Essential Air Service at Seven Montana Communities

Order: 2016-8-24 Served: August 24, 2016

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

Issued by the Department of Transportation on the 24th of August, 2016

Essential Air Service at

DUBOIS, PENNSYLVANIA DOT-OST-2004-17617 JOHNSTOWN, PENNSYLVANIA DOT-OST-2002-11451 MORGANTOWN, WEST VIRGINIA DOT-OST-2005-20735

Under 49 U.S.C. § 41731 et seq.

ORDER SELECTING AIR CARRIER

Summary By this Order, the Department of Transportation (“the Department”) is selecting Southern Airways Express, LLC (“Southern”), to provide subsidized Essential Air Service (EAS) to the communities of DuBois and Johnstown, Pennsylvania, and Morgantown, West Virginia. Each community will receive 38 weekly round trips to large- or medium-hub airports.

Background By Order 2014-7-11, issued July 18, 2014, the Department re-selected Silver Airways (“Silver”) to provide EAS at Morgantown, West Virginia, and Johnstown, Pennsylvania, from August 1, 2014, through September 30, 2016, and also re-selected Silver at DuBois, Pennsylvania, from October 1, 2014, through September 30, 2016.

In anticipation of the end of these communities’ contracts on September 30, 2016, by Order 2016-3-33, issued on March 28, 2016, the Department requested proposals for EAS at DuBois, Johnstown, and Morgantown (along with other communities not addressed in this Order) with proposals due no later than May 3, 2016. On April 27, 2016, Silver requested an extension to the deadline until May 20, 2016. On April 28, 2016, the Department granted the extension request, thereby making proposals to serve the above communities due on May 20, 2016.

The carriers’ complete proposals and community comments may be accessed online at www.regulations.gov. Therefore, we will only briefly summarize the proposals and comments in the chart below.

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Airline Proposals Boutique Air Option 1 Option 2 Origin Route Annual Subsidy $ Route Annual Subsidy $ 12 weekly non-stops to 24 weekly non- BWI and 12 weekly DuBois stops to BWI 2,675,869 non-stops toPIT 2,683,400 14 weekly non-stops to 28 weekly non- BWI and 14 weekly Johnstown stops to BWI. 2,674,148 non-stops to PIT 2,763,049 14 weekly non-stops to 14 weekly non- IAD and 21 weekly non- Morgantown stops to IAD 2,906,358 stops to PIT 3,222,004 Corporate Flight Management Option 1 Option 2 Origin Route Annual Subsidy $ Route Annual Subsidy $ 24 weekly non- 18 weekly non-stops to DuBois stops to IAD/BWI 4,205,558 IAD/BWI 3,514,911 18 weekly non- 24 weekly non-stops to Johnstown stops to IAD/BWI 3,145,330 IAD/BWI 3,712,783 18 weekly non- 24 weekly non-stops to Morgantown stops to IAD/BWI 3,347,832 IAD/BWI 3,982,787 Silver Airways Option 1 Origin Route Annual Subsidy $ 12 weekly non- stops to IAD via DuBois Johnstown 1,349,803 12 weekly non- Johnstown stops to IAD 1,974,903 13 weekly non- Morgantown stops to IAD 3,210,395 Southern Airways Express Option 1 Option 2 Option 3 Origin Route Annual Subsidy $ Route Annual Subsidy $ Route Annual Subsidy $ 19 weekly non- stops to PIT and 19 14 weekly non-stops to non-stops weekly to PIT and 19 non-stops 31 weekly non- DuBois BWI 2,967,587 weekly to BWI 2,760,404 stops to PIT 2,640,298

24 weekly non- stops to PIT and 14 19 weekly non-stops to non-stops weekly to PIT and 14 non-stops 32 weekly non- Johnstown IAD/BWI 2,912,558 weekly to IAD/BWI 2,697,078 stops to PIT 2,470,700 19 weekly non- 19 weekly non- stops to PIT stops to PIT and 19 24 weekly non-stops to and 14 non- non-stops weekly to PIT and 14 non-stops stops weekly to Morgantown IAD 2,989,432 weekly to IAD 2,989,803 IAD 2,663,241 ViaAir Option 1 Origin Route Annual Subsidy $ 24 weekly non- Morgantown stops to IAD 2,397,626

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Community Comments On May 23, 2016, the Department requested comments from the communities regarding the carrier- selection case. All three communities support Southern’s Option 1 with 38 weekly round trips per community, and both Johnstown and Morgantown expressed strong dissatisfaction with Silver’s service over the last two years.

