Order: 2014

- 7

- 12

Served: July 14 , 2014



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 14 th day of July , 20 1 4

Essential Air Service at

LAUREL/HATTIESBURG, MISSISSIPPI MERIDIAN, MISSISSIPPI DOCKET DOT

- OST

- 2001

- 10685

DOCKET DOT

- OST

- 2008

- 0112

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



### ORDER SELECTING AIR CARRIER

Summary By th is O rder, the Department is selecting ExpressJet Airlines (ExpressJet)

, to provide

Essential Ai r Service (EAS) at Laurel/Hattiesburg and Meridian, Mississippi

, using 50

- passenger Canadair Regional Jet (CRJ200) aircraft to Dallas/Fort Worth International Airport (Dallas or DFW ) f or the period from November, 1, 2014, through

O ctober 3 1, 2016. At each com munity, ExpressJet will provide 12 nonstop or one

- stop round trips per week over a Meridian

- Laurel/Hattiesburg

- Dallas or Laurel/Hattiesburg

Meridian

- Dallas routing for a combined annual subsidy of $7,821,307 ($3,910,654 for each community)

. 1

Background By Orders 2012

- 5

- 17 (May 22, 2012) and 2012

- 7

- 35 (July 30, 2012)

, the Departm ent
selected Silver Airwa ys (Silver) to provide 12 nonstop round trips per week at Laurel/Hattiesburg and 13 nonstop round trips per week at Meridian for an annual subsidy of $2,965,667 and $2,417,808, respectively. At both communities, Silver operates 34

- passenger Saab 340 aircraft to Hartsfield

- Jackson Atlanta International Airport (Atlanta). 2

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

2 By Order 2012

- 5

- 17, the Department also selected Silver to provide EAS at Muscle Shoals, Alabama, Greenville, and Tupelo, Mississippi. We will address tho se communities’ EAS in a separate Order.- 2

-

On April 9, 2014, Silver filed a 90

- day notice of its intention to terminate scheduled air service at Laurel/Hattiesburg and Meridian . As a result of th at notification, the Department

issued Order 2014

- 4

- 24 prohibiting Silver from terminating service and requesting proposals from air carriers interested in providing EAS at the communities for a new term. 3
In response to that Order, three air carriers submi tted proposals: Aerodyn amics, Inc. (ADI ), ExpressJet, and Sun Air Express, LLC d/b/a Sun Air International (Sun Air).

All three air carrier’s proposals and the communities’ comments may be accessed online at www.regulations.gov by entering each community’s respective Docket number in the

search block.

Proposal of ADI

ADI submitted proposals to serve Laurel/Hattiesburg and Meridian as an inseparable, “all

or

- nothing” package

– meaning that their proposal to provide EAS is on the condition that they are awarded the EAS contract for all three communities. 4 At Laurel/Hattiesburg, ADI

propose d to provide 12 nonstop round trips per week to Atlanta using 50

- passenger Embraer

- 145 aircraft (EMB145) for an annual sub sidy of $4,443,553. At Meridian, ADI proposed to provide 14 nonstop round trips per wee k to Atlanta using EMB 145 aircraft for an annual subsidy of $4,119,628

.

Proposal of ExpressJet ExpressJet proposed to provide 12 round trips per week at both Laurel/Ha ttiesburg and

Meridian from D FW using CRJ200 aircraft for a combined annual subsidy of $7,821,307. The airline will provide a mix of nonstop and one

- stop service over a Meridian

Laurel/Hattiesburg

- D FW or Laurel/Hattiesburg

- Meridian

- D FW routing. ExpressJe t states that under its proposal, passengers would be seamlessly connected into American Airlines’ global network.

Proposal of Sun Air Sun Air proposed to provide service at Laurel/Hattiesburg with 26 nonstop round trips per week to Louis Armstrong New O rleans International Airport (New Orleans) using 8

- passenger twin

- engine Piper Chieftain aircraft for an annual subsidy $2,543,285.

Community Comments We received comments from the Mayors of Hattiesburg, Laurel, and Meri dian , all strongly supporting the selection of ExpressJet to provide EAS at their communities

. The Mayors of Laurel and Hattiesburg both based their support of ExpressJet on the fact that the carrier

would use 50

- passenger regional jets and offer service to Dallas /Fort Worth Internat ional Airport , both of which they believed would provide travelers better service and more connecting opportunities. The Mayor of Meridian noted that ExpressJet’s codeshare with American Airlines, its approval by the Department of Defense to carry militar y personnel

,

3 Silver also filed notice to terminate service at Muscle Shoa ls, Alabama, Greenville, and Tupelo, Mississippi

, and Order 2014

- 4

- 24 prohibited Silver from terminating service at those communities as well.

