Order 2011

- 10

- 24 Served: October 31, 2011



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION


### OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 31 st of October, 2011

Essential Air Service at

DODGE CITY , KANSA S

GARDEN CITY , KANSAS

GREAT BEND , KANSAS

HAYS , KANSAS, AND LIBERAL, KANSAS

Under 49 U.S.C. 41731 et seq

. DOCKET OST

- 1998

- 3502

DOCKET OST

- 1998

- 3503

DOCKET OST

- 1998

- 3496

DOCKET OST

- 1998

- 3497

DOCKET OST

- 1998

- 3498

Order Tentatively Selecting Carriers

Summary By this order, the Department i s tentatively selecting American Eagle Airlines to provide essential air service (EAS) at Garden City for $ 2,919,026 annual subsidy , and Great Lakes Aviation, Ltd., (Great Lakes) to provide EAS at Dodge City for $1, 688,598

, Liberal for $2,555,150, and Grea t Bend and Hays combined for $3,246,061 for a two

- year period beginning when American Eagle inaugurates service at Garden City , or $10,408,835 total for both airlines

. We set the subsidy rate for Great Lakes at all five communities from October 1 until Am erican Eagle inaugurates its Garden City service at $10,999,748

. 1

Background By Order 200 9

- 9

- 5 the Department selected Great Lakes to provide EAS to Dodge City, Garden City, Great Bend, Hays, and Liberal

, Kansas , through September 30, 20 11 , at a combined annual subsidy rate of $8,897,565 for service with 19

- seat Beech 1900 aircraft, with all service to

Denver

, except for Great Bend , which was to receive service to Kansas City. Order 2010

- 3

- 15 approved an alternate service pattern whereby Great Lakes was a llowed to provide Great Bend

1 Such subsidy is calculated and distributed on a fiscal year basis, subject to the availability of appropriated f unds.- 2

-

with Denver

- only service , and Great Lakes has continued to provide Great Bend and the other

communities with service to Denver . The current service and subsidy for the five communities is

as follows:

Dodge City, $1,842,749, t welve nonstops and twelve one

- stops per week ; Garden City, $1,884,303, thirty nonstops per week, Great Bend, $1,257,617, twelve one

- stops per week; Hays, $1,954,327, twenty four nonstops per week; Liberal, $1,958,570, eighteen nonstops per week.

As the contract for Great Lakes was due to expire on September 30

, Order 20 11

- 4

- 4 requested proposals for a new contract period with proposals due May 2

. We received proposals from American Eagle, Multi

- Aero, Inc., d/b/a Air Choice One (Air Choice) , Gr e at Lakes

, Wings of Alaska, Inc., d/b/a Seaport Airlines (Seaport) , and SkyWest Airlines, Inc

. , d/b/a United Express We summarized these proposals, as shown in the following chart, and forwarded them to the

communities and carriers for their comment s

.

Proposed a ircraft type

, frequency

, a nd hubs are outlined in the chart above, but the following characteristics also apply

. American Eagle‟s Garden City

- only proposal provide s for a 120

- day- 3

-

termination notice with no hold in . SkyWest‟s proposal was for Garden City and Hays, only. Although SkyWest calculated separate subsidy levels for each communit y, it presented its proposal as an all

- or nothing package. Great Lakes ‟ proposal was for all five communities , and it too was presented as a n all

- or

- nothing package. Unlike SkyWest, Great Lakes did not separately

break out the individual subsidy it requested for each community. 2 SeaPort proposed service to

three of the five communities. It s propos ed service linked Dodge City with Great Bend to Denver, with Dodge City also getting one

- stop service over Salina to Kansas City ; s ervice to Hays stood by itself. The service proposals of Air Choice One were proposed on a stand

- alone

basis for each community , except that the carrier proposes to lin k service for Liberal with Great

Bend to Wichita.

On June 13 we received a request from Garden City for an extension until July 15 to submit

comments. On July 8 we received another request for an extension from both Dodge City and Garden City through Aug ust 6, and by notice we granted those requests.

