Order 201 5

- 1

- 5

Served: January 5 , 201 5



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 5 th day of January , 20 1 5

ORDER RE SELECTING CARRIER

Summary By this O rder, the Department is re selecting SkyWest Airlines (SkyWest ), operating a s Delta

Connection

, to provide subsidiz ed Essential Air S ervice (EAS) with 50

- passenger Canadair Regional Jet 200 (CRJ200) aircraft

, between each of the four communities captioned above

and the Minneapolis

- St. Paul International Airport (MSP)

, for the two

- year period from February 1, 2015, through January 31, 2017

. The annual subsidy rate s will be set at $2,970,122 for Iron Mountain/Kingsford (Iron Mountain), Michigan , $1,671,602 for

Brainerd

, Minnesota, $2,197,037 for International Falls, Minnesota , and $2,050,889 for Rhinelander, Wisconsin

, f or a combined total of $ 8,889,650

. See Appendix A for a map.

Background By O rder 2012

- 9

- 11, issued on September 11, 2012, the Department selected SkyWest to provide EAS at Iron Mountain,, Brainerd

, International Falls, and Rhinelander, for the two year period beginning when th e carrier initiated full

- EAS at all four communities. SkyWest inaugurated service at Brainerd, International Falls, and Iron Mountain on December 15, 2012, and at Rhinelander on January 4, 2013, thus setting the contract expiration as January 31, 2014. Under that Order, Sky W est provides each of the communities with service

as summarized in the following table.

Essential Air Service at

IRON MOUNTAIN/KINGSFORD, MICHIGAN; BRAINERD, MINNESOTA; INTERNATIONAL FALLS, MINNESOTA; and RHINELANDER, WISCONSIN

Under 49 U.S.C. 41731 et seq

. DOT

- OST

- 1999

- 5175

DOT

- OST

- 2011

- 0135

DOT

- OST

- 2009

- 0304
DOT

- OST

- 2011

- 0109- 2

-

Community Round Trips per

Week 1 Aircraft Annual Subsidy

Iron Mountain, MI 13 (7 nonstop, 6 one

- stop)

50

- seat CRJ

- 200 $2,512,971

Rhinelander, WI 14 nonstop $1,519,619

International Falls, MN 12 (7 nonstop, 5 one

- stop) $1,107,900

Brainerd, MN 12 nonstop $1,356,764

On August 14, 2014, the Department issued Order 2014

- 8

- 10, requesting proposals from carriers interested in providing EAS at any or all of the communities for a new contract period. In response to that request, the Department received one proposal, from SkyWest,

the incumbent. A c op y of the proposal , along with all public comments received, may be accessed online through the F ederal Docket Management System a t: www.regulations.gov

, by searching for docket “ DOT

- OST

- 1999

- 5175 ” (Iron Mountain), “ DOT

- OST

- 2011

- 0135 ” (Brainerd), “ DOT

- OST

- 2009

- 0304 ” (International Falls), or “ DOT

- OST

- 2011

- 0109 ” (Rhinelander)

.

Proposal of SkyWest Airl ines SkyWest submitted a service propo sal for all four communities. All service would be provided to MSP and would be operat ed with a Delta Air Lines code

- share

, utilizing Canadair Regional Jet 200 (CRJ200) aircraft with 50 passenger seats. The service t o be provided each community and the associated subsidy requirements are summarized in the

table below:

Community Round Trips per

Week 1 Aircraft Annual Subsidy

Iron Mountain, MI 13 (7 nonstop, 6 one

- stop)

50

- seat CRJ

- 200 $2,970,122

Rhinelander, WI 14 nonstop $2,050,889

International Falls, MN 12 (7 nonstop, 5 one

- stop) $2,197,037

Brainerd, MN 12 nonstop $1, 671,602

Community Comments

On October 2, 2014

, the Department sent correspondence to the airport managers an d other

civic officials of the four communities summarizing the proposal and requesting comments
on the carrier

- selection decision.

In response , the Department received comments from numerous potential EAS customers

, civic and elected officials, including t he Dickinson County Board of Commissioners

, the Crow Wing County Board of Commissioners

, the Mayor of Brainerd, the President of the Brainerd City Council, Brainerd Lak es Regional Airport Commission

, the Brainerd Lakes Area Economic Development Corporation , and the Rhinelander/Oneida County Airport

. All of the parties strongly endorsed SkyWest , many noting the excellent service it has provided

the communities and its reliable on

- time performance

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-

Decision on Carrier Selection The decision in this case is straightforward. SkyWest w as the only carrier to submit a proposal. SkyWest has been providing reliable EAS at these communities for nearly two

years and it has received community support for its reselection. As such, t he Department has

decided to re select SkyWest to provide EAS between each of the four communities captioned

above and MSP , in accordance with its proposal , for the two

- year period from February 1, 2015, through January 31, 2017 . The annual subsidy ra te s will be set at $2,970,122

, $1,671,602

, $2,197,037 , and $2,050, 889 at Iron Mountain, Brainerd, International Falls, and Rhinelander, respectively, or a combined total of $ 8,889,650

.

