Order 2018-7-12 July 16, 2018
UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION
OFFICE OF THE SECRETARY WASHINGTON, D.C.
Issued by the Department of Transportation on the 16th of July, 2018
OFFICE OF THE SECRETARY WASHINGTON, D.C.
Issued by the Department of Transportation on the 16th of July, 2018
ORDER SELECTING AIR CARRIER
Summary
By this Order, the U.S. Department of Transportation (the Department) is selecting SkyWest Airlines, Inc., operating as United Express (SkyWest), to provide Essential Air Service (EAS) at Prescott, Arizona, for the period from August 1, 2018, through August 31, 2020, using 50-seat CRJ-200 aircraft. SkyWest will provide Prescott with 12 weekly round trips to Denver International Airport (DEN) and Los Angeles International Airport (LAX) for an annual subsidy of $3,983,055.
Background
By Order 2017-2-14 (February 23, 2017), the Department selected Great Lakes Airlines to provide EAS at Prescott, with 12 weekly nonstop round trips to LAX, using 30-seat Brasilia EMB-120 aircraft, for an annual subsidy of $2,798,419. Over the course of the contract, Great Lakes frequently operated its service to/from Prescott with Beech 1900-D aircraft, reconfigured to 9 passengers seats.
After the close of business on March 26, 2018, the Department received an e-mail from Great Lakes stating, “All revenue flying is ending tonight.” Great Lakes suspended all of its operations, including those at Prescott, notwithstanding that 49 U.S.C. § 41734 prohibits the carrier from suspending service before 90 days.2 As a result, the Department issued an emergency request for replacement service by Order 2018-3-25 (March 27, 2018) for both long- term and short-term emergency replacement service. Proposals for interim service were due April 3, 2018, while proposals for long-term service were extended with a due date of July 2, 2018, at the request of the community.
Summary of Proposals
In response to Order 2018-3-25, regarding the short-term proposals, we received proposals from Advanced Air, Boutique Air, Inc. (Boutique), and Mokulele Flight Service, Inc. dba Mokulele Airlines (Mokulele).
Prescott requested that the Department reject all interim proposals, citing the lack of multi- engine proposals and the community’s view that the subsidies proposed for the single-engine service were too high. The community expressed concern that single-engine service, at such subsidy rates, would jeopardize Prescott’s eligibility in the EAS program by potentially exceeding the $200 per passenger subsidy limit.3
Summary of Long-Term Proposals
In response to long-term proposals, we received proposals from Advanced Air, Aerodynamics, Inc. dba California Pacific Airlines (Aerodynamics), Boutique, Key Lime Air, Mokulele, Silver Airways, and SkyWest Airlines.
Aerodynamics
Aerodynamics proposed two options, both with 50-seat ERJ-145 aircraft. Option 1 proposed 12 weekly nonstop round trips to DEN, at an annual subsidy of $5,213,834; this option is a contingent bid with Alamosa, Colorado. Option 2 proposed 12 weekly nonstop round trips to PHX, at an annual subsidy of $4,139,563.
Advanced Air
Advanced proposed three options, all with 9-seat, twin-engine King Air 350 aircraft. Option 1 proposed 14 weekly nonstop round trips to Hawthorne Municipal Airport (HHR) in the Los Angeles area and 14 weekly nonstop round trips to Phoenix Sky Harbor International Airport (PHX), at an annual subsidy of $3,552,363. Option 2 proposed 14 weekly nonstop round trips to HHR and 17 weekly nonstop round trips to PHX, at an annual subsidy of $3,854,944. Option 3 proposed 7 weekly nonstop round trips to HHR and 24 weekly round trips to PHX, at an annual subsidy of $3,864,060. Advanced Air’s operations to HHR would include transport for passengers and luggage to any terminal at LAX.
Boutique Air
Boutique Air provided several proposals, as listed in the table below.
Key Lime Air
Key Lime proposed 14 weekly nonstop round trips to DEN. All service would be provided with 30-seat Dornier 328 Jet aircraft for an annual subsidy of $4,880,330.
