Order 2012

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Served: June 29, 2012



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

Issued by the Department of Transportation
on the 29 th day of June , 2012

Essential Air Service at

Altoona, Pennsylvania Johnstown, Pennsylvania Victoria, Texas Staunton, Virginia Beckley, West Virginia Clarksburg/Fairmont, West Virginia Morgantown, West Virginia

Under 49 U.S.C. 41731 et seq

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ORDER EXTENDING SERVICE OBLIGATION

Summary By this O rder, the Departme nt extends the Essential Air Service ( “ EAS ” ) obligation of Colgan
Airlines , Inc. d / b / a United Airlines Express (“ Colgan ”), at Altoona, Johnstown

, Staunton, Beckley, Clarksburg/Fairmont, and Morgantown, for 30 days , through August 7 , 2012.

Background By Order 2012

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- 9, issued on February 14, 2012, the Department requested proposals from air carriers interested in providing EAS at Altoon a and Johnstown, PA, for a new term beginning July 1, 201 2, with or without subsidy. Tho se proposals were due by March 14, 2012.

B y Order 2012

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- 16, is sued on February 23, 2012, the Department requested proposals from air carriers interested in providing EAS at Beckley, Clarksburg/Fairmont, and/or Morgantown, for a new term beginning August 1, 2012, with or without subsidy . Tho se proposals were due by

A pril 3, 2012.On March 8, 2012, Pinnacle Airlines, Corp., the parent company of Colgan, filed notice of its intent to terminate its currently subsidized service at the seven above

- captioned communities, effective June 8, 2012.

B y Order 2012

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- 14, issued on March 23, 2012, in accordance with the mandate in 49 U.S.C.
Section 41734(b), 1 the Department prohibited Colgan from suspending service at all seve n communities for 30 days beyond the end of the 90

- day notice period (i.e. July 8, 2012) . That

O rd er also requested proposals for replacement service at Victoria and Staunto n. We did not solicit proposals for the other five communities because we had already solicited proposals due

to the impending expiration of Colgan’s EAS obligations in those commu nities at the time Colgan filed its 90

- day notices. The Staunton and Victoria proposals were due April 25, 2012

. We have issued O rders selecting replacement carriers at all of the communities except Victoria ; h owever, the re placement service will not have commence d b y July 8, 2012, the end of the
current hold

- in period.

Additional Developments
O n April 1, 2012 , Pinnacle Air lines Corp. filed for protection under Chapter 11 of the Bankruptcy Code

. Pinnacle has raised questions regarding the Departme nt’s authority to require
the air carrier to maintain service at the above communities in light of Pinnacle’s Chapter 11 filing

. Pinnacle argues that the automatic stay (11 U.S.C. Section 362) became effective immediately upon its Chapter 11 filing on April 1. Pinnacle maintains that, under these circumstances, the Department lacks the authority to extend the service obligation at the above communities, and any Order r equiring Colgan to maintain EAS is null and void under the Bankruptcy Code. Moreove r, Pinnacle has asserted that its EAS obligations are executory contracts that it can seek to reject pursuant to 11 U.S.C. Section 365.

The Secretary’s obligation to ensure that an EAS carrier continues to provide at least a minimum
level of EAS applies b oth to subsidized and unsubsidized EAS carriers. Section 41734(c) requires the Secretary to hold

- in a carrier for additional 30

- day periods until rep lacement service actually begins. 2 Contrary to Pinnacle’s assertion, the automatic stay does not prohibi t the Department from carrying out its statutory obligation under Section 41734. Rather, any and all orders issued by the Department extending Colgan’s service obligations pursuant to Section 41734 are consistent with the exception to the automatic stay provided for in Section 362(b)(4) of the Bankruptcy Code. T hus, the Secretary’s authority

-- or, more accurately, the Secretary’s legal obligation

-- de rives not from what Debtors allege is an executor y contract, but from the

1 49 U.S.C. Section 41734(b) states:

If at the end of the notice period under subsection (a) of this section the Secretary has not found another air carrier to provide basic essential service to the eligible place, the Secretary shall require the carrier providing notice to continue to provid e basic essential air service to the place for an additional 30

- day period or until another carrier begins to provide basic essential air service to the place, whichever occurs first. (Emphasis added).

2 49 U.S.C. Section 41734(c) provides:

If at the en d of the 30

- day period under subsection (b) of this section the Secretary decides another air carrier will not provide basic essential air service to the place on a continuing basis, the Secretary shall require the carrier providing service to continue to provide service for additional 30

- day periods, until another carrier begins providing service on a continuing basis.... (Emphasis added).Secretary’s statutory requirement to issue hold

- in orders pursuant to Section 41734 , which applies equally to carriers operating outside of a bankruptcy as to those operating post

- pe tition as
a debtor

- in

- possession.

Nevertheless, t he Department has been working closely with all the stakeholders in this case, including Pinnacle, Colgan, United Airlines, the communities, and Silver Airways, the selected replacement carrier at all the communities except Victoria. 3 Based on the assurances that we
have received from Silver Airways (“Silver”) and United Airlines (“United”)

, we are confident, and fully expect, that Silver’s replacement service will be fully operational by August 1

. Furthermore, for flight reservations beginning on August 1 and thereafter , United has taken steps
on its website to effectuate the transition to Silver by identifying Silver as the carrier operating flights between the communities specified below and Dulle s International Airport

. In view of all
of the above

, and i n accordance with 49 U.S.C. Section 41734(c), we will extend the service obligations of Colgan at the communities specified below for an additional 30 days, or until replacement service actually b egins, whichever occurs first. T he Department will continue to provide compensation to Colgan pursuant to 49 U.S.C. Section 41734(d). Moreover, because we
have been assured that Silver and United will be prepared to begin providing EAS at the communities specified below by August 1, 2012, we do not anticipate that there will be a need
for further hold

- i n orders to be issued to Colgan.

This Order is issued under the authority assigned in 14 CFR 385.12(k)(5).

ACCORDINGLY,

1. The Department requires Colgan Airlines, Inc. a wholly

- owned subsidiary of Pinnacle Airlines Corporation, d/b/a United Express, to continue providing EAS at Altoona and Johnstown, Pennsylvania; Staunton, Virginia; and Beckley, Clarksburg/Fairmont, and Morganto wn, West Virginia; for an add itional 30 days, through August 7 , 2012, or until an air carrier capable of providing reliable EAS actually begins service, whichever comes first;

2

. These docket s will remain open until further O rder of the Department; and

3

. The Department will serve a copy of this Order on the mayors and airport managers of: Altoona and Johnstown, PA; Victoria, TX; Staunton, VA; and Beckley, Clarksburg/Fairmont, and Morgantown, WV ; Pinnacle Airlines, Corp., Silver Airways, United Airlines and Colgan

Air line s , Inc

.

Persons entitled to petition the Department for review of this order under the Department’s regulation at 14 C.F.R. § 385.50 must file such petitions within ten (10) days after the date of
service of this order.

3 Colgan represents that it is not able to continue providing EAS at Victoria , Texas beyond June 30, 2012

. T he

carrie r has advised us that by that date, it has or will have terminated its entire Houston operation, which supports the Victoria service, in order to preserve the company as an ongoing concern. However, we are well on the way to securing replacement service a t Victoria. We have received carrier proposals, the community has submitted their preferences regarding the carrier selection, and we expect to issue a final decision shortly selecting a replacement

carrier for Victoria

.This order will be effective immediately, and the filing of a petition for review shall not preclude
its effectiveness.

By:

TODD M. HOMAN
Director Office of Aviation Analysis

(SEAL)

An electronic version of this document is available on line at www.regulations.gov