Order 2011

- 11

- 20 Served: November 17, 2011



### UNITED STATES OF AMERICA
DEPARTMENT OF TRANSPORTATION
OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 17 th of November, 2011

Ninety

- day Notice of Mesaba A viation

, Inc., and Pinnacle Airlines, Inc., to terminate service at:

Alpena, Michigan

under 49 U.S.C. 41731 et seq

. Docket DOT

- OST

- 2009

- 0300

ORDER REQUESTING PROPOSALS

Summary By this order, the Department is re

- soliciting proposals from all interested carriers to provide subsidized essential air service (EAS) at Alpena, Michigan. Proposals are due by

Dec ember 5 . (See Appendix A for a map.)

Background By Order 2 010

- 5

- 18 the D epartment selected Mesaba Aviation, Inc., d/b/a Delta Connection (Delta) to provide 13 nonstop round trips per week between Alpena and
Detroit with 34

- seat Saab 340 equipment for $1,532,660 annually through May 31, 2012.
O n July 15, 2011, Delta filed noti ce to terminate that service at Alpena as well as its
service at a number of other communities

. By Order 2011

- 9

- 5, September 13, we prohibited Delta from terminating service at Alpena and those other communities and requested proposals by October 12. 1 In response

, we received proposals from Gulfstream International Airlines, Inc., and Intrepid International Airlines.

Gulfstream proposed 18 nonstop round trips per week to Cleveland with 19

- seat Beech 1900 aircraft, and requested $3,243,009 annual s ubsidy. Intrepid, which does not currently have authority to provide scheduled passenger service, proposed four nonstop round trips per week to Lansing, Michigan, with 19

- seat Jetstream aircraft and requested $911,800 annual subsidy for that service.

1 By notice dated October 12 we extended that deadline to October 14.- 2

-

Community Comments We received comments from the Alpena County Regional Airport, the Alpena County Board of Commissioners, the Bank of Alpena, and numerous individuals. Most of the

comments ignored Intrepid’s proposal and discussed the deficiencies of Gul fstream’s

. 2

By letter dated September 22, t he Alpena County Regional Airport indicates

, “We are requesting that the Department do everything in it s power to hold Delta Air L ines in Alpena to fulfill their ‘plan to enhance global connections to small towns and cities
across the US’ as stated [by Delta] in a letter on April 18, 2008, announcing their plans to merge with Northwest. ” On November 7 the Alpena County Board of Comm issioners
stated that neither carrier’s proposal would provide the needed level of service or connectivity and requested a 60

- day extension “so that the newly formed Airport Committee would have an adequate period of time to fully investigate an Essential Air Service carrier for Alpena County.”

On November 3, the Bank of Alpena indicated what it saw to be numerous deficiencies
with Gulfstream’s proposal , and those concerns were echoed by the comments of other members of the community . Among the ir concer ns w ere the need for guaranteed code sharing and an integrated reservation system ; that a three million dollar award to Gulfstream for less service was not a good use of taxpayer money; 3 that cancelled flights
in the more

- distant Cleveland would leave pass engers with fewer choices in getting
home ; that Gulfstream’s aircraft were smaller and without a lavatory ; that Cleveland is

not a n international gateway airport like Detroit with less than half of Detroit’s nonstop departures

. 4 Others noted that Alpena’s enplanements were up two years in a row, so it
made no sense to select smaller aircraft.

Decision
We have decided to re

- bid proposals for Alpen a, Michigan . Intrepid’s proposal does not meet the statutory two

- round

- trip

- per

- day requirement, and we have serious concerns about the subsidy level requested by Gulfstream . We encourage the community to complement our efforts during this re

- solicitation period to secure additional options as it presumably has been doing since Delta first filed its ter mination notice

.

While both the community and Department are dissatisfied with the current options before us, we wish to highlight the fact that the sources of our dissatisfactions are
different. We are concerned that the level of subsidy Gulfstream req uests is very high

-- more than twice the program average.

