Before the United States DepartmentofTransportation April 6, 2015 Proposal to Provide Essential Air Service at MERCED, CALIFORNIA DocketOST-1998-3521 Under49 U.S.C. 41731 etseq. 

### Amended Proposal ofSeaPortAirlines, Inc. to Provide EAS at Merced, California By Order 2014-5-9 dated May 21, 2014, the U.S. Department of Transportation ("the Department") requested proposals from carriers interested in providing Essential Air Service ("EAS") at Merced and Visalia, California. By Order 2104-12, the Department selected SeaPort Airlines to provide EAS at Visalia for a two-year term. SeaPort Airlines launched service to Visalia from Burbank and Sacramento on February 9, 2015. The Visalia market has responded very stronglyto SeaPort Airlines' service, producing the highest load factor amongthe 12 EAS communities on our route map. On March 27, 2015, the Department sent an email stating one carrier had proposed modifications to its earlier EAS proposal at Merced and, in the interest ofafair carrier selection process, the other carriers that submitted proposals were being given the opportunity to make theirown amendments no laterthan April 6, 2015. This document serves as the timely amendment of SeaPort Airlines to its proposal to provide EAS at Merced, California. Based on the high passenger counts being generasted at Visalia, our EAS proposal at Merced is being amended to include a service pattern which mirrorsthat a Visalia: 12 weekly roundtrips between Merced and Sacramento plus 12 weekly roundtrips between Merced and Burbankthat originate orterminate at San Diego. The new service pattern will require subsidy of

**$2,0~4,**148 peryear. The amended service pattern proposal for Merced is nearly identical to that which SeaPort provides atVisalia. While Merced and Visalia each have unique characteristics, we believe it is reasonable to assume that the response to SeaPort's service in Visalia provides a reasonable indication of how the Merced market would likely respond. In this context, we believe our proposal represents the bestopportunityfor Merced to maintain eligibilityforsubsidized EAS. SeaPort Airlines appreciates the opportunity to submit this amended proposal and the Department's effort to maintain a fair carrier selection process. Questions regarding this proposal should be directed to: Timothy Sieber, ExecutiveVice President

SeaPortAirlines, Inc. (971) 340-1716 tsieber@seaportair.com 

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# SpecificAmendmentsto EAS Proposal
This document details specific components ofthe July 11, 2014 proposal ofSeaPort Airlines to provide EAS at Merced, Californiathatwewish to amend, consistentwith theemail notiufication from the Department on March 27, 2015 that amendments to carrier proposals may be filed no laterthan April 6, 2015. The primary amendment involves replacing ofone ofthetwos hubs in our original proposal with a superior alternative. This results in need for secondary amendments to other elements ofthe proposal such as schedules and frequencies, fares, and requested level ofsubsidy. In addition, we have included datathat illustratesthe very positive market response byVisaliato SeaPort Airlines during the first two months of service. While these two months represent a small portion ofthe 24 month contract period, it is reasonable to assumethe market response of Visalia provides an indication ofhowthe Merced marketwould respond to SeaPort's service. NewService Pattern: Sacramentoand Burbank(continuingtoSan Diego) SeaPort's ORIGINAL EAS proposal at Merced included a service pattern of 18 weekly roundtrips to Oakland International Airport ("OAK") and 6 weekly roundtrips to Burbank/Bob Hope ("BUR") Airportthat originated orterminated at San Diego ("SAN"). SeaPort's AMENDED proposal to provide EAS at Merced is asfollows:

• 12weekly roundtrips to Sacramento InternationalAirport ("SMF") and • 12 weekly roundtrips to Burbank/Bob Hope Airport, originating or terminating as "1- stop"serviceto San Diego. The substitution of Oakland with Sacramento is the result of an agreement between SeaPort and Sacramento International Airport that modifies the airport's rates and charges schedule to allow economic operation of our 9-seat aircraft, while at the same complying with FAA grant assurances. Access to SMF at a reasonable cost is something that SeaPort has worked on for nearly three years, but was unable to achieve ahead of the July 11, 2014 deadline for EAS proposals at Visalia and Merced. Once the agreement was reached, however, SeaPort immediately sought consent of the Visalia City Council to replace the planned Oakland service with Sacramento service. This was following by a formal request to the Department for approval to a change in service pattern. The request was subsequently granted and service from Visalia to both Burbankand Sacramentowas launched on February 9, 2015. 1 Sincethefirstflight, demand from Visaliato Sacramento has been strong and we believe similar results in Merced are very probable based on the following factors:

