Order 2011

- 11

- 30 Served: November 23, 2011



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION



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

Issued by the Department of Transportation

on the 23 rd of November, 2011

Essential Air Service at

FORT DODGE

, IOWA MASON CITY, IOWA IRON MOINTAIN, MICHIGAN BRAINERD, MINNESOT A THIEF RIVER FALLS, MINNESOTA WATERTOWN, SOUTH DAKOTA

Under 49 U.S.C. 41731 et seq

. DOCKET OST

- 2001

- 1068 2

DOCKET OST

- 2001

- 10684

DOCKET OST

- 1999

- 5175

DOCKET OST

- 2011

- 0135

DOCKET OST

- 2001

- 10642

DOCKET OST

- 2001

- 10644

Orde r Selecting Carrier Summary By this order, the Department is selecting Great Lakes Aviation, Ltd., to provide essential air service (EAS) at the six communities captioned above at the following annual subsidy rates: Brainerd, Minnesota, $959,865; Fort Dodge, $1,798,693; Iron Mountain, $1,707,841; Mason City

, $1,174,468 ; Thief River Falls, Minnesota, $1,881,815; and Watertown

, $1,710,324

, for the

two

- year period beginning when Gr eat Lakes inaugurates full EAS at all six communit ies

. 1

Background On July 1 5 , 20 11

, Mesaba Aviation, Inc., and Pinnacle Airlines, d/b/a Delta Connection (Delta)

filed 90

- day notices of their intent to suspend their joint service at these six communities

effective October 1 3

. 2 By Order 20 11

- 9

- 5 we prohibited Delta from terminating service and requested proposals for replacement service

. When a carrier files a 90

- day notice of its intent to suspend service at a community, we have a legal obligation to mak e every effort to secure replacement service and release the suspending carrier. In that context, the decision at these six

1 Such subsidy is calculated and distributed on a fiscal year basis, subj ect to the availability of appropriated funds.

2 Delta filed notice at a total of twenty four (24) communities. This order addresses only these six communities. We will address those other communities in subsequent orders.- 2

-

communities is very straightforward and so we will issue a final decision now to allow the

carriers to start to work out smooth tra nsitions as we continue to process the carrier

- selection decisions at the remaining communities. Except for Brainerd, t hese communities were all

receiv ing subsidized service from Delta with 34

- seat Saab 340s at the time it filed notice, and we

have summarized th e service and subsidy levels in the following chart:

Carrier Proposals In response to our request for p roposals, w e received proposals from Bemidji Aviation Services,
Inc., Great L akes Aviation (Great L akes) , Mul ti

- Aero, Inc., d/b/a Air Choice One , and Sovereign

A ir. 3 While t he chart below outlines the critical elements of each carrier’s proposals , there are other considerations. Great Lakes indicated that it would not be able to provide the service under any of its proposals unless we selected them at a minimum of five communities, so that it would

have sufficient flights to open a new hub at Min neapolis. Air Choice One’s proposals are all

stand

- alone proposals; however, its aircraft do not meet the two

- engine requirement. Sovereign

Air ’s Fort Dodge and Mason City proposals are a two

- city package. By Order 2010

- 10

- 21, the Department dismissed S over e ign Air’s application for Commuter Air Carrier Authority, and by

Order 2011

- 2

- 3, the Department dismissed its petition for reconsideration of that order.

T herefore, the carrier does not currently have, nor has it any current prospect of receiving soo n, the requisite operating authorities to provide scheduled air service from either DOT or FAA.

3 Sovereign Air submitted a number of options. We summarize above the option that requires the least subsidy. A ll of Sovereign Air’s proposals

, our letters to the community requesting comment , and the communities’ comments

can be seen on www.regulations.gov in each community’s Docket as listed on the front page of this order.

.- 3

-

Bemidji submitted a proposal at only one community, Thief River Falls. It proposed service

with twin

- engine 9

- seat Beech C

- 99 aircraft. 4 The carrier requested $2,358,963 annual subsidy for nineteen nonstop round trips per week to Minneapolis.

