Order 2012-9-11

Served: September 11, 2012

 UNITED STATES OF AMERICA

 DEPARTMENT OF TRANSPORTATION

 OFFICE OF THE SECRETARY

 WASHINGTON, D.C.

Issued by the Department of Transportation

on the 11th day of September, 2012

ORDER SELECTING CARRIER AND SETTING FINAL SUBSIDY RATES

Summary

By this Order, we are selecting SkyWest Airlines (SkyWest), operating with a Delta Air 

Line, Inc. (Delta) code-share, to provide subsidized Essential Air Service (EAS) with 50-

passenger Canadair Regional Jet 200 (CRJ200) aircraft, between each of the four 

communities captioned above and Minneapolis-St. Paul International Airport (MSP), for the 

two-year period beginning when the carrier initiates full EAS at all four communities. The 

annual subsidy rates will be set at $2,512,971, $1,356,764, $1,107,900, and $1,519,619, for 

Iron Mountain/Kingsford (Iron Mountain), Michigan, Brainerd and International Falls, 

Minnesota, and Rhinelander, Wisconsin, respectively, or a combined total of $6,497,254. 

See Appendix A for a map.

Background

On July 15, 2011, Mesaba Aviation, Inc. (Mesaba), and Pinnacle Airlines (Pinnacle), 

subsidiaries of Pinnacle Airlines Corporation, d/b/a Delta Connection, filed 90-day notices of 

their intent to suspend their joint service at Iron Mountain, Brainerd and International Falls, 

Minnesota, effective October 13, 2011.1 By Order 2011-9-5, September 13, 2011, the 

Department prohibited Delta from terminating service at these three communities in 

accordance with 49 U.S.C. § 41734(b), and requested proposals for replacement service by 

October 12, 2011, later extended to October 14, 2011. The notices at these three 

 1 Delta filed notice at twenty four (24) communities. This order addresses only three of those communities plus 

Rhinelander, Wisconsin, where Chautauqua Airlines, Inc. filed notice to suspend service.

Essential Air Service at

IRON MOUNTAIN/KINGSFORD, MICHIGAN;

BRAINERD, MINNESOTA;

INTERNATIONAL FALLS, MINNESOTA; and

RHINELANDER, WISCONSIN

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

 DOT-OST-1999-5175;

 DOT-OST-2011-0135;

 DOT-OST-2009-0304; and

 DOT-OST-2011-0109
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communities were triggered by Mesaba/Pinnacle’s retirement of its 34-seat Saab aircraft. As 

a result of the larger jet aircraft replacing the smaller Saab 340 aircraft, Order 2011-9-5, 

required Mesaba/Pinnacle to continue to provide service as follows:

Community Hub Weekly 

Frequencies Stops Annual Subsidy

Established 

by Order

Iron Mountain MSP/DTW 21 1 $2,090,534 2010-6-7

Brainerd MSP 14 none subsidy-free -

International Falls MSP 14 none $1,309,886 2010-5-18

During the pendency of this carrier selection case, we are requiring Mesaba/Pinnacle to 

provide 12 round trips a week at each of these three communities. Brainerd and International 

Falls connect to MSP, while Iron Mountain connects to Detroit (DTW).2

At Rhinelander, on September 12, 2011, Chautauqua Airlines, Inc., a wholly owned 

subsidiary of Republic Airways Holdings and doing business as Frontier Airlines 

(Chautauqua) filed a 90-day notice with the Department of its intent to terminate its then 

unsubsidized service, effective December 11, 2011. By Order 2011-10-15 

(October 20, 2011), the Department prohibited Chautauqua from suspending service through 

December 11, 2011, and requested proposals from carriers interested in providing 

replacement service. By several subsequent Orders,3 the Department has required

Chautauqua to maintain the statutory frequency requirement of two round trips a day, six 

days a week, i.e., twelve round trips a week, utilizing Embraer 135 (37-seats) or Embraer 145 

(50-seats) at an annual rate of $1,837,638.4 We are also currently negotiating an updated 

hold-in subsidy rate with Chautauqua for its provision of EAS at Rhinelander.

