Order 2010-9-13

Served: September 14, 2010

 UNITED STATES OF AMERICA

 DEPARTMENT OF TRANSPORTATION

 OFFICE OF THE SECRETARY

 WASHINGTON, D.C.

Issued by the Department of Transportation

on the 9th day of September, 2010

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, and Ely, Nevada, for the two-year period from 

October 1, 2010, through September 31, 2012. The annual subsidy rates will be set at 

$1,961,174, $1,746, 507, and $1,752,067 for Merced, Visalia and Ely, respectively, for a

combined total of $5,459,748. See Appendix A for a map.

Background

By Order 2008-6-26, June 23, 2008, the Department selected Great Lakes to provide 

subsidized EAS at Merced and Visalia, California, and Ely, Nevada, for the two-year period 

beginning October 1, 2008, at a combined annual subsidy of $4,900,401 with 19-seat Beech 

1900D turboprop aircraft.

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

Order 2010-5-4 on May 4, 2010, soliciting proposals to provide efficient EAS, with subsidy 

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

passenger levels at both Merced and Visalia are very low.

Proposals

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

Lakes submitted a proposal that is similar to the service it currently provides. McCall 

Essential Air Service at

MERCED, CALIFORNIA 

VISALIA, CALIFORNIA 

ELY, NEVADA 

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

Docket DOT-OST-1998-3521

Docket DOT-OST-2004-19916

Docket DOT-OST-1995-361
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Aviation Inc.’s (McCall) proposal contained three different service options for service at Ely

only. 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 the docket numbers listed on the first page.

Great Lakes

Great Lakes’ proposal for each community, as summarized in the table below, could be 

selected on a stand-alone basis (i.e., it is not a three-city all or nothing proposal). The carrier 

would utilize 19-passenger Beech 1900D aircraft and its code-share agreements where 

applicable.

Community Hub(s) Served/

Service Pattern

Daily

Round 

Trips

Annual 

Subsidy 

Requirement

Merced

Nonstop to Las Vegas or one-stop to Denver;

No upline restrictions on one round trip;

Upline service routing would be one-stop to Ontario, 

Los Angeles or Orange County

2

(14 weekly) $1,961,174

Visalia

Nonstop to Ontario, Los Angeles or Orange County;

No upline restrictions on one round trip;

Upline service routing would be one-stop to Denver 

or Las Vegas

2

(14 weekly) $1,746,507

Ely

No upline restrictions;

Service routing would be nonstop to Las Vegas or 

one-stop to Denver

1

(6 weekly) $1,752,067

Total (all three communities) $5,459,748

McCall

As summarized below, McCall submitted a proposal with three different options, all for 

nonstop service between Ely and Salt Lake City, utilizing 8-seat aircraft.

Service 

Option 

#

Weekly 

Round 

trips

Aircraft Type

Annual 

Subsidy 

Required

1 7 Piper PA31-350

Navajo Chieftain $1,081,360

2 7 Beech-200 $1,756,822

3 12 Piper PA31-350 

Navajo Chieftain $1,602,627

Community Comments

On June 4, 2010, the Department sent correspondence to the civic officials of the three 

communities summarizing several important statutory limitations imposed on the EAS 

Program,1 how they would affect the carrier-selection process at the three communities,2

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

the communities are guaranteed service with at least 15-passenger aircraft by virtue of the fact that they

and 

requesting comments on the carrier-selection decision.
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In response, the Department received community comments from: Merced Regional Airport 

Authority, the Mayor of Visalia, and White Pine County Board of County Commissioners 

(representing Ely). 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 Vegas-McCarran International Airport, 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 his community’s preference for service to Los Angeles International Airport. Ely’s 

official affirmed the community’s preference for the aircraft utilized by Great Lakes (when 

contrasted to McCall’s), and requests that the Department consider returning to a two round 

trip a day service pattern. The Vice Chairman of the Board of County Commissioners argues 

that additional service would result in substantially more enplanements.

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 the three communities, in accordance with 

its proposal summarized above, for the two-year period from October 1, 2010, through 

September 30, 2012. The annual subsidy rate for Merced will be set at $1,961,174, 

$1,746,507 at Visalia, and $1,752,067 for Ely, or a combined total of $5,459,748, up from 

the current rate of $4,900,401.

At Merced and Visalia, the carrier-selection decision is straightforward. Great Lakes was the 

only carrier to submit a proposal and the communities support the carrier. Great Lakes is a 

well-established carrier and we find both the service and subsidy levels to be reasonable.

At Ely, Great Lakes’ proposal meets all of the statutory carrier-selection criteria. The carrier 

has a long history of providing reliable EAS. Its code-share agreements at Denver 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.

In contrast, McCall’s service options at Ely did not receive any support from the community.

