Order 20 1 3

- 1 2

- 5

Served: December 6

, 20 1 3



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 6 th day of December , 20 1 3

ORDER SELECTING CARRIER

Summary By this Order , we are selecting SkyWest Airlines ( SkyWest ), to provide subsi diz ed Essential

A ir S ervice (EAS) at Vernal and Moab, Utah

, with 30

- passenger Embraer Brasilia air craft

, for the two

- year period from January 1, 2014, through December 31, 2015

. The annual subsidy rate for Vernal will be set at $1, 415

, 696 , and $ 2, 303,347 for Moab, f or a combined total of $ 3, 719,043

. 1 See Appendix A for a map.

Background By Order 20 11

- 12

- 1 9 ( December 23 , 20 11) , the Department re selected Great Lakes Aviation

, Ltd. (Great Lakes) , to provide subsidized EAS at Vernal and Moab utilizing 19

- pas senger Beech B

- 1900D aircraft , through December 3 1, 20 1 3 . Under that Order , Great Lakes provide s Vernal with 12 weekly nonstop round trips to Denver for an annual subsidy rate of $ 1, 299,194

. At Moab, Great Lakes also provide s 12 weekly nonstop round trip s to Denver for an annual subsidy rate of $ 1, 816,486 . The combined annual subsidy rate for both

communities is $ 3

, 115,680

.

In anticipation of the end of the current rate term

, the Department issued Order 20 1 3

- 6

- 19 (June 26

, 20 13) , solicit ing proposals to provide EAS , with subsidy support if necessary, at

Vernal and /or Moab

. In response to our solicitation we received proposals from Great Lakes (the incumbent), SkyWest, and Boutique Air (Boutique).

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

Essential Air Service at :

VERNAL, UTAH MOAB, UTAH

Under 49 U.S.C. 41731 et seq

. DOT

- OST

- 1997

- 2706
DOT

- OST

- 1997

- 2827- 2

-

Proposals The proposals are briefly summarized below

. Full copies of the proposals and all public

comments received can be accessed at www.regulations.gov by searching for docket DOT

OST

- 1997

- 2706 (Vernal) or DOT

- OST

- 1997

- 2827 (Moab).

Great Lakes

Great Lakes submit ted two service options for Vernal and one for Moab. All service would be provided with twin

- engine, 19

- passenger Beechcraft 1900D aircraft. At Vernal, under its first service option, Great Lakes would provide two daily (12 weekly) nonstop round trips to Denver for an annual subsidy of $1,297,615. Under its second service option, Great Lakes would provide three daily (18 weekly) nonstop round trips to Denver for an annual subsidy of $1,657,570.

At Moab, Great Lakes would provide two daily (12 weekly) nonstop round trips to Denver for an annual subsidy of $1,798,772.

SkyWest SkyWest submitted one proposal for each community. At both communities

, SkyWest

would utiliz e twin

- engine, 30

- passenger Embraer Brasilia aircraft. At Vernal, SkyWest would provid e two daily (12 weekly) nonstop round trips to Salt Lake City for an annual subsidy of $1,415,696. At Moab, SkyWest would also provide two daily (12 weekly) nonstop round trips to Salt Lake City for an annual subsidy of $2,303,347.

Boutique Boutique subm itted a proposal with seven service options, which are summarized in the below table. All service would be provided with single

- engine, nine

- passenger Pilatus PC

- 12

aircraft.

Option Round trips per week Routing Annual Subsidy

1 22 CNY

- LAS

$4,302,201 22 CNY

- SLC (via VEL)

22 VEL

- SLC

22 VEL

- LAS (via CNY)

1B 22 CNY

- LAS

$5,103,672 22 CNY

- DEN (via VEL)

22 VEL

- DEN

22 VEL

- LAS (via CNY)

2 18 CNY

- LAS

$3,757,607 18 CNY

- SLC (via VEL)

18 VEL

- SLC

18 VEL

- LAS (via CNY)

2B 18 CNY

- LAS $4,427 ,784 18 CNY

- DEN (via VEL)

18 VEL

- DEN- 3

-

18 VEL

- LAS (via CNY)

3 12 CNY

- LAS $3,140,636 12 CNY

- DEN

12 VEL

- SLC $1,677,669 12 VEL

- DEN

4 18 CNY

- SLC $1,709,560

18 VEL

- SLC $865,470

5 18 CNY

- DEN

$3,097,526 12 CNY

- SLC (via VEL)

18 VEL

- SLC

12 VEL

- DEN (via CNY)

Community Comments On July 26, 2013, we solicited community comments on the carrier

- selection decision at

Vernal and Moab. From Vernal , we received a letter of support for SkyWest from the Uintah County Commission, co

- signed by May o r Gary Showalter of Vernal City. From Moab, we received responses from the Grand County Council

, Moab Mayor David Sakrison

, the Canyon Fields Airport Board

, and several other local, county, and state organizations and

individuals supporting SkyWest’s pro posed service

. W e also received several comments from individuals in Vernal in the oil and gas industry who did not support a change in hub from Denver to Salt Lake City.

