Order: 2012

- 4

- 30

Served: April 26, 2012



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 26 th day of April , 20 1 2

Essential Air Service at

ALTOONA, PENNSYLVANIA JOHNSTOWN, PENNSYLVANIA DOCKET DOT

- OST

- 2002

- 11446

DOCKET DOT

- OST

- 2002

- 11451

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



### ORDER SELECTING CARRIER

Summary By th is O rder, the Department is selecting Silver Airways , formerly Gulfstream International Airways, to provide Essential Air Service (EAS) at Altoona and Johnstown, Pennsylvania

, to Washington Dulles International Airport (Washington Dulles)

, for a

combined annual subsidy of $3,997,187. 1 Service to be provided will be 18 weekly nonstop and one

- stop round trips over an Altoona

- Johnstown

- Washington Dulles or

Johnstown

- Altoona

- Washington Dulles routing using 34

- seat Saab 340 aircraft for the two

year period beginning when the carrier begins full EAS at both communities

.

Background By Order 2010

- 5

- 10, May 10, 2010, the Department selected Colgan Air, Inc., operating as United Express (Colgan), to provide EAS at Altoona and Johnstown with three round trips each weekday and weekend (18 a week), with a mix of nonstop and one

- stop service over

an Altoona

- Johnstown

- Washington Dulles or Johnstown

- Altoona

- Washington Dulles

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

funds.- 2

-

routing using 34

- seat Saab 340 aircraft for a combined annual subsid y of $3,348,294 from July 1, 2010, through June 30, 2012.

As the end of the contract was approaching, we issued Order 2012

- 2

- 9, February 14, 2012, requesting proposals from carriers interested in p roviding EAS at the communities for a new term beginning July 1, 2012. In response to that Order, we received a proposal from only Silver Airways. Subsequent to our issuing the Request for Proposals, Colgan file d a 90

- day notice to suspend its service at Altoona and Johnstown, as well as five other EAS

communities.

Silver Airways’ complete proposal and the communities’ comments may be accessed

online at http://www.regulations.gov/ by entering each community’s Docket number in the

search block: Altoona, Docket DOT

- OST

- 2002

- 11446, and Johnstown, Docket DOT

OST

- 2002

- 11451.

Proposal of Silver Airways Silver Airways proposed one option for a two

- year term that would provide three weekday and three weekend nonstop round trips (18 a week) to Washing ton Dulles using 34

- seat Saab 340 aircraft for a combined annual subsidy of $3,997,187 . This proposal is contingent upon United Airlines ’ (United) extending an existing codeshare agreement with Silver Airways to include the Altoona and Johnstown flights.

Community Comments

Both communities submitted comments on Silver Airways ’ proposal to serve Washington

Dulles using Saab 340 aircraft. Mr. Chuck Pillar, Airport Manager for Altoona

- Blair County Airport , states “Since service commenced to IAD in February 2008, the airport has seen positive improvements in enplanement numbers. The response from both the Blair County local business community and the leis ure passengers has also been very positive and encouraging.”

The J ohnstown

- Cambria County Airpo rt Authority submitted a letter expressing the critical role the airport plays in Johnstown’s economic development. The letter also

included a list of questions prepared by an airline committee formed to manage the upcoming air service transition. This airline committee is made up of airport board members, community leaders, and individuals with backgrounds in the travel industry. On April 4, Department staff conducted a conference call with the airline committee to answer and address their questions and concerns. At the end of the call, the airline committee agreed to conduct a similar conference call in the near future with Silver Airways. Subsequently, we received additional comments from each community supporting the selection of Silver Airways’ for its EAS air carrier.

Decision The decision is straightforward

. The communities support Silver Airways’ proposal and Silver Airways is a well

- established airline in the EAS progra m. Furtherm ore, the proposed service to Washington Dulles would provide the communities with excellent, seamless access to the National air transportation system. While we understand that this- 3

-

proposal is contingent upon Silver Airways’ obtaining a United codeshare agreement to include the Altoona and Johnstown flights, we are optimistic this can be achieved given that Silver Airways has an existing United code

- share at Cleveland

- Hopkins International Airport.

