OST-2001-10128 - EAS at Pierre, SD

OST-2001-10128

Increases in costs associated with converting Great Lakes Aviation's operations from FAR Part 135 to Part 121 in 1997 coupled with increases in fuel costs in the past year have caused Great Lakes to incur losses in providing scheduled service at Pierre.

The service currently provided by Northwest Airlink to Minneapolis/St. Paul will meet Pierre's air service needs and provide continuing access to the national air transportation system.

On behalf of the South Dakota Aeronautics Commission I would like to express our concern and objection regarding the loss of air service to Pierre, South Dakota, by Great Lakes Aviation. Pierre has a good record of enplanements to Denver due to state government employees traveling for work, in addition to the flights taken by the general public.

Without the option of flying directly to Denver, any flight west must first go through Minneapolis. The connections through Minneapolis often add many hours of travel time. We believe the loss of service to the Pierre Airport will negatively impact the community of Pierre as a whole, State Government and the Pierre Airport and hereby request the DOT deny Great Lakes Aviation's request to discontinue service to Pierre.

Our last review of Pierre's essential air service determination was conducted in 1988 (Order 88-1-42, January 20, 1988) and specified service to both Denver and Minneapolis/St. Paul. The Department's policy over the past decade has been to terminate subsidy for service to second hubs as the program's resources have been stretched thinner and thinner. And we continue to believe that to be a sound policy. Many of the dual-hub designations were established two decades ago, well before the carriers developed sophisticated hub-and-spoke systems. These well-developed hubs provide access to the national air transportation system. However, Pierre is unique in a couple of respects. First, of course, it is the state capital of South Dakota. As such, the loss of Great Lakes' service between Pierre and Denver would add a considerable amount of travel time for state government employees relying on Great Lakes' nonstop service as a means to and from work at the state capital. Second, the distances are very long. For example, the nonstop air miles to Denver and Minneapolis are 385 and 350, respectively, while one provides eastbound connections and the other westbound. If Denver-bound passengers had to travel via Minneapolis, they would first travel 350 miles to Minneapolis, then 680 miles from Minneapolis to Denver, for a total in excess of 1000 miles for what is a 385-mile nonstop flight. Put another way, westbound passengers would have to travel about 700 extra miles - roughly 350 east to Minneapolis and 350 back west just to get back where they started.

By this order, the Department is requesting proposals from carriers interested in providing essential air service (EAS) at Brookings, Huron and/or Pierre, South Dakota, for a two-year period, with or without subsidy.

The service proposed by such bid offers the two subsidy-eligible communities of Huron and Brookings, South Dakota, three round-trip flights each weekday, and two round-trip flights each weekend day. On May 6, 2004, Westward received an Air Carrier Operating Certificate issued under Title 14 CFR 135 of the United States Code of Federal Regulations.

Westward anticipates submittal of final documents to effect Westward's Certificate of Public Convenience and Necessity for Interstate Air Transportation (Docket OST-02-14071) to the Department no later than May 17, 2004.

Big Sky Transportation Co. is pleased to provide proposals to provide Essential Air Service to the South Dakota points of Brookings, Huron and Pierre. It is our belief that the proposals being made are unique and offer the South Dakota community's substantially better service than is being provided by the incumbent carrier. The Big Sky proposals include service for the Huron and Brookings communities to Omaha, Nebraska. Service from the state capital of Pierre is proposed to Denver.

Great Lakes Aviation, Ltd. is pleased to submit these proposals to provide essential air transportation at these points in South Dakota.

In light of the instructions in the order to provide a "last and final" offer for the service to these points, Great Lakes has provided a list of options for service to these Essential Air Service points for the communities and the Department to choose from. As in the recent bids for service points in Nebraska, Colorado and Wyoming, Great Lakes is bidding on these points to provide service in the local markets to Denver as Great Lakes Airlines. These service patterns and times are designed specifically to connect with our code-share partners Frontier and United Airlines in Denver, with which we hold exclusive code-sharing agreements for the service at these points. Service into Minneapolis will be operated as Great Lakes Airlines, and those flights are designed to connect advantageously with Northwest Airlines' flight structure there. Great Lakes holds a ticketing and baggage agreement with NWA that allows for through ticketing and baggage check for our customers traveling through Minneapolis.

Mesa Air Group, Inc. d/b/a Air Midwest cordially submits a proposal to provide Essential Air Service at Brookings, Huron, and Pierre, South Dakota. Mesa proposes timely non stop service to Denver, Colorado and Omaha, Nebraska. All nights will be operated with a pressurized turboprop Beech 1900 D aircraft with 19 seats. This level of service meets the requirements mandated by Order 2004-4-8.

