Order 201 2

- 1 2

- 21

Served: December 28 , 201 2



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 28 th day of December , 201 2

ORDER TENTATIVELY RESELECTING CARRIER

Summary By this O rder, the Department is tentatively re selecting SeaPort Airlines , Inc. (SeaPort) , to provide subsidized E ssential A ir S ervice (EAS) at Pendleton, Oregon, for the four

- year period from January 1, 201 3 , through December 31, 201 6

, for an annual subsidy rate of $1, 834,708

.

Background By Order 2010

- 10

- 18 ( October 26 , 20 10 ) , the Department selected SeaPort to provide three nonstop round trips per day (21 per week) between Pendleton and Portland with 9

- seat
Pilatus PC

- 12 aircraft , for the two

- year period beginning January 1, 201 1

, through December 31, 2012

. SeaPort provide d this service for a first

- year subsidy rate of $1, 463,681 and $1, 502,521 in the second year

.

In anticipation of the expiration of the existing contract , the Department issued

Order 2012

- 8

- 13 ( August 1 0

, 201 2 ) , soliciting proposals from carriers interested in providing EAS, with or without subsidy, at Pendleton for a new contract period. In response we received proposals f rom SeaPort and Sovereign Air, I nc. (Sovereign).

Proposals A summary of the proposals received is provided below

. Full c opie s of the proposals and public filings regarding Pendleton’s EAS may be accessed online through the Federal Docket

Essential Air Service at

PENDLETON, OREGON

Under 49 U.S.C. 41731 et seq

. Docket DOT

- OST

- 2004

- 19934- 2

-

Management System at: http://www.regulations.gov by entering d ocket n umber

DOT

- OST

- 2004

- 19934 in the search box

.

SeaPort SeaPort proposed two service options for Pendleton. Both service options would be oper ated

with nine

- passenger
, single

- engine Cessna Caravan aircraft. The first option would provide 22 weekly nonstop round trips (21 subsidized with an additional unsubsidized round trip) to Portland. This option would require a first

- year subsidy of $1,834,708 , increasing to $1,926,444 in the second year. The second service option proposed would consist of the same service pattern, b ut would be for a four

- year term. The annual subsidy would be equal to the second year subsidy under the first service option ( $1,926,444 ), for all four years.

S ince the Department would not be subsidiz ing the 22 nd weekly round trip, we cannot require

the carrier to continue to operate i t.

Sovereign Sovereign proposed two service options for Pendleton. The first option would provide service with three daily round trips to Portland International Airport (19 total per week) with

19

- passenger Jet stream 31/32 aircraft. Sovereign would require an annual subsidy of $1,669,692

. Sovereign’s second service option would provide three daily round trips to Portland (21 total per week) with nine

- passenger , twin

- engine King Air 100/200 aircraft.

This servi ce option would require an annual subsidy of $1,500,117

.

Community Comments

On October 5, 2012 , the Department requested comments from the civic officials of

Pendleton and the a irport m anager of the Eastern Oregon Regional Airport regarding the

carrier selection decision.

In response, the Department received a letter from Mayor Phillip Houk of Pendleton

, detailing the results of the November 6, 2012, City Council meeting at which the EAS

selection was discussed

. At the meeting, the City Co uncil voted unanimously to recommend SeaPort’s proposal for a four

- year contract. The City Council also voted unanimously to

waive the twin

- engine aircraft requirement

.

Decision We have decided to select SeaPort on a tentative basis to provide EAS at Pendleton, OR, for

the four

- year period beginning January 1, 2013. We will not select the proposal of Sovereign as the carrier does not have the requisite operating authority from either the Department o r Federal Aviation Administratio n , and it has no sup port from the community

. SeaPort is the incumbent carrier and has been providing reliable EAS at Pendleton since January 2010. SeaPort’s proposal would continue to meet the EAS needs of the community and has

received the full support of the community.

