Order 2012-8-7

Served: August 3, 2012

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 RATES

Summary

By this Order, the Department is selecting Great Lakes Aviation, Ltd. (Great Lakes), to 

continue providing subsidized Essential Air Service (EAS) at Alamosa and Cortez, Colorado,

for the two-year period beginning August 1, 2012, at the annual subsidy rates of $2,078,676 and 

$2,240,766, respectively.1 (See Appendix A for a map of the service 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, 1978, the date the Airline Deregulation Act 

of 1978 was signed into law. (See 49 U.S.C. §§ 41731-41744 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 communities for the two-year period through July 31, 2012. 

That Order 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 Beechcraft 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-1998-3508
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service at the communities, with subsidy support if necessary, for the two-year period beginning 

August 1, 2012.

Carrier Proposals

Great Lakes proposes to continue providing its current level of service, under code-share 

agreements with United Express and Frontier Airlines, consisting of 18 nonstop round trips per 

week between each community and Denver, with 19-seat Beechcraft 1900D aircraft. Great 

Lakes proposes to provide this service at the annual subsidy rates 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 

Management System. Under these circumstances, Sovereign Air’s proposal has been deemed 

ineligible for this 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, 2012.

Great Lakes is a well-established air carrier that has participated in the EAS program for 30 

years. 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 from 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.
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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 question 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 operations 

proposed here.

This Order 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, and establishes the subsidy rates, as detailed in Appendix A, for the twoyear period beginning August 1, 2012;

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 compensation 

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 arrivals 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 Great 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 retained. 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 aircraft 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 significant number of aircraft substitutions, a revision of this rate may be required.
4

6. Dockets DOT-OST-1997-2960 and DOT-OST-1998-3508 will remain open until further 

order of the Department; and

7. The Department will serve a copy of this Order on the Mayors and Airport Managers 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 available online at

www.regulations.gov
Appendix 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 Passenger 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 20:58 21:56 BE1 12345 7

No Upline Scheduling Restrictions
Appendix 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