Order 2012

- 11

- 33 Served: November 29, 2012


### UNITED STATES OF AMERICA **DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY**  **WASHINGTON, D.C.** Issued b y the Department of Transportation on the 29th day

of November , 20 1 2

**ORDER RE**  **- SELECTING CA**  **RRIER A ND SETTING FINA**  **L SUBSIDY RA TES**  **Summary** By this Order, the Department is re - selecting Great Lakes Aviation, Ltd. ( “ Great Lakes ” ) to provide subsidized E ssential Air S ervice (“EAS”) with 19

-passenger Beechcraft B

- 1900D aircraft at Clovis and Silver City /Hurley /Deming, New Mexico ( “ Silver City”), for the period from December 1 , 201 2 , through November 30, 2014 , at a combined annual subsidy rate of $ 4,052,949

. 1 **Background** B y Order 2011

- 4

- 19 , issued on April 22, 2011 , the Dep artment re - selected Great Lakes to provide subsidized EAS at Clovis and Silver City, through May 3 1, 2013

. That Order directed Great Lakes to provide each community with 12 nonstop round trips per week to Albuquerque , using 19

- seat Beech 1900 aircraft , at an annual subsidy o f $1, 592,157 for Clovis and $ 1, 594,092 at Silver City

. On June 4, 2012, Great Lakes filed a 90

- day notice of its intention to terminate its scheduled air service at both communities, effective September 3, 2012. A copy of Great Lakes’ filing may b e accessed online through the Federal Docket Management System at http://www.regulations.gov , by entering “DOT

- OST

- 1996

- 1902” (Clovis) or “DOT

- OST

1996

- 1903” (Silver City) in the “SEARCH for: Rules, Comments, Adjudications or Supporting Documents:” field

.

1 Such subsidy is calculated and distributed on a fiscal year basis, subject to the availability of funds. Essential Air Service at **CLOVIS ,**  **NEW MEXICO SILVER CITY/HURLEY/DEMING, NEW MEXICO**  Under 49 U.S.C. 41731 et seq

. **Docket DOT -** **OST -**  **1996 -**  **1902 Docket DOT**  **- OST**  **- 1996**  **- 190**  **3**- 2

-

By Order 2012

- 7

- 20 , issued on July 1 7, 2012 , the Department (a) requested proposals from air carrier’s interested in providing EAS at either or both communities for a new contract period, with or without subsidy, and (b) extended the EAS obligation of Great Lakes at Clovis and Silver City

for an additional 30 days, through October 3, 2012

. 2 **Proposals** In response to Order 2012

- 9

- 16, the Department received proposals from SeaPort Airlines, Inc. (“SeaPort”) and Great Lakes . Each air carrier’s proposal and the community comment s may b e accessed online through the Federal Docket Management System at: http://www.regulations.gov , by doing a search on the corresponding community docket numbers listed on the first page. **SeaPort** SeaPort propos ed to provide a single inseparable service package at both communities utilizing either a 9

-passenger Cessna Caravan or 8

-pass enger Piper Chieftain aircraft with 18 weekly non stop round trips a week to Albuquerque

. Seaport’s proposal included the stipulation that both communities must choose the same aircraft ty pe . SeaPort requested the following subsidy requirements: **Clovis -** **Albuquerque Year 1**  **Year 2** Cessna Caravan $2,160,518 $2,268,544 Piper Chieftain $2,232,336 $2,349,058

**Silver City** **- Albuquerque**  **Year 1 Year 2**  Cessna Caravan $1,893,414 $1,988,085 Piper Chieftain $1,943,316 $2,044,643 SeaPort’s proposals also include mention of an interline agreement with US Airways and the air carrier’s intent to implement another agreement, which would include full e

-ticketing and through baggage with another major airline. **Great Lakes** Great Lakes, the incumbent air carrier at Clovis and Silver City, submitted a proposal with stand

- alone options for EAS at each community, utilizing 19

- seat Beech 1900 aircraft. At Clovis, Great Lakes proposed to provide 1 2 one - stop round trips per week between Clovis and Denver, via Alamosa, Colorado; Liberal, Kansas; Santa Fe, New Mexico; or Pueblo, Colorado, at an annual subsidy of $ 1,954,490

. At Silver City, the air carrier propose d to provide 1 2 round trips per week between the community

and Denver, Colorado, via Alamosa, Colorado; Santa Fe, New Mexico; or Pueblo , Colorado, or nonstop service between Silver City and Phoenix, Arizona, at an annual subsidy

of $ 2,098,460

.

