Order 2011

- 6

- 25
Served: June 2 7 , 2011



### UNITED STATES OF AMERICA
DEPARTMENT OF TRANSPORTATION
OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation
on the 2 7 th day of June , 20 11

ORDER RE

- SOLI CITING PROPOSALS

Summary By this order, the Department is requesting proposals f or a second time f rom carriers interested in providing essential air service ( EAS ) at the four Arkansas communities f rom November 1, 2011, through October 31, 2013, with or without subsidy, by July 12, 2011 (See Appendix A for a map.)

Background By Order 2009

- 6

- 25, June 26, 2009, the Department selected Alaska Juneau Aeronautics, Inc. d/b/a SeaPort Airlines (SeaPort) to serve all four communities for a two

- year period , at a combined first

- year subsidy rate of $6,046,789 (El Dorado/Camden [El Dorado]: $2,095,517, Harrison: $1,695,929, Hot Springs: $1,419,102, Jonesboro: $836,241)

. The combined second

year subsidy rate is $5,740,363 (El Dorado: $2,060,725, Harrison: $1,591,119, Hot Springs: $1,288,527, Jonesboro: $799,992) . Service was to consist of 18 weekly nonstop round trips between each community and Memphis, with 9

- seat Pilatus PC

- 12 aircraft. Sea Port inaugurated service at all four communities on October 26, 2009, thus making the expiration date of its
contract Oct ober 30, 2011.

In anticipation of the expiration of the current contract, the Department issued O rder 20 11

- 4

- 15, April 15, 2011

, requesting proposals for any or all of the four Arkansas communities to be submitted no later than May 25. In response to tha t Order, the Department received proposals from three carriers, SeaPort, the incumbent, Multi

- Aero, Inc. d/b/a Air Choice One (Air C hoice One) and Gulfstream International Airlines (Gulfstream). Gulfstream’s proposal was for service

Essential Air Service at

EL DORADO/CAMDEN, ARKANSAS HARRISON, ARKANSAS HOT SPRINGS, ARKANSAS JONESBORO, ARKANSAS

Under 49 U.S.C. 41731 et seq

. Docket DOT

- OST

- 1997

- 2935
Docket DOT

- OST

- 1997

- 2935
Docket DOT

- OST

- 1997

- 2935
Docket DOT

- OST

- 1997

- 2935- 2

-

to El Dorado/Camden an d Harrison only, while SeaPort and Air Choice One proposed service to
all four communities. Subsequently, on June 1, Gulfstream withdrew its proposal.

In the request for proposals, Order 2011

- 4

- 15, we discussed the high subsidy per passenger at Hot Sprin gs and Jonesboro. Specifically , we noted that b ased on the most recent 12

- month period for which data were available ( February 1, 2010, through January 31, 2011 ), 1,602 passengers were enplaned and deplaned at Hot Springs , while 952 passengers were enplaned and deplaned at Jonesboro . The current annual subsidy 1 amount for Hot Springs is $1, 288,527 and Jonesboro’s is $799,992 . Therefore, the subsidy per passenger at Hot Springs is $ 804 and $ 840

at Jonesboro . The Department is prohibited from subsid izing air service at a community where the subsidy per passenger exceeds $200, unless the community is more than 210 highway miles
from the nearest large or medium hub airport 2

. Hot Springs and Jonesboro well exceed the $200 per passenger cap and both are fewer than 210 miles from a large or medium hub. Hot Springs is 198 miles and Jonesboro is 82 miles, both from Memphis International Airport ( MEM ) , a medium hub airport

.

Both communities experienced a hiatus in service between Air Midwest’s cessation of operations on June 30, 2008, and the inauguration of service from SeaPort on October 26, 2009. We note d that these four communities suffered the longest service hiatus of all the communities affected by four EAS carrier shut downs and, while we allow for traffic to rebuild after such a hiatus, enplanements at both communities remain extremely low, averaging 2.6 enplanements per day at Hot Springs and 1.5 per day at Jonesboro. 3 As stated above, the per

- passenger subsidy exceeds the $200 cap by over four times, with both communities having a per passenger subsidy in excess of $800. However, r ather than terminate service eligibility at either communit y , th e Department solicited proposals f or EAS at both, and we stated that the Department w ould evaluate all proposals submitted before committing to a two

- year contract or making a final determination on Hot Springs and Jonesboro’s continuing eligibility. During the window prior to
the due dat e for proposals, we asked both communities to work aggressively with all potential applicants to mitigate some of the risks that the carriers may face in an attempt to lower their subsidy levels and/or increase passenger traffic.

