Order 2017-1-1 Served: January 3, 2017 UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C. Issued by the Department of Transportation on the 3 rd day of January, 2017 Essential Air Service at MACON, GEORGIA DOT-OST-2007-28671 under 49 U.S.C. 41731 et seq. ORDER SETTING ANNUAL SERVICE LEVELS AND TOTAL COSTS UNDER THE ALTERNATE ESSENTIAL AIR SERVICE PROGRAM Summary By this Order, the United States Department of Transportation (the Department) approves the application submitted by the Middle Georgia Regional Airport (Macon) under the Alternate Essential Air Service (AEAS) program. The Department will enter into a grant agreement with Macon for a two-year term to provide up to $4,687,979 per year in financial assistance to be used by Macon for public charter service to Washington, D.C., using 30-seat Jetstream 41 aircraft. Background By Order 2013-2-26, issued on February 27, 2013, the Department selected Silver Airways Corp. (Silver) to provide EAS at Macon at an annual subsidy rate of $1,998,696. Under the terms of that contract, Silver was to provide six nonstop round trips per week to Atlanta and six nonstop round trips per week to Orlando (12 total weekly round trips), using 34-passenger Saab 340-B aircraft for the two-year period from March 15, 2013, through March 14, 2015. On August 5, 2014, Silver filed a 90-day notice of its intent to terminate service at Macon, effective November 5, 2014. 1 As a result, the Department issued Order 2014-10-21, on October 24, 2014, requesting proposals from air carriers interested in providing EAS at Macon for a new term. In response to that Order, Community AirLink Co. submitted a proposal for consideration; however, Community AirLink Co. was not eligible to perform EAS because it did not hold any form of authority issued by the Department or the Federal Aviation 1 Macon has been without any scheduled passenger air service since November 5, 2014.
- 2 - Administration (the FAA) to conduct air transportation. 2 As a result, on September 1, 2015, the Department issued Order 2015-9-2 re-soliciting proposals from air carriers interested in providing EAS at Macon. That re-solicitation Order, as well as the complete public file for EAS at Macon, may be accessed online through the Federal Docket Management System at: http://www.regulations.gov, by entering DOT-OST-2007-28671 in the SEARCH for: Rules, Comments, Adjudications or Supporting Documents: field. Summary of Proposals In response to the Department s re-solicitation, Corporate Flight Management, Inc. d/b/a Contour Airlines (CFM), American Aviation Group, Inc./Ultimate Jetcharters Airlines, Inc., Aviation Street, Inc. d/b/a Community Air, and Raven Air d/b/a Island Hoppers Aerial Adventures submitted proposals for consideration. Those proposals are summarized below: Corporate Flight Management Option A (optional 19 seat aircraft available under AEAS): Round Trips/Hub Aircraft Subsidy 18 weekly to Nashville, TN 9 seat Jetstream 31 $ 4,158,090 Corporate Flight Management Option B (requires AEAS): Round Trips/Hub Aircraft Subsidy 6 weekly to 30 Seat Jetstream 41 Washington, DC $ 3,997,074 3 weekly to Orlando 30 Seat Jetstream 41 3 weekly to Tampa 30 Seat Jetstream 41 Corporate Flight Management Option C (requires AEAS): Round Trips/Hub Aircraft Subsidy 12 weekly to Washington, DC 30 Seat Jetstream 41 $ 4,687,979 Options B and C are not viable EAS proposals due to the size of the aircraft. In accordance with 14 CFR Part 135 operating requirements, CFM is limited to 9-seat aircraft when providing scheduled air transportation. 2 49 U.S.C. 41732(a) (stating that basic [EAS] is scheduled air transportation.... ).