2 We have continued to hold

- in Great Lakes by successive 30

- day Orders.- 3

-

**Community Comments** By e -mails dated August 17, 2012 , the Department solicited the views of the civic officials at the respective communities and the New Mexico Department of Transportation (NM DOT) , as to which carrier ’ s proposals they would prefer. Clovis and Silver City support the re - selection of Great Lakes. The Mayor of Clovis stated that the City C ommission unanimously

voted to recommend Great Lakes. The Grant County3 Manager stated “the County Commission would like to have the Essential Air Service continue with Great Lakes Airlines with two round trip service a day to Phoenix .” The Mayor of Silver City also sent a letter supporting the retention of Great Lakes. **Decision** After careful consideration of this matter, including the comments of local official s, the Department has decided to re - select Great Lakes to provide 1 2 one - stop round trips per week between Clovis and Denver, via Alamosa, Liberal, Santa Fe, or Pueblo, at an annual subsidy o f $ 1,954,490

. At Silver City, Great Lakes will provide 1 2 nonstop round trips per week between the community and Phoenix, Arizona, or one - stop service between Silver City and Denver via Alamosa, Santa Fe, or Pueblo at an annual subsidy of $ 2,098,460

. Great Lakes is well

- established and has been providing EAS at the respective communities for many ye ars, and the communities support the re - selection of the air carrier

. Furthermore, Great Lakes provides excellent access to the national air transportation system through the use of its interline e -ticketing agreements with American Airlines, Delta Air Lines, Frontier Airlines, United Airlines, and U.S. Airways. W e also find that both Great Lakes’ service and subsidy levels are reasonable. W e note that Great Lakes’ proposal offers several options of hubs to be served. Under the Denver option, Great Lakes has full code

- share agreements in place with both United Airlines and Frontier Airlines, providing passengers with seamless connections to the national air transportation system. In this context, we expect Great Lakes and the communities to formulate which service option would provide the best service for the communities. In that regard, we note that Grant County ( Silver City) expressed a preference for Phoenix, while Clovis was silent as to which hub it preferred. As a final matter regarding Great Lakes’ re - selection, we note that Great Lakes filed a 90

- day notice of its intent to suspend service on June 4, 2012. In these situations, 49 U.S.C. § 41734(d) provides for air carriers to receive an increased subsidy rate no later than 180 days after the date of its filing the 90

- day notice. Thus, we will establish the effective date for the new, two
- ye ar contact period as December 1, 2012, through November 30, 2014. We shall make this selection at the communities contingent upon the Department’s receiving properly executed certifications from Great Lakes that they are in compliance with the Department’s regulations regarding drug

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

3 Silver City and Hurley are located in Grant County. Deming is located in Luna County. Grant County owns the airport w

here EAS is provided.- 4

-

**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 that would cause us to question the air carrier's fitness at this time. W e have contacted the Federal Aviation Administration, and it has raised no concerns that would negatively affect our fitness finding s . W e therefore conclude that the air carrier is reliable and remains fit to conduct the operations proposed here. This Order is issued under authority delegated in 49 CFR Part 1.56a(f). **AC CORDINGLY,**  1. W e re - select Great Lakes Aviation, Ltd. to provide Essential Air S ervice at Clovis and Silver City

/Hurley /Deming, New Mexico, and establish the subsidy rates, as described in Appendix B , for the period from December 1, 2012 , through November 30, 2014 ; 2

. We direct Great Lakes Aviation, Ltd., to retain all books, records, and other source and summary documentation to support claims for paym ent, and to preserve and maintain such documentation in a manner that readily permits its audit and examination by representatives of the Department. S uch documentation shall be retained for seven ye ars from the service date of this Order or until the Department indicates that the records may b e destro yed , whichever comes first. C opies of flight logs for aircraft sold or disposed of must be retained. The air carrier may f orfeit its c ompensation for any c laim that is not supported under the terms of this Order ; 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 E ssential Air S ervice at Clovis, New Mexico, and at Silver City /Hurley /Deming, New Mexico ; 4

. These Docket s will remain open until further order of the Department; and 5. We will serve copies of this Order on the parties listed in Appendix C

. By :

**SUSA N L.**  **KURL AN**  **D** Assistant Secretary for Aviation and International Affairs (SEAL) An electronic version of this document is available in the Federal Docket Management

System (FDMS) at http://www.regulations.gov**Ap pendix**  **A Page 1 of**  **2** 

## Great Lakes Aviation, Ltd. Annual Compensation Requirements for Essential Air Service at

Clovis, New Mexico to Denver (DEN) Two Round Trips

– B1900

– one stop via AL S, LBL, SAF, or PUB

98.0% Completion Factor

Departures: 1,227 Block Hours: 1,636
Operating Revenues: Passenger: 7,500 psgrs at $ 144.97 $ 1,087,275 Other (at 0.62% of passenger revenue) $ 6,741 Total Operating Revenues: $ 1,094,016 Operating Expenses: Direct: Aircraft and Hull Insurance $ 365,710