Community Comments

On October 21, the staff sent letters to each community requesting comments regarding the proposals

and we have now received res ponses from six communities, summarized below.

4 The Beech C

- 99 can be configured with up to 15 seats. Bemidji’s proposal configures the aircraft to 9 seats, presumably to stay within its Part 135 authority.- 4

-

Brainerd Great Lakes was the only carrier to submit a proposal for Brainerd. The Mayor of Brainerd stated that he is “disappointed in the outcome of the bid process, but thankful that we are EAS eligible and will continue to have air service.” The Mayor endorsed the comments of the Airport Manager and business community, which were also disappointed with the size and seating capacity of the B

- 1900s proposed by Great Lakes, compared to the significantly la rger equipment they replace, as well as the lack of lavatories and flight attendants

, and their reduced ability to handle golf clubs, hockey bags,

and other accessories. The community was concerned that Great Lakes’ 19 seat Beech 1900 would not always acc ommodate the early morning passengers that could be accommodated on the larger 34

- seat Saab 340 currently operated by Delta

. T he community was especially frustrated that they were gearing up for a jet bridge at their terminal, but that the Beech 1900 requires ground boarding, both at Brainerd and at the hub, Minneapolis.

Fort Dodge The City of Fort Dodge endorses the proposal of Great Lakes, but recommends that Great Lakes

increase the frequency from three round trips per day to four. The city notes the importance of competitive and low fares, on

- time performance , and minimum cancel l ations. The community endorses the “unprecedented cooperation between Delta and Great Lakes” which w ill “provide our region w ith seamless worldwide connectivity by offering interline and ticketing arrangements with Delta Airlines.”

The airport commission supports Great Lakes, but would like to have the same frequency of

service as Mason City , and was a lso concerned that its fares be competitive with that nearby airport

.

Iron Mountai n The Dickins on County Board of Commissioners “strongly supports the bid of Great L akes Aviation.

The 19

- seat Beech 1900D aircraft has proved to be a reliable aircraft for weather conditions in the Upper Peninsula. The support of Delta Airlines for Great Lakes through an interline and ticketing arrangement, code

- shares and booking capability on delta.com enhances the attractiveness of Gr e at Lakes.”

Mason City The airport manager of Mason City recommend s the selection of Great Lakes. “First and foremost, as good financial stewards, we must evaluate the cost difference between the three proposals.” Great Lakes' proposal is much less expensive, requiring $1,174,468, vs. $2, 522,445 for Air Choice One and $1,577,562 for Sovereign Air

. 5 Also, Mason City prefers that its service not be tagged with Fort Dodge, as Sovereign Air proposes. It notes that while Air Choice One proposes a higher frequency

in view of its smaller aircra ft, those aircraft are not pressurized, unlike those of Great Lakes. Finally, the community indicates that “A very important point to consider was that Sovereign Air is currently trying to acquire its funding and scheduled

- service authority.” Great Lakes currently has “more interline agreements, more code

- shares and the ability to issue frequent flyer miles on Delta.”

5 Sovereign Air reques ted $3,155,123 for Fort Dodge/Mason City combined , and we have assigned half of that package to Mason City for comparison purposes.- 5

-

Thief River Falls

The Thief River Falls Regional Airport Authority favors Great Lakes because its baggage handling and interline agreements at Minneapolis allow for seamless service to the final destination, and

because of its general e

- ticketing through Delta.com. Great Lakes ’ proposed non

- stop service to Minneapolis is critically important to the community . “[C]omm unity comments regarding air service have overwhelmingly identified the current one

- stop structure as a major factor for not utilizing the service [more].” Sovereign Air and Air Choice One both proposed one

- stop service. While Bemidji

A viation proposes t hree nonstops a day to Minneapolis, the community is concerned that it provides “limited ability for passengers to connect to other destinations.

