Order 2013

- 6

- 13

Served: June 1 2 , 2013



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 12th day of June , 20 1 3

Docket DOT

- OST

- 1997

- 2605

FINAL ORDER TERMINATING ELIGIBILITY

, ALLOWING SUSPENSION OF
SERVICE

, AND REQUESTING PROPOSALS

Summary By this O rder, the Department is : (1) terminating the eligibility of Lewistown and Miles City, Montana , under the Essential Air Service (“EAS”) program; (2) allowing Silver Airways, Inc. (“Silver”) , to suspend service at Lewistown and Miles City , if it chooses ; and (3) soliciting proposals from air carriers interested in providing EAS at Glasgow, Glendive, Havre, Sidney, and /or Wolf Point, Montana

, for a new contract , with or without subsidy. Air c arriers should file their proposals no later than July 2

, 2013

. An area map is attached as Appendix A.

Background By Order 2011

- 1

- 27, serv ed on February 3, 2011, the Department selected Silver (formally Gulf stream International Airlines) to provide subsidized EAS with

19

- passenger Beechcraft B

- 1900D aircraft at the above communities , for the two

- year period ended May 31, 2013. The level of service and subsidy levels for each community

under that contract is as follows: Essential Air Service at

LEWISTOWN, MONTANA MILES CITY, MONTANA GLASGOW, MONTANA GLENDIVE, MONTANA HAVRE, MONTANA SIDNEY, MONTANA WOLF POINT, MONTANA

under 49 U.S.C. 41731 et seq.- 2

-

Lewistown $1,325,733 12 RTs per week Miles City $1,621,821 12 RTs per week Glasgow $1,166,049 12 RTs per week

Glendive $1,193,391 12 RTs per week

Havre $1,162,329 12 RTs per week Sidney $2,932,152 17 RTs per week

Wolf Point $1,502,378 12 RTs per week

The complete public file for EAS at each of the above Montana communities may be accessed online through the Federal Dockets Management System at: http://www.regulations.gov by entering “DOT

- OST

- 1997

- 2605” in the “SEARCH for: Rules, Comments, Adjudications or Supporting Documents:” field. Additionally,

h istorical traffic and annual subsidy rates are detailed in Appendix B.

Legislative Changes The Federal Aviation Administration (“FAA”) Modernization and Reform Act of 2012 (Public Law 112

- 95), signed into law on February 14, 2012, amended the definition of “eligible place” for the purpose of receiving EAS. 1 The amendment, among other things, states that to be eligible, a community must have had an average subsidy per passenger of less than $1,000 during the most recent fiscal year, as determined by the Secretary of Transportation

. 2

Order to Show Cause By O rder 2013

- 3

- 13, issued on March 28, 2013, the Department tentatively determined to terminate the eligibility of Lewistown and Miles City under the EAS program. Our tentative decision was based on the statutory requirement that the average subsidy per

pass enger must be less than $1,000 during the most recent fiscal year per 49 U.S.C. § 41731(a)(1)(C).

For the most recent fiscal year (FY 2012), Silver transported 660 total passengers at Lewistown and 694 total passengers at Miles City at annual subsidy rate s of $1,325,733 and $1,621,821, respectively. Thus, the corresponding average per passenger subsidy for FY 2012 is $2,009 at Lewistown, and $2,337 at Miles City. Order 2013

- 3

- 13 directed all interested parties to show cause by April 17, 2013, as to why t he Department should not make final its tentative findings and conclusions.

Objections to the Department’s Show Cause Order The Department received a significant number of letters 3 from various concerned parties objecting to the Department’s tentative decision to terminate EAS at Lewistown and Miles City, Montana, including Governor Steve Bullock, elected community officials, County Commissioners, multiple civic org a n izat ions, travel and tourism groups, small

1 See 49 U.S.C. § 41731.

2 Communities in Alaska and Hawaii are exempt.

3 The Department also received Resolution No. 3811 from the City of Lewistown requesting the Secretary

of T ransportation delay suspension of EAS service at Lewistown.- 3

-

business owners, and concerned citizens

. 4 There were common threads to most of the comments and they are summarized below.

Numerous objecting parties encouraged the Department to take into consideration Montana’s unique geographic circumstances when making a final decision

. Montana is

the four th largest state by area in the nation but has only a bout one million residents. The objectors note that, b ecause of its huge s ize but sparse population, air transportation is vitally important to quality of life of Montana residents

.

