Order 2021-3-19 Served: March 18, 2021

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

Issued by the Department of Transportation on the 18th day of March, 2021

Essential Air Service at

JACKSON, TENNESSEE (FAIN 69A3452160500)1 DOT-OST-2000-7857

under 49 U.S.C. § 41731 et seq.

ORDER SELECTING AIR CARRIER

Summary By this Order, the U.S. Department of Transportation (the Department) is selecting , Inc. (Boutique Air) to provide (EAS) at Jackson, Tennessee for the two- year period from June 1, 2021, through May 31, 2023. In addition, the Department acknowledges the joint motion of LLC (Southern Airways) and Multi-Aero, Inc. d/b/a Air Choice One (Air Choice One) to disqualify Boutique Air’s proposal, but denies the relief sought. Finally, the Department is extending the terms of Order 2017-3-11 until the date when Boutique Air commences EAS at Jackson.

Under the terms of this Order, Boutique Air will provide a total of 18 nonstop round trips per week consisting of 12 weekly nonstop round trips to Hartsfield–Jackson Atlanta International Airport (ATL) and six weekly nonstop round trips to St. Louis Lambert International Airport (STL), using 8- or 9-seat Pilatus PC-12 aircraft, at an annual subsidy of $1,985,941 for the first year and $2,025,659 for the second year.2

Background By Order 2017-3-11 (March 21, 2017), the Department selected Air Choice One to provide EAS at Jackson for the four-year period from June 1, 2017, through May 31, 2021. Under the terms of that Order, Air Choice One provided Jackson with 18 nonstop round trips per week to STL, using 9-seat Cessna Grand Caravan aircraft, at an annual subsidy of $1,884,399.

By Order 2018-1-10 (January 18, 2018), the Department approved the request of Air Choice One to change its EAS pattern at Jackson, effective March 1, 2018, at no additional subsidy, as indicated in the table below:

1 Federal Award Identification Number (FAIN). 2 Such subsidy is calculated and distributed on a fiscal year basis, subject to the availability of funds. - 2 -

Effective Dates Hub(s) Weekly Round Trips June 1, 2017 ‐ February 28, 2018 St. Louis Lambert International Airport (STL) 18 St. Louis Lambert International Airport (STL) 12 March 1, 2018 ‐ May 31, 2021 Hartsfield–Jackson Atlanta International Airport (ATL) 6

Summary of Air Carrier Proposals In anticipation of the end of the contract term established by Order 2017-3-11, the Department issued Order 2020-9-10 (September 16, 2020), soliciting proposals for a new term. In response to the Department’s solicitation, Air Choice One, Boutique Air, Hyannis Air Service, Inc. d/b/a (Cape Air), LLC (Silver Airways), and Southern Airways Express LLC submitted proposals for consideration.

Those proposals, as well as the complete public file for EAS at Jackson, may be accessed online through the Federal Docket Management System at www.regulations.gov by entering “DOT- OST-2000-7857” in the “SEARCH” field.

Air Choice One’s Proposal Air Choice One proposed three options, each consisting of 18 total nonstop round trips per week from Jackson to ATL and STL, using either 9-seat Cessna Grand Caravan 208 or 9-seat aircraft, and for either a two- or four-year term. Air Choice One’s proposal commits $50,000 annually to market the air service.

Air Choice One Option #1 12 Weekly Round Trips to STL and 6 Weekly Round Trips to ATL Using 9-Seat Cessna Grand Caravan 208 For a 2- or 4-Year Term Ye ar Subsidy Year 1$ 2,222,367 Year 2$ 2,289,038 Year 3$ 2,357,709 Year 4$ 2,428,440 - 3 -

Air Choice One Option #2 6 Weekly Round Trips to STL and 12 Weekly Round Trips to ATL Using 9-Seat Beechcraft 1900 For a 2- or 4-Year Term Ye ar Subsidy Year 1$ 2,555,977 Year 2$ 2,632,656 Year 3$ 2,711,636 Year 4$ 2,792,985 Air Choice One Option #3 6 Weekly Round Trips to STL Using 9-Seat Cessna Grand Caravan and 12 Weekly Round Trips to ATL Using 9-Seat Beechcraft 1900 For a 2- or 4-Year Term

