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Proposal to Provide Essential Air Service at 

### MERCED, CAL:IFORNIA VISALIA, CALIFORNIA
Under49 U.S.C. 41731 etseq. Docket DOT-OST-1998-3521 Docket DOT-OST-2004-19916



# SeaPortAirlines, Inc. Proposal to Provide Essential Air Service at Merced and Visalia, California
By Order 2012-5-11, the Department requested proposals from carriers interested in providing Essential Air Service (EAS) at Merced and Visalia, California no later than June 11, 2012. By Memorandum, the Department subsequently extended the deadline for submission of proposals to no later than June 25, 2012. Pursuant to that Order, SeaPort Airlines, Inc. respectfully submits this timely proposal to provide subsidized essential air service tothe communities ofMerced and Visalia.
This proposal has been structured to offer residents and visitors a greater number ofdeparture time choices, more nonstop and direct destinations, and a comprehensive marketing strategy at a lower level ofsubsidy than being paid to the present operatorof EAS at Merced and Visalia. The improved service at a lower level of subsidy in this proposal is intended to directly address concerns expressed by the Department in Order 2012-5-11 regarding subsidy levels at both Merced and Visalia which presently exceed the statutory limit of$200 per passengers. Shortly after this proposal is docketed, SeaPort Airlines will contact the Airport Manager in each co111munity to schedule a presentation to explain our proposal in detail and answer any questions. In the interim and throughoutthe carrier selection process, questions regarding this proposal should be directed to: Timothy Sieber Vice President

- Strategy & Corporate Development SeaPortAirlines, Inc. 7505 NE AirportWay Portland, OR 97218 (971) 340-1716 tsieber@seaportair.com

# SEAtPORT

=====AIRLINES


# Description of Proposed Service
CompanyOverview
SeaPort Airlines, Inc. is a FAA certified scheduled airline with 30 years ofexperience in commercial aviation and built around providing efficient and reliable service to rural communities. This is in sharp contrast to the strategies ofthe global airline brands and their regional airline partnersthat no longer havethe operational oreconomic capability, or in many cases even a strategic desire, to serve small communities such as Merced and Visalia. SeaPort Airlines is headquartered in Portland, Oregon and has operational bases in Portland, Memphis (Tennessee), and Juneau (Alaska). Our approximately 180 professionals operate a fleet of 14 aircrafton an average of90 daily departuresto 20 cities in eight states. The focus ofour business is providing affordable and reliable service to small and rural communities, with particular focus on providing connectivitywith the national airtransportation system. Presently, SeaPort delivers Essential Air Service to seven communities: Excursion Inlet, Alaska; Pendleton, Oregon; El Dorado, Hot Springs, and Harrison, Arkansas; Salina, Kansas; and Jackson, Tennessee. 1 In each ofthese cases, after award ofthe EAS contract, we have started service on time, on budget, and with fares either at or below those outlined in our proposal. This record stands in stark contrast to a number of other airlines in the EAS program that submit proposals with unreasonably low fares that are never realized by the traveling public, delay the start ofservice, or do not launch service after it has been awarded bythe Department. 

### ATrack Record ofBuilding Community Partnerships SeaPort Airlines prides itself on developing partnerships with each community it serves. This includes participation in local events, donation of tickets, on-going communication, and regular community meetings. We believe this approach serves our own interests equally with those of our EAS communities by fostering long-term, stable relationships that result in increased ridership and, eventually, reduced subsidy requirements.
We also note that in every one of our EAS communities (except in Alaska), SeaPort Airlines represented the first time that service was offered with single-engine aircraft. Any initial trepidation about aircraft size quickly, however, dissipated as each experienced the benefit of higher frequency levels that can only be economically provided with smaller aircraft. Combined with our affordable fares and highly-personal service, SeaPort Airlines enjoys strong community support in our EAS communities. This point is underscored by the fact that every one of our EAS communities in the Lower 48 has selected SeaPort Airlines to continue serving their market for an additional contract period.2 This includes the recent reselection of SeaPort Airlines in Salina, Kansas for a four-year contract (ratherthan the standard two-year contract) based on overwhelmingly positive support from the community, and the selection of SeaPort Airlines at Pendleton, Oregon for a contract renewal overa competing bid thatoffered 37-passengeraircraftand the brand ofa majorairlines.

1 Proposals to provide Essential Air Service at Kake, Alaska are awaiting the Department's carrierselection.

2 SeaPort had previously provided EAS at Jonesboro, AR but elected not to pursue a second contract term in that marketduetoweaktraffic and marketconditions that indicated a low chance the market could be revitalized.

