Order 2011-1-27 

Served: February 3, 2011 

^s^ ^ 

f^^^mr^ UNITED STATES OF AMERICA 

g ^ H 5 DEPARTMENT OF TRANSPORTATION 

%\^^^ ^ OFFICE OF THE SECRETARY 

^^^^rfo^^"^ WASHINGTON, D.C. 

Issued by the Department of Transportation 

On the 31st day of January, 2011 

Essential Air Service at 

GLASGOW, MONTANA 

GLENDIVE, MONTANA 

HAVRE, MONTANA 

LEWISTOWN, MONTANA 

MILES CITY, MONTANA 

SIDNEY, MONTANA 

WOLF POINT, MONTANA 

Under49U.S.C. 41731 etseq. 

Docket DOT-OST-1997-2605 

ORDER SELECTING CARRIER AND SETTING FINAL SUBSIDY RATES 

Summary 

By this order, we are selecting Gulfstream International Airlines (Gulfstream), to provide 

subsidized essential air service (EAS) with 19-passenger Beechcraft B-1900D aircraft at 

Glasgow, Glendive, Havre. Lewistown, Miles City, Sidney and Wolf Point, Montana, for a 

two-year period beginning when the carrier inaugurates full EAS at all seven communities 

through the end of the 24' month thereafter, at a combined annual subsidy rate of 

$10,903,854.' (See Appendix A for a map.) 

Background 

By Order 2007-12-22, December 21, 2007, the Department selected Great Lakes Aviation, 

Ltd., Inc. (Great Lakes), operating as both a Frontier and United Airlines code-share partner, 

to provide subsidized EAS at the seven Montana communities, utilizing 19-seat Beech1900D aircraft, for a two-year period at a combined annual subsidy rate of $8,201,992. Great 

Lakes' original proposal was for service to Billings with the prospect of later ^hanging the 

communities' hub from Billings to Denver if such a change could be agreed upon with the 

communities. Great Lakes commenced full EAS under Order 2007-12-22 in April 2009. 

Such subsidy is calculated and distributed on a fiscal year basis, subject to the availability of funds. 
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By Order 2008-7-9, July 3, 2008, the Department approved Great Lakes' request to provide 

service to Denver, instead of Billings, at Lewistown, Miles City and Sidney. Similarly, by 

Order 2010-6-8, June 7, 2010, the Department approved the carrier's request to alter its 

service pattern at Glendive and provide 6 round trips a week to Denver and 6 to Billings. 

Great Lakes obtained support from the communities before we approved these service pattern 

changes. 

In anticipation of the end of the rate term on April 30, the Department issued Order 

2010-11-6 on November 5, 2010, soliciting proposals to provide efficient EAS, with subsidy 

support if necessary, at the seven Montana communities. 

Proposals 

The Department received proposals from two carriers in response to its solicitation. Great 

Lakes and Gulfstream submitted inseparable package bids for EAS service at all 7 Montana 

communities. These proposals are summarized below. Each carrier's proposal and comment 

letters may be accessed online through the Federal Docket Management System at: 

http://www.regulaiions.EOv. by doing a search on the docket number listed on the first page. 

Great Lakes 

Great Lakes, the incumbent carrier and operating as a Frontier and United Airlines codeshare partner, proposed to continue its existing one-stop or nonstop service and schedule 

between each of the seven Montana EAS communities and either Denver or Billings utilizing 

19-seat Beech 1900D (or 30-seat Embraer 120 Brasillia aircraft at its discretion), for a 

combined annual subsidy of $10,697,409. The level of service at each community is 

provided in the table below: 

Community 

Glasgow 

Glendive 

Havre 

Lewistown 

Miles City 

Sidney 

Wolf Point 

Weekly 

Round Trips 

12 

12 

12 

12 

12 

17 

12 

Gulfstream 

Gulfstream, under its independent marketing identity, submitted a proposal for service 

between each EAS community and Billings utilizing 19-passenger Beech 1900D aircraft, for 

a combined annual subsidy rate of $10,903,854. The carrier proposed the same exact 

frequency levels of service as detailed in the table above. Lewistown, Miles City and Sidney 

would receive nonstop service, while Glasgow and Wolf Point would receive a mixture of 

one-stop and nonstop service. Glendive and Havre would receive one-stop service. 

Gulfstream has maintained ticketing and baggage interline agreements with legacy carriers at 

several large airports. 
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Community Comments 

On December 10, 2010, the Department sent correspondence to the members of the Montana 

Essential Air Service Task Force (which includes officials from the seven communities and 

the Montana Aeronautics Division) summarizing the proposals and requesting comments and 

preferences on the carrier-selection decision. 

In response, the Department received a letter from the Chairman of the task force on 

January 13 indicating that the community representatives voted 6-1 in favor of Gulfstream. 

