-----------------------------------------------------------------------
  Order 2008-5-43

  Served: June 3, 2008
  -----------------------------------------------------------------------

**UNITED STATES OF AMERICA**

**DEPARTMENT OF TRANSPORTATION**

**OFFICE OF THE SECRETARY**

**WASHINGTON, D.C.**

Issued by the Department of Transportation

  -----------------------------------------------------------------------
  on the 29^th^ day of May, 2008

  -----------------------------------------------------------------------

+---------------------------------+------------------------------------+
| Request for Proposals at:       | **Docket: DOT-OST-2002-11348**     |
|                                 |                                    |
| **ATHENS, AND**                 | **Docket: DOT-OST-2007-28671**     |
|                                 |                                    |
| **MACON, GEORGIA**              |                                    |
|                                 |                                    |
| Under 49 U.S.C. 41731 *et seq*. |                                    |
+---------------------------------+------------------------------------+

#  {#section .mainheading}

**ORDER SELECTING CARRIER**

**AND ESTABLISHING SUBSIDY RATE**

## Summary

By this order, the Department is selecting Pacific Wings, L.L.C. d/b/a
Georgia Skies (Georgia Skies), to provide subsidized essential air
service (EAS) at Athens and Macon, with 9-seat Cessna Grand Caravan
C‑208B turboprop aircraft, for the two-year period beginning when the
carrier inaugurates full EAS at both communities, at an annual subsidy
of \$2,437,692. (See Appendix A for an area map.)

## Background

**ATHENS**

On May 3, 2007, Air Midwest, Inc., a wholly owned subsidiary of Mesa Air
Group, Inc., d/b/a US Airways Express (Air Midwest), filed a 90-day
notice of its intent to terminate its subsidized service at Athens and
three other communities, effective August 1, 2007.[^1] In response, the
Department issued an order holding the carrier in and requesting
proposals to provide EAS with subsidy if necessary. One carrier,
Gulfstream International Airlines, Inc., submitted a proposal to replace
Air Midwest, which we selected, but the carrier never began service.
Subsequently, we solicited two additional rounds of proposals, most
recently in conjunction with Macon, by Order 2008-3-21, March 24, 2008.
We've received proposals from Georgia Skies, Vintage Props & Jets
(Vintage), and Air Greco, Inc. d/b/a Wings Air (Wings Air).

**MACON**

On July 2, 2007, Atlantic Southeast Airlines (ASA) filed a 90-day notice
of its intention to suspend its subsidy-free service at Macon, effective
October 1, 2007. By Order 2007‑6‑12, July 13, 2007, we prohibited ASA
from suspending service, required it to provide Macon with two daily
nonstop round trips to Atlanta, and requested proposals from carriers
interested in providing replacement service, with subsidy if necessary.
The initial request did not produce any proposals, and we solicited
proposals three additional times, most recently by Order 2008-3-21 in
conjunction with Athens. That order produced proposals from the same
three carriers that filed for Athens service: Georgia Skies, Vintage,
and Wings Air.

**PROPOSALS**

All three carriers proposed service with 9-seat aircraft, i.e., aircraft
with passenger seating capacity below the 15-seat standard for these EAS
communities. The carriers' proposals for both communities are summarized
in the table below. In addition, each carrier's proposal and the
communities' formal comments may be accessed online through the Federal
Docket Management System at:
[http://www.regulations.gov](http://www.regulations.gov/)

by doing a "Search" on docket number 2002-11348 (for Athens) or
2007-28671 (for Macon).

