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 16 th 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

- 20 0 9

- 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 sel ected 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 1 5 , 20 11, Pinnacle Airlines Corporation d/b/a Delta Connection (Delta)

, filed 90

- day notices of intent to suspend their subsid ized service 1 at the three above

- captioned communities, effective October 1 3, 2011

. 2 By Order 20 11

- 9

- 5

, we requested proposals and requir ed 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 subsid y 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 th an one of its code share partners. Delta indicate d 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 co mmunities.- 2

-

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

.
At Escanaba and Iron Mountain, w e have agreed to annual subsidy rates of $4,173,730 for the two cities c ombined 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 ha ve agreed to an annual subsidy rate of $2,554,977 for the period from January 11, 2012, until further notice. At Alpena, w e have continued to request proposals for long

- term carrier selection, most recently by Order 2011

- 3

- 19

, March 30 , 2012 , with
proposa ls due May 15 , 2012 , and this Order has no direct bearing on the long

- term carrier

- selection proceeding at that community

.

This O rder 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 Ap p endix 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 n ot 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- 3

-

A CCORDINGLY ,

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 descri bed 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 do cumentation 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 ca rrier 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 O rder 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 th e World Wide Web at http://www.regulations.govAppendix 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 200 9

- 0300

SERVICE: 1 2 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: 1,227 2
ANNUAL SUBSIDY RATE: $2, 554,977
RATE PER FLIGHT: $2, 082 3
WEEKLY CEILING: $ 49,968 4

Discussion Delta was selected by Order 2010

- 5

- 18 through May 31 , 201 2 , 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, Mi chigan, 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 wi ll 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 Fur ther 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: 1,227 2 1,227 1,227 1,227 ANNUAL SUBSIDY RATE: $2,0 86,86 5 3 $2,086,865 $1,920,693 4 $1,920,693
RATE PER FLIGHT: $1, 701 5 $1, 701 $1,565 6 $1,565 WEEKLY CEILING: $ 40, 824 7 $40, 824 $37,560 8 $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 2 3

.

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 div ided by two. 4 Annual subsidy of $3,841,386 for the two communities combined divided by two. 5 $2,0 86 ,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

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Note: The carrier understands that it may forfeit its compensa tion 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 carri er 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 com pleted 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. I f 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 comp ensation. 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 transportat ion 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 adju stments 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, rel evant 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 t he 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, th e 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.