O rder: 2012

- 6

- 19

Served: June 22, 2012



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

Issued by the Department of Transportation

on the 22 nd day of June , 20 1 2

Essential Air Service at

McCOOK, NEBRASKA DOCKET DOT

- OST

- 1997

- 3005

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



### ORDER RE

- SELECTING CARRIER AND

ESTABLISHING SUBSIDY RATES

Summary

By th is O rder, the Department is re

- selecting Great Lakes Aviation, Ltd. (“Great Lakes”) to

provide Essential Air S ervice (EAS) at McCook, Nebraska

, using 1 9

- seat Beech 1900D

aircraft for the two

- year period beginning June 1, 2012, through May 31 , 2014

, for an

annual subsidy of $ 1,976,338

. 1

Background

By Order 2010

- 6

- 3

, issued on June 2

, 2010 , the Department selected Great Lakes to

provide EAS at McCook with 12 weekly nonstop round trips to Denver International

Airport (“Denver”) for the period from June 1, 2010 , through May 31, 2012 , for an annual

subsidy of $ 1,583,277.

As the end of the contract was approac hing, we issu ed Order 2012

- 1

- 28 on

January 27, 2012

, requesting proposals from air carriers interested in providing EAS at the

1 Such subsidy is calculated and distributed on a fiscal year basis, subject to the availability of appropriated

funds.- 2

-

community for a new term beginning June 1

, 2012 . In response to that Order , we received

only one proposal, which was submitted by the incumbent air carrier

, Great Lakes

.

The air carrier’s complete proposal and community comments may be accessed online at

http://www.regulations.gov/ by entering Docket number DOT

- OST

- 1997

- 3005 in the

search block

.

Proposal of Great Lakes

Great Lakes proposed one option for a two

- year term that would continue to provide two

nonstop round trips each weekday and weekend (1 2 total round trips per week) to Denver

using 1 9

- seat Beech 1900D aircraft for an annual subsidy of $ 1,976,338

.

Community Comments

On March 21, 2012 , we requested community comments regard ing this EAS case. In

response, we received a letter from the Honorable Dennis Berry , Mayor of McCook

. That

letter expressed some displeasure wit h the current service in that enplanements are low and

there is a lack of marketing for the existing air service. The Mayor argued that

enplanements would increase if air fares were lowered . Mayor Berry stated that EAS

subsidies should be based , to some degree, on enplanements , which he believes would

result in increased air travel dem and and incentivize air carriers to improve service

. The

Mayor also mentioned that

, despite the above, the EAS service has improved recently due

in part to fewer cancelations of scheduled flights

.

Decision

The decision is straightforward in that Great Lakes is the only applicant

. E ven though its

subsidy request is slightly more than the current subsidy, Great Lakes is a well

- established

air carrier that provides EAS at many communities. Moreover, its service to Denver as

both United Airlines and Frontier Airlines code

- share partners provides excellent access to

the National air transportation system. Finally, we find that both the service and subsidy

levels are reasonable. We are concerned, however, by the community’s displeasure with

the current service provided by Great Lakes and strongly encourage both parties to work

together to address these concerns. 2 Addition ally, we note that McCook is exempt from

the $200 cap because it is more than 210 miles from the nearest large or medium hub

airport, however, the Department wishes to remind Great Lakes and McCook about the

recently enacted law that established a new subs idy cap at $1,000 per passenger regardless

of distance from hub airports

. 3 The Department fully expects McCook and Great Lakes to

work cooperatively to ensure subsidy rates remain well below the $1,000 mark.

W e shall make this selection of Great Lakes at McCook contingent upon the Department’s

receiving properly executed certifications from the air carrier that it is in compliance with

2 In that regard, we note that Great Lakes, and all EAS air carriers, do have an incentive to generate more

passengers because they are paid a flat subsidy rate, so if the air carrier generates more passenger service than

forecast, the EAS air carrier retai ns all the additional revenue.