Mokulele
Mokulele proposed 28 weekly nonstop round trips to PHX. All service would be provided with 9-seat Cessna Caravan aircraft for an annual subsidy of $1,248,279.
Silver Airways
Silver proposed 12 weekly nonstop round trips, with 10 weekly round trips to LAX, and
2 weekly round trips to Las Vegas McCarran International Airport (LAS), using 46-seat ATR- 42-600 aircraft for an annual subsidy of $5,303,561.
SkyWest Airlines
SkyWest proposed 12 weekly round trips to LAX and DEN, branded as United Express, using 50-seat CRJ-200 regional jet aircraft, for an annual subsidy of $3,983,055.
Community Comments
On July 3, 2018, the Department requested the community’s views regarding this carrier- selection case. In a letter dated July 3, 2018, the Department received comments from Prescott Mayor Greg Mengarelli, stating that, after considering a detailed analysis of its air service market and after reviewing the proposals from each of the seven carriers carefully, the City of Prescott supports the selection of SkyWest “in the strongest terms.”4 The letter from the Mayor outlined what the community sees as SkyWest’s strengths, including United Airlines-branded and coded regional jet service to Denver and Los Angeles, its large fleet of aircraft, “a long history of very successful EAS service,” and current EAS service at over three dozen communities. The Mayor further stated that more than 30,000 annual passengers are generated at SkyWest’s average EAS community, and all of its communities are complaint with EAS program requirements.
In response to Order 2018-3-25, regarding the short-term proposals, we received proposals from Advanced Air, Boutique Air, Inc. (Boutique), and Mokulele Flight Service, Inc. dba Mokulele Airlines (Mokulele).
Prescott requested that the Department reject all interim proposals, citing the lack of multi- engine proposals and the community’s view that the subsidies proposed for the single-engine service were too high. The community expressed concern that single-engine service, at such subsidy rates, would jeopardize Prescott’s eligibility in the EAS program by potentially exceeding the $200 per passenger subsidy limit.3
Summary of Long-Term Proposals
In response to long-term proposals, we received proposals from Advanced Air, Aerodynamics, Inc. dba California Pacific Airlines (Aerodynamics), Boutique, Key Lime Air, Mokulele, Silver Airways, and SkyWest Airlines.
Aerodynamics
Aerodynamics proposed two options, both with 50-seat ERJ-145 aircraft. Option 1 proposed 12 weekly nonstop round trips to DEN, at an annual subsidy of $5,213,834; this option is a contingent bid with Alamosa, Colorado. Option 2 proposed 12 weekly nonstop round trips to PHX, at an annual subsidy of $4,139,563.
Advanced Air
Advanced proposed three options, all with 9-seat, twin-engine King Air 350 aircraft. Option 1 proposed 14 weekly nonstop round trips to Hawthorne Municipal Airport (HHR) in the Los Angeles area and 14 weekly nonstop round trips to Phoenix Sky Harbor International Airport (PHX), at an annual subsidy of $3,552,363. Option 2 proposed 14 weekly nonstop round trips to HHR and 17 weekly nonstop round trips to PHX, at an annual subsidy of $3,854,944. Option 3 proposed 7 weekly nonstop round trips to HHR and 24 weekly round trips to PHX, at an annual subsidy of $3,864,060. Advanced Air’s operations to HHR would include transport for passengers and luggage to any terminal at LAX.
Boutique Air
Boutique Air provided several proposals, as listed in the table below.
Key Lime Air
Key Lime proposed 14 weekly nonstop round trips to DEN. All service would be provided with 30-seat Dornier 328 Jet aircraft for an annual subsidy of $4,880,330.
Mokulele
Mokulele proposed 28 weekly nonstop round trips to PHX. All service would be provided with 9-seat Cessna Caravan aircraft for an annual subsidy of $1,248,279.
Silver Airways
Silver proposed 12 weekly nonstop round trips, with 10 weekly round trips to LAX, and
2 weekly round trips to Las Vegas McCarran International Airport (LAS), using 46-seat ATR- 42-600 aircraft for an annual subsidy of $5,303,561.
SkyWest Airlines
SkyWest proposed 12 weekly round trips to LAX and DEN, branded as United Express, using 50-seat CRJ-200 regional jet aircraft, for an annual subsidy of $3,983,055.