Community Comments On August 19 City Managers of Garden City and Dodge City signed a joint recommendation that was also endorsed by the State of Kansas. The joint recommendation proposed a regional
partne rship aimed to maximize “the benefits to the traveling public in both Dodge City and Garden City and strategies for funding the total amount of subsi dy which would be required

. ” The regional partnership aimed to secure American Eagle‟s regional jet servic e from Garden City to Dallas that the nearby citizens of Dodge City could use as well as Garden City; and likewise

service by Great Lakes from Dodge City to Denver that the nearby citizens of Garden City could

use. T he community and state also committed t o providing their own subsidy to offset the higher level of subsidy required by American Eagle . “... t he City of Garden City is committing a $333,333 annual subsidy to help lessen the financial impact of this regional plan on the Essential

Air S e rvi c e progra m. We will defer to you r judgment as to how this money moves from the community to American Eagle.”

The Hays City Commission indicated it was pleased to have a wide array of proposals to select

from and recommended the selection of Great Lakes. It indic ated that a “major factor in the Commission[ „ s]” recommendation was the prospective runway closure at Hays that might require

a service hiatus of between two and six months if DOT selected SkyWest, because Great Lakes‟

smaller Beech 1900 would be able to c ontinue to operate to Hays during construction, while SkyWest‟s larger Brasilia would not

. Also, SkyWest‟s proposed service at Hays would provide the community with less than ideal service because the first flight of the day would not originate

in Hays

.

The Mayor of Liberal indicated his community favored the reselection of Great Lakes. He noted that “Great Lakes Aviation has had a presence in Liberal for many years and has provided great air transportation with good connections while being a good comm unity partner.”

2 The subsidy amounts at individual cities above were illustrated for the communities‟ benefit because Great Lakes did not provide separate rates for individual cities. We prorated the total requested annual subsidy of $10,999,74 8 in Great Lakes‟ pr oposal by the current subsidy rates for Great Lakes‟ service.- 4

-

The Great Bend Airport Manager recommended the selection of SeaPort, based on t h at carrier‟s demonstrated reliability, newer aircraft, lower fares, increased frequency, and a better marketing program to promote growth, and a lower subsid y bid than the other carriers. He indicated that Great Bend‟s second preference would be for Great Lakes.

Decision for Dodge City and Garden City Our longstanding program practice has been to defer to communities‟ wishes whenever possible within budget ary limitations, but almost always when it would require no additional subsidy. Consistent with that practice, we will tentatively select American Eagle to serve Garden City at an annual subsidy rate of $ 2,919,026 and will tentatively select Great Lakes t o provide EAS at Dodge City at an annual subsidy rate of $ 1, 688,598

.

Absent the first

- of

- its

- kind agreement between Dodge City and Garden City discussed earlier

, our only viable option 3 would be to select Great Lakes to serve both communities for a n estim ated total annual subsidy of $4,607,624. However, in this case Dodge City and Garden City have worked together to come up with a regional plan that gives each community the serv ice it

wants at no additional subsidy cost to the Department. Essentially, Do dge City will give up enough service at its local airport to make the combined subsidies for American Eagle ‟s service at Garden City and Great Lakes‟ service at D odge City cost no more than the combined Dodge City

- Garden C ity subsidy Great Lakes originally proposed . Both communities support the selection of American Eagle to provide two nonstop Garden City

- D allas round trips a day (1 4 a week) for $ 2,919,026

. This reflects American Eagle‟s original bid of $3,252,359, less $333,333 that Garden City and the state have committed to provide. In this way, the region essentially

would receive nonstop service to two different hubs. In order to be subsidy neutral to the Department, that leaves $ 1, 688,598 of EAS subsidy for Dodge City ‟s air service. T he

communiti es and Great Lakes informally agreed in their August 19 joint recommendation to a service pattern of three nonstop Dodge City

- Denver round trips a day (17 a week) for $1 ,688,598 annually

.

