## Before the United States Department of Transportation August 15 , 2012

Proposal to Provide Essential Air Service at

ATHENS, GEORGIA

Under 49 U.S.C. 41731 et seq. Docket OST

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# SeaPort Airlines, Inc. Proposal to Provide Essential Air Service at

Athens, Georgia

By Order 2012

- 7

- 15 , the Department requested proposals for Essential Air Service (EAS) at Athens, Georgia no later than August 1 , 2012. By Memorandum date d July 19

, 2012, at the request of SeaPort Airlines and without objection from the community, the Department extend ed the due date for proposals until August 15 , 2012.

Pursuant to that Memorandum

, SeaPort Airlines, Inc. respectfully submits this proposal to provide

subsidized essent ia l air service to the community of Athens, Georgia. The proposal has two service options that connect Athens

- Ben Epps Airpor t with the national air transportation system via Charlotte (CLT) and /or Nashville (BNA) . Dependent on the service option selected, SeaPort Airl ines is requesting first year annual subsidy le vel s of $ 1, 5 53

, 093 or $1, 6 16

, 887 , increasing to $1

, 630 ,410

or $1,697,420 during the second year of service.

After this proposal is docketed , SeaPort Airlines will contact the Airport Manager to schedule a meeting in Athens at which ti me we will explain our proposal in detail and answer any questions of the community. In the interim and throughout the carrier selection process, questions regarding this proposal should be directed to:

Timothy Sieber

Vice President

– Commercial

SeaPort Airlines, Inc. 7505 NE Airport Way Portland, OR 97218 (971) 340

- 1716 tsieber@seaportair.comOST

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August 15, 2012 Page | 2 

# Description of Proposed Service

Company Introduction

SeaPort Airlines , Inc. is a FAA certified scheduled airline with 30 years of experience in commercial

aviation

. The company is headquartered in Portland, Oregon and has operational bases at Portland, Memphis (Tennessee), and Juneau (Alaska). Our approximately 1 80 professionals operate a fleet of

14 aircraft on an average of 90 daily departures to 2 0 cities in eight states

. Presently, service to

seven of these communities is provided under the EAS program : Excursion Inlet, Alaska; Pendleton, Oregon; El Dorado, Hot Springs, and Harrison, Arkansas; Salina, Kansas; and Jackson, Tennessee.

The focus of SeaPort’s business model is providing affordable and reliable service to small and rural

communities that the global airline brands either characterize as no longer being strategically important to their own business model, or because the passenger ticket revenue generated by that community is not sufficient to support the cost structure and increasingly larger aircraft of regional

airlines that provid e capacity to th ose global brands on a contract (i.e., “fee per departure”) basis.

To serve these communities, SeaPort operates aircraft with operating costs and passenger capacity that are aligned with a market’s true demand, offers higher frequencies and departure tim e choices than possible with larger aircraft, sets all fares at a price point that is attractive to potential customers but does not result in shifting the true cost of air travel from the customer to the Department , and provides attentive and personal service that , in many of our markets, is commonly referred to as “The SeaPort Experience.”

When awarded an EAS contract, SeaPort Airlines b egin s service on time, on budget, and with fares

at or below those in our service pr oposal. Once service is launch ed

, we develop a partnership wi th each community by participating in local events, donation of tickets, regular dialogue with airport management and community leaders, and presentation s to civic clubs and other similar organization s

. These activities serve our own interests as equally as those of the community by fostering grass roots support for local air service, a positive relationship between the community and EAS carrier, and, as ri dership builds, can lead to enplanement levels that ensure continued eligibility

in the EAS p rogram.

The strongest evidence of our commitment to provide quality air service and build community partnerships is demonstrated by the fact that in every one of our “Lower 48” EAS communities

SeaPort Airlines has been re

- selected as the EAS provider at the end of the first contract period

. This includes the reselection of SeaPort Airlines earlier this year for a four

- year contract (rather than

the s tandard two

- year contract) to in Salina, Kansas based on overwhelmingly positive support from the community, and the re selection of SeaPort Airlines at Pendleton, Oregon over a competing bid

that offered 37

- passenger aircraft and marketed with the brand of a major airline

.