Additionally, the objectors point to the fact that enplanements were higher when air transportation was provided by Great Lakes Aviation Ltd. (Great Lakes) with a hub

destination of Denver. When Silver was awarded the EAS contract in 2011, the hub destination changed from Denver to Billings

, and subsequently

, enplanements declined. Under these circumstances, the objecting parties request additional time, approximately two years, to replace Silver with another suitable air carrier and change the hub

destination back to Denv er.

Additionally, many of the objectors state that these communities have no bus or rail

service and that EAS is the only form of public transportation available to the citizens of Lewistown and Miles City . T herefore , terminating air service would eliminate their only access the national air transportation system.

Various objecting parties claim that terminating EAS at Lewistown and Miles City would

have a detrimental effect on the airport , the local travel and tourism industry, and the

communiti es’ ability to attract and retain businesses and high

- quality educators

. Moreover , the objectors fear that the remaining five EAS communities in Montana could be in jeopardy of losing its service in the coming years if either Lewistown or Miles City

is el iminat ed from the EAS program

.

Decision

The objecting parties ha ve not disputed our tentative determination that the communities’

average per passenger subsidy for FY 2012 is $2,009 at Lewistown, and $2,337 at Miles City

- well above the $1,000 limit. As stated above, Public Law 112

- 95 amended the definition of “eligible place” to include the requirement that during the most recent fiscal year, a community must have had an average subsidy per passenger of less than $1,000.

With regard to the low enplanement numbers on air transportation to the hub airport of Billings, the Department notes that during the previous air carrier

- selection case in 2011, the majority of the seven EAS Montana communities, by a 6 to 1 margin , favore d Silver with the hub destination being Billings. 5

W hile passenger enplanements were higher several years ago when Great Lakes provided service to Denver, t he statute does not allow the Department to look prospectively when

4 The Department also received several l etters in support of our tentative decision.

5 See Order 2011

- 1

- 27, issued on February 3, 2011.- 4

-

determining whether the communi ties meet the eligibility requirement; r ather

, the statute requires that the Department look back to the most recent prior fiscal year.

Given th is statutory requirement

, the D epartment hereby finalizes its tentative findings in

Order 2013

- 3

- 13 , and allo w s Silver to terminate service. 6 In order to allow for an orderly shutdown, we will continue to authorize subsidy through Ju ly 15 , 2013, and allow Silver to suspend service at that time. If Silver does decide to suspend service at the

communities , the Department expects it to contact all passengers who hold reservations for flights that will be suspended to inform them of the suspension, and to assist them in arranging alternative transportation or to provide them with a refund of their ticket pri ce, without penalty, if requested.

Request for Proposals As the end of the current contract approaches, we are here requesting proposals from air

carriers interested in providing EAS at Glasgow, Glendive, Havre, Sidney, and /or Wolf Point, Montana

, wit h or without subs idy, for a new two

- year period . Air carriers should file their proposals no later than July 15, 2013. After that date, our s taff will docket proposals, thereby making them public, and direct each air carrier to serve a copy of its

propos al on the civic parties and other applicants. Shortly thereafter, we will provide a summary of the proposals to community officials and ask them for their final comments. We will give full consideration to all proposals filed in a timely manner. 7

Intere sted air carriers should prepare their proposals with every expectation that their initial proposals will represent their final and only proposals. However, we retain the discretion to negotiate proposals with air carriers when we deem it desirable; in su ch cases, of course, we will give all applicants the same opportunity. We also retain the discretion to reject outright all unreasonable or unrealistic proposals and re

- solicit a new round of proposals. However, negotiation or rejections are only an occasional exception

to the rule.

We are here providing interested air carriers with some basic information to serve as guidance when they prepare their proposals, but we will not prescribe a precise format for their proposals. We expect proposa ls to adequately describe the service being proposed and the annual amount of subsidy being requested. The applicants can make their own judgments as to the level of detail they wish to present; however, they might want to include proposed schedules as we ll as supporting data for their subsidy requests, such as projected block hours, revenues and expenses. We strongly encourage clear, well

documented proposals that will facilitate their evaluation by the affected communities and the Department. 8

6 We take this action pursuant to 49 U.S.C. §§ 40101(a)(7), (11), and (16), and 41731

- 42; see also 14

CFR Part s 27 1, 323, 325.

