### Order 2012

- 7

- 35 Served: July 30, 2012

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION



### OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 30 th of July, 2012

Essential Air Service at

MERIDIAN

, MISSISSIPPI

Under 49 U.S.C. 41731 et seq

. DOCKET DOT

- OST

- 2008

- 0112

ORDER SELECTING CARRIER AND SETTING HOLD

- IN RATE

S UMMARY By this Order , the Department is selecting Silver Airways, Inc. (Silver), to provide E ssential A ir

S ervice (EAS) at Meridian

, Mississippi, for $2,417,808 annual subsidy

. T he service will consist

of 1 3 nonstop round trips per week to Atlanta (ATL) year round with 34

- seat Saab 340 aircraft. 1

The Order also sets a final rate for the incumbent, ExpressJet Airlines, d/b/a Delta Conn ection (Delta), for the period July 1, 2012, until it is replaced by Silver.

BACKGROUND By Order 2010

- 5

- 28, the Department selected Delta 2 to provide EAS at Meridian, Mississippi, through June 30, 2012. Annual service and subsidy levels were set a t 13 no nstop round trips per week to Atlanta and $686,489 annual subsidy for service with 50

- seat CRJ

- 200 regional jets . As the end of the contract approached, Order 2012

- 4

- 19, April 13, 2012, requested proposals by May 3, 2012. We received a timely

- filed proposal from only one applicant, Silver. 3 Silver proposes to provide 13 nonstop round trips per week to Atlanta with 34

- seat Saab 340 turboprops for $2,417,808 annual subsidy. We requested comment from the community regarding Silver’s proposal by June 2 1, 2012, and received the m on June 28, 2012.

COMMUNITY COMMENTS

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

2 ExpressJet is a wholly

- owned subsidiary of SkyWest Airlines, Inc

. 3 By Notice issued May 1, 2012, we extended the deadline for proposals to May 17, 2012, in response to a request by Silver.- 2

-

The community objected to the tentative schedule in Silver’s proposal. “[Silver’s ] first propos ed flight ar rives in Atlanta at 11:40 am, some four hours after the connections allowed by ou r current early morning flight which puts the passenger to their destination by noon in almo st all cases. The business passenger loses a half day of work compared to an early morning (6:00 am ) departure [as in Delta’s current schedule

. ] ” The community was also concerned that because the first flight of the day was scheduled to arrive in Atlanta at 11:40 am, and the last flight of the day to Meridian was scheduled to leave Atlanta at 4:40 pm, “the business traveler can’t complete even a half day of work [in Atlanta] before having to depart for home.”

RESPONSE OF SILVER On July 2, 2012, Silver responded with a revised schedule, as follows:

Silver indicated that “S t udying th e travel patterns of the community and best use of Silver Airways’ resources, this alternative service pattern would seem the best compromise. It should be understood that this is a draft schedule and may not be representative of the final published

schedu le.”

D ECISION

The selection of Silver is straightforward: their proposal is the only one that can be selected, and the proposed service and subsidy levels appear reasonable

.

The community expressed only one concern , that being the schedule initially o ffered by Silver. The revised schedule fully meets the concerns expressed by the community. The first flight of the day

from Meridian will leave at 6 am

, as the community requested, allowing Meridian originating passengers to arrive the same day at virtu ally any community in the U.S. Likewise the last flight of the day leaves Atlanta at 9 pm, and this later departure

, combined with the earlier scheduled departure at Meridian

, affords the business passengers a full day of work at Atlanta.

The carrier indicates that its revised schedule may not be representative of the final published

schedule. It would be counter

- productive for the Department to dictate an exact schedule for any carrier, as the best connecting times change from month

- to

- month as other carriers at the hub modify their schedule

. However, the revised schedule makes clear that Silver proposes to base an aircraft in Meridian, which by itself will go far to meet the community’s concerns.

