Order: 2014

- 2

- 1

Served: February 4, 2013



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

On the 4th day of February , 2014

ORDER REQUESTING PROPOSALS

Summary By this O rder, the Department is requesting proposals from ca rriers interested in providing

E ssential A ir S ervice (EAS) at Manistee /Ludington (Manistee)

, Michigan , for a new contrac t period, beginning June 1 , 2014, with subsidy support if necessary

. (See Appendix A for a map). Carriers should file their proposals no later than February 27 , 2014

.

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 prov ide subsidized EAS at Manistee consisting of 13 nonstop round trips a week to Milwaukee, Wisconsin

, for an annual subsidy of $1,694,794. Chautauqua inaugurated service at the community on April 18, 2011. Subsequently, o n September 12, 2011, Chautauqua filed a 180

- day notice of its intention to

dis continue operations at Manistee, 1 effective March 10, 2012.

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. 2 However, the community is entitled to service with twin

- engine aircraft operated by two pilots.

1 See D OT

- OST

- 1996

- 1266

2 At that time , 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 has

stated “that basi c essential air service minimum requirements shall not include the 15

- passenger capacity requirement”. See Consolidated and Further Continuing Appropriations Act, P.L. 112

- 55, November 18, 2011 , and continued by the consolidated Appropriations Act, 2014, P.L. 113

- 76.

Essential Air Service at

MANISTEE /LUDINGTON , MICHIGAN

Under 49 U.S.C. 41731 et seq

. D ocket DOT

- OST

- 1996

- 17112

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 subs idize. 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 t rips 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

– differe nt hubs, for example

– with subsidy requirements that remain competitive.

Multi

- Aero Inc., d/b/a Air Choice One (Air Choice One) was the only applicant to submit a proposal for traditional EAS at the community. Air Choice One’s proposal would have utiliz ed

9

- seat, single

- engine Cessna Grand Caravan aircraft and included service between Manistee and Chicago O ’ Hare International Airport (ORD) . 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 Alternative Essential Air Service (AEAS) Program.

By Order 2012

- 3

- 9 (March 16, 2012), the Department selected Service Option #2, as detailed in the January 5, 2012, in the Manistee County Blacker Airport Authority’s (Airport Authority) applic ation under Alternative Essential Air Service (AEAS) Program

. 3 On May 3, 2012, t he U.S. Department of Transportation and the Airport Authority, in association with the community of Manistee, Michigan, entered into a grant agreement, for up to $4,199,075, for AEAS for two years, to allow the Airport Authority to contract with a Part 380 indirect air carrier to provide scheduled public charter air transportation from the Community to Chicago Midway International Airport (MDW), a large

- hub airport. The Gr ant Award comprised reimbursement

of start

- up costs and costs incurred per completed flight segment using two

- 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 eligible for funding under the Grant Agreement.

The complete public file for EAS /AEAS at Manistee may b e accessed online through the Federal

Dockets M anagement System at: www.regulations.gov by entering “DOT

- OST

- 1996

- 1 711 ” or

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

for the 21 st Century (AIR

- 21) as a pilot program, but was made permanent in Section 405 of the Vision 100.

49 U.S.C. 41745.3

“ DOT

- OST

- 200 4

- 1 8715” in the “Search for Rules, Comments, Adjudications, or Supporting

Documents” field.

Request for Proposals

As the end of the current AEAS grant approaches, the Department is requesting proposals from carriers interested in providing EAS at Manistee

, with subsidy support if necessary , for a new

rate term beginning June 1

, 201 4

. The concept of the AEAS program is that communities that

think they could use the EAS funding more efficiently than under traditional EAS could apply for those funds to be used in a way tailored by and for the community. Thus, it is necessary to

determine a baseline of what level of subsidy we would authorize under traditional EAS. But we want to make clear that this is not just a hypothetical drill; rather, if we receive traditional EAS proposals that satisfy the community and are within our budget const raints, the community ma y opt out of AEAS and back into traditional EAS

. Additionally, a community may apply for

A EAS once proposals for tra ditional EAS have been received, evaluated, and the subsidy

baseline is established. Carriers should file their pr oposals no later than February 27 , 2014

. Staff will the n docket the proposals, thereby making them public

. Shortly afterwards, we will provide a summary of the proposals to the communit y and ask them to submit their final comments. We will give full con sideration t o all proposals that are timely filed. 4

Interested carriers should prepare their proposals with every expectation that their initial proposals will represent 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 outright all unreasonable or unrealistic proposals and re

- solicit a new round of proposa ls. However, negotiation and rejection are only occasional exceptions to the rule.

