Order 2010

- 5

- 18 Served: May 13, 2010


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

Issued by the Department of Transportation
on the 13 th of May, 2010

ORDER SETTING PAST

- PERIOD RATES, SELECTING CARRI ER AT ALPENA, INTERNATIONAL FALLS, AND SAULT STE. MARIE, AND
TENTATIVELY SELECTING CARRIER AT TUPELO

Summary By this order, we are setting final past

- period subsidy rates for Mesaba Airlines, Inc., d/b/a Delta Connection (Mesaba), 1 for its forced service at Alpena and Sault Ste. Marie, Michigan, International Falls, Minnesota, and Tupelo, Mississippi. We are also selecting Mesaba to provide essential air service (EAS) at three of these four communities on a prospective basis. At the fourth community, Tup elo, we are tentatively selecting Mesaba to provide service based on a pro

- rata application of the rate Mesaba agreed to which the staff applied to a reduced service level. The table below summarizes the annual rates
described above. 2

Time Period International Falls Alpena Sault Ste. Marie Tupelo Total 10/12/09 -- 6/9/10 $1,284,788 $738,686 $738,686 $974,131 $3,736,291
6/10/10 -- 5/31/12 $1,309,886 $1,532,660 $237,825 $921,878 $4,002,249

1 Mesaba is a wholly

- own ed subsidiary of Delta Air Lines.

2 Such subsidy is calculated and distributed on a fiscal year basis, subject to the availability of appropriated
funds. Essential Air Service at

ALPENA, MICHIGAN
INTERNATI ONAL FALLS, MINNESOTA SAULT STE. MARIE, MICHIGAN, and TUPELO, MISSISSIPPI,

Under 49 U.S.C. 41731 et seq

. DOCKET OST

- 2009

- 0300
DOCKET OST

- 2009

- 0304
DOCKET OST

- 2009

- 0303
DOCKET OST

- 2009

- 0305- 2

-

Background On July 14, 2009, Mesaba Airlines filed 90

- day notices of intent to suspend its subsidy

- free service at these four communities effective October 12. 3 By Order
2009

- 7

- 16, we prohibited Mesaba from terminating service and requested

pr oposals for replacement service . We received proposals from Mesaba at all of the communities, and from Pacific Wings at Tupelo.

Order 2009

- 10

- 8 rejected Mesaba’s proposals as not being consistent with its Form 41
financial and T

- 100 traffic data report ed to the Department’s Bureau of Transportation Statistics, in its Form 41 and T

- 100 filings. 4 The order deferred selecting Mesaba at any community until after we discussed the costing of its proposals with the carrier.

Carrier Proposals and Community Comments
Order 2009

- 10

- 8 also re

- requested proposals at all four communities. In response to that request, we received proposals from Mesaba, Intrepid International Airlines, and Alaska Juneau Aeronautics, Inc., d/b/a SeaPort Airlines. Before addressing proposals for specific communities, there are several preliminary issues regarding each carrier’s proposals. Regarding Mesaba, the carrier noted on November 18, 2009, that it would retire its fleet of Saab 340 aircraft, the only aircraft contemplated in i ts proposals, within two to three years. For Intrepid, the carrier’s proposal of one round trip a day falls short of the statutory guarantee of two round trips a day, six days a week. Regarding SeaPort, the carrier’s proposal does not meet the statutory guarantee of service with 15

- seat or larger
twin

- engine aircraft. In late November 2009, the staff sent letters to each community requesting comments regarding the proposals submitted in this second round, and we
have summarized them below.

Alpena and S ault Ste. Marie Mesaba resubmitted its prior proposal 5 requesting $1,976,958 annual subsidy for Alpena and Sault Ste. Marie, combined. Under that proposal, Alpena would receive 14 nonstops, and Sault Ste. Marie 7 nonstops and 7 one

stops over Alpena to D etroit with Saab 340 aircraft. Intrepid International Airlines submitted a proposal requesting $1,241,000 annual subsidy. All of Intrepid’s service was

to be with 50

- seat CRJ

- 200 aircraft with service routed Sault Ste. Marie to Alpena to Lansing to Chica go (Midway), and would be for a total of 7 nonstops per week.