We are, however, concerned that the proposed subsidy c ould put Altoona’s per passenger subsidy slightly over the $200 cap. Since the Department is prohibited from subsidizing air service at a community where the subsidy per passenger exceeds $200, unless the community is more than 210 highway miles from the nearest large

- or medium

- hub airport, we fully expect the community and airline to work together to maximize use of the service to ensure the subsidy per passenger is $200 or less.

We shall make this selection of Silver Airways at Altoona and Johnstown contingent upon the Department’s receiving properly executed certifications from the 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 act ivities. 2

S ervice Transition We expect Silver Airways and Colgan to work together to make a smooth transition at these communities. In that regard, before Colgan suspends it s service we expect it to notif y any passengers holding reservations for travel a fter the suspension date, to assist those passengers in making alternate air transpor t ation arrangements, or to provide a refun d of the ticket price, without penalty, if requested.

Colgan’s current EAS contract expires on June 30, 2012. Should Silver A ir ways not start full EAS on July 1, 2012 , the Department will extend Colgan’s current contract until Silver Airways begins full EAS.

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 E AS

. Silver Airways is subj ect to the Department’s continuing fitness requirements, and no information has come

to our attention tha t wou ld cause us to questio n 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 finding s . We therefore conclude that the carrier s are reliable

and r emain fit to conduct the operations proposed here.

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

ACCORDINGLY,

1. We select Silver Airways to provide Essential Air S ervice at Altoona an d Johnstown, Pennsylvania, and establish an annual subsidy rate as described in Appendix C;

2 The certifications are available on the Web at http://ostpxweb.dot.gov/aviation/index.html

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-

2

. We direct Silver Airways 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 p ermits 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. Co pies 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 f i nd that Silver Airways continue to be fit, willing and able to operate as a

commuter carrie r
, and capable of providing reliable Essential Air S ervice at Altoona and Johnstown, Pennsylvania ;

4

. These docket s will remain open pending further Department action ; and

5 . We will serve copi es of this Order on the Mayor s and Airport Managers of Altoona and

Johnstown

, Pennsylvania, Silver Airways, and Colgan Air, Inc.

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



## AREA MAPAppendix B

Silver Airways Proposal:

(98% Completion Factor
Assumed ) Annual

Stats & Assumptions

Aircraft Type SF3

Departures 3,058

Block Hours 2,456

O&D Passengers 25,000

Load Factor 40%

Avg Fare 82

A/C Miles 243,385

RPMs (000) 3,310

ASMs (000) 8,275

Pax Ticket Revenue 2,054,840

Operating Expense

Fuel 1,478,562

Crew 662,450

Maintenance 1,616,073

Station 1,091,403

Distribution 288,207

A/C Ownership 341,642

Promotion 24,000

Fixed Overhead 261,500

Total 5,763,835

Operating Loss 3,708,995

5% Profit Margin on Cost 288,192

EAS Subsidy Required 3,997,187

Subsidy / Pax 160Appendix C

Silver Airways

Essential Air Service to be Provided at Altoona and Johnstown, Pennsylvania

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

Scheduled Service : 1 8 weekly nonstop and one

- stop round trips over an Altoona

- Johnstown

Washington Dulles or Johnstown

- Altoona

- Washington D ulles routing

Aircraft : 34

- passenger Saab 340 Rate per Eligible Flight: $ 1,089 1
Weekly Ceiling for each community : $ 3 9,204 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 significant elements of the required service, without prior approval. The carrier understands that an aircraft take

- off and landing at its

schedu led 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 th e 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 operated; flights that overfly points for lack of traffic will not be compensated. I n 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 unilatera lly, 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 stipulat ed 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 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.

Funds are not currently available for performance under this Order beyond September 30, 2012. The Government’s obligation for performance unde r this Order beyond September 30, 2012, 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 Se ptember 30, 2012, until funds are made available to the Department for performance. If funds are not made available for performance beyond September 30, 2012, the Department will provide notice in writing to the carrier.

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

1 Annual compensation of $3,997,187 divided by3,669 annual departures (36 weekly departures x 2 communities

x 52 weeks x 98 percent completion)

. 2 36 arrivals and departures per week multiplied by $1,089 per flight

.