on schedule and fare changes before they become effective. It is SeaPort’s view that airlines and communities, who we view as our customer, need not be at odds with each other. We have a shared interest in fostering grass roots suppor t for local air service

, which therefore builds enplanements to the level needed as suring continued eligibility in the EAS p rogram.

SeaPort is especially aware of the unique location and location of Kalaupapa peninsula. We are appreciative of the unique needs of the residents of Kalaupapa as our company President, Rob McKinney, provided air service to the community with another air ca rrier from 2002

- 2005. He has been to the community many times and was privileged with a visit to Father Damien’s church.

Our commitment to EAS communities is demonstrated by the fact that in every “mainland ” community that SeaPort serves in the EAS pro gram
, 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 tha n 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 El Dorado, Harrison, and Hot Springs, effective November 1, 2013.

Aircraft



### SeaPort Airlines ’ proposal at Kalu a papa c ontemplates operations with Cessna Caravan s which will allow us to offer safe, comfortable, and affordable air transportation in a modern a nd economical aircraft. T ravelers to and from Kaluapapa are familiar with the Cessna Caravan, as this is the same aircraft operated by the current EAS provider

.

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.OST

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### The large cargo pod on the Caravan allows for more baggage than can be accommodate d on older piston twins (i.e., Piper Chieftain and Cessna 402) and allows us to segregate passenger baggage for security purposes. 1

Proposed Service Pattern

SeaPort’s proposal to provide EAS at Kaluapapa includes 1 2 weekly nonstop roundtrips to Honolulu and 18 weekly to Molokai (“topside”). An Illustrative schedule for the service pattern in this proposal is provided below.

If sel ected to provide EAS at Kaluapapa

, SeaPort Airlines will solicit community comment on proposed flight schedules prior to making them available for sale to the publ ic. As much as practical, these comments will be incorporated into the final schedule and factoring any impact on flight schedules at Athens.

Fares & Pricing

A ll of SeaPort ’s fares are priced on a one

- way basis

, including all taxes and fees, and structured as follows:

 The highest price point (br anded as “ FULL flex ”) provides our customer s 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 f lex ”) 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 offers a range of fares (“ F REE 2f lex” and “ f lex4 FEE ”) with price point s 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 the Kaluapapa market, as of the date of this proposal and after expiration of introductory fares

, along with the rules and restrictions applicable to each price point.

1 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. Depart Arrive Frequency Depart Arrive Frequency

7:25am 7:35am ExSatSun 8:00am 8:10am ExSatSun 1:25pm 1:35pm Daily 2:30pm 2:40pm Daily 3:30pm 3:40pm Daily 4:00pm 4:10pm Daily

8:25am 9:05am ExSatSun 6:30am 7:10am ExSatSun 4:25pm 6:00pm Daily 12:30pm 1:10pm Daily Kaluapapa - Kaunakakai Kaunakakai - Kaluapapa

Kaluapapa - Honolulu Honolulu - KaluapapaOST

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- 6773 October 31, 201 3 Page | 5 SeaPort Airlines ’ calculation of subsidy requirements is based on a projection of an average ticket price of $ 33.12 and $ 62.21 to Molokai and Honolulu , respectively. No local passengers or revenue are assumed between Kaunakakai and Honolulu

.
During the first 30 days of service, SeaPort Airlines would offer an introductory fare including all
taxe s and fees) to/ from Molokai of $29 and to/from Honolulu of $49

. This fare will be available on every seat and every flight during the period.

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 the major global distribution systems (GDS), or all of the major online travel agencies and meta

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

The company recently announced that it will migrate to the Amadeus Altea reservation platform on March 22, 2014 (see “ Attachment A ” ) . With t his new system, SeaPort will have unsurpassed capability compared to other regional airlines with regard to interline ticketing, through baggage check

- in, e

- commerce, and Inter

- Airline Thru Check

- In (IATCI). Most importantly, with the new system the compa ny will launch its first full interline agreement on March 22, 2014 with a major airline serving Hawaii, to be followed by a second carrier agreement on May 1, 2014. The company is in discussions with two other major carriers regarding agreements for implementation later in 2014.

Subsidy Request Calculations

The following pag es contain the calculations that support SeaPort Airlines ’ request for subsidy to provide EAS at Kaluapapa

, Hawaii

.
Respectfully submitted,

Timothy Sieber Vice President

– Commercial SeaPort Airlines, Inc.

October 31, 201 3 FULLflex FREE2flex flex4FEE Noflex Kaluapapa - Kaunakakai $59 $39 $29 $19 Kaluapapa - Honolulu $109 $79 $49 $39

Advance Purchase 0 0 3-7 days 14 days Change Fee $0 $0 $50 Not Permitted
Refundable Yes Yes No NoOST

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- 6773 October 31, 201 3 Page | 6 Proforma Data Operating Projections Average Sector Length (sm) 30 Scheduled Departures 1,560
Scheduled Block Hours 572.0

Projected Completion Factor 98.5%

Projected Completed Departures 1,537 Projected Completed Block Hours 563.4

Passenger Projections Projected Passengers 6,706 Passengers per Departure 4.4

Projected Average Fare $46.08

Revenue Passenger Miles (RPMs) 202,521 Available Seat Miles (ASMs) 371,243 Projected Load Factor 54.6%

Financial Projections
Revenues Passenger Ticket Revenues $309,024 Ancillary Revenues $6,180

Total $315,204

Expenses Flight Operations $87,894 Aircraft Ownership/Lease $300,000
Fuel & Oil $167,336 Sales & Marketing $40,000 Traffic Servicing $230,831

Insurance $21,973

Maintenance $107,050
Sub-Total - Direct $955,083

Indirect $251,795 Total Expenses $1,206,878

Projected Operating Profit/(Loss) ($891,674)

Subsidy Calculations Operating Loss $891,674
Economic Return @ 5% $60,344

Required Subsidy $952,018

Subsidy per Departure $619.56 Subsidy per Passenger $141.97 Avg. Enplanements per Operational Day 10.7 

### 18 Weekly RTs: Kalaupapa - Honolulu OST-2000-6773 Aircraft Option: Cessna Caravan 12 Weekly RTs: Kalaupapa - KaunakakaiOST

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### ATTACHMENT AOST

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