The communities‟ strong preference for this package

-- American E agle at Garden City and Great Lakes at Dodge City

-- reflects the synergies of each proposal. Dodge City is only 43 miles from Garden City, so passengers at either community may choose to drive to the other community‟s airport in order to receive nonstop service to a different large hub without having to make a connecting flight and backhaul

-- both Garden City and Dodge are located on a virtual straight line between Denver and Dallas, Denver being northwest of each community and Dallas being

s outheast. F urthermore, at Garden City and Dodge City

, each of the two carriers has a code

share relationship with the major carrier that hubs at each airport. Also, while we find that American Eagle‟s subsidy request is reasonable for the service it proposes, we are aware that in

3 We would not select SkyWest because it proposed a two

- city package of Hays and Garden City and neither community supports SkyWest. Moreover, due to planned runway construction next year, SkyW est could not legally serve Hays for several months whereas Great Lakes can with its smaller, 19

- seat aircraft. We would not select Air Choice One because the communities are not willing to waive their rights and accept 9

- seat aircraft. We would not

sele ct Seaport because it proposed a two

- city package (Dodge City and Great bend), and Dodge City affirmatively

refused to waive the 9

- seat guarantee.- 5

-

several EAS markets where it has recently begun subsidized EAS, traffic has burgeoned 4 and we fully anticipate that subsidy will decrease at the end of the contract at these communities as well as Garden City.

As stated in Order 2011

- 4

- 4, w e retain the right in all carrier

- selection proceedings to negotiate proposals or to solicit a new round of proposals. In this case, we are tentatively selecting a combination of options that were not submitted originally, i.e., Great Lakes did not submit a four

- city package. Therefore, t o be procedurally fair to all the parties, w e will issue this order on a show

- cause basis and allow all interested parties, i.e. Dodge City, Garden City, Air Choice One, American Eagle, Great Lakes, Seaport and SkyWest, t en days from the service date of this order to show cause why we should not make this tentative decision final.

Decision for Great Bend, Hays, and Liberal

We have decided not to select either Air Choice One or SeaPort. Both carriers proposed service

wi th single

- engine aircraft, and the EAS statute requires that service be provided with twin

engine aircraft unless the community waives that guarantee. Only Great Bend waived that
guarantee by recommending SeaPort. However, SeaPort‟s proposal at Great Ben d contemplates

one

- stop service over Dodge City, and Dodge City did not waive its guarantee of twin

- engine aircraft, so we cannot select SeaPort at either Great Bend or Dodge City

.

We have decided not to select SkyWest at Hays . SkyWest proposed service a t Garden City and at Hays. However, the carrier indicated that its proposal could only be selected as a two

- city package. While SkyWest‟s combined subsidy request of $4,017,744 is very attractive, Hays

recommends that we select Great Lakes

. SkyWest ‟s pr oposal at Hays contemplates inside

- out
service

– basing the aircraft in Denver rather than at an EAS community, and thus the first flight of the day would be out of the hub and miss the morning connecting banks at Denver. In addition, the runway at Hays w ill be under construction for up to half

- a

- year, and SkyWest‟s larger Brasilias would be un able to operate during that time, while Great Lakes‟ smaller B

- 1900 s would. That leaves Great Lakes as the only option for Great Bend, H ays, and Liberal

.

While w e are tentatively selecting Great Lakes at Great Bend, Hays, and Liberal, Great Lakes did not propose separate subsidy rates for each community but, rather, a five

- city package showing only a total expense forecast and individual community revenue forecast s. Therefore w e have

calculated individual subsidy rates based on Great Lakes‟ original proposal. On the expense side,

w e have used Great Lakes‟ unit cost per block hour at each community based on its original proposal, including a five percent profit ma rkup, and then applied those unit costs to the block

hours at Great Bend, Hays, and Liberal based on Great Lakes‟ initial service proposal and the block times required to provide that service as reported by the carrier on its T

- 100 Segment
report. For rev enue, we u sed Great Lakes‟ own forecasts. Based on th ese calculation s , as shown

4 These communities are Grand Island, Nebraska, and Joplin, Missouri. At Manhattan, Kansas, American Eagle

r eplaced Great Lakes ‟ subsidized service and began providing subsidy

- free service to Dallas and now Chicago

O‟Hare.- 6

-

in Appendix B, Liberal w ould require an annual subsidy of $2,555,150, and Great Bend and Hays a combined annual subsidy of $3,246,061. 5

We are concerned that the subsidy Gr eat Lakes has requested at these five communities has

increased over the last two rate cycles by more than 20 percent each cycle , from $7,253,299 to $8,897,566 to $10,999,717

. 6 We remain concerned about the level of subsidy required at these communities, and will closely review the level of service and the corresponding subsidy needed at each community at the end of this rate cycle. We anticipate that subsidy need for both American Eagle and Great Lakes in the next rate cycle will decrease substantially.