Merced, California: DOT-OST-1998-3521 Visalia, California: DOT-OST-2004-19916 Page 12 June25, 2012

# SEA>tPORT

====AIRUNES



### We encourage the communities of Merced and Visalia to contact any of our EAS communities to discuss the responsive, affordable, and reliable air service that we provide. Additional evidence of our ability to develop strong partnerships and provide Merced and Visalia with reliable, customerfocused air service is demonstrated through community and customer comments that are provided later in this document.
Aircraft 

### SeaPort isoffering two aircraft types for consideration by the communities of Merced and Visalia, both ofwhich are described below: Cessna Caravan SeaPort Airlines is proposing to provide service at Merced and Visalia using the modern and efficient Cessna Caravan turboprop. Currently being produced in the USA, the "Caravan" was originally designed in the 1980'sto replace an aging fleet ofpiston-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 seats nine passengers and we believe this aircraft offers the "right size" capacity increment for both ofthe communities in this proposal, enabling us to offer optimal frequency levels and reasonable fares while simultaneously minimizing the required level ofsubsidy. While the Caravan is certified for single-pilot operation SeaPort typically operates with both a Captain and First Officer.

The large cargo pod on the Caravan accommodates more baggage than on older piston twins (i.e., Piper Chieftain and Cessna 402) and allows for easier segregation of passengers and baggagefor security purposes.3

3 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 of65 cubic feet and 700 pounds in its nose compartment and two wing lockers.

Merced, California: DOT-OST-1998-3521 Visalia, California: DOT-OST-2004-19916 Page 13 June 25, 2012

# SEAtPDRT

======:t.IRLINES



### As noted earlier, however, SeaPort operates single-engine aircraft and enjoys strong community support in all of the EAS markets that we serve. This is because on a daily basis we demonstrate that the Cessna Caravan is the ideal platform for safe and reliable air transportation with higher frequencies than would be economically possible with larger aircraft. While our experience in these other markets makes us confident ofour ability to build support in Merced and Visalia, we offer the following additional points for consideration as both communities evaluate this proposal: 

# + The argument that single-engine aircraft are less safe than multi-engines is based on the presumption ofengine failure. Failure of modern turbine engines is extremely rare, and even rarerthat enginefailure is the primary cause ofan accident or incident. 

# + Multi-engine aircraft experience asymmetric thrust and a loss ofclimb performance of up to 80%. In contrast, single-engine aircraft don't experience asymmetric thrust, and they typically have higherglide ratios and can land at slower speeds.


## + As reliability has improved over the last 75 years, airlines have specified fewer engines on new aircraft designs- "more is better"nolongerapplies. 

# + Newer, modern technology single-engine turboprops aircraft provide a better customer experience than 35 year old piston-powered twin engine aircraft. PiperChieftain
49 U.S.C. 41732(b)(5) entitles communities to EAS service with twin-engine aircraft, however communities can waive their right to twin-engine aircraft. SeaPort Airlines presently provides service in all ofour EAS communities with single engine aircraft and, as noted above, every one of our EAS communities in the Lower 48 has selected SeaPort Airlines to continue serving their market for an additional contract period. Notwithstanding our belief that the.Cessna Caravan represents the best platform for frequent, economical and reliable air service at Merced and Visalia, we are including in this proposal the option ofservice with twin-engine Piper Chieftains.
The Chieftain is a stretched version ofthe Piper Navajo that operates with a single-pilot and 9 passengers. The aircraft has two Lycoming piston engines and baggage storage in a nose compartment and wing lockers.4 

### The aircraft offers adequate range with a full load of passengers to operate the service pattern offered in this proposal, and has a typical cruise speed of 175 knots. Over 1,800 Chieftains were built between 1972 and 1984 by Piper Aircraft. Analysis of aircraft presently offered for sale indicatesthat ifthe option ofservice with Chieftains is selected, we will not have any difficultyfinding a suitable aircraftto serve Merced and Visalia.

4 See footnote 3.

Merced, California: DOT-OST-1998-3521 Visalia, California: DOT-OST-2004-19916 Page 

### 14 June 25, 2012

# SEAtPORT

====•AIRliNES



### InterlineConnectivity& 

### GDS Display
All SeaPort Airlines flights are displayed in the major global distribution systems, making our flights available for sale via travel agents and all primary online travel portals and meta-searchers such as Orbitz, Travelocity, Expedia, Kayak, Hipmunk, and CheapoAir. 

## SeaPortAirlines Availability in Global Distribution Channels

J>mH**~JT~-off** {E)t!'l!lding**Tlille<Off~tflidlt)** '**~>S!OOei~B:Sllp** 

# •

SeaPort has an interline ticketing agreement with US Airways and an agreement has been reached with a major airline that has a large presence on the West Coast that is scheduled to become effective on August 20, 2012. Additionally, we are close to securing additional interline agreements thatwill allowour customers to purchase single ticket itineraries between their local airport and even more destinations around the world. At least one, and possibly two more, interline agreements providing greater connecting opportunities for travelers from Merced and Visalia are anticipated to be in place bythe end of2012. To facilitate these agreements, SeaPort recently migrated to the Radixx reservation system. This new system provides us with the functionality to implement unilaterial and bilaterial ·interline eticketing (lET) agreements, including inter airline thru check-in (IATCI) for baggage check to a

Merced, California: DOT-OST-1998-3521 Visalia, California: DOT-OST-2004-19916 Page 

### 15 June25, 2012

# SE ORT

customer's final destination and (dependent on agreement terms with each carrier) issuance of connecting boarding passes. Proposed Aircraft Routing 

### & Connecting Hubs


### At both Merced and Visalia, SeaPort Airlines is proposing a linear service pattern that provides service overthe following routing: Oakland International Airport (serving the San Francisco BayArea) ¢ Merced ¢ Visalia ¢Burbank (serving the LA Basin)¢ San Diego · This routing will provide travelers in Merced and Visalia with a combination of nonstop and direct service to three of the four largest metropolitan areas in California (Sacramento being the only remaining one). Equally important, the proposed service pattern results in more frequent flights than presently offered ateither Merced orVisalia. 

