Order: 2015

- 4

- 13

Served: April 17, 2015



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 17 th day of April, 20 1 5



### ORDER SELECTING AIR CARRIER AND ESTABLISHING HOLD

IN TERMS

Summary By this Order the Department is selecting Boutique Air (Boutique) to provide Essential Air Service ( EA S ) at Show Low, Arizona

, for a two

- year term from May 1, 2015, through April 30, 2017, at an annual subsidy of $1,243,255.

Also b y this Order, the Department establishes the EAS obligation of Great Lakes Ltd. (Great Lakes) , at Show Low, for 30 days beyond its 90

- day termination notice , through July 16, 2015

, or unti l Boutique commences serv ice, whichever comes first.

Background By Order 2013

- 6

- 1 (June 3, 2013 ), the Department selected Great Lakes to provide EAS at Show Low, for the two

- year period from May 1, 2013, through April 30, 2015, for a n annual subsidy of $1,672,000 , with 12 weekly round trips during the off

- peak season, an d 18 weekly round trips during the peak season.

As the end of the contract was approaching, the Department issued Order 2014

- 11

- 15 (November 25, 2014) requesting proposals from air carriers interested in providing EAS at Essential Air Service at

SHOW LOW, ARIZONA

Under 49 U.S.C. § 41731 et seq

. DOCKET DOT

- OST

- 1998

- 4409- 2

-

the commun ity for a new contract t erm. In response to that Order, the Department received proposals from Great Lakes and Boutique

.

Each air carrier’s complete proposal and community comments may be accessed online at www.regulations.gov by entering the community’s respective Docket number in the search

block.

Proposal of Great Lakes

Great Lakes submitted a bi d to serve the community using either 9

- passenger or 19

- passenger Beechcraft 1900D aircraft , with nonstop service to Phoenix (PHX) and/or one

stop service to Denver (DEN), with 12 weekly round trips during the off

- peak season, and 18 weekly round trips during the pe ak season. The 9

- passenger option consists of $2,275,339 in annual subsidy and the 19

- passenger option is $1,894,384 in annual subsidy.

Proposal of Boutique Air

Bout ique Air submitted a proposal using 9

- passenger Pilatus PC

- 12 aircraft for a n annual subsidy of $1,243,255, with nonstop service to PHX. The carrier would offer 12 weekly round trips during the off

- peak months (January

- April ), and 18 weekly round trips during the peak months (May

- December).

Community Comments

On January 21

, 2015, the Department requested comments from the community regarding this EAS air carrier selection case. In response

, the Departme nt received a letter from Mayor Daryl Seymore, recommending Boutique Air as the preferred carrier at Show Low. Mayor Seymore stated, “The Boutique Air representatives impressed the Council with their proactive approach to serve our community and their eag erness to provide excellent

service ”.

Great Lakes’ termination notice On March 18, 2015, Great Lakes filed a 90

- day notice to terminate service at Show Low, with the last day of scheduled air service to be June 16, 2015. The carrier states that since the City recommended Boutique, it be allowed to terminate service earlier than prescribed in the notice, with the Mayor of Show Low’s consent. As of the date of this Order, the Mayor of Show Low has not indicated his willingness to allow Great Lakes to terminate service before Boutique inaugurates service.

Decision

After care fully reviewing each air carrier’s proposal, the Department has decided to select Boutique at Show Low. The airline has the support of the community and Show Low has

submitted a waiver from its statutory guarantee of aircraft with at least 2 engines and using 2 pilots. 1 The Department finds the subsidy and service levels reasonabl e and that the

service will meet the EAS needs of the community

.

1 See 49 USC § 41732(B)(5)

.- 3

-

We shall make this selection upon the Department’s receiving properly executed

certifications from the air carr iers that they are in compliance with the Department’s regulations regarding drug

- free workplaces and nondiscrimination, as well as the regulations concerning lobbying activities. 2

Hold

- In Show Low is guaranteed a minimum of two round trips to Phoenix or other suitable hub. Great Lakes’ proposed termination of service would cause Show Low to be left with no air service and, therefore, the Department is required by law to prohibit Great Lakes from terminating such service at the end of its 90

- day notice, i. e., June 16, 2015. As such, the Department will require Great Lakes to continue to maintain its current level of service at the community for succ essive 30

- day periods until Boutique Air has initiated service.

