DEPARTMENT OF TRANSPORTATION

WASHINGTON, D.C.

June 6, 2013

Essential Air Service at

EL DORADO, HARRISON, HOT SPRINGS,

ARKANSAS

Under 49 U.S.C. 41731 et. Seq.

Docket DOT-OST-1997-2935

COMMENTS OF SEAPORT AIRLINES, INC IN RESPONSE TO SUPPLEMENTAL 

INFORMATION SUBMITTED BY BOUTIQUE AIR

By Order 2013-4-6 issued on April 12, 2013, the Department requested proposals from 

air carriers interested in providing Essential Air Service at the Arkansas communities of El 

Dorado, Harrison, and Hot Springs for a new term to begin on November 1, 2013.

Four companies submitted proposals: SeaPort Airlines, Inc. (hereafter also referred to as 

“SeaPort”); Multi-Aero, Inc. dba Air Choice One; Boutique Air, Inc. (hereafter also referred to as 

“Boutique”); and Osage Airlines, LLC. On May 20, 2013, the Department provided all of the 

proposals to elected officials, airport managers, and other interested parties via email, and 

asked that comments be submitted to the Docket no later than June 19, 2013.1

On May 31, 2013, Boutique Air sent an email to the Department’s EAS division stating: 

“As we spoke about, here is the clarifying information regarding our per passenger subsidy at 

Hot Springs. Please let me know if you have any additional questions.”2 The “clarifying”

information specified the amount of subsidy per passenger that Boutique was requesting at Hot 

Springs, along with the forecasted number of passengers for each option in its proposal that 

included service to Hot Springs.

 

1

The Department noted in its email: “Osage states that its proposal is contingent upon the Department's approval of 

its application for Commuter Air Carrier Authority. To date, the Department has not yet received such application from 

Osage.” On this basis, we assume that Osage Air’s proposal was not considered valid by the Department. 

2

Email from Daniel Helland to AJ Muldoon, with copies to all that the Department had provided carrier proposals. 

Information was provided on an attachment.
Comments of SeaPort Airlines, Inc.

Docket DOT-OST-1997-2935

Page 2

In these comments, SeaPort Airlines will show that the information submitted to the 

Department by Boutique Air includes an incorrect calculation of the amount of the subsidy per

passenger the carrier is requesting at Hot Springs. 

SeaPort Airlines respectfully requests that the Department give full consideration to the 

comments and supporting data provided herein, as well community comments, as it completes

the carrier selection process for EAS at El Dorado, Harrison, and Hot Springs, Arkansas.

In support of its position, SeaPort states the following:

Subsidies per Passenger Requested by Boutique Air Are Based On Incorrect Calculations

As noted, Boutique Air emailed to the Department “clarifying” information with regard to 

the number of passengers it projected to carry at Hot Springs and, as result, the amount of 

subsidy per Hot Springs passenger it was requesting. That information included annualized 

projections of “itinerary” and “segment” passengers for each the three options in its EAS 

proposal that included service to Hot Springs.

After studying the numbers, we concluded that the projection of “itinerary” passengers is

equivalent to what is more commonly referred to as “O&D passengers.” These passengers are

counted as traffic between a specific origin and destination (i.e., Hot Springs to Memphis) or 

over a specific “itinerary” (i.e., Dallas to El Dorado to Hot Springs to Memphis).

We also concluded that projected “segment” passengers refers to the total of number of 

passengers onboard between point A and point B, without regard to each passenger’s true 

origin or destination. This includes those purchasing a ticket between A and B, those flying 

between A and B but originating or terminating at an upline or downline city, and those flying to 

or from entirely different city but purchasing a ticket that requires connection(s) at A and/or B.

On page 4, SeaPort has replicated the “itinerary” and “segment” data that Boutique Air 

submitted to the Department as “clarifying” the number of passengers it projects to carry and 

amount of subsidy per passenger is requesting at Hot Springs.

As submitted to the Department, Boutique Air calculates subsidy at Hot Springs of 

between $126 and $132 per passenger, which is less than half the amount paid by the 

Department during 2012 and well below the statutory limit of $200 per passenger. If Boutique 

Air is selected to provide EAS at Hot Springs, however, this will not be the case. Simply, the

carrier’s calculation was performed incorrectly. 
Comments of SeaPort Airlines, Inc.

