Order 2012-3-9

Served: March 16, 2012

 UNITED STATES OF AMERICA

 DEPARTMENT OF TRANSPORTATION

 OFFICE OF THE SECRETARY

 WASHINGTON, D.C.

Issued by the Department of Transportation

on the 16th day of March, 2012

ORDER SETTING ANNUAL SERVICE LEVEL AND TOTAL COSTS UNDER THE

ALTERNATE ESSENTIAL AIR SERVICE PROGRAM

Summary

By this Order, we are selecting Service Option #2, as detailed in the Manistee County Blacker 

Airport Authority’s (Airport Authority) 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 1,019 annual 

nonstop one-way flights between the Manistee County Blacker Airport and Chicago Midway 

International Airport (MDW), for a two-year period beginning when the Part 135 and/or Part 

121 direct air carrier inaugurates service at the community through the end of the 24th month 

thereafter. By the terms of the Grant Agreement, service will be provided utilizing two-pilot, 

twin-engine aircraft with 30 seats for the first six months of service and with 19 seats for the 

remaining 18 months, at an annual rate of no more than $2,143,294 (which includes a one-time

payment of $200,000 for start-up costs) for the first-year and $2,055,782 for the second year.

Background

By Order 2011-1-16, January 22, 2011, the Department selected Chautauqua Airlines, Inc., a 

wholly owned subsidiary of Republic Airways Holdings and doing business as Frontier 

Airlines (Chautauqua), utilizing 37-seat Embraer 135 aircraft, to provide subsidized Essential 

Air Service (EAS) at Manistee/Ludington, Michigan (Manistee), consisting of 13 nonstop 

round trips a week to Milwaukee, Wisconsin, for an annual subsidy of $1,694,794. With the 

concurrence of the community, the carrier ceased operations at Manistee, following 180 days’ 

notice to the Department and community. Chautauqua inaugurated service at the community

on April 18, 2011.

Alternate Essential Air Service at:

MANISTEE/LUDINGTON, MICHIGAN

Under 49 U.S.C. 41731 et seq. and 41745

DOT-OST-1996-1711

DOT-OST-2004-18715
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On September 12, 2011, Chautauqua filed both a 180-day notice of its intention to discontinue 

operations at Manistee and Ironwood, Michigan/Ashland, Wisconsin,1 effective 

March 10, 2012, and a 90-day notice of its intention to suspend its subsidy-free service at 

Rhinelander, Wisconsin, effective December 11, 2011.2

By Order 2011-10-15, issued October 20, 2011, the Department requested proposals from 

carriers interested in providing EAS at Manistee for a two-year period, with or without subsidy. 

That Order stated that the community was not entitled to service with 15-seat or larger aircraft.3

However, the community is entitled to service with twin-engine aircraft operated by two pilots. 

With the advent of Chautauqua’s two round trips a day with regional jets, the community 

averaged 58 passengers per day, in each direction, making it difficult to quantify the actual 

demand and the service levels that the Department would be willing to subsidize. Given that 

the EAS program ensures only a safety-net level of service and not necessarily all the service 

that a community wants, we requested proposals for three or four round trips a day (18 or 24 a 

week) with 8- or 9-seat aircraft or two round trips a day (12 a week) with 15-seat or larger 

aircraft. Carriers were encouraged to propose more than one service option if they chose and 

were not limited to those requirements if they envisioned other, potentially more attractive 

possibilities – different hubs, for example – with subsidy requirements that remain competitive.

Multi-Aero Inc., d/b/a Air Choice One Airlines (Air Choice One) was the only applicant to 

submit a proposal for traditional EAS at the community. Air Choice One’s proposal utilized 9-

seat, single-engine Cessna Grand Caravan aircraft and included service between Manistee and 

Chicago O’Hare International Airport. The carrier proposed two distinct levels of service for 

both two- and four-year rate terms, as summarized below.

Service 

Option 

#

Level of Service

(round trips a week)

Annual Subsidy Required

2-Year Term 4-Year Term

1 18 $1,593,658 $1,545,848

2 24 $1,889,368 $1,832,687

However, during a regularly scheduled meeting on December 12, 2011, the Airport Authority 

voted unanimously not to waive the two-pilot, twin-engine requirements for EAS, thereby 

rejecting Air Choice One’s proposal. During the meeting, the Airport Authority also 

unanimously voted to pursue its options under the AEAS Program.

 1 See DOT-OST-1996-1266.

2 See DOT-OST-2011-0109.

3 Until very recently, communities that averaged 11 or more enplanements per day during any calendar year from 

1976-1986 we entitled to service with 15-seat or larger aircraft. 49 U.S.C. 41732 (b)(3). Subsequently, Congress 

repealed that provision. See Consolidated and Further Continuing Appropriations Act, P.L. 112-55, 

November 18, 2011.
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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. 4

One of those is the AEAS.5 By notice dated July 27, 2004, the Department established AEAS

and invited communities to submit proposals.6 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 19-seat 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.7 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.

On January 5, 2012, the Airport Manager of the Manistee County Blacker Airport, with support 

from the Airport Authority, Manistee County Board of Commissioners, Manistee Area 

Chamber of Commerce, and the Manistee County Visitors Bureau, submitted an application for

AEAS.

