Airport Commission Agenda CITY OF PENDLETON July 25, 2018 6:00 PM Airport Administration Office, Terminal Building

1. CALL TO ORDER a. Introductions

2. NEW BUSINESS a. EAS Bid Proposals

3. PUBLIC FORUM This is the time set aside for anyone to ask questions, make requests, or offer comments.

4. ADJOURNMENT

If special accommodations for hearing, visual, or manual impairment are needed to allow an individual to participate, or if in interpreter is needed, please contact the City's administrative office at 541-966-0201 at least 48 hours in advance of the meeting. Page 2 of 23 Essential Air Service Proposal

Pendleton, OR DOT-OST-2004-19934

July 18, 2018

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About

Our Story Headquartered in , California, Boutique Air has been in operation since 2007. We began by flying fire surveillance missions for the U.S. Forestry Service and Bureau of Land Management. We evolved to provide air charter services across the west coast with our fleet of Pilatus and Cessna aircraft. As a charter operator we have received certifications from both industry-leading safety organizations, ARG/US and Wyvern. Boutique Air employs pilots that are highly experienced and hold the most advanced FAA ratings - a key reason for our continued perfect safety record.

In July of 2012, Boutique Air applied for commuter operating authority from the Department of Transportation. We quickly passed tests on financial fitness and management competency, receiving authority for scheduled service in January of 2014. We began flying scheduled service between and in January of 2014.

We have worked to develop effective distribution channels. We have connections in place with all of the major Global Distribution Systems (GDSs), which travel agents use to access the market. You will find us on Worldspan and Galileo (Travelport), , and Amadeus. In addition, we are on the major Online Travel Agencies (OTAs), including Expedia, Travelocity, Priceline, Orbitz, CheapTickets, and CheapOAir.

EAS Contracts On April 22, 2014 Boutique Air received its first EAS contract when the DOT selected the airline to provide service between Clovis and DFW. Since then, we have continued our track record of success and now serve 17 different EAS communities and operate out of 30 different airports. Continuing on this path of successful growth, Boutique Air began service to Dodge City, KS on January 1, 2018.

548 Market St, Suite 73298 | San Francisco, CA 94104 | t. 415.449.0505 | f. 415.738.7671 1

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What People Are Saying About Boutique Air

Boutique Air PC-12, one of the best turboprop aircraft on the market!... Give them a try!! ​ ​ -Tarek A. via Yelp.com

We also feel that the PC-12 aircraft bid by Boutique Air presents the safest and most ​ comfortable option for the traveling public. -Hon. Mayor David Lansford in Recommendation Letter City of Clovis, NM

Flew with Boutique from LA to Vegas and back and must say I was extremely surprised. From the ease of check-in, To the flight itself, the whole process was great. Price was competitive ​ ​ with any other airline out there. I plan on flying boutique for all my Vegas outings, and may even look into renting the whole plane for a group trip. Thanks Boutique! -Kevin J. via Yelp.com

We find that Boutique Air is fit, willing and able to operate as a commuter air carrier, and capable of providing reliable Essential Air Service... ​ -Susan L. Kurland in Clovis EAS Award Asst. Sec. for Aviation and International Affairs US DOT

Right now Boutique Air is a very cool secret. ​ -Examiner.com

Flew with Boutique Air from LA to Las Vegas round trip and it was a great experience. Good ​ service, on time departures, and a hassle free and nice way to travel in general. A really nice pilot and copilot as well. -Patrick S. via Yelp.com

Smooth flights and personable staff are part of the experience… ​ -Clovis News Journal

548 Market St, Suite 73298 | San Francisco, CA 94104 | t. 415.449.0505 | f. 415.738.7671 2

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Route Map

548 Market St, Suite 73298 | San Francisco, CA 94104 | t. 415.449.0505 | f. 415.738.7671 3

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Aircraft: Boutique Air currently operates a modern fleet of Pilatus PC-12 and Beechcraft King Air 350 ​ aircraft. All flights are flown by Captains with over 1,200 hours of flight experience and an instrument rating. While we are certified to fly single pilot we opt to fly with a two pilot crew. Boutique Air ensures pilots provide a level of customer service beyond that of normal commercial airlines.

