-----------------------------------------------------------------------
  Order 2008-4-10

  Served: April10, 2008
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**UNITED STATES OF AMERICA**

**DEPARTMENT OF TRANSPORTATION**

**OFFICE OF THE SECRETARY**

**WASHINGTON, D.C.**

Issued by the Department of Transportation

  -----------------------------------------------------------------------
  on the 7th day of April, 2008

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+-------------------------------------------+--------------------------+
| Essential Air Service at                  | **Docket                 |
|                                           | DOT-OST-1996-1266**      |
| **IRONWOOD, MICHIGAN/ASHLAND, WISCONSIN** |                          |
|                                           | **Docket                 |
| **MANISTEE/LUNDINGTON, MICHIGAN**         | DOT-OST-1996-1711**      |
|                                           |                          |
| Under 49 U.S.C. 41731 *et seq*.           |                          |
+-------------------------------------------+--------------------------+

**ORDER SELECTING CARRIER AND SETTING FINAL SUBSIDY RATES**

## Summary

By this order, the Department is selecting Great Lakes Aviation, Ltd.
(Great Lakes), to provide subsidized essential air service (EAS) at
Ironwood, Michigan/Ashland, Wisconsin, and Manistee/Ludington, Michigan,
utilizing 19-seat Beech 1900D aircraft at a combined annual subsidy rate
of \$3,292,260, for a new two-year term beginning when it inaugurates
full service. (See Appendix A for a map.)

## Background

By Order 2008-1-13, January 17, 2008, the Department: (a) selected
Mesaba Aviation, Inc., d/b/a Mesaba Airlines (Mesaba), operating as
Northwest Airlink, to provide subsidized EAS at Iron Mountain/Kingsford
and Escanaba Michigan, at a combined annual subsidy rate of \$2,251,767;
and (b) requested proposals by February 1 from carriers interested in
providing EAS at Ironwood, Michigan/Ashland, Wisconsin, and
Manistee/Ludington, Michigan, for a new two-year period. The Department
did not receive any proposals in response to Order 2008-1-13.

By Order 2008-2-12, the Department re-solicited proposals EAS at
Ironwood/Ashland and Manistee/Ludington with a due date of February 27.

On February 25, Pacific Wings Airlines, Ltd. (Pacific Wings) filed a
motion with the Department requesting a 15-day extension, until March
11, of the proposal due date. Specifically, Pacific Wings stated that
the extension of time "should provide sufficient time for the Department
to obtain written expression of intent from each community and for
Pacific Wings to submit a proposal should the communities agree to
service using 9-seat aircraft."

On February 27, the Department telephoned the airport managers at each
community to solicit their comments on Pacific Wings' motion. Both
airport managers opposed Pacific Wings' motion for a variety of reasons.
As a result, the Department denied Pacific Wings' motion to extend the
due date for EAS proposals at the two communities.

**Proposals**

In response to Order 2008-2-12, Great Lakes was the only air carrier to
submit a proposal.

Great Lakes' proposal is to serve Milwaukee, Wisconsin, with Beech
1900Ds.[^1] The carrier's proposal may be accessed online through the
Federal Docket Management System (FDMS) at:
[http://www.regulations.gov](http://www.regulations.gov/) by doing a
document search on Docket IDs: DOT-OST-1996-1266 or DOT-OST-1996-1711.

Great Lakes will provide Ironwood/Ashland with two daily one-stop (at
Rhinelander, Wisconsin) round trips for an annual subsidy rate of
\$1,492,865. Great Lakes would also provide Manistee/Ludington with two
daily nonstop round trips, for an annual subsidy of \$1,799,395. The
combined annual subsidy rate of \$3,292,260, is significantly more than
the existing annual subsidy rates. Great Lakes is also working on
obtaining a code-sharing agreement with Midwest Airlines at Milwaukee.

