Order: 2014-9-10 Served: September 15, 2014

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 15 th day of September, 2014

Essential Air Service at

PIERRE, SOUTH DAKOTA

Under 49 U.S. C. § 47131 et seq. DOT-OST-2011-0138



### ORDER REQUESTING PROPOSALS

Summary By this Order, the Department is requesting proposals from air carriers interested in providing Essential Air Service (EAS) at Pierre, South Da kota, with or without subsidy support, beginning as soon as possible. Proposals are due October 15, 2014. (See Appendix A for a map.)

Background Great Lakes Aviation, Ltd. (“Great Lakes”) has pr ovided EAS at Pierre on a subsidy-free basis for a number of years. However, for the last eight months or more, Great Lakes has experienced severe operational issues. The carrier cites the cu rrent pilot shortage, which in turn was triggered by Congressional and regulatory changes to pilot requirements, as the principle reason for its

deterioration of service. On January 16, 2014, we received a letter from Laurie Gill, the Mayor of Pierre, outlining Great Lakes’ service proble ms and asking that the Department issue a Request for Proposals for EAS service on the gr ounds that Great Lakes’ service was so

unreliable as to not constitute EA S. At that time, Great Lakes i ndicated that it was taking steps to fix its operational problems, 1 and we decided to take a wait-and-see approach.

On July 9, 2014, we received a second letter from Mayor Gill indicating that not only had the service not improved, it had deterior ated further. The Mayor stated that cancellation rates were 23%, 29% and 24 % for this March, April and May, respectively, and that Great Lakes’ on-time performance is below 50 percent. According to the Mayor, enpl anements have “plummeted” as a result of the poor service.

The complete public file for EAS at Pierre may be accessed online through the Federal Docket Management System at www.regulations.gov , by entering “DOT-OST-2011-0138” in the “SEARCH for: Rules, Comments, Adjudica tions or Supporting Do cuments:” field.

1 Among other things, Great Lakes stated that it was taking 10 seats out of most of its 19-seat Beech 1900Ds to allow it to operate under the FAA’s Part 139 regulations that have different pilot requirements than the Part 121 regulations.

U N I T E D S

T A T E S O F A

M E R I C A D E P A R T M E N T O F T R A N S P O R T A T

I O N- 2 -

Decision

In the FAA Modernization and Reform Act of 2012, Pub. L. 112-95 (Feb. 14, 2012), Congress amended 49 U.S.C. § 41731(a)(1)(B) to change the definition of “eligible place” for the purpose of receiving EAS. Under the amendment, elig ible communities are those that (among other things), at any time during the period between September 30, 2010, and September 30, 2011, inclusive— (i) received essential air service for which compensation was provided to an air carrier under this subchapter; or (ii) received a 90-day notice of in tent to terminate essential air service and the Secretary required the air carrier to continue to provide such service to the community.

On July 16, 2011, Mesaba Aviation, Inc. (Mesaba) and Pinnacle Airlines d/b/a Delta Connection (Pinnacle) filed notice to term inate service at Pierre, along w ith 23 other EAS communities (24 total). The Secretary required those carriers to continue to provide EAS to 23 communities by Order dated September 23, 2011 (DOT Order 2011-9-5) and, separate ly, to Pierre by Order 2011-11-4, dated November 2, 2011. Under Or der 2011-11-4 (and two subsequent Orders

that extended their se rvice obligation, Orde rs 2011-12-25 and 2012-1-7), the Department required Mesaba and Pinnacle to c ontinue to provide EAS to Pierre through February 1, 2012.

