Order: 2014

- 6

- 4

Served: June 6, 2014



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 6 th day of June , 20 1 4

Essential Air Service at

BAR HARBOR, MAINE PRESQUE ISLE/HOULTON, MAINE PLATTSBURGH, NEW YORK DOCKET DOT

- OST

- 2011

- 0185

DOCKET DOT

- OST

- 2000

- 8012

DOCKET DOT

- OST

- 2003

- 14783

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



### ORDER RE

- SELECTING AIR CARRIER

Summary By th is O rder, the Department is re

- selecting Peninsula Airways, Inc. (PenAir)

, to provide

Essential Ai r Service (EAS) at Presque Isle, Maine

, and Plattsburgh, New York

, using 3 0

- 33

- passenger Saab 340 aircraft to Boston Logan International Airport (Boston) f or the two

year term from July 1, 2014, through June 30, 2016. At Presque Isle, PenAir will provide

19 week ly nonstop round trips for an annual subsidy of $ 4,710,683 ; at Plattsburgh

, PenAir will provide 12 weekly nonstop round trips for an annual subsidy of $2,714,074. Also by this Order, the Department will rely on PenAir to provide subsidy

- free EAS at Bar Harbor,

Maine , for another two

- year period from July 1, 2014, through June 30, 2016, during the High Season

, 1 complementing year

- round subsidized service by H yannis Air Service, Inc. d/b/a Cape Air. 2

Background By Order 2012

- 3

- 2 (March 2, 2012 ), the Department selected PenAir to provide EAS at

Pres que Isle and Plattsburgh to Boston using Saab 340 aircraft , for a two

- year period beginning when PenAir inaugurated service at both communities through the 24 th month

1 App roximately one week before Memorial Day to approximately one week after Labor Day.

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

-

thereafter. 3 At Presque Isle, PenAir provides 19 weekly round trips for a current annual subsidy rate of $3,892,174; at Plattsburgh, PenAir provides 12 weekly round trips for a current annual subsidy of $2,470,834. 4

As the end of the contract was approaching, we issued Order 2014

- 1

- 21 (January 31

, 2014 ) requesting proposals from air carriers interested i n providing EAS at the communities for a new term. In respo nse to that Order, PenAir , the incumbent air carrier

, was the only airline to submit a proposal.

PenAir ’s compl ete proposal and the communities’ comments may be accessed online at www.regulations.gov by entering each community’s respective Docket number in the

search block.

Proposal of PenAir

PenAir submitted proposal s to serve both Presque Isle and Plattsburgh from Boston for a

two

- year term using 30

- 33 passenger Saab 340 aircraft. The proposals are an inseparable,

all

- or

- nothing package

.

At Presque Isle, Pen Air proposed two options. Option 1 is status

- quo service for an annual subsidy of $4,710,683. Option 2 is for status

- quo service b ut with a specific schedule that would provide Presque Isle with an early morning departure to Boston and a late evening arrival to Presque Isle. 5 The annual subsidy request for Option 2 is $5,180,456

.

At Plattsburgh, Pen Air proposed to provide status

- q uo service for an annual subsidy of $2,714,074.

At Bar Harbor, Pen Air proposed to continue offering 14 weekly nonstop round trips on a subsidy

- free basis during the High Season, from around the Memorial Day holiday weekend to Labor Day.

Community Comments

On March 12

, 2014 , the Department solic ited comments from the communities regarding

this air carrier se lection case. Mr. Scott Wardwell

, Airport Director at Northern Maine Regional Airport, submitted comments on behalf of the Airport Advisory Com mittee and Presque Isle City Council supporting Pen Air’s Option 2. Mr. Wardwell states that PenAir’s Option 2 “seeks to address the sig nificant decline in boardings

, ” as well as address complaints by the local busine ss community that stem from Pen Air’s sh orter operational day. Mr. Wardwell states that it is imperative for Presque Isle business

travelers to have an early morning departure out of Presque Isle and a late evening arrival into Presque Isle.

3 PenAir commenced service at bo th communities on June 14, 2012 and, therefore, the contract expiration

date is Jun e 30, 2014.

4 Under the same order, the Department selected carriers to provide service to Bar Harbor, Maine.

5 As of May 23, 2014, the commu nity has flights departing to Boston at 7:30am, 11:30am, and 3 :40pm, with flights arriving from Boston around 10 :50am, 3:10pm and 7:30 pm.- 3

-

Mr. Christopher D. Kreig, Airport Manager at Plattsburgh International Airport, submitted a letter on behalf of Clinton County supporting for PenAir’s Plattsburgh proposal. Mr. Kreig noted, “PenAir’s service has been well received and I have received multiple compliment s on their professionalism and customer service.” Mr. Kreig also added that PenAir had become a strong partner with the community.