Further, we stated, “ Rega rding proposals for Hot Springs and Jonesboro, as stated above, we will evaluate all proposals submitted before committing to a two

- year contract or making a final determination on those two communities’ continuing eligibility. Proposals including Hot Spr ings and/or Jonesboro should acknowledge the per passenger subsidy as stated above, and describe specific plans to address the issue, including, but not limited to, lower annual subsidy levels, marketing plans, such as advertising or fare promotions, enhan ced access to connections to the national transportation system, codeshare agreements with major airlines, and/or wider access to distribution in reservation systems or consumer websites.”

1 Annual subsidy rates listed here are second

- year rates, lower than first

- year rates, as proposed by SeaPort.

2 Congress first established the $200 ceiling under P.L. 101

- 164 for fiscal year 1990, and reestablished it in fiscal years 1994

- 1999. The ceilin g was made permanent by P.L. 106

- 69, the Department of Transportation and Related Agencies Appropriations Act of 2000.

3 See Appendix B for traffic history.- 3

-

Neither Air Choice One n or SeaPort addressed the per passenger sub sidy, either with lower subsidy requirements or specific plans to address the issue at Hot Springs or Jonesboro as we requested. SeaPort , the incumbent, proposed greatly higher subsidies at both communities over
what the carrier is currently receiving. A ir Choice One also proposed higher subsidy requirements than the current rates and forecast passenger traffic that is unrealistic . For example, at Jonesboro, Air Choice One forecast 7,900 annual passengers; however, in the last 12 months,
SeaPort carried only 952. Similar ly exaggerated forecasts were proposed for the other
communities.

Decision
After carefully reviewing the proposals, we have decided to r eject all proposals and solicit a new round of proposals from carriers interested in providing EAS at any or all of the Arkansas communities discussed here, from November 1, 2011, through October 31, 2013 , with or without subsidy. Respondents to this second request should submit their proposals no later than July 12,
2011

. Jonesboro and Hot Springs are currently over the $200 per passenger subsidy cap, as described above, and rather than terminate eligibility for both communities, we again request that carriers address the cap issue. If, after receiving proposals from this second round of solicitation, we do not receive proposals that adeq uately address the issue, we will consider whether to terminate Hot Springs and Jonesboro’s eligibility from receiving subsidized air service because
their subsidy per passenger levels exceed $200.

Request for Proposal s C arriers interested in filing proposals, with or without subsidy requests, should file them no later
than July 12, 2011 . Staff will then 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 communit y and ask it to submit their final comments. We will give full consideration to all proposals that are timely filed. 4

Interested carriers s hould 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. We also retain the discreti on to reject outright all unreasonable or unrealistic proposals and re

- solicit a new round of proposals. However, negotiation and 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

4 Carriers should not expect the Department to accept late fillings. In cases where a carrier prop oses 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 pr oposed.- 4

-

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 e ncourage clear, well

- documented proposals that will facilitate their evaluation by
the affected communit y and the Department. 5

With respect to each community, we expect proposals consisting of service with two

- pilot, twin

engine aircraft with at least 15 passenger seats, and offering two round trips each weekday and weekend (12 total round trips per week) to a suitable hub airport (e.g. Dallas/Fort Worth, Houston George Bush Intercontinental, Kansas City, Memphis, or St. Louis ), that offers

numerous connec ting opportunities to the national air transportation system. Two communities may be served on a linear basis, where traffic demand and aircraft size are appropriate (e.g.
Harrison

– Hot Springs

– Dallas/Fort Worth). I f aircraft with fewer than 15 passen ger seats are contemplated, service patterns should consist of three nonstop round trips each weekday and weekend (18 total round trips per week). If such a proposal is submitted and the community ultimately supports the service, in effect waiving their r ight to 15

- seat or larger aircraft, we would consider the waiver to apply only to the two

- year carrier

- selection at hand, i.e. we would not assume that the community waives their rights for all time. Harrison and Hot Springs have requested that we solicit proposals that include at least one option to a specific hub, but service proposals to other hubs will also considered. The list below summarizes the hubs that those two communities have noted are of high interest to them.

