Order 2008-5-13

Served: May 12, 2008

**UNITED STATES OF AMERICA**

**DEPARTMENT OF TRANSPORTATION**

**OFFICE OF THE SECRETARY**

**WASHINGTON, D.C.**

> ![](media/image1.wmf){width="0.9166666666666666in"
> height="0.9472222222222222in"} Issued by the Department of
> Transportation
>
> on the 12^th^ day of May, 2008

+------------------------------------------+---------------------------+
| Essential air service at                 | > **Docket                |
|                                          | > DOT-OST-1996-1899**     |
| > **KINGMAN, ARIZONA**                   |                           |
| >                                        |                           |
| > **PRESCOTT, ARIZONA**                  |                           |
|                                          |                           |
| under 49 U.S.C. 41731 *et seq.*          |                           |
+------------------------------------------+---------------------------+

#  {#section .paraheading}

**ORDER PROHIBITING TERMINATION OF SERVICE**

**AND REQUESTING PROPOSALS**

**Summary**

By this order, the Department is (a) prohibiting Air Midwest, Inc., a
wholly-owned subsidiary of Mesa Air Group, Inc. (Air Midwest), from
terminating its subsidized service at Kingman and Prescott, Arizona, for
30 days beyond the end of its 90-day notice period, and (b) requesting
long-term proposals from carriers interested in providing essential air
service (EAS) at either or both communities, with or without subsidy, by
June 2, 2008. (See Appendix A for a map.)

# Background {#background .paraheading}

Under Order 2007-6-10, June 13, 2007, Air Midwest was selected to
provide EAS at Kingman and Prescott for a two-year period beginning when
it inaugurated service. Air Midwest inaugurated service at the two
communities on October 1, 2007. On May 7, 2008, Air Midwest filed a
90-day notice with the Department of its intent to terminate its
subsidized EAS at Kingman and Prescott, effective August 4, 2008.

Service currently consists of three round trips a day (18 per week) over
a Kingman -- Prescott -- Phoenix or Prescott -- Kingman -- Las Vegas
routing with Beech 1900-D aircraft.

# Decision {#decision .paraheading}

Because Air Midwest's proposed termination of service would leave
Kingman and Prescott without any scheduled air service, we must prohibit
the carrier from terminating such service at the end of its 90-day
notice period and request proposals for replacement service. We will
also require it to maintain service at the communities for an initial
30-day period after the original 90-day notice period consisting of the
service patterns contained in the current contracts. Furthermore, we
will require Air Midwest to continue to maintain service at the
communities for successive 30-day periods until we have completed
processing the carrier replacement case and the new carrier(s) has
actually started service.

# Request for Proposals {#request-for-proposals .paraheading}

Carriers interested in filing proposals, with or without subsidy
requests, should file them no later than June 2, 2008. At the end of
that period, our staff will docket the proposals, thereby making them
public, and direct each carrier to serve a copy of its proposal on the
civic parties and other applicants. Shortly afterwards, we will provide
a summary of the proposals to the communities and ask them to submit
their final comments. We will give full consideration to all proposals
that are timely filed.[^1]

Interested carriers should prepare their proposals with every
expectation that their initial proposals will represent their *final*
and *only* proposals. However, we retain the discretion to negotiate
proposals with carriers when we deem it desirable; in such cases, of
course, we will give all applicants the same opportunity. We also retain
the discretion to reject outright all unreasonable or unrealistic
proposals and re-solicit a new round of proposals. However, negotiation
or rejection are only occasional exceptions to the rule.

We are here providing interested carriers with some basic information to
serve as guidance when they prepare their proposals, but we will not
prescribe a precise format for their proposals. We expect proposals to
adequately describe the service being proposed and the annual amount of
subsidy being requested. The applicants can make their own judgments as
to the level of detail they wish to present; however, they might want to
include proposed schedules as well as supporting data for their subsidy
requests, such as projected block hours, revenues and expenses. We
strongly encourage clear, well-documented proposals that will facilitate
their evaluation by the affected communities and the Department.[^2]

With respect to Kingman and Prescott, we expect proposals consisting of
service with 15-seat or larger aircraft to a suitable hub airport, such
as Phoenix, Las Vegas, Los Angeles, or Salt Lake City, with airline
connections to the national air transportation system. In that regard,
we note that the community of Kingman has expressed some interest in
service to Las Vegas over the years. Kingman also informed us that the
current service, linked with Prescott has worked well. Service should
consist of three nonstop or three one-stop round trips per day (18 per
week), if 19-seat aircraft (or similar) are proposed, or two nonstop or
two one-stop round trips (12 per week), if aircraft seating more than 19
passengers are proposed. Communities and air carriers are encouraged to
work together in advance of the due date for proposals to craft a
service pattern that is desirable to the community and meets the
operational needs of the airline interested in submitting a proposal. In
addition, carriers should be very clear as to whether a specific
community's proposal is on a stand-alone basis, or whether it is part of
a larger, inseparable package with other communities.