To further illustrate that our commitment and ability to deliver outstanding customer service, comments submitted by actual customers and airport managers in EAS communities are provided later in this proposal. Most importantly, howev er, we encourage the Athens community to contact the airport manager in any of our EAS communities to discuss the responsive, affordable, and reliable air service that we provide

.

Further evidence of our commitment to providing reliable, customer

- focused air service is demonstrated through community and customer comments that are provided later in this document.OST

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August 15, 2012 Page | 3 Aircraft



### SeaPort Airlines presently provides service in all of our EAS communities with single engine aircraft and, as noted above, every one of our EAS communities in the Lower 48 has reselected us for additional contract periods with those same aircraft



### . We strongly believe that modern single

engine aircraft represent the best platform to provide EAS service that is frequent, affordable,

and reliable

.

The Cessna Caravan allows SeaPort Airlines to offer safe, comfortable, and affordable air transportation in a modern and economical aircraft. Given an urgent need to rebuild customer trust in the air service offered at Ben Epps Airport, the attributes of the Cessna Caravan are perfectly s uited for this mission

Currently being 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 2,000 Caravans have been built l ogging a total of over 12.5 million flight hours.

The Caravan is certified for single

- pilot operation , however SeaPort typically operates with both a Captain and First Officer.

The large cargo pod on the Caravan allows for more baggage than can be accommodate d on older piston twins (i.e., Piper Navajo and Cessna 402) and allows us to segregate passenger baggage for security purposes. 1

1 The cargo pod on the Cessna Caravan has a maximum capacity of 111 cubic feet and 1,090 pounds. In compari son, the Piper Chieftain has a maximum capacity of 65 cubic feet and 700 pounds in its nose compartment and two wing lockers.OST

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August 15, 2012 Page | 4 Service Pattern



### SeaPort Airlines is proposing the two following service options for consideration by the Athens

co mmunity and the Department:

Option#1 12 roundtrips per week to Nashville International Airport

Option #2

− 12 roundtrips per week to Charlotte Douglas International Airport

a nd

6 roundtrips per week to Nashville International Airport

In all cases, SeaPort Airlines would operate from the main terminals at Athens

- Ben Epps Airport

and both Charlotte and Nashville. 2

In Order 2012

- 7

- 15, the Department noted low passenger levels of current EAS service at Athens and, as a result, requested p roposals with frequency levels of two nonstop roundtrips per day (12 per week). Option #1 provides the level of frequency requested by the Department by offering 12 weekly nonstop to Nashville International Airport.

In our discussions with the community, however, it expressed a strong desire to see the return of Charlotte as a connecting point with the national air transportation system. With the belief that community support is necessary, Option #2 of our proposal includes 12 weekly roundtrips to

Charlott e and 6 weekly roundtrips to Nashville International Airport. SeaPort recognizes that the total 18 weekly roundtrips in our proposal is higher than number requested by the Department, however, for the following reasons we believe this option serves both the interests of the community and Department:

 S ervice to Charlotte is responsive to the community’ s stated preference and provide s access to a major hub for US Airways that includes a growing number of nonstop flights to Europe and US Airways’ first ever service to South America.

 T he great er c onsumer choice afforded by the third frequency and second hub would increase the usefulness and marketability of EAS at Athens, allowing traffic at Ben Epps Airport to rebound more quickly and ease the path to the 1 0 enplanements per day necessary for continued eligibility in the EAS program.



###  Nashville ’s airline service profile is significantly different than Charlotte ’s , increasing the overall benefits that a second hub typically offers. Specifically, Charlotte ’s domination by a legacy carrier (US Airways) means that like other hub markets, the price of numerous nonstop flights to many destinations is average fares higher than the national average. Conversely, Southwest Airlines operates 54% of all seats at Nashvi lle International Airport meaning that it has fares which are less than the national average.

