Order: 2014-9-18 

Served: September 25, 2014 

 UNITED STATES OF AMERICA 

 DEPARTMENT OF TRANSPORTATION 

 OFFICE OF THE SECRETARY 

 WASHINGTON, D.C. 

Issued by the Department of Transportation 

on the 25th day of September, 2014 

Essential Air Service at 

 

VICTORIA, TEXAS DOT-OST-2005-20454 

DOT-OST-2004-18715 

 

under 49 U.S.C. 41731 et seq. 

ORDER SETTING ANNUAL SERVICE LEVEL AND TOTAL COSTS 

UNDER THE ALTERNATE ESSENTIAL AIR SERVICE PROGRAM 

Summary 

By this Order, we approve Victoria County’s (Victoria) application under the Alternate 

Essential Air Service (AEAS) Program. The Department will enter into a Grant Agreement 

with the community to provide funding for regularly scheduled charter service consisting of 

at least 1,032 annual nonstop flights between Victoria Regional Airport (Victoria) and 

Dallas/Fort Worth International Airport (DFW), and Austin-Bergstrom International Airport 

(AUS), for a two-year period from November, 1, 2014, when the Part 135 and/or Part 121 

direct air carrier inaugurates service at Victoria through October 31, 2016. By the terms of 

the Grant Agreement, service will be provided utilizing 19-passenger two-pilot, twin-engine 

aircraft at an annual rate of not more than $2,288,152. 

Background 

By Order 2012-7-17 (July 13, 2012), the Department selected Sun Air Express, LLC d/b/a 

Sun Air International (Sun Air) to provide EAS at Victoria to George Bush 

Intercontinental Airport (Houston or IAH) using 9-passenger, twin engine Piper Chieftain 
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aircraft for a two-year period beginning when the air carrier commenced full EAS.1 Under 

that Order, Sun Air provides Victoria with 24 weekly nonstop round trips for an annual 

subsidy of $2,294,036. 

As the end of the contract was approaching, we issued Order 2014-3-6 (March 11, 2014) 

requesting proposals from air carriers interested in providing EAS at the community for a 

new term. In response to that Order, Boutique Air, and Sun Air submitted proposals. Both 

air carriers’ proposals and the community’s comments may be accessed online at 

www.regulations.gov by entering DOT-OST-2005-20454 in the search block. 

Proposal of Boutique Air 

Boutique Air submitted a proposal with three options, all using 9-passenger, single-engine 

Pilatus PC-12 aircraft. Option 1 proposed 12 nonstop round trips to DFW and 12 nonstop 

round trips to IAH (for a total of 24 round trips a week) for an annual subsidy of $2,201,715. 

Option 2 proposed 24 nonstop round trips to just IAH for an annual subsidy of $1,941,403. 

Option 3 proposed 18 nonstop round trips to DFW for an annual subsidy of $1,958,613. 

Proposal of Sun Air 

Sun Air submitted a proposal to provide four round trips each weekday and weekend (24 

per week) to IAH using 9-passenger, twin-engine Piper Chieftain PA-31 aircraft for an 

annual subsidy of $1,996,978. 

Community Comments 

On May 5, 2014, Mr. Jason Milewski, the Managing Director of the Victoria Regional 

Airport, with support from the community of Victoria, submitted comments on this air 

carrier selection case. Mr. Milewski’s letter rejected the proposals put forth by Boutique 

Air and Sun Air and submitted an application for AEAS. 

Regarding Sun Air’s proposal, the community based its decision not to support their 

proposal on numerous maintenance cancellations during the course of the current EAS 

contract, as well as aircraft baggage limitations and a steep decline in passenger 

enplanements since the carrier started serving Victoria. With respect to Boutique Air’s 

proposal, Mr. Milewski stated the community was unwilling to waive its right to twinengine aircraft at this time 

The community supports air transportation conducted by Public Charters, Inc. (Public 

Charters), an indirect air carrier, which would contract with Corporate Flight Management, 

a Federal Aviation Administration (FAA) approved direct air carrier for an annual subsidy 

of $2,288,152. Public Charters proposed one service option, with one one-stop round trip to 

DFW via AUS, which would operate every day except Sunday. A second nonstop round 

trip to AUS would operate three days a week. Public Charters would use 19-passenger 

Jetstream 31/32 aircraft. 

