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Exhibit 10(c)
ORDER 99-12-28
UNITED STATES OF AMERICA
DEPARTMENT OF TRANSPORTATION
OFFICE OF THE SECRETARY
WASHINGTON, D.C.
Issued by the Department of Transportation
on the 29th day OF DECEMBER, 1999
Essential Air Service at Served: January 3, 2000
EL DORADO/CAMDEN, ARKANSAS DOCKETS: OST-1997-2935
JONESBORO, ARKANSAS
HARRISON, ARKANSAS
HOT SPRINGS, ARKANSAS
ENID, OKLAHOMA OST-1997-2401
PONCA CITY, OKLAHOMA
BROWNWOOD, TEXAS OST-1997-2402
under 49 U.S.C. 41731 et seq.
ORDER RESELECTING CARRIER
AND ESTABLISHING SUBSIDY RATES
SUMMARY
By this order, the Department reselects Big Sky Transportation, d/b/a Big Sky
Airlines (Big Sky), to provide subsidized essential air service (EAS) at E1
Dorado/Camden, Jonesboro, Harrison, and Hot Springs, Arkansas, Enid and Ponca
City, Oklahoma, and Brownwood, Texas, for a new two-year rate term at a combined
subsidy rate of $6,712,448 annually effective December 1, 1999, through November
30, 2001. (See Appendix A for a map.)
BACKGROUND
Big Sky has provided EAS at these seven communities since late November 1998,
under Order 98-10-9, October 7, 1998, when it was selected to replace Aspen
Mountain Air (AMA), at all seven communities. AMA had experienced severe
financial problems and filed for protection under Chapter 11 of the bankruptcy
laws. AMA shortly thereafter informed the Department that because of its ongoing
financial situation it intended to suspend service at the seven communities as
soon as a replacement carrier could be found. Consequently, the Department
requested emergency replacement service and selected Big Sky to provide service
at the seven communities at the same service levels and subsidy rates as AMA's.
All service is provided with 19-seat Metro aircraft. Big Sky's current subsidy
rates and service levels for the seven communities expired November 30, 1999.
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Under our normal procedures when nearing the end of a rate term, we contact the
incumbent carrier to determine whether it is interested in continuing service
and whether it will continue to require subsidy. If the carrier wishes to
continue service with subsidy, we usually negotiate a new subsidy rate with the
carrier, issue an order tentatively reselecting it for a new two-year rate term
at the agreed-to rate, and direct other parties to show cause why we should not
finalize our tentative decision. Other carriers are then invited to submit
competing proposals in response to the show-cause order, and if any such
proposals are received, we process them as a competitive case. Although Big Sky
had advised us that it was interested in continuing to provide subsidized
service at all seven points, in this case, two other carriers expressed an
interest in providing EAS at these communities--Merlin Express, located in San
Antonio, Texas, and Casino Airlines, in Shreveport, Louisiana. Under those
circumstances and our program policy, we issued an order requesting proposals
from all interested carriers to provide essential air service at the seven
communities.
PROPOSALS
We received a proposal from only one carrier, Big Sky Airlines. The carrier
proposes to provide EAS at all seven communities with 19~seat Metro aircraft at
the same service level it is currently providing and at the annual subsidy rates
as follows:
ROUND TRIPS
EACH WEEKDAY
COMMUNITY HUB AND WEEKEND ANNUAL SUBSIDY RATE
- - --------- ----- ----------- -------------------
E1 Dorado Dallas (nonstop) Three ELD and JBR
Jonesboro Dallas (via El Dorado) Two $1,651,137
Harrison St. Louis (via Mountain Home) & Two
Dallas (via Hot Springs) Two
Hot Springs St. Louis (via Mountain Home & Two Harrison and
Harrison)and Hot Springs
Dallas (nonstop) Three $2,251,181 (1)
Enid Dallas (via Ponca City) Four Enid and Ponca
Ponca City Dallas (via Enid) Four City--$1,944,244
Brownwood Dallas (nonstop) Three $865,886
COMMUNITY COMMENTS
We have not received any formal comments from the communities; however, we have
informally discussed Big Sky's proposed service with civic officials from
Jonesboro, El Dorado, and Enid. Both Jonesboro and Enid were satisfied with Big
Sky's proposed service except that Jonesboro requested service to St. Louis in
addition to its subsidized Dallas service. During the past year,
(1) The St. Louis service is provided over the intermediate point Mountain Home.
Mountain Home is not an essential air service community.
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Big Sky experimented with providing one round trip a day in the Jonesboro-St.
Louis market. That service proved to be unprofitable and has been suspended by
Big Sky.(2) El Dorado has complained that Big Sky's service has been unreliable
in that too many flights have been cancelled.