Watertown The airport manager indicat es that he visited with both Air Choice One and Great Lakes, and

appre ciated their time and interest in pro posing service. He note s that the interior of the Air Choice

One aircraft are configured in an executive style that could prove very comfortable. However, while the aircraft is important,

“it is the ease of use of the entire service that matters the most to the public. Great Lakes Aviation has more interline agreements, more code

- shares, and the future ability to issue frequent flyer miles on Delta. Air Choice one is working on agreements for ticket and baggage wi th Delta and other airlines. However, they are not finalized. ...Great Lakes will have the ability to have tickets purchased from Delt a .com, is currently listed on major travel websites, and can issue boarding passes through to the destination where Air Ch oice One

does not.”

Decision

After review ing all the carrier s ’ proposal s and the communities’ comments , t he carrier

selection decision s are very straightforward, and we have decided to select Great Lakes.

All of t he communities support the selection of Great Lakes , and the proposals of each of the other applicants do not meet minimum program requirements . Air Choice One operates single

engine aircraft, and the EAS program en s ures communities of service with twin

- engine aircraft (49 U.S.C. 41732(b)(5) . As noted by several of the communities, Sovereign Air does not currently have the requisite authority to operate their proposed service from either the Federal Aviation Administration or the Department. In addition

, we find that the s ervice levels proposed by Great Lakes are responsive to our Request for Proposals and that its subsidy levels are

reasonable. Finally, though not determinative, we note that Delta is working with Great L akes in an attempt to make the connecting service at Minneapolis as seamless as possible, as noted in

Delta’s letter dated October 20 :

“Due to the retirement of our 34

- seat Saab aircraft fleet, Delta no longer has suitable

aircraft to serve the smaller EAS markets. To that end, we are cooperating with G reat
Lakes Aviation to enhance their EAS bids in nine small communities where they recently submitted bids. If Great Lakes is selected

, Delta intends to assist Great Lakes through an interline and ticketing arrangement, participation in our SkyMiles frequ ent flyer program, and booking capability on D elta.com. ”- 6

-

The communities have expressed appreciation for Delta ’s support in this endeavor , which is

tantamount to a code

- share arrangement in many ways and promises to provide the communities with seamless access to the national air transportation system.

Service Transition

W e expect Great Lakes and Delta to work together to make a smooth transition at these

communities . In that regard, before Delta suspends its service we e xpect it to notify any passengers holding reservations for travel after the suspension 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. In this regard, the EAS staff will be working with Delta to establish new

hold

- in subsidy rates as the current contracts become eligible for renegotiation.

Certifications We shall make these selections contingent upon the Department’s receiving properly executed

certifications from Great Lakes that it is in compliance with the Department’s 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. Great Lakes is subject to the Department’s continuing fitness requirements, and no info rmation has come to our attention that would cause us to question the carrier ’ s 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 therefore conc lude that the carrier s remain fit to conduct the operations proposed

here.

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

ACCORDINGLY,

1. We select Great Lakes Aviation, Ltd. to provide essential air service to Brainerd, Minnesota ; Fort Dodge and Mason City, Iowa; Iron Mountain, Michigan; Thief River Falls, Minnesota ; and Watertown, South Dakota;

2. We set the final rate s of compensation for Great Lakes Aviation, Ltd., for the provision of

essential air service at Brainerd, Minnes ota, Fort Dodge and Mason City, Iowa; Iron Mountain, Michigan; Thief River Falls, Minnesota; and Watertown, South Dakota; as described in Appendix C ;- 7

-

3. We direct Great Lakes Aviation, Ltd., to retain all books, records, and other source and summary do cumentation to support claims for payment, and to preserve and maintain such documentation in a manner that readily permits its audit and examination by representatives of the Department. Such documentation shall be retained for seven years or until the D epartment indicates that the records may be destroyed, whichever comes first. Copies of flight logs for aircraft sold or disposed of must be retained. The carrier may forfeit its compensation for any claim that is not supported under the terms of this or der;

4. We find that Great Lakes Aviation, Ltd., continues to be fit, willing and able to operate as a

c ommuter carrier and capable of providing reliable essential air service at the these communities

5. Th ese docket s will remain open until further or der of the Department; and

6. We will serve copies of this order on the Mayors and Airport Managers of Brainerd, Minnesota, Fort Dodge and Mason City, Iowa; Iron Mountain, Michigan; Thief River Falls, Minnesota; and Watertown, South Dakota; S overeign Ai r, Multi

- Aero, Inc., d/b/a Air Choice One, and Great Lakes Aviation, Ltd.

