Order: 2015-3-14

Served: March 25, 2015

 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 March 2015

Essential Air Service at

CRESCENT CITY, CALIFORNIA DOT-OST-1997-2649

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

ORDER SELECTING AIR CARRIER

Summary

By this Order, the United States Department of Transportation (the Department) is 

selecting Peninsula Airways, Inc. (PenAir) to provide Essential Air Service (EAS) at 

Crescent City, California, for the two-year term from September 15, 2015, through 

September 30, 2017.

1

 Crescent City will receive two daily nonstop round trips (14 per 

week) to Portland International Airport (PDX) using 30-passenger Saab 340 (Saab 340)

aircraft. PenAir will be compensated at a first-year subsidy rate of $3,506,231, and a 

second-year subsidy rate of $2,951,831.2

Background

By Order 2014-4-23 (April 22, 2014), the Department selected SkyWest Airlines, operating 

as United Express (SkyWest), to provide Crescent City with 14 weekly nonstop round trips 

to San Francisco International Airport (SFO) for a one-year contract term from 

August 1, 2014, through July 31, 2015, using 30-passenger Embraer Brasilia EMB 120 

(EMB 120) aircraft for an annual subsidy of $2,454,084.

 1 PenAir stated in its proposal that its service at Crescent City would commence on September 15, 2015. The 

Department, however, will set the start of the contract term to begin September 1, with the understanding that 

PenAir’s EAS will begin on September 15.

2 Such subsidy is calculated and distributed on a fiscal year basis, subject to the availability of funds.
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On November 18, 2014, SkyWest filed a 90-day notice to terminate its air service at 

Crescent City, effective April 6, 2015. In its notice, SkyWest stated that it will transition 

to an all jet fleet in 2015 and will eliminate the EMB-120 aircraft from its fleet. Because 

SkyWest’s termination would result in Crescent City having no scheduled air service, the 

Department issued Order 2014-11-18 (November 25, 2014) prohibiting SkyWest from 

terminating service and requesting proposals from air carriers interested in providing EAS 

at the community.

3

 The original due date for proposals was December 22, 2014. Multiple 

extension requests were submitted to the Department, all supported by the community of 

Crescent City. The first extension was until January 15, 2015; the second extension 

request was until February 17, 2015. In response to that Order, three air carriers submitted 

proposals: Air Excursions LLC d/b/a Alaska Airplanes and Redwood Airlines (Air 

Excursions), PenAir, and SeaPort Airlines, Inc. (SeaPort).

4

Each air carrier’s complete proposal and community comments may be accessed online at 

www.regulations.gov by entering docket number DOT-OST-1997-2649 in the search 

block.

Proposal of PenAir

PenAir submitted a proposal for a two-year term to provide two daily nonstop round trips 

(14 per week) to PDX using Saab 340 aircraft for annual subsidy of $3,506,231 for the first 

year and $2,951,831 for the second year.

Proposal of SeaPort

SeaPort submitted a proposal for a four-year term to provide 25 weekly nonstop round trips 

to PDX and 12 weekly nonstop round trips to Sacramento International Airport using 

single-engine, 9-passenger Pilatus PC-12 aircraft for an annual subsidy of $7,691,469.

Community Comments

On February 18, 2015, the Department requested comments from Crescent City regarding 

this EAS air carrier-selection case. In response, we received a letter from the Border Coast 

Regional Airport Authority (the community), representing the views of the community of 

Crescent City. In their letter, the community outlined their air service priorities: 

“...connectivity with a major air carrier, competitive fares, an aircraft commensurate with 

historical/projected market volume, and an attractive schedule.” The community decided 

that PenAir’s proposal best aligned with those priorities. Specifically, the community’s 

reasons for supporting PenAir’s proposal are: 1) full code-share with Alaska Airlines, 2) 

interline agreements with Delta and United, 3) Saab 340 aircraft, 4) PenAir’s service 

history, 5) enhanced functionality of the PDX hub versus the SFO hub, and 6) competitive 

through-fare metrics with major air carriers.

 3 SkyWest also filed notices to terminate service at Moab, Utah, Pueblo, Colorado, and Vernal, Utah. Order 

2014-11-18 prohibited the airline from terminating service at those communities as well. We will address 

those communities’ EAS in separate Orders. 4 Air Excursions subsequently withdrew their proposal from final consideration. Therefore, that proposal was 

not considered for this EAS air carrier-selection case.
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Decision

After carefully reviewing each air carrier’s proposal and taking into account community 

feedback, the Department has decided to select PenAir to provide EAS at Crescent City for 

a two-year term. We base our decision on the five factors 49 U.S.C. § 41733(c)(1) directs 

us to consider: 1) service reliability; 2) contractual and marketing arrangements with a 

larger carrier at the hub; 3) interline agreements with a larger carrier at the hub; 4) 

community views, giving substantial weight to the views of the elected officials 

representing the users; 5) whether the carrier has included a plan in its proposal to market 

its service to the community.

