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May4, 2012 

Mr. Dennis DeVany 

Chief, Essential Air Service Division 

Office of Aviation Analysis 

Department of Transportation 

1200 New Jersey Avenue SE, 

Washington, D.C. 20590 

Reference; DOT-OST-2008-0209, 2001-10685, 2009-0305, 2000-7856 

COUNCIL MEMBERS: 

JA.IAES HOlLAND 

,JERRY KNiGHT 

ALLEN NOLES 

dOE PA.MP:NTO 

NEAL VV!LL!S 

Greenville, MS, Laurel/Hattiesburg, MS, Tupelo, MS, and Muscle Shoals, AL, EAS 

Dear Dennis, 

This letter is the joint response of the Cities of Greenville, MS, Laurel/Hattiesburg, MS, Tupelo, MS and 

Muscle Shoals/Florence/Sheffield, AL, to the Department's request for community comments in the 

matter of the Cities Essential Air Service and air carrier EAS bids received on April10, 2012. 

The Cities wish to begin their comments by thanking the Department for its patience in allowing EAS 

bidding to extend to four rounds. Given the extra time, the Cities were finally able, in the fourth round, 

to recruit an adequate replacement carrier, equipment and route proposal. The Cities spent a great deal 

of time, work and money on recruiting adequate replacement air service and this work has finally been 

rewarded. 

Our Endorsement: 

The Cities unanimously and without reservation endorse Silver Airways as our replacement carrier. 

Silver proposes to operate service from all four cities to Atlanta, the largest airline hub in the world, 

using 34-seat SF-340 turboprop aircraft that have been a mainstay of small community air service for 

many years. Silver also has a complete set of Ticket and Bag Agreements with all major airlines and 

extensive and successful experience in EAS service (13 current EAS contracts). Finally, Silver is, at this 

writing, close to signing an enhanced interline agreement with Delta Air Lines. Delta is the largest carrier 

at Atlanta and the dominant airline brand across Mississippi and Alabama. The enhanced interline 

agreement will be similar to the one between Delta and Great Lakes Airlines. That agreement is 

facilitating a smooth transition between Delta and Great Lakes at nine EAS cities in the upper Midwest. 

The agreement includes display of the replacement carrier's flights on Delta.com and a variety of other 

business partnership elements. 

OFFICE BOX 2624 • MUSCLE SHOALS. ALABAMA 35662 • (256) • FAX (256) 386-9201 
Specifically, the Cities endorse Silver Airways Option 1, providing for 24 weekly nonstop flights between 

Atlanta and Hattiesburg and between Atlanta and Muscle Shoals, plus 36 weekly flights on a paired 

routing between Greenville, Tupelo and Atlanta. The total annual subsidy requirement for this proposal 

is $12,613,827. 

Silver has associated Option 1 with an EAS proposal for service from Atlanta to Greenbrier/White 

Sulphur Springs (Docket DOT-OST-2003-15553). While peripheral to the combined service patterns of 

the Cities, to the extent this additional route is necessary for Silver Airways to economically perform its 

proposed services at the Cities, the Cities fully support and endorse Silver Airways service at Greenbrier. 

Other Bids: 

Multi-Aero, Inc., dba AirChoiceOne, submitted a six option bid to provide EAS service at the Cities. 

While the Cities appreciate the interest of AirChoiceOne in providing EAS service at our airports, we 

reject all carrier bids as inadequate on multiple counts. 

General Comments Regarding AirChoiceOne and Its EAS Bids: 

)i- None of the carrier bids break out a traffic forecast for each city, rather each offers a projection 

of total passengers for the total (two-city or four-city) operation. This makes it impossible for 

each individual City to understand the carrier's anticipated traffic and load factor by city. 

)i- Aircraft seating capacity on several bids is unclear. We assume the Caravan bid (option 2) to be 

with a nine passenger aircraft. There is no clarification as to aircraft size on the Navajo bids, 

although the ASM totals for one of those bids are 77.77% of the Caravan bid for the same 

routings, thus we assume the Navajo is a seven passenger aircraft (7 divided by 9 is 77. 77%). 

)i- The bids involving a Jetstream aircraft do not clarify if a J31 or J32 type is envisioned. There is a 

huge difference in payload and reliability (and lease or ownership costs) between the two 

variations. 