+-----------+-----------+---+---------------------------------------------+
| **        | **A       | * |                                             |
| Carrier** | ircraft** | * |                                             |
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+-----------+-----------+---+---------------------------------------------+
| Pacific   | 9 --      | A |                                             |
| Wings     | passenger | T |                                             |
| d/b/a     | Cessna    | H |                                             |
| Georgia   | Grand     | E |                                             |
| Skies     | Caravan   | N |                                             |
|           | -- C‑208B | S |                                             |
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+-----------+-----------+---+---------------------------------------------+
| Vintage   | 9 --      | A |                                             |
| Props &   | passenger | T |                                             |
| Jets      | B         | H |                                             |
|           | eechcraft | E |                                             |
|           | King Air  | N |                                             |
|           | 100/200   | S |                                             |
|           | --        | - |                                             |
|           | tw        | - |                                             |
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+-----------+-----------+---+---------------------------------------------+
| Air       | 9 --      | A |                                             |
| Greco,    | passenger | T |                                             |
| Inc.      | Piper     | H |                                             |
| d/b/a     | Navaho,   | E |                                             |
| Wings Air | PA-31-350 | N |                                             |
|           | Chieftain | S |                                             |
|           | --        | - |                                             |
|           | tw        | - |                                             |
|           | in-engine | 4 |                                             |
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+-----------+-----------+---+---------------------------------------------+
|           |           |   |                                             |
+-----------+-----------+---+---------------------------------------------+
| Key: NS   |           |   |                                             |
| RTs =     |           |   |                                             |
| nonstop   |           |   |                                             |
| round     |           |   |                                             |
| trips     |           |   |                                             |
+-----------+-----------+---+---------------------------------------------+

**Community Comments**

By letter dated May 8, 2008, the Department solicited the views of the
Mayors and airport managers of both Athens and Macon as to which
carrier's proposal they would prefer. We noted that we have an
obligation to relieve the incumbent carriers of their service
obligations, that we had solicited proposals several times at both
communities, and that this was the first time that we received any
proposals at all. All three carriers proposed service using aircraft
having fewer than 15 seats as called for by our governing statutes. We
also indicated that their support for a particular carrier's proposal
would not be construed as having waived their right to 15-seat aircraft
for all time, but, rather, only for the duration of the upcoming
two-year contract.

In a letter dated May 21, the Mayor Heidi Davison of Athens indicated
that the City and the Athens Airport Authority fully supports the
selection of Pacific Wings (Georgia Skies) to serve the Athens--Atlanta
market with the carrier's 9-passenger Cessna aircraft (its option #2).
The Mayor also emphasized that time is of the essence because Air
Midwest, Athens's incumbent carrier, ceases all service at Athens on
May 23. She said that Pacific Wings' best met the community's criteria
of affordable pricing, interlining agreements with major carriers, a
marketing plan, and a business model designed to wean the airline off
EAS dependency. All these factors led the Athens-Ben Epps Airport
Authority to vote unanimously to support Pacific Wings Atlanta proposal.

In a letter dated May 23, Mayor Robert Reichert of the City of Macon
indicated that the community also supports the selection of Georgia
Skies as being in the best interest of the Macon community. He indicated
that Pacific Wings, which would operate in Macon as Georgia Skies, would
offer newer aircraft with greater luggage capacity than the other
proposals. He also noted that Pacific Wings also appears better
positioned to negotiate agreements with larger airlines that will allow
passengers and their baggage to make seamless transfers to their
connecting flights in Atlanta, and that that ability is crucial.

**Decision**

After careful consideration of this matter, including the comments of
the Mayors of both Athens and Macon, and after carefully reviewing all
three carriers' proposals, we have decided to select Georgia Skies'
Athens - Atlanta and Macon - Atlanta proposals for a combined annual
subsidy of \$2,437,692 for a new, two-year term beginning when the
carrier inaugurates full EAS to both communities. The carrier's proposal
for Athens would provide 12 weekly nonstop round trips to and from
Atlanta for an annual subsidy rate of \$1,051,386; and the carrier's
proposal for Macon would provide 26 weekly nonstop round trips to
Atlanta for an annual subsidy rate of \$1,386,306.

