Order 20 12

- 3

- 5

Served: M arch 7 , 20 1 2



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 7 th day of March , 20 1 2

ORDE R SELECTING CARRIER AND SETTING
FINAL SUBSIDY RATES

Summary By this Order , we are: (1) selecting Great Lakes Aviation, Ltd. (Great Lakes) to provide

subsidized Essential Air Service ( EAS ) at Ironwood , Michigan /Ashland , Wisconsin, and

Rhinelander , Wisconsin, for a two

- year period beginning when the carrier inaugurates full EAS

at both communities through the end of the 24 th month thereafter ; and (2) establishing a hold

- in

rate for Chautauqua Airlines, Inc., a wholly owned subsidiar y of Republic Airways Holdings and doing business as Frontier Airlines (Chautauqua) for the provision of subsidized EAS at

Rhinelander from December 12, 2011 until Great Lakes begins full EAS at the community. Great Lakes, utilizing 19

- seat Beech 1900D ai rcraft, will require annual subsidies of $ 1, 410,250 for Rhinelander and $1,747,326 for Ironwood/Ashland. Chautauqua will continue

to utilize 37

- seat or substitute 50

- seat jet aircraft for a short

- term annual subsidy rate of $ 1,837

, 638

.

Background By Or der 2011

- 1

- 16, January 22, 2011 , the Department selected Chautauqua , utilizing 37

- seat Embraer 135 aircraft, to provide subsidized EAS at Ironwood consisting of 1 3 one

- stop (at Rhinelander or Wausau/Stevens Point, Wisconsin) round trips a week for an annua l subsidy of $1,387,589

. With the concurrence of the community, u nder the authority in 49 U.S.C. § 40109,

Order 2011

- 1

- 16 also allowed the carrier to cease operations at Ironwood on 180 days’ notice to the Department and communit y

. Chauta uqua inaugurated service at the community on April 18, 2011.

At Rhinelander, Chautauqua provided unsubsidized service consisting of 13 nonstop round trips a week to Milwaukee using 37

- seat Embraer 135 aircraft. Essential Air Service at :

IRONWOOD, MICHIGAN/ASHLAND, WISCONSIN RHINELANDER, WISCONSIN

Under 49 U.S.C. 41731 et seq

. DOT

- OST

- 1996

- 1266
DOT

- OST

- 2011

- 0109- 2

-

On September 12, 2011

, Chautauqua filed both a 180

- day notic e of its intention to discontinue operations at Ironwood, effective March 10 , 2012 , and a 90

- day notice of its intention to suspend its subsidy

- free service at Rhinelander, effective December 11 , 2012

. 1

By Order 2011

- 10

- 15, issued O ctober 20, 2011, the Department prohibited Chautauqua from suspending service at Rhinelander 2 and request ed proposals from carriers interested in providing EAS at Ironwood and/or Rhinelander for a two

- year period, with or without subsidy

. Th at Order stated that the communitie s are guaranteed service with 15

- seat or larger aircraft by virtue of their having averaged 11 or more enplanement per day in any year from 1976

- 1986 ( 49 U.S.C. § 41732 (b)(3)). A t Rhinelander we request ed proposals for four round trips a day (24 a week) with 19

- seat aircraft, three round trips a day (18 a week) with 30

- seat aircraft, or two round trips a day (12 a week) with larger aircraft. 3 Carriers were encouraged to propose more than one service optio n if they chose and were not limited to those requirements if they envisioned other, potentially more attractive possibilities

– different hubs, for example

– with subsidy requirements that remain competitive.

By Orders 2011

- 12

- 1, 2011

- 12

- 16 and 2012

- 1

- 36 , the Department extended Chautauqua’s EAS obligation at Rhinelander for successive 30

- day periods, of which the most recent will end on

March 10

, 2012. We will continue to extend Chautauqua’s service obligation at the community for an additional 30 days, or until replacement service actually begins, whichever occurs first by separate Order

.