Transitional Rate Consistent with established program policy, we typically use a carrier‟s prospective proposal that was submitted during the competitive bid process to establish a bridge rate until the new carrier inaugurates service. After reviewing Great Lakes‟ proposed rate for the five

- community package , we find that it appears reasonable for the proposed service level s . We will therefore establish it as the final rate for the carrier‟s service at Dodge City, Garden City, Great Bend, Hays, and Lib er al for the period from October 1, 2011, until American Eagle inaugurates service at Garden City and Great Lakes adjusts its service to the level we are tentatively selecting.

Service Transition Provided that our tentative selection becomes final, we exp ect Great Lakes and American Eagle to work together to make a smooth transition at Garden City. In that regard, before Great Lakes suspends its service to Garden City, we expect it to notify any passengers holding reservations for travel after the suspens ion date, to assist those passengers in making alternate air transportation arrangements, or to provide a refund of the ticket price, without pena lty, if requested.

Certifications

Before t he Department can pay compensation, American Eagle Airlines and G reat Lakes Aviation, L td, must provide properly executed certifications that each is in compliance with the regulations regarding drug

- free workplaces and nondiscrimination, as well as the regulations governing lobbying activities.

Carrier Fitness

49 U.S. C. 41737(b) requires that we find an air carrier fit, willing, and able to provide reliable service before we may subsidize it to provide essential air service. American Eagle and Great

Lakes are subject to the Department‟s continuing fitness requirements , and no information has come to our attention that would cause us to question the carriers ‟ fitness at this time. We have contacted the Federal Aviation Administration, and it has raised no concerns that would negatively affect our fitness finding. We t herefore conclude that the carrier s remain fit to conduct the operations proposed here.

5 Because Great Bend receives one

- stop service over Hays, any allocation of the total subsidy between the two communities would be arbitrary.

6 This rate reflects the transitional rate before American Eagle inaugurates service. The annual subsidy by the Department proposed by this order is $10,408,835.- 7

-

This order is issued under authority delegated in 49 CFR 1.56a(f).

ACCORDINGLY,

1 . We direct the parties to show cause within ten (10) days of the service date of th is order why

we should not select American Eagle Airlines to provide essential air service at Garden C ity, as described in Appendix C, and Great Lakes Aviation, Ltd., to provide essential air service at Dodge City, Great Bend, Hays, and Liberal, Kansas, as described in Appendix C.

2. If no objection is filed within the designated time, or if no timely

- filed objection raises material issues of fact, we hereby delegate authority to the Director, Office of Aviation Analysis, to make the above rates final;

3

. We set the final rates for Great Lakes Aviation, Ltd. , at Dodge City, Garden City, Great Bend, Hays, and Liberal, Kansas, from October 1, 2011, until American Eagle inaugurates essential air service at Garden City, as described in Appendix D;

4 . We direc t Great Lakes Aviation, Ltd.

, and American Eagle Airlines, to retain all books, records, and other source and summa ry documentation to support claims for payment, and to preserve and maintain such documentation in a manner that readily permits its audit an d 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, whichever comes first. Copies of flight logs for aircraft sold or disposed of mu st be retained. The carrier may forfeit its compensation for any claim that is not supported under the terms of this order;

5 . We find that Great Lakes Aviation, Ltd. , continues to be fit, willing

, and able to operate as a

commuter carrier and capable o f providing reliable essential air service at Dodge City, Garden City, Great Bend, Hays, and Liberal

, Kansas ;

6 . We find that American Eagle Airlines continues to be fit, willing, and able to operate as a certificated carrier and capable of providing rel iable essential air service at Garden City, Kansas;

7 . Th ese docket s will remain open until further order of the Department; and- 8

-

8 . We will serve copies of this order on the State of Kansas , the communities of Dodge City, Garden City, Great Bend, Hays, and Liberal

, Kansas, American Eagle Airlines , Multi

- Aero, Inc., d/b/a Air Choice One, Wings of Alaska, d/b/a SeaPort, SkyWest Airlines, Inc. , and Great Lakes Aviation, Ltd.

