CITY Of MERCED 

"Gateway to Yosemite" 

May 5, 2015 

Mr. Kevin Schlemmer 

Chief EAS & Domestic Analysis Division, X-53 

Office of Aviation Analysis, Room W86-309 

U.S. Department of Transportation 

1200 New Jersey Avenue, S.E. 

Washington, DC 20590 

Re: Order No. 2014-5-9, Order Requesting Proposals 

Dear Mr. Schlemmer, 

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I am pleased to write as the City's administrative head of the Merced Regional Airport 

(MCE) to convey comments regarding selection of a commercial air carrier to provide 

Essential Air Service for the community and region. 

As you know, the City carefully reviewed the original proposals submitted by Boutique 

Air, Great Lakes Aviation, Ltd., Makani Kai Air (dba Wine Country Express), Mokulele 

Airlines, and Seaport Airlines, Inc. in response to the Department of Transportation 

(DOT) Order 2014-5-9 Requesting Proposals for Essential Air Service (EAS). 

A subcommittee comprised of three representatives of the Merced Regional Airport 

·Authority (MRAA), two members of airport management, and a member of the public 

interviewed executives of the five air carriers on August 7, 2014. Representatives of 

Mokulele Airlines and Seaport Airlines met with the subcommittee for a second 

discussion on September 16, 2014. The Airport Authority convened on August 13, and 

September 23, 2014, during which MRAA commissioners, airport and City of Merced 

staff, and interested community members discussed the proposals. My letter to you of 

September 29, 2014, expressed the desire of the City to work with Great Lakes Airlines 

for establishment of service between MCE and the Los Angeles International Airport 

(LAX) with a regional jet on an accelerated basis. 

678 West 18th Street o Merced, Caliiornia 95340 
May 5, 2015 

Page 2 

Since that time, the City has been in discussion with Great Lakes Airlines, as the only 

provider offering two-engine aircraft and a pressurized cabin. As you know, the 

discussions with Great Lakes in the past few months shifted to a focus on the delivery of 

service in Brasilia aircraft, but without a firm start of service date or range. On March 26, 

2015, Great Lakes officials corresponded with you seeking to formally alter the bid to 

provide for service in EMB-120 Brasilia aircraft to LAX rather than regional jet service to 

Denver. The DOT subsequently extended the opportunity to amend initial proposals to 

the other four companies originally interested in providing service to MCE. Of the group 

of four, Boutique Air and Seaport Airlines, Inc., also elected to submit revised proposals. 

On April 21, 2015, the Airport Authority subcommittee interviewed company executives 

from Boutique Air, Great Lakes Airlines, and Seaport Airlines, Inc. The options were 

discussed that evening at the monthly Airport Authority meeting and those opinions 

have been conveyed to me. 

Recommendation 

Following careful evaluation of the opportunities presented by the airline companies, the 

City of Merced has concluded that its interests and those of the region will be best 

served by Boutique Air. Boutique has dramatically expanded its operational scope and 

points of service in the past eight months since the original proposals were submitted. It 

has established a positive track record in the EAS communities it serves and it recently 

was recommended by additional communities to serve EAS routes. The Pilatus PC-12 

aircraft is capable of providing comfortable and efficient service between MCE and LAX 

given its pressurized cabin and superior cruise speed capabilities. The airline's 

performance at other EAS sites for reliability of the service and growth of passenger 

numbers is impressive and the commitment to engage in aggressive marketing to the 

populace in Merced and the broader region is also highly desirable. The additional 

points of service beyond LAX, to Oakland International Airport (OAK) and to McCarran 

International Airport in Las Vegas (LAS), represent a very attractive package that we 

believe will well serve Merced and the region. In addition, the pending final authorization 

from TSA to enable Boutique to fly. from sterile to sterile locations is essential to the 

City's recommendation. 