However, we are concerned about the subsidy level requested by SeaPort under its four

- year option

. Under its two

- year proposal, SeaPort is requesting $1,834,708 for the first year of

service. However, u nder its four

- year option, the first

- year subsidy r ate would increase to $1,926,444, and remain at that level for the duration of the contract. We are concerned as to why the added financial stability and security of a four

- year contract would cause an increase- 3

-

in the required subsidy. Due to the delays and uncertainties that issuing a new RFP would impose on the co mmunity and the carrier, we will tentatively select SeaPort to continue providing EAS at Pendleton but at subsidy levels slightly lower than those originally proposed by SeaPort for a four

- year contract. Specifically, we will authorize an annual subsidy rate of $1,834,708 for a four

- year contract, beginning on January 1, 2013.

Because we are selecting an option that is different than what the carrier proposed, we will give SeaPort 10 days fol lowing the service date of this Order to accept or reject this tentative award or offer a revised bid. In addition, we will also give Sovereign 10 days to object and/or submit a revised bid. If SeaPort files a timely objection, or if Sovereign files an

o bjection or revised proposal, we will address those issues in a subsequent Order. Under either scenario, we will compensate SeaPort at the rates we are setting here from January 1, 2013, as final rates, until further Departmental action.

We shall make th e 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

go verning lobbying activities.

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

. SeaPort is subject to the Department’s continui ng fitness requirements, and no information ha s come 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 O rder is issued under auth ority delegated in 49 CFR Part 1.56a (f).

ACCORDINGLY, 1. The Department tentatively select s SeaPort Airlines

, Inc. to provide E ssential Air S ervice

at Pendleton

, Oregon, at service levels and subsidy rates as described in Appendix C , f or the period from January 1, 2013 , through December 31, 20 1 6 ;

2

. The Department directs SeaPort Airlines, Inc. and Sovereign Air, Inc. to show cause why we should not select SeaPort Airlines, Inc. at the service and subsidy levels described in Appendix C;

3. If we receive timely objections and/or revised proposals, we will compensate SeaPort Airlines, Inc., pursuant to ordering par agraph 1 above as final rates until further Departmental action;

4. If we receive no timely objections or revised proposals, we delegate to the Director of the Office of Aviation Analysis, the authority to issue an Order finalizing the tentative findings

in this Order ;- 4

-

5

. The Department directs 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 a udit and examination by representatives of the Department. Such documentation shall be retained for seven years

from the date of service of this Order or until the Department indicates that the records may be destroyed, whichever comes first. Copies of f light 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;

6 . We find that SeaPort Airlines

, Inc. continues to be fit, willing and able to ope rate as a

commuter air carrier and capable of providing reliable E ssential A ir S ervice at Pendleton, Oregon;

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

8

. We will serve copies of this Order on SeaPort Airlines, Inc., Sovereign Air, Inc., the mayor of Pendleton, OR, and the airport manager of the Eastern Oregon Regional Airport.

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 BAppendix C Page 1 of 2

SeaPort Airlines , Inc.
Essential Air Service t o b e Provided at Pendleton, Oregon

Effective Period : January 1, 201 3

, through Dec ember 31 , 201 6

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

service : No service may be permitted to upline point s 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: Cessn a Caravan (9 passenger seats). Timing of flights: Flights must be well

- timed and well

- spaced in order to ensure full compensation. Annual compensation: $1, 834,708 1 This rate assumes an annual completion factor of 99 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 : $ 849 per each arrival and departure from Pendleton 2 Weekly Compensation Ceiling: $3 5,658 3

1 See Appendix B.

2 2,184 scheduled annual arrivals/departures x 99% completion factor = 2,162 annual arrivals/departures. $1,834,708 divided by 2,162 arrivals/departures = $849.

3 $849 per arrival/departur e x 42 arrivals/departures per week.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 subs idy 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 th e 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 se rvice 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 par tial 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 March 31, 2013 . The Department’s obligation for performance unde r this order beyond March 31, 2013 , 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 March 31, 2013 , until funds are made ava ilable to the Department for performance. If funds are not made available for performance beyond March 31, 2013 , 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 serv ice provided

under this order.