Order 20 1 1

- 4

- 19

Served: April 22 , 20 1 1



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 22nd day of April , 20 1 1

ORDER RE SELECTING CARRIER S AND SETTING FINAL SUBSIDY RATES

Summary By this order, the Department is reselecting: (a) Pacific Wings L.L.C., d/b/a New Mexico Airlines to provide subsidized essential air service (EAS), with 9

- seat Cessna Grand Caravan (C

- 208B) turboprop aircraft at Carlsbad, New Mexico, for the two

- year period beginning June 1, 2011, for an annual subsidy rate of $1,350,253; and (b) Great Lakes Aviation, Ltd. (Great Lakes), to provide subs idized EAS with 19

- passenger Beechcraft B

1900D aircraft at Clovis and Silver City/Hurley/Deming, New Mexico (Silver City), for the period from May 1, 2011 to May 31, 2013, at a combined annual subsidy rate of $3,186,249. 1 (See Appendix A for a map.)

Bac kground By Order 2009

- 4

- 18, April 27, 2009, the Department selected New Mexico Airlines to provide subsidized EAS at Carlsbad, through May 31, 2011. Under that order, New Mexico Airlines provides two nonstop round trips between Carlsbad and Albuquerque ea ch weekday and each weekend, utilizing single

- engine, 9

- passenger Cessna Grand Caravan (C

- 208B) turboprop aircraft for an annual subsidy rate of $ 1,046,284

.

Similarly, by Order 2009

- 3

- 3, March 6, 2009, the Dep artment selected Great Lakes to provide subsidized EAS at Clovis and Silver City, through April 30, 2011. Under that order, Great Lakes provides each community with 12 nonstop round trips per week to

1 Such subsidy is calculated and distributed on a fiscal year basis, subject to the availability of funds. Essential Air Service at

CARLSBAD, NEW MEXICO
CLOVIS

, NEW MEXICO SILVER CITY/HURLEY/DEMING, NEW MEXICO

Under 49 U.S.C. 41731 et seq

. Docket DOT

- OST

- 2002

- 12802
Docket DOT

- OST

- 1996

- 1902
Docket DOT

- OST

- 1996

- 190 3- 2

-

Albuquerque at an annual subsidy of $1,517,277 for Clovis and $ 1,442,174 at Silver City

. All service is provided with 19

- seat Beech 1900 aircraft.

In anticipation of the end of the rate term s
, t he Department issued Order s 20 10

- 11

- 9 (Clovis and Silver City) and 2010

- 12

- 10 (Carlsbad) , soliciting proposals to provide efficient EAS, with subsidy support if necessary, at the three communities.

Proposals On January 7, 2011, New Mexico Airlines provided notice to the Department that it would launch three daily nonstop round trips between Albuquerque and Clovis, on a subsidy

- free basis, utilizing 9

- seat Cessna 208B aircraft, starting May 1, 2011. However, instead of terminating the carrier

- selection case at Clovis due to a subsidy

- free proposal, we determined that the carrier’s subsidy

- fre e proposal did not meet the twin

- engine, two

- pilot requirement contained in 49 U.S.C § 41732 (b)(5) and therefore continued to process a normal case at Clovis. In response to the requests for proposals, Great Lakes, New Mexico Airlines, Gulfstream Interna tional Airlines, Inc. (Gulfstream), and Alaska Juneau Aeronautics, Inc. d/b/a SeaPort Airlines (SeaPort) submitted proposals. However, Gulfstream withdrew its proposal on February 2, 2011, a day after having been selected to begin EAS at seven communities in Montana. The proposals under consideration 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 the corresponding community docket numbers listed on the first page.

New Mexico Airlines

New Mexico Airlines submitted “stand

- alone” proposals at Carlsbad and Silver City for service to Albuquerque, utilizing 9

- seat Cessna 208B aircr aft. At Carlsbad, the carrier would provide 12 weekly nonstop round trips for an annual subsidy requirement of $1,350,253. At Silver City, the carrier would provide 18 weekly nonstop round trips for $1,332,184.

SeaPort SeaPort proposed to provide “stand

- alone” service at all three communities utilizing 9

- seat
Pilatus PC

- 12 aircraft. The carrier would operate from non

- sterile gates at Silver City, Carlsbad and Albuquerque.

