Order 2012

- 9

- 6

Served: September 6, 2012



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 6 th day o f September , 20 1 2

Essential Air Service at

MACON, GEORGIA DOCKET DOT

- OST

- 2007

- 28671

under 49 U.S.C. 41731 et seq.



### ORDER SELECTING CARRIER

AND ESTABLISHING SUBSIDY RATES

Summary By th is O rder, the Department is selecting Sun Air Express, LLC d/b/a Sun Air International (Sun Air) to provide Essential Air Service (EAS) at Macon, Georgia

, for an annual subsidy of $ 1,946,266

. 1 The s ervice to be provided will be f our nonstop round trips per weekday and four per weekend (24 a week) to Atlanta Hartsfield International Airport (Atlanta) using 9

- passenger, twin

- engine Piper Chieftain aircraft for the two

- year period beginning when the carrier commences full EAS

.

B a c k g r o un d The Department’s FY 2012 appropriation (P.L. 112

- 55) limited eligibility in the EAS program in the lower 48 states to certain communities, including those that received subsidized EAS “at any time between September 30, 2010, and September 30, 2011, inclusive.” Macon is eligible f or subsidized service because it was receiving service on a subsidized basis from Pacific Wings , L.L.C., d/b/a Georgia Skies (Pacific Wings) through January 24, 2011 , and subsidy

- free service starting January 25, 2011

. However, on

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

funds.- 2

-

April 26, 2012, Pacific Wings filed a 90

- day notice of its intent to terminate its

unsubsidized s ervice at Macon

, which triggered this carrier

- selection case

.

By Order 2012

- 5

- 25, issued on May 24, 2012, the Department prohibited Pacific Wings from terminating service for 30 days beyond the end of the 90

- day notice period, i.e. August 25, 2012, and requested proposals from air carriers interested in providing EAS at

Macon , wit h or without subsidy. In response to that Order, we received two proposals.

Copies of the proposals may be accessed online through the Department’s Dockets Management System at: http://www.regulations.gov/ by entering “DOT

- OST

- 2007

- 28671” in the “Enter Keyword or ID” field

.

Proposal of American Aviation Group, Inc. d/b/a Twin Air Calypso American Aviation Group, Inc. d/b/a Twin Air Calypso (TAC), proposes to off er six daily

nonstop round trips (42 a week ) between Macon and Atlanta utilizing an eight

- passenger
, single

- engine Cessna Caravan aircraft, for an annual subsidy of $1,555,825. 2

TAC currently has an application pending before the Department for authority to conduct scheduled passenger operations as a commuter air carrier. That application , as well as the Department’s request for additional information pertaining to that application, can be accessed online through the Department’s Dockets Management System by entering

“DOT

- OST

- 2011

- 0143” in the “ Enter Keyword or ID” field.

Proposal of Sun Air Sun Air proposes four nonstop round trips per weekday

, two round trips on Saturday

, and two round trips on Sunday (2 4 a week) to Atlanta using 9

- passenger, twin

- engine Piper

Chieftain aircraft for an annual subsidy of $ 1,946,266

. The Department recently found Sun Air fit to conduct scheduled passenger operations as a commuter air carrier, and the air

carrier is currently working with the F ederal Aviation Administration (FAA) to finalize that operating authority.

According to its application, Sun Air has made significant investments to acquire access to industry interline and baggage agreements with major air carriers. Additionally, it has made arrangements to use gate space w ithin the sterile concourse at Atlanta , thereby eliminating the need for passenger s to re

- clear security upon arrival and allow ing for seamless baggage transfers.

Community Comments By letter dated July 31, 2012, the Honorable Robert Rei chert, Mayor of Macon, provided support for Sun Air’s application. The Mayor points out the advantages Sun Air has over TAC, which include investment s in interline agreements with major air carriers and the

2 Most EAS communities are guaranteed service with twin

- engine aircraft. However, because Macon has received single

- engine service for “ at least 60 consecutive operating days since October 31, 1978 ,” in

ac cordance with 49 U.S.C. § 41732 (b)(5), Macon is not guaranteed twin

- engine air service. For this reason

, TAC’s prop osal i s eligible for consideration

.- 3

-

convenience of direct terminal access. Furthermore

, the community is concerned about the time required for TAC to obtain full operating authority.

