Order 2013

- 10

- 8 Served: October 21, 2013



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION


### OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 21 st of October, 2013

Essential Air Service (EAS) at

PADUCAH, KEN TUCKY HANCOCK/HOUGHTON, MICHIGAN MUSKEGON, MICHIGAN PELLSTON, MICHIGAN SAULT STE. MARIE, MICHIGAN WATERTOWN, NEW YORK

EAU CLA IRE , WISCONSIN

Under 49 U.S.C. 41731 et seq

. DOCKET DOT

- OST

- 2009

- 0299

DOCKET DOT

- OST

- 2009

- 0302

DOCKET DOT

- OST

- 2009

- 0301

DOCKET DOT

- OST

- 2011

- 0133

DOCKET DOT

- OST

- 2009

- 0303

DOCKET DOT

- OST

- 1997

- 2842

DOCKET DOT

- OST

- 2009

- 0306

ORDER SELECTING CARRIERS AT SIX COMMUNITIES AND TENTATIVELY

SELECTING CARRIER AT WATERTOWN, NEW YORK

Summary By this Order

, the Department is re select ing Delt a Air Lines, Inc. (Delta)

, to provide Essential Air Service (EAS) at Pellston and Sault Ste. Marie, Michigan ; and SkyWest Airlines (SkyWest)

, at Paducah, Kentucky; Hancock/Houghton, and Muskegon , Michigan ; and Eau Claire,

Wisconsin. The Order also tentati vely re select s American Airlines (American) , at Watertown,

New York

. 1

Background and Proposals

B y a series of Orders

, the Department selected carriers to provide EAS at the above communities at various subsidy rate levels shown below

. All of the service at these communities is currently provided with r egional jets on a nonstop basis , and critical current and proposed rate and service

elements are shown in the table below . As the contracts were about to expire, b y Order

1 Such subsidy is calculated and distributed on a fiscal year basis, subject to the availability of funds.- 2

-

2013

- 5

- 13, May 21, 2013, the Depar tment requested proposals for EAS at the seven above captioned communities, with proposals due no later than June 26, 2013. After two separate requests from American

, by two separate notice s we granted extensions to that deadline . The

first notice extend ed the deadline through July 10, and the second through July 15, 2013 . On that

date

, we received one proposal and one option for each community from the incumbent carrier currently serving th at community . All of the proposals contemplated nonstop service with

r egional j et aircraft and the same frequency of service as that which is currently subsidized and

t hat we requested in the RFP , except for Watertown. At Watertown

, American has proposed to increase its level of service from 12 round trips per week t o 13. American also requested that Watertown and the Department agree to waive their hold

- in authority under 49 U.S.C. § 41734 and instead agree to allow American to terminate service upon 120 days’ notice. The table

outlines the current status of these co mmunities and also summarizes the proposals most recently

submitted. We received final community comments on September 11 , 2013.

Miles to Selection Rate Subsidy Rates Forecast Passengers Community Carrier Hub Hub Order Expires Current Proposed Prior Proposed Muskegon, MI SkyWest ORD 118 2012-2-11 12/31/2013 $1,576,067 $1,389,952 25,000 33,700
Eau Claire, WI SkyWest ORD 268 2012-2-2 12/31/2013 $1,733,576 $1,546,536 35,000 40,000

Pellston, MI 2 Delta DTW 293 2012-4-10 10/31/2013 $1,055,322 $1,077,413 39,602 42,230

Sault Ste. Marie, MI 2 Delta DTW 341 2012-4-10 1/31/2014 $1,676,136 $1,765,393 40,732 40,732
Paducah, KY SkyWest ORD 342 2012-2-2 12/31/2013 $1,710,775 $2,034,160 35,000 42,230 Hancock/Houghton, MI SkyWest ORD 359 2012-2-2 12/31/2013 $934,156 $690,976 44,000 50,000

Watertwon, NY 2 American ORD 617 2011-3-34 11/30/2013 $3,047,972 $3,636,045 28,737 40,228

2

Community Comments There were strong endorsements for Delta from each community where it proposed service.

Sault Ste. M arie indicates that commercial “passenger air service is essential to the economy of Sault Ste. Marie and the Eastern Upper Peninsula [of Michigan.] [The community] would encourage you to accept the proposal from Delta Air Lines to continue with Essential Air Service

to Sault Ste. Marie.” Pellston indicates that “with any community the more service the better. Having said this, the Village of Pellston is thankful for the service Delta currently provides to Pellston and appreciates Delta’s latest proposal .”