 

### Despite 33% more departures and double the number of hub choices in Option #2, the

difference in subsidy requirement relative to Option #1 is a marginal $63, 794 (4. 0 %) when

revenues are factored

. O perating AHN

- BNA segment s on a “open for sale” basis will allow

2 SeaPort Airlines passenger and aircraft servicing at Nashville International Airport is contracted to American Eagle

Airlines. I f selected to provide EAS at Athens, the company will hire its own customer service personnel at Ben Epps Airport and contract passenger and aircraft servicing at Charlotte Douglas International Airport to another airline.OST

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August 15, 2012 Page | 5 SeaPort Airlines to rotate aircraft into our existing Mid

- South maintenance base, ensuring that

Athens customers are provided with reliable service to the ir preferred hub (Charlotte) but in a manner than minimizes subsidy requirements. 3

For these reasons, and specifically our understanding that the community wants service to Charlotte, SeaPort Airlines believes that Option #2 is the superior of the two pr oposals, one that provides the best opportunity for Athens to achieve enplanement levels needed to maintain eligibility, and represents a creative (yet appropriate) use of EAS funds to restore a market which under the current EAS provider has experienced a significant loss of ridership.

Illustrative Schedule

Illustrative schedule s for both service options are provided below. If selected to Athens, however,

final schedules will not be established without community input

.

We believe the schedule outlined for both service pattern s provide a choice of departure times for

the consumer while allowing us to route the aircraft to our Memphis maintenance base via a revenue flight segmen t . This benefits the Department by resulting in a lower overall subsidy request.

Pricing Model

In all markets, SeaPort Airlines offers a range of fares all priced on a one

- way basis. The highest price point (branded as “FullFlex”) provides a customer with total flexibility to change travel plans

without incurring any change fee or, if desired, receive a total refund. The lowest price point (branded as “NoFlex”) is best suited for customers who are certain about their travel plans and requires an advance purchase of 21

- days, is non

- re fundable

, and does not permit any changes from the original booked itinerary. In between is a range of fares (“Flex4Free” and “Flex4Fee”) that provides a choice of price

- point s based largely on how certain a customer is that their travel plans

will not cha nge. Except for the two highest price points, fares are also subject to capacity controls

3 In earlier EAS proceedings, D epartment staff has indicated to us that repositioning costs necessary for operational reasons were permissible for inclusion in proposals provided that the resultant subsidy request was compliant with program statutory requirements for maintaining EAS eli gibility. To this end, SeaPort Airlines calculated a subsidy requirement on the basis of operating 12 weekly roundtrips to Charlotte along with 3 weekly rotations (assuming zero revenue) between Athens and our maintenance base at Memphis International Airport. This approach would have required annual subsidy of $1, 717

, 111 or $ 100,224 greater than Option #2 but without the positive impacts that a

t hird frequency and second destination would have toward the minimum requirement of 10 enplanements per day.OST

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August 15, 2012 Page | 6 meaning that the farther in advance a reservation is made, the more likely a customer is to get a

lower fare.

This strategy, which is not materially different from other airlines, allows SeaPort to s et price points

in a manner that makes our service attractive to virtually all segments of the market who might utilize

air service at Athens

- Ben Epps Airport. This , combined with highly reliable service, will be an

effe ctive tool t oward reaching the minimum 10 enplanement per day threshold necessary for continued participation in the EAS program.

The table below summarizes the range of proposed ticket prices in the Athens market, as of the date of this proposal and after expiration of introductory fares

, along with the rules and restrictions applicable to each price point.



## SeaPort Airlines Illustrative Fares Athens, Georgia

NOTE: Listed price points include Federal Excise Tax , segments fee

, and 9/11 security fee

SeaPort Airlines projects an average ticket price of $ 68.69 and $ 91.04 to Charlotte and Nashville, respectively, from Athens

- Ben Epps Airport. Net of taxes and fees, revenue to SeaPort and the basis for calculation of subsidy requirements, is projected to be $ 58.22 per customer traveling to/from Charlotte and $ 7 8 .99 per customer traveling to/from Nashville.

During the first 30 days of service, SeaPort Airlines would offer an introductory fare of $ 3 9 (including all taxes and fees) on every seat, on every flight to and from Athens. Our experience in Jackson

indicates that this type of pricing incentive is necessary to entice customers and provide the opportunity to differentiate SeaPort Airlines from the current EAS provider.