First, PenAir has a proven record of providing reliable EAS, in the contiguous 48 states, 

specifically Plattsburgh, New York, and Presque Isle, Maine. Also, PenAir’s service 

would code-share with Alaska Airlines, thereby providing passengers access to Alaska 

Airlines’ large domestic network. In addition, PenAir’s service to PDX, a medium-hub 

airport, as well as a hub for Alaska Airlines, will provide customers with numerous 

connections to the national air transportation system. Furthermore, PenAir has unanimous 

community support, a key air carrier-selection criterion. Moreover, PenAir provided a 

brief overview of their proposed marketing initiatives at Crescent City. Lastly, the 

Department notes that PenAir’s proposal requires significantly less subsidy than that of 

SeaPort’s proposed subsidy.

The Department shall make this selection contingent upon its receiving properly executed 

certifications from PenAir that it is in compliance with the Department’s regulations 

regarding drug-free workplaces and nondiscrimination, as well as the regulations 

concerning lobbying activities.5

Service Transition

While SkyWest’s 90-day termination notice stated it would cease service at Crescent City 

on April 6, 2015, in accordance with 49 U.S.C. § 41734(c), the Department expects

SkyWest to maintain its current service levels at the subsidy rates described in 

Order 2014-4-23, until PenAir begins full EAS, which, at this time, is expected to begin in 

September 2015. The Department also expects SkyWest and PenAir to work together to 

make a smooth transition at the community. In that regard, before SkyWest 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.

In addition, to ensure the community has a smooth carrier transition, the Department will 

permit PenAir to begin its proposed operations at Crescent City on a date earlier than 

September 15, 2015, and the Department would adjust its two-year term accordingly. 

 5 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
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Carrier Fitness

49 U.S.C. §§ 41737(b) and 41738 require that the Department find an air carrier fit, 

willing, and able to provide reliable service before the Department 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. The Department has contacted the Federal Aviation Administration, 

and it has raised no concerns that would negatively affect our fitness findings. The 

Department therefore concludes 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. The Department selects Peninsula Airways, Inc. to provide Essential Air Service at 

Crescent City, California, and establishes the annual subsidy rate as described in 

Appendix C;

2. The Department directs 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 service 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 carriers may forfeit their compensation for any claim that is not 

supported under the terms of this Order;

3. The Department finds that Peninsula Airways, Inc. is fit, willing and able to operate as a 

certificated air carrier, and capable of providing reliable Essential Air Service at Crescent 

City, California;

4. We require SkyWest Airlines, operating as United Express, to maintain its current 

service at Crescent City, California, until PenAir commences full EAS at the community; 
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5. This docket will remain open pending further Department action; and

6. The Department will serve a copy of this Order on the mayor of Crescent City, 

California, the airport director at Del Norte County Regional Airport, Air Excursions LLC. 

d/b/a Alaska Seaplanes and Redwood Airlines, Peninsula Airways, Inc., SeaPort Airlines, 

Inc., and SkyWest Airlines, operating as United Express.

By:

BRANDON M. BELFORD

Deputy Assistant Secretary for

Aviation and International Affairs

(SEAL)

An electronic version of this document is available at www.regulations.gov
Appendix A

AREA MAP

Maps generated by the Great Circle Mapper - copyright © Karl L. Swartz.

 
 Appendix C

Page 2 of 2

PenAir Proposal at Crescent City, California
Appendix C

Page 1 of 2

Peninsula Airways, Inc.

Essential Air Service to be provided at Crescent City, California

DOT-OST-1997-2649

Annual Subsidy: $3,506,231

Contract Term: September 15, 2015, through September 30, 2016

Hub: Portland International Airport (PDX)

Scheduled Service: 14 nonstop round trips per week to PDX

Aircraft: 30-passenger Saab 340

Rate per Eligible Flight: $2,4571

Weekly Ceiling: $68,7962

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 may not be available for performance under this Order beyond September 30, 2015. The Government’s obligation for 

performance under this Order beyond September 30, 2015, 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, 2015, until funds are made available to the Department for performance. If sufficient funds are 

not made available for performance beyond September 30, 2015, the Department will provide notice in writing to the carrier.

All claims for payment, including any 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 on.

 1 Annual compensation of $3,506,231 divided by 1,427 annual departures (28 weekly departures x 52 weeks x 98 

percent completion).

2 28 arrivals and departures per week multiplied by $2,457 per flight.
 Appendix C

Page 2 of 2

Peninsula Airways, Inc.

Essential Air Service to be provided at Crescent City, California

DOT-OST-1997-2649

Annual Subsidy: $2,951,831

Contract Term: October 1, 2016, through September 30, 2017

Hub: Portland International Airport (PDX)

Scheduled Service: 14 nonstop round trips per week to PDX

Aircraft: 30-passenger Saab 340

Rate per Eligible Flight: $2,0691

Weekly Ceiling: $57,9322

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 may not be available for performance under this Order beyond September 30, 2015. The Government’s obligation for 

performance under this Order beyond September 30, 2015, 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, 2015, until funds are made available to the Department for performance. If sufficient funds are 

not made available for performance beyond September 30, 2015, the Department will provide notice in writing to the carrier.

All claims for payment, including any 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 on.

 1 Annual compensation of $2,951,831 divided by 1,427 annual departures (28 weekly departures x 52 weeks x 98 

percent completion).

2 28 arrivals and departures per week multiplied by $2,069 per flight.