There were strong endorsements for SkyWest from each community where it proposed service

. Eau Claire supported SkyWest, noting that in “ response to the increase in passenger traffic, the Airport Commission [and community] is pleased that SkyWest has been able to reduce their subsidy request by almost $200,000 over the prior two

- year period. The Airport will work with SkyWest to continue reducing that subsidy over the next two years with continued growth in passenger traffic.” Paducah indicates that it has “reviewed the essential air service proposal of SkyWest Airlines and [is] looking forward to a continued profitable partnership for another two

years. ” Houghton states that reliable air service is very important to the economic welfare of the

area, and that Michigan Technological University and hundreds of small high

- tech firms could not survive without air service. “The City of Houghton strongly endorses SkyWest ’s proposal

for essential air service.” Hancock says that it “has been please d with th e performance and

2 As requested, we will afford Delta and American the flexibility to pick any of their several code

- share partners to actually operate the service, while the subsidy payments for that service will flow through the parent.- 3

-

pricing of SkyWest/United via O’Hare during the last four years, and believes SkyWest is suited to undertake the next two years as well.” Muskegon endorsed SkyWest’s proposal. However, the community continues to want SkyWest to inaugura te “ an everyday morning originating flight and evening return flight [otherwise] business travelers have far less occasion to use our airport.”

Watertown strong ly endorse s American ’s proposal

. “Added to American’s continuing commitment to [Watertown] and the surrounding area is the now documented ease of purchasing a very reasonably priced ticket, the convenience of reaching almost any destination within the country in short order and the airline’s plan to add another much needed flight on Sunday.
[ Ameri can ] has more than met all of our expectations in the initial two

- year period that we have

worked with one another. ” 3 The community also accepted American’s request that it be allowed

to terminate its service on 120 days' notice

.

Decision s at Eau Claire, Hancock/Houghton, Muskegon, Paducah, Pellston, and Sault Ste. Marie

All seven communities are among the strongest traffic generators in the EAS program. Compared to each carrier ’ s proposals two years ago , traffic is constant at Sault Ste. Marie; slightly increased at Pellston; and substantially increased at the remaining five

, i.e., Eau Claire, Hancock/Houghton, Muskegon, Paducah, and Watertown.

At the six communities captioned above

, the carrier

- selection decision is straightforward. As

shown in the a bove table, less subsidy is required at three communities, and slightly more at three

others . O verall the level of subsid y has decreased by two percent from that in the prior carrier

selection cycle . The carriers propose to maintain the same level of ser vice that they are currently providing and all six communities strongly endorse the incumbent carriers. We will therefore re

select Delta and SkyWest at the service and subsidy levels that they have proposed.

Tentative Decision at Watertown

At the sevent h community, Watertown, American characterizes its service as a success and
proposes to increase it s service to 13 round trips per week, one more than the 12 round trips per

week it provide s under the current contract

. Two years ago American projected tha t it would transport 28,737 passengers, a four

- fold increase over that transported by the prior EAS carrier

. 4 American has, in fact, beaten that target, transporting 37,546 passengers in the year ended July 31, 2013, the most recent year reported by the c arrier.

However, the clear success American achieved in generating passengers causes us to be

concerned , because it has not been matched by an ability to reduce its need for subsidy. The carrier requests $3,636,045 annual subsidy

– an increase of almost 20 percent from the current rate of $3,047,972. It indicates that the “proposed EAS subsidy is higher than our previous

3 A commenter, a single individual, was concerned with the high level of subsidy requested by American. He note d that while traffic has responded to American’s service, “t hey are asking for even more taxpayer dollars than what is

in their current contract. ....

. I would like to see Watertown’s airport succeed, but not at the expense of an inflated subsidy that could jeopardize the entire Essential Air Service program.”

