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United States of America Department of Transportation Office of the Secretary Washington, D.C

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United States of America Department of Transportation Office of the Secretary Washington, D.C Order: 2020-2-3 Served: February 3, 2020 UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C. Issued by the Department of Transportation on the 3rd day of February, 2020 Essential Air Service at HANA, HAWAII DOCKET DOT-OST-1999-6502 (FAIN 69A3452060440)1 Under 49 U.S.C. § 41731 et seq. ORDER VACATING ORDER 2019-11-17 AND SELECTING AIR CARRIER Summary By this Order, the U.S. Department of Transportation (the Department) is: (1) vacating Order 2019-11-17 (November 29, 2019); and (2) selecting Mokulele Flight Service, Inc. d/b/a Mokulele Airlines (Mokulele) to provide Essential Air Service (EAS) at Hana, Hawaii, from February 1, 2020, through January 31, 2024. Mokulele will provide Hana with 14 nonstop round trips per week to Kahului Airport in Kahului, Maui (OGG), using 9-seat Cessna Caravan aircraft, at annual subsidy rates of $157,309, $163,601, $170,145, $176,951, respectively.2 Background By Order 2017-12-13 (December 18, 2017), the Department selected Mokulele3 to provide Hana with 14 nonstop round trips per week to OGG using 9-seat Cessna Caravan aircraft, from November 21, 2017, through November 30, 2019, at an annual subsidy rate of $114,099. As the end of the current contract approached, the Department issued Order 2019-6-4 (June 3, 2019), requesting proposals from air carriers interested in providing EAS at Hana for a new term, with or without subsidy, beginning December 1, 2019. Those proposals were due to the Department by July 9, 2019. In response to that solicitation, by letter dated July 3, 2019, Mr. Richard Schuman, President of Schuman Aviation Company Ltd. d/b/a Makani Kai Helicopters d/b/a Ko Olina Helicopters d/b/a Pacific Air Express d/b/a Makani Kai Air Charters (Makani Kai), asked the Department to accept 1 Federal Award Identification Number. 2 Such subsidy is calculated and distributed on a fiscal year basis, subject to the availability of funds. 3 On February 8, 2019, Southern Airways Express, LLC (Southern Airways), a U.S. commuter air carrier, closed on a transaction to acquire substantially all of the assets of Mokulele. Currently, Mokulele continues to operate as a separate air carrier. - 2 - his letter as the air carrier’s proposal to provide unsubsidized EAS at Hana. Mr. Schuman wrote: “Makani Kai Air proposes unsubsidized, zero taxpayers dollars, to provide this service. Makani Kai Air would provide two daily non-stop round trips between [OGG] and Hana Airport six days a week using Cessna Grand Caravan aircraft. Makani Kai also [proposes] offering daily non- stop flights between Honolulu and Hana six days a week using twin engine Piper Chieftains.” The Department also received a proposal from the incumbent air carrier, Mokulele, for 14 weekly round trips from Hana to OGG using its 9-seat Cessna Caravan aircraft, seeking annual subsidies of $157,309, $163,601, $170,145, $176,951, respectively, for a total subsidy of $668,006, over a four-year term. The complete public file for EAS at Hana may be accessed online through the Federal Dockets Management System at https://www.regulations.gov by entering “DOT-OST-1999-6502” in the “SEARCH” field. Comments On July 10, 2019, the Department requested formal comments regarding the above air carrier- selection case and explained that “[a]s typical in every solicitation for proposals, the Department asked for proposals to serve Hana ‘with or without subsidy support.’ Footnote two of Order 2019-6-4 states, ‘In cases where a carrier proposes to provide EAS without subsidy and we determine that basic EAS, as required by 49 U.S.C. § 41732, can be reliably provided without such compensation, the Department typically will not proceed with the airline-selection case. Instead, the Department will simply rely on that airline’s subsidy-free service as proposed.’” In response, on July 10, 2019, the Honorable Michael Victorino, Mayor of the County of Maui, submitted a letter expressing support for Mokulele’s selection. The Mayor explained that “Mokulele has provided safe, reliable, and affordable air transportation for over seven years. Mokulele’s commitment to safety as measured by always using two pilots and opening a pilot training facility here in Maui with a full motion simulator, is extremely important to our community.” The Mayor further stated that “we strongly support [Mokulele’s] request for contract renewal for a four-year term.” Subsequent Developments By Order 2019-11-17 (November 29, 2019), the Department relied on Makani Kai to provide subsidy-free