Order 20 1 5

- 4

- 12 Served: April 17 , 20 1 5



### 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 CARRIER

Summary By this O rder, the Department is selecting Boutique Air (Boutique) to provide subsidized

E ssential A ir S ervice (EAS) at Carlsbad, New Mexico, for the two

- year period beginning
June 1, 201 5, through May 31, 2017 , for an annual subsidy rate of $ 2,410,695

. 1

Background

B y Order 201 3

- 5

- 5 ( May 6 , 20 1 3 ) , the Department re selected Pacific Wings, L.L.C., d/b/a/

New Mexico Airlines (New Mexico Airlines) to pro vide subsidized EAS at Carlsbad from
June 1, 2013, through May 31, 201 5 . Under that O rder, New Mexico Airlines was selected

to provide 12 nonstop round trips each week between Carlsbad and Albuquerque (ABQ)

, utilizing single

- engine, 9

- passenger Cessna Grand Caravan (C

- 208B) turboprop aircraft for an annual subsidy rate of $ 1, 397,081

.

In anticipation of the end of the current rate term, t he Department issued Order 20 1 4

- 1 2

- 11 (December 1 6 , 201 4 ) , soliciting proposals to provide EAS at Carlsbad , wi th subsidy support if necessary

. In response to that request, we received one proposal from Boutique . The proposal is summarized below. The complete proposal is available online at www.regulations.gov by searching for docket: DOT

- OST

- 2002

- 12802.

Boutique Air Boutique submitted a proposal with two service options. Under both o ptions, flights would be operated with single

- engine, 9

- passenger Pilatus PC

- 12 aircraft. The first option would provide 12 weekly nonstop round trips to ABQ for an annual subsidy of $ 2,081,503

. The

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

CARLSBAD, NEW MEXICO

Under 49 U.S.C. 41731 et seq

. Docket DOT

- OST

- 2002

- 12802- 2

-

second option would provide 12 weekly nonstop round tri ps to the Dallas/Ft. Worth International Airport ( DFW ) . This option would require an annual subsidy of $2, 739,886.

Community Comments On January 21, 2015 , we solicited community comments regarding the carrier

- selection

deci sion at Carlsbad. On February 23 , 201 5 , we received letters from the Carlsbad Air

Service Committee , members of the Carlsbad City Council, and Carlsbad Mayor Dale Janway. All letters express support for the selection of Boutique . However, the community requested that instead of either of the two service options proposed by Boutique, the community would prefer one round trip per day to each ABQ and DFW.

Decision

The carrier

- selection decision at Carlsbad is straightforward. Boutique was the only carrier to submit a proposal

, it meets all of the requirements for EAS 2 and the service level and subsidy request are reasonable. In addition, Boutique has received the unanimous support of the community. In regard to the community’s request for one round trip each to ABQ and DFW, t he Department contacted Boutique to see if that service pattern would be possible and what subsidy would be required. In response, Boutique stated that it would be possible, and the required subsidy would be the sum of one

- half of each of the proposed

ser vice options.

Therefore, the Department has decided to select Boutique to provide EAS at Carlsbad, provid ing 6 weekly nonstop round trips to ABQ and 6 weekly nonstop round trips to DFW, for a combined annual subsidy of $ 2

, 410

, 695 (calculated as one

- half o f Boutique’s proposed ABQ subsidy request of $2, 081,503 plus one

- half of Boutique’s proposed DFW subsidy of $2, 739,886 )

. 3 The Department shall make th is selection at Carlsbad contingent upon receiving properly executed certifications from Boutique that it is in compliance with the Department’s regulations regarding drug

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

Note Regarding Eligibility

T he Department wishes to remind Boutique and Carlsbad about the recently enacted law that established a new subsidy cap of $1,000 per passenger, regardless of distance from hub airports. 4 The Department expects both the community and air carrier to work cooperatively to ensure subsidy rates remain in compli an ce with the $1,000 subsidy per passenger cap to remain eligible for the EAS program.

