Order: 2014

- 6

- 9

Served June 17, 2014



### 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 June , 20 1 4

Essential Air Service at

ALAMOSA, COLORADO

CORTEZ, COLORADO DOCKET DOT

- OST

- 1997

- 2960

DOCKET DOT

- OST

- 1998

- 3508

under 49 U.S.C. 41731 et seq.



### ORDER RE

- SELECTING CARRIER AND

ESTABLISHING SUBSIDY RATES

Summary

By th is O rder, the Department is re

- selecting Great Lakes Aviation, Ltd. ( Great Lakes)

, to

provide Essential Air S ervice (EAS) at Alamosa and Cortez, Colorado

, using 19

- seat

Beech craft 1900D aircraft

, for the two

- year period from August 1, 201 4 , through

July 31, 201 6

, at an annual subsidy rate of $ 2,192,179 for Alamosa, and $2,270,297 for

Cortez

. 1

Background

By Order 2012

- 8

- 7

, issued on August 3, 2012 , the Department re

- selected Great Lakes to

provide EAS using 19

- seat Beechcraft 1900D aircraft, for the period from August 1, 2012,

through July 31, 2014 , with service from Alamosa providing 18 weekly nonstop round

trips to Denver International Airport ( Denver)

, and from Cortez providing 18 weekly

nonstop roun d trips to Denver at an annual subsidy rate of $2,078,676, at Alamosa, and

$2,240,766, at Cortez.

1 Such subsidy is calculated and distributed on a fiscal year basis, subject to the availability of funds.- 2

-

In anticipation of the end of the current rate term

, the Department issu ed Order 2014

- 2

- 3

,

on February 4, 2014

, soliciting proposals from air carriers interested in providing EAS at

Alamosa and Cortez , with subsidy support if necessary, for a new term beginning

August 1

, 201 4 . In response to that Order , we received one proposal

, from the incumbent

air carrier

, Great Lakes

.

That proposal as well as the complete public file for EAS at Alamosa and Cortez may be

accessed online through the Federal Docket Management System at

http://www.regulations.gov/ by entering Docket number “ DOT

- OST

- 1997

- 2960”

(Ala mosa) or “DOT

- OST

- 1998

- 3508” (Cortez) in the “ SEARCH for: Rules, Comments,

Adjudications or Supporting Documents:” field.

Proposal of Great Lakes

Great Lakes proposed to continue to provide three nonstop round trips for a two

- year term

from Alamosa and Cortez each weekday and weekend (1 8 total round trips per week per

community ) to Denver using 19

- seat Beech craft 1900D aircraft for an annual subsidy rate

of $ 2,192,179 at Alamosa and $2,270,297 at Cortez

.

Community Co mments

By letter dated March 18 , 201 4

, the Department solicited community comments regarding

Great Lakes’ proposal to continue providing EAS at Alamosa and Cortez

. The

communities elected not to submit formal comments regarding this air carrier

- selection

case.

Decision

In selecting a n air carrier to provide subsidized EAS not in Alaska, 49 U.S.C.

§ 41733(c)(1) directs us to consider five factors: (1) service relia bility; (2) contractual and

marketing arrangements with a larger air carrier at the hub; (3) interline arrangements with

a larger air carrier at the hub (4) community views; and (5) whether the air carrier has

included a plan in its proposal to market the service. In addition

, t he Consolidated and

Further Continuing Appropriations Act, 2012, Public Law No. 112

- 55, and continued by

the Full

- Year Continuing Appropriations Act, 2013, Public Law No. 113

- 6, and Continuing

Appropriations Act, 2014, Public Law No . 113

- 46 , provides that when selecting a n air

carrier to provide EAS, the Department may consider the relative subsidy requirements,

thus codifying a factor that we have considered since the inception of the program.

Given the facts of this carrier

- selec tion case, we have decided to re

- select Great Lakes for a

new, two

- year term, from August 1, 2014, through July 31, 2016. Great Lakes has been

providing E AS at Alamosa and Cortez for many years, and the community raised no

objections to the re

- selection of the incumbent air carrier. Furthermore, Great Lakes

provides access to the national and global air transportation system through the use of its

interline e

- ticketing agreements with American Airlines, Delta Air Lines, Frontier Airlines

, United Airlines, and US Airways. W e also find that both Great Lakes’ service and subsidy

levels are reasonable.- 3

-

We shall make this selection of Great Lakes at Alamosa and Cortez contingent upon the