)i- The carrier's Jetstream bids, regardless of variation, assume the carrier will gain a Part 121 air 

carrier operating certificate (18 passenger capacity) within 12 months of initial operations under 

a Part 135 certificate (8 passenger capacity). It is our understanding that gaining a Part 121 

certification is a significant undertaking, requiring significant capital and investment in personnel 

and equipment in order to demonstrate to the FAA the ability to operate under the heightened 

standards of Part 121. 

)i- The carrier states in its "Market Growth Strategy- Connectivity" statement (page 3 of its bid 

document) that it is working to secure interline ticket and bag (lET) agreements with major 

airlines, including Delta. The carrier offers no firm commitments or timeline from any network 

carrier to enter into an lET. This is of great concern to the Cities in that an lET is essential for any 

Delta replacement service to have a chance to generate traffic. Without appropriate lETs all the 

AirChoiceOne options amount to aircraft (of three different types) flying around empty because 

they lack the fundamental mechanisms of connectivity to Delta or any other airline at Memphis 

or Atlanta (Option 5). 
'Y The Department apparently shares our concerns about the carrier's lack of lET. In Order 2011-

12-17 the Department awarded AirChoiceOne a new EAS term at Burlington and Decatur, but 

for only one year (the carrier bid two years or four years), with a proviso that the carrier must 

"fully implement an electronic ticketing and baggage agreement with a major airline with a hub 

operation at Chicago O'Hare and/or St. Louis by January 31, 2013." The Department also 

recently rejected a AirChoiceOne Navajo bid at Alpena, Michigan, with a lack of lET apparently a 

consideration in that decision. 

>- The carrier's "estimated flight operations" schedule examples in each Option cause us concern. 

Delta is the dominant carrier at Memphis and the carrier operates three distinct banks of flights 

during the day. The representative schedules of the carrier do not appear to match up with 

these Delta banks in any consistent way. Given that the carrier is bidding four trips to Memphis 

from each city and there are only three Delta banks to connect to it is essential that 

considerable attention be paid to the detail of schedule timing. There appears to be little 

attention to this detail in the carrier's representative schedules. 

? Building on that concern, a review of T100 block time data for the Delta Connection Mesaba 

SF340 services between each city and Memphis during 2010 (different periods in the case of 

Muscle Shoals) indicates actual block times for that fast turboprop that are significantly greater 

than what the AirChoiceOne appears to expect to accomplish with much slower Caravan, Navajo 

and Jetstream aircraft. 

For some reason AirChoiceOne believes its relatively slow Caravan, Navajo and Jetstream 

aircraft will fly the Greenville, Muscle Shoals and Tupelo routes in significantly less time than the 

much faster Mesaba SF340s aircraft did. At Hattiesburg the carrier appears to believe its much 

slower aircraft will cover 250 miles to Memphis in just a slightly longer block time. This not only 

suggests a lack of attention to detail in preparing the bids, it also calls into question the carrier's 

cost estimates since many costs are based on block hours and the carrier appears to have 

underestimated the block hours actually needed to operate its various proposals. 

BLOCK TIME COMPARISION: MEMPHIS & ATLANTA ROUTES 

BlkTime ACO Bid Block Times 

Route Distance Period XJ SF340 Caravan Navajo Jetstream 

MEM/ 

GLH 122 2010 :52 :45 :45 :45 

PIB 250 2010 1:22 1:40 1:40 1:30 

TUP 88 2010 :45 :30 :30 :30 

MSL 134 2008-2009 1:03 :40 :40 :40 

An/ 

MSL 198 2009-2010 1:18 1:00 

Source: XJ block times per DOTTlOO, ACO block times per bid document 
Y AirChoiceOne currently offers service at Burlington, Iowa, Decatur, Illinois and Jonesboro, 

Arkansas, all with EAS subsidy. All three markets are served with Caravan equipment while the 

carrier appears to have one Navajo on its Part 135 certificate. Current EAS service at Burlington 

and Decatur is subject to the Department's concerns (noted above) about the carrier's lack of 

lET agreements, with a deadline for some sort of carrier progress on gaining lET agreements by 

January 2013. Furthermore, the carrier faces another challenge in retaining its current subsidy at 

Jonesboro in that the service must show progress in generating traffic sufficient to keep 

subsidies under $200 per passenger. Based on the traffic history of Jonesboro and the carrier's 

subsidy amount, this appears nearly impossible. Thus the carrier's entire existing route system 

appears to be subject to re-bid or subsidy termination by early 2013, only eight months from 

now. 

