Order : 2010

- 9

- 26

Served: September 30 , 20 10



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 27 th day of September , 20 10

ORDER REJECTING AND RESOLICITING PROPOSALS

Summary By this order, the Department is again re questing proposals from carriers interested in providing essential air service ( EAS ) at Ironwoo d, Michigan/Ashland, Wisconsin (Ironwood)

, and /or Manistee/Ludington, Michigan (Manistee)

, for a new two

- year term

. (See Appendix A for a map.) Carriers should file their proposals no later than October 18

.

Background

B y Order 2008

- 4

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

- seat Beech

1900D aircraft for a new two

- year term beginning when it inaugurate d full service

. Under that order, Great Lakes provide s Ironwood with two daily one

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

. Great Lakes

commenced service at the two communities on May 5

, 2008 , meaning that the contract was originally scheduled to expire on May 31, 2010

.

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

- 2

- 18 on February 19 synchr onizing the contract

end dates at the two communities with two additional EAS communities in Michigan

– Iron Mountain/Kingsford and Escanaba. Essential Air Service at

IRONWOOD, MICHIGAN/ASHLAND, WISCONSIN MANISTEE/LUNDINGTON, MICHIGAN

Under 49 U.S.C. 41731 et seq

. Docket DOT

- OST

- 199 6

- 1266
Docket DOT

- OST

- 1996

- 1711- 2

-

On June 4, b y O rder 2010

- 6

- 4, the Department selected M esaba A irlines to serve Iron Mountain/Kingsford and Escanaba and re quested prop osals from carriers interested in providing EAS at Ironwood and/or Manistee only , for a new two

- year term.

Proposals In response to Order 20 10

- 6

- 4

, Charter Air Transport , Inc. (Charter Air) and Sovereign Air

, Inc. (Sovereign) submit ted proposals

.

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

the d ocket number s listed on the first page

. E ach carrier’s propo sal is briefly summarized

below.

Charter Air

C harter Air submitted a n inseparable two

- city package (due to aircraft routing) bid for

service to Milwaukee with 30

- passenger Embraer 120 aircraft. Specifically, Charter Air would provide each community 12 one

- stop or nonstop round trips a week for an annual subsidy of $3,491,513. Charter Air would operate the service as public charters under

14 CFR Part 380 of the Department’s aviation regulations, in conjunction with Public

Charters , In c.
, a public charter operator, which would provide ticketing, reservations, and

other customer services.

Sovereign Sovereign ’s proposal comprises two options, both with service to Chicago

- O’Hare. The first option would utilize 8

- seat King Air C9 0 aircraft and provide each community with 21 one

stop or nonstop round trips a week for an annual subsidy of $2,551,725

. The second option would provide each community 14 one

- stop or nonstop round trips a week, utilizing 9

- seat King Air 200 aircraft

, for a n annual subsidy of $2,053,759.

Community Comments

On July 7 , the Department solicited the views of the civic officials of both communities

, and

the Michigan State Department of Transportation.

The Manistee County Blacker and Gogebic

- Iron County Airport Board s (representing

Ironwood /Ashland ) , in a unanimous vote, endorsed Charter Air

. In follow

- up correspondence, both airport managers acknowledged Charter Air’s lack of code

- share and marketing agreements, but restated their preference for Charter Air.

T he Air Service Specialist , Aviation Services Division, Bureau of Aeronautics & Freight

Services

, Michigan Department of Transportation

, supported the community preferences as

summarized above, stating “we support the selection of Charter Air Transport as we believe their proposal offers the highest possibility of long

- term success.”

Decision

After careful consideration, we have decide d to re

- solicit proposals for EAS at Ironwood

and /or Manistee by October 18

.- 3

-

When Congress established the EAS program in 1978, it established certain minimum

standards

. “Basic essential air service provided under [49 U.S.C.] section 41733 of this title

is scheduled air transportation of passengers and cargo.” 49 U.S.C. § 41732 (emphasis added). I n order to provide schedu led air transportation under the EAS program , carriers must hold (1) the necessary operating authority from the De partment to conduct scheduled air transportation and (2) the necessary safety authority from the FAA that is consistent with

the carrier’s ope rating authority

. Scheduled operations means “any common carriage

passenger

- carrying operation for compensation or hire conducted by an air carrier ...for which the certificate holder or its representative offers in advance the departure location, departur e time, and arrival location. It does not include any passenger

- carrying operation that is conducted as a public charter operator under [14 CFR] [P] art 380....” 1

With respect to Sovereign , the carrier does not have the necessary operating authority from the Department to conduct scheduled air transportation and therefore does not meet the requirements of the EAS program. Sovereign currently holds exemption authority under

Part 298 of the Department’s r ules (14 CFR Part 298) to conduct on

- demand charter operations. Charter air transportation is not scheduled air transportation. 2 Further, Sovereign has not received any community support.

