Order 2012-4-20

Served: April 16, 2012

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

Issued by the Department of Transportation

on the 16th of April, 2012

Essential Air Service at

ALPENA, MICHIGAN

ESCANABA, MICHIGAN

IRON MOUNTAIN, MICHIGAN

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

DOCKET DOT-OST-2009-0300

DOCKET DOT-OST-2003-15128

DOCKET DOT-OST-1999-5175

ORDER SETTING FINAL RATES

Summary

This Order sets final past-period and prospective rates for Delta’s forced service at 

Alpena, Escanaba, and Iron Mountain. By Order 2011-11-30, we selected Great Lakes to 

provide Essential Air Service (EAS) at Iron Mountain, and by Order 2012-4-10, we 

selected Delta to provide EAS at Escanaba. This Order does not select Delta at Alpena,

but rather sets a final rate for Delta’s service there until it can be replaced by a carrier 

willing to provide that service on a long-term basis. 

Background

On July 15, 2011, Pinnacle Airlines Corporation d/b/a Delta Connection (Delta), filed 90-

day notices of intent to suspend their subsidized service1 at the three above-captioned 

communities, effective October 13, 2011.2 By Order 2011-9-5, we requested proposals 

and required Delta to continue to maintain service at the communities “consistent with 

the level we are currently subsidizing.” See the chart below for that level of service, all 

of which was being provided with 34-seat Saab aircraft, and the attendant subsidy rates.

 

1 The notice was filed by Pinnacle’s two wholly-owned subsidiaries, Mesaba Aviation, Inc., and Pinnacle 

Airlines, both doing business as Delta Connection. Delta Air Lines, Inc., proposed to be responsible for the 

provision of this service itself, rather than one of its code share partners. Delta indicated that it would 

parcel out the EAS responsibilities at separate times to one of its code share partners, including Pinnacle, 

Atlantic Southeast, SkyWest, Mesaba, or Chautauqua, depending on availability of aircraft and other 

considerations in order to afford Delta maximum flexibility to meet its obligations.

2 Delta simultaneously filed notice at a number of other communities. This Order addresses the past-period 

and prospective rates at only these three communities.
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3

By Order 2011-12-25, we reduced the required level of service to each of these 

communities to a total 12 nonstop round trips per week, because Delta had replaced all of 

its 34-seat Saab service in favor of larger, 50-seat regional jets and terminated the subsidy 

for nonstop and one-stop service between Escanaba and Iron Mountain and 

Minneapolis.4 Delta did not terminate its Escanaba/Iron Mountain service to 

Minneapolis until March 24, 2012. 

Decision

Delta is entitled to compensation for its forced service at these three communities until it 

is either replaced or begins service pursuant to a carrier-selection Order. We have 

reviewed Delta’s proposals for compensation, and, after meeting with the carrier, have 

reached agreement as to the reasonable levels of compensation for each community, both 

retroactively and going forward. Appendix A shows the calculation of all of the rates.

At Escanaba and Iron Mountain, we have agreed to annual subsidy rates of $4,173,730 

for the two cities combined for the period from January 11, 2012, through March 23, 

2012; and $3,841,386 for the two cities combined for the period from March 24, 2012, 

until further notice.5 At Iron Mountain, Order 2011-11-30 selected Great Lakes to 

provide nonstop service to Minneapolis. When Great Lakes inaugurates that service, 

Delta will terminate its one-stop service from Iron Mountain to Detroit, and the rate set 

by Order 2011-4-10 for Delta’s nonstop service between Escanaba and Detroit will begin. 

At Alpena we have agreed to an annual subsidy rate of $2,554,977 for the period from 

January 11, 2012, until further notice. At Alpena, we have continued to request proposals 

for long-term carrier selection, most recently by Order 2011-3-19, March 30, 2012, with 

proposals due May 15, 2012, and this Order has no direct bearing on the long-term 

carrier-selection proceeding at that community. 

This Order is issued under authority delegated in 49 CFR 1.56a(f).

 

3 Order 2010-6-4 linked Escanaba and Iron Mountain, with Iron Mountain receiving 14 one-stop round 

trips over Escanaba to Detroit, and Escanaba receiving seven one-stop round trips over Iron Mountain to 

Minneapolis.

4 Appendix A shows that the combined annual subsidy for Iron Mountain and Escanaba is $3,841,386 for 

the one-stop Iron Mountain to Escanaba to Detroit service, or $1,920,693 per community

5 We have excised from the earlier period the revenue bound for Minneapolis, since we have not 

recognized the corresponding expenses incurred by Delta. 

