Order: 2014

- 5

- 9

Served May 21, 2014

U N
I T E D S

T A T E S O F A

M E R I C A D E P A R T M E N T O F T R A N S P O R T A T

I O
N UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY
WASHINGTON, D.C.

Issued by the Department of Transportation

on the 21 st day of May , 20 1 4

Essential Air Service at

MERCED, CALIFORNIA

VISALIA, CALIFORNIA

Under 49 U.S. C. § 47131 et seq. DOCKET DOT

- OST

- 1998

- 3521

DOCKET DOT

- OST

- 2004

- 19916



### ORDER REQUESTING PROPOSALS

Summary
By this Order, the Department is requesting proposals from air carriers interested in providing
Essential Air Service (“EAS”) at Merced and/or Visalia, California

, for a new two

- year period,

with or without subsidy support . Proposals are due June 27 , 201 4

. (See Appendix A for a map. )

B a c k g r o un d By Order 2012

- 9

- 9 , issued on September 10, 2012 , the Department re

- selected Great La kes
Aviation, Ltd. (“Great Lakes”) to provide subsidized EAS at Merced and Visalia using 9

- and

19

- passenger Beechcraft aircraft, for the two

- year period from October 1, 2012, through
September 30

, 2014 . Under that contract, Great Lakes has provided Merce d with 12 weekly

nonstop round trips to Los Angeles (LAX), and/ or to Las Vegas (LAS) , at an annual subsidy rate

of $ 1, 698,878

. At Visalia, Great Lakes has provided 12 weekly nonstop round trips to LAX

and/or LAS , at an annual subsidy or $1,697,929.

That Order, as well as the complete public file for EAS at Merced and Visalia

, may be accessed
online through the Federal Docket Management System at http://www.regulations.gov

, by
entering “DOT

- OST

- 1998

- 3521” for Mer ced and “DOT

- OST

- 2004

- 19916” for Visalia in the
“SEARCH for: Rules, Comments, Adjudications or Supporting Documents:” field.

Request for Proposals As the end of the rate term approaches, we are here requesting proposals from air carriers
interested in pr oviding EAS at Merced and/or Visalia

, with or without subsidy support , for the

two

- year period beginning October 1 , 2014. Air carriers should file their proposals no later than

June 27 , 2014. After that date, our staff will docket the proposals, thereby making them public.- 2

-

Additionally, we request each air carrier serve a copy of its proposal on the civic parties at

Merced and Visalia and on the other applicants. Shortly afterwards, we will provide a s ummary

o f the proposals to the communities and ask t hem to submit any formal comments on this carrier

selection case. We will give full consideration to all proposals that are timely filed. 1

We are here providing interested air carriers with some basic information to serve as guidance
when they prepare their proposals, but we will not prescribe a precise format for their
proposals. We expect proposals to adequately describe the service being proposed and the

annual amount of subsidy being requested. The applicants can make their own judgments as

to the level of detail they wish to present; however, we recommend they include information
concerning proposed schedules and projected block hours. In addition, applicants are
encouraged to provide financial data supporting their subsidy requests, including in formation
on their projected expenses and revenues. We strongly encourage clear , well

- documented
proposals that will facilitate their evalua tion by the affected community and the Department. 2

The Department expects proposals that are consistent with what the above communities
currently receive

. At Merced and Visalia , Great Lakes currently provides 12 weekly nonstop round trips to LAX from each community , using 19

- seat aircraft , and, as of May 1, some flights
are operating with 9

- seat aircraft

. We encour age proposals consisting of 12 weekly nonstop
round trips with 19

- seat or larger aircraft to a large or medium hub. If 9

- seat aircraft are
contemplated, we will consider additional frequencies. Air c arriers are also welcome to
propose more than one servi ce option, if they choose. They also need not limit themselves to
these requirements if they envision other, potentially more attractive service possibilities

-- different hubs or length of contract, for example

-- with subsidy requirements that remain

co mpetitive.

Interested air carriers should prepare their propo s al with every expectation that their initial
proposal will also be their final and only proposal. We retain the discretion to negotiate
proposals with air carriers when we deem it desirable; i n such cases we will give all
applicants the same opportuni t y. We also retain the discretion to reject outright all

unreasonab l e or unrealistic proposals and solicit a new round of proposals. However, we
anticipate that negotiation or rejection will rema in on l y occasional exceptions to the rule.

In order to assist air carriers in developing traffic and revenue projections for their proposals, we
have summarized historical passenger levels at each of the communities in Appendix B. In the

1 Air carriers should not expect the Department to accept late filings. In cases where a carrier proposes to provide

EAS without subsidy and we determine that service can be reliably provided without such compensation, we usually
do not proceed with the carrier

- selection case. Instead, we simply rely on that carrier’s subsidy

- free service as
proposed.