**•** Harrison

– Dallas/Fort Worth International, Kansas City, or Memphis

**•** Hot Springs

– Dallas/Fort Worth International or Dallas Love Field

Regarding proposals for Hot Springs and Jonesboro, as stated above, we will evaluate all proposals submitted before committing to a two

- year contract or making a final determination on those two communities’ continuing eligibility. Proposals including Hot Springs and/or Jonesboro must acknowledge the per passenger subsidy as stated above, and describe specific plans to address the issue, including, bu t not limited to, lower annual subsidy levels, marketing plans, such as advertising or fare promotions, enhanced access to connections to the national transportation system through electronic ticketing and baggage agreements or codeshare agreements with ma jor airlines, and/or wider access to distribution in reservation systems or
consumer websites. In t he proposal, we also expect to be informed of what plans the communities have to address the cap, in a joint effort either with the carrier or independent o f the
carrier.

5 In selecting a carrier to provide subsidized essential air service, 49 U.S.C. 41733(c)( 1) directs us to consider four factors: (a) scheduled service reliability; (b) contractual and marketing arrangements with a larger carrier to ensure service beyond the hub; (c) interline arrangements that the applicant has made with a larger carrier at th e hub; and (d) community views, giving substantial weight to the views of the elected officials representing the users. In addition, the Consolidated Appropriations Act, 2008, Public Law 110

- 161, provides that when selecting a carrier to provide EAS, the Department may consider the relative subsidy requirements, thus codifying a factor that we have considered since the inception of the program.- 5

-

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 pr oposal. 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, fo r example

– with subsidy requirements that remain competitive.

Service and Traffic History
For the 12

- month period ended January 31, 2011, th e most recent period for which traffic data are available, El Dorado averaged 4.0 enplanements per day, Harrison 5 .7, Hot Springs, 2.6, and
Jonesboro 1.5. 6 In order to assist carriers in making their traffic and revenue forecasts, we have included historical traffic data in Appendix B.

Other Carrier Requirements The Department is responsible for implementing various Federal statutes governing lobbying activities, drug

- free workplaces, and nondiscrimination. 7 Consequently, all carriers receiving Federal subsidy for essential air service must certify that they are in compliance with Department regulations regarding dr ug

- 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 prohibi ted 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 required to complete the required certifications. Interested carriers re quiring more detailed information regarding these requirements should contact the Office of Aviation Analysis at (202) 366

- 5903. 8

6 See Appendix B for historical traffic data. Enplanements represent one

- half of total origin

- and

- destination tr affic, and average enplanements per day are based on 313 days per service year

. 7 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 Pa rt 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).

8 The certifications are also avai lable on the web at http://ostpxweb.dot.gov/aviation/index.html.- 6

-

Community and State Comments
The communit ies and State are welcome to submit comments at any time. We encourage prospective applicants to contact the communit y be fore they submit their proposal s so that they
can tailor them to the communit y ’ s needs, as they will not be able to amend it after the due date.
A s noted earlier, we will provide a copy of the proposals to the civic parties and ask them to submit their final comments shortly after July 12, 2011 , the due date for proposals.

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

ACCORDIN GLY,
1. We request that carriers interested in providing essential air service at El Dorado/Camden, Harrison, Hot Springs, and/or Jonesboro, Arkansas, submit their proposals, with or without subsidy requests, no later than July 12 , 2011. The proposals should be e

- mailed to EAS@dot.gov , with the title “Proposal to Provide Essential Air Service at (community or communities of interest), DOT

- OST

- 1997

- 2935”; 9

2. This docket will remain open until further order of the Department; and

3. We will serve copi es of this order on the mayors of El Dorado, Camden, Harrison, Hot Springs, and Jonesboro, and the airport managers of South Arkansas Regional Airport/Goodwin Field (El Dorado/Camden), Boone County Regional Airport (Harrison), Hot Springs Memorial
Field A irport, and Jonesboro Municipal Airport, and the parties listed in Appendix C

.