DECISION
We have reviewed Big Sky's proposal and find that the proposed service will meet
the essential air service requirements for the seven communities and that its
subsidy request is reasonable. Thus, we will reselect Big Sky to provide
essential air service at Brownwood, Enid, Ponca City, Harrison, Hot Spring,
Jonesboro and E1 Dorado for another two-year period through November 30, 2001,
at a combined annual subsidy rate of $6,712,448.(3)
The combined rate we are authorizing here is above the current rate by about
$380,000, principally because traffic in most markets has been depressed over
the past several years. While we are concerned about any increase in subsidy
rates, there are extenuating circumstances regarding these seven communities. In
late 1995, the Department implemented program-wide service cuts as a result of
Congressional reductions in fiscal year 1996 funding for the EAS program.(4)
Subsidy levels in all markets (except Alaska), including these seven communities
were cut to support only ten round trips a week in order to keep spending within
Congressional budget levels. Beginning in fiscal year 1998 (effective October 1,
1997), Congress authorized funds necessary to restore service compliance with
the statutory EAS requirements established in the Airport and Airway Safety and
Capacity Expansion Act of 1987.(5) Toward the end of 1997 and early 1998,
carriers began phasing in the required service upgrades. Not long after service
had been restored at these seven communities the incumbent carrier, Aspen
Mountain Air, began having financial troubles and its service became unreliable
and was finally terminated in November 1998. As we explained above, although Big
Sky was selected to provide replacement service, AMA's suspension occurred
before Big Sky was fully prepared to commence service and, consequently, Big Sky
was unable initially to implement a full service pattern. In a further
development, Big Sky, along with several other commuter carriers, suffered a
heavy loss of pilots to larger air carriers, which forced flight cancellations,
especially in mid-1999. Thus, in view of this succession of disruptive
developments, service at these communities has only recently become fully
reliable. For that reason, Big Sky has been understandably reluctant to project
much increase in traffic at the communities. In these circumstances, although we
are concerned that the subsidy rate in total is increasing, we find Big Sky's
revenue projections and subsidy-need estimate reasonable.
As a final matter, we have earmarked a specific dollar amount for local
advertising in Big Sky's subsidy rates and we fully expect the carrier to use
that amount as proposed to continue to promote its service at these essential
air service communities.
(2) Although St. Louis is not part of Jonesboro's EAS definition, Big Sky
offered the St. Louis service for about a six-month period between July and
December. In light of the fact that not many passengers used the St. Louis
service, at this time we are not prepared to expand Jonesboro's EAS definition.
(3) See Appendix B for details of Big Sky's subsidy calculation.
(4) See Orders 95-11-28, November 17, 1995, and 96-2-1, February 2, 1996.
(5) These funds are provided for by the Rural Air Service Survival Act, which
was part of the FAA reauthorization legislation, enacted in 1996.
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CARRIER FITNESS
49 U.S.C. 41737(b) and 41738 require that we find an air carrier fit, willing
and able to provide reliable service before we compensate it for providing
essential air service. We last reviewed Big Sky's fitness by Order 98-9-12,
September 14, 1998, in connection with its selection at seven Montana points,
and Order 98-10-9, October 7, 1998, in connection with its selection at the
seven points in Arkansas, Oklahoma, and Texas. The Department routinely monitors
the carrier's continuing fitness, and no information has come to our attention
that would lead us to question their ability to operate in a reliable manner. We
contacted the FAA Flight Standards District Office in Montana that oversees Big
Sky's operations and they have advised us that Big Sky is conducting its
operations in accordance with its regulations, and that it knows of no reason
why we should not find that Big Sky Airlines remains fit. Based on our review of
its most recent submissions, we find that Big Sky Airlines continues to have
available adequate financial and managerial resources to maintain reliable
service at the seven communities in Arkansas, Oklahoma, and Texas, and that it
continues to possess a favorable compliance disposition.
This order is issued under authority delegated in 49 CFR 1.56a(f).
ACCORDINGLY,
1. The Department selects Big Sky Airlines to provide essential air service at
El Dorado/Camden, Jonesboro, Harrison, and Hot Springs, Arkansas; Enid and Ponca
City, Oklahoma; and Brownwood, Texas, at the service levels and subsidy rates
described in Appendix C, from December 1, 1999, through November 30, 2001;
3. The Department sets the final rates of compensation for Big Sky Airlines for
the provision of essential air service at E1 Dorado/Camden, Jonesboro, Harrison,
and Hot Springs, Arkansas; Enid and Ponca City, Oklahoma; and Brownwood, Texas,
as described in Appendix C, from December 1, 1999, through November 30, 2000,
payable as follows: for each calendar month during which essential air service
is provided, the amount of compensation shall be subject to the ceilings per
week set forth in Appendix C, and shall be determined by multiplying the
subsidy-eligible arrivals and departures flown during the month by the following
amounts;(6)
Enid and Ponca City: $408.63
Brownwood: $485.36
El Dorado and Jonesboro: $555.19
Hot Springs and Harrison: $420.62
3. We find that Big Sky Airlines continues to be fit, willing, and able to
operate as a commuter air carrier and capable of providing reliable essential
air service at E1 Dorado/Camden, Jonesboro, Harrison, and Hot Springs, Arkansas;
Enid and Ponca City, Oklahoma; and Brownwood, Texas;
(6) See Appendix B for the calculation of these rates, which assumes the use of
the aircraft designated. If the carrier reports a significant number of aircraft
substitutions, a revision of these rates may be required.
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4. We direct Big Sky Airlines 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 or until the Department indicates that the records may
be destroyed. Copies of flight logs for aircraft sold or disposed of must be
retained. The carriers may forfeit their compensation for any claim that is not
supported under the terms of this order;
5. These dockets will remain open until further order of the Department; and
6. We will serve a copy of this order on the Mayors and airport managers of E1
Dorado, Camden, Jonesboro, Harrison, and Hot Springs, Arkansas, Enid and Ponca
City, Oklahoma, and Brownwood, Texas, the States' Departments of Transportation,
and Big Sky Airlines.
By:
(SEAL)
A. BRADLEY MIRES
Deputy Assistant Secretary for Aviation
and International Affairs
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