4 Cape Air transported 5,115 and 6,434 in the years ended October 31, 2010 and 2011, the last two full years before it was replaced by American. Cape Air’s level of traffic exceeded what its predecessors had carried.- 4

-

agreement primarily due to the proposed additional departure” each week. 5 The EAS staff met with officials from American to attempt to resolve this paradox of both substantially increased

traffic and subsidy , but there was no resolution

. 6

Order 2013

- 5

- 13 requested 12 round trips per week . As shown in Appendix B

- 2, American projects a 69 percent load factor at Watertown , indicating that unused seats remain available with the current service level of 12 round trips per week, and making the need to require additional service even more problematic. 7 In addition, t he EAS program is not in an expansion mode. Congress has tightened eligi bility standards, and several communities have recently lost service altogether

. A number of additional communities may soon lose all EAS subsidy as Congress has further tightened eligibility standards based on Fiscal Year 2013 data. For th e reasons cite d

above , we have tentatively decided not to increase the required level of service at Watertown

, and direct American to show cause as to why we should not select it to continue the current level of service, i.e., 12 nonstop round trips per week with region al jets to Chicago O’Hare, with the annual subsidy level set at $3,356,349. 8

We expect that with another two years of American’s service

, the carrier and the community will develop ways to not only maintain Watertown ’ s current high traffic levels

, but a lso work toward reducing the subsidy requirements for that service.

Carrier Fitness

49 U.S.C. §§ 41737(b) and 41738 require that the Department find an air carrier fit, willing, and able to provide reliable service before the Department may subsidize it to provide EAS. American, Delta, and SkyWest are subject to the Department’s continuing fitness requirements, and no information has come to our attention that would cause us to question the carriers ’ fitness

at this time. DOT has contact ed the Federal Aviation Administration, and it has raised no concerns that would negatively affect our fitness findings. We therefore conclude that the three

carrier s remain fit to conduct the operations proposed here.

This Order is issued under authority delega ted in 49 CFR Part 1. 25 a (b)

.

5 In fact, 43 percent of the subsidy increa se is due to the increased service: $3,046,972 x 13/12 = $3,301,970;$3,301,970

- $3,046,972 = $253,998 . The overall increase in subsidy was $588,073; and $253,998 is 43 percent of that amount.

6 SkyWest’s proposal at Paducah , the most expensive of the p roposals at the other six communities, also projected

increased traffic and increased subsidy . However, unlike American’s proposals at Watertown, SkyWest’s is for

status

- quo service

. 7 We note that carriers can always, and they occasionally do, operate more service than they contract to provide but without subsidy

. 8 $3,636,045 x 12/13 = $3,356,349. Even with that reduced level of service Watertown’s subsidy is still very high

. Compared to Paducah, the most expensive of the other communities at issue h ere, Watertown requires two

- thirds more annual subsidy: $3,356,349 ÷ $2,034,160.- 5

-

ACCORDINGLY,

1. We direct American to show cause within ten (10) business days of the service date of this

Order why we should not select it to provide EAS at Watertown , New York, as described in this Order and in Appendix C

- 1. If we receive no objection, we delegate to the Director, Office of Aviation Analysis, authority to make this decision final;

2. We select Delta to provide EAS at Pellston and Sault Ste. Marie, Michigan, as described in Appendices C

- 2 and C

- 3, respectively;

3. We select SkyWest to provide EAS at Eau Claire, Wisconsin, Hancock/Houghton and Muskegon, Michigan, and Paducah, Kentucky, as described in Appendices C

- 4, C

- 5

, C

- 6, and

C

- 7, respectively ;

4 . We direct American, Delta, and SkyWest 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 from the service date of

the Order 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 ;

5 . We find that American, Delta, and SkyWest, continue to be fit, willing and able to operate as certificated air carrier s and capable of providing reliable EAS at Eau Claire, Wisconsin; Hancock/Houghton, Muskegon, Pellston, Sault Ste. Marie, Michigan; Paducah, Kentucky; and Watertown, New York;

6. Under our authority in 49 U.S.C. § 40109, w e will allow American t o cease operations at

Watertown on 120 days ’ notice;

7 . Th ese docket s will remain open until further Order of the Department; and- 6

-

8 . We will serve copies of this Order on the civic officials of Eau Claire, Wisconsin; Hancock/Houghton, Muskegon, Pellston, Sault Ste. Marie, Michigan; Paducah, Kentucky; and
Watertown, New York

, and on American, Delta , and on SkyWest.