- 3 - American Aviation Group, Inc. (serving as the indirect air carrier); Ultimate Jetcharters, Inc. (serving as the direct air carrier)(requires AEAS): Round Trips/Hub Aircraft Subsidy Year 1: Subsidy Year 1: 42 weekly to Atlanta 30 Seat Fairchild Dornier $ 1,555,825 $ 1,184,714 The indirect air carrier, American Aviation Group, Inc. d/b/a Ultimate Jetcharters of Macon, Georgia does not hold authority from the FAA or the Department to provide air transportation of any kind and has not properly registered the trade name Ultimate Jetcharters. 3 The direct air carrier, Ultimate Jetcharters, Inc. of North Canton, Ohio, holds authority to provide public charter operations under Part 380 of the Department s regulations; however, neither American Aviation Group nor Ultimate Jetcharters has authority to provide scheduled air transportation as required by EAS. 4 Therefore, this proposal is not viable. Aviation Street, Inc. d/b/a Community Air (requires AEAS): Round Trips/Hub Aircraft Subsidy 21 weekly to Atlanta 15 Seat Beechcraft 99 $ 2,530,335 Aviation Street, Inc. d/b/a Community Air (Aviation Street) does not hold any form of air transportation authority issued from the Department or the FAA and has not properly registered the trade name Community Air in accordance with 14 CFR Part 215. In its proposal, Aviation Street stated that it will wet lease with other air carriers to operate flights on its behalf, explaining, One example of this in the US was Hooters Air, which used Pace Airlines to operate the flights under a wet lease agreement, even though the aircraft were painted in the Hooters Air color scheme. The application did not indicate which certificated air carrier Aviation Street intends to contract with to operate this service, thereby making this proposal unviable. Raven Air d/b/a Island Hoppers Aerial Adventures (requires AEAS): Round Trips/Hub Aircraft Subsidy 5 weekly to Charlotte 9 Seat Piper Navajo Chieftain 1 Weekly to Fort Lauderdale 9 Seat Piper Navajo Chieftain 5 weekly to Nashville 9 Seat Piper Navajo Chieftain $ 1,080,945 2 weekly to Orlando 9 Seat Piper Navajo Chieftain 2 weekly to St. Petersburg/Tampa 9 Seat Piper Navajo Chieftain 3 14 CFR Part 215 of the Department s regulations provides that any air carrier wishing to use an alternative trade name must first register that name with the Department. 4 See 49 U.S.C. 41732(a).
- 4 - Raven Air, LLC d/b/a Island Hoppers Aerial Adventures is a registered air taxi operating under 14 CFR Part 298 of the Department s regulations, which limits their operations to fewer than five round trips per week in any market. Upon inspection, the Department has no indication that the air carrier is in the process of obtaining its 14 CFR Part 135 scheduled authority from the Department, as stated in its proposal. As indicated above, EAS requires a minimum of 12 round trips a week, this air carrier lacks the requisite authority to provide EAS, and this proposal is not viable. Community Comments On March 1, 2016, the Department requested community comments regarding this air carrier selection case. Those comments were due to the Department by April 1, 2016. Upon review of the proposals, on July 22, 2016, the Middle Georgia Regional Airport submitted an application for financial assistance under the AEAS program. Background on Alternate Essential Air Service On December 12, 2003, President George H.W. Bush signed into law the Vision 100 Century of Aviation Reauthorization Act, P.L. 108-176 (Vision 100), which, among other things, directed the Department to establish certain Community and Regional Choice Programs. Congress established AEAS 5 as a Pilot program to provide communities with an alternative to the traditional EAS-type service. Typically, the EAS program pays subsidy to regional air carriers to provide a minimum level of air service to a major hub airport with twin-engine aircraft. The AEAS program provides that the Department, instead of paying compensation to an air carrier to provide EAS, may provide financial assistance directly to the eligible community. 6 Eligible communities may use the assistance for the purposes spelled out in statute, 7 such as more frequent service with smaller aircraft, on-demand air taxi service, scheduled or on-demand surface transportation, purchasing an aircraft, or regionalized air service. Each community accepted into the AEAS program must execute a grant agreement with the Department before it begins spending funds under the program. By notice dated July 27, 2004, the Department invited communities to submit proposals under the program. Macon s Alternate Essential Air Service Application The Middle Georgia Regional Airport s application, which is incorporated here by reference, 8 requests $4,687,979 per year under the AEAS program, for a two-year term, to fund public charter service to Washington, D.C., using 30-seat Jetstream 41 aircraft, at a 98 percent completion factor. This is the same frequency, hub destination, completion factor, and subsidy requirements proposed by CFM under Option C before the Department in the EAS carrier selection proceeding. Macon asserts that this service, by CFM has the best chance of success in Middle Georgia. CFM plans to operate the service under the Contour Airlines trade name. 5 See https://www.regulations.gov/document?d=dot-ost-2004-18715-0001. The program remains in force today. 6 It is the Department s policy that under no circumstances may a community participate in both the traditional EAS Program and the AEAS Program at the same time. Communities choosing to withdraw from the AEAS Program may request to be reinstated in the traditional EAS program, which could potentially result in a hiatus in air service. 7 See Appendix A for a copy of the statute. 8 See https://www.regulations.gov/document?d=dot-ost-2007-28671-0120.
