BEFORE THE DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C.

Docket DOT-OST-1996-1266 Docket DOT-OST-1996-1266 Docket DOT-OST-1996-1711

PETITION OF CHARTER AIR TRANSPORT, INC.

AND PUBLIC CHATERS, INC. FOR RECONSIDERATION Communications with respect to this document should be addressed to:

Susan B. Jollie Law Office of Susan B. Jollie 7503 Walton Lane Annandale, VA 2200 (703) 354-8450 (703) 354-4945 (facsimile) SJollie@verizon.net Attorney for Charter Air Transport, Inc. and Public Charters, Inc.

October 20, 2010 Essential Air Service at IRONWOOD, MICHIGAN/ASHLAND, WISCONSIN MANISTEE/LUDINGTON, MICHIGAN Under 49 U.S.C. 41731 et seq.1 BEFORE THE DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C.

Docket DOT-OST-1996-1266 Docket DOT-OST-1996-1266 Docket DOT-OST-1996-1711

PETITION OF CHARTER AIR TRANSPORT, INC.

AND PUBLIC CHATERS, INC. FOR RECONSIDERATION Pursuant to Rule 37 of the Department’s Procedural Rules, 1 Charter Air Transport, Inc. (“CAT”) and Public Charters, Inc. (“P1”) petition for review of Order 2010-9-26. This request is joined by Manistee and Ironwood, Michigan. The Department erred in adopting an unnecessarily restrictive legal interpretation of the phrase “scheduled air transportation.” The proposal that DOT rejected met or exceeded the objective service criteria that Congress established for Essential Air Service (EAS). 49 U.S.C. § 41732.
The regularly scheduled flights to be operated with CAT’s 30 seat aircraft and marketed by P1 through internet and travel agent ticket distribution systems will offer meaningful access to the nation’s air transportation network and enable the affected communities to rebuild the level and quality of air service to which they are entitled. Congress has authorized DOT to grant exemptions from statutory requirements when consistent with the public interest. As recipients of EAS services, Manistee and Ironwood

1 14 CFR §302.37. Essential Air Service at IRONWOOD, MICHIGAN/ASHLAND, WISCONSIN MANISTEE/LUDINGTON, MICHIGAN Under 49 U.S.C. 41731 et seq.2

are without doubt best positioned to understand what kind of service meets the needs of their citizens and is accordingly consistent with the public interest. When EAS communities have agreed to waive statutory requirements, DOT has provided subsidy to the preferred applicant.

DOT should therefore reconsider Order 2010-9-26 and reverse this decision insofar as it forecloses CAT/P1 from being selected to perform EAS. This determination would not only benefit the inhabitants of these communities, but also offer the prospect of relieving stresses that are adversely affecting the EAS program.

DOT MUST FOSTER INNOVATION IN THE EAS PROGRAM
The EAS program is in a downward spiral, as recently documented in a report by the Government Accountability Office (“GAO”) entitled National Transportation System: Options and Analytical Tools to Strengthen DOT’s Approach to Supporting Communities’ Access to the System (July 2009)(“GAO Report”). GAO, advised by a panel of industry experts, reported that:

♦ A n u n i n t e n d e d c o n s e q u e n c e o f t h e F A A ’ s C o m m u t e r S a f e t y a n d F A A P a r t 1 1 9 rulemaking proceedings has been to eliminate aircraft types/operators that are needed to serve EAS markets. 19 seat turboprops are relatively costly to operate, no longer in production, in limited supply, costly to acquire and refurbish to current FAA aircraft standards (GAO Report at 15-16).

♦ T h e p o o l o f p o t e n t i a l E A S p r o v i d e r s ( i n c l u d i n g P a r t 1 3 5 o p e r a t o r s o f 9 s e a t aircraft) has shrunk from 34 in 1987 to 10 in 2009 (GAO Report at 14).