Y The carrier's limited fleet of three Caravans and one Navajo is in striking contrast to the fleet 

size needed to operate proposed services at all four of the Cities. We estimate, given the age 

and mechanical nature of the Navajo and Jetstream aircraft types, that the carrier would have to 

acquire and provision for parts and maintenance for six aircraft (four lines of flying and two 

spares) in order to reliably operate the four new markets. This also means that pilots and 

mechanics sufficient to staff that number of routes, flights and aircraft would have to be hired, 

trained and placed into line service. Given the carrier's small scope of current operations, which 

are almost exclusively with the Caravan, the ability of the carrier to promptly begin service and 

replace Delta with reliable service is open to question. Furthermore, we are to then believe in 

carrier options 3, 4, S and 6 that the carrier will not only achieve all of that dramatic expansion 

in a prompt manner, but will follow it up with the rapid achieving of a FAA Part 121 Operating 

Certificate. We also note that at this time there does not appear that a single Piper Navajo or 

Jetstream is in scheduled air service anywhere in the lower 48. 

Comments on Each Specific AirChoiceOne Bid: 

Option 1 

Inaccurate Block Times- As is detailed on the previous page, the carrier is assuming exceptional block 

time performance from its aircraft, achieving block times to and from Memphis that are measurably 

faster than those documented in DOT TlOO data for Mesaba SF340s in recent years. On the Greenville 

route the carrier suggests it will operate 7 minutes faster per flight than Mesaba did (56 minutes per day 

faster), at Tupelo 15 minutes per flight faster (120 minutes per day faster), at Muscle Shoals 23 minutes 

faster (184 minutes per day faster). 

Even if the Navajo could perform the services at the same block speeds the SF340 has historically 

demonstrated, and somehow only be 18 minutes slower on the long 250 mile route from Hattiesburg to 

Memphis, this would mean about six block hours per day additional flying, above and beyond what the 

carrier has projected in Option 1. 

Six additional block hours per day is roughly 1,800 additional block hours per year added to the Option 1 

cost structure. At the $988 per block hour in cost the carrier has projected for the Navajo in Option 1 

this equates to some $1,778,400 in added cost, which would move the carrier's 5% profit of $415,562 to 

an annual loss of over $1,300,000. 
Extremely Optimistic load Factors -While the carrier has not detailed traffic and revenue by market in 

Option 1 it has projected 42,500 annual passengers or 4.33 per flight on 9,811 annual segments. This 

equates to a 61.9% load factor on a 7 passenger Navajo. 

A review of actual AirChoiceOne load factors using 9 passenger Caravan aircraft on its existing mature 

Decatur and Burlington routes shows that in the first year of service on these routes (2010) the carrier 

achieved a 24.1% load factor with the best performing route achieving a 38.2% load factor. Even in the 

second year of service only one of the routes achieves a load factor above 60% and that is a route to 

Chicago ORO. 

ACO LOAD FACTORS 2010/2011 

Load Factor 

Route 2010 2011 Period 

ORDBRL 38.2% 77.2% 59.8% 

ORO DEC 20.1% 59.8% 41.2% 

SnBRL 25.4% 56.8% 42.5% 

snoec 14.4% 36.0% 25.8% 

System 24.1% 58.2% 42.5% 

Memphis is not Chicago ORO. It is actually less a connecting hub than St. louis for a carrier without a 

network code or even lET since it lacks the fare options and competition generated by large scale lCC 

operations. 

While Memphis does have a declining Delta hub (150 daily departures to 58 cities), St. louis has over 90 

daily departures by Southwest Airlines, its largest carrier, to 31 cities. 

Memphis generated just over 3 million local 0&0 in 2011 at an average domestic fare of $219. St. louis 

generated over 9.5 million O&D at an average fare of $158. 