7 Air carriers should not expect the Department to accept late filings. In cases where an air carrier proposes to provide EAS without subsidy and we determine that service can be reliably provided without such compensation, we typically do no t proceed with the carrier

- selection case. Instead, we simply rely on that carrier’s subsidy

- free service as proposed.

8 In selecting a carrier to provide subsidized EAS, 49 U.S.C. § 41733(c)(1) directs us to consider five factors: (a) scheduled service reliability; (b) contractual and marketing arra ngements with a larger carrier to- 5

-

With spe cific respect to Glasgow, Glendive, Havre, Sidney, and Wolf Point, the Department expects proposals consistent with what the communities are currently receiving, with continued service to a suitable hub airport that offers numerous connecting opportunities to the national air transportation system. Communities and air carriers are encouraged to work together in advance of the due date for proposals to design a service pattern that is desirable to the community and meets the operational

needs of the airline interested in submitting a proposal. In addition, air carriers should be very clear as to whether a specific community’s proposal is on a stand

- alone basis, or whether it is part of a larger, inseparable package with other communities.

We encourage pr oposals that meet those requirements in an efficient manner. Air carriers are also welcome to propose more than one service option, if they choose; they need not limit themselves to those requirements if they envision other, potentially more attractive

se rvice possibilities

-- different hubs, for example

-- with subsidy requirements that remain competitive.

Service and Traffic History Silver has operated subsidized service at the above communities since 2011. During the fiscal year ended 2012, the most r ecent fiscal year for which data are available, Glasgow averaged 6 enplanements a day, Glendive 2, Havre 3, Sidney 34, and Wolf Point 8. 9 In order to assist air carriers in making their traffic and revenue forecasts, we have included

historical traffic da ta in Appendix B.

Filing Requirements Air carrier proposals should be submitted to the Department with all materials merged into a single document. The document will be published on www.regulations.gov and

each page should be formatted to be viewed online.

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

- free workplaces, and nondiscrimination. 10 Consequently, all air carriers receiving Federal subsidy for EAS must certify that they are in compliance with Department regulations regarding drug

- free workplaces and nondiscrimination, and those

ensure service beyond the hub airport ; (c) interline arrangements that the applicant has made with a larger carrier at the hub; (d) community v iews, giving substantial weight to the views of the elected officials representing the users ; and (e) whether the air carrier has included a plan in its proposal to market its service to the community . In addition, the Consolidated Appropriations Act, 200 8, Public Law 110

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

9 See Appendix B for histori cal traffic data.

10 The regulations applicable to these area s are: (1) 49 CFR Part 20

-- restrictions on lobbying; (2) 49 CFR Part 21

-- Nondiscrimination in federally

- assisted programs of the Department of Transportation

-- Effectuation of title VI of the Civil Rights Act of 1964; 49 CFR Part 27

-- Nondiscrimination on the basis of disability in programs and activities receiving or benefiting from Federal financial assistance; and 14 CFR Part 382

-- Nondiscrimination on the basis of disability in air t ravel; and (3) 49 CFR Part 29

-- Government

- wide debarment and suspension (non

- procurement) and government

wide requirements for drug

- free workplace (grants).- 6

-

air carriers whose subsidies exceed $100,000 over the li fe of the rate

- term must also certify that they are in compliance with the regulations governing lobbying activities. Because the Department is prohibited from paying subsidy to air carriers that do not submit these documents, all air carriers that plan t o submit proposals involving subsidy should be aware that the selected air carrier will be required to complete the required certifications. Interested air carriers requiring more detailed information regarding these requirements should contact the Office of Aviation Analysis at (202) 366

- 5903. 11

Community and State Comments The communities and State are welcome to submit comments at any time. We encourage prospective applicants to contact the communities before they submit their proposals so that they ca n tailor them to the communities’ needs, as they will not be able to amend them after the due date. As noted earlier, we will provide a summary of the proposals to the civic parties shortly after July 2, the due date for proposals, and ask them to submit

their final comments.

This Order is issued under authority delegated in 49 CFR Part 1.25a(b)

.