The letters to Alpena and Sault Ste. Marie noted that Intrepid’s proposed service fell short of the communities’ statutory guarantee of two round trips a day, and, at Sault Ste. Marie,

3 Mesaba also filed notices at Eau Claire, Wisconsin, Muskegon and Houghton, Michigan, and Paducah,

K entucky. By Order 2009

- 10

- 8 we selected SkyWest Airlines to replace Mesaba and b y Order 2010

- 3

- 26 we set final rates for Mesaba’s forced service at those four communities from October 12, 2009, thru February 2010, when SkyWest replaced Mesaba.

4 Pacific W ings also submitted a proposal at Tupelo with 9

- seat Cessna 208 aircraft. Order 2009

- 8

- 10 did not select them because the community was not willing to waive its right to service with 15

- seat aircraft as guaranteed under the EAS program’s governing statute s. See 49 U.S.C § 41732(b).

5 Issued in response to Order 2009

- 7

- 16.- 3

-

was sh ort of the statutory requirement of no more than one intermediate stop to a hub. Finally, the letter noted that Intrepid did not have authority to operate interstate air service, and that, while it had stated it would provide the service by wet

- leasing ai rcraft, crew, maintenance, and insurance from Atlantic Southeast Airlines, officials of Atlantic Southeast were not aware of any such discussion or agreement.

In response to our request for comments, both communities gave strong support to Mesaba. Alpe na noted that Mesaba provided dedicated and reliable air service. Sault Ste. Marie noted that it had provided eleven years of reliable service, and looked forward to the benefits of the merger of Mesaba’s parent, Northwest Airlines, with Delta.

Interna tional Falls Only Mesaba submitted proposals at this community. Mesaba resubmitted its prior proposal, requesting $1,998,849 annual subsidy for 14 nonstop round trips per week to Minneapolis, with the aircraft based in Minneapolis. It also submitted a

n ew proposal requesting $2,312,114 in annual subsidy. The only difference between this option and the first one is that the aircraft would overnight at International Falls.

The letter to the community recognized the community’s stated desire 6 for three nonstop round trips a day to Minneapolis, but noted that such service with 34

- seat aircraft exceeded program guidelines. It reiterated the position of Order 2009

- 10

- 8 that three daily nonstops would only be possible if that service were linked with anothe r community, such that seats were shared and the maximum level of service under program guidelines

– two round trips a day, fourteen days per week, with 67

- seats

– would not be exceeded. 7 The community supported the selection of the high cost option with the aircraft based in International Falls, for $2,312,114 annually.

Tupelo Mesaba affirmed its prior proposal in response to Order 2009

- 7

- 16 requesting $1,061,068 annual subsidy for a total of 14 nonstop round trips per week to Tupelo

– 7 to
Atlanta an d 7 to Memphis. The carrier submitted additional proposals based on a total of three round trips per day to Atlanta and Memphis. 8 community’s stated desire for three nonstop round trips a day, but noted that such serv ice
with 34

- seat aircraft exceeds program guidelines. The letter to Tupelo recognized the

9

6 Mesaba did not propose three round trips a day at International Falls. However, carriers are permitted to provide service above the EAS level, but we are not allowed to pay for it.

7 International Falls is guaranteed the maximum level of service allowed by program guidelines

– two round trips and 67 seats per day , but only during the peak summer season. International Falls has historically received three round trips per day in the p eak season and Mesaba has stated that it intends to continue that level of service in the peak, but we have excised the cost of that service from the subsidy support
calculations.

8 Mesaba presented three variants on this theme: 21 nonstops total to Atla nta and Memphis for $1,987,253; 20 nonstops for $1,828,423; and 19 nonstops for $1,660,068 annual subsidy. These proposals had between 12 and 14 round trips to Memphis, with Atlanta service a constant one round trip per day, reflecting the community's

pre ference for the Memphis hub.

9 EAS definitions require capacity sufficient to accommodate historical passengers, with the maximum number of passengers set at 40 enplaned and 40 deplaned per day. The Department used a 65 percent load
factor standard to arri ve at a maximum capacity guarantee of 62 seats. The Airport and Airway Safety and- 4

-

We also received a proposal from SeaPort Airlines. SeaPort proposed to provide Tupelo
with a total of 49 nonstops a week , 28 to Memphis and 21 to Atlanta, for $1,058,088 annually. All of the servi ce would be with 9

- seat Pilatus PC

- 12 aircraft, for a total of 63 seats per day. The letter noted that SeaPort’s proposal could only be selected if Tupelo waived its statutory guarantee of 15

- seat or larger twin

- engine aircraft, which the community chose not to do.