♦ A s l e g a c y c a r r i e r s e x i t m a r k e t s , t h e n u m b e r o f E A S m a

r k e t s g r o w s , i n c r e a s i n g from 87 in 2003 to 102 in 2008 (GAO Report at 9).3 ♦ A v e r a g e E A S s u b s i d i e s h a v e r i s e n 3 5 % f r o m $ 8 8 3 , 0 0 0 i n 2 0 0 3 t o $ 1

. $ 1

. 3 7 1 million in 2008, with a 65 % increase in the last year reviewed by GAO (GAO Report at 9).

♦ S o m e c o m m

u n i t i e s h a v e a l r e a d y e x p e r i e n c e d s e r v i c e i n t e r r u p t i o n s , a n d i f unsubsidized carriers cease serving EAS-eligible markets, the risks are great that capacity available from 19 seat EAS operators will be inadequate. ( See GAO Report at 13-14)

♦ I f t h e r e a r e n o E A S c a r r i e r s a v a i l a b l e t o s e r v e a m a r k e t o r s e r

v i c e s a r e provided with 9 seat aircraft, members of EAS communities instead use cars ( See GAO Report at 21-22, 28), an alternative that FAA has determined is far less safe than air transportation ( See 61 Fed. Reg. 28416 )

. When the EAS program was first established in 1978, Congress intended that EAS communities receive the quality of services that approximated that which had been provided by certificated scheduled air carriers that had served markets during the highly regimented regulatory regime that was being deregulated. Over the years, Congress sought to protect EAS communities by establishing criteria that defined the qualities of the air transportation service for which Congress provided subsidies. 49 U.S.C. § 41732 now describes the service attributes that Congress intended for minimum essential air service. The key elements are: (1) transportation to a hub offering reasonable connections (§ 41732(a)); (2) twice daily frequencies (two for the weekend)( § 41732(b)(1)); (3) flights at reasonable times and at fares comparable to generally prevailing prices (§ 41732(b)(2)); (4) aircraft with 15 or more seats (§ 41732(b)(3)); (5) service to meet4

estimated demand at specified load factors not to exceed 60% (§ 41732(b)(4)); (6) aircraft with two engines and using two pilots (§ 41732(b)(5)); and (7) pressurized aircraft (§ 41732(b)(6)). The regularly scheduled public charter flights proposed by CAT/P1 meet each of the enumerated attributes of subsidized air transportation services set forth in § 41732.
In stark contrast, the EAS services that are now being subsidized are rapidly devolving in a manner that Congress surely did not contemplate. More than twenty percent (20%) of EAS markets are currently served by operators of aircraft with 9 or fewer seats. 2 The small aircraft certificated by the FAA under 14 CFR Part 23 lack many of the safety features of large aircraft meeting the more demanding safety standards of Part 25, such as the 30 seat aircraft CAT would utilize.
Of these, many operators use aircraft with one engine and/or a single pilot crew.
See Attachment 1. Some EAS flights do not even operate into the commercial airline terminals of airports but rather transport passengers to FBOs that service private aircraft. These flights do not undergo pre-flight TSA security screening and there is no barrier between the unscreened passengers and the cockpit. See Attachment 2. In some instances, tickets cannot be purchased from any other source than the carrier’s web site.
See Order 2009-10-13 at 6.
Small aircraft of 9 or fewer seats were intended to serve as “air taxis,” providing flights to private charter customers. The safety and security regulations under which they are authorized operate reflect this reality. The Department nonetheless permits these