Given the dates outlined above, the fact that Pi erre was receiving unsubs idized service at the

time Mesaba and Pinnacle terminated service to Pi erre, and because the Secretary did not require

Mesaba and Pinnacle to continue to provide Pierre with EAS until after September 30, 2011, the statute, on its face, terminates Pierre’s eligibility for EAS. However, taking into consideration the particular facts involved he re, the similar circumstances expe rienced by Pierre and the other 23 communities affected by Mesaba and Pinnacle’s termination, and the fact that Pierre is an eligible EAS community in all other respects, we find that it is in the public interest to exempt Pierre from the requirement at 49 U.S.C. § 41731(a )(1)(B) and maintain its st atus as an “eligible place” under the EAS program. 49 U.S.C. § 40109(c); 49 CFR 1.25a(b)(4)(i). Pierre’s continued eligibility for EAS is in the public interest because it supports th e goal of maintaining a complete and convenient system of conti nuous scheduled air transportation for small communities and isolated areas.” 49 U.S.C. § 40101(a)(11).

As regards Mayor Gill’s request for a resolic itation, when a carrier provides subsidy-free EAS

service and we determine that se rvice can be provided reliably without subsidy, we typically do not conduct a carrier-selection pr oceeding. However, due to th e community’s concerns about Great Lakes’ EAS service, the disruptions in Pi erre’s service described by the Mayor in her letters to the Department, and the severe operati onal issues confronted by Great Lakes over the past several months, we will request proposals for EAS service for Pierre.

Request for Proposals We are requesting proposals from air carriers inte rested in providing EAS at Pierre, with or without subsidy support, for a two-year period. 2 Air carriers should f ile their proposals no later than October 15, 2014. After that date, our sta ff will docket the proposals, thereby making them public. Additionally, we request each air carrier serve a copy of its proposal on the civic parties at Pierre and on the other applicants. Shortly afterwards, we will provide a summary of the

2 Under 49 U.S.C. § 41734(a), Great Lakes may not end, suspend, or reduce air transportation to Pierre without first providing at least 90 days’ advanced notice to the Department, the State of South Dakota, and the City of Pierre.- 3 -

proposals to the community and ask them to submit any formal comments on this carrierselection case. We will give full considera tion to all proposals th at are timely filed. 3

We are providing interested ai r carriers with some basic info rmation to serve as guidance when they prepare their propos als, but we will not prescrib e a precise form at for their proposals. Air carrier proposals should be su bmitted to the Department with all materials merged into a single document. In addition , because the document will be published on www.regulations.gov , each page should be formatted to be viewed on line. We expect proposals to adequately describe the service be ing proposed and the annu al amount of subsidy being requested. The ap plicants can make their own judgments as to the level of detail they wish to present; however, we recommend they include information concerning proposed schedules and projected block hours. In add ition, applicants are en couraged to provide financial data supporting their subsidy reques ts, including information on their projected expenses and revenues. We st rongly encourage clear, well-docu mented proposals that will

facilitate their evaluation by the affected commun ities and the Department. 4

Proposals should provide sufficient capacity to accommodate historical levels. Specifically, we request proposals to a major hub airport such as Denver or Minneapolis/St. Paul that will provide good access to the national air trans portation system. Re garding capacity and frequency levels, for proposals w ith 34-seat or larger aircraft , we expect 12 round trips a week; for service with 30-seat aircraft, we expect 18 round trips a week; and if 19-seat aircraft are proposed, we expect 24 ro und trips per week. Alternatively, we w ill accept proposals consisting of additional frequencies if smaller aircraft (9-passenger) are contemplated. We encourage proposals that meet these guidelines in an efficient manner. Air carriers are also welcome to propose more than on e service option, if they choose . They also need not limit themselves to these requirements if they envi sion other, potentially more attractive service possibilities -- different hubs or length of contract, for example -- with subsidy requirements that remain competitive.

