### Beforethe United States DepartmentofTransportation January7, 2015

Proposal to Provide Essential Air Service at EL CENTRO/IMPERIAL, CALIFORNIA DocketOST-2008-0299 Under49 U.S.C. 41731 etseq.


## Proposal ofSeaPortAirlines, Inc. to Provide Essential AirService at El Centro/Imperial, California

By Order2014-12-2, the U.S. DepartmentofTransportation ("the Department") requested proposals from carriers interested in providing Essential Air Service (EAS) at El Centro/Imperial, California no laterthan January7, 2015. SeaPort Airlines, Inc. respectfully submits this timely proposal to provide subsidized EAS at El Centro/Imperial asfollows:
• 12weekly roundtripsto Burbank Bob HopeAirport; and
• 12weekly roundtripsto San Diego InternationalAirport. The requested annual level ofsubsidy for this service is $2,264,009. This proposal is submitted on the basis ofafouryearcontractaward. After this proposal is docketed, SeaPort Airlines will schedule a meeting with the community to explain our proposal in detail and answer any questions. In the interim and throughout the carrier selection process, questions regarding this proposal should be directedto: Timothy Sieber ExecutiveVice President

SeaPortAirlines, Inc. 7505 NEAirportWay Portland, OR 97218 (971) 340-1716 tsieber@seaportair.com

# SEA PORT

Discussion of Proposal Company Introduction SeaPort Airlines, Inc. is a FAA certified scheduled airline based in Portland, Oregon with over 30 years of experience in commercial aviation. In addition to Portland, the company has operational bases at Memphis, Tennessee (MEM); San Diego, California (SAN); and Juneau, Alaska (JNU). Over 300 professionals provide service to 23 cities across ten states and two countries with a fleet of21 aircraft. The company's route map as ofthe date ofthis proposal is provided below: 1

SoutheastAlaska

The primary focus of SeaPort Airlines is to provide affordable and reliable air service to small and rural communities across America. Service to 11 ofthe communities on our route map is provided under the EAS program: Muscle Shoals, Alabama; Tupelo, Mississippi; Pendleton, Oregon; El Dorado, Hot Springs, and Harrison, Arkansas; Salina and Great Bend, Kansas; Jackson, Tennessee; and El Centro/Imperial, California.

1 SeNiceto Muscle Shoals, AL begins on January 12, 2015. OST-2008-0299 January7, 2015 Page

### 12==AIR INES

In December, the Department awarded SeaPort the contract to provide EAS at Visalia, California. Beginning in February 2014, service will be provided to both Burbank Bob Hope Airport (Los Angeles Basin) and Sacramento InternationalAirport. Increasing our presence in California is a major focus of SeaPort Airlines. This was demonstrated most recently on December 15, 2015 with the launch of our first international service, connecting San Diego International Airport with San Felipe, Mexico. Along with service to one additional destination in Mexico, SeaPort has identified four intra-California routes that, subjectto available aircraft, may be added during 2015. Aircraft SeaPort Airlines' proposal to provide EAS at El Centro/Imperial assumes operations with 9- passsenger Cessna Caravans. That will allow us to offer safe, comfortable, and affordable air transportation with a reasonable level offrequency. Produced in the USA, the "Caravan" was originally designed in the 1980's to replace an aging fleet of piston-powered aircraft, such as the De Havilland Otter and Piper Chieftain. Over 2,500 Caravans have been built logging over 13 million flight hours. SeaPort operates a total of 14 Cessna Caravans, including three recently delivered brand newfrom thefactory.

The new aircraft, which SeaPort anticipates taking additional deliveries of during 2015, are equipped with the all-glass Garmin G1000 avionics suite which incorporates Synthetic Vision Technology(SVT) that includestopographical displays ofterrain, visualization ofother airtraffic, and real-time data from both aircraft and engine that improves situational awareness and trend monitoring to facilitate pre-emptive maintenance that reduces flight delays and cancellations attributableto mechanical issues.
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### 13

# SEA PORT

Further benefits of the Garmin 1000 include an advanced autopilot system that can perform virtually all pilot actions from climb-out through final descent and reduces pilot workload with precise vertical and horizontal guidance. These capabilities will result in higherflight completion rates, even during the most challenging weather conditions, as well as enhanced levels of safety and comfort. While the Caravan is certified for single-pilot operation, SeaPort typically operateswith both a Captain and First Officer. The recently delivered aircraft are equipped with a TKS anti-ice/de-ice system that exudes glycol-based fluid through laser drilled holes on the leading edge ofthe wing and other critical surfaces. The fluid prevents precipitation from adhering the aircraft, further enhancing both safetyand operational reliability Proposed Service Patterns 