In response to our request for comment, the community stated “It is our decision to inform you that we prefer Delta Airlines’ proposal scheduling three round trip daily flights in and out of Tupelo.” Based on the community’s response, SeaPor t’s proposal is

un

- selectable.

Decision The proposals in response to Order 2009

- 10

- 8 essentially left the Department with the same set of options as from the first round of proposals that we had earlier rejected. Essentially Mesaba proposed a few new opt ions that would require even higher subsidy levels, and two new applicants each filed a single proposal, each of which is statutorily
deficient. 10 Rather than request proposals for a third time, we directed the EAS staff to negotiate subsidy rates with Mes aba. Because their proposals were fundamentally unacceptable, we did not offer to negotiate revised proposals with Intrepid or with SeaPort, leaving only Mesaba’s proposals on the table.

We have reached agreement with Mesaba as to reasonable levels of su bsidy for specified levels of service and subsidy at all four of the communities for the past period , October 12, 2009, through June 9, 2010

. 11

2009

- 10

- 8, it was our concern about these proposals’ costs that led us to re

- request proposals, and all of the agreed levels of subsidy are lower than those originally proposed. For the prospective period, we have reached agreement with
the carrier for service at all of the communities exc ept Tupelo. As stated in Order

12

Capacity Expansion Act of 1987, P.L. 100

- 223, changed the load factor standard from 65

- to 60

- percent, thereby increasing the maximum number of seats required, i.e., 40 passe ngers/60% = 67 seats. As we have noted, we could authorize subsidy for additional frequency and capacity for carriers choosing to link communities together in a linear service pattern to recognize that the seats are shared by two communities. The reduction in projected subsidy reflects lower estimates of indirect unit costs, reduced estimates of block times required to provide the service, thereby affecting direct costs, and a prorate of station expenses at International Falls to factor out Mesaba’s historical peak

season service levels that were above the EAS levels. We find that after these adjustments, the agreement is consistent with the carrier’s historical costs.

10 Intrepid pr oposed only one round trip a day with two

- stop service to Sault Ste. Marie, and SeaPort proposed service with nine

- seat aircraft. No community was willing to waive their rights.

11 Because of the time it takes to revise schedules, the period from now thr ough June 9, when Mesaba will revise its schedules, may be considered part of the past period.

12 Technically that is not the case at Alpena, where the rate has increased from $988,479 to $1,532,660. However, that is merely an artifact of separating Alpena from Sault Ste. Marie in the prospective period.
The two

- community package has decreased from $1,976,958 as originally proposed by Mesaba to $1,770,485 ($1,532,660 plus $237,825)- 5

-

Sault Ste. Marie The carrier has agreed to an annual subsidy of $738,686 13 for the past period decreasing to $237,825 prospectively. For the past period Mesaba provided a total of 14 round trips per week to Detroit

– 7 nonstops and 7 one

- stops over Alpena. Prospectively, Sault Ste. Marie would receive only nonstop service. The decrease in subsidy between the two period s is the result of a revenue increase of almost a quarter at Sault Ste. Marie as a result of the superior schedule in the latter period along with some additional expenses associated with nonstop service. We find these proposals reasonable.

Alpena The c arrier has agreed to annual subsidy of $738,686 14 for the past period increasing to $1,532,660 prospectively. The increase in subsidy between the two periods is the direct result of Sault Ste. Marie, the bigger traffic

- generating community, no longer
shari ng its revenue and service with Alpena. Because Alpena had nonstop service to Detroit in both periods, there is a minimal effect on its projected revenue. We find these proposals reasonable.

International Falls Mesaba has agreed, prospectively, to base an aircraft in the community year round with annual subsidy rates of $1,284,788 in the past period, and $1,309,886 prospectively. The carrier’s compensation in both periods is based on 14 nonstops per week year round. The primary difference between the two periods is that the past period has an estimate of 0.75 percent inflation applied to it. 15 We find these proposals reasonable.