.

By:

Susan Kurland Assistant Secretary for

Aviation and International Affairs (SEAL)

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

Nonstop Great Circle Miles to Minneapolis (MSP) Brainerd, BRD 114 Fort Dodge, FOD 168 Iron Mountain, IMT 257 Mason City, MCW 119 Thief River Falls (TVF) 261 Watertown, ATY 193Appendix B Page 1 of 6

Great Lakes Aviation, Ltd. Essential Air Service

to be Provided to Brainerd, Minnesota

Effective Period : Two

- year period beginning when Great Lakes begins full EAS at each of these communities through the 24 th month thereafter.

Service : 2 4 nonstop round trips per week to Minneapolis (MSP).

Aircraft : Beech 1900D, 19 seats. Rate per Eligible On e

- Way Flight : $ 391 1
Weekly Ceilings : $ 18,768 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 ou tlined 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 destination constitutes a completed flight; absent an explanation suppor ting 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 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 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 c arrier 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 cons ider 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 serv ice 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 or at the stipulated service levels, the carrier may cease to

pro vide 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 t hereto shall not operate to controvert the foregoing paragraph.

Funds are not currently available for performance under this order beyond September 30, 2012 . The Government’s obligation for performance under this order beyond September 30, 2012 , is subje ct 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 September 30, 2012 , until funds are made available to the Department for performance. If funds are not made available for performance beyond September 30, 2012 , 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 $ 959,865 divided by 2,454 estimated annual completed departures and arrivals:

24 flights/ week x 2 directions x 52 weeks x 313/312 x 98 percent completion

. 2 $ 391 x 48 flights per week = $ 18,768

.Appendix B Page 2 of 6

Great Lakes Aviation, Ltd. Essential Air Service

to be Provided to Fort Dodge, Iowa

Effective Period : Two

- year period beginning when Great Lakes begins full EAS at each of these communities through the 24 th month thereafter.

Service : 18 nonstop round trips per week to Minneapolis (MSP).

Aircraft : Beech 1900D, 19 seats. Rate per Eligible On e

- Way Flight : $ 978 1
Weekly Ceilings : $ 35,208 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 significant 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 completed, 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 sig nificant 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 Analy sis 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. 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 r equirements 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 or at the stipulated service levels, the carrier may cease to provide service to that spe cific 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 September 30, 2012 . The Government’s obligation for performance under this order beyond September 30, 2012 , is subject to the availability o f 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 September 30, 2012 , until funds are made available to the Department for p erformance. If funds are not made available for performance beyond September 30, 2012 , 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 provide d under this order.

1 Annual compensation of $ 1,798,693, divid ed by 1,840 estimated annual completed departures and arrivals:

18 flights/ week x 2 directions x 52 weeks x 313/312 x 98 percent completion

. 2 $ 978 x 36 flights per week = $ 35,208

.Appendix B Page 3 of 6

Great Lakes Aviation, Ltd. Essential Air Service

to be Provided to Iron Mountain, Michigan

Effective Period : Two

- year period beginning when Great Lakes begins full EAS at each of these communities through the 24 th month thereafter.

Service : 18 nonstop round trips per week to Minneapolis (MSP).