4 ADI also proposed service to Tupelo, which was included with Laurel/Hattiesburg and Meridian as part of

the a ir carrier’s inseparable package.- 3

-

and its authority from the Department of Transportation's Economic Fitness Division to provide scheduled passenger service

, all pointed in favor of supporting ExpressJet’s proposal.

Decision After carefully reviewing all the airlines’ propo sals and the co mmunities’ comments, the Department has decided to select ExpressJet to provide EAS at Laurel/Hattiesburg and Meridian. The communities overwhelmingly support ExpressJet’s proposal and we find the service levels proposed to be reasonable. We base our decision on the five carrier selection criteria contained in 49 U.S.C. §41733(c), in addition to its proposed subsidy

level : 1) service reliability; 2) contractual and marketing arrangements with a larger carrier at the hub; 3) interline arrang ements with a larger carrier at the hub; 4) community views, giving substantial weight to the views of the elected officials representing the users; and 5) whether the carrier has included a plan in its proposal to market its service to the community.

First, ExpressJet , a wholly

- owned subsidiary of SkyWest, Inc.

, 5 has a proven record of providing reliable EAS. ExpressJet previously provided EAS at Meridian from Atlanta , as a Delta Connection carrier , and SkyWest Airlines has extensive experience provid ing EAS at numerous communities throughout the country. ExpressJet’s service would operate as American Eagle and

, thus

, would provide passengers access to American Airlines’ global

network . In addition, ExpressJet’ s service to D FW International Airport

, a large hub airport and the largest hub for American Airlines, will provide customers with seamless connections to the national air transportation system. Furthermore, ExpressJet has unanimous community support, a key carrier

- selection criterion. While E xpressJet did not include in their proposal a plan to market their service, neither did ADI n or Sun Air.

We are concerned that ExpressJet projects a subsidy per passenger of $313 for each

communit y

. C urrently the subsid ies per passenger based on FY2013 d ata for

Lau rel/Hattiesburg and Meridian are $250 and $192, respectively. S ervice provided by

Silver was not satisfactory, and, as a result, traffic levels dropped significantly

. However,

t he Department of Transportation and Rela ted Agencies Appropriations Act 2000, prohibits the Department from subsidizing EAS to communities located within the 48 contiguous States receiving per passenger subsidy amounts exceeding $200, unless the

communities are located more than 210 miles from the nearest la rge or medium hub. 6
Both Laurel/Hattiesburg and Meridian are within 210 miles of Memphis International Airport, a medium hub airport, and therefore subject to the $200 cap. The Department fully expects both communities and ExpressJet to work cooperativel y to ensure subsidy

rates are in compliance with the $200 per passenger cap to remain eligible for EAS. 7

5 SkyWest, Inc. is also the holding company of SkyWest Airlines.

6 Congress first established the $200 ceiling under P.L. 101

- 164 for fiscal year 1990, and reestablished it in fiscal years 1994

- 1999. The ceiling was made permanent by P.L. 106

- 69, the Department of Transportation and Related Agencies Appropriations Act of 2000.

7 On May 1, 2014, a Notice of Proposed Enforcement Policy on the $200 per passenger subsidy cap was published in the Federal Register (Volume 79, I ssue 84). It outlined the Department’s proposed policy on this issue, which would use traffic data from October 1, 2014, through September 30, 2015, to measure- 4

-

Based on ExpressJet’s prior experience to provide reliable service, we have a high degree of confidence that traffic levels will increase dramatically

, which will ensure that the

communities’ subsidy per passenger will be in compliance with the $200 per passenger subsidy cap

.

Service Transition We expect Silver to maintain its current service levels at the subsidy r ates described in

Order 2012

- 5

- 17 and 2012

- 7

- 35 , until ExpressJet begins operations at both communities, which, at this time, is expected to begin in November 2014

.

We expect Silver and ExpressJet to work together to make a smooth transition at both communities. In that regard, before Silve r 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 pen alty, if requested.