2 Compare Attachment 1 (27 entries) with May 2010 U S Subsidized EAS Report (109 entries for Lower 48 states). http://ostpxweb.dot.gov/aviation/X-50%20Role_files/essentialairservice.htm5

operations to qualify as “scheduled air transportation” for EAS purposes even when they do not meet the Congressionally defined minimum EAS criteria. With the projected obsolescence of the few remaining 19 seat aircraft, this is the grim prospect for EAS service that most EAS communities will face sooner or later. Passengers understandably will not accept inferior service in small aircraft that do not embody the safety and security features associated with airline service, so they fly less or drive more. Enplanements decline, which in turn is interpreted by DOT as evidence that a community cannot support service with the kind of aircraft Congress specifically directed that DOT subsidize. In hopes of escaping the downward spiral, Manistee and Ironwood endorsed the service that CAT has offered to provide with 30 seat aircraft incorporating more advanced safety features, including a crew consisting of two pilots and a flight attendant, more comfortable seating and better accessibility, the capability to better avoid turbulence, and a lavatory—and at competitive subsidy rates. This type of aircraft more closely approximates the kind of service that the communities received from certificated local service carriers prior to 1978 than the 9 or 19 seat aircraft currently deployed in EAS subsidized service. Nevertheless, Order 2010-9-26 concludes that the proposed services with 30 seat aircraft are not eligible for EAS subsidy. The fundamental recommendation of the GAO Report was that DOT “assess some of its practices as well as whether other forms of air service ... might better serve some communities.” GAO suggested that this assessment “include a re-examination framework to re-visit the program’s objectives.” The Department concurred in this recommendation. GAO Report, at Highlights . Given DOT’s commitment to re-examine6

its EAS program, DOT is compelled to re-evaluate Order 2010-9-26 with an open mind about innovative approaches that would meet the objective Congressionally mandated criteria of §41732 and satisfy the EAS needs identified by the local EAS communities that best understand their markets. THE LEGAL INTERPRETATION OF 49 U.S.C §41732 IS INCORRECT Order 2010-9-26 is predicated on enforcing imagined restrictive certificate requirements, not on improving the quality of EAS service. It concludes that CAT does not have the requisite FAA authority to conduct “scheduled operations,” and its proposal to provide scheduled public charter flights in conjunction with P1 was therefore not eligible for EAS subsidy. Implicit in this reasoning is a finding that Congress used the phrase “scheduled air transportation” in §41732 with the intention of precluding scheduled public charters that meet or exceed all of its seven enumerated objective service criteria that ultimately came to define minimum essential air service. The Order acknowledges that CAT and P1 could provide the proposed service today between any two points in the United States under CAT’s existing FAA authority without EAS subsidy. In other words, scheduled public charters can be safely performed using 30 seat aircraft, but they cannot be subsidized. DOT’s interpretation of the statute is that Congress intended to deprive EAS communities of a higher quality of service that can lawfully be provided in non-subsidized markets. Order 2010-9-26 violates numerous tenets of statutory construction to come to such an illogical conclusion. The term “scheduled air transportation” is not defined in 49 U.S.C. §40102. The task of legal interpretation is to discern Congressional intent assuming that Congress used7

words in accordance with their plain meaning and their related usage in the statute and contemporaneous DOT economic regulations. Common usage of the term would support an interpretation consistent with the common law concept of “common carriage” in which transportation service was sold to the public at a stated price to be provided at times set forth in a published schedule and all comers would be accommodated subject to the physical constraints of the conveyance. The statutory definitions of “air transportation” alludes to this fundamental concept by describing it as “transportation of passengers by aircraft as a common carrier for compensation or hire...” 49 U.S.C. §40102(25).
An “air carrier” is defined as any U.S. citizen “undertaking by any means, directly or indirectly, to provide air transportation.” 49 U.S.C. §40102(25). A public charter operator is defined as an “indirect air carrier” meaning “any person who undertakes to engage indirectly in air transportation operations and who uses for such transportation the services of a direct air carrier.” 14 CFR §380.2.
Section 41733(c) provides that an “air carrier”—defined to include both a charter operator and air carrier—may apply for compensation to provide basic EAS. Thus, public charters are air transportation services. There is nothing in the definitions pertaining to EAS that prevents providers of public charters from applying for subsidy to support air transportation service to EAS communities.
The terms “scheduled service” and “flight schedule” appear in DOT’s Economic Regulations that bear on statutory interpretation of the phrase “scheduled air transportation” as used in §41732. The flights that the public charter operator sells to the8

