Order 2012-1-23

Served: January 26, 2012

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

Issued by the Department of Transportation

on the 26th of January, 2012

Essential Air Service at

ABERDEEN, SOUTH DAKOTA

BEMIDJI, MINNESOTA

BUTTE, MONTANA

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

 DOCKET DOT-OST-2011-0137

 DOCKET DOT-OST-2011-0134

 DOCKET DOT-OST-2011-0136

ORDER SELECTING CARRIER

Summary

By this Order, the Department is selecting SkyWest Airlines, Inc. (SkyWest) to provide Essential 

Air Service (EAS) at the three above-captioned communities as follows: Aberdeen, South 

Dakota, $1,198,222; Bemidji, Minnesota, $1,338,293; Butte, Montana, $672,230.1 

Background

On July 15, 2011, SkyWest filed notice to terminate its subsidy-free service at Butte, Montana, 

and Mesaba Aviation, Inc. and Pinnacle Airlines, two wholly owned subsidiaries of Pinnacle 

Airlines Corporation, all three operating as Delta Connection (Delta), filed notice to terminate 

their subsidy-free service at Aberdeen, South Dakota, and Bemidji, Minnesota.2 By 

Order 2011-9-5, issued on September 13, 2011, we prohibited those suspensions and requested 

proposals by October 12, 2011. By Notice, we extended the deadline for proposals to 

October 14, 2011. We received a proposal from Gulfstream International Airlines at Butte, 

Montana, and from SkyWest for each of the three communities. On October 21, 2011, we 

requested comments from the communities on the proposals. On November 21, 2011, we 

received comments from each of the three communities, all endorsing the selection of SkyWest. 

 

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

2 Delta filed notice at a number of other communities, but we are addressing those communities in other orders.
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On December 11, 2011, the EAS staff contacted SkyWest because it appeared that its expenses 

at these three communities were out of line with those at another set of communities (Eau Claire, 

Wisconsin, Hancock/Houghton and Muskegon, Michigan, and Paducah, Kentucky) where it had 

earlier submitted proposals.3

In brief, SkyWest subsequently agreed to substantial reductions in subsidy at Aberdeen, Bemidji, 

and Butte from what it had initially proposed on October 14, 2011. The bases for the 

adjustments were lower projected fuel expenses at all of the communities, an increase in 

passengers forecast at Butte, and reduced forecast flying time at Aberdeen, which drives most of 

the forecast expenses for operating the aircraft. Also, the carrier revised its costing, assigning 

less expense to its departure-related cost pools.4 The following table depicts the evolution in 

SkyWest’s requested subsidy levels.

Decision

We have reviewed the subsidy rates agreed to by SkyWest and the EAS staff and find them 

reasonable for the service proposed. The support expressed by every community for SkyWest, 

and the fact that the one competing proposal did not meet the minimum statutory requirements,5

favor the selection of SkyWest. In addition, Gulfstream indicated it was not interested in 

renegotiating its bid at Butte, the only community where it proposed service. 

We will not request an additional round of subsidy bids at these three communities.6 While 

SkyWest has been able to view the competing proposal at Butte and to recognize that there were 

no competing proposals at either Aberdeen or Bemidji, the carrier has agreed to lower rates than 

those that it initially proposed. Therefore, no party is aggrieved by our selecting SkyWest at 

lower subsidy levels than originally proposed and we will make our selection of SkyWest at 

these three communities final.

 

3 See Order 2012-1-24.

4 SkyWest also agreed to consistently allocate indirect expenses, substantially reducing expenses at Aberdeen, 

Bemidji, and Butte. 

5 Staff did not offer to renegotiate rates with Gulfstream, the only competitor, and that at only one community, 

Butte. Gulfstream’s proposal contemplated service to the small hub of Billings, that does not meet the requirement 

that EAS be to a large- or medium-hub for communities within 400 miles of a large or medium hub. 

6 All of the Department’s requests for proposals indicate that proposals must be submitted by a deadline, and that they 

will be held confidential until all of the proposals are made public. “Interested carriers should prepare their proposals 

with every expectation that their initial proposals will also be their final and only proposals. 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 solicit a 

new round of proposals.” (See page five of Order 2011-9-5 and page two of Order 2011-8-10.) 