 

1 Sun Air started full EAS on October 1, 2012, thus making the contract expiration date September 30, 2014. 
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Alternate Essential Air Service Background 

On December 12, 2003, President Bush signed into law the Vision 100—Century of 

Aviation Reauthorization Act, P.L. 108-176 (Vision 100), which, among other things, 

directed the Department to establish certain Community and Regional Choice Programs.2

One of those is AEAS. Congress established this Pilot program to provide communities 

with an alternative to the traditional EAS-type service. Typically, the EAS program pays 

subsidy to regional air carriers to provide two or three round trips a day to a major hub 

airport with twin-engine aircraft. The AEAS program is designed to allow communities to 

forego their EAS for a prescribed amount of time in exchange for receiving a grant to spend 

in a variety of ways that might better suit their individual needs.3

 These options are spelled 

out in statute and include more frequent service with smaller aircraft, on-demand air taxi 

service, scheduled or on-demand surface transportation, regionalized air service, or 

purchasing an aircraft. Each community awarded a grant must execute a grant agreement 

with the Department before it begins spending funds under a grant award. By notice dated 

July 27, 2004, the Department established AEAS and invited communities to submit 

proposals under the program. 

Decision 

After careful consideration, including the comments of the local officials, the Department 

has decided to approve Victoria Regional Airport’s application for AEAS, pending 

execution of a Grant Agreement. 

We base this decision on two factors. First, the community has been unhappy with the 

service provided by the incumbent air carrier, Sun Air. Indeed, service provided by the 

airline was not satisfactory, and, as a result, traffic levels dropped significantly. Therefore, 

we ruled out re-selecting Sun Air for a new contract term. Second, Boutique Air proposed 

service using single-engine aircraft, and the community was not willing to waive its right to 

twin-engine aircraft. 

The community strongly supports inclusion in the AEAS program, and the proposed 

indirect air carrier and direct air carrier, Public Charters and Corporate Flight Management, 

respectively, both have a proven track record of providing AEAS. 

We are concerned that Public Charters projected passengers seems highly ambitious. The 

proposal “anticipates” a 71% increase over 2012 calendar year passenger levels. That 

would mean that Public Charters expects to exceed passenger levels when Colgan Air 

served the community, which not only code-shared with Continental Airlines and operated 

as Continental Express (later United Airlines and United Express), it used larger, 34-

passenger Saab 340 aircraft. We are not entirely convinced this is realistic, even though the 

passenger usage estimates would ensure that Victoria’s subsidy per passenger go below the 

$200 cap. As stated earlier, service provided by Sun Air was not satisfactory, and, as a 

 

2 See Appendix A for a copy of the statute. 

3 Under no circumstances could a community participate in both the traditional EAS Program and the AEAS 

Program at the same time. Communities choosing to withdraw from the AEAS Program may request to be 

reinstated in the traditional EAS program, but there could be a hiatus in service. 
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result, traffic levels dropped significantly, and its per passenger subsidy is currently above 

the cap at $369 (based on 12 months of data ending March 31, 2014). The community said 

they completed three studies to understand its traffic patterns and air service needs and they 

believe this to be a promising proposal, and has requested a four-year term for the AEAS 

grant. However, given the high passenger projections and other uncertainties, we will select 

this proposal for an initial two-year period. 

Eligibility discussion 

To maintain eligibility in the AEAS program, communities must comply with all eligibility 

requirements that communities subsidized by traditional EAS are subject to. 