By Orders 2011-11-30 (November 23, 2011), 2012-3-5 (March 7, 2012) and 2012-4-8 (April 

5, 2012), the Department selected Great Lakes Aviation, Ltd. (Great Lakes) to provide EAS 

at all four of communities for a two-year period beginning when it inaugurates full service at 

the communities through the end of the 24th month thereafter.

On June 11, 2012, however, Great Lakes sent an e-mail to the Department encouraging the 

re-solicitation of proposals for EAS at Iron Mountain, Brainerd, International Falls and 

Rhinelander. Great Lakes explained that it had recently experienced an aggressive 

expansion, is in the process of re-engineering its business model (including its approach to 

code-sharing and the associated reservation system infrastructure), has concerns regarding 

availability of gates and facilities to expand further at MSP, and does not want to hinder 

 2 By several subsequent Orders, the Department required Delta to maintain the level of service detailed in the 

table above at Brainerd and International Falls. By Order 2011-12-25, the level of service at Iron Mountain was 

reduced to a total of 12 nonstop round trips per week and the subsidy for nonstop and one-stop service between 

the community (and Escanaba, Michigan) and MSP was terminated. By Order 2012-4-20, April 16, 2012, the 

Department set the annual subsidy rate at Iron Mountain at $2,086,854, for 12 one-stop round trips a week to 

DTW only, for the period January 11, 2012 through March 23, 2012. Similarly, Order 2012-4-20 also set Iron 

Mountain’s prospective annual subsidy rate, from March 23, 2012, until further notice, at $1,920, 693, for the 

same 12 one-stop round trips a week to DTW. We are currently negotiating hold-in subsidy rates with Delta for 

its Brainerd and International Falls service.

3 See Orders 2012-4-1, 2012-5-3, 2012-5-26, 2012-6-9, 2012, 7-2 and 2012-7-32.

4 See Order 2012-3-5.
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communities from considering other alternatives. In response to Great Lakes’ notification, 

we contacted all four communities and they supported the issuance of a new request for 

proposals. By Order 2012-6-9, June 15, 2012, the Department solicited proposals to provide 

efficient EAS, with subsidy support if necessary, at any or all of the four communities.

Proposals

The Department received proposals from the three carriers whose proposals are described 

below. Copies of the proposals may be accessed online through the Federal Docket 

Management System at: http://www.regulations.gov, by typing “DOT-OST-1999-5175” 

(Iron Mountain), “DOT-OST-2011-0135” (Brainerd), “DOT-OST-2009-0304” (International 

Falls), or“DOT-OST-2011-0109” (Rhinelander) in the “SEARCH for: Rules, Comments, 

Adjudications or Supporting Documents:” field.

Great Lakes

Great Lakes submitted “stand alone” service options for nonstop service between each of the 

four communities and MSP, utilizing 19-passenger Beech 1900D aircraft and its code-share 

agreements where applicable, as summarized in the table below.

Community Daily

Round Trips

Annual Subsidy 

Requirement

Iron Mountain 3

(18 weekly) $1,857,610

Brainerd 4

(24 weekly) $1,785,221

International 

Falls

3

(18 weekly) $1,797,644

Rhinelander 3

(18 weekly) $1,667,947

SkyWest

SkyWest, operating with a Delta code-share and utilizing Canadair Regional Jet 200 

(CRJ200) aircraft, submitted two inseparable package bids for service to MSP. One 

inseparable package bid includes service at both Iron Mountain and Rhinelander, and the 

other inseparable package bid includes Brainerd and International Falls. Iron Mountain 

would receive a minimum of 13 (7 nonstop) round trips a week and Rhinelander would 

receive a minimum of 14 nonstop round trips a week, for a combined annual subsidy rate of 

$4,032,589 ($2,512,971 at Iron Mountain and $1,519,618 at Rhinelander).5 Brainerd would 

receive a minimum of 12 nonstop round trips a week, and International Falls would receive a 

minimum of 12 (7 nonstop) round trips a week, for a combined annual subsidy rate of 

$2,464,663 ($1,356,764 at Brainerd and $1,107,900 at International Falls).

Sovereign Air

Sovereign Air Inc. submitted service options at all of the communities, as summarized in the 

table below.

