### Order 2012

- 4

- 8 Served: April 5, 2012
UNITED STATES OF AMERICA
DEPARTMENT OF TRANSPORTATION


### OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation
on the 5 th of April, 2012

Essential Air Service at

INTERNATIONAL FALLS
, MINNESOTA

Under 49 U.S.C. 41731 et seq

. DOCKET DOT

- OST

- 20 0 9

- 0304

ORDER SELECTING CARRIER
S UMMARY By this Order

, the Department is selecting Great Lakes Aviation, Ltd. (Great Lakes), to provide
E ssential A ir S ervice (EAS) at International Falls

, Minnesota, for $993,247 annual subsidy

. T he
service is to consist of 1 8 nonstop round trips per week to Minneapolis (MSP) year round with

19

- seat Beech 1900 aircraft. 1

BACKGROUND On July 15, 2011, Mesaba Aviation, Inc., and Pinnacle Airlines, subsidiaries of Pinnacle Airlines Corporation, d/b/a Delta Connection (Delta)

, filed 90

- day notices of their intent to suspend their joint service at International Falls, Minnesota, effective October 13 , 2011

. 2 By Order 2011

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- 5

, September 13, 2011, we pr ohibited Delta from terminating service and requested proposals for replacement service by October 12, 2011, later extended to October 14 , 2011

. T he Order required that the level of service be consistent with what we were subsidizing at the time Delta
fil ed notice. Because Delta’s notice was triggered by Mesaba/Pinnacle ’s re placing its fleet of

s maller 34

- seat Saab 340 turboprops with 50

- seat regional jets , by Order 2011

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- 25,
December 29, 2011, w e reduced the required frequency to 12 round trips per week , and

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 total of 24 communities. This Order addresses only International Falls. We have selected (a) Great Lakes Aviation, Ltd., to replace Delta at Fort Dodge and Mason City, Iowa; Iron Mountain, Michigan; Brainerd and Thief River Falls, Minnesota; Devils Lake and Jame stown, North Dakota; and Watertown, South Dakota; (b) American Eagle at Sioux City and Waterloo, Iowa; and (c) SkyWest at Aberdeen, South Dakota; Bemidji, Minnesota; and Butte, Montana

. We are processing carrier

- selection proceedings at the remaining

comm unities. We will address the other communities in subsequent Orders.- 2

-

requested proposals

. We received timely

- filed proposals from two carriers

-- Great Lakes Aviation and Sovereign Air . On October 21 we requested comments from the community by November 21 on these proposals. We have received th ose comments, and the carrier

- selection issue is now ready for decision.

CARRIER PROPOSALS We received timely

- filed proposals from Great Lakes and from Sovereign Air. However, one of Sovereign Air ’s options is moot because it was presented as an inseparable package deal

. Specifically, Sovereign’s Option 1 was premised on the carrier ’s also being selected to provid e EAS

at Thief River Falls, Minnesota . However, b y Or der 2011

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- 30, November 23, 2011, we selected Great Lakes to provide EAS at Thief River Falls . Moreover, Sovereign does not have the required operating authority from either the FAA or the Department , and has no community support . Thus only Great Lakes’ proposal is viable.

Great Lakes proposed to provide 18 nonstop round trips per week to Minneapolis (MSP), with 19

- seat Beech 1900 aircraft. The carrier requests $993,247 annual subsidy for this service. In addition, the carrier indicates that it will provide additional lift during the summer peak season if no other carrier prov ides service.

COMMUNITY COMMENTS
On November 16 , 2011, w e re ceived comments from the Kooching Economic Development Authority ; on November 17 , 2011, from the Management Analysis and Development Division of
the S tate of Minnesota ; on November 18 , 2011, from the Chamber of Commerce ; on November 21, 2011, and again on January 30

, 2012, from the Mayor of International Falls ; on November 22 , 2011, from the Airport Commission; and on Novem b er 28 , 2011, from the Boise Paper C ompany

. In addition, on March 6, 2012, the EAS staff and Great Lakes met with a number of civic officials from International Falls, including Mayor Shawn Mason.

In its filing on November 21 , 2011, t he City of Internat i onal Falls endorsed the selection of Great
L akes as its EAS carrier but was concerned with three critical elements for its air service: sufficient summer capacity, reliable service, and appropriate scheduling.

“ We believe it is critical that whatever carrier is chosen for service at INL have th e capacity to increase summer opt ions as needed to accommodate the requirements of our local tourist economy, at least up the maximum seat allowance provided for under the EAS program....We are not asking for more seats than we need. We ask only that the United States Department of Transpo r t ation requires

– or at least allows for

– our selected carrier to provide the maximum 67 seats permitted, for the period from June through August... .Nearly half of our annual enplanements accrue during our short three months of summer. We cannot afford to lose 10 to 15 percent of that total for lack of just a few seats per day.”

On January 30, 2012, the City of International Falls indicated that

“Without commercial air service, our community and our region would suffer significant economic decline. Our summer tourism industry is the main support of our- 3

-

many small resorts and other business e s that work with them. They depend on the airport to b ring in their customers. Our cold Weather Test Industry relies on
commercial air service to move goods and people in and out of the airport

- based test
center. We benefit from the t r ade of our Canadian neighbors who cross the border to do
business and who provide nearly half of our annu al enplanements. Because of the extreme distances to other commercial airports, it is not practical or realistic to assume our local business climate could continue as is, let alone improve, if our own
commercial service is discontinued.”

