Order: 2011
- 6
- 6 Served: June 7, 2011 

### UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C. Issued b y the Department of Transportation on the 7 th day

of June , 20 1 1 Essential Air Service at WATERTOWN, SOUTH DAKOTA DOCKET DOT - OST - 2001 - 10644 under 49 U.S.C. 41731 et seq.



### ORDER RE - SELECTING CARRIER Summary By this order, the Department is re - selecting Mesaba Aviation, Inc., operating as Delta Connection (Mesaba), to provide essential air service (EAS) at Watertown , South Dakota
. Mesaba will provide two daily nonstop round trips (14 a week) to Minneapolis/St . Paul International Airport (Minneapolis) using 34
- seat Saab 340 aircraft for a short
- term contract period beginning August 1, 2011, through October 3 1 , 2011 , for an annual subsidy of $1,769,019 , pro - rated at $4 50,736 for the contract period
. 1 Background By Order 2009
- 7
- 15, July 16, 2009, the Dep artment selected Mesaba to provide EAS at Watertown for the period from August 1 , 2009, through July 31, 2011, for an annual subsidy of $1,338,321 for 14 nonstop roun d trips per week to Minneapolis
. As the end of the contract was approac hing, we issu ed Order 2011
- 1
- 23 , January 28, 2011, requesting proposals from carriers interested in providing EAS at the community, for a new , two - ye ar period beginning August 1, 2011 . In response to that order, we received prop osals from the incumbent, Mesaba , as well as Multi
- Aero Inc. d/b/a Air Choice One (Air Choice One), and SeaPort Airlines, Inc. (SeaPort).

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

Each carrier’s complete proposal and community comments may

be accessed online at http://www.regulations.gov/ by entering Docket number DOT
- OST
- 2001
- 10644 in the search block , so we will only briefly summarize the proposals below
. Proposal of Air Choice One Air Choice One proposed two daily nonstop round trips (14 a week) to Minneapolis usi ng 30
- seat Saab 340 aircraft for an annual subsidy of $2,632,835 for a two
- ye ar term, or $2,580,179 for a four
- ye ar term . Proposal of Mesaba Mesaba proposed a three
- month contract maintaining status
- quo service of two daily nonstop round trips (14 a week) to Minneapolis using 34
- seat Saab 340 aircraft for an annual subsidy of $2,446,480. Proposal of SeaPort SeaPort proposed four daily nonstop round trips (2 8 a wee k) to Minneapolis using 9
- seat Pilatu s PC
- 12 aircraft for an annual subsidy of $1,935,874 for the first ye ar and $2,001,605 for the second year. Community Comments On April 6, 2011, we requested community comments regarding this carrier
- selection case. In response, we received a letter from Eric A. Dahl, Airport Manager at Watertown Regional Airport, on behalf of the City of Watertown, stating that the community supported Mesaba’s proposal to provide EAS for the City of Watertown, South Dakota. Decision In narrowing the field of opti ons, Air Choice One and SeaPort received no community support. Moreover, Watertown is entitled to receive service with 15
- seat or larger aircraft, and the community

did not waive its right to receive service with 15
- seat or larger aircraft, as is proposed by SeaPort. In the case of Air Choice One, the airline currently does not have the requisite operating authority from either the Federal Aviation Administration or the Department of Transportation’s Economic Fitness Division to operate 30
- seat aircraft in scheduled service. Therefore, we will not select either Air Choice One or SeaP ort. Mesaba , on the other hand, has served Watertown for several years, has provided re liable service to the community , and has the community ’s support, and it is for these reason s that we have decided to re
- select Mesaba. We were concerned that Mesaba’s proposed annual subsidy of $2,446,480 was high. Af t er subsequent discussions with the EAS staff, the carrier agreed to reduce its requested subsidy to $1,769,019. It is our policy to request that all carriers submit proposals on a “best and final” basis, but we retain the right to negotiate with carriers if it appears warranted from our review of the proposals. We note that Mesaba’s proposal is very unusual, in that it is only for a three
- month period, rather than the ty

pical two years. Mesaba explains this as follows: “As the Department is aware, the Saab 340 aircraft are scheduled to be retired from Mesaba's fleet b y the end of 2011. No decision has yet been made on replacement- 3
-

aircraft or replacement flying
. According ly , Mesaba's bid is for a short term EAS contract period ending on November 1, 2011. Mesaba will advise the Department as soon as a decision is made regarding long term plans for service at these communities.” While we asked for two
- ye ar bids in our request for proposals (RFP), the Department has discretion to award contracts that are longer or shorter than two ye ars when we find that the individual facts provide compelling reason to do so. Inthis case, the community has not waived its right to 15
- seat or larger aircraft and Air Choice One does not currently have the requisite operating authority to perform the proposed service. Meanwhile, the community supports Mesaba’s short
- term proposal and we find this proposal is at present the best option available. Therefore, we are selecting Mesaba’s short
- t erm proposal. Because of the short
- term contract, we will soon be issuing another RFP for service beginning November 1. W e shall make this selection of Mesaba at Watertown contingent upon the Department’s receiving properl y executed certifications from the carrier that it is in compliance with the Department’s regulations regarding drug
- free workplaces and nondiscrimination, as well as the regulations concerning lobbying activities. 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 before we may subsidize it to provide essential air service
. Mesaba is subj ect to the Department’s continuing fitness requirements, and no information has come to our attentio n that would cause us to questio n the 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 finding s . We therefore conclude that the carrier is reliab le and remain s fit to conduct the operations proposed here. This order is issued under authority delegated in 49 CFR 1.56a(f). AC CORDINGLY, 1. We select Mesaba Aviation, Inc. to provide essential air service at Watertown , South Dakota, an d establish an annual subsidy rate of $1,769,019 , as described in Appendix C; 2. We direct Mesaba Aviation, Inc. to retain all books, records, and other source and summary documentation to support claims for pay ment, and to preserve and maintain such documentation in a manner that readil y permits its audit and examination by representatives of the Department. Such documentation shall be retained for seven ye ars or until the Department indicates that the records may

