us. Department of 

Transportation 

Office of the Secretary 

of Transportation 

Mr. Bryon Mazade 

City Mamiger 

933 Terrace St. 

Muskegon, MI 4944(} 

Dear Mr. Mazade: 

1200 New Jersey Avenue, SE 

Washington, DC 20590 

September 2, 2011 

As you know, SkyWest Airlines, Inc., d/b/a United Express (SkyWest), provides 

subsidized air service under the essential air service (EAS) program at Muskegon. The 

Department's current contract with SkyWest at Muskegon calls for an annual subsidy of 

$660,720 with fourteen nonstop round trips per week to Chicago O'Hare with 50-seat 

CRJ-200 aircraft, and it expires December 31,2011. In anticipation of the end of that 

contract, by Order 2011-8-10 the Department requested "best and final" proposals to serve 

Muskegon for a new, two-year period, and we received timely-filed proposals from 

SkyWest, Sovereign Air, Inc., Multi-Aero, Inc., d/b/a Air Choice One (Air Choice One), 

and Intrepid International Airlines. 

My purpose in writing is to inform you of the results of each carrier's service and subsidy 

proposal and request your comment before we submit a recommendation on the carrierselection issue to the Assistant Secretary for Aviation and International Affairs for 

decision. Copies of each carrier's full proposal may be accessed online through the 

Department's Dockets Management System at http://www.regulations.gov/ by entering 

"DOT -OST 2009-0301" in the "enter Keyword or ID" field, so we will only summarize 

them here. 

Air Choice One The carrier proposes to provide a total of forty two ( 42) nonstop round 

trips per week to Chicago O'Hare for $2,288,646 annual subsidy. All service would be 

with 9-seat, single-engine, unpressurized, turboprop Cessna Caravan aircraft. We note that 

Muskegon's EAS calls for service with 15-seat, twin-engine aircraft. Thus it is likely we 

would only select Air Choice One if the community waives those assurances. In that 

event, we would consider that waiver effective only for the two-year period of the Air 

Choice One's contract. 

Sovereign Air The carrier proposes to operate nineteen (19) nonstop round trips per week 

to Chicago O'Hare for $636,365 annual subsidy. All service would be with 19-seat 

Jetstream 31132 aircraft. The carrier notes that it is "currently in the process of acquiring 

its scheduled service authority and anticipates being able to start its Essential Air Service 

by December 15, 2011." 
- 2 -

Sky West The carrier proposes to provide a total of fourteen (14) nonstop round trips per 

week to Chicago O'Hare for $1,112,826 annual subsidy. All service would be with 50-seat 

CRJ-200 regional-jet aircraft. 

Intrepid International Airlines The carrier proposes to provide service with 19-seat 

Jetstream 31132 aircraft "arriving 4 days a week, in the early morning from Lansing, 

Michigan, and then carry on to Chicago/Midway or, Indianapolis on an alternating daily 

basis and then returning on that same route in the later part of each afternoon ... " The 

carrier.requests • $1 ,000,000 t'or this service. The carrier also notes that "if not granted the 

contractual·subsidy, we fully intend to ask for permission to provide this alternative 

service": Because this service would not exceed four days per week, the carrier has 

authority to provide this service. Also, I would note that the carrier does not need our 

permission to inaugurate subsidy-free service at any time so long as it meets the 

requirements of the Federal Aviation Administration and our Office of Air Carrier Fitness. 

Please note that the average passenger fares shown in the carriers' proposals do not 

necessarily reflect the average local fares passengers would pay, but rather reflect the 

prorated portion of the total ticket price, e.g., the Muskegon- Chicago portion of a 

Muskegon - Chicago- New York ticket that the carrier would realize. Also, the implicit 

average fare, as reflected in the carriers' subsidy calculations is net of certain charges such 

as federal transportation security fees, excise and ticket taxes, and passenger facility 

charges. Of course, carriers have the discretion to charge fares they deem appropriate, and 

the proposed passenger fares were developed for subsidy rate computation purposes only. 

Each carrier would have to realize passenger fares comparable to the averages shown in its 

proposal in order to achieve break-even or profitable operations even with subsidy. 

You should also note that any schedules submitted by the carriers are illustrative only, and 

the carrier selected may make schedule changes to reflect changing conditions, e.g., to 

better meet shifting connecting bank times at the hub. The Department expects subsidized 

air carriers to maintain well-timed and well-spaced flights in order to ensure full 

compensation. 

We know this matter is important to you and we will act as quickly as possible upon receipt of 

your letter. In order to expedite the case, please submit your comments by email to 

EAS @dot.gov and to Kevin.Adams @dot.gov, by October 3. If you have any questions or do 

not wish to submit formal comments, please contact Kevin Adams at (202) 366-1047. 

Enclosures 

Sincerely, 

x:-9--' ~~:; 

11~ .. 

J. 

~ 

DeVany 

Chief, Essential Air Service Division 

Office of Aviation Analysis 

cc: Airport Manager, SkyWest, Air Choice One, Sovereign Air, Intrepid 
Muskegon, Michigan- Chicago O'Hare International Airport- Caravan 

Operation Revenues 

MKG-ORD Revenues 

Other Revenues 

Total Operating Revenues 

Direct Operating Expenses 

Flying Operations 

Fuel and Oil 

Maintenance 

Aircraft Leases 

Total Direct 

Marketing 

Indirect 

Total Operating Expenses 

Operating Loss 

Profit Element (5% total Oper. Exp.) 