We encourage proposals that meet these requirements in an efficient
manner. Carriers are also welcome to propose more than one service
option, if they choose; they need not limit themselves to those
requirements if they envision other, potentially more attractive service
possibilities \-- different hubs, for example \-- with subsidy
requirements that remain competitive.

# Service and Traffic History {#service-and-traffic-history .paraheading}

In order to assist interested carriers in developing traffic and revenue
projections for their service proposals, we have summarized some
historical origin-destination traffic in Appendix B. For the most recent
12-month period, ending December 31, 2007, enplaned passengers per day
averaged 7.7 at Kingman and 12.2 at Prescott.[^3]

#  {#section-1 .paraheading}

# Other Carrier Requirements {#other-carrier-requirements .paraheading}

The Department is responsible for implementing various Federal statutes
governing lobbying activities, drug-free workplaces, and
nondiscrimination.[^4] Consequently, all carriers receiving Federal
subsidy for essential air service must certify that they are in
compliance with Department regulations regarding drug-free workplaces
and nondiscrimination, and those carriers whose subsidies exceed
\$100,000 over the life of the rate term must also certify that they are
in compliance with the regulations governing lobbying activities.
Because the Department is prohibited from paying subsidy to carriers
that do not submit these documents, all carriers that plan to submit
proposals involving subsidy should be aware that the selected carrier
will be expected to complete the required certifications. Interested
carriers requiring more detailed information regarding these
requirements as well as copies of the certifications should contact the
Office of Aviation Analysis at (202) 366-5903.[^5]

# Community and State Comments {#community-and-state-comments .paraheading}

The community and states are welcome to submit comments at any time. As
noted above, we encourage prospective applicants to contact the
communities before they submit their proposals so that they can tailor
them to the communities' needs, as they will not be able to amend them
after the due date. As noted earlier, we will provide a copy of the
proposals to the civic parties and ask them to submit their final
comments shortly after June 2, the due date for carrier proposals.

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

**ACCORDINGLY,**

1\. We prohibit Air Midwest, Inc., a wholly-owned subsidiary of Mesa Air
Group, Inc. (Air Midwest) from suspending service at Kingman and
Prescott, Arizona, at the end of its 90-day notice period, and require
it to maintain service at the communities, as set forth in Appendix D,
for an initial 30-day period through September 4, 2008, or until a
carrier capable of providing reliable essential air service actually
begins service, whichever is first;[^6]

2\. We direct Air Midwest to retain all books and other source and
summary documentation to support claims for payment, and to preserve and
maintain such documentation in a manner that readily permits its 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 logs for
aircraft sold or disposed of must be retained. The carrier may forfeit
its compensation for any claim that is not supported under the terms of
this order;

3\. We request that carriers interested in providing essential air
service at Kingman and Prescott, Arizona, submit their proposals, with
or without subsidy requests, no later than June 2, 2008. The proposals
should be sent to the EAS & Domestic Analysis Division, X-53, Office of
Aviation Analysis, U.S. Department of Transportation, 1200 New Jersey
Avenue S.E., Washington, D.C. 20590, with the title "Proposal to Provide
Essential Air Service at Kingman and/or Prescott, Arizona (Docket
DOT-OST-1996-1899),"[^7]

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

5\. We will serve copies of this order on the communities and airport
managers of Kingman and Prescott, Arizona, and the parties listed in
Appendix E.

