Order: 20 1 1
- 1
- 25 Served : January 31 , 201 1


### UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C. Issued b y the Department of Transportation on the 31 st of January , 201 1
Essential Air Service at GRAND ISLAND, NEBRASKA Under 49 U.S.C. 41731 et seq . Docket DOT - OST - 2002 - 13983

ORDER SELECTING CARRIER Summary By this order , the Department is s electing American Eagle Airlines (American Eagle) to provide essential air service (EAS) at Grand Island, Nebraska , for an annual subsidy of $2, 215,582, for a two - ye ar period beginning when the carrier inaugurates service through the end of the 24 th month thereafte r . 1 Background By Order 2008

- 7
- 8, July

3, 2008, the Department selected Great Lakes Aviation, Ltd. (Great Lakes) to provide 18 nonstop round trips per week to Kansas City International Airport using 19
- passenger Beech 1900 aircraft, for a two

- ye ar period beginning when the carrier inaugurated full EAS, at an annual subsidy amount of $2,271,640. Great Lakes inaugurated partial EAS on February 1, 2009, with 12 nonstop round trips per week to Kansas City . On April 8, 2009, Great Lakes added an additional six weekly round trips to Kansas City , fulfilling the carrier’s full service obligation , meaning that the contract will end on April 30, 2011
. With full support from the community , b y Order 2009

- 10
- 7, October 16, 2009 , the Department approved an alternate service pattern f

or Grand I sland that permitted Great Lakes to receive its full subsidy if it operated some or all of its 18 weekl y round trips to Denver. Great Lakes moved all 18 weekl y round trips from Kansas City to Denver on December 1, 2009.

1 Such subsidy is calculated and distributed on a fiscal year basis, subject to the availability of appropriated funds.- 2
-

In anticipation of the e nd of the rate term, the Department issued Order 2010
- 11
- 2, November 4, 2010 , solicit ing proposals to provide EAS , with or without subsidy , at Grand Is land, for a new two - ye ar period
. Proposal s In response to that order, we received proposals from four carriers: Great Lakes, the incumbent, American Eagle, Alaska Juneau Aeronautics, Inc. d/b/a SeaPort Airlines (SeaPort), and Sky West Airlines (Sky

West)
. Am erican Eagle American Eagle proposes to operate two dail y nonstop round trips (1 3 total round trips per week) from Grand Island to Dallas/Fort Worth International Airport, for an annual subsidy rate of $2, 215,582
. American Eagle proposes to operate Embraer regional jet aircraft, seating 37, 44, or 50 passengers. American Eagle requests the ability t o use these aircraft to match supply with demand, as well as day

- of

- operation swaps for operational flexibility
. As a condition of its proposal, American Eagle requested that the DOT and Grand Island waive the right to hold

- in upon its filing of a 120

- day n otice to terminate service. Great Lakes Great Lakes proposes to continue its current service pattern at Grand Island with 18 nonstop round trips per week to Denver International Airport using 19

- passenger Beechcraft 1900D aircraft for an annual subsidy of $1,999,827. The carrier would continue to offer service patterns and schedule times designed to connect with its code

- share partners (Frontier Airlines and United Airlines). SeaPort SeaPort proposes to serve Grand Island with three daily nonstop round trips to Denver ( 18 total per week) and two daily

nonstop round trips to Kansas City ( 12 total per week), utilizing 9

- passenger Pilatus PC

- 12 aircraft. Its first

- ye ar subsidy request is $ 3,394,101 , and its second

- ye ar subsidy request is $ 4,050,132
. SkyWest Sky West has proposed 12 nonstop round trips each week from Grand Island to Chicago O’Hare International Airport. It would operate the service as United Express using 50

- seat Canadair regional jet aircraft, for an annual subsidy of $2,999,758

. The complete proposal s of the four carriers may be accessed online at : http://www.regulations.gov/ by entering DOT

- OST
- 200 2
- 13983 in th e “Enter Key word or ID” field. Community and State Comments A letter from the Hall County Airport Authority