At Carlsbad, the carrier proposed to provide 12 nonstop round trips per week to

A lbuquerque for a first

- year subsidy of $1,156,001 and a second

- year rate of $1,152,468. At Clovis, SeaPort would provide 18 nonstop round trips a week to Albuquerque for an annual subsidy of $1,995,500 for the first year and $1,985,880 for the second. At Silver City, the carrier would provide 21 round trips a week to Albuquerque for $1,690,515 in annual subsidy for the first year and $1,685,707 for the second. The carrier also proposed a

14

- round

- trip

- a

- week option at each community with prorate d subsidy adjustment s. Please note that the annual subsidy requirements above are taken directly from the exhibits the carrier submitted, but differ slightly from the number of weekly round trips discussed in the text of SeaPort’s proposal.

SeaPort’s proposals al so include mention of an interline agreement with US Airways; however, the details and applicability of the agreement at Albuquerque are not discussed.- 3

-

Great Lakes Great Lakes, the incumbent carrier at Clovis and Silver City, submitted a proposal with

stan d

- alone options for EAS at each community, utilizing 19

- seat Beech 1900 aircraft. At Clovis, Great Lakes proposed to provide 12 nonstop round trips per week between the community and Albuquerque or Denver, one

- stop over Santa Fe or Pueblo, at annual

subsi dy of $1,592,157. At Silver City, the carrier proposes to provide 12 nonstop round trips per week between the community and Albuquerque, Phoenix or Denver, one

- stop over Santa Fe, or a combination of Phoenix and Denver service (via Santa Fe) at an annual subsidy of $1,594,092.

Community Comments By e

- mails dated January 11 and 20, 2011, the Department solicited the views of the civic of officials at the respective communities and the New Mexico Department of Transportation (NM DOT) , as to which carriers’ proposals they would prefer. At Clovis and Silver City, we noted that the aircraft types proposed by New Mexico Airlines and SeaPort do not meet

the twin

- engine, two pilot requirement contained in 49 U.S.C § 41732 (b)(5). We received

comments from the co mmunities and the NM DOT as summarized below.

I n Carlsbad , the mayor and airport manager endorse the reselection of New Mexico

Airlines. The NM DOT notes that neither SeaPort’s nor New Mexico Airlines ’ proposed aircraft types meet t he tw in

- engine requirement, and has concern that New Mexico Airlines ’ aircraft is not pressurized

.

Clovis and Silver City support the reselection of Great Lakes. The Mayor of Clovis stated that the City Commission unanimously voted to recommend Great Lakes. The Grant County 2 Manager, states “the County Commission would like to keep the service to Albuquerque with Great Lakes.” The Mayor of Silver City also sent a comment letter supporting the retention of Great Lakes. The NM DOT states “the Beechcraft 1900D proposed by Great Lakes meets all current EAS requirements” and “presents the safest and most comfortable option for the traveling public.”

Decision After careful consideration of this matter, including the comments of local official s, the Department has decided to re select New Mexico Airlines to provide EAS at Carlsbad and Great Lakes at Clovis and Silver City. New Mexico Airlines would continue to provide 12 weekly round trips between Carlsbad and Albuquerque for an annual subsidy rate of $ 1,350,253. Great Lakes will provide 12 nonstop r ound trips per week between Clovis and Albuquerque or Denver, one

- stop over Santa Fe or Pueblo at annual subsidy of $1,592,157. At Silver City, Great Lakes will provide 12 nonstop round trips per week between the

commu nity and Albuquerque, Phoenix or Denver, one

- stop over Santa Fe or a combination of Phoenix and Denver service (via Santa Fe) at annual subsidy of $1,594,092.

2 Silver City and Hurley are located in Grant County. Deming is located in Luna County. Grant County owns the airport where EAS is provided.- 4

-

At Carlsbad, t he u se of 9

- seat aircraft may provide a better balance between the demand for air service with the supply of aircraft seats and ensure the effective utilization of aircraft

. 3

I n contrasting New Mexico Airlines’ proposal with SeaPort’s, we find that New Mexico

Airlines ’ is superior. New Mexico Airlines has established interlin e ticketing and baggage agreements with numerous partner airlines worldwide and can be found on all major global distribution systems and internet travel portals. New Mexico Airlines also has electronic interline ticketing with major domestic and internat ional airlines worldwide, providing customers the ability to book travel between the EAS community and hub and beyond , to other points in the national air tr ansportation system. While SeaP ort currently provides EAS at other communities, only its service b etween the EAS community and hub can be found on major global distribution systems and internet travel portals. Customers interested in travel beyond the hub, which is typically the vast majority of EAS passengers, are required to create a separate itiner ary, buy a separate ticket, and re

- check bags at the hub. Thus, in terms of seamless connectivity to the national air transportation system, New Mexico Airlines has a decided advantage. New Mexico Airlines has been providing EAS at Carlsbad for many year s, and the community supports its reselection. We find that these selection criteria outweigh the additional subsidy costs in this case. In supporting New Mexico Airlines, Carlsbad has effectively waived their right to the minimum aircraft requirements f or at least the two

- year contract.