Regarding Charter Air, the carrier also fails to meet the EAS Program requirements because it does not hold authority from the Department and the FAA to operate 30

- seat aircraft in

scheduled operations

. The company currently holds (1) economic authority from the Department to conduct chart er air transportation and economic authority from the Department to conduct scheduled air transportation as a commuter air carrier pursuant to
14 CFR Part 135

, 3 and (2) safety authority from the FAA in the form of an air carrier certificate authorizing it t o operate under the on

- demand rules of 14 CFR Part 135.

A lthough Charter Air has the appropriate form of economic authority to undertake the operations it proposes using 30

- seat Embraer Brasilia aircraft , it seeks to conduct these pursuant to a 14 CFR Part 380 public charter program. 4 Public charter operations are not considered, by definition, scheduled operations. 5

1 14 CFR § 119.3. In addition, under 49 U.S.C § 41732, essential air service must be conducted as scheduled air transportation , and charter air

transporta tion is not scheduled air transportation. Moreover, the Department limited Charter

Air ’s economic authority to operations conducted pursuant to 14 CFR Part 135

. Under

14 CFR Part 135 , carriers can conduct on

- demand operations with 30

- seats or less aircra ft

2 See 14 CFR § § 119.3, 380.2 . A c harter flight is defined as “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

... . ” 14 CFR § 380.2.

3 See Order 2010

- 3

- 8, issued March 8, 2010, in Docket DOT

- OST

- 2009

- 0187. The Department imposed limitations on Charter Air based on the operating plans it described in its application for economic authority. Those plans included the use of aircraft with passenger seating capacity ranging from 9 to 30 seats in operations conducted as a public charter pursuant to 14 CFR Part 380. Operations conducted as pu blic charters are

considered on

- demand operations and not scheduled operations. See 14 CFR §§ 119.3, 380.2.

4 We note that performing the propo sed operations in this manner, i.e. , as a public charter, would allow Charter Air to continue to operate under its current form of FAA safety authority. In addition, o ur determination in this case does not impact the carrier’s ability to provide service u nder Part 380 in a context other than EAS.

5 See 14 CFR §§ 119.3, 380.2.- 4

-

and scheduled operations with non turbojet aircraft having no more than 9 passenger seats.
However, Charter Air’s proposal seeks to use 30

- seat Embraer Brasilia aircraft, for which it does not possess the requisite FAA safety authority to use in scheduled air transportation

.

In light of the above, we have determined it necessary to reject the proposals receiv ed and to

re

- solicit proposals.

We appreciate Charter Air’s and Sovereign’s interest in participating in the EAS pro gram, and we note that Charter Air has at least two remedies at its disposal. If Charter Air wants to pursue opportunities in the EAS program, one course of action is to pursue full FAA Part 121 authority as all other EAS providers operating 10

- seat aircr aft or larger have done. The second option is to propose service with nine

- seat or smaller non

- turbojet aircraft, for which it currently has all the requisite author ity from the FAA and Department

. Similarly, Sovereign could also pursue obtaining full sc heduled operating authority.

Compensation for Interim

- Period Service During this long carrier

- replacement case, we will require the incumbent carrier, Great Lakes, to continue providing service until replacement service begins. Great Lakes is eligible to be compensated for the provision of EAS at the two communities until a replacement carrier inaugurates full EAS operations at the communities . Thus, pursuant to

U.S.C. 41734(d), the Department will continue to compensate Great Lakes t he sub sidy

amounts set in Order 2008

- 4

- 10

.

Request for Proposals
As noted above, w e are re

- soliciting proposals from all carriers interested in providing

service at Ironwood/Ashland and /or Manistee/Ludington with or without subsidy, for the

two

- year period beginning when the carrier inaugurates full service. Carriers should file their proposals no later than October 18 . Staff will then docket the proposals, thereby making them public, and direct each carrie r to serve a copy of its proposal on the civic parties and other applicants. Shortly afterwards, we will provide a summary of the proposals to the communities and ask them to submit their final comments. We will give full consideration to all proposals t hat are timely filed. 6

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 de em 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 resolicit a new round of proposals. However, negotiation and rejec tion 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 for their proposals. We expect propo sals to adequately describe the service being proposed and the

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

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

- free service as proposed.- 5

-

annual amount of subsidy being requested. The applicants can make their own judgments as to the level of detail they wish to present; however, they might want to include proposed

schedules as well as supporting data for their subsidy requests, such as projected block hours, revenues and expenses. We strongly encourage clear, well

- documented proposals that will facilitate their evaluation by the affected communities and the Department. 7

With s pecific respect to Ironwood/Ashland and Manistee/Ludington

, the Department expect s proposals consisting of service with 19

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

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

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

, subject to the concurrence of the communities

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

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

.

