## Or der: 20 11

- 1 2

- 15

Served : Dece mber 22 , 20 11



## UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 2 2 nd 

## day of Dece mber , 20 11

Essential Air S ervice at

JACKSON, TENNESSEE

under 49 U.S.C. 41731 et seq. Docket DOT

- OST

- 2000

- 7857

ORDER S ELECTING CARRIER

Summary By this order

, the Department is s electing SeaPort Airlines, Inc. ( SeaPort ) to provide
subsidized essential air service (EAS) at Jackson, Tennessee

, for a one

- year period

. 1 

## The

one

- year period will begin when SeaPort inaugurates full EAS and will run through the end
of the 12 th 

## month thereafter. This selection of SeaPort will provide Jackson with 1 2 nonstop round trips per week to Nashville International Airport ( “ Nashville ” ) and 6 nonstop round trips per week to Memphis International Airport ( “ Memphis ” ) using 9

- passenger Cessna Grand Caravan ai rcraft at an annual subsidy rate of $1,149,703

.

Background By Order 2009

- 6

- 17 (June 22 , 2009 ) , the Department selected Pacific Wings to provide 18 nonstop round trips per week from Jackson to Nashville using a 9

- passenger Cessna Grand Caravan, for 24

mont hs beginning when the carrier inaugurated service, for a n annual subsidy rate of $1, 225,628. Pacific Wings inaugurated service at Jackson on August 31, 2009 . The current contract expire d on August 31, 2011 . Pacific Wings operates the service under the brand name Tennessee Skies.

Before Pacific Wings inaugurated service at Jackson, the community experienced an extended service hiatus. The previous carrier, Big Sky Airlines, ceased operations at Jackson on January 6, 2008. Great Lakes Aviation, Ltd. (G reat Lakes) was selected to serve Jackson by Order 2008

- 2

- 1 (February 6, 2008), but Great Lakes never began service. Thus, Jackson was without scheduled air service from January 7, 2008, until August 31, 2009.

1 Subsidy is calculated and distributed on a fiscal year basis, subject to the availability of appropriated funds.

## - 2

-

In anticipation of the expiration of Pacific Wings’ contract on August 31, 2011, the Department

issued Order 2011

- 1

- 19 (January 21, 2011), soliciting proposals on or before March 16, 2011, from carriers interested in providing service at Jackson. On March 15, 2011, prior to the due date for

proposa ls, Pacific Wings notified the Department of its intention to provide subsidy

- free service at Jackson, effective September 1, 2011, the end of its current contract. As a result, the Department notified the community and ceased the carrier

- selection proces s.

On June 30, 2011, Pacific Wings filed with the Department a 90

- day notice of its intent to terminate service at Jackson, as well as Owensboro, Kentucky, 2 

## effective September 30, 2011. Pacific Wings stated that despite many attempts, it had been “unabl e to procure counter or gate space at [Nashville International Airport] on reasonable terms.” The carrier stated that these “barriers to access continue to impede and frustrate our service delivery efforts.”

In response to Pacific Wings’ 90

- day notice to suspend service, t he Department issued

Order 2011

- 8

- 27 , August 31 , 2011, prohibiting Pacific Wings from terminating subsidized service for 30 days beyond the end of its 90

- day notice period, and requesting long

- term proposals from

carriers interested in providing EAS at Jackson . Proposals were due September 30

.

Discussion

Order 2011

- 8

- 27 explained that Public Law 112

- 27, signed into law on August 5, 2011, amended the definition of “eligible place” for the purpose of receiving EAS. See 49 U.S.C. § 41731. The amendment states that to be eligible, a community must be located not less than 90 miles from the nearest medium or large hub airport and must have had an average subsidy per passenger of less than $1,000 , regardless of isolation, during the most rec ent fiscal year, as determined by the Secretary of Transportation. Section 41731, as amended, also grants the Secretary the authority to

issue a waiver of the 90

- mile criterion if the Secretary determines that the “geographic

characteristics of the locati on result in undue difficulty in accessing the nearest medium or large hub airport.” 49 U.S.C. § 41731(d). The Department is currently preparing a Notice of Proposed Rulemaking regarding the new waiver provisions under 49 U.S.C. § 41731, as amended. Jonesboro’s long

- term eligibility may be affected by this amendment.

Proposals

I n response to that O rder, we received proposals from Multi

- Aero, Inc. d/b/a Air Choice One (Air Choice One), and SeaPort Airlines, Inc. (SeaPort).

Copies of each proposal may be accessed online at http://www.regulations.gov by entering DOT

OST

- 2000

- 7857 in the “ Enter Keyword or ID ” section.