We also note that over 50% of the passengers departing the Merced Regional Airport 

connect at LAX through code share and/or interline mechanisms to a larger carrier for 

travel to a final destination. We recognize that the percentage may well be higher since 

passengers transferring to a carrier such as Southwest Airlines would not be 

discernable since Southwest does not utilize inter-line arrangements. The current 

absence of a code share with a major carrier and interline agreements is of concern, but 

we believe that Boutique will work effectively with passengers to make the transition as 

convenient as possible. In addition, Boutique participates in the major online 

reservations sites. 
May 5, 2015 

Page 3 

Boutique also has presented a pricing strategy that, when coupled with its planned 

aggressive marketing, should yield significantly higher enplanement numbers. We are 

confidant that with this new carrier the EAS program numbers will improve drastically 

and be sufficient to exceed the average of 10 passengers per service day minimum 

required for EAS eligibility. We note that the federal fiscal year is nearly half over and 

·that the DOT enplanement numbers for MCE for the period October 2014 through April 

2015 are not at the required levels. Boutique has stated that it could begin service at 

MCE 60 - 90 days after award of the contract. We will work with Boutique to build as 

many enplanements as possible in the months remaining in the fiscal year toward 

achieving maximized traffic levels. Moreover, Boutique recently hired a marketing 

manager and has committed to investing $30,000 or more into the expanded MCE 

market area. It also is interested in marketing Merced and the surrounding attractions 

such as Yosemite National Park to prospective passengers in each of the destination 

cities. The bid by Boutique also will satisfy the DOT requirement that the per passenger 

subsidy not exceed $200 as of September 30, 2015. 

Pilot shortages pose a critical nation-wide problem that unfortunately has affected Great 

Lakes Airlines severely. The shortage situation is also affecting Seaport Airlines, Inc., in 

one eastern market. Boutique Air is seeking to retain its pilots through its attractive 

employment compensation packages and it anticipates being able to continue to 

operate with a full cadre of pilots, many on a career employee basis. 

Importance of New EAS Contract 

With the advent of service with a new carrier offering reliable service to highly desirable 

destinations, Merced and the surrounding region of over one million population will 

benefit even more greatly from the EAS service and we are confident that reliability of 

service and the number of passenger enplanements will be restored to satisfy and 

exceed the DOT EAS standard. As you know, the airport consistently generated much 

higher passenger numbers until recent years. 

It is also important to note that a significant new market area has emerged with the 

recent cancellation of passenger service from Modesto to LAX and San Francisco 

International Airport (SFO). Following the service cancellation, which increased our 

service area population to over one million, a growing number of new passengers from 

Tracy, Manteca, Modesto, and Turlock, are expressing interest in flying out of the 

Merced Regional Airport. We believe that targeted marketing to these areas to be 

launched following the award of a new contract will yield notably higher passenger 

numbers and will serve a regional need, coupled with the provision of reliable service. 

In addition, the Skywest service with Brasilia aircraft between Fresno and LAX will 

terminate in early May 2015. It is our understanding that the service will be replaced 
May 5, 2015 

Page4 

with regional jet flights to LAX each day operating with lesser frequency, potentially 

creating an additional market to the south. It is also important to note that reliable air 

service will help minimize congestion on the heavily traveled highways in the region. 

Comments Regarding Air Service Bids 

In offering comments, we are cognizant of the published criteria utilized by DOT in 

evaluating bids which includes the factors of service reliability, contractual and 

marketing arrangements with a larger carrier at the hub, interline arrangements with a 

larger carrier at the hub, and community views. 

We also note our concern about the prospect of waiving the guarantee to EAS air 

service provided by larger aircraft with two or more engines and using two pilots should 

a provider operating smaller single engine aircraft be selected and provide service for 

60 consecutive service days, as provided in U.S.C. Section 41732(b)(5). However, at 

this point in the discussions, we believe that a shift to a carrier offering service in 

smaller single engine aircraft is necessary in order to recover reliability in service and 

increase passenger numbers. 

Great Lakes Airlines 

The City until recently believed that the region and local community would be best 

served by the amended service bid by Great Lakes Airlines. Great Lakes is the only 

Part 121 carrier and the sole contending service provider that operates larger, twin 

engine aircraft with a pressurized cabin which is more suitable for flights into LAX. It 

offers connectivity to other major airlines for continuing travel to a final destination 

through code share arrangements with United Airlines and interline agreements with 

most of the major carriers. 