In order to assist air carriers in developing traffic and revenue proj ections for their proposals, we have summarized historical passenger levels at Pierre in Appendix B. In the most recent 12- month period for which data are availabl e (July 1, 2013, through June 30, 2014), Pierre generated a total of 23,461 total origin and destination passeng ers, or an average of 37.5

3 Air carriers should not expect the Department to accept late filings. In cases where a carrier proposes to provide EAS without subsidy and we determine that service can be reliably provided without such compensation, we typically do not proceed with the carrier-s election case. Instead, we simply rely on that carrier’s subsidy-free service as proposed. 4 In selecting a carrier to provide subsidized EAS for an eligible place not in Alaska, 49 U. S.C. § 41733(c)(1) directs us to consider five factors: (a) service reliability ; (b) contractual and marketing arrangements with a larger carrier at the hub; (c) interline arrangem ents with a larger carrier at the hub; (d) community views, giving substantial weight to the views of the elected offi cials representing the users; and (e) whet her the carrier has included a plan in its proposal to market its service to the community. In addition, the Consolidated and Further Continuing Appropriations Act, 2012, Public Law No. 112-55, and con tinued by the Full-Year Continuing Appropriations Act, 2013, Public Law No. 113-6, and the Continuing Appropria tions Act, 2014, Public Law No. 113-46, 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 inception of the program.- 4 -

enplanements per day. 5 We note that this represents a marked decrease for the first and second quarter of 2014, compared to previous years, as can be readily seen in Appendix B.

Interested air carriers should prepare their prop osal with every expectation that their initial proposal will also be their final and only proposal. We retain th e discretion to negotiate proposals with air carriers when we deem it desirable; in su ch cases we will give all applicants the same opportunity. We also re tain the discretion to reject outright all unreasonable or unrealistic proposals an d solicit a new round of proposals.

Other Air Carrier Requirements The Department is responsible for implementing various Federal statutes governing lobbying activities, drug-free workplaces and nondiscrim ination. Consequently, all air carriers receiving Federal subsidy to su pport EAS must certify that they are in compliance with Department regulations regarding drug-free work places and nondiscrimination, and those air carriers whose subsidies exceed $100, 000 over the life of the rate term must also certify that they are in compliance with the regulations governing lobbying ac tivities. All air carriers that plan to submit proposals involvi ng subsidy should submit the re quired certifications along with their proposals. Interested air carrier s requiring more detailed information regarding these requirements, as well as copies of th e certifications, should contact the Office of Aviation Analysis at (202) 366- 5903. The Department is proh ibited from paying subsidy to

air carriers that do not submit these documents

. 6

Community Comments

Civic officials and the State are welcome to su bmit comments at any time. We encourage prospective applicants to contact the community before they submit their proposals so that they can tailor them to the community’s needs, as they will not be able to amend them after the due date. As noted earlier, we will provide a copy of the proposals to the civic parties and ask them to submit their final comments shortly after October 15, 2014, the due date for air carrier proposals.

ACCORDINGLY,

1. We request that ai r carriers interested in providing E ssential Air Service at Pierre, South Dakota, submit their proposals, with or wi thout subsidy requests , no later than October 15, 2014. The proposals should be emailed to: EAS@dot.gov with the title “Proposal
to Provide Essential Air Service at Pierre, South Dakota, Docket DOT-OST-2011-0138;” 7

5 In calculating enplanements per day, we take total annual origin and destination passenger numbers and divide by two to get passengers in one direction (enplanements at the EAS community), and then by 313 days to get average daily enplanements at the EAS community. 6 The regulations applicable to these areas are: (1) 49 CF R Part 20 – New restrictions on lobbying; (2) 49 CFR Part 21 – Nondiscrimination in federally-assi sted programs of the Department of Transportation – Effectuation of title VI of the Civil Rights Act of 1964; 49 CFR Part 27 – Nondiscrimination on the basis of disability in programs and activities receiving or benefiting from Federal financial assi stance; and 14 CFR Part 382 – Nondiscrimination on thebasis of disability in air travel; and (3) 49 CFR Part 29 – Government-wide debarment and suspension (nonprocurement) and government-wide requir ements for drug-free work place (grants). The certifications are available

on the web at http://www.dot.gov/policy/aviation-policy/small-co mmunity-rural-air-service/essential-air-service

. 7 Questions regarding filings in response to this Order should be directed to Michael Gormas at michael.gormas@dot.gov or (202) 366-1853.- 5 -

2. Great Lakes Aviation, Ltd. has seven days to provide a substantive response to the City’s concerns described in the Mayor ’s letters to the Department (in the Docket DOT-OST-2011- 0138).