general public are listed in a flight schedule approved by DOT that the direct air carrier is committed to operate. 14 CFR § 380.28-29.
Under the applicable DOT economic regulations, direct air carriers, such as CAT, that operate aircraft with 60 or fewer seats may perform the flight operations as either an “air taxi” or “commuter.” 14 CFR Part 298.The distinction is based on whether the carrier provides “scheduled service.” “Scheduled service” is defined as “transport service operated over routes pursuant to published flight schedules ...” 14 CFR § 298.2. Section 298.21(d) provides that no air taxi operator may “provide scheduled passenger service at an eligible point “ unless it has registered as a commuter carrier” and been found fit “to conduct such service.”
DOT has interpreted its economic regulations to require a direct air carrier that performs more than 4 weekly frequencies in a city-pair market as public charters to obtain a “fitness determination” under 14 CFR Part 204. This fitness determination is only required of commuter carriers that perform scheduled services as defined in Part 298. In order to perform five or more weekly public charter flights, CAT satisfied this requirement in a proceeding in which it was found “fit, willing, and able to conduct scheduled passenger operations as a commuter carrier.” Order 2010-3-8, DOT-OST 2009-0187. If, as Order 20109-26 erroneously concludes, public charters are by definition never “scheduled air transportation services,” then it follows that air taxis operating under Part 298 are legally entitled to operate as many weekly public charter flights in any given city pair market as they wish without complying with Part 204. Since this has not9

heretofore been DOT’s legal interpretation of these requirements, the inescapable conclusion is that public charter operations are a form of “scheduled air transportation services.” Further support for this legal interpretation can be found by analyzing the structure of §41732. Congress has specifically enumerated detailed objective, qualitative attributes that describe “scheduled air transportation” eligible for EAS funding. Congress adopted the EAS program because it was anticipated that service by certificated scheduled air carriers would be discontinued once the Airline Deregulation Act became law, and subsequent experience confirmed this belief. Notably absent from the statute are any references to “certificates” issued by either DOT or FAA. Nor is it reasonable to assume Congress would want to artificially limit the service options available to communities at a time when it was believed that de-regulation would spawn new innovative ways of providing air transportation services. See generally 49 U.S.C §40101. A legal interpretation of “scheduled air transportation” in §41732(a) that is consistent with DOT’s regulatory definitions is common carriage flight operations that are provided by air carriers in accordance with a published schedule of flights with a frequency of 5 or more weekly trips in any city-pair market. The term “air carrier” is defined to encompass air transportations services delivered through the collaboration of the indirect and direct air carriers. Public charters therefore satisfy the definition of “scheduled air transportation services” that is based on DOT economic regulations. To the extent Congress intended to restrict eligibility for EAS subsidy, it did so by specifying the attributes of minimum EAS in §41732(b). This reflects the approach that would be taken by a prospective passenger who would describe the amenities associated10

with airline service. In this regard, the EAS proposal of CAT/P1 conforms to these expectations far better than the inferior caliber of EAS services now being funded. Given the specificity concerning the attributes of minimum EAS, it must be presumed that Congress was exclusively concerned with the quality of the service and not regulatory classifications. Congress exhibited no intention to exclude public charters from receiving EAS subsidy provided that the proposed service would otherwise meet the requirements of §41732(b).
Instead of adhering to the legal principles of statutory construction to effectuate Congressional intent for EAS, Order 2010-9-26 travels down some dubious paths to deny EAS communities the services they want and deserve. The Order offers a truncated definition of “public charters,” which appears to categorically state that public charters are not scheduled service. In fact, the definition reads: “ Charter flight means a flight operated under the terms of a charter contract between a direct air carrier and its customer. It does not include scheduled air transportation...sold on an individually ticketed ...basis. The definition serves to distinguish air transportation service that is sold in accordance with Part 380, which has provisions relating to the method of sale and protection of passenger deposits, from air transportation services sold by air carriers in their own name pursuant to their contract of carriage with the passenger.
Both “scheduled” air carriers and public charter operators sell individually ticketed air transportation services that may be performed with a frequency that defines “scheduled service.” Indeed, the method of distribution for the proposed EAS services is in many ways indistinguishable from how tickets were sold in 1978 because P1 publishes11