By:

> **MICHAEL W. REYNOLDS**
>
> Acting Assistant Secretary for Aviation and International Affairs

(SEAL)

*An electronic version of this document is available*

*on the World Wide Web at*
[http://www.regulations.gov](http://www.regulations.gov/)

**AREA MAP**

![](media/image2.wmf){width="3.3680555555555554in"
height="5.214583333333334in"}

**Traffic History\***

  -------------------- -------------------- -- ---------------------- --------------------------- --------------------- -------- ---------------------- --------------------------- ---------------------
  [Year]{.underline}   [Qtr.]{.underline}      [Origin]{.underline}   [Destination]{.underline}   [Total]{.underline}            [Origin]{.underline}   [Destination]{.underline}   [Total]{.underline}

                                                                                                                                                                                    

                                               **Kingman, AZ**                                                                   **Prescott, AZ**                                   

  2005                 1                       519                    485                         1,004                          1,978                  1,928                       3,906

  2005                 2                       634                    624                         1,258                          1,790                  1,794                       3,584

  2005                 3                       342                    311                         653                            513                    489                         1,002

  [2005]{.underline}   [4]{.underline}         [405]{.underline}      [413]{.underline}           [818]{.underline}              [692]{.underline}      [583]{.underline}           [1,275]{.underline}

  Total                                        1,900                  1,833                       3,733                          4,973                  4,794                       9,767

                                                                                                                                                                                    

  2006                 1                       537                    492                         1,029                          721                    675                         1,396

  2006                 2                       615                    616                         1,231                          949                    914                         1,863

  2006                 3                       649                    605                         1,254                          1,017                  953                         1,970

  [2006]{.underline}   [4]{.underline}         [606]{.underline}      [602]{.underline}           [1,208]{.underline}            [1,081]{.underline}    [915]{.underline}           [1,996]{.underline}

  Total                                        2,407                  2,315                       4,722                          3,768                  3,457                       7,225

                                                                                                                                                                                    

  2007                 1                       460                    444                         904                            634                    682                         1,316

  2007                 2                       554                    572                         1,126                          701                    698                         1,399

  2007                 3                       552                    574                         1,126                          619                    615                         1,234

  [2007]{.underline}   [4]{.underline}         [865]{.underline}      [775]{.underline}           [1,640]{.underline}            [1,998]{.underline}    [1,697]{.underline}         [3,695]{.underline}

  Total                                        2,431                  2,365                       4,796                          3,952                  3,692                       7,644

                                                                                                                                                                                    

                                                                                                                                                                                    

                                                                                                                                                                                    

                                                                                                                                                                                    

                                                                                                                                                                                    

                                                                                                                                                                                    

                                                                                                                                                                                    

                                                                                                                                                                                    

                                                                                                                                                                                    

                                                                                                                                                                                    

                                                                                                                                                                                    

                                                                                                                                                                                    

                                                                                                                                                                                    

                                                                                                                                                                                    

                                                                                                                                                                                    

                                                                                                                                                                                    

                                                                                                                                                                                    

                                                                                                                                                                                    

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

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

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

\*Source -- T-100 Market Report, Passengers in Scheduled Passenger
Service

\*Note: Great Lakes took over from Air Midwest Q32005. Air Midwest
resumed service Q42007.

[General Terms and Conditions for Essential Air Service]{.underline}

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 plans 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 the 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 the 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 ensured 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 the order, then,
at the end of the period for which the Department does make payments in
the stipulated amounts or at the stipulated 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 Department and carrier do not constitute a total or partial
reduction or cessation of payment.

Funds are not presently available for performance under this Order
beyond September 30, 2008. The Government\'s obligation for performance
under any rate 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 any rate 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 by 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 any rate order.

AIR MIDWEST

ESSENTIAL AIR SERVICE TO BE MAINTAINED

EFFECTIVE PERIOD: August 5, 2008, until further Department action

SERVICE: 18 round trips per week over a Kingman -- Prescott -- Phoenix
or a Prescott -- Kingman -- Las Vegas routing.

AIRCRAFT TYPE Beech 1900 (19 seats)

TIMING OF FLIGHTS Flights must be well timed and well spaced to ensure
full compensation

