CITY OF MERCED 

"Gateway to Yosemite" 

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Office of the City Manager Telephone 209/385-6834 Fax 209!123-1780 

September 29, 2014 

Mr. Kevin Schlemmer 

ChiefEAS & Domestic Analysis Division, X-53 

Office of Aviation Analysis, Room W86-309 

U.S. Department ofTransportation 

1200 Nev-1 Jersey Avenue, S.E. 

Washington, DC 20590 

Re: Order No. 2014-5-9, Order Requesting Proposals 

Dear Mr. Schlemmer, : .. -) 

The City of Merced has reviewed the Department of Transportation (DOT) Order 2014-5-9 Requesting 

Proposals for Essential Air Service (EAS), and the proposals submitted from Boutique Air, Great Lakes 

Aviation, Ltd., Makani Kai Air (dba Wine Country Express), Mokulele Airlines, and Seaport Airlines, Inc. 

.. ,) 

A subcommittee comprised ofthree representatives of the Merced Regional Airport Authority (MRAA), two 

members of airpmi management, and a member of the public interviewed executives of the tive air caniers on 

August 7, 2014. Representatives of Mokulele Airlines and Seaport Airlines met with the subcommittee for a 

second discussion on September 16, 2014. The Airport Authority convened on August I 3, and September 23. 

2014. during which MRAA commissioners. airport and City of Merced staff, and interested community 

members discussed the proposals. We -vvrite this joint letter as Chairman of the Merced Regional Airport 

Authority and as City Manager, serving as the City's administrative head of the Regional Airport Authority. We 

are pleased to offer the following comments for your consideration. 

Importance ofNew EAS Contract 

The City of Merced and the Airport Authority strongly urges that a new EAS contract be awarded for a two-year 

period. Merced and the surrounding region of over one million population will benefit greatly from the EAS 

service and we are confident that reliability of service and the number of passenger enplanements will be 

restored to satisfy and exceed the DOT EAS standard of an average of 1 0 passengers per service day which the 

airport regularly generated until recent years. It is also important to note that a significant new market area has 

emerged with the recent cancellation of passenger service from Modesto to LAX and San Francisco 

International Airport (SFO). Following the service cancellation, which increased our service area population to 

over one million, a growing number of new passengers from Tracy, Manteca, Modesto. and Turlock, are 

expressing interest in flying out of the Merced Regional Airpmi. We believe that targeted marketing to these 

678 WPst 18th StrPf't • ,\\prcPd, California '!"il--1-0 
Mr. Kevin Schlemmer, Chief EAS & Domestic Analysis Division, X-53 

Page2 

September 29, 2014 

areas to be launched following the award of a new contract will yield notably higher passenger numbers and will 

serve a regional need. 

We also note that over 50% of the passengers depmting the Merced Regional Airport are connecting at the Los 

Angeles International Airport (LAX) through the interline mechanism to a larger carrier for travel to a final 

destination. We recognize that the percentage may well be higher since passengers transferring to a carrier such 

as Southwest Airlines would not be discernable since Southwest does not utilize inter-line arrangements. 

Comments Regarding Air Service Bids and Recommendation 

In offering comments, we are cognizant of the published criteria utilized by DOT in evaluating bids \Vhich 

includes the factors of service reliability, contractual and marketing arrangements with a larger canier at the 

hub, interline arrangements \Vith a larger carrier at the hub, and community vie\VS. We also are acutely aware of 

the importance of enplaning adequate numbers of passengers to remain eligible for participation in the EAS 

program. 

We also note our concern about the prospect of waiving the guarantee to EAS air service provided by larger 

aircraft with two or more engines and using two pilots should a provider operating smaller single engine aircraft 

be selected and provide service for 60 consecutive service days, as provided in U.S.C. Section 41732(b)(5). 

Great Lakes Airlines 

We recognize that the Great Lakes proposal for service to the Merced Regional Airport was contingent on also 

providing service to the Visalia Airport. We are aware that Visalia recommended selection of Seaport Airlines 

and we have received vvTitten commitment (attached) fl.·om the Chief Executive Officer of Great Lakes Airlines 

to serve the Merced Regional Airport alone. 

The City believes that the region and local community \Vill be best served by the regional jet (ERJ) service bid 

by Great Lakes Airlines, proposing twice daily non-stop round trips between Merced Regional Airport and 

Denver International Airport (DEN). We believe it is imperative to the success of EAS service to Merced that 

the ERJ service be instituted as soon as possible. We therefore ask that ERJ service begin earlier than within one 

year from the date of execution of the award, realizing there will be lead time necessary to mount jet service. 