Interline Connectivity & GDS Display

SeaPort presently has an interline ticketing agreement with US Airways , the dominant carrier at Charlotte Douglas International Airport and is currently implementing an interline agreement, including E

- ticketing and thru baggage , with another major airline that is scheduled to be available

for sale on September 20, 2012. Upon completion of this implementation

, agreements with other

carriers will be sought and dialogue s are currently underway with three other large airlines.

SeaPort Airlines tickets may be purchased by calling our toll

- free reservation number, online at

www.SeaPortAir lines .com, at any travel agent connected to the major global distribution systems (GDS), or all of the major online travel ag encies and meta

- sear chers such as Orbitz, Travelocity, Expedia, Kayak, Hipmunk, and CheapoAir.OST

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August 15, 2012 Page | 7 Marketing & Public Relations Strategy

Recognizing the low volume of traffic under the current EAS provider and the requirement of at least 10 enplanements per day for continued EAS eligibility

, SeaPort is prepared to implement a comprehensive marketing and public relations strategy if selected to serve the Athens market . In addition to local advertising, these activities include:

 Local Even t Marketing: Recognizing that visible participation in local events has been successful for both legacy and low

- cost airlines, SeaPort has implemented a similar strategy in all of its communities. These have ranged from SeaPort Airlines community Easter eg g hunts, to presenting at business expos, to hosting “after hours” events at local Chamber of Commerce meetings. In addition, SeaPort often makes “in kind” donations of tickets for use by local charities, either for their own business needs or as a fundrai sing tool (i.e., raffles, silent auctions, etc.).

 Social Media: SeaPort Airlines effectively leverages social media to engage our customer s in a dynamic two

- way conversation using Internet sites such as Facebook, Twitter, FourSquare &

LinkedIn. We have fo und social media to be an excellent tool for generating passenger referrals and information sharing in our communities, and expect similar results in Athens

.

 FlyerFlex Customer Rewards: During 2011, SeaPort launched a new and improved customer loyalty program called “ FlyerFlex .” This program provides customers with a variety of benefits including free flights, service charge waivers, and bonus points. During the summer of 2012,

SeaPort will be unveiling further enhancements to the FlyerFlex program including a wider range of travel award options and the ability for customers to check balances and redeem awards

online.

 Value Accounts: SeaPort offers Corporate Value Account s that encourage busin esses to make a long

- term investment in local air service by offering a variety of benefits

, such as waivers to change fees and savings of 5% to 15%. It is important to note that unlike the corporate travel programs of major airlines that are not designed to serve small businesses in rural communities, SeaPort’s program can provide savings to a company of virtually any size and can be used by any employee of a company.

In service proposals herein , SeaPort Airlines has allocated $ 50 ,000 per year for market ing and sales activity in Athens . Th is budget factors media costs in Athens media markets and that traffic typically originates in the EAS communi ty rather than the hub market. This advertising budget will be effectively leveraged with “new media” such as social networking, blogs, opt

- in email, etc. , all

intended to engage customers and build relationships on a more personal level.

Equally as important, there are lessons learned from our service in Jackso n, TN (McKellar

- Sipes Regional Airport) that will be valuable in the effort to rebuild traffic levels at Athens. At Jackson, we replaced the same carrier which presently serves Athens and, like Athens, that community experienced a significant decline in ri dership over the carrier’ s tenure as the EAS provider. While we implemented the marketing strategy described above, offered affordable fares, and operated with high dispatch reliability, the increase in traffic (while dramatic compared to our predecessor) was not as strong as we had hoped.

In response, we reached out to decision makers at companies in the Jackson market known to generate demand for air travel. At these face

- to

- face meeting s , we explain ed details of our service, emphasized different iation with the previous operator, outlined the importance of supporting local air service and its impact on the Jackson economy , and communicated the requirement s for continuedOST

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August 15, 2012 Page | 8 eligibility in the EAS program. This strategy, which effectively was a throwback to w hen airlines sold business travelers using sales calls rather than emai l, produced results. 4 Enplanements at Jackson have increased and SeaPort intends to use this experience as a template for producing similar

results for Athens.

