Order: 2014

- 4

- 19

Served April 22, 2014



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 22 nd day of April , 20 1 4

Essential Air Service at

CLOVIS, NEW MEXICO DOCKET DOT

- OST

- 1996

- 1902

under 49 U.S.C. § 41731 et seq.



### ORDER SELECTING CARRIER AND

ESTABLISHING SUBSIDY RATES

Summary By th is O rder, the Department is selecting Boutique Air

, to provide Essential Air S ervice ( “ EAS ” ) at Clovis, New Mexico

, for the two

- year period beginning June 1, 2014 , through May 3 1 , 201 6 . Boutique Air will provide Clovis with 18 nonstop round trips each week to Dallas/Fort Worth International Airport ( “ DFW ” ), using 9

- seat Pilatus PC

- 12 (“PC

- 12”) aircraft, at an annual subsidy rate of $ 3,179,857

. 1

Background By Order 2012

- 11

- 33

, issued on November 29, 2012 , the Department re

- selected Great

Lakes Aviation, Ltd. ( “ Great Lakes ” ) to provide EAS at Clovis with 12 one

- stop round trips per week between Clovis and Denver

, via Alamosa, Colorado; Liberal, Kansas; Santa Fe, New Mexico; or Pueblo, Colorado, using 19

- seat Beech craft 1900D aircraft, for the period from December 1, 2012 , through November 30, 2014 , at an annual subsidy rate of $ 1, 954,490

.

On December 10, 2013, Great Lakes filed a 90

- day notice of its intention to terminate its scheduled air transportation service at Clovis, effective March 10, 2014. In that notice,

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

funds.- 2

-

Great Lakes explained that it had offered the community several service options over the years, including different hubs, and the community currently takes the posit ion that DFW would most likely provide the best air service options for the community

. While Great

Lake s agrees with the community, it did not operate service at DFW at the time

, and

therefore the air carrier filed notice to terminate its operations at Clovis.

In response to Great Lakes’ notice to terminate its operations at Clovis, the Department

issued Order 2014

- 1

- 10, on January 14, 2014, prohibiting Great Lakes from terminating

service at the community for 30 days beyond the end of the air carrier’s 90

- day notice period, i.e. April 9, 2014. Additionally by that O rder, the Department requested proposals from air carriers interested in providing EAS at Clovis, with subsidy support if necess ary. In response to that Order, the Department received proposals from Boutique Air

, SeaPort Airlines, Inc. (“SeaPort”), and On the Way

– Clovis Cabs.

A copy of those proposals , as well as the complete public file for EAS at Clovis, may be

accessed on line through the Federal Docket Management System at http://www.regulations.gov , by entering “DOT

- OST

- 1996

- 1902” in the SEARCH for: Rules, Comments, Adjudications or Supporting Documents:” field.

Termination of Service by Great Lakes On January 31, 2013, Great Lakes terminated all service to Clovis, leaving the community without scheduled air transportation.

Proposal of Boutique Air Boutique Air proposed to provide the community with 24 nonstop round trips per w eek t o DFW, using 9

- seat Pilatus PC

- 12 aircraft

, at an annual subsidy request of $ 3,888,274

.

Proposal of SeaPort Airlines, Inc.

SeaPort proposed to provide 12 one

- stop round trips per week to Dallas Love Field via Abilene, Texas, using 9

- seat Cessna Caravan aircraft, at an annual subsidy request of $2,813,992

.

Proposal of On the Way

– Clovis Cabs On the Way

– Clovis Cabs proposed three round trip s on ground transportation using a 47

- passenger charted bus and/or two 15

- passenger vans, with service to Albuquerque International Sunport, at an annual subsidy request of $1,800,000.

Community Comments By letter dated February 20 , 201 4

, the Department r equested community comments regard ing this EAS case. In response, we received a letter from the Honorable David

Lansford , Mayor of Clovis . That letter explained that the Clovis City Commission

recommends Boutique Air to serve the Clovis market. Mayor Lansford explained that his

constituents have frequently expressed a desire for service to the Dallas /Fort Worth Metroplex , and the aircraft used by Boutique Air , a 9

- seat PC

- 12

, presents the safest and most comfortable options for the community

. Additionally by that letter, Mayor Lansford- 3

-

expressed that the community i s supportive of service consisting of fewer than 24 round trips per week

.