## SeaPortAirlines, Inc. Proposed Service Pattern & Illustrative Schedule Merced 

## &Visalia, California

Basin !Burbank)

Merced, California: DOT-OST-1998-3521 Visalia, California: DOT-OST-2004-19916 Page 16 June 25, 2012

# SEA ORT

Frequency Levels In Order 2012-5-11, the Department states: "If

### 819-seataircraftare proposed, we would expect ·four orfive roundtrips a 

### day (24 or30 a 

### week).'.f> While Order 2012-5-11 is silent on service patterns in conjunction with another community, we note that in Orders requesting EAS proposals in other communities the Department has included language regarding higher frequency levels when communities share capacity. For example, in Order 2011-9-5 the Department stated: 

### "We may subsidize additional frequencies if the affected community is served in conjunction with anothercommunity.'13


### The linear service pattern that SeaPort Airlines proposes results in an average of six daily departures at both Merced Regional Airport and Visalia Municipal Airport. To complement the illustrative schedule shown on the previous page, the table below summarizes the total number of weekly and average daily arrivals from and departures to each connecting hub airport (including nonstop and direct flights), as well as the "bridge" flights between the two communities. 7

San Diego (1-Stop)



### The greater choice of flight times and destinations provided by this service pattern is projected to result in higher passenger enplanements at both Merced and Visalia which, when combined with a requested subsidy level that is lower than the current rate, is responsive to the Departments concerns about present subsidy levels being above the $200 per passengerstatutory limit.

5 Order2012-5-11, p. 3

6 Order2011-9-5, p. 6

7 Nonstop segments are shaded and have bold typeface

Merced, California: DOT-OST-1998-3521 Visalia, California: DOT-OST-2004-19916 Page 

### 17 June 25, 2012

# SE 

# PORT

Finally, note that the proposed service pattern includes "up-line" San Diego service the VIS-BUR segment. None of the operating costs for the BUR-SAN segment have been included in the calculation ofsubsidy requirements and SeaPortAirlines will operate BUR-SAN entirely at its own risk. We have, however, included projected revenues that will be generated by passengers traveling between San Diego and Visalia (and to a lesser degree, between San Diego and Merced), contributing to a loweroverall subsidy requirement.8 Connecting HubAirports
As noted, the service pattern that we are proposing at Merced and Visalia provides access to three ofthe four largest metropolitan areas in California. In addition, each ofthe "hub airports" provides a range ofconnection opportunities to domestic and international destinations on a mix of legacy and low-fare airlines.

OaklandInternationalAirport(serving the San Francisco BayArea)

Oakland International Airport (OAK) provides convenient access to the San Francisco Bay Area, including transportation to both downtown Oakland and San Francisco via the Bay Area Rapid Transit (BART) system. AirBART is a shuttle service that links with the BART rail system at the Coliseum/Oakland Airport station. From there, it is quick ride to major tourist and business centers in the Bay Area including: San Francisco's Embarcadero (21 min), downtown Berkeley (23 min), Central Oakland (10 min), and Balboa Park (33 min). Equally as important, Oakland International Airport provides connecting opportunities on nine airlines to destinationsthroughoutthe United States and Mexico. 9 It is importantto point outthat nearly 82% of capacity at OAK is provided by low-fare carriers, including Spirit and Allegiant, which are commonly referred to as "ultra-low fare" airlines. A map of nonstop service available from Oakland International Airport is provided on the next page.

8 The higher level offlight activity at Burbank resulting from our operation of BUR-SAN will generate airport station efficiencies that accrueto the BUR-VIS further lowering oursubsidy requirement.
9 1n addition, ArkeFiy provides weekly summerseasonal service between OAKand Amsterdam.

Merced, California: DOT-OST-1998-3521 Visalia, California: DOT-OST-2004-19916 Page 18 June25, 2012

## Oakland InternationalAirport Nonstop Service- June 2012 

# SEA(PDRT

====·AIRLINES

Finally, the most important advantage ofOakland International Airport as a gatewayto the Bay Area is the lack of delays relative to those experienced at San Francisco International Airport, a situation that will be amplified over the next couple of years as the airport undergoes major runway construction. In the last year, SFO experienced 12% more delays, averaging 40% longer than OAK. 10

BurbankBob Hope Airport(serving the LosAngeles Basin)