In analyzing this case, we first examined whether any of the numerous
options could be disposed of rather easily. The proposals offered by
Vintage had no community support and required by far the most subsidy.
Even Vintage's least expensive combination of proposals, (Athens #2
paired with Macon #3) totals more than \$3.5 million the first year,
compared to first-year rates of \$2.4 million for Georgia Skies and
\$2.2 million for Wings Air. In addition, Vintage's subsidy rates for
both communities increase the second year (to \$3.6 million).

That leaves only Wings Air and Georgia Skies left for consideration.
Wings Air's subsidy request is \$2.2 million the first year and \$0.9
million the second year, under the presumption that it would serve Macon
on a subsidy-free basis after the first year. Georgia Skies' proposal
requires \$2.4 million per year during each of the two years. We have
decided to select Georgia Skies for a number of reasons.

The statutory carrier-selection criteria that we are required to
consider are the preferences of the EAS communities, the demonstrated
reliability of the applicants in providing scheduled air service, and
the marketing and interline-arrangements that the applicants have made
with larger carriers to ensure convenient connecting service beyond the
hub. All of these statutorily mandated criteria support the selection of
Georgia Skies. First, both communities strongly support the selection of
Georgia Skies, despite the fact that Wings Air has proposed more
frequencies. While we always give weight to communities' views, we find
that it is appropriate to give even greater weight to their views here
because, by supporting Georgia Skies, they have effectively waived their
right to larger aircraft, which would undoubtedly require far more
subsidy than we are authorizing here.

Second, Pacific Wings, the parent of Georgia Skies, has all the
requisite operating authority to provide its proposed service, and has
provided scheduled air service for many years. On the other hand, Wings
Air, according to its proposal, operates as an air taxi or an on-demand
air carrier, and does not currently provide scheduled air service, and,
moreover, does not have the requisite authority to do so.[^2] Thus,
Georgia Skies is in a position to inaugurate service more quickly than
Wings Air. We find that this ability takes on added significance in this
case, particularly for Athens, because the community is currently
without any service as Air Midwest ceased all operations in the East on
May 23, enroute to a total, system-wide shut down and liquidation on
June 30.

We also find that Georgia Skies has an advantage over Wings Air
regarding the third criterion \-- enhanced connecting opportunities
beyond the hub. While neither carrier has a code-share agreement with a
major carrier at Atlanta, as an operating carrier, Georgia Skies does
have interline ticketing and baggage handling agreements with most major
carriers, while Wings Air currently has none.

Based on all the above, we select Pacific Wings, L.L.C. d/b/a Georgia
Skies, to provide EAS at Athens and Macon as proposed for a two-year
period beginning when it inaugurates full EAS at both communities.

We shall make the selection of Georgia Skies contingent upon the
Department's receiving properly executed certifications from the carrier
that it continues to comply with the Department's regulations regarding
drug-free workplaces, non-discrimination, and lobbying activities.

## Carrier Fitness

49 U.S.C. 41737(b) and 41738 require that we find an air carrier fit,
willing, and able to provide reliable service before we may subsidize it
to provide essential air service. Pacific Wings, L.L.C. d/b/a Georgia
Skies, has been found fit previously to provide scheduled passenger
service at other communities, most recently by Order 2007-9-29,
September 26, 2007, selecting it to provide subsidized EAS at
Alamogordo/Holloman Air Force Base, New Mexico. Since that time, no
information has come to our attention that would lead us to question the
carrier's ability to operate in a reliable manner. The FAA has advised
us that the carrier is conducting its operations in accordance with its
regulations, and knows of no reason why we should not find that Georgia
Skies is fit to provide the service proposed here. Based on the above,
we find that Pacific Wings, L.L.C. is fit to provide the essential air
transportation at issue in this case.