The Airport Authority proposed air transportation conducted by a Part 380 indirect air carrier 

contracting with a Federal Aviation Administration (FAA) approved Part 135 and/or Part 121 

direct air carrier. Service would be provided utilizing twin-engine aircraft conducting a 

minimum number of regularly scheduled charter flights each year, but may vary to reflect 

seasonal fluctuations in demand for service. A summary of the various options proposed are 

summarized in the table on the next page. The entire public file regarding federally subsidized 

air service at the community may be accessed online through the Federal Docket Management 

System at: http://www.regulations.gov, by doing a keyword or ID search on: DOT-OST-1996-

1711.

 4 See Appendix A for a copy of the statute.

5 AEAS was originally established by Congress in 2004 in the Wendell H. Ford Aviation Investment and Reform 

Act for the 21st Century (AIR-21) as a pilot program, but was made permanent in Section 405 of Vision 100.

49 U.S.C. 41745.

6 See DOT-OST-2004-18715.

7 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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Service 

Option

#

Aircraft Type -

Seats1

Level of Service2

(round trips a week)

Minimum 

Yearly 

Round 

Trips

Total

Annual 

Federal 

Funding 

Required

1 Embraer 120 – 30 12 (May - August) and

7 (Sept. - April) 500 $2.3M (ea. yr.)

2 Embraer 120 - 30 and

Jetstream 3100 – 19

10 (first 6 months of service) and

10 (remaining 18 months of service) 5203 $2.1M (1st yr.)$2.056M (2nd yr.)

3 Jetstream 3100 - 19 10 (year-round) 520 $2.0M (ea. yr.)

Notes: 1. Equivalent service with substitute aircraft is allowed.

2. Actual frequency may vary to accommodate seasonal fluctuations in demand for service.

3. At a 98% completion percentage or a total of 1,019 one-way flights.

Under its application, the Airport Authority would contract with a Part 380 indirect air carrier 

to provide charter air service nonstop between Manistee and MDW with customer funds 

escrowed until flight completion. Tickets would be available for purchase through standard 

channels, including the indirect air carrier’s website, one or more Global Distribution Systems, 

one or more Online Travel Agents, and by phone. In addition, the indirect carrier will work 

towards standard industry e-ticketing interline and baggage agreements with other carriers 

based at MDW, where possible. The application also states that indirect carrier will expend 

resources to promote and market the new service.8

Decision

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

decided to approve the Airport Authority’s application for AEAS, specifically Service Option 

#2 above, pending execution of a Grant Agreement.

First, we cannot select Air Choice One’s proposal for traditional EAS because the community 

has affirmatively not waived its right to two-pilot, twin-engine aircraft.

As among the three service options under AEAS, we have decided to select Service Option #2. 

The AEAS statute presumes that, rather than pay an airline a certain amount per year to provide 

EAS, we would pay the community that same amount and the community would secure its own 

service. The proposed amount of subsidy under Service Option #2 is appropriate. 

Chautauqua’s current rate is approximately $1.7 million, but the carrier found it so inadequate 

that it filed notice to suspend service. Air Choice One’s proposals ranged from $1.6 million to 

$1.9 million, but neither meets the EAS specifications for twin-engine service, which, 

presumably, would require more subsidy. We have also examined past subsidy rates that did 

conform to the EAS requirements. Three years ago, effective February 1, 2009, we were 

compensating Great Lakes Aviation at $1.8 million per year to provide two daily round trips 

(14 a week) with 19-seat Beech 1900Ds. We would expect that the required subsidy to 

duplicate the service of three years ago would be higher. Therefore, based on all of the above, 

we find the community’s request for $2.1 million for the first-year and $2.056 million for the 

second are reasonable and represent fair proxies for what we would have to pay in subsidy for 

EAS that meets the statutory criteria.

 8 These and other specifics related to AEAS at Manistee will be finalized in a Grant Agreement agreed to by the 

Department and the Airport Authority.
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Under service option #2, once a Grant Agreement has been executed, the community will 

receive regularly scheduled charter service consisting of at least 1,019 annual nonstop one-way 

flights between the Manistee County Blacker Airport and MDW, for a two-year period 

beginning when the Part 135 and/or Part 121 direct air carrier inaugurates service at the

community through the end of the 24th month thereafter. Service will be provided utilizing 

two-pilot, twin-engine aircraft with 30 seats for the first six months of service and with 19 seats 

for the remaining 18 months, for a first-year rate of $2,143,294 (which includes a one-time 

payment of $200,000 for start-up costs) and $2,055,782 for the second-year.

ACCORDINGLY,

1. We select Service Option #2 included in Manistee/Ludington, Michigan’s application, as 

submitted by the Manistee County Blacker Airport Authority, for Alternate Essential Air 

Service, for two years upon execution of a Grant Agreement with the Department and 

beginning when the Part 135 and/or Part 121 direct air carrier inaugurates full service at the 

community through the end of the 24th month thereafter;

2. The Department directs Manistee County Blacker Airport Manager and the Part 380 indirect 

air carrier contracted as part of the AEAS Grant Agreement 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 this Order or until the Department indicates that the records may be 

destroyed, whichever comes first.

3. These Dockets will remain open until further Order of the Department; and

4. Docket Operations will serve copies of this Order on the parties listed in Appendix B.

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

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

SERVICE LIST

Manistee Blacker County Airport, Barry Lind

Michigan Department of Transportation, Matthew Brinker

Public Charters, Inc., Jim Gallagher