Or der: 20 1 3

- 8

- 13

Served : August 23 , 20 1 3



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 23 rd day of August , 20 1 3

Essential Air S ervice at

EL DORADO/CAMDEN, ARKANSAS HARRISON, ARKANSAS HOT SPRINGS, ARKANSAS

under 49 U.S.C. 41731 et seq. Docket DOT

- OST

- 1997

- 2935

Docket DOT

- OST

- 1997

- 2935

Docket DOT

- OST

- 1997

- 2935

ORDER RE

- S ELECTING CARRIER

Summary By this O rder

, the Department is re

- s electing S eaPort Airlines , Inc. ( SeaPort ) to provide

subsidized E ssential A ir S ervice ( EAS ) at El Dorado/Camden (El Dorado) , Harrison, and Hot Springs, Arkansas, at a combined annual subsidy rate of $5, 865

, 372 ( $ 1,977,153 for El Dorado, $ 2,251,207 for Harrison, and $ 1,637,012 for Hot Springs) for the four

- year period from November 1, 201 3 , through October 31, 201 7

. 1

Background By Order 2011

- 11

- 21 (November 17, 2011), the Department re

- selected SeaPort to provide subsidized EAS at El Dorado, Harrison, and Hot Springs , Arkansas

, for the two

- year period from November 1, 2011, through October 31, 2013 . Under that Order, SeaPo rt provides each community with 18 weekly round trips to a hub airport using single

- engine, nine

- passenger Pilatus PC

- 12 aircraft, for a combined annual subsidy of $5,990,780. SeaPort provides El Dorado with service to Dallas Love Field (DAL) and Mem phis International Airport (MEM), Harrison with service to Kansas City International (MCI) and MEM, and Hot Springs with

service to DAL and MEM.

1 Subsidy is calculated and dist ributed on a fiscal year basis, subject to the availability of funds.- 2

-

In anticipation of the end of SeaPort’s current contract on October 31, 201 3 , the Department

issued Order 201 3

- 4

- 6 ( April 12 , 201 3)

. In response to th at Order, SeaPort, Multi

- Aero, Inc. d/b/a Air Choice One ( Air Choice One ) , Boutique Air (Boutique), and Osage Airlines, LLC (Osage) submitted proposals

. The carriers’ proposals are summarized below. The complete

p roposals are available at www.regulations.gov by searching for docket: DOT

- OST

- 1997

- 2935.

SeaPort
SeaPort, the incumbent carrier, submitted a proposal for El Dorado, Harrison, and Hot Springs, utilizing single

- engine, nine

- passenger Cessna Caravan aircraft. For El Dorado, SeaPort would provide 12 weekly nonstop ro und trips to DAL , and 12 weekly nonstop or one

- stop round trips to

MEM. This service would be provided for an annual subsidy of $1,977,153.

Harrison would receive 12 weekly nonstop round trips to MEM and 6 weekly nonstop round trips to MCI , requiring an annual subsidy of $2,251,207.

Finally, Hot Springs would receive nine weekly nonstop round trips to MEM and nine wee kly

one

- stop round trips to DAL for an annual subsidy of $1,637,012

.

The proposal is submitted as an inseparable package that would require a combined annual subsidy of $5,865,372 for a four

- year term.

Air Choice One Air Choice One proposed three standalone options for Harriso n as well one option for combined service for El Dorado/Camden and Hot Springs. All service would be operated with single

- engine, nine

- passenger Cessna Caravans. Air Choice One has offered each service option

for either a two

- or four

- year term. Air Ch oice One’s proposed service patterns are summarized

in the table below:

Harrison
Round trips per

week Annual
Subsidy 2 Aircraft
Option 1 10

- MEM & 8

- STL $2,294,435 Caravan
Option 2 18

- STL $2,235,910 Caravan
Option 3 18

- MEM $2,092,092 Caravan

El Dorado & Hot Springs
Round trips per

week Annual
Subsidy 2 Aircraft

Option 1 18

- MEM (from each community) $4,138,189 Caravan

2 Required subsidy for a two

- year contract. Subsidy would be slightly discounted i f selected for four years.- 3

-

Boutique Boutique Air proposed several service options in various combinations. They are summarized in

the table below. All service would be offered with single

- engine, nine passenger Pilatus PC

- 12

aircraft and are offered for a two

- year term.