We note also that Great Lakes has successfully negotiated a nev.r contract with the Airline Pilots Association 

that includes jet pay scales, thus paving the way for operation of jet services. 

For the remainder of the first year of the contract period, prior to initiation ofERJ service, we believe that LAX 

is the hub best suited to meet travelers' needs among the destination airports bid. In terms of ma.rketability of 

service to DEN, we note that the Fresno Yosemite Intcmational Airport recently lost Frontier airlines and its 

flights to Denver, leaving unmet passenger needs for what was a very popular route that we believe Great Lakes 

can help meet through Merced. 

Great Lakes is the only Part 121 carrier and the sole contending service provider that operates larger, twin 

engine aircraft with a pressurized cabin which is more suitable for f1ights into LAX given the distance, altitude 

requirements and concems about passenger comfort, connectivity to other major airlines for continuing travel to 

a final destination, and prospects for building repeat business. 
Mr. Kevin Schlemmer, Chief EAS & Domestic Analysis Division, X-53 

Page3 

September 29, 2014 

Great Lakes offers code share arrangements \Vith United Airlines and interline agreements and e-ticket interline 

arrangements with most of the major caiTiers. These services are of great utility to the traveling public flying 

from the Merced Regional Airport and are directly responsive to the criteria identified by DOT as central to the 

EAS selection process. 

We also note that Great Lakes has provided poor reliability of service due to dramatic shortages of available 

crew resulting from regulatory changes raising to 1,500 the number of flight hours needed for first officers to 

attain A TP credentials. This has resulted in operation of the Beech 1900 with only 9 of its 19 seats to enable the 

airline to operate under Part 135 for the purpose of first officer flight hour standards. 

Great Lakes leadership intends to place four round-trips per \Vcek with the Beech 1900 in the 19 seat 

configuration into the Merced market beginning in November 2014, pursuant to Part 110. This extra 40 seat 

capacity each week will help bolster and is vital to improving enplanement numbers. 

Great Lakes leadership also has indicated that it expects to restore the 19 seat configuration in the Beech 1900 

by March 2015, provided that an exemption is approved for air carriers to make up to 24 round trip flights 

weekly between two paired cities instead of the four round trips weekly cuiTently provided for in Part 110 of the 

FAA regulations. As you know, the pilot ranks at Great Lakes shrank from 300 to 78 during the cunent pilot 

shortage afflicting the aircraft industry. This continues to pose challenges for Great Lakes, although the situation 

is considerably improved and an aggressive pilot training program is in place. We are unable to assess the 

likelihood of securing the amendment to Part 110 sought by the airline industry to allow up to 24 weekly round 

trips to be flown under part 135 training requirements for first oftl.cers. It is clear to us, ho\\rever, that without 

the added capacity early in FY 2015, the City cannot enplane an adequate number of passengers to satisfy EAS 

standards. This is another reason ERJ service to Denver needs to begin earlier than one year from award. 

In addition, the per passenger subsidy requirement as bid for the first year of the contract is very high at $397.02 

as a result of basing the bid on the nine seat configuration of the Beech 1900.We are acutely aware of the 

requirement that the per passenger subsidy not exceed $200.00 by September 2015. The ERJ ser,lice committed 

to by Great Lakes identifies a subsidy of $127.18 per passenger. This would bring the Merced Regional Airport 

into compliance with the DOT subsidy cap by the end of September 2015. 

The return to a 19-seat capacity for the Merced flights to LAX, coupled with an aggressive marketing effort 

throughout the region, and a dedicated aircraft to serve the Merced Regional Airport would significantly boost 

the number of enplanements and permit the community to meet the average of 10 enplanements per service day 

for the first year of the contract. 

After detailed conversations with the President and CEO, we believe that the \Vaning of public contl.dence 

associated with the serious reliability problems can be addressed effectively. Great Lakes has committed to 

provide a level of cash to be detennined as well as free tickets and other means in suppo1i of marketing, along 

with the personal involvement of company leadership in community events and meetings with key business 

leaders in the region, as part of major efforts to restore confidence in the reliability of the air service. 