I would like to update you on the essential air service situation at Pierre and to give Nu an opportunity to submit any comments if you wish. As you know, by Order 2004-4-8, April 6, 2004, the Department solicited proposals from all interested air carriers to provide service at Pierre, Brookings and Huron. In response to that order, we received proposals containing a total of seventeen service options from four carriers-Great Lakes Aviation, Air Midwest, Big Sky Airlines, and Westward Airways. (Westward Airways is not proposing service to Pierre.) While we would normally write up a brief summary of all of the proposals, that is not practical in this case given the number of options.

In order of priority, the following EAS proposals are preferred by the community of Pierre, SD:

On behalf of the citizens of Brookings, South Dakota, we respectfully request your assistance in the selection of airline service to our city, as provided by the Essential Air Service program.

Per document 97-8-9 (Order Reselecting Carrier.. .) under assigned document number OST-1997-2785, four (4) airlines have submitted bids to provide service to Brookings. Following several community meetings and consultations with our fellow community (Huron, South Dakota), we are firm in our belief that the service which would best serve our two communities is that of Option 3 as offered by Mesa Air Group, Inc. d/b/a Air Midwest (Document number OST-1997-2785-34).

By this order, the Department is selecting Great Lakes Aviation, Ltd. to continue providing subsidized essential air service at Pierre, and Air Midwest to provide subsidized essential air service at Brookings and Huron, for a two-year period. Great Lakes' service at Pierre is to consist of 12 weekly nonstop round trips to Denver with 19seat Beech 1900-D aircraft, at an annual subsidy of $449,912. Air Midwest's service at Brookings and Huron is to consist of 12 weekly flights routed Huron-Brookings-Omaha-Brookings-Huron, with 19-seat Beech 1900-D aircraft, at an annual subsidy of $2,078,727.

We stress that we are very concerned over the low passenger levels and expect both communities to work diligently with Air Midwest to improve traffic levels, which should also result in decreasing subsidy levels in future years.

By Order 2004-7-5, July 9, 2004, the Department selected Great Lakes Aviation, Ltd. to provide subsidized essential air service at Pierre through June 30, 2006, at the annual rate of $449,912. Great Lakes’ service consists of 12 nonstop round trips a week to Denver with 19-seat Beech 1900D aircraft. In addition, Mesaba Aviation, Inc., d/b/a Mesaba Airlines, d/b/a Northwest Airlink provides 14 one-stop round trips a week to Minneapolis with 34-seat Saab 340 aircraft. The service provided by Mesaba is not subsidized.

As the end of the current rate term approaches, we are here requesting proposals from carriers interested in providing service in the Pierre-Denver market, with or without subsidy, for the two-year period beginning July 1, 2006. Carriers should file their proposals within 30 days of the date of service of this order.

With specific respect to Pierre, we expect proposals consisting of service, at a minimum, with two-pilot, twin-engine aircraft with at least 15 passenger seats, and offering two round trips to Denver each weekday and weekend (12 a week). Such service is generally consistent with what the community currently receives, and fully satisfies its essential air service requirements. We encourage proposals that meet those requirements in an efficient manner. Carriers are also welcome to propose more than one service option, if they choose; they need not limit themselves to those requirements if they envision other, potentially more attractive service possibilities - different hubs, for example - with subsidy requirements that remain competitive.

The Big Sky proposal encompasses service between Pierre and Denver with two well timed flights each weekday and one flight each on Saturday and Sunday, for a total of twelve weekly flights. The annual EAS subsidy required for this service pattern is $379,616.

Big Sky's EASYFARES have been successful in increasing passenger traffic at our EAS communities local airports. The implementation of EASYFARES, in our EAS markets, representing a net fare reduction of approximately 20%-30% has resulted in a 35%-40% increase in ridership. Big Sky will continue to aggressively price its fares.

The Great Lakes proposal contemplates non-stop, conveniently timed connecting services with our Code Share partners United and Frontier at our Denver Hub. Our code share agreements will give Pierre the greatest competitive opportunity available in the Rocky Mountain Region. In addition, Great Lakes maintains interline ticketing and baggage agreements with the majority of carriers serving their hubs from Denver, which will allow for maximum utilization of our air service for passengers flying in and out of Pierre, South Dakota.