Option Round
trips per

week Routing Annual Subsidy

1 18 DFW

- HOT

- HRO

- MEM $4,082,475

12 ELD

- DFW $1,374,155 6 ELD

- MEM

2 12 DFW

- HOT

- HRO

- MEM $3,037,784

12 ELD

- DFW $1,467,688 6 ELD

- MEM

3 12 DFW

- ELD

- HRO

- MEM $3,255,330

4 12 DFW

- ELD

- HOT

- MEM $3,577,516

12 HRO

- MEM
$1,460,655 6 HRO

- DFW

4B 12 DFW

- ELD

- HOT

- MEM $3,577,516

12 HRO

- MEM $1,561,921 6 HRO

- MCI

5 12 ELD

- DFW $2,547,046 6 ELD

- MEM

12 HRO

- MEM $2,110,913 6 HRO

- DFW

5B 18 ELD

- DFW $1,980,104

Osage Osage submitted a proposal with seven service options for various combinations of the communities. Osage proposes to operate their service with a single

- engine Cessna Stationair 8 (C

- 206). Osage states that its proposal is contingent upon the Department’ s approval of its application for Commuter Air Carrier Authority. To date, the Department has not yet received such application from Osage. For this reason, we will not consider its proposal further ; however,

the full document is available at www.regulations.gov

.

Community Comments

On May 2 0 , 2013 , we requested community comment s regarding the carrier selection at the se communities

.

El Dorado

We received a letter from Frank Hash

, Mayor of the City of El Dorado. He states

, “ [T]he El Dorado Airport Commission voted ... to recommend the reselection of SeaPort Airlines, Inc. as- 4

-

the provider of Essential Air Service at our community

. ” Mayor Hash cites the more than doubling of enplanements since SeaPort began service at the community . Further, he states that the community is concerned about Boutique’s lack of experience in the EAS program

. Additionally, the community did not favor Air Choice One’s proposal as it would not provide

access to Dallas.

Harr ison The Department received a letter from Jeff Crocket, the Mayor of Harrison, stating that the City of Harrison supports the reselection of SeaPort and its request for a four

- year contract

. Mayor Crocket states, “Our recommendation to reselect SeaPort i s also based on the airline’s track record of providing reliable service, reasonable fares, and friendly and personal service.”

We also received a letter from Bob Reynolds, Chairman of the Boone County Airport

Administrative Board

. H e states “ Based on the review of the proposals ... but equally as much on the dependable and affordable service that SeaPort Airlines has provided our community since 2009, the Boone County Airport Administrative Board recommends that Seaport Airlines

be reselected...”

Hot Springs The Department received a letter from Ruth Carney, Mayor of Hot Springs. She states that th e Hot Springs Memorial Airport Committee, the Hot Springs Chamber of Commerce, the Hot Springs Advertising & Promotion Commission, and the City of Hot Springs all support the

reselection of SeaPort as their EAS provider . She says that the City believes SeaPort “will continue to provide reliable air service to our community based on a proven track record experienced during the last f orty three (43) months.”

Additional Comments The Department also received numerous comments from private citizens. These comments were nearly unanimou s in their support of the reselection of SeaPort. Many of the commenters noted SeaPort’s reliability, c onvenience, and customer service as reasons for their support. 3

Decision In narrowing the field of options, we first turned to Osage. Osage stated in its proposal that its ability to provide service is contingent upon it ’s receiving Commuter Air Carrier Authority from the Department. As stated above, we have not received an application for such authority from Osage and will therefore not consider its proposal further.

This leaves us with the proposals of Air Choice One, B outique and SeaPort. All three carriers submitted responsive, competitive proposals. In o rder to distinguish among them , we must look

to the prescribed statutory selection criteria. When selecting a carrier, 49 U.S.C. § 41733(c)(1)

directs us to conside r five factors: (1) service reliability; (2) contractual and marketing arrangements with a larger carrier at the hub; (3) interline arrangements with a larger carrier at the hub; (4) community views, giving substantial weight to the views of the elected of ficials representing the users ; and (5) whether the carrier has included a plan to market its services to

3 All public comments received are available in docket: DOT

- OST

- 1997

- 2935 at www.regulations.gov

.- 5

-

the community

. In addition, The Consolidated and Further Continuing Appropriations Act,

2012

, 4 provides that when selecting a carrier to provide EAS, the Department may consider the relative subsidy requirements, thus codifying a factor that we have considered since the inception of the program.

SeaPort has been providing EAS at these communities since 200 9

. It has provided reliable service with an average completion factor of 92% since it inaugurated service, and over 98% in the most recent year

- ended period. SeaPort received unanimous support from the civic officials

in the three communities. We note t hat SeaPort has done a commendable job in increasing enplanements at all three communities since it inaugurated service.

While Boutique’s subsidy requirements were generally lower than SeaPort’s, it did not receive support from any of the communities. Nor does it have any interline agreements or contractual or marketing arrangements with a major carrier at the hub. Therefore, we will not select Boutique.

Regarding Air Choice One , it s proposal did not receive any community support and it would require the highest subsidy of all the applicants. Based on these factors, we will not select Air

Choice One.