We are here providing interested carriers with some basic information to serve as guidance when they prepare their proposals, but we will not prescribe a precise format fo r 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 own judgments as to the level of detail they wish to present; however, we recommend t hat they include information concerning proposed schedules and projected block hours . In addition, applicants urged to provide financial data supporting their subsidy requests, including information on their projected expenses and

revenues. We strongly encourage clear, well

- documented proposals that will facilitate their evaluation by the affected communit ies and the Department

. 5

4 Car riers should not expect the Department to accept late fillings. In cases where a carrier proposes to provide EAS without subsidy and we determine that basic EAS, as required by 49 U.S.C. § 41732, can be reliably provided without such compensation, we typi cally will 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 subsidized EAS for an eligible place not in Alaska , 49 U.S.C. § 41733(c) (1) directs us to consider five factors: (a) service reliability; (b) contractual and marketing arrangements with a larger carrier at the hub; (c) interline arrangements with a larger carrier at the hub; (d) community views, giving substantial weight

to t he views of the elected officials representing the users; and (e) whether the carrier has included a plan in its proposal to market its service to the community. In addition, the Consolidated Appropriations Act, 201 4, Public

Law No. 11 3

, provides that wh e n selecting a carrier to provide EAS, the Department may consider the relative subsidy requirements

, thus codifying a factor that we have considered sinc e the inception of the program

. Interested carriers should also be aware that our general provisions governing Essential Air Service will be included4

Historically, from 2003

- 2010, the community averaged 5

- 11 enplanements per day. In 2011, with Chautauqua ’s service, the co mmunity averaged 35 enplanements per day. After Chautauqua suspended service in 2011

, enplanements returned to pre

- Chautauqua levels. In years 2012 through the third quarter of 2013, the community averaged 9 enplanements per day. For the past 30 years or so, Manistee has generally averaged fewer than 10 enp lanements per day. W e will request proposals for three or four round trips a day (18 or 24 a week) with 8

- or 9

- seat aircraft or two round trips each weekday and weekend (12 a week) with 15

- seat o r larger

aircraft.

The Department expects service to a suitable hub airport that provides numerous connecting opportunities to the national air transportation system. We encourage proposals that meet these guidelines in an effi cient manner. Carriers are also welcome to propose more than one service option, if they choose. T hey also need not limit themselves to the se requirements if they envision other, potentially more attractive service possibilities

-- different hubs or length of

contract, for exam ple

-- with subsidy requirements that remain competitive.

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 Regulations.gov, each page

should be formatted to be viewed online.

Service and Traffic History

For the most recent 12

- month period (October 1, 2012, through September 30, 2013), Manistee

a verage s 7.2 enplanements per day

. We have provided some histori c traffic data in Appendix B.

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

- free workplaces, and nondiscrimination. 6 Consequently, all carriers receiving Federal subsidy for EAS 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 contract must 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 subsidy should be aware that the selected carrier will be required to complete the required certifications. Interested carriers requiring more detailed information regarding these requirements should contact the Offic e of Aviation Analysis at (202) 366

- 5903. 7

in the selection Order as part of our authorization of subsidy for the selected service. Appendix C of this Order contains those general provisions.

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

-- New Restrictions on Lobbying; (2) 49 CFR Part 21

-- Nondiscrimination in Federally

- Assisted Programs of the Department of Transportation

-- Effectuation of Title VI of the Civil Rights Act of 1964; (3) 49 CFR Part 27

-- Nondiscrimination on the Basis of Disability in Programs and Activities Receiving or Benefiting from Federal Financial Assistance; (4)

14 CFR Part 382

-- Nondiscrimination on the Basis of Disability in Air Travel; and (5) 49 CFR Part 29

-- Government

- Wide Debarment and Suspens ion (Non

- Procurement) and Government

- Wide Requirements for Drug

Free Workplace (Grants).