By:

Susan L. Kurland Assistant Secretary for

Aviation and International Affairs (SEAL)

An electronic version of this document is available at http://www.reg ulations.govAppendix A

Nonstop Great Circle Miles to Chicago (ORD) Nonsto p Miles to Watertown (ART) Muskegon, MKG 118 New York, EWR 247 Eau Claire, EAU, 268 Boston, BOS 277 Pellston, PLN, 293 Philadelphia, PHL 287 Hancock/Houghton, CMX 359 Pittsburgh, PIT 324 Sault Ste. Marie, CIU, 341 Cleveland, CLE 346

Paduc ah, PAH 343 Washington, DCA 359 Watertown, ART, 617 Detroit, DTW 391 Chicago, ORD 617

Nonstop Great Circle Miles to Detroit (DTW) Muskegon, MKG 161 Pellston, PLN, 243 Sault Ste. Marie, CIU, 284

Watertown

, ART

, 391 Hancock/Houghton, CMX 42 5 Eau Claire, EAU, 447 Paducah, PAH 458Appendix B-1

Essential Air Service to be Provided to Eau Claire, WI; Hancock/Houghton, Muskegon, Pellston, Sault Ste. Marie, MI;
and Paducah, KY; and Watertown, NY

Carrier American 1/ Delta SkyWest Community Watertown Pellston Sault Ste. Marie Eau Claire Houghton Muskegon Paducah

Docket 1997-2842 2011-0133 2009-0303 2009-0306 2009-0302 2009-0301 2009-0299 Weekly Round Trips 12 13 13 14 14 14 14

Hub ORD DTW DTW ORD ORD ORD ORD Aircraft Type RJs RJs RJs RJs RJs RJs RJs

Seats 44 50 50 50 50 50 50
Departures 1,227 1,330 1,330 1,427 1,427 1,427 1,427 Stage Length 617 293 341 268 359 118 342

Available Seat Miles 33,301,324 19,484,500 22,676,500 19,121,800 25,614,650 8,419,300 24,401,700 Revenue Passenger Miles 22,911,678 12,373,390 13,889,612 10,720,000 17,950,000 3,976,600 13,680,000

Block Time 2.12 1.17 1.25 1.13 1.20 0.77 1.30

Block Hours 2,606 1,553 1,662 1,617 1,712 1,094 1,855
Passengers 37,134 42,230 40,732 40,000 50,000 33,700 40,000
Passenger Fare $132.00 $112.96 $108.73 $93.00 $98.00 $73.00 $97.00

Passenger Revenue $4,918,901 $4,770,498 $4,428,872 $3,719,999 $4,900,000 $2,460,100 $3,880,001

Other Revenue $0 $653,559 $606,756 $0 $0 $0 $0

Total Revenue $4,918,901 $5,424,057 $5,035,628 $3,719,999 $4,900,000 $2,460,100 $3,880,001

Direct Expenses $6,654,388 $3,767,625 $4,031,811 $3,784,086 $4,006,679 $2,559,823 $4,340,569
Indirect Expenses $1,226,802 $2,308,515 $2,324,283 $1,231,662 $1,318,060 $1,106,893 $1,291,965
Operating Expenses $7,881,190 $6,076,140 $6,356,094 $5,015,748 $5,324,739 $3,666,716 $5,632,534

Profit $394,060 $425,330 $444,927 $250,787 $266,237 $183,336 $281,627

Economic Cost $8,275,250 $6,501,470 $6,801,021 $5,266,535 $5,590,976 $3,850,052 $5,914,161

Annual Subsidy $3,356,349 $1,077,413 $1,765,393 $1,546,536 $690,976 $1,389,952 $2,034,160

1/ Reflects an application of the factor of 12/13 to American's proposal.Appendix B-2

American's Current and Prior SkyWest's Current and Prior Proposals at Watertown Proposals at Paducah

Percent Percent

2011 2013 Change 2011 2013 Change

Miles 617 617 343 343
Departures 1,223 1,329 8.67% 1,427 1,427 0.00%

Blk Time 1.94 2.12 9.28% 1.30 1.30 0.00% Completion 98.00% 98.00% 98.00% 98.00%

Seats 44 44 50 50

ASMs 33,203,090 36,076,434 8.65% 24,473,050 24,879,600 1.66%

RPMs 17,730,450 24,820,857 39.99% 12,005,000 13,680,000 13.95%

Load Factor 53.00% 68.80% 49.05% 54.98%
Passengers 28,737 40,228 39.99% 35,000 40,000 14.29%
Average Fare $142 $132 -7.04% 115 97 -15.65%

Revenue $4,094,786 $5,328,809 30.14% $4,025,000 $3,880,000 -3.60%

Total Expenses $6,802,627 $8,537,956 25.51% $5,462,643 $5,632,534 3.11%

Economic Cost $7,142,758 $8,964,854 25.51% $5,735,775 $5,914,161 3.11%

Subsidy $3,047,972 $3,636,045 19.29% $1,710,775 $2,034,161 18.90%

Revenue ÷ RPMs $0.2309 $0.2147 -7.04% $0.3353 $0.2836 -15.41%
Expense ÷ ASM $0.2151 $0.2485 15.51% $0.2344 $0.2377 1.43%