ACCORDINGLY,

1. We terminate the eligibility of Lewistown and Miles City, Montana , under the Essential Air Service program, effective July 16 , 2013 ;

2. We will continue to authorize subsidy for Silver Airways, Inc. for the provision of

EAS at Lewistown and Miles City, Montana , as described in Appendix A of Order 2011

- 1

- 27 , through Ju ly 15 , 2013;

3

. We allow Silver Airways, Inc. , to suspend service at Lewistown and Miles City,

Montana , after July 15

, 2013 , if it chooses; and

4

. W e request that air carriers interested in providing Essential Air Service at Glasgow, Glendive, Havre, Sidney, and/or Wolf Point, Montana, submit their proposals, with or

with out subsidy requests, no later than July 15 , 2013. The proposals should be e

- mailed

to: EAS@dot.gov with the title “Proposal to Provide Essential Air Service at Glasgow, Glendive, Havre, Sidney, and/or Wolf Point, Monta na, Docket DOT

- OST

- 1997

- 2605;” 12

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

1 1 The certifications are available online under “Reports and Publications” at http://www.dot.gov/policy/aviation

- policy/small

- community

- rural

- air

- service/essential

- air

- service

1 2 Questions regarding filings in response to this Order may be directed to Scott Faulk at (202) 366

- 9721

or scott.faulk@dot.gov

.- 7

-

6. We will serve copies of this Order on the mayors of Lewistown, M iles City, Glasgow, Glendive, Havre, Sidney, and Wolf Point, Montana, and the airport managers of Lewistown Municipal Airport, Miles City Airport/ Frank Wiley Field, Wokal Field/Glasgow International Airport, Dawson Community Airport, Havre City

- County Airport, Sidney

- Richland Municipal Airport, Wolf Point International Airport, and t he

service list for this docket

.

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.gov/Appendix A



### AREA MAPAppendix B Page 1 of 2



### Pass e n ger Traffic and Annual Essential Air Service Subsidy at Montana 1

Lewistown

12 Months Ended Total Enplanements Total Deplanements Total

Traffic Annual Subsidy at April 1 Subsidy per Pax

Sep. 30, 2012 337 323 660 $1,325,733 $2,009

Miles City

12 Months Ended Total Enplanements Total Deplanements Total

Traffic Annual Subsidy at April 1 Subsidy per Pax

Sep. 30 2012 350 344 694 $ 1,621,821 $2,337

Glendive

12 Months Ended Total
Enplanements Total
Deplanements Total

Traffic Annual
Subsidy at
April 1 Subsidy Per Pax

Sep. 30, 2012 693 632 1,325 1,193,391 $901

Havre

12 Months Ended Total
Enplanements Total
Deplanements Total

Traffic Annual
Subsidy at
April 1 Subsidy per Pax

Sep. 30 2012 1,091 1,056 2,147 $1,162,329 $541

Glasgow

12 Months Ended Total
Enplanements Total
Deplanements Total

Traffic Annual Subsidy at
April 1 Subsidy per Pax

Sep. 30 2012 693 1,876 2,569 $1,166,049 $453

1 Source: Bureau of Transportation Statistics: Schedule T

- 100Appendix B Page 2 of 2

Wolf Point

12 Months Ended Total
Enplanements Total
Deplanements Total

Traffic Annual Subsidy
at April 1 Subsidy per Pax

Sep. 30 2012 2,612 2,494 5,106 $1,502,378 $294

Sidney

12 Months Ended Total
Enplanements Total
Deplanements Total

Traffic Annual Subsidy
at April 1 Subsidy per Pax

Sep. 30 2012 11,582 10,653 22,235 $2,932,152 $131Appendix C

E xample of G e n e r a l T e r m s a nd C ondi t ions f or Es s e n t i a l A ir Se r v i c e

The air c a rr i e r un d er st a nds t h a t it m a y f o rfe it its c omp e ns a tion f or a n y f li g hts th a t it do e s not

op era te in c o n f o r m a n c e with the t er ms a nd stipul a tions of the ra te Order

, i n c luding the s er vi c e pl a ns outlin e d in the Order a nd a n y oth e r s i g ni f i c a nt e l e m e nts of the re qui re d s er vi ce , without

p r ior a p p r ov a l. The air c arr i e r und e r st a nds th a t a n a i r cr a f t t a k e