4 While traffic in the Jackson market has and continues to increase, the market remains below the 10 enplanement per day statutory requirement for c on tinued EAS program eligibility. First, considering the well

- publicized performance of the previous EAS operator, we knew that rebuilding customer trust in air service offered at McKellar

- Sipes Regional Airport would be a “process” not an “event.” Second, the TSA has refused to provide passenger screening at Jackson, arrivals at the connecting hub must be in a non

- sterile area away from the main passenger terminal and shuttling passengers in a van to the main terminal for connecting flights. We are working with elected representatives of the Jackson area, as well as bureaucratic channels, to reverse the TSA’s decision that is n egatively impacting perception of local air service and impeding our ability to rebuild traffic.OST

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August 15, 2012 Page | 9 

# Community & Customer Feedback

As noted by the Department in Order 2012

- 7

- 15, traffic at Athens

- Ben Epps Airport has experienced a precipitous decline in recent years. Outlined in our service proposal, SeaPort Airlines has identified a number of specific tactics that it will undertake in order to rebuild traffic at Athens and meet the requirement of at least 10 enplanements per day for continued EAS eligibility. Most effective among
these tactics, however, will simply be for SeaPort to do what it does best and does every day : Provide our customers with a great experience and build a partnership with the community

.

Provided below is a small sample of the comments that SeaPort Airlines regularly receives from o ur customers and from EAS community partners:

Our Essential Air Service Community Partners

“South Arkansas Regional Airport and the entire South

- central Arkansas region suffered from the loss of air service previously provided by Mesa Airlines in the Spring of 2008. Unreliable service and a poor schedule were already negatively impacting enplanements before Mesa pulled out, but at that point, the nearest option for air service of any kind was almost a two hour drive away. After sorting through applic

ations from many different interested carriers, the El Dorado Airport Commission, along with El Dorado’s Mayor, chose SeaPort to restore air service to South Arkansas. This was the beginning of a great partnership between SeaPort and our local community.

“Working with SeaPort has been nothing but a pleasure from the bottom to the top of their organization, and their commitment to excellence shines through the glowing comments that I hear from people who fly with them. In addition to hearing comments fro m others, I have flown SeaPort on several occasions, and have come away from the experience thinking ‘This is how all air service

should be.”

− Josh Zylks Airport Manager South Arkansas Regional Airport (Goodwin Field)

“Eastern Oregon Regional Airport at Pendleton had been struggling since schedule changes following 9/11 served by a carrier flying 37 seat aircraft. Low passenger count attributed to poor schedule, which then contributed to poorer passenger count. The car rier's solution was to bring in larger aircraft and fly to a different hub. The Airport and community balked at this suggestion and went in search of alternatives. The solution found through the EAS process was SeaPort Air flying a 9 passenger Pilatus. The passengers have welcomed the new service, much better schedule, and are elated with ‘no security check’ and stand by time. Passengers today will say, ‘I love the service’, ‘great customer service,’ and ‘I'm sure glad I finally tried it, cause I'll be back ’

“In our particular market, the 9 passenger aircraft is perfect, and SeaPort Air provides the schedule, the professionalism, and customer service we need and desire.”

− Larry Dalrymple Airport Manager Pendleton Regional AirportOST

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August 15, 2012 Page | 10 “I understand the impo rtance of having dependable, reliable air service with an affordable cost. Not only will SeaPort Airlines meet these needs, but excel by providing great customer service, a high level of community involvement, and an eagerness to become a community partner ”.

− Luci Larson Former Mayor & Owner of

Action Travel Salina, KS

Our Customers

“Two hours before the flight I booked my ticket to Memphis from Hot Springs. Wow! What a surprise; it was simple, convenient, great price, and impeccable service. It far exceeded my expectations and I will be flying to Memphis on SeaPort Airlines instead of driving from now on. The

customer service was fabulous!”

− Ruth Ann Smith Hot Springs to Memphis)

“My husband and I recently had to make a fast trip to Dallas for the funeral of a dear friend. I was not interested in making that drive over a fast weekend. Then I remembered that SeaPort had recently started flights between Hot Springs and Dallas. I call ed SeaPort, Jim and Bob were so quick to get us booked, last minute so we could fly down and attend the funeral and visit with family and friends that we don't get to see very often.

