O r d e r 2015

- 3

- 6

S er v e d: March 13 , 2015



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 13 th day of March , 20 15

DOT

- OST

- 1996

- 1899

FI N A L ORD E R T E R M I N A T I NG E LIGIBILIT Y AND

A LLO W ING S U SPE N S ION OF SE R V IC E

Summary By this Order, the Department is terminating the eligibility of Kingman, Arizona , un der the Essential Air Service (EAS ) progra m and allowing Great Lakes Aviation, Ltd. (Great Lakes) , to suspend service at Kingman , if it chooses

.

Background By Order 2013

- 6

- 1 (June 3, 2013)

, the Departme nt re

- selected Great Lakes to provide EAS at Kingman, with 12 weekly nonstop round trips to Los Angeles or Phoenix for the two

- year period from May 1, 2013, through April 30, 2015, for an a nnual subsidy of $1,635,180.

The c ompl e te public f ile f or E AS a t Ki n gman m a y be ac c e ss e d online th r o u g h the Fe d e ra l

Do c k e ts M a n a g e m e nt S y s t e m a t: http://www. re g ul a tions

. gov b y e nt er i n g “ D OT

- O S T

- 1996

- 1899 ” in the “ S EA RC H f o r : R ul e s, C omm e nts, Ad j udi ca tions or S uppo r ti n g Do c u m e nts:” f i e ld.

Addition a l l y , histo r i ca l t raff ic and monthly subsi d y actually paid a r e d e t a il e d in App e ndix A

.

L e gi s l a t i ve Ch a ng es
The Fe d era l Avi a tion A dminist ra tion ( F AA) Mod er ni z a tion a nd R ef o r m A c t of 2012 ( P ublic L a w 112

- 9 5 )

, si g n e d into l a w on Fe b r u a r y 14, 2012, a m e n d e d the d ef inition of “e li g ible pl a c e ” f or the p u rpose of r ece ivi n g E A S

. 1 The a m e nd m e nt, a mo n g ot h e r thi n g s, st a t e s th a t to be

1 S ee 4 9 U

. S

. C

. § 4 17 3 1.

Essential Air Service at

KINGMAN, ARIZONA

u nder 49 U.S.C. 41731 et seq.- 2

- eligible, a community must have had an average subsidy per passenger of less than $1,000 during the most recent fiscal year, beginning with fiscal year 2013, as determined by the Secretary of Transportation

. 2

Ord e r t o S h o w C a u s e
B y O r d e r 2014

- 11

- 17 (November 25, 2014) , t h e D e p ar tm e nt t e nt a tiv e l y d e t er min e d to t er min a te
the e li g ibili t y of Kingman but allowed for objections to the Department’s tentative

decision. The Department’s t e nt a tive d ec ision w a s b a s e d on the st a tuto r y r e qui re m e nt th a t
the a v e r a g e subsi d y p e r p a ss e n g e r must be l e ss th a n $1,000 du r ing the most re c e nt f is ca l y e a r

p er 49 U. S

. C . § 41731 (a)( 1 ) ( C )

.

F or the most re c e nt F is c a l Y e a r ( 2 014 )

, Great Lakes transported 1,059 total passengers at an annual subsidy rate of $1,635,180. Thus, the corresponding average per passenger subsidy for FY 2014 was $1,544.07

. O r d e r 2014

- 11

- 17 di rec t e d a ll int ere st e d p ar ti e s to sh o w ca use within 20 days ( December 15, 2014 )

, a s to w h y t h e D e p ar t m e nt should not m a ke f in a l its t e nt a tive

f i ndin g s a nd c on c lusions.

Ob j ec t ions t o t he D e p a r t m e n t ’s S h o w C a u s e Or d er
The D e p ar tm e nt r e ce iv e d two similar letters obj ec ting to its t e nt a tive d ec ision to t er min a te EAS at Kingman

, one from Richard E. Anderson , Mayor of Kingman, and o ne from Mr. David French, Executive Director of Kingman Airport Authority , Inc

.

