Order: 2015

- 4

- 24

Served: April 30

, 201 5



### UNITED STATES OF AMERICA
DEPARTMENT OF TRANSPORTATION
OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation
on the 30 th day of April

, 20 1 5



### ORDER RE

- SELECTING AIR CARRIER Summary By this Order the Department is re

- selecting Great Lakes Aviation, Ltd. (Great Lakes) to provide Essential Air Service ( EA S ) at Page and Prescott , Arizona

, for a two

- year term

, from May 1, 2015, through April 30, 2017, at an annual subsidy of $2,275,111 at Page and $2,657,002 at Prescott

.

Background By Order 2013

- 6

- 1 (June 3, 2013 ), the Department selected Great Lakes to provide EAS at Page and Prescott

, for the two

- year period from May 1, 2013, through April 30, 2015, for a
combined annual subsidy of $ 4,566,353, with 12

- 24 weekly round trips , depending on the season at Page, and 18 weekly round trips at Prescott.

As the end of the contract was approaching, we issued Order 2014

- 11

- 15 (November 25, 2014) requesting proposals from air carriers interested in providing EAS at
the se commun ities for a new contract term. In response to that Order, we received proposals from Great Lakes for both Page and Prescott, and Boutique Air for Page only. Essential Air Service at

PAGE, ARIZONA PRESCOTT, ARIZONA

Under 49 U.S.C. § 41731 et seq

. DOCKET DOT

- OST

- 1997

- 2694
DOCKET DOT

- OST

- 1996

- 1899- 2

-

Each air carrier’s complete proposal and community comments ma y be accessed online at www.regulations.gov by entering the community’s respective Docket number in the search
block.

Proposal of Great Lakes
Great Lakes submitted a bi d to serve Page u sing either 9

- passenger or 19

- passenger Beechcraft 1900D (1900D) aircraft , with nonstop service to Phoenix (PHX)

, and/or one

stop service to Denver (DEN), or Los Angeles (LAX), with 12 weekly round trips during
the off

- peak season, and 24 weekly round trip s during the pe ak season. The 9

- passeng er option costs $2,690,636 in annual subsid y and the 19

- passenger option costs $ 2,275,111 in annual subsidy.

At Prescott, the carrier submitted a bid using either 9 , or 19

- passenger 1900D aircraft , or, 30

- passenger Embraer EMB

- 120 aircraft (EMB

- 120) . The 1900D aircraft bid consists of nonstop service to LAX, and/or one

- stop service to DEN, with 18 weekly round trips, at an annual subsidy of $3,152,565 for the 9

- passenger option, or $2,721,884 for the 19

- passenger o ption. Also, Great Lakes submitted a bid with 24 weekly round trips to PHX using the 9

- passenger or 19

- passenger aircraft at an annual subsi dy of $2,845,027, or $2,735,624, respectively. The 30

- passenger, EMB

- 120 aircraft bid consists of 12 weekly round trips to LAX at an annual subsidy of $2,657,002.

Proposal of Boutique Air

Bout ique Air submitted a proposal with two options for Page (only)

, using 9

- passenger Pilatus PC

- 12 aircraft. Option 1 would provide 18 weekly nonstop round trip s to PHX for an annual subsidy of $2,584,892

. Option 2 would provide 18 w eekly nonstop round trips to Salt Lake City (SLC) for an annual subsidy $2,807,954

.

Community Comments
On January 21

, 2015, the Department requested comments from the communities regarding this EAS air carrier selection case. In response

, the Department r eceived a letter on March 12, 2015, from Page Airport Director, Rick Olson

, supporting Boutique, which stated, “Last evening, the Page City Council (by a vote of 4 to 3), elected to recommend Boutique Air as the EAS provider with direct service to Phoenix, Arizona

. ” In subsequent correspondence to the Department, after learning that their decision to recommend Boutique Air would require the community to waive its right to twin

- eng ine, single

- pilot aircraft, the community expressed some concerns about the Boutique recommendation. Boutique operates with Pilatus PC

- 12 equipment, a single

- engine aircraft. The Department
communicated that there is no statutory guarantee of twin

- engine, two

- pilot aircraft after a community has been served for 60 consecutive days with aircraft other than tha t, and made
them aware of the legal issues regarding the twin

- engine provision. On March 13, 2015, the Page City Council held a special meeting pertaining to its EAS recommendation. The Council, afte r considering both legal and future operational considerations, rescinded its recommendation of Boutique and recommended continued service with Great Lakes for
the next term. On March 16, 2015

, in an email to the Department, Airport Director Rick
Olson stated

, “The C ity of Page would prefer Bid 2, providing 19

- seat accommodation to Phoenix Sky Harbor Airport (Denver and Los Angeles as bid)

. ” The community later- 3

-

cited Great Lakes’ twin

- engine aircraft , interline ticket agreement s, and secure baggage checked through to the destination, as deciding factors.