The very high average fare paid at Memphis does not bode well for a sum of two locals pricing strategy 

such as AirChoiceOne proposes to employ at Memphis. 

Thus, based on both the carrier's actual experience on its mature route system and the pricing 

environment at Memphis in comparison to St. louis, the carrier's forecast load factor of 61.9% using 

Navajo aircraft at Memphis operating four round trip daily patterns into a three bank Delta hub is at 

best, wildly optimistic. 

The carrier projected a Memphis system average fare of $64.36 with 42,500 0&0 generating $2.735 

million in annual revenue. A more realistic load factor of 40% would generate 27,471 annual 0&0. Even 

given the carrier's high average fare assumption (into a high fare hub) this would reduce carrier revenue 

from $2.735 million to $1.768 million, a loss of nearly a million dollars.in annual revenue. 

Ability to Scale Up Operations and Make a Profit- We have already noted that, given the age and 

mechanical nature of the Piper Navajo, we believe the carrier would need six to operate Option 1. The 

carrier has one Navajo in operation. Acquiring five additional aircraft and outfitting same with spares 

plus the hiring of requisite pilot and mechanic staff will require a large capital investment by the carrier. 
At the same time we believe there is a clear underestimation of cost of operation (due to block time 

miscalculations) totaling nearly $1.8 million and a clear overestimation of traffic and revenue totaling 

nearly $1.0 million. 

Thus, on top of a perhaps insurmountable capital expenditure in order to achieve the scale needed to 

operate Option 1, we believe that this small carrier will encounter a $2.8 million dollar gap between its 

bid cost and revenue assumptions and its financial reality in attempting to begin Option 1 service. 

Furthermore, like all carrier options, Option !lacks lET. The carrier has no timeline for implementation 

and the Department itself is concerned enough about this to hold existing carrier EAS awards on a short 

leash to January 2013. 

Option 1 should be rejected by the Department as unrealistic. Indeed, award of Option 1 to the carrier 

would likely result in some combination of a failure to start up, carrier financial difficulties during startup 

or carrier filing for additional subsidy within a year of startup. 

Option 2 

Option 2 is rejected by the Cities due to the proposed use of single engine aircraft. 

Option 3 and Option 4 

Option 3 is a Memphis service bid for Greenville and Hattiesburg using Jetstream aircraft with an 

assumed year one of Part 135 operation with eight passenger seats and an assumed year two and 

beyond Part 121 operation with 18 passenger seats. 

Option 4 is a Memphis service bid for Tupelo and Muscle Shoals using Jetstream aircraft and the same 

Part 135 start and Part 121 evolution as in Option 3. 

Taken together, the two Options total $9.8 million in annual subsidy, only $700,000 less in subsidy than 

Silver Airways Option 2. 

Taken together, the combined Option 3/4 calls for an amazing 49,950 annual O&D during year one 

(eight passenger capacity) and a 64% load factor. Once Part 121 is achieved annual passenger totals are 

forecast to grow to an even more amazing 63,000 O&D. While we appreciate the carrier's faith in our 

markets, we are deeply concerned that the carrier's product will not be embraced to that extent. 

Our comments on Option 1 regarding the practical passenger generating ability of an airline that lacks 

lET and uses a sum of locals pricing strategy at a high air fare hub like Memphis apply here even more so 

than they do in regard to Option 1. 

Our comments on Option 1 regarding the carrier's ability to acquire six Jetstream aircraft, the necessary 

maintenance housing and spares, and the needed pilots and mechanics also stand in regard to Option 

3/4, only more so. Furthermore, at least with the Navajo, the carrier has actual operating experience 

with the aircraft type. The Jetstream would be totally new to the carrier's operational team and would 

involve supporting a new turbine engine type with which the carrier has no experience. 
Our comments in Option 1 regarding inaccurate block times also apply to Option 3/4. While the 

Jetstream is a faster aircraft than a Caravan or Navajo, it is not as fast as a SF340, thus there is some 

significant error in the carrier's estimate of total block hours needed to operate the proposed service 

pattern. 

Combining a clear overestimation of traffic and revenue with an underestimation of operating costs due 

to block time estimate errors with the huge financial commitment required by a small company to 

acquire six Jetstreams and necessary spares and adequate operational staff and then operate them 

under Part 135, while in the same timeframe acquiring Part 121 certification strains credibility. 

