UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C.

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1 Order: Served: March 29, 2019 UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C. Issued by the Department of Transportation on the 29 th day of March, 2019 FORT LEONARD WOOD, MISSOURI FRANKLIN/OIL CITY, PENNSYLVANIA HAGERSTOWN, MARYLAND MORGANTOWN, WEST VIRGINIA VICTORIA, TEXAS ALTOONA, PENNSYLVANIA BRADFORD, PENNSYLVANIA DUBOIS, PENNSYLVANIA FORT DODGE, IOWA JOHNSTOWN, PENNSYLVANIA LANCASTER, PENNSYLVANIA MERCED, CALIFORNIA MUSCLE SHOALS, ALABAMA OWENSBORO, KENTUCKY PARKERSBURG, WEST VIRGINIA/MARIETTA, OHIO VERNAL, UTAH DOT-OST DOT-OST DOT-OST DOT-OST DOT-OST DOT-OST DOT-OST DOT-OST DOT-OST DOT-OST DOT-OST DOT-OST DOT-OST DOT-OST DOT-OST DOT-OST Under 49 U.S.C et seq. ORDER TENTATIVELY TERMINATING ESSENTIAL AIR SERVICE ELIGIBILITY AT CERTAIN COMMUNITIES AND TENTATIVELY GRANTING WAIVERS UNDER SECTION 458 OF PUBLIC LAW FOR OTHER COMMUNITIES Summary By this Order, the U.S. Department of Transportation (the Department) has tentatively determined that the 16 communities listed above did not meet one or two statutory eligibility criteria required to remain in the Essential Air Service (EAS) program. The Department has tentatively determined that three of these communities (Franklin/Oil City, PA, Hagerstown, MD, and Victoria, TX) did not enplane an average of 10 or more passengers per day during Fiscal Year 2018 (FY 2018), as required by 49 U.S.C (a)(1)(B). In addition, two other communities (Fort Leonard Wood, MO, and Morgantown, WV) tentatively

2 - 2 - required a rate of subsidy per passenger of more than $200 (the Subsidy Cap ), with each of the community s subsidy per passenger during FY2018 not lower than the subsidy per passenger for any of the three previous fiscal years. The Department is directing interested persons to show cause why the Department should not terminate the eligibility of these five communities (as further discussed below). The Department is also tentatively granting waivers for the 11 remaining communities because each of these communities required a subsidy-per-passenger for FY 2018 that is lower than the subsidy-per-passenger for any of the three previous fiscal years, as discussed further below and as displayed in Appendix D. Additionally, even if the Department ultimately determines that Vernal, UT s subsidy-per-passenger was not lower than it was in any of the three previous fiscal years, the Department tentatively grants Vernal a waiver because it experienced a service hiatus during Fiscal Year 2018 that impacted its compliance. All 16 communities may file objections and/or petitions for waivers, and the Department will not terminate subsidized service until objections and petitions for waivers are reviewed and an Order is issued finalizing the Department s findings about compliance with the 10-enplanement and Subsidy Cap requirements, and granting or denying petitions for waivers. Objections to the Department s tentative decision and petitions for waivers from these requirements are due within 20 days after the service date of this Order. In addition, communities that required a subsidy per passenger in excess of the Subsidy Cap during FY 2018 may work with an air carrier to submit a proposal to the Department that complies with the Subsidy Cap, as further described in this Order. Background The FAA Modernization and Reform Act, Pub. L. No (Feb. 14, 2012) (FAA 2012), amended 49 U.S.C (a) to change the definition of eligible place for the purpose of receiving EAS by adding a new subsection (1)(B). Subsection (1)(B) states that, to be an eligible place for EAS, a community must have averaged 10 or more enplanements per service day, as determined by the Secretary, during the most recent fiscal year beginning after September 30, This requirement does not apply to locations in Alaska and Hawaii and communities that are more than 175 driving miles from the nearest large- or medium-hub airport. 1 The Secretary may waive the 10-enplanement requirement, on an annual basis, if the community demonstrates to the Secretary s satisfaction that the reason the location averages fewer than 10 enplanements per day is due to a temporary decline in enplanements. 2 The Department of Transportation and Related Agencies Appropriations Act, 2000, Pub. L. No (Oct. 9, 1999), prohibits the Department from subsidizing EAS for communities located within the 48 contiguous States when per passenger subsidy amounts exceed $200, unless the communities are located more than 210 miles from the nearest large- or medium-hub airport. On October 9, 2014, the Department issued a Notice of Enforcement Policy announcing how the 1 See 49 U.S.C (c) and (d). 2 See 49 U.S.C (e).