Th e carrier

- selection decision at Clovis and Silver City is very straightforward

. The communities are guaranteed service wit h at least 15

- seat aircraft, Great Lakes is well

established and has been providing EAS at the respective communities for many years, and the communities support the reselection of the carrier . Further , neither New Mexico

Airlines’ n or SeaPort’s proposed aircraft types meet the twin

- engine, two

- pilot requirement

contained in 49 U.S.C § 41732 (b)(5) . W e also find that both Great Lakes’ service and subsidy levels are reasonable. Subject to community approval, service from Clovis may operate to Denver and service from Silver City may operate to Phoenix or Denver.

We shall make these selection s at the communities contingent upon the Department’s receiving properly executed certifications from New Mexico Airlines and Great Lakes that they are in compliance with the Department’s regulations regarding drug

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

Finally, the Department will synchronize the three communities’ expiration dates by establishing Great Lakes’ contract at Clovis and Silver Ci ty for 25 months, to expire May 31, 2013, the same day as New Mexico Airlines’ contract is set to expire at Carlsbad.

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. New Mexico Airlines and Great Lakes are subject to the Department’s continuing fitness requirements, and no information has come to our attention that would cause us to question the carriers’

fitness t o provide EAS in these markets at this time. We have contacted the Federal

3 T he incumbent EAS carrier, New Mexico Airlines, has been utilizing 9

- seat Cessna 208B aircraft for several years. As a result, t he community has received only single

- pilot, single

- engine service for 60 or more consecutive days, and, therefore, the community is not guaranteed EAS with two

- engine, two

- pilot aircraft.- 5

-

Aviation Administration, and it has raised no concerns that would negatively affect our fitness finding in these markets . We therefore conclude that the carriers are reliable and

remain fit to conduc t the operations proposed here.

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

ACCORDINGLY,

1. We reselect Pacific Wings L.L.C., d/b/a New Mexico Airlines, to provide essential air service at Carlsbad, New Mexico, and establishes the subsidy rates

, as descr ibed in Appendix C, for the period from June 1, 2011, through May 31, 2013;

2. We reselect Great Lakes Aviation, Ltd. to provide essential air service at Clovis and Silver City/Hurley/Deming, New Mexico, and establishes the subsidy rates

, as described in Appendix C, for the period from May 1, 2011, through May 31, 2013;

3. The Department directs Pacific Wings L.L.C., d/b/a New Mexico Airlines, and Great Lakes Aviation, Ltd., to retain all books, records, and other source and summary documentation to sup port 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 indicate s that the records may be destroyed, whichever comes first. Copies of flight logs for aircraft sold or disposed of must be retained. The carriers may forfeit its compensation for any claim that is not supported under the terms of this order;

4. We find that Pacific Wings L.L.C., d/b/a New Mexico Airlines, continues to be fit, willing and able to operate as a commuter air carrier and capable of providing reliable essential air service at Carlsbad, New Mexico;

5. We find that Pacific Great Lakes Aviatio n, Ltd. continues to be fit, willing and able to operate as a commuter air carrier and capable of providing reliable essential air service at Silver City/Hurley/Deming, New Mexico, New Mexico; and

6

. Th ese Docket s will remain open until furt her order of the Department.