Service Transition The Department expect s New Mexico Airlines and Boutique to work together to make a

smooth transition at Carlsbad. In that regard, before New Mexico Airlines suspends its

2 Boutique’s proposal uses single

- engine aircraft, and since Pacific Wings d/b/a New Mexico Airlines has

served Carlsbad for at least 60 consecutive o perating days at any time since October 31, 1978, the community

is no t guaranteed aircraft with at least 2 engines and 2 pilots. Thus, Boutique’s proposal meets basic EAS requirements. See 49 USC § 41732(b)(5)

. 3 Proposed ABQ subsidy = $2,081,503; Propo sed DFW subsidy = $2,739,886. ($2,081,503 / 2) + ($2,739,886 / 2) = $2,410,695.

4 See 49 U.S.C. § 41731(a)(1)(C).- 3

-

service it must notify any passengers holding reservations for travel after the suspension date, and assist those passengers in making alternate air transportation arrangements, or provide a refund 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 we may subsidize it to provide EAS

. Boutique is subject 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 t o provide EAS in th i s market

at this time. We have contacted the Federal Aviation Administration, and it has raised no

concerns that would ne gatively affect our fitness finding in this market . We therefore

conclude that the carrier is reliable and remain s fit to conduc t the operations proposed here.

This O rder is issued under authority delegated in 49 CFR Part 1. 25a(b)

.

ACCORDINGLY,

1. The Department select s Boutique Air to provide E ssential A ir S ervice at Carlsbad, New Mexico, and establishes the service levels and subsidy rates

, as described in Appendix C, for the period from June 1, 201 5, through May 31, 2017 ;

2 . The Department directs 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 rep resentatives 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 o r disposed of must be retained. The carriers may forfeit its compensation for any claim that is not supported under

the terms of this O rder;

3

. The Department find s Boutique Air continues to be fit, willing and able to operate as a

commuter air carrier and capable of providing reliable E ssential A ir S ervice at Carlsbad, New Mexico;

4

. Th is Docket will remain open until furt her O rder of the Department;- 4

-

5

. The Department will serve copies of this Order on the Mayor and Airport Manager of Carlsbad, New Mexico, New Mexico Airlines and Boutique Air

.

By:

BRANDON M. BELFORD Deputy Assistant Secretary for

Aviation and International Affairs

(SEAL)

An electronic version of this document is available i n the Federal Docket Management System (FDMS) at http://www.regulations.govAppendix A



# AREA MAP

This map is provided by Sabre ® AirVision TM Profit Essentials and is being used with express permission of the copyright holder,

Sabre Airline Solutions®.Appendix B Page 1 of 2Appendix B Page 2 of 2

Subsidy Calculation

2 RT One

- half
ABQ $2,081,503 $1,040,752

DFW $2,739,886 $1,369,943

Total Annual Subsidy: $2,410,695Appendix C Page 1 of 2

Boutique Air
Provision of Essential Air Service at Carlsbad, New Mexico Summary of Service To Be Provided

Effective Period : June 1, 20 1 5 through May 31, 201 7

. Scheduled Service : 6 nonstop round trips per week to Albuquerque , and; 6 nonstop round trips per week to Dallas/Ft. Worth

. Aircraft type: Pilatus PC

- 12 (9

- seats). Intermediate stops and upline service : No service to any intermediate or upline points are contemplated under the terms of the carrier’s proposal; accordingly, no such service may be provided on subsidized flights without prior Department approval. Timing of flights: Flights must be well

- timed an d well

- spaced in order to ensure full compensation. Annual compensation: $ 2,410,695 1 Subsidy Rate per Flight : $ 1, 971 2

Weekly Compensation Ceiling: $ 47,304 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 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 be en 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 jeopar dize 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 wr itten 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 ope rated; 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 me t 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 locat ion 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 t o any requirement for notice of such cessation. Those adjustments in the

1 See Appendix B.

2 Annual compensation of $ 2,410,695 divided by 1,22 3 annual departures (24 we ekly departures x 52 weeks x 98 % completion factor).

3 24 flights per week multiplied by $1, 971 per flight.Appendix C Page 2 of 2

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 pa ragraph.

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 30 , 2015 , 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 September 30 , 2015 , until funds are made available to the Department for performance. If sufficient funds are not made availab le for performance 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 31st; August claims must be submitted by November 30th, and so on.