Order : 2010

- 6

- 4
Served: June 4 , 20 10



### UNITED STATES OF AMERICA
DEPARTMENT OF TRANSPORTATION
OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation
on the 1st da y of June , 20 10

ORDER RE

- SELECTING CARRIER

, SETTING FINAL SUBSIDY RATES AND REQUESTING PROPOSALS

Summary By this order, the Department is : (a) re

- selecting Mesaba Aviation, Inc., d/b/a Mesaba Airlines (Mesaba), doing busine ss as Delta Connection

, utilizing 3 4

- seat Saab 340 aircraft to provide subsidized essential air service ( EAS ) at Iron Mountain/Kingsford and Escanaba

, Michigan

, for a new two

- year period, at a combined annual subsidy rate of $ 4,181

, 068 ; 1 and (b) re questing proposals by Ju ly 6 from carriers interested in providing EAS at Ironwoo d, Michigan/Ashland, Wisconsin

, and /or Manistee/Ludington, Michigan, only

, for a new two

year term

. (See Appendix A for a map.)

Background
O n August 14, 2008, the Department issued Order 2008

- 8

- 14, reselecting Mesaba Aviation, Inc., d/b/a Mesaba Airlines (Mesaba), operating as Northwest Airlink , utilizing 34

- seat Saab 340 aircraft to provide subsidized EAS at Iron Mountain/Kingsford and Escanaba for a

new two

- year period, beginning A ugust 15, 2008 , through August 31, 2010 . Under th at order, Mesaba provides seven one

- stop or nonstop round trips each week between each community and both Detroit and Minneapolis (28 weekly flights per community) for a combined annual subsidy rate of $2,8 70,236.

1 Such subsidy is calculated and distributed on a fiscal year basis, subject to the availability of funds. Essential Air Service at

IRON MOUNTAIN/KINGSFORD, MICHIGAN IRONWOOD, MICHIGAN/ASHLAND, WISCONSIN MANISTEE/LUNDINGTON, MICHIGAN ESCANABA, MICHIGAN

Under 49 U.S.C. 41731 et seq

. Docket DOT

- OST

- 1999

- 5175
Docket DOT

- OST

- 199 6

- 1266
Docket D OT

- OST

- 1996

- 1711 Docket DOT

- OST

- 2003

- 15128- 2

-

Similarly, b y Order 2008

- 4

- 10, April 7, 2008, the Department selected Great Lakes Aviation, Ltd. (Great Lakes) , to provide subsidized EAS at Ironwood/Ashland and Manistee/Ludington utilizing 19

- seat Beech 1900D aircraft for a new two

- year term begi nning when it inaugurate d full service

. Under that order, Great Lakes provides Ironwood/Ashland with two daily one

- stop (at Rhinelander, Wisconsin) round trips for an annual subsidy rate of $1,492,865. Great Lakes also provide s Manistee/Ludington with tw o daily nonstop round trips, for an ann ual subsidy of $1,799,395, or combined annual subsidy rate of $3,292,260

. Great Lakes commenced service at the two communities on May 5

, 2008 , meaning that the

contract was originally scheduled to expire on May 31, 2 010

.

In anticipation of the end of the rate term s and in order to attract as many applicants as possible , the Department issued Order 20 10

- 2

- 18 on February 19, 2010

, synchronizing the contract end dates at all four communities to August 31, 2010, and soli citing proposals to provide efficient EAS, with s ubsidy support if necessary , at any or all four of the
communities

.

Proposals In response to Order 20 10

- 2

- 18

, the incumbent carriers (Mesaba and Great Lakes), along
with Charter Air Transport , Inc. (Charter Air) and Sovereign Air , Inc. (Sovereign) submit ted proposals

.

Copies of the proposals and community comments may be accessed online through the Federal Docket Management System at: http://www.regulations.gov, by doing a search on
the d ockets listed on th e first page

. E ach carrier’s proposal is briefly summarized below.

Mesaba
Mesaba

, d/b/a Delta Connection

, submitted a proposal with three service/subsidy options

, all utilizing 34

- passenger Saab 340 aircraft

, to provide EAS at Iron Mountain/Kingsford and Escanaba only. Options 1 (Escanaba only) and 2 (Iron Mountain/Kingsford only) can be combined for an annual subsidy rate of approximately $4.485 million , as shown in the table
below

.