EAS at Hana and terminated the air carrier selection case at Hana, effective February 1, 2020. Subsequently, by letter dated December 16, 2019, Mr. Schuman submitted a request to withdraw Makani Kai’s subsidy-free proposal. The letter explained that, “Makani Kai Air proposed unsubsidized service to Hana but [on December 13, 2019], the major hotel in Hana took [possession] of its own airplane to service its own customers.” Decision Since Makani Kai withdrew its proposal for EAS at Hana, and the Department can no longer rely on the air carrier for unsubsidized air service, the Department has decided to vacate Order 2019-11-17 and select Mokulele for a four-year term. Mokulele was the only other air carrier to submit a proposal for EAS at Hana. Title 49 U.S.C. § 41733(c)(1) directs the Department to consider five factors when making an air carrier selection not in Alaska: (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) the preferences of the actual and potential users of the EAS, giving substantial weight to the views of the elected officials representing the - 3 - actual and potential users of the service; and (E) whether the air carrier has included a plan in its proposal to market the service.4 Mokulele has been providing reliable EAS at Hana since 2013 (both unsubsidized and subsidized). Mokulele has an interline passenger and baggage agreement with Alaska Airlines, Inc. and American Airlines, Inc. As indicated above, Mayor Victorino is strongly supportive of Mokulele’s four-year term and the air carrier included a marketing plan in its proposal. Air 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. Mokulele is subject to the Department’s continuing fitness requirements, and no information has come to the Department’s attention that would cause the Department 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 United is reliable and fit to conduct the operations proposed at Hana. This Order is issued under authority delegated in 49 CFR Part 1.25a(b)(6)(ii)(D). ACCORDINGLY, 1. The Department vacates Order 2019-11-17 (November 29, 2019); 2. The Department selects Mokulele Flight Service, Inc. d/b/a Mokulele Airlines to provide Essential Air Service at Hana, Hawaii, at the service levels and subsidy rates described in Appendix B, for the period from February 1, 2020, through January 31, 2024; 3. The Department directs Mokulele Flight Service, Inc. d/b/a Mokulele Airlines to retain all books, records, and other source and summary documentation to support claims for payment, including copies of flight logs for aircraft used to provide Essential Air Service under this Order and sold or disposed of, and to preserve and maintain such documentation in a manner that readily permits its audit and examination by representatives of the Department. This documentation shall be retained for three years from the last day of service under this Order, or such longer period as the Department may notify the air carrier. If any litigation, claim, or audit is started before the expiration of the three-year period, the records must be retained until all litigation, claims, or audit findings involving the records have been resolved and final action taken. The air carrier may forfeit its compensation for any claim that is not supported under the terms of this Order; 4. This selection is contingent upon receiving properly-executed certifications from the air carrier that it is in compliance with the Department’s regulations regarding drug-free workplaces and nondiscrimination requirements, as well as the regulations concerning lobbying activities;5 4 In addition, the Further Continuing Appropriations Act, 2020, Pub. L. No. 116-94, 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. 5 The certifications are internet accessible at: http://www.transportation.gov/office-policy/aviation-policy/essential- air-service-reports. - 4 - 5. The Department finds Mokulele Flight Service, Inc. d/b/a Mokulele Airlines fit, willing, and able to operate as a commuter air carrier, and capable of providing reliable Essential Air Service at Hana, Hawaii; 6. This docket will remain open pending further Department action; and 7. The Department will serve a copy of this Order on the State of Hawaii Department of Transportation; the civic officials of Hana, Hawaii; Maui County, Hawaii, Mokulele Flight Service, Inc. d/b/a Mokulele Airlines, and Schuman Aviation Company Ltd. d/b/a Makani Kai Helicopters d/b/a Ko Olina Helicopters d/b/a Pacific Air Express d/b/a Makani Kai Air Charters. By: Joel Szabat Assistant Secretary Aviation and International Affairs (SEAL) An electronic version of this document is available at https://www.regulations.gov Appendix A Mokulele Flight Service, Inc.
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