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Notice of Adjustments to Service Obligations

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Notice of Adjustments to Service Obligations Served: May 12, 2020 UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C. CONTINUATION OF CERTAIN AIR SERVICE PURSUANT TO PUBLIC LAW NO. 116-136 §§ 4005 AND 4114(b) Docket DOT-OST-2020-0037 NOTICE OF ADJUSTMENTS TO SERVICE OBLIGATIONS Summary By this notice, the U.S. Department of Transportation (the Department) announces an opportunity for incremental adjustments to service obligations under Order 2020-4-2, issued April 7, 2020, in light of ongoing challenges faced by U.S. airlines due to the Coronavirus (COVID-19) public health emergency. With this notice as the initial step, the Department will use a systematic process to allow covered carriers1 to reduce the number of points they must serve as a proportion of their total service obligation, subject to certain restrictions explained below.2 Covered carriers must submit prioritized lists of points to which they wish to suspend service no later than 5:00 PM (EDT), May 18, 2020. DOT will adjudicate these requests simultaneously and publish its tentative decisions for public comment before finalizing the point exemptions. As explained further below, every community that was served by a covered carrier prior to March 1, 2020, will continue to receive service from at least one covered carrier. The exemption process in Order 2020-4-2 will continue to be available to air carriers to address other facts and circumstances. Background On March 27, 2020, the President signed the Coronavirus Aid, Recovery, and Economic Security Act (the CARES Act) into law. Sections 4005 and 4114(b) of the CARES Act authorize the Secretary to require, “to the extent reasonable and practicable,” an air carrier receiving financial assistance under the Act to maintain scheduled air transportation service as the Secretary deems necessary to ensure services to any point served by that air carrier before March 1, 2020. On March 31, 2020, the Department 1 For purposes of this notice, the Department will consider carriers that have applied for CARES Act assistance, but not yet received it, as covered carriers. 2 Through this process, the Department is not altering or revoking any exemptions already granted. If a covered carrier already has a partial exemption for a point (e.g., seasonal, reduced frequencies), it may still submit that point for a full exemption through this process. The Department will publish an updated Service Obligation list (i.e., Order 2020-4-2, Appendix B) to include designations for exemptions granted to carriers at certain points, EAS points which are not covered by the order or by this notice, and a designation of covered carriers based upon the most recent information. This list will be available in the docket electronically in Excel format to assist carriers in planning their submissions. -2- issued an order to show cause (Order 2020-3-10) proposing parameters for implementing carriers’ service obligations. After evaluating comments received, the Department issued Final Order 2020-4-2 on April 7, 2020. Since that time, the Department has continued to monitor the ongoing impacts of the COVID-19 public health emergency on the commercial aviation industry. The Department has granted several exemptions to carriers’ service obligations, recognizing circumstances where it is not reasonable or practicable for carriers to serve all points or all frequencies in their service obligations.3 The Department notes that demand for passenger air travel is just beginning to rise from historic lows at approximately five percent of pre-COVID-19 levels according to industry and government reports.4 Numerous carriers have requested exemptions – in some cases, making multiple requests – to reduce or eliminate their service obligations at certain points where demand is essentially zero. Carriers contend that services to certain points in their networks are unreasonable, impracticable, costly, and challenging to complete in light of public health and safety concerns. Considering the range of exemption requests received and the circumstances that the industry continues to face six weeks after the Department published Order 2020-4-2, the Department believes that the Secretary’s authority to determine whether it is reasonable and practicable to require a carrier to maintain a particular service provides the Department with ample authority to consider and grant additional, incremental relief for carriers to reduce their service obligations consistent with the goals of the CARES Act. The approach described here allows the Department to address systematically a range of similar exemption requests that have been filed in a manner that ensures relief is granted in a fair and efficient manner for all carriers, while also guaranteeing that no point is deprived of all air service. The relief described below will allow carriers to reduce their service obligations, thereby reducing carriers’ financial burden and providing flexibility to manage operations and staffing across their networks. Meanwhile, the Department will ensure that, in granting the adjustments described here, all points previously covered under the service obligations retain access to the national air transportation system. Every covered point will continue to receive service from at least one covered carrier. The Department reiterates that obligations under the Essential Air Service (EAS) program take primacy over any obligations imposed by Order 2020-4-2. Accordingly, covered carriers cannot use this process to obtain relief from EAS obligations. Discussion The Department will allow covered carriers to exempt from their service obligation five (5) percent of the points in their service obligation list, or five (5) points, whichever is greater. Appendix A provides the number of each carrier’s service obligation points and the corresponding number of points that can be exempted under this relief. 3 See, e.g., Notice of Action Taken re: Alaska Airlines, Inc., Apr. 17, 2020, DOT-OST-2020-0037-0081. 4 See https://www.airlines.org/dataset/impact-of-covid19-data-updates/. -3- The Department intends to move expeditiously to implement these new flexibilities, with due regard for competition between air carriers. Therefore, covered carriers should submit their list of exemption requests, in priority order, to [email protected], no later than 5:00PM (EDT), on May 18, 2020 in accordance with the application procedures outlined in Appendix B. The Department will review carrier submissions and not permit any point to lose service from all covered carriers. As such, if a carrier seeks to exempt points where the carrier is the only covered carrier at that point, the Department will not provide an exemption from that point. Likewise, should two or more covered carriers request to be exempted from the same point, the Department will grant the exemption(s) based on the carriers’ prioritized lists, until only one covered carrier remains.5 Cities with multiple airports as compiled and documented by the Bureau of Transportation Statistics6 and published with Order 2020- 4-2 are included, such that if a carrier were to be granted Washington, D.C. (DCA) as its exemption point, for example, it would not have to serve Washington Dulles (IAD) or Baltimore-Washington (BWI).7 When granting exemption requests under this notice, the Department will give priority to carriers’ lists but may also consider other factors such as the remaining service at the point and whether the remaining carriers are covered carriers for the purposes of Order 2020-4-2. The Department expects that all carriers, including small and regional carriers, will be able to take advantage of this opportunity to reduce their service obligations.8 The Department reserves the right to deny an exemption request for a point if the exemption would result in inadequate capacity or connectivity to serve the point, as informed by the standards in the CARES Act9 or public interest considerations. Carriers are encouraged to include back-up points in their exemption requests should the Department not be able to satisfy their initial exemption list.10 The Department will issue a tentative decision, 5 If two or more carriers have equally ranked an exemption point, and granting all requests would result in zero carriers serving that point, the Department will implement the following tie-breaking procedure: carriers that have smaller service obligation frequencies at the point will be provided relief over carriers with larger frequency obligations followed by carriers with smaller system-wide service obligations being provided relief over carriers with larger system-wide service obligations. 6 List of all airports and cities is available at the following URL: https://www.transtats.bts.gov/Tables.asp?DB_ID=595&DB_Name=Aviation%20Support%20Tables&DB_ Short_Name=Aviation%20Support%20Tables. 7 BTS cities and airports can be found in Appendix C. All airports will be converted to their corresponding BTS city. To avoid data quality issues the Department is requesting both the BTS City and Airport. See Appendix B for the required submission format. Exemption applications that are not submitted in the required format electronically will not be considered. 8 Per Order 2020-4-2, the Department explained that for regional carriers, any Service Obligation applies to the marketing carrier. Therefore, the Department expects to only receive exemption requests from regional carriers for points that they are obligated to serve under their own brand. 9 “When considering whether to exercise
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