Ye ar Subsidy Year 1$ 2,454,203 Year 2$ 2,527,829 Year 3$ 2,603,664 Year 4$ 2,681,774

Boutique Air’s Proposal Boutique Air proposed four options, each consisting of 18 total nonstop round trips per week from Jackson to ATL, STL, Pensacola International Airport (PNS), Nashville International Airport (BNA), and/or O'Hare International Airport (ORD), using 8- or 9-seat Pilatus PC-12 aircraft. Boutique Air has an interline and with , Inc. (United) and an interline agreement with , Inc. (American). Boutique Air’s proposal indicates it will commit $20,000 annually to market the air service.

Boutique Air Option #1 12 Weekly Round Trips to ATL and 6 Weekly Round Trips to STL Using 8- or 9-Seat Pilatus PC-12 Ye ar Subsidy Year 1$ 1,985,941 Year 2$ 2,025,659 - 4 -

Boutique Air Option #2 12 Weekly Round Trips to ATL and 6 Weekly Round Trips to PNS Using 8- or 9-Seat Pilatus PC-12 Ye ar Subsidy Year 1$ 2,000,964 Year 2$ 2,040,983 Boutique Air Option #3 12 Weekly Round Trips to ATL and 6 Weekly Round Trips to BNA Using 8- or 9-Seat Pilatus PC-12 Ye ar Subsidy Year 1$ 1,923,695 Year 2$ 1,962,168 Boutique Air Option #4 12 Weekly Round Trips to ATL and 6 Weekly Round Trips to ORD Using 8- or 9-Seat Pilatus PC-12 Ye ar Subsidy Year 1$ 2,201,229 Year 2$ 2,245,253

Cape Air’s Proposal Cape Air submitted four options, providing either 18 or 21 nonstop round trips per week to STL for either two or four year periods, using 9-seat Tecnam Traveler aircraft, at the annual subsidy rates indicated in the tables below. Cape Air has interline ticket and baggage agreements with United, American, , Inc., JetBlue Airways, Inc., and , Inc., and intends to spend $95,000 annually to market the air service.

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Cape Air Option #1 18 Weekly Round Trips to STL Using 9-Seat Tecnam Traveller For a 2- or 4-year Term Ye ar Subsidy Ye ar Subsidy Year 1$ 2,860,538 Year 12,782,702$ Year 2$ 2,989,262 Year 22,907,924$ Year 3$ 3,038,781 Year 4$ 3,175,526 Cape Air Option #2 21 Weekly Round Trips to STL Using 9-Seat Tecnam Traveller For a 2- or 4-year Term Ye ar Subsidy Ye ar Subsidy Year 1$ 3,227,732 Year 13,139,905$ Year 2$ 3,372,980 Year 23,281,201$ Year 3$ 3,428,855 Year 4$ 3,583,154

Silver Airways’ Proposal Silver Airways proposed to provide 12 nonstop round trips to ATL, using 30-seat Saab 340 aircraft, for a two-year period at an annual subsidy of $5,065,332 for the first year, and $5,022,364 for the second year, as indicated in the table below.

Silver Airways 12 Weekly Round Trips to ATL Using 34-Seat Saab 340

Ye ar Subsidy Year 1$ 5,065,332 Year 2$ 5,022,364

Southern Airways’ Proposal Southern Airways proposed several options consisting of 18 nonstop round trips per week from Jackson to ATL, BNA, STL, and/or ORD, using either 9-seat Pilatus PC-12 or 9-seat Cessna Grand Caravan 208 aircraft, for either a two- or four-year term. Southern Airways has interline and baggage agreements with American, Alaska, and foreign air carriers, and its proposal indicates it will spend $25,000 per community to market the air service.

