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## ~**~** '**l.~··>--** ''.J 1 :..__.!;- US.Deportmentof Transportation OfficeoftheSecretary ofTransportation
The Honorable Bill Paxton City Hall 300 South 5th Street PO Box 2267 Paducah, KY 42002-2267 Dear MayorPaxton: Ti

.. l) -· 1200 NewJersey Avenue, SE Washington, DC 20590

September 2, 2011

As you know, SkyWest Airlines, Inc., d/b/a United Express (SkyWest), provides subsidized air service under the essential air service (EAS) program at Paducah. The Department's current contract with SkyWest at Paducah calls for an annual subsidy of $567,923 with fourteen nonstop round trips per week to Chicago O'Hare with 50-seat CRJ-200 aircraft, and it expires December 31, 2011. Inanticipation ofthe end ofthat contract, by Order 2011-8-10 the Department requested "bestand final" proposals to serve Paducah for a new, two-yearperiod, and we received timely-filed proposals from SkyWest, SovereignAir, Inc., and Multi-Aero, Inc., d/b/a Air Choice One (Air Choice One). My purpose in writing is to inform you ofthe results ofeach carrier's service and subsidy proposal and request your commentbefore we submit a recommendation onthe carrierselection issue to the Assistant Secretary for Aviation and International Affairs for decision. Copies ofeach carrier's full proposal may be accessed online through the Department's Dockets Management System at http://www.regulations.gov/by entering "DOT-OST 2009-0299" in the "enter Keyword or ID" field, so we will only summarize them here. Air Choice One Thecarrierproposes to provide a total offorty two (42) nonstop round trips per week to St. Louis, Missouri, for $2,239,605 annual subsidy. All service would be with 9-seat, single-engine, unpressurized, turboprop Cessna Caravan aircraft. We note that Paducah's EAS calls for service with 15-seat, twin-engine aircraft. Thus it is likely we would only select Air Choice One ifthe community waives those assurances. In that event, we would considerthat waiver effective onlyfor the two-year period ofthe Air Choice One's contract. Sovereign Air The carrierproposes to operate nineteen (19) nonstop round trips per week to Chicago O'Harefor $826,598 annual subsidy. All service would be with 30-seat Domier 328 regional-jet aircraft. The carrier notes that it is "currently in the process of acquiring its scheduled service authority and anticipates being able to start its Essential Air Serviceby December 15, 2011."

### - 2 - SkyWest 

### The carrierproposes to provide a total offourteen (14) nonstop round trips per week to Chicago O'Hare for $1,245,426 annual subsidy. All service would be with 50-seat CRJ-200 regional-jet aircraft. Please note that the average passengerfares shown in the carriers' proposals do not necessarily reflect the average local fares passengers would pay, butratherreflect the prorated portion ofthe total ticket price, e.g., the Paducah- Chicago portion ofa Paducah

- Chicago

- New York ticket that the carrier would realize.,.Also, the implicit average fare, as reflected in the carriers' subsidy calculations is net ofcertain charges such as federal transportation security fees, excise and ticket taxes, and passengerfacility charges. Ofcourse, carriers have the discretion to charge fares they deem appropriate, and the proposed passengerfares were developed for subsidyrate computationpurposes only. Each carrier would have to realize passengerfares comparable to the averages shown in its proposal in order to achieve break-even orprofitable operations even with subsidy. You should also note that any schedules submitted bythe carriers are illustrative only, and the carrier selected may make schedule changes to reflect changing conditions, e.g., to better meet shifting connecting bank times at the hub. The Department expects subsidized air carriers to maintain well-timed and well-spaced flights in orderto ensure full compensation. We know this matter is important to you and we will act as quickly as possible upon receipt of your letter. In orderto expeditethe case, please submit your comments by email to EAS@dot.gov and to Kevin.Adams@dot.gov, by October 3. Ifyou have any questions or do not wish to submit formal comments, please contact Kevin Adams at (202) 366-1047.