2 In selecting a carrier to provide subsid ized EAS for an eligible place not in Alaska, 49 U.S.C. § 41733(c)(1)
directs us to consider five factors: (a) service reliability; (b) contractual and marketing arrangements with a larger
carrier at the hub; (c) interline arrangements with a larger carrie r at the hub; (d) community views, giving substantial
weight to the views of the elected officials representing the users; and (e) whether the carrier has included a plan in
its proposal to market its service to the community. In addition, the Consolidate d and Further Continuing
Appropriations Act, 2012, Public Law No. 112

- 55, and continued by the Full

- Year Continuing Appropriations Act,

2013, Public Law No. 113

- 6, and the Continuing Appropriations Act, 2014, Public Law No. 113

- 46, provides that

when selec ting a carrier to provide EAS, the Department may consider the relative subsidy requirements, thus
codifying a factor that we have considered since the inception of the program.- 3

-

most recent 12

- m onth period for which data are available (Oct ober 1, 2012, through
September 30, 2013) Merced generated 4,810 total origin and destination passengers , or an average of 7.7 enplanements per day

. 3 For that same period, Visalia generated 6,762 total origin

a nd destination passengers, or an average of 10.8 enplanements per day.

Special discussion regarding Merced

We note that 49 U.S.C. § 41731(a)(B) requires that EAS communities within 175 driving miles

of a large or medium hub have an average of 10 enplaneme nts per service day or more, as
determined by the Secretary, during the most recent fiscal yea r beginning after
September 30, 2012 . Communities that do not enplane an average of 10 or more enplanement
per service day are not eligible for EAS support, barr ing a waiver from the Secretary. The
Secretary has the authority to waive the 10

- enplanement standard, on an annual basis, if the
community can demonstrate that the reason the location averaged fewer than 10 enplanements
per day is due to a temporary decl ine in enplanements. 4

As noted above, Merced did not meet the 10

- enplanement threshold , and t he Department issued

Order 2014

- 4

- 26, on April 24, 2014, which directed interested parties to show cause as to why
the Department should not terminate the elig ibility of the those communities that enplaned fewer

than 10 passengers per day. Those objections were due May 14, 2014, and will be addressed in a
subsequent Order , which will also include procedures for applying for a waiver

. Prospective
applicants for service at Merced should be aware of this development as Merced w ould need a
waiver from the Secretary in order to continue to be eligible for subsidized EAS. Staff will be
available to answer any questions.

Discussion Regarding Eligibility
The Departme nt of Transportation and Related Agencies Appropriations Act, 2000, prohibits the
Department from subsidizing EAS to communities located within the 48 contiguous States receiving per passenger subsidy amounts exceeding $200, unless the communities are loca ted
more than 210 miles from the nearest large or medium hub. 5 Merced and Visalia are both

located within 210 miles of a large or medium hub airport, and therefore subject to the $200 cap.
Merced is approximately 107 miles from Mineta San Jose Internatio nal Airport (SJC), a medium
hub, and Visalia is approximately 178 miles from Burbank Bob Hope Airport (BUR), a medium

hub. The Department fully expects both Merced, if granted a waiver from the 10

- enplanement
requirement, and Visalia to work cooperatively with prospective applicants to ensure subsidy rates remain below the $200 per passenger level to remain eligible for the EAS program. 6

3 In calculating enplanements per day, our longstanding practice is to take total annual origin and destination
passenger numbers for each fiscal year. We then divided by two to get passengers in one direction (enplanements at
the EAS community), and then by 313 days to get average daily enplanements at the EAS community.

4 See 49 U.S.C. § 41731(e).

5 Congress first established the $200 ceiling under P.L. 101

- 164 for fiscal year 1990, and reestablished it in fiscal
years 1994

- 1999. The ceiling was made permanent by P.L. 106

- 69, the Department of Transportation and Related
Agenci es Appropriations Act of 2000.

6 On May 1, 2014, a Notice of Proposed Enforcement Policy on the $200 per passenger subsidy cap was published
in the Federal Register (Volume 79, Issue 84) outlined the Department’s proposed policy on this issue, which woul d
use traffic data from October 1, 2014, through September 30, 2015 to measure compliance. The Department has
solicited public comments on the policy and they are due June 30, 2014. Refer to www.regulations.gov and search

“DOT

- OST

- 2014

- 0061” for more information.- 4

-

O t h e r Air Ca rr i e r R e qu i reme n t s The Department is responsible for implementing various Federal statutes governing l obb ying

activities , drug

- free workplaces and nondiscrimination

. 7 Consequent l y, all air carriers
receiving Federal subsidy to support EAS must certify that they are in compliance with
Department regulations regarding drug