Subsequent Developments On April 10, 2014, Boutique Air filed an amendment to its proposal by adding a second option consisting of 18 round trips to DFW for a two

- year term

, using 9

- seat PC

- 12 aircraft, at a subsidy request of $3,179,857. SeaPort was afforded an opportunity to amend its proposal, but declined to make any adjustments to its original proposal

.

Decision In selecting an air carrier to provide subsidized EAS not in Alaska, 49 U.S.C. § 41733(c)(1) directs us to consider five factors: (1) service reliability; (2) contractual and marketing arrangements with a larger air carrier at the hub; (3) interline arrang ements 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

, the Consolidated and Further Continuing Appropriations Act, 2012, Public Law No. 112

- 5 5, 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 an air carrier to provide EAS, the Department may consider the relativ e subsidy requirements, thus codifying a factor that we have considered since the inception of the program.

Regarding On the Way

– Clovis Cabs, it proposes ground transportation, which is not responsive to the Department’s request for proposals for air s ervice. Moreover, the community is entitled to air service, which On the Way

– Clovis Cabs would not provide. Therefore, we will not consider this application further.

As between Boutique Air and Sea P ort, we have decided to select Boutique Air . Sea P ort proposed two one

- stop round trips a day with 9

- seat Cessna Caravans. In our request for proposals, we requested service levels that were comparable to the then

- existing service levels, e.g., two round trips a day with 19

- seat aircraft, or more frequencie s with 9

- seat
aircraft. 2 Not only did Sea P ort not propose increased frequencies with 9

- seat aircraft, the carrier also proposes an intermediate stop, further reducing the capacity available to Clovis

passengers. Assuming that one half of the seats would be available to Clovis passengers and one half for Abilene passengers ( boarding at the intermediate stop), Clovis effectively would have 4 1⁄2 seats available per flight or 9 outbound seats per day, contrasted with the 38 seats per day that we had requested (2 departures x 19 seats). Further, the community did not support Sea P ort ’s proposal

.

Regarding Boutique Air , t he Mayor of C lovis states that the community fully supports

B outique Air’s proposa l

. However, perhaps recognizing that Boutique Air ’s original proposal requires nearly $1 million more than Sea P ort ’s proposal , the community on its

2 In Order 2014

- 1

- 10, the Department solicited service consistent with what Clovis received, which was 12 weekly round trips with 19

- seat aircraft. Selecting Boutique to provide 6 additional weekly round trips more than what Clovis received, but with 9

- seat aircraft instead of 19

- seat aircraft will accommodate the current

passeng er enplanements of approximately 5 per day while giving the community room to grow its enplanements beyond that.- 4

-

own motion stated that it was willing to accept fewer than 24 round trips a day. T he

difference between SeaPort ’ s bid of 12 one

- stop round trips per week at $2,813,992 is only slightly less than Boutique Air’s amended proposal of 18 nonstop round trips per week at $ 3,179,857

.

When possible, and within budgetary limitations, we accede to a community’s

recommendat ions for its air carrier choice. As discussed above, Clovis recommends the selection of Boutique Air. We are also highly cognizant of the fact the Clovis is currently without any scheduled air service and has been since February 1, 2014

. Under these circumstances, w e will select Boutique Air ’s amended proposal of 18 nonstop round trips per week, for an an nual subsidy of $ 3,179,857

.

About Boutique Air Boutique Air was formed as a corporation under the laws of the State of California on

June 1, 2007. The company was originally called Shasta Flyers Aviation, Inc. The air carrier has a successful record of performing on

- demand charters, pilot training, and air attack p atrol services for government sectors, such as the U.S. Forest Service, Bureau of Land Management, and California Department of Forestry and Fire Protection. On September 20, 2011, Shasta Flyers was purchased by Open Trip, Inc., which subsequently changed the name of the company to Boutique Air, Inc.

On July 2, 2012, Boutique Air, which at the time was operating as an on

- demand air taxi serving the Northern California area and operating under Part 298 of the Department’s regulations and Part 135 of the Federal Aviation Regulations, filed an application in Docket

DOT

- OST

- 2012

- 0108 for authority to conduct scheduled passenger operations as a

commuter air carrier.

By Or der 2012

- 12

- 07, issued December 14, 2012, the Department found Boutique Air fit to

condu ct scheduled passenger service as a commuter air carrier and Boutique Air currently provides scheduled service between Los Angeles and Las Vegas.

