Before the United States Department ofTransportation September30, 2014

Essential Air Service at JACKSON, TENNESSEE Docket OST-2000-7857
Under49 U.S.C. 41731 et seq.

REQUEST FOR CHANGE IN COMPENSATION FOR PROVIDING ESSENTIAL AIR SERVICE AT JACKSON, TENNESSEE
By Order2011-12-15, the Department selected SeaPortto provide subsidized Essential Air Service ("EAS") at Jackson, Tennesee for a one year period at an annual subsidy rate of$1,149,703. The one yearcontract period was because concerns about Jackson's continued eligibility to receive subsidized EAS. By Order2013-2-23, the Department extended the service period for SeaPort at Jackson, Tennesseethrough January 31, 2014 at an annual subsidy rate of$1,115, 210. The reduced rate was established based on SeaPort's original proposal to provide EAS at Jackson, and assumed thattraffic levels at Jackson could be sufficiently restored aftera yearthereby lowering the required subsidy level. By Order2014-1-23, the Departmenttemporarily extended the service period until September30, 2014 atthe same subsidy rate established in Order2013-2-23. This temporary extension was due to uncertaintity about Jackson's future eligibility for EAS resulting from changes to continued eligibility requirements in the Federal Aviation Adminstration (FAA) Modernization and Reform Act of2012 (Public Law No: 112-95) and specificallythatthe community enplane an average of 10 passengers per day. By Order2014-6-6, the Department issued a Final OrderTerminating EAS Eligibiilty and Establishing Waiver Procedures for 13 communities in the EAS program, including Jackson. On September26, 2014, the Department granted waivers to 12 ofthose communities, including Jackson. 1

1 Order2014-9-21SeaPortAirlines, Inc. Requestfor Change in EAS Compensation atJackson Page 2 of4
SeaPort is understanding ofthe Department having to managethe uncertaintity over Jackson's continued eligibility to receive subsidized EAS, we notethat service is currently being provided at a rate first calculated in our proposal submitted on October2, 2011. As such, SeaPort respectively requests an increase in subsidy at Jackson from $607.89 to $910.65 perdeparture. On annual basis, this equates to a subsidy rate of$1,687,696. To supportthis increase in subsidy, SeaPort provides the following:

• Refusal bythe Transportation SecurityAdminstration ("TSA") to reestablish passenger and baggage screening at Jackson has required SeaPortto deplane passengers arriving into BNA atthe Fixed Based Operator ("FBO"). This has resulted in each SeaPort arrival atJackson paying a ramp fee to the FBO and anotherfee to a commercial shuttle service thattransports passengers to the main terminal.

• Increased direct maintenance costs resulting from an additional engine starts to reposition aircraftfrom the FBO to the main terminal for departing flights.

• Increased indirect maintenance costs due to renewal at a higher lease rate for our hangarat Memphis International Airport

• Increase in fees charged by athird-party to ground handle SeaPort's passengers and aircraft at BNA.

• Increased flight crew costs in the form higherofcompensation and significantly higherfrequency oftraining events due to the national pilot shortage.

• Higher costs resulting from our switch to the Altea reservation platform which improves SeaPort's ability to enter into interline agreements but has notyet resulted in an agreementthatwill materially benefit enplanement levels at Jackson, such as Delta, American, or United.2
·

• Enplanement levels at Jackson which were much higherthan the previous provider of EAS but belowthose projected in the proposal submitted three years ago. This is due to 1)TSA's refusal to reestablish screening that suppressestraffic by adding inconvenience and time to make a connection at BNA, 2) SeaPort's underestimation of how much market confidence in air service at Jackson had been eroded by the previous EAS operator, and 3) delay in establishing interline agreements that specifically benefit enplanement levels atJackson market.

2 SeaPort has an interline with Alaska Airlines and is currently conducting testing to implement an agreementwith Hawaiian Airlines in early November2014.SeaPortAirlines, Inc. Request for Change in EAS Compensation atJackson Page 3 of4

• Increases in corporate overhead which are primarily attributableto higher premiums on health insurance provided to ouremployees.

The table on page 4 ofthis filing summarizes the data supporting the requested increase in subsidy to $910.65 perdeparture, approximating $1,687,696 on an annualized basis. With service period established in Order 2014-1-23 scheduled to expire on September30, 2014, SeaPort respectively requests that the new subsidy rate be effective
on October 1, 2014 and applied retroactively is the Department approvesthis request after that date. Until otherwise advised by the Department, SeaPort intends to continue providing subsidized EAS to the community ofJackson, Tennessee. Nonetheless, we askthat a Request for Proposals be issued as quickly as possible so that a permanent subsidy rate
can be established through the typical carrierselection process.3 Any questions related to this request can be directed as described below.
Respectfully Submitted,

Timothy Sieber Executive Vice President SeaPortAirlines, Inc. 7505 NE AirportWay Portland International Airport Portland, Oregon 97218 Office: (971) 340-1716 email: tsieber@seaportair.com
DATE: September30, 2014

3 SeaPort is understanding ofthe higherthan workload faced by Department staff resulting from regular carrier selection proceedings, evaluation ofSCASD proposals, and nowthe need to move ahead with carrier selections at communities where continued EAS eligibility was previously not assured.SeaPortAirlines, Inc. Requestfor Change in EAS Compensation atJackson Page 4 of4
OST-2000-7857 RequestforChange in EAS Compensation atJackson, TN 12 Weekly RTs: Jackson- Nashville 6 Weekly RTs: Jackson -Memphis

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 ONnership/Lease Fuel & Oil Sales & Marketing Traffic Servicing Insurance Maintenance Sub-Total- Direct Indirect Total Expenses Projected Operating Profit/(Loss) Subsidy Calculations Operating Loss Economic Return @ 5% 

## I Required Subsidy Subsidy per Departure Subsidy per Passenger Avg. Enplanements per Operational Day Proforma Data
111 1,872 1,768.0 99.0%

1,853 1,750.3

5,051

2.7 $47.85 560,661 1,851,427 30.3%

$241,677

$6,042 $247,719
$173,282 $294,000 $401,698

$25,000 $371,036

$31,506 $306,306 $1,602,828

$240,424 $1,843,253 ($1 ,595,534)

$1,595,534 $92,163 $1,687,6961 $910.65 $334.13 8.1