Air Choice One proposed two options, each operating with 9

- passenger Cessna Grand Caravan

ai rcraft. Option 1 is three nonstop round trips each weekday and weekend (18 per week) to

Lambert

- St. Louis International Airport, for an annual subsidy of $1,810,690. Option 2 is three nonstop round trips each weekday and weekend (18 per week) to Nashvill e International Airport for an annual subsidy of $1,741,701.

SeaPort proposes three options, all using 9

- passenger Cessna Caravan aircraft. Option 1 is three nonstop round trips each weekday and weekend (18 per week) to Memphis International Airport

2 See Order s 2 011

- 8

- 6 and 2011

- 10

- 14 for information regarding Owensboro.

## - 3

-

(Mem phis) for an annual subsidy of $ 947,818 (first year) and $925,603 (second year). Option 2 is two nonstop round trips each weekday and weekend (12 per week) to Nashville and one nonstop round trip each weekday and weekend (6 per week) to Memphis for an annual subsidy of $1,149,703 (first year) and $1,115,210 (second year). Option 3 is two nonstop round trips each weekday and weekend (12 per week) to Memphis and one nonstop round trip each weekday and weekend (6 per week) to Nashville for an annual subsi dy of $1,034,164 (first year) and $1,006,387 (second year).

Community Comments
On October 18 , we requested community comment s regarding the carrier selection at
Jackson

. We received a letter from the Jackson

- Madison County Airport Authority, recommending Seaport Airlines be chosen as the carrier at Jackson. The Airport Authority believes that option #2 (12 weekly nonstops to Nashville and 6 weekly nonstop round trips to Memphis) gives Jackson more opportunity to lower the subsidy per passenge r by
allowin g two hub choices for travelers, Delta Airlines at Memphis and Southwest Airlines at

Nashville.

Decision After reviewing each carrier’s proposal and taking into account community feedback, we have

decided to select SeaPort ’s proposal (option 2) of 12 week ly nonstop round trips to Nashville and 6 weekly nonstop round trips to Mem phis

.

Both of Air Choice One’s proposals require greater annual subsidy than any of SeaPort’s proposals, and the carrier did not receive any community support. The community affirmatively supports SeaPort’s Option 2 for 12 weekly nonstop round trips to Nashville and 6 weekly nonstop round trips to Memphis. Although it requires greater annual subsidy than the carrier’s Option 1 or Option 3 , we have decided to select the commun ity’s recommendation ( O ption 2) . This will allow the community an opportunity to build ridership during the one

- year period of this contract by maintaining the majority of the community’s flights to Nashville while additionally providing service to Memphi s.

The community remains subject to the $200 per passenger subsidy cap 3 

## and the $1

, 000 per passenger subsidy cap (see Discussion section, above). We will monitor the per passenger subsidy

toward the end of the 12

- month period and the NPRM process to dete rmine the community’s eligibility status

.

We shall make this selection at Jackson 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 concerning lobbying activities.

Carrier Fitness

3 Congress first established the $200 ceiling under P.L. 101

- 164 for fiscal year 1990, and reestablished it in fiscal years

1994

- 1999. The ceiling was made permanent by P.L. 106

- 69, the Department of Transportation and Related Agencies Appropriations Act of 2000.

## - 4

-

49 U.S.C. 41737(b) requires that we find an air carrier fit, willi ng, and able to provide reliable service before we may subsidize it to provide essential air service

. SeaPort is sub j ect 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 h ere.

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

ACCORDINGLY,

1. We select SeaPort Airlines, Inc. , to provide essential air service at Jackson, Tennessee ;

2 . We set the final rate of compensation for SeaPort Airlines, Inc.

, for the provision of essential air

service at Jackson, Tennessee

, as described in Appendix C ;

3

. The Department directs S eaPort 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 when EAS begins or until the Department indicates that the r ecords 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;

4

. We find that SeaPort Ai rlines, Inc.

, continue s to be fit, willing and able to operate as a commuter
carrier and capable of providing reliable essential air service at Jackson, Tennessee ;

5 . Th is docket will remain open until further order of the Department; and

6 . We will s erve copies of this order on the Mayor of Jackson and the Executive Director of

Jackson

- Madison County Airport Authority

, Multi

- Aero, Inc. d/b/a Air Choice One

, and SeaPort Airlines, Inc.

By:

SUSAN L. KURLAND Assistant Secretary for

Aviation and International Affairs

(SEAL)

An electronic version of this document is available at http://www.regulations.gov

## Appendix A



# AREA MAP

This map is provided by Planet Profitability Forecasting System and is being used with express permission of the copyright holder, Sabre Airline Solutions®.

