Order 2010-10-18

Served: October 29, 2010

 UNITED STATES OF AMERICA

 DEPARTMENT OF TRANSPORTATION

 OFFICE OF THE SECRETARY

 WASHINGTON, D.C.

Issued by the Department of Transportation

on the 26th day of October, 2010

ORDER RESELECTING CARRIER AND SETTING FINAL SUBSIDY RATES

Summary

By this order, the Department is reselecting Alaska Juneau Aeronautics, Inc., d/b/a SeaPort 

Airlines (SeaPort), to provide subsidized essential air service (EAS) at Pendleton, Oregon, 

for the two-year period from January 1, 2011, through December 31, 2012, for a first-year 

subsidy rate of $1,463,681 and $1,502,521 for the second. (See Appendix A for a map.)

Background

By Order 2008-10-25, October 21, 2008, the Department selected SeaPort to provide three 

nonstop round trips a day (21 a week) between Pendleton and Portland with 9-seat PilatusPC-12 aircraft, for the two-year period beginning when the carrier inaugurated full service, 

for a first-year subsidy rate of $1,566,729 and $1,608,394 for the second. The carrier 

inaugurated service in December 2008.

In anticipation of the end of the rate term on December 31, the Department issued 

Order 2010-8-8 on August 13, 2010, soliciting proposals to provide efficient EAS, with 

subsidy support if necessary, at Pendleton.

Proposals

The Department received proposals from SeaPort, SkyWest Airlines (SkyWest) and 

Sovereign Air, Inc. (Sovereign). These proposals are summarized below. Copies of the 

proposals and public filings regarding Pendleton’s EAS may be accessed online through the 

Essential Air Service at

PENDLETON, OREGON

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

Docket DOT-OST-2004-19934
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Federal Docket Management System at: http://www.regulations.gov by doing a search on 

Docket Number DOT-OST-2004-19934.

SeaPort

SeaPort would continue to provide three daily nonstop round trips between Pendleton and 

Portland, utilizing 9-seat Pilatus-PC-12 aircraft, for a subsidy rate of $1,463,681 for the firstyear of service and $1,502,521 for the second.

SkyWest

SkyWest, operating as United Express and utilizing 30-seat Embraer Brasilia aircraft, 

proposed to provide Pendleton with 12 weekly round trips to Portland for an annual subsidy 

rate of $1,748,140.

Sovereign

Sovereign, utilizing 9-seat Cessna 208 Caravan aircraft, submitted a proposal with two

distinct service options for service between Pendleton and Portland. The first option would 

provide three daily round trips (21 a week) for an annual subsidy rate of $1,283,544. Under 

the second option, the community would receive four round trips each weekday and three 

round trips each on Saturday and Sunday (26 a week) for an annual subsidy of $1,409,379.

Community Comments

On September 15, 2010, the Department sent correspondence to the civic officials of 

Pendleton and the Airport Manager for the Eastern Oregon Regional Airport requesting 

comments on the carrier selection decision.

In response, the Department received a letter from the Mayor detailing the results of the 

October 5th City Council meeting. At the meeting, the City Council voted unanimously to 

recommend the SeaPort’s proposal and waive the 15-seat minimum and twin-engine aircraft 

specifications.

Decision on Carrier Selection

After careful consideration of this matter, including the comments of local officials, the 

Department has decided to reselect SeaPort to provide EAS at Pendleton in accordance with 

the carrier’s proposal. SeaPort’s proposal would provide three daily nonstop round trips 

between Pendleton and Portland, utilizing 9-seat Pilatus-PC-12 aircraft, for an annual subsidy 

rate of $1,463,681 for the first-year of service and $1,502,521 for the second. We find that 

the service and subsidy levels that SeaPort proposed are reasonable.

This case is very straightforward: the community supports the selection of SeaPort, and its 

subsidy requirements for the next two-year period represent a cost savings over the current 

rates and when contrasted with SkyWest’s proposal. SeaPort’s Pilatus-PC-12 aircraft may 

also provide a better balance between the demand for air service at the community with the 

supply of aircraft seats. Alaska Juneau Aeronautics, Inc. is a well-established carrier and 

continues to increase its participation in the EAS program.

With respect to Sovereign, the carrier does not have the necessary operating authority from 

the Department or the Federal Aviation Administration to conduct scheduled air 
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transportation and therefore does not meet the requirements of the EAS program. Sovereign 

currently holds exemption authority under Part 298 of the Department’s rules (14 CFR Part 

298) to conduct on-demand charter operations. Charter air transportation is not scheduled air 

transportation.1 Further, Sovereign has not received any community support.

Lastly, the community has waived its right to the twin-engine and 15-seat minimum aircraft 

for the two-year contract.

We shall make this selection at Pendleton 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 

governing lobbying activities.

Carrier Fitness

49 U.S.C. 41737(b) requires 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 subject 

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 

affect our fitness finding. We therefore conclude that the carrier remains fit to conduct the 

operations proposed here.

This order is issued under authority delegated in 49 CFR 1.56a (f).