Specifically , the Uintah County Commission stated that at a recent joint meeting of Uintah County and Vernal City officials, “a vote was taken and the group unanimously voted to request a change from Great Lakes to SkyWest for Essential Air Service.” Similarly, at Moab, the Grand County Council stated in their letter that “The Grand Cou nty Airport Board and Grand County Council have reviewed the [EAS] proposals submitted by SkyWest, Great Lakes, and Boutique Airlines. After considerable discussion, we strongly [emphasis in original] urge your office to accept the SkyWest Airlines EAS pr oposal.” We also received over 45 letters of support for SkyWest from various local businesses and individuals in the Moab community supporting SkyWest and highlighting Great Lakes’ recent reliability issues and how they have impacted them.

Finally, w e also received a letter from Utah Governor Gary Herbert. The lette r states:

“[t]he Moab community has a strong connection to Salt Lake City. The proposal from SkyWest Airlines to provide service to Salt Lake City International Airport under an existing o perating agreement with Delta Airlines would allow seamless travel by tourists and locals alike. Additionally, the SkyWest proposal enjoys strong support from the local community, including local business owners, the chair of the Grand County Airport Boar d, and chair of the Grand County Council.”- 4

-

Decision After careful consideration, including the comments of local official s, the Department has

decided to Select SkyWest to provide EAS at Vernal and Moab , in accordance with its proposal

.

In examining t he proposals, we first looked to Boutique. Boutique ’s proposal did not receive support from either community. Nor do es it have the codeshare and/or interline agreements

with other carriers at the hub as SkyWest and Great Lakes offer . Additionally, the s ubsidy required by Boutique would be well in excess of that required by either of the other carriers for similar capacity levels

. Therefore, we will not select Boutique at either community.

Vernal

When se lecting a carrier, 49 U.S.C. § 41733(c)(1) directs us to consider five factors: (1) service reliability; (2) contractual and marketing arrangements with a larger carrier at the hub; (3) interline arrangements with a larger carrier at the hub; (4) community views

, giving substantial weight to the views of the elected officials representing the users, and ; (5) whether the carrier has included a plan to market its services to the community. In addition the Consolidated and Continuing Appropriations Act, 2012 2 , provides that when selecting a carrier to provid e EAS, the Department may consider the relative subsidy requirements, thus codifying a factor that we have considered since the inception of the

program.

B oth SkyWest and Great Lakes have long histories of providing EAS

. Both carriers also

have codeshar e arrangements with major carriers at their respective hubs 3 and interline agreements with most other carriers. While the subsidy required by SkyWest is slightly higher than that of Great Lakes, we find it to be reasonable for the level of service to be

p rovided . Additionally, the community is firmly in support of SkyWest’s selection

. We will therefore select SkyWest to provide EAS at Vernal, consistent with its proposal.

Moab

At Moab we face a similar situation where both carrier s submitted competitive bids and we must rely on the statutory criteria in order to select an EAS provider. Here again, community support was fi rmly behind SkyWest’s proposal. So much so in fact, that the community even offered to forego one round trip per week in order to red uce the subsidy requirement.

We are concerned about the reliability issues that Moab has experienced with Great Lakes and its negative impacts on the community

. 4 As described earlier, the Department has

received several letters from local businesses an d community members specifically detailing the service issues with Great Lakes and how they have impacted them. Additionally, SkyWest has a greater ability to handle the steadily increasing traffic at Moab with its 30

- seat
aircraft

. Furthermore, in addit ion to the statutory requirement that we give substantial weight

2 Public Law No. 112

- 55, and continued by the Full

- Year Continuing Appropriations Act, 2013, Pu blic Law

No. 113

- 6, and the Continuing Appropriations Act, 2014, Public Law No. 113

- 46

. 3 SkyWest codeshares with Delta at Salt Lake City, and Great Lakes codeshares with both United and Frontier

at Denver.

4 Based on T

- 100 traffic data for the year

- ended August 31, 2013, Great Lakes service between Moab and Denver has averaged only a 90% completion factor. This is much lower than it projected in its proposal (98%).- 5

-

to the views of the elected officials in the community (which in this case unanimously support SkyWest’s proposal), our regulations also state that when selecting which hub

service should be provided to, we consider the commercial, geographic, and political ties of the hub to the community. 5 Whereas Salt Lake City is both the state capital of Utah and , as outlined in several of the community comments we received, has significantly more

commer cial ties to Moab than does Denver, it unquestionably has an advantage under this guideline

.