2 As we stated in our letter to the community requesting comments, Intrepid does not currently have authority to provide scheduled air service, and its proposal, contemplating a total of four round trips per
week does not meet basic EAS requirements in 49 U.S.C. 41732

. 3 Many of the comments contraste d Gulfstream’s proposal with smaller equipment to Cleveland, a smaller hub, to the current $1.5 million contract with Mesaba to Detroit, with larger Saab 340 equipment. Delta filed notice because it is retiring those aircraft and the smallest aircraft ava ilable to it are much more expensive regional jets. Delta only has an obligation to continue to provide EAS until we secure a replacement capable of providing reliable basic EAS.

4 For the month of August, 2011, Detroit had 19,412 departures in scheduled passenger service while Cleveland had 7,509.- 3

-

The community is concerned that the level of service proposed by Gulfstream is inferior to what Alpena currently receives . However, Gulfstream’s propo sal meets the statutory provisions of 49 U.S.C. §4173 1 et seq , for providing basic EAS

. Under those provisions, basic EAS for Alpena requires the following: ( 1 ) s ervice t o a large or medium hub with convenient air service to a substantial number of destinations; ( 2 ) 12 nonstop or one

- stop round trips a week; and ( 3 ) t win

- engine aircraft operated with two pilots. Moreover, Gulfstream’s proposed service meets the provisions of §41733 that set the criteria for the Department in selecting a carrier: demonstrated reliability in providing scheduled ai r service, contractual and marketing arrangements with a larger carrier to ensure service beyond the hub airport; interline arrangements with a larger carrier that allows for the passenger to travel with one ticket, one reservation, and one baggage check i n.

Based on all of the above, we have decided that the best option is to re

- solicit proposals on an expedited basis. 5

Request for Proposals Carriers interested in filing proposals for Alpena

-- with or without subsidy

-- should

e

- mail them to our staff at EAS@dot.gov

, no later than Dec ember 5 , 2011. Our staff will then docket the proposals, thereby making them public, and we suggest that each applicant serve a copy of its proposal on the civic pa rties and other applicants. Shortly
thereafter w e will provide a summary of the proposals to the community officials and ask
them to submit their final comments two weeks later . We will give full consideration to all proposals filed in a timely manner. 6

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 unrealis tic proposals and solicit a new round of proposals.

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. We expect proposals to adequat ely describe the service being 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 and routings as we ll as supporting data for their subsidy requests, such as projected block hours, revenues and expenses. We strongly encourage clear, well

documented proposals that will facilitate their evaluation by the affected community and the Department. 7

5 49 U.S.C. §41734(f) directs the Department, when prohibiting a carrier from terminating service, “to make

every effort to find another carrier” to provide basic EAS as quickly as possible.

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

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

- free service as proposed.

7 In selecting a carrier to provide subsidized EAS , 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;- 4

-

W e reque st proposals for either two or three round trips a day (12 or 18 a week) with 19

- seat aircraft. We also encourage the community to discuss options with carriers that might not meet the technical definition of basic EAS but that may be more cost efficient and more preferable from the community’s viewpoint. For example, we would entertain proposals with 8/9

- seat aircraft and as many as four or five round trips a day (24 to 30 a week). Finally, we take note that the community has expressed concerns about Cl eveland

as its hub. As a result, we encourage proposals to other hubs, such as the community’s current hub of Detroit, as well as Chicago and Minneapolis , or any other hub that provides access to the national air transportation system.

As always, staff w ill work with the carrier s to ensure that service and subsidy levels are reasonable. However, we would not dismiss any proposal out of hand without first consulting with community officials. We encourage any proposal that would simultaneously satisfy the community’s needs and minimize taxpayer expenditures.

Carriers are also welcome t o propose more than one service option, if they choose . T hey need not limit themselves to the current service pattern if they envision other, potentially more attractive service possibilities

-- different hubs or lengths of term

-- with subsidy requiremen ts that remain competitive.

In order to assist carriers in makin g their passenger and revenue forecasts, we have included historical passenger data in Appendix B. We note that Alpena is a reasonably
strong traffic generator for the EAS program , averagi ng 35 enplanements a day during the year ended August 31, 2011, and has been growing.

New Filing Procedures Carrier proposals should be submitted to the Department with all materials merged into a single document. In addition, because the document will b e published on Regulations.gov, each page should be formatted to be viewed online.

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

- free workplaces and nondiscrimination. 8 Consequently, all

(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 requirements, thus codifying a factor that we have considered since the inception of the program. Interested carriers should also be aware that o ur general provisions governing EAS 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.