By:

SUSAN L. KURLAND Assistant Secretary for

Aviation and International Affairs

(SEAL)

An electronic version of this document is available i n the Federal Docket Management System (FDMS) at http://www.regulations.govAppendix A



# AREA MAP

ABQ : Albuquerque International Sunport Airport Codes

CNM : Clovis Municipal Airport

CVN : Cavern City Airport (Carlsbad)

DEN : Denver International Airport

PHX : Phoenix Sky Harbor International Airport

PUB : Pueblo Memorial Airport

SAF: Santa Fe Municipal Airport

SVC : Grant County Airport ( Silver City)

This map is provided by Sabre ® AirVision TM Profit Essentials and is being used with express permission of the copyright ho lder,

Sabre Airline Solutions®.Appendix B Page 1 of 3

Pacific Wings L.L.C., d/b/a New Mexico Airlines Provision of Essential Air Service at Carlsbad, New Mexico Calculation of Compensation RequirementAppendix B Page 2 of 3

Great Lakes Aviation Ltd. Provision of Essential Air Service at Clovis, New Mexico Calculation of Compensation RequirementAppendix B Page 3 of 3

Great Lakes Aviation Ltd.
Provision of Essential Air Service at Silver City/Hurley/Deming, New Mexico Calculation of Compensation RequirementAppendix C Page 1 of 4

Pacific Wings L.L.C., d/b/a New Mexico Airlines
Provision of Essential Air Service at Carlsbad, New Mexico Summary of Service To Be Provided

Effective Period June 1, 20 11 through May 31, 201 3

. : Scheduled Service 12 round trips a week to Albuquerque. : Aircraft type: Cessna 208B (9

- seats). Intermediate stops and upline service : No service to any intermediate or upline points are contemplated under the terms of the carrier’s proposal; accordingly, no such service may be provided on subsidized flights without prior Department approval. Timing of flights: Flights must be well

- timed and well

- spaced in order to ensure full compensation. Annual compensation: $ 1,350,253 This rate assumes an annual completion factor of 9 5 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 : $ 1,138 1

Weekly Compensation Ceiling: $ 27,312 2

1 Annual subsidy of $1,350,253 divided by 1,186 annual departures: 2 arrivals and 2 departures each week day and each weekend (24 flights/week) x 52 weeks x .95 (completion factor) = 1,186.

2 24 flights per week multiplied by $1,138 per flight.Appendix C Page 2 of 4

Great Lakes Aviation, Ltd.
Provision of Essential Air Service at Clovis, New Mexico Summary of Service To Be Provided

Effective Period May 1, 20 11 through May 31, 201 3

. : Scheduled Service 12 round trips a week to Albuquerque. : Aircraft type: Beechcraft B

- 1900D (19 passenger seats)

. Intermediate stops and upline service : No service to any intermediate or upline points are contemplated under the terms of the carrier’s proposal; accordingly, no such service may be provided on subsidized flights without prior Department approval. Timing of flights: Flights must be well

- timed and well

- spaced in order to ensure full compensation. Annual compensation: $1, 592,157 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 : $ 1,298 1

Weekly Compensation Ceiling: $ 31,152 2

1 Annual subsidy of $1,592,157 divided by 1,227 annual departures: 2 arrivals and 2 departures each week day and each weekend (24 flights/we ek) x 52 weeks x .98 (completion factor) = 1,227 + 4 additional flights.

2 24 flights per week multiplied by $1,298 per flight.Appendi x C Page 3 of 4

Great Lakes Aviation, Ltd.
Provision of Essential Air Service at Silver City/Hurley/Deming, New Mexico Summary of Service To Be Provided

Effective Period May 1, 20 11 through May 31, 201 3

. : Scheduled Service 12 round trips a week to Albuquerque. : Aircraft type: Beechcraft B

- 1900D (19 passenger seats)

. Intermediate stops and upline service : No service to any intermediate or upline points are contemplated under the terms of the carrier’s proposal; accordingly, no such service may be provided on subsidized flights without prior Department approval. Timing of flights: Flights must be well

- timed and well

- spaced in order to ensure full compensation. Annual compensation: $1, 594,092 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 : $ 1,299 1

Weekly Compensation Ceiling: $ 31,176 2

1 Annual subsidy of $1,594,092 divided by 1,227 annual departures: 2 arrivals and 2 departures each week day and each weekend ( 24 flights/week) x 52 weeks x .98 (completion factor) = 1,227 + 4 additional flights.

2 24 flights per week multiplied by $1,299 per flight.Appendix C Page 4 of 4

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 s ubsidy 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 t he 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 Offi ce 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 carri er 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 complete ly , 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 ther eto shall not operate to controvert the foregoing paragraph.

Funds are not currently available for performance under this order beyond April 15 , 201 1 . The Department’s obligation for performance unde r this order beyond April 15 , 2011 , is subject to

the a vailability 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 March 3, 2011 , until funds are made available to the Departme nt for performance. If funds are not made available for performance beyond April 15 , 2011 , 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 se rvice provided

under thi s order.