Order: 2014

- 8

- 19

Served: August 27, 2014



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation on the 27th day of August, 20 1 4

Essential Air Service at

MUSCLE SHOALS, ALABAMA

GREENVILLE , MISSISSIPPI

TUPELO , MISSISSIPPI DOCKET DOT

- OST

- 200 0

- 785 6

DOCKET DOT

- OST

- 2008

- 0 209

DOCKET DOT

- OST

- 200 9

- 0305

under 49 U.S.C. 41731 et seq.



### ORDER SELECTING AIR CARRIER AND DEFERRING ACTION

Summary By th is O rder, the Department is 1) selecting SeaPort Airlines, Inc. ( SeaPort )

, to provide

Essential Ai r Service (EAS) at Tupelo , Mississippi

, using 9

- passenger Cessna Grand

Caravan (Cessna) aircraft with 18 nonstop round trips per week to Nashville International Airport (BNA ) and 12 nonstop round trips per week to Memphis International Airport (MEM ) . The annual subsidy is $ 2,506,436 , f or a two

- year term from October 1, 2014, through September 30, 2016 ; 1 and 2) deferring action at Muscle Shoals, Alabama, and Greenville, Mississippi, until further Order from the Department.

Background By Order 2012

- 5

- 17 (May 22, 201 2) the Dep artment selected Silver Airwa ys (Silver) at Tupelo to provide 18 nonstop round trips per week to Hartsfield

- Jackson Atlant a International Airport (ATL ) using 34

- passenger Saab 340 aircraft for an annual subsidy of

1 Such subsidy is calculated and distributed on a fiscal year basis, subject to the availability of funds.- 2

-

$3,522,398. 2 On April 9, 2014, Silver filed a 90

- day notice of its intention to terminate

scheduled air service at Tupelo . As a result of this notification, the Department issued

Order 2014

- 4

- 24 prohibiting Silver from terminating service and requesting proposals fr om air carriers interested in providing EAS at the community for a new term. 3 In resp onse to that Order, four air carriers submitted proposals: Aerodyn amics, Inc. (ADI ), Multi

- Aero, Inc. d/b/a Air Choice One (Air Choice One), SeaPort , and Sun Air Express, LLC d/b/a Sun

Air International (Sun Air).

Each air carrier’s proposal and the community ’ s comments may be accessed online at www.regulations.gov by entering each community’s respective Docket number in the

sear ch block.

Special discussion abou t Muscle Shoals and Greenville

The FAA Modernization and Reform Act of 2012 amended 49 U.S.C. § 41731(a)(1)(B) to change the 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 year beginning after September 30, 2012. The legislation exempts locations in

Alaska and Hawaii and c ommunities that are more than 175 driving miles from the nearest large or medium hub airport

. 4 The Secretary also has the authority to waive the 10

- enplanement standard, on an annual basis, if the community can demonstrate that the

reason the location av erages fewer than 10 enplanements per day is due to a temporary decline in enplanements. 5

Order 2014

- 4

- 26, issued on April 24, 2014

, found that Greenville w as within 175 m iles of Memphis , a medium hub, and Muscle Sh oals was within 175 miles of Nashville , both averaged fewer than 10 enplanements per day in fiscal year 2013 and, thus, both communities’ EAS eligibility was tenta tively terminated by that Order

. That tentative decision was made final by Order 2014

- 6

- 6, issued June 24

, 2014, which also descri bed the waiver process and announced our intention n ot to terminate EAS subsidy during the

pro cessing of any waiver petitions. Both Muscle Shoals and Greenville filed their waiver petition s on July 23, 2014, and their long

- term status in the EAS program w ill not be known until the waiver process has concluded . Therefore, we will defer action on Muscle Shoals and Greenville. Any proposal that packages Muscle Shoals or Greenville will not

be considered.

Proposal of ADI

ADI submitted a proposal to serve Tupelo (as well as Laurel/Hattiesburg and Meridian) as an inseparable, “all

- or

- nothing” package

– meaning that their proposal to provide EAS is on the condition that they are awarded the EAS contract for all three communities. ADI

2 By Order 2012

- 5

- 17, the Department also selected Silver to provide EAS at Muscle Sh oals

, Gree nville, and Laurel/Hattiesburg. See Order 2014

- 7

- 12 re gard ing EAS at Laurel/Hattiesburg.

3 Silver also filed notice to terminate service at Muscle Shoa ls and Gre enville, and Order 2014

- 4

- 24 prohibited Silver from terminating service at those communities as well.

4 49 U.S.C. § 41731(c) & (d).