 5 We would typically authorize subsidy for only 12 round trips a week; however, in this case, the flight are 

shared by two communities.
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Option Community (ies) Hub(s) Served/

Service Pattern

Aircraft 

Type

(Seats)

Daily

Round 

Trips

Annual 

Subsidy 

Requirement

1 International Falls 

and Brainerd one-stop (at Brainerd) to MSP Jetstream 41(29)

4

(24 weekly) $1,472,093

2 Brainerd one-stop (at St. Cloud) to Chicago 

O’Hare International Airport (ORD)

Dornier 328

(30)

3

(18 weekly) $1,302,781

3 Iron Mountain and 

Rhinelander

one-stop (at Rhinelander) to Chicago 

O’Hare International Airport (ORD)

Dornier 328

(30)

5

(30 weekly) $1,960,453

We also note that Sovereign Air Inc. has not obtained the required operating authority from 

either the Federal Aviation Administration or the Department.

Community Comments

On July 31, 2012, the Department sent correspondence to the airport managers and other 

civic officials of the four communities summarizing the proposals and requesting comments 

on the carrier-selection decision.

In response, the Department received comments from numerous potential EAS customers, 

civic and elected officials, including the Chairman of the Dickinson County Board of 

Commissioners (Iron Mountain), the Michigan Department of Transportation – Office of 

Aeronautics Division, the Crow Wing County Board of Commissioners (Brainerd), the 

Mayor of Brainerd, the President of the Brainerd City Council, the Chair of the Brainerd 

Lakes Regional Airport Commission, the Interim Airport Manager of the Brainerd Lakes 

Regional Airport, the Mayor of International Falls, the Falls International Airport 

Commission, the Governor of Wisconsin, the Chair of the Rhinelander/Oneida County 

Airport Commission, and the Mayor of Rhinelander. All of the parties specifically noted 

above strongly endorsed SkyWest. Most comments supporting SkyWest included mention of 

its proposed aircraft size, the code-share relationship with Delta, and/or the carrier’s recently 

established presence in the region.

Decision on Carrier Selection

After careful consideration, including the comments of local government officials and 

potential users of the air service, the Department has decided to select SkyWest to provide 

EAS between each of the four communities captioned above and MSP, in accordance with its 

proposal summarized above, for the two-year period beginning when the carrier initiates full 

EAS at all four communities. The annual subsidy rates will be set at $2,512,971, $1,356,764, 

$1,107,900, and $1,519,619 at Iron Mountain, Brainerd, International Falls, and Rhinelander, 

respectively, or a combined total of $6,497,254.

When selecting a carrier, 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 
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requirements, thus codifying a factor that we have considered since the inception of the 

program.

SkyWest has a good track record in providing EAS. It is proposing nonstop service at both 

Brainerd and Rhinelander and mix of nonstop and one-stop service at Iron Mountain and 

International Falls. It will connect the four communities to MSP, a hub for its code-share 

partner, Delta and will provide robust access to the national air transportation system. 

Furthermore, it has strong support from the elected officials and the vast majority of the 

commenting public at each community.

All of the above mandatory carrier-selection criteria favor the selection of SkyWest. Given 

the alternatives available, the communities overwhelmingly endorse SkyWest’s proposals. 

However, we also have to take into consideration the burden imposed on taxpayers.

Sovereign Air’s proposal projects the largest taxpayer savings, but we are not able to select it 

because the applicant does not have operating authority from either the Department or the 

Federal Aviation Administration, leaving only SkyWest and Great Lakes as viable 

applicants.

Great Lakes’ annual subsidy request at Iron Mountain is approximately $655,000 less than 

SkyWest’s; however, SkyWest’s proposal at the community also includes service at 

Rhinelander, and the two communities are an inseparable package bid. Thus, selecting Great 

Lakes at Iron Mountain would require us to either re-bid Rhinelander or select Great Lakes at

Rhinelander too. If we were to re-bid Rhinelander on a stand-alone basis, the apparent 

savings at Iron Mountain would be illusory because the cost of serving Rhinelander on a 

stand-alone basis would almost certainly be higher than via the linear routing proposed by 

SkyWest. In addition, both communities strongly support the selection of SkyWest, a 

statutorily mandated selection criterion. Furthermore, SkyWest’s proposal utilizes the same 

type of aircraft that is currently being operated at Iron Mountain and may offer more 

capacity, thereby providing greater potential in reducing the subsidy per passenger, when 

compared to Great Lakes. While not decisional, Great Lakes also encouraged the 

Department to re-solicit proposals at the four communities, due in part to its concerns 

regarding the availability of gates and facilities to expand further at MSP.