Subsidy Aberdeen Bemidji Butte Total

Original $1,525,683 $1,768,722 $803,093 $4,097,498

Agreed $1,198,222 $1,338,293 $672,230 $3,208,745

Difference $327,461 $430,429 $130,863 $888,753
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Carrier Fitness

49 U.S.C. 41737(b) requires that the Department find an air carrier fit, willing, and able to 

provide reliable service before the Department may subsidize it to provide EAS. 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. The Department has 

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

negatively affect our fitness findings. The Department therefore concludes that the carrier 

remains fit to conduct the operations proposed here.

Certifications

Before the Department can pay compensation, SkyWest must provide properly executed 

certifications that it is in compliance with the regulations regarding drug-free workplaces and 

nondiscrimination, as well as the regulations governing lobbying activities.

Carrier Transition

We expect SkyWest and Pinnacle to work together to make a smooth transition at Aberdeen and 

Bemidji.7 In that regard, before Pinnacle suspends its service at Aberdeen or Bemidji, we expect 

it to 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. 

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

ACCORDINGLY,

1. We select SkyWest Airlines, Inc., to provide Essential Air Service at Aberdeen, South Dakota, 

Bemidji, Minnesota, and Butte, Montana, as described in Appendix C; 

2. We direct SkyWest 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 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, Inc., continues to be fit, willing and able to operate as a 

certificated carrier and capable of providing reliable essential air service at these communities;

4. These dockets will remain open until further Order of the Department; and

 

7 At the other five communities there will be no service transition because SkyWest is the incumbent carrier.
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5. We will serve copies of this Order on the Mayors and Airport Managers of Aberdeen, South 

Dakota, Bemidji, Minnesota, and Butte, Montana, Gulfstream International Airlines, Inc., and 

SkyWest Airlines, Inc.

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-1

Nonstop, Great Circle Miles

Aberdeen (ABR) to Minneapolis (MSP) 257

Bemidji (BJI) to Minneapolis (MSP) 199

Aberdeen to Sioux Falls (FSD) 153

Aberdeen to Fargo (FAR) 128

Bemidji to Grand Forks (GFK) 109

Bemidji to Fargo (FAR) 97
Appendix A-2

Nonstop Great Circle Miles from Butte (BTM)

Helena (HLN) 51

Missoula (MSO) 101

Billings (BIL) 191

Denver (DEN) 578

Salt Lake City (SLC) 358
Appendix B

Agreement per Discussion Concluded December 21, 2011

Community Aberdeen Bemidji Butte

Hub MSP MSP SLC

Docket 2011-0137 2011-0134 2011-0136

Distance 257 199 358

RPM's 11,565,000 8,457,500 16,468,000

Seats 50 50 50

ASM 18,336,950 14,198,650 25,543,300

Revenue Psgrs. 45,000 42,500 46,000

Average Fare $102.5 $87.5 $107.0

Departures @ 98% 1/ 1,427 1,427 1,427

Block Time, Minutes 71 60 75

Block Hours 1,689 1,427 1,784

Passenger Revenue $4,612,500 $3,718,750 $4,922,000

Total Directs $4,310,328 $3,641,704 $4,020,262

Total Indirects $1,223,693 $1,174,527 $1,307,576

Operating Expense $5,534,021 $4,816,231 $5,327,838

Margin @5% $276,701 $240,812 $266,392

Economic Costs $5,810,722 $5,057,043 $5,594,230

Agreed Subsidy $1,198,222 $1,338,293 $672,230

1/ 14 one-way flights x 2 directions x 52 weeks x 98% completion = 1,42
Appendix C

SkyWest Aviation, Inc., d/b/a Delta Connection, Inc., Essential Air Service to be Provided to

Aberdeen, South Dakota, Bemidji, Minnesota, and Butte, Montana,

Dockets 2011-0137, 2011-0134, 2011-0136

Scheduled Service: 14 nonstop round trips per week

Aircraft: 50-Seat CRJ-200 Regional Jet

Aberdeen Bemidji Butte

Hub MSP MSP SLC

Annual Subsidy $1,198,222 $1,338,293 $672,230

Annual Flights1 1,427 1,427 1,427

Rate per Flight 2 $840 $938 $471

Weekly Ceiling 3 $23,520 $26,264 $13,188

Effective:

From: Svc. Start Svc. Start 10/13/11

Through: 2/28/14 2/28/14 12/31/13

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

 

1 14 one-way flights x 2 directions x 52 weeks x 98 percent completion = 1,427.

2 Annual subsidy ÷ annual flights.

3 Rate per flight x 28 flights per week.