Order 201 2

- 8

- 7

Served: August 3 , 20 1 2



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

Issued by the Department of Transportation

on the 3rd day of August

, 2012

ORDER SELECTING CARRIER

AND ESTABLISHING SUBSIDY RATE S

Summary

By this O rder, the Department is select ing Great Lakes Aviation

, Ltd

. ( Great Lakes )

, t o

continue provid ing subs idized E ssential A ir S ervice (EAS) at Alamosa and Cortez, Colorado

, for the two

- year period beginning August 1, 20 1 2 , at the annual subs idy rate s of $ 2,078,676 and

$ 2,240,766 , respectively

. 1 (See Appendix A for a map of the servic e area

. )

Background

Alamosa and Cortez are guaranteed to receive at least a minimum level of air service under the

EAS program by virtue of the fact that they appeared on a certificated carrier’s Civil

Aeronautics Board

- issued certificate on October 24, 1 978, the date the Airline Deregulation Act

of 1978 was signed into law. (See 49 U.S.C. §§ 417 3 1

- 41744 for the EAS program’s

governing statutes.) By Order 2010

- 7

- 5

, issued on July 13, 2010 , the Department selected

Great Lakes to provide EAS at the communi ties for the two

- year period through July 31, 201 2

. That O rder established annual subsidy rates of $ 1,987,155 for Alamosa, and $ 1,847,657 for

Cortez, for service consisting of 18 nonstop round trips per week from each community to

Denver, operated with 19

- seat Beech craft 1900D aircraft

.

In anticipation of the end of the rate term, the Department issued Order 2012

- 4

- 21

, on

April 16, 2012 , requesting proposals from air carriers interested in providing replacement

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

ALAMOSA, COLORADO

CORTEZ, COLORADO

Under 49 U.S.C. 41731 et seq

. DOCKET DOT

- OST

- 1997

- 2960

DOCKET DOT

- OST

- 1998

- 35082

service at the communit ies , with subsidy sup port if necessary, for the two

- year period beginning

August 1, 201 2

.

Carrier Proposal s

Great Lakes proposes to continue providing its current level of service

, under code

- share

agreements with United Express and Frontier Airlines

, consisting of 1 8 nonstop round trips per

week between each community and Denver, with 19

- seat Beech craft 1900D aircraft . Great

Lakes proposes to provide this service at the annual subsidy rate s of $ 2,078,676 for Alamosa

and $ 2,240,766 for Cortez.

Sovereign Air, Inc.

, submitted a proposal on May 31, 2012, 16 days after the deadline of May

15, 2012, and 13 days after Great Lakes’ proposal was posted on the Department’s Docket

M anagement S ystem. Under these circumstances , Sovereign Air’s proposal has been deemed

ineligible for thi s air carrier

- selection process

.

Community Comments

By letters dated May 24, 2012, the Department solicited comments from the Mayors and

Airport Managers from each community 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

The decision is straightforward and clearly points to the re

- selection of Great Lakes for a new,

two

- year term

, beginning August 1, 20 1 2

.

Gre at Lakes is a well

- established air carrier that has participated in the EAS program for 30

y ears. Moreover, its interline arrangements with American Airlines, Delta Airlines, United

Airlines, U.S. Airways, and Frontier Airlines at Denver will provide the community with

seamless access to the national air transportation system. Finally, we find both the service and

subsidy levels to be reasonable.

We shall make this selection contingent upon the Department’s receiving properly executed

certifications fr om Great Lakes that it is in compliance with the Department’s regulations

regarding drug

- free workplaces and nondiscrimination, as well as the regulations governing

lobbying activities.3

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 subject to

the Department’s continuing fitness requirements, and no information has come to our attention

that would cause us to qu estion 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. We therefore conclude that the air carrier remains fit to conduct the op erations

proposed here.

This O rder is issued under authority delegated in 49 CFR 1.56a(f).

ACCORDINGLY,

1. The Department selects Great Lakes Aviation

, Ltd

., to continue to provide EAS at Alamosa

and Cortez, Colorado , a nd establishes the subsidy rate s

, as detailed in Appendix A , for the two

year period beginning August 1, 20 1 2 ;

2

. We set the final rate of compensation for Great Lakes , for the provision of EAS at Alamosa

, payable as follows: for each month during which EAS is provided, the amount of com pensation

shall be subject to the weekly ceiling set forth in Appendix B and shall be determined by

multiplying the subsidy

- eligible arrivals and departures completed during the month by

$ 1, 129 ; 2

3 . We set the final rate of compensation for Great Lakes, for the provision of EAS at Cortez,

payable as follows: for each month during which EAS is provided, the amount of compensation

shall be subject to the weekly ceiling set forth in Appendix B and shall be determined by

multiplying the subsidy

- eligible arriv als and departures completed during the month by

$ 1

, 218 ; 3

4 . The Department finds that Great Lakes continues to be fit, willing and able to operate as a

commuter air carrier and capable of providing reliable EAS at Alamosa and Cortez ;

5 . We direct Grea t Lakes 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 documentation shall be retained for seven years from the date of service

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 retain ed. The carrier

may forfeit its compensation for any claim that is not supported under the terms of this order;

2 See Appendix B for the calculation of this rate, which assumes the use of the aircraf t designated. If the carrier

reports a significant number of aircraft substitutions, a revision of this rate may be required.

3 See Appendix B for the calculation of this rate, which assumes the use of the aircraft designated. If the carrier

reports a s ignificant number of aircraft substitutions, a revision of this rate may be required.4

6 . Docket s DOT

- OST

- 1997

- 2960 and DOT

- OST

- 1998

- 3508 will remain open until further

o rder of the Department; and

7 . The Department will serv e a copy of this O rder on the M ayor s and A irport M anagers of

Alamosa and Cortez, and Great Lakes Aviation

, Ltd.