## Appendix B

S ea P o r t A i r li n es , I n c

. O p t i o n # 2

6 W eek l y R ound t r i p s : Jacks on , T N

- M e m ph i s , T N

1 2 W eek l y R ound t r i p s : Jacks on , T N

- N as h v ill e , T N

pOp e r a t i n g P r o j e c t i on s

A v

e r ag e S e c t o r Leng t h ( s m ) Y e a r 1

111 Y e a r 2

111

S c hedu l e d D epa r t u r e s 1

, 87 2 1

, 87 2

S c hedu l e d B l o c k H ou r s 1

, 487

. 2 1

, 487

. 2

P r o j e c t e d C o m p l e t i o n F a c t o r 98

. 0 % 98

. 0 %

P r o j e c t e d C o m p l e t e d D epa r t u r e s 1

, 83 5 1

, 83 5

P r o j e c t e d C o m p l e t e d B l o c k H ou r s 1

, 457

. 5 1

, 457

. 5

Pass e ng e r P r o j e c t i on s

P r o j e c t e d P a ss enge r s 5

, 89 9 6

, 48 9

P r o j e c t e d A v e r ag e F a r e $64

. 6 2 $65

. 9 2

R e v enu e P a ss enge r M il e s (R P M s ) 654

, 78 9 720

, 26 8

A v

a il ab l e S ea t M il e s ( AS M s ) 1

, 832

, 72 5 1

, 832

, 72 5

P r o j e c t e d Loa d F a c t o r 35

. 7 % 39

. 3 %

F i n a n c i a l P r o j e c t i on s

R e v enue s

P a ss enge r T i ck e t R e v enue s $381

, 22 0 $427

, 72 9

A n c ill a r y R e v enue s $9

, 18 8 $10

, 34 0

T

o t a l $390

, 40 8 $438

, 06 9

E x pen s e s

F li gh t O pe r a t i on s $247

, 76 8 $250

, 53 7

A i r c r a f t O w ne r s h i p / Lea s e $164

, 64 0 $164

, 64 0

F ue l & O i l $405

, 31 9 $419

, 50 5

T

r a ff i c S e r v i c i n g $163

, 31 8 $169

, 91 2

I n s u r an c e $29

, 14 9 $29

, 73 2

M a i n t enan c e $240

, 48 0 $245

, 29 0

S ub

- T o t a l

- D i r e c t $1

, 250

, 67 4 $1

, 279

, 61 5

I nd i r e c t $216

, 09 9 $199

, 69 8

T

o t a l E x pen s e s $1

, 466

, 77 3 $1

, 479

, 31 3

P r o j e c t e d O pe r a t i n g P r o f i t/ ( Lo ss ) ( $1

, 076

, 365 ) ( $1

, 041

, 244 )

S ub s i d y C a l c u l a t i on s
O pe r a t i n g Lo s s $1

, 076

, 36 5 $1

, 041

, 24 4

E c ono m i c R e t u r n @ 5 % $73

, 33 9 $73

, 96 6

R e qu i r e d S ub s i d y $1

, 149

, 70 3 $1

, 115

, 21 0

**% C**  **h g**  **i n**  **S ub**  **s i**  **d**

**y R**  **e qu**  **e s**  **t D**  **u r**  **i n**  **g Y**  **ea r**  **T w** 

**o**
**- 3** 

**. 0**  **%**

S ub s i d y pe r D epa r t u r e $626

. 6 9 $607

. 8 9

S ub s i d y pe r P a ss enge r 

### $194

. 9 0 $171

. 8 6

## Appendix C

SeaPort Airlines, Inc.

Essential Air Service to be Provided at Jackson, Tennessee

Effective Period : One year beginning when SeaPort inaugurates full EAS through the end of the

12 th 

## month thereafter

Scheduled Service : 12 nonstop round trips per week to Nashville International Airport and 6 nonstop round trips per week to Memph is International Air port
Aircraft : Cessna Grand Caravan

, 9 seats Rate per Eligible Flight 1 

## : $ 62 7 Weekly Ceilin g 2 

## : $ 22,572

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 t he 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 or der 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 a nd 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 d eviating 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 unilaterall y, 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 ag reed 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 f rom 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 September 30, 2012

. The Governmen t’s obligation for performance under this order beyond September 30, 2012 , 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 per formance under this order beyond September 30, 2012 , until funds are made available to the Department for performance. If funds are not made available for performance beyond September 30, 2012 , 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

.

1 Annual compensation of $1,149,703 , divided by 1,835 annual departures (36 weekly departures x 52 weeks x 98 percent completion).

2 36 flights per week multiplied by $ 627 per f light.