3 - 3 - Department intended to enforce compliance with the Subsidy Cap. 3 FAA 2012 authorized the Secretary of Transportation to waive the Subsidy Cap, subject to the availability of funds, on a case-by-case basis, for a limited period of time. The FAA Reauthorization Act of 2018, Pub. L. No (Oct. 15, 2018) (FAA 2018), amended this provision as discussed below. Methodology and Enplanement History To determine whether an EAS community is subject to the 10-enplanement-per-day and Subsidy Cap requirements, the Department must determine the community s distance, by driving miles, to the nearest large- or medium-hub airport. The Department measures the shortest driving distance from the center of the EAS community to the nearest large- or medium-hub airport. 4 In calculating enplanements per day, the Department has taken total annual origin and destination passenger numbers for FY 2018, divided by two, to show passengers in one direction (enplanements at the EAS community), and then divided by 313 days to get average daily enplanements at the EAS community. The Department does not use 365 days per year in its calculations because the typical EAS contract provides for the equivalent of six-day-a-week service. 5 The subsidy per passenger was calculated by taking the annual subsidy actually paid and dividing by the total number of enplanements plus deplanements at the EAS community on the subsidized EAS air carrier for Fiscal Year 2018, i.e., from October 1, 2017, through September 30, Decision First, the Department has tentatively determined that all 16 communities at issue here are within either 210 miles or 175 miles of a large- or medium-hub airport and, thus, are subject to either the Subsidy Cap or the 10-enplanement eligibility standard, or both. Appendix A shows the communities that the Department has tentatively determined to have averaged fewer than 10 enplanements per day in FY 2018, and includes the average enplanements per day, the distance to the nearest large- or medium-hub, and total passenger levels for FY On May 1, 2014, the Department published a Notice of Proposed Enforcement Policy for the Subsidy Cap in the Federal Register, 79 Fed. Reg , for comment. After a 60-day public comment period and review, the Department issued the Final Notice of Enforcement Policy on October 9, 2014, 79 Fed. Reg This method of calculating distance to the nearest large- or medium-hub airport is consistent with longstanding Department practice. See 54 Fed. Reg (Dec. 22, 1989) (amending 14 CFR Part 398). 5 For example, the Department typically subsidizes two round trips a day Monday through Friday and two round trips over the weekend (12 round trips a week) or three round trips each weekday and over the weekend (18 a week). Using 313 days (52 weeks x 6 days = one day = 313), instead of 365 days, has the effect of raising the average daily enplanements by 17 percent. 6 The Notice of Enforcement Policy stated that the Department would consider the actual subsidies paid to assess a community s average per passenger subsidy, upon request. For efficiency, the Department has decided to rely on its calculation of actual subsidies paid in this enforcement action. For all communities, the average subsidy per passenger based on actual subsidies paid is lower than the annual subsidy contract amounts because of flight completion rates. Thus, the Department finds that all communities subject to enforcement in this Order benefit from the use of actual subsidies paid. Comments are welcome on this.