### &Illustrative FlightSchedules SeaPort's proposal to provide EAS at El Centro/Imperial includes a schedule similar to that which we currently provide. This includes 12 weekly roundtrips to Burbank and 12 weekly roundtrips to San Diego, and is illustrated below: 

## EL CENTRO/IMPERIAL, CALIFORNIA Flight# Depart Arrive Step**Freque~cy** Flight# Stops Frequency TO: BURBANK(LOSANGELES) FROM: BURBANK (LOSANGELES) 5111 5:45am 7:00am 0 ExSatSun 5112 7:30am 8:45am 0 ExSatSun 5197 7:00am 8:15am 0 SatOnly 5198 8:45am 10:00am 0 SatOnly 5115 3:00pm 4:15pm 0 ExSat 5210/5114 11:35am 1:45pm SAN TueWedFri 5116 4:45pm 6:00pm 0 ExSatSun TO:SAN DIEGO FROM:SAN DIEGO 5111/5201 5:45am 8:45am BUR ExSatSun 5114 1:00pm 1:45pm 0 ExSun 5113 9:55am 10:40am 0 ExSatSun 5205/5116 2:00pm 6:00pm BUR ExSatSun 5199 10:30am 11:15am 0 Sa!Only 5118 7:30pm 8:15pm 0 ExSat 5117 6:15pm 7:00pm 0 ExSat We anticipate no major changes to the above schedule over the term of the next contract period. Any changes that might occurwould only be after consultation with, or atthe request of, the community. An example of SeaPort's willingness to work with the El Centro/Imperial, CA community was the recent adjustment of a departure time from Burbank ten minutes later to betteraccommodate connectionswith a SouthwestAirlinesflightfrom Sacramento. The maps on the next page show nonstop destinations from both San Diego International Airportand Burbank Bob HopeAirport.2

2 Published schedules forJune2015 as ofDecember 19, 2014. OST-2008-0299 January 7, 2015 Page

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# SEA PORT

==.AIR INES 

## Nonstop Destinations Servedfrom San Diego InternationalAirport May 2015



## Nonstop Destinations Servedfrom Burbank Bop HopeAirport May2015

OST-2008-0299 January7, 2015 Page 

### 15

# SEA PORT**==,~,IRL1NES** Fares & Pricing SeaPortAirlines projections oftraffic and revenue in this proposal assume the continued use of a low-fare pricing fare model that allows forthe customer'sfare from El Centro/Imperial to be an "add-on" to the fare of a connecting airline at the hub and still result in reasonable overall trip cost. Thetable below illustratesthe fares SeaPort plansto offerat El Centro/Imperial to both Burbank and San Diego, along with the rules and restrictions applicableto the three basicfare families of ourcompany. 

## Illustrative Fares at El Centro/Imperial, Ca .iiJIIill. IMPERIAUELCENTROto/from BURBANK $119 $89-$59 $49 IMPERIAUELCENTROto/fromSAN DIEGO $89 $69-$59 $49 Advance Purchase (Days Before**De~arture)** 0 3-7 7-14 Refunds Permitted Yes No No Feeto Change Itinerary $0 $50 Not Permitted Stand-by For Earlier FlightSame Day $0 $25 Not Permitted #of Free Checked Bags (50 lbs each) 2 1 1 Fee for Oversize/Excess Checked Bags $50 $50 $50 Feefor**Bookin~** atAirport/on Phone $0 $0 $25

In addition to the fares listed above, customers in El Centro/Imperial will have access to new productsthatSeaPort is rolling out overthe nextsix months:
• Commuter Books that offer 10 tickets at a discounted prices and waiver of certain restrictions.
• Studentstand-byfares for $25 each-way, based on available seats.
• Private negotiated fares that allow companies to realize progressive savings based on level ofactivityand/orshare oftheirairtravel budget committed to local airservice. InterlineConnectivity& GDS Display SeaPortAirlines tickets may be purchased by calling our toll-free reservation number, online at www.SeaPortAirlines.com, at any travel agent connected to a major global distribution system (GDS), or all of the major online travel agencies and meta-searchers such as Orbitz, Travelocity, Expedia, Kayak, Hipmunk, and CheapoAir. On March 23, 2014, SeaPortAirlines became thefirst US airline to be completely hosted bythe AmadeusAltea reservation platform. This system is onethe topthree distribution systems in the world and is the same reservation system for such leading airlines as Air France/KLM, Qantas, Emirates, Korean Airlines, and others.