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Southern Airways Option A 18 Weekly Round Trips to BNA Using 9-Seat Cessna Caravan Subsidy Year 1$ 1,916,560 Year 2$ 1,964,474 Year 3$ 2,013,586 Year 4$ 2,063,925 Southern Airways Option B 11 Weekly Round Trips to BNA and 7 Weekly Round Trips to STL Using 9-Seat Cessna Caravan Subsidy Year 1$ 2,129,497 Year 2$ 2,182,735 Year 3$ 2,237,303 Year 4$ 2,293,236 Southern Airways Option C 7 Weekly Round Trips to ATL and 11 Weekly Round Trips to STL Using 9-Seat Cessna Caravan Subsidy Year 1$ 2,443,942 Year 2$ 2,505,040 Year 3$ 2,567,666 Year 4$ 2,631,858 Southern Airways Option D 11 Weekly Round Trips to ATL and 7 Weekly Round Trips to STL Using 9-Seat Cessna Caravan Subsidy Year 1$ 2,511,208 Year 2$ 2,573,988 Year 3$ 2,638,337 Year 4$ 2,704,296 - 7 -

Southern Airways Option E 18 Weekly Round Trips to ATL Using 9-Seat Cessna Caravan Subsidy Year 1$ 2,545,034 Year 2$ 2,608,660 Year 3$ 2,673,876 Year 4$ 2,740,723 Southern Airways Option F 18 Weekly Round Trips to ATL Using 9-Seat Pilatus PC 12 Subsidy Year 1$ 2,671,586 Year 2$ 2,738,375 Year 3$ 2,806,835 Year 4$ 2,877,006 Southern Airways Option G 11 Weekly Round Trips to ATL and 7 Weekly Round Trips to CHI Using 9-Seat Pilatus PC 12 Subsidy Year 1$ 2,899,482 Year 2$ 2,971,969 Year 3$ 3,046,268 Year 4$ 3,122,425

Community Comments On November 5, 2020, the Department requested community comments regarding this air carrier selection case.

By letter co-signed by Executive Director Steve Smith of the Jackson-Madison County Airport Authority, Mayor Jimmy Harris of Madison County, and Mayor Scott Conger of the City of Jackson, the community provided support for Boutique Air’s proposal, with a particular preference for Boutique’s option #2:

After listening to members of our community and doing our research, the Jackson-Madison County Airport Authority committee voted unanimously to recommend Boutique Air as the Essential Air Service provider for Jackson, TN.

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[Jackson] will enjoy the safety and comfort benefits of Boutique Air's high flying pressurized aircraft as winter icing conditions can be an issue for our routes. Both Cape Air, Southern and Air Choice One do not offer any significant fleet of pressurized aircraft, a significant negative in our experience. Silver Airways bid was an outlier as their costs are high and destinations limited.

Joint Motion to Disqualify On January 29, 2021, Southern Airways and Air Choice One submitted a joint motion for the disqualification of Boutique Air’s EAS proposal at Jackson. The primary argument in the motion is that Boutique Air’s option #2 proposes to provide air transportation to a small hub airport, PNS, in violation of 49 USC § 41732, which requires most EAS to be to a medium or large hub airport. The motion also contends that the Department should disqualify Boutique Air’s EAS proposal at Jackson because, in other carrier selection proceedings, the local communities believed Boutique Air’s unsubsidized EAS proposals to be financially unrealistic. Finally, the movants request that the Department exercise its authority under 49 U.S.C. 41712 to determine whether Boutique Air engaged in an unfair method of competition in its development of EAS proposals at Carlsbad, NM and Chadron, NE.

The Department denies the relief sought by the movants. First, as explained below, the Department is not selecting Boutique Air’s option #2 proposal, thus rendering moot movants’ argument as to PNS. Second, the Department does not view comments regarding the financial viability of Boutique Air’s proposals for unsubsidized EAS at other communities to be relevant to its proposal for subsidized EAS here. Finally, the Department does not believe there are reasonable grounds to open an investigation of Boutique Air under 49 U.S.C. § 41712. See 49 U.S.C. § 46101 & 14 CFR Part 302.