## Subsequent Development

On May 29, Wings Air filed a motion for leave to file an otherwise
unauthorized document in the form of late EAS proposal.[^3] In its late
proposal, the carrier states that it can now provide both communities'
EAS on a subsidy-free basis. The carrier explains that the major
developments that lead to a subsidy-free proposal are recently
negotiated lower handling or "turn" fees at Atlanta and a re-evaluation
of the traffic and revenue potential of the markets, resulting in an
increased revenue forecast.

We reject Wings Air's late proposal. Nothing in the carrier's pleading
changes the fundamental reasoning for our basic decision \-- Wings Air
does not have the requisite operating authority to provide scheduled air
service. In the case of Athens, that inability takes on even added
importance because the community is currently without scheduled air
service.

This order is issued under authority delegated in 49 CFR 1.56a(f).

## ACCORDINGLY,

1\. The Department selects Pacific Wings, L.L.C., to provide essential
air service at Athens and Macon, Georgia, as described in Appendix B,
for the two-year period beginning when the carrier begins to provide
full essential air service pursuant to this Order;

2\. We set the final rates of compensation for Pacific Wings, L.L.C.,
for the provision of essential air service at Athens, Georgia, as
described in Appendix B, for the two-year period beginning when the
carrier begins to provide full essential air service pursuant to this
Order, consisting of twelve nonstop round trips per week to Atlanta,
Georgia, payable as follows: for each month during which essential air
service is provided, the amount of compensation shall be subject to the
weekly ceiling set forth in Appendix B and shall be determined by
multiplying the subsidy-eligible flights completed during the month to
and from Atlanta by \$859.68;[^4]

3\. We set the final rates of compensation for Pacific Wings, L.L.C.,
for the provision of essential air service at Macon, Georgia, as
described in Appendix B, for the two-year period beginning when the
carrier begins to provide full essential air service pursuant to this
Order, consisting of twenty-six nonstop round trips per week to Atlanta,
Georgia, payable as follows: for each month during which essential air
service is provided, the amount of compensation shall be subject to the
weekly ceiling set forth in Appendix B and shall be determined by
multiplying the subsidy-eligible flights completed during the month to
and from Atlanta by \$523.13;[^5]

4\. We direct Pacific Wings, L.L.C., to retain all books, records, and
other source and summary documentation to support claims for payment and
to preserve and maintain such documentation in a manner that readily
permits the audit and examination by representatives of the Department.
Such documentation shall be retained for seven years or until the
Department indicates that the records may be destroyed, whichever is
earlier. Copies of flight logs for aircraft sold or disposed of must be
retained. The carrier may forfeit compensation for any claim that is not
supported under the terms of this order;

5\. We find that Pacific Wings, L.L.C., is fit, willing and able to
operate as a commuter air carrier and capable of providing reliable
essential air service at Athens and Macon, Georgia;

6\. We accept Air Greco, Inc. d/b/a Wings Air's motion for leave to file
an otherwise unauthorized document, and reject the carrier's amended
proposal;

7\. These dockets will remain open until further order of the
Department; and

8\. We will serve copies of this order on the mayors and airport
managers of Athens and Macon, Georgia; the Governor of Georgia; Air
Greco, Inc. d/b/a Wings Air; Vintage Props & Jets; and Pacific Wings,
L.L.C. d/b/a Georgia Skies.

By:

**MICHAEL W. REYNOLDS**

Acting Assistant Secretary for Aviation

and International Affairs

(SEAL)

An electronic version of this document is available in the Federal
Docket Management System (FDMS) at

[*http://www.regulations.gov*](http://dms.dot.gov/)

Area Map

![](media/image3.wmf)

**Pacific Wings, L.L.C. d/b/a Georgia Skies**

**Essential Air Service at Athens, Georgia**

**[Compensation Calculation]{.underline}**

  ------------------------ ----------------------------------------------
  [Effective               Two-year period beginning when the carrier
  period]{.underline}:     starts full essential air service.

