Order 2012

- 1

- 6 Served: January 10, 2012



### UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 10 th of January, 2012

Ninety

- day Notice of Mesaba A viation

, Inc., and Pinnacle Airlines, Inc., to terminate service at:

Alpena, Michigan

under 49 U.S.C. 41731 et seq

. Docket DOT

- OST

- 2009

- 0300

ORDER RE

- SOLICITING PROPOSALS

Summary By this Order , the Department is re

- soliciting proposals from all interested carriers to provide subsidized Essential Air Service (EAS) at Alpena, Michigan. Proposals are due by January 31 , 2012 . (See Appendix A for a map)

. Background By Order 2 010

- 5

- 18

, the Department selected Mesaba Aviation, Inc., d/b/a Delta Connection (Delta)

, to provide 13 nonstop round trips per week between Alpena and Detroit with 34

- seat Saab 340 equipment for $1,532,660 annually through May 31, 2012. O n July 15, 2011, Delta filed notice to terminate service at Alpena

, as well as its service
at 23 other communities

. By Order 2011

- 9

- 5, dated September 13, 2011, we prohibited Delta from terminating service at Alpena and those other communities and requested proposals by October 12 , 2011

. 1 In response
, we received proposals from Gulfstream International Airlines, Inc., and Intrepid International Airlines.

Gulfstream proposed 18 nonstop round trips per week to Cleveland with 19

- seat Beech 1900 aircraft, and requested $3,243,0 09 annual subsidy. Intrepid, which does not currently have authority to provide scheduled passenger service, proposed four nonstop round trips per week to Lansing, Michigan, with 19

- seat Jetstream aircraft and requested $911,800 annual subsidy.

1 By Notic e dated October 12 , 2011, we extended that deadline to October 14 , 2011

.- 2

-

The community was opposed to Intrepid’s proposal because, among other things, it would provide only four round trips a week, well below the two

- round

- trip s

- a

- day, six days a week statutory requirement. The community was also opposed to Gulfstream’s proposal, principally because it would serve Cleveland as the community’s connecting hub.

By Order 2011

- 11

- 20 we re

- solicited proposals for Alpena, with proposals due December 5 , 2011 . As stated on page two of that Order :

We have decided to re

- bid proposals for A lpena, Michigan. Intrepid’s proposal does not meet the statutory two

- round

- trip

- per

- day requirement, and we have serious concerns about the subsidy level requested by Gulfstream. We encourage the community to complement our efforts during this re

- solicit ation period to secure additional options as it presumably has been doing since Delta first filed its termination notice.

While both the community and Department are dissatisfied with the current options before us, we wish to highlight the fact that the sources of our dissatisfactions are different. We are concerned that the level of subsidy Gulfstream requests is very high

-- more than twice the program average.

Proposals In response to our second solicitation for proposals, we received proposals from only one carrier, Intrepid. Intrepid proposes a total of ten round trips per week between Alpena and either Lansing or Grand Rapids, Michigan, with 19

- seat Jetstream turbo props with an on board lavatory, and requests $3,024,000 annual subsidy.

Intrepi d indicates the following:

First, we are (PADF) [Presque Aero Development Foundation] a nonprofit organization, dedicated to the advocacy of air travel. And, although we are not operating under the authority as an FAA/DOT certified air carrier, our organization would be under contract to a full y authorized air carrier, who is subject to all safety, staffing

, i ns u r ance and m aintenance stipulations, subject to [the same as?] any other certified air carrier to provide the aforementioned service. And, that we would operate unde r the rules of a 380 operation.

Community C o mment On December 29, 2011, the Mayor of Alpena indicated that Alpena did not support Intrepid because it does n ot have authority to provide scheduled passenger service.

Decision We will reject Intrepid’s most recent proposal and re

- solicit proposals. First, Intrepid correctly indicates that it has neither DOT n or FAA operating aut hority. Regarding its proposal to provide EAS with 19

- seat aircraft in partnership with an unnamed Part 380 operator, the Department found in Order 2011

- 1

- 16 that EAS, by statute, cannot be- 3

-

provided under Part 380 of the Department’s Aviation Regulations. 2 In addition to not holding sufficient operating authority, Intrepid’s proposal has other deficiencies. The carrier proposes service to Grand Rapids and Lansing, Michigan, but basic EAS requires that the service be to a large

- or m edium

- hub airport unless the communit y is more than 400 miles from the nearest large or medium hub . Alpena is less than 400 miles from Detroit, and neither Grand Rapids nor Lansing is a medium or large hub

. Finally, the ten round trips per week proposed by Intrepid fall short of the minimum frequency required by EAS, namely twelve round trips per week.

