Order 20 10

- 9

- 13

Served: September 1 4 , 20 10



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 9 th day of September , 20 10

ORDER SELECTING CARRIER AND SETTING FINAL SUBSIDY RATES

Summary By this order, we are re selecting Great Lakes Aviation, Ltd. (Great Lakes), to provide

subsidiz ed essential air service (EAS) with 19

- passenger Beech craft B

- 1900D air craft at
Merced and Visalia

, California, and Ely, Nevada

, for the two

- year period from

October 1, 2010, through September 31, 2012

. The annual subsidy rate s will be set at $1,961,174

, $1,746, 507, and $1,752,067 for M erced, 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 De partment issued

Order 2010

- 5

- 4 on May 4, 2010 , solicit ing 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 res ponse 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- 2

-

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 d ocket number s 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

- passe nger 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;

N o upline restrictions on one round trip;

U pline service routing would be one

- stop to Ontario, Los Angeles or Orange County 2 ( 14 weekly) $1,9 6 1 ,174

Visalia Nonstop to Ontario, Los Angeles or Orange County;

N o upline restrictions on one round trip;

U pline 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 affe ct 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.- 3

-

In response , the Department received community comments from : Merc ed 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

. M erced ’s official

also made note o f 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 consi deration 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 McCa ll’s), and request s 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 official s, 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 3 0 , 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 Visali a, 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 reasonabl e.

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 ag re ement s at Denver with

United Airlines and Frontier Airlines will provide the community online connections to more

than 150 domestic and international destinations

. The community support s 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 th e 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 hig hway miles of a large or medium hub, and, therefore, is exempt from this limit.- 4

-

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. W e 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 m aximize 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.

W e 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.

Ca rrier 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 requirement s, 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,

1. We re select Great Lakes Aviation, Ltd. , t o provide essential air service at Merced and Visalia, California

, and Ely, Nevada, and establish the subsidy rates

, as described in Appendix C , f or the period from October 1, 2010 , through September 30

, 20 1 2 ;

2 . The Department directs Great Lakes Aviation, Ltd. , to retain all books, reco rds, 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 ret ained 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;- 5

-

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 . 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 3

Great Lakes Aviation, Ltd.
Provision of Essential Air Service at Merced, California Calculation of Compensation RequirementAppendix B Page 2 of 3

Great Lakes Aviation, Ltd.
Provision of Essential Air Service at Visalia, California Calculation of Compensation RequirementAppendix 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% comple tion factorAppendix 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 Septem ber 3 0 , 20 12

. : Scheduled Service : Merced : Fourteen nonstop round trips each week to Las Vegas

McCarran In ternational 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: p oints upline from Merced (via Ontario, Los Angeles or Orange County) may be served on one daily subsidiz ed round trip

. Visalia: p oints 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: 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: Merced : $ 1, 961,174

Visalia : $ 1, 7 46,507 Ely: $1,752,067 This rate assumes an annual completion factor of 9 8 .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 : $ 1,367.62 1

Visalia : $ 1,217.93 2 Ely: $ 2,853.53 3 Weekly Compensation Ceiling: Merced : $ 38,293.36 4

Visalia : $ 34,102.04 5 Ely: 34,242.36 6

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 multipli ed 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 schedu le 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 ca rrier 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 com plete 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 stipula ted 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 und er 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 S eptember 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 s ubmitted 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