Department’s receiving properly executed certifications from the air carrier that it is in

compliance with the Department’s regulations regarding drug

- free workplaces and

nondiscrimination, as well as the regulations concerning lobbying activities

. 2

Note Regarding Eligibility

The Department of Transportation and Related Agencies Appropriations Act, 2000,

prohibits the Department from subsidizing EAS to communities located within the 48

contiguous States receiving per passenger subsidy amounts exceeding $200, unless the

communities are located more than 210 miles from the nearest large or medium hub. 3 We

note that Cortez is exempt from the $200 per passenger statutory limit because it is more

than 210 miles from the nearest large or medium hub airport; h owever, Alamosa is within

210 miles of Albuquerque International Sunport , a medium hub , and therefore subject to

the $200 cap

. The Department fully expects both Alamosa and Great Lakes to work

cooperatively to ensure subsidy rates remain below the $ 200 pe r passenger level to remain

eligible for the EAS program. 4

We also wish to remind both communities about the recently enacted law that established a

new subsidy cap at $1,000 per passenger regardless of distance from hub airports. 5 The

Department fully expects all parties involved to work cooperatively to ensure subsidy rates

remain below the $1,000 per passenger level to remain eligible for the EAS program.

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 tha t would cause us to questio n the air carrier's fitness at this time. We have

contacted the Federal Aviation Administration, and it has raised no concerns that would

negatively affect our fitness finding s . We therefore conclude that the air carrier is reliable

and remain s fit to conduct the operations proposed here.

This Order is issued under authority delegated in 49 CFR Part 1.25a(b)

.

2 The certifications are internet accessible at: http://www.dot.gov/policy/aviation

- policy/small

- community

rural

- air

- service/essential

- air

- service

. 3 Congress first established the $200 ceiling under P.L. 101

- 164 for fiscal year 1990, and reestablished it in

fiscal years 1994

- 1999. The ceili ng was made permanent by P.L. 106

- 69, the Department of Transportation

and Related Agencies Appropriations Act of 2000.

4 On May 1, 2014, a Notice of Proposed Enforcement Policy on the $200 per passenger subsidy cap was

published in the Federal Register (Volume 79, Issue 84) . It outlined the Department’s proposed policy on

this issue, which would use traffic data from October 1, 2014, through September 30, 2015

, to measure

compliance. The Department has solicited public comments on the policy and they are due June 30, 2014.

Refer to www.regulations.gov and search “DOT

- OST

- 2014

- 0061” for more information.

5 See 49 USC § 41731(a)(1)(C).- 4

-

ACCORDINGLY,

1. We re

- select Great Lakes Aviation, Ltd. to provide Essential Air S ervice at Alamosa

and Cortez, Colorado

, at the service levels and subsidy rate s as described in Appendix B

, for the period from August 1, 2014, through July 31, 2016 ;

2. We direct Great Lakes Aviation, Ltd.

, to retain all books, records, and other source and

summary documentation to support claims f or 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 air carrier may forfeit its compensation for any claim that is not

supported under the terms o f this Order ;

3 . We f i nd that Great Lakes Aviation, Ltd. continues to be fit, willing and able to operate

as a commuter air carrier

, and capable of providing reliable Essential Air S ervice at

Alamosa and Cortez, Colorado ;

4. These docket s will remain open pending further Department action ; and

5

. The Department will serve cop i es of this Order on the civic offic i als of Alamosa and

Cortez, Colorado, the Manager of San Luis Valley Regional Airport, the Manager of

Cortez Municipal Airport, Great Lakes Av iation, Ltd.

, and the service list for this

docket.

B y:

SUSAN L. KURLAND

Assistant Secretary for

Aviation and International Affairs

(SEAL)

An electronic version of this document is ava ilable at

http://www.regulations.govAppendix A

Page 1 of 2

Great Lakes Aviation, Ltd.

Annual Compensation Requirements for EA S at

Alamosa, Colorado to Denver (DEN)

Three Round Trips

– B1900

98.0% Completion Factor

Departures: 1,840

Block Hours: 1,810

Revenue Passenger Miles: 2,640,250

Available Seat Miles: 6,257,840

Operating Revenues:

Passenger: 14,750 psgrs at $107.72 $1,588,870

Other (at 0.62% of passenger revenue) $9,851

Total Operating Revenues: $1,598,721

Operating Expenses:

Direct: Aircraft and Hull Insurance $365,710

Fuel and Oil $990,359

Flying Operations $357,004

Maintenance $639,719

Total Direct Expenses: $2,352,792

Total Indirect Expenses: $1,257,589

Total Operating Expenses $3,610,381

Operating Loss ($2,011,660)

Profit Element (5.0% of Total Operating Expenses) $180,519

Annual Compensation Requirement: $2,192,179

Representative Schedule

*** [ALS] Alamosa, Colorado ***

DEPARTURES

FLT TO DPT ARR EQP FREQ

7263 DEN 6:00 7:13 BE1 12345

7263 DEN 8:00 9:00 BE1 6

7264 DEN 10:45 11:45 BE1 12345 7

7269 DEN 16:28 17:28 BE1 12345 7

ARRIVALS

FLT FROM DPT ARR EQP FREQ

7305 DEN 12:15 13:13 BE1 12345

7268 DEN 15:20 16:18 BE1 12345 7

7258 DEN 20:58 21:56 BE1 6

7258 DEN 20:58 21:56 BE1 12345 7

No Upline Scheduling RestrictionsAppendix A

Page 2 of 2

Great Lakes Aviation, Ltd.