4 - 4 - Appendix B lists the communities that the Department has tentatively determined to have required a subsidy per passenger more than the Subsidy Cap and includes the actual subsidy paid to carriers providing EAS, the FY 2018 passenger levels (enplanements plus deplanements at the EAS community), and the distance to the nearest large- or medium-hub. The Department finds that Vernal, UT, as listed on Appendix B, experienced a service hiatus during FY After careful consideration of this matter, the Department has tentatively decided to terminate the eligibility of Fort Leonard Wood, MO; Franklin/Oil City, PA; Hagerstown, MD; Morgantown, WV; and Victoria, TX. The Department also tentatively grants a waiver to the remaining 11 communities listed in Appendix B, as further discussed below. Appendix B lists the required subsidy-per-passenger for the 11 communities over the previous three fiscal years. The Secretary may grant waivers from the Subsidy Cap under Section 426 of Public Law Section 426(c) of Public Law states, subject to the availability of funds, the Secretary may waive, on a case-by-case basis, the subsidy-per-passenger cap established by section 332 of the Department of Transportation and Related Agencies Appropriations Act, 2000 (Public Law ; 113 Stat. 1022). A waiver issued under this subsection shall remain in effect for a limited period of time, as determined by the Secretary. Section 426 of Public Law was amended by Section 458 of Public Law to add Section 426(d), which states: (1) The Secretary shall waive application of the subsidy-per-passenger cap described under subsection (c) if the Secretary finds that the community s subsidy-per-passenger for a fiscal year is lower than the subsidy-per-passenger for any of the 3 previous fiscal years. (2) The Secretary shall waive application of the subsidy-per-passenger cap if the subsidyper-passenger for a fiscal year is less than 10 percent higher than the highest subsidy-perpassenger from any of the 3 previous fiscal years. The Secretary may only waive application of the subsidy-per-passenger cap under this paragraph once per community. (3) Nothing in this subsection shall be construed to limit the Secretary s ability under subsection (c) to waive application of the subsidy-per-passenger cap. (See Appendix B for application of this provision) Should the Department finalize the tentative findings that the 11 communities listed on Appendix B s Fiscal Year 2018 subsidy-per-passenger was lower than the subsidy-per-passenger for any of the three previous fiscal years, the Secretary shall waive application of the Subsidy Cap in accordance with Section 426(d)(1). If the Department finalizes its tentative finding that Vernal, UT is not compliant with the Subsidy Cap, but concludes that it is not eligible for a waiver under Section (d)(1), the Department tentatively grants Vernal a waiver from the Subsidy Cap under Section 426(c) because it experienced a service hiatus during Fiscal Year 2018 that impacted its compliance.

5 - 5 - The Department will give interested persons 20 days after the service date of this Order to submit objections and/or petitions for waivers, as discussed below. Objections Objections submitted in response to this Order should be strictly limited to disputing the tentative findings contained in this Order, i.e., the mileage, subsidy, or passenger data. Such objections should be fully documented and should contain complete information on the data used by the parties objecting. Waiver Procedures Communities that have their EAS eligibility tentatively terminated by this Order for noncompliance with the ten-enplanement requirement and/or that are not eligible for a waiver under Section 426(d)(1), may petition for a waiver(s). The Department will consider petitions for waivers from the 10-enplanement requirement of 49 U.S.C (a)(1)(B) under the authority provided in 49 U.S.C (e). The petition should state that it is a request for a waiver from 49 U.S.C (a)(1)(B) and include an explanation of the nature and extent of the relief sought and any information and arguments available to the petitioner to support the petition for waiver. Petitions should provide facts and circumstances to aid the Secretary s consideration of whether the reason the location averages fewer than ten enplanements per day is due to a temporary decline in enplanements. As discussed above, the Secretary also has authority to grant waivers from the Subsidy Cap under Section 426 of Public Law Section 426(c) of Public Law states, subject to the availability of funds, the Secretary may waive, on a case-by-case basis, the subsidy-perpassenger cap established by section 332 of the Department of Transportation and Related Agencies Appropriations Act, 2000 (Public Law ; 113 Stat. 1022). A waiver issued under this subsection shall remain in effect for a limited period of time, as determined by the Secretary. Any petition for a waiver should include all information the petitioner deems relevant to the Secretary s consideration of the petition. Communities that are identified as tentatively non-compliant with either or both eligibility requirements should also include, in their petitions, how they plan to reach the targets if waivers are granted. All petitions for waivers must be submitted within 20 days after the service date of this Order, with the title Petition of (EAS community) for a waiver from the 10-enplanement statute and/or Subsidy Cap, Docket DOT-OST-(appropriate Docket number from page 1 of this Order), to ensure timely consideration in accordance with 49 CFR 5.11(b). All petitions must be filed electronically to Kevin.Schlemmer@dot.gov, Venkatesh.Paluvai@dot.gov, EAS@dot.gov or by FAX to The Department will consider each petition for waiver based upon the individual merits and circumstances of that community. Each petition received by the Department will be made available at

