Order 20 11

- 1 2

- 19
Served: Dece m ber 23 , 20 11



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

Issued by the Department of Transportation
on the 23 rd day of Dec em ber , 20 11

ORDER RE SELECTING CARRIER AND SETTING FINAL SUBSIDY RATES

Summary By this Order , we are re selecting Great Lakes Aviation, Ltd. (Great Lakes), operating as both
a Frontier Airlines and United Airlines code

- share partner, to provide subsidiz ed essential air service (EAS) with 19

- passenger Beech craft B

- 1900D air craft at Vernal and Moab

, Utah

, for
the two

- year period from January 1, 20 12 , through December 31, 201 3

. The annual subsidy rate for Vernal will be set at $1, 299,194, and $1,816,486 for Moab, or a combined total of $3, 115,680 . See Appendix A for a map.

Background By Order 20 09

- 12

- 9

, D ecember 1 4 , 2009 , the Department selected Great Lakes Aviation

, Ltd. (Great Lakes) , to provide subsidized EAS at Vernal and Moab utilizing 19

- passenger Beech B

- 1900D aircraft , through December 3 1, 20 11 . Under that Order , Great Lakes provide s Vernal with 12 weekly nonstop round trips to Denver for an annual subsidy rate of $ 1,421,478

. At Moab, Great Lakes also provide s 12 weekly nonstop round trips to Denver for an annual subsidy rate of $ 1,798,370 . The combined annual subsidy rate for both

communities t otals $ 3

, 219

, 848

.

In anticipation of the end of the current rate term

, the Department issued Order 20 11

- 7

- 3 on July 1, 20 11 , solicit ing proposals to provide efficient EAS , with subsidy support if necessary,

at Vernal and /or Moab

. Our selection process at Moab and Vernal is governed by several important statutory limitations imposed on the EAS Program . B oth communities are

Essential Air Service at :

MOAB, UTAH
VERNAL , UTAH

Under 49 U.S.C. 41731 et seq

. DOT

- OST

- 1997

- 2827
DOT

- OST

- 1997

- 2706- 2

-

guaranteed to rece ive air service with twin

- engine , two

- pilot aircraft. 1 In addition, the Department is prohibited from paying subsidy for EAS at any community where the per

passenger rate exceeds $200, unless the community is greater than 210 highway miles from the nearest large or medium hub. In this case, Vernal is clearly less than 210 hi ghway miles from Salt Lake City and, therefore, is subject to the $200 subsidy

- per

- passenger ceiling . In contrast, Moab is not within 210 highway miles of a large or medium hub, and

, therefore

, is exempt from this limit.

Based on historic al service levels and the statutory limitations described above, in order to attract as broad an array of proposals as possible, we stated in the Request for Proposals that

we would entertain proposals for three round trips a day (18 a week) with eight

- or nine

- seat
aircraft or 12 ro und trips a week with 1 5

- seat or larger aircraft to Salt Lake City or any other suitable hub offering convenient access to the nation’s air transportation system. Carriers were encouraged to propose more than one service option if they chose and were not limited to those requirements if they envisioned other, potentially more attractive possibilities

-- different hubs, for example

-- with subsidy requirements that remain competitive.

Proposals The Department received a total of eight se rvice options from two carriers in res ponse to its

solicitation

. Great Lakes submitted a proposal that would replicate the existing level of
service at the communities

. SeaPort Airlines, Inc. ’s ( SeaPort ) proposal contained six different service options, three separate service patterns at each c ommunity

. These proposals
are summarized below. Each carrier’s proposal and comment letters may be accessed online through the Federal Docket Management System at: http://www.regulations.gov, by doing a

search on Dockets DOT

- OST

- 1997

- 2827 (Moab) or DOT

- OST

- 1997

- 2706 (Vernal)

.

Great Lakes

Great Lakes , operating as a United Airlines and Frontier Airlines code

- share partner,

submitted “ stand

- alone ” service options to provide EAS at both communities . Great Lakes
woul d provide twelve nonstop round trips a week from each Vernal and Moab to Denver, utilizing 19

- passenger Beech 1900D aircraft. The annual subsidy requirement at Vernal is $1, 299,194 and for Moab, $1,816,486

.

SeaPort

SeaPort submitted a proposal for each community on a “ stand

- alone ” basis. SeaPort would

utiliz e pressurized Pilatus PC

- 12 aircraft configured for 9

- passengers with three service options at each community with all service being nonstop, as summarized below

.