Tupelo As stated earlier, SeaPort’s proposal is unselectable, and so we have not negotiated a revised proposal with that c arrier, making Mesaba the only carrier. Mesaba agreed to a rate of $1,419,593 for a total of 19 nonstop round trips per week to Atlanta and Memphis

with the staff. 16 As we have stated in our requests for proposals for both round one and round two, the maxi mum seat guarantee consistent with program guidelines is 67 seats per day, or two daily nonstop round trips with Saab 340 aircraft. Mesaba’s proposed service level of 19 round trips a week clearly exceeds this level, so we will not select it.

However, there is an extenuating circumstance in this case. The statutory minimum for air service to any community is two round trips per day to a single hub. For almost a year, Tupelo has not received that level of service. Before it filed notice, Mesaba change d its level of service at Tupelo below the statutory minimum of two round trips per day to a single hub by providing one round trip a day to two different hubs. As we discussed in
Order 2009

- 10

- 8, this type of service limits connecting opportunities for p assengers. Furthermore, the community has a strong preference for service to the Memphis hub, with

13 $1,477,371 combined subsidy for Alpena and Sault Ste. Marie, divided by t wo communities.

14 IBID.

15 That same inflation estimate is applied to the prospective rates at all four communities.

16 Seven round trips to Atlanta for $682,091 and twelve round trips to Memphis for $737,502.- 6

-

an evening flight from Memphis into Tupelo. 17 We find that good cause exists to provide the community with some additional service above the program guideli nes. For a temporary period 18 w e are willing to authorize subsidy for an additional weekly round trip for a total of fifteen round trips a week. In addition, Mesaba has agreed to base the aircraft in Tupelo which, when coupled with 15 round trips a week, could provide the community with three round trips on all or most weekdays to Memphis as it has requested, along with an early morning flight out of the community and a late evening arrival from the hub. We will not prescribe the number of flights that m ust be provided to each hub, nor the mix of flights on weekdays or weekends. Given the community’s stated preference for the Memphis hub, for subsidy purposes we have taken the rate agreed to by Mesaba and the EAS staff of $737,502 for twelve 19 nonstop rou nd trips a week to Memphis and prorated it up to fifteen. We believe that this is a very fair offer to Mesaba, as the twelve round trip forecast was premised on it also providing competing daily service to Atlanta. We encourage the community to work clos ely with Mesaba to craft a schedule that is in their
mutual best interests.

We give Mesaba ten days from the service date of this order to show cause why this level of service and subsidy is not appropriate.

Carrier Fitness
49 U.S.C. 41737(b) requires th at DOT find an air carrier fit, willing, and able to provide reliable service before DOT may subsidize it to provide essential air service. Mesaba Airlines, Inc., is subject to the Department’s continuing fitness requirements, and no
information has come to our attention that would cause us to question the carrier's fitness at this time. DOT has contacted the Federal Aviation Administration, and it has raised no concerns that would negatively affect our fitness finding. DOT therefore concludes that
the c arrier remains fit to conduct the operations proposed here.

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

A CCORDINGLY ,

1. We set the final rates for Mesaba Airlines, Inc., for its provision of essential air service at Alpena and Sa ult Ste. Marie, Michigan, International Falls, Minnesota, and Tupelo, Mississippi, as described in Appendix B;

2. We select Mesaba Airlines, Inc., to provide essential air service at Alpena and Sault Ste. Marie, Michigan, and International Falls, Minnesot a, as described in Appendix C ;

17 Because of the need for good connections at Me mphis, in both directions, we will tentatively require Mesaba to continue to base an aircraft in Tupelo.

18 The term of this order.

19 Mesaba submitted three options at Tupelo, each with 7 round trips per week to Atlanta, and either 12, 13,

or 14 round trips to Memphis. However, its agreement with the staff was for a single option consisting of 19 nonstop round trips per week

-- 7 to Atlanta and 12 to Memphis

-- and we have based the proposed level of subsidy on that agreement.- 7

-

3. We direct Mesaba Airlines, Inc., to show cause within ten (10) calendar days of the date of service of this order why we should not select it to provide essential air service at Tupelo, Mississippi, as described in Append ix C ;

4. If no objections are filed within ten days, we delegate to the Director of the Office of Aviation Analysis the authority to make final the tentative rate at Tupelo ;