This decision is contingent upon the Department’s receiving properly executed

certifications from the air carrier that they are in compliance with the Department’s

regu lations regarding drug

- free workplaces and nondiscrimination, as well as the regulations concerning lobbying activities. 8

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 subsidize it to provide EAS

. ExpressJet 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. We have contacted the Federal Aviation Administration, and it has raised no concerns that would negatively affect our fitness findin gs. We therefore conclude that ExpressJet 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

. We se lect ExpressJet Airlines to provide Essential Air S ervice at Laurel/Hattiesburg and Meridian, Mississippi, and establish the annual subsidy rate s as described in Appendix C ;

2

. We direct ExpressJet Airlines 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

compl iance. The Department solicited public co mments on the policy and they were due June 30, 2014.

Refer to www.regulations.gov and search “DOT

- OST

- 2014

- 0061” for more information.

8 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- 5

-

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 may forfeit its compensation for any claim that is not supported under the terms of this Order ;

3 . We f i nd that ExpressJet Airline s is fit, willing and able to operate as a c ertificated air

carrie r
, and capable of providing reliable Essential Air S ervice at Laurel/Hattiesburg and Meridian, Mississippi;

4. We require Silver Airways to maintain its current service at Laurel/Hattiesburg and Meridian, Mississippi, until ExpressJet Airlines commences service;

5

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

6

. The Department will serve a copy of this O rder on the mayors of Hattiesburg, Laurel, and Meridian, Mississippi; the airport managers of Hattiesburg

- Laurel Regional Airport

and Meridian Regional Airport; Aerodynamics, Inc., ExpressJet Airlines; and Sun Air Express, LLC d/b/a Sun Air International.

B y:

SUSAN L. KURLAND Assistant Secretary for

Aviation and International Affairs

(SEAL)

An electronic version of this document is ava ilable at www.regulations.govA ppendix A



## AREA MAP

Maps generated by the Great Circle Mapper

- copyright © Karl L. Swartz

.Appendix B



### ExpressJet Proposal for EAS at Laurel/Hattiesburg and Meridian, MSAppendix C Page 1 of 2

ExpressJet Airlines

Essential Air Service to be Provided at Laurel/Hattiesburg

, Mississippi

DOT

- OST

- 2001

- 10685

Annual Subsidy: $3,910,654

Effective Period : November 1

, 2014 through October 31

, 2016

Scheduled Service : 12 nonstop and one

- stop round trips per week to Dallas /Fort International Airport (DFW)

Aircraft : 50

- passenger CRJ200 (50 passenger seats) Rate per Eligible Flight: $ 3, 198 1
Weekly Ceiling : $ 76,752 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. I n 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 pe rformance under this O rder beyond September 30, 2014

. The Government’s obligat ion for performance under this O rder beyond September 30, 2014

, is subject t o 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 u nder this order beyond September 30, 2014 , until funds are made available to the Departmen t for performance. If sufficient funds are

not made available for performance beyond September 30, 2014 , 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 $ 3,910,654 divide d by 1,223 annual departures (24 wee kly departures x 52 weeks x 98 percent completion)

. 2 24 arrivals and depart ures per week multiplied by $ 3,198 per flight

.Appendix C Page 2 of 2

ExpressJet Airlines

Essential Air Service to be Provided at Meridian, Mississippi

DOT

- OST

- 2008

- 0112

Annual Subsidy: $3,910,654

Effective Period : November 1, 2014, through October 3 1, 201 6

Scheduled Service : 12 nonstop and one

- st op round trips per week to Dallas/Fort Worth International Airport (DFW)

Aircraft : CRJ200 (50 passenger seats) Rate per Eligible Flight: $ 3,198 1
Weekly Ceiling : $ 76,752 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 significan t elements of the required service, without prior approval. The carrier understands that a n 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 co nsidered eligible for subsidy. In addition, if the carrier does not schedule or operate its flights in full conformance with the Order for a significant per iod, it may jeopardize its entire subsidy claim for the period in question. If the carrier contemp lates 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 cir cumstances 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 t o 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 t hat 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, 2014. The Gov ernment’s obligation for performance under this Order beyond September 30, 2014, 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 performanc e under this order beyond September 30, 2014, until funds are made available to the Department for performance. If sufficient funds are not made available for performance beyond September 30, 2014, the Department will provide notice in writing to the carr ier.

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 $ 3,910,654 divide d by 1,223 annual departures (24 wee kly departures x 52 weeks x 98 percent completion)

. 2 24 arrivals and departures per week multiplied by $ 3,198 per flight

.