Order 2013

- 4

- 17 Served: April 25, 2013


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

Issued by the Department of Transportation

on the 25 th of April, 2013

Ninety

- day Notice of Pacific Wings Airlines, Inc., to terminate service at:

Kamuela, Hawaii

under 49 U.S.C. 41731 et seq

. Docket DOT

- OST

- 1997

- 2833

ORDER PROHIBITING SUSPENSION OF SERVICE AND REQUESTING PROPOSALS
Summary By this order, the Department prohibit s Pacifi c Wings, LLC (Pacific Wings) from terminating its subsidy

- free service at Kamuela, Hawaii, at the end of the 90

- day notice period, effective June 12, 2013, and for successive 30

- day periods until a replacement carrier has been selected and begins service. We are also requesting proposals by May 22 from carriers interested in providing replacement E ssential A ir S ervice (EAS) at Kamuela

. Background On March 14 , 20 1 3

, Pacific Wings filed notice of its intent to terminate its subsidy

- free service at Kamuela, Hawaii , effective June 12, 2013

. Accor ding to Sabre Airline Solutions, the following service, all nonstop, was provided to Kamuela with 9

- seat Cessna Caravan aircraft when the carrier filed its notice:

Time Weekly
AL FLT ORG DST Departure Arrival EQP Departures
LW 211 MUE OGG 1030 1110 CNA 7
LW 299 MUE OGG 1520 1555 CNA 5
12

LW 210 OGG MUE 930 1010 CNA 7
LW 298 OGG MUE 1420 1455 CNA 5
12 Source, Sabre Airline Solutions- 2

-

Hold

- In Pacific Wings ’ proposed termination of service at Kamuela would leave it with no scheduled air service . Thus, the Department must prohibit the carrier from terminat ing such service at the end of its 90

- day notice period, i.e., June 12, 2013

. 1 W e will require Pacific Wings to provide 1 2 nonstop round trips per week at Kamuela for 30 days beyond June 12, 2013, and to maintain that level of service for successive 30

- day periods until we have completed processing the carrier

- selection case and the selected carrier has actually started service

. Request for Proposals Carriers interested in filing proposals for K amuela

-- with or without subsidy

-- should

e

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

, no later than May 22 , 201 3

. Our staff will then docket the proposals, thereby making them public, and direct each carrier to serve a copy of its proposal on the civic parties and other applicants. Shortly afterwards, we will provide a summary of the proposals to the community officials and ask them to submit their final comments. We will give full consideration to all proposals filed in a timely

manner. 2

Interested carriers should prepare their proposals with every expectation that their initial proposals will also be their final and only proposals. We retain the discretion to negotiate proposals with carriers when we deem it desir able. 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 round of proposals.

We are here providing interested carrier s with some basic information to serve as guidance when they prepare their proposals, but we will not prescribe a precise format for their proposals. We expect proposals to adequately describe the service being proposed and the annual amount of subsidy be ing 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 h ours, revenues and expenses. We strongly encourage clear, well

- documented proposals that will facilitate their evaluation by the community and the Department. 3 W e are requesting 12 nonstop round trips per week. Service should be to a medium or large hub

.

1 The FAA R eauthorization Act (P.L 112.95) capped the EAS program, but specifically excluded Alaska and Hawaii from that ceiling.
2 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 typically do not proceed with the carr ier

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

- free service as proposed.
3 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 arrangements 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 provide 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 o ur general provisions governing EAS will be included in the selection order as part of our authorization of subsidy for the selected service. Appendix C of this order contains those general provisions.- 3

-

As always, staff will work with the carrier s to ensure that service and subsidy are reasonable. However, we would not dismiss any proposal out of hand without first consulting with community officials. We encourage any proposal that would simultaneously satisfy the community’s needs and minimize taxpayer expenditures.

Carriers are also welcome t o 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 remain competitive.

In order to assist carriers in makin g their passenger and revenue forecasts, we have included historical passenger data in Appendix B. We note that Kamuela’s traffic is among the lowest in the EAS program. We understand that Pacific Wings did not operate its service unless passengers called ahead to reserve a flight, and that fares when service was provided were high.

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 published on Regulations.gov, each page should be formatted to be viewed online.