The decision at Brainerd and International Falls is very straightforward: SkyWest’s subsidy 

Is $1.1 million less than Great Lakes’ and both communities fully support SkyWest.

Based on all of the above, we will select SkyWest at all four communities. We are, 

nonetheless, concerned with the level of subsidy SkyWest requires at Iron Mountain. While 

SkyWest’s proposal at the community may offer more capacity and allow for more 

passengers, we expect the community to proactively work with SkyWest to increase 

passenger levels and, thus, reduce subsidy levels in the next two years.

The Department shall make this selection at the four communities contingent upon the 

Department’s receiving properly executed certifications from SkyWest that it is in 

compliance with the Department’s regulations regarding drug-free workplaces and 

nondiscrimination, as well as the regulations governing lobbying activities.
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Carrier Transition

We expect Mesaba/Pinnacle, Chautauqua, SkyWest and Delta to work together to make a 

smooth transition at these communities. In that regard, before Mesaba/Pinnacle suspends 

their service they must notify any passengers holding reservations for travel after the 

suspension date, to assist those passengers in making alternate air transportation 

arrangements, or to provide a refund of the ticket price, without penalty, if requested.

Carrier Fitness

49 U.S.C. §§ 41737(b) and 41738 require that we find an air carrier fit, willing, and able to 

provide reliable service before we may subsidize it to provide essential air service. SkyWest

is subject to the Department’s continuing fitness requirements, and no information has come 

to our attention that would cause us to question the carrier's fitness at this time. We have 

contacted the Federal Aviation Administration, and it has raised no concerns that would 

negatively affect our fitness finding. We therefore conclude that the carrier remains fit to 

conduct the operations proposed here.

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

ACCORDINGLY,

1. We select SkyWest Airlines, to provide Essential Air Service at Iron Mountain/Kingsford, 

Michigan, Brainerd and International Falls, Minnesota, and Rhinelander, Wisconsin, and 

establish the subsidy rates, as described in Appendix C, for 24 months after full EAS 

commences at all four communities;

2. The Department directs Pinnacle Airlines Corporation d/b/a Delta Connection and 

Chautauqua Airlines, Inc., d/b/a Frontier Airlines, 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 its 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;

3. We find that SkyWest Airlines, continues to be fit, willing and able to operate as a 

certificated air carrier and capable of providing reliable EAS at Iron Mountain/Kingsford, 

Michigan, Brainerd and International Falls, Minnesota, and Rhinelander, Wisconsin;

4. We will continue to require Pinnacle Airlines Corporation d/b/a Delta Connection to 

provide EAS at Iron Mountain, Michigan, as described in Appendix B-2 of Order 2012-4-20,

and at Brainerd and International Falls, Minnesota, as described in Order 2011-9-5, until 

SkyWest Airlines inaugurates full service at the four communities;
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5. We will also continue to require Chautauqua Airlines, Inc., d/b/a Frontier Airlines to 

provide EAS at Rhinelander, Wisconsin, as described in Appendix A of Order 2012-7-32, 

until SkyWest Airlines inaugurates full service at the four communities;

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

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

By:

SUSAN L. 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

AREA MAP

Maps generated by the Great Circle Mapper - copyright © Karl L. Swartz
Appendix B

Page 1 of 2

SkyWest Airlines

Provision of Essential Air Service at

Iron Mountain/Kingsford, Michigan, and Rhinelander, Wisconsin

Calculation of Compensation Requirement
Appendix B

Page 2 of 2

SkyWest Airlines

Provision of Essential Air Service at

Brainerd and International Falls, Minnesota

Calculation of Compensation Requirement
Appendix C

Page 1 of 3

SkyWest Airlines

Provision of Essential Air Service at

Iron Mountain/Kingsford, Michigan, and Rhinelander, Wisconsin

Summary of Service To Be Provided

Effective Period: Beginning with the start of full EAS at all four communities 

through the end of the 24th month thereafter.