On behalf of the Hancock County

- Bar Harbor Airport, Airport Manager Bradley C. Madeira submitted comments supporting the pr oposal of PenAir. Mr. Madeira states, “It is critically important for our tourism market and for our community that the service PenAir provides continues, as this community relies on their seasonal service to Boston, and for making connections to Boston’s large network of U.S. and foreign destinations.”

Decision The decision at Plattsburgh is clear. PenAir is the only air carrier to submit a proposal and the community supports it. We find the service and subsidy levels are reasonable, and will

meet the community’s air service needs.

At Presque Isle , PenAir was the only carrier to submit a proposal, but we are faced with two options. While the community supports PenAir’s Option 2 with a specific schedule, it is $469,773 more than PenAir’s Option 1 proposal , and would be $1,288,282 more than the current annual subsidy. Even the Opt ion 1 proposal will see an $818,509 increase over

the current ann ual subsidy. As described earlier, the Airport Director at Northern Maine Regional Airport stated the com munity’s desire for a specific schedule, an earlier departure and a return arrival later in the evening than PenAir currently offers in order to address the “significant” decline in boardings. However, PenAir’s option 2 does not forecast any additional passengers or revenue over Option 1, yet would increase the cost to the Department by $469,773 annually. We note that while traffic is down when comparing the period from April 1, 2013, to March 31, 2014, with that of the previous carrier which offered the specific schedule th at the community prefers (April 1

, 2011, to

March 31, 2012), the difference is 4,435 total passengers for the year, or only about 7 enplanements per d ay. 6 While PenAir’s option 1 may not provide an optimal schedule for all potential and existing users , it certainly is attracting a significant number of passengers. If the carrier believes that a schedule change with an earlier morning departure would

g enerate additional profits, the carrier is free to do so during the contract period. We encourage the carrier and community to work together to optimize a schedule.

While we place strong emphasis on the community feedback, EAS statutes do not

guarantee a desired level of service but rather a safety

- net level of service to connect the community to the national air transportation system. We cannot reasonably justify providing additional Federal subsidy for a more desirable service schedule to a community

t hat already has sufficient air service connecting it to the national air transportation system. Furthermore, it is not the practice of the Department to dictate to the EAS carrier the type of schedule they are to provide, other than to direct flights be “well

- timed and well

spaced” to ensure compensation, and that they are in c ompliance of the minimum basic

6 See Appendix A.- 4

-

Essential A ir S ervice as described in 49 U.S.C. § 41732 (b)(2). Presque Isle will continue to have three weekday and four weekend departures, with an originating departure with service to a large hub airport with over 500 daily departures, providing excellent access to the national air transportation system. Therefore, we will select PenAir’s Opti on 1 for the

new, two

- year term

.

This decision is cont ingent upon the Department’s receiving properly executed

certifications from the air carrier that they are in compliance with the Department’s

regu lations regarding drug

- free workplaces and nondiscrimination, as well as the regulations concerning lobbying activities. 7

Carrier Fitness
49 U.S.C. §§ 41737(b) and 41738 require that we find an air carrier fit, willing, and able to provide reliable service before we may subsidize it to provide EAS

. PenAir is subject to the Department’s continuing fitness requirements, and no information has come to our

attention that would cause us to question the air carrier’s fitness at this time. We have contacted the Federal Aviation Administration, and it has raised no concerns that would negatively affect our fitness findin gs. We therefore conclude that PenAir is reliable and fit to conduct the operations proposed here.

This Order is issued under authority delegated in 49 CFR Part 1

. 25a(b)

.

ACCORDINGLY,

1

. We select Peninsula Airways, Inc. to provide Essential Air S ervice at Presque Isle, Maine, and Plattsburgh, New York, and establish the annual subsidy rate as described in Appendix D ;

3. We rely on Peninsula Airways, Inc. to provide Essential Air Service with 14 weekly nonstop round trips on a subsidy

- free basis during High Season at Bar Harbor, Maine, in conjunction with Hyannis Air Service, Inc., d/b/a C ape Air;

2

. We direct Peninsula Airways, Inc. 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 ser vice date of this 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 no t supported under the terms of this Order ;

7 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- 5

-

3 . We f i nd that Peninsula Airways , Inc. is fit, willing and able to operate as a c ommuter air

carrie r
, and capable of providing reliable Essential Air S ervice at Bar Harbor and Presque

Maine , and Plattsburgh, New York ;

4

. Th ese docket s will remain open pending further Department action ; and

5

. The Department will serve a copy of this O rder on the City Manager of Presque Isle

, Maine; the County Administrator for Clinton County, New York; the Airport Director at

Northern Maine Regional Airport ; the Airport Manager at Plattsburgh International Airport; Peninsula Airways, Inc

. and Hyannis Air Service, Inc. d/b/a Cape Air.