6 - 6 - Proposals for Service that Comply with Subsidy Cap Title 49 U.S.C (f)(2) states that the Secretary must establish procedures to permit a community to work directly with an air carrier to submit a proposal that would not exceed the Subsidy Cap prior to termination of eligibility for non-compliance with the Subsidy Cap. Communities are encouraged to work with the air carrier providing subsidized EAS to submit a proposal that complies with the minimum service requirements at 49 U.S.C (b) for a subsidy below the Subsidy Cap. Carriers should express a willingness to amend their current Order for EAS service to reduce the subsidy, consistent with the submitted proposal. Communities wishing to submit a proposal in accordance with 49 U.S.C (f)(2) must submit their proposals no later than 20 days following the service date of this Order. Appendix C shows the maximum subsidy level at the 16 communities with continuous service during FY 2018 that are required to be in compliance with the Subsidy Cap, assuming that enplanements remain constant at FY 2018 levels. If the Department determines that a proposal is reasonable, the Department will amend the community s current Order for EAS service to align with the proposal, and take no further action based on the community s FY 2018 non-compliance with the Subsidy Cap. Next Steps If the Department finalizes the tentative findings to terminate a community s EAS eligibility in a subsequent Order, the Department will specify an effective date for termination of EAS eligibility at that community. In that event, if a specific carrier providing EAS at one of the affected communities decides to suspend service on or after the effective date, the Department will expect it to contact all passengers who hold reservations for flights that will be suspended to inform them of the suspension and assist them in arranging alternative transportation or to provide a refund of the ticket price, without penalty, if requested. The Department reminds carriers that their contracts and service obligations remain in full force until the completion of this process. In the meantime, the Department hereby requires the incumbent carriers to provide EAS at the communities until further notice, which will be included in the Department s Final Order on this matter. This Order does not preclude carriers from starting or continuing air service at these communities without subsidy. This Order is issued under authority delegated in 49 CFR 1.25a(b)(6)(ii)(D). ACCORDINGLY, 1. The Department tentatively finds that the 16 communities listed in Appendix A required a rate of subsidy per passenger in excess of $200 during Fiscal Year 2018 and are located fewer than 210 miles from the nearest large-or medium-hub, and therefore, tentatively did not comply with Section 332 of Pub. L. No The Department tentatively terminates the EAS eligibility of Fort Leonard Wood, MO, and Morgantown, WV; 2. The Department tentatively finds that Franklin/Oil City, PA; Hagerstown, MD; and Victoria, TX averaged fewer than 10 enplanements per service day in Fiscal Year 2018, as specified in Appendix A, and are located fewer 175 miles from the nearest large-or