1 The service pattern change requested by SeaPort in this instance did not include a change in overall weeklyfrequencies, number ofseats, or level ofsubsidy. In fact, SeaPort has absorbed the expense ofthe longerVisalia - Sacramento flight relative toVisalia - Oakland. OST-1998-3521 April6, 2015 Page 12 

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• While OAK offered a greater number of nonstop destinations and daily departures, service at SMF provides a balance of choices that include the "Big 3" U.S. airlines and resultant access to the global alliances, as well as service from Southwest, Alaska, Hawaiian, Aeromexico, JetBiue, and Volaris.2 This variety of carriers at Sacramento ensures a healthy competitive environmentthat benefits customers in the form of lower ticket prices.

• The advantage of Oakland regarding frequencies and nonstop destinations is partly attributable a few low-fare carriers offering service to leisure destinations such as Disneyworld, Mexico, Hawaii, and desert golfin thewinter. Customers traveling to these destinations, particularly those with more than one small child, are typically inclined to drive to a distant airport to board a nonstop flight rather than use take advantage of connecting at their local airport. In this context, the needs of business travelers become a majorfocus ofthe service at Merced and their needs are better met bythe connecting opportunites available at Sacramento.

• In addition to enhanced connecting opportunities, Sacramento's role as the seat of government for the world's 81h largest economy creates significant local traffic demand. This includes government employees traveling on business, as well as private sector employees needing to communicate with the government. Additional traffic is generated by business unrelated to government, including strong medical and tech sectors, with the latter represented by companies such as Intel, Hewlett-Packard, EDS, and Apple Computer. Finally, we note that during interviews conducted by the air service subcommittee of Merced Regional AirportAuthorityfollowing our July 11, 2014 proposal submission, SeaPortwas asked whether Sacramento had been considered as an alternative to Oakland. In response, we explained the challenges that the rates and charges in place at Sacramento at that time, and that SeaPort was committed to accessing SMF on economically viable terms but that timeline to achieve this goal was unknown.3 With costs at Sacramento International Airport now structured to alloweconomical operation of9-seataircraft, SeaPortwelcomed the opportunityto amend our proposal in a manner that was directly responsive to the subcommittee's specific requestduring ourinterview. Amended Service Pattern Results in Improved Schedule Proposal As outlined above, SeaPort's amended proposal to provide EAS at Merced includes 12 weekly roundtrips to Sacramento and 12 weekly roundtrips to Burbank, all either originating or terminating at San Diego providing single-plane service between Merced and San Diego. SeaPort's proposed scheduleforthis amended service pattern is provided on the next page.

2 The "Big 3"U.S. airlines, in order, are American (American + US Airways), United (United + Continental), and Delta (Delta + Northwest)
3 To illustratethe challenge ofSacramento's "one size fits all" rates and charges, $875was the standard charge to use a passenger hold room and adjacent aircraft parking position at SMF without provision for adjustment based on aircraft capacity. On a 265-seat Airbus A330, the $875 would translate in a cost of$3.30 per seat. The same fee on a 140-seat Boeing 737 results in cost of$6.25 per departing seat, higher but economically tenable. That same $875 fee assessed on a 9-seat Cessna Caravan would result in a cost per departing seat of approximating $97 and eliminate any chance for economically viable service at Sacramento, with or withoutsubsidy. OST-1998-3521 April 6, 2015 Page

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### Merced FlightSchedule Amended EAS Proposal ofSeaPortAirlines ===AIRLINES

Flight Leave Arrive Freq Stops Flight Leave Arrive Freq St()ps Merced -+ Burbank Burbank-+ Merced 5450 9:10am 10:50am ExSun 0 5451 12:30pm 2:10pm ExSat 0 5452 4:55pm 6:35pm ExSat 0 5453 6:50pm 8:30pm ExSat 0 Merced -+ Sacramento Sacramento

### + Merced 5400 6:30am 7:20am ExSun 0 5401 8:00am 8:50am ExSun 0 5404 2:25pm 3:15pm ExSat 0 5405 3:40pm 4:30pm ExSat 0 Merced-+ San Diego San Diego -+ Merced 5450 9:10am 12:15pm ExSun 5451 11:00am 2:10pm ExSun 5452 4:55pm 8:00pm ExSat 5453 5:25pm 8:30pm ExSat Key pointswith respectto the schedule provided above:

• Note that all flights between Merced and Burbank either originate or terminate at San Diego. This results in the Merced- San Diego market provided with two 1-stop flights in each direction on each weekday, as well as single roundtrip in each direction on both Saturdays and Sundays.
• SeaPort's amended EAS proposal at Merced includes 12 weekly roundtrips to Burbank, double the number in our original proposal. Similar to the discussion of Sacramento instead of Oakland, a desire for increased frequency to Burbank was expressed by the subcommitteewhile discussing our original proposal. Ourschedule above is intended to be responsiveto that request.