By:

Susan Kurland Assistant Secretary for

Aviation and International Affairs (S EAL)

An electronic version of this document is available on the World Wide Web at http://www.regulations.govAppendix A

Nonstop Great Circle Miles

,

To Dallas (DFW) Wichita (ICT)

DDC 374 DDC 139

GCK 404 GCK 181

GBD 390 GBD 91

HYS 429 HYS 130

LBL 362 LBL 199

To Denver (DEN) Miscellaneous

D DC 292 LBL

- GCK 62

GCK 250 GCK

- DDC 43

GBD 329 DDC

- HYS 83

HYS 297 HYS

- GBD 41

LBL 279 DDC

- GBD 72 Dodge City, DDC; Garden City, GCK; Great Bend, GBD; Hays, HYS, and Liberal (LBL).Appendix C Page 1 of 4

American Eagle Airlines, Essential Air Service

to be Provided to Garden City, Kansas

Effective Period : Two year period beginning when American Eagle begins full EAS through the

24 th month thereafter.

Service : 14 nonstop round trips per wee k to Dallas

. Aircraft : Embraer Regional Jet

. Rate per Eligible On e

- Way Flight : $ 2, 040 1
Weekly Ceilings : $ 57,120 2

Note: The carrier understands that it may forfeit its compensation for any flights that it does not operate in conformance

with the terms an d 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 carrier understands that an aircraft take

- off and landing at its

scheduled destinat ion 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 carri er 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 carrier contemplates any such changes beyond the scope of the order duri ng 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 carrier to provide service on these routes. The carrier must complete all flights that can be safely operated; flights that overfly points for lack of traffic will not be compensated. I n determining whether subsidy payment for a deviating f light 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 amounts o r at the stipulated service levels, the 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 carrier do not constitute a total or partial reduction or cessation of payment.

Subsidy contract 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 are not currently available for performance under this order beyond November 18 , 201 1 . The Government‟s obligation for p erformance under this order beyond November 18 , 2011 , is subject to the availability of appropriated 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 o rder beyond November 18 , 2011 , until funds are made available to the Department for performance. If funds are not made available for performance beyond November 18 , 2011 , the Department will provide notice in writing to the carrier.

All claims for paymen t must be submitted within 60 days of the last day of service provided under this order.

1 Annual compensation of $ 2,919,026 divided by 1,431 estimated annual completed departures a nd arrivals:

14 flights/ week x 2 directions x 52 weeks x 98 percent completion

. 2 $2, 040 x 28 flights per week = $ 57,120

.Appendix C Page 2 of 4

Great Lakes Aviation, Ltd., Essential Air Service to be

Provided to Dodge City, Kansas

Effective Period : Two

- year period beginning when American Eagle begins full EAS (at Garden City) through the 24 th month thereafter. Dodge City : 1 7 nonstop round trips per week to Denver

. Aircraft : Beech 1900

. Rate per Eligible On e

- Way Flight : $ 1,005 1
Weekly Ceilings : $ 34,170 2

Note: The 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 significan t
elements of the required service, without prior approval. The 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 compl eted, such as certain weather cancellations, only completed flights are considered eligible for subsidy. In addition, if the carrier does not schedule or operate its flights in full conformance with the order for a significant per iod, it may jeopardize it s entire subsidy claim for the period in question. If the 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 ap proval from the Department to be ensured of full compensation. Should circumstances warrant, the Department may locate and select a replacement carrier to provide service on these routes. The 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 pr ovided for under this order, then, at the end of the period for which the Department does make payments in the stipulated amounts or at the stipulated service levels, the 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 carrier do not constitute a total or partial reduction or cessation of payment.