7 - 7 - medium-hub, and, therefore, tentatively did not comply with 49 U.S.C (a)(1)(B). The Department tentatively terminates the EAS eligibility of these communities; 3. For Fiscal Year 2018, the Department tentatively waives Section 332 of Pub. L. No (the Subsidy Cap ), as specified in Appendix B, for Altoona, PA; Bradford, PA; DuBois, PA; Fort Dodge, IA; Johnstown, PA; Lancaster, PA; Merced, CA; Muscle Shoals, AL; Owensboro, KY, Parkersburg, WV/Marietta, OH; and Vernal, UT in accordance with Section 426(d)(1) of Pub. L. No , as amended by Section 458 of Pub. L. No , because the Department tentatively finds that they required a subsidy-per-passenger for FY 2018 that is lower than the subsidy-per-passenger for at least one of the three previous fiscal years; 4. The Department directs all interested persons to show cause within 20 days after the date of service of this Order why the Department should not make final the tentative findings and conclusions set forth above and/or file a petition for a waiver from 10- enplanement/subsidy Cap requirements. Objections and petitions for waivers should be filed electronically to Kevin.Schlemmer@dot.gov, Venkatesh.Paluvai@dot.gov, EAS@dot.gov, or by FAX at ; 5. In the event Fort Leonard Wood, MO, and Morgantown, WV, which were tentatively found to exceed the Subsidy Cap, wish to submit proposals for EAS that comply with the Subsidy Cap, the Department directs them to submit such proposals within 20 days of the date of service of this Order. Compliant proposals should be filed electronically to Kevin.Schlemmer@dot.gov, Venkatesh.Paluvai@dot.gov, EAS@dot.gov, or by FAX at ; 6. The Department will afford full consideration to the matters and issues raised in any timely and properly filed objections and petitions for waivers before taking further action; 7. These dockets will remain open until further order of the Department; and

8 The Department will serve copies of this Order on the civic officials of Altoona, PA; Bradford, PA; DuBois, PA; Fort Dodge, IA; Fort Leonard Wood, MO; Franklin/Oil City, PA; Hagerstown, MD; Johnstown, PA; Lancaster, PA; Merced, CA; Morgantown, WV; Muscle Shoals, AL; Owensboro, KY, Parkersburg, WV/Marietta, OH; Vernal, UT; and Victoria, TX, and Boutique Air, Inc., Hyannis Air Service, Inc. d/b/a Cape Air, Multi- Aero, Inc. d/b/a Air Choice One, SkyWest Airlines, Inc., and Southern Airways Express, LLC. By: Joel Szabat Assistant Secretary Aviation and International Affairs (SEAL) An electronic version of this document is available at

9 Appendix A EAS communities tentatively determined to have fewer than 10 enplanements per service day and/or exceeded the $200 subsidy cap during Fiscal Year 2018 A B C D E F G H I J Miles to nearest L/M Nearest Total enplanements and Service Enplanements per day (column F divided by G Actual Subsidy per passenger Count State EAS Community HUB L/M hub deplanements days* divided by 2) Subsidy Paid (I divided by F) Communities that are subject to both the 10-enplanement requirement and the $200 subsidy cap and are tentatively noncompliant with both 1 PA Franklin/Oil City 85 PIT 3, $1,553,293 $480 1 MD Hagerstown 78 IAD 4, $1,757,475 $355 1 TX Victoria 119 AUS 4, $2,623,644 $531 Communities that are subject to both the 10-enplanement requirement and the $200 subsidy cap, but are tentatively noncompliant with the Subsidy Cap 1 MO Fort Leonard Wood 136 STL 15, $3,111,628 $203 1 WV Morgantown 75 PIT 10, $2,988,960 $282 5 * Prorated service days are based on 6-day a week service (EAS minimum service requirements).

10 Appendix B EAS communities tentatively determined to have exceeded the $200 per passenger subsidy cap during Fiscal Year 2018, but tentatively potentially qualify for a waiver for noncompliance A B C D E F G H I J Count State EAS Community Miles to nearest L/M HUB Nearest L/M hub Total enplanements and deplanements Service days* Enplanements per day (column F divided by G divided by 2) Actual Subsidy Paid Subsidy per passenger (I divided by F) Communities that are subject to both the 10-enplanement requirement and the $200 subsidy cap, but are tentatively noncompliant with the Subsidy Cap 1 PA Altoona 112 IAD 7, $2,311,200 $322 1 PA Bradford 77 BUF 7, $2,188,875 $276 1 PA DuBois 112 PIT 9, $2,911,755 $296 1 IA Fort Dodge 156 OMA 14, $3,012,588 $202 1 PA Johnstown 84 PIT 8, $2,824,540 $340 1 PA Lancaster 86 PHL 10, $2,470,920 $238 1 CA Merced 107 SJC 15, $3,142,714 $209 1 AL Muscle Shoals 122 BNA 11, $2,770,704 $235 1 KY Owensboro 138 BNA 10, $2,134,092 $205 1 WV Parkersburg/Marietta, OH 110 CMH 7, $1,849,695 $253 1 UT Vernal* 150 SLC 15, $3,259,047 $ *Prorated service days are based on 6-day a week service (EAS minimum service requirements). *Vernal, UT experienced a service hiatus and are tentatively non-compliant with the Subsidy Cap.