Note Regarding Eligibility

W e note that Clovis is exempt from the $200 per passenger statutory limit 3 becau se it is more than 210 miles from the nearest large or medium hub airport; however, the Department wishes to remind Boutique Air and Clovis about the recently enacted law that established a new subsidy cap at $1,000 per passenger regardless of distance fro m hub airports. 4 The Department fully expects both parties to work cooperatively to ensure subsidy rates remain well below the $1,000 per passenger level to remain eligible for the EAS program

.

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 ceil ing was made permanent by P.L. 106

- 69, the Department of Transportation and Related Agencies Appropriations Act of 2000.

4 See 49 USC § 41731(a)(1)(C).- 5

-

We shall make this selection of Boutique Air at Clovis contingent upon the Department 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

. 5

Air 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 Air is subject to the Department’s conti nuing 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).

ACCORDINGLY,

1. The Department select s Boutique Air to provide Essential Air S ervice at Clovis, New

Mexico

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

from June 1, 2014, through May 31 , 2016 ;

2. We direct 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 representatives of the Department. Such d ocumentation 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 ai r carrier may forfeit its compensation for any claim that is not supported under the terms of this Order ;

3 . We f i nd that Boutique Air is fit, willing and able to operate as a commuter air carrier

, and capable of providing reliable Essential Air S ervice at Clovis, New Mexico ;

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

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

- policy/small

- community

rural

- air

- service/essential

- air

- service

.- 6

-

5

. The Department will serve copies of this Order on the civic officials of Clovis, New Mexico, the Manager at Clovis Municipal Airport, Boutique Air, SeaPort Airlines, Inc., On the Way

– Clovis Cabs, and the service list for this docket.

By:

SUSAN L. KURLAND Assistant Secretary for

Aviation and International Affairs

(SEAL)

An electronic version of this document is available at http://www.regulations.govAppendix A 

## Boutique Air

Annual Compensation Requirements for Essential Air Service at

Clovis, New Mexico to Dallas / Ft. Worth International Airport ( DFW )

For 24 Round Trips per Week at 98.0% Completion Factor
As Originally Proposed

------------------------------------------- Amended Proposal

-----------------------------------------------

RTs per Week Destination Subsidy Request Term

24 DFW (may move up to 12 to ABQ) $3,888,274 2 years

18 DFW (may move up to 12 to ABQ) $3,179,857 2 years Operations

Scheduled
Flights 2,496
Completion Factor of 98% 2,446

Scheduled Block Hours 4,056

Scheduled Seats 22,464

Scheduled ASMs 8,154,432

Revenue

Passengers 4,400

Average Fare $119.50

Fare Revenue $252,824

Total Revenue $525,824

Expenses

Fuel $1,290,604

Ownership $660,000

Maintenance and Reserves $1,297,920

Staff $694,682

Marketing and Distribution $17,601

Other Indirect Costs $243,097

Total Costs $4,203,904

Profit Element $210,195

Margin 5.00%

Total Subsidy Requirement $3,888,274Appendix B

Boutique Air

Essential Air Service to be provided at Clovis, New Mexico

Effective Period : June 1

, 201 4 , through May 3 1 , 201 6 1

Scheduled Service : Eighteen nonstop round trips each week to Dallas/Ft. Worth

Aircraft : 9

- Seat Pilatus PC

- 12 Rate per Eligible Flight: $ 1, 728 2
Weekly Ceiling : $ 62,208 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 significan t elements of the required service, without prior approval. The carrier understands that an aircraft take

- o ff 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 per iod, it may jeopardize its entire subsidy claim for the period in question. If the carrier contemplates any such ch anges 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

warran t, 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. I n determining w hether 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 m ake 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 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 be made. No legal liability on the part of the Government for any payment may arise for performance under this

order b eyond September 30, 2014, until funds are made available to the Department for performance. If sufficient funds are not made available for 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 claimed. 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 We selected June 1, 2014 as a budgetary marker. If Boutique Air plans to initiate service at Clovis prior to June 1, we request that the carrier coordinate with the Department.

2 Annual compensation of $ 3,179,857 divided by 1,840 annual departures (313 service days x 6 flights per service day x 98 percent completion).

3 36 flights per week multip lied by $ 1, 728 per flight.