● 8 or 9 Passenger Executive Configuration ● Pressurized Cabin ● Power Outlets ● Enclosed Lavatory

548 Market St, Suite 73298 | San Francisco, CA 94104 | t. 415.449.0505 | f. 415.738.7671 4

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Historical Passenger Traffic Performance

Boutique Air has enjoyed the privilege of serving the Pendleton community since December of 2016 when it initiated service. During this period, Boutique Air has worked tirelessly to improve the quality of air service Pendleton has received, as can be witnessed from the graph below:

Boutique Air has increased Pendleton traffic by 72.4% versus Seaport during each carrier’s last twelve months of operation. (Source: T100 & Company Submitted data ending June 2018) ​

548 Market St, Suite 73298 | San Francisco, CA 94104 | t. 415.449.0505 | f. 415.738.7671 5

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Codeshare, Interline and MileagePlus Frequent Flyer Agreements Boutique Air launched its interline agreement with in May 2017 and its in May 2018. Customers have flow-through ticketing and baggage capabilities for those flights that connect with United Airlines.

Passengers are also able to book through United.com and connect with any of United’s flights at our mutual hubs.

Boutique Air also participates in United Airlines’ MileagePlus Frequent Flyer Program. Passengers can earn and redeem award miles on all Boutique Air flights.

(Image of codeshare fares currently available on United.com for travel between Pendleton and San Francisco)

548 Market St, Suite 73298 | San Francisco, CA 94104 | t. 415.449.0505 | f. 415.738.7671 6

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Proposal

Overview Our proposals would be flown in eight or nine-seat, modern, pressurized Pilatus PC-12 or Beechcraft King Air 350 aircraft. The term is two years, with a four year option.

In order to increase brand recognition in the community, Boutique Air will spend at least $20,000 per year in Pendleton if it is selected for advertising & marketing to help ensure that air service for the community is a success. We will utilize a combination of radio, print, billboard, TV, and internet advertising.

Note on Service Start Date Due to Boutique Air’s existing operations in Pendleton, a flight service interruption will not result if Boutique Air is selected to continue providing the community air service. Boutique Air is committed to a long term relationship with Pendleton and looks forward to sustained growth in passenger traffic and trust in our service.

Community Input

Shortly after the bids are complete, Boutique Air will schedule meetings with airport and/or city officials. This will allow us to answer any questions and provide additional information.

While we can’t promise we will be able to implement everyone’s suggestions, we welcome feedback from the community, as well as anyone who may have an interest in the proposed flights. What we can promise is that we will listen to your feedback, and give it the attention and consideration it deserves.

With respect and appreciation,

Shawn Simpson CEO

548 Market St, Suite 73298 | San Francisco, CA 94104 | t. 415.449.0505 | f. 415.738.7671 7

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Pendleton, OR Option: 21 Weekly Nonstop RTs PDT-PDX (3x Daily RTs) Operations PC-12 King Air 350 Scheduled Flights 2,184 2,184 Completed Flights (98%) 2,140 2,140 Scheduled Block Hours 2,097 1,758 Scheduled Seats 17,472 19,656 Scheduled ASMs 3,179,904 3,577,392

Revenue Passengers 12,580 14,152 Average Fare $86 $101 Fare Revenue $1,081,866 $1,429,384 Total Revenue $1,081,866 $1,429,384

Expenses Fuel $566,093 $870,269 Ownership $860,000 $860,000 Maintenance and Reserves $904,700 $1,033,757 Crew $538,437 $722,187 Airport Rent $143,505 $147,043 Landing Fees $62,306 $89,435 Staff $189,280 $189,280 Insurance $20,000 $20,000 Marketing and Distribution $20,000 $20,000 Other Indirect Costs $103,672 $90,809 Total Costs $3,407,993 $4,042,780

Profit Element $170,400 $202,139 Margin 5.0% 5.0%

Total Subsidy Year 1 $2,496,526 $2,815,535 Total Subsidy Year 2 $2,558,939 $2,885,923 Total Subsidy Year 3 $2,622,912 $2,958,071 Total Subsidy Year 4 $2,688,485 $3,032,022

548 Market St, Suite 73298 | San Francisco, CA 94104 | t. 415.449.0505 | f. 415.738.7671 8

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DUNS Number: 078369539

July 18, 2018

Todd Homan Kevin Schlemmer Mark Raggio Office of Aviation Analysis US Department of Transportation 1200 New Jersey Avenue SE Washington, DC 20590

RE: EASat Pendleton, Oregon (”PDT”) Docket DOT-OST-2004-19934

Dear Messrs. Homan, Schlemmer, and Raggio:

Silver Airways LLC(”Silver”) is pleased to present to the Department of Transportation (the ”Department”), Silver's response to the Request for Proposals for Essential Air Service to Pendleton, Oregon (”PDT"). In addition to responding to the specifics of the RFP,we will demonstrate that meets all five selection criteria outlined in 49 U.S.C. § 41733(c)(1) and is the best possible service provider for Pendleton and the surrounding communities.