For these reasons, w e have decided to re

- select SeaPort to continue to serve El Dorado, Harrison, and Hot Sp rings. We shall make this selection at El D orado/Camden, Harrison, and Hot Springs contingent upon the Department’s receiving properly executed certifications from SeaPort that it is in compliance with the Department’s regulations regarding drug

- free workplaces and nondiscrimination, as well as the regulations concerning lobbying activities.

As noted in the Order Requesting Proposals, the Department is prohibited from subsidizing air service at a community where the subsidy per passenger exceeds $200, unless the community is more than 210 highway miles from the nearest large or medium hub airport. 5 Hot Spring’s

current subsidy per pas senger is $ 310. 6 Rather than terminate Hot Spring’s eligibility at this stage, the Department expects Hot Springs and SeaPort to work together to maximize use of the service awarded under this Order to avoid exceeding the $200 per passenger cap, which cou ld result in the termination of eligibility for subsidy under the EAS program. We appreciate the steps SeaPort plans to take, as outlined in its proposal, to continue to stimulate traffic and lower costs at Hot Springs in order to decrease the per passeng er subsidy.

4 Public Law No. 112

- 55, and continued by the Full

- Year Continuing Appropriations Act, 2013, Public Law No.

113

- 6.

5 Congress first established the $200 ceiling under P.L. 101

- 164 for fiscal year 1990, and reestablished it in fiscal years 1994

- 1999. The ceiling was made permanent by P.L. 106

- 69, the Department of Transportation and Related Agencies Appropriations Act o f 2000.

6 Subsidy per passenger is calculated by dividing the annual subsidy by the total passengers enplaned and deplaned at the airport. Hot Spring’s annual subsidy is $1,474,388. The total number of passengers enplaned and deplaned during the last 12 months (January, 2012

– December, 2012) is 4,751, resulting in a per passenger subsidy of $310

.- 6

-

Carrier Fitness

49 U.S.C. §§ 41737(b) and 41738 require that we find an air carrier fit, willing, and able to provide reliable service before we may subsidize it to provide essential air service

. SeaPort is

sub j ect to the Department’s continuing fitness requirements, and no information has come to our attention that would cause us to question the carrier's fitness at this time. We have contacted the Federal Aviation Administration, and it has raised no concerns that would negatively af fect our fitness finding. We therefore conclude that the carrier remains fit to conduct the operations proposed here.

This O rder is issued under authority delegated in 49 CFR Part 1. 25a(b)

.

ACCORDINGLY,

1. We select SeaPort Airlines, Inc. , to provide E ssential A ir S ervice at El Dorado/Camden, Harrison, and Hot Springs, Arkansas ;

2 . We set the final rate s of compensation for SeaPort Airlines, Inc.

, for the provision of Essential

A ir S ervice at El Dorado/Camden, Harrison, and Hot Springs, Arkansas, as described in Appendix C ;

3

. We direct 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 or until the Department indicates that the records may be destroyed, whichever comes first. Copies of flight logs for aircraft sold or dispo sed of must be retained. The carrier may forfeit its compensation for any claim that is not

sup ported under the terms of this O rder;

4

. We find that SeaPort Airlines, Inc.

, continue s to be fit, willing and able to operate as a

commuter carrier and capabl e of providing reliable essential air service at El Dorado/Camden, Harrison, and Hot Springs, Arkansas ;

5 . Th is docket will remain open until further O rder of the Department; and- 7

-

6 . We will serve copies of this O rder on the Mayor s of El Dorado, Camden, Harrison, and Hot Springs, and the Airport Manager s of South Arkansas Regional Airport at Goodwin Field ( El

Dorado/Camden )

, Boone County Regional Airport ( Harrison )

, and H ot Springs Memorial Field Airport , SeaPort Airlines

, Inc.

, Mul ti

- Aero, Inc. d/b/a Air Choice One , Boutique Air, and Osage Airlines, LLC

.

By:

SUSAN L. KURLAND Assistant Secretary for

Aviation and International Affairs

(SEAL)

An electronic version of this document is at http://www.regulations.govAppendix A



## AREA MAP

This map is provided by Planet Profitability Forecasting System and is being used with express permission of the copyright holder, Sabre Airline Solutions®.Appendix B Page 1 of 3Appendix B Page 2 of 3Appendix B Page 3 of 3Appendix C Page 1 of 3

SeaPort Airlines , Inc.