Fuel and Oil $ 917,795 Flying Operations $ 289,801 Maintenance $ 415,070 Total Direct Expenses: $ 1,988,376 Total Indirect Expenses: $ 914,963 Total Operating Expenses $2, 903,339 Operating Loss ($1, 809,323 ) Profit Element (5.0% of Total Operating Expenses) $ 145,167 **Annual Compensation Requirement: $1,9**  **54,490 Ap**  **pendix A**  **Page 2**  **of 2**  

## Great Lakes Aviation, Ltd. Annual Compensation Requirements for Essential Air Service at Silver City

/Hurley /Deming, New Mexico to Denver (DEN) or Phoenix (PHX) Two Round Trips

– B1900

– one stop via AL S, SAF, PUB, or non stop to PHX 98.0% Completion Factor

Departures: 1,227 Block Hours: 1,538
Operating Revenues: Passenger: 6,000 psgrs at $ 137.85 $ 827,100 Other (at 0.62% of passenger revenue) $ 5,128 Total Operating Revenues: $ 832,228 Operating Expenses: Direct: Aircraft and Hull Insurance $ 365,710

Fuel and Oil $ 837,810 Flying Operations $ 272,441 Maintenance $ 401,137 Total Direct Expenses: $ 1,877,098 Total Indirect Expenses: $ 914, 033 Total Operating Expenses $2, 791,131 Operating Loss ($1, 958,903 ) Profit Element (5.0% of Total Operating Expenses) $ 139,557 **Annual Compensation Requirement: $**  **2,098,460 Ap**  **pendix B**  **Page 1 of 2 Great Lakes A** 

**viation, Ltd. Provision of Essential A**  **ir Service at Clovis, New Mexico** 

**Summary**

**of Service To Be Provided** Effective Period : December 1, 2012, through November 30, 2014

. Scheduled Service : 1 2 round trips a week to Denver Aircraft ty

pe: Beechcraft B

- 1900D (19 passenger seats)

. Intermediate stops and upline service : One

- stop via ALS, LBL, SAF, or PUB

. Timing of flights: Flights must be well

-timed and well

- spaced in order to ensure full compensation. Annual compensation: $ 1,954,490 This rate assumes an annual completion factor of 9 8 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 : $ 1, 592 1 Weekly Compensation Ceiling: $ 38,208 2

1 Annual subsidy of $1,954,490 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 $1,592 per flight.**Ap pendix**  **B Page 2 of 2**  **Great Lakes A**

**viation, Ltd. Provision of Essential A**  **ir Service at Silver City/Hurley/Deming, New Mexico** 

**Summary**

**of Service To Be Provided** Effective Period : December 1, 2012, through November 30, 2014. Scheduled Service : 12 round trips a week to Denver or Phoenix

. Aircraft ty

pe: Beechcraft B

- 1900D (19 passenger seats)

. Intermediate stops and upline service : One stop via ALS, SAF, PUB, or nonstop to PHX Timing of flights: Flights must be well

-timed and well

- spaced in order to ensure full compensation. Annual compensation: $ 2,098,460 This rate assumes an annual completion factor of 9 8 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 : $ 1, 710 1 Weekly Compensation Ceiling: $ 41,040 2

1 Annual subsidy of $2,098,460 divided by 1,227 annual departures (313 service days x 4 flights per servic e day x 98 percent completion). 2 24 flights per week multiplied by $1,710 per flight.**Ap pendix**  **C 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 e ligibility for a flight that has not been completed, such as certain weather cancellations, only c ompleted flight s 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 j eopardize its entire subsidy c laim for the period in question. I f 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 Anal ys is 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 overfl y points for lack of traffic will not be compensated. In determining whether subsidy pay ment 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, e ither partially or complete ly, terminates or reduces pay ments 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 pay ments in the stipulated amounts or at the stipulated service levels, the carrier may c ease 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 pay ment. Subsidy c ontracts 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 thi s order beyond March 31, 2013

. The Department’s obligation for performance under this order beyond March 31, 2013 , is subject to the availability

o f appropriated funds from which pay ment for services can be made. No legal liability on the part of the Government for any pay ment may

arise for performance under this order beyond March 31, 2013 , until funds are made available to the Department for performance. If funds are not made available for performance beyond March 31, 2013 , the Department will provide notice in writing to the carrier. All claims for pay

ment must be submitted within 60 days of the last day of service provided under this order.