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                                                                 ORDER 2001-6-22

                                                           Served: June 28, 2001

[DEPARTMENT OF              UNITED STATES OF AMERICA
TRANSPORTATION            DEPARTMENT OF TRANSPORTATION
UNITED STATES OF            OFFICE OF THE SECRETARY
AMERICA LOGO]                   WASHINGTON, D.C.

                   Issued by the Department of Transportation
                         on the 25th day of June, 2001


----------------------------------
 Essential Air Service at

 EPHRATA/MOSES LAKE, WASHINGTON                             DOCKET OST-98-3344-6

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

                             ORDER SELECTING CARRIER
                            AND SETTING SUBSIDY RATE

SUMMARY

By this order, the Department is selecting Big Sky Airlines, to provide
essential air service at Ephrata/Moses Lake, Washington, for a two-year period
at an annual subsidy of $479,702.

BACKGROUND

By Order 2000-3-5, issued March 13, 2000, the
Department selected Horizon Air Industries, Inc.
(Horizon), to provide essential air service at
Ephrata/Moses Lake for a two-year period. Subsidy
was set at an annual rate of $514,311 for the                      [MAP]
period January 1, 2000, through December 31, 2001,
for twelve nonstop round trips each week (two
round trips Monday-Friday and two round trips
over the weekend period) between Ephrata/Moses
Lake and Seattle with 37-seat DeHavilland Dash
8-200 aircraft.

Although Horizon's two-year contract was not set to expire until the end of the
year, the Department become aware of another carrier that was interested in
providing essential air service at Ephrata/Moses Lake. We contacted Horizon and
advised the carrier of this situation. Horizon stated that it did not object to
the Department's issuing an order seeking replacement service proposals and
would not object to such a replacement carrier being selected to begin service
prior to the end of the current contract.



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As a result, we issued Order 2001-5-9, May 10, 2001, requesting proposals from
all carriers interested in providing replacement essential air service at
Ephrata/Moses Lake. In response to that order, we received a proposal only from
Big Sky Transportation Company, Inc., d/b/a Big Sky Airlines (Big Sky).

BIG SKY PROPOSAL

Big Sky proposes to provide Ephrata/Moses Lake with 18 nonstop round trips each
week to Seattle with 19-seat Metro III or Metro 23 aircraft. The carrier
requests an annual subsidy of $479,702 for this service. Details of the subsidy
calculation for Big Sky's proposed service are contained in Appendix B.(l)

Big Sky's proposed service would be provided under a code-share agreement with
Alaska Airlines. It has also requested that the route be added to Big Sky's
existing code-share agreement with Northwest Airlines.(2)

COMMUNITY COMMENTS

The City of Ephrata and the City of Moses Lake, as well as the Port of Ephrata
and the Port of Moses Lake, have all advised the Department by telephone that
they fully support the selection of Big Sky to provide essential air service at
the community.

CARRIER SELECTION

We have decided to select Big Sky to provide Ephrata/Moses Lake's essential air
service for a two-year period at the agreed-to annual subsidy rate of $479,702.
Big Sky's three round trips a day will provide approximately the same number of
seats a day to the Seattle hub. As set forth in Appendix A, service is to
consist of eighteen nonstop round trips each week between Ephrata/Moses Lake and
Seattle with 19-seat Fairchild Metro III or Metro 23 aircraft.

Under the Department's governing statutes, 49 U.S.C. 41733(c), we are required
to consider, among other things, the applicant's operating experience, its
marketing arrangements to ensure service beyond the hub, and the community's
views. Big Sky has been providing essential air service at seven communities in
Montana since 1980, and has recently been selected to provide subsidized air
service in Texas, Oklahoma and Arkansas. The carrier has the full support of the
community and its affiliations with Northwest Airlines and Alaska Airlines will
provide the community with the full panoply of service and fare options
available at Seattle. We find that the agreed-to service and subsidy levels are
reasonable.(3)


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(1) Although not part of it's proposal, Big Sky states that it will provide
    Ephrata/Moses Lake with one round trip each service day to Spokane in order
    to shuttle its aircraft in and out of its home base in Billings for
    maintenance.

(2) Big Sky also has a code-share arrangement with America West Airlines.

(3) Big Sky has advised the Department that, if selected, it has targeted a
    start-up date at Ephrata/Moses Lake of July 29, 2001.