Essential Air Service to be Provided at El Dorado/Camden, Arkansas

Effective Period : November 1, 201 3 , through October 31, 201 7

Scheduled Service : 12 weekly nonstop round trips to DAL and 12 weekly nonstop or one

- stop roundtrips to MEM

Aircraft : Cessna Caravan

, 9 seats Rate per Eligible Flight 1 : $ 796 Weekly Ceilin g 2 : $ 38,2 08

Note: The 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 elemen ts of the required service, without prior approval. The carrier understands that an

aircraft take

- off and landing at its scheduled destination constitutes a completed flight; absent an explanation supporting subsidy eligibility for a flight that has not b een completed, such as certain weather cancellations, only completed flights are considered eligible for subsidy. In addition, if the carrier does not schedule or operate its flights in full conformance with the Order for a significant period, it may jeop ardize its entire subsidy claim for the period in question. If the 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 carrier to provide service on these routes. The carrier must complete all flights that can be

safel y 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 complete, terminates or reduces payments for service or changes service requirements at a specific lo cation 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 carrier may cease to provide service to that specific location without regar d 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 carrier do not constitute a total or partial reduction or cessation of payment.

Fund s may not be available for performance under this Order beyond September 30, 2013. The Government’s obligation for performance under this Order beyond September 30, 2013, 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, 2013, until funds are made available to the Department for performance. If sufficient funds are not made available for performance beyond September 30, 2013, 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. H owever, 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 8 0 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 31 st ; August claims must be submitted by November 30 th , and so on.

1 Annual compensation of $ 1 ,977,153 , divided by 2,484 annual departures ( 48 weekly arrivals and departures x 52

weeks x 9 9 .5 percent completion)

. 2 48 arrivals and departures per week multiplied by $ 796 per flight

.Appendix C Page 2 of 3

SeaPort A irlines, Inc.

Essential Air Service to be Provided at Harrison, Arkansas

Effective Period : November 1, 201 3 , through October 31, 201 7

Scheduled Service : 6 weekly nonstop round trips to MCI and 12 weekly nonstop round trips to

MEM

Aircraft : Cessna Caravan

, 9 seats Rate per Eligible Flight 1 : $ 1, 208 Weekly Ceilin g 2 : $ 43,488

Note: The 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 carrier understands that an

aircraft take

- off and landing at its scheduled destination constitutes a completed flight; absent an e xplanation 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 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 carrier contemplates any such changes beyond the scope of the Order during the applicable period of these rates, it mus t 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 carrier to provide service on t hese routes. The 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 D epartment 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 complete, 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 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

carrier do not c onstitute a total or partial reduction or cessation of payment.

Funds may not be available for performance under this Order beyond September 30, 2013. The Government’s obligation for performance under this Order beyond September 30, 2013, is subject to t he 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, 2013, until funds are made available to the Department f or performance. If sufficient funds are not made available for performance beyond September 30, 2013, the Department will provide notice in writing to the carrier.

Subsidy contracts are subject to, and incorporate by reference, relevant statutes and Dep artment 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 8 0 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 31 st ; August claims must be submitted by November 30 th , and so on.

1 Annual compensation of $2, 251,207 , divided by 1, 863 annual departures (36 weekly departures x 52 weeks x 9 9 .5 percent completion)

. 2 36 arrivals and departures per week multiplied by $ 1, 208 per flight

.Appendix C Page 3 of 3

SeaPort Airlines, Inc.

Essential Air Service to be Provided at Hot Springs, Arkansas

Effective Period : November 1, 201 3 , through October 31, 201 7

Scheduled Service : 9 weekly one

- stop round trips to DAL and 9 weekly nonstop round trips to

MEM

Aircraft : Cessna Caravan , 9 seats Rate per Eligible Flight 1 : $ 8 79 Weekly Ceilin g 2 : $ 31,644

Note: The 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 elemen ts of the required service, without prior approval. The carrier understands that an

aircraft take

- off and landing at its scheduled destination constitutes a completed flight; absent an explanation supporting subsidy eligibility for a flight that has not b een completed, such as certain weather cancellations, only completed flights are considered eligible for subsidy. In addition, if the carrier does not schedule or operate its flights in full conformance with the Order for a significant period, it may jeop ardize its entire subsidy claim for the period in question. If the 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 carrier to provide service on these routes. The carrier must complete all flights that can be

safel y 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 complete, terminates or reduces payments for service or changes service requirements at a specific lo cation 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 carrier may cease to provide service to that specific location without regar d 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 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, 2013. The Government’s obligation for performance under this Order beyond September 30, 2013, is subject to the availability of funds from which payment for services can be m ade. No legal liability on the part of the Government for any payment may arise for performance under this Order beyond September 30, 2013, until funds are made available to the Department for performance. If sufficient funds are not made available for p erformance beyond September 30, 2013, 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. H owever, 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 8 0 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 31 st ; August claims must be submitted by November 30 th , and so on.

1 Annual compensation of $ 1,637,012 , divided by 1,8 63 annual departures (36 w eekly departures x 52 weeks x 99 .5 percent completion)

. 2 36 arrivals and departures per week multiplied by $ 8 79 per flight

.