Based on all of the above, we have decided that the best option is to re

- solicit proposals at this time

. 3

Request for Proposals Carriers interested in filing proposals for Alpena

-- with or without subsidy

-- should

e

- mail them to our staff at EAS@dot.gov

, no later than January 31, 2012

. Our staff will then docket the proposals, thereby making them public, and we suggest that each applicant serve a copy of its proposal on the civic parties and other applicants. Shortly thereafter

, w e will provide a summary of the proposals to the community officials and ask them to submit their final comments about two weeks la ter . We will give full consideration to all proposals filed in a timely manner. 4

Interested carriers should prepare their proposals with every expectation that their initial proposals will also be their final and only proposals. We retain the discreti on to negotiate proposals with carriers when we deem it desirable. In such cases, of course, we will give all applicants the same opportunity. We also retain the discretion to reject outright all unreasonable or unrealistic proposals and solicit a new ro und of proposals.

We are providing interested carriers with some basic information to serve as guidance when they prepare their proposals, but we will not prescribe a precise format. We expect proposals to adequately describe the service being proposed and the annual amount of subsidy being requested. The applicants can make their own judgments as to the level of detail they wish to present; however, they might want to include proposed schedules and routings as well as supporting data for their subsidy requests, such as projected block hours, revenues and expenses. We strongly encourage clear, well

-

2 See Order 2011

- 1

- 16, January 22, 2011, Petition for Reconsideration of Order 2010

- 6

- 4 regarding EAS at Manistee/Ludington, Michigan.
3 49 U.S.C. §41734(f) directs the Department, when prohibiting a carrier from terminating service, “to make
every effort to find another carrier” to provide basic EAS as quickly as possible.
4 Carriers should not expect the Department to accept late filings. In cases where a carrier proposes to provide EAS without subsidy and we determine that service can be provided reliably without such compensation, we do not proceed with the carrier

- select ion case. Instead, we simply rely on that carrier’s subsidy

- free service as proposed.- 4

-

documented proposals that will facilitate their evaluation by the community and the Department. 5

W e request proposals for two round trips a day (twelve per week) with 30

- seat or larger aircraft, or either two or three round trips a day (12 or 18 a week) with 19

- seat aircraft. We also encourage the community to discuss options with carriers that might not meet the technical d efinition of basic EAS but that may be more cost efficient and more preferable from the community’s viewpoint. For example, we would entertain proposals with eight

- or nine

- seat aircraft and as many as four or five round trips a day (24 to 30 a week). 6 Finally, we take note that the community has expressed concerns about Cleveland as its hub. As a result, we encourage proposals to other hubs, such as the community’s current hub of Detroit, as well as Chicago , or any other hub that provides access to the national air transportation system.

Carriers are also welcome to propose more than one service option, if they choose . T hey need not limit themselves to the current service pattern if they envision other, potentially more attractive service possibilities

-- different hubs or lengths of term

-- with subsidy requirements that are competitive.

In o rder to assist carriers in makin g their passenger and revenue forecasts, we have included historical passenger data in Appendix B. We note that Alpena is a reasonably strong traffic generator for the EAS program , averaging 3 6 enplanements a day based on six

- d ay per week service during the year ended October 31 , 2011, and has been growing.

New Filing Procedures Carrier proposals should be submitted to the Department with all materials merged into a single document. In addition, because the document will be pu blished on Regulations.gov, each page should be formatted to be viewed online.

5 In selecting a carrier to provide subsidized EAS , 49 U.S.C. 41733(c)(1) directs us to consider four factors. (1) service reliability; (2) contractual and marketing arr angements with a larger carrier at the hub; (3) interline arrangements with a larger carrier at the hub; and (4) community views. In addition , The Consolidated Appropriations Act, 2008, Public Law 110

- 161, provides that when selecting a carrier to provid e EAS, the Department may consider the relative subsidy requirements, thus codifying a factor that we have considered since the inception of the program. Interested carriers should also be aware that our general provisions governing EAS will be included i n the selection Order as part of our authorization of subsidy for the selected service. Appendix C of this Order contains those general provisions.
6 Previously most EAS communities were entitled to service with 15

- seat or larger aircraft. However, in
t he Department’s FY 2012 appropriation (Consolidated and Further Continuing Appropriations Act, P.L. 112

- 55, November 18, 2011), Congress repealed the 15

- seat guarantee, although communities are still entitled to service with twin

- engine aircraft.- 5

-

Other Carrier Requirements The Department is responsible for implementing various Federal statutes governing lobbying activities, drug

- free workplaces and nondiscrimination. 7 Consequently, all carriers receiving Federal subsidy to support E AS must certify that they are in compliance with Department regulations regarding drug

- free workplaces and nondiscrimination, and those carriers whose subsidies exceed $100,000 over the lif e of the rate term must also certify that they are in compliance with the regulations governing lobbying activities. All carriers that plan to submit proposals involving subsidy should submit the required certifications along with their proposals. Intere sted carriers requiring more detailed information regarding these requirements, as well as copies of the certifications, should contact the Office of Aviation Analysis at (202) 366

- 5903. The Department is prohibited from paying subsidy to carriers that do not submit these documents. 8

Community Comments The communit y and the State are welcome to submit comments on the proposals at any time. As noted earlier, we will provide a summary of the proposals to the civic parties and the State and ask them to su bmit their final comments approximately two weeks after the carrier proposals are received

.

