Order: 2011-6-6

Served: June 7, 2011

 UNITED STATES OF AMERICA

 DEPARTMENT OF TRANSPORTATION

 OFFICE OF THE SECRETARY

 WASHINGTON, D.C.

Issued by the Department of Transportation

on the 7th day of June, 2011

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 31, 2011, for an annual subsidy of 

$1,769,019, pro-rated at $450,736 for the contract period.

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Background

By Order 2009-7-15, July 16, 2009, the Department 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 round trips per week to Minneapolis.

As the end of the contract was approaching, we issued Order 2011-1-23, January 28, 2011,

requesting proposals from carriers interested in providing EAS at the community, for a new,

two-year period beginning August 1, 2011. In response to that order, we received proposals 

from the incumbent, Mesaba, as well as Multi-Aero Inc. d/b/a Air Choice One (Air Choice One), 

and SeaPort Airlines, Inc. (SeaPort).

 

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Such subsidy is calculated and distributed on a fiscal year basis, subject to the availability of appropriated funds.
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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 using 30-

seat Saab 340 aircraft for an annual subsidy of $2,632,835 for a two-year term, or $2,580,179 for 

a four-year 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 (28 a week) to Minneapolis using 9-seat Pilatus 

PC-12 aircraft for an annual subsidy of $1,935,874 for the first year 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 options, 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 SeaPort.

Mesaba, on the other hand, has served Watertown for several years, has provided reliable service 

to the community, and has the community’s support, and it is for these reasons that we have 

decided to re-select Mesaba. We were concerned that Mesaba’s proposed annual subsidy of 

$2,446,480 was high. After 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 typical 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 by the end of 2011. No decision has yet been made on replacement 
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aircraft or replacement flying. Accordingly, 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-year bids in our request for proposals (RFP), the Department has 

discretion to award contracts that are longer or shorter than two years when we find that the 

individual facts provide compelling reason to do so. In this 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-term proposal. Because of the short-term contract, 

we will soon be issuing another RFP for service beginning November 1.

We shall make this selection of Mesaba at Watertown contingent upon the Department’s 

receiving properly 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 subject to 

the Department’s continuing fitness requirements, and no information has come to our attention 

that would cause us to question 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 

findings. We therefore conclude that the carrier is reliable and remains fit to conduct the 

operations proposed here.

This order is issued under authority delegated in 49 CFR 1.56a(f).

ACCORDINGLY,

1. We select Mesaba Aviation, Inc. to provide essential air service at Watertown, South Dakota,

and 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 payment, and to preserve and maintain such documentation 

in a manner that readily permits its audit and examination by representatives of the Department. 

Such documentation shall be retained for seven years 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 carrier may forfeit its compensation for any claim that is not 

supported under the terms of this order;

3. We find that Mesaba Aviation, Inc. continues 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
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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.

By:

SUSAN L. KURLAND

Assistant Secretary for

Aviation and International Affairs

(SEAL)

An electronic version of this document is available at

http://www.regulations.gov
Appendix A

AREA MAP

 
Appendix B

Proposed Subsidy for Non-stop Service ATY to MSP

14 weekly 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 Indirect 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 $450,736
 Appendix 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: 34-seat Saab 340

Rate per Eligible Flight: $1,253;

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Weekly Ceiling: $35,0842

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 significant 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 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 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 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 subsidy and/or service that are mutually agreed to in writing 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 

payment 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 performance beyond September 30, 2011, the 

Department will provide notice in writing 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.