Option
# Community Weekly round trips Hub Served Annual Subsidy Requi rement

1 E scanaba 14 (nonstop) Detroit $2.310 M

2 Iron Mountain/ Kingsford 14 (nonstop) Minneapolis $2.176 M

3 Escanaba and I ron Mountain/Kingsford 21 (one

- stop & nonstop) Detroit and Minneapolis $4.181 M

Great Lakes
Great Lakes submitted a four

- commu nity package bid ( all or nothing ) for service to Milwaukee (where it will utilize its code

- share agreement with Frontier Airlines) with 19

- passenger Beech 1900D aircraft. Its proposed service levels for each community and annual subsidy requirement are su mmarized below- 3

-

Community Weekly round trips Service pattern notes

E scanaba 18 no restrictions upline

I ron Mountain/Kingsford 18 no restrictions upline

I ronwood/Ashland 1 4 one

- stop authority over I ron Mountain

, E scanaba, or Rhinelander , Wisconsin

. Mani stee/Ludington 14 no restrictions upline Annual Subsidy Requirement $6.471 M

Charter Air
C harter Air submitted a proposal with seven options. Each option stands on its own and can be combined with other options utilizing additional aircraft. Its propo sed service levels for each community and annual subsidy requirements are summarized below.

Option
# Community Aircraft type (pa ssenger

seats)

– upline service Weekly
round trips Hub Served Annual Subsidy Requirement

1 Escanaba Embraer 120 (30)

– shared with M anistee 18 (one

- stop & nonstop)

Milwaukee $3.477 M

M anistee/ Ludington Embraer 120 (30)

– shared with E scanaba 12 (one

- stop & nonstop)

2 I ronwood/
Ashland Embraer 120 (30)

– shared with Iron
Mountain 12 (one

- stop & nonstop) $3.173 M

I ron Moun tain/ Kingsford Embraer 120 (30)

– shared with I ronwood 12 (one

- stop & nonstop)

3 E scanaba Embraer 120 (30) 12 (nonstop) Milwaukee $2.254 M

4 M anistee/ Ludington BAE 3200 Jetstream (19) 12 (nonstop) $1.746 M

5 M anistee/ Ludington BAE 3200 Jetstream ( 19) 12 (nonstop) Chicago

- Midway $1.899 M

6 I ronwood/
Ashland BAE 3200 Jetstream (19) 12 (nonstop) Milwaukee $1.918 M

7 I ron Mountain/ Kingsford Embraer 120 (30) 12 (nonstop) $2.254 M

Sovereign Sovereign ’s proposal comprises two, two

- community packag es , both utilizing King Air 350
aircraft configured with 12 seats ( it can accommodate 15 seats ) , with service to Chicago

O’Hare . Escanaba and Manistee /Ludington are combined as one package

, and
Ironwood/Ashland and Iron Mountain/Kingsford is the other . T he service level and subsidy rate for each package is summarized in the table below.- 4

-

Community Weekly round trips Annual Subsidy Requirement

E scanaba 28 (one

- stop & nonstop) $2.462 M Manistee/Ludington 28 (one

- stop & nonstop)

Ironwood/Ashland 28 (one

- stop & nonstop) $2.147 M Iron Mountain/ Kingsford 28 (one

- stop & nonstop)

Community Comments
On March 3 0, 2010 , the Department solicited the views of the airport managers and civic
officials at the four communities

, and the Michigan State Department of Transportation.

Escanaba and Iron Mountain/Kingsford strongly support Mesaba’s option servicing Minneapolis/St. Paul and Detroit . Specifically, the Delta County Airport Board and the Delta County Board of Commissioners (representing Escanaba) believe th at Mesaba’s three

- round

trip

- a

- day proposal serving both Minneapolis and Detroit will better serve local customers

. The Dickinson County Board of Commissioners (representing Iron Mountain /Kingsford )
supports Mesaba ’s O ption #3, stating that, “access to ma jor hubs and the conv en ience of single

- carrier connections is an asset to this community.”

Manistee/Ludington and Ironwood/Ashland recommend Great Lakes. The Manistee County Blacker Airport Authority, in a close vote, “chose Great Lakes with its experi en ce,” however;
it also made a back

- up recommendation for Charter Air’s Chicago Midway service option if the Great Lakes proposal was not selectable because of the all

- or

- nothing nature of Great

L akes’ proposal . The Gogebic

- Iron County Airport Board (repres enting Ironwood /Ashland )
voted to recommend retaining Great Lakes

.