- o f f a nd l a nding a t its s c h e du l e d

d e stin a tion c onstitut e s a c ompl e t e d f li g ht; a bs e nt a n e x pl a n a tion suppo r ting subsi d y e li g i b ili t y f o r

a f l i g ht th a t h a s n ot b ee n c ompl e t e d, su c h a s cer t a in w ea th e r ca n ce ll a tions, o n l y c ompl e t e d f li g hts

a r e c onsid ere d e l i g ible f or su b si d y

. I n a ddition, if the air carr i e r d o e s not s c h e dule or o p era t e its

f li g hts in f ull c on f o r m a n c e with the Order f o r a s i g ni f i ca nt p e r iod, it m a y j e op ar di z e its e nti r e subsi d y c l a im f or t he p er iod in qu e stion. I f the air c a rr i e r c ont e mpl a t e s a n y su c h c h a ng e s b e y ond

the s c ope o f the Order du r ing the a ppli ca ble p e r iod of th e se ra t e s, it must f i r st noti f y the O ff i c e of

Avi a tion An a l y sis in w r iti n g a nd r ece ive w r itt e n a pp r o v a l f r om the D e p a r tm e nt to be e nsu re d o f

f ull c omp e ns a tion. S hould c i rc umst a n ce s w arr a n t , the D e p ar tm e nt m a y l o c a te a nd s e l e c t a

re pl a ce m e nt air c arr i e r to p r ovide s er vi c e on th e se r out e s. The air c a rr i e r must c ompl e te a ll

f li g hts th a t ca n b e s a f e l y op era t e d; f l i g hts th a t ov e rf l y points f o r l ac k of t r a f f ic will not be

c omp e ns a t e d. I n d e t er m i ning wh e t h e r subsi d y p a y m e nt f o r a d e v i a ting f l i ght should be a djust e d

or dis a llow e d, t he D e p a r tm e nt will c onsid e r the e x t e nt to whi c h the g o a ls of the p r og ra m a r e m e t

a nd the e x t e nt of acce ss to the n a tion a l a ir t ra nspo r t a tion s y s t e m p r ovid e d to the c ommuni t y

.

I f the D e p ar tm e nt unil a t e ra l l y
, e ith e r p a r ti a l l y or c ompl e t e l y , t er min a t e s or re du ce s p a y m e nts f or

s e r vi c e or c h a ng e s s er vi c e r e qui re m e nts a t a sp ec i f ic lo c a tion p r ovid e d f or und e r this Order, th e n,

a t the e nd of the p e r iod f or whi c h the D e p ar tm e nt d o e s m a ke p a y m e nts in the stipul a t e d a mounts

or a t the stipul a t e d s er vi c e l e v e ls, the air c a rr i e r m a y cea se to p r ovide s er v i c e t o th a t sp ec i f ic

lo c a tion without re g a r d to a n y r e qui re m e nt f or noti c e of su c h c e ss a tion. Those a djustm e nts in the

l e v e ls of subsi d y a nd/or s er vi c e th a t ar e mutu a l l y a g r ee d to in w r iting b y the D e p ar tm e nt a nd air

ca r r i e r do not c on s titute a tot a l or p ar ti a l re d u c tion or ce ss a tion of p a y m e nt.

S ubsi d y c ont r a c ts ar e su b j ec t to, a nd in c o r po r a te b y r ef e re n c e
, r e l e v a nt st a t ut e s a nd D e p ar tm e nt

r e g ul a tions, a s th e y m a y be a m e nd e d fr om time to tim e . How e v er
, a n y su c h st a tut e s, r e g ul a tions,

or a m e ndm e nts th ere to sh a ll not op era te to c ont r o v er t the f o r e g oi n g p ar a g r a ph.

F unds may not be a v a il a ble f or p erf o r m a n c e und e r this Solicitation b e y ond September 30, 2013

. The Gov er n m e nt ' s obli g a tion f or p erf o r m a n c e und e r this Solicitation b e y o n d September 30, 2013 , is subj ec t to the a v a il a bili t y of f unds f r o m whi c h p a y m e nt f or s e r vi ce s c a n be m a d e . No l e g a l li a bili t y on the p a r t of the Go v er nm e nt f or a n y p a y m e nt m a y a r ise f or

p erf o r m a n c e und e r th i s solicitation b e y ond September 30, 2013 , until f unds ar e m a de a v a i l a ble

to the D e p a r tm e nt f or p erf o r m a n c e

. I f f u n ds ar e not m a de a v a il a ble f o r p e r f o r m a n c e b e y ond September 30, 2013 , the D e p a r tm e nt will p r ovide noti c e in w r iting to the air c arr i er

.

All c l a ims f or p a y m e nt must be submitt e d within 60 d a y s o f the l a st d a y o f s er vi c e p r ovid e d

und e r this Order.