Decision After reviewing both airlines’ proposal and taking into account the community’s comments, the Department has decided to select Sun Air. The community supports Sun Air’s proposal and specifically mentions the importance of interline agreements with major

airlines and the convenience of direct terminal access , both of which Sun Air has stated it

has taken measures to obtain

.

Further

, by Order 2012

- 2

- 20, issued on February 24, 2012, the Department issued a

c onsent o rder concerning unauthorized scheduled passenger service as a commuter air carrier by TAC in violation of 49 U.S.C. §§ 41101, 4 1712, and 41738 and

14 CFR Part 298, the Department’s commuter air carrier requirements, as well as Order

2005

- 3

- 38. That Order directed TAC to cease and desist from further violating those statutory provisions, federal regulations, and O rder and assed TAC a compromised civil penalty of $70,000. Under these circumstances, the D epartment is concerned with the

recent enforcement action against TAC and the lengthy time that may be required for it to
obtain its operating authority.

W e find both the service and subsidy levels proposed b y Sun Air to be reasonable. We

shall make this selection of Sun Air at Macon contingent upon the Department ’s receiving properly executed certifications from the air carrier that it is in compliance with the Department’s regu lations regarding drug

- free workplaces and nondiscrimination, as well as the regulations concerning lobbying activities

. 3

S ervice Transition We expect Pacific Wings and Sun Air to work together to make a smooth transition at

Macon

. In that regard, before Pacific Wings suspends its service it must notify any passengers holding reservations for travel after the suspension date, assist those passengers in making alternate air transportation arrangements, or provide a refund of the ticket price, without penalty, if requested.

Legislati ve Changes Which May Affect Future EAS Eligibility at Macon The FAA Modernization and Reform Act of 2012 (Pu blic Law No: 112

- 95) amended

49 U.S.C. § 41731(a)(1)(B) to change the definition of “eligible place” for the purpose of receiving EAS. The amendment states that to be eligible, a community must maintain an average of 10 enplanements or more per service day, as determined by the Secretary, during the most recent fiscal year beginning after September 30, 2012. 4 The legislation exempts location s in Alaska and Hawaii and communities that are more than 175 driving miles from the nearest large or medium hub airport. As Macon is only about 81 miles from

3 The certifications are available on th e Web at http://ostpxweb.dot.gov/aviation/index.html

. 4 The Secretary also has authority to waive the 10 passenger requirement, on an annual basis, if the community can demonstrate that the reaso n the location averages fewer than 10 passengers per day is due to a temporary decline in enplanements. See 49 U.S.C. § 41731(e).- 4

-

the Atlanta airport, the community must meet the 10

- enplanement

- a

- day threshold for EAS

to conti nue after FY2013, barring a waiver from the Secretary.

In the most recent fiscal year for which data are available, FY2011 (October 2010

- September 2011), Pacific Wings generated a total of 1,988 passengers (inbound and outbound), or an average of about 3 enplanements per day. 5 Sun Air and Macon should be aware that the Department will continue to monitor Macon ’ s eligibility to receive EAS in light of these new requirements throughout the life of any executed contract. The Department may cancel a contract for any community receiving EAS if enplanements remain below 10 per day during FY2013 , barring a waiver from the Secretary

.

Additionally, communities are no t eligible for subsidized air service if their per passenger subsidy exceed s $ 1,000

. 6 T he estimated subsidy per passenger based on FY11 origin and destination passengers at Macon is $979. However, that figure is based on unsubsidized air service provided by Pacific Wings . In its proposal

, Sun Air states that its airfares will be

50% to 70% lower than the current fare, and therefore will become more affordable to a

greater number of travelers. This has the potential to increase enplanements, thereby

decreas ing the subsidy per passenger rate

. The Department strongly encourages Macon

and Sun Air to work together to increase enplanements and bring its rate of subsi dy per passengers into compliance in order to avoid termination of eligibility for subsidy under the EAS program

. We will monitor both the subsidy per passenger rate and the

10

- enpl anement threshold during this upcoming two

- year contract to ensure compliance

with the statute.