- 5 - The Honorable Robert A.B. Reichert, Mayor of Macon-Bibb County Consolidated Government, provided a letter of support for the community s participation in the AEAS program. In that letter, Mayor Reichert explained that Macon has experienced a number of issues, primarily poor performing carriers since 2006, when Delta Air Lines, through its regional carrier, Atlantic Southeast Airlines, ceased operations at the community. Since that time, Macon has been impacted by a variety of air service challenges, ranging from the economic downturn of 2008 to the current pilot shortage that is stressing many regional airports today. Mayor Reichert listed four critical factors to ensure successful air transportation at Macon: 1) Department of Defense certification that authorizes military transportation, 2) interline agreements with a major air carrier, 3) a schedule that is accessible in the Defense Travel System (DTS), and 4) a schedule in which departure times and frequency can capture a majority of passengers. Additionally, the Mayor explained that the County commissioned a True Market Study to determine the level of demand for air service and what the top destinations are for the passengers using the Macon airport. The study determined that the community has over 1.1 million people within the catchment area and that Washington, D.C. is the second most traveled destination after New York. Although CFM s Nashville Option qualified as EAS, the Mayor was unsupportive of this option due to the airline s lack of interline agreements with major carriers serving Nashville (BNA) resulting in inadequate opportunities for passengers to connect onto other destinations beyond BNA. Additionally, the Mayor stated, Considering the proximity of BNA and the fact that our True Market Study does not list BNA as a top 50 destination, we believe very few passengers would find this route useful. Therefore, the Mayor seeks financial assistance to provide for nonstop round trip flights between Macon and Washington, D.C. Decision The AEAS statute provides that, instead of paying compensation to an air carrier to provide basic EAS at a community, the Department will provide compensation directly to the community to use for one of the purposes specified in 49 U.S.C. 41745(a)(3). Thus, the Department typically determines the amount of financial assistance available to a community by reference to the community s current EAS subsidy, 9 or for communities not currently receiving EAS, by reference to proposals obtained through a carrier selection proceeding. 10 In the current carrier selection proceeding seeking carriers to provide EAS, the Department only received one viable proposal, CFM s Option A proposal to serve Nashville. CFM requested approximately $4.2 million to provide air service to a medium-hub using a 9-seat aircraft. Although CFM s Option C does not qualify for EAS because CFM does not hold the requisite authority to provide scheduled air transportation using its 30-seat aircraft, the Department finds that CFM s Option C proposal best reflects what the Department would have paid an air carrier to provide EAS at Macon that could be successful. If all of the proposals submitted to the Department qualified for EAS, the Department would have selected CFM s Option C in the carrier selection proceeding. Section 41733(c)(1) of Title 49 U.S.C. directs the Department to consider five factors when making a carrier selection 9 See https://www.regulations.gov/document?d=dot-ost-2004-18715-0001. 10 See, e.g., DOT Order 2012-3-9.