**DISTRIBUTION**

Carl Nelson, American Airlines

Arlen Rinkenberger, Bemidji Aviation

Cori Rude, Bemidji Aviation

Fred DeLeeuw, Big Sky Airlines

Gordon Long, Boston-Nebraska Airways

Andrew Bonney, Cape Air

Dan Wolf, Cape Air

J. Flaherty, Cape Air

John Rupert, Caribbean Sun Airlines

Dennis Burnett, Great Lakes Air

Mike Great Lakes, Great Lakes Air

Andy Price, Commutair

Joel Raymond, Commutair

Bruce Keiner, Continental Airlines

Dan Weiss, Continental Airlines

Lorry Halloway, Continental Airlines

Dan Shuman, Delta Air Lines

Joe Esposito, Delta Air Lines

Kate Soled, Executive Airlines

Chuck Howell, Great Lakes Airlines

Doug Voss, Great Lakes Airlines

Thomas P. Cooper, Gulfstream International Airlines

Mickey Bowman, Gulfstream International Airlines

Bruce Tecklenburg, Horizon Air

Jeff Cole, Horizon Air

Tim Brooks, Kenmore Air

Tim L. McDonald, Northwest Airlines

Thomas Bacon, Mesa Airlines

Mike Holcomb, Mesa Airlines

Bob Weil, Mesaba Airlines

John Spanjers, Mesaba Airlines

Anthony Intravia, Midwest Airlines

David Reeve, Midwest Airlines

James Rankin, Midwest Airlines

Jose Maldonado, MN Aviation

Darnea Wod, Multi Aero

Shane Storz, Multi Aero

Bryan Ebensteiner, Northwest Airlines

Greg Kahlstorf, Pacific Wings

Philip Reed, Pinnacle

Mary Schneider, Scenic Airlines

Mitzi Daines, Scenic Airlines

**DISTRIBUTION (continued)**

Jerry Balsano, Shuttle America

Eric Christensen, SkyWest Airlines

Mike Thompson, SkyWest Airlines

Bob Karns, Soveriegn Air

Bill Mishk, Trans States Airlines

Gerry Wigmore, Trans States Airlines

Alicia Gabriel, United Airlines

James Starnes, United Airlines

Jason Reisinger, US Airways

[^1]: Carriers should not expect the Department to accept late filings.
    In cases where a carrier proposes to provide essential air service
    without subsidy and we determine that service can be reliably
    provided without such compensation, we do not proceed with the
    carrier-selection case. Instead, we simply rely on that carrier's
    subsidy-free service as proposed.

[^2]: 49 U.S.C. 41733(c)(1) directs us to consider four factors in
    selecting a carrier to provide subsidized essential air service: (1)
    service reliability; (2) contractual and marketing arrangements with
    a larger carrier at the hub; (3) interline arrangements with a
    larger carrier at the hub; and (4) community views. In addition, the
    Consolidated Appropriations Act, 2008, Public Law 110-161, states
    that when selecting a carrier to provide essential air service, the
    Department may consider the carriers' relative subsidy requirements,
    thus codifying a factor that we have considered since the inception
    of the program. Interested carriers should also be aware that our
    general provisions governing essential air service will be included
    in the selection order as part of our authorization of subsidy for
    the selected service. Appendix C of this order contains those
    general provisions.

[^3]: ^Enplaned\ passengers\ per\ day\ calculated\ by\ adding\ enplanement\ and\ deplanements\ totals\ from\ Appendix B,\ for\ 4Q2006,\ 1Q2007,\ 2Q2007,\ and\ 3Q2007,\ then\ dividing\ by\ 313\ service\ days,\ then\ dividing\ by\ 2.^

[^4]: The regulations applicable to these areas are: (1) 49 CFR Part 20
    \-- New restrictions on lobbying;

    \(2\) 49 CFR Part 21 \-- Nondiscrimination in federally-assisted
    programs of the Department of Transportation \-- Effectuation of
    title VI of the Civil Rights Act of 1964; 49 CFR Part 27
    \--Nondiscrimination on the basis of disability in programs and
    activities receiving or benefiting from Federal financial
    assistance; and 14 CFR Part 382 \-- Nondiscrimination on the basis
    of disability in air travel; and (3) 49 CFR Part 29 \--
    Government-wide debarment and suspension (non-procurement) and
    government-wide requirements for drug-free workplace (grants).

[^5]: The certifications are also available on the web at
    http://ostpxweb.dot.gov/aviation/index.html.

[^6]: In accordance with 49 U.S.C. 41734(c), we will extend Air
    Midwest's service obligation for successive 30-day periods as
    necessary until replacement service actually begins.

[^7]: Questions regarding filings in response to this order may be
    directed to Kevin Schlemmer at (202) 366-3176. Proposals should be
    e-mailed to <kevin.schlemmer@dot.gov> and to
    <dennis.devany@dot.gov>, or faxed to their attention at: (202)
    366-7638.