BELF 1/ 93.15% 115.75% 24.26% 69.90% 83.81% 19.90%

1/ Breakeven Load Factor: Revenue per RPM ÷ Expense per ASM. For example, $0.2151 Expense per ASM ÷ $0.2309 Revenue per RPM = 93.15 percent. If Expense per ASM
exceeds Revenue per RPM, then regardless of the number of passengers carried (recognizing that load factor can never exceed 100 percent), the community will continue to require subsidy support.Appendix C

- 1

American, Essential Air Service to be Provided to Watertown, New York Docket 1997

- 2842

Effective Period : December 1, 2013, through January 31, 201 6 ; Service: Twelve (12) nonstop round trip s per week to Chicago O’Hare (ORD) ; Aircraft Type : Embraer

- 140 Regional Jet 1 Annual Subsidy : $ 3,356,349 Annual Flights : 1,227 2
Subsidy per Flight : $ 2,735 3
Weekly Subsidy Ceiling : $ 65,640 4

The carrier understands that it may forfeit its compensation for a ny 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 r equired service, without prior approval. The carrier underst ands 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 cert ain weather cancellations, only completed fli ghts 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 per iod, it may jeopardize its entire subsidy claim for the period in question. If the ca rrier 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 receiv e written approval from the Department to be ensured of full compensati on. 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 op erated; flights that overfly points for lack of traffic will not b e 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 e xtent of access to the national air transportation sy stem 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 stipulated amounts or at the stipulated service levels, the carrier may cease to provide service to that spec ific location without regard to any requirement for notice of such cessation. Those adjustment s 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 pa yment.

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 forego ing paragraph.

Funds may not be available for performance under this Order beyond January 15, 2014 . The Government’s obligation for performance under this Order beyond January 15, 2014 , is subject to the availability of funds from which payment for services can be made. No legal liability on the part of the Government for a ny payment may arise for performance under this Order beyond January 15, 2014 , until funds are made available to the Department for performance. If sufficient funds are not made available for performance beyond January 15, 2014

, the Department will provid e notice in writing to the carrier.

All claims for payment, including any amended claims, must be submitted within 90 days of the last day of the month for which compensation is being claimed. For example, claims filed for service provided in July must b e filed by October 31; August claims must be submitted by November 30, and so on.

1 Flights may be operated by American Eagle or Chautauqua , as American deems appropriate

2 12 trips per w eek x two directions x 52 weeks x 313/312 days x .98 completion = 1,22 7 flights.

3 $ 3,356,349 ÷ 1,227 flights.

4 $ 2,735 per flight x 24 flights per week.Appendix C

- 2
Delta, Essential Air Service to be Provided to Pellston, Michigan Docket 2011

- 0133

Effective Period : November 1, 2013, through January 31, 201 6 ; Service: Off p eak: Twelve (12) nonstop round trips per week to Detroit (DTW); Peak: Fourteen (14) nonstop round trips per week to Detroit (DTW) with CRJ

- 200 Aircraft; Annual Subsidy : $1,077,413
Annual Flights : 1,329 1

Subsidy per Flight : $811 2

Seasonality 3 O ff

- Peak Per iod Peak Period
Weekly Subsidy Ceiling : $ 19,464 4 $22,708 5

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 pla ns 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 s upporting 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 confo rmance with the order for a significant period, it may jeopardize its entire subsidy claim for the period in question. If the carrier contemplates any such changes beyond the scop e of the order during the applicable period of these rates, it must first no tify the Office of Aviation Analysis in writing and receive written approval from the Department to be ensured of full compensation. Should circumstances warrant, the Department may locate and select a replacement carrier to provide service on these route s. 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 deviat ing 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 do es make payments in the stipulated amounts or at the stipulated service levels, the carrier may cea se 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 th at are mutually agreed to in writing by the Department and carrier do not constitut e a total or partial reduction or cessation of payment.

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 am endments thereto shall not operate to controvert the foregoing paragraph.

Funds may not be available for performance under this Order beyond January 15, 2014 . The Government’s obligation for performance under this Order beyond January 15, 2014 , is subject to the availability of 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 January 15, 2014 , until funds are made available to the Departmen t for performance. If sufficient funds are not made available for performance beyond January 15, 2014, the Department will provide notice in writing to the carrier.