Shifting to ERJ service \Vould make a tremendous difference in attracting the flying public and significantly 

bolster the economic development prospects for Merced and the surrounding area. Connections to and from 

Denver will make travel more convenient for corporate travelers coming to the region from points outside of 

California. The City believes that this type of service will greatly enhance efforts to attract nev,o corporations and 
Mr. Kevin Schlemmer, Chief EAS & Domestic Analysis Division, X-53 

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September 29, 2014 

research interests to Merced especially given the gro•vth of the relatively new University of California, Merced 

campus. UC Merced is a research university with a significant focus in the engineering and biological, 

enviroru11ental and commuter sciences arenas that will continue to attract business interests and add growing 

demand for air service. This boost to economic development is critical to Merced, which is a very diverse 

community which continues to face long-tern1 economic challenges. 

Mokulele Airlines 

The Airport Authority recommended the selection ofMokulele Airlines (which would conduct mainland 

business under the name "Community Air") to service the Merced Regional Airp011. We believe that Mokulele 

presents the best option for Caravan service among the other airlines basing bids on single engine service, given 

the superb track record of the airline in Hawaii and the very impressive company history of reliability, safety, 

successful application of passenger gro~1h and retention strategies, as well as economic viability. The 

anticipated per passenger subsidy is under the $200.00 per passenger cap. 

The company has indicated its willingness to vvork with the community on scheduling matters and its 

commitment to growih in the market and the potential tor additional at risk service is noteworthy and 

commendable. We are confident that the company would be successful in developing a passenger market and 

growing the number of enplanements through reliable and passenger-friendly service. In addition, the fact that 

the company would bring new Grand Caravan EX service to Merced is attractive, as is the voluntary adherence 

to Part 121 safety standards, including the requirement for two pilots. The company also has no foreseeable, 

flight crew shortage issues. Also, Mokulele has confirmed its intention to finance marketing eff01is and the 

personal involvement of the CEO and the top marketing executive in adve11ising the air service and building ties 

in the community and the region. The CEO, who has an extensive and impressive background in the airline 

industry, has indicated that the company will do what is necessary for the air service to be successful. Mokulele 

currently has an interline agreement with Alaska Airlines. 

While favoring the initiation of ERJ service tor the Merced Regional Airp011, the City was impressed •vith 

Mokulele and believes that the company would deliver excellent service and that it has the potential to develop 

additional service and destinations. The company estimates that service could begin about 30 to 60 days after 

a\.-vard of the contract. We also note, that the company is incuiTing significant costs associated with the purchase 

of new aircraft and may need to reconsider its ability to provide service to the Merced Regional Airport should 

significant delay be experienced in the selection of an EAS carrier. It is impo11ant to note also that we have 

concerns that service to Oakland International Airport will make it difficult to tap into the Modesto and 

suiTounding area market since it is unlikely that passengers would drive to Merced to catch a flight to Oakland 

\v·hen it is more time efficient to drive to Oakland. 

Conclusion 

We share the common goal of restoring the enplanement numbers at the Merced Regional Airport through 

reliable and affordable air service and we appreciate working in partnership with you in furtherance of this 

objective. 

Thank you very much for your review of this material and please do not hesitate to contact 

Janet E. Young, Interim Airport Manager at (209) 385-6874 or email: voungj(CI.:cityofmcrced.org. should you 

have questions. 
Mr. Kevin Schlemmer, Chief EAS & Domestic Analysis Division, X-53 

Page 5 

September 29, 2014 

Sincerely, 

John Bramble 

City Manager 

/'J '/ . 

. . ··/ 

/1ti/VrJ? ' 4 : 

,./Larry Morelock 

Chair, Merced Regional Airport Authority 

Enclosure 

cc: Michael Wegley, Director of Water Resources and Reclamation and Airport 

Janet E. Young, Interim Airport Manager 
September19, 2014 

Ms. Janet E. Young 

Interim Airport Manager 

Merced Regional Airport 

20 Macready Drive 

Merced, California 95341 

Dear Ms. Young: 

First of all we would like to thank you and the committee for your continuing efforts to explore 

all alternatives with our EAS proposal. As you know, our proposal was an "all or nothing" bid 

for both Visalia and Merced. After our phone discussions with you today, should your 

community recommend our regional jet proposal to the DOT, Great Lakes' is prepared to serve 

Merced with regional jet service to Denver "stand alone". 

We are confident this route would be very successful with air service in Modesto and Fresno 

being dropped by other carriers. 

Again, we appreciate the relationship we have with the City and community of Merced and look 

forward to a long lasting relationship. 

Should you have any further questions please feel free to call us. 

Sincerely, 

4tt-l/Ldt'A/ 

Charles R. Howell IV 

CEO 

1022 Airport Parkway+ Cheyenne,,~.YjlD.Dl~'\307) 432-7000 +Fax (307) 432-7001 

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