8 The regulations applicable to these areas are: ( 1) 49 CFR Part 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

–

n ondiscrimination on t he 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

- procurement) and government

wide requirements for drug

- free workplace (grants).- 5

-

carriers receiving Federal subsidy to support essential air service must certify that they are in compliance with Department regulations regarding drug

- free workplaces and nondiscrimination, and those carriers whose s ubsidies exceed $100,000 over the life of the rate term must also certify that they are in compliance with the regulations governing lobbying activities. All carriers that plan to submit proposals involving subsidy should submit the required certification s along with their proposals. Interested carriers requiring more detailed information regarding these requirements, as well as copies of the certifications, should contact the Office of Aviation Analysis at (202) 366

- 5903. The Department is prohibited fr om paying subsidy to carriers that do not submit these
documents. 9

Community Comments
The communit y and the State are welcome to submit comments on the proposals at any time. As noted earlier, we will provide a summary of the proposals to the civic par ties
and the State and ask them to submit their final comments approximately two weeks after the carrier proposals are received

.

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

ACCORDINGLY;

1. The Department requests proposals from carriers interested in providing essential air service, with subsidy if necessary, by December 5

. Proposals should be emailed to EAS@dot.gov and be entitled “Proposals to Provide Essential Air Service at Alpena,
Docket 2009

- 0300. ” Service should be consistent with that discussed in the body of the
order. Questions regarding filings may be directed to Kevin Adams at 202

- 366

- 1047 ;

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

9 The certifications are also available on the web at http://ostpxweb.dot.gov/aviation/index.html.- 6

-

3 . The Department will serve a copy of this order on the mayor and airport manager of Alpena, Michigan, Pinnacle Airlines Corporation, Gulfstream International Airlines, Inc., Intrepid International, and on the carriers in our service list.

By:

TODD M. HOMAN

Director Office of Aviation Analysis

(SEAL) An electronic version of this document is available

a t http://www.regulations.govAppendix A

Map for Alpena and Vicinity

Nonstop Great Circle Miles From Alpena (APN) CIU, Sault Ste. Marie 92 CLE, Cleveland 267 DTW, Detroit 198 GRR, Grand Rapids 181 MKE, Milwaukee 261 MKG, Muskegon 187 ORD, Chicago O’Hare 305 PLN, Pellston 69 TVC, Traverse City 102Appendix B

Historical Traffic at Alpena, Michigan (APN)
T-100 Market Report

Year Month Origin Destination O&D

2008 9 649 540 1,189

2008 10 532 553 1,085

2008 11 571 507 1,078

2008 12 522 561 1,083

2009 1 515 452 967

2009 2 493 470 963

2009 3 620 549 1,169

2009 4 443 494 937

2009 5 588 564 1,152

2009 6 671 707 1,378

2009 7 830 849 1,679

2009 8 918 863 1,781

7,352 7,109 14,461

2009 9 649 597 1,246

2009 10 681 658 1,339

2009 11 588 579 1,167

2009 12 532 627 1,159

2010 1 591 454 1,045

2010 2 457 462 919

2010 3 704 660 1,364

2010 4 596 674 1,270

2010 5 571 586 1,157

2010 6 713 759 1,472

2010 7 925 988 1,913

2010 8 1,108 962 2,070

8,115 8,006 16,121

2010 9 736 696 1,432

2010 10 789 729 1,518

2010 11 720 676 1,396

2010 12 720 804 1,524

2011 1 694 591 1,285

2011 2 687 643 1,330

2011 3 1,080 953 2,033

2011 4 824 934 1,758

2011 5 991 993 1,984

2011 6 1,089 1,170 2,259

2011 7 1,315 1,281 2,596

2011 8 1,437 1,277 2,714

11,082 10,747 21,829Appendix 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 understan ds 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 fligh ts 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 carrie r 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

co mpensated. 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 communit ies

.

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 f or 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 s tatutes 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 solicitation beyond [DATE]. The Department’s obligation for performance under this solicitation beyond [DATE], is contingent upon the availability of appropriated funds from which payment
for services can be made. No legal liability on the part of t he Government for any payment may arise for performance under this order beyond [DATE], until funds are made available to the Department for performance. If funds are not made available for performance beyond [DATE], the carrier will receive notice in wri ting by the Department.

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