Community Comments
On July 3, 2018, the Department requested the community’s views regarding this carrier- selection case. In a letter dated July 3, 2018, the Department received comments from Prescott Mayor Greg Mengarelli, stating that, after considering a detailed analysis of its air service market and after reviewing the proposals from each of the seven carriers carefully, the City of Prescott supports the selection of SkyWest “in the strongest terms.”4 The letter from the Mayor outlined what the community sees as SkyWest’s strengths, including United Airlines-branded and coded regional jet service to Denver and Los Angeles, its large fleet of aircraft, “a long history of very successful EAS service,” and current EAS service at over three dozen communities. The Mayor further stated that more than 30,000 annual passengers are generated at SkyWest’s average EAS community, and all of its communities are complaint with EAS program requirements.
Regarding the other carrier proposals, the community expressed concerns, including service reliability, the use of single-engine aircraft, lack of interline ticketing and baggage agreements with major carriers, overly-optimistic passenger forecasts that may hinder the community’s ability to comply with its requirements to maintain eligibility for EAS, particularly the $200 per passenger subsidy cap, and lack of connecting opportunities within the main commercial passenger terminal at certain airports.
Decision
After carefully reviewing the proposals and the community’s comments, the Department has decided to select SkyWest Airlines to provide Prescott’s EAS at an annual subsidy of $3,983,055, for the period from August 1, 2018, through August 31, 2020.
In selecting a carrier to provide subsidized EAS for an eligible place not in Alaska, 49 U.S.C. § 41733(c)(1) directs the Department to consider five factors: (A) service reliability; (B) contractual and marketing arrangements with a larger air carrier at the hub; (C) interline arrangements with a larger air carrier at the hub (D) community views, giving substantial weight to the views of the elected officials representing the users of the service; and (E) whether the air carrier has included a plan in its proposal to market the service.
In addition, the Consolidated Appropriations Act, 2018, Pub. L. No. 115-141, provides that, when selecting a carrier to provide EAS, the Department may consider the relative subsidy requirements, thus codifying a factor that we have considered since the inception of the program.
SkyWest meets all of the selection criteria. Furthermore, the Department finds that SkyWest’s proposed service and subsidy levels are reasonable.
Community Eligibility
Title 49 U.S.C. § 41731(a)(1)(B) provides that a community must maintain an average of 10 enplanements per service day, as determined by the Secretary of Transportation, during the most recent fiscal year, to remain eligible for EAS. Locations in Alaska and Hawaii, and communities that are more than 175 driving miles from the nearest large or medium hub airport, are exempt from this requirement. Prescott is within 175 miles of Phoenix Sky Harbor International Airport (PHX), a large-hub airport, and is subject to this requirement.
Further, the Department of Transportation and Related Agencies Appropriations Act, 2000, Pub. L. No. 106-69, prohibits the Department from subsidizing EAS to communities located within the 48 contiguous States with a subsidy per passenger subsidy amount exceeding $200, unless the community is located more than 210 miles from the nearest large- or medium-hub airport. The FAA Modernization and Reform Act of 2012, Pub L. 112-95, provides that the Secretary of Transportation may waive the $200 subsidy cap, subject to the availability of funds, on a case- by-case basis, for a limited period of time. Prescott is also subject to the $200 subsidy cap.
Decision
After carefully reviewing the proposals and the community’s comments, the Department has decided to select SkyWest Airlines to provide Prescott’s EAS at an annual subsidy of $3,983,055, for the period from August 1, 2018, through August 31, 2020.
In selecting a carrier to provide subsidized EAS for an eligible place not in Alaska, 49 U.S.C. § 41733(c)(1) directs the Department to consider five factors: (A) service reliability; (B) contractual and marketing arrangements with a larger air carrier at the hub; (C) interline arrangements with a larger air carrier at the hub (D) community views, giving substantial weight to the views of the elected officials representing the users of the service; and (E) whether the air carrier has included a plan in its proposal to market the service.