A. Proposal Summary

Silver proposes to provide safe, reliable, and cost-efficient roundtrip Essential Air Service between Portland International Airport (PDX)and Eastern Oregon Regional Airport at Pendleton (PDT). Silver intends to operate Essential Air Service flights with 34-seat Bplus aircraft with 12 weekly frequencies, as defined by the Department to meet historical demand.

Silver respectfully requests an annual subsidy package of approximately $5.4 millionto begin service to Pendleton for a period of at least 24 months beginning January 1, 2019.

B. Silver Airways Background

Silver is a Part 121 certificated U.S. airline operating approximately 100 daily scheduled flights between gateways in and the Bahamas, New England, and recently

July 18, 2018 Silver Airways Essential Air Service Proposal Page I 1

Page 13 of 23 announced service scheduled for 2018 to communities in Huntsville, AL;Branson, MO; , IL;New Orleans, LA;and Houston, TX.

Silver is headquartered in Fort Lauderdale, Florida, and operates its primary maintenance facility at the Orlando International Airport. The airline currently owns or leases a fleet of 21 Saab 340 Bplus aircraft and one ATR-42-600, with commitments to acquire an additional 19, factory-new, ATR-42-600 or ATR-72-600 turboprop aircraft by 2020. The airline is supported by a team of over 600 aviation professionals including approximately 170 pilots.

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Silver manages and maintains its own industry-leading reservations system, powered by Sabre. This system allows Silver to independently manage and market all of its flights. Passengers can book Silver flights through a variety of media including its website, www.si|verairways.com, its telephone reservations center, and all major online travel agencies, including Expedia and Travelocity.

The airline maintains valuable and consumer-friendly relationships with major U.S. and international air carriers. Silver has had a codeshare relationship with United Airlinesfor over 20 years, as well as more recent agreements with JetBlue Airways and Avianca. United codeshare passengers can earn and redeem Mi|eagePlus benefits while travelling on Silver

July 18, 2018 Silver Airways Essential Air Service Proposal Page | 2

Page 14 of 23 Airways. JetBlue passengers can earn TrueBlue points on codeshare flights. Additionally, the company has entered into interline baggage and ticketing agreements with Air Canada, AlaskaAirlines,AllNippon Airways, , AzulBrazilianAirlines,Bahamasair, COPA, Delta Airlines, Emirates, and Hahn Air.

As a Part 121 certificated air carrier, Silver Airways adheres to the airline industry's most rigorous standard safety practices. In addition to Part 121 oversight from the Federal

Aviation Administration, Silver participates with the IOSAregistry — a worldwide safety standard established by the International Air Transport Association (IATA)recognized by major airlines across the globe as a requirement for establishing commercial partnerships. Further, the company has the ability to establish fares with the United States government through the General Services Administration's Government Airfare program. Only carriers who routinely pass rigorous inspections from the Department of Defense are allowed to participate in this program.

Since August 2017, Silver announced several new strategic initiatives. First, the company placed an order for new ATR-600 series aircraft including 20 firm orders. Second, the company appointed a new management team with important relationships at major domestic and international airlines. Steve Rossum, Silver's Chief Executive Officer has had senior executive roles at and regional air carriers and is well versed in the air needs of EAScommunities. Col. Jeffrey A. Miller (USAFRet.) oversees flight operations and has been a commercial and military pilot for over 35 years flying numerous varieties of aircraft including captaining Air Force Two. Kurt Brulisauer is head of ground operations and is designated as the Pendleton community liaison for all EASoperations. These senior leaders have held executive positions with passenger and cargo airlines including US Airways, AirTran Airways, DHLAirways, , Pinnacle Airlines, World Airways, Reno Air, and .

Silver has recently acquired San Juan-based and anticipates its operations to be combined with Silver in 2019. This willallow for both network growth throughout the Caribbean and partnership growth with Seaborne’s codeshare partners.