  [Service at              12 nonstop round trips per week to Atlanta,
  Athens]{.underline}:     Georgia

  [Intermediate stops and  No other service to any intermediate or upline
  upline                   points is contemplated under the terms of this
  service]{.underline}:    proposal; accordingly, no such service may be
                           provided on subsidized flights without prior
                           Department approval.

  [Timing of               Flights must be well-timed and well spaced to
  Flights]{.underline}:    ensure full compensation.

  [Aircraft                Cessna C-208B Grand Caravan turboprop aircraft
  type]{.underline}:       with 9 passenger seats.

  [Subsidy Rate per        \$859.68[^6]
  Flight]{.underline}:     

  [Weekly Compensation     \$20,632.32[^7]
  Ceiling:]{.underline}    
  ------------------------ ----------------------------------------------

**Note:** The carrier understands that it may forfeit its compensation
for any flights that it does not operate in conformance with the terms
and stipulations of the rate order, including the service plan outlined
in the order and any other significant elements of the required service,
without prior approval. The carrier understands that an aircraft
take-off and landing at its scheduled destination constitutes a
completed flight; absent an explanation supporting subsidy eligibility
for a flight that has not been completed, such as certain weather
cancellations, only completed flights are considered eligible for
subsidy. In addition, if the carrier does not schedule or operate its
flights in full conformance with this order for a significant period, it
may jeopardize its entire subsidy claim for the period in question. If
the carrier contemplates any such changes beyond the scope of this Order
during the applicable period of these rates, it must first notify the
Office of Aviation Analysis in writing and receive written approval from
the Department to be assured of full compensation. Should circumstances
warrant, the Department may locate and select a replacement carrier to
provide service on these routes. The carrier must complete all flights
that can be safely operated; flights that overfly points for lack of
traffic will not be compensated. In determining whether subsidy payment
for a deviating flight should be adjusted or disallowed, the Department
will consider the extent to which the goals of the program are met and
the extent of access to the national air transportation system provided
to the community.

If the Department unilaterally, either partially or completely,
terminates or reduces payments for service or changes service
requirements at a specific location provided for under this order, then,
at the end of the period for which the Department does make payments in
the agreed amounts or at the agreed service levels, the carrier may
cease to provide service to that specific location without regard to any
requirement for notice of such cessation. Those adjustments in the
levels of subsidy and/or service that are mutually agreed to in writing
by the parties to the agreement do not constitute a total or partial
reduction or cessation of payment.

Funds are not currently available for performance under this Order
beyond September 30, 2008. The Government\'s obligation for performance
under this Order beyond September 30, 2008, is contingent upon the
availability of appropriated funds from which payment for services can
be made. No legal liability on the part of the Government for any
payment may arise for performance under this Order beyond
September 30, 2008, until funds are made available to the Department for
performance. If funds are not made available for performance beyond
September 30, 2008, the carrier will receive notice in writing from the
Department.

Subsidy contracts are subject to, and incorporate by reference, relevant
statutes and Department regulations, as they may be amended from time to
time. However, any such statutes, regulations, or amendments thereto
shall not operate to controvert the foregoing paragraph.

All claims for payment must be submitted within 60 days of the last day
of service provided under this order.

**Pacific Wings, L.L.C. d/b/a Georgia Skies**

**Essential Air Service at Macon, Georgia**

**[Compensation Calculation]{.underline}**

  ------------------------ ----------------------------------------------
  [Effective               Two-year period beginning when the carrier
  period]{.underline}:     starts full essential air service.

  [Service at              26 nonstop round trips per week to Atlanta,
  Macon]{.underline}:      Georgia

  [Intermediate stops and  No other service to any intermediate or upline
  upline                   points is contemplated under the terms of this
  service]{.underline}:    proposal; accordingly, no such service may be
                           provided on subsidized flights without prior
                           Department approval.

  [Timing of               Flights must be well-timed and well spaced to
  Flights]{.underline}:    ensure full compensation.

  [Aircraft                Cessna C-208B Grand Caravan turboprop aircraft
  type]{.underline}:       with 9 passenger seats.