In addition, the Consolidated Appropriations Act, 2018, Pub. L. No. 115-141, provides that, when selecting a carrier to provide EAS, the Department may consider the relative subsidy requirements, thus codifying a factor that we have considered since the inception of the program.
SkyWest meets all of the selection criteria. Furthermore, the Department finds that SkyWest’s proposed service and subsidy levels are reasonable.
Community Eligibility
Title 49 U.S.C. § 41731(a)(1)(B) provides that a community must maintain an average of 10 enplanements per service day, as determined by the Secretary of Transportation, during the most recent fiscal year, to remain eligible for EAS. Locations in Alaska and Hawaii, and communities that are more than 175 driving miles from the nearest large or medium hub airport, are exempt from this requirement. Prescott is within 175 miles of Phoenix Sky Harbor International Airport (PHX), a large-hub airport, and is subject to this requirement.
Further, the Department of Transportation and Related Agencies Appropriations Act, 2000, Pub. L. No. 106-69, prohibits the Department from subsidizing EAS to communities located within the 48 contiguous States with a subsidy per passenger subsidy amount exceeding $200, unless the community is located more than 210 miles from the nearest large- or medium-hub airport. The FAA Modernization and Reform Act of 2012, Pub L. 112-95, provides that the Secretary of Transportation may waive the $200 subsidy cap, subject to the availability of funds, on a case- by-case basis, for a limited period of time. Prescott is also subject to the $200 subsidy cap.
In addition, 49 U.S.C. Section 41731(a)(1)(C) states that, to be eligible for EAS, a community must have an average subsidy per passenger of less than $1,000 during the most recent fiscal year, as determined by the Secretary of Transportation, or face termination of subsidy eligibility, regardless of distance to the nearest hub airport. The $1,000 subsidy per passenger limit applies to all EAS communities outside of Alaska and Hawaii.
In order to be compliant with the above requirements, the Department expects the airline and the community to work together to ensure Prescott will remain eligible for EAS.
Other Carrier Requirements
The Department makes the selection at Prescott contingent upon its receipt of properly-executed certifications from SkyWest that it is in compliance with the Department’s regulations regarding drug-free workplaces and nondiscrimination, as well as the regulations concerning lobbying activities.
Carrier Fitness
Title 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. SkyWest is subject to the Department’s continuing fitness requirements, and no information has come to our attention that would cause us to question the air carrier’s fitness at this time. The Department has contacted the Federal Aviation Administration, and it has raised no concerns that would negatively affect our fitness findings. The Department therefore concludes that SkyWest is reliable and fit to conduct the operations proposed here.
This Order is issued under authority delegated in 49 CFR § 1.25a(b)(6)(ii)(D).
ACCORDINGLY,
1. The Department selects SkyWest Airlines, Inc. to provide Essential Air Service at Prescott, Arizona, under the terms described in Appendix B;
2. This Order is contingent upon the Department’s receipt of properly-executed certifications from the air carrier that they are in compliance with the Department’s regulations regarding drug-free workplaces and nondiscrimination, as well as the regulations concerning lobbying activities;
3. This docket will remain open until further order of the Department; and
In order to be compliant with the above requirements, the Department expects the airline and the community to work together to ensure Prescott will remain eligible for EAS.
Other Carrier Requirements
The Department makes the selection at Prescott contingent upon its receipt of properly-executed certifications from SkyWest that it is in compliance with the Department’s regulations regarding drug-free workplaces and nondiscrimination, as well as the regulations concerning lobbying activities.
Carrier Fitness
Title 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. SkyWest is subject to the Department’s continuing fitness requirements, and no information has come to our attention that would cause us to question the air carrier’s fitness at this time. The Department has contacted the Federal Aviation Administration, and it has raised no concerns that would negatively affect our fitness findings. The Department therefore concludes that SkyWest is reliable and fit to conduct the operations proposed here.
This Order is issued under authority delegated in 49 CFR § 1.25a(b)(6)(ii)(D).