Scheduled Service: Iron Mountain/Kingsford: Seven nonstop and six one-stop (at 

Rhinelander, Wisconsin) round trips each week to Minneapolis-St. 

Paul (MSP).

Rhinelander: Fourteen nonstop round trips each week to 

Minneapolis-St. Paul (MSP).

Intermediate stops and upline 

service: 

No service to any intermediate point is contemplated under the 

terms of the carrier’s proposal; accordingly, no such service may 

be provided on subsidized flights without prior Department 

approval.

Aircraft type: Canadair Regional Jet 200 (CRJ200) - 50-passenger seats

Timing of flights: Flights must be well-timed and well-spaced in order to ensure full 

compensation.

Annual compensation: Iron Mountain/Kingsford: $2,512,971

Rhinelander: $1,519,619

This rate assumes an annual completion factor of 98 percent. A 

compensation ceiling is to be applied per calendar week such that 

service above that ceiling in one week cannot make up for service 

shortfalls in another week.

Subsidy Rate per Flight: Iron Mountain/Kingsford: $1,8971

Rhinelander: $1,0652

Weekly Compensation 

Ceiling:

Iron Mountain/Kingsford: $49,3223

Rhinelander: $29,8024

 1 $2,512,971 divided by 1,325 annual departures: (4 flights x 6 days x 52 weeks) + (2 flights x 1 day x 52 

weeks) x .98 (completion factor) = 1,325.

2 $1,519,609 divided by 1,427 annual departures: 4 flights x 7 days x 52 weeks x .98 (completion factor) = 1,427.

3 26 flights per week multiplied by $1,897 per flight.

4 28 flights per week multiplied by $1,065 per flight.
Appendix C

Page 2 of 3

SkyWest Airlines

Provision of Essential Air Service at

Brainerd and International Falls, Minnesota

Summary of Service To Be Provided

Effective Period: Beginning with the start of full EAS at all four communities 

through the end of the 24th month thereafter.

Scheduled Service: Brainerd: Twelve nonstop round trips each week to 

Minneapolis-St. Paul (MSP).

International Falls: Seven nonstop and five one-stop (at 

Brainerd, Minnesota) round trips each week to Minneapolis-St. 

Paul (MSP).

Intermediate stops and upline 

service: 

No service to any intermediate point is contemplated under the 

terms of the carrier’s proposal; accordingly, no such service may 

be provided on subsidized flights without prior Department 

approval.

Aircraft type: Canadair Regional Jet 200 (CRJ200) - 50-passenger seats

Timing of flights: Flights must be well-timed and well-spaced in order to ensure full 

compensation.

Annual compensation: Brainerd: $1,356,764

International Falls: $1,107,900

This rate assumes an annual completion factor of 98 percent. A 

compensation ceiling is to be applied per calendar week such that 

service above that ceiling in one week cannot make up for service 

shortfalls in another week.

Subsidy Rate per Flight: Brainerd: $1,1091

International Falls: $9062

Weekly Compensation 

Ceiling:

Brainerd: $26,6163

International Falls: $21,7444

 1 $1,356,764 divided by 1,223 annual departures: 4 flights x 6 days x 52 weeks x .98 (completion factor) = 

1,223.

2 $1,107,900 divided by 1,223 annual departures: 4 flights x 6 days x 52 weeks x .98 (completion factor) = 1,223.

3 24 flights per week multiplied by $1,109 per flight.

4 24 flights per week multiplied by $906 per flight.
Appendix C

Page 3 of 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 these 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 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 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 not operate to controvert the foregoing paragraph.

Funds are not currently available for performance under this Order beyond September 30, 2012. 

The Department’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.
Appendix D

SERVICE LIST

Brainerd Lakes Regional Airport, Rick Adair

City of Brainerd, Nikki Tabaka

Crow Wing County Board, Jennifer Simota

Dickinson County, Michigan, Kay Pascoe

Ford Airport, Tim Howen

Falls International Airport, Susan Baratono

Falls International Airport Commission, Bob Anderson

City of International Falls, Betty Bergstrom

Rhinelander/Oneida County Airport, Joe Brauer