• Theflight schedulefrom Mercedto Sacramento includes an early morning departurethat allows a nearly full day of business to be completed with a return the same day. Similarly, schedules to Burbank and San Diego allow for same-day trips that include productivetime atthe destinationthat approximates halfofaworkday.

• The schedule proposed by SeaPort will allow passengers a choice of four departure times everyweekday, and two departuretimes on both Saturday and Sunday, as well as a choice of two hub airports. This represents a doubling of choices over the present schedule provided by Great Lakes and should result in our service capturing a greater share ofthetrafficgenerated in the primaryservice area ofMerced Regional Airport. Finally, SeaPort acknowledges concerns over access to international connections that Merced would lose if LAX service were replaced with service to Burbank. We are addressing these concerns by providing access to ground transportation services for transfers between LAX and BUR. This effort was initiated in partnership with rideshare service Uber, providing SeaPort Airlines customers $25 off their first Uber trip from airports throughout our system, including Burbank, San Diego, and Sacramento. Later this year, SeaPort will add to our website functionality that allow customers to reserve in advance ground transfer services ranging from shared vans to private executive town car. This service should lower anxiety over unknown costs and uncertainty over getting a safe, reliable service in a time frame that allows for any connection.

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# - 'More importantly, the cost ofthetransfer service plus SeaPort's lowfares will be less expensive than the current fare charged by Great Lakes' between Merced and Los Angeles.4 That lower cost will actually provide a less-hassled travel experience for Merced passengers. To illustrate, today passengers in Merced can fly nonstop (but are frequently delayed) to Los Angeles International Airport where connections with international flights require boarding an interterminal transfer bus crowded with other passengers andtheir baggage. In contrast, SeaPort's proposal would see a passenger boarding in Merced and arriving at Burbank (an airport with very few airtraffic delays) and is met in baggage claim bythe Uber driver. Telephone calls and otherworkcan accomplished from the carwhile driver navigatesto LAXwhere, upon arrival, the passenger is dropped curbside near the outside check-in area of the airline for their internationalflight. Interline Connectivity 

### &GDS Display As noted in ouroriginal proposal, in March 2014 SeaPortAirlines becamethefirst U.S. carrierto be fully-hosted on theAmadeus Althea reservation. Wewerefollowed by CapeAir in November 2014with SouthwestAirlines scheduled to befully-migrated toAltea bythe end of2016. This system provides SeaPort unsurpassed capability to interline ticketing, the convenience of customer friendly optional services (i.e., ground transfers, travel insurance, discounts on destination attractions, hotels, rental cars, etc.), through baggage check-in, connecting boarding passes on participating connecting interline partners, notification by SMS text and/or email of schedule changes and flight irregularities, abilityfor customersto make changesto reservations online, and online check-in that includes discounts for pre-payment of specific services and fees. The capabilities ofAltea enabled SeaPortto implement its first bilateral interline e-ticketing and baggage agreement in March 2014 with Alaska Airlines. 5 A second agreement with Hawaiian Airlines followed in December2014. SeaPort has an understanding with a "Big 3" U.S. airlineto tentatively begin the implementation of another interline agreement in September 2015. We continues to pursue agreements with other airlines that will provide customers with improved connectivity to destinations across the country and around the world. For customers in Merced, in addition to the "Big 3" airlines, the most beneficial interline agreement would be with jetBiue, which providesservicesfrom Sacramento, Burbank, and San Diego. It is important to note that outreach to potential interline partners, along with our significant investment in reservation technology that can complete interline e-ticketing, does not assure additional agreements. The evaluation of SeaPort as an interline partner includes consideration by the larger airline of how much incremental traffic and revenue can flow from our aircraft to their aircraft. The larger carrier will often use these estimnates to compare SeaPort with other new interline partner opportunities, ensuring that resources are allocated to agreements that provide the highestvolumes or greateststrategicvalue. This meansthatevery market added to SeaPort's route map increases ourvalue as a potential interline partner. We are hopeful thatthe amended proposal herein results in our being able to include Merced in discussions with other airlines aboutthe connecting trafficand revenue that an interliningwith SeaPortwill provide.