Proposals

Great Lakes was the only applicant to submit a proposal for EAS at the two communities

. The proposal is summarized below. The entire public file for EAS at the two communities may also be accessed online through the Federal Docket Management System at: http://www.regulations.gov

, by doing a search on the d ocket number s listed on the first page

.

Great Lakes

Great La kes submitted “stand

- alone” service options to provide EAS at Ironwood and

Rhinelander with 19

- passenger Beech 1900D aircra ft. At Rhinelander, t he carrier w ill provide

1 8 nonstop round trips a week from Rhinelander to Minneapolis/St. Paul for an annual su b sidy requirement of $ 1,410,250

. At Ironwood , the carrier proposed to provide 1 2 nonstop round trips a week to Minneapolis/St. Paul for an annual subsidy rate of $ 1,747,326

.

Community Comments

On December 19 , 2011

, the Department sent an email to the airport managers and civic

officials of both communities summarizing the proposal submitted and requesting their

comments on the carrier

- selection decision

.

1 Chautauqua also filed a notice to suspend service at Manistee, Michigan, and we will address that case in a separate order.

2 As we mentioned earlier, Ironwood waived its right to hold i n Chautauqua’s service after 180 days.

3 Previously, most EAS communities were entitled to service with 15

- seat or larger aircraft. However, in the Department’s FY 2012 appropriation (Consolidated and Further Continuing Appropriations Act, P.L. 112

- 55,

No vember 18, 2011), Congress repealed the 15

- seat guarantee, although communities are still entitled to service

with twin

- engine aircraft.- 3

-

In response , the Department received comments co

- signed by Gogebic

- Iron County Airport (Ironwood) Manager and Airport Board Chairman, the Rhinelander/Oneida County Airport

C hair, Mayor of Rhinelander, and the Executive Director s of both the Oneida County Economic Development Corporation and the Rhinelander Area Chamber of Commerce

. All parties general ly support the selection of Great Lakes

.

The representatives from Ironwood are in favor of service to Minneapolis/St. Paul but also express concern over the proposed schedule and argue that Chautauqua’s existing schedule provides its traveling public with more us eful connecting opportunities.

The Mayor of Rhinelander and Airport Chair highlight the importance of Great Lakes and Delta Air Lines following through with the proposed upgrade in electronic comm unication systems. They believe service to local customers would improve if both airlines’ reservation, customer relations and frequent flyer program systems were integrated better

. Both parties agree that Great Lakes’ proposal of three round trips a day would be sufficient in the off

- p e ak months; however, based on historical traffic

, insist that flight frequency should be increased during peak summer months. The Executive Director s of the Oneida County Econo mic Development Corporation and Rhinelander Area Chamber of Commerce detail the important

role that Great La kes’ proposed service will play in the region and how it supports both the region’s manufacturing businesses and tourism industry.

Decision on Carrier Selection After careful consideration, including the comments of local officials, the Department has

decided to select Great Lakes to provide EAS at both communities, in accordance with its proposal.

Great Lakes , utilizing twin

- engine, two

- pilot, 19

- passenger, Beec h 1900D aircraft, was the only carrier to submit a proposal and the communities support the carrier. The carrier will provide

1 8 weekly nonstop round trips between Rhinelander and Minneapolis/St. Paul for an annual subsidy requirement of $1, 410,250

. At I ronwood , the carrier proposed to provide 12 nonstop round trips a week to Minneapolis/St. Paul for an annual subsidy rate of $1,747,326. Great

Lakes is a well

- established carrier and provides EAS to many communities across the country

. Moreover, we find both the service and subsidy levels to be reasonable.

T he Department fully expects that passenger traffic will continue to grow at both communities

, and e ncourages the communities and Great Lakes to continue to work together to ensure the sustainability of the service.

The Department shall make this selection at both communities contingent upon the Department’s receiving properly executed certifications from Great Lakes Aviation, Ltd , that it is in compliance with the Department’s regulations regarding d rug

- free workplaces and nondiscrimination, as well as the regulations governing lobbying activities.