Option 3 and Option 4, either alone or combined, should be rejected by the Department as unrealistic 

on multiple counts. The carrier needs to acquire a Part 121 certification and operate Jetstream aircraft 

before it boldly proposes to essentially double the size of its operation while adding four new markets, a 

new hub, a new aircraft type and a Part 121 certification, all in a short timeframe. 

Option 5 

Option 5 proposes Tupelo to Memphis service and Muscle Shoals to Atlanta service, all with Jetstream 

aircraft in the Part 135 year one, Part 121 thereafter scenario already addressed in comments on Option 

3/4. The bid becomes confusing in that in year two and beyond (with Part 121) the bid becomes a dual 

hub bid with Tupelo having one stop service via Muscle Shoals to Atlanta and Muscle Shoals one stop 

service to Memphis via Tupelo. 

The bid document describes the service as 24 round trips per week in year one and that is illustrated in 

the schedule and borne out in the year one statistics. 

However, the year two and beyond sheets describe an 18 round trip per week plan and have statistics 

for such a plan. The schedule plan for year two and beyond shows a four round trip pattern at Atlanta 

and at Memphis plus the four daily tag flights linking Tupelo and Muscle Shoals. Thus the schedule plan 

for year two and beyond of Option 5 does not match the projected operating statistics. 

The carrier's block time between Muscle Shoals and Atlanta is listed as one hour while Mesaba's faster 

SF340s recorded a 78 minute block on the same route in recent years. This implies that every Jetstream 

operation will incur perhaps 20 additional block minutes. On an annual basis this is 800 additional block 

hours in year one (eight seat operation and four trips per day) and 600 additional block hours in year 

two and beyond (18 seat operation and three trips per day). 

The carrier's block time between Tupelo and Memphis is listed as 30 minutes whereas the Mesaba 

SF340s required 45 minutes. This means 600 additional block hours in year one and perhaps 450 

additional block hours in year two and beyond, assuming the Jetstream can accomplish the operation 

with the same speed as the SF340. 

The carrier assumes a 68.9% load factor in year one. Given the disparity between the illustrated 

schedule and the operational statistics plus the lack of a breakdown of traffic by market or city pair it is 

impossible to estimate the carrier's load factor for year two and beyond. 
For all the reasons previously noted related to Jetstream bids Option 5 should be rejected by the 

Department. Beyond that, the year two forecast of Option 5 does not match the illustrative schedule 

and it is not clear what exactly the carrier is proposing to operate in year two and beyond. One further 

note is that the carrier appears to assume access to Atlanta can be gained at reasonable cost for three 

or four daily Jetstream flights. Other carriers have advised the Cities that gaining reasonably priced 

access to Atlanta is difficult, if not impossible, especially if the scale of operation is only three or four 

daily trips. 

Option 6 

Option 6 proposes Tupelo and Muscle Shoals service to Memphis with a Navajo the first year and a 

Jetstream in years two and beyond. 

As is the case with previous Options, block times appear to be significantly underestimated and traffic 

forecasts can be described as bold, given the high average fares at Memphis and the sum of two locals 

pricing strategy. 

Previous comments about lack of lET and the ability of the carrier to expand, add a new aircraft type and 

transition to Part 121 apply here as well. 

Summary 

The Cities again wish to thank the Department for granting us four rounds of bidding. That extra time 

gave us the chance, working together, to successfully recruit an adequate replacement air service in the 

form of Silver Airways. 

We repeat our endorsement of that carrier as our replacement. We recommend Silver Airways and 

Option 1 for our replacement carrier and service. 

To the extent that Silver Airways may require award of the Atlanta- Greenbrier EAS designation in order 

to have the economic scope to provide the services of Option 1 or Option 2 at our cities, we endorse 

Silver for Greenbrier service as outlined in their proposals. 

We appreciate the interest of AirChoiceOne in our markets however we reject all AirChoiceOne bids as 

inadequate for the numerous reasons listed in this letter. 

We urge the Department to promptly select Silver Airways as our replacement carrier to allow that 

carrier to begin the replacement process and to ensure a smooth transition during 2012. 

Best regards, 

~#25~ David H. Bradford 

Mayor