Enclosures Sincerely,

# ~~**5\~** Dennis J. DeVany Chief, Essential Air Service Division Office ofAviationAnalysis

cc: Airport Manager, SkyWest, AirChoice One, SovereignAirPaducah, Kentucky- Lambert St. Louis International Airport- Caravan Operation Revenues PAH-STL Revenues Other Revenues Total Operating Revenues
Direct Operating Expenses Flying Operations Fuel and Oil Maintenance Aircraft Leases Total Direct Marketing Indirect Total Operating Expenses Operating Loss Profit Element (5% total Oper. Exp.) Compensation Required Compensation per PAX Compensation per Departure $1,755,000.00 8,775.00 $1,763,775.00

$ 646,006.20

1,017'736.62

793,664.76 475,000.00 $2,932,407.58 186,475.50 693,860.00 $3,812,743.08 $2,048,968.08 190,637.16 $2,239,605.24 $82.95 $521.76 

## I ! # Passengers:

Average Fare: Departures: Block Hours: Revenue Passenger Miles: Available Seat Miles: 27,000 $65.00

4,292 3,691 3,915,000 5,586,235 Representative Schedule Departure Arrival PAH 6:00AM CT STL 7:00AM CT STL 7:30AM CT PAH 8:30AM CT PAH 9:00AM CT STL 10:00AM CT STL 10:15AM CT PAH 11:15 AM CT PAH 11:30AM CT STL 12:30 PM CT STL 1:00PM CT PAH 2:00PM CT PAH 2:15PM CT STL 3:15PM CT STL 3:30PM CT PAH 4:30PM CT PAH 4:45 PM CT STL 5:45 PM CT STL 6:00PM CT 

## I PAH 7:00PM CT PAH 7:15PM CT 

### I STL 8:15 PM CT STL 8:30PM CT PAH 9:30PM CT i 

## iPaducah Schedule Fit# Freq From 102 1234567 PAH 112 1234567 ORD 202 23456 PAH 212 23456 ORD 302 1234567 PAH 312 1234567 ORD TO ORD PAH ORD 

# .**~** PAH ORD PAH Dpt-Arr 6:40am-7:40am 8:40am-9:40am 10:40am11:40am 12:40pm-1:40pm 6:40pm-7:40pm 8:40pm-9:40pm

# -Aff~»-:>'~**~~5~ \9}~** **so\.Jeve~f\A**30-Seat Dornier328Jet Sovereign Air, Inc. Annual Compensation Requirement for Essential Air Service for Paducah

Aircraft Type Available Seats Per Departure Passengers Per Trip

Block Hours Departures Total Passengers Average Fare

Revenue Passenger Miles Available Seat Miles Passenger Revenue Other Rev. @ .6 of pax. Rev. %

Total Revenue Aircraft and Hull Insurance Fuel and Oil Flying Operations

Other Direct Costs Maintenance

Total Direct Costs Total Indirect Costs Total Operating Expenses Operating Loss Profit@ 5%

Completion Rate Load Factor 19 Round trips PerWeek

$165 one way

Annual Compensation Requirement 30-seats 30 19.5
1,916 1,916 37,347

14,688,575 22,589,640 $6,162,255

$308,113 $6,470,368

$220,000 $2,038,624 $1,116,939

$572,245 $1,272,517 $5,220,325 $1,729,166
$6,949,491

$479,123 $347,475 $826,598

97% 65%SkyWest Airlines Paducah, KV Essential Air Service Bid 8/31/2011

Number of round-trips per week Aircraft type Passenger Revenue Passengers Average fare Revenue Block Time Trip block time (minutes) Total scheduled block time Total completed block time RPMS Passengers Stage length

ASMs Scheduled departures Competed departures Stage length Available Seats

Revenue Direct operating expenses Flight attendant RPM related Departure related ASM related Total expenses Operating income (loss) 5% profit margin Subtotal Marketingassistance Subsidy requirement SkyWest effective rates per unit Cost pertrip Cost per passenger SkyWest cost per block hour Effective Subsidy rate per unit Subsidy pertrip Subsidy per passenger

Load factor 98%

98%

CRJ Blk Hr $ 2,066.24 Blk Hr $ 37.30 RPMs $ 0.003 Departures $ 412.56 ASMs $ 0.011 $ $

$ $ $ $ $ $ $ $ $ $ $ $
$ $ $
$ $ 2012-2013 Paducah, KY Chicago, IL 14 CRJ200
35,000 109.00 3,815,000

78 1,893 1,855
35,000

342 11,970,000
1,456 1,427

342 50 24,897,600
3,815,000 3,832,759

69,189 35,910 588,674 273,874 4,800,406 (985,406) 240,020 1,225,426

20,000 1,245,426
3,364

137 2,588

859 35

48% ,,. a

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