The Department of Transportation and Related Agencies Appropriations Act 2000, prohibits 

the Department from subsidizing EAS to communities located within the 48 contiguous 

States receiving per passenger subsidy amounts exceeding $200, unless the communities are 

located more than 210 miles from the nearest large or medium hub.4

 Victoria is within 210 

miles of IAH, a large hub airport, and therefore subject to the $200 cap. The Department 

fully expects the community and Public Charters to work cooperatively to ensure subsidy 

rates are in compliance with the $200 per passenger cap to remain eligible for EAS.5

 

Additionally, the community must maintain an average of 10 enplanements per service day. 

Public Law No. 112-95 amended 49 U.S.C. §41731(a)(1)(B) to change the definition of 

“eligible place” for the purpose of receiving EAS. The amendment states that to be eligible, 

a community must maintain an average of 10 enplanements or more per service day, as 

determined by the Secretary, during the most recent fiscal year beginning after 

September 30, 2012.6

In summary, although we are selecting this AEAS application for a period of two years, 

with a possible two-year extension, the community must maintain eligibility requirements 

like other communities in the AEAS/EAS programs. Victoria must enplane more than 10 

passengers per service day for each fiscal year and have a per passenger subsidy cap of less 

than $200 (based on FY2015, which is October 1, 2014, through September 30, 2015). 

Service Transition 

To ensure a smooth carrier transition, the Department will extend Sun Air’s service period 

at Victoria through October 31, 2014, or until the direct air carrier begins operations. This 

will allow extra time for Sun Air to wind down its existing operations and give the 

incoming air carrier additional time to start its service. We expect Sun Air to maintain its 

 

4 Congress first established the $200 ceiling under P.L. 101-164 for fiscal year 1990, and reestablished it in 

fiscal years 1994-1999. The ceiling was made permanent by P.L. 106-69, the Department of Transportation 

and Related Agencies Appropriations Act of 2000. 

5 On May 1, 2014, a Notice of Proposed Enforcement Policy on the $200 per passenger subsidy cap was 

published in the Federal Register (Volume 79, Issue 84). It outlined the Department’s proposed policy on this 

issue, which would use traffic data from October 1, 2014, through September 30, 2015, to measure 

compliance. The Department solicited public comments on the policy and they were due June 30, 2014. A 

final document on the subject will be released in the near future. Refer to www.regulations.gov and search 

“DOT-OST-2014-0061” for more information. 

6 The Secretary also has authority to waive the 10 passenger requirement, on an annual basis, if the community 

can demonstrate that the reason the location averages fewer than 10 passengers per day is due to a temporary 

decline in enplanements and to waive the $200 subsidy-per-passenger limit. See 49 U.S.C. §41731(e). 
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current service levels at the subsidy rate described in Appendix B. In addition, before Sun 

Air suspends its service, we expect it to notify all passengers holding reservations for travel 

after the suspension date, to assist those passengers in making alternate air 

transportation arrangements, or to provide a refund of the ticket price, without penalty, if 

requested. 

ACCORDINGLY, 

1. We select the application of Victoria, Texas, as submitted by Victoria County, for 

Alternate Essential Air Service, for two years upon execution of a Grant Agreement with 

the Department and beginning November 1, 2014, ending October, 31, 2016, subject to 

compliance with all eligibility criteria;

2. At Victoria’s discretion and compliance with all AEAS/EAS program requirements, this 

contract may be extended up to two additional years; 

3. The Department directs Victoria County and the Part 380 indirect air carrier contracted as 

part of the Alternate Essential Air Service Grant Agreement to retain all books, records, and 

other source and summary 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 this Order or until the Department indicates that the 

records may be destroyed, whichever comes first. 

4. These dockets will remain open pending further Department action; and 

5. The Department will serve a copy of this Order on the civic officials of Victoria, Texas, 

the Managing Director at Victoria Regional Airport, Public Charters, Inc., Corporate Flight 

Management, Boutique Air, and Sun Air Express, LLC d/b/a Sun Air International. 