B y:

SUSAN L. KURLAND Assistant Secretary for

Aviation and International Affairs

(SEAL)

An electronic version of this document is ava ilable at www.regulations.govAppendix A

Passenger Traffic Presque Isle, ME (PQI)

Stn Year Quarter Uniquecarriername Orig pax Dest Pax Total

PQI 2011 2 Colgan Air 3,272 3,659 6,931

PQI 2011 3 Colgan Air 4,133 4,038 8,171

PQI 2011 4 Colgan Air 3,529 3,413 6,942

PQI 2012 1 Colgan Air 3,168 2,944 6,112

28,156

PQI 2012 2 Colgan Air 2,760 2,924 5,684

PQI 2012 2 Peninsula Airways Inc. 580 735 1,315

PQI 2012 3 Peninsula Airways Inc. 3,286 3,208 6,494

PQI 2012 4 Peninsula Airways Inc. 2,364 2,273 4,637

PQI 2013 1 Peninsula Airways Inc. 2,333 2,209 4,542

22,672

PQI 2013 2 Peninsula Airways Inc. 2,596 2,848 5,444

PQI 2013 3 Peninsula Airways Inc. 3,593 3,584 7,177

PQI 2013 4 Peninsula Airways Inc. 2,904 2,781 5,685

PQI 2014 1 Peninsula Airways Inc. 2,809 2,606 5,415

23,721Appendix B



# AREA MAP

Maps generated by the Great Circle Mapper

- copyright © Karl L. Swartz

.Appendix C



### PenAir Proposal for EAS at Presque Isle, Maine, and Plattsburgh, New YorkAppendix D Page 1 of 2

Peninsula Airways, Inc.

Essential Air Service to be Provided at Presque Isle, Maine

DOT

- OST

- 2000

- 8012

Annual Subsidy: $4,710,683

Effective Period : July 1, 2014

, through June 30, 2016

Scheduled Service : 19 weekly nonst op round trips to Boston

Aircraft : 30

- 33 passenger Saab 340 Rate per Eligible Flight: $ 2,457 1
Weekly Ceiling : $ 93,366 2

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 significan t 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, suc h 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 per iod, 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 fr om 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 exte nt 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 fo r 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 cessat ion. 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 b y 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 pe rformance under this O rder beyond September 30, 2014

. The Government’s obligat ion for performance under this O rder beyond September 30, 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 u nder this order beyond September 30, 2014 , until funds are made available to the Department for performance. If sufficient 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, including any amended claims, must be submitted wi thin 90 days of the last day of the month for which compensation is being claimed. For example, claims for service provided in July must be filed by

October 31; August claims must be submitted by November 30, and so on.

1 A nnual compensation of $ 4,710,683 divide d by 1,917 annual departures (3 8 wee kly departures x 52 weeks x 97 percent completion)

. 2 3 8 arrivals and depart ures per week multiplied by $ 2,457 per flight

.Appendix D Page 2 of 2

Peninsula Airways, Inc.
Essential Air Service to be Provided at Plattsburgh, New York

DOT

- OST

- 2003

- 14783

Annual Subsidy: $2,714,074

Effective Period : July 1, 2014, through June 30, 2016

Scheduled Service : 12 weekly nonstop round trips to Boston

Aircraft : 30

- 33 passenger Saab 340 Rate per Eligible Flight: $ 2,241 1
Weekly Ceiling : $ 53,784 2

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 significan t 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 addi tion, 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. I n 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 uni laterally, 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 st ipulated 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 b y 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. 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 September 30, 2014. The Government’s obligation for performance under this Order beyond September 30, 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 September 30, 20 14, until funds are made available to the Department for performance. If sufficient 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, including an y amended claims, must be submitted within 90 days of the last day of the month for which compensation is being claimed. For example, claims for service provided in July must be filed by
October 31; August claims must be submitted by November 30, and so o n.

1 Annual compensation of $ 2,714,074 divide d by 1,211 annual departures (24 weekly departures x 52 w eeks x 97 percent completion)

. 2 24 arrivals and departures per week multiplied by $ 2,241 per flight

.