- 6 - decision not in Alaska or Hawaii: (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 its service to the community. 11 As previously stated, when considering all of the proposals submitted for consideration under traditional EAS, the Department would have selected CFM s Option C, if this Option had qualified as EAS, because it aligns with many of the above factors that must be considered when making a carrier selection decision for subsidized EAS. CFM has experience providing reliable EAS at Tupelo, MS, 12 and is the operating air carrier under the AEAS program at two other communities: Manistee/Ludington, MI, and Victoria, TX. All three communities have been pleased with CFM s overall service, including completion factors and on-time performance. Additionally, as indicated above, the Mayor strongly supports CFM s proposed service to Washington, D.C. Option, particularly given that past service to Atlanta and Florida resulted in poor ridership. Further, the Mayor stated that CFM s Option A, with 9-seat aircraft to a medium hub (Nashville), but with no interline agreements to seamlessly connect with other air carriers to reach many of Macon s top destinations and no local market (Macon-Nashville), is very likely to be unsuccessful. The Mayor believes that service to Washington, D.C. provides for the best opportunity for the community to rebuild an air transportation market that has been dormant since November 2014. The Department notes that CFM s Option C proposes two round trips a day to a large-hub, and satisfies the basic EAS minimum service requirements for this community set forth in 49 U.S.C. 41732(b). While CFM s Option A also satisfies the basic EAS minimum service requirements for this community, the Department finds that because CFM s Option C is more consistent with the selection criteria at 49 U.S.C. 41733(c)(1), CFM s Option C establishes a rational market-driven proxy level of funding needed to provide subsidized passenger air service at Macon for a new two-year term. Service to Washington, D.C. will provide the Macon community and military personnel from nearby Robins Air Force Base with direct access to the community s second most popular destination, and one-stop service to its most popular destination, and provide a connection to the national air transportation system on a variety of airlines that provide omni-directional air service. The Department would expect that under Macon s unique circumstances, the required capital to rehabilitate a market that has been without any scheduled air service for such an extended period of time would require a higher than average funding level. Therefore, the Department finds that, although CFM will be offering a public charter service and not scheduled air transportation, its proposal seeking subsidy of $4,687,979 is an acceptable reflection of the subsidy needed to provide EAS at Macon under 49 U.S.C. 41733(c) and 41737. 11 In addition, the Consolidated Appropriations Act, 2016, Pub. L. 114-113, provides that when selecting a carrier to provide EAS, the Department may consider the relative subsidy requirements, thus codifying a factor that has been considered since the inception of the program. 12 See Order 2015-12-12, issued on December 22, 2015.
- 7 - Therefore, pending the execution of a grant agreement, the Department approves the Middle Georgia Regional Airport s application for AEAS at Macon as proposed. The Department finds that the services proposed in the application are eligible for funding under AEAS. 13 Although Macon is being awarded a grant under the Alternate EAS program, it still must adhere to all the eligibility requirements of the EAS program. 14 Eligibility Discussion The Department of Transportation and Related Agencies Appropriations Act, 2000, prohibits the Department from subsidizing EAS to communities located within the 48 contiguous States receiving per-passenger subsidy amounts exceeding $200, unless the communities are 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 ( The Act ), provides that the Secretary of Transportation may waive the $200 Subsidy Cap, subject to the availability of funds, on a caseby-case basis, for a limited period of time. The service will need to generate approximately 23,440 passengers annually (approximately 37.4 enplanements per day) to be in full compliance with the $200 per passenger subsidy cap. The carrier estimates 16,511 passengers annually, so that estimate will need to be greatly exceeded to be in compliance with the $200 cap. The Act also amended 49 U.S.C. 41731(a)(1)(B) to change the definition of eligible place for the purpose of receiving EAS. The amendment states that to be eligible, a community must maintain an average of 10 enplanements or more per service day, as determined by the Secretary, during the most recent Fiscal Year beginning after September 30, 2012. The legislation exempts locations in Alaska and Hawaii and communities that are more than 175 driving miles from the nearest large- or medium-hub airport. The Secretary also has the authority to waive the 10 enplanement standard, on an annual basis, if the community can demonstrate that the reason the location averages fewer than 10 enplanements per day is due to a temporary decline in enplanements. 15 The $200 subsidy per passenger and the 10 enplanement per service day requirements apply to Macon because it is 82 driving miles to Hartsfield Jackson Atlanta International Airport, a large-hub. 16 Additionally, the Department reminds Macon and CFM, or any other indirect or direct air carrier that may serve the community during this contract period, about 49 U.S.C. 41731(a)(1)(C), which states that to be eligible, a community must have had 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 a hub 13 49 U.S.C. 41745(a)(3). 14 See Establishment of Alternate Essential Air Service Pilot Program Pursuant to Vision 100, July 27, 2004, Docket No. DOT-OST-2004-18715. 15 See 49 U.S.C. 41731(e). 16 The Department will address community compliance with these requirements in a future Order based on actual result.