At DuBois, we received comments from the County Commissioner of Jefferson County, the Chairman of the Clearfield Jefferson Counties Regional Airport Authority, and a State Representative. All three letters cited Southern’s favorable price structuring, advertising and marketing plan, and reputation for operational efficiency as factors for their preference. Rep. Matt Gabler of the 75th district of the Pennsylvania House of Representatives mentions that “[with] Southern’s proposed pricing for tickets, service levels and level of professionalism and enthusiasm, it is the Authority’s hope that the per-seat cap can be overcome easily and that ridership will increase capturing those driving to those destinations.” The Chairman of the Clearfield Jefferson Counties Regional Airport Authority stated the the authority voted unanimously for Southern’s Option 1, with 19 weekly round trips to both Pittsburgh and to Baltimore.

RaNell Fenchak, the airport manager at the Johnstown Cambria County Airport, states that the community supports Southern’s proposal for 24 weekly nonstops to Pittsburgh and 14 weekly nonstop to Washington Dulles, citing Southern’s operational efficiency, scheduling, fleet quality and potential for code sharing and/or interline agreements. Further, “[a]lthough they do not have code share [or] interline agreements, they are currently in the process of establishing an interline agreement. They also have methods in place to provide timely and convenient check in at the connecting airports.”

Calvin G. Kelly III, Acting Airport Director at Morgantown Municipal Airport recommends Southern’s Option 1, and cites the carrier’s reputation for reliability and operational efficiency.

Decision In selecting an air carrier to provide subsidized EAS 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 serve; and (E) whether the air carrier has included a plan in its proposal to market the service. 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.

Southern (previously Sun Air) has a record of providing reliable EAS at markets around the U.S., and, with the exception of Silver, none of the proposals received contemplated contractual, marketing, or interline arrangements with a larger air carrier at a hub airport. In this case, the communities’ support of Southern is clear. As described above in the Department’s statutory selection criteria, the Department is directed to consider community views and also to give substantial weight to the views of elected officials. All of the letters received from the three communities were in support of Southern, including comments from Morgantown and Johnstown expressing the communities’ strong dissatisfaction with the service that Silver, the incumbent, has provided over the last two years. The Morgantown Municipal Airport specifically cited Silver’s lack of reliability as a major factor leading to “the significant dwindling of [the community’s] enplanements…” Additionally, Southern states in its proposal, “Southern has full-time, dedicated EAS marketing professionals who maintain a physical -4- presence in each service community. Including weekly marketing calls and bi-weekly visits with airport officials, Southern executives are engaged with the airports in every aspect of the operation.” Considering Southern’s a comprehensive marketing plan, robust scheduling options, and the communities’ strong and unanimous support of Southern’s proposals, the Department will select Southern’s Option1 to provide EAS at DuBois, Johnstown, and Morgantown.

Southern proposes use of single-engine aircraft. Under 49 U.S.C. § 41732(b)(5), EAS requires service by an aircraft with at least two engines. However, 49 U.S.C. § 40109(c) states that the Secretary may grant an exemption from certain EAS requirements when the exemption is consistent with the public interest. Under 49 U.S.C. § 40101(a)(11), the Secretary of Transportation shall consider as being in the public interest: “maintaining a complete and convenient system of continuous scheduled interstate air transportation for small communities and isolated areas with direct financial assistance from the United States Government when appropriate.”

All three communities specifically supported an exemption from 49 U.S.C. § 41732(b)(5), and fully understand all consequences of this request. Rick Wise, Chairman of the Clearfield-Jefferson Counties Regional Airport Authority, states, “We believe there is sufficient value in use of [single engine] aircraft in our community that we are prepared to waive our right to twin engine service. We understand that use of single engine aircraft for Essential Air Service could eliminate the twin engine minimum standard in future EAS bids.” RaNell Fenchak, Manager at the Johnstown-Cambria County Airport Authority, also submitted a letter waiving the community’s right for the current contract term and potentially for future EAS bids, stating, “We hereby waive the multi-engine requirement for our EAS, based on the high reliability rate of the Pratt and Whitney PT6 engine used in the Caravan aircraft.” The Department grants an exemption from 49 U.S.C. 41732(b)(5) to these communities and finds that this exemption is consistent with the public interest.

Reminder About EAS Eligibility To remain eligible for EAS, communities must comply with all applicable EAS eligibility requirements. 49 U.S.C. § 41731(a)(1)(C) states that to be eligible for EAS, communities (except those in Alaska and Hawaii) 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 hub airport. All three communities are in compliance with this EAS eligibility requirement.

In addition, the Consolidated Appropriations Act, 2016, Pub. L. 114-113 prohibits the Department from subsidizing EAS to communities located within the 48 contiguous States with a 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. All three communities are located within 210 miles of a large- or medium-hub airport and, thus, are subject to the $200 subsidy cap1.