C ARRIER TRANSITION Local Time of: Intermediate

From To Departure Arrival Aircraft Frequency Stops

Meridian Atlanta 600 825 SF3 X7 0

Meridian Atlanta 900 1125 SF3 7 Only 0

Meridian Atlanta 1330 1555 SF3 X6 0

Atlanta Meridian 1230 1305 SF3 X6 0

Atlanta Meridian 1715 1750 SF3 6 Only 0

Atlanta Meridian 2100 2135 SF3 X6 0- 3

-

We expect Silver and Delta to w ork together to make a smooth transition at Meridian . In that regard, before Delta suspends its service it must notify any passengers holding reservations for travel after the suspension date, to assist those passengers in making alternate air transportat ion arrangements, or to provide a refund of the ticket price, without pena lty, if requested.

Furthermore

, Delta must be compensated for its forced service from July 1, 2012, until Silver replaces it. The carrier requests $1,681,857 annual subsidy for 1 3 nonstop round trips per week to

Atlanta with a 50

- seat CRJ

- 200, the same service it was selected to provide. We have reviewed this claim, and it appears reasonable. 4 Therefore we will set a final rate for that service, as described in Appendix C

- 2.

CARRIER FITNESS

49 U.S.C. 41737(b) and 41738 require that the Department find an air carrier fit, willing, and able to provide reliable service before the Department may subsidize it to provide EAS

. Silver Airways, Inc., is subject to the Department’s con tinuing fitness requirements

. We contacted the Federal Aviation Administration, and it has raised no concerns that would negatively affect our fitness findings. The Department therefore concludes that the carrier remains 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, Inc., to provide E AS at Meridian

, Mississippi ;

2 . We set the final rate of compensation for Silver Airways, Inc., for the provision of EAS at
Meridian

, Mississippi

, as described in Appendix C

- 1 ;

3. We set the final rate of compensation for ExpressJet Airlines, d/b/a Delta Connection, for the provision of E AS at Meridian

, Mississippi , as described in Appendix C

- 2 ;

4

. We direct Silver A irways, Inc., and ExpressJet A irlines , d/b/a Delta Connection, 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 d ocumentation 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. Copies of flight logs for aircraft sold or disposed of

must be retained. The ca rrier may forfeit its compensation for any claim that is not supported

under the terms of this Order ;

5 . We find that Silver Airways, Inc.

, continue s to be fit, willing and able to operate as a

commuter carrier and capable of providing reliable EAS at th e these communities ;

4 The increase in subsidy for Delta between that set by Order 2010

- 5

- 28 and what we are setting here is due to a decrease in projec ted revenue, as reflected in more recent traffic forecasts, and in higher fuel prices. For that matter, the higher subsidy required by Silver is due to significantly lower projected revenue, offset partly by lower in direct operating expenses compared to D elta

.- 4

-

6 . We will continue to require ExpressJet Airlines, d/b/a Delta Connection

, to provide EAS at

Meridian until it is replaced by Silver Airways, Inc. ;

7 . Th is docket will remain open until further Order of the Department; and

8 . We will serve copies of this Order on the Mayor and Airport Manager of Meridian

, Mississippi

, Delta Airlines, Inc., ExpressJet Airlines, and Silver Airways, Inc.

By:

Susan Kurland Assistant Secretary for

Aviation and International Affairs (SEAL)

An electronic version of this document is available on the World Wide Web at http://www.regulations.govAppendix A

Nonstop Great Circle Miles to Meridian (MEI) Hattiesburg, PIB, 69 Columbus, GTR, 77 Jackson, JAN, 77 Mobile, MOB, 117 Birmingham, BHM, 144 Memphis, MEM, 200 Atlanta, ATL, 267Appendix B

Subsidy Need at Meridian, Mississippi, Docket 2008-0112

Order Hold-In

2010-5-28 Rate

Carrier ExpressJet ExpressJet Silver
Aircraft Type CRJ-200 CRJ-200 Saab 340
Weekly Nonstop Trips 13 13 13