By:

SUSAN L. KURLAND

Assistant Secretary for Aviation

and International Affairs

(SEAL)

An electronic version of this document is availabl e on line at

www.regulations.govAppendix A

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GREAT LAKES AVIATION

, LTD

. ANNUAL COMPENSATION REQUIREMENT FOR ESSENTIAL AIR SERVICE AT

ALAMOSA, COLORADO

Departures: 1,840

Block Hours: 1,810

Revenue Passe nger Miles: 2,685,000

Available Seat Miles: 6,257,840

Operating Revenues:

Passenger 15,000 psgrs at $102.72 $1,540,800

Other (at 0.62% of passenger revenue) $9,553

Total Operating Revenues: $1,550,353

Operating Expenses:

Direct: Aircraft and Hull Insurance $365,710

Fuel and Oil $1,057,245

Flying Operations $317,003

Maintenance $512,429

Total Direct

Expenses: $2,252,387

Total Indirect Expenses: $1,203,831

Total Operating Expenses $3,456,218

Operating Loss ($1,905,865)

Profit Element (5.0% of Total Operating Expenses) $172,811

Annual Compensation Requirement: $2,078,676

Representative Schedule

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

DEPARTURES

FLT TO DPT ARR EQP FREQ

7263 DEN 6:00 7:00 BE1 12345

7263 DEN 8:00 9:00 BE1 6

7264 DEN 10:45 11:45 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 20:5 8 21:56 BE1 12345 7

No Upline Scheduling RestrictionsAppendix A

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GREAT LAKES AVIATION, LTD

. ANNUAL COMPENSATION REQUIREMENT FOR ESSENTIAL AIR SERVICE AT

CORTEZ, COLORADO

Departures: 1,840

Block Hours: 2,347

Revenue Passenger Miles: 4,448, 000

Available Seat

Miles: 9,718,880

Operating

Revenues:

Passenger 16,000 psgrs at $127.98 $2,047,680

Other (at 0.62% of passenger revenue) $12,696

Total Operating Revenues: $2,060,376

Operating

Expenses:

Direct: Aircraft and Hull Insurance $365,710

Fuel and Oil $1,373,084

Flying Operations $411,054

Maintenance $586,411

Total Direct Expenses: $2,736,259

Total Indirect Expenses: $1,360,067

Total Operating Expenses $4,096,326

Oper ating Loss ($2,035,950)

Profit Element (5.0% of Total Operating Expenses) $204,816

Annual Compensation Requirement: $2,240,766

Representative Schedule

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

DEPARTURES

FLT TO DPT ARR EQP FREQ

7261 D EN 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 9:55 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

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GREAT LAKES AVIATION, LTD.

ANNUAL COMPENSATION REQUIREMENT FOR ESSENTIAL AIR SERVICE AT

ALAMOSA, COLORADO

Effective period: August 1, 201 2 , through Ju ly 3 1 , 201 4

Service: 18 nonstop round trips per week to Denver

Aircraft type: Beechcraft 1900D aircraft ( 19 seats)

Timing of flights: No upline or intermediate service is permitted without prior

Department approval. Flights must be well

- timed and well

spaced in order to ensure full compensation.

Annual compensation: $ 2,078,676 1

Subsidy Rate Per

Arrival/Departure: $ 1,129 2

Weekly Compensation

Ceiling: 2 $ 40,644 3

1 This rate assumes an annual completion factor of 9 8% . 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.

2 Annual compensation of $2,078,676 divided by 1,840 annual arrivals and departures calculated as follows: 6

flights x 313 service days x 98% completion = 1,840

3 Subsidy rate per arrival/departure of $1,08 0 multiplied by 36 eligible arrivals and departures

.Appendix B

2 of 2

GREAT LAKES AVIATION, LTD.

ANNUAL COMPENSATION REQUIREMENT FOR ESSENTIAL AIR SERVICE AT

CORTEZ, COLORADO

Effective period: August 1, 201 2 , through Ju ly 3 1 , 201 4

Service: 18 nonstop round trips per week to Denver

Aircraft type: Beechcraft 1900D aircraft ( 19 seats)

Timing of flights: No upline or intermediate service is permitted w ithout prior

Department approval. Flights must be well

- timed and well

spaced in order to ensure full compensation.

Annual compensation: $ 2,240,766 1

Subsidy Rate Per

Arrival/Departure: $ 1,218 2

Weekly Compensation

Ceiling: 2 $ 43,841 3

1 This rate assumes an annual completion factor of 9 8% . 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 i n another week.

2 Annual compensation of $2,240,766 divided by 1,840 annual arrivals and departures calculated as follows: 6

flights x 313 service days x 98% completion = 1,218.

3 Subsidy rate per arrival/departure of $1,218 multiplied by 36 eligible arri vals and departures.A ppendix C

General Terms and Conditions for Essential Air Service

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 explanati on 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 con formance 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 these rates, 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 rou tes. The carrier must complete all

flights that 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 Departmen t 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 paymen ts

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

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 constit ute 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 paragraph.

Funds are not currently available for performance under this order beyond September 30, 201 2

. The Government's obligation for performance under this order beyond September 30, 20 1 2 , is

contingent upon the availability of appropriated 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 beyond September 30, 201 2 , until funds a re made available to the

Department for performance. If funds are not made available for performance beyond

September 30, 201 2 , the carrier will receive notice in writing by the Department.

All claims for payment must be submitted within 60 days of the l ast day of service provided

under this order.