Additionally, with the exception of Alaska and Hawaii, communities within 175 miles of a large- or medium-hub airport 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.

1 See Order 2016-5-17 (May 20, 2016) for details regarding DuBois and Johnstown’s eligibility. -5-

All three communities are located within 175 miles of a large- or medium-hub airport and, thus, are subject to the 10-enplanement-per-day standard.

With this selection of Southern at DuBois, Johnstown, and Morgantown, the Department fully expects Southern and the communities to work together to increase passenger usage at their respective airports to ensure the subsidy per passenger complies with the $200 subsidy cap.

Carrier Fitness 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 Essential Air Service. Southern 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 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 the carrier remains fit to conduct the operations proposed here.

This Order is issued under authority delegated in 49 CFR Part 1.25a(b).

ACCORDINGLY, 1. The Department selects Southern Airways Express, LLC, to provide Essential Air Service at DuBois and Johnstown, PA, and Morgantown, WV, as described in Appendix C;

2. The Department directs Southern Airways Express, LLC, 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 date of service 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 carrier may forfeit its compensation for any claim that is not supported under the terms of this Order;

3. The Department finds that Southern Airways Express, LLC, continues to be fit, willing and able to operate as a commuter air carrier and capable of providing reliable Essential Air Service at DuBois and Johnstown, Pennsylvania, and Morgantown, West Virginia;

4. Under the Department’s authority in 49 U.S.C. § 40109(c), the Department exempts DuBois and Johnstown, PA, and Morgantown, WV, from the requirement under 49 U.S.C. § 41732(b)(5) and finds that this exemption is consistent with the public interest under 49 U.S.C. § 40101(a)(11);

5. These dockets will remain open until further order of the Department; and

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6. The Department will serve copies of this Order on the civic officials of DuBois and Johnstown, Pennsylvania: Morgantown, West Virginia; and the airport managers of DuBois Regional Airport; John Murtha Johnstown-Cambria County Airport; and Morgantown Municipal Airport, Southern Airways Express, LLC, Boutique Air, Corporate Flight Management, Silver Airways, and Via Air, LLC.

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

SERVICE AREA MAP

Appendix B Page 1 of 3

Southern Airways Express – DuBois, PA

Appendix B Page 2 of 3

Southern Airways Express – Johnstown, PA

Appendix B Page 3 of 3

Southern Airways Express – Morgantown, WV

Appendix C Page 1 of 3

Southern Airways Express, LLC Essential Air Service to be provided at DuBois, Pennsylvania Docket OST-2004-17617

Effective Period: October 1, 2016, through October 31, 2018 Scheduled Service: 19 weekly nonstop round trips to Baltimore-Washington Int’l Thurgood Marshall Airport and 19 weekly nonstop round trips to Pittsburgh International Airport (PIT) Aircraft: 9-seat Cessna Caravan Rate per Eligible Flight: $7701 Weekly Ceiling: $58,5202

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, 2016. The Government’s obligation for performance under this order beyond September 30, 2016, 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, 2016, until funds are made available to the Department for performance. If sufficient funds are not made available for performance beyond September 30, 2016, 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 $2,967,587 divided by 3,853 annual departures (76 weekly departures x 52 weeks x 97.5 percent completion). 2 76 flights per week multiplied by $770 per flight. Appendix C Page 2 of 3

Southern Airways Express, LLC Essential Air Service to be provided at Johnstown, Pennsylvania Docket OST-2002-11451

Effective Period: October 1, 2016, through October 31, 2018 Scheduled Service: 24 weekly nonstop round trips to Pittsburgh International Airport (PIT) and 14 weekly nonstop round trips to Washington Dulles International Airport (IAD) Rate per Eligible Flight: $7601 Weekly Ceiling: $57,7602

1 Annual compensation of $2,912,558 divided by 3,833 annual departures (76 weekly departures x 52 weeks x 97 percent completion). 2 76 flights per week multiplied by $760 per flight. Appendix C Page 3 of 3

Southern Airways Express, LLC Essential Air Service to be provided at Morgantown, West Virginia Docket OST-2005-20735

Effective Period: October 1, 2016, through October 31, 2018 Scheduled Service: 19 weekly nonstop round trips to Pittsburgh International Airport (PIT) and 19 weekly nonstop round trips to Washington Dulles International Airport (IAD) Aircraft: 9-seat Cessna Caravan Rate per Eligible Flight: $7801 Weekly Ceiling: $59,2802

1 Annual compensation of $2,989,432 divided by 3,833 annual departures (76 weekly departures x 52 weeks x 97 percent completion). 2 76 flights per week multiplied by $780 per flight.