  [Subsidy Rate per        \$523.13[^8]
  Flight]{.underline}:     

  [Weekly Compensation     \$27,202.76[^9]
  Ceiling:]{.underline}    
  ------------------------ ----------------------------------------------

**Note:** The carrier understands that it may forfeit its compensation
for any flights that it does not operate in conformance with the terms
and stipulations of the rate order, including the service plan outlined
in the order and any other significant elements of the required service,
without prior approval. The carrier understands that an aircraft
take-off and landing at its scheduled destination constitutes a
completed flight; absent an explanation supporting subsidy eligibility
for a flight that has not been completed, such as certain weather
cancellations, only completed flights are considered eligible for
subsidy. In addition, if the carrier does not schedule or operate its
flights in full conformance with this order for a significant period, it
may jeopardize its entire subsidy claim for the period in question. If
the carrier contemplates any such changes beyond the scope of this Order
during the applicable period of these rates, it must first notify the
Office of Aviation Analysis in writing and receive written approval from
the Department to be assured of full compensation. Should circumstances
warrant, the Department may locate and select a replacement carrier to
provide service on these routes. The carrier must complete all flights
that can be safely operated; flights that overfly points for lack of
traffic will not be compensated. In determining whether subsidy payment
for a deviating flight should be adjusted or disallowed, the Department
will consider the extent to which the goals of the program are met and
the extent of access to the national air transportation system provided
to the community.

If the Department unilaterally, either partially or completely,
terminates or reduces payments for service or changes service
requirements at a specific location provided for under this order, then,
at the end of the period for which the Department does make payments in
the agreed amounts or at the agreed service levels, the carrier may
cease to provide service to that specific location without regard to any
requirement for notice of such cessation. Those adjustments in the
levels of subsidy and/or service that are mutually agreed to in writing
by the parties to the agreement do not constitute a total or partial
reduction or cessation of payment.

Funds are not currently available for performance under this Order
beyond September 30, 2008. The Government\'s obligation for performance
under this Order beyond September 30, 2008, is contingent upon the
availability of appropriated funds from which payment for services can
be made. No legal liability on the part of the Government for any
payment may arise for performance under this Order beyond September 30,
2008, until funds are made available to the Department for performance.
If funds are not made available for performance beyond September 30,
2008, the carrier will receive notice in writing from the Department.

Subsidy contracts are subject to, and incorporate by reference, relevant
statutes and Department regulations, as they may be amended from time to
time. However, any such statutes, regulations, or amendments thereto
shall not operate to controvert the foregoing paragraph.

All claims for payment must be submitted within 60 days of the last day
of service provided under this order.

[^1]: We have dealt with EAS at the other three communities, DuBois and
    Franklin/Oil City, Pennsylvania, and Lewisburg, West Virginia, in
    separate orders.

[^2]: Wings Air recently submitted an application with the Department
    for such authority, and it is being processed by the Department's
    Air Carrier Fitness Division.

[^3]: We accept Wings Air's motion to file an otherwise unauthorized
    document.

[^4]: See Appendix B for the calculation of this rate, which assumes the
    use of the aircraft designated. If the carrier reports a significant
    number of aircraft substitutions, a revision of this rate may be
    required.

[^5]: See Appendix B for the calculation of this rate, which assumes the
    use of the aircraft designated. If the carrier reports a significant
    number of aircraft substitutions, a revision of this rate may be
    required.

[^6]: \$1,051,386 compensation, divided by 1,223 scheduled departures:
    52 weeks \* 24 flights \* 0.98 completion factor.

[^7]: 24 flights per week \* \$859.68 = \$20,632.32.

[^8]: \$1,386,306 compensation, divided by 2,650 scheduled departures:
    52 weeks \* 52 flights \* 0.98 completion factor.

[^9]: 52 flights per week \* \$523.13 = \$27,202.76.