T he obj e c to r s point to the FAA mandate that all copilots must have a minimum of 1500 hours of total time holding an Air Transport Pilot (ATP) certificate

, and

, as a result, Great Lakes has lost many copilots due to having fewer than 1500 hours . Furthermore, Great Lakes’ c aptains have

left the carrier to jobs at larger, legacy airlines, which resulted in the carrier cancelling a significant number of its fligh ts due to lack o f crew availability. Addition a l l y
, t he obj ec to r s

st a te d th a t “[ p ] assenger confidence in local airline service will not be achieved when 25% of the flights are cancelled due to federal mandates. ” They also stated that the Department had just a few month s ago granted a waiver from the 10

- enplanement per day standard throughout all of Fiscal Y ear 2015 and that to now terminate Kingman is a form of “double jeopardy

. ” 3 Finally, they state that is not possible for the community to take corrective

action when the EAS carrier’s service is unreliable.

D ec i s ion There are a number of statutory eligibility standards that communities must meet in order to remain in the EAS program. The two that are most relevant for Kingman are the 10

- enplanement minimum and the $1,000 subsidy

- per

- passenger cap. These are separate requirements tha t rely on different standards. Kingman must satisfy both standards independently, to remain an eligible community. Kingman did receive a waiver from the 10

- enplanement standard, and se rvice continued. However, subsidy per passenger levels at Kingman are over the $1,000 cap and, unlike the 10

- enplanement standard, there is no statutory provision for a waiver from the $1,000 cap

.

2 C o mm u n iti e s in A l a s k a a n d H a w a ii a r e e x e m p t.
3 See Order 2014

- 9

- 21 (September 26, 2014), that addressed the 10

- enplanement per service day requirement , which

is a separate requirement from the $1,000 per passenger subsidy limit

.- 3

- At the time that Kingman was granted a waiver from the 10

- enplanement standard, the Department stated its intention to address Kingman’s compliance with the $1,000 subsidy cap in a future Order. Subsequent to that Order, data became available for Fiscal Year 2014 traffic at Kingman, which include revenue passeng er enplanements and deplanements, and Kingman’s subsidy per passenger averaged $1,544 per person. Based on this information, and in accordance with the requirements of 49 U.S.C. 41731(a)(1)(C), the Department tentatively determined that Kingman was not co mpliant with the $1,000 subsidy cap, and proposed to terminat e Kingman’s EAS eligibility. An Order to Show Cause was issued on November 25, 2014, giving the opportunity for int erested persons to object, and , as noted above, the Department received two obj ections

.

T he community has raised two issues currently affecting Kingman’s eligibi lity to receive subsidized EAS. First, the community noted that it received a waiver from the 10

- enplanement requirement for Fiscal Year 2015. T he Department fully acknowledges that it granted Kingman

a waiver f rom the 10 enplanement standard; h owever, that in no way immunizes the community from the requirement to comply with $ 1,000 subsidy per passenger limit

. 4 Second, the objectors indicated that enplanements decl ined due to flight cancellations.

To address t he objectors’ statement that 25 percent of flights were cancelled, the Department examined data showing scheduled vs. completed flights for the period in question, and Great Lakes’ completion factor at Kingman was 74 .2 percent

. See Appendix B for full data on Great

Lakes’ com pletion factor for Fiscal Y ear 2014

. Given the low completion factor, the Department examined the subsidy actually paid to see if the subsidy per passenger was lower

than described in the Order tentatively terminating Kingman’s eligibility to receive subsidized EAS. The actual subsidy paid for flights to and from Kingman for the 12

- month period at issue was $1,310,260. With 1,059 tota l passengers carried, the actual subsidy per passenger was $1,237.26, still well above the statutory limit of $1,000 per passenger. See Appendix A.

The obj ec ting p ar ti e s did not disput e the Department’s t e nt a tive d e t er min a tion th a t the

c ommunity’s a v er a ge p e r p a ss e n g e r s u bsi d y f or F Y 2014 was above the $ 1,000 limit. As

s t a t e d a bov e
, P ublic L a w 112

- 9 5 a m e nd e d the d ef inition of “e li g ible pl a ce ” to in c lude the

r e qui r e m e nt th a t du r ing the most rece nt f is c a l y ea r , a c ommuni t y must h a ve h a d a n a v e r a g e sub s i d y p e r p a ss e n g e r of l e ss th a n $1,000.