5. The Department finds that Mesaba Airlines, Inc., continues to be fit, willing and able to operate as a certificated carrier and capable of providing reliable essential air service at Alpena and Sault Ste. Marie, Michigan, International Falls, Minnesota, and Tupelo, Mississippi;

6 . We direct Mesaba Airlines, Inc., to retain all bo oks, 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 shal l 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;

7 . These Dockets will remain open until further Department action; and

8 . The Department will serve copies of this order on the Mayor and airport manager of each community, on Intrepid International Airli nes, Inc., SeaPort Airlines, Delta Air Lines, Inc., and on Mesaba Airlines, Inc.,

By:

Susan L. Kurland 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.govAppendix A Page 1 of 2

Nonstop Great Circle Mileages

INL

- MSP 254

APN

- CIU 91

APN

- DTW 198
CIU

- DTW 283

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 A

- 2

Nonstop Great Circle Miles

TUP

- MEM 88

TUP

- ATL 253

ATL

- MEM 332

This map is provided by Sabre ® AirVision TM P rofit Essentials and is being used with express permission of the copyright holder, Sabre Airline Solutions®.Appendix B Page 1 of 6

Annual Subsidy Rate at Four Communities, October 12, 2009, thru June 9, 2010

Total INL APN/CIU TUP

Docket Numbers 2009-0304 2009-0300/303 2009-0305
Hub(s) MSP DTW ATL/MEM

R./T.Week 14 14 14 Completion Factor 97% 97% 98%

Pax 1/ 89,485 21,243 42,486 25,756

Block Hours 1/ 7,133 1,935 3,493 1,705
Flts. to/from Hub(s) 4,970 1,416 2,124 1,430 Seat Deps.at Hub(s) 79,520 22,656 33,984 22,880 Enpl. Pax. At Hub(s) 44,743 10,622 21,243 12,878

Pax. Revenue $8,270,195 $1,805,655 $4,562,291 $1,902,249

Other Rev. $879,016 $222,351 $443,528 $213,137

Total Revenue $9,149,211 $2,028,006 $5,005,819 $2,115,386

Pilot per Block Hour $1,702,790 $461,923 $833,849 $407,018
Fuel per Block Hour (104 gph) $1,717,840 $466,006 $841,219 $410,615
Mtc. per Block Hour $2,476,649 $671,851 $1,212,805 $591,993

Aircraft $1,451,851 $393,850 $710,965 $347,036

Total Directs $7,349,130 $1,993,630 $3,598,838 $1,756,662

Total Indirects $4,922,776 $1,161,412 $2,575,629 $1,185,735

Total Operating $12,271,906 $3,155,042 $6,174,467 $2,942,397

Profit @ 5% $613,595 $157,752 $308,723 $147,120

Economic Cost $12,885,501 $3,312,794 $6,483,190 $3,089,517

Annual Subsidy Rate $3,736,290 $1,284,788 $1,477,371 $974,131

1/ Nonstop Flts./ Days/ Completion Block Block Nonstop City-Pair Miles Day Year Percent Time Hours Flights

INL-MSP 254 4 365 0.97 82 1,935 1,416

TUP-ATL 253 2 365 0.98 92 1,097 715

TUP-MEM 88 2 365 0.98 51 608 715

APN-DTW 198 4 365 0.97 78 1,841 1,416

CIU-DTW 283 2 365 0.97 97 1,145 708

CIU-APN 91 2 365 0.97 43 507 708Appendix B Page 2 of 6

Subsidy Rate Agreement for the Provision of Essential Air Service by Delta/Mesaba at

Inter national Falls, Minnesota, Docket 2009

- 0304

______________________________________________________________________ EFFECTIVE PERIOD: October 12, 2009, thru June 9, 2010.

_____________________________________________________________________ SERVICE: 14 round nonstop round trips per week between International Falls and Minneapolis.

________________________________________________________________________ AIRCRAFT TYPE: Saab 340

______________________________________________________________________ T IMING OF FLIGHTS: Flights must be well

- timed and well

- spaced to ensure full compensation.

_______________________________________________________________________ ANNUAL SUBSIDY RATE: $1,284,788 RATE PER FLIGHT: $907 1 WEEKLY CEILING: $25,396 2

This rate assumes an annual completion factor of 97 percent. A compensation ceiling is to be applied each week
, such that service above that ceiling in one week cannot make up
for service shortfalls in another week.

