Order: 2011-1-25

 Served: January 31, 2011

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

Issued by the Department of Transportation

on the 31st of January, 2011

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 selecting 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-year period beginning when the carrier inaugurates service through the end of the 24th month 

thereafter.

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-year 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, by Order 2009-10-7, October 16, 2009, the Department approved an alternate 

service pattern for Grand Island that permitted Great Lakes to receive its full subsidy if it 

operated some or all of its 18 weekly round trips to Denver. Great Lakes moved all 18 weekly 

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.
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In anticipation of the end of the rate term, the Department issued Order 2010-11-2, November 4, 

2010, soliciting proposals to provide EAS, with or without subsidy, at Grand Island, for a new 

two-year period. 

Proposals

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 SkyWest 

Airlines (SkyWest).

American Eagle

American Eagle proposes to operate two daily nonstop round trips (13 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 to 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 notice 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-year subsidy request is $3,394,101, and its second-year 

subsidy request is $4,050,132.

SkyWest

SkyWest 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 proposals of the four carriers may be accessed online at: 

http://www.regulations.gov/ by entering DOT-OST-2002-13983 in the “Enter Keyword 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 days’ notice to 

terminate services. The Airport Authority was appreciative of the bids received from four 
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airlines. The Board believed that American Eagle’s service “provides a significant improvement 

in service” and American Eagle’s proposal “supports the Airport Authority’s ultimate goal to 

become subsidy free.” It did not consider the bid from SeaPort Airlines because “they did not 

meet the fifteen (15) seat requirement.” It stated that the bid from SkyWest Airlines for service 

to Chicago O’Hare was popular and would be successful, but “felt the bid would not be 

considered by the Department of Transportation because of the cost of the bid.” The Airport 

Authority thanked Great Lakes “for the service it provided to Grand Island for the past two 

years.” The Airport Authority’s primary goal is becoming “EAS subsidy free” and the numerous 

cancelled flights by Great Lakes 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 Airport has been working diligently 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 not 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 any other proposal.

SkyWest’s proposal for 12 weekly nonstop flights to Chicago O’Hare International Airport using 

50-seat regional jet aircraft operating as United Express, required almost $800,000 more per year 

in annual subsidy than a comparable proposal (American Eagle’s 13 weekly nonstop flights) and 

it did not have community support. Thus, we will not select either SeaPort or SkyWest’s 

proposal.

This leaves the proposals from Great Lakes and American Eagle for consideration. Both 

proposals offer twin-engine, two-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 air transportation system. The subsidies requested are reasonable 

for the service provided.

In its recommendations to the Department, The Mayor of the City of Grand Island and The Hall 

County Airport Authority strongly 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 $215,000 per year), in the short-term. However, we find that American Eagle 

offers the best opportunity to significantly 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.
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We shall make this selection at Grand Island contingent upon the Department’s receiving 

properly 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 

regulations 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 Island, 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 Lakes’ 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 begins service. Consistent with established program policy, we 

typically 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 inaugurates 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 subject 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 carriers 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 Airlines to provide essential air service at Grand Island, 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 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, whichever comes first. Copies of flight logs for aircraft sold or 
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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 continues to be fit, willing and able to operate as a certificated

carrier and capable of providing reliable essential air service at Grand Island, Nebraska;

5. Under our authority in 49 U.S.C. 40109, we will allow American Eagle to cease operations at 

Grand Island on 120 days’ notice; 

6. We set the hold-in rate of compensation for Great Lakes Aviation, Ltd. for essential 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 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, whichever comes first. Copies 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;

8. This docket will remain open until further order of the Department; and

9. We will 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 SkyWest Airlines.

By:

SUSAN L. KURLAND

Assistant Secretary

for Aviation and International Affairs

(SEAL)

An electronic version of this document is available at http://www.regulations.gov
Appendix A

AREA MAP

This map is provided by Sabre® AirVisionTM 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 Island
Appendix B

Page 2 of 2
Appendix C

Page 1 of 2

American Eagle Airlines

Essential Air Service to be Provided at Grand Island, Nebraska

Effective Period: Two years beginning when American Eagle inaugurates service (on or after 

May 1, 2011), through the end of the 24th month thereafter

Scheduled Service: 13 weekly round trips to Dallas/Fort Worth International Airport

Intermediate stops and upline service: Service must be nonstop

Aircraft: Embraer 135 (37 seats); Embraer 140 (44 seats); or Embraer 145 (50 seats)

Rate per Eligible Flight: $1,6721

Weekly Ceiling: $43,3722

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 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 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 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 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 writing 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 performance. If funds are not made available for performance beyond March 3, 2011, 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 Annual compensation of $2,215,582, divided by 1,325 annual departures (26 flights per week x 52 weeks plus 4) x 

98 percent completion).

2 26 flights per week multiplied by $1,672 per flight.
Appendix 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: 18 weekly round trips to Denver

Intermediate stops and upline service: Service must be nonstop 

Aircraft: Beechcraft 1900D (19 seats)

Rate per Eligible Flight: $1,0901

Weekly Ceiling: $39,2402

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 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 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 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 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 writing 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 performance. If funds are not made available for performance beyond March 3, 2011, 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 Annual compensation of $1,999,827, divided by 1,835 annual departures (36 flights per week x 52 weeks plus 4) x 

98 percent completion).

2 36 flights per week multiplied by $1,090 per flight.