Burbank Bob Hope Airport (BUR) provides convenient, hassle-free access to the Los Angeles area. The airport is the closest to many ofthe most popular LA destinations, including Universal Studios, Warner Brothers Studios, Rose Bowl Stadium, Dodger Stadium, KodakTheater, Getty Center, Santa Monica, Griffith Park, Hollywood Bowl, and The Grove. The airport is 30 minutes to downtown Los Angeles compared to 40 minutesfrom Los Angeles InternationalAirport. Bob Hope Airport also offers travelers the convenience of multi-model transportation. Ten Amtrak trains and 29 Metrolinktrains serve the Bob HopeAirportTrain Station daily, helping travelers getto Downtown Burbank, Glendale and Union Station in Downtown Los Angeles. In addition to train service, the airport offers free shuttle service to the Downtown Burbank Station, where connections can be made with the Santa Clarita Line, and to the North Hollywood Red Line Station where Red Line provides easy accessto Hollywood and·Downtown LosAngeles.
As for connections, Bob Hope Airport offers an average of75 nonstop flights daily on Alaska, Delta, jetBiue, Southwest, United, and US Airways toWest Coastcities, mid-continent hubs and NewYork. Current nonstop connecting destinations are illustrated on the map on the next page.

10 SOURCE: Bureau ofTransportation Statistics.

Merced, California: DOT-OST-1998-3521 Visalia, California: DOT-OST-2004-19916 Page 

### 19 June 25, 2012

## Burbank Bob HopeAirport Nonstop Service- June 2012 

# SEAtPORT

o====•AIRllN ES



### The greatest strength of Burbank Bob Hope Airport is the convenient travel experience, particularly relative to Los Angeles International Airport. All connecting flights at BUR are in one terminal, compared to multipleterminals (and security checkpoints) at LAX. Fortravelers departing BUR, it is a short walk from the parking shuttle to short security lines and onto the aircraft. For arriving travelers, there is curbside pick-up, convenient access to rental cars, quick parking shuttles, and freeways located only a mile away.

San Diego InternationalAirport



### San Diego International Airport (SAN) provides convenient access to the San Diego metropolitan area, including downtown San Diego, San Diego Cruise Ship Terminal, NAS North Island, and MCAS Miramar. The airport consistently ranks high in surveys conducted by Airports Council International (ACI) that capture passenger appraisal of service factors, from check-in through to departure atthe gate. The airport is served by 17 airline brands (including affiliated regional partners) offering nonstop service to over 50 destinations on an average of250 daily departures. As shown on the map on the next page, this includes domestic service as well as service to Canada, Mexico, and the United Kingdom.

Merced, California: DOT-OST-1998-3521 Visalia, California: DOT-OST-2004-19916 Page 110 June 25, 2012

## San Diego International Airport Nonstop Service- June 2012 

# SEA>tPORT**====<~~.tRLINES**

In addition to service shown on the map, Alaska Airlines has announced itwill begin nonstop service between San Diego and Orlando on October 11, 2012 and Japan Airlines will begin nonstop service to Tokyo, Japan (NaritaAirport) in December2012 using Boeing 787 aircraft. 

### Pricing Model SeaPort Airlines employs a simplified pricing strategy ofall fares being one-way with varying levels of advance purchase and capacity controls. This approach allows us to offer attractive fares while minimizingrequired levels ofsubsidy and offering a path for continued eligibility to participate in the EAS program. The projected highest and lowest fare in both Merced and Visalia, along with a projection of the average fare, is provided on the table below: 

## SeaPortAirlines Illustrative Fares Pricing Range &Average

Merced, California: DOT-OST-1998-3521 Visalia, California: DOT-OST-2004-19916 Page 111 June25, 2012

# SE 

# PORT

SeaPort Airlines believesthat ourfare structure represents a responsible approach to pricing in EAS communities and is consistent with the overall objectives of the program. While we offer affordable fares that can be combined with fares from the connecting hub for an overall reasonable trip cost, we do not believe that pricing strategies that shiftthe true cost ofairtransportation from the consumerto the Departmentare consistentwith the intentofthe essential air service program. PassengerTraffic Projections SeaPort's projections of traffic and revenue at Merced and Visalia were developed using a forecasting methodology that factors recent and historical traffic levels, in addition to frequencies, connecting options, aircraftsize, nonstopv multi-stop flights, averagefares, etc. 

## SeaPortAirlines Projected PassengerO&DTraffic by City-Pair

Note that projections include 7,825 local O&D passengers between San Diego and Burbank. This equates to approximately 10.8 passengers daily each way (PDEW) and is provided to demonstrate that there will be sufficient capacity on this "up line" service to accommodate thru passengers traveling to and from Visalia and Merced. Marketing 

### & Community Relations
In this proposal, SeaPort Airlines has allocated $50,000 per year for marketing and sales activity for both Merced and Visalia (combined total of$100,000). Ifselected to provide EAS, we will employ a comprehensive mix of marketing and public relations strategies to introduce our brand to the community and increase enplanements at Merced and Visalia.
In addition to traditional advertising in each community, including a mix of printand radio, key strategiesthatwewill employ include: 

# + Local Event Marketing: Recognizing that visible participation in local events has been successful for both legacy and low-cost airlines, SeaPort has implemented a similar strategy in all ofits communities. These have ranged from SeaPortAirlines' community Easteregg hunts, to presenting at business expos, to hosting "after hours" events at local Chamber of Commerce meetings. In addition, SeaPort often makes "in kind" donations of tickets for use by local charities, eitherfor their own business needs or as a fundraising tool (i.e., raffles, silent auctions, etc.). 