Decision on Carrier Selection 

After careful consideration, including the comments of local officials, the Department has 

decided to select Gulfstream to provide EAS at the seven communities, in accordance with 

its proposal summarized above, for two years beginning when the carrier inaugurates full EAS 

at all communities through the end of the 24ih month thereafter. The armual combined subsidy 

rate will be set at $10,903,854. 

The carrier-selection decision is straightforward. Gulfstream has years of experience 

providing scheduled air service and continues to increase its participation in the EAS 

program. While Gulfstream requires about $200,000 in additional subsidy, that increment is 

spread over seven communities, or less than $30,000 per community. The majority of 

communities, by a vote of 6 to 1, favor Gulfstream and we find both the service and subsidy 

levels to be reasonable. Given the rather small difference in subsidy on a per-community 

basis, we will defer to the communities' views in this case. 

The Department shall make this selection at the seven communities contingent upon the 

Department's receiving properly executed certifications from Gulfstream that it is in 

compliance with the Department's regulations regarding drug-free workplaces and 

nondiscrimination, as well as the regulations governing lobbying activities. 

Compensation for Interim-Period Service 

Great Lakes' current contract expires on April 30, 2011. In the event that Gulfstream's 

service is not fully in place by that date, we will require the incumbent carrier, Great Lakes, 

to continue providing service until replacement service begins. Great Lakes is eligible to be 

compensated for the provision of EAS at the seven communities until a replacement carrier 

inaugurates full EAS operations at the communities. We would generally use Great Lakes' 

prospective proposal that was submitted in a competitive envirormient to establish a shortterm, hold-in rate. However, Great Lakes' prospective rate is calculated on a mix of both 

Billings and Denver service. The Denver service requires substantially more flying than 

Billings. Shortly after the communities voted 6-1 to support Gulfstream, Great Lakes issued 

a press release saying that, effective February 10, it would revert to all-Billings service, 

which is what Great lakes originally proposed and upon which the current subsidy 

calculations arc based. Therefore, we will extend the current subsidy rates set in Order 2007-

12-22 until Gulfstream's service is fully in place. 

We expect Great Lakes and Gulfstream to work together to make a smooth transition at the 

seven communities. In that regard, before Great Lakes suspends its service, we expect it to 

contact all passengers holding reservations for travel after its final date of service, to inform 
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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. 

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. Gulfsteam 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 lime. 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 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 Gulfstream International Airlines, to provide essential air service at Glasgow, 

Glendive. Havre, Lewistown, Miles City, Sidney and Wolf Point, Montana, as described in 

Appendix C, for a two-year period beginning when the carrier inaugurates full essential air 

service at all communities through the end of the 24th month thereafter; 

2. The Department directs Gulfstream International 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 readiiy pennits 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; 

3. We find that Gulfstream International Airlines, continues to be fit, willing and able to 

operate as a commuter air carrier and capable of providing reliable essential air service at 

Glasgow, Glendive, Havre, Lewistown, Miles City, Sidney and Wolf Point, Montana; 

4. We will extend the annual subsidy rates and the rates per flight and weekly compensation 

ceilings set for Great Lakes Aviation, Ltd. in Order 2007-12-22, December 21, 2007, until 

Gulfstream IntemationaJ Airlines inaugurates full essential air service; 

5. This Docket will remain open until further order of the Department; and 
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6. We will serve copies of this order on the parties listed in Appendix D. 

By: 

SUSAN L KURLAND 

Assistant Secretary for 

Aviation and International Affairs 

(SEAL) 

An electronic version of this document is available in the Federal Docket Management 

System (FDMS) at littp:/Avww. reuulations. iiov 
Appendix A 

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Appendix C 

Page 1 of 3 

Gulfstream International Airlines 

Provision of Essential Air Service at Lewistown, Miles City and Sidney, Montana 

Summary of Service To Be Provided 

Effective Period: Two years beginning when Gulfstream Inaugurates full service at all 

seven Montana communities through the end of the 24th month 

thereafter. 

Scheduled Service: Lewistown: twelve nonstop round trips each week to Billings. 

Miles City I twelve nonstop round (rips each week to Billings. 

Sidney: seventeen nonstop round trips each week to Billings. 

Intermediate stops and upline 

service: 

No service to any intermediate or upline points are contemplated under 

the terms of the carrier's proposal; accordingly, no such service may be 

provided on subsidized flights without prior Department approval. 

Aircraft tvpe: Beechcraft B-I9Q0D (19 passenger seats). 

Timing of flights: Flights must be well-timed and well-spaced in order to ensure full 

compensation. 

Annual compensation: Lewistown: $1,325,733 

Miles Citv: $1,621,821 

Sidney: $2,932,152 

This rate assumes an annual completion factor of 97 percent. A 

compensation ceiling is to be applied per calendar week such that 

service above that ceiling in one week cannot make up for service 

shortfalls in another week. 