its schedules through ATPCo (the Airline Tariff Publishing Company) and settles accounts through ARC (the Airline Reporting Corporation)—both of which are the successors in interest to the organizations established by pre-1978 regulated certificated scheduled air carriers. For tickets issued under Public Charters, Inc.’s “P1” air carrier code, passengers purchasing transportation on regularly scheduled public charter flights are also provided with a copy of the Part 380 contract that provides for consumer protections that are arguably superior to direct sales by air carriers.
Regardless of how the tickets are sold, public charters can qualify as a form of air transportation service provided with a scheduled service frequency. This is the basis of the Department’s regulations defining the threshold for a commuter air carrier fitness determination regardless of whether the scheduled services are provided pursuant to public charter contracts or tickets sold by the air carrier. The flight operations are scheduled air transportation services. The distinguishing feature in today’s deregulated market is the regulations that govern sale of individual tickets.
This confusion between the method of sale and the mode of flight operations carries through in the discussion of CAT’s FAA “safety authority.” Order 2010-9-26 concludes that CAT is ineligible to receive EAS subsidy payments because §41732 incorporates the word “scheduled” and CAT does not have FAA authority to conduct “scheduled operations.”
The erroneous legal analysis in Order 2010-9-26 proceeds from the premise that CAT proposed to provide EAS by selling individually ticketed air transportation solely under its own name pursuant to its own economic and safety authorizations. This is a12

fundamental mischaracterization of what was in fact proposed. The EAS service proposal was that CAT as a direct air carrier would provide “scheduled air transportation” as authorized under DOT’s Part 204 and 298 regulations meeting all the mandated EAS service requirements that would be sold as “public charters” under DOT’s Part 380 regulations. The proposal is an acceptable form of “scheduled air transportation” for EAS purposes because it operates with the scheduled frequencies to a hub airport in accordance with the express qualitative service requirements set forth in §41732 (b) and 14 CFR Part 398, the DOT economic regulations from which they were derived.
FAA elected to impose Part 121 operating rules on certain operations with aircraft of 10 to 30 seats, while permitting public charter flights to be operated under slightly different Part 135 operating rules when conducted with aircraft of up to 30 seats. This different regulatory treatment presumably reflected FAA’s judgment about public perceptions and the propriety of imposing the economic costs of certain of its flight rules on aircraft operators that predominantly provided service as regional carriers under a code share agreement with a large air carrier operating under Part 121 rules. See FAA Part 119 rulemaking, 60 Fed. Reg. 65832, 65832-34, 65836.
There is nothing in DOT economic regulations that precludes treating public charters as a form of scheduled air transportation—indeed the relevant DOT definitions and practice support this interpretation. Order 2010-9-26 is unprecedented because it disregards DOT economic regulations and instead uses a definition taken from FAA regulations. This is contrary to legal precedent governing statutory interpretation. Congress first used the phrase “scheduled air transportation” in connection with13

EAS long before FAA in 1996 adopted the definition of “scheduled operations” that is now being read into §41732(a). For purposes of construing Congressional intent in choosing statutory language, it must be presumed that Congress used language and regulatory concepts from DOT’s economic regulations in effect at the time of enactment. There is absolutely no support for the proposition that Congress intended that DOT’s economic regulations be construed with reference to FAA safety regulations that did not then exist.
By defining “scheduled air transportation” in its economic regulations to mean “scheduled operations” under FAA’s Part 121, Order 2010-9-26 departs from prior practice establishing that terminology and concepts used in DOT economic regulations need not conform with FAA regulatory definitions. FAA recognized this when it adopted Part 119, stating: “The FAA acknowledges that this definition differs from the definition of “commuter operator” in Part 93 and from the DOT definition. That inconsistency will continue.” 60 Fed. Reg. at 65880. Likewise, in its guidance material DOT recognizes that the definition in FAA rules differ from its economic regulations. See, e.g., the DOT publication entitled “How to Become a Commuter Air Carrier” at 3, n. 4. The legal principles governing statutory construction presume that Congress knew that DOT and FAA regulatory definitions differ and therefore Congress would have intended that only DOT economic regulatory definitions apply to DOT economic programs such as EAS.
If the use of the term “scheduled air transportation” in §41732 evidenced Congressional intent to require EAS flights be performed under Part 121, then Congress would not have permitted communities to elect service with aircraft of nine seats or less14