T he Department received a resolution from the Mayor and City Council of Prescott, recommending Great Lakes

. The resolution states, “... the City of Prescott requests that Great Lakes Aviation commit to provide Essential Air Service between Prescott and Los Angeles using Embraer EMB

- 120 aircraft, with not less than two daily nonstop flights

. ” The community fully embraces the aircraft upgrade to the la rger, 30

- passenger aircraft.

Decision After carefully reviewing each air carrier’s proposal, the Department has decided to select
Great Lakes at both communities . The airline has the support of the communities , a key
air carrier selection criterion

. Additionally, Page did not waive its statutory guarantee of 2

- engine, 2

- pilot aircraft, therefore, Boutique’s proposal was not considered further. The Department finds the subsidy and service levels reasonabl e and that the service will meet
the EAS needs of both Page and Prescott

.

The selection shall be made upon the Department’s receiving properly executed

cert ifications from the air carrier that they are in compliance with the Department’s regulations regarding drug

- free workplaces and nondiscrimination, as well as the regulations concerning lobbying activities. 1

Discussion regarding continued eligibility requirements
The Federal Aviation A dministration (FAA) Modernization and Reform Act of 2012 (Public Law No: 112

- 95) amended 49 U.S.C. § 41731(a)(1)(B) to change the definition of “eligible place” for the purpose of receiving EAS. The amendment states that to be eligible, a community must m aintain an average of 10 enplanements or more per service day, as determined by the Secretary, during the most recent fiscal yea r beginning after September 30, 2012. T he legislation exempts locations in Alaska and Hawaii and
communities that are more than 175 driving miles from the nearest large

- or medium

- hub airport. Prescott is within 175 miles of Phoenix Sky Harbor International Airport (PHX), a large

- hub , and therefore, it must meet the 10

- enplanement

- a

- day threshold for EAS o r otherwise face termina tion of its eligibility to receive EAS, barring a waiver from the Secretary. Page is located beyond 175 miles of the nearest large or medium hub airport, and, therefore, is exempt from this requirement

Additionally, the Department is prohibited from subs idizing air service at a community where the subsidy per passenger exceeds $200, unless the community is more than 210 highway miles from the nearest large

- or medium

- hub airport. This applies to Prescott
because it is located fewer than 210 miles from PH X. Page is exempt from th e $200 per

1 The certifications are available online under “Reports and Publications” at http://www.dot.gov/policy/aviation

- policy/small

- community

- rural

- air

- service/essential

- air

- service- 4

-

passenger cap

. 2 As stated in the Notice of Enforcement Policy on the $200 per passenger subsidy cap, the Department is measuring compliance with this requirement on passenger traffic from October 1, 2014, through Septe mber 30, 2015. 3

Although Page is exempt from the $200 per passenger statutory limit , as described above, both Page and Prescott are subject to the $1,000 per passenger per passenger subsidy cap, regardless of distance from hub airports. 4 The Department fully expects Great Lakes to work cooperatively with both communities t o ensure subsidy rates remain below the $1,000 per passenger level to remain eligible for the EAS program.

Carrier Fitness
49 U.S.C. §§ 41737(b) and 41738 require that the Department find s an air carrier fit, willing, and able to provide reliable service before we may subsidize it to provide EAS

. Great Lakes is subject to the Department’s continuing fitness requirements, and no
information has come to our attention tha t would cause us to question the air carrier’s
fitness at this time. The Department contacted the Federal Aviation Administration, and it has raised no concerns that would negatively affect our fitness findin gs. We therefore
conclude that Great Lakes Aviation, Ltd. is reliable and fit to conduct the operations proposed here.

This Order is issued under authority delegated in 49 CFR Part 1

. 25a(b)

.

ACCORDINGLY,

1. The Department select s Great Lakes Aviation, Ltd. to provide Essential Air S ervice at Page and Prescott , Arizona, and establish es the annual subsidy rate s as described in Appendix C ;

2. The Department direct s Great Lakes Aviation, Ltd. to retain all books, records, and other source and summary documentation 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 d ocumentation shall be retained for seven years from the service date of this Order or until the Department indicates that the records may be destroyed, whichever comes first. Copies of flight logs for aircraft sold or disposed of must be retained. The ca rrier s may forfeit their compensation for any claim that is not supported under the terms of this Order ;

3 . The Department finds that Great Lakes Aviation, Ltd. is fit, willing and able to operate

as a c ertificated commuter air carrie r , and capable of providing reliable Essential Air

S ervice at Page and Prescott , Arizona ;

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

- 164 for fiscal year 1990, and re

- established it in fiscal years 1994

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

- 69, the Department of Tra nsportation and Related Agencies Appropriations Act of 2000.