Board (Airport Authority) stated that it voted (5

- 0) to recommend the bid from American Eagle to provide nonstop regional jet service to Dallas/Fort Worth International Airport. Included in its recommendation, the Airport Authority agreed to waive the right to hold in American Airlines upon issuance of 120 day s’ notice to terminate services. The Airport Authority was appreciative of the bids received from four- 3
-

airlines. The Board believed that American Eagle’s service “provides a significant improvement in ser vice” and American Eagle’s proposal “supports the Airport Authority ’s ultimate goal to become subsidy free.” Itdid not consider the bid from SeaPort Airlines because “they did not meet the fifteen (15) seat requirement. ” It stated that the bid from SkyW est Airlines for service to Chicago O’Hare was popular and would be successful, but “felt the bid would not be considered b y the Department of Transportation because of the cost of the bid.” The Airport Authority thanked Great Lakes “for the service it pr ovided to Grand Is land for the past two ye ars.” The Airport Authority ’s primary goal is becoming “EAS subsidy free” and the numerous cancelled flights b y Great L akes and its monthly average enplanements of 550 would not improve if “we continue the service with Great Lakes Aviation.” Jay Vavricek, Mayor of the City of Grand Island, submitted a letter of support and a resolution for thirteen (13) weekly

nonstop flights to Dallas/Fort Worth with American Eagle Airlines. “The Central Nebraska Regional Airpo rt has been working diligentl y to improve the air service options available to central Nebraskans and bring affordable and convenient options to serve more passengers.” Decision SeaPort’s application proposes service with 9

- seat aircraft, and, thus, did n ot meet the 15

- seat requirement for Grand Island and the community does not support its proposal. SeaPort’s proposal also required a higher annual subsidy than an y other proposal. Sky West’s proposal for 12 weekl y nonstop flights to Chicago O’Hare International Airport using 50
- seat regional jet aircraft operating as United Express , required almost $800,000 more per ye ar in annual subsidy

than a comparable proposal (American Eagle’s 13 weekly nonstop flights) and it did not have community support. Thus, w e will not select either SeaPort or Sky West’s proposal. This leaves the proposals from Great Lakes and American Eagle for consideration. Both proposals offer twin

- engine, tw o - pilot aircraft with 15 or more seats, and provide through ticketing and baggage transfer with major airlines (Frontier and United for Great Lakes and American for American Eagle) and both proposals would offer service to a large hub airport with numerous connections to the a ir transportation sy stem. The subsid ies requested are reasonable for the service provided. In its recommendations to the Department, The Mayor of the City of Grand I sland and The Hall County Airport Authority

strongl y supported American Eagle’s proposal to DFW. When a community

strongly supports a proposal we attempt to defer to the community ’s preference when possible
. In this case , American Eagle’s proposal requires more subsidy than Great Lakes ’ (approximately

$2 15 ,000 per year), in the short

- term. However, we find that American Eagle offers the best opportunity to significantl y increase passenger levels and lower subsidy levels in the out years, and will select it on that basis. We caution the community , however, that if these twin goals are not attained, we would be inclined to revert to subsidizing 19

- seat aircraft at the end of this two

- year contract. Based on all of the above , we will select American Eagle to provide EAS at Grand Island for a two

- year period.- 4
-

We shall make th i s selection at Grand Island contingent upon the Department’s receiving properl y executed certifications from American Eagle that the carrier is in compliance with the Department’s regulations regarding drug

- free workplaces and nondiscrimination, as well as the regulation s concerning lobbying activities. As a final matter, we expect Great Lakes to work together with American Eagle to ensure a smooth transition in service at the respective communities. In that regard, before Great Lakes suspends its service at Grand Islan d , we expect it to contact all passengers holding reservations for travel after the final date of service, to inform them of the change in service, and to assist them in arranging alternate transportation or to provide a refund of the ticket price, without penalty , if requested. Hold - in rate The subsidy rate for Great L akes’ current service ends on April 30, 2011. If American Eagle does not inaugurate service by May 1, 2011, we will establish a bridge rate to compensate Great Lakes until American Eagle be gins service. Consistent with established program policy , we ty picall y use a carrier’s prospective proposal that was submitted during the competitive bid process to establish a bridge rate until the new carrier inaugurates service. After reviewing Great Lakes’ proposed rate, we have concluded that it appears reasonable for the service at issue. We will therefore establish it as the final rate for the carrier’s hold

- in service at Grand Island, for the period from May

1, 2011, until American Eagle inaugurat es service. Carrier Fitness 49 U.S.C. 41737(b) requires that we find an air carrier fit, willing, and able to provide reliable service before we may

subsidize it to provide essential air service
. American Eagle is sub j ect to the Department’s continuing fitness requirements, and no information has come to our attention that would cause us to question 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. We therefore conclude that the carrier s remain fit to conduct the operations proposed here. This order is issued under authority delegated in 49 CFR 1.56a(f). ACCORDINGLY, 1. We select American Eagle A irlines to provide essential air service at Grand I sland, Nebraska ; 2 . We set the final rate of compensation for American Eagle for the provision of essential air service at Grand Island, Nebraska , as described in Appendix C , page 1 ; 3 . We direct American Eagle to retain all books, records, and other source and summary documentation to support claims for pay ment, and to preserve and maintain such documentation in a manner that readil y permits its audit and examination by representatives of the Department. Such documentation shall be retained for seven ye ars or until the Department indicates that the records may

be destroyed, whichever comes first. Copies of flight logs for aircraft sold or- 5
-

disposed of 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 American Eagle continue s to be fit, willing and able to operate as a certificated carrier and capable of providing reliable essential air service at Grand Is land, Nebraska ; 5. Under our authority

in 49 U
. S
. C
. 40109, w e will allow American Eagle to cease operations at Grand Island on 120 days ’ notice; 6 . We se t the hold

