Order 2012-3-5

Served: March 7, 2012

 UNITED STATES OF AMERICA

 DEPARTMENT OF TRANSPORTATION

 OFFICE OF THE SECRETARY

 WASHINGTON, D.C.

Issued by the Department of Transportation

on the 7th day of March, 2012

ORDER 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 24th month thereafter; and (2) establishing a hold-in 

rate for Chautauqua Airlines, Inc., a wholly owned subsidiary 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 aircraft, 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 Order 2011-1-16, January 22, 2011, the Department selected Chautauqua, utilizing 37-seat 

Embraer 135 aircraft, to provide subsidized EAS at Ironwood consisting of 13 one-stop (at 

Rhinelander or Wausau/Stevens Point, Wisconsin) round trips a week for an annual subsidy of 

$1,387,589. With the concurrence of the community, under 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 community. Chautauqua 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
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On September 12, 2011, Chautauqua filed both a 180-day notice 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 October 20, 2011, the Department prohibited Chautauqua from 

suspending service at Rhinelander2 and requested proposals from carriers interested in 

providing EAS at Ironwood and/or Rhinelander for a two-year period, with or without subsidy. 

That Order stated that the communities 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)). At Rhinelander we requested 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 option 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 docket numbers listed on the first page.

Great Lakes

Great Lakes submitted “stand-alone” service options to provide EAS at Ironwood and 

Rhinelander with 19-passenger Beech 1900D aircraft. At Rhinelander, the carrier will provide 

18 nonstop round trips a week from Rhinelander to Minneapolis/St. Paul for an annual subsidy 

requirement of $1,410,250. At Ironwood, the carrier proposed to provide 12 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 in 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, 

November 18, 2011), Congress repealed the 15-seat guarantee, although communities are still entitled to service 

with twin-engine aircraft.
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In response, the Department received comments co-signed by Gogebic-Iron County Airport 

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

Chair, Mayor of Rhinelander, and the Executive Directors of both the Oneida County 

Economic Development Corporation and the Rhinelander Area Chamber of Commerce. All

parties generally 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 useful 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 communication 

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-peak 

months; however, based on historical traffic, insist that flight frequency should be increased 

during peak summer months. The Executive Directors of the Oneida County Economic 

Development Corporation and Rhinelander Area Chamber of Commerce detail the important 

role that Great Lakes’ 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, Beech 1900D aircraft, was the only 

carrier to submit a proposal and the communities support the carrier. The carrier will provide 

18 weekly nonstop round trips between Rhinelander and Minneapolis/St. Paul for an annual 

subsidy requirement of $1,410,250. At Ironwood, 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.

The Department fully expects that passenger traffic will continue to grow at both communities, 

and encourages 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 drug-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 11, 2011, the end 

of its 90-day notice period, until Great Lakes inaugurates its full EAS operation at the 
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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 an air carrier fit, 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 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 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 business as Frontier Airlines, as described in 

Appendix C, for the provision of essential air service at Rhinelander, Wisconsin, beginning 

December 11, 2011, until the replacement carrier inaugurates its full service;

2. We select Great Lakes Aviation, Ltd., to provide essential air service at Ironwood, 

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, 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;

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 Ironwood, 

Michigan/Ashland, Wisconsin, and Rhinelander, Wisconsin;

5. These Dockets will remain open until further Order of the Department; and
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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® AirVisionTM 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 $1,837,638
Appendix B

Page 2 of 3

Great Lakes Aviation, Ltd.

Provision of Essential Air Service at Rhinelander, Wisconsin

Calculation of Compensation Requirement
Appendix B

Page 3 of 3

Great Lakes Aviation, Ltd.

Provision of Essential Air Service at Ironwood, Michigan/Ashland, Wisconsin

Calculation of Compensation Requirement
Appendix 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 11, 2011, until further Department action

Scheduled Service: 12 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 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: $1,4981

Weekly Compensation 

Ceiling:

$35,9522

 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.

Provision 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 flights without prior Department 

approval.

There are no limitations on service upline from either community

Aircraft type: Beechcraft B-1900D (19 passenger seats).

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

compensation.

Annual compensation: Ironwood/Ashland: $1,747,326

Rhinelander: $1,410,250

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: Ironwood/Ashland: $1,4241

Rhinelander: $7662

Weekly Compensation 

Ceiling:

Ironwood/Ashland: $34,1763

Rhinelander: $27,5764

 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 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

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

Rhinelander/Oneida County Airport Commission, Robert G. Heck