# + City Ticket Offices: SeaPort's plans for Merced and Visalia include establishing city ticket offices in the downtown area ofeach community. Borrowing from the success ofsuch offices by other airlines, we believe that this will increase visibility of the airport and air service, create an additional opportunity to provide the highly-personalized customer service on which we have

Merced, California: DOT-OST-1998-3521 Visalia, California: DOT-OST-2004-19916 Page 112 June 25, 2012

# SEA>tPDRT

AIRLINES

built our reputation, and reinvest in the local communities. We are also considering the use of city ticketoffices as the base for a new Spanish-speaking call center. 11 

# + Social Media: Since 2010, SeaPort Airlines has managed a successful social media campaign that has allowed the Company to dynamically engage its customer base in a two-way conversation through sites such as Facebook, Twitter, FourSquare & Linkedln. We have found social media to be an excellenttool for generating passenger referrals and information sharing in ourcommunities, and expect similar results in both Merced and Visalia. 

# + FlyerFiex Customer Rewards: SeaPort offers a customer loyalty program called 

### "F/yerF/ex." This program provides customers with a variety of benefits including free flights, service charge waivers, and bonus points. With the implementation of our new reservation system complete (described above), SeaPort plans to unveil enhancements to the 

### F/yerF/ex program over the next six months that include a wider range oftravel award options and ability for customers to check balances and redeem awards online. 12 

# + Value Accounts: SeaPort offers Corporate Value Accounts that encourage businesses to make a long-term investment in local air service by offering a variety of benefits, such as waivers to change fees and savings of as much as 15% off published fares. Unlike corporate travel programs of major airlines that typically prevent small businesses from realizing meaningful benefits, companies ofvirtually any size (and any employee ofthose companies) can realize real savings and benefits from SeaPort'sValueAccount program. Our approach to marketing budgeting is based on the philosophy that reasonable advertising budgets can be effectively leveraged with "new media" such as social networking, blogs,**opt~in** email, etc. to engage with customers on a more personal level. Similar to our fare structure, we believe this approach represents a fiscally responsible use of subsidy (and therefore taxpayer dollars) in EAS.

11 Because ofthe investment required, establishment of city ticket offices is contingent on the selection offour-year EAS contract as discussed later in this proposal.

12 As interline agreements are added, SeaPort will seek to offer opportunities for credit accrual in the frequent flyer programs ofour majorairline partners.

Merced, California: DOT-OST-1998-3521 Visalia, California: DOT-OST-2004-19916 Page 113 June 25, 2012

# SEAtPDRT

":::.":===:AIRLINES


# Community

# &Customer Feedback

To this point, we have outlined our own view of why SeaPort Airlines is uniquely positioned to provide reliable and reasonably priced air transportation, contribute to economic vitality and quality of life in both Merced and Visalia, and ensure that the communities maintain their eligibility to participate in the EAS community by reducing subsidy levels to below the $200 per passenger cap. The strongest proof of our ability to deliver this product can be found in the accolades we regularly receive from both our customers and community partners. Below is just a small sample of the commentsthatwe have received: 

### Our EssentialAirService Community Partners "South Arkansas Regional Airport and the entire South-central Arkansas region suffered from the Joss ofairservicepreviouslyprovidedbyMesa Airlines in the Spring of2008. Unreliable service and 

### apoorschedule were alreadynegativelyimpacting enplanementsbefore Mesa pulledout, butatthat point, the nearestoption forairservice ofanykind was almost

### a two hourdrive away. Aftersorting through applications from many different interested carriers, the El Dorado Airport Commission, along with El Dorado's Mayor, chose SeaPort to restore airservice to South Arkansas. This was the beginning ofa greatpartnership between SeaPortandourlocalcommunity. "Working with SeaPort has been nothing but a pleasure from the bottom to the top of their organization, and theircommitment to excellence shines through the glowing comments that I hear from people who fly with them. In addition to hearing comments from others, I have flown SeaPort on severaloccasions, andhave come awayfrom the experience thinking 'This is howallairservice shouldbe."

- Josh Zylks Airport Manager SouthArkansas RegionalAirport (Goodwin Field)

"Eastern Oregon Regional Airport at Pendleton had been s_truggling since schedule changes following 9111 served by

### a carrier flying 37 seat aircraft. Lowpassengercount attributed to poor schedule, which then contributed to poorerpassengercount. The carrier's solution was to bring in largeraircraft and fly to 

### a different hub. The Airport and community balked at this suggestion and wentin search ofalternatives. The solution found through the EASprocess was SeaPortAirflying a 9passengerPilatus. The passengers have welcomed the new service, much betterschedule, and are elated with 'no securitycheck'andstandbytime. Passengers todaywill say, '/love the service', 'greatcustomerservice,'and 'I'm suregladI finallytriedit, cause I'llbe back'

"In ourparticularmarket, the 9passengeraircraftisperfect, andSeaPortAirprovides the schedule, theprofessionalism, andcustomerservice we needanddesire."