11 Appendix C Maximum annual subsidy to be compliant with $200 per passenger subsidy cap State EAS Community YE 09/30/18 Passenger Totals (Both directions) Passengers (Inbound and Outbound) Actual Subsidy Paid Maximum Annual Subsidy Amount to be Compliant PA Altoona 7,173 $ 2,311,200 $ 1,434,600 PA Bradford 7,921 $ 2,188,875 $ 1,584,200 PA DuBois 9,825 $ 2,911,755 $ 1,965,000 IA Fort Dodge 14,891 $ 3,012,588 $ 2,978,200 MO Fort Leonard Wood 15,299 $ 3,111,628 $ 3,059,800 PA Franklin/Oil City 3,235 $ 1,553,293 $ 647,000 MD Hagerstown 4,956 $ 1,757,475 $ 991,200 PA Johnstown 8,316 $ 2,824,540 $ 1,663,200 PA Lancaster 10,365 $ 2,470,920 $ 2,073,000 CA Merced 15,019 $ 3,142,714 $ 3,003,800 WV Morgantown 10,605 $ 2,988,960 $ 2,121,000 AL Muscle Shoals 11,800 $ 2,770,704 $ 2,360,000 KY Owensboro 10,432 $ 2,134,092 $ 2,086,400 WV Parkersburg/Marietta, OH 7,316 $ 1,849,695 $ 1,463,200 UT Vernal* 15,071 $ 3,259,047 $ 3,014,200 TX Victoria 4,944 $ 2,623,644 $ 988,800 *Vernal, UT experienced a service hiatus and is tentatively non-compliant with the Subsidy Cap.

12 Appendix D EAS communities potentially non-compliant with $200 per passenger subsidy cap, but may qualify for waiver, because its subsidy per passenger for FY2018 is lower than any of the three previous fiscal years FY2015 FY2016 FY2017 FY2018 State EAS Subsidy-per- Subsidy-per- Subsidy-per- Subsidy-per- Reason for Community Passenger Passenger Passenger Passenger Tentative Waiver 1 PA Altoona $ 420 $ 448 $ 304 $ 322 FY18 less than FY16 1 PA Bradford $ 289 $ 242 $ 265 $ 276 FY18 less than FY15 1 PA DuBois $ 324 $ 412 $ 331 $ 296 FY18 less than FY17 1 IA Fort Dodge $ 324 $ 281 $ 243 $ 202 FY18 less than FY17 Fort Leonard MO $ Wood N/A N/A N/A N/A 1 PA Franklin/Oil City $ 515 $ 428 $ 412 $ 480 FY18 less than FY15 1 MD Hagerstown $ 612 $ 241 $ 344 $ 355 FY18 less than FY15 1 PA Johnstown $ 276 $ 281 $ 348 $ 340 FY18 less than FY17 1 PA Lancaster $ 764 $ 379 $ 268 $ 238 FY18 less than FY17 1 CA Merced $ 625 $ 209 FY18 less than FY15 1 WV Morgantown N/A N/A $ 210 $ 282 N/A 1 AL Muscle Shoals $ 501 $ 243 $ 222 $ 235 FY18 less than FY16 1 KY Owensboro $ 207 $ 239 $ 218 $ 205 FY18 less than FY17 1 WV Parkersburg $ 375 $ 406 $ 253 FY18 less than FY16 1 UT Vernal* $ 333 $ 265 $ 216 FY18 less than FY16 1 TX Victoria $ 405 $ 538 $ 380 $ 531 FY18 less than FY16 16 *Vernal, UT experienced a service hiatus and is tentatively non-compliant with the Subsidy Cap.