C. Proposal Details

Silver believes that its unique proposal can fundamentally improve air service to Pendleton by returning key attributes to the product offering, in line with the Department's selection criteria, including: 0 An uncompromising commitment to safety 0 Reliable service operated on a schedule built to be defensible against delays 0 Access to hundreds of connection opportunities at the large hub airports through Silver's existing interline ticketing and baggage agreements with all of the major carriers 0 Strong community coordination and cooperation 0 A robust marketing program supported by both Silver and PDT

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Page 15 of 23 0 A US-based call center staffed by bi-lingual Silver employees for customer support 0 An eco-friendly, modern turboprop aircraft

1. Essential Air Service Selection Criteria

Our proposal is specifically designed to meet all five selection criteria as indicated in the Department's request for proposals and in 49 U.S.C. § 41733(c)(1). Furthermore, our ability to meet all of the selection criteria is key to why we believe Silver's proposal will be superior to all other proposals.

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1. Service Reliability. Silver has put in place a number of initiatives to ensure service reliability across its network. These initiatives include co-locating crew bases, maintenance bases, and spare aircraft; ensuring strong pilot retention and recruitment, and building schedules that allow for easy recovery of delays once they occur. These efforts have produced Controllable Completion Rates in excess of 99% in 2018 and Controllable On-Time Performance on par or exceeding major U.S. carriers.

2. Contractual and marketing relationships with a large carrier at the hub. i. Silver has in place codeshare and frequent flyer program agreements with United Airlines and jetB|ue. Upon award, Silver will invite both carriers to extend our existing agreements which already support our Florida and Bahamas networks to Pendleton.

July 18, 2018 Silver Airways Essential Air Service Proposal Page | 4

Page 16 of 23 ii. Silver is also in discussions with American and Delta to assume their codeshares arrangements with recently acquired Seaborne Airlines. Upon award of service, we expect our new partners to add their marketing codes to flights to PDT. Passengers who take advantage of our marketing agreements will be able to purchase tickets with joint itineraries via online and ”brick-and-mortar” travel agencies, partner airline websites, and reservations centers.

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July 18, 2018 Silver Airways Essential Air Service Proposal Page I 5

Page 17 of 23 3. Interline arrangements with a larger carrier at the hub. Silver maintains interline ticketing and baggage agreements with twelve carriers from across the globe, including , the largest carrier in PDXwith more than 140 flights per day. Five additional partner airlines also provide service to PDX,and collectively account for almost 30,000 connecting Seats per Day Offered by Silver's Partners seats each way on an from Portland international Airport average day. These arrangements allow for passengers to purchase a single ticket across airlines, experience a AirCanada, 553 single check-in with the first carrier, and have —__, Alaska, 15,733 JetBlue, 879 T? baggage automatically transferred between American, carriers without 2,750 reclaiming and United, 3,915

rechecking at the Delta, 5,818 connection airport.

Communit views ivin substantial wei ht to the elected officials re resentin the users. Silver has already engaged in working with locally elected officials as well as Eastern Oregon Regional Airport management to ensure our proposal will meet the needs of the community including visits to Pendleton by our operations and commercial executives.

Whether the carrier has included in its ro osal a Ian to market its service to the community. Silver has included several aspects of marketing plans in its proposal. i. As discussed, Silver intends to market flights to allow maximum connectivity to the flights of our interline airline partners. ii. Silver will also incorporate Pendleton into its own system-wide marketing efforts, which include: 1. Adding the ability for sales though Silver's website, call centers, and travel agent distribution network. 2. Silver will commit to a minimum annual marketing spend of $50,000. These funds will be expended on behalf of, and in coordination with the community. 3. Silver willseek to foster and leverage community relationships and cooperative marketing programs to extend the reach of marketing for each community. This can include use of pre-existing airport sponsored sales teams, and the use of promotions and trade with local organizations to extend the reach and frequency of Silver's marketing efforts.

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Page 18 of 23 4. Silver willalso work to become a greater part of the Pendleton community through community outreach, sponsorships, promotions, and volunteer programs. 5. Silver has designated Kurt Brulisauer, Senior Vice President of Ground Operations, as the executive who will be responsible to address any needs of PDTor the Department including Silver's operational performance. His e-mail is [email protected].

2. Service Pattern and Schedule

Silver Airways’ proposal is rooted in providing Pendleton with a level of capacity and frequency outlined by the Department in the RFPand in alignment with historic traffic trends.

a. Proposed Schedules

Silver is proposing a schedule with twelve weekly roundtrips per the Department of Transportation solicitation, optimized for connections and crew requirements. Allflights willbe operated by 34-seat Saab 340 Bplusaircraft.

The schedules indicated are subject to change and further community input.

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Silver Airways proposes to operate the services described for a two-year term, beginninglanuary 1, 2019.

b. Modern, cabin-class aircraft

Silver will utilize its fleet of Saab SF340 Bplus aircraft to support Essential Air Service in PDT. All Silver flights are operated with twin-engine aircraft and flown by a crew of two highly trained and quali?ed pilots. Silver's SF340 seats up to 34 passengers with standard and extended legroom economy seating in a configuration similar to large regional jets.