3 See www.regulations.gov , docket OST

- 2014

- 0061 for a complete discussion.

4 See 49 U.S.C. § 41731(a)(1)(C).- 5

-

4

. Th ese docket s will remain open pending further Department action ; and

5

. The Department will serve a copy of this Order on the mayor s of Page and Prescott, Arizona, the airport manager s of Page Municipal Airport, Prescott Municipal Airport ; Boutique Air, and Great Lakes Aviation, Ltd.

By:

BRANDON M. BELFORD Deputy Assistant Secretary for
Aviation and International Affairs

(SEAL)

An electronic version of this document is ava ilable at www.regulations.govAppendix A



## AREA MAP

Maps generated by the Great Circle Mapper

- copyright © Karl L. Swartz

.Appendix B Page 1 of 2Appendix B Page 2 of 2Appendix C Page 1 of 2 Great Lakes Aviation, Ltd.
Essential Air Service a t Page, Arizona
DOT

- OST

- 1997

- 2694

Effective Period : May 1, 2015

, through April 30

, 201 7
Hubs : PHX nonstop and/or DEN one

- stop or LAX one

- stop Aircraft : 19

- passenger Beechcraft 1900D Rate per Eligible Flight: 1 $ 1,173
Scheduled Service : 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 t he required service, without prior approval. The carrier understands that an aircraft take

- off and lan ding at its scheduled destination constitutes a completed flight; absent an explanation supporting subsidy eligibility for a flight that has not been completed, such as cert ain weather cancellations, only completed flights are considered eligible for subsi dy. 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 que stion. If the carrier contemplates any such changes beyo nd 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 Dep artment 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 sub sidy 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 De partment 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 do es make paymen ts in the stipulated service levels, the carrier may cease to provide service to that specific location without regards 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 a mended from
time to time. However, any such statutes, regulations, or amendments thereto shall not operate to controvert the foregoing paragr aph.

Funds may not be available for performance under this Order beyond September 30, 2015

. The Government’s obligation for performance

under this Order beyond September 30, 2015 , is subject to the availability of 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, 201 5 , until funds are made available to the Department for performance. If sufficient funds are not made available for perfo rmance beyond September 30,

2015 , the Department will provide notice in writing to the carrier.

All claims for paym ent, including any amended claims, must be submitted within 90 days of the last day of the month for which compensation is being claimed. For example, claims for service provided in July must be filed by October 31; August claims must be submitted by Nove mber 30, and so on.

1 Annual compensation of $2,275,111 divided by 1,9 36 annual departures , per Great Lakes’ proposal ( 38 weekly departures x 52 weeks x 98 percent completion)

. 2 Page’s service varies by season, with 12 weekly round trips in the off

- peak, 18 weekly round trips in shoulder seasons, and 24 weekly round trips in peak season. Weekly departures x $1,173 per flight

. Service Dates Departures per Week Weekly Ceiling May 1, 2015-May 14, 2015 36 $42,228
May 15, 2015-October 2, 2015 48 $56,304

October 3, 2015-December 6, 2015 36 $42,228
December 7, 2015-February 29, 2016 32 $37,536
March 1, 2016-April 30, 2016 38 $44,574
May 1, 2016-May 14, 2016 36 $42,228
May 15, 2016-October 6, 2016 48 $56,304

October 7, 2016-December 4, 2016 36 $42,228
December 5, 2016-February 28, 2017 24 $28,152
March 1, 2017-April 30, 2017 36 $42,228Appendix C Page 2 of 2

Great Lakes Aviation, Ltd.
Essential Air Service a t Prescott , Arizona
DOT

- OST

- 1996

- 1899

Effective Period : May 1, 2015, through April 30, 2017
Scheduled Service : 12 weekly nonstop r ound trips to LAX
Aircraft : 30

- passenger Embraer EMB

- 120 Rate per Eligible Flight: 3 $ 2,173 Weekly Ceiling : 4 $ 52,152

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 it s 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 r ate, 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 s ervice 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 flight should be adjusted or disall owed, 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, terminate s 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 service levels, the carrier may cease to pr ovide service to that specific location without regards 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 tot al 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 may not be available for performance under this Order beyond September 30, 2015. The Government’s obligation for performance under this Order beyond September 30, 2015, is subject to the availability of 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, 2015, until funds are made available to the Department for performance. If sufficient funds are not made available for performance beyond September 30, 2015, the Department will provide notice in writing to the carrier.

All claims for payment, including any amended claims, must be submitted within 90 days o f the last day of the month for which compensation is being claimed. For example, claims for service provided in July must be filed by
October 31; August claims must be submitted by November 30, and so on.

3 Annual compensation of $2,657,002 divided by 1,223 annual departures (24 weekly departures x 52 weeks x 98 percent completion)

. 4 24 weekly departures x $2,173 per flight

.