Order 2015-1-4

Served: January 5, 2015

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

Issued by the Department of Transportation

on the 5th day of January, 2015

ORDER ESTABLISHING NEW SUBSIDY RATE ON A TEMPORARY BASIS

Summary

By this Order, the Department is establishing a new subsidy rate for SeaPort Airlines, Inc. 

(SeaPort) to provide Essential Air Service (EAS) on a temporary basis 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 6 nonstop round trips per week to Memphis International Airport,1

using nine-seat Cessna Grand Caravan aircraft, at an annual subsidy rate of $1,687,696.2 

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 of service 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 2011.3 Subsequently, by Order 2014-1-23, issued on January 31, 2014, the 

Department extended SeaPort’s service contract through September 30, 2014, at the same 

 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. 

3 See Order 2013-2-23 for a full discussion. At one time, Jackson’s eligibility was uncertain because of a new 

statutory requirement that would have made EAS communities ineligible if they were within 90 miles of the 

nearest large or medium hub, which would have affected Jackson. That statute was subsequently repealed.

Essential Air Service at

JACKSON, TENNESSEE

Under 49 U.S.C. § 41731 et seq.

DOT-OST-2000-7857
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subsidy rate of $1,115,210, and by Order 2014-10-2, issued on October 9, 2014, the 

Department further extended SeaPort’s contract through February 28, 2015.

By notice dated September 30, 2014, SeaPort requested a compensation adjustment for 

providing EAS at Jackson. In that notice, SeaPort explained that the cost of providing air 

service at Jackson has escalated since SeaPort’s original proposal submitted to the Department 

in 2011. Seaport identified several reasons for the escalating costs at Jackson, including the 

fact that the Transportation Security Administration (TSA) no longer has a presence at Jackson. 

The absence of TSA requires SeaPort to deplane its passengers at the Fixed Base Operator at 

the Nashville International Airport, resulting in increased expenses associated with ground 

handling and shuttle bus services to transport passengers to the main concourse. Seaport 

submitted a proposal indicating an annual subsidy rateof $1,687,696.

SeaPort’s notice, as well as 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.

Legislative Changes that Affected Jackson

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 is required to meet the 10-enplanement-a-day threshold for EAS to continue 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). 

In order to maintain continuous service at Jackson, the Department issued Order 2014-10-2 on 

October 9, 2014, temporarily extending SeaPort’s current contract through February 28, 2015.
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By Order 2014-10-21, issued on October 24, 2014, the Department, among other things, 

requested proposals from air carriers interest in providing EAS at Jackson for a new term. 

Those proposals were due November 24, 2014, and the Department is in the process of

completing this carrier selection case, which will establish a new long-term EAS contract.

Decision

As described above, the Department has issued a series of Orders extending SeaPort’s service 

obligation so that the community of Jackson did not suffer from a service hiatus and because 

SeaPort has been serving Jackson nearly a full year longer than originally contemplated without 

a rate adjustment to its 2011 proposal, the Department will provide a new subsidy rate to 

SeaPort,4 until the pending carrier-selection case has been finalized and a new contract has 

been issued to provide EAS at Jackson. 

 

The Department selected SeaPort based on its October 2011 proposal. SeaPort’s proposal

contemplated a two year term, after which point the Department would typically initiate a new 

carrier selection proceeding. For the reasons described in this Order, however, SeaPort is now 

in its third year of service at Jackson. SeaPort has agreed to continue service to this community

during the pendency of the Department’s proceedings related to Jackson’s continued eligibility 

for EAS and, now, the carrier selection proceeding. During this time, the Department has 

subsidized SeaPort at SeaPort’s 2011 proposed rate, although SeaPort has experienced an 

almost 25 percent increase in expenses for this service.

Because of the delay in initiating a carrier selection proceeding, SeaPort has continued to serve 

Jackson long beyond the period originally contemplated in SeaPort’s 2011 proposal. During 

this additional service period, SeaPort has experienced significantly increased costs. Therefore, 

the Department, in accordance with SeaPort’s September 30, 2014 request for a subsidy 

increase, will establish a new annual subsidy rate of $1,687,696 (as further detailed in 

Appendix B of this Order) for SeaPort’s service at Jackson. This new subsidy rate is needed to 

enable SeaPort to continue to provide EAS at Jackson during the pendency of the carrier 

selection proceeding. 5 This subsidy rate is effective as of October 1, 2014 and will continue 

for the duration of the term of service established by Order 2014-10-2 (extending SeaPort’s 

service term until the earlier of further action by the Department or February 28, 2015).

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

ACCORDINGLY,

1. SeaPort Airlines, Inc. will to continue to provide Essential Air Service at Jackson, 

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

2. The Department sets the rate of compensation for SeaPort Airlines, Inc., for the provision of 

Essential Air Service at Jackson, Tennessee, as described in Appendix B; 

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 

 4 In accordance with its request dated September 30, 2014, the Department will set SeaPort’s annual subsidy rate 

at $1,687,696.

5 The Department may adjust subsidy rates established for a carrier when the adjustment is in the public interest. 

14 CFR 271.8(b); see also 49 U.S.C. 41737(e).
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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:

 BRANDON M. BELFORD

 Deputy Assistant Secretary for

 Aviation and International Affairs

(SEAL)

An electronic version of this document is available online at

www.regulations.gov
 SeaPort Airlines, Inc. Appendix A

6 Weekly Roundtrips: Jackson, TN – Memphis, TN

12 Weekly Roundtrips: Jackson, TN – Nashville, TN

Operations Projections

Average Sector Length (sm) 111

Scheduled Departures 1,872

Scheduled Block Hours 1,768

Projected Completion Factor 99%

Projected Completed Departures 1,853

Projected Completed Block Hours 1,750.30

Passenger Projections

Projected Passengers 5,051

Passengers per Departure 2.7

Projected Average Fare $47.85 

Revenue Passenger Miles (RPMs)

 

560,661 

Available Seat Miles (ASMs) 1,851,427

Projected Load Factor 30.30%

Financial Projections

Revenues

Passenger Ticket Revenues $241,677 

Ancillary Revenues $6,042 

Total $247,719 

Expenses

Flight Operations $173,282 

Aircraft Ownership/Lease $294,000 

Fuel & Oil $401,698 

Sales & Marketing $25,000 

Traffic Servicing $371,036 

Insurance $31,506 

Maintenance $306,306 

Sub-Total - Direct $1,602,828 

Indirect $240,424 

Total Expenses $1,843,253 

Projected Operating Profit/(Loss) ($1,595,534)

Subsidy Calculations

Operating Loss $1,595,534 

Economic Return @ 5% $92,163 

Required Subsidy $1,687,696 
 Appendix B

SeaPort Airlines, Inc.

Essential Air Service to be Provided at Jackson, Tennessee

Effective Period: October 1, 2014, through 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: $911

Weekly Ceiling2: $32,796

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 December 11, 2014. The Government’s 

obligation for performance under this Order beyond December 11, 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 December 11, 2014, until funds are made available to the Department 

for performance. If sufficient funds are not made available for performance beyond December 11, 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 $1,687,696 divided by 1,853 annual departures (36 weekly departures x 52 weeks x 99

percent completion).

2 36 flights per week multiplied by $911 per flight.