Order: 2012-9-9

Served: September 10, 2012

 UNITED STATES OF AMERICA

 DEPARTMENT OF TRANSPORTATION

 OFFICE OF THE SECRETARY

 WASHINGTON, D.C.

Issued by the Department of Transportation

on the 10th day of September, 2012

ORDER SELECTING CARRIER AND SETTING FINAL SUBSIDY RATES

Summary

By this Order, we are reselecting Great Lakes Aviation, Ltd. (Great Lakes), to provide 

subsidized Essential Air Service (EAS) with 19-passenger Beechcraft B-1900D aircraft at 

Merced and Visalia, California, for the two-year period from October 1, 2012, through 

September 31, 2014. The annual subsidy rates will be set at $1,698,878 and $1,697,929, for 

Merced and Visalia, respectively, for a combined total of $3,396,807. See Appendix A for a 

map.

Background

By Order 2010-9-13, September 14, 2010, the Department selected Great Lakes to provide 

subsidized EAS at Merced and Visalia, California, with 19-seat Beech 1900D turboprop 

aircraft, for the two-year period beginning October 1, 2010, at a combined annual subsidy of 

$3,707,681.

In anticipation of the end of the rate term on September 30, 2012, the Department issued 

Order 2012-5-11 on May 10, 2012, soliciting proposals to provide efficient EAS, with 

subsidy support if necessary, at Merced and Visalia. The Request for Proposals also noted 

that passenger levels at both Merced and Visalia are low but increasing since the switch in 

hub from Ontario to Los Angeles.

Proposals

The Department received proposals from two carriers in response to its solicitation. Great 

Lakes submitted an inseparable package proposal (serving both communities only) with a 

Essential Air Service at

MERCED, CALIFORNIA

VISALIA, CALIFORNIA

Under 49 U.S.C. 41731 et seq.

Docket DOT-OST-1998-3521

Docket DOT-OST-2004-19916
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single service pattern. SeaPort Airlines, Inc. (SeaPort) also submitted an inseparable package 

bid with one linear service pattern and included the use of two 9-seat aircraft types (either 

Cessna Caravan or Piper Chieftains). These proposals are summarized below.

Copies of the proposals may also be accessed online through the Federal Docket 

Management System at: http://www.regulations.gov, by typing “DOT-OST-1998-3521” 

(Merced) or “DOT-OST-2004-19916” (Visalia) in the “SEARCH for: Rules, Comments, 

Adjudications or Supporting Documents:” field.

Great Lakes

Great Lakes would utilize 19-passenger Beech 1900D aircraft, as summarized in the table 

below.

Community Hub(s) Served/

Service Pattern

Daily

Round 

Trips

Annual 

Subsidy 

Requirement

Merced

one-stop to Los Angeles (LAX), Ontario (ONT), or 

Orange County (SNA); or

nonstop to Las Vegas (LAS)

2

(12 weekly) $1,698,878

Visalia nonstop to Los Angeles (LAX), Ontario (ONT) or 

Orange County (SNA)

2

(12 weekly) $1,697,929

SeaPort

As mentioned above, SeaPort submitted a proposal with two different 9-seat aircraft types. 

The carrier also states that it would offer the communities a four-year option at no increase in 

annual subsidies in the table below. The carrier proposed a linear service pattern that would 

be routed Oakland (OAK) – Merced – Visalia – Burbank (BUR) – San Diego (SAN). Each 

community would receive five round trips a day – either three to OAK and two to BUR or 

vice versa. We note, however, that statutory EAS provides service from a designated 

community to a hub airport, and the BUR-SAN routing is beyond the scope of the EAS 

program, and we can neither pay for nor require hub-to-hub service.

Community Aircraft Type

Annual 

Subsidy 

Required

Merced Cessna Caravan $1,578,113

Piper Chieftain $1,604,249

Visalia Cessna Caravan $1,857,912

Piper Chieftain $1,890,839

Community Comments

On July 6, 2012, the Department sent correspondence to the airport managers and other civic 

officials of the two communities summarizing several important statutory limitations
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imposed on the EAS Program, how they would affect the carrier-selection process at the two

communities, and requesting comments on the carrier-selection decision.1

In response, the Department received community comments from the Merced Regional 

Airport Authority and the Mayor of Visalia. All of the commenting parties endorsed Great 

Lakes. Merced’s official also made note of five areas – aircraft reliability, desire for larger 

aircraft, preference for continued service to LAS and LAX, more community involvement, 

and financial contributions in marketing the service – that either need improvement or 

focused consideration from Great Lakes. The Mayor of Visalia made note of the recent 

increase in enplanements (and the resultant decrease in the subsidy per passenger) at the 

community and its continued preference for service to LAX. The Mayor urged Great Lakes 

to consider implementing the community-orientated customer service elements (e.g., a local 

ticketing office) that had been offered by SeaPort but also affirmed the community’s 

preference for nonstop service to a large hub airport utilizing larger, twin-engine aircraft.

Decision On Carrier Selection

After careful consideration, including the comments of local officials, the Department has

decided to reselect Great Lakes to provide EAS at both communities, in accordance with its 

proposal summarized above, for the two-year period from October 1, 2012, through 

September 30, 2014. The annual subsidy rate for Merced will be set at $1,698,878 and 

$1,697,929 at Visalia, or a combined total of $3,396,807, down from the current combined 

rate of $3,707,681.