All claims for payment, including any amended claims, must be submitted within 90 days of the last day of the month for which compensation is being claimed. For example, claims filed for service provided in July must be filed by October 31; August claims must be submitted by November 30, and so on.

1 Off

- Peak, 26 weeks: 12 trips per w eek x two directions x 26 weeks x 0.98 = 612 flights; Peak, 26 weeks: 14 trips per w eek x two directions x 26 weeks x 0.98 x 183/182 day s = 717 flights.

2 $1,077,413 ÷ 1,329 flights.

3 Off

- Peak, 11/1/13

-- 5/3/14; Peak, 5/4/14

— 11/1/14; Off

- Peak, 11/2/14

— 5/2/15; Peak, 5/3/15

- 10/31/15 ; Off

- peak,

11/1/15

– 1/31/16

4 $ 811 per flight x 24 flights per week.

5 $ 811 per flight x 28 flights per week

.Appendix C

- 3 Delta, Essential Air Service to be Provided to Sault Ste. Marie, Michigan Docket 2009

- 0303

Effective Period : February 1, 2014, through January 31, 201 6 ; Service: Thirteen nonstop round trips per week to Detroit (DTW) ; Aircraft Type : CRJ

- 200 Annual Subsidy : $ 1,765,393 Annual Flights : 1,329 1
Subsidy per Flight : $ 1,328 2
Weekly Subsidy Ceiling : $ 34,528 3

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 servi ce plans outlined in the order and any other significant elements of the required service, without prior approval. The carrier understands that an aircraft take

- off and landing at its scheduled destination constitutes a completed flight; absent an explana tion supporting subsidy eligibility for a flight that has not been completed, such as certain weather cancellations, only completed flights are considered eligible for subsidy.

In addition, if the carrier does not schedule or operate its flights in full conformance with the order for a significant period, it may jeopardize its entire subsidy claim for the period in question. If the carrier contemplates any such changes beyond the scop e of the order during the applicable period of these rates, it must fi rst notify the Office of Aviation Analysis in writing and receive written approval from the Department to be ensured of full compensation. Should circumstances warrant, the Department may locate and select a replacement carrier to provide service on these routes. The carrier must complete all flights that can be safely operated; flights that overfly points for lack of traffic will not be compensated. In determining whether subsidy payment for a deviat ing flight should be adjusted or disallowed, the Depar tment 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 pa yments 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 do es make payments in the stipulated amounts or at the stipulated service levels, the carrier m ay 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 th at are mutually agreed to in writing by the Department and carrier do not con stitute a total or partial reduction or cessation of payment.

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.

Funds may not be available for performance under this Order beyond January 15, 2014 . The Government’s obligation for performance under this Order beyond January 15, 2014 , is s ubject to the availability of 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 January 15, 2014 , until funds are made available to the Dep artment for performance. If sufficient funds are not made available for performance beyond January 15, 2014

, the Department will provide notice in writing to the carrier.

All claims for payment, including any amended claims, must be submitted within 90 d ays of the last day of the month for which compensation is being claimed. For example, claims filed for service provided in July must be filed by October 31; August claims must be submitted by November 30, and so on.

1 13 trips per w eek x two directions x 52 weeks x 313/312 days x .98 completion = 1,329 flights.

2 $ 1,765,393 ÷ 1,329 flights.

3 $ 1,328 per flight x 26 flights per week.Appendix C

- 4 SkyWest

, Essential Air Se rvice to be Provided to Eau Claire, Wisconsin Docket 2009

- 030 6

Effective Period : January 1, 2014, through January 31, 201 6 ; Service: Fourteen (14) nonstop round trips per week to Chicago O’Hare (ORD); Aircraft Type : CRJ

- 200 Annual Subsidy : $ 1, 546,536

An nual Flights : 1, 431 1
Subsidy per Flight : $ 1, 081 2
Weekly Subsidy Ceiling : $ 3 0,268 3

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, inclu ding the service plans outlined in the order and any other significant elements of the required service, without prior approval. The carrier understands that an aircraft take

- off and landing at its scheduled destination constitutes a completed flight; abs ent 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 f lights in full conformance with the order for a significant period, it may jeopardize its entire subsidy claim for the period in question. If the carrier contemplates any such changes beyond the scop e of the order during the applicable period of these rat es, it must first notify the Office of Aviation Analysis in writing and receive written approval from the Department to be ensured of full compensation. Should circumstances warrant, the Department may locate and select a replacement carrier to provide se rvice 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 deviat ing flight should be adjusted or disallo wed, 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 do es make payments in the stipulated amounts or at the stipulated service levels, the carrier may cease to provide service to that specific location without regard to any requirement for notice of such cessation. Those adjustments in the levels of subsidy and/or service th at are mutually agreed to in writing by the Department and carr ier do not constitute a total or partial reduction or cessation of payment.

