Order 2012

- 9

- 27

Served: September 28 , 20 12



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

Issued by the Department of Transportation

on the 28 th day of September, 2012

ORDER SELECTING CARRIER AND ESTABLISHING SUBSIDY RATE S

Summary By this O rder, the Department is select ing SeaPort Airlines, Inc. (SeaPort)

, to provid e subsidized

E ssential A ir S erv ice (EAS) at Athens, Georgia

, at annual subs id ies of $ 1, 553,093 from

October 1 , 2012 through Se ptember 30, 2013; and $1,630

, 410 from October 1, 2013 through September 30, 2014

. 1

Background By Order 2010

- 10

- 5 (October 7, 2010), the Department selected Pac ific Wings, L.L.C. dba Georgia Skies (Pacific Wings) to provide EAS at Athens, Georgia, for the two

- year period ending September 30, 2012. Under that contract, Pacific Wings provides two nonstop round trips a day (12 a week) with 9

- seat Cessna Car avan air craft for an annual subsidy of $ 1,051,386. In anticipation of that contract’s expiration, we issued Order 2012

- 7

- 15 (July 13, 2012) soliciting proposals from carriers interested in providing EAS at Athens for a new contract period. In
response to our req uest, we received proposals from four carriers: Sovereign Air, Inc. (Sovereign), Sun Air Express dba Sun Air International (Sun Air), Multi

- Aero, Inc. dba Air Choice One (Air Choice One), and SeaPort. The proposals are summarized below.

Carrier Proposal s We received proposals from four carriers as noted above

. The full proposals can be accessed

online at www.regulations.gov under docket DOT

- OST

- 2002

- 11348

. Due to the large response,

we ha ve summarized the propos als in table form below:

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

Essential Air Service at

ATHENS , GEORGIA

Under 49 U.S.C. § 41731 et seq

. DOCKET DOT

- OST

- 2002

- 113482

Carrier Annual Subsidy Hub Round Trips Per Week Aircraft

Sovereign $1,102,170 ATL 14 nonstop Jetstream 31/32 (19 seats)

Sun Air $1,480,975 ATL 22 nonstop Piper Chieftain (9 seats)

Sea P ort

- Option 1 $1,553,093 1 / BNA 12 nons top Cessna Grand Caravan (9 seats)

$1,630,410 2 / BNA 12 nonstop Cessna Grand Caravan (9 seats)

Sea P ort

- Option 2 $1,616,887 1 / CLT/BNA 12 nonstop to CLT, 6 nonstop to BNA Cessna Grand Caravan (9 seats)

$1,697,420 2 / CLT/BNA 12 nonstop to CLT, 6 nonstop to BNA Cessna Grand Caravan (9 seats)

Air Choice One $1,896,856 3 / ATL 18 nonstop Caravan/Navajo (9 seats)

1 / First year rate.

2 / Second year rate.

3 / Two

- year rate. $1,877,887 per year for a four year contract.

Community Comment s In response to our request for comments , we received a response from Mayor Nancy Denson of

Athens

- Clarke County. The community recognizes that passenger levels have dropped significantly in recent years, placing them in jeopardy of losing subsidized ser vice due to new statutory requirements. 2 After considering each of the proposals received, the community supports SeaPort’s second service option, consisting of twelve weekly round trips to Charlotte and six weekly round trips to Nashville. The M ayor stat es:

[T] he Airport Authority recommended, and I concur, that SeaPort Airlines be awarded the EAS contract for Option #2, Athens/Charlotte and Athens/Nashville. This is the most prudent choice for meeting both the air travel needs of this community and prov iding the opportunity to meet future EAS passenger requirements.

Decision In narrowing the field of options, we first turned to Sovereign. Sovereign did not receive community support , n or does it have the requisite operating authority from either the Dep artment or the Federal Aviation Administration. Thus, we will not consider Sovereign’s proposal further.

Sun Air proposed serving Athens with 22 weekly nonstop round trips to Atlanta. However, their proposal states that their bid is contingent upon them being awarded the upcoming EAS contract at Macon, GA, as well as “confirmation of effective interline e

- ticketing with Delta Air Lines.”