- free workplaces and nondiscrimination , and those air

carr i ers whose subsidies exceed $100,000 over the life of the rate term must also certify that
they are in compliance with the regu l ations governing lobbying activities. All air carriers that
plan to submit proposals involving subsidy shou ld submit the required certifications along
with their proposals. Interested air carriers requiring more detailed infor m ation regarding

the s e requirements, as well as copies of the certifications, should contact the Off i ce of

Aviation Ana l ysis at (202) 36 6

- 5903. The Department is prohibited from paying subsidy to

air carriers that do not submit these document s

. 8

C o m m un i t y C o m m e n ts

Civic officials and the State are welco m e to submit comments at any time. We encourage prospective applicants to contact the communi t y before they submit their proposals so that
they can tailor them to the communi t y’s needs, as they will not be ab l e to amend them after
the due date. As noted earlier, we will provide a copy of the propo s als to the civic parties and

ask them to submit their final comments short l y after June 27 , 201 4 , the due da t e for air

carr i er proposals.

This Order is issued under authority delegated in 49 CFR Part 1.25a(b) and re

- delegated to the
Director, Office of Aviation Analysis.

ACCORDI N G L Y,

1. We re quest that air carriers interested in providing E ssential A ir S erv i ce at Merced and/or

Visalia, California , submit their proposals, with or without subsidy requests, no later than

June 27

, 2014 . The proposals should be emailed to: EAS@dot.gov with the title “Proposal to

Provide Essential Air Service at Merced and /or Visalia, California, ” with the docket number
corresponding to the comminutes as show on the first page of this Order; 9

2

. Docket s DOT

- OST

- 199 8

- 3 521 and DO T

- OST

- 2004

- 19916 will remain open until furt her
Order of the Department; and

7 The regulations applicable to these areas are: (1) 49 CFR Part 20

– New restrictions on lobbying; (2) 49 CFR Part

21

– Nondiscrimination in federally

- assisted programs of the Department of Transportat ion

– Effectuation of title VI
of the Civil Rights Act of 1964; 49 CFR Part 27

– Nondiscrimination on the basis of disability in programs and
activities receiving or benefiting from Federal financial assistance; and 14 CFR Part 382

– Nondiscrimination on t he
basis of disability in air travel; and (3) 49 CFR Part 29

– Government

- wide debarment and suspension (non

procurement) and government

- wide requirements for drug

- free workplace (grants).

8 The certifications are also available on the web at http://www.do t.gov/policy/aviation

- policy/small

- community

rural

- air

- service/essential

- air

- service

9 Questions regarding filings in response to this Order should be directed to Mr. Scott Faulk at scott.faulk@dot.gov

or (202) 3 66

- 9967.- 5

-

3

. The Department will serve cop i es of this Order on the civic offic i als of Merced and Visalia,

California; the Manager s of Merced Regional Airport/Macready Field and Visalia Mu nicipal
Airport ; Great Lakes Aviation, Ltd. ; and the service list for this docket

.

Persons entitled to petition the Department for review of this Order under the Department’s

Regulations, 14 CFR Part 385.31(a), must file such petitions within seven (7) da ys after the date

of service of this Order.

This Order will be effective immediately, and the filing of a petition for review shall not
preclude its effectiveness.

By:

TODD M. HOMAN

Director

Office of Aviation Analysis

An electronic version of this document is available

online at www.regulations.gov.Appendix A



### A R EA M AP

M ap s g ene r a t e d b y t h e G r eat Ci r cle M appe r

- c op y r i g h t © Ka r l L. S w a r t z

.Appendix B Page 1 of 2



### Historical passenger Traffic at Merced, CA 1

Year Quarter Enplanements Deplanements Total Avg. Daily

Enplanements

2010 4 640 615 1255

2011 1 487 481 968

2011 2 805 808 1613

2011 3 925 939 1864

2857 2843 5700 9.1

2011 4 947 929 1876

2012 1 795 797 1592

2012 2 924 963 1887

2012 3 921 984 1905

3587 3673 7260 11.6

2012 4 614 604 1218

2013 1 471 469 940

2013 2 632 590 1222

2013 3 730 700 1430

2447 2363 4810 7.7

1 Source: Bureau of Transportation Statistics; Schedule T

- 100.Appendix B Page 2 of 2



### Historical passenger Traffic at Visalia, CA 1

Yea r Quarter Enplanements Deplanements Total Avg. Daily

Enplanements

2010 4 474 503 977

2011 1 425 435 860

2011 2 711 630 1341

2011 3 941 932 1873

2551 2500 5051 8.1

2011 4 903 832 1735

2012 1 768 695 1463

2012 2 905 908 1813

2012 3 9 85 1,025 2010

3561 3,460 7021 11.2

2012 4 686 728 1414

2013 1 688 640 1328

2013 2 996 1,011 2007

2013 3 975 1,038 2013

3345 3,417 6762 10.8

1 Source: Bureau of Transportation Statistics; Schedule T

- 100.Appendix C

Example of General Terms and Conditions for Eassential Air Service

The air c a rr i e r un d er st a nds t h a t it m a y f o rfe it its c omp e ns a tion f or a n y f li g hts th a t it do e s not

op era te in c o n f o r m a n c e with the t er ms a nd stipul a tions of the ra te Order