Aircraft : Beech 1900D, 19 seats. Rate per Eligible On e

- Way Flight : $ 928 1

Week ly Ceilings : $ 33,408 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 significant 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 completed, 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 signifi cant 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 select a replacement carrier to provide service on these routes. The carrier must complete all fli ghts 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 requi rements 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 or at the stipulated service levels, the carrier may cease to provide service to that specifi c 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 ces sation 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 September 30, 2012 . The Government’s obligation for performance under this order beyond September 30, 2012 , 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 September 30, 2012 , until funds are made available to the Department for performance. If funds are not made available for performance beyond September 30, 2012 , 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 $ 1,707,841, divid ed by 1,840 estimated annual completed departures and arrivals:

18 flights/ week x 2 directions x 52 weeks x 313/312 x 98 percent completion

. 2 $ 928 x 36 flights per week = $ 33,408

.Appendix B Page 4 of 6

Great Lakes Aviation, Ltd. Essential Air Service

to be Provided to Mason City, Iowa

Effective Period : Two

- year period beginning when Great Lakes begins full EAS at each of these communities through the 24 th month thereafter.

Service : 24 nonstop round trips per week to Minneapolis (MSP).

Aircraft : Beech 1900D, 19 seats. Rate per Eligible On e

- Way Flight : $ 479 1
Weekly Ceilings : $ 22,992 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 significant 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 completed, 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 sig nificant 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 Analy sis 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. 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 r equirements 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 or at the stipulated service levels, the carrier may cease to provide service to that spe cific 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 September 30, 2012 . The Government’s obligation for performance under this order beyond September 30, 2012 , is subject to the availability o f 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 September 30, 2012 , until funds are made available to the Department for p erformance. If funds are not made available for performance beyond September 30, 2012 , 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 or der.

1 Annual compensation of $ 1,174,468, divid ed by 2,454 estimated annual completed departures and arrivals:

24 flights/ week x 2 directions x 52 weeks x 313/312 x 98 percent completion

. 2 $ 479 x 48 flights per week = $ 22,992

.Appendix B Page 5 of 6

Great Lakes Aviation, Ltd. Essential Air Service

to be Provided to Thief River Falls, Minnesota

Effective Period : Two

- year period beginning when Great Lakes begins full EAS at each of these communities through the 24 th month thereafter.

Service : 12 nonstop round trips per week to Minneapolis (MSP).

Aircraft : Beech 1900D, 19 seats. Rate per Eligible On e

- Way Flight : $ 1,534 1
Weekly Ceilings : $ 36,816 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 completed, such as certain weather ca ncellations, 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 p eriod 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 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 nat ional 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 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 suc h 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 incor porate 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 a vailable for performance under this order beyond September 30, 2012 . The Government’s obligation for performance under this order beyond September 30, 2012 , 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 September 30, 2012 , until funds are made available to the Department for performance. If funds are not made available for performance beyon d September 30, 2012 , 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 $ 1,881,815, divid ed by 1,227 estimated annual completed departures and arrivals:

12 flights/ week x 2 directions x 52 weeks x 313/312 x 98 percent completion

. 2 $ 1,534 x 24 flights per week = $ 36,816

.Appendix B Page 6 of 6

Great Lakes Aviation, Ltd. Essential Air Service

to be Provided to Watertown, South Dakota

Effective Period : Two

- year period beginning when Great Lakes begins full EAS at each of these communities through the 24 th month thereafter.

Service : 1 8 nonstop round trips per week to Minneapolis (MSP).

Aircraft : Beech 1900D, 19 seats. Rate per Eligible On e

- Way Flight : $ 930 1
Weekly Ceilings : $ 33, 480 2

Note: The carrier understands that it may forfeit its compensation for any flights that it does not op erate 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 completed, such as certain weather cancellations, only completed flights are considered eligible f or 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 chan ges 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 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 whe ther 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.

I f 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 mak e 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 contract are subject to, and incorporate by reference, relevant statutes and Department regulation s, 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 September 30, 2012 . The Government’s obligation for performance under this order beyond September 30, 2012 , 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

payme nt may arise for performance under this order beyond September 30, 2012 , until funds are made available to the Department for performance. If funds are not made available for performance beyond September 30, 2012 , the Department will provide notice in wri ting 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 $ 1,710,324, divid ed by 1,840 estimated annual completed departures and arrivals:

18 flights/ week x 2 directions x 52 weeks x 313/312 x 98 percent completion

. 2 $ 930 x 36 flights per week = $ 33,480.