Merced, California: DOT-OST-1998-3521 Visalia, California: DOT-OST-2004-19916 Larry Dalrymple Airport Manager Pendleton RegionalAirport

Page 114 June 25, 2012

# SEA(PORT

====AIRLINES

"/ understand the importance ofhaving dependable, reliable airservice with an affordable cost. Not only will SeaPortAirlines meet these needs, but excel byproviding great customerservice, 

### a high levelofcommunityinvolvement, andan eagerness to become

### a communitypartner".

OurCustomers Luci Larson

·Former Mayor

### & Ownerof Action Travel Salina, KS

"Two hours before the flight I booked my ticket to Memphis from Hot Springs. Wow! What 

### a surprise; it was simple, convenient, great price, and impeccable service. It far exceeded my expectations andI willbe flying to Memphis on SeaPortAirlines instead ofdriving from nowon. The customerservice was fabulous!"
Ruth Ann Smith Customer (flewfrom Hot Springs to Memphis)

"Flewwith youguys from Wenatchee to Vancouver WA andback. Awesome trip, had

### a greatflight. TONS more fun than a biggerplane, anda lotless hassle. Willbe making the same trip again this fall! Thanks a bunch forthe awesome service here, we've neededa decentcarrieroutofPangborn for

### a long time."
Dan Brown Customer (flewfrom Wenatchee to Portland)

"Had 

### a great flight last Friday from Hot Springs AR to Dallas Love field

...had Jeremy (The Flying Hawaiian) 

### &Colin

...Best Flight ever! Highlyrecommend this airline

....Great

### &Friendlyservice! I will definitelyflythis airline again!"

- Susan Gower Customer (flewfrom Hot Springs to Dallas)

"/ have neverhad such 

### a positive experience connected with any airline. I read about SeaPortAir last October when theyopened the Mid-South Route, but didn't have the chance to fly unW March. Usually the dread ofthe process comes then youjust grin andbearit; however, with SeaPortAirI couldarrive 15minutes early. The hassle free no TSA is wonderfulandmade me feelspecial. Ihave flown twice in the last2 months andthe customerservice from start to finish is outstanding. I willbe a regular customer and have already recommended the airline to several associates. Thank you, SeaPortAir, formaking me fee/like

### a queen!"

Merced, California: DOT-OST-1998-3521 Visalia, California: DOT-OST-2004-19916 - Catherine Martin Customer (fewfrom Memphis to Harrison)
Page 115 June 25, 2012

# SEA/PORT

====1\IRLINES

"MyhusbandandI recentlyhadto make a fast trip to Dallas forthe funeral ofa dearfriend. Iwas not interestedin making that drive overa fast weekend. Then I remembered that SeaPort hadrecently started flights between Hot Springs and Dallas. I called SeaPort, Jim andBob were so quick to get us booked, lastminute so we could fly down andattend the funeral and visit with family and friends that we don'tgetto see vefYoften.
EvefYone was so friendly, helpfulandprofessional. Itwas a dream trip, even to attenda funeral. The pilotgoing down was so kind. When he found out thatmyhusbandhadbeen a ball turretgunnerin WW/1, he gave him a set ofheadphones so he couldlisten to the communication between the pilots andthe airtraffic controllers. To saythe least, myhusbandwas impressed. Itwas such a blessing to have been taken care ofin such

## a kindandprofessionalmanner, especiallyunderthe circumstances ofourtrip. Thankyou, Jim, Bob, Chris, Doug, RodneyandMichael."

- Catherine Martin Customer (fewfrom Hot Springs to Dallas)

"Fortwo decades I have been picking mymotherup at the airportand fortwo decades I have been met with the defeated, hang-dog look that the ordeal ofair travel has given her. I guess it pretty much does it to all ofus, but (as she is well into her80's) I worfYaboutthe tollit takes on hermore andmore lately.
"When Ipickedherup todayfrom herSeaPort flight K52325 from Dallas andsaw she was smiling, you could have knocked me over with 

### a feather! She couldn't stop raving about howpleasant the flight was. Letme be clear. My motheris a tough-as-nails Mid-western Yankee from the oldschool who has been around the world a couple oftimes since the late 1940's. She doesn't bestow idle praise andshe seldom raves. "I'm in the service industfYmyselfand I know howoften complaints come through. Ijust want to be sure to letyou know how wellevefYone didon this flight. In the future, I will look to SeaPort first for mytravelneeds andwillspreadthe goodwordto myfriends.
"A smile anda kind wordgo a long wayy'all. Thankyou forgetting this one so right."