Decision Title 49 U.S.C. § 41733(c)(1) directs the Department to consider five factors when making an air carrier selection for a community not in Alaska, where basic EAS will not be provided without compensation:3 (A) service reliability of the applicant air carrier; (B) the existence of contractual and marketing arrangements with a larger air carrier at the hub; (C) the existence of 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 those users; and (E) whether the air carrier has included a plan in its proposal to market the EAS. In addition, Section 41732(b)(1)(A) requires basic EAS to include at least two daily round trips six days a week for an eligible place not in Alaska. Finally, the Consolidated Appropriations Act, 2021, Pub. L. No. 116-260 (December 27, 2020), authorizes the Department to consider the relative subsidy requirements of the applicant air carriers.

After careful consideration, the Department has decided to select Boutique Air. Boutique Air’s option #1 proposal—to provide Jackson with 18 total nonstop round trips per week consisting of 12 weekly nonstop round trips to ATL and six weekly nonstop round trips to STL, using Pilatus PC-12 aircraft, at an annual subsidy of $1,985,942 for the first year and $2,025,659 for the second year—meets the air carrier selection criteria the Department is required to consider, and

3 The Department did not receive any proposals to provide EAS at Jackson without subsidy. - 9 -

the Department finds its service and subsidy levels reasonable. Therefore, the Department is selecting Boutique Air for a two-year term. Boutique Air has been a partner in the EAS program for several years, it included a marketing plan in its proposal, it has interline ticket and baggage agreements in place with larger air carriers, and the community supports the selection of Boutique Air.

Service Transition The Department expects the air carriers to work together to make a smooth transition at Jackson, with no hiatus in service. In order to give Boutique Air sufficient time to begin its EAS at Jackson, the Department is extending the terms of Order 2017-3-11 until the date when Boutique Air commences EAS at Jackson. During the extension period, Air Choice One will continue to receive the existing annual subsidy rate and will operate the existing service pattern.

Before Air Choice One terminates its EAS, the Department expects the air carrier to notify all passengers holding reservations for travel after the termination date, to assist those passengers in making alternate air transportation arrangements, or to provide a full refund of the ticket price, without penalty, if requested.

Reminder About EAS Eligibility To remain eligible for EAS, communities must comply with all applicable EAS eligibility requirements. We note that many of the traditional eligibility requirements, including those below, were waived for Fiscal Years 2020 and 2021 by the Consolidated Appropriations Act, 2021, Pub. L. No. 116-260 (December 27, 2020). But, unless waived by Congress for future fiscal years, compliance with these eligibility requirements will resume at the beginning of Fiscal Year 2022.

Title 49 U.S.C. § 41731(a)(1)(B) provides that a community must 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. Locations in Alaska and Hawaii, and communities that are more than 175 driving miles from the nearest large or medium hub airport, are exempt from this requirement. Jackson is subject to this requirement, because it is not more than 175 miles from the nearest large or medium hub airport.

Further, the Department of Transportation and Related Agencies Appropriations Act, 2000, Pub. L. No. 106-69 (October 9, 1999), prohibits the Department from subsidizing EAS to communities located within the 48 contiguous States that require a subsidy per passenger amount exceeding $200 (“Subsidy Cap”), unless the community is located more than 210 miles from the nearest large or medium hub airport. Jackson is subject to this requirement, because it is not more than 210 miles from the nearest large or medium hub airport. EAS communities, except for those in Alaska and Hawaii, are also subject to an additional $1,000 subsidy per passenger cap, regardless of the distance to a hub airport.4

The Department expects Boutique Air and Jackson to work together to ensure that the community will comply with the applicable requirements. Communities that fail to comply with the applicable above requirements may risk having their eligibility in the EAS program

4 See 49 U.S.C. § 41731(a)(1)(C). - 10 - terminated. In the event the Department terminates a community’s eligibility for EAS due to lack of compliance, that action will supersede this Order.