Docket DOT-OST-1997-2935

Page 3

When calculated correctly and using the carrier’s own projections of passengers and

own requested level of subsidy, the per passenger subsidy levels at Hot Springs would actually 

increase in two of the three options that Boutique Air included in its proposal.

More specifically, we assert that Boutique’s subsidy per passenger was calculated using

projections of passengers that originate or terminate at Hot Springs plus passengers not 

traveling to/ from Hot Springs but transiting HOT while enroute to/from another airport.3 To 

explain, we have deconstructed the calculations of Boutique Air:

The amount of per passenger subsidy at Hot Springs that Boutique Air represented to 

the Department in its submission:

Option#1 = $132 

Option #2 = $126 Boutique Air subsidy per passenger requirement @ HOT

Option #4 = $132

In its submission, Boutique Air stated that 50% of the subsidy request for each of the 

three options that include service to Hot Springs was allocated to that market for purposes of 

calculating subsidy per passenger: 

Option #1 = $2,041,238 

Option #2 = $1,518,892 Boutique Air annual subsidy requirement @ HOT

Option #4 = $1,788,758

Dividing the annual subsidy requirement by the stated subsidy per passenger, we are 

able to determine the number of passengers that Boutique Air claims it will carry at Hot Springs: 

Option #1 = $2,0412,238 / $132 = 15,560/pass.

Option #2 = $1,518,892 / $126 = 12,060/pass.

Option #3 = $1,788,758 / $132 = 13,360/pass.

As explained above and illustrated on the page 5, the calculated number of passengers 

equals the total number of “itinerary” passengers that was provided to the Department by 

Boutique Air. 

 

3

“Direct” flight (i.e, one-stop on a multi-leg routing using the same flight number)
Comments of SeaPort Airlines, Inc.

Docket DOT-OST-1997-2935

Page 4

Boutique Air Boutique Air SeaPort 2012

Option #1 Option #2 Traffic

Itinerary

HOT-DFW 1,700 1,530

DFW-HOT 1,700 1,530

HRO-MEM 3,500 3,150

MEM-HRO 3,500 3,150

HOT-HRO-MEM 800 720

MEM-HRO-HOT 800 720

HRO-HOT-DFW 2,640 1,980

DFW-HOT-HRO 2,640 1,980

Total Itinerary Passengers 17,280 14,760 4,749

Adjusted Itinerary Passengers 5,000 4,500

% Growth Over SeaPort Actual 2012 5.3% -5.2%

Segment

HOT-DFW 4,340 3,510

DFW-HOT 4,340 3,150

HRO-HOT 3,440 2,700

HOT-HRO 3,440 2,700

Total Onboard Segment Passengers 15,560 12,060

Subsidy Requirement at HOT $2,041,238 $1,518,892

INCORRECT: Subsidy Based on # Onboard Segment Passengers $131.18 $125.94

Subsidy Adjusted Using HOT Itinerary Passengers $408 $338

Boutique Air Air Choice One SeaPort Airlines

Option #4 Proposal Proposal

Itinerary

ELD-DFW 1,580

DFW-ELD 1,580

HOT-MEM 1,500 3,850 1,272

MEM-HOT 1,500 3,850 1,271

ELD-HOT-MEM 1,700

MEM-HOT-ELD 1,700

HOT-ELD-DFW/DAL 1,900 1,742

DAL/DFW-ELD-HOT 1,900 1,742

Total Itinerary Passengers 13,360 7,700 6,027

Adjusted Itinerary Passengers 8,300 7,700 6,027

% Growth Over SeaPort Actual 2012 74.8% 62.1% 26.9%

Segment

HOT-MEM 3,200 3,850 1,284

MEM-HOT 3,200 3,850 1,284

ELD-HOT 3,600 4,310

HOT-ELD 3,600 4,310

Total Onboard Segment Passengers 13,600 7,700 11,188

Subsidy Requirement at HOT $1,788,758 $1,954,694 $1,637,012

INCORRECT: Subsidy Based on # Onboard Segment Passengers $133.89 $253.86 $271.64

Subsidy Adjusted Using HOT Itinerary Passengers $216 $254 $272

Boutique Air - Per Passenger Subsidy Requirement at Hot Springs, Arkansas

Erroneous Calculations, Corrected Calculations, and Other Proposal Calculations
Comments of SeaPort Airlines, Inc.