Merced, California: DOT-OST-1998-3521 Visalia, California: DOT-OST-2004-19916 Mark Davis Peterson Customer (flewfrom Dallas to Memphis)

Page 116 June 25, 2012

# SEAtPDRT

.:::::===:<\IRLl NES



# Service Proposal

SeaPort Airlines is proposing a single and inseparable service proposal at Merced and Visalia with the option of flights using either the Cessna Caravan or Piper Chieftain. The level of requested subsidy, by airplane type, is summarized on the table below.
Cessna Caravan Piper Chieftain Merced $1,578,113 $1,604,249 Visalia $1,857,912 $1,890,839 TOTAL $3,436,025 $3,495,088


### This proposal provides each community with an attractive mix of nonstop and direct service to multiple destinations that, when combined with an aggressive marketing strategy, is structured to result in higher traffic levels which will lower subsidy per passenger levels to below the $200 statutory limit. 13 

### Furthermore, the subsidy levels requested are belowthat currently provided to the incumbentcarrier. Term ofContractOption
The service proposal is structured on the basis ofa two year term. Notwithstanding the risk of cost inflation in coming years (particularly related to fuel) that could possibly outstrip traffic growth and reasonable fare increases, SeaPort is offering the Departmentand the communities the option to contractthe proposed annual subsidy rate for a fouryear period at no increase in annual subsidy beyond that level specified for the two year term. We believe this provides the communities of Merced and Visalia with the assurance ofstable air service for an extended period and reduces the administrative burden on both the Department and ourselves. SeaPort Airlines, Inc. appreciates the opportunity to submit this proposal and we welcome any questions or commentsfrom the communities and/orthe Department. Respectfully submitted,
Timothy Sieber Vice President

- Strategy & 

### Corporate Development SeaPortAirlines, Inc. June 11, 2012

13 Note that the higher "Indirect Expenses" for Piper Chieftain reflect that, should the communities select this type, these would be the only such aircraft in our fleet. Calculations ofTRAFFIC SERVICING factor in the operating costs of Merced Regional Airport as outlined in the May 17, 2012 letter to the Department from John Bramble, City Manager in Merced. Finally, the communities and Department are reminded that costs associated with operation of "up-line" BUR-SAN segment are not included in calculations of subsidy requirement and that we intend to operate that segment at its own risk. seaPort Airlines will agree to consult with the Department and communities prior to making any changes to this up-line service.

Merced, California: DOT-OST-1998-3521 Visalia, California: DOT-OST-2004-19916 Page 117 June 25, 2012SeaPortAirlines, Inc. Merced,California (Cessna Caravan) Operating Projections Awrage Sector Length (sm) Scheduled Departures Scheduled Block Hours Projected Completion Factor Projected Completed Departures Projected Completed Block Hours Passenger & Revenue Projections Projected Passengers MCE-BUR MCE-OAK MCE-SAN MCE-VIS Total Projected Awrage Fare MCE-BUR MCE-OAK MCE-SAN MCE-VIS Awrage Local Rewnue Passenger Miles (RPMs) Available Seat Miles (ASMs) Load Factor Projected Market Load Factor (Local Traffic Only) Average SegmentLoadFactor(Includes Thru Traffic) Onboard Segment Load Factor: MCE-OAK Onboard Segment Load Factor: MCE-VIS Financial Projections Rewnues PassengerTicket Rewnues Ancillary Rewnues Total Expenses Flight Operations Aircraft Ownership/Lease Fuel & Oil Sales & Marketing Traffic Sel\icing Insurance Maintenance Sub-Total- Direct Indirect Total Expenses Projected Operating Profit/(Loss) Subsidy Calculations Operating Loss Economic Return @ 5% !Required Subsidy Subsidy per Departure Subsidy per Passenger- MCE O&D Only

Merced, California: DOT-OST-1998-3521 Visalia, California: DOT-OST-2004-19916

# SEA~PDRT =====AIRLINES

96 2,808 2,106.0 98.5% 2,766 2,074.4

1,875 5,201

982

14 8,072
$119.80

$52.65 $151.12

$48.12 $80.22 770,959 2,381,423
32.4% 48.0%l 54.7% 40.8%

$647,531

$15,217 $662,748
$176,325 $360,319 $582,494 $50,000 $346,938

$33,191 $373,394 $1,922,661

$211,493 $2,134,153 ($1 ,471 ,405)

$1,471,405

$106,708 $1,578,1131 $570.56 $195.50

Page 118 June 25, 2012SeaPortAirlines, Inc. Visalia, California (Cessna Caravan) Operating Projections A.erage Sector Length (sm) Scheduled Departures Scheduled Block Hours Projected Completion Factor Projected Completed Departures Projected Completed Block Hours Passenger Projections Projected Passengers VIS-BUR VIS-SAN VIS-OAK VIS-MCE Total Projected A.erage Fare VIS-BUR VIS-SAN VIS-OAK VIS-MCE A.erage Re.enue Passenger Miles (RPMs) Available Seat Miles (ASMs) Load Factor Projected Market Load Factor (Local Traffic Only) Average SegmentLoadFactor(Includes Thru Traffic) Onboard Segment Load Factor: VIS-BUR Onboard Segment Load Factor: VIS-MCE Financial Projections Re.enues Passenger licket Re.enues Ancillary Re.enues Total Expenses Flight Operations Aircraft Ownership/Lease Fuel & Oil Sales & Marketing Traffic Servicing Insurance Maintenance Sub-Total