1 Annual compensation of $1,2 84,788 divided by 1,416 annual flights, calculated as follows: 4 flights per day x 365 days x .97 completion = 1,416.

2 $907 times 28 flights per week.Appendix B Page 3 of 6

Subsidy Rate Agreement for the Provision of Essential Air Service by Delta/Mesaba at Alpena, Michigan, Docket 2009

- 0300

______________________________________________________________________ EFFECTIVE PERIOD: October 12, 2009, thru June 9, 2010.

________________________________________________________________________ SERVICE: 14 round nonstop round trips per week between Alpena and Detroit.

________________________________________________________________________ AIRCRAFT TYPE: Saab 340

________________________________________________________________________ TIMING OF FLIGHTS: Flights must be well

- timed and well

- spaced to ensure full compensation.

_______________________________________________________________________ ANNUAL SUBSIDY RATE: $738,686

RATE P ER FLIGHT: $522 1 WEEKLY CEILING: $14,616 2

This rate assumes an annual completion factor of 97 percent. A compensation ceiling is to be applied each week
, such that service above that ceiling in one week cannot make up
for service shortfalls in another week.

1 Annual compensation of $738,686 ($1,477,371 ÷ 2 communities) divided by 1,416 annual flights,

calcul ated as follows: 4 flights per day x 365 days x .97 completion = 1,416.

2 $522 times 28 flights per week.Appendix B Page 4 of 6

Subsidy Rate Agreement for the Provision of Essential Air Service by Delta/Mesaba at Sault Ste. Marie, Michigan, Docket 2009

- 0303

______________________________________________________________________ EFFECTIVE PERIOD: October 12, 2009, thru June 9, 2010.

________________________________________________________________________ SERVICE: 7 one

- stop and 7 nonstop round trips per week between Sault Ste. Marie and
Detroit.

________________________________________________________________________ AIRCRAFT TYPE: Saab 340

________________________________________________________________________ TIMING OF FLIGHTS: Flights must be well

- timed and well

- spaced to ensure full compensation.

_______________________________________________________________________ ANNUAL SUBSIDY RATE: $738,686 RATE PER FLIGHT: $522 1 WEEKLY CEILING: $14,616 2

This rate assumes an annual completion factor of 97 percent. A compensation ceiling is to be applied each week
, such that service abov e that ceiling in one week cannot make up
for service shortfalls in another week.

1 Annual compensation of $738,686 ($1,477,371 ÷ 2 communities) divided by 1,416 annual flights, calculated as follows: 4 flights per day x 365 days x .97 completion = 1,416.

2 $522 times 28 flights per week.Appendix B Page 5 of 6

Subsidy Rate Agreement for the Provision of Essential Air Service by Delta/Mesaba at Tupelo, Mississippi, Docket 2009

- 0305

______________________________________________________________________ EFFECTIVE PERIOD: October 12, 2009, thru June 9, 2010.

________________________________________________________________________ SERVICE: 7 nonstop round trips per week to Atlanta and 7 nonstop round tri ps per week to Memphis.

________________________________________________________________________ AIRCRAFT TYPE: Saab 340

________________________________________________________________________ TIMING OF FLIGHTS: Flights must be well

- timed and well

- spa ced to ensure full compensation.

_______________________________________________________________________ ANNUAL SUBSIDY RATE: $974,131 RATE PER FLIGHT: $681 1 WEEKLY CEILING: $19,068 2

This rate assumes an annual completion factor of 98 percent. A compensation ceiling is to be applied each week
, such that service above that ceiling in one week cannot make up
for service shortfalls in another week.

1 Annual compensation of $974,131 divided by 1,431 annual flights, calculated as follows: 4 flights per day x 365 days x .98 completion = 1,431.

