## Before the United States Department of Transportation 

# Washington, DC July 11, 2014

Essential Air Service at MERCED, CALIFORNI A Docket OST-1997-3521 V ISALIA, CALIFORNI A Docket OST-2004-19916 under 49 U.S.C. 41731 et.seq.

This document contains Great Lakes Aviation, Ltd.'s response to Order Requesting Proposals 2014-5-9. Great Lakes Aviation, Ltd. is pleased to submit this proposal, as an inseparable package, for Merced and Visalia, California. Our proposals contemplate conveniently timed connecting services to our Los Angeles (LAX) hub, whereby passengers may utilize our code-share agreements with United Airlines. Local service will be marketed and priced utilizing the Great Lakes (ZK) brand and reservations system. Additionally, Great Lakes maintains interline ticketing and baggage agreements with the majority of the other carriers serving LAX, including interline e-ticketing agreements with American Airlines, Delta Airlines, Frontier Airlines and United Airlines . All of which will offer passengers traveling to and from these communities supplemental access to the domestic and international air transportation system. The proposed service is being offered utilizing pressurized, twin-engine Beech 1900D aircraft flown by two pilots. New FAA pilot qualification rules have created an industry-wide pilot shortage which has had an acute impact on Great Lakes. These new rules mandated that first officers obtain an Airline Transport Pilot certification (“ATP”) prior to being qualified to perform crewmember duties in scheduled airline passenger service under FAR Part 121 regulatory requirements. A key factor to enable a pilot to receive an ATP certificate is the accumulation of 1,500 flight hours. On March 18th of this year, Great Lakes received from the FAA new operations specifications allowing us to hire pilots under it's FAR Part 121 Certificate utilizing FAR Part 135 regulatory hiring requirements. This allows our new hire pilots to operate the Beech 1900D aircraft in a nine seat configuration and will enable Great Lakes to restore pilot staffing levels while maintaining FAR Part 121 hiring, training and maintenance standards. Great Lakes' "base case" proposals assume that we will be limited to nine available seats for our Beechcraft 1900D aircraft.Questions and comments may be referred to:

Michael O. Matthews Chief Financial Officer Great Lakes Aviation, Ltd. 1022 Airport Parkway Cheyenne, WY 82001 (307) 432-7000 Great Lakes recognizes the temporary challenges many EAS communities are experiencing in complying with the 10 enplanement per day criteria as prescribed by the FAA Modernization and Reform Act of 2012. In this regard, we share the views expressed by the leadership of the Merced community and it is Great Lakes' belief that the regulatory relief for small community air service must be granted in the near future. Excessive subsidy requirements will force communities to loose EAS service eligibility as available seats are being dramatically reduced due to arbitrary limitations on aircraft seating configurations. Great Lakes’ stands ready to participate in creative solutions to assist small communities in their efforts to remain in the National Air Transportation System. In addition to the "base case" proposal, Great Lakes is submitting an indicative proposal for regional jet service for both Merced and Visialia to our Denver hub. We are prepared to commit, with the full marketing support of the communities and the regulatory support of federal agencies, to upgrading the aircraft to 37 seat or larger regional jets operating two roundtrips per weekday and two roundtrips over the weekend period. Although this service may not be immediately available, it is Great Lakes' intent to pursue this level of service within the term of the new two year period.Table of Contents:SubsidyPassengers Average Subsidy CostBid Service Point(s) Hub Served Round Trips Equipment RequirementForecast Fare per Passenger1 Merced, California Los Angeles 2 1900D - 9 seat$2,779,1167,000$92.27 $397.022 Visalia, California Los Angeles 2 1900D - 9 seat$2,145,9177,500$89.12 $286.12$4,925,03314,500$339.661 Merced, California Denver 2 ERJ$3,497,32327,500$194.72 $127.182 Visalia, California Denver 2 ERJ$3,497,75027,500$194.97 $127.19$6,995,07355,000$127.18

# Great Lakes Aviation, Ltd. Annual Compensation Requirements for Essential Air Service at 

# Merced, California to Los Angeles (LAX) Two Round Trips - B1900 - 9 seat - current schedules should be used as sample pattern of servic e (at 98 percent completion)