Block Hours 1,657 1,531 1,990

Passengers 35,506 30,638 24,749

Fare $122.00 $124.84 $91.58

Passenger Revenue $4,331,751 $3,824,848

Other Revenue $438,963 $484,315

Total Revenue $4,770,714 $4,309,163 $2,266,480

Pilots $539,101 $570,577 $694,461

Fuel $1,140,193 $1,594,252 $1,173,748

Maintenance $756,361 $791,818 $1,353,062

Aircraft $728,761 $755,154 $226,278

Total Directs $3,164,416 $3,711,801 $3,447,549

Indirects $1,998,916 $1,993,933 $1,013,678

Operating Expense $5,153,333 $5,705,734 $4,461,227

Inflation $38,650 $0 $0

Profit $257,667 $285,286 $223,061

Economic Cost $5,449,650 $5,991,020 $4,684,288

Annual Subsidy $678,936 $1,681,857 $2,417,808Appendix C

- 1

Silver Airways, Inc., Essential Air Service to be Provided to

Meridian

, Mississippi , Docket 2008

- 0112

Effective Period : Start of Silver ’ s s ervice at Meridian

, through the 24 th month thereafter.

Scheduled Service : 1 3 nonstop round trips per week to Atlanta (ATL) Aircraft Type : Saab 340, 34 seats Annual Subsidy $2,417,808 Annual Flights 1,325 1

Subsidy per Flight: $ 1,825 2

Weekly Ceiling : $ 47,450 3

Note: The carrier understands that it may forfeit its compensation for any flights that it does not operate in conformance wi th the terms and stipulations of the rate Order , including the service plans outlined in the Order and any other significant elemen ts 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 b een 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 jeop ardize 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 this rate, it must first notify the Office of Aviation Analysis in writing and receive w ritten 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 be adjusted or disallowed, the Department will consider the extent to which the goals of the program ar e 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 lo cation 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 spec ific location without regar d 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 pa yment.

Subs idy 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 th e foregoing paragraph.

Funds are not currently available for performance under this Order beyond September 30, 2012 . The Government’s obligation for performance under 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 September 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 submitted within 60 days of the last day of service provided under this Order

.

1 13 flights x 2 directions x 52 weeks x .98 = 1,325

. 2 Annual subsidy divided by annual flights.

3 26 flights per week x $1,825.Appendix C

- 2

ExpressJet Airlines, Essential Air Service to be Provided to Meridian, Mississippi, Docket 2008

- 0112

Effective Period : July 1, 2012, until start of Silver’ service

Scheduled Service : 1 3 nonstop round trips per week to Atlanta (ATL) Aircraft Type : CRJ

- 200, 50 seats Annual Subsidy $ 1,681,857 Annual Flights 1,32 9 1

Subsidy per Flight: $1, 266 2

Weekly Ceiling : $ 32,916 3

Note: The carrier understands that it may forfeit its compensation for any flights that it does not operate in conformance wi th the terms and stipulations of the rate Order, including the service plans outlined in the Order and any other significant elemen ts 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 b een 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 jeop ardize 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 this rate, it must first notify the Office of Aviation Analysis in writing and receive w ritten 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 be adjusted or disallowed, the Department will consider the extent to which the goals of the program ar e 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 lo cation 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 spec ific location without regar d 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 pa yment.

Subs idy 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 th e foregoing paragraph.

Funds are not currently available for performance under this Order beyond September 30, 2012 . The Government’s obligation for performance under this Order beyond September 30, 2012 , is subject to the availability of appropriated funds from wh ich 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 September 30, 2012 , until funds are made available to the Department for performance. If funds are no t made available for performance beyond September 30, 2012 , the Department will provide notice in writing to the carrier.

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

.

1 13 flights x 2 directions x 52 weeks x .98 x 313/312 = 1,32 9

. 2 Annual subsidy divided by annual flights.

3 2 6 flights per week x $1, 266

.