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Horizon Air To Submit New Bid Including Pendleton-Portland Service

PENDLETON, Ore.-(Business Wire)-September 5, 2008 - Horizon Air said today it will submit a new bid to the Department of Transportation (DOT) for Pendleton service — and in a change from its earlier bid, it will include flights to Portland.

The bid is in response to the DOT’s resolicitation of two-year-term proposals under the Essential Air Service (EAS) program. The city of Pendleton rejected all earlier proposals and asked the DOT to seek additional bids.

“Sustained high fuel costs have dramatically changed airline economics, and we have had to carefully reevaluate how we serve every market, even those we’ve served for more than a quarter century,” said Dan Russo, vice president of marketing and communications for Horizon Air. “It’s our sincere desire to continue serving the Pendleton community with our award-winning service, as we have since 1982, and we’re doing everything possible within the framework of our economics to ensure that outcome. While we believe our earlier proposal for two flights a day to Seattle met the EAS program’s requirements and added many new connection opportunities, we understand the community’s interest in continuing to have access to Portland. We’ve responded by working hard to find a way in our new proposal to include flights to Portland as well.”

Horizon’s flights would be operated with 76-seat Q400 aircraft, which are replacing the 37-seat Q200 aircraft Horizon currently operates to Pendleton and other communities. Horizon is retiring the smaller Q200 after Oct. 28. The Q400 is a high-speed, twin-engine turboprop, and is one of the most technologically advanced regional aircraft in the world. It's as quiet and comfortable as a jet – thanks to special technology that suppresses noise and vibration, generously sized overhead storage bins, unobstructed under-seat space, and ample headroom (6 feet, 5 inches). The Q400 is also among the most environmentally friendly aircraft today, burning 30 percent less fuel and producing 30 percent lower emissions than comparable jets.

Horizon will continue to serve Pendleton at least through Nov. 28, in accordance with DOT guidance. For the 30 days leading up to this, Horizon is being allowed to operate per its previous proposal (two daily flights to Seattle with a stop in Walla Walla). As a result, Horizon has discontinued tickets sales on direct flights between Pendleton, Pasco and Portland for flights after Oct. 27 and will offer flights from Pendleton to Seattle (with a stop in Walla Walla) with connections to Portland and other cities throughout North America, starting Oct. 28. These new flights are expected to be available for purchase starting Sept. 14.

The DOT’s latest solicitation requires new bids to be submitted by Sept. 23. The DOT is expected to make a decision on the submitted bids by Nov. 1, after a public comment period.

The original EAS bidding process began on June 28, when Horizon filed a notice with the DOT of its intent to terminate subsidized service at Pendleton effective Oct. 27. Horizon’s notice was filed in order to trigger a request for proposals from the DOT for a new contract. Filing with DOT to withdraw from the EAS market is the only means by which a carrier can obtain an increase in the subsidy that reflects unanticipated dramatic cost increases, like the recent spike in fuel costs.

In response to the first DOT order on July 7 soliciting bids, Horizon submitted a proposal to provide Pendleton with a combination of two one-stop (via Walla Walla) or nonstop Q400 roundtrips from Pendleton to Seattle each weekday and one over each weekend. A competing proposal offered five daily nonstop roundtrips between Pendleton and Portland, utilizing nine-seat Cessna 402 aircraft, for an amount more than $1 million higher than Horizon’s proposal.

On Aug. 20, the Pendleton City Council recommended that the DOT reject both proposals and resolicit proposals for EAS. The city acknowledged that the process could leave Pendleton without air service after Nov. 28 because of the time necessary to solicit, evaluate and award a new contract. The DOT subsequently released Horizon from its obligations under the current EAS contract after Nov. 28. Horizon’s latest proposal includes a provision that ensures there will be no interruption in the airline’s service to Pendleton if the DOT selects Horizon’s bid.

Horizon serves 48 cities throughout Arizona, California, Oregon, Washington, Idaho, Montana, Nevada, Baja California Sur (Mexico), and British Columbia and Alberta (Canada). Together, Horizon Air and Alaska Airlines serve 94 cities and are subsidiaries of Alaska Air Group, Inc. (NYSE:ALK).

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