By:

SUSAN L. KURLAND Assistant Secretary
for Aviation and International Affairs

(SEAL)

An electronic version of this document is available at http://www.regulations.gov

9 Questions regarding filings in response to this order may be directed via e

- mail to Kevin Schlemmer at kevin.schlemmer@dot.gov or via phone at ( 202) 366

- 3176Appendix A



### AREA MAP

This map is provided by Sabre ® AirVision TM Profit Essentials and is being used with express permission of the copyright holder,
Sabre Airline Solutions®.Appendix B Page 1 of 2 Traffic History*

Stn Year Month Inbound traffic Outbound traffic Totals

ELD 2009 10 23 2 25

ELD 2009 11 70 59 129

ELD 2009 12 77 66 143

ELD 2010 1 77 72 149

ELD 2010 2 44 76 120

ELD 2010 3 88 82 170

ELD 2010 4 96 94 190

ELD 2010 5 99 102 201

ELD 2010 6 101 119 220

ELD 2010 7 116 127 243

ELD 2010 8 126 115 241

ELD 2010 9 200 120 320

ELD 2010 10 136 144 280

ELD 2010 11 89 69 158

ELD 2010 12 102 100 202

ELD 2011 1 92 83 175
2,520 (12-months traffic ending 1/31/11)

Stn Year Month Inbound traffic Outbound traffic Totals

HOT 2009 10 27 19 46

HOT 2009 11 34 38 72

HOT 2009 12 30 32 62

HOT 2010 1 34 41 75

HOT 2010 2 50 53 103

HOT 2010 3 51 54 105

HOT 2010 4 79 68 147

HOT 2010 5 56 56 112

HOT 2010 6 58 72 130

HOT 2010 7 62 71 133

HOT 2010 8 54 59 113

HOT 2010 9 115 105 220

HOT 2010 10 78 75 153

HOT 2010 11 52 47 99

HOT 2010 12 86 79 165

HOT 2011 1 60 62 122
1,602 (12-months traffic ending 1/31/11)Appendix B Page 2 of 2

Traffic History (continued)

Stn Year Month Inbound traffic Outbound traffic Totals

HRO 2009 10 19 22 41

HRO 2009 11 128 111 239

HRO 2009 12 103 112 215

HRO 2010 1 94 113 207

HRO 2010 2 107 104 211

HRO 2010 3 113 116 229

HRO 2010 4 157 153 310

HRO 2010 5 112 103 215

HRO 2010 6 125 132 257

HRO 2010 7 121 110 231

HRO 2010 8 153 163 316

HRO 2010 9 253 242 495

HRO 2010 10 170 197 367

HRO 2010 11 130 144 274

HRO 2010 12 193 198 391

HRO 2011 1 158 143 301
3,597 (12-months traffic ending 1/31/11)

Stn Year Month Inbound traffic Outbound traffic Totals

JBR 2009 10 9 9 18

JBR 2009 11 21 28 49

JBR 2009 12 24 29 53

JBR 2010 1 24 37 61

JBR 2010 2 19 38 57

JBR 2010 3 28 45 73

JBR 2010 4 28 36 64

JBR 2010 5 36 37 73

JBR 2010 6 36 38 74

JBR 2010 7 29 43 72

JBR 2010 8 34 33 67

JBR 2010 9 65 58 123

JBR 2010 10 39 40 79

JBR 2010 11 36 61 97

JBR 2010 12 51 49 100

JBR 2011 1 43 30 73

952 (12-months traffic ending 1/31/11)

ELD=El Dorado/Camden; HOT=Hot Springs; HRO=Harrison; JBR=Jonesboro

*Source

– T

- 100 Market Report, Passengers in Schedule d Passenger Service ; Traffic figures reflect SeaPort Airlines onlyAppendix C

Example of General Terms and Conditions for Essential Air Service

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 aircra ft 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 an y 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 circumsta nces 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
de termining 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 Depart ment 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 su bsidy 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 currently available for performance under this solicitation beyond [DATE] . The
Government’s obligation for perform ance under this solicitation beyond [DATE] , 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 ari se for performance under this order beyond [DATE] , until funds are made available to the Department for performance. If funds are not made available for performance beyond [DATE] , the carrier will receive notice in writing by the Department.

Subsidy cont racts 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 paragr aph.