Annual Compensation Requirements for EAS at

Cortez, Colorado to Denver (DEN)

Three Round Trips

– B1900

98.0% Completion Factor

Departures: 1,840

Block Hours: 2,347

Revenue Passenger Miles: 4,656,500

Available Seat Miles: 9,718,880

Operating Revenues:

Passenger: 16,750 psgrs at $128.75 $2,156,563

Other (at 0.62% of passenger revenue) $13,371

Total Operating Revenues: $2,169,933

Operating Expenses:

Direct: Aircraft and Hull Insurance $365,710

Fuel and Oil $1,263,357

Flying Operations $462,922

Maintenance $732,496

Total Direct

Expenses: $2,824,486

Total Indirect Expenses: $1,404,305

Total Operating Expenses $4,228,791

Operating Loss ($2,058,857)

Profit Element (5.0% of Total Operating Expenses) $211,440

Annual Compensation Requirement: $2,270,297

Representative Schedule

*** [CEZ] Cortez, Colorado ***

DEPARTURES

FLT TO DPT ARR EQP FREQ

7261 DEN 6:00 7:13 BE1 12345

7261 DEN 6:45 7:58 BE1 6

7263 DEN 8:05 9:18 BE1 1234567

7267 DEN 16:17 17:30 BE1 12345 7

ARRIVALS

FLT FROM DPT ARR EQP FREQ

7262 DEN 8:35 21:55 BE1 1234567

7266 DEN 14:43 16:03 BE1 12345 7

7267 DEN 16:45 18:05 BE1 6

7270 DEN 20:56 22:16 BE1 12345 7

No Upline Scheduling RestrictionsAppendix B

Page 1 of 2

Great Lakes Aviation, Ltd.

Essential Air Service to be provided at Alamosa, Colorado

DOT

- OST

- 1997

- 2960

Effective Period : August 1, 2014 , through July 31, 2016

Scheduled Service : Three nonstop round trips each weekday and weekend (1 8 total round trips

per week) to Denver

Aircraft : 19

- Seat Beechcraft 1900D

Rate per Eligible Flight: $1, 191 1

Weekly Ceiling : $ 42,876 2

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 co mpleted, 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 applicable

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 replacement carrier to provide service on these routes. The carrier must complete all flights that can be

safely operat ed; 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 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 carrier 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 do not constitute a total

or partial reduction or cessation of payment.

Subsidy contract are subject to, and i ncorporate 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 avai lable for performance under this order beyond September 30, 2014. The Government’s

obligation for performance under this order beyond September 30, 2014, is subject to the availability of funds from

which payment for services can be made. No legal liabil ity on the part of the Government for any payment may

arise for performance under this order beyond September 30, 2014, until funds are made available to the Department

for performance. If sufficient funds are not made available for performance beyond Sep tember 30, 2014, 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, claim s 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 $2,192,179 divided by 1,840 annual departures (313 service days x 6 flights per service

day x 98 percent completion).

2 36 flights per week multiplied by $1,191 per flight.Appendix B

Page 2 of 2

Great Lakes Aviation, Ltd.

Essential Air Service to be provided at Cortez , Colorado

DOT

- OST

- 1998

- 3508

Effective Period : August 1, 2014, through July 31, 2016

Scheduled Service : Three nonstop round trips each weekday and weekend (18 total round trips

per week) to Denver

Aircraft : 19

- Seat Beechcraft 1900D

Rate per Eligible Flight: $1,234 1

Weekly Ceiling : $4 4,424 2

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 this rate, it must first notify the Office of Aviation Analysis in wri ting 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 t hat 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 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 service levels, the carrier may cease to provide service to that

specific location without regards to any r equirement 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.

Subsidy contra ct 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 may not be available for performance under this order beyond September 30, 2014. The Government’s

obligation for performance under this order beyond September 30, 2014, is subject to the availability of funds from

which payment for services can b e made. No legal liability on the part of the Government for any payment may

arise for performance under this order beyond September 30, 2014, until funds are made available to the Department

for performance. If sufficient funds are not made available fo r performance beyond September 30, 2014, 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 clai med. 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 $2,270,297 div ided by 1,840 annual departures (313 service days x 6 flights per service

day x 98 percent completion).

2 36 flights per week multiplied by $1,234 per flight.