ACCORDINGLY,

1. The Department selects Alaska Juneau Aeronautics, Inc., d/b/a SeaPort Airlines, to 

provide essential air service at Pendleton, Oregon, and establish the subsidy rates, as 

described in Appendix C, for the period from January 1, 2011, through December 31, 2012;

2. The Department directs Alaska Juneau Aeronautics, Inc., d/b/a SeaPort Airlines, 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 disposed of must be retained. 

The carrier may forfeit its compensation for any claim that is not supported under the terms 

of this order;

3. We find that Alaska Juneau Aeronautics, Inc., d/b/a SeaPort Airlines, continues to be fit, 

willing and able to operate as a commuter air carrier and capable of providing reliable 

essential air service Pendleton, Oregon;

4. This Docket will remain open until further order of the Department; and

 1 See 14 CFR §§ 119.3, 380.2. A charter flight is defined as “a flight operated under the terms of a charter 

contract between a direct air carrier and its customer. It does not include scheduled air transportation....” 14 

CFR § 380.2.
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5. Docket Operations will serve copies of this order on the parties listed in Appendix D.

By:

SUSAN L. KURLAND

Assistant Secretary for Aviation

and International Affairs

(SEAL)

An electronic version of this document is available on the World Wide Web at:

http://www.regulations.gov/
Appendix A

PENDLETON, OREGON

AND SURROUNDING COMMUNITIES
Appendix B

Alaska Juneau Aeronautics, Inc., d/b/a SeaPort Airlines

Provision of Essential Air Service at Pendleton, Oregon

Calculation of Compensation Requirement

Year 1 Year 2

Aircraft

Departures 2,124 2,124

Block Hours 1,975.3 1,975.3

Operting Revenues

Passengers 8,500 8,925

Passenger Revenue $1,021,615 $1,072,696

Other Revenue (including through revenue) $10,216 $10,727

Total Operating Revenue $1,031,831 $1,083,423

Operating Expenses:

Direct

Crews $146,371 $153,490

Fuel $570,077 $598,581

Insurance $128,139 $128,139

Maintenance $416,793 $437,632

Aircraft Lease $302,224 $302,224

Total Direct Expenses $1,563,604 $1,620,266

Total Indirect Expenses $813,074 $842,538

Total Operating Expenses $2,376,678 $2,462,804

Operating Loss $1,344,847 $1,379,381

Profit Element (5.0% of Total Operating Expenses) $118,834 $123,140

Annual Compensation Requirement $1,463,681 $1,502,521

Pilatus-PC-12
Appendix C

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Alaska Juneau Aeronautics, Inc., d/b/a SeaPort Airlines

Essential Air Service To Be Provided at Pendleton, Oregon

Effective Period: January 1, 2011 through December 30, 2012.

Scheduled Service: Three daily nonstop round trips between Pendleton and Portland.

Intermediate stops and upline 

service: 

No service may be permitted to upline point on subsidized 

Pendleton flights. No service to any intermediate point is 

contemplated under the terms of the carrier’s proposal; 

accordingly, no such service may be provided on subsidized 

flights without prior Department approval.

Aircraft type: Pilatus-PC-12 (9 passenger seats).

Timing of flights: Flights must be well-timed and well-spaced in order to ensure full 

compensation.

Annual compensation: Year 1 - $1,463,681

Year 2 - $1,502,521

This rate assumes an annual completion factor of 97.3 percent. A 

compensation ceiling is to be applied per calendar week such that 

service above that ceiling in one week cannot make up for service 

shortfalls in another week.

Subsidy Rate per Flight: Year 1 - $688.79 per each arrival and departure from Pendleton1

Year 2 - $707.07 per each arrival and departure from Pendleton2

Weekly Compensation 

Ceiling:

Year 1 - $28,929.183

Year 2 – $29,696.944

 1 $1,463,681 divided by 2,125 arrivals and departures: 42 arrivals/departures per week x 52 weeks x .973

(completion factor) =2,125. 2 $1,502,521 divided by 2,125 arrivals and departures: 42 arrivals/departures per week x 52 weeks x .973

(completion factor) =2,125. 3 42 flights per week multiplied by $688.79 per flight.

4 42 flights per week multiplied by $707.07 per flight.
Appendix C

Page 2 of 2

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 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 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 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 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 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 constitute a total or partial reduction or cessation of payment.

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.

Funds are not currently available for performance under this order beyond December 3, 2010. 

The Department’s obligation for performance under this order beyond December 3, 2010, is 

subject to the availability of appropriated 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 3, 2010, until funds are made available to the Department for 

performance. If funds are not made available for performance beyond December 3, 2010, the 

Department will provide notice in writing to the carrier.

All claims for payment must be submitted within 60 days of the last day of service provided 

under this order.
Appendix D

SERVICE LIST

Mr. Larry Dalrymple

Airport Manager

Eastern Oregon Regional Airport

2016 Airport Road

Pendleton, Oregon 97801

Mr. Doug Hedlund

Interim Director

Oregon Department of Aviation

3040 25th Street, SE

Salem, Oregon 97302-1125

The Honorable Phillip Houk

Mayor of Pendleton

500 S.W. Dorian Avenue

Pendleton, Oregon 97801

Rob McKinney

President

SeaPort Airlines

7505 NE Airport Way

Portland, Oregon 97218