4 Fare of$193.60 each-wayquoted by Great Lakes website on April 3fortravel on April 7, 2015
5 Bilateral agreements allow both participating carriers to make reservations and issue tickets on each other's flights. A unilateral agreement onlyallows one carrierto sell and issuetickets. OST-1998-3521 April6, 2015 Page

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Fares & Pricing
Effective June 1, 2015, SeaPort will simplify our fare structure by reducing the number offare types from four to three, as well replace "branded" fare names with short, and easier to understand, descriptions. On the same date, SeaPort will begin offering customers the convenience of online check-in that also provides an opportunity to save time and money by pre-paying certain fees at home. As a result, we are amending thefares and pricing ofour proposal to provide EAS at Merced to include 1) the simplified fare structure that will be offered if SeaPort Airlines is selected to provide EAS at Merced, and 2) changes to the market specific fares, including replacement of Oakland fareswith Sacramentofares. These changes are summarized on the graphicbelow. 

### Revised SeaPortAirlines FareStructure & Price Points Revised Proposal ofSeaPortAirlines to Provide EAS at Merced

Burbank

Express security lane Second checked baggage at no charge SeaPort Perks Bonus % Refunds Itinerarychange afterticketing (plus anyfare difference) Telephone/Airportticketing fee

Second Checked Bag/Overweight Bag

PayatAirporVPre-PayatHome Third Check Bag

PayatAirporVPre-PayatHome GolfClubs

PayatAirporVPre-PayatHome Unaccompanied Minor Fee atHome Fully Flexible& Refundable $109

0 X X 25% Permitted

$0

No Charge $50 I $35 $50 I$35

To supplement advertising and create awareness, SeaPortAirlineswill offeran introductoryfare of$39 (including all taxes and fees) on everyseat and everyflight departing Merced forthefirst 30 days of service. The objective of this introductory pricing is to draw customers back to Merced Regional Airport and getthem "talking up" the new service by demonstrating a strong the contrast between the service provided by SeaPortAirlinesto thatofGreat LakesAviation.

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# Maintaining EAS Eligibilityfor Merced As discussed in our proposal submitted on July 11, 2014, Merced was one of 13 communities thatthe Department notified ofits intentto terminate eligibilityfor EAS subsidized service based enplanements below an average of 10 per day during the year ending September 30, 2013. Merced, along with all but one ofthe other communities, filed a request, and was subsequently granted a waiver from this requirement. This waiver provided the community and the EAS carrierwith an opportunityto increase enplanementsto the minimum requirement of 10 perday duringthe measurement periodthatends September30, 2015. The Department issued a Final Notice of Enforcement on October 24, 2014 that described its intention to enforce the subsidy limit of $200 per passenger for communities located no more than 210from a medium or large hub airport in order maintain eligibilityforsubsidized EAS. The Departmentwill enforce ofthis policy based on enplanements for the period ending September 30, 2015. Merced's continued eligibility for subsidized EAS is contingent on the market enplaning an average ofno lessthan 10 enplanements on servicethat requires subsidywhich equatesto less than $200 per passenger. Additionally, while waivers from the 10 enplanement requirement were granted to all communities that applied in the first year the Department enforced this policy, it is reasonable that future enforcement will be more stringent. As our chart in the discussion following illustrates, Great Lakes did not achieve the 10 enplanements per day requirement in anysingle month during calendaryear2014. ContinuationofCurrentService Risks Merced'sContinued EligibilityforSubsidized EAS SeaPort Airlines reviewed T-100 filings by Great Lakes Aviation to see if progress was being made to achieving the benchmarks necessary to maintain Merced's eligibility for subsidized EAS. The period analyzed was forthe 12-months ending December2104, the last month thatdata is presently availableto the public. With this data, we are able to estimate forthe time period both the average enplanements per operational day and the amount of subsidy per passenger at Merced.6 As the following graph illustrates, Great Lakes has made no progress toward continuing Merced's EAS eligibility.