Departures: 1,227 Block Hours: 1,534 Revenue Passenger Miles: 1,820,000 Available Seat Miles: 2,871,180
Operating Revenues: Passenger: MCE-LAX 7,000 psgrs at $92.27 $645,890

Other: (at 0.62% of passenger revenue) $4,005 Total Operating Revenues: $649,895
Operating Expenses: Direct: Aircraft and Hull Insurance $365,710 Fuel and Oil $911,917 Flying Operations $302,565 Maintenance $483,092 Total Direct Expenses: $2,063,284 Total Indirect Expenses: $1,202,440 Total Operating Expenses: $3,265,724 Operating Loss ($2,615,829) Profit Element (5.0% of Total Operating Expenses) $163,286 Annual Compensation Requirement: $2,779,116 All Merced - Los Angeles - Merced service is Non-Sto p This Proposal is submitted with no upline scheduling restrctions.

# Great Lakes Aviation, Ltd. Annual Compensation Requirements for Essential Air Service at 

# Visalia, California to Los Angeles (LAX) Two Round Trips - B1900 - 9 seat - current schedules should be used as sample pattern of service (at 98 percent completion)

Departures: 1,227 Block Hours: 1,227 Revenue Passenger Miles: 1,305,000 Available Seat Miles: 1,921,482
Operating Revenues: Passenger: VIS-LAX 7,500 psgrs at $89.12 $668,400

Other: (at 0.62% of passenger revenue) $4,144 Total Operating Revenues: $672,544
Operating Expenses: Direct: Aircraft and Hull Insurance $365,710 Fuel and Oil $719,515 Flying Operations $242,014 Maintenance $430,051 Total Direct Expenses: $1,757,290 Total Indirect Expenses: $926,959 Total Operating Expenses: $2,684,249 Operating Loss ($2,011,705) Profit Element (5.0% of Total Operating Expenses) $134,212 Annual Compensation Requirement: $2,145,917 All Visalia - Los Angeles - Visalia service is Non-Stop This Proposal is submitted with no upline scheduling restrctions.

# Great Lakes Aviation, Ltd. Annual Compensation Requirements for Essential Air Service at 

## Merced, California to Denver (DEN) Two Round Trips - ERJ (at 98 percent completion)

Departures: 1,227 Block Hours: 2,760 Revenue Passenger Miles: 24,062,500 Available Seat Miles: 39,724,125
Operating Revenues: Passenger: MCE-DEN 27,500 psgrs at $194.72 $5,354,800

Other: (at 0.62% of passenger revenue) $33,200 Total Operating Revenues: $5,388,000
Operating Expenses: Direct: Aircraft and Hull Insurance $370,772 Fuel and Oil $2,574,255 Flying Operations $1,045,819 Maintenance $1,478,659 Total Direct Expenses: $5,469,505 Total Indirect Expenses: $2,992,707 Total Operating Expenses: $8,462,212 Operating Loss ($3,074,212) Profit Element (5.0% of Total Operating Expenses) $423,111 Annual Compensation Requirement: $3,497,323
All Merced - Denver - Merced service is Non-Sto p This Proposal is submitted with no upline scheduling restrction s

# Great Lakes Aviation, Ltd. Annual Compensation Requirements for Essential Air Service at 

## Visalia, California to Denver (DEN) Two Round Trips - ERJ (at 98 percent completion)

Departures: 1,227 Block Hours: 2,760 Revenue Passenger Miles: 23,045,000 Available Seat Miles: 38,044,362
Operating Revenues: Passenger: VIS-DEN 27,500 psgrs at $194.97 $5,361,675

Other: (at 0.62% of passenger revenue) $33,242 Total Operating Revenues: $5,394,917
Operating Expenses: Direct: Aircraft and Hull Insurance $370,772 Fuel and Oil $2,574,255 Flying Operations $1,045,819 Maintenance $1,478,659 Total Direct Expenses: $5,469,505 Total Indirect Expenses: $2,999,702 Total Operating Expenses: $8,469,207 Operating Loss ($3,074,290) Profit Element (5.0% of Total Operating Expenses) $423,460 Annual Compensation Requirement: $3,497,750
All Visalia - Denver - Visalia service is Non-Sto p This Proposal is submitted with no upline scheduling restrctions