Order 2013

- 4

- 6

Served: April 12

, 2013



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 12 th day of April

, 2013

ORDER R EQUESTING PROPOSALS

Summary By this Order , the Department is requesting proposals from carriers interested in providing

Essential Air Service (EAS) at El Dorado/Camden (El Dorado), Harrison, and/or Hot Springs, Arkansas, with or without subsidy, for a new term . Proposal s are due May 16, 2013 . (See Appendix A for a map .)

Background By Order 2011

- 11

- 2 1, November 17, 2011, the Department re

- selected SeaPort Airlines, Inc. (SeaPort) to provide subsidized EAS at the three Arkansas communities, at a combined annual subsidy rate of $5,990,780 ($2,4 36,074 for El Dorado, $2,080 ,318 for Harrison, and $1,474,388 for Hot Springs) for the two

- year period from November 1, 2011, through October 31, 2013

. 1

Sea P ort provide s the three communities with 18 round trips per week using nine

- seat Pilatus PC

12 aircraft

. 2 SeaPort provides El Dorado with service to Dallas Love Field (DAL) and Memphis International Airport (MEM)

, Harrison with service to Kansas City International (MCI) and MEM, and Hot Springs with service to DAL and MEM.

Recent L egislative C hang es The Federal Aviation Administration (FAA) Modernization and Reform Act of 2012 (Public

Law No: 112

- 95) amended 49 U.S.C. § 41731(a)(1)(B) to change the definition of “eligible

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

2 According to published schedules, in addition to the 18 weekly round trips we selected it to provide, SeaPort provides Harrison with an additional six round trip flights per week on an unsubsidized basis

. Essential Air Service at

EL DORADO/CAMDEN, ARKANSAS HARRISON, ARKANSAS HOT SPRINGS, ARKANSAS

Under 49 U.S.C. 41731 et seq

. Docket DOT

- OST

- 1997

- 2935- 2

-

place” for the purpose of receiving EAS. The amendment states that to be elig ible, a community must maintain an average of 10 enplanements or more per service day, as determined by the Secretary, during the most recent fiscal year beginning after September 30, 2012. 3 The legislation exempts locations in Alaska and Hawaii and communities that are more than 175 driving miles from the nearest large or medium hub airport. 4 In this case, all three communities are more than 175 driving miles from the nearest large or mediu m airport, and

, thus, are exempt
from the 10

- enplanement a day threshold

. 5

In addition, Public Law 112

- 27, signed into law on August 5, 2011, amended the definition of “eligible place” for the purpose of receiving EAS. Among other things, the amendment s tates that to be eligible, a community must have had an average subsidy per passenger of less than $1,000 durin g the most recent fiscal year

, regardless of the community’s distance from the nearest hub airport

. 6 Currently, none of the three communities ’ s ubsidy per passenger exceeds

th e $1,000 l imit.

Special discussion concerning Hot Springs The Department is prohibited from subsidizing air service at a community where the subsidy per passenger exceeds $200, unless the community is more than 210 highway miles from the nearest large or medium hub airport. 7 Hot Springs is 198 miles from Memphis International Airport and based on CY2012 data (January 1, 2012, through December 31, 2012), 4,749 passengers were enplaned and deplaned at Hot Springs. The annual subsidy amount for Hot Springs is $1,474,388 . Therefore, the subsidy per passenger at Hot Springs is $310

. Rather than terminate the community’s eligibility, at this stage , the Department will solicit proposals for EAS and evaluate all proposals submitted before either committing to a new rate term or making a final determination on Hot Springs ’ continuing eligibility to receive EAS in light of its current subsidy per passenger being above the $200 ceiling. Before proposals are due, we expect the communit y to work aggressively with all potential applicants to mitigate some of the risks that the air carriers may face in an attempt to lower their subsidy levels. We also expect air carriers to detail in their proposals how they will work with the community in lowering the subsidy per passenger

below t he $200 cap.

Request for Proposals As the end of the current rate term approach es , we are here requesting proposals from carriers interested in providing service at El Dorado, Harrison, and/or Hot Springs, with or without subsidy, for a new rate term. Carriers should file their proposals no later than May 16, 2013

. After that date, our staff will docket the proposals, thereby making them public, and direct each carrier to serve a copy of its proposal on the ci vic parties and other applicants. Shortly

3 The Secretary also has authority to waive the 10

- passenger requirement, on an annual basis, if the community can

demonstrate that the reason the location averages fewer than 10 passengers per day is due to a temporary decline in enplanements. See 49 U.S.C. § 41731(e).

4 See 49 U.S.C. § 41731(c) and (d)

5 All three communities are farther than 175 driving miles from Memphis International Airport, the nearest applicable large or medium hub (El Dorado/Camden

- 2 37 miles, Harrison

- 2 44 miles, and Hot Springs

- 198 miles)

. 6 Communities in Alaska and Hawaii are exempt.

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

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

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

- 69, the Department of Transporta tion and Related Agencies Appropriations Act of 2000.- 3

-

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 that are timely

filed. 8

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 deem 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 re

- solicit a new round of proposals. However, negotiation or rejection 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 proposals to adequately describe the service bei ng proposed and the 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 r equests, 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. 9

With respect to the three Arkansas communities at issue here

, we expect proposals consistent with what the communities are currently receiving, with continued service to a suitable hub airport that offers numerous connecti ng opportunities to the national air transportation system

. Communities and air carriers are encouraged to work together in advance of the due date for proposals to design a service pattern that is desirable to the community and meets the operational

needs of the airline interested in submitting a proposal

. In add ition, carriers should be very clear as to whether a specific community’s proposal is on a stand

- alone basis, or whether it is part of a larger, inseparable package with other communities. As discussed above, all proposals for service to Hot Springs shoul d explicitly acknowledge the ceiling and address what steps will be

t aken to reduce the per passenger subsidy to $200 or below. Proposals that do not address the issue may be rejected outright.