The Department recognizes that the relative subsidy requirements for SkyWest are higher than Great Lakes. However, in view of the strong community support for SkyWest, together

with the factors discussed above , we will select SkyWest to provide EAS at Moab, consistent with its proposal.

The Department shall make SkyWest’s selection at Vernal and Moab contingent upon the Department’s receiving properly executed certifications from SkyWest that it is in compliance with the Department’s regulations regarding drug

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

Service Transition We expect Great Lakes and SkyWest to work together to make a smooth transition at Vernal

and Moab. In that regard, before Great Lakes suspends its service they must notify any passengers holding reservations for travel after the suspension date, and assist those passengers in making alternat e air transportation arrangements, or provide a refund of the ticket price, without penalty, if requested.

Great Lakes’ current EAS contract at Vernal and Moab expires on December 31 , 201 3 , and SkyWest may not be able to begin full EAS by then. In that e vent, consistent with established pr ogram policy, we typically use the incumbent air carrier’s prospective proposal that was submitted during the competitive bid process to establish a bridge rate until the new

a ir carrier inaugurates service. After revie wing Great Lakes’ proposed rate s for Vernal and

Moab , we find that they appear reasonable for the proposed service levels. We will therefore

establish those rates as the final rate s for the air carrier’s service at Vernal and Moab for the period from Janua ry 1, 201 4 , until SkyWest inaugurates full EAS , but no later than January 31, 2014

.

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 provid e essential air service

. SkyWest is subj ect 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 Admin istration, 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 O rder is issued under authority delegated in 49 CFR Part 1. 25a(b)

.

5 14 C.F.R. Part 398.2(c)(ii).- 6

-

ACCORDINGLY,

1. We select SkyWest Airlines t o provide E ssential A ir S ervice at Vernal , UT

, at the service

levels and subsidy rates as described in Appendix C , f or the period from January 1, 201 4

, through December 31, 20 1 5 ;

2. We select SkyWest Airlin es to provide E ssential A ir S ervice at Moab, UT, at the service levels and subsidy rates as described in Appendix C , f or the period from January 1, 2014

, through December 31, 20 15 ;

3. If SkyWest Airlines is not able to begin full Essential Air Service at Vernal or Moab, UT, by January 1, 2014, we will continue to provide subsidy to Great Lakes Aviation, Ltd. , at the rates described in Appendix C, until such time as SkyWest Airlines inaugurates full Essential

Air Service , but no later than January 31, 2014 ;

4 . We direct SkyWest Airlines 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 represent atives 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 carri er may forfeit its compensation for any claim that is not sup ported under the terms of this O rder;

5 . We direct Great Lakes Aviation, Ltd. to retain all books, records, and other source and summary documentation to support claims for payment, and to pres erve 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 sup ported under the terms of this O rder;- 7

-

6 . We find that SkyWest Airlines continues to be fit, willing and able to operate as a

certificated air carrier and capable of providing reliable E ssential A ir S ervice at Vernal and Moab, U T ;

7 . Th e s e Docket s will remain open until further Order of the Department; and

8

. We will serve copies of th is Order on SkyWest, Great Lakes Aviation, Ltd.

, and Boutique

Air , as well as the mayors and airport managers of Vernal and Moab, UT

.

By:

SUSAN L. KURLAND Assistant Secretary for Aviation

and International Affairs

(SEAL)

An electronic version of thi s document is available at: http://www.regulations.gov/Appendix AAPPENDIX B Page 1 o f 4APPENDIX B Page 2 o f 4APPENDIX B Page 3 o f 4APPENDIX B Page 4 o f 4APPENDIX C Page 1 of 4

SkyWest Airlines
Essential Air Service to be Provided at Vernal, Utah
DOT

- OST

- 1997

- 2706

Effective Period: January 1, 2 014 through December 31, 2015

Scheduled Service: 12 weekly nonstop round trips to Salt Lake City

. Aircraft type: Embraer EMB

- 120 Brasilia (30 passenger seats). Annual compensation: $1,415,696 1 Subsidy Rate per Flight: $1,158 2 Weekly Ceiling: $27,792 3

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 elem ents 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 je opardize 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 recei ve 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 saf ely 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 progra m 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, 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 carrier do not constitute a total or part ial reduction or cessation of payment.

Fu nds may not be available for performance under this Order beyond January 15, 2014 . The Government’s obligation for performance under this Order beyond January 15, 2014 , 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 January 15, 2014 , until funds are made available to the Department for performance. If sufficient funds are not made available for performan ce beyond January 15, 2014 , the Department will provide notice in writing to the carrier.

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.

All claims for payment, including any amended claims, must be submitted within 9 0 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 st ; August claims must be submitted by November 30 th , and so on.