Thus

, the D e p ar tm e nt h ere b y f in a li z e s its t e nt a t ive f indin g s in O r d e r 2014

- 11

- 17

, that Kingman’s subsidy per passenger exc eeded $1,000 during Fiscal Y ear 2014

, a nd a llows Great

Lakes to t er min a te s er vi ce

. I n o r d e r to a llow f or a n o r d er l y shutdown, the Department will

c ont i nue to a utho r i z e subsi d y th r ou g h April 30, 2015

, the end of Great Lakes’ current

contract, a nd permit Great Lakes to susp e nd s er vi c e a t th a t tim e

. I f Great Lakes d ec ide s to

susp e nd s er vi c e a t the c ommunity

, the D e p ar t m e nt e x p ec ts it to c ont a c t a ll p a ss e n g er s who

h o ld re s er v a tions f or f li g hts th a t will be susp e nd e d to in f o r m th e m of the susp e nsion, a nd to

a ssist th e m i n arra n g i n g a lt er n a tive t r a n spo r t a tion or p r ovide th e m with a ref und of t h e ir ti c k e t

p r i ce, without p e n a l t y , if r e qu e s t e d.

4 See Order 2014

- 9

- 21 (September 26, 2014) notifying Kingman that “[t]he waiver granted by this Order does not insulate Kingman

... from the $1,000 requirement...”- 4

- This O r d e r is issu e d und e r a utho r i t y d e l e g a t e d in 49 C F R P ar t 1.25 a( b )

.

A C C O RDINGL Y

, 1. The Department terminates the eligibility of Kingman , Arizona , under the Essential Air Service program, effective April 30, 2015 ;

2. The Department will c ontinue to a utho r i z e subsi d y f or Great Lakes Aviation, Ltd. f o r t h e

p r ovision of E AS a t Kingman, Arizona

, a s d e s cr ib e d in App e ndix C of O r d e r 2013

- 6

- 1 , th r ou g h April 30, 2015 ;

3. The Department will a llow Great Lakes Aviation, Ltd.

, to susp e nd s er vi c e a t Kingman

, Arizona, after April 30, 2015, if it c hoos e s;

4. T he Department will not entertain petitions for reconsideration of this Order , as the opportunity was provided for the filing of objections to the Order to Show Cause proposing termination of Kingman’s EAS eligibi lity (Order 2014

- 11

- 17 );

4

. This do c k e t will re m a in op e n until f u r th e r o r d e r of the D e p ar tm e nt; a n d

5

. The Department will s er ve c opi e s of this O r d e r on the m a yor of Kingman, Arizona, the

Executive Director of Kingman Airport Authority, Inc. , and Great Lakes Aviation, Ltd.

B y:

BRANDON M. BELFORD Deputy Assistant Secretary for

Aviation and International Affairs

(SEAL)

An electronic version of this document is available at : http://www.regulations.gov/Appendix A

Claims Payment Data for Kingman, AZ 5

Month Subsidy Per Flt. No. of Flts. Submitted
for Payment Subsidy Paid

Oct-13 $1,337 90 $120,330

Nov-13 $1,337 52 $69,524

Dec-13 $1,337 50 $66,850

Jan-14 $1,337 64 $85,568

Feb-14 $1,337 82 $109,634

Mar-14 $1,337 66 $88,242

Apr-14 $1,337 74 $98,938

May-14 $1,337 102 $136,374

Jun-14 $1,337 104 $139,048

Jul-14 $1,337 103 $137,711

Aug-14 $1,337 103 $137,711

Sep-14 $1,337 90 $120,330

980 $1,310,260

Total Passengers and Actual Subsidy Paid Per Passenger at Kingman, AZ 6

Month No. of

passengers
Oct-13 184

Nov-13 101

Dec-13 147

Jan-14 121

Feb-14 71

Mar-14 66
Apr-14 62
May-14 76

Jun-14 76

Jul-14 56
Aug-14 56
Sep-14 43

Total 1,059

Actual Subsidy Paid $1,310,260
Actual Subsidy Per Passenger $1,237.26

5 From Aviation Decisions Data S ystem (ADDS), the Department’s claims payment system.

6 Source: Bureau of Transportation Statistics: T

- 100Appendix B

Completion Factor at Kingman, AZ

year month uniquecarrier Flights Sched Flights Performed % Difference

2013 10 Great Lakes 170 144 84.7%

2013 11 Great Lakes 102 50 49.0%

2013 12 Great Lakes 106 50 47.2%

2014 1 Great Lakes 106 64 60.4%

2014 2 Great Lakes 112 82 73.2%

2014 3 Great Lakes 120 66 55.0%

2014 4 Great Lakes 120 74 61.7%

2014 5 Great Lakes 124 114 91.9%

2014 6 Great Lakes 120 118 98.3%

2014 7 Great Lakes 124 104 83.9%

2014 8 Great Lakes 124 112 90.3%

2014 9 Great Lakes 120 96 80.0%

1448 1074 74.2%