CarrierSelection End of Annual Intermediate Weekly

Communities Order Contract Subsidy Hub Stops Frequency

Alpena 2010-5-18 5/31/2012 $1,523,660 Detroit 0 14

Escanaba 3 2010-6-4 8/31/2012 $2,090,534 MSP/DTW 1 21

Iron Mountain 3 2010-6-4 8/31/2012 $2,090,534 MSP/DTW 1 21
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ACCORDINGLY,

1. We set the final rates for Delta Air Lines, Inc., for its provision of Essential Air 

Service at Alpena, Escanaba, and Iron Mountain, Michigan, as described in 

Appendices A and B;

2. These rates are in lieu of, and not in addition to, those set by Order 2010-5-18 and 

Order 2010-6-4;

3. We direct Delta Airlines, Inc., to retain all books, records, and other source and 

summary documentation to support claims for payment and to preserve and maintain 

such documentation in a manner that readily permits the audit and examination by 

representatives of the Department. Such documentation shall be retained for seven years 

from the service date of this Order, or until the Department indicates that the records may 

be destroyed, whichever comes first. Copies of flight logs for aircraft sold or disposed of 

must be retained. The carrier may forfeit its compensation for any claim that is not 

supported under the terms of this Order; 

4. These Dockets will remain open until further Department action; and

5. The Department will serve copies of this Order on Mesaba Aviation, Inc., Pinnacle 

Airlines Corporation, Great Lakes Aviation, Inc., and Delta Air Lines, Inc.

By:

Susan Kurland

Assistant Secretary for

Aviation and International Affairs

(SEAL)

An electronic version of this document is available on the World Wide Web at

http://www.regulations.gov
Appendix A

Provision of Essential Air Service at Alpena, Escanaba, and Iron Mountain, Michigan

APN ESC/IMT ESC/IMT

Effective Time 1/11/2012 3/24/2012 1/11/2012

Periods: 1/ UFN UFN 3/23/2012

O&D Passengers 21,086 37,509 3/ 33,509

Total Flights 2/ 1,227 1,227 1,227

Seats/AC 50 50 50

Total Seats (HUB) 61,350 61,350 61,350

Block Time 59 72 & 34 72 & 34

Blk. Hours 1,207 2,168 4/ 2,168 5/

Fare $82 $90 $90

Pax. Revenue $1,729,052 $3,375,810 $3,015,810

Other @ 12% $207,486 $405,097 $361,897

 Total Revenue $1,936,538 $3,780,907 $3,377,707

Total Directs @ $2,337.59/bh $2,821,471 $5,067,896 $5,067,896

Total Indirects $1,456,162 $2,191,431 $2,123,949

Total Operating $4,277,633 $7,259,327 $7,191,845

Profit @ 5% $213,882 $362,966 $359,592

Economic Costs $4,491,515 $7,622,293 $7,551,437

Annual Subsidy $2,554,977 $3,841,386 $4,173,730

1/ Start of Great Lakes service at Iron Mountain, IMT, and Delta's service at Escanaba.

2/ 12 trips x 2 directions x 52 weeks x .98 x 313/312 = 1,227

3/ ESC, 21,352 @ $90; IMT, 16,157 @ $90

4/ IMT-ESC-DTW, 12 trips x 2 directions x 52 weeks x .98 = 1,227 flights x (34+72) min. = 2,168 blk. hrs.

5/ 37,509 passengers less 4,000 MSP bound passengers.
Appendix B-1

Essential Air Service by Delta Air Lines, Inc., at 

Alpena, Michigan, Docket 2009-0300

SERVICE: 12 nonstop round trips to Detroit (DTW).1

AIRCRAFT TYPE: CRJ-200, 50 seats

TIMING OF FLIGHTS: Flights must be well-timed and well-spaced to ensure full 

compensation. 

Effective Period: January 11, 2012, Until Further Notice

FLIGHTS: 1,2272

ANNUAL SUBSIDY RATE: $2,554,977

RATE PER FLIGHT: $2,0823

WEEKLY CEILING: $49,9684

Discussion

Delta was selected by Order 2010-5-18 through May 31, 2012, for 14 nonstop round trips per 

week to Detroit with Saab 340s for $1,532,660 annual subsidy. The carrier filed notice on 

July 15, 2011, and was held in by Order 2011-9-5 to that level of service. Delta thus became 

eligible for a new rate on January 11, 2012, i.e., 180 days after it filed notice. Order 2011-12-25 

reduced the required level of service to 12 nonstop round trips per week, which Delta began 

providing on January 1, 2012.