Compensation for Interim

- Period Service

As noted above

, Chautauqua, the incumbent carrier, is required to continue to provide service

at Rhinelander until full replacement service begins. As a result , Chautauqua is eligible to be compensated for the provision of EAS at Rhinelander, beginning December 1 1 , 2011, the end

of its 90

- day notice period, until Great Lakes inaugurates its full EAS operation at the- 4

-

community . Thus, pursuant to U.S.C. 41734 (d), the Department will compensate Chautauqua for the provision of EAS at the community as detailed Appendix B

. Lastly, we expect Chautauqua and Great Lakes to work together to ensure a smooth transition

in service at Rhinelander and Ironwood . In that regard, we expect Chautauqua to contact all passengers holding reservations for flights after Chautauqua ’ s final date of service, to inform them of the change in service, and to assist them in arranging alternate transportation or to provide a refund of the ticket price, without penalty, if requested.

Carrier Fitness 49 U.S.C. 41737(b) requires that we find a n air carrier fi t, willing, and able to provide reliable service before we may subsidize it to provide essential air service. Great Lakes is subject to the Department’s continuing fitness requirements, and no information ha s come to our attention

that wou ld cause us to question the car rier'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 th e carrier remains fit to condu ct the operations proposed

here.

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

ACCORDINGLY

,

1. We establish hold

- in subsidy rates for Chautauqua Airlines, Inc., a wholly owned subsidiary of Republic Airways Holdings and doing busi ness as Frontier Airlines , as described in Appendix C , for the provision of essential air service at Rhinelander, Wisconsin, beginning

December 1 1

, 2011, until the replacement carrier inaugurates its full service;

2. We select Great Lakes Aviation, Ltd.

, t o provide essential air service at Ironwoo d, Michigan/Ashland, Wisconsin , and Rhinelander, Wisconsin

, and establish the subsidy rates

, as described in Appendix C, for two years beginning when the carrier inaugurates full service at
both communities through the end of the 24th month thereafter ;

3 . The Department directs Great Lakes Aviation, Ltd. , 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, wh ichever 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 ;

4 . We find that Great Lakes Aviation, Ltd. , continues to be fit, willing and able to operate as a

commuter air carrier and capable of providing reliable essential air service at Ironwoo d, Michigan/Ashland, Wisconsin , and Rhinelander, Wisconsin ;

5 . Th e s e Docket s will remain open until further Ord er of the Department; and- 5

-

6 . Docket Operations 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

Airport Codes

DTW: Detroit Metropolitan Wayne County Airport

IWD : Gogebic

- Iron County Airport ( Ironwood , Michigan)

MBL : Manistee County Blacker Airport (Manistee, Michigan) MKE: General Mitchell International Airport MSP: Minneapolis

– St. Paul International Airport ORD: Chicago O’Hare International Airport

RHI : Rhinelander/Oneida County Airport

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 Page 1 of 3

Chautauqua Airlines, Inc. d/b/a Frontier Airlines Provision of Essential Air Service at Rhinelander, Wisconsin Calculation of Compensation Requirement

Market: Rhinelander to Milwaukee

Aircraft 37-seat ERJ135; or

50-seat ERJ-145

Mileage 201

Weekly Departures 12

Annual Departures 1227

Block per Departure 0.875 hours

Annual Block Hours 1074 hours

Completion Percent 98%

Revenue

Annual Pax 27,200

Average Segment Fare $60.50

Other $118,320

Total Revenue $1,763,920

Expenses

Direct

Flight Crew $191,387

Fuel Costs $1,050,587

Maintenance $711,912

Aircraft $257,760

Total Direct $2,211,646

Indirect

Distribution $194,480

Station $636,591

Overhead $387,338

Total Indirect $1,218,409

Total Annual Expense $3,430,055

Profit Margin @5% $171,503

Total Economic Cost $3,601,558

Subsidy Request $1,837,638Appendix B Page 2 of 3

Great Lakes Aviation, Ltd.
Provision of Essential Air Service at Rhinelander, Wisconsin Calculation of Compensation RequirementAppendix B Page 3 of 3