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CARRIER FITNESS

49 U.S.C. 41737(b) and 41738 requires that we find an air carrier fit,
willing and able to provide reliable service before we may compensate it for
essential air service. Big Sky is a certificated air carrier and has operated
successfully for a number of years. We last reviewed the fitness of Big Sky when
we selected it to provide essential air service at the seven Montana points in
Order 2000-11-11. Big Sky remains subject to the Department's continuing
fitness monitoring. No information has come to our attention that would lead us
to conclude that Big Sky does not continue to be fit. The Federal Aviation
Administration states that it knows of no reason to question Big Sky's fitness.
We therefore conclude that the carrier remains fit to conduct the operations
proposed here.

CARRIER TRANSITION

As a final matter, we expect both Horizon and Big Sky to work together to
arrange an orderly transition of service at Ephrata/Moses Lake. This includes
notifying all passengers holding reservations on affected flights that Horizon's
service will be suspended, informing them of the availability of replacement
service by Big Sky, and assisting them in making alternative reservations.

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

ACCORDINGLY,

1.   We select Big Sky Transportation Company, Inc., d/b/a Big Sky Airlines, to
     provide essential air service at Ephrata/Moses Lake, Washington, as
     described in Appendix A, for the period beginning on or about July 29,
     2001, through July 31, 2003;

2.   We set the final rate of compensation for Big Sky Transportation Company,
     Inc., d/b/a Big Sky Airlines, for the provision of essential air service at
     Ephrata/Moses Lake, Washington, as described in Appendix A, for the period
     from on or about July 29, 2001, through July 31, 2003, payable as follows:
     for each month during which essential air service is provided, the amount
     of compensation shall be subject to the weekly ceiling set forth in
     Appendix A, and shall be determined by multiplying the subsidy-eligible
     arrivals and departures completed during the month by $264.15;(4)

3.   We direct Big Sky Transportation Company, Inc., d/b/a Big Sky 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 or until the Department indicates that the records may be
     destroyed. Copies of flight logs for aircraft sold or disposed of



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(4) See Appendix B for the calculation of this rate, which assumes the use of
    the aircraft designated. If the carrier reports a significant number of
    aircraft substitutions, revision of this rate may be required.



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

4.   We find that Big Sky Transportation Company, Inc., d/b/a Big Sky Airlines,
     continues to be fit, willing and able to operate as a certificated air
     carrier and capable of providing reliable essential air service at
     Ephrata/Moses Lake, Washington;

5.   Docket OST 98-3344 shall remain open until further order of the Department;
     and

6.   We will serve copies of this order on the civic officials of Ephrata and
     Moses Lake, the manager of the Grant County Airport, the Washington State
     Department of Transportation, Aviation Division; the Governor of
     Washington; Big Sky Airlines, and Horizon Air Industries.

By:




                                 SUSAN MCDERMOTT
                     Deputy Assistant Secretary for Aviation
                           and International Affairs






(SEAL)


              An electronic version of this document is available
                  on the World Wide Web at http://dms.dot.gov/



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                                                                      APPENDIX A
                                                                     Page 1 of 2



                                BIG SKY AIRLINES
                     ESSENTIAL AIR SERVICE TO BE PROVIDED AT
                         EPHRATA/MOSES LAKE, WASHINGTON


<TABLE>
<S>                        <C>
 Effective Period:         On or about July 29, 2001, through July 31, 2003

 Service:                  Eighteen nonstop round trips each week to Seattle

 Aircraft:                 Fairchild Metro III or Metro 23 aircraft (19 passenger seats)

 Timing of Flights:        Flights must be well timed and well spaced to ensure full compensation.

 Subsidy Rate:             Per year - $479,702
                           Per arrival from or departure to Seattle - $264.15(1)

 Weekly
 Compensation Ceiling:     $9,509.40(2)
</TABLE>






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(1) Annual compensation of $479,702, divided by the number of arrivals and
    departures estimated to be performed annually (l,816), calculated by
    multiplying 36 arrivals and departures each week x 52 weeks x 97 percent
    completion.

(2) The subsidy rate for each arrival/departure ($264.15) multiplied by the
    number of scheduled subsidy-eligible flights per week (36).


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                                                                      APPENDIX A
                                                                     Page 2 of 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 plan 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 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 this 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 Aviation Analysis in writing and
receive written approval from the Department to be assured 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. 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 agreed amounts or at the agreed 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 parities to the agreement do not constitute a total or partial
reduction 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 not operate
to controvert the foregoing paragraph.