# CITY OF MERCED "Gateway to Yosemite"

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Office ofthe City Manager Telephone 209/385-6834 Fax 209!123-1780 September 29, 2014 Mr. Kevin Schlemmer ChiefEAS & Domestic Analysis Division, X-53 Office ofAviationAnalysis, Room W86-309 U.S. Department ofTransportation 1200 Nev-1 Jersey Avenue, S.E. Washington, DC 20590 Re: OrderNo. 2014-5-9, Order Requesting Proposals Dear Mr. Schlemmer, :.. -)

The City ofMerced has reviewed the Department ofTransportation (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 CountryExpress), Mokulele Airlines, and Seaport Airlines, Inc. ..,)

A subcommittee comprised ofthreerepresentatives ofthe Merced Regional Airport Authority (MRAA), two members ofairpmi management, and a member ofthe public interviewed executives ofthe tive air caniers on August 7, 2014. Representatives ofMokulele Airlines and SeaportAirlines met with the subcommittee for a second discussion on September 16, 2014. The Airport Authority convened onAugust I3, and September 23. 2014. during which MRAA commissioners. airport and City ofMerced staff, and interested community members discussed the proposals. We -vvrite thisjoint letter as Chairman ofthe Merced Regional Airport Authority and as City Manager, serving as the City's administrative head ofthe Regional Airport Authority. We are pleased to offer the following comments for your consideration. Importance ofNewEAS Contract The City ofMerced and the Airport Authority strongly urges that a new EAS contract be awarded for a two-year period. Merced and the surrounding region ofover one million population will benefit greatly from the EAS service and we are confident that reliability ofservice and the number ofpassenger enplanements will be restored to satisfy and exceed the DOT EAS standard ofan average of 1 0passengers per service day which the airport regularly generated until recent years. Itis also important to note that a significant new market areahas emerged with the recent cancellation ofpassenger service from Modesto to LAX and San Francisco International Airport (SFO). Following the service cancellation, which increased our service area populationto over one million, a growing number ofnew passengers from Tracy, Manteca, Modesto. and Turlock, are expressing interest in flying out ofthe Merced Regional Airpmi. We believe that targeted marketing to these 678 WPst 18th StrPf't • ,\\prcPd, California '!"il--1-0Mr. Kevin Schlemmer, ChiefEAS & DomesticAnalysis Division, X-53 Page2 September29, 2014

areas to be launched following the award ofa newcontract will yield notably higher passengernumbers and will serve a regional need. We also note that over 50% ofthe passengers depmtingthe Merced Regional Airport are connecting at the Los Angeles International Airport (LAX) through the interline mechanism to a larger carrierfor 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 RegardingAir Service Bids and Recommendation In offering comments, we are cognizant ofthe published criteriautilized by DOT in evaluatingbids \Vhich includes the factors ofservice 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 ofenplaning adequate numbers ofpassengers to remain eligible for participation in the EAS program. We also note our concern about the prospect ofwaivingthe guarantee to EAS air service providedby 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. Section41732(b)(5). Great Lakes Airlines Werecognize that the Great Lakes proposal for service to the Merced Regional Airport was contingent on also providing service to the VisaliaAirport. We are aware that Visalia recommended selection ofSeaport Airlines and we have received vvTitten commitment (attached) fl.·om the ChiefExecutive Officer ofGreat Lakes Airlines to serve the Merced Regional Airport alone. The City believes that the region and local community \Vill be best served by the regionaljet (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 ofEAS 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 ofexecution ofthe award, realizing there will be lead time necessaryto mountjet service. We note also that Great Lakes has successfully negotiated a nev.r contract with the Airline Pilots Association that includesjetpay scales, thus paving the way for operation of jet services. Forthe remainder ofthe first year ofthe contractperiod, 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 ofma.rketability of service to DEN, we note that the Fresno Yosemite Intcmational Airport recently lost Frontier airlines and its flights to Denver, leaving unmet passengerneeds 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, ChiefEAS &DomesticAnalysis Division, X-53 Page3 September29, 2014