1 Previously most EAS communities were entitled to service with 15

- s ea t or larger aircraft. H owever , in the Department’s FY 2012 appropriation (Consolidated and Further Continuing Appropriations Act, P.L. 112

- 55

, November 18, 2011 ), Congress repealed the 15

- seat guarantee.- 3

-

Service Option

# Prop osed Service Annual Subsidy Required

Vernal Moab

1 18 round trips a week to Salt Lake City (SLC) $1,566,015 $2,074,620

2 11 round trips a week to Denver (DEN); and 7 round trips a week to SLC $1,855,925 $2,278,580

3 7 round trips a week to DEN; and 11 round trips a week to SLC $1,701,407 $2,197,787

SeaPort ’ s options do not meet the twin

- engine requirement for either community , and the Department would not select SeaPort at either unless we receive d written community support. Based on the historical passenger traffic included in Order 2011

- 7

- 3, SeaPort ’ s per

passenger subsidy requirement s for service options #s 1 and 3 are below the statutory cap at Vernal, but service option #2 is not.

Community Comments

On August 30, 2011

, the Department sent letters to the airport managers and civic officials of

both communities , summarizing the statutory restrictions imposed on the EAS Program (as described above) , all of the proposal s submitted

, and requesting their comments on the

carrier

- selection decision

.

In response , the Department received community comments from the Vernal Regional Airport Manager and Grand County Council

. Both parties endorsed Great Lakes’ proposal. Each community made note o f the ir preferences for 19

- passenger , pressurized aircraft

. Vernal expressed some concern about Great Lakes’ reliability and dependability. H owever, they have met with the airline and expect service to improve

.

Decision on Carrier Selection

After careful consideration, including the comments of local official s, the Department has decided to reselect Great Lakes to provide EAS at both communities, in accordance with its proposal. The carrier will continue to provide 12 weekly nonstop round trips between Ve rnal and Denver (with no upline restrictions on one round trip) and between Moab and Denver (with no upline restrictions on one round trip) with twin

- engine, two

- pilot, 19

- passenger, Beech 1900D aircraft . The annual subsidy rate for Vernal will be set at $ 1, 299,194 ; and $ 1,816,486 for Moab.

At Vernal, Great Lakes’ proposal meets all of the statutory carrier

- selection criteria. Great Lakes requires less subsidy than all of the SeaPort options and the community is supportive of Great Lakes’ proposal

. The carrier has a long history of providing reliable EAS. Its code

share ag re ement with both Frontier Airlines and United Airlines at Denver provides the community online connections to more than 150 domestic and international destinations

. In
addition , we find both the service and subsidy levels to be reasonable.

In contrast, SeaPort ’s service options at Vernal do not meet the twin

- engine requirement , nor did the carrier receive support from the community

. SeaPort did not identify any code

- share
partners at Denver or Salt Lake City

, and only mentions a basic inter line baggage agreement- 4

-

with US Airways, a major carrier but with relatively few connecting opportunities at Denver or Salt Lake City

. Thus, the selection of Great Lakes at Ver nal is clear.

At Moab, we requested proposals for either two round trips a day with 15

- seat or larger

aircraft or three round tri ps a day with 8

- or 9

- seat aircraft

. Great Lakes meets all t he minimum service requirements and carrier

- selection criteria

, 2 including community support.

SeaPort has proposed a higher annual subsidy than Great Lakes and Seaport’s aircraft do not
meet the twin

- engine requirement

. SeaPort ’s 18 round trips a week to Salt Lake City option is approximately $ 250,000 more than Great Lakes’ proposal,. Great Lakes has interline baggage agreements with all major carriers and full y implemented code

- share agreements
with both Frontier Airlines and United Airlines at Denver that allow for one reservation,

ti cket and baggage check

- in that p rovide s seamless service beyond the hub. Similar to the

situation at Vernal , Great Lakes’ proposal at Moab meets all of the statutorily mandated

selection criteria

. Finally, while not decisional, half of Great Lake’s service at Moab is flown

over a Page

- Moab

- Denver routing. Selecting SeaPort could also result in our having to pay more subsidy at Page

.

Based on all of the above, the Department has decided to authorize the annual subsid ies requested by Great Lakes at both communities . In that regard, the Department fully expects that passenger traffic will continue to grow at both communities , and expects the
communities and Great Lakes to continue to work together to ensure the sustainability of the
service.

The Department shall make this selection at b oth communities contingent upon the Department’s receiving properly executed certifications from Great Lakes Aviation, Ltd , that it is in compliance with the Department’s regulations regarding drug

- free workplaces and nondiscrimination, as well as the regu lations governing lobbying activities.