The community leaders echoed their written statements at their meeting with the EAS staff, emphasizing in particular the need for increased capacity during the summer. Following that meeting, Great Lakes confirmed that it would “commit t o at least one round trip during summer peak travel being provided with our 30

- seat Brasilias. Great Lakes recognizes the need for additional capacity seasonally and will do so without requesting additional subsidy beyond that
of the rates established for our 19

- seat Beech 1900

- Ds.”

D ECISION
The sele ction of Great Lakes is straightforward: their proposal is the only one that can be selected, the proposed service and subsidy levels appear reasonable, and the community has fully
endorsed their selection.

The community’s main concern is that there be sufficient capacity to accommodate historical traffic during the peak summer season. Great Lakes’ pr oposal does not specify extra service during the peak season, and thus we cannot require it to provide that service. However, the carrier has since
indicated that it will provide extra lift during the summer by using a larger, 30

- seat Brasilia aircraft
in lieu of the 19

- seat Beech 1900s it proposed on at least one of it s subsidized flights for no additional subsidy

. 3

Carrier Transition We expect Great Lakes and Delta to work together to make a smooth transition at International
Falls . In that regard, before Delta suspends its service 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

pena lty, if requested. In this regard, the EAS staff will be working wit h Delta to establish a hold

in subsidy rate for its past

- period service to the community

.

CARRIER FITNESS
49 U.S.C. 41737(b) and 41738 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

. Great Lakes Aviation, Ltd, is subject to the Department’s continuing fitness requirements

. We contacted the Federal Aviation Administration, and it has raised no concerns that would negatively affect our fitnes s findings. The Department therefore concludes that the carrier remains fit to conduct the operations proposed here.

3 Under our rules, a carrier can substitute a larger aircraft for the one it proposed and be subsidized at the same rate
as that of the smaller aircraft

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-

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

ACCORDINGLY,

1. We select Great Lakes Aviation, Ltd., to provide Essential Air Service at International Falls,
Minnesota ;

2 . We set the final rate s of compensation for Great Lakes Aviation, Ltd., for the provision of
Essential Air Service at International Falls

, Minnesota

, as described in Appendix C ;

3 . We direct Gr eat Lakes Airlines, 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., continue s to be fit, willing and able to operate as a
commuter carrier and capable of providing reliable Essential Air Service at the these
communities ;

5. We will continue to require Mesaba/Pinnacle Airlines to provide EAS at International Falls until it is replaced by Great Lakes Aviation, Ltd. ;

6 . Th is docket will rema in open until further Order of the Department; and

7 . We will serve copies of this Order on the Mayor and Airport Manager of International Falls

, Minnesota

, Delta Airlines, Inc., Sovereign Air, and on Great Lakes Aviation, Ltd.

By:

Susan 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.govAppendix A

Nonstop Great Circle Miles to Minneapolis (MSP) RST, Rochester, 76 BRD, Brainerd, 114 DLH, Duluth, 144 HIB, Hibbing, 174 BJI, Bemidji, 199 FAR, Fargo, 223 INL, International Falls, 255 TVF, Thief River Falls, 261 GFK, Grand Forks, 284Appendix B

Great Lakes Aviation, Ltd., Proposal for Essential Air Service at
International Falls, Minnesota, Docket 2009-0304

Aircraft Beech 1900 D
Departures 1/ 1,840

Block Hours 2,454
Passengers 28,750

Passenger Revenue $3,235,813

Other Revenue $20,062

Total Revenue $3,255,875

Flying Operations $429,794

Fuel $1,222,302

Maintenance $601,152

Aircraft & Hull $365,710

Total Directs $2,618,958

Total Indirects $1,427,825

Total Operating $4,046,783

Profit $202,339

Economic Cost $4,249,122

Subsidy $993,247

1/ 18 round trips per week x 2 directions x 52 weeks x .98 completion x 313/312 = 1,840

Tentative Weekday Schedule

INL to MSP MSP to INL

6:30 to 7:45 10:32 to 11:57

12:12 to 1:27 2:15 to 3:40

3:55 to 5:10 7:45 to 9:10Appendix C

Delta Air Lines, Inc., Essential Air Service to be Provided to International Falls, Minnesota, Docket 200 9

- 0304

Effective Period : Start of Great Lakes’ Service at International Falls

, through the 24 th month thereafter.

Scheduled Service : 1 8 nonstop round trips per week to Minneapolis (MSP)

Aircraft Type : Beech 1900, 19 seats

Rate per Flight: $ 540 1

Weekly Ceiling : $ 19,440 2

Note: The carrier understands that it may forfeit its compensation for any flights that it does not operate in conformance wi th 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 e ligibility 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 Avia tion 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 co mplete 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 exten t 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 t o that specific location without regard to any requirement for notice of such cessation. Those adjustments in the levels of subsidy and/or service th at are mutually agreed to in writing by the Department and carrier do not constitute a total or partial re duction 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 n ot 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 Annual compensation of $ 993, 247 , divided by 1, 840 annual flights, calculated as follows: 18 round trips per week x 2 directions x 52 weeks x .98 completion x 313/312 = 1,840

. 2 36 flights per week x $ 540

.