ACCORDINGLY,
1. The Department selects SkyWest Airlines, Inc. to provide Essential Air Service at Prescott, Arizona, under the terms described in Appendix B;
2. This Order is contingent upon the Department’s receipt of properly-executed certifications from the air carrier that they are in compliance with the Department’s regulations regarding drug-free workplaces and nondiscrimination, as well as the regulations concerning lobbying activities;
3. This docket will remain open until further order of the Department; and
4. The Department will serve copies of this order on the mayor of Prescott, Arizona, the Airport Director and Assitant Airport Director at Prescott Municipal Airport, SkyWest Airlines, Inc., Advanced Air, Aerodynamics, Inc. dba California Pacific Airlines, Boutique Air, Inc., Key Lime Air, Mokulele Flight Service, Inc. d/b/a Mokulele Airlines, and Silver Airways.
By:
Joel Szabat
Deputy Assistant Secretary for Aviation and International Affairs
By:
Joel Szabat
Deputy Assistant Secretary for Aviation and International Affairs
(SEAL)
An electronic version of this document is available at www.regulations.gov
1 Federal Award Identification Number.
2 A notice of service suspension was posted on Great Lakes’ website at www.flygreatlakes.com. The carrier failed to provide the Department the notice required under 49 U.S.C. § 41734.
3 The Department of Transportation and Related Agencies Appropriations Act, 2000, Pub. L. No. 106-69, prohibits the Department from subsidizing air service at a community where the subsidy per passenger exceeds $200 (the Subsidy Cap), unless the community is more than 210 miles from the nearest large- or medium-hub airport. Prescott is located fewer than 210 miles from PHX, a large-hub airport, making it subject to this requirement.
4 The community’s full analysis of proposals and recommendation letter may be found in the community’s docket on www.regulations.gov by entering “OST-1996-1899.”
Appendix A
Appendix B
SkyWest Airlines, Inc.
Essential Air Service to be provided at Prescott, AZ Docket DOT-OST-1996-1899
Effective Period: August 1, 2018, through August 31, 2020
Hubs: Denver International Airport (DEN) and Los Angeles International Airport (LAX) Frequency: 12 round trips per week
Aircraft: 50-seat CRJ 200
Rate per Eligible Flight: $3,2571
Weekly Ceiling: $78,1682
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 this rate, 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 service levels, the carrier may cease to provide service to that specific location without regards 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 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 the foregoing paragraph.
Funds may not be available for performance under this order beyond September 30, 2018. The Government’s obligation for performance under this order beyond September 30, 2018, is subject to the availability of 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, 2018, until funds are made available to the Department for performance. If sufficient funds are not made available for performance beyond September 30, 2018, the Department will provide notice in writing to the carrier.
All claims for payment, including any amended claims, must be submitted within 90 days of the last day of the month for which compensation is being claimed. For example, claims for service provided in July must be filed by October 31; August claims must be submitted by November 30, and so on.
1 Annual compensation of $3,983,055 divided by the 1,223 annual departures (24 average weekly departures x 52 weeks x 98 percent completion).
2 24 flights per week multiplied by $3,257 per flight.
Essential Air Service to be provided at Prescott, AZ Docket DOT-OST-1996-1899
Effective Period: August 1, 2018, through August 31, 2020
Hubs: Denver International Airport (DEN) and Los Angeles International Airport (LAX) Frequency: 12 round trips per week
Aircraft: 50-seat CRJ 200
Rate per Eligible Flight: $3,2571
Weekly Ceiling: $78,1682
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 this rate, 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 service levels, the carrier may cease to provide service to that specific location without regards 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 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 the foregoing paragraph.
Funds may not be available for performance under this order beyond September 30, 2018. The Government’s obligation for performance under this order beyond September 30, 2018, is subject to the availability of 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, 2018, until funds are made available to the Department for performance. If sufficient funds are not made available for performance beyond September 30, 2018, the Department will provide notice in writing to the carrier.
All claims for payment, including any amended claims, must be submitted within 90 days of the last day of the month for which compensation is being claimed. For example, claims for service provided in July must be filed by October 31; August claims must be submitted by November 30, and so on.
1 Annual compensation of $3,983,055 divided by the 1,223 annual departures (24 average weekly departures x 52 weeks x 98 percent completion).
2 24 flights per week multiplied by $3,257 per flight.