**Community Comments**

On February 28, the Department e-mailed the airport managers at
Ironwood/Ashland and Manistee/Ludington, to solicit the communities'
views on Great Lakes' proposal.

Both communities support Great Lakes' proposal. Specifically, the
manager at the Gogebic-Iron County Airport (Ironwood) wrote that the
Airport Board, city officials, and local businesses believe that "the
proposed equipment and flight schedule will, once again, create the
increase in boardings that we experienced in the past and look for in
the future." Similar to his comments during previous EAS
carrier-selections, he again notes the importance of a nonstop flight
between Ironwood and Milwaukee. He argues that by stopping in
Rhinelander, seats are taken away from Ironwood passengers, and, as a
result, Ironwood passengers are forced to compete for the limited seats.

The manager of the Manistee County Blacker Airport supports Great Lakes
based on its ability to obtain the code-share agreement with Midwest
Airlines and offer the same schedule and fare structure that Skyway
Airlines provides.

**Decision on Carrier Selection**

After careful consideration of this matter, including the comments of
local officials, the Department has decided to select Great Lakes to
provide EAS at Ironwood/Ashland and Manistee/Ludington, in accordance
with the carrier's proposal. Great Lakes' proposal would link these two
communities to the national air transportation system at Milwaukee.
Ironwood/Ashland would receive two daily one-stop (at Rhinelander) round
trips and Manistee/Ludington would receive two daily nonstop round
trips. The combined annual subsidy rate is set at \$3,292,260. Despite
the increase in the subsidy rate, we find that both the service and
subsidy levels are reasonable.

This case is very straightforward, Great Lakes was the only carrier to
submit a proposal and both communities support the selection of the
carrier. Great Lakes is an established carrier, provides a significant
amount of subsidized EAS throughout the country, and has previously
served these two communities. The carrier anticipates obtaining a
code-share agreement with Midwest Airlines and its proposed service
would essentially replicate the existing (one-stop and nonstop) service
to Milwaukee that Skyway Airlines has successfully provided for several
years. We encourage the communities and the carrier to continue to work
together to optimize the service patterns under this carrier selection.
Finally, we note that Midwest Airlines is in the process of shutting
down the operations of Skyway. The plans are for Great Lakes to take
over these routes on or about April 6.

We shall make this selection at Ironwood/Ashland and Manistee/Ludington
contingent upon the Department's receiving properly executed
certifications from Great Lakes that it is in compliance with the
Department's regulations regarding drug-free workplaces and
nondiscrimination, as well as the regulations governing 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 compensate it
for essential air service. We last found Great Lakes fit to provide
scheduled passenger service as a commuter air carrier by
Order 2007-12-22 when we selected it to provide essential air service at
seven Montana communities. The Department has routinely monitored the
carrier's continuing fitness. No information has come to our attention
that would lead us to conclude that Great Lakes does not continue to be
fit. The Federal Aviation Administration has advised us that it is in
compliance with all FAA regulations and that there is no reason why they
cannot be selected for the EAS service at Ironwood/Ashland and
Manistee/Ludington. We therefore conclude that Great Lakes is fit to
conduct the operations proposed here.

**Carrier Transition and Compensation for Interim-Period Service**

During this long carrier-replacement case, we have required the
incumbent carrier, Skyway Airlines, to continue providing service until
replacement service begins. Skyway Airlines is eligible to be
compensated for the provision of EAS at the two communities until Great
Lakes inaugurates their full essential air service operations at
Ironwood/Ashland and Manistee/Ludington. Thus, pursuant to 49 U.S.C.
41734 (d), the Department will continue to compensate Skyway Airlines
the subsidy amounts set in Order 2007-6-5.

Lastly, we expect Skyway Airlines and Great Lakes to work together to
ensure a smooth transition in service at Ironwood/Ashland and
Manistee/Ludington. In that regard, we expect Skyway Airlines to contact
all passengers holding reservations for flights after Skyway Airlines'
final date of service, to inform them of the change in service, and to
assist them in arranging alternate transportation or to provide a refund
of the ticket price, without penalty, if requested.