Compensation Required 

Compensation per PAX 

Compensation per Departure 

$1,621,500.00 

8,107.50 

$1,629,607 .so 

$ 578,400.90 

963,450.64 

743,658.30 

475,000.00 

$2,760,509.84 

191,452.15 

779,708.00 

$3,731,669.99 

$2,102,062.49 

186,583.50 

$2,288,645.99 

$97.39 

$533.19 

# Passengers: 

Average Fare: 

Departures: 

Block Hours: 

Revenue Passenger Miles: 

Available Seat Miles: 

23,500 

$69.00 

4,292 

3,305 

2,773,000 

4,546,040 

Representative Schedule 

Departure Arrival 

MKG 6:00AM ET ORD 6:00AM CT 

ORD 6:30AM CT MKG 8:30AM ET 

MKG 8:45AM ET ORD 8:45AM CT 

ORD 9:15AM CT MKG 11:15 AM ET 

MKG 11:30 AM ET ORD 11:30 AM CT 

ORD 12:00 PM CT MKG 2:00PM ET 

MKG 2:15PM ET ORD 2:15PM CT 

ORD 2:45 PM CT I MKG 4:45PM ET 

MKG 5:00PM ET ORD 5:00PM CT 

ORD 5:30 PM CT MKG 7:30PM ET 

MKG 8:00 PM ET ORD 8:00PM CT 

ORD 8:30 PM CT MKG 10:30 PM ET 

.. . ,~ 
.. Muskegon Schedule 

Fit# Freq From 

101 1234567 MKG 

111 1234567 ORO 

201 23456 MKG 

211 23456 ORO 

301 1234567 MKG 

311 1234567 ORO 

TO 

ORO 

MKG 

ORO 

MKG 

ORO 

MKG 

Opt-Arr 

6 :30a m-7 :OOa m 

8:30am-9:00am 

10:30amll:OOam 

12:30pm-1:00pm 

5:30pm-6:00pm 

8:30pm-9:00pm 

A~ f e.,_!)_ "C ;/ \J 

p ~~ C- \.t' 2 

5o u e ~ e :-f'-t .A- ... v 
19-Seat Jetstream 31/32 

Sovereign Air, Inc. 

Annual Compensation Requirement for Essential Air Service for Muskegon 

MKG-ORD 

Aircraft Type 

Available Seats Per Departure 

Passengers Per Trip 

Block Hours 

Departures 

Total Passengers 

Average Fare 

Revenue Passenger Miles 

Available Seat Miles 

Passenger Revenue 

Other Rev. @ .6 of pax. Rev. % 

Total Revenue 

Aircraft and Hull Insurance 

Fuel and Oil 

Flying Operations 

Other Direct Costs 

Maintenance 

Total Direct Costs 

Total Indirect Costs 

Total Operating Expenses 

Operating Loss 

Profit@ 5% 

Completion Rate 

Load Factor 

$90 one way 

Annual Compensation 

Requirement 

Ary~..Jl~ ~ ~ 

\> 5 e ~ 9 1--?- s~ ve.ve:-1'-'\.. .A ... v 

19-seat 

19 

Avg 12.2 

958 

1,916 

23,347 

2,754,946 

4,295,672 

$2,101,230 

$126,074 

$2,227,304 

$102,000 

$312,853 

$310,000 

$178,221 

$222,212 

$1,125,286 

$1,602,018 

$2,727,304 

$500,000 

$136,365 

$636,365 

97% 

64% 
SkyWest Airlines 

Muskegon, Ml Essential Air Service Bid 

8/31/2011 

Number of round-trips per week 

Aircraft type 

Passenger Revenue 

Passengers 

Average fare 

Revenue 

Block Time 

Trip block time (minutes) 

Total scheduled block time 

Total completed block time 

RPMS 

Passengers 

Stage length 

ASMs 

Scheduled departures 

Competed departures 

Stage length 

Available Seats 

Revenue 

Direct operating expenses 

Flight attendant 

RPM related 

Departure related 

ASM related 

Total expenses 

Operating income (loss) 

5% profit margin 

Subtotal 

Marketing assistance 

Subsidy requirement 

SkyWest effective rates per unit 

Cost per trip 

Cost per passenger 

SkyWest cost per block hour 

Effective Subsidy rate per unit 

Subsidy per trip 

Subsidy per passenger 

load factor 

98% 

98% 

CRJ 

Blk Hr $ 2,066.24 

Blk Hr $ 37.30 

RPMs $ 0.003 

Departures $ 412.56 

ASMs $ 0.011 

2012-2013 

Muskegon, Ml 

Chicago, IL 

14 

CRJ200 

25,000 

$ 82.00 

$ 2,050,000 

46 

1,116 

1,094 

25,000 

118 

2,950,000 

1,456 

1,427 

118 

so 

8,590,400 

$ 2,050,000 

$ 2,260,345 

$ 40,804 

$ 8,850 

$ 588,674 

$ 94,494 

$ 2,993,167 

$ (943,167) 

$ 149,658 

$ 1,092,826 

$ 20,000 

$ 1,112,826 

$ 2,098 

$ 120 

$ 2,736 

$ 766 

$ 44 

34% 

A\'fe~J~ yC-

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