Subsidy contr act 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 paragrap h.

Funds are not currently available for performance under this order beyond November 18 , 201 1 . The Government‟s obligation for performance under this order beyond November 18 , 2011 , is subject to the availability of appropriated 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 November 18 , 2011 , until funds are made available to the Department for performance. If funds are not made avail able for performance beyond November 18 , 2011 , the Department will provide notice in writing to the carrier.

All claims for payment must be submitted within 60 days of the last day of service provided under this order.

1 Annual compensation of $1, 688,598 divided by 1,680 estimated annual completed departures and arrivals: 17 flights/week x 2 directio ns x 52 weeks x 95 percent completion

. 2 $ 1,005 x 34 flights per week = $ 34,170

.Appendix C

Pa ge 3 of 4

Great Lakes Aviation, Ltd., Essential Air Service to be Provided to

Great Bend and Hays, Kansas

Effective Period : Two year period beginning when American Eagle begins full EAS (at Garden City) through the 24 th month thereafter.

Great Bend : 12 one

- stop round trips per week to Denver with Beech 1900 aircraft. Hays : 24 nonstop round trips per week to Denver with Beech 1900 aircraft.

Great Bend Hays Rate per On e

- Way Flight : 1 $ 8 82 $ 8 82 Weekly Ceiling : $ 21,168 2 $ 42,336 3

Note: The carrier understands that it may forfeit its compensation for any flights that it does not operate in conformance with the ter ms and stipulations of the rate order, including the service plans outlined in the order and any other significant elements of t he required service, without prior approval. The 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 comple ted, such as certain weather cancellations, only completed flights are considered eligible for subsidy. In addition, if the 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 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 app roval from the Department to be ensured of full compensation. Should circumstances warrant, the Department may locate and select a replacement carrier to provide service on these routes. The 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 pro vided for under this order, then, at the end of the period for which the Department does make payments in the stipulated amounts or at the stipulated service levels, the carrier may cease to provide service to that spec ific location without regard to any r equirement 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 carrier do not constitute a total or partial reduction or cessation of pa yment.

Subsidy contra ct 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 th e foregoing paragraph

.

Funds are not currently available for performance under this order beyond November 18 , 2011. The Government‟s obligation for performance under this order beyond November 18 , 2011, is subject to the availability of appropriated 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 November 18 , 2011, until funds are made available to the Department for performance. If funds are not

made availa ble for performance beyond November 18 , 2011, the Department will provide notice in writing to the carrier.

All claims for payment must be submitted within 60 days of the last day of service provided under this order.

1 Annual compensation of $ 3,246,061 divided by 3,681 estimated annual completed departures and arrivals:

Great Bend: 12 flights/week x 2 directions x 52 weeks x 9 8 percent co mpletion x 313/312 = 1,227 Hays: 24 flights/week x 2 directions x 52 weeks x 9 8 percent completion x 313/312 = 2,454.

2 $8 82 x 24 flights per week = $2 1,168

. 3 $8 82 x 48 flights per week = $ 42,336

.Appendix C Pag e 4 of 4

Great Lakes Aviation, Ltd., Essential Air Service to be

Provided to Liberal, Kansas

Effective Period : Two year period beginning when American Eagle begins full EAS (at Garden City) through the 24 th month thereafter.

Liberal : 1 8 nonstop round tr ips per week to Denver with Beech 1900 aircraft. Rate per Eligible On e

- Way Flight : $ 1,389 1
Weekly Ceilings : $ 50,004 2

Note: The carrier understands that it may forfeit its compensation for any flights that it does not operate in conformance

with the term s 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 carrier understands that an aircraft take

- off and landing at its

scheduled dest ination 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 c arrier 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 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 sel ect a replacement carrier to provide service on these routes. The carrier must complete all flights that can be safely operated; flights that overfly points for lack of traffic will not be compensated. I n determining whether subsidy payment for a deviati ng 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, eit her 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 amoun ts or at the stipulated service levels, the 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 t o in writing by the Department and carrier do not constitute a total or partial reduction or cessation of payment.