While Sun Air was successful in their bid for the Macon EAS contract, t o date, neither the Department nor the communi ty has received notice that it has reached an agreement with Delta

Airlines. Therefore, we will not move forward with consideration of Sun Air’s proposal.

We next examined the proposal of Air Choice One with service to Atlanta

. The community did
not sup port this service option

. Additionally, t he subsidy required by Air Choice One is the

2 Section 421 of the FAA Modernization and Reform Act of 2012 (Public Law No. 112

- 95) requires communities within 175 driving miles of a large or medium hub airport to maintain an average of ten passenger e nplanements per service day during the most recent fiscal year beginning after September 30, 2012, in order to retain eligibility for subsidized EAS, unless they receive a waiver from the Secretary. Communities in Alaska and Hawaii are exempt.3

highest of all of the proposals received. Based on these factors, we will not select Air Choice

One.

This leaves us with the two service proposals from SeaPort. Both options would be operated with single

- engine nine passenger Cessna Grand Caravan aircraft. The first o ption would provide twelve weekly nonstop round trips to Nashville for an annual subsidy of $1,553,093 in the first year and $1,630,410 in the second ye ar . The second option would provide twelve weekly nonstop round trips to Charlotte and six weekly nonstop roundtrips to Nashville. For this service option, SeaPort would require a first

- year subsidy of $ 1,616,887, and a second year subsidy of $1,697,420.

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, 3 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 i nception of the program. Although the subsidy require ments for both

SeaPort’s f irst and second service option s are similar

, we cannot justify the addition al expense of subsidizing service to a second hub . The core objective of the EAS program is to conne ct
smaller communities to the n ational transportation system, and SeaP ort’s two round trips a day to

Nashville fully meet that objective. In addition, that capacity level will easily accommodate Athens’s current passenger levels that are averaging about t hree enplanements a day.

Nonetheles s, we note that SeaP ort asked for only a modest subsidy increase to include additional

service to Charlotte six days a week, meaning that the carrier projects that the service could operate at nearly break

- even levels. Given that, and the community’s support for that service, we encourage the community to work diligently with the carrier to mitigate some of the risks of providing the additional round trip.

Therefore, after taking all of the above into careful considerat ion, w e have decided to select

SeaPort and their first service option to provide EAS at Athens for a new two

- year period beginning October 1, 201 2

. We find that the proposed service fully meets the needs of the community and best meets the statutory crite ria

.

We shall make this selection contingent upon the Department’s receiving properly executed

certifications from SeaPort that it is in compliance with the Department’s regulations regarding drug

- free workplaces and nondiscrimination, as well as the regu lations governing lobbying

activities.

Recent Legislative Changes Which May Affect Future EAS Eligibility

The F ederal A viation A dministration (FAA) Modernization and Reform Act of 2012 (Public

Law No: 112

- 95) amended 49 U.S.C. § 41731 (a)(1)(B) to change th e definition of “eligible place” for the purpose of receiving EAS. The amendment states that to be eligible, a community must maintain an average of 10 enplanements or more per service day, as determined by the Secretary, during the most recent fiscal yea r beginning after September 30, 2012

. 4 The

3 Public La w 110

- 161

. 4 The Secretary also has authority to waive the 10 passenger requirement, on an annual basis, if the community can demonstrate that the reason the location averages fewer than 10 passengers per day is due to a temporary decline in enplanements. See 49 U.S.C. §41731(e).4

legislation exemp t s locations in Alaska and Hawaii and communities that are more than 175 driving miles from the neares t large or medium hub airport. As Athens is only about 72 miles from the Atlanta airport, the community must meet the 10

- enplanement

- a

- day threshold for EAS to continue after FY2013, barring a waiver from the Secretary

.

In the most recent fiscal year for which data are available, FY2011 (October 2010

- September 2011), Pacific Wings generated a to tal of 2,839 passengers (inbound and outbound) , or an average of 4.5 enplanements per day. 5 SeaPort and Athens must attract additional passengers, thus increasing enplanements to meet the 10 enplanements per day statutory requirement in order

for them to remain eligible to continue receiving EAS after FY2013.