We encourage proposals that meet th e se requirements in an e fficient 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

–

8 Carriers should not expect the Department to accept late filings. In cases where a carrier proposes to provide E AS without subsidy and we determine that service can be reliably provided without such compensation, we typically do not proceed with the carrier

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

- free service as proposed.

9 In selecting a carrier to provide subsidized E AS , 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, P ublic Law 110

- 161, provides that when selecting a carrier to provide EAS, the Department may consider the relative subsidy requirements, thus codifying a factor that we have considered since the inception of the program. Interested carriers should also be aware that our general provisions governing

Essential Air Service 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.- 4

-

different hubs or length o f service terms

, for example

-- with subsidy requirements that remain competitive

.

Service and Traffic History

For the 12

- month period ended December 31

, 201 2 , th e most recent period for which traffic data are available, El Dorado averaged 9.6 enplanements per day, Harrison 16.9

, and Hot Springs 7.6

. 10 We

note that traffic at al l three communities has increased significantly since SeaPort inaugurated

service i n late 2009 and the community and the carrier’s efforts should be commended. In order to assist carriers in making their traffic and revenue forecasts, we have included historical traffic data in Appendix B.

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

- free workplaces, and nondiscrimination. 11 Consequently, all carriers receiving Federal subsidy for E AS 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 term 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 involving 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) 366

- 5903. 12

Community and State Comments

The communiti es and state are welcome to submit comments on the proposals at any time. As noted earlier, however, we will provide a summary of the proposals to the civic parties and ask them to submit their final comments shortly after May 16, 2013

, the due date for p roposals.

This Order is issued under authority delegated in 49 CFR Part 1.25a(b) and re

- delegated to the Director, Office of Aviation Analysis.

ACCORDINGLY,

1. W e request that carriers interested in providing Essential Air Service at El Dorado/Camden, Harrison, and/or Hot Springs, Arkansas

, submit their proposals, with or without subsidy, no later

10 See Appendix B for historical traffic data. Enplanements represent one

- half of total origin

- and

- destination traffic, and average enplanements per day are based on 313 days per service year

. 11 The regulations applicable to these areas are: (1) 49 CFR Par t 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

- p rocurement) and government

- wide requirements for drug

- free workplace (grants).

12 The certifications are available online under “Reports and Publications” at http://www.dot.gov/policy/aviation

policy/small

- community

- rural

- air

- service/essential

- air

- service

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-

than May 16, 2013 . The proposals should be e

- mailed to EAS@dot.gov

, with the title “Proposal

to Prov ide E AS at El Dorado, Harrison, and/or Hot Springs) ” ; 13

2 . Th is docket will remain open until further order of the Department; and

3 . We will serve copies of this Order on the mayors of El Dorado, Camden, Harrison, and Hot Springs, and the airport managers of South Arkansas Regional Airport /Goodwin Field (El Dorado/Camden), Boone County Regional Airport (Harrison), and Hot Springs Memorial Field Airport, and the service list for this docket.

Persons entitled to petition the Department for review of this Order under the Department’s Regulations, 14 CFR Part 385. 31(a) , must file such petitions within seven ( 7 ) days after the date

of service of this Order

.

This Order will be effective immediatel y, and the filing of a petition for review shall not preclude its effectiveness.

By:

TODD M. HOMAN

Director Office of Aviation Analysis

(SEAL)

An electronic version of this document at http://www.regulations.gov

13 Questions regarding filings in response to this Order may be directed via e

- mail to Kevin Schlemmer at kevin.schlemmer@dot.gov or via phone at (202) 366

- 3176.Appendix A



## AREA MAP

This map is provided by Sabre ® AirVision TM Profit Essentials and is being used with express permission of the copyright holder, Sabre Airline Solutions®.Appendix B Traffic History *

Year Airport Air Carrier Enplaned pax Deplaned pax Totals

2010 ELD SeaPort Airlines, Inc. 1,220 1,274 2,494

2011 ELD SeaPort Airlines, Inc. 1,848 1,772 3,620

2012 ELD SeaPort Airlines, Inc. 3,059 2,949 6,008

Year Stn Air Carrier Enplaned pax Deplaned pax Totals

2010 HOT SeaPort Airlines, Inc. 780 775 1,555

2011 HOT SeaPort Airlines, Inc. 1,738 1,804 3,542

2012 HOT SeaPort Airlines, Inc. 2,438 2,311 4,749

Year Stn Air Carrier Enplaned pax Deplaned pax Totals

2010 HRO SeaPort Airlines, Inc. 1,775 1,728 3,503

2011 HRO SeaPort Airlines, Inc. 3,013 2,934 5,947

2012 HRO SeaPort Airlines, Inc. 5,347 5,243 10,590

ELD=El Dorado/Camden; HOT=Hot Springs; HRO=Harrison

*Source

– T

- 100 Market Report, Passengers in Scheduled Passenger Service

.Appendix C

Example of General Terms and Conditions 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 flig ht; 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 thes e rates, 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 provi de 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 di sallowed, 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, termi nates 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 le vels, 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 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

sta tutes, regulations, or amendments thereto shall not operate to controvert the foregoing paragraph.

Funds may not be available for performance under this solicitation beyond [DATE] . The

Government’s obligation for perform ance under this solicitation beyon d [DATE] , is contingent upon the availability of funds from which payment for services can be made. No legal liability on the part of the Government for any payment may arise for performance under this Order beyond [DATE] , until funds are made available t o the Department for performance. 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

.