be destroyed, whichever comes first. Copies of fl ight 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; 3 . We f i nd that Mesaba Aviation, Inc. continue s to be fit, willing and able to operate as a certificated carrier , and capable of providing reliable essential air service at Watertown ; 4. This docket will remain open pending further Department action ; and- 4
-

5 . We will serve copies of this order on the Mayor of Watertown , the Airport Manager of Watertown Regional Airport, Mesaba Aviation, Inc
. , Multi
- Aero, Inc., and SeaPort Airlines, Inc. B y:

SUSAN L. KURLAND Assistant Secretary for Aviation and International Affairs (SEAL) An electronic version of this document is ava ilable at http://www.regulations.govAppendix A



## AREA MAPAppendix B
Proposed Subsidy for Non - stop Service ATY to MSP

14 week ly n/s flights (Sun - Sat 2x/day) Community(s) ATY Hub(s) MSP Round trips per week 14 Completion Factor 97% Total Passengers 17,174 Block hours 1,684 Flts. to/from Hub 1,416 Seat Deps.at Hub 22,659 Enpl. Pax. At Hub 8,587 Pax per operation 12 Segment Fare $74 Passenger Revenue $1,266,531 Observed other rev % of pax 15.9% Other Revenue $201,695 Total Revenue $1,468,226 Direct Operating Expense Unit Rate Driver Pilots $231.22 per block hour $389,306 Pilot overhead $30.41 per block hour $51,201 Fuel $342.73 per block hour $577,062 Direct Maintenance $255.37 per block hour $429,968 Maintenance overhead $121.53 per block hour $204,621 Aircraft ownership $209.03 per block hour $351,945 Total Direct Operating Expense $1,190.29 $2,004,102 Indirect Operating Expense Inflight $51.76 per block hour $87,141 Inflight overhead $3.72 per block hour $6,259 Revenue Related 3.99% % of pax rev $50,578 Onboard expense $0.1864 per pax $3,201 Passenger Related $6.28 per pax $107,800 Cargo 0.0260% % of pax rev $329 Advertising 1.23% % of pax rev $15,595 EAS Station Expense $200,440 Hub Station Expense, Pax related $7.95 per enplaned pax $68,245 Hub Station Expense, Seat related $10.94 per seat dept $247,851

Sum of the Above, Non
- Fuel $2,214,479 Corporate Overhead 13.17% % of non
- fuel costs $291,549 Total I ndirect Operating Expense $1,078,988 Total Operating Expense $3,083,090 Profit 5% $154,155 Economic Cost $3,237,245 Required Annual Subsidy Rate $1,769,019 Daily Subsidy Rate $4,847 Required Subsidy for period August 1
- November 1, 2011 $450,736Appendix C Mesaba Aviation, Inc. Essential Air Service to be Provided at Watertown, South Dakota Effective Period : August 1, 2011, through October 31 , 2011 Scheduled Service : Two daily nonstop round trips (14 a week) to Minneapolis Aircraft : 3 4
- seat Saab 340 Rate per Eligible Flight: $ 1,253 ; 1 Weekly Ceiling : $35,084 2 Note: The carrier understands that it may forfeit its compensation for any flights that it d oes not operate in conformance with 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 aircraf t 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 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 these rates, it must first notify the Office of Aviation Analysis in writing and receive written approval from the Department to be ensured of full compensation. Should circumstan ces 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 det ermining 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 c ommunity. If the Department unilaterally, either partially or complete ly , 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 to that specific location without regard to any requirement for notice of such cessation. Those adjustments in the levels of sub sidy and/or service that are mutually agreed to in w riting by the Department and the carrier do not constitute a total or partial reduction or cessation of payment. Funds are not currently available for performance under this order beyond September 30, 2011
. The Department’s obligation for performance under this order beyond September 30, 2011 , 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 payme nt may arise for performance under this order beyond September 30, 2011 , until funds are made available to the Department for performance. If funds are not made available for perf ormance beyond September 30, 2011 , the Department will provide notice in w ri ting to the carrier. 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. All claims for payment must be submitted within 60 days of the last day of service provided under this order.

1 Annual compensation of $1,769,019 divided by $1,412 annual departures (28 weekly departures x 52 weeks x 97 percent completion). 2 28 arrivals and departures per week multiplied by $1,253 per flight.