Subsidy Rate per Flight: Lewistown: $1,094.74' 

Miles City: $1,339,242 

Sidney: $1.709.713 

Weekly Compensation Ceiling: Lewistown: $26,273.76^ 

Miles Citv: $32,141.76^ 

Sidney: 58.130.146 

' $ 1,325,733 divided by 1,21 I annual departures: 24 flights x 52 weeks x .97 (completion factor) = 1.211. 

^ $ 1,621.821 divided by 1.211 annual departures: 24 flights x 52 weeks x .97 (completion factor) = 1,211. 

-H2,932,152 divided by 1,715 annual departures: 34 flights x 52 weeks x .97 (completion factor) = 1,715. 

** 24 flights per week multiplied by $1,094.74 per flight. 

^ 24 flights per week multiplied by $1,339.24 per flight. 

^ 34 flights per week multiplied by $ 1,709.71 per flight. 
Appendix C 

Page 2 of 3 

Gulfstream International Airlines 

Provision of Essential Air Service at Havre, Glendive, Glasgow and Wolf Point, Montana 

Summary of Service To Be Provided 

Effective Period: Two years beginning when Gulfstream inaugurates full service at all 

seven Montana communities through the end of the 24lh month 

thereafter. 

Scheduled Service: Havre: twelve one-stop round trips each week to Billings. 

Glendive: twelve one-stop round trips each week to Billings. 

Glasgow: five nonstop and seven one-stop round trips each week to 

Billings. 

Wolf Point: seven nonstop and five one-stop round trips each week to 

Billings. 

Intermediate stops and upline 

service: 

Havre: an intermediate stop at Lewistown, Montana is permitted. 

Glendive: an intermediate stop at Miles City, Montana is permitted. 

Glasgow: an intermediate stop at Wolf Point, Montana may be served 

on seven weekly subsidized round trips. 

Wolf Point: an intermediate stop at Glasgow, Montana may be served 

on five weekly subsidized round trips. 

No service to any intermediate point is contemplated under the terms of 

the carrier's proposal; accordingly, no such service may be provided on 

subsidized flights without prior Department approval. 

Beechcraft B-1900D (19 passenger seats). 

Timing of flights: Flights must be well-timed and well-spaced in order to ensure full 

compensation. 

Annual compensation: Havre: $1,162,329 

Glendive: $1,193,391 

Glasgow: $1,166,049 

Wolf Point: $1,502,378 

This rate assumes an annual completion factor of 97 percent. A 

compensation ceiling is to be applied per calendar week such that 

service above that ceiling in one week cannot make up for service 

shortfalls in another week. 

Subsidy Rate per Flight: Havre: $959.81' 

Glendive: $985.46-

Glasgow: $962.88^ 

Wolf Point: $1,240.61^ 

Weekly Compensation Ceiling: Havre: $23,035.44^ 

Glendive: $23,651.04^ 

Glasgow: $23,109.12"^ 

Wolf Point: $29,774.64« 

' $1,162,329 divided by 1.211 annual departures: 24 flights x 52 weeks x .97 (completion factor) = 1,211. 

^ $1,193,391 divided by 1.211 anmial departures: 24 flights x 52 weeks x .97 (completion factor) = 1,21 1. 

•Hl,166.049 divided by 1.211 annual departures: 24 flights x 52 weeks x .97 (completion factor) = 1,211. 

"* $1,502,378 divided by 1,211 annual departures: 24 flights x 52 weeks x .97 (completion factor) = 1,211. 

5 24 flights per week multiplied by $959.81 per flight. 

^ 24 flights per week multiplied by $985.46 per flight. 

"^ 24 flights per week multiplied by $962.88 per flight. 

^ 24 flights per week multiplied by $ 1,240.61 per flight. 
Appendix C 

Page 3 of 3 

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 p]ans 

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 

Department'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. 
Appendix D 

SERVICE LIST 

Debbie Alke Brad Schmidt 

Administrator Box 910 

Montana Aeronautics Division Mile City, Montana 59301 

P.O. Box 200507 

Helena, Montana 59620-0507 

Mickey Bowman 

Vice President of Corporate Development 

Gulfstream International Airlines 

3201 Griffin Road, 4^ Floor 

Ft. Lauderdale, Florida 33312 

Bret Carpenter 

Basin State Bank 

Box 598 

Lewistown, Montana 59457 

Elmer Egli 

1981 Wyoming Avenue 

Glendive, Montana 59330 

Gerry Grabofsky 

1315 12'^ Street 

Havre, Montana 59501 

Rick Isle 

City of Wolf Point 

2014'*'Avenue South 

Wolf Point, Montana 59201 

Michael O. Matthews 

Vice President & Chief Financial Officer 

Great Lakes Aviation, Ltd. 

1022 Airport Parkway 

Cheyerme, Wyoming 82001 

Walt McNutt 

110 12^ Aver 

Sidney, Montana 59270 

110 12^ Avenue, SW 

John Rabenberg 

Chairman 

Montana Essential Air Service Task Force 

643 Remuda Creek Road 

Fort Peck, Montana 59223