Docket DOT-OST-1997-2935

Page 5

Eligibility for subsidized service is airport specific and, therefore, only that traffic 

which originates or terminates at the EAS-eligible point may be used to calculate subsidy per 

passenger and, as a result, the community’s continued eligibility in the EAS program. Traffic not 

originating or terminating (i.e., passes through) at the EAS-eligible point may not be used when 

calculating the amount of per passenger subsidy because it has no bearing on the true demand 

for EAS-subsidized service at a community. 

To calculate the true amount of subsidy per passenger that Boutique Air will require at 

Hot Springs, the number of passengers with an origin or destination other than HOT must be 

substracted from the carrier’s projection of “itinerary” traffic. 

This results in the number of passengers beginning or ending their travels at Hot 

Springs, and therefore eligible to be counted in subsidy per passenger calculation, being 49% to 

71% lower than represented by Boutique Air to the Department in the “clarifying” information:

Option #1 = $2,0412,238 / 5,000 = $408 per pass.

Option #2 = $1,518,892 / 4,500 = $338 per pass.

Option #3 = $1,788,758 / 6,800 = $263 per pass.

Boutique Air Boutique Air Boutique Air

Option #1 Option #2 Option #4

Itinerary Itinerary

HOT-DFW 1,700 1,530 ELD-DFW 1,580

DFW-HOT 1,700 1,530 DFW-ELD 1,580

HRO-MEM 3,500 3,150 HOT-MEM 1,500

MEM-HRO 3,500 3,150 MEM-HOT 1,500

HOT-HRO-MEM 800 720 ELD-HOT-MEM 1,700

MEM-HRO-HOT 800 720 MEM-HOT-ELD 1,700

HRO-HOT-DFW 2,640 1,980 HOT-ELD-DFW/DAL 1,900

DFW-HOT-HRO 2,640 1,980 DAL/DFW-ELD-HOT 1,900

Total Itinerary Passengers 17,280 14,760 Total Itinerary Passengers 13,360

Adjusted Itinerary Passengers 5,000 4,500 Adjusted Itinerary Passengers 6,800

% Reduction in Passengers -71% -70% % Reduction in Passengers -49%

Annual Subsidy Requirement $2,041,238 $1,518,892 Annual Subsidy Requirement $1,788,758

Adjusted Subsidy per Passenger $408 $338 Adjusted Subsidy per Passenger $263

Boutique Air - Passenger Traffic Forecasts by Itinerary For Options That Include Hot Springs

As Provided by Boutique Air & Subserquently Corrected by SeaPort Airlines
Comments of SeaPort Airlines, Inc.

Docket DOT-OST-1997-2935

Page 6

Whether the difference between our calculations and those submitted by Boutique Air 

are due to a mistake, a lack of understanding of the EAS program, or a deliberate attempt to 

obfuscate the true amount of subsidy per passenger the carrier is requesting. SeaPort 

respectively requests that the Department consider the per passenger subsidy we provided 

herein as being the accurate representation of per passenger subsidy that Boutique is 

requesting at Hot Springs and this these figures be used when evaluating proposals during the 

EAS carrier selection process. 

Summation

In these comments, SeaPort Airlines has determined an error exists in the calculation of 

EAS subsidy per passenger requested by Boutique Air at Hot Springs. Rather than a subsidy 

between $126 and $132 that Boutique claims, the corrected amount ranges from $216 to $408 

per passenger dependent on the option.

This includes two of the three options in Boutique’s proposal being higher than the $272 

of subsidy per passenger at Hot Springs that SeaPort projects in its proposal. While we 

acknowledge the level of subsidy at HOT remains above the $200 statutory limit, it is below the 

$310 per passenger that the Department paid during 2012. Through continued partnership with 

the community and the specific plans outlined in our proposal, SeaPort believes we can 

continue to gradually reduce the amount of subsidy at Hot Springs and secure that community’s 

future eligibility in the EAS program.

For the foregoing reasons, SeaPort respectfully urges the Department to carefully 

consider the information provided herein as it selects a carrier to provide Essential Air Service at 

El Dorado, Harrison, and Hot Springs, Arkansas. 

Respectfully submitted,

Timothy F Sieber

Executive Vice President 

SEAPORT AIRLINES, INC.

7505 NE Airport Way

Portland International Airport

Portland, Oregon 97218

(971) 340-1716

Email: tim@seaportair.com

June 6, 2013