1 See Appendix B.

2 $1

, 415,696 annual compensation divided b y 1,223 annual flights (24 weekly flights x 52 weeks x 98% completion factor).

3 $1,158 per flight x 24 weekly flights.APPENDIX C Page 2 of 4

SkyWest Airlines
Essential Air Service to be Provided at Moab , Utah
DOT

- OST

- 1997

- 2827

Effective Period : January 1, 2014 through December 31, 2015

Scheduled Service: 12 weekly nonstop round trips to Salt Lake City

. Aircraft type: Embraer EMB

- 120 Brasilia (30 passenger seats). Annual compensation: $ 2,303,347 1 Subsidy Rate per Flight: $ 1, 883 2 Weekly Ce iling: $4 5,192 3

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 fli ght 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 p eriod, 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 w riting 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 goa ls 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, terminates or reduces payments for service or changes service requirement s 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 loca tion 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 part ial

reduction or cessation of payment.

Funds may not be available for performance under this Order beyond January 15, 2014 . The Government’s obligation for performance under this Order beyond January 15, 2014 , is subject to the availability of funds from which payment for service s can be made. No legal liability on the part of the Government for any payment may arise for performance under this Order beyond January 15, 2014 , until funds are made available to the Department for performance. If sufficient funds are not made availab le for performance beyond January 15, 2014 , the Department will provide notice in writing to the carrier.

Subsidy contracts are subject to, and incorporate by reference, relevant statutes and Department regulations, as they may be amended from time to tim e. However, any such statutes, regulations, or amendments thereto shall not operate to controvert the foregoing paragraph.

All claims for payment, including any amended claims, must be submitted within 9 0 days of the last day of the month for which compe nsation is being claimed. For example, claims for service provided in July must be filed by October 31 st ; August claims must be submitted by November 30 th , and so on.

1 See Appendix B.

2 $2,303,347 annual compensation divided by 1,223 annual flights (24 weekly flights x 52 weeks x 98% completion factor ).

3 $1,883 per flight x 24 weekly flights.APPENDIX C Page 3 of 4

Great Lakes Aviation, Ltd. Essential Air Service to be Provided at Vernal, Utah

DOT

- OST

- 1997

- 2706

Effective Period: January 1, 2014 until SkyWest inaugurates full EAS at Vernal, UT, but no later than January 31, 2014

. Scheduled Service: 12 weekly nonstop round trips to Denver. Aircraft type: Beechcraft 1900

- D ( 19 passenger seats).

Annual compensation: $1, 297,615 1 Subsidy Rate per Flight: $1, 061 2 Weekly Ceiling: $ 25,464 3

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 ope rate 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 complete, te rminates 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.

Funds may not be available for performance under this Order beyond January 15, 2014 . The Government’s obligation for performance under this Order beyond January 15, 2014

, 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 January 15, 2014 , until funds are made available to th e Department for performance. If sufficient funds are not made available for performance beyond January 15, 2014 , the Department will provide notice in writing to the carrier.

Subsidy contracts are subject to, and incorporate by reference, relevant statu tes 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, including any amended claims, must b e submitted within 9 0 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 st ; August claims must be submitted by November 30 th , and so on.

1 See Appendix B.

2 $1,297,615 annual compensation divided by 1,223 annual flights (24 weekly flights x 52 weeks x 98% completion factor).

3 $1,061 per flight x 24 weekly flights.APPENDIX C Page 4 of 4

Great Lakes Avia tion, Ltd. Essential Air Service to be Provided at Moab, Utah

DOT

- OST

- 1997

- 2827

Effective Period: January 1, 2014 until SkyWest inaugurates full EAS at Moab , UT, but no later than January 31, 2014.

Scheduled Service: 12 weekly nonstop round trips to Denv er. Aircraft type: Beechcraft 1900

- D ( 19 passenger seats). Annual compensation: $ 1,798,772 1 Subsidy Rate per Flight: $ 1, 471 2 Weekly Ceiling: $ 35,304 3

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 eligibl e 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 c hanges 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 war rant, 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

determinin g 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 communit y.

If the Department unilaterally, either partially or complete, 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.

Funds may not be available for performance under this Order beyond January 15, 2014 . The Government’s obligation for performance under this Order beyond January 15, 2014 , 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 January 15, 2014 , until funds are made available to the Department for performance. If sufficient funds are not made available for performance beyond January 15, 2014 , the Department will provide notice in writing to the carrier.

Subsidy co ntracts 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 para graph.

All claims for payment, including any amended claims, must be submitted within 9 0 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 st ; August cla ims must be submitted by November 30 th , and so on.

1 See Appendix B.

2 $1,798,772 a nnual compensation divided by 1,223 annual flights (24 weekly flights x 52 weeks x 98% completion factor).

3 $1,471 per flight x 24 weekly flights.APPENDIX C Page 5 of 4