The Assistant Administrator, Aviation Services Division, Bureau of Aeronautics & Freight
Services

, Michigan Department of Transportation

, supported the community preferences as
summarized above, but also requested that the Department and Great Lakes “negotiate a prorated award to reflect servic e to only Ironwood and Manistee, ” because Great Lakes’ proposal was a four

- community, all

- or

- nothing package.

Decision on Carrier Selection
After ca reful consideration, we have decide d to : (a) select Mesaba ’ s Option #3 at Escanaba
and Iron Mountain/Kingsford ; and (b) re

- solicit proposals for EAS at Ironwood/Ashland
and /or Manistee /Kingsford by June 23

.

Escanaba and Iron M ountain/Kingsford
The carrie r

- selection decision here is rather straightforward. Mesaba meets all four of the statutorily mandated selection criteria. Mesaba, operating as Delta Connection, would provide seamless service beyond the hub, and it s interline arrange ments allow for pass engers to travel on one reservation , ticket and baggage check

- in. Mesaba has years of experience providing scheduled air service and has the full support of both communities.- 5

-

Regarding which of Mesaba ’s options to s elect, the communities support O ption #3 and that is the least expensive option

, so we will select it. Mesaba will utilize 34

- seat Saab 340
aircraft and provide Escanaba 14 weekly non stop round trips to Detroit and 7 weekly one

stop (at Iron Mountain /Kingsford) round trips to Minneapolis/St. Pa ul . Similarly, Iron Mountain/Kingsford will receive 7 weekly nonstop flights to Minneapolis/St. Paul and 14 weekly one

- stop (at Escanaba ) round trips to Detroit . The combined annual subsidy rate is $ 4,181,068 compared to nearly $4.5 million to serve the communities individually with two round trips a day. 2

The Department wil l make this selection at the se two communities contingent upon the Department’s receiving properly executed certifications from Mesaba that it is in compliance with the Department’s r egulations regarding drug

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

Ironwood/Ashland and Manistee/Ludington In order to respond to the Michigan Department of Transportation’s request and to accede to Ironwood/Ashland’s and Manistee/Kingsford’s carrier preferences, we are providing for a second round of proposals from all interested carriers for EAS at Ironwood/Ashland and/or Manistee/Kingsford , while also retaini ng all of the proposals that are not lin ked to Iron Mountain/Kingsford or Escanaba

. B ecause we are selecting Mesaba to provide subsidized EAS

at Escanaba and Iron Mountain/Kingsford , we are requesting proposals for Ironwood/Ashland and/or Manistee/Kingsford only

.

As discussed above, Great Lake s’ current proposal is a four

- community package bid ( all or nothing ) and therefore is not selectable

. Sovereign’s proposal is similarly unselectable due to
aircraft sharing or routing. In the proposal, the Manistee/Ludington option is linked to
Escanaba and Ironwood/Ashland to Iron Mountain/Kingsford. A ddition ally , Sovereign does not currently have the requisite operating authority from either the Department or the Federal Aviation Administration to provide scheduled air service, its aircraft would not m eet the 15

- seat standard (49 U.S.C. § 41732(b)(3) , and it has no community support. In evaluating Charter Air’s service options at the two communities, we note that combining the least

e xpensive of its service option at Manistee/Ludington (~$1.7 million) with the stand

- alone option for Ironwood/Ashland would result in a n annual subsidy requirement of approximately $3.7 million

, which is greater than the EAS program average. Further, while
Charter Air notes that it continues to work with other airlines for interline and ticketing agreements, none are specifically identified, and therefore its proposal does not meet this important selection criterion

. Moreover, neither community recommended Charter Air as its first choice. Based on all of the above, we fin d that good cause exists to request a second

- round of proposals. 3

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 compensate it for essential air service. Me saba is

2 Because all three round trips a day serve both communit ies, and the seats are thus shared, the capacity level does not exceed the program’s 67

- seat maximum capacity guarantee. See 14 CFR 398.6.

3 Charter Air should provide written confirmation of its continuing interest in participating in the second

- round
of this carrier selection case at Ironwood/Ashland and/or Manistee/Kingsford or submit a revised proposal.- 6

-

subject to the Department’s continuing fitness monitoring, and no information has come to
our attention that would c ause us to question the 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 findings. We therefore conclude that Mesaba remains fit to conduct the operations proposed here.