We encourage proposals that meet those requ irements in an efficient manner. Carriers are also welcome to propose more than one service option, if they choose; they need not limit themselves to those requirements if they envision other, potentially more attractive service possibilities

-- different hubs, for example

-- with subsidy requirements that remain competitive.

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

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

. During the year ended December 31, 2009

, Ironwood/Ashland averaged 3. 1 enplanements a day

, and Manistee/Ludington 7.5

.

7 In selecting a carrier to provide subsidized essential air service, 49 U.S.C. 41733(c) (1) directs us to consider four factors: (1) service reliability; (2) contractual and marketing arrangements with a larger carrier at the hub; (3) interline arrangements with a larger carrier at the hub; and (4) community views. In addition, the Consolidated Appropriations Act, 2008, Public Law 110

- 161, provides that when selecting a carrier to provide EAS, the Department may consider the relative subsidy requirements, t hus 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 EAS will be included in the selection order as part of our authorization of subsidy for the selected service. Appendix C of this order contains those general provisions.- 6

-

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

- free workplaces, and nondiscrimination. 8 Consequently, all carrie rs receiving Federal subsidy for essential air service must certify that they are in compliance with Department regulations regarding drug

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

- t erm 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 invol ving 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 Office of Aviation Analysis at (202) 3 66

- 5903. 9

Community and State Comments The communities and State are welcome to submit comments at any time. We encourage prospective applicants to contact the communities before they submit their proposals so that they can tailor them to the communities ’ needs, as they will not be able to amend them after the due date. As noted earlier, we will provide a summary of the proposals to the civic parties and ask them to submit their final c omments shortly after Octo ber 18

.

This order is issued under authori ty delegated by the Assistant Secretary for Aviation and

International Affairs in 49 CFR 1.56a(f).

ACCORDINGLY,

1

. We request that carriers interested in providing essential air service at Ironwood, Michigan/Ashland, Wisconsin and /or Manistee/Ludington, Michigan , submit their proposals, with or without subsidy requests, no later than October 18 , 2010

. The proposals should be e

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

, ” with the

docket number s corresponding to the communit ies as shown on the first page of this order; 10

2

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

8 Th e regulations applicable to these areas are: (1) 49 CFR 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; 49 CFR Part 27

-- Nondiscrimination on the basis of disability in programs and activities receiving or benefiting from Federal financial assistance; and

14 CFR Part 382

-- Nondiscrimination on the basis of disability in air travel; and (3) 49 CFR Part 29

-- Government

- wide debarment and suspension (non

- procurement) and government

- wide requirements for drug

free workplace (grants).

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

10 Questions regardi ng filings in response to this order may be directed to Brian Swanson at (202) 366

- 5392 or brian.swanson@dot.gov

.- 7

-

3

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

.

By:

SUSAN L. KURLAND Assistant Secretary for

Aviation and International Affairs

(SEAL)

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



# AREA MAPAppendix B Page 1 of 2

Historical Enplanements 1

Ironwood/Ashland

Year

Ended Total

Scheduled Passengers Annual

Enplanements 2 Average Enplanements
Per Day 3

31-Dec-03 4,574 2,287 6.3

31-Dec-04 5,769 2,885 7.9

31-Dec-05 6,405 3,203 8.8

31-Dec-06 6,622 3,311 9.1

31-Dec-07 5,826 2,913 8.0

31-Dec-08 2,905 1,453 4.0

31-Dec-09 2,290 1,145 3.1

Manistee/Ludington

Year

Ended Total

Scheduled Passengers Annual

Enplanements 2 Average Enplanements
Per Day 3

31-Dec-03 2,917 1,459 4.0

31-Dec-04 3,941 1,971 5.4

31-Dec-05 3,951 1,976 5.4

31-Dec-06 5,551 2,776 7.6

31-Dec-07 6,004 3,002 8.2

31-Dec-08 4,044 2,022 5.5

31-Dec-09 5,472 2,736 7.5

Notes:

1. Source: http://mdotwas1.mdot.state.mi.us/public/airportstats/

2. Total scheduled passengers divided by two.

3. Average annual enplanements divided by 3 65 service days, except for annual periods ended 12/31/2004 and 12/31/2008 (3 66 service days).Appendix B Page 2 of 2

General Terms and Con ditions 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

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 eligibilit y 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 with the order for a si gnificant 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 An alysis 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 wh ich 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 amounts or at the stipulated service levels, the carrier may cease to provide service to that specific location without regard to any requirement for notice of such cessation. Those adjustments in the levels of subsidy and/or service that are mutually agreed to in writing by the Department and carrier do not constitute a total or partial red uction or cessation of payment.