5 49 U.S.C. § 4 1731(e).- 3

-

proposed to provide Tupe lo with 12 nonstop round trips per week to Atlanta using 50

- passenger Embraer

- 145 aircraft (EMB145) for an annual subsidy of $3,831,108. 6

Proposal of Air Choice One Air Choice One submitted proposals that were combined packages and stand

- alone options. The combined packages included Muscle Shoals and Greenville ; however, since

action at those two communities is being deferred at this time, we will only address the

stand

- alone option s at Tupelo

.

The chart below summarizes the main components of the airl ine’s stand

- alone options for Tupelo.

Options Annual Subsidy (2

- year contract, subsidy for years

1 & 2) Annual Subsidy (4

- year contract, subsidy for years

3 &4) Aircraft Seats Stops Weekly Frequency Hub

T1 $2,902,207 $2,873,185 Cessna

Caravan or Piper Navajo 8/9 0 30 MEM

T2 $3,536,182 $3,500,820 Cessna

Caravan or Piper Navajo 8/9 0 12/18 BNA /

MEM

T3 $3,302 ,882 $3,269,853 Cessna

Caravan or Piper Navajo 8/9 0 36 MEM

T4 $3,906,312 $3,867,249 Cessna

Caravan or Piper Navajo 8/9 0 18/18 BNA /

MEM

Proposal of SeaPort

SeaPort proposed to provide 18 nonstop round trips per week to BNA and 12 nonstop round trips per week to MEM (36 round trips per week in total) using 9

- passenger Cessna aircraft for an annual subsidy of $2,506,436.

6 Laurel/Hattiesburg and Meridian supported a proposal from ExpressJet Airlines, Inc. (ExpressJet) and by

Order 2014

- 7

- 12 the Department selected ExpressJet to provide EAS at both communities. Since ADI’s proposal was contingent on being selected at all three communities, it was eliminated from consideration in

this air carrier selection case.- 4

-

Proposal of Sun Air Sun Air proposed 31 nonstop ro und trips per week to MEM using 8

- passenger Piper

Chieftain aircraft for an annual subsidy $2,871,083

.

Community Comments On June 3, 2014, the Department solicited comments from Tupelo regarding this air carrier selection case. We received a letter from Mr. Fred Cook, Chair of the Tupelo Airport Authority, supporting SeaPort’s proposal. Mr. Cook stated t hat SeaPort’s low subsidy

request

, high level of frequency to two hubs, and the community’s confidence the airline will generate traffic surpassing 10 enplanements per day and keep the s ubsidy per passenger below $200, as the primary reasons for the commun ity’s support for the air carrier’s proposal over the competing bids.

Decision After carefully reviewing each airline’s proposal and the co mmunity’s comments, the Department has decided to select SeaPort to provide EAS at Tupelo . In addition to the

commu nity supporting SeaPort’s proposal, the airline’s subsidy request was less than the competing air carrier bids, and is approximately $1M less than the annual subsidy the Department currently pays to the inc umbent carrier. SeaPort also provid es reliable service

at several communities in the EAS program.

This decision is contingent upon the Department’s receiving properly executed certifications from the air carrier that they are in compliance with the Department’s regulations regarding drug

- fre e workplaces and nondiscrimination, as well as the regulations concerning lobbying activities. 7

Legislative Changes That May Affect Future EAS Eligibility

As mentioned above, Public Law No. 112

- 95 amended 49 U.S.C. §41731(a)(1)(B) to change the 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 year beginning after September 30, 2012. 8 The legislation exempts locations in Alaska and Hawaii and communities that are more than 175 driving miles from the nearest large or medium hub airport. Additionally, the Department of Transportation and Related Agencies Approp riations Act, 2000, prohibits the Department from subsidizing EAS to communities located within the 48 contiguous States receiving per passenger subsidy amounts exceeding $200, unless the communities are located more than 210 miles from the nearest large o r medium hub airport. As Tupelo is within 175 miles of a large or medium hub airport (MEM) and

, thus

, is also within 210 miles of a large or medium hub

7 The certifications are available online under “Reports and Publications” at http://www.dot.gov/policy/aviation

- policy/small

- community

- rural

- air

- service/essential

- air

- service

8 The Secretary also has authority to waive the 10 passenger requirement, on an annual basis, if the community can demonst rate that the reason the location averages fewer than 10 passengers per day is due to a temporary decline in enplanements and to waive the $200 subsidy

- per

- passenger limit. See 49 U.S.C. §41731(e).- 5

-

(MEM), the community must meet the 10

- enplanement

- a

- day threshold and not exceed the $200 subsidy per passenger cap for EAS to continue, barring a waiver from the Secretary. 9

Public Law 112

- 27 , signed into law on August 5, 2011 , further amended the definition of “eligible pl ace” for the purpose of receiving EAS. 10 The amendment, among other things, states that to be eligible, a community must have had an average subsidy per passenger of less than $1,000 during the most recent fiscal year, as determined by the Secretary of

Tra nsportation.

