Order 2010

- 10

- 18

Served: October 2 9 , 2010



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 2 6 th day of October, 2010

ORDER RESELECTING CARRIER AND SETTING FINAL SUBSIDY RATES

Summary By this order, the Department is re selecting 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 Pilatus

PC

- 12 aircraft , for the two

- year period beginning when the carrier inaugurate d full servi ce, 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 Dec ember 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

Sov ereign 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- 2

-

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 first

year 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

r ate of $1, 74 8, 140

.

Sovereign Sovereign , utilizing 9

- seat Cessna 208 Caravan aircraft , submitted a proposal with t wo distinct service options for service between Pendleton and Portland

. The first option would provide three daily round trips (21 a week) fo r 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 5 th 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 Carri er Selection After careful consideration of this matter, including the comments of local officials, the Department has decided to re select SeaPort to provide EAS at Pendleton in accordance with the carrier’s proposal. SeaPort ’ s proposal would provide thre e 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

- yea r 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 requirement s for the next two

- year period represent a cost savings over the current

rates and when contrasted with SkyWes t’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 increas e 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- 3

-

transportation and therefore does not meet t he 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 communit y ha s waived its right to the twin

- engine and 15

- seat minimum aircr aft

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 fi t, 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 ha s co me to our attention that would cause us to question the car rier'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 th e 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 select s 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 , f or the period from January 1, 2011 , through December 31, 20 12 ;

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 Departme nt. 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 com pensation 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 reli able

essential air service Pendleton, Oregon;

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

1 See 14 CFR § § 119.3, 380.2 . A c harter 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.- 4

-

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 COMMUNITIESAppendix 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-12Appendix C Page 1 of 2

Alaska Juneau Aeronautics , Inc., d/b/a SeaPort Airlines
Essential Air Service To Be Provided at Pendleton, Oregon

Effective Period January 1, 2011 through Dec ember 30, 201 2

. : 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 Pen dleton 1

Year 2

- $ 707.07 per each arrival and departure from Pendleton 2 Weekly Compensation Ceiling: Year 1

- $ 28

, 929

. 18 3

Year 2

– $29,696.94 4

1 $1, 463,681 divided by 2,12 5 arrivals and departures: 42 arrivals/departures per week x 52 weeks x .97 3 (completion factor) =2,12 5

. 2 $1, 502,521 divided by 2,12 5 arrivals and departures: 42 arrivals/departures per week x 52 weeks x .97 3 (completion factor) =2,12 5

. 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

- o ff 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 ch anges 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 warr ant, 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 complete ly , 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 regul ations, 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 unde r 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 payme nt 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 25 th 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