that operate under Part 135 operating rules. The statute is devoid of any reference to FAA related regulatory requirements. Indeed, by adopting the small aircraft waiver provision, 49 U.S.C §41732(b)(3)(B), Congress authorized EAS subsidies for Part 135 operators with small aircraft certificated to FAA Part 23 specifications that do not incorporate a number of safety features that are mandated for Part 25 larger aircraft of the type operated by CAT.
FAA regulations provide that scheduled flight operation rules set forth in Part 121 do not apply to public charter flight operations for aircraft with 30 or less seats. FAA regulations provide that public charters are to be operated as Part 135 flight operations when performed with aircraft of 30 or less seats. CAT has Part 135 Operations Specifications, which FAA judges to be appropriate for performing public charters.
CAT in fact performs public charters today on a daily basis under these flight rules with no adverse affect on the safety of its operations. In so doing, CAT is exercising its DOT economic authority to perform “scheduled services” under Parts 298 and 204. CAT therefore possesses the requisite DOT and FAA authorizations to conduct the proposed operations.
Order 2010-9-26 uncharacteristically elevates form over substance by reading restrictive legal requirements into the statute to prohibit consideration of reasonably priced service proposals that are preferred by the EAS communities. This decision must be reversed because it improperly forecloses safe, reliable, and high quality service that passengers prefer and Congress intended that small communities receive.15

DOT POSSESSES THE AUTHORITY TO GRANT A WAIVER OR EXEMPTION
While there is ample legal rationale for reversing the decision, Congress has given DOT the authority to deviate from legal requirements. The Secretary may exempt any person from provisions of the statute, including §§41731-41742, “when the Secretary decides that the exemption is consistent with the public interest.” 49 U.S.C §40109(c). There is no absolute legal “veto” over providing communities with the best available EAS service of their choice. Throughout most of its history, the EAS program has been administered to meet challenges creatively. Congress frequently approved, and current statutory language reflects codification of many of DOT’s initiatives. The hallmark of the EAS program has been its responsiveness to meeting local service demands, as identified by those that best understand their situation. DOT’s decision in Order 2010-9-26 seems to exalt regulatory technicalities over real world considerations, but it is a situation that can easily be remedied by exercising the exemption authority Congress provided. There is ample legal precedent establishing that DOT will fund services if a community elects to waive its rights under §41732. Congress explicitly directed DOT to take into account when selecting an EAS carrier “the preferences of the actual and potential users of air transportation at the eligible place, giving substantial weight to the views of the elected officials representing the users.” 49 U.S.C. § 41733(c)(1)(D). The most obvious manifestation of Congressional deference to community choice is 49 U.S.C. § 41432 (b)(3)(B). This provision specifically states that DOT cannot select an EAS provider operating aircraft of less than 15 seats unless the community waives its rights.16 There is no comparable express waiver provision in other subsections of 41732. However, DOT has either interpreted the statute as providing the flexibility to waive any of the statutory EAS service requirements or DOT has exercised its exemption authority sub silentio. Order 2009-2009-10-13 at 6 (community declines to waive the 2 engine/2 pilot requirement); Order 2008-10-25 at 3 (the community “effectively waived its rights to the twin engine and 15 seat minimum aircraft standards”). 3 In Order 2010-9-9, DOT makes it clear that it is exercising its exemption authority to permit an EAS carrier to exit the market despite the statutory requirements of §41734 (Ordering paragraph 5 at unnumbered page 5). In other instances, the order does not specify the precise legal authority that is being exercised. However, the unmistakable pattern is that DOT has deferred to EAS communities’ stated preferences for a carrier by deviating from the minimum service requirements of 49 U.S.C. §41732. The primacy of the community preference will be respected even in situations in which another applicant that met all the Congressionally defined minimum criteria and/or submitted a lower bid.
See Order 2008-10-25. What most matters to EAS communities is the quality of service that is going to be provided and not the regulatory labels. Public charter operations sold under Part 380 will exceed the service that Manistee or Ironwood now receive or could expect to receive from the pool of EAS applicants that are operators of 9 seat or 19 seat aircraft. As DOT acknowledged, CAT’s FAA safety authority allows public charters operations with 30 seat aircraft today. There is no reasonable basis to deny EAS subsidy payments for service that could be safely provided to any other city in the United States. It is not