I would like to update you on the essential air service situation at Pierre and give you an opportunity to submit any comments if you wish. As you know, Great Lakes’ current EAS contract expires June 30, 2006. In anticipation of that, we issued Order 2006-3-3, March 3,2006, which solicited proposals from carriers interested in providing subsidized service at Pierre. In response to our request, we received proposals from two carriers, Great Lakes; and Big Sky Transportation Co.

My purpose in writing to you at this time is to request any final comments you might have on the proposals before we submit a recommendation to the Assistant Secretary for Aviation and International Affairs. We request that you review each proposal and submit any comments you may have as soon as possible, but in no case later than April 28. We will carefully consider your comments before we submit a recommendation to the Assistant Secretary for a decision.

The community of Pierre, SD strongly recommends that the Department of Transportation find in favor of Great Lakes Airlines' Essential Air Service proposal #1, two round trips - B1900 to Denver, CO. Great Lakes Airlines has demonstrated reliability in its operation of Pierre's air service. Additionally, Great Lakes Airlines maintains key code share arrangements with Denver's two largest hub operators, United Airlines and Frontier Airlines. These code share arrangements provide seamless travel and maximize the number of single-connect destinations which our constituents desire. As the state capital of South Dakota, our local and state representatives regularly use Great Lakes Airlines' code share service and support community preference for Great Lakes Airlines.

By Order 2004-7-5, the Department selected Great Lakes Aviation, Ltd., to provide two nonstop round trips on weekdays and on weekends to Denver with 19-seat Beech 1900D turboprop aircraft for the two-year period ending June 30, 2006, at an annual subsidy of $449,912. As the end of that two-year contract period was approaching, the Department issued Order 2006-3-3 on March 3, 2006, requesting proposals for a new two-year period beginning July 1, 2006, with or without subsidy. In response to our request, we received proposals from Big Sky and from Great Lakes.

After carefully considering the various issues involved and the community’s comments, we have decided to select Big Sky to provide EAS at Pierre for a two-year period. The carrier’s proposed service and subsidy levels are reasonable, and the carrier’s service at its other subsidized communities continues to be satisfactory.

We set the final rates of compensation for Big Sky Transportation Co., d/b/a Big Sky Airlines, for the provision of essential air service at Pierre, South Dakota, as described in Appendix B, for the two-year period beginning July 1, 2006, payable as follows: for each month during which essential air service is provided, the amount of compensation shall be subject to the weekly ceilings set forth in Appendix B and shall be determined by multiplying the subsidy-eligible flights completed during the month to and from Denver by $310.40.

Great Lakes has provided subsidized essential air service in the Pierre-Denver market for several years. Most recently, by Order 2006-5-7, issued May 10, 2006, the Department selected Big Sky Transportation Co., d/b/a Big Sky Airlines to replace Great Lakes as Pierre’s EAS carrier for a two-year period beginning on or about July I ; Great Lakes’ current contract expires on June 30. We selected Big Sky to serve the Pierre-Denver market in a competitive proceeding in which both Big Sky and Great Lakes submitted EAS proposals, as fully set forth in Order 2006-5-7.

As we do in all cases when a non-incumbent is selected, we stated in that order that we expected Great Lakes and Big Sky to coordinate the transition in EAS responsibilities. After issuance of that order, Great Lakes informed us, as well as Big Sky and the community, that it would continue to serve the Pierre-Denver market. The staff contacted officials from Big Sky for their reaction to Great Lakes’ announcement. and they told us that Big Sky would not inaugurate service as long as Great Lakes remained in the market.

Given the foregoing, we will not continue to pay Great Lakes subsidy after the end of its current contract on June 30. We may only authority subsidy for a community’s service when it would otherwise not receive any scheduled air service. Great Lakes’ actions indicate that it will continue voluntarily to provide service at Pierre. and thus there is no basis for the Department to continue to pay subsidy to the carrier. We will also suspend -- but not revoke -- our selection of Big Sky to provide EAS at Pierre for two years. Should Great Lakes decide to terminate service at Pierre at any time during this two-year period, and no other carrier has commenced scheduled service in the interim, the service and subsidy levels authorized by Order 2006-5-7 for Big Sky would automatically become effective, assuming, of course, that Big Sky is still willing to accept those conditions. We find that this is the most efficient and equitable way to ensure that Great Lakes’ reversal of its earlier decision that it required EAS subsidy to serve Pierre, after failing to be selected for subsidy, does not adversely affect the community or the other carrier in this proceeding.

OST-01-10128	July 11, 2001	Notice to Terminate Scheduled Air Service at Pierre, SD	90-Day Notice to Terminate Service at Pierre, SD
		Service List