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.

Funds may not be available for performance under this Order beyond January 15, 2014 . The Government’s obligation for performance under this Order beyond January 15, 2014 , is subject to the availability of 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 January 15, 2014 , until funds are made availa ble to the Department for performance. If sufficient funds are not made available for performance beyond January 15, 2014

, the Department will provide notice in writing to the carrier.

All claims for payment, including any amended claims, must be submitt ed within 90 days of the last day of the month for which compensation is being claimed. For example, claims filed for service provided in July must be filed by October 31; August claims must be submitted by November 30, and so on.

1 1 4 trips per w eek x two directions x 52 weeks x 313/312 days x .98 completion = 1, 431 flights.

2 $ 1, 546,536 ÷ 1, 431 flights.

3 $ 1,081 per flight x 28 flights per week.Appendix C

- 5 SkyWest, Es sential Air Service to be Provided to Hancock/Houghton, Michigan Docket 2009

- 0302

Effective Period : January 1, 2014, through January 31, 201 6 ; Service: Fourteen (14) nonstop round trips per week to Chicago O’Hare (ORD) ; Aircraft Type : CRJ

- 200

Annual Sub sidy : $ 690,976 Annual Flights : 1,431 1
Subsidy per Flight : $ 483 2
Weekly Subsidy Ceiling : $ 13,524 3

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 ra te order, including the service plans outlined in the order and any other significant elements of the required service, without prior approval. The carrier understands that an aircraft take

- off and landing at its scheduled destination constitutes a comple ted flight; absent an explanation supporting subsidy eligibility for a flight that has not been completed, such as certain we ather cancellations, only completed flights are considered eligible for subsidy.

In addition, if the carrier does not schedule o r operate its flights in full conformance with the order for a significant period, it may jeopardize its entire subsidy claim for the period in question. If the carrier contemplates any such changes beyond the scop e of the order during the applicable peri od of these rates, it must first notify the Office of Aviation Analysis in writing and receive written approval from the Department to be ensured of full compensation. Should circumstances warrant, the Department may locate and select a replacement carrie r 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 deviat ing flight should be adju sted 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 complet ely, 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 do es make payments in the stipulated amounts or at the stipulated service levels, the carrier may cease to provide service to that specific location without regard to any requirement for notice of such cessation. Those adjustments in the levels of subsidy and/or service th at are mutually agreed to in writing by the Depa rtment and carrier do not constitute a total or partial reduction or cessation of payment.

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

Funds may not be available for performance under this Order beyond January 15, 2014 . The Government’s obligation for performance under this Order beyond January 15, 2014 , is subject to the availability of 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 January 15, 2014 , until funds are made available to the Department for performance. If sufficient funds are not made available for performance beyond January 15, 2014

, the Department will provide notice in writing to the carrier.

All claims for payment, including any amended claims, must be submitted within 90 days of the last day of the month for which compensation is being claimed. For example, claims filed for service provided in July must be filed by October 31; August claims must be submitted by November 30, and so on.

1 14 trips per w eek x two directions x 52 weeks x 313/312 days x .98 completion = 1,431 flights.

2 $ 690,976 ÷ 1,431 flights.

3 $ 483 per flight x 28 flights per week.Appendix C

- 6 SkyWest, Essential Air Service to be Provided to Muskegon, Michigan Docket 2009

- 0301

Effective Period : January 1, 2014, through January 31, 201 6 ; Service: Fourteen (14) nonstop round trips per week to Chicago O’Hare (ORD) ; Aircraft Type : CRJ

- 200

Ann ual Subsidy : $ 1,389,952 Annual Flights : 1,431 1
Subsidy per Flight : $ 971 2
Weekly Subsidy Ceiling : $ 27,188 3

The carrier understands that it may forfeit its compensation for any flights that it does not operate in conformance with the terms and stipulations of the rate order, including the service plans outlined in the order and any other significant elements of the required service, without prior approval. The carrier understands that an aircraft take

- off and landing at its scheduled destination constitutes a completed flight; absent an explanation supporting subsidy eligibility for a flight that has not been completed, such as cert ain weather cancellations, only completed flights are considered eligible for subsidy.

