Order 2012-12-21

Served: December 28, 2012

 UNITED STATES OF AMERICA

 DEPARTMENT OF TRANSPORTATION

 OFFICE OF THE SECRETARY

 WASHINGTON, D.C.

Issued by the Department of Transportation

on the 28th day of December, 2012

ORDER TENTATIVELY RESELECTING CARRIER

Summary

By this Order, the Department is tentatively reselecting SeaPort Airlines, Inc. (SeaPort), to 

provide subsidized Essential Air Service (EAS) at Pendleton, Oregon, for the four-year 

period from January 1, 2013, through December 31, 2016, for an annual subsidy rate of 

$1,834,708.

Background

By Order 2010-10-18 (October 26, 2010), 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, 2011, through 

December 31, 2012. SeaPort provided 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 10, 2012), soliciting proposals from carriers interested in providing 

EAS, with or without subsidy, at Pendleton for a new contract period. In response we 

received proposals from SeaPort and Sovereign Air, Inc. (Sovereign).

Proposals

A summary of the proposals received is provided below. Full copies 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
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Management System at: http://www.regulations.gov by entering docket number 

DOT-OST-2004-19934 in the search box.

SeaPort

SeaPort proposed two service options for Pendleton. Both service options would be operated 

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, but 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. 

Since the Department would not be subsidizing the 22nd weekly round trip, we cannot require 

the carrier to continue to operate it.

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 Jetstream 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 service 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 airport manager 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 Council 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 or

Federal Aviation Administration, and it has no support 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, under its four-year option, the first-year subsidy rate 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 
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in the required subsidy. Due to the delays and uncertainties that issuing a new RFP would 

impose on the community 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 following 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 

objection 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 the 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) and 41738 require that we find an air carrier fit, willing, and able to 

provide reliable service before we may subsidize it to provide EAS. 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 Part 1.56a(f).

ACCORDINGLY,

1. The Department tentatively selects SeaPort Airlines, Inc. to provide Essential Air Service 

at Pendleton, Oregon, at service levels and subsidy rates as described in Appendix C, for the 

period from January 1, 2013, through December 31, 2016;

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 paragraph 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; 
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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 audit 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 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;

6. We find that SeaPort Airlines, Inc. continues to be fit, willing and able to operate as a 

commuter air carrier and capable of providing reliable Essential Air Service at Pendleton, 

Oregon;

7. This Docket will remain open until further Order 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 COMMUNITIES
Appendix B
Appendix C

Page 1 of 2

SeaPort Airlines, Inc.

Essential Air Service to be Provided at Pendleton, Oregon

Effective Period: January 1, 2013, through December 31, 2016.

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

Intermediate stops and upline 

service: 

No service may be permitted to upline points 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: Cessna Caravan (9 passenger seats).

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

compensation.

Annual compensation: $1,834,7081

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 Pendleton2

Weekly Compensation 

Ceiling:

$35,6583

 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/departure 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 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 March 31, 2013. The 

Department’s obligation for performance under 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 available 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 service provided 

under this order.