- 8 - airport. The $1,000 subsidy per passenger limit applies to all EAS communities, with the exception of those in Alaska or Hawaii. Macon s compliance with these eligibility requirements will be assessed at the end of each fiscal year. Air Carrier Fitness 49 U.S.C. 41737(b) and 41738 require the Department to find an air carrier fit, willing, and able to provide reliable service before it can provide subsidized AEAS. CFM is subject to the Department s continuing fitness requirements, and no information has come to the Department s attention that would bring into question the air carrier's fitness at this time. The FAA has been contacted, and it has raised no concerns that would negatively affect the Department s fitness findings. The Department therefore concludes that CFM 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 approves the application of Macon, Georgia, as submitted by the Macon- Bibb County Aviation Department, for two years upon execution of a Grant Agreement with the Department and beginning April, 2017, through March 31, 2019, subject to compliance with all eligibility criteria; 2. The Department directs Corporate Flight Management, Inc. d/b/a Contour Airlines or any carrier the community may contract its Alternate Essential Air Service with, 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 from the service date of this Order 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 air carrier may forfeit its compensation for any claim that is not supported under the terms of this Order; 3. The Department finds Corporate Flight Management, Inc. d/b/a Contour Airlines fit, willing, and able to provide reliable Alternate Essential Air Service at Macon, Georgia; 4. This docket will remain open pending further Departmental action; and
- 9-5. The Department will serve copies of this Order on the civic officials of Macon, Georgia, the Airport Director at the Middle Georgia Regional Airport, Corporate Flight Management, Inc. d/b/a Contour Airlines, American Aviation Group, Inc./Ultimate Jetcharters Airlines, Inc., Aviation Street, Inc., and Raven Air d/b/a Island Hoppers Aerial Adventures. By: JENNY T. ROSENBERG Acting Assistant Secretary for Aviation and International Affairs (SEAL) An electronic version of this document is available at http://www.regulations.gov
Appendix A 49 U.S.C. Sec. 41745. Community and regional choice programs (a) ALTERNATE ESSENTIAL AIR SERVICE PILOT PROGRAM (1) ESTABLISHMENT - The Secretary of Transportation shall establish an alternate essential air service pilot program in accordance with the requirements of this section. (2) ASSISTANCE TO ELIGIBLE PLACES - In carrying out the program, the Secretary, instead of paying compensation to an air carrier to provide essential air service to an eligible place, may provide assistance directly to a unit of local government having jurisdiction over the eligible place or a State within the boundaries of which the eligible place is located. (3) USE OF ASSISTANCE - A unit of local government or State receiving assistance for an eligible place under the program may use the assistance for any of the following purposes: (A) To provide assistance to air carriers that will use smaller equipment to provide the service and to consider increasing the frequency of service using such smaller equipment if the Secretary determines that passenger safety would not be compromised by the use of such smaller equipment and if the State or unit of local government waives the minimum service requirements under section 41732(b). (B) To provide assistance to an air carrier to provide on-demand air taxi service to and from the eligible place. (C) To provide assistance to a person to provide scheduled or on-demand surface transportation to and from the eligible place and an airport in another place. (D) In combination with other units of local government in the same region, to provide transportation services to and from all the eligible places in that region at an airport or other transportation center that can serve all the eligible places in that region. (E) To purchase aircraft to provide transportation to and from the eligible place or to purchase a fractional share in an aircraft to provide such transportation after the effective date of a rule the Secretary issues relating to fractional ownership. (F) To pay for other transportation or related services that the Secretary may permit.