By this Order, t he Department will require Great Lakes to continue to serve Show Low for 30 days beyond its 90

- day termination notice, through July 16, 2015 , or earlier if Boutique begins full EAS at the community before July 16. Since Great Lakes’ contract ends April 30, 2015, the Department wil l begin to compensate Great Lakes beginning May 1, 2015, at the rate it proposed in the carrier selection proceeding. 3

Service Transition The Department expects Great Lakes and Boutique Air to work together to make a smooth transition at the community. In that regard, before Great Lakes suspends its service, we expect it to notify all passengers holding reservations for travel after the suspension date, to assist those passengers in making alternate air transportation arrangements, or to provide

a refun d of the ticket price, without penalty, if requested.

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 the Department may subsidize it to provide EAS

. Boutique

Air and Great Lakes Aviation, Ltd. are subject to the Department’s continuing fitness requirements, and no information has come to our attention that would cause us to question

the air carriers ’ fitness at this time. The Department contacted the Federal Aviation Administration, and it has raised no concerns that would negatively affect our fitness

findin gs. The Department therefore conclude s that Boutique Air and Great Lakes Aviation,

Ltd. are reliable and fit to conduct the operations proposed h ere.

This Order is issued under authority delegated in 49 CFR Part 1

. 25a(b)

.

2 The certifications are available online under “Reports and Publications” at http://www.dot.gov/policy/aviation

- policy/small

- community

- rural

- air

- service/essential

- air

- service

3 In accordance with 49 U.S.C. 41734(c), the D epartm ent will extend Great Lakes’ service obligation for

successive 30

- day periods as necessary until replacement service begins.- 4

-

ACCORDINGLY,

1. The Department select s Boutique Air to provide Essential Air S ervice at Show Low, Arizona, and establish the annual subsidy rate s as described in Appendix C ;

2. The Department direct s Boutique Air 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 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 sol d or disposed of

must be retained. The carrier s may forfeit their compensation for any claim that is not supported under the terms of this Order;

2. The Department prohibits Great Lakes Aviation, Ltd.

, from suspending service at Show

Low

, at the end of the 90

- day notice period, and require it to maintain its current lev el of

service at the community, as set forth in Appendix D , for an ini tial 30

- day period through July 16 , 2015, or until Boutique Air actually is able to begin EAS service, whichever is

fi rst , at the rate as prescribed in Appendix C, page 2;

3 . The Department finds that Boutique Air is fit, willing and able to operate as a commuter
air carrie r
, and is capable of providing reliable Essential Air S ervice at Show Low,

Arizona ;

4

. The Department direct s 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 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 carrier s may forfeit their compensation for any claim that is not supported under the terms of this Order ;

5

. Th is docket will remain open pending further Department action ; and- 5

-

6

. The Department will serve a copy of this O rder on the mayor of Show Low, Arizona, the airport manager of Show Low Regional Airport ; Boutique Air, and Great Lakes Aviation, Ltd.

B y:

BRANDON M. BELFORD Deputy Assistant Secretary for

Aviation and International Affai rs

(SEAL)

An electronic version of this document is ava ilable at www.regulations.govA ppendix A



## AREA MAP

Maps generated by the Great Circle Mapper

- copyright © Karl L. Swartz

.Appendix B Page 1 of 2

BOUTIQUE AIR

548 Market St San

Francisco, CA t.

415.449.0505

f. 415.738.7671



### Show Low, AZ

Seasonal: 2 Daily RT (Jan

- Apr.) 3 Daily RT (May

- Dec.)