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

## 

## ACCORDINGLY,

1\. We select Great Lakes Aviation, Ltd., to provide essential air
service at Ironwood, Michigan/Ashland, Wisconsin, and
Manistee/Ludington, Michigan, as described in Appendix B, for the
two-year period, beginning when the carrier inaugurates full EAS at the
two communities;

2\. The Department sets the final rate of compensation for Great Lakes
Aviation, Ltd., for the provision of essential air service at Ironwood,
Michigan/Ashland, Wisconsin, and Manistee/Ludington, Michigan, as
described in Appendix B, for the two-year period, beginning when the
carrier inaugurates full EAS at both communities, 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 C, and shall be determined by multiplying the
subsidy-eligible arrivals and departures completed during the month by
\$1,064.81 at Ironwood, Michigan/Ashland, Wisconsin, and \$1,283.45 at
Manistee/Ludington, Michigan;

3\. The Department directs Great Lakes Aviation, Ltd., and Skyway
Airlines, Inc., d/b/a Midwest Connect, 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 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 comes
first. Copies of flight 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;

4\. We find that Great Lakes Aviation, Ltd. continues to be fit, willing
and able to operate as a commuter air carrier and capable of providing
reliable essential air service at Ironwood, Michigan/ Ashland,
Wisconsin, and Manistee/Ludington, Michigan;

5\. These Dockets will remain open until further order of the
Department; and

6\. Docket Operations will serve copies of this order on the parties
listed in Appendix D.

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://www.regulations.gov/)*

**AREA MAP**

![](media/image2.wmf){width="5.6875in" height="5.3180555555555555in"}

**Great Lakes Aviation, Ltd.**

**Provision of Essential Air Service at Ironwood, Michigan/Ashland,
Wisconsin**

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

![](media/image3.wmf){width="5.739583333333333in"
height="5.145833333333333in"}

**Great Lakes Aviation, Ltd.**

**Provision of Essential Air Service at Manistee/Ludington, Michigan**

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

![](media/image4.wmf){width="5.864583333333333in"
height="5.052083333333333in"}

**Great Lakes Aviation, Ltd.**

**Provision of Essential Air Service at:**

**Ironwood, Michigan/Ashland, Wisconsin and Manistee/Ludington,
Michigan**

**[Summary of Service To Be Provided]{.underline}**

+----------------------+-----------------------------------------------+
| [Effective           | Two years beginning when the carrier          |
| Period]{.underline}: | initiates scheduled service as described      |
|                      | below.                                        |
+----------------------+-----------------------------------------------+
| [Aircraft            | Beech 1900D (19 passenger seats).             |
| type:]{.underline}   |                                               |
+----------------------+-----------------------------------------------+
| [Scheduled           | **[Ironwood/Ashland]{.underline}:** two daily |
| S                    | one-stop round trips to Milwaukee.            |
| ervice]{.underline}: |                                               |
|                      | **[Manistee/Ludington]{.underline}:** two     |
|                      | daily nonstop round trips to Milwaukee.       |
+----------------------+-----------------------------------------------+
| [Intermediate stops  | **[Ironwood/Ashland]{.underline}:** An        |
| and upline           | intermediate stop is permitted at             |
| s                    | Rhinelander, Wisconsin.                       |
| ervice]{.underline}: |                                               |
|                      | There are no limitations on service upline    |
|                      | from Ironwood/Ashland.                        |
|                      |                                               |
|                      | **[Manistee/Ludington]{.underline}:** No      |
|                      | intermediate stop is permitted.               |
|                      |                                               |
|                      | There are no limitations on service upline    |
|                      | from Escanaba.                                |
+----------------------+-----------------------------------------------+
| [Timing of           | Flights must be well-timed and well-spaced in |
| f                    | order to ensure full compensation.            |
| lights:]{.underline} |                                               |
+----------------------+-----------------------------------------------+
| [Annual              | **[Ironwood/Ashland]{.underline}:**           |
| compen               | \$1,492,865                                   |
| sation:]{.underline} |                                               |
|                      | **[Manistee/Ludington]{.underline}:**         |
|                      | \$1,799,395                                   |
|                      |                                               |
|                      | These rates assume an annual completion       |
|                      | factor of 96 percent. A compensation ceiling  |
|                      | is to be applied per calendar week such that  |
|                      | service above that ceiling in one week cannot |
|                      | make up for service shortfalls in another     |
|                      | week.                                         |
+----------------------+-----------------------------------------------+
| [Subsidy Rate per    | **[Ironwood/Ashland]{.underline}:**           |
| Milwaukee            | \$1,064.81[^2]                                |
| Flight]{.underline}: |                                               |
|                      | **[Manistee/Ludington]{.underline}:**         |
|                      | \$1,283.45[^3]                                |
+----------------------+-----------------------------------------------+
| [Weekly Compensation | **[Ironwood/Ashland]{.underline}:**           |
| C                    | \$29,814.68[^4]                               |
| eiling:]{.underline} |                                               |
|                      | **[Manistee/Ludington]{.underline}:**         |
|                      | \$35,936.60[^5]                               |
+----------------------+-----------------------------------------------+