In addition, if the carrier does not s chedule or operate its flights in full conformance with the order for a significant period, it may jeopardize its entire subsidy claim for the period in question. If the carrier contemplates any such changes beyond the scop e of the order during the applic able period of these rates, it must first notify the Office of Aviation Analysis in writing and receive written approval from the Department to be ensured of full compensation. Should circumstances warrant, the Department may locate and select a replaceme nt 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 deviat ing flight

shoul d 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 o r 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 do es make payments in the stipulated amounts or at the st ipulated 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 th at 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 subject to, and incorporate by reference, relevant statutes and Department regulations, as they may be amended

from time to time. Ho wever, any such statutes, regulations, or amendments thereto shall not operate to controvert the foregoing paragraph.

Funds may not be available for performance under this Order beyond January 15, 2014 . The Government’s obligation for performance under th is Order beyond January 15, 2014 , is subject to the availability of 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 January 15, 2014 , unt il funds are made available to the Department for performance. If sufficient funds are not made available for performance beyond January 15, 2014

, the Department will provide notice in writing to the carrier.

All claims for payment, including any amended claims, must be submitted within 90 days of the last day of the month for which compensation is being claimed. For example, claims filed for service provided in July must be filed by October 31; August claims must be submitted by November 30, and so on.

1 14 trips per w eek x two directions x 52 weeks x 313/312 days x .98 completion = 1,431 flights.

2 $ 1,389,952 ÷ 1,431 flights.

3 $ 971 per flight x 28 flights per week.Appendix C

- 7 SkyWest, Essential Air Service to be Provided to Paducah, Kentucky Docket 2009

- 0299

Effective Period : January 1, 2014, through January 31, 201 6 ; Service: Fourteen (14) nonstop round trips per week to Chicago O’Hare (ORD) ; Aircraft Type : CRJ

- 200 Annual Subsidy : $ 2,034,160 Annual Flights : 1,431 1
Subsidy per Flight : $ 1,421 2
Weekly Subsidy Ceiling : $ 39,788 3

The carrier understands that it may forfeit its compensation for any flights that it does not operate in conformance with the terms and

sti pulations of the rate order, including the service plans outlined in the order and any other significant elements of the requ ired service, without prior approval. The carrier understands that an aircraft take

- off and landing at its scheduled destination c onstitutes a completed flight; absent an explanation supporting subsidy eligibility for a flight that has not been completed, such as cert ain weather cancellations, only completed flights are considered eligible for subsidy.

In addition, if the carrier does not schedule or operate its flights in full conformance with the order for a significant period, it may jeopardize its entire subsidy claim for the period in question. If the carrier contemplates any such changes beyond the scop e of the order during the applicable period of these rates, it must first notify the Office of Aviation Analysis in writing and receive written approval from the Department to be ensured of full compensation. Should circumstances warrant, the Department may locate and

select a replacement carrier to provide service on these routes. The carrier must complete all flights that can be safely operated; flights that overfly points for lack of traffic will not be compensated. In determining whether subsidy payment for a deviat ing fl ight should be adjusted or disallowed, the Department will consider the extent to which the goals of the program are met and the e xtent of access to the national air transportation system provided to the community.

If the Department unilaterally, either p artially 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 do es make payments in the stipulated amounts or at the stipulated service levels, the carrier may cease to provide service to that specific location without regard to any requirement for notice of such cessation. Those adjustments in the levels of subsidy and/or service th at 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 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.

Funds may not be available for performance under this Order beyond January 15, 2014 . The Government’s obligation for performanc e under this Order beyond January 15, 2014 , is subject to the availability of 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 January 15, 2014 , until funds are made available to the Department for performance. If sufficient funds are not made available for performance beyond January 15, 2014

, the Department will provide notice in writing to the carrier.

All claims for payment, including a ny amended claims, must be submitted within 90 days of the last day of the month for which compensation is being claimed. For example, claims filed for service provided in July must be filed by October 31; August claims must be submitted by November 30, a nd so on.

1 14 trips per w eek x two directions x 52 weeks x 313/312 days x .98 completion = 1,431 flig hts.

2 $ 2,034,160 ÷ 1,431 flights.

3 $ 1,421 per flight x 28 flights per week.