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. Boutique Air 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 Federal Aviation Administration has not raised any concerns that would negatively affect the Department’s fitness findings. The Department therefore concludes that Boutique Air is reliable and fit to conduct the operations proposed at Jackson.

This Order is issued under authority delegated by the Secretary of Transportation in 49 CFR § 1.25a(b)(6)(ii)(D).

ACCORDINGLY,

1. The Department selects Boutique Air, Inc. to provide Essential Air Service at Jackson, Tennessee, at the service levels and subsidy rates as described in Appendix B, for the period from June 1, 2021, through May 31, 2023;

2. The Department extends the terms of Order 2017-3-11 until the date when Boutique Air, Inc. commences Essential Air Service at Jackson, Tennessee—obligating Multi-Aero, Inc. d/b/a Air Choice One to continue to provide Essential Air Service at Jackson, Tennessee during that period at the existing annual subsidy rate and with the existing service pattern;

3. The Department acknowledges the joint motion of Southern Airways Express LLC and Multi- Aero, Inc. to disqualify Boutique Air, Inc.’s proposal, but denies the relief sought;

4. This selection is contingent upon receiving properly-executed certifications from Boutique Air, Inc. that it is in compliance with the Department’s regulations regarding drug-free workplaces and nondiscrimination, as well as the regulations concerning lobbying activities;5

5. The Department directs Boutique Air, Inc. 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 EAS 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;

5 The certifications are internet accessible at: http://www.transportation.gov/office-policy/aviation-policy/essential- air-service-reports. - 11 -

6. The Department finds Boutique Air, Inc. fit, willing, and able to operate as a commuter air carrier, and capable of providing reliable Essential Air Service at Jackson, Tennessee;

7. This docket will remain open pending further Department action; and

8. The Department will serve copies of this Order on the civic officials of Jackson and Madison County, Tennessee, the Airport Manager of McKellar-Sipes Regional Airport, and the Chairman of Jackson-Madison County Airport Authority.

By:

Joel Szabat Deputy Assistant Secretary for Aviation and International Affairs

(SEAL) An electronic version of this document is available at http://www.regulations.gov Appendix A Boutique Air, Inc Annual Compensation Requirements for Essential Air Service at Jackson, Tennessee to provide 18 nonstop round trips each week

Appendix B Page 1 of 2 Boutique Air, Inc. Essential Air Service to be provided at Jackson, TN DOT- OST-2000-7857

Contract Term: June 1, 2021, through May 31, 2023 Scheduled Service/Hubs: Twelve (12) nonstop round trips per week to Hartsfield–Jackson Atlanta International Airport (ATL) and six (6) weekly nonstop round trips to St. Louis Lambert International Airport (STL) Aircraft: 8- 9-seat Pilatus PC-12 aircraft First Year (June 1, 2021, through May 31, 2022)/Rate per Eligible Flight: $1,0821 First Year Weekly Ceiling: $38,9522 Second (June 1, 2022, through May 31, 2023)/Rate per Eligible Flight: $1,1043 Second and third Year Weekly Ceiling: $39,7444

Note: The air 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 air 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 air 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 air 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 air carrier to provide service on these routes. The air 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 amounts, the air carrier may cease to provide service to that specific location without regard 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 air carrier do not constitute a total or partial reduction or cessation of payment.

1 Annual compensation of $1,985,941 divided by 1,835 annual departures (36 weekly departures x 52 weeks x 98 percent completion). 2 36 flights per week multiplied by $1,082 per flight. 3 Annual compensation of $2,025,659 divided by 1,835 annual departures (36 weekly departures x 52 weeks x 98 percent completion). 4 36 flights per week multiplied by $1,104 per flight. Appendix B Page 2 of 2

Subsidy contracts 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, 2021. The Government’s obligation for performance under this Order beyond September 30, 2021, 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, 2021 until funds are made available to the Department for performance. If sufficient funds are not made available for performance beyond September 30, 2021, the Department will provide notice in writing to the air 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.