OST -2008-0299 January 7, 2015 Page

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# SEA PORT

==AIRLINES

With this new system, SeaPort has unsurpassed capability compared to other regional airlines with respect to interline ticketing, offering optional services, through baggage check-in, InterAirline Thru Check-In (IATCI), SMS notifications to customers of schedule changes and flight irregularities, the ability for customers to make online changes to reservations, and (eventually) online check-in. Most importantly, however, Altea enabled SeaPortAirlinesto implement its first bilateral interline e-ticketing and baggage agreement.3 That agreement with Alaska Airlines was activated on March 24, 2014, the day after the reservation migration was completed. A second interline agreementwith HawaiianAirlines was activated on December 15, 2014. The company has initiated discussionswith multiple airlines about potential incremental revenue from connecting SeaPort customers to build a business case for interline agreements similarto the onewith Alaska Airlines and Hawaiian Airlines. In addition to reservations, SeaPortAirlines offers rental cars and hotels on itswebsite. SeaPort plans to enhance this offering in 2015 with a dynamic booking process for business trips and vacations that will allow customers to book flights (including those of interline partners), rental car, and hotel in asingletransaction and all from asingle screen. Thiswill be included as partof an overall makeover of the company's website in late 2015 that will be designed for better functionalitywith mobile devices and complies with new USDOT requirementsfor accessibility. Sales 

### &Marketing SeaPort Airlines proposal to provide EAS at El Centro/Imperial, California includes a commitment to spend $25,000 during each year of the contract term for advertising and promotional activities. These expenditures are intended to help increase traffic in the market and maintain a level above 10 enplanements peroperational day. Advertising Advertising activities will focus on radio, print, online, and outdoor (i.e., roadside signs and sports stadium boards) throughout the catchment area of Imperial County Airport. On a limited basis, we would purchase commercials during local television news broadcasts. Sales & Community Relations Advertising will be supported by aggressive and sustained sales activities focused on companies and organizations in the El Centro/Imperial area with a need for reliable, affordable travel options. The sales message would include explanation the value proposition of flying compared to driving, connectivity possibilities, service enhancements, and the importance of local businesses to support local air service. The costs associated with sales activities (i.e., printing, travel, etc.) are not included in the $25,000 advertising budget.

3 Bilateral agreements allow both participating carriers to make reservations and issue tickets on each other's flights. A unilateral agreementonly allows one carrierto sell and issuetickets. OST-2008-0299 January7, 2015 Page 

### 17**==,~IRLINES** 

# Subsidy Request Calculations
As noted on page one, SeaPort Airlines is requesting annual subsidy of $2,264,009 at El Centro/Imperial, California to provide 12 weekly roundtrips to San Diego and 12 weekly roundtrips to Burbank. This calculates to subsidy of $925.57 per departure. The next page containsthe calculationsto supportthe requested subsidy amount. This proposal is being submitted on the basis ofan award ofafour-year contract.

Timothy Sieber Executive Vice President SeaPortAirlines, Inc. January 7, 2015

OST-2008-0299 January7, 2015 Page

### 18OST-2008-0299 January7, 2015 

# SEA :'PORT

OST-2008-0299 Cessna Caravan, Two-Pilots 12Weekly RTs: El Centro/Imperial- Burbank 12 Weekly RTs: El Centro/Imperial- San Diego Operating Projections Average Sector Length (sm) Scheduled Departures Scheduled Block Hours Projected Completion Factor. Projected Completed Departures Projected Completed Block Hours Passenger Projections Projected Passengers Passengers per Departure ProjectedAverage Fare Revenue Passenger Miles (RPMs) Available SeatMiles (ASMs) Projected Load Factor Financial Projections Revenues PassengerTicket Revenues Ancillary Revenues Total Expenses Flight Operations AircraftONnership/Lease Fuel & Oil Sales & Marketing Traffic Servicing Insurance Maintenance Sub-Total
- Direct Indirect Total Expenses Projected Operating Profiti(Loss) Subsidy Calculations Operating Loss Economic Return @ 5% 

# I Required Subsidy Proforma Data 140 2,496 2,496.0

98.0% 2,446 2,446.1

7,675 3.1 $72.24 1,074,500 3,082,061 34.9%

$554,428

$13,861 $568,288 $269,069 $531,000 $614,211

$25,000 $451,337

$51,368 $403,603 $2,345,587

$351,838 $2,697,425 ($2,129,137)

$2,129,137

$134,871 $2,264,0091

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