Great Lakes offers code share arrangements \Vith United Airlines and interline agreements and e-ticket interline arrangements with most ofthe major caiTiers. These services are ofgreat utilityto 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 ofservice due to dramatic shortages ofavailable crew resulting from regulatory changes raising to 1,500 the number offlight hours needed for first officers to attainATP credentials. Thishas resulted in operation ofthe Beech 1900 with only 9 ofits 19 seats to enable the airline to operate under Part 135 for the purpose offirst officer flight hour standards. Great Lakes leadership intends to place four round-trips per \Vcek withthe Beech 1900 in the 19 seat configuration into the Merced market beginning in November 2014, pursuant to Part 110. This extra40 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, providedthat an exemption is approved for air carriers to make up to 24 round trip flights weekly between two paired cities instead ofthe four round trips weekly cuiTently provided for in Part 110 ofthe FAA regulations. As you know, the pilotranks at Great Lakes shrank from 300to 78 during the cunentpilot shortage afflicting the aircraft industry. This continues to pose challenges for Great Lakes, although the situation is considerably improved and an aggressive pilot training programis in place. We are unable to assess the likelihood ofsecuring the amendment to Part 110 sought by the airline industry to allow up to 24 weekly round trips to be flown underpart 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 ofpassengers to satisfy EAS standards. This is anotherreason ERJ service to Denver needs to begin earlier than one year from award. In addition, the perpassenger subsidy requirement as bid for the first year ofthe contract is very high at $397.02 as a result ofbasing the bid onthe nine seat configuration ofthe Beech 1900.We are acutely aware ofthe requirementthat the perpassenger subsidy not exceed $200.00 by September 2015. The ERJ ser,lice committed to by Great Lakes identifies a subsidy of$127.18 perpassenger. This would bring the Merced Regional Airport into compliance with the DOT subsidy capby the end ofSeptember 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 significantlyboost the number ofenplanements and permit the community to meetthe average of 10 enplanements per service day for the first year ofthe contract. After detailed conversations with the President and CEO, we believe that the \Vaning ofpublic contl.dence associated with the serious reliability problems can be addressed effectively. Great Lakes has committed to provide a level ofcash to be detennined as well as free tickets and other means in suppo1i ofmarketing, along with the personal involvement ofcompany leadership in community events and meetings with key business leaders in the region, as part ofmajor efforts to restore confidence in the reliability ofthe air service. Shifting to ERJ service \Vould make a tremendous difference in attracting the flying public and significantly bolsterthe 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 ofservice will greatly enhance efforts to attract nev,o corporations andMr. Kevin Schlemmer, ChiefEAS & DomesticAnalysis Division, X-53 Page4 September29, 2014

research interests to Merced especially given the gro•vth ofthe relatively newUniversity ofCalifornia, 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 attractbusiness interests and add growing demand for air service. Thisboost to economic development is critical to Merced, which is a very diverse communitywhich continues to face long-tern1 economic challenges. Mokulele Airlines The Airport Authority recommended the selection ofMokuleleAirlines (which would conduct mainland business under the name "CommunityAir") to service the Merced Regional Airp011. We believe that Mokulele presents the best option for Caravan service among the other airlines basingbids on single engine service, given the superb track record ofthe airline in Hawaii and the very impressive companyhistory ofreliability, safety, successful application ofpassenger**gro~1h** and retention strategies, as well as economic viability. The anticipatedperpassenger subsidy is underthe $200.00 per passenger cap. The company has indicated its willingness to vvork with the community on schedulingmatters and its commitment to growih inthe market and the potential tor additional atrisk service is noteworthy and commendable. We are confidentthat the company would be successful in developing a passenger market and growing the number ofenplanements 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 ofthe CEO andthe 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 ofERJ 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 ofthe contract. We also note, that the company is incuiTing significant costs associated with the purchase ofnew aircraft and may need to reconsider its ability to provide service to the Merced Regional Airport should significant delay be experienced in the selection ofan 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 ofrestoring the enplanement numbers at the Merced Regional Airport through reliable and affordable air service and we appreciate working in partnership with you in furtherance ofthis objective. Thankyou very much for yourreview ofthis 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, ChiefEAS & DomesticAnalysis Division, X-53 Page 5 September29, 2014

Sincerely,

John Bramble City Manager /'J '/

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## /1ti/VrJ? ' 4 : 

### ,./Larry Morelock

Chair, Merced Regional Airport Authority

Enclosure

cc: Michael Wegley, Director ofWater Resources and Reclamation and Airport Janet E. Young, Interim Airport ManagerSeptember19, 2014

Ms. Janet

### E. Young InterimAirportManager MercedRegional Airport 20 MacreadyDrive Merced, California95341 

### DearMs. Young: First ofall we would like tothankyou andthe committeefor yourcontinuing effortsto explore all alternatives with ourEAS proposal. As youknow, ourproposal was

### an "allornothing"bid for bothVisaliaand Merced. After ourphone discussions withyoutoday, shouldyour communityrecommend ourregionaljetproposal to the DOT,GreatLakes' isprepared to serve Merced withregionaljetservice to Denver "stand alone". We are confidentthisroute would be very successful with air service inModesto andFresno being dropped by othercarriers. Again, we appreciatetherelationship we have withthe City and community ofMerced and look forward to a long lasting relationship. Should youhave any further questions please feel free to call us. Sincerely, 

# 4tt-l/Ldt'A/ CharlesR. Howell IV CEO

1022 Airport

### Parkway+**Cheyenne,,~.YjlD.Dl~'\307)** 432-7000 

### +Fax(307) 432-7001

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