 

1 One-stop service is allowed for the month of April, 2012.

2 12 round trips per week x 2 directions x 52 weeks x 0.98 completion x 313/312 days = 1,227.

3 $2,554,977 ÷ 1,227 annual flights.

4 $2,082 x 24 flights per week.
Appendix B-2

Essential Air Service by Delta Air Lines, Inc., at Escanaba and Iron Mountain, 

Michigan, Dockets 2003-15128 and 1999-5175

EFFECTIVE PERIOD: January 11, 2012, until start of service by Great Lakes at Iron Mountain 

per Order 2011-11-30. At that point, the $2,833,558, annual subsidy rate Delta proposed to be 

selected for at Escanaba will become effective, replacing the rates below.

AIRCRAFT TYPE: CRJ-200, 50 seats

TIMING OF FLIGHTS: Flights must be well-timed and well-spaced to ensure full 

compensation. 

January 11, 2012, thru March 24, 2012, 

. March 23, 2012 . . Until Further Notice. 

Escanaba Iron Mountain Escanaba Iron Mountain

WEEKLY ROUND TRIPS:1 12 nonstops 12 one-stops 12 nonstops 12 one-stops

HUB: DTW DTW DTW DTW

FLIGHTS: 1,2272 1,227 1,227 1,227

ANNUAL SUBSIDY RATE: $2,086,8653 $2,086,865 $1,920,6934 $1,920,693

RATE PER FLIGHT: $1,7015 $1,701 $1,5656 $1,565

WEEKLY CEILING: $40,8247 $40,824 $37,5608 $37,560

Note: Delta was selected by Order 2010-6-4 through August 31, 2012, for 14 round trips to 

Detroit and 7 round trips to Minneapolis with Saab 340s for $4,181,068. The carrier filed notice 

on July 15, 2011, was held in by Order 2011-9-5 to that level of service. Delta thus became 

eligible for a new rate on January 11, 2012, i.e., 180 days after it filed notice. Order 2011-12-25 

reduced the required level of service to a total of 12 nonstop round trips per week. Delta 

continued providing service to Minneapolis until March 23. 

 

1 Service routed Iron Mountain to Escanaba to Detroit.

2 12 round trips per week to Detroit x 2 directions x 52 weeks x 0.98 completion x 313/312 days = 1,227.

3 Annual subsidy of $4,173,730 for the two communities combined divided by two.

4 Annual subsidy of $3,841,386 for the two communities combined divided by two.

5 $2,086,865 ÷ 1,227 annual flights.

6 $1,920,693 ÷ 1,227 annual flights.

7 $1,701 * 24 flights per week.

8 $1,565 * 24 flights per week.
Appendix B-3

Note: The carrier understands that it may forfeit its compensation for any flights that it does not 

operate in conformance with the terms and stipulations of the rate Order, including the service plans 

outlined in the Order and any other significant elements of the required service, without prior 

approval. The carrier understands that an aircraft take-off and landing at its scheduled destination 

constitutes a completed flight; absent an explanation supporting subsidy eligibility for a flight that 

has not been completed, such as certain weather 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 significant period, it may jeopardize its entire subsidy claim for the 

period in question. If the carrier contemplates any such changes beyond the scope of the Order 

during the applicable period of this rate, it must first notify the Office of Aviation Analysis in writing 

and receive written approval from the Department to be ensured of full compensation. Should 

circumstances warrant, the Department may locate and select a replacement carrier to provide service 

on these routes. The carrier must complete all flights that can be safely operated; flights that overfly 

points for lack of traffic will not be compensated. In determining whether subsidy payment for a 

deviating flight should be adjusted or disallowed, the Department will consider the extent to which 

the goals of the program are met and the extent of access to the national air transportation system 

provided to the community.

If the Department unilaterally, either partially or completely, terminates or reduces payments for 

service or changes service requirements at a specific location provided for under this Order, then, at 

the end of the period for which the Department does make payments in the stipulated 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 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 are not currently available for performance under this Order beyond September 30, 2012. 

The Government’s obligation for performance under this Order beyond September 30, 2012, is 

subject to the availability of appropriated funds from which payment for services can be made. 

No legal liability on the part of the Government for any payment may arise for performance 

under this Order beyond September 30, 2012, until funds are made available to the Department 

for performance. If funds are not made available for performance beyond September 30, 2012, 

the Department will provide notice in writing to the carrier.

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

under this Order.