7 The certifications are also available on the web at http://www.dot.gov/policy/aviation

- policy/small

- community

rural

- air

- service/essential

- air

- service

.5

Community Comments

The communit y is welcome to submit comments at any time. We encourage prospective appl icants to contact the community before they submit their proposals so that they can tailor

them to the communit y ’ s 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 shortly after the deadline for carrier proposals, and ask them to submit their final comments.

This Order is issued under authority delegated in 49 CFR Part 1.25a(b) and re

- del egated to the Director, Office of Aviation Analysis.

ACCORDINGLY,

1. We request that carriers interested in providing Essential Air Service at Manistee, Michigan

, submit their proposals, with subsidy support if necessary , no later than February 27 , 2014

. The proposals should be e

- mailed to: EAS@dot.gov with the title “Proposal to Provide E AS at Manistee, MI ”; 8

2. Th ese docket s will remai n open until further O rder of the Department; and

3 . We will serve copies of this O rder on the mayor of Manistee , Michigan, the airport manager of Manistee Blacker Airport

, and the service list for th is docket.

Persons entitled to petition the Department for review of this Order under the Department’s

Re gulations, 14 CFR Part 385.31(a), must file such petitions within seven (7) days after the date

of service of this Order.

This Order will be effective immediately, and the filing of a petition for review shall not preclude its effectiveness.

By:

TODD M. HOMAN

Director Office of Aviation Analysis (SEAL) An electronic version of this document is available

o nline at http://www.regulations.gov

.

8 Questions regarding filings in response to this O rder may be directed to Brooke Chapman at (202) 366

- 0577 or mail to : Brooke.Chapman @dot.gov

.Appendix A

AREA MAP

Maps generated by the Great Circle Mapper

- copyright © Karl L. Swartz.Appendix B

EAS Carrier Traffic at : Manistee/Ludington, Michigan

Quarter Year Deplanements Enplanements Total Traffic Enplanements per Day

1 2010 535 622 1,157 7

2 2010 929 845 1,774 11

3 2010 1,151 1,240 2,391 16

4 2010 714 695 1,409 9

Annual

Totals 3,329 3,402 6,731 10.8

1 2011 575 628 1,203 8

2 2011 3,436 3,341 6,777 43

3 2011 4,369 4,765 9,134 59

4 2011 2,522 2,482 5,004 32

Annual

Totals 10,902 11,216 22,118 35.3

1 2012 983 1,105 2,088 13

2 2012 344 341 685 4

3 2012 1,327 1,261 2,588 17

4 2012 132 121 253 2

Annual

Totals 2,786 2,828 5,614 9 .0

1 2013 419 424 843 5

2 2013 635 635 1,270 8

3 2013 1,059 1,059 2,118 14

4 2013 N/A N/A 0 0
2,113 2,118 4,231 9.2

Notes :
1. Source 2010

- 2012 : Bureau of Transportation Statistics T

- 100 Market

. 2. Source 2013: Michigan DOT website (http://mdotcf.state.mi.us/public/airportstats/)
3. E nplanements per Day = Total Traffic/2/ 313 annual service days (314 in leap years) ; Quarter 4 for

2012 + Quarters 1+2+3 for 2013 )/2/ 313

. =4,484 passengers/2/313 = 7.2 passengers per dayAppendix C

Example of General Terms and Conditions for Essential Air Service

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 outl ined 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 supporti ng 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 wi th 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

c arrier 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 cons ider 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 complete, terminates or reduces payments for

servic e 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 provi de 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 o r partial reduction or cessation of payment.

Funds may not be available for performance under this Order beyond [DATE]. The Government’s obligation for performance under this Order beyond [DATE], 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 [DATE], until funds are made available to the Department for performance. If sufficient funds are not made avail able for performance beyond [DATE] , the Department will provide notice in writing to the carrier.

Subsidy contracts are subject to, and incorporate by reference, relevant statutes and Department regulations, as they may be amended from time to time. Howe ver, any such statutes, regulations, or amendments thereto shall not operate to controvert the foregoing paragraph.

All claims for payment, including any amended claims, must be submitted within 9 0 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 st ; August claims must be submitted by November 30 th , and so on.