6 Subsidy per passenger was calculated by multiplying the awarded amount ofsubsidy per number in effect each month by the actual numberofdepartures reported by Great Lakes in T-100 filings, then divided the number ofenplanements reported on T-100 filings forthe same period. Subsidy perdeparturewas calculated using rates established bythe Department in Orders 2012-9-9 and 204-10-15. OST-1998-3521 April6, 2015 Page 17 -'

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### Average Daily Enplanements

## &Subsidy Per Passenger EssentialAirServiceAt Merced, California Year Ending December31, 2014

0 $0 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 _,Average Daily Enplanements
... Subsidy per Passenger
SOURCE: T-100 datavia Diio.net 

### Continued EligibilityforEAS at Merced Requires a "Fresh

**Sta~"** SeaPortAirlines believes the best hope for Merced to maintain eligibility for subsidized EAS is best described as a"fresh start" forairservice offered at Merced Regional Airport. This means a change to service dramatically different from that which the community has experienced over the pastfiveyears and which any promisesto improvewould likely be metwith skepticism. SeaPort believes our proposal represents such change, and provides Merced the best chance to maintain EAS eligibility. Our belief is based on the following factors, some of which have previously been discussed in the amendmentsto our proposals:
• A shift in service from Los Angeles International Airport, which is often subject to delays on the ground and in the air, to less congested airports at Burbankand Sacramento.
• A schedule and service pattern that doublesthe average daily departures and numberof hubs served, resulting in a greater number of choices for passengers to use air service from Merced Regional Airport.
• Connecting opportunities at Burbank and Sacramento with a mix ofairlines that includes legacy cariers (i.e., the "Big3"), low-fare airlines (i.e, Southwest, jetBiue, Volaris), and large niche carriers that have significant regional dominance (i.e., Alaska, Hawaiian, etc.).
• The leading market position of Southwest Airlines at Sacramento and Burbank, supported by the presence of jetBiue, which ensures fares at both airports remain reasonable and, when added to a SeaPortticket between the hub and Merced, provides passengerswith a reasonable total trip cost.
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• Nonstopflights to Sacramentowill serve latentdemand for accessto the state capitol by both the private and publicsector, and who must nowdrivethatdistance.
• A schedulethatwill allow same-daytrips to the capitol in Sacramento, as well as sameday trips to both Burbank and San Diego that include adequate time at the destination equalto approximately halfofaworkday.
• Providing convenient access to ground transfer services, as well a promotional activities with ride-share service, Uber, to help lower customer anxiety about switching at the beginning and end oflong internationaljourneys utilizing LAX.
• Allowing accommodation for the unique characteristics ofthe Merced market, SeaPort would employ marketing tactics that have proven success in other EAS markets. This includes paid media placements (print, radio, outdoor, etc.) stretched with trade agreements, as well as customer engagement on social media sites such as Facebook, Twitter, and Linkedln.
• Outreach to business groups and community organizations by ourfull-time Manager of Community Affairs to provide details on SeaPort, the service we will provide, and how we plan to restore confidence in the service provided at Merced Regional Airport.

• A pricing strategy intended to stimulate demand at Merced Regional Airport, with fares starting as low of$39 (Sacramento with advance purchase) with our highest price point of $129 (fully-refundable and no advance purchase to San Diego) that still provides customers with a good value, and all ofwhich are significantly lowerthan current Great Lakes' fares.
• Sales calls to major employers in and around Merced offering the incentive ofdiscounts off published fares in exchange for commitments that a reasonable percentage of the company's businesstravel will usethe service available at Merced Regional Airport.
• Offering other products such as 1) Commuter Books which provide savings on bulk ticket purchases which results in a customer commitment to the local airport and 2) Student Standby Fares that provide a low-costtravel option and generate enplanements thatcan be counted toward EAS eligibilitydetermination.
• The declining presence of service by Great Lakes Aviation in California indicate little likelihood of an investment in marketing activities aimed at growing Merced traffic. In contrast, SeaPortAirlines has a long-term interest in Merced as part oflargerstrategyto develop intra-California service that connects small and mid-size communitieswith large metropolitan areas and connectionswith otherairlines at hub airports. EarlySuccess inVisalia isan IndicatorofSeaPort's LikelySuccess in Merced As noted earlier in this document, SeaPortAirlines began service atVisalia Municipal Airport on February 9, 2015. The service pattern we offer in Visalia is identicalto thatwhich we propose at Merced with slightdifference in specificdeparturetimesto each city. The early market response to ourserviceatVisalia has exceeded all expectations and is believed to be at least indicative of the howthe Merced marketwould respond to SeaPortAirlines' service.

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The graph belowshowstotal O&D passengers and load factoron nonstop segmentsto Burbank and Sacramento. 