2 $681 times 28 flights per week.Appendix B Page 6 of 6

Note: The carrier u nderstands that it may forfeit its compensation for any flights that it did not operate in conformance with the terms and stipulations of this order, including the service plans outlined in the order and any other significant elements of the required servi ce, 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 ce rtain weather cancellations, only completed flights are considered eligible for subsidy. In addition, if the carrier did not schedule or operate its flights in full conformance with the order for a significant period, it may jeopardize its entire subsidy c laim for the period in question. If the carrier contemplated any such changes beyond the scope of the order during the applicable period of this rate, it should have first notified the Office of Aviation Analysis in writing and received written approval fr om the Department to be ensured of full compensation. 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. General Terms and Conditions for Essential Air Service

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

All claims for payment mu st be submitted within 60 days of the issuance of this order.Appendix C Page 1 of 6

Annual Subsidy Rate at Four Communities, June 10, 2010, through May 31, 2012

INL APN CIU Tupelo

Docket Numbers 2009-0304 2009-0300 2009-0303 2009-0305 2009-0305
Hub(s) MSP DTW DTW ATL MEM

R./T.Week 14 13 14 7 12 Completion Factor 97% 97% 97% 98% 98%

Pax 1/ 21,243 16,994 32,573 13,594 18,028

Block Hours 1/ 1,935 1,709 2,289 1,097 1,042
Flts. to/from Hub(s) 1,416 1,315 1,416 715 1,226 Seat Deps.at Hub(s) 22,656 21,040 22,656 11,440 19,616 Enpl. Pax. At Hub(s) 10,622 8,497 16,287 6,797 9,014

Pax. Revenue $1,805,655 $1,384,416 $3,646,908 $1,087,520 $1,207,876

Other Rev. $222,351 $133,168 $323,756 $126,770 $129,509

Total Revenue $2,028,006 $1,517,584 $3,970,664 $1,214,290 $1,337,385

Pilot per Block Hour $465,387 $411,032 $550,527 $263,839 $250,611
Fuel per Block Hour (104 gph) $469,508 $414,672 $555,403 $266,176 $252,831
Mtc. per Block Hour $676,882 $597,825 $800,715 $383,742 $364,502

Aircraft $396,810 $350,465 $469,405 $224,962 $213,683

Total Directs $2,008,587 $1,773,994 $2,376,050 $1,138,719 $1,081,627

Total Indirects $1,170,358 $1,131,000 $1,632,035 $667,358 $894,456

Total Operating $3,178,945 $2,904,994 $4,008,085 $1,806,077 $1,976,083

Profit @ 5% $158,947 $145,250 $200,404 $90,304 $98,804

Economic Cost $3,337,892 $3,050,244 $4,208,489 $1,896,381 $2,074,887

Annual Subsidy Rate $1,309,886 $1,532,660 $237,825 $682,091 $737,502

1/ Nonstop Flts./ Weeks/ Completion Block Block Nonstop City-Pair Miles Week Year Percent Time Hours Flights

INL-MSP 254 28 52.14 0.97 82 1,935 1,416

APN-DTW 198 26 52.14 0.97 78 1,709 1,315

CIU-DTW 283 28 52.14 0.97 97 2,289 1,416

TUP-ATL 253 14 52.14 0.98 92 1,097 715

TUP-MEM 88 24 52.14 0.98 51 1,042 1,226

Note: 52*365/364 = 52.14 weeks per year -- to take account of the fact that 52 weeks equals 364 days.Appendix C Page 2 of 6

Subsidy Rate Agreement for the Provision of Essential Air Service by Delta/Mesaba at International Falls, Minnesota, Docket 2009

- 0304

_____________________________________________________________________ EFFECTIVE PERIOD: June 10, 2010, through May 31, 2012

________________________________________________________________________ SERVICE: 14 round nonstop round trips per week betwee n International Falls and Minneapolis. The carrier agrees to base its aircraft in International Falls.

________________________________________________________________________ AIRCRAFT TYPE: Saab 340

________________________________________________________________________ TIMING OF FLIGHTS: Flights must be well

- timed and well

- spaced to ensure full compensation.

_______________________________________________________________________ ANNUAL SUBSIDY RATE: $1,309,886 RATE PER FLIGHT: $925 1

WEEKLY CEILI NG: $25,900 2

This rate assumes an annual completion factor of 97 percent. A compensation ceiling is to be applied each week
, such that service above that ceiling in one week cannot make up
for service shortfalls in another week.

1 An nual compensation of $1,309,886 divided by 1,416 annual flights, calculated as follows: 4 flights per day x 365 days x .97 completion = 1,416.