- in rate of compen sation for Great Lakes Aviation, Ltd. for essenti al air service at Grand Island, Nebraska, as described in Appendix C, page 2; 7. We direct Great Lakes Aviation, Ltd. to retain all books, records, and other source and summary documentation to support claims for payment, and to preserve and maintain such documentation i n 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, whichever comes first. Copies of fli ght 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; 8
. Th is docke t will remain open until further order of the Department; and 9
. We wi ll serve copies of this order on the mayor of Grand Island , the Hall County Executive Airport Director , Alaska Juneau Aeronautics, Inc. d/b/a SeaPort Airlines, American Eagle Airlines, Great Lakes Aviation, Ltd., and Sky West Airlines
. By :

SUSAN L. KURLAND Assistant Secretary for Aviation and International Affairs (SEAL) An electronic version of th is document is available at http://www.regulations.govAppendix A



## AREA MAP

This map is provided by Sabre ® AirVision TM Profit Essentials and is being used with express permission of the copyright holder, Sabre Airline Solutions®.Appendix B Page 1 of 2
American Eagle Airlines Proposal to serve Grand IslandAppendix B Page 2 of 2Appendix C Page 1 of 2

Am erican Eagle Airlines Essential Air Service to be Provided at Grand Island, Nebraska Effective Period : Two ye ars beginning when American Eagle inaugurates service (on or after May 1, 2011) , through the end of the 24 th month thereafter Scheduled Service : 1 3 weekl y round trips t o Dallas/Fort Worth International Airport Intermediate stops and upline service : S ervice must be nonstop Aircraft : Embraer 135 (37 seats); Embraer 140 ( 44 seats ) ; or Embraer 145 ( 50 seats ) Rate per Eligible Flight: $ 1, 6 72 1 Weekly Ceilin g : $ 43,3 7 2 2 Note: The carrier understands that it may forfeit its compensation for any flights that it does not operate in conformanc e 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 eligibility for a flight that has not been completed, such as certain weather cancellations, only completed flights are considered eligible for subsidy. In add ition, 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 scop e 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 ensured of full compensation. Should circumstances warrant, the Department m ay 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 paym ent for a deviating flight should be adjusted or disallow ed, 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 complete ly , 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 w riting by the 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 b e 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 March 3, 2011
. The Government’ s obligation for performance under this order beyond March 3, 2011 , 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 performanc e under this order beyond March 3, 2011 , until funds are made available to the Department for performance. If funds are not made available for performance beyond March 3, 2011 , the Department will provide notice in w riting to the carrier. All claims for payment must be submitted within 60 days of the last day of service provided under this order.
1 Annual compensation of $2,215,582 , divided by 1,32 5 annual departures (26 flights per week x 52 weeks plus 4) x 98 percent completion)
. 2 26 flights per week multiplied by $ 1,6 72 per flight.Appe ndix C Page 2 of 2 Great Lakes Aviation, Ltd. Essential Air Service to be Provided at Grand Island, Nebraska Effective Period : May

1, 2011 , until American Eagle inaugurates service Scheduled Service : 1 8 weekl y round trips to Denver Intermediate stops and upline service : Service must be nonstop Aircraft : Beechcraft 1900D (19 seats) Rate per Eligible Flight: $ 1, 0 90 1 Weekly Ceiling : $ 39,240 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 scheduled destination constitutes a completed flight; absent an explanation supporting subsidy eligibi lity 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 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 comple te 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 complete ly , 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 w riting by the 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 are not currently available for performance under this order beyond March 3, 2011
. The Government’s obligation for performance under this order beyond March 3, 2011 , 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 March 3, 2011 , until funds are made available to the Department for perfo rmance. If funds are not made available for performance beyond March 3, 2011 , the Department will provide notice in w riting to the carrier. All claims for payment must be submitted within 60 days of the last day of service provided under this order.

1 Annual compensation of $1,999,827 , divided by 1,8 35 annual departures (36 flights per week x 52 weeks plus 4) x 98 percent completion)
. 2 36 flights per week multiplied by $ 1,0 90 per flight.