In regards to SeaPort’s service options utilizing Cessna Caravans, we note that they do not 

meet the minimum engine and pilot requirements and that the communities did not waive

their rights to service with twin-engine, two-pilot aircraft. Therefore, the service options 

using single-engine and –pilot aircraft will not be discussed as competitive alternatives to the 

proposal submitted by Great Lakes.

At Merced, the decision boils down to selecting either Great Lakes, which meets all the 

minimum service requirements and carrier-selection criteria,2 including community support, 

or SeaPort, which has proposed a slightly lower annual subsidy than Great Lakes. 

Specifically, SeaPort’s proposal at Merced is approximately $95,000 less than Great Lakes’ 

proposal. Great Lakes has interline baggage agreements with all major carriers and fully 

implemented code-share agreements with both Frontier Airlines and United Airlines at LAX 

that allow for reservation, ticket and baggage check-in that provides seamless service beyond 

 1 First, the two communities are guaranteed to receive air service with twin-engine, two-pilot aircraft. Second, 

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, Merced and Visalia are clearly less than 210 highway miles from a large or medium hub, and, 

therefore, are subject to the $200 subsidy-per-passenger ceiling.

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 Appropriations 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 since the inception of the program.
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the hub. In contrast, SeaPort has an interline ticking agreement with US Airways and makes 

mention of an agreement with a major airline with a large presence on the West coast that is 

expected to become effective in mid-August. Similar to the situation at Visalia discussed 

below, Great Lakes’ proposal at Merced meets all of the statutorily mandated selection 

criteria. Lastly, we also note that Great Lakes will provide the community nonstop service to 

a large hub airport. SeaPort’s proposal offers nonstop service to smaller hub airports.

At Visalia, the carrier-selection decision is straightforward. Great Lakes’ proposal meets all

of the statutory carrier-selection criteria and requires less annual subsidy than SeaPort’s twinengine, two-pilot aircraft option. The carrier has a long history of providing reliable EAS. 

Its code-share agreements at LAX with United Airlines and Frontier Airlines will provide the 

community online connections to more than 150 domestic and international destinations. 

The community supports the re-selection of Great Lakes. Moreover, we find both the service 

and subsidy levels to be reasonable.

The Department fully expects that passenger traffic will continue to grow at the two

communities as service patterns continue to remain constant, and expects the communities 

and Great Lakes to continue to work together to towards reducing the subsidy per passenger 

to ensure the sustainability of the continuation of the existing service levels beyond this 

prospective two-year contract. We encourage the communities and Great Lakes to work 

together to maximize use of the service awarded under this Order to avoid exceeding the 

$200 per passenger cap, which could result in the termination of eligibility for subsidy under 

the EAS program.

The Department shall make this selection at the two communities 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) and 41738 require 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 information 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 conclude that the carrier remains fit to 

conduct the operations proposed here.

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

ACCORDINGLY,

1. We reselect Great Lakes Aviation, Ltd., to provide Essential Air Service at Merced and 

Visalia, California, and establish the subsidy rates, as described in Appendix C, for the period 

from October 1, 2012, through September 30, 2014;
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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 

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 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 Merced and 

Visalia, California;

4. These Dockets will remain open until further order of the Department; and

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 A
Appendix B

Page 1 of 2

Great Lakes Aviation, Ltd.

Provision of Essential Air Service at Merced, California

Calculation of Compensation Requirement
Appendix B

Page 2 of 2

Great Lakes Aviation, Ltd.

Provision of Essential Air Service at Visalia, California

Calculation of Compensation Requirement
Appendix C

Page 1 of 2

Great Lakes Aviation, Ltd.

Provision of Essential Air Service at Merced and Visalia, California

Summary of Service To Be Provided

Effective Period: October 1, 2012 through September 30, 2014.

Scheduled Service: Merced: Twelve one-stop round trips each week to Los Angeles 

(LAX), Ontario (ONT), Orange County (SNA) or nonstop round 

trips each week to Las Vegas.

Visalia: Twelve nonstop round trips each week to Los Angeles, 

Ontario (ONT) or Orange County (SNA).

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.

Aircraft type: Beechcraft B-1900D (19 passenger seats).

Timing of flights: Flights must be well-timed and well-spaced in order to ensure full 

compensation.

Annual compensation: Merced: $1,698,878

Visalia: $1,697,929

This rate assumes an annual completion factor of 98 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: Merced: $1,3891

Visalia: $1,3882

Weekly Compensation 

Ceiling:

Merced: $33,3363

Visalia: $33,3124

 1 $1,698,878 divided by 1,223 annual departures: 4 flights x 6 days x 52 weeks x .98 (completion factor) = 

1,223.

2 $1,697,929 divided by 1,223 annual departures: 4 flights x 6 days x 52 weeks x .98 (completion factor) = 1,223.

3 24 flights per week multiplied by $1,389 per flight.

4 24 flights per week multiplied by $1,388 per flight.
Appendix 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 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 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 these 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 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 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 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 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 Department’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.