3 See 49 USC Section 41731(a)(1)(C)- 3

-

the Department’s regulations regarding drug

- free workplaces and nondiscrimination, as

well as the regulatio ns concerning 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 EAS

. Great Lakes is subj ect

to the Department’s continuing fitness requirements, and no information has come to our

attention tha t would cause us to questio n the air carrier's fitness at this time. We have

contacted the Federal Aviation Administration, and it has raised no concerns that would

negativel y affect our fitness finding s . We therefore conclude that the air carrier is reliable

and remain s fit to conduct the operations proposed here.

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

ACCORDINGLY,

1. We select Great Lakes Aviation, Ltd. to provide Essential Air S ervice at McCook,

Nebraska

, an d establish an annual subsidy rate of $ 1,976,338

, as described in Appendix A ;

2. We direct 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 d ocumentation 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 ai r carrier may forfeit its compensation for any claim that is not

supported under the terms of this Order ;

3 . We f i nd 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 S ervice at

McCook ;

4. This docket will remain open pending further Department action ; and- 4

-

5 . We will serve copies of this Order on the Mayor of McCook , the Executive Director of

the McCook Airport Autho rity, and Great Lakes Aviation, Ltd

.

B y:

SUSAN L. KURLAND

Assistant Secretary for

Aviation and International Affairs

(SEAL)

An electronic version of this document is ava ilable at

http://www.regulations.govAppendix A 

## Great Lakes Aviation, Ltd.

Annual Compensation Requirements for Essential Air Service at

McCook, Nebraska to Denver (DEN)

Two Round Trips

– B1900

98.0% Completion Factor

Departures: 1,227

Block Hours: 1,227

Revenue Passenger Miles: 872,000

Available Seat Miles: 5,082,234

Operating Revenues:

Passenger: MCK

DEN 4,000 psgrs at $92

. 10 $368,400

Other (at 0.62% of passenger revenue) $2,284

Total Operating Revenues: $370,684

Operating Expenses:

Direct: Aircraft and Hull Insurance $182,855

Fuel and Oil $838,812

Flying Operations $214,897

Maintenance $344,468

Total Direct Expenses: $1,581,032

Total Indirect Expenses: $654,227

Total Operating Expenses $2,235,259

Operating Loss ($1,864,575)

Profit Element (5.0% of Total Operating Expenses) $111,763

Annual Compensation Requirement: $1,976,338

Representative Schedule

*** [MCK] McCook, Nebraska ***

DEPARTURES

FLT DPT ARR TO EQP FREQ

7243 6:57 7:00 DEN BE1 12345

7243 7:39 7:42 DEN BE1 67

7309 17:41 17:44 DEN BE1 12345

ARRIVALS

FLT EQP FREQ FROM DPT ARR

7309 BE1 12345 DEN 15:30 17:31

7250 BE1 6 DEN 17:31 19:32

7250 BE1 12345.7 DEN 19:10 21:11

No Upline Scheduling RestrictionsAppendix B

Great Lakes Aviation, Ltd.

Essential Air Service to be provided at McCook, Nebraska

Effective Period : June 1

, 2012, through May 31 , 201 4

Scheduled Service : two nonstop round trips each weekday and weekend (12 total round trips per

week) to Denver

Aircraft : 19

- seat Beech 1900D

Rate per Eligible Flight: $ 1,611 ; 1

Weekly Ceiling : $ 38,664 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 elemen ts 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 b een 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 jeop ardize 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

safel y 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 reg ard 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 the

carrier do not constitute a total or partial reduction or cessation of payment.

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 perf ormance beyond September

30, 2012 , the Department will provide notice in writing to the carrier.

Subsidy contracts are subject to, and incorporate by reference, releva nt 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.

All claims for payment must be submitted within 60 d ays of the last day of service provided under this Order

.

1 Annual compensation of $1,976,338 divided by 1,227 annual departures (313 service days x 4 flights per service

day x 98 percent completion).

2 24 flights per week multiplied by $1,611 per flight.