- Associated Press - Friday, January 9, 2015

GREENVILLE, Miss. (AP) - SeaPort Airlines’ bid to restore passenger air service to Greenville has encountered turbulence before its first flight even takes off.

The Portland, Oregon-based regional airline had planned to begin service to and from Greenville on Monday. That is on hold since the carrier and Memphis International Airport haven’t agreed on financial terms on SeaPort’s use of a passenger gate and waiting area in the main concourse.

The airline decided it would have to hold off on beginning operations in Greenville and notified Mayor John Cox on Monday.

“We thought we had a deal with the Memphis airport a year or so ago,” Tim Sieber, SeaPort’s executive vice president, said Tuesday. “We’re trying to work with the airport to work out a financial model that will work.

“Originally, they said $11,000 a month; that was a year ago. Then they came back at a little more than $19,000, which wouldn’t work under our model.”

The airport’s opening offer of the $11,000-a-month lease “was one of the figures that was baked into our bid” to assume the federally subsidized Greenville service, Sieber said.

“If we can get back to that number, or even close to it, we’re in business. If the airport cost was $7 or $8 a passenger, and now it’s $13 to $14 a seat, that gets to a tipping point, especially now when the price of gasoline is dropping,” making the drive to Memphis economically more appealing.

Regulatory and contractual obligations limit negotiations, Scott Brockman, the president and chief executive officer of Memphis International Airport, said.

“We have what’s called ‘a most-favored nation’ clause with our airlines. I can’t give SeaPort a rate that is cheaper than Delta” or any other airline, Brockman said.

“I have to charge them rates and fees that are nominally the same as I charge other airlines. And there are federal rules I have to abide by. My hands are somewhat tied as to how low I can go,” he said.

SeaPort executives have attempted to sublet gate access from established carriers at the Memphis airport, Sieber said, but “the airport has a clause in its contract that effectively limits how low airlines can go in subletting space to other airlines so that they’re not competing with the airport itself.

“When you’re trying not to go over $59 a seat” - SeaPort’s target price one-way between Greenville and Memphis after the first month’s $39 fare each way - “and $10 a seat is going straight to the airport, it doesn’t work,” Sieber said.

SeaPort in late October won a three-way competition to serve the Greenville market. In its proposal to the Department of Transportation, SeaPort said it anticipated passenger revenue of $484,000 in its first year of service.

The airline requested the smallest EAS subsidy of the three bidders for total operating expenses of $1.5 million, or $198 per passenger, and anticipated a first-year profit of $94,000.

Silver Airways in April announced its intention to quit service to and from Greenville Mid-Delta Airport. Its last flight out of Greenville was on Sept. 30.

Delta Airlines in September 2013 sharply reduced its flights into and out of Memphis International, ending the airport’s status as a hub for the carrier. Delta once boasted 240 daily flights through 69 gates, Brockman said: “Now, they have 25 daily flights out of 10 gates.”

That precipitous drop resulted in higher gate charges for other airlines serving Memphis.

“When Delta pulled out, the rental burden shifted to the other carriers,” Sieber said.

Now, SeaPort is trying to work out an arrangement that would reduce the amount of space the airline is required to lease for its Memphis operations.

“What we’re saying is charge us the same amount per square foot, just reduce the number of square feet to fit our needs,” Sieber said. “We don’t need a lounge that holds 80 people when we’re flying nine-seat airplanes. What we’re asking them to do is put up a temporary wall, airports do that all the time, to reduce the size of the space to fit the footprint we need to rent.

“The airport wins given that the vast majority of their gates are empty, and I think they realize there’s not a long line of airlines lining up to fly into that market. And the concessionaires win. They need passengers coming in and buying what they’re selling.

“This is not just about SeaPort. This is not just about Greenville. There are a lot of partners involved,” Sieber said.

Given the uncertainty created by the so far unavailing negotiations with Memphis International, SeaPort has yet to approve a two-year, $36,890-per-year lease for use of Greenville Mid-Delta Airport’s terminal.

Cox said the city has no say in the lease issue “but we’re going to make every effort to contact Memphis officials, SeaPort and federal authorities to see if the airline and the airport can conclude a contract on a lease.”

SeaPort operates a private terminal at Memphis International, paying $7,500 a month rent. Seaport said operations into the private terminal would not “be in the city’s best interest nor represent the level of service presented in our proposal to provide EAS.”

Sieber said the airline isn’t throwing in the towel.

“We’re committed to meeting with anyone we can to work this out,” he said. “We want to provide the service in Greenville that we proposed. This is not an insurmountable task. It’s unfortunate, but it just takes time.”

However, in his email to Cox, Sieber wrote that “at some point in the near future … we believe a decision will need to be made with respect to requesting that U.S. Department of Transportation request a new round of proposals.”

SeaPort had hired five employees here to staff its ticket counter at Greenville Mid-Delta Airport. They now are on standby.

___

Information from: Delta Democrat-Times, https://www.ddtonline.com


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