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

ACCORDINGLY;

1. The Department requests proposals from carriers interested in providing Essential Air Service , with subsidy if necessary, by January 31 , 2012

. Proposals should be emailed to EAS@dot.gov and be entitled “Proposals to Provide Essential Air Service at Alpena, Docket 2009

- 0300. ” Service should be consistent with that discussed in the body of the Order

. Questions regarding filings may be directed to Kevin Adams at 202

- 366

- 1047 or k evin.adams@dot.gov ;

2 . Th is docket will remain open until further o rder of the Department; and

7 The re gulations applicable to these areas are: (1) 49 CFR Part 20

– New restrictions on lobbying; (2) 49 CFR Part 21

– Nondiscrimination in federally

- assisted programs of the Department of Transportation

– Effectuation of title VI of the Civil Rights Act of 19 64; 49 CFR Part 27

–
n ondiscrimination on the basis of disability in programs and activities receiving or benefiting from Federal financial assistance; and 14 CFR Part 382

– Nondiscrimination on the basis of disability in air travel; and (3) 49 CFR Part 29

– Government

- wide debarment and suspension (non

- procurement) and government

wide requirements for drug

- free workplace (grants).
8 The certifications are also available on the web at http://ostpxweb.dot.gov/aviation/index.html.- 6

-

3 . The Department will serve a copy of this Order on the M ayor and A irport M anager of Alpena, Michigan, Pinnacle Airlines Corporation, Gulfstream International Airlines, Inc., Intrepid International, and the carriers in our service list.

By:

TODD M. HO MAN Director Office of Aviation Analysis (SEAL) An electronic version of this document is available

a t http://www.regulations.govAppendix A

Map for Alpena and Vicinity

Nonstop Great Circle Miles From Alpena (APN) CIU, Sault Ste. Marie 92 CLE, Cleveland 267 DTW, Detroit 198 GRR, Grand Rapids 181 MKE, Milwaukee 261 MKG, Muskegon 187 ORD, Chicago O’Hare 305 PLN, Pellston 69 TVC, Traverse City 102Appendix B

Historical Traffic at Alpena, Michigan (APN) T-100 Market Report

Origin Dest O&D
Year Month Pax. Pax. Pax.
2008 11 571 507 1,078
2008 12 522 561 1,083
2009 1 515 452 967
2009 2 493 470 963
2009 3 620 549 1,169
2009 4 443 494 937
2009 5 588 564 1,152
2009 6 671 707 1,378
2009 7 830 849 1,679
2009 8 918 863 1,781
2009 9 649 597 1,246
2009 10 681 658 1,339
YE 10-30-2009 7,501 7,271 14,772

2009 11 588 579 1,167
2009 12 532 627 1,159
2010 1 591 454 1,045
2010 2 457 462 919
2010 3 704 660 1,364
2010 4 596 674 1,270
2010 5 571 586 1,157
2010 6 713 759 1,472
2010 7 925 988 1,913
2010 8 1,108 962 2,070
2010 9 736 696 1,432
2010 10 789 729 1,518
YE 10-30-2010 8,310 8,176 16,486

2010 11 720 676 1,396
2010 12 720 804 1,524
2011 1 694 591 1,285
2011 2 687 643 1,330
2011 3 1,080 953 2,033
2011 4 824 934 1,758
2011 5 991 993 1,984
2011 6 1,089 1,170 2,259
2011 7 1,315 1,281 2,596
2011 8 1,437 1,277 2,714
2011 9 1,087 968 2,055
2011 10 952 898 1,850
YE 10-30-2011 11,596 11,188 22,784Appendix C

Example of General Terms and Conditions for Essential Air Service 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 eligib ility 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 Aviatio n 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 compl ete 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 t o which the goals of the program are met and the extent of access to the national air transportation system provided to the communit ies

. 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 carrier do not constitute a total or partial red uction or cessation of payment.

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 n ot operate to controvert the foregoing paragraph.

Funds are not currently available for performance under this solicitation beyond [DATE]. The Department’s obligation for performance under this solicitation beyond [DATE], is contingent upon the availabil ity 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 [DATE], until funds are made available to the Department for performa nce. If funds are not made available for performance beyond [DATE], the carrier will receive notice in writing by the Department.

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

.