Carrier Fitness 49 U.S.C. 41737(b) requires that we find an air carrier fi t, 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 information ha s come to our attention that would cause us to question the car rier'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 conclude that th e carrier remains fit to conduct the operations proposed here.

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

ACCORDINGLY,

2 The carrier

- selection criteria are not prerequisites; rather, they are used as guidelines when performing a comparative analysis in our decision making. In selecting a carrier to provide subsidized essential air service,

49 U.S.C. 41733(c) (1) directs us to consider four factors: (1) service reliability; (2) contractual and marketing arrangements with a larger carrier at the hub; (3) interline arrangements with a larger carrier at the hub; and (4) community views. In addition, the Consolidated Appropriat ions Act, 2008, Public Law 110

- 161, provides that when selecting a carrier to provide EAS, the Department may consider the relative subsidy requirements, thus codifying a factor that we have considered sinc e the inception of the program.- 5

-

1. We re select Great Lakes Aviation, Lt d. , t o provide essential air service at Vernal and Moab, Utah

, and establish the subsidy rates

, as described in Appendix C , f or the period from January 1, 201 2 , through December 31, 20 1 3 ;

2 . The Department directs 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 documentation shall be retained for seven years 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 carrier may forfeit its compensation for any claim that is not supported under the terms of this Order ;

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

a commuter air carrier and capable of providing reliable essential air service at Vernal a nd Moab, Utah ;

4 . Th e s e Docket s will remain open until further Order of the Department; and

5 . Docket Operations will serve copies of this Order on the parties listed in Appendix D

.

By:

SUSAN L. 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.gov/Appendix AAppendix B Page 1 of 2

Great Lakes Aviation, Ltd.
Provision of Essential Air Service at Moab , Utah Calculation of Compensation RequirementAppendix B Page 2 of 2

Great Lakes Aviation, Ltd.
Provision of Essential Air Service at Vernal , Utah Calculation of Compensation RequirementAppendix C Page 1 of 2

Great Lakes Aviation, Ltd. Provision of Essential Air Service at Vernal and Moab, Utah Summary of Service To Be Provided

Effective Period : January 1, 201 2 through December 31 , 20 1 3

. Scheduled Service : Vernal: Twelve nonstop round trips each week to Denver
Moab: Twelve nonstop round trips each week to Denver Intermediate stops and upline
service : No service to any intermediate point is contemplated under the terms of the carrier’s proposal; accordingly, no such service may be provided on subsidized flights without prior Department approval. Points upline from Moab and /or Vernal may be served on one daily subsidized flight each weekday and each weekend

. Aircraft type: Bee chcraft B

- 1900D (19 passenger seats). Timing of flights: Flights must be well

- timed and well

- spaced in order to ensure full compensation. Annual compensation: Vernal: $ 1, 299,194

Moab: $ 1, 816,486 This rate assumes an annual completion factor of 9 8 percent. A compensation ceiling is to be applied per calendar week such that service above that ceiling in one week cannot make up for service
shortfalls in another week. Subsidy Rate per Flight : Vernal: $ 1, 0 62 1

Moab: $ 1,4 85 2 Weekly Compensation
Cei ling: Vernal: $ 25,488 3

Moab: $ 35, 640 4

1 $ 1,299,194 divid ed by 1,223 annual departures: 4 flights x 6 days x 52 weeks x .98 (completion factor) = 1,223.

2 $1,816,486 divided by 1,223 annual departures: 4 flights x 6 days x 52 weeks x .96 (completion factor) = 1,223.

3 24 flights per week multiplied by $1,062 p er flight.

4 24 flights per week multiplied by $1,485 per flightAppendix C Page 2 of 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 flig ht; 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 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 thes e rates, 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 provi de 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 di sallowed, 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 complete ly , termi nates 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 le vels, 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 contracts are subject to, and incorporate by reference, relevant statutes and Department regulations, as they may be amended from time to time. However, any such sta tutes, 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 , 201 2

. The Department’s obligation for performance unde r 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 Sept em ber 30, 2012

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

All claims for payment must be submitted with in 60 days of the last day of se rvice provided

under this Order

.Appendix D

SERVICE LIST

Grand County, Ruth Dill on Grand County Airport, Kelly Braun Great Lakes Aviation, Chuck Howell Great Lakes Aviation, Michael Matthews SeaPort Airlines, Timothy Sieber Vernal Regional Airport, Kelly Harvey