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

- free workplaces and nondiscrimination. 4 Consequently, all carriers receiving Federal subsidy to support essential air service must certify that they are in compliance with Department regulations regard ing drug

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

- 5903. The Department is prohibited from paying subsidy to carriers that do not submit these documents. 5

4 The regulations 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 1964; 49 CFR Part 27

–
n ondiscrimination on t he 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). 5 The certifications are also available at : http://www.dot.gov/policy/aviation

- policy/small

- community

- rural

- air

- service/essential

- air

- service

.- 4

-

Community Comments The community 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 State and ask them to submit their final comments shortly after May 22 , the due date for carrier proposals.

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

ACCORDINGLY;

1. The Department requests proposals from carriers interested in providing essential air service, with subsidy if necessary, by May 22 , 20 13

. Proposals should include all the data required by section 204.4 of the Department’s Regulations (14 CFR 204.4). Proposals should be emailed to EAS@dot.gov and be entitled “Proposals to Provide Essential Air Service at Kamuela, Hawaii

. ” Service should be consistent with that discussed in the body of the order and shown in Appendix C

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

- 366

- 1047 or Kevin.Adams@dot.gov ;

2. The Department prohibits Pacific Wings Airlines, LLC., from suspending its subsidy

- free service at Kamuela, Hawaii

, at the end of its 90

- day notice period and requires it to maintain at least 1 2 nonstop round trips a week with 9

- seat or larger aircraft for an additional 30

- day period through Ju ly 12, 2013 , or until a carrier capable of provid ing reliable essential air service actually begins service, whichever comes first; 6

3 . The Department directs Pacific Wings Airlines, LLC, to retain all books, records, and other source and summary documents to support subsidy 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. Suc h documentation shall be retained for seven years 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 compensatio n for any claim that is not supported under the terms of this order;

4 . Th is docket will remain open until further order of the Department; and

6 In accordance with 49 U. S.C. 41734(c), we will extend the carrier ’ s service obligation for successive 30

- day periods as necessary until replacement service actually begins.- 5

-

5 . The Department will serve a copy of this order on the mayor of Kamuela, Hawaii ; the Hawaii Department of Transportation; and on the carriers in our service list.

By:

Susan L. Kurland Assistant Secretary for Aviation and International Affairs (SEAL) An electronic version of this document is available

a t http://www.regulations.gov

## Appendix A

Kamuela, Hawaii (MUE)

Nonstop Great

- Circle Miles from Kamuela Kona (KOA) 30 Hilo (ITO) 45 Kahului (OGG) 79 Honolulu (HNL) 172Appendix B

Pacific Wings, Scheduled Service, Kamuela (MUE)

T-100 Market Report T-100 Segment Report Passengers Departures
Year Month Origin Dest O&D Scheduled Performed
2010 2 6 6 12 52 11
2010 3 1 1 52 2
2010 4 1 3 4 50 3
2010 5 0
2010 6 1 1 50 1
2010 7 1 1 52 2
2010 8 3 3 6 52 3
2010 9 2 2 4 50 3
2010 10 5 2 7 52 2
2010 11 3 4 7 50 3
2010 12 4 3 7 52 2
2011 1 9 9 52 1
YE 1/31/11 35 24 59 564 33

2011 2 7 7 14 48 5
2011 3 2 1 3 54 1
2011 4 0
2011 5 1 1
2011 6 0
2011 7 1 1 52 4
2011 8 3 4 7 54 2
2011 9 3 1 4 52 2
2011 10 0
2011 11 0
2011 12 1 1 2 53 1
2012 1 1 2 3 53 4
YE 1/31/12 18 17 35 366 19

2012 2 2 2 50 1
2012 3 0
2012 4 1 1 2 51 2
2012 5 1 1 54 2
2012 6 0
2012 7 1 1 2 53 2
2012 8 1 1 54 0
2012 9 0 50 0
2012 10 2 2 54 2
2012 11 0 52 0
2012 12 8 8 52 2
2013 1 4 2 6 54 5
YE 1/31/13 8 16 24 524 16A ppendix 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 o f 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 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 sche dule 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 applicabl e period of these rates, 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. In determining whether subsidy payment for a deviating flight should b e 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 c ompletely, 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 stipu lated 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 th e Department and carrier 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.

Funds may not be available for performance under this solicitation beyond [DATE]. The Government ’s obligation for performance under th is solicitation beyond [DATE], is contingent upon 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 [DATE] , until funds are made available to the Department for performance. If funds are not made available for performance beyond [DATE], the carrier will receive notice in writing from the Department.

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