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U.S.Deportmentof Transportation OfficeottheSecretary ofTransportation Mr. Mike Huggins '·-· J CityManager 203 S. Farwell St. Eau Claire, WI 54701 Dear Mr. Huggins: ' '

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1200 NewJersey Avenue, SE Washington, DC 20590
September2, 2011

As you know, SkyWest Airlines, Inc., d/b/a United Express (SkyWest), provides subsidized air service underthe essential air service (EAS) program at Eau Claire. The Department's current contract with SkyWest at Eau Claire calls for an annual subsidy of $1,732,372 with fourteen nonstop round trips per week to Chicago O'Hare with 50-seat CRJ-200 aircraft, and it expires December 31, 2011. In anticipation ofthe end ofthat contract, by Order 2011-8-10 the Department requested "best and final" proposals to serve Eau Claire for a new, two-year period, and we received timely-filed proposals from SkyWest, SovereignAir, Inc., and Multi-Aero, Inc., d/b/a Air Choice One. (Air Choice One). My purpose in writing is to inform you ofthe results ofeach carrier's service and subsidy proposal and request yourcomment before we submit arecommendation on the carrierselection issue to the Assistant Secretaryfor Aviation and International Affairs for decision. Copies ofeach carrier's full proposal may be accessed online through the Department's Dockets Management System at http://www.regulations.gov/byentering "DOT-OST 2009-0306" in the "enter Keyword or ID" field, so we will only summarize them here. Air Choice One The carrierproposes to provide a total ofthirty five (35) nonstop round trips per week to Chicago O'Harefor $2,773,778 annual subsidy. All service would be with 9-seat, single-engine, unpressurized, turboprop CessnaCaravan aircraft. We note that Eau Claire's EAS calls for service with 15-seat, twin-engine aircraft. Thus it is likely we would only select AirChoice One ifthe community waives those assurances. In that event, we would considerthat waiver effective only for the two-year period ofthe Air Choice One's contract. Sovereign Air Option 1The carrierproposes to operate nineteen (19) nonstop round trips per week to Chicago O'Harefor $1,592,252 annual subsidy. All service would be with 30-seatDomier 328 regional-jet aircraft. The carrier notes that it is "currentlyin the process ofacquiring its scheduled service authority and anticipates being able to start its Essential Air Service byDecember 15, 2011."

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Option 2 The carrier's proposal under Option 2 would be identical to Option 1in terms of frequency ofnonstop service and aircraft type. However, the carrier would provide upline service to St. Cloud, Minnesota, and requests areduced level ofsubsidy, $1,228,252. SkyWest The carrierproposes to provide a total offourteen (14) nonstop round trips per week to Chicago O'Harefor $1,244,783 annual subsidy. All service would be with 50-seat CRJ-200 regional-jet aircraft. Please note that the average passengerfares shown in the carriers' proposals do not necessarily reflect the average local fares passengers would pay, butratherreflect the prorated portion ofthe total ticketprice, e.g., the Eau Claire- Chicago portion ofan Eau Claire- Chicago- New York ticket that the carrier would realize. Also, the implicit average fare, as reflected in the carriers' subsidy calculations is net ofcertain charges such as federal transportation securityfees, excise and tickettaxes, and passengerfacility charges. Ofcourse, carriers have the discretion to charge fares they deem appropriate, and the proposedpassengerfares were developed for subsidyrate computation purposes only. Each carrier wouldhave to realize passengerfares comparable to the averages shown in its proposal in order to achieve break-even or profitable operations even with subsidy. You should also note that any schedules submittedby the carriers are illustrative only, and the carrier selected may make schedule changes to reflect changing conditions, e.g., to bettermeet shifting connectingbanktimes at the hub. The Departmentexpects subsidized air carriers to maintain well-timed and well-spaced flights in orderto ensure full compensation. We know this matter is important to you and we will act as quickly as possible uponreceipt of your letter. In orderto expedite the case, please submit your comments byemail to EAS@dot.gov and to Kevin.Adams@dot.gov, by October 3. Ifyou have any questions ordo not wish to submit formal comments, please contact Kevin Adams at (202) 366-1047.

Enclosures Sincerely,

# ~~**~Y** Dennis J. DeVany Chief, Essential Air ServiceDivision Office ofAviation Analysis

cc: Airport Manager, SkyWest, Air Choice One, SovereignAirEau Claire, Wisconsin- Chicago O'Hare International Airport- Caravan Operation Revenues EAU-ORD Revenues Other Revenues Total Operating Revenues
Direct Operating Expenses Flying Operations Fuel and Oil Maintenance Aircraft Leases Total Direct Marketing Indirect Total Operating Expenses Operating Loss Profit Element (5% total Oper. Exp.) Compensation Required Compensation per PAX Compensation per Departure $2,376,000.00 11,880.00 $2,387,880.00
$ 715,400.00

1,577,886.24 1,173,256.00

475,000.00 $3,941,542.24 191,037.60 783,285.00 $4,915,864.84 $2,527,984.84 245,793.24 $2,773,778.08 $115.57 $775.45 I

I # Passengers:

Average Fare: Departures: Block Hours: Revenue Passenger Miles: 24,000 $99.00

3,577 5,723 6,456,000 Available Seat Miles: 8,636,191 RepresentativeSchedule Departure EAU 5:00AM CT ORO 6:45AM CT EAU 8:30AM CT ORO 10:15 AM CT EAU 12:00 PM CT ORO 1.45 PM CT EAU 3:30PM CT ORO 5:15 PM CT EAU 7:00PM CT ORO 8:45PM CT 

# l Arrival ORO 6:30AM CT EAU 8:15 AM
..CT ORO 10:00AM CT EAU 11:45AM CT ORO 1:30PM CT EAU 3.15 PM CT ORO 5:00PM CT EAU 6:45 PM CT ORO 8:30 PM CT EAU 10:15 PM CT1 30-Seat Dornier 328 Jet Sovereign Air, Inc. Annual Compensation Requirement for Essential Air Service for Eau Claire Proposal #1
Aircraft Type Available Seats Per Departure Passengers Per Trip
Block Hours Departures Total Passengers Average Fare
Revenue Passenger Miles Available Seat Miles Passenger Revenue Other Rev. @ .6 of pax. Rev. %

Total Revenue Aircraft and Hull Insurance Fuel and Oil Flying Operations
Other Direct Costs Maintenance

Total Direct Costs Total Indirect Costs Total Operating Expenses Operating Loss Profit@ 5%

Completion Rate Load Factor 19 Round trips PerWeek

$155 one way

Annual Compensation Requirement 30-seats 30 18.8
1,916 1,916 35,998

9,657,464 15,404,640 $5,579,690

$334,781 $5,914,714

$220,000 $2,038,624 $1,116,939

$572,245 $1,272,517 $5,220,325 $1,929,166 $7,149,491 $1,234,777

$357,475 $1,592.252
97% 63%30-Seat Dornier328Jet Sovereign Air, Inc. Annual Compensation Requirement for Essential Air Service Proposal #2 EAU CLAIRE (EAU) to CHICAGO (ORD) starting at ST CLOUD (STC)
Aircraft Type Available Seats Per Departure Passengers Per Trip
Block Hours Departures Total Passengers Average Fare
Revenue Passenger Miles Available Seat Miles Passenger Revenue Other Rev. @ .6 of pax. Rev. %

Total Revenue Aircraft and Hull Insurance Fuel and Oil Flying Operations
Other Direct Costs Maintenance

Total Direct Costs Total Indirect Costs Total Operating Expenses Operating Loss Profit@ 5%

Completion Rate Load Factor 19 Round trips PerWeek

$155 one way Avg.

Annual Compensation Requirement 30-seats 30 26

$7,904,690

$474,281 $8,378,714

$220,000 $2,338,624 $1,216,939 $1,972,245 $1,272,517 $7,020,325

$9,149,491

$770,777 $457,475 $1,228,252
97% 86%Eau Claire Schedule #1 Fit# Freq From TO Dpt-Arr 802 1234567 EAU ORO 6:20am-7:10am 812 1234567 ORO EAU 8:20am-9:10am 902 23456 EAU ORO 10:20am11:10am 912 23456 ORO EAU 12:20pm-1:10pm 702 1234567 EAU ORO 6:20pm-7:10pm 712 1234567 ORO EAU 8:20pm-9:10pm
St Cloud , Eau Claire, Chicago Schedule #2 Fit# Freq Depart Arrive Depart 502 1234567 STC 6:30am EAU 6:50am-7:00am 503 1234567 ORO 9:00am EAU9:50am-10:00am 504 23456 STC 11:30am EAU11:50am-12:pm 505 23456 OR02:00pm EAU2:50pm-3:00pm 506 1234567 STC6:30pm EAU6:50pm-7:OOpm 507 1234567 ORD9:00pm EAU9:50PM-10:00PM Arrive ORO 8:00am STC 10:20am ORD1:00pm STC3:20pm ORD8:00pm STC10:20pm

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Sovereign Air complies with the Global Warming Pollution Reduction requirements for 2012 and year 2020.

Sovereign Air, Inc.SkyWest Airlines Eau Claire, WI Essential Air Service Bid 8/31/2011

Number of round-trips per week Aircrafttype Passenger Revenue Passengers Average fare Revenue Block Time Trip block time (minutes) Total scheduled block time Total completed block time RPMS Passengers Stage length

ASMs Scheduled departures Competed departures Stage length Available Seats

Revenue Direct operating expenses Flight attendant RPM related Departure related ASM related Total expenses Operating income (loss) 5% profit margin Subtotal Marketing assistance Subsidy requirement SkyWest effective rates per unit Cost pertrip Cost per passenger SkyWest cost per block hour Effective Subsidy rate per unit Subsidy pertrip Subsidy per passenger
loadfactor 98%

98%

CRJ Blk Hr $ 2,066.24 Blk Hr $ 37.30 RPMs $ 0.003 Departures $ 412.56 ASMs $ 0.011 $ $

$ $ $ $ $ $ $ $ $ $ $ $
$ $ $ $ $ 2012-2013

Eau Claire, WI

Chicago, ll 14 CRJ200
35,000 92.00 3,220,000
68 1,650 1,617
35,000 268 9,380,000
1,456 1,427

268 50 19,510,400
3,220,000 3,341,380

60,319 28,140 588,674 214,614 4,233,127 (1,013,127)

211,656 1,224,783

20,000 1,244,783
2,967

121 2,618

858

35
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