Great Lakes Aviation, Ltd.
Provision of Essential Air Service at Ironwood, Michigan/Ashland, Wisconsin Calculation of Compensation RequirementAppendix C Page 1 of 3

Chautauqua Airlines, Inc. d/b/a Frontier Airlines Provision of Essential Air Service at Rhinelander, Wisconsin Summary of Service To Be Provided

Effective Period : Beginning December 1 1 , 201 1, until further Department action

Scheduled Service : 1 2 nonstop round trips each week to Milwaukee Intermediate stops and upline

service : No service to any other 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. There are no limitations on service upline from either community Aircraft type: Embraer 135 (37

- seats) or Embraer 145 (50

- seats) Timing of flights: Flights must be well

- timed and well

- spaced in order to ensure full compensation. Annual compensation: $ 1

, 837

, 638 This rate assumes an annual completion factor of 9 8 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 : $ 1, 498 1 Weekly Compensation Ceiling: $ 3 5

, 95 2 2

1 $1,837,638 divided by 1,227 annual departures: 24 flights x 52 weeks x 313/312 x .98 (completion factor) =
1,227.

2 24 flights per week multiplied by $1,498 per flight.Appendix C Page 2 of 3

Great Lakes Aviation, Ltd.
Provis ion of Essential Air Service at Ironwood, Michigan/Ashland, Wisconsin

, and Rhinelander, Wisconsin Summary of Service To Be Provided

Effective Period : Two years beginning when Great Lakes inaugurates full service both communities through the end of the 24th month thereafter.

Scheduled Service : Ironwood/Ashland : 12 nonstop round trips each week to Minneapolis/St. Paul

Rhinelander : 18 nonstop round trips each week to Minneapolis/St. Paul 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 flig hts without prior Department approval. There are no limitations on service upline from either community Aircraft type: Bee chcraft B

- 1900D (19 passenger seats). Timing of flights: Flights must be well

- timed and well

- spaced in order to ensure full

comp ensation. Annual compensation: Ironwood/Ashland : $ 1, 747

, 326

Rhinelander : $ 1, 410,250 This rate assumes an annual completion factor of 9 8 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 : Ironwood/Ashland : $ 1,424 1

Rhinelander : $ 766 2 Weekly Compensation Ceiling: Ironwood/Ashland : $ 34,176 3

Rhinelander : $ 27,576 4

1 $ 1,747,326 divided by 1,227 annual departures: 4 flights x 313 days x .98 (completion factor) = 1,227.

2 $1,410,250 divided by 1,840 annual departures: 6 flights x 313 days x .98 (completion factor) = 1,840.

3 24 flights per week multiplied by $1,424 per flight.

4 36 flights per week multiplied by $766 per flightAppendix 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 co mpleted, 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 writt en 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 oper ated; 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 me t and the extent of access to the national air transportation system provided to the community.

If the Department unilaterally, either partially or complete ly , terminates or reduces payments for service or changes service requirements at a specific locati on 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 pa ragraph.

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

, 201 2 . The Department’s obligation for performance unde r 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 Sept ember 30, 2012 , until funds are made available to the Department for performance. If funds are not made available for performance beyond Sept em ber 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 se rvice provided

under this Order

.Appendix D

SERVICE LIST Chautauqua Airlines, Josh Pascoe

Frontier Airlines, Daniel Shurz Gogebic

- Iron County Airport, Duane DuRay Gogebic

- Iron County Airport Board, Joseph Bonovetz Great Lakes Aviation, Michael Matthews Great Lakes Aviation, Chuck Howell Oneida County Economic Development Corporation, Roger A. Luce City of Rhinelander, The Honorable Richard J. Johns Rhinelander/Oneida County Airport, Joseph Brauer

Rhinelande r/Oneida County Airport Commission, Robert G. Heck