Request for Proposals As noted above, w e are re

- soliciting proposals from all carriers , including Mesaba

, Great Lakes, Charter Air and Sovereign

, interested in providing service at Ironwood/Ashland
and /or Manistee/Ludington only

, with or without subsidy, for the two

- year period beginning when the carrier inaugurates full service. Carriers should file their pr oposals no later than

Ju ly 6 . Staff will then docket the proposals, thereby making them public, and direct each carrier to serve a copy of its proposal on the civic parties and other applicants. Shortly afterwards, we will provide a summary of the propos als to the communities and ask them to submit their final comments. We will give full consideration to all proposals that are timely
filed. 4

Interested carriers should prepare their proposals with every expectation that their initial proposals will repre sent their final and only proposals. However, we retain the discretion to negotiate proposals with carriers when we deem it desirable; in such cases, of course, we will give all applicants the same opportunity. We also retain the discretion to reject out right all unreasonable or unrealistic proposals and resolicit a new round of proposals. However, negotiation and rejection are only occasional exceptions to the rule.

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

- documented proposals that will facilitate their evaluation by the affected communities and the Department. 5

With specific respect to Ironwood/Ashland and Manistee/Ludington

, the Department expect s proposals consisting of service with 19

- passenger or l arger aircraft and offering two round trips a day (12 a week) between each community and Milwaukee, Detroit, Minneapolis, or

4 Carriers should not expect the Department to accept late fillings. In cases where a carrier proposes to provide
essential air service without subsid y and we determine that service can be reliably provided without such compensation, we do not proceed with the carrier

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

- free service as proposed.

5 In selecting a carrier to provide subsidiz ed essential air service, 49 U.S.C. 41733(c) (1) directs us to consider four factors: (1) service reliability; (2) contractual and marketing arrangements with a larger carrier at the hub; (3) interline arrangements with a larger carrier at the hub; and (4) community views. In addition, the Consolidated Appropriations Act, 2008, 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
consid ered sinc e the inception of the program. Interested carriers should also be aware that our general provisions governing EAS will be included in the selection order as part of our authorization of subsidy for the selected service. Appendix C of this order contains those general provisions.- 7

-

any other hub that provides good access to the national air transportation system

. . We would also entertain proposals with smaller aircraft, offering three round trips a day (18 a week)

, subject to the concurrence of the communities

. Such service is generally consistent with what the communities currently receive, and fully satisfies their essential air service requirements.

Commun ities and air carriers are encouraged to work together in advance of the due date for proposals to craft a service pattern that is desirable to the community and meets the operational requirements of the airline interested in submitting a proposal. In add ition, carriers should be very clear as to whether their proposals are for both Ironwood/Ashland and Manistee/Kingsford as an inseparable package, or whether they would serve either community individually

.

We encourage proposals that meet those requiremen ts in an efficient manner. 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 service possibilities

-- different hubs, for example

-- with subsidy requirements that remain competitive.

New Filing Procedures Carrier proposals should be submitted to the Department with all materials merged into a single document. In addition, because the document will be published on Regu lations.gov, each page should be formatted to be viewed online.

Service and Traffic History Historical traffic for Ironwood/Ashland and Manistee/Ludington is detailed in Appendix D

. During the year ended December 31, 2009

, Ironwood/Ashland averaged 3. 1 e nplanements a day

, and Manistee/Ludington 7.5

.

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

- free workplaces, and nondiscrimination. 6

6 The regulations applicable to these areas are: (1) 49 CFR Part 20

-- New restrictions on lobbying; Consequently, all carriers rece iving Federal subsidy for essential air service must certify that they are in compliance with Department regulations regarding drug

- free workplaces and nondiscrimination, and those carriers whose subsidies exceed $100,000 over the life of the rate

- term mus t also certify that they are in compliance with the regulations governing lobbying activities. Because the Department is prohibited from paying subsidy to carriers that do not submit these documents, all carriers that plan to submit proposals involving su bsidy should be aware that the selected carrier will be required to complete the required certifications. Interested carriers requiring

(2) 49 CFR Part 21

-- Nondiscrimination in federally

- assisted programs of the Department of Transportation

-- Effectua tion 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 travel; and (3) 49 CFR Part 29

-- Government

- wide debarment and suspension (non

- procurement) and government

- wide requirements for drug

free workplace (grants).- 8

-

more detailed information regarding these requirements should contact the Office of Aviation Analysis at (202) 366

- 5903

. 7

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 can 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 and ask them to submit their final c omments shortly after Ju ly 6

.

This order is issued under authority delegate d by the Assistant Secretary for Aviation and
International Affairs in 49 CFR 1.56a(f).