3. Docket DOT-OST-2011-0138 will remain open until further Order of the Department; and

4. The Department will serve c opies of this Order on the civic official s of Pie rre, South Dakota, Great Lakes Aviation, Ltd., an d the service list for this docket.

By:

SUSAN L. KURLAND Assistant Secretary for Aviation

and International Affairs

An electronic version of this document is available

online at www.regulations.gov.Appendix A



### AREA MAP
\

This map is provided by Sabre ® AirVision TM Profit Essentials and is being used with express permission of the copyright holder, Sabre Airline Solutions®Appendix B

Pierre, South Dakota (PIR) 1

Historical traffic

Year Quarter Uniquecarriername Enplanements Deplanements Totals

2011 3 Mesaba Airlines 2,983 2,863 5,846

2011 3 Great Lakes Airlines 1,067 1,072 2,139

2011 4 Mesaba Airlines 2,598 2,434 5,032

2011 4 Great Lakes Airlines 1,479 1,539 3,018

2012 1 Endeavor Air Inc. 265 148 413

2012 1 Great Lakes Airlines 1,938 2,003 3,941

2012 2 Great Lakes Airlines 2,492 2,443 4,935 25,324

2012 3 Great Lakes Airlines 2,949 2,865 5,814

2012 4 Great Lakes Airlines 3,806 3,683 7,489

2013 1 Great Lakes Airlines 3,013 2,945 5,958

2013 2 Great Lakes Airlines 3,381 3,517 6,898 26,159

2013 3 Great Lakes Airlines 3,643 3,606 7,249

2013 4 Great Lakes Airlines 3,989 3,828 7,817

2014 1 Great Lakes Airlines 2,029 2,000 4,029

2014 2 Great Lakes Airlines 2,164 2,202 4,366 23,461

1 Source: Bureau of Transportation Statistics; Schedule T-100Appendix C

Example of General Terms and Cond itions for Essential Air Service

The air carrier understands that it may forfeit its compensation for any flights that it does not operate in conformance with the terms and stipula tions of the rate Order, including the service plans outlined in the Order and an y other significant elements of the required service, without prior approval. The air 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 cancellations, only completed flights are considered eligible for subsidy. In addition, if the air carrier does no t schedule or operate its flights in full conformance w ith the Order for a significant period, it may jeopardize its entire subsidy claim for the period in question. If the air carrier contemplates any such changes beyond the scope of the Order during the appl icable period of these rates, it must first notify the Office of Aviation Analysis in writing and receive written a pproval from the Department to be ensured of full compensation. Should circum stances warrant, the Departme nt may locate and select a replacement air carrier to provide service on thes e routes. The air carr ier 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 paym ent for a deviating flight should be adjusted or disallowed, the Department will consider the ex tent to which the goals of the program are met

and the extent of access to the national air tr ansportation system provided to the community.

If the Department unilaterally, either partially or completely, terminates or reduces payments for service or changes service require ments at a specific location provi ded for under this Order, then, at the end of the period for whic h the Department does make paym ents in the stipulated amounts or at the stipulated service levels, the air carr ier may cease to provide se rvice to that specific location without regard to any requirement for no tice of such cessation. T hose adjustments in the levels of subsidy and/or service that are mutually agreed to in writing by the Department and air carrier do not constitute a total or part ial reduction or cessation of payment.

Subsidy contracts 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.

Funds may not be available for perfor mance under this Order beyond [DATE]. The Government’s obligation for performance under this Order beyond [DATE], is subject to the availability of funds from which payment for services can be made. No legal liability on the part of the Government for any payment may ar ise for performance under this Order beyond [DATE], until funds are made available to the De partment for performance. If sufficient funds are not made available for performance beyond [D ATE], 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 st ; August claims must be submitted by

November 30 th , and so on.