, i n c luding the s er vi c e pl a ns outlin e d in the Order a nd a n y oth e r s i g ni f i c a nt e l e m e nts of the re qui re d s er vi c e , without

p r ior a p p r ov a l. The air c arr i e r und e r st a nds th a t a n a i r cr a f t t a k e

- o f f a nd l a nding a t its s c h e du l e d

d e stin a tion c onstitut e s a c ompl e t e d f li g ht; a bs e nt a n e x pl a n a tion suppo r ting subsi d y e li g i b ili t y f o r

a f l i g ht th a t h a s n ot b ee n c ompl e t e d, su c h a s cer t a in w ea th e r ca n ce ll a tions, o n l y c ompl e t e d f li g hts

a r e c onsid ere d e l i g ible f or su b si d y

. I n a ddition, if the air carr i e r d o e s not s c h e dule or o p era t e its

f li g hts in f ull c on f o r m a n c e with the Order f o r a s i g ni f i ca nt p e r iod, it m a y j e op ar di z e its e nti r e
subsi d y c l a im f or t he p er iod in qu e stion. I f the air c a rr i e r c ont e mpl a t e s a n y su c h c h a ng e s b e y ond

the s c ope o f the Order du r ing the a ppli ca ble p e r iod of th e se ra t e s, it must f i r st noti f y the O ff i c e of

Avi a tion An a l y sis in w r iti n g a nd r ece ive w r itt e n a pp r o v a l f r om the D e p a r tm e nt to be e nsu re d o f

f ull c omp e ns a tion. S hould c i rc umst a n ce s w ar r a n t , the D e p ar tm e nt m a y l o c a te a nd s e l e c t a

re pl a ce m e nt air c arr i e r to p r ovide s er vi c e on th e se r out e s. The air c a rr i e r must c ompl e te a ll

f li g hts th a t ca n b e s a f e l y op e ra t e d; f l i g hts th a t ov e rf l y points f o r l ac k of t r a f f ic will not be

c omp e ns a t e d. I n d e t er m i ning wh e t h e r subsi d y p a y m e nt f o r a d e v i a ting f l i ght should be a djust e d

or dis a llow e d, t he D e p a r tm e nt will c onsid e r the e x t e nt to whi c h the g o a ls of the p r og ra m a r e m e t

a nd the e x t e nt of acce ss to the n a tion a l a ir t ra nspo r t a tion s y s t e m p r ovid e d to the c ommuni t y

.

I f the D e p ar tm e nt unil a t e ra l l y

, e ith e r p a r ti a l l y or c ompl e t e l y , t er min a t e s or re du ce s p a y m e nts f or

s e r vi c e or c h a ng e s s er vi c e r e qui re m e nts a t a sp ec i f ic lo c a t ion p r ovid e d f or und e r this Order, th e n,

a t the e nd of the p e r iod f or whi c h the D e p ar tm e nt d o e s m a ke p a y m e nts in the stipul a t e d a mounts

or a t the stipul a t e d s er vi c e l e v e ls, the air c a rr i e r m a y cea se to p r ovide s er v i c e t o th a t sp ec i f ic

lo c a tion without re g a r d to a n y r e qui re m e nt f or noti c e of su c h c e ss a tion. Those a djustm e nts in the

l e v e ls of subsi d y a nd/or s er vi c e th a t ar e mutu a l l y a g r ee d to in w r iting b y the D e p ar tm e nt a nd air

ca r r i e r do not c on s titute a tot a l or p ar ti a l re d u c tion or ce ss a tion of p a y m e nt.

S ubsi d y c ont r a c ts ar e su b j ec t to, a nd in c o rpo r a te b y r ef e re n c e

, r e l e v a nt st a t ut e s a nd D e p ar tm e nt

r e g ul a tions, a s th e y m a y be a m e nd e d fr om time to tim e . How e v er

, a n y su c h st a tut e s, r e g ul a tions,

or a m e ndm e nts th ere to sh a ll not op era te to c ont r o v er t the f o r e g oi n g p ar a g r a ph.

Funds may not be available for performance under this Order beyond [DATE] . The
Government’s obligation for performance under this Order beyond [DATE] , is subject to the
availability of funds from which payment for services can be made. N o legal liability on the part
of the Government for any payment may arise for performance under this Order beyond

[DATE] , until funds are made available to the Department for performance. If sufficient funds
are not made available for performance beyond [D ATE] , the Department will provide notice in
writing to the 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 servi ce provided in July must be filed by October 31 st ; August claims must be submitted by November

30 th , and so on.