Order: 2015

- 3

- 14

Served: March 25, 201 5



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 25 th day of March 20 1 5

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 E ssential Air Service (E AS ) at Crescent City, California

, for the two

- year term from September 1 5

, 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 su bsidy rate of $3,5 06,231, 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.- 2

-

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 interest ed 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, 20 15; the second extension request was until February 17, 2015. In response to that Order, three air carriers submit ted 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 Febr uary 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 tho se priorities. Spec ifically, the community’ s reasons for supporting PenAir’s proposal are: 1) full code

- share with Alaska Airlines, 2) interline agreements w ith 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 notice s to terminate service at Moab, Utah, Pueblo, Colorado, and Vernal, Utah. Order

2014

- 11

- 18 pr ohibited the airline from terminating service at those communities as well. We will address

those communities’ EAS in separate Order s

. 4 Air Excursions subsequently withdrew their proposal from final consideration. Therefore, that proposal was

not consid ered for this EAS air carrier

- selection case.- 3

-

Decision After carefully reviewing each air carrier’s p roposal 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 rec ord of providing reliable EAS, in the cont iguous 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 t o PDX, a medium

- hub airport, as well as a hub for Alaska Airlines, will provide custome rs 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 Cres cent City. Lastly, the Department note s 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 PenAi r 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 expect s SkyWest to maintain its current service levels at the s ubsidy rates described in

Order 2014

- 4

- 23 , until PenAir begins full EA S , which, at this t ime, is expected to begin in September 2015

. The Department also expect s SkyWest and PenAir to work together to

make a smoot h 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 com munity 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- 4

-

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 findin gs. The Department therefore conclude s 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 select s Peninsula Airways, Inc. to provide Essential Air S ervice at Crescent City, California

, and establish es the annual subsidy rate as described in Appendix C ;

2

. The Department direct s 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 d ocumentation 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 ca rrier s may forfeit their compensation for any claim that is not supported under the terms of this Order ;

3

. The Department f i nd s that Peninsula Airways, Inc. is fit, willing and able to operate as a certificated air carrie r
, and capable of providing reliable Essential Air S ervice 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 commun ity;- 5

-

5

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

6

. The Department will serve a copy of this O rder 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

.

B y:

BRANDON M. BELFORD Deputy Assistant Secretary for

Aviation and International Affairs

(SEAL)

An elec tronic version of this document is available at www.regulations.govAppendix 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, CaliforniaAppendix 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 1 5, 2015, through September 30

, 2016

Hub : Portland International Airport (PDX )

Scheduled Service : 14 non stop round trips per week to PDX

Aircraft : 30

- passenger Saab 340 Rate per Eligible Flight : $ 2,457 1
Weekly Ceiling: $ 68,796 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 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 fligh t; 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 i ts 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 disal lowed, 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, terminat es 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 p rovide 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 to tal 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 amendment s 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 A nnual 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 depart ur es per week multiplied by $2,457 per flight.Appe ndix 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 : $ 2,069 1
Weekly Ceiling: $ 57,932 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 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 cancellatio ns, 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 l evels 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 a nd 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 beyon d 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 w ithin 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.