SeaPort and Tupelo should also be aware that the Department wil l continue to monitor eligibility to receive EAS in light of these requirements throughout the life of the EAS

contract. The Department may cancel a contract for any community re ce iving EAS if enplanements are below 10 per day during FY2014 and any subsequent fiscal year

.

The Department highly encourages SeaPort and Tupelo to work together to remain in compliance with the statute.

Service Transition We expect Silver and SeaPort to work together to make a smooth transition at both communities. In that regard, before Silver suspends its service, we expect it to notify all passengers holding reservations for travel after the suspension date, to assist those passengers in making al ternate air transportation arrangements, or to provide a refund of the ticket price, without penalty, if requested.

Carrier Fitness

49 U.S.C. §§ 41737(b) and 41738 require that we find an air carrier fit, willing, and able to provide reliable service be fore we may subsidize it to provide EAS

. SeaPort is subject to the Department’s continuing fitness requirements, and no information has come to our

attention that would cause us to question the air 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 findin gs. We therefore conclude that SeaPort is reliable and fit to conduct the operations proposed here.

This Order is issued under authority delegat ed in 49 CFR Part 1

. 25a(b)

.

9 On May 1, 2014, a Notice of Proposed Enforcement Policy on the $200 per passenger subsidy cap was published in the Federal Register (Volume 79, Issue 84). It outlined the Department’s proposed policy on this issue, which would use traffic data from October 1, 2014, through September 30, 2015, to measure compl iance. The Department has solicited public comments on the policy and the comment period closed

June 30, 2014. Refer to www.regulations.gov and search “DOT

- OST

- 2014

- 0061” for more information.

10 See 49 U.S.C. § 41731.- 6

-

ACCORDINGLY,

1

. We select SeaPort Airlines, Inc. to provide Essential Air S ervice at Tupelo , Mississippi,

and establish the annual subsidy rate s as described in Appendix C ;

2

. We direct SeaPort Airlines, Inc., 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 d ocumentation 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 ca rrier may forfeit its compensation for any claim that is not supported under the terms of this Order ;

3 . We f i nd that SeaPort Airlines, Inc., is fit, willing and able to operate as a c ertificated air

carrie r
, and capable of providing reliable Essential A ir S ervice at Tupelo , Mississippi;

4

. Th ese docket s will remain open pending further Department action ; and

5

. The Department will serve a copy of this O rder on the mayors of Muscle Shoals, Alabama, and Greenville and Tupelo , Mississippi; the airport managers of Mid

- Delta Regional Airport (Greenville), Tupelo Regional Airport, and Northwest Alabama Regional Airport (Muscle Shoals), Aerodynamics, Inc., SeaPort Airlines, Inc.; and Sun Air Express,

LLC d/b/a Sun Air Internationa l.

B y:

SUSAN L. KURLAND Assistant Secretary for

Aviation and International Affairs

(SEAL)

An electronic version of this document is ava ilable at www.regulations.govA ppendix A



## AREA MAP

Maps generated by the Great Circle Mapper

- copyright © Karl L. Swartz

.Appendix B



### SeaPort Proposal for EAS at Tupelo , MSAppendix C

SeaPort Airlines, Inc.

Essential Air Service to be Provided at Tupelo , Mississippi

DOT

- OST

- 2009

- 0305

Annual Subsidy: $2,506,436

Effective Period : October 1, 2014

, through September 30, 2016

Scheduled Service :

• 18 nonstop round trips per week to Nash ville International Airport (BNA)

• 1 2 nonstop round trips per week to Memphis International Airport (MEM)

Aircraft : 9

- p assenger C essna Grand Caravan Rate per Eligible Flight: $ 811 1
Weekly Ceiling : $ 48, 660 2

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 significan t
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 comple ted, 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 per iod, 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 app roval 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 pro vided for under this Order, then, at the end of the period for which the department does make payments in the stipulated service levels, the carrier may cease to provide service to that specific location without regards to any requirement for notice of suc h 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 contract are subject to, and incor porate 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 may not be available for pe rformance under this O rder beyond September 30, 2014

. The Government’s obligat ion for performance under this O rder beyond September 30, 2014

, is subject to the availability of 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 u nder this order beyond September 30, 2014 , until funds are made available to the Department for performance. If sufficient funds are

not made available for performance beyon d September 30, 2014 , the Department will provide notice in writing to the carrier.

All claims for payment, including any amended claims, must be submitted within 90 days of the last day of the month for which compensation is being claimed. For example, claims for service provided in July must be filed by

October 31; August claims must be submitted by November 30, and so on.

1 A nnual compensation of $ 2,506,436 divide d by 3,089 annual departures (60 wee kly departures x 52 weeks x 99 percent completion)

. 2 60 arrivals and depart ures per week multiplied by $ 811 per flight

.