- Direct Indirect Total Expenses Projected Operating Profiti(Loss) Subsidy Calculations Operating Loss Economic Return @ 5% !Required Subsidy Subsidy per Departure Subsidy per Passenger

- VIS O&D Only

Merced, California: DOT-OST-1998-3521 Visalia, California: DOT-OST-2004-19916 

# SEAtPDRT**c:=:=:====~IRLINES**

135 2,808 2,730.0

98.5% 2,766 2,689.1

3,995 1,620 3,901 14 9,530
$78.52 $146.12 $106.36

$48.12 $101.36 974,150 3,360,544
29.0% 49.2%1 54.1% 40.8%

$965,986

$22,701 $988,687
$228,569 $467,081 $755,085

$50,000 $388,337

$43,025 $532,491 $2,464,588

$246,459 $2,711,046 ($1,722,360)

$1,722,360

$135,552 $1,857,9121 $671.73 $194.95
Page 119 June25, 2012SeaPortAirlines, Inc. Merced, California (PiperChieftain) Operating Projections Awrage Sector Length (sm) Scheduled Departures Scheduled Block Hours Projected Completion Factor Projected Completed Departures Projected Completed Block Hours Passenger & Revenue Projections Projected Passengers MCE-BUR MCE-OAK MCE-SAN MCE-VIS Total Projected Awrage Fare MCE-BUR MCE-OAK MCE-SAN MCE-VIS Awrage Local Rewnue Passenger Miles (RPMs) AVclilable Seat Miles (ASMs) Load Factor Projected Market Load Factor (Local Traffic Only) Average SegmentLoadFactor(Includes Thru Traffic) Onboard Segment Load Factor: MCE-OAK Onboard Segment Load Factor: MCE-VIS Financial Projections Rewnues PassengerTicket Rewnues Ancillary Rewnues Total Expenses Flight Operations Aircraft Ownership/Lease Fuel & Oil Sales & Marketing Traffic Sen.king Insurance Maintenance Sub-Total

- Direct Indirect Total Expenses Projected Operating Profit/(Loss) Subsidy Calculations Operating Loss Economic Return @ 5% !Required Subsidy Subsidy per Departure Subsidy per Passenger- MCE O&D Only

Merced, California: DOT-OST-1998-3521 Visalia, California: DOT-OST-2004-19916

# SEA~PDRT =====AIRLINES

96 2,808 2,074.8 98.5% 2,766 2,043.7

1,875 5,201

982

14 8,072
$119.80

$52.65 $151.12

$48.12 $80.22 770,959 2,381,423
32.4%
54.7% 40.8%

$647,531

$15,217 $662,748
$122,621

$93,083 $621,278

$50,000 $346,938

$79,703 $500,701 $1,814,323

$344,721 $2,159,045 ($1,496,297)

$1,496,297

$107,952 $1,604,2491 $580.01 $198.74

Page 120 June 25, 2012SeaPortAirlines, Inc. Visalia, California (PiperChieftain) Operating Projections**A~.erage** Sector Length (sm) Scheduled Departures Scheduled Block Hours Projected Completion Factor Projected Completed Departures Projected Completed Block Hours Passenger Projections Projected Passengers VIS-BUR VIS-SAN VIS-OAK VIS-MCE Total Projected**A~.erage** Fare VIS-BUR VIS-SAN VIS-OAK VIS-MCE**A~.erage Re~.enue**  Passenger Miles (RPMs) Available Seat Miles (ASMs) Load Factor Projected Market Load Factor (Local Traffic Only) Average SegmentLoadFactor(Includes Thru Traffic) Onboard Segment L:oad Factor: VIS-BUR Onboard Segment Load Factor: VIS-MCE Financial Projections**Re~.enues** Passenger licket**Re~.enues** Ancillary**Re~.enues** Total Expenses Flight Operations Aircraft Ownership/Lease Fuel & Oil Sales & Marketing Traffic Senncing Insurance Maintenance Sub-Total- Direct Indirect Total Expenses Projected Operating Profit/(Loss) Subsidy Calculations Operating Loss Economic Return @ 5% !Required Subsidy Subsidy per Departure Subsidy per Passenger- VIS O&D Only

Merced, California: DOT-OST-1998-3521 Visalia, California: DOT-OST-2004-19916 

# SEA(PORT

=====AIRLINES

135 2,808 2,667.6 98.5% 2,766 2,627.6

3,995 1,620 3,901 14 9,530
$78.52 $146.12 $106.36

$48.12 $101.36 974,150 3,360,544
29.0% 49.2%1 54.1% 40.8%

$965,986

$22,701 $988,687
$157,655 $119,678 $798,786

$50,000 $388,337 $102,476 $687,611 $2,304,542

$437,863 $2,742,405 ($1,753,719)

$1,753,719

$137,120 $1,890,8391 $683.63 $198.41

Page 

### I21 June25, 2012