ACCORDINGLY,
1. We select Mesaba Aviation, Inc., d/b/a Delta Connection , to provide essential air service

at Iro n Mountain/Kingsford and Escanaba, Michigan , as descri bed in Appendix C , for the

two

- year period , beginning September, 1, 2010, through August 31, 2012 ;

2

. The Department directs Mesaba Aviation, Inc., d/b/a Delta Connection, to retain all books, records, and other source and summary documentation to suppor t 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 or until the Department indicates t hat 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 not supported under the terms of this order;

3 . We find tha t Mesaba Aviation, Inc., d/b/a Delta Connection , continues to be fit, willing and able to operate as a certificated air carrier and capable of providing reliable essential air
service at Iron Mountain/Kingsford and Escanaba, Michigan ;

4

. We request that carriers interested in providing essential air service at Ironwood, Michigan/Ashland, Wisconsin and /or Manistee/Ludington, Michigan , submit their proposals, with or without subsidy requests, no later than Ju ly 6 , 2010

. The proposals should be e

mailed to: EAS@dot.gov with the title with the title “Proposal to Provide Essential Air
Service at Ironwood, Michigan/Ashland, Wisconsin and/or Manistee/Ludington, Michigan

, ”
with the docket number s corresponding to the communit i es as shown on the first page of this order; 8

5

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

7 The certifications are also available on the web at http://ostpxweb.dot.gov/ aviation/index.html.

8 Questions regarding filings in response to this order may be directed to Brian Swanson at (202) 366

- 5392 or brian.swanson@dot.gov

.- 9

-

6

. We will serve copies of this order on the parties listed in Appendix E

.

By:

SUSAN L. KURLAND Assistant Secretary for
Aviat ion and International Affairs

(SEAL)

An electronic version of this document is available i n the Federal Docket Management System (FDMS) at http://www.regulations.govAppendix A



# AREA MAPAppendix B

Mesaba Aviation, Inc., d/ b/a Mesaba Airlines Provision of Essential Air Service at Iron Mountain/Kingsford and Escanaba, Michigan Calculation of Compensation Requirement

Option #3
EAS Stations ESC & IMT

Hubs DTW & MSP Round trips per week 21 Completion Factor 97% Total Passengers 29,740
Total Block Hours 4,212

Passenger Revenue $2,444,361

Other Revenue $296,030

Total Revenue $2,740,392

Pilots $1,006,369

Fuel $1,008,215

Maintenance $1,511,699

Aircraft $872,057
Total Direct Costs $4,398,340

Total Indirect Costs $2,146,775

Total Operating $6,545,115 Inflation Rate Allowance @0.75 % $49,088 Profit @ 5.0% $327,256
Economic Cost $6,921,459

Required Annual Subsidy Rate $4,181,068Appendix C Page 1 of 2

Mesaba Aviation, Inc., d/b/a Mesaba Airlines Provision of Essential Air Service a t Iron Mountain/Kingsford and Escanaba, Michigan Summary of Service To Be Provided

Effective Period September 1, 2010 through August 31, 2012. : Scheduled Service : Iron Mountain/Kingsford: 7 weekly nonstop round trips to Minneapolis/St. Paul and 14 weekl y one

- stop (at Escanaba) to
Detroit.
Escanaba: 14 weekly nonstop round trips to Detroit and 7 weekly one

- stop (at Iron Mountain/Kingsford) to Minneapolis/St.
Paul No service to any other point is contempl ated under the terms of the carrier’s proposal; accordingly, no such service may be provided on subsidized flights without prior Department approval. Additional Intermediate Stops and upline service:

Aircraft type: Saab 340 (34 passenger seats). Timing of flights: Flights must be well

- timed and well

- spa ced in order to ensure full compensation. Annual compensation: $ 4

, 181

, 068 This rate assumes an annual completion factor of 97 percent. A compensation ceiling is to be applied per calendar week such that service above that ceiling in one week cannot make up for
service shortfalls in another week.
Subsid y Rate per Flight : $ 986

. 80 1 Weekly Compensation Ceiling

pe r Community: per arrival from or departure to Minneapolis or Detroit. $ 41, 445

. 6 0 2

1 $ 4,181,068 divided by 4,237 annual departures: 3 arri vals/departures per day x 2 communities x 7 days per week x 52 weeks x .97 (completion factor) = 4,237.

2 21 flights per week per community multiplied by $986.80 per flight.Appendix C Page 2 of 2

NOTE:

The carrier understands that it may forfeit its compen sation 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 car rier 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 c ompleted 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 these rates, 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 transpo rtation system provided to the community.