The Department is , nonetheless, concerned with the level of subsidy SkyWest requires

, which has increased substantially

. We expect the communities to proactively work with SkyWest in order to maximize passenger levels and revenue thus, potentially reduc ing subsidy levels in future years.

The Department shall make this selection at the four communities contingent upon the Department’s receiving properly executed certifications from SkyWest that it is in compliance with the Department’s regulations regarding drug

- free workplaces and nondiscrimination, as well as the regulations governing lobbying activit ies.

Carrier Fitness

49 U.S.C. §§ 41737(b) and 41738 require that the Department find an air carrier fi t, willing, and able to provide reliable service before the Department may subsidize it to provide

essential air service. SkyWest is subject to the Dep artment’s continuing fitness requirements,

and no information ha s come to the Department’s attention that would cause the Department to question the car rier's fitness at this time. The Department ha s contacted the Federal Aviation Administration, and it h as raised no concerns that would negatively affect the Department’s fitness finding. The Department therefore conclude s that th e carrier remains fit to conduct the operations proposed here.

This O rder is issued under authority delegated in 49 CFR Part 1. 25a(b)

.

ACCORDINGLY,

1. The Department re select s SkyWest Airlines t o provide Essential Air S ervice at Iron Mountain/Kingsford, Michigan, Brainerd and International Falls, M innesota, and

Rhinelander

, Wisconsin, and establish es the service levels and subsidy rates as described in Appendix C ;

2 . The Department directs SkyWest Airlines 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

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- 4

-

be retained. The c arrier may forfeit its compensation for any claim that is not supported under the terms of this order;

3

. The Department find s that SkyWest Airlines , continues to be fit, willing and able to

operate as a certificated air carrier and capable of providing reliable EAS at Iron Mountain/Kingsford, Michigan, Brainerd and International Falls, M innesota, and Rhinelander, Wisconsin ;

4 . Th e s e Docket s will remain open until further order of the Department; and

5

. The Department will serve copies of this Order o n the mayors of Iron Mountain and Kingsford, Michigan, Brainerd, Minnesota, International Falls, Minnesota, Rhinelander, Wisconsin, the airport managers at Ford Airport (Iron Mountain/Kingsford), Brainerd Lakes Regional Airport, Falls International Airport (International Falls) , and Rhinelander/Oneida County Airport, and the service list for this docket.

By:

BRANDON M. BELFORD Deputy 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

Maps generated by the Great Circle Mapper

- copyright © Karl L. SwartzAppendix B

Proposal of SkyWest Airlines

Essential Air Service at Iron Mountain/Kingsford

, Michigan, International Falls and Brainerd, Minnesota,

and Rhinelander, WisconsinAppendix C Page 1 of 2

SkyWest Airlines
Provision of Essent ial Air Service at

Iron M ountain/Kingsford, Michigan, Rhinelander, Wisconsin , and International Falls and Brainerd, Minnesota Summary of Service To Be Provided

Effective Period : February 1, 2015 through January 31, 2017

Scheduled Service : Iron Mountain/Kingsford : 7 nonstop and 6 one

- stop (at Rhinelander, Wisconsin) round trips each week to MSP

. Rhinelander : 14 nonstop round trips each week to MSP

. International Falls: 7 nonstop and 5 one

- stop (at Hibbing, Minnesota) round trips each week to MSP.

Brainerd: 12 nonstop round trips per week to MSP. Aircraft type: Canadair Regional Jet 200 (CRJ200)

– 50 passenger seats Annual compensation: 1 Iron Mountain/Kingsford : $2,970,122

Rhinelander : $2,050,889

International Falls: $ 2

, 197

, 037

Brainerd: $1,671,602 Subsidy Rate per Flight : 2 Iron Mountain/Kingsford : $2,242

Rhinelander : $1,437

International Falls: $1,796

Brainerd: $1,367 Weekly Compensation Ceiling: 3 Iron Mountain/Kingsford : $ 58,292

Rhinelander : $ 40,236

International Falls: $ 43,104

Brainerd: $ 32,808

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 elemen ts 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 be en 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 jeopar dize 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 wr itten 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 ope rated; flights that overfly points for lack of traffic will not be compensated. In

1 See Appendix B.

2 Annual Compensation divided by annual flights. Carrier proposal assumes a 98% completion factor which is applied here.

3 Subsidy rate per flight multiplied by weekly flights (26 at Iron Mountain, 28 at Rhinelander, 24 at International Falls, and 24 at Br ainerd )

.Appendix C Page 2 of 2

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 me t and the extent of access to the national air transportation system provided to the community.

If the Department unilaterally, either partially or complete, terminates or reduces payments for service or changes service requirements at a specific locatio n 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 carrier do not constitute a total or partial reduction or cessation of payment.

Subsidy c ontracts 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 para graph.

Funds may not be available for performance under this Order beyond January 14, 2015 . The Government’s obligation for performance under this Order beyond January 14, 2015 , 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 arise for performance under this Order beyond January 14, 2015 , until funds are made available to the Department for performance. If sufficient funds are not made available for p erformance beyond January 14, 2015 , 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 31st; August claims must be submitted by November 30th, and so on.