Operations

Scheduled Flights 1,660 Completed Flights (98%) 1,627

Scheduled Block Hours 1,357

Scheduled Seats 14,939

Scheduled ASMs 1,912,136

Revenue

Passengers 7,200 Average Fare 85.00

Fare Revenue $612,000

Total Revenue $612,000

Expenses

Fuel $390,096 Ownership $480,000

Maintenance and Reserves $400,545

Staff $171,680 Marketing and Distribution $23,040

Other Indirect Costs $254,274

Total Costs $1,719,635

Profit Element $135,620
Margin 5.00%

Total Subsidy $1,243,255Appendix B Page 2 of 2Appendix C Page 1 of 2

Boutique Air

Essential Air Service at Show Low, Arizona

DOT

- OST

- 1998

- 4409

Effective Period : 1 May 1, 2015 through April 30

, 2017

Hub : Phoenix Sky Harbor International Airport (PHX)

Scheduled Service : Off

- peak

- 12 weekly nonstop round trips; Jan. 3, 2016

- Apr. 30, 2016, Jan. 1, 2017

- Apr. 29, 2017

Peak

- 18 weekly nonstop round trips; May 1, 2015

- Jan. 2, 2016, May 1, 2016

- Dec. 31, 2016, April 30, 2017

Aircraft : 9

- passenger Pilatus PC

- 12 Rate per Eligible Flight : 2 $ 755 Weekly Ceiling : 3 Off

- peak = $ 18,120 ; Peak = $27,180

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 significan t
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 compl eted, 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 per iod, it may jeopardize it s 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 this rate, it must first notify the Office of Aviation Analysis in writing and receive written ap proval 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 pr ovided for under this Order, then, at the end of the period for which the department does make payments in the stipulated service levels, the carrier may cease to provide service to that specific location without regards to any requirement for notice of su ch 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 contract are subject to, and inco rporate 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 may not be availab le for pe rformance under this O rder beyond September 30, 201 5

. The Government’s obligat ion for performance under this O rder beyond September 30, 2015

, is subject to the availability of 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 u nder this order beyond September 30, 2015 , until funds are made available to the Department for performance. If sufficient funds are

not made available for performance beyond Septem ber 30, 2015 , the Department will provide notice in writing to the carrier.

All claims for payment, including any amended claims, must be submitted within 90 days of the last day of the month for which compensation is being claimed. For example, claims f or service provided in July must be filed by

October 31; August claims must be submitted by November 30, and so on.

1 The date is an estimate for a budgetary marker. Actual start date will be determined by Boutique Air.

2 Annual compensation of $1,243,255 divide d by 1,646 annual departures ( 24 weekly departures x 1 6 weeks x 98 percent completion + 36 weekly departures x 36 weeks x 98 percent completion)

3 Off

- peak: 24 flights x $ 755 per flight ; Peak: 36 flights x $ 755 per flightAppendix C Page 2 of 2

Great Lakes Aviation, Ltd.

Essential Air Service at Show Low, Arizona, Hold

- in rate

DOT

- OST

- 1998

- 4409

Effective Period : May 1, 2015

, through July 31

, 201 5 , or until Boutique Air begins

service.

Scheduled Service : 18 weekly nonstop round trips to Phoenix, with an option to serve

Denver with one round trip a day

Aircraft : Beechcraft 1900D Rate per Eligible Flight: 1 $ 1, 032 Weekly Ceiling : 2 $ 37,152

Note: The carrier understands that it may forfeit its compensation for any flights that it does not operate in conformance with the terms and stipulatio ns 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 constitu tes 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 appli cable period of this rate, 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 replacemen t 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. I n 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 service levels, the c arrier may cease to provide service to that specific location without regards 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 d o not constitute a total or partial reduction or cessation of payment.

Subsidy contract 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, regu lations, or amendments thereto shall not operate to controvert the foregoing paragraph.

Funds may not be available for performance under this Order beyond September 30, 2015

. The Government’s obligation for performance under this Order beyond September 3 0, 2015 , is subject to the availability of 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, 201 5 , until funds are made available to the Department for performance. If sufficient funds are not made available for perfo rmance beyond September 30, 2015 , the Department will provide notice in writing to the carrier.

All claims for payment, including any amended claims, must be submitted within 90 days of the last day of the month for which compensation is being claimed. For example, claims for service provided in July must be filed by

October 31; August claims must be submitted by November 30, and so on.

1 Annual compensation of $1,894,384 divided by 1,835 annual departures (36 weekly departures x 52 weeks x 98 percent completion)

. 2 36 weekly departures x $1,032 per flight

.Appendix D

Essential Air Service to be mai ntained at Show Low

Effective Period: July 16 , 2015, or until further Depar t ment action

Scheduled Service: 18 weekl y nonstop round trips to PHX or DEN

Aircraft: Beech craft 1900D