**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 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 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.

**SERVICE LIST**

Mr. Rob Abent

Director

Michigan Department of Transportation

Bureau of Aeronautics & Freight Services

2700 E. Airport Service Dr.

Lansing, Michigan 48906-2171

Mr. Gregory Aretakis

Vice President -- Planning

Midwest Airlines, Inc.

6744 South Howell Avenue

Oak Creek, Wisconsin 53154

The Honorable Frank Busalacchi

Secretary

Wisconsin Department of Transportation

4802 Sheboygan Ave.

P.O. Box 7910

Madison, Wisconsin 53707-7910

Mr. Dennis DeRosso

Chairman

Iron County Board of Supervisors

Iron County Courthouse

300 Taconite, Suite 101

Hurley, Wisconsin 54534

Mr. Duane DuRay

Manager

Gogebic - Iron County Airport

E5560 Airport Road

Ironwood, Michigan 49938

Mr. Bill House

Airport Manager

Manistee County Blacker Airport

2323 Airport Road

Manistee, Michigan 49960

LeRoy Kangas

Chairman

Gogebic County Board of Commissioners

Gogebic - Iron County Airport Authority

N10446 Lake Road

Ironwood, Michigan 49938

Mr. Michael Moran

Chairman

Manistee County Blacker Airport Authority

2323 Airport Road

Manistee, Michigan 49960

Mr. Robert P. Silverberg

Silverberg, Goldman & Bikoff, L.L.P.

1101 30th Street N.W.

Suite 120

Washington, D.C. 20007

[^1]: Great Lakes plans to acquire four Beech 1900Ds from Skyway
    Airlines, Inc., d/b/a Midwest Connect (Skyway Airlines), the
    incumbent EAS carrier. Great Lakes does not need all four aircraft
    to serve Ironwood/Ashland and Manistee/Ludington, but will use the
    additional aircraft to fulfill its obligations at several other EAS
    communities.

[^2]: Annual subsidy of \$1,492,865 divided by 1,402 annual departures:
    2 daily arrivals and 2 daily departures at Ironwood/Ashland (4
    flights/day) x 365 days x .96 (completion factor) = 1,402.

[^3]: Annual subsidy of \$1,799,395 divided by 1,402 annual departures:
    2 daily arrivals and 2 daily departures at Manistee/Ludington (4
    flights/day) x 365 days x .96 (completion factor) = 1,402.

[^4]: Rate per departure of \$1,064.81 multiplied by 28 scheduled weekly
    departures.

[^5]: Rate per departure of \$1,283.45 multiplied by 28 scheduled weekly
    departures.