By: 

SUSAN L. KURLAND 

Assistant Secretary for 

Aviation and International Affairs 

(SEAL) 

An electronic version of this document is available at 

www.regulations.gov
 Appendix A 

 

 

49 U.S.C. § Sec. 41745. Community and regional choice programs 

(a) ALTERNATE ESSENTIAL AIR SERVICE PILOT PROGRAM 

(1) ESTABLISHMENT - The Secretary of Transportation shall establish an alternate essential 

air service pilot program in accordance with the requirements of this section. 

(2) ASSISTANCE TO ELIGIBLE PLACES - In carrying out the program, the Secretary, instead 

of paying compensation to an air carrier to provide essential air service to an eligible place, may 

provide assistance directly to a unit of local government having jurisdiction over the eligible 

place or a State within the boundaries of which the eligible place is located. 

(3) USE OF ASSISTANCE - A unit of local government or State receiving assistance for an 

eligible place under the program may use the assistance for any of the following purposes: 

(A) To provide assistance to air carriers that will use smaller equipment to provide the 

service and to consider increasing the frequency of service using such smaller equipment 

if the Secretary determines that passenger safety would not be compromised by the use of 

such smaller equipment and if the State or unit of local government waives the minimum 

service requirements under section 41732(b). 

(B) To provide assistance to an air carrier to provide on-demand air taxi service to and 

from the eligible place. 

(C) To provide assistance to a person to provide scheduled or on-demand surface 

transportation to and from the eligible place and an airport in another place. 

(D) In combination with other units of local government in the same region, to provide 

transportation services to and from all the eligible places in that region at an airport or 

other transportation center that can serve all the eligible places in that region. 

(E) To purchase aircraft to provide transportation to and from the eligible place or to 

purchase a fractional share in an aircraft to provide such transportation after the effective 

date of a rule the Secretary issues relating to fractional ownership. 

(F) To pay for other transportation or related services that the Secretary may permit.
 Appendix B 

 

 

Sun Air Express, LLC d/b/a Sun Air International 

Essential Air Service to be Provided at Victoria, Texas 

Effective Period: October 1, 2014 through October 31, 2014 

Scheduled Service: 24 weekly nonstop round trips to George Bush Intercontinental Airport 

(Houston) 

Aircraft: 9-passenger, twin-engine Piper Chieftain 

Rate per Eligible Flight: $9381

Weekly Ceiling for each community: $45,0242 

Note: The carrier understands that it may forfeit its compensation for any flights that it does not operate in conformance 

with the terms and stipulations of the rate Order, including the service 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 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 scope of the Order during the applicable period of this rate, 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 deviating flight should be adjusted or disallowed, the Department will consider 

the extent to which the goals of the program are met and the extent of access to the national air transportation system 

provided to the community. 

If the Department unilaterally, either partially or completely, terminates or reduces payments for service or changes 

service requirements at a specific location provided for under this Order, then, at the end of the period for which the 

department does make payments in the stipulated service levels, the carrier may cease to provide service to that 

specific location without regards to any requirement for notice of such cessation. Those adjustments in the levels of 

subsidy and/or service that are mutually agreed to in writing by the Department and carrier do not constitute a total 

or partial reduction or cessation of payment. 

Subsidy contract 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 are not currently available for performance under this Order beyond September 30, 2014. The Government’s 

obligation for performance under this Order beyond September 30, 2014, is subject to the availability of appropriated funds 

from which payment for services can be made. No legal liability on the part of the Government for any payment may arise 

for performance under this Order beyond September 30, 2014, until funds are made available to the Department for 

performance. If funds are not made available for performance beyond September 30, 2014, the Department will provide 

notice in writing to the carrier. 

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

 

1

 Annual compensation of $2,294,036 divided by 2,446 annual departures (48 weekly departures x 52 weeks x 98 

percent completion). 

2

 48 arrivals and departures per week multiplied by $938 per flight.