3 Because there are twin engine/ two pilot aircraft with less than 15 seats, exercise of the express waiver provision contained in § 41432 (b)(3)(B) does not necessarily imply a waiver of the separate statutory requirement set forth in § 41432(b)(5).17

fair to treat citizens of Ironwood and Manistee as second class citizens forced to accept inferior service – possibly at higher cost to the federal government. The communities strongly prefer EAS air transportation services proposed by CAT to be marketed as public charters in conjunction with P1. If these communities are willing to waive the “scheduled air transportation” requirement of §41732 as articulated in Order 2010-9-26, then DOT should declare its willingness to grant an exemption that would enable CAT/P1 to be selected to provide subsidized EAS. AN EXEMPTION IS CONSISTENT WITH THE PUBLIC INTEREST The Airline Deregulation Act, which first authorized EAS subsidies, substituted the phrase “consistent with the public interest” for “required by the public interest” to reflect the statutory bias for permitting the operation of free markets to provide services with the greatest public benefits. Order 2010-9-26 is reminiscent of heavy handed federal regulation that prescribed methods of doing business and protected the select few incumbent certificate holders from competition. The Order dictates that CAT has two choices: obtain Part 121 FAA Certification or acquire and operate 9 seat aircraft – which by definition do not meet the statutory EAS minimum requirements. In other words, CAT is constrained to doing business by reference to services offered by incumbent EAS providers. The GAO Report documents the deficiencies inherent in confining EAS services to an ever smaller pool of providers that tend to operate either with 19 seat aircraft that are nearing obsolescence or with 9 seat of smaller aircraft are not acceptable to passengers—provided at increasingly higher costs and less value. This is compelling real world evidence of regulatory and/or18

commercial barriers to entry on the terms dictated by regulators, and the resulting unacceptable deterioration of EAS service. In those instances when an EAS community waives its rights to 15 seat aircraft— often because there are no other available alternatives— “scheduled service” that qualifies for EAS subsidy in fact resembles a level of service much more consistent with general aviation or small aircraft charters than with airline service. For example, depending on the operator:

 Aircraft have no co-pilot

 the co-pilot’s seat on single-pilot routes can be sold to a passenger who has full access to all aircraft controls

 passengers who do not undergo TSA screening have full access to the pilot, aircraft controls, and other passengers.

 aircraft were built to Part 23 general aviation standards and do not incorporate safety features associated with larger aircraft

 aircraft cabins are small, in some cases the size of a sport utility vehicle, denying access to passengers without the requisite agility

 aircraft are subject to turbulence

 there are no flight attendants

 aircraft have no private lavatories

 passengers are delivered to remote private facilities at the hub airport rather than the main terminal, contributing to inconvenience and delay

 tickets may only be purchased from the air carrier If these services are “consistent with the public interest” and entitled to exemption from certain requirements of §41732, a proposal that embodies superior service and that is strongly endorsed by the associated EAS communities is also consistent with the public interest and likewise entitled to exemption at the communities’ request. Both Ironwood19

and Manistee, Michigan have indicated that they would waive the scheduled service requirement of §41732 in order to provide the following benefits to their citizens:

 Service with a twin-engine turboprop aircraft built and regulated to Part 25 airliner standards

 A full crew complement of a Captain, First Officer, and Flight Attendant

 Physical barrier inhibiting unauthorized cockpit access

 Readily accessible cabin with seating and overhead storage for 30 passengers

 Full sized private lavatory

 1,200 pound partitioned, pressurized cargo hold

 Service directly to and from the main terminal at the hub airport for reliable connections

 Full TSA security procedures for passengers and aircraft

 Ticketing online, through major internet travel agents (e.g. Travelocity) and through Global Distribution Systems (GDS) used by travel agents

 Enhanced consumer protections enforced by the requirements of 14 CFR Part 380 DOT is directed to promote innovation and competition in air transportation services as a means of providing for the needs of small communities. 49 U.S.C §40101(a)(11),(13), and (16). In the three decades since adoption of the EAS program, there have been vast changes in the operating environment—notably different aircraft types, and technical advances that permit direct sale and ticketing of air transportation. CAT and P1 want to make these resources available to reinvigorate services provided to EAS communities. DOT order 2010-9-26 needlessly erects “certificate” based roadblocks harkening back to discredited forms of pre-1978 economic regulation.20 On reconsideration, DOT should ask: What are the compelling legal and regulatory policy arguments for denying EAS communities access to superior service offerings as judged by the communities (assuming the subsidy amounts requested are reasonable)? Even if there were some basis for adhering to a restrictive legal interpretation, all the relevant policy based considerations support granting a waiver or exemption. 4

CONCLUSION
Scheduled air transportation service eligible for EAS subsidy under DOT economic regulations can be provided as public charters provided that the proposal meets the specific requirements of minimum EAS. This interpretation best effectuates the fundamental objective of providing quality air transportation to these small communities. This interpretation conforms with definitions in DOT economic regulation. CAT has the requisite DOT and FAA authority to perform public charter flight operations. The finding that CAT is disqualified because it lacks FAA authority for “scheduled operations” is therefore in error. This FAA authority is not required to perform public charter flights. The approach taken in Order 2010-9-26 must be reversed because of its far-reaching implications. There are numerous instances in which the definition of words used in DOT economic regulations differ from FAA regulations relating to rules for flight operations. It has heretofore been accepted that the definitions

4 Protection of incumbents, which could be couched in terms of “fairness,” was a concept that was specifically rejected in the context of the Airline Deregulation Act. Innovation and competition threaten the status quo, but produce benefits to the passengers and communities that define the “public interest.”21

and concepts should not be “harmonized” because the two regulatory regimes have fundamentally different objectives. The EAS subsidy program is entirely a function of DOT economic regulation— and the only question should be how to deliver the services Congress described as minimum EAS. FAA for its part has decided that unsubsidized public charter flights can be safely operated with 30 seat aircraft under Part 135 aircraft operating rules. It would be a perverse reading of Congressional intent if DOT were to liberally exercise its authority to subsidize carriers that do not meet the express criteria for minimum EAS service while narrowly interpreting its powers in a manner that denied EAS communities the opportunity for EAS subsidized public charter service that by any objective measure is a superior offering in terms of customer service, amenities, aircraft safety features, and the ability to procure tickets using sophisticated distribution outlets.

WHEREFORE, Charter Air Transport, Inc. and Public Charters, Inc. respectfully requests that DOT: (1) reconsider its decision in Order 2101-9-26; (2) reverse Order 2010-9-26 insofar as it finds that Charter Air Transport is not eligible to provide EAS service as regularly scheduled public charter operations; or, in the alternative, (3) declare that an EAS community may waive or request an exemption from the “scheduled service” requirement that would authorize subsidy payments for public charter flights that would otherwise meet the requirements of §41732; and (4) proceed without further