Order 2014-7-16 Served: July 23, 2014



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OF FICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 23 r d day of July, 2014

ORDER SETTING ANNUAL SERVICE LE VEL AND TOTAL COSTS UNDER THE

ALTERNATE ESSENTIAL AIR SERVICE PROGRAM

Summary By this Order, we are selec ting Manistee County Blacker Airpor t Authority’s (“Manistee” or “Airport Authority”) app lication under the Alternate Essent ial Air Service (AEAS) Program. The Department will enter into a Grant Agreem ent with the community to provide funding for regularly scheduled charter serv ice flights between the Manist ee County Blacker Airport and Chicago Midway International Ai rport (MDW) or alternate large or medium hub airport, for the four-year period beginning July 26, 2014, through July 31, 2018. By the terms of the Grant Agreement, service will be provi ded utilizing two-pilot, twin-engi ne aircraft, with either 19 or 30 seats, using BAE Jetstream 41 and/or 31 or equi valent aircraft, at an annual rate of no more than $2,328,104. Flight frequency will vary seas onally, with once daily service during the off peak season and twice daily se rvice during peak season.

Alternate Essential Air Service Background On December 12, 2003, President Bush signed in to 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 Co mmunity and Regional Choice Programs. 1

One of those is the Alternate Essential Air Se rvice (AEAS). Congress established this Pilot Program to provide communities with an altern ative to the traditional EAS-type service. Typically, the EAS program pays subsidy to regi onal 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

1 See Appendix A for a copy of the statute. 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- 2 -

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 bette r suit their individual needs. 2 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 airc raft. Each community awarded a grant must execute a grant agreement with the Department before it begi ns 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.

On May 3, 2012, the U.S. Department of Tran sportation and the Airport Authority, in association with Manistee, Mi chigan, entered into a grant agreement, for up to $4,199,075, for AEAS for two years, to allow the Airport Author ity to contract with a Part 380 indirect air carrier to provide scheduled publ ic charter air transportation from the Community to MDW, a large-hub airport. Manistee esta blished a relationship with P ublic Charters, Inc. (Public Charters) to facilitate its air service to MDW. The Grant Award comprised reimbursement of start-up costs and costs incurred per completed flight segment using tw o-pilot, twin-engine aircraft with 19 seats or larger equipment. In addition, service levels of no more than 32,951 passenger seats flown in the fi rst year of service and no more than 14,398 passenger seats flown in the second year of service were elig ible for funding under the Grant Agreement.

The complete public file for EAS/AEAS at Manistee may be accessed online through the Federal Dockets Management System at: www.regulations.gov by entering “DOT-OST-1996-

1711” or “DOT-OST-2004-18715” in the “Search for Rules, Comments, Adjudications, or Supporting Documents” field.

Proposals As Manistee’s grant was set to expire May 31, 2013, the Departme nt’s solicited proposals for a new term by Order 2014-2-1, February 4, 2013. Manistee’s grant was subsequently extended through July 25, 2014. In response to the De partment’s solicitation, one proposal for traditional EAS was received, from Sun Air Express, LLC dba Sun Air International (“Sun Air”) one option offering servic e to Milwaukee and Chicago Midw ay for an annual subsidy of $3,184,192, and a second option offering service to Milwaukee for an annual subsidy of $2,595,134.

Subsequently, Manistee submitted an application for a new grant agreement under the Alternate EAS Program. Manistee proposes to continue its relationship w ith Public Charters but with additional flexibility on which hub airport it serv es by having its subsidy calculated based on ASMs (available seat miles) flow n, rather than number of seats, which it used for its previous

grant.

Decision After careful consideration, incl uding the comments of local o fficials, the Department has decided to approve the Airport Authority’s application for AE AS, pending execution of a Grant Agreement.

2 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.- 3 -

The community cites several well-reasoned arguments for co ntinuing service under AEAS. The Manistee Blacker Airport Authority voted unanimously for continuation of AEAS. The incumbent direct air carrier, Corporate Flight Management, ha s continually operated AEAS at Manistee since November 15, 2012, to MDW. The fares are r easonable and the carrier has demonstrated quality service, which is indicated by the very high rates of flights completed and on-time departures. Manistee has a good working relationship with the in direct air carrier, Public Charters, and holds frequent strategy and planning meetings with Public Charters. The community has invested significant time into de veloping the AEAS service, along with Public Charters, and states it is in the community’s best interest to continue AEAS in order to continue to build on the two-year investment.

The Department will enter into a Grant Agreem ent with the community to provide funding for regularly scheduled charter serv ice flights between the Manist ee County Blacker Airport and MDW, or alternate large or medium hub airpor t, for the four-year period from July 26, 2014, through July 31, 2018. By the terms of the Grant Agreement, service will be provided utilizing two-pilot, twin-engine aircraft, with either 19 or 30 seats, using BAE Jetstream 41 and/or 31 or equivalent aircraft, at an a nnual rate of no more than $2,328,104. Flight frequency will vary seasonally, with once daily servic e during the off peak season and twice daily service during peak season.

ACCORDINGLY,

1. We select the application as submitted by the Manistee County Black er Airport Authority, serving Manistee/Ludington, Michigan, for Altern ate Essential Air Servic e, for four years upon execution of a Grant Agreement with the Department and beginning July 26, 2014, through July 31, 2018;

2. The Department directs the Airport Director at Manistee County Bl acker Airport and the

Part 380 indirect air carrier or ot her air carrier contracted as pa rt 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 repres entatives 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 dest royed, whichever comes first.

3. These Dockets will remain open until further Order of the Department; and- 4 -

4. Docket Operations will serve copies of th is 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 at http://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 Transpor tation shall establish an alternate essential air service pilot program in accordance w ith 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 with in 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 a ny 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 fr equency 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 othe r units of local government in the same region, to provide transportation services to and from all the elig ible places in that region at an airport or other transportation center th at can serve all the eligib le 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 transpor tation or related services that the Secretary may permit.Appendix B

SERVICE LIST

Manistee Blacker County Airport, Barry Lind Michigan Department of Tr ansportation, Matthew Brinker Public Charters, Inc., Jim Gallagher