Everyone was so friendly, helpful and professional. It was a dream trip , even to attend a funeral. The pilot going down was so kind. When he found out that my husband had been a ball turret gunner in WWII, he gave him a set of headphones so he could listen to the communication between the pilots

and the air traffic controller s. To say the least, my husband was impressed. It was such a blessing to have been taken care of in such a kind and professional manner, especially under the circumstances of our trip. Thank you, Jim, Bob, Chris, Doug, Rodney and Michael.”

− Catherine Marti n (Hot Springs to Dallas)

“For two decades I have been picking my mother up at the airport and for two decades I have been met with the defeated, hang

- dog look that the ordeal of air travel has given her. I guess it pretty much does it to all of us, but (as she is well into her 80's) I worry about the toll it takes on her more and more lately.

“When I picked her up today from her SeaPort flight K52325 from Dallas and saw she was smiling, you could have knocked me over with a feather! She couldn't stop r aving about how pleasant the flight was. Let me be clear. My mother is a tough

- as

- nails Mid

- western Yankee from the old school who has been around the world a couple of times since the late 1940's. She doesn't bestow idle praise and she seldom raves.OST

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August 15, 2012 Page | 11 “I'm in the service industry myself and I know how often complaints come through. I just want to be sure to let you know how well everyone did on this flight. In the future, I will look to SeaPort first for my travel needs and will spread the good word to my f riends.

“A smile and a kind word go a long way y'all. Thank you for getting this one so right.”

− Mark Davis Peterson (Dallas to Memphis)

“ I can not say enough wonderful things about my experience with your company. My son, who is 7, flew for the first time as an unaccompanied minor. Let’s just say that my son and I were very

nervous.

On arrival to Kansas City I was welcomed with front row parking and an employee that was welcoming and reassuring. When his plane landed the pilot, Demetrius came and talked to me and my son for twenty minutes about safety and just reassuring me. He then a llowed me to walk my son to the plane and see him off. Demetrius started buckling my son into his seat and my son started to cry, I could see him reassuring him that everything was going to be ok. All of your employees were

wonderful and were conscious of safety and the well

- fare of my son. My son’s flights from Kansas City to Memphis were wonderful and because of the extra attention he feels comfortable and unafraid of flying by himself.

You have made me a lifelong customer. My son will be flying at leas t once a year to see his Grandparent. I have told all my friends, family and co

- workers about your company and how if they have an opportunity they should fly with SeaPort. Thank You again for making a nervous mother and

a scared child feel comfortable.”

− Misty Strayhorn ( Kansas City to Memphis)

“I have never had such a positive experience connected with any airline. I read about SeaPort Air last October when they opened the Mid

- South Route, but didn’t have the chance to fly until March. Usually the dread of the process comes then you just grin and bear it; however, with SeaPort Air I could arrive 15 minutes early. The hassle free no TSA is wonderful and made me feel special. I have flown twice in the last 2 months and the customer service from start to finish is outstanding. I will be a regular customer and have already recommended the airline to several associates. Thank you,

SeaPort Air

, for making me feel like a queen!”

− Catherine Martin ( Memphis to Harrison)OST

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August 15, 2012 Page | 12 

# Subsidy Request & Supporting Calculations

The following pages contain the service proposals of SeaPort Airlines to provide essential air service

at Athens

- Ben Epps Airport.

Each proposa l is presented on the basis of annual subsidy require ment f or each year in a two year

term. Notwithstanding the risk of inflation in coming years (particularly related to fuel costs ) that could possibly outstrip traffic growth and our ability to respond with reasonable fare increases, SeaPort is offering the Department and the community the option to contract the s econd year subsidy level for a four

- year period ( i.e., a nnual rate of $1,630, 410 or $1,697, 420 for each of the four years , depending on service option selected)

. We believe this provides the Athens community with the assurance of stable air service for an extended period and reduces the administrative burden on both the Department and ourselves.

Respectfully submitted,

Timothy Sieber

Vice President

– Commercial SeaPort Airlines, Inc.

August 15 , 2012OST

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