Carrier Fitness

49 U.S.C. Sections § 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 EAS . T he Department recently found Sun Air fit to conduct scheduled passenger operations as a

commuter air carrier and no information has come to our attention that would cause us to question the air carrier’s fitness to provide EAS in this market at this time. We therefore

conclude t hat Sun Air is reliable and fit to conduct the operations proposed here.

This Order is issued under autho rity delegated in 49 CFR Part 1.56a(f).

ACCORDINGLY,

1. We select S un Air Express, LLC d/b/a Sun Air International to provide Essential Air

S ervice at Macon, Georgia

, contingent upon it receiving full operating authority from both the Department and Federal Aviation Administration. We establish an annual subsidy rate as described in Appendix B ;

2

. We direct Sun Air Express, LLC d/b/a Sun Air International to retain all books, records, and other source and summary documentation to support claims for payment, and to

5 Source: Bureau of Transportation Statistics; Form 41, Schedule T

- 100. Daily averages are based on one

half of the O&D passengers, divided by 313 service days (314 during leap years).

6 See 49 USC Section 41731(a)(1)(C)

.- 5

-

preserve and maintain such documentation in a manner that readily permits its audit and examination by representatives of the Department. Such documentation shall be retaine d 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 be retained. The carrier may forfeit its compensation for any claim that is not supported under the te rms of this Order ;

3 . We f i nd that Sun Air Express, LLC d/b/a Sun Air International is fit, willing and able to

operate as a commuter air carrie r
, and capable of providing reliable Essential Air S ervice at Macon, Georgia ;

4

. D ocket DOT

- OST

- 2007

- 28671 w ill remain open pending further Department action ; and

5 . We will serve copies of this Order on the Mayor and Airport Manager of Macon, Georgia

, Sun Air Express, LLC d/b/a Sun Air International, and American Aviation Group,

Inc. d/b/a Twin Air Calypso

.

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



## Sun Air International, LLC

Annual Compensation Requirements for Essential Air Service at
Macon, Georgia to Atlanta, Georgia
Four daily round trips per weekday and four round trips per weekend (24 a week)
98.0% Completion Factor

Projected Operations

Annual

MCN

- ATL
Passenger $477,034

Other Revenues $7,156

TOTAL OPERATING

REVENUE $484,190

OPERATING EXPENSES
Flight Operations $195,500

Fuel and Into

- P lane $562,162

Maintenance $496,603
Passenger Service $717,263
Aircraft Ownership $169,952

Other $173,240

TOTAL OPERATING COST $2,314,720

OPERATING INCOME/LOSS

- $1,830,530

PROFIT ELEMENT (5% OF OPERATING COST) $115,736

SUBSIDY REQUIRED $1,946,266Appendix B

Sun Air Express, LLC d/b/a Sun Air International

Essential Air Service to be Provided at Macon, Georgia

Effective Period : Beginning with full EAS through the end of the 24 th month thereafter

Scheduled Service : 2 4 weekly nonstop round trips to Atlanta Hartsfield International Airport ( Atlanta )

Aircraft : 9

- passenger, twin

- engine Piper Chieftain Rate per Eligible Flight: $ 796 1
Weekly Ceiling for each community : $ 38, 208 2

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 significan t
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 co mpleted, 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 per iod, 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 this rate, 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 operat ed; 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 service levels, the carrier may cease to provide service to that specific location without regards 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 contract are subject to, and i ncorporate 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 are not currently available for performance under this Order beyond September 30, 2012. The Government’s obligation for performance under this Order beyond September 30, 2012, is subject to the availability of appropriated funds from which payment for services ca n be made. No legal liability on the part of the Government for any payment may arise for performance under this Order beyond September 30, 2012, until funds are made available to the Department for performance. If funds are not made available for perfor mance beyond September 30, 2012, the Department will provide notice in writing to the carrier.

All claims for payment must be submitted within 60 days of the last day of service provided under this Order.

1 Annual compensation of $1,946,266 divided by 2,446 annual departures (48 weekly departures x 52 weeks x 98 percent completion)

. 2 48 arrivals and departures per week multiplied by $1,591 per flight

.