2 $925 times 28 flights per week.Appendix C Page 3 of 6

Subsidy Rate Agreement for the Provision of Essential Air Service by Delta/Mesaba at Alpena, Michigan, Docket 2009

- 0300

______________________________________________________________________ EFFECTIVE PERIOD: June 10, 2010, thru May 31, 2012.

________________________________________________________________________ SERVICE: 13 round nonstop round trips per week between Alpena and Detroit.

________________________________________________________________________ AIRCRAFT TYPE: Saab 340

________________________________________________________________________ TIMING OF FLIGHTS: Flights must be well

- timed and well

- spaced to ensure full compensation.

_______________________________________________________________________ ANNUAL SUBSIDY RATE: $1,532, 660 RATE PER FLIGHT: $1,166 1 WEEKLY CEILING: $30,316 2

This rate assumes an annual completion factor of 97 percent. A compensation ceiling is to be applied each week
, such that service above that ceiling in one week cannot make up
for service shortfalls i n another week.

1 Annual compensation of $1,532,660 divided by 1,315 annual flights, calculat ed as follows: 26 flights per week x 52 weeks x 365/364 days x .97 completion = 1,315.

2 $1,166 times 26 flights per week.Appendix C Page 4 of 6

Subsidy Rate Agreement for the Provision of Essential Air Service by Delta/Mesaba at Sault Ste. Marie, Michigan, Docket 2009

- 0303

______________________________________________________________________ EFFECTIVE PERIOD: June 10, 2010, thru May 31, 2012

________________________________________________________________________ SERVICE: 14 nonstop round trips per week between Sault Ste. Marie and Detroit.

________________________________________________________________________ AIRCRAFT TYPE: Saab 340

________________________________________________________________________ TIMING OF FLIGHTS: Flights must be well

- timed and well

- spaced to ensure full compensation.

_______________________________________________________________________ ANNUAL SUBSIDY RATE: $237,825 RATE PER FLIGHT: $168 1 WEEKLY CEILING: $4,704 2

This rate assumes an annual completion factor of 97 percent. A compensation ceiling is to be applied each week
, such that service above that ceiling in one week cannot make up
for service shortfalls in another week.

1 Annual compensation of $237,825 divided by 1,416 annual flights, calculated as follows: 4 flights per day x 365 days x .97 compl etion = 1,416.

2 $168 times 28 flights per week.Appendix C Page 5 of 6

Subsidy Rate Agreement for the Provision of Essential Air Service by Delta/Mesaba at Tupelo, Mississippi, Docket 2009

- 0305

______________________________________________________________________ EFFECTIVE PERIOD: June 10, 2010, thru May 31, 2012.

________________________________________________________________________ SERVICE: 15 nonstop round trips per week to Memphis and/or Atlanta. The carrier agrees to ba se its aircraft in Tupelo.

________________________________________________________________________ AIRCRAFT TYPE: Saab 340

________________________________________________________________________ TIMING OF FLIGHTS: Flights must be well

- timed and well

- sp aced to ensure full compensation.

_______________________________________________________________________ ANNUAL SUBSIDY RATE: $921,878 1 RATE PER FLIGHT: $601 2 WEEKLY CEILING: $18,030 3

This rate assumes an annual completion factor of 98 percent. A compensation ceiling is to be applied each week
, such that service above that ceiling in one week cannot make up
for service shortfalls in another week.

1 $737,502 times 15/12 round trips per week. See Appendix C, Page 1.

2 Annual compensation of $921,878 divided by 1,533 annual flights, calculated as follows: 30 flights per week x 52 weeks x 365/364 days x .98 completion = 1,533.

3 $601 times 30 flights per week.Appendix C Page 6 of 6

General Terms and Conditions for Essential Air Service

The carrier unders tands 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 servi ce, 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 c ertain 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
subsid y 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 t he 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 o f 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 un der this 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 f or 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.

Subsidy contracts are subj ect 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.

Funds ar e not currently available for performance under this solicitation beyond September 30,
2010. The Government’s obligation for performance under this solicitation beyond September 30, 2010 , is contingent upon the availability of appropriated funds from whic h 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, 2010 , until funds are made available to the Department for performance. If funds are not made available for performance beyond September 30, 2010 , the carrier will receive notice in writing by the Department.

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