We also note, however, that Great Lakes unfortunately has provided poor reliability of 

service due to dramatic shortages of available crew resulting from regulatory changes 

raising to 1,500 the number of flight hours needed for first officers to attain ATP 

credentials. This has resulted in operation of the Beech 1900 with only 9 of its 1 9 seats 

to enable the airline to operate under Part 135 for the purpose of first officer flight hour 

standards. This situation continues to pose challenges for Great Lakes, despite its 

continuing best efforts to recruit pilots to address the crew shortfall. It is clear to us, that 

without greater reliability of service and additional seat capacity above the current nineseat configuration of the Beech 1900, the assurance of adequate flight crew availability, 

and a near term date for start of Brasilia service, that the City cannot enplane an 

adequate number of passengers to satisfy EAS standards. 
May 5, 2015 

Page 5 

In addition, the per passenger subsidy calculation as bid for the first year pf the contract 

is $397.02 as a result of basing the bid on the nine seat configuration of the Beech 

1900. We are aware of the requirement that the per passenger subsidy not exceed 

$200.00 by September 30, 2015. We are unable to estimate when the service in Brasilia 

aircraft would sufficiently reduce the per-passenger subsidy without a clear start 

window. 

Great Lakes has committed to expend an estimated $30,000 in cash for marketing to 

make the Brasilia service successful, along with the personal involvement of company 

leadership in community events and meetings with key business leaders in the region, 

as part of major efforts to restore confidence in the reliability of the air service. 

While shifting to Brasilia service could be very attractive to the flying public and could 

significantly bolster the economic development prospects for Merced and the 

surrounding area, the inability to secure an estimated start date or an estimated window 

for start of service contributes significantly to our recommendation for Boutique Air. 

I also note that we have enjoyed working with the Great Lakes leadership and the 

excellent MCE station staff over the past several years and we look forward to working 

with Great Lakes for the remainder of the time it serves MCE. 

Seaport Airlines Inc. 

We very much appreciated the revised bid from Seaport Airlines, Inc., and we recognize 

the strength of the passenger enplanement numbers experienced to date at Visalia 

(VIS) since the beginning of service with Seaport. Seaport also has committed $25,000 

or more for marketing purposes for MCE service. We remain concerned, however, that 

the unpressurized and comparatively slower Caravan aircraft is not the optimal airplane 

for flight service to Los Angeles from Merced and we also believe that LAX represents 

the more convenient airport over Burbank Bob Hope Airport for passengers seeking to 

transfer to another carrier for travel to a final destination. In addition, we understand that 

Seaport could not begin service at MCE until October 2015. 

Conclusion 

We share the common goal of restoring the enplanement numbers at the Merced 

Regional Airport through reliable and affordable air service and we appreciate working 

in partnership with you in furtherance of this objective. The City believes that the 

proposed service from Boutique Air will prove beneficial to the region and will be highly 

used by travelers. We also recognize the potential benefits of the service to business 

travelers, especially faculty and staff from UC Merced who regularly travel by car to 
May 5, 2015 

Page 6 

meetings in California, especially to Oakland and Los Angeles. We also note that 

historically some of the largest passenger counts were generated on flights to Las 

Vegas. The airport is critical to the City's ability to continue to attract new business 

interests. This boost to economic development is of vital importance to Merced, which is 

a· very diverse community which continues to face long-term economic challenges. 

Thank you very much for your review of this material and please do not hesitate to 

contact Janet E. Young, Interim Airport Manager at tel: 209-385-6874 (email: 

youngj@cityofmerced.org), should you have questions. 

Sincerely, 

I OL--r- c/~ . 6\..D-,~-~rz..__ 

John M. Bramble 

City Manager 

Cc: Michael Wegley, Director of Water Resources and Reclamation and Airport 

Janet E. Young, Interim Airport Manager 

_ Larry Morelock, Chair, Merced Regional Airport Authority