McCall also indicated that it has not finalized agreements with any code-share partners at 

Salt Lake City, nor does it have even the basic interline baggage agreements in place. Thus, 

the selection of Great Lakes at Ely is clear.

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

communities, 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. In this regard, we note that Great Lakes recently switched the hub 

for Merced’s service from Ontario to Las Vegas, advanced bookings increased significantly 

 

generated more than 11 enplanements per day in any calendar year from 1976-1986. Third, 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.

2 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. In contrast, Ely is not within 210 highway 

miles of a large or medium hub, and, therefore, is exempt from this limit.
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and actual enplanements more than doubled. We would expect similar results at Visalia if 

service was provided to a major connecting hub airport.

Although we are selecting Great Lakes to serve Merced and Visalia for a two-year period, we 

remain concerned that both communities are currently over the $200 cap. We are confident 

that with a switch of service at Visalia to a major connecting hub airport, Great Lakes will 

increase passenger levels substantially. However, if we find that the subsidy level still 

exceeds the statutory $200 per passenger cap, we will take appropriate action. 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.

We appreciate McCall’s interest in participating in the EAS program and encourage the 

carrier to continue its efforts towards finalizing its full interline arrangements and look 

forward to receiving proposals from the carrier in the near future.

The Department shall make this selection at the three 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) 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. 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 1.56a (f).

ACCORDINGLY,

1. We reselect Great Lakes Aviation, Ltd., to provide essential air service at Merced and 

Visalia, California, and Ely, Nevada, and establish the subsidy rates, as described in 

Appendix C, for the period from October 1, 2010, through September 30, 2012;

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;
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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, and Ely, Nevada;

4. These Dockets 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 A
Appendix B

Page 1 of 3

Great Lakes Aviation, Ltd.

Provision of Essential Air Service at Merced, California

Calculation of Compensation Requirement
Appendix B

Page 2 of 3

Great Lakes Aviation, Ltd.

Provision of Essential Air Service at Visalia, California

Calculation of Compensation Requirement
Appendix B

Page 3 of 3

Great Lakes Aviation, Ltd.

Provision of Essential Air Service at Visalia, California

Calculation of Compensation Requirement

One Round Trip – B1900

98.5% completion factor
Appendix C

Page 1 of 2

Great Lakes Aviation, Ltd.

Provision of Essential Air Service at Merced and Visalia, California and Ely, Nevada

Summary of Service To Be Provided

Effective Period: October 1, 2010 through September 30, 2012.

Scheduled Service: Merced: Fourteen nonstop round trips each week to Las VegasMcCarran International Airport or one-stop round trips each week 

to Denver.

Visalia: Fourteen nonstop round trips each week to Ontario, Los 

Angeles, or Orange County.

Ely:

Intermediate stops and upline 

service: 

 Six weekly nonstop round trips each week to Las Vegas or 

one-stop round trips each week to Denver.

Merced: points upline from Merced (via Ontario, Los Angeles or 

Orange County) may be served on one daily subsidized round trip.

Visalia: points upline from Visalia (via Denver or Las Vegas) 

may be served on one daily subsidized round trip.

Ely: No upline restrictions.

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: $1,961,174

Visalia: $1,746,507

Ely: $1,752,067

This rate assumes an annual completion factor of 98.5 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: Merced: $1,367.621

Visalia: $1,217.932

Ely: $2,853.533

Weekly Compensation 

Ceiling:

Merced: $38,293.364

Visalia: $34,102.045

Ely: 34,242.366

 1 $1,961,174 divided by 1,434 annual departures: 4 flights x 7 days x 52 weeks x .985 (completion factor) = 1,434.

2 $1,746,507 divided by 1,434 annual departures: 4 flights x 7 days x 52 weeks x .985 (completion factor) = 1,434.

3 $1,752,067 divided by 614 annual departures: 2 flights x 6 days x 52 weeks x .985 (completion factor) = 614

4 28 flights per week multiplied by $1,367.62 per flight.

5 28 flights per week multiplied by $1,2170.93 per flight.

6 12 flights per week multiplied by $2,853.53 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, 2010. 

The Department’s obligation for performance under this order beyond September 30, 2010, 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, 2010, until funds are made available to the Department 

for performance. If funds are not made available for performance beyond September 30, 2010, 

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.
Appendix D

SERVICE LIST

The Honorable Bob Link

Mayor of Visalia

425 East Oak Avenue, Suite 301

Visalia, California 93291

Ms. RaLeene Makley

Vice Chairman

White Pine County Board of Commissioners

953 Campton Street

Ely, Nevada 89301

Ms. Janet Young

Chair

Merced Regional Airport Authority

20 Macready Drive

Merced, California