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

Scheduled Air Carriers, Contiguous US and Puerto Rico
Air Greco/Wings Air Horizon Air, Jeff Cole Air Sunshine, Inc. ICEPR, Luis Irizarry Air Sunshine, Mirmohammad Adili Intrepid Internatl Air, Rick Eyk Air West, Inc., John Raatz Island Air Charters, Linda House Air Wisconsin, Annette Daly Jet Air, Daniel Wolford Air Wisconsin, Jim Rankin Kenmore Air, Tim Brook s Airline Associates, Bill Mishk McCall Aviation, Dan Scott Alaska Airlines, Jeff Cole McCall Aviation, Michelle Alaska Airlines, Sandy Sinick Mesaba, John Spanjers Allegiant Air, Brian Davis Mesaba, Max Shemesh American Airlines, Carl Nelson MidStar Airlines, Jeffrey Fonner American Eagle, Gary Foss Midwest Airlines, Greg Aretakis American Eagle, Robert Emrich MN Aviation, Jose Maldonado Atlantic Southeast, Jon Lindlief Multi Aero, Darnea Atlantic Southeast, Roger Weston Multi Aero, Shane Storz Aviation Technologies/Charter Air Transport Northern Air Cargo, David Karp Bemidji Aviation, Cori Rude Northern Air Cargo, Eric Van Andel Bemidji Aviation, Arlen Rinkenberger NYDC, Henok Araya Cape Air, Andrew Bonney OST, Brian Swanson Cape Air, Dan Wolf OST, Dennis DeVany Cape Air, J. Flaherty OST, Kevin Adams Chautauqua, Josh Pascoe OST, Kevin Schlemmer Classic Aviation, Tony Henderson OST, Michael Martin Colgan Air, Mike Colgan Pacific Aviation Group, Craig Garrick Colgan Air, Kevin Scott Pacific Aviation Group, Ron Pye CommutAir, Andy Price Pacific Wings, Frank Ford CommutAir, Joel Raymond Pacific Wings, Greg Kahlstorf Consultant, Michael Mooney PenAir, Danny Seybert Consultant, Robert Silverberg PenAir, Scott Bloomquist Continental, Bruce Keiner Pinnacle Airlines, Jennifer Gammill Continental, Dan Weiss Pinnacle Airlines, Megan Rosia Continental, Lorry Halloway Pinnacle Airlines, Phil Reed Delta, Anthony Canitano Planemasters, Inc. John Kessler Delta, Dan Shuman Planemasters, Inc. Paul Berliner Delta, Dana Debel Planemasters, Inc. Todd DeSimone Delta, Jeff Davidman Raytheon, Mike Scheidt Delta, Jeff Morgan Saab Group, Polly Prelinger Delta, Joe Esposito Scenic, Mary Schneider Delta, Kristal Murphy Scenic, Mitzi Daines Delta, Sascha Vanderbellen Seaborne Airlines, Shawn Lewis Delta, Stephen A. Hedden SeaPort Airlines, Daniel Helland DHS, Bill Ragan SeaPort/Wings of Alaska, Rob McKinney DHS, David Bernier Shuttle America, Jerry Balsano
Dorado Jets SkyWest, Brad Rawson Dorado Jets, Mark McKenna SkyWest, Eric Christensen Era Aviation, Lori Goodman SkyWest, Michael Thompson Executive Airlines, Kate Soled Sovereign Air, Bob Karns Frontier Flying, Bob Hajducovich Sovereign Air, Lois R. Barton Frontier Airlines, Daniel Shurz Tatonduk, Robert Everts
Frontline Aviation Tatonduk, Robert Ragar Gem Air, Dan Schroeder Tradewind, Eric Zipkin Gem Air, JoAnn Wolters TransStates, Fred Oxley Great Lakes, Chuck Howell TransStates, Gerry Wigmore Great Lakes, Doug Voss Transport Azumah, Joel Anabilah

- Azumah Gulfstream, Dave Hackett United, Alicia Gabriel Gulfstream, Mickey Bowman United, James Starnes Gulfstream, T. Cooper US Airways, Benjamin Slocum Horizon Air, Dan Russo US Airways, Howard Kass Horizon Air, Jennifer Thompson US Airways, Jason Reisinger Horizon Air, Mike McQueen Warbelows Air Ventures, Art Warbelow