In addition, Public Law 112

- 27, signed into law on August 5, 2011, amended the definition of “eligible place” for the purpose of receiving EAS. Among other things, the amendment states

that to be e ligible, a community must have had an average subsidy per passenger of less than $1,000 during the most recent fiscal year.

SeaPort and Athens should also be aware that the Department will continue to monitor Athens’ eligibility to receive EAS in light of these new requirements throughout the life of this contract. The Department may cancel this contract if enplanements remain below 10 per day during

FY2013.

Furthermore, Athens is subject to the $200 per passenger cap and should maximize traffic to

avoid possible termination from receiving subsidized EAS. 6 The De partment fully expects that

Athens and Silver will work together to ensure that the subsidy per passenger is below $200.

Carrier Fitness

49 U.S.C. § 41737(b) requires that we find an air carrier f it, willing, and able to provide reliable service before we may subsidize it to provide essential air service. Sea P ort is subject to the Department’s continuing fitness requirements, and no information has come to our attention that would cause us to ques tion 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 p roposed

here.

Service Transition We expect Pacific Wings and SeaPort to work together to make a smooth transition at Athens. In that regard, before Pacific Wings suspend s their service they must notify any passengers holding

reservations for travel after the suspension date, assist those passengers in making alternate air transportation arrangements, or provide a refund of the ticket price, without penalty, if requested.

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

5 Source: Bureau of Transportation Statistics; Form 41, Schedule T

- 100. Daily averages are based on one

- half of the O&D passengers, divided by 313 service days (314 during leap years).

6 Congress first established the $200 ceiling under P.L. 101

- 164 for fiscal year 1990, and reestablished it in fiscal years 1994

- 1999. The ceiling was made permanent by P.L. 106

- 69, the Department of Transportation and Related Agencies Appropriations Act of 2000. The Department is prohibited from payi ng subsidy for EAS at any community where the per

- passenger rate exceeds $200, unless the community is greater than 210 miles from the nearest large or

medium hub.5

ACCORDINGLY

,

1. The Department selects SeaPort Airlines, Inc. to provide EAS at Athens

, Georgia , a nd establishes the subsidy rate , as detailed in Appendix C , for the two

- year period beginning

October 1, 20 1 2 ;

2

. The Department finds that SeaPort Airlines, Inc. co ntinues to be fit, willing and able to
operate as a commuter air carrier and capable of providing reliable EAS at Athens , Georgia ;

3

. We direct SeaPort Airlines, Inc. to retain all books, records, and other source and summary documentation to support cla ims 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 issuance 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 O rder;

4

. Docket DOT

- OST

- 2002

- 11348 will remain open until further order of the Department; and

5

. The Depart ment will serve a copy of this O rder on the m ayor and airport manager of Athens

, Pacific Wings

, SeaPort, Air Choice One, Sovereign, an d Sun Air.

By:

SUSAN L. KURLAND Assistant Secretary for Aviation

and International Affairs

(SEAL)

An electronic version of this document is available on line at www.regulations.govAppendix A



### Area MapAppendix BAppen dix C

SeaPort Airlines, Inc. Essential Air Service to be Provided to Athens, Georgia, Docket: DOT

- OST

- 2002

- 11348

Effective Period : October 1, 2012, through September 30, 2014.

Scheduled Service : 12 weekly nonstop round trips to Nashville.

A ircraft : Single

- Engine Piston

– Cessna Grand Caravan.

Year 1 Year 2 Annual Subsidy: 1 $1,553,093 $1,630,410 Annual Flights: 2 1,236 1,236 Rate per Flight: 3 $1,257 $1,3 20 Weekly Ceiling: 4 $30,157 $31, 680

Note: The carrier understands that it may forfe it 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

appro val. 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 cancella tions, 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 ensur ed 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 cessati on. 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.

1 See Appendix B.

2 12 round trips per week x two directions x 52 weeks = 1,248. Applying a 99% completion factor results in 1,236.

3 Annual subsidy divided by annual flights.

4 Rate per flight x 12 weekly round trips x two directions.Appendix C

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 l iability 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.