If the Department unilaterally, either partially or complete ly , 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 amounts or at the stipulated service levels, the carrier may cease to provide service to that specific location without regard 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 contracts 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 are not currently available for perfor mance under this order beyond September 30, 2010. The Department’s obligation for performance under this order beyond September 30, 2010, is subject to the availability of appropriated 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, 2010, until funds are made available to the Department for performance. If funds are not made available for performance beyond September 30, 201 0, the Department will provide notice in writing to the carrier.

All claims for payment must be submitted within 60 days of the last day of service provided
under this order.Appendix D Page 1 of 2

Historical Enplanements 1

Ironwood/Ashland

Year
Ended Total
Scheduled Passengers Annual
Enplanements 2 Average Enplanements
Per Day 3

31-Dec-03 4,574 2,287 6.3
31-Dec-04 5,769 2,885 7.9
31-Dec-05 6,405 3,203 8.8
31-Dec-06 6,622 3,311 9.1
31-Dec-07 5,826 2,913 8.0
31-Dec-08 2,905 1,453 4.0
31-Dec-09 2,290 1,145 3.1

Manistee/Ludington

Year
Ended Total
Scheduled Passengers Annual
Enplanements 2 Average Enplanements
Per Day 3

31-Dec-03 2,917 1,459 4.0
31-Dec-04 3,941 1,971 5.4
31-Dec-05 3,951 1,976 5.4
31-Dec-06 5,551 2,776 7.6
31-Dec-07 6,004 3,002 8.2
31-Dec-08 4,044 2,022 5.5
31-Dec-09 5,472 2,736 7.5

Notes:
1. Source: http://mdotwas1.mdot.state.mi.us/public/airportstats/
2. Total scheduled passengers divided by two.
3. Average annual enplanemen ts divided by 3 65 service days, except for annual periods ended 12/31/2004 and 12/31/2008 (3 66 service days).Appendix D Page 2 of 2

General Terms and Conditions for Essential Air Service

The carrier understands that it may forfeit its compensation for any flights that it do es 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 e ligible 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 these rates, 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
circumstanc es 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 dete rmining 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 co mmunity.

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 Departme nt does make payments in the stipulated amounts or at the stipulated service levels, the carrier may cease to provide service to that specific location without regard to any requirement for notice of such cessation. Those adjustments in the levels of subs idy 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 contracts are subject to, and incorporate by reference, relevant statutes and Departmen t 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 are not currently available for performance under this solicitation bey ond [DATE] . The Department’s obligation for perform ance under this solicitation beyond [DATE] , is contingent upon the availability of appropriated funds from which payment for services can be made. No legal liability on the part of the Department for any payment may arise for performance under this order beyond [DATE] , until funds are made available to the Department for performance. If funds are not made available for performance beyond [DATE] , the carrier will receive notice in writing by the Departmen t.

All claims for payment must be submitted within 60 days of the last day of service provided under
this order.Appendix E

SERVICE LIST

Mr. Thomas Baldini
District Director Congressman Bart Stupak 1229 W. Washington Street Marquette, Michigan 49855

Mr. Duane Du Ray Manager Gogebic

- Iron County Airport E5560 Airport Road Ironwood, Michigan 49938

Mr. Gerald E. Edwards
Assistant Administrator , Aviation Services
Division Bureau of Aeronautics & Freight Services Michigan Department of Transportation
Aeronautics Bui lding 2700 Port Lansing Road Lansing, Michigan 48906

The Honorable Thomas C. Elegeert
Chairman Delta County Board of Commissioners
Administration Office 310 Ludington Street Escanaba, Michigan 49829

Mr. Tim Howen Manager Ford Airport
PO Box 609
Iron Mou ntain Michigan 49801

Mr. Barry Lind Manager Manistee County Blacker Airport 2323 Airport Road Manistee, Michigan 49960

Ms. Connie Ness Airport and Parks Manager Delta County 3300 Airport Road Escanaba, Michigan 49829 Mr. John G. Spanjers
President an d Chief Operating Officer
Mesaba Airlines 1000 Blue Gentian Road, Suite 200 Eagan, Minnesota 55121

The Honorable Henry Wender
Chair man Board of Commissioners Dickinson County, Michigan
Courthouse
P.O. Box 609 Iron Mountain, Michigan 49801

Mr. David Woo dworth
Vice Chairman Delta County Airport Board 3300 Airport Road Escanaba, Michigan 49829