### PassengerCounts & Load Factors FirstTwo Months ofService atVisalia by SeaPortAirlines

1,400 n1% 80%
1,200 70% 59.6% 60% f! 1,000 

## ., en C> 

# .. c: 50% "' 

## ., 3 "' "' 800 (I) 

## .,

**~** a. ..... 0 40% 0 ell 

## ., 0 600 

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### ., ]i 30% 

## .,

**~** a Q 400 20% 200 10%

0 0% February9-28 March 1-31 -VIS-BUR Passengers-VIS-SMF Passengers --VIS-BUR Load Factor-e-VIS-SMF Load Factor Seaport's amended proposal to provide EAS at Merced includes a service pattern that is virtually identical to thatwe are providing at Visalia and illustrated above. Ofequal importance, however, is that the fact that service we replaced at Visalia was nearly identical to the service we would replace at Merced, if selected provide EAS. Here again, similarities between the Merced and Visalia communities provide SeaPort with confidence that the strong market of Visalia provides, at the very least, an indication that Merced would have a similar market response. During the first two months ofservice (including a shortened February), SeaPort has enplaned and deplaned over2,000 passengers atVisalia Municipal Airport. Continued generation oftraffic at that rate would result in 10,000 enplanements by the end ofthis year, resulting in Visalia Municipal Airport being reclassified as a "primary airport" thus regaining automatic apportionment ofat least $650,000 in Airport Improvement Program (AlP) funding from the FAA each year. Finally, if 10,000 enplanements are reached and then sustained, it would virtually secure Visalia's place on the list of communities eligible to receive subsidized EAS. To illustrate this point, SeaPort'sservice atVisalia generated an average of 17.9 daily enplanements in February 2015, increasingto an average of24.1 enplanements in March 2015.

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## Recap ofAmended Proposal & 

## Revised Subsidy Request In this filing, SeaPort Airlines hereby amends its July 11, 2014 proposal to provide EAS at Merced, California. In summary, the amended proposal includes:
• 12 weekly roundtripsto Sacramento InternationalAirport and • 12weekly roundtrips to Burbank/Bob HopeAirport, continuing to San Diego.

• All flights would be flown with Cessna Caravans, a reliable and comfortable turboprop thatseats 9-passengers and two crewmembers.

• The required amount of subsidy to provide the service pattern proposed is $2,074,148 peryearwith assumption ofatwo-yearaward. Ifawarded the EAS·contract at Merced, SeaPort Airlines would provide service nearly identical to thatwe provide in Visalia. While each market has unique characteristics, the strong support for SeaPort's service at Visalia provides confidence that we would produce similar results at Merced. This provides further supportto SeaPort's beliefthat ouramended proposal represents the best opportunity for Merced to reach the two benchmarks used to determine eligibility to continued receiving subsidized EAS: 1) Average of 1 0+ enplanements each day, and 2) Subsidy lessthan $200 per passenger. SeaPort Airlines will be happy to provide the appropriate personnel to the Merced Regional Airport Authority, City of Merced, and/or the Departmentto discuss our original proposal dated July 11, 2014, as well asthe amendments contained in this document. Respectfullysubmitted,
Timothy Sieber ExecutiveVice President SeaPortAirlines, Inc. April 6, 2015

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### OST-1998-3521 Cessna Caravan, Two-Pilots 12Weekly RTs: Merced - Sacramento

12 Weekly RTs: Merced- Burbank <===.AIRLINES

Proforma Data Operating Projections Average Sector Length (sm) 197 Scheduled Departures 1,976 Scheduled Block Hours 2,686.7 Projected Completion Factor 99.0% Projected Completed Departures 1,956 Projected Completed Block Hours 2,659.8 Passenger Projections Projected Passengers 11,008 Passengers per Departure 5.6 Projected Average Fare $56.23 Revenue Passenger Miles (RPMs) 2,165,679 Available Seat Miles (ASMs) 3,463,780 Projected Load Factor 62.5% Financial Projections Revenues PassengerTicket Revenues $618,978 Ancillary Revenues $15,474 Total $634,452 Expenses Flight Operations $292,578 Aircraft Ownership/Lease $324,000 Fuel & Oil $610,424 Sales & Marketing $25,000 Traffic Servicing $421,374 Insurance $47,876 Maintenance $521,895 Sub-Total- Direct $2,243,148 Indirect $336,472 Total Expenses $2,579,620 Projected Operating Profit/(Loss) ($1 ,945,167) Subsidy Calculations Operating Loss $1,945,167 Economic Return @ 5% $128,981 

# I Required Subsidy $2,074,1481 Subsidy per Departure $1,060.27 Subsidy per Passenger $188.42 Avg. Enplanements perOperational Day 17.6

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