Subsidy contract are subject to, and incorporate by reference, relevant statutes and Department regulations, as they may be amended from tim e to time. However, any such statutes, regulations, or amendments thereto shall not operate to controvert the foregoing paragraph.

Funds are not currently available for performance under this order beyond November 18 , 201 1 . The Government‟s obligation f

or performance under this order beyond November 18 , 2011 , is subject to the availability of appropriated 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 th is order beyond November 18 , 2011 , until funds are made available to the Department for performance. If funds are not made available for performance beyond November 18 , 2011 , the Department will provide notice in writing to the carrier.

All claims for pa yment must be submitted within 60 days of the last day of service provided under this order.

1 Annual compensation of $ 2,555,150 divided by 1, 840 est imated annual completed departures and arrivals:

1 8 flights/week x 2 directions x 52 weeks x 9 8 percent completion x 313/312.

2 $ 1,389 x 3 6 flights per week = $ 50,004

.Appendix D

Great Lakes Aviation, Ltd., Essential Air Service to be Provided to Dodge City, Garden

City, Great Bend, Hays, and Liberal, Kansas

Effect ive Period : October 1, 2011, until the s tart of full EAS by American Eagle at Garden City, Kansas

. Dodge City : 12 nonstop and 12 one

- stop round trips per week to Denver with Beech 1900 aircraft. Garden City : 30 nonstop round trips per week to Denver with Beech 1900 aircraft.

Great Bend : 12 one

- stop round trips per week to Denver with Beech 1900 aircraft. Hays : 24 nonstop round trips per week to Denver with Beech 1900 aircraft.

Liberal : 18 nonstop round trips per week to Denver with Beech 1900 aircraft. Dodge City Garden City Great Bend Hays Liberal Rate per On e

- Way Flight : 1 $ 996 $996 $996 $996 $996 Weekly Ceilings : 2 $ 47,808 $59,760 $23,904 $47,808 $35,856

Note: The 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 servi ce, without prior approval.

The carrier understands that an ai rcraft 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 complete d flights are consid ered eligible for subsidy. In addition, if the carrier does not schedule or operate its flights in full conformance with the orde r for a significant period, it may jeopardize its entire subsidy claim for the period in question. If the carrier contemplate s 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 circums tances warrant, the Department may locate and select a replacement carrier to provide service on these routes. The carrier must complete all flights that can be safely operated; flights that overfly points for lack of traffic w ill 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 th e 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 Depa rtment does make payments in the stipulated amounts or at the stipulated service levels, the carrier may cease to provide service to that specific location without regard to any requireme nt 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 carrier do not constitute a total or partial reduction or cessation of payment.

Subsidy contract are subject to, and incorporate by reference, relevant statutes and Depart ment 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 are not currently available for performance under this order beyond November 18 , 2011. The Government‟s obligation for performance under this order beyond November 18 , 2011, is subject to the availability of appropriated funds from which payment for services can be made. No legal liability on the part of the Government f or any payment may arise for performance under this order beyond November 18 , 2011, until funds are made available to the Department for performance. If funds are not made available for performance beyond November 18 , 2011, the Department will provide not ice in writing to the carrier.

All claims for payment must be submitted within 60 days of the last day of service provided under this order.

1 $10,999,748 annual compensation, divided by 11,042 estimated annual completed departu res and arrivals,

calculated as follows: Dodge City , 48 flights/week x 52 weeks x 98 percent completion x 313/312 = 2,454; Garden City , 60 flights/week x 52 weeks x 98 percent completion x 313/312 = 3,067 ; Great Bend

, 24 flights/week x 52 weeks x 98 percen t completion x 313/312 = 1,227 ; Hays

, 48 flights/week x 52 weeks x 98 percent completion x 313/312 = 2,454;

Liberal

, 36 flights/week x 52 weeks x 98 percent completion x 313/312 = 1,840.

2 Dodge City , 48 flights/week x $996 = $47,808; Garden City , 60 fligh ts/week x $996 = $59,760;

Great Bend

, 24 flights/week x $996 = $23,904; Hays

, 48 flights/week x $996 = $47,808;

Liberal

, 36 flights/week x $996 = $35,856.