July 18, 2018 Silver Airways Essential Air Service Proposal Page I 7

Page 19 of 23 Onboard, passengers have access to overhead bins, a restroom, and beverage service provided by an inflight crew member.

Schedule Built for Reliability

We have designed our PDT schedule and our airline to operate reliably. The following concepts are employed to create a reliable network:

1. Dedicated Aircraft. Silver will have a dedicated aircraft to fly only the route between Pendleton and Portland. In addition, to provide for greater degree of reliability and operational integrity, Silver intends to have a second Saab 340Bplus situated as a spare in either Pendleton or Portland. As the schedule will feature significant spare time, any delays that occur from time to time can be absorbed or the spare aircraft can be utilized.

2. Pilot Retention and Recruitment. A key to reliable airline operations is a consistent supply of pilots. Silver currently has a steady stream of prospective pilots and no reliability concerns related to lack of crew. Silver already has a pipeline program in place with -based where Silver pilots may continue their career path with Frontier. We are continuously improving our pilot hiring program in order to attract a talented workforce who wish to be a part of the communities we serve.

July 18, 2018 Silver Airways Essential Air Service Proposal Page | 8

Page 20 of 23 3. Pilot Efficiency. In order to attract and retain a full complement of highly trained pilots, Silver's schedule will contain specific items designed to support our pilot team, including easily commutable lines; in-base accommodations, and single crew overnights designed to make pilot work days efficient within Part 117 standards.

cl. Operation Built for Connectivity

Combined Proposed Silver [ Interline Partner Route Map

1. Hub Structure. Silver's schedules are designed around the published schedules and minimum connection times of our partner carriers at PDX. Thisfocus will ensure Silver is able to maximize connections to our interline partners. 2. Connections. Through interline partnerships, Silver will provide seamless, one- stop connections to 58 destinations including Alaska,Hawaii, and 6 international cities. 3. Remain-Over-Night (RON). Silver's aircraft will remain over-night at Pendleton. This schedule allows for morning departures and evening arrivals, allowing travelers from Pendleton to create "day-trips” and maximize their time in many destinations.

July 18, 2018 Silver Airways Essential Air Service Proposal Page I 9

Page 21 of 23 4. Financial Proposal

Silver's financial proposal is below. Silver requires a total annual subsidy package of $5.4 million in order to initiate service between Pendleton and Portland.

Annual Information —-—-— Total Stage Length 182 Completed Departures per year (98%) 1,223 Completed BlockHours 1,399 ASMS 7,568,172

Passengers 27,249 Load Factor 66% Revenue per Passenger $58 Passenger Revenue $1,587,750

Variable Costs $4,387,238 Aircraft Ownership $1,217,585 Overhead & Interest $954,493 Marketing Expense $50,000 Expenses $6,609,317

Profit (Loss) Excluding Subsidy ($5,021,567)

Subsidy Revenue (5% margin) $5,368,131

Subsidy per Departure $4,389 Subsidy per BlockHour $3,836 Subsidy per Passenger $197 Weekly Maximum $103,233

Silver requires a minimum service period of 24 months.

D. Conclusion

We believe Silver has presented a very compelling case to become the Essential Air Service provider in Pendleton. Silver is uniquely positioned to meet all of the Department's selection criteria while offering the community the maximum consumer benefits.

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Page 22 of 23 We believe the community and the Department of Transportation will find Silver's response superior to all other responses. We believe no other carrier will be able to offer the combination of services that Silver offers, including: 0 Interline partnerships with worldwide reach o The potential for codeshare service with several major carriers Single-ticket itineraries to destinations worldwide through major carrier connections A management team committed to working with each community to maximize traffic Commitment to maintain industry-leading operational reliability and customer service Commitment to working with each community to add new and effective marketing using assets provided by Silver, the communities, and other stakeholders 0 A twin-engine, turbo—prop aircraft available with amenities on par with major regional carriers

We look forward to working with the Department and the Pendleton community to implement 2' this award,/My’teamand‘l\:\1reavailable to answer any questions, and more importantly, we are excitedaboutthe prospectslof serving the Pendleton market. / ?ry 7’ truly yours, ix

1 Steven’A&os's'um \\~~—~£hief‘Executive Officer

July 18, 2018 Silver Airways Essential Air Service Proposal Page I 11

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