Subsidy contracts are subject to, and incorporate by reference, relevant statutes and Department regulations, as they may be amended from time to time. However, any such statutes, regulations,

or amendments thereto shall n ot operate to controvert the foregoing paragraph.

Funds are not currently available for performance under this solicitation beyond [DATE] . The Department’s obligation for perform ance under this solicitation beyond [DATE] , is contingent upon the availabil ity of appropriated funds from which payment for services can be made. No legal liability on the part of the Department for any payment may arise for performance under this order beyond [DATE] , until funds are made available to the Department for performa nce. If funds are not made available for performance beyond [DATE] , the carrier will receive notice in writing by the Department.

All claims for payment must be submitted within 60 days of the last day of service provided

under this order.Appendix C

SERVICE LIST

Air Sunshine, Inc. Jet Air, Daniel Wolford

Air Sunshine, Mirmohammad Adili Kenmore Air, Tim Brooks

Air West, Inc., John Raatz McCall Aviation and Salmon Air, Dan Scott

Air Wisconsin, Barbara Jones McCall Aviation, Michelle

Airline Associates, Bill Mishk Mesa Air Group, Jonathan Ornstein

Alaska Airlines, Jeff Cole Mesa Air Group, Michael Lotz

Alaska Airlines, Sandy Sinick Mesa Air Group, Mike Holcomb

Allegiant Air, Robert Ashscroft Mesaba, Max Shemesh

American Airlines, Carl Nelson Mesaba, John Spanjers

American Eagle, Jeff Hartz Midstar Airlines, Jeffrey Fonner

Atlantic Southeast, Jon Lindlief Midwest Airlines, Greg Aretakis

Atlantic Southeast, Roger Weston MN Aviation, Jose Maldonado

Bemidji Aviation, Arlen Rinkenberger Multi Aero, Darnea

Bemidji Aviation, Cori Rude Multi Aero, Shane Storz

Cape Air, Andrew Bonney Northwest, Tim McDonald

Cape Air, Dan Wolf NYDC, Henok Araya

Cape Air, J. Flaherty OST, Brian Swanson

Classic Aviation, Tony Henderson OST, Dennis DeVany

Colgan Air, Mike Colgan OST, Kevin Adams

CommutAir, Andy Price OST, Kevin Schlemmer

CommutAir, Joel Raymond OST, Michael Martin

Consultant, Robert Silverberg OST, Renee Williams

Continental, Bruce Keiner Pacific Wings, Frank Ford

Continental, Dan Weiss Pacific Wings, Greg Kahlstorf

Continental, Lorry Halloway Penn Air, Danny Seybert

Delta Air Lines Amy Martin Penn Air, Scott Bloomquist

Delta Air Lines, Jeff Morgan Pinnacle Airlines, Joe Williams

Delta Air Lines, Dan Shuman Pinnacle Airlines, Phil Reed

Delta Air Lines, Joe Esposito Public Charters, Jim Gallagher

Delta Air Lines, Sascha Vanderbellen Scenic, Mary Schneider

Delta Air Lines, Karen Zachary Scenic, Mitzi Daines

Dorado Jets Seaborne Airlines, Wayne D’Amico

Dorado Jets, Mark McKenna SeaPort Airlines. Jim Day

Era Aviation, Mike Lenorman SeaPort Airlines. Rob McKinney

Executive Airlines, Kate Soled Shuttle America, Jerry Balsano

Frontier Flying, Bob Hajducovich SkyWest, Eric Christensen

Gem Air, Dan Schroeder SkyWest, Michael Thompson

Gem Air, JoAnn Wolters Sovereign Air, Bob Karns

Great Lakes Airlines, Chuck Howell Sovereign Air, Lois R. Barton

Great Lakes Airlines, Doug Voss Tradewind, Eric Zipkin

Gulfstream, Dave Hackett Trans States, Fred Oxley

Gulfstream, Mickey Bowman Trans States, Gerry Wigmore

Gulfstream, T. Cooper United, Alicia Gabriel

Homeland Security, Bill Ragan United, James Starnes

Homeland Security, David Bernier US Airways, Benjamin Slocum

Homeland Security, Randy Webb US Airways, Howard Kass

Horizon Air, Dan Russo US Airways, Jason Reisinger

Horizon Air, Jennifer Thompson Warbelows Air Ventures, Art Warbelow

Horizon Air, Jeff Cole Wings Air (Air Greco), Aaron Goerlich

ICEPR, Luis Irizarry State of Michigan

, Matt Brinker

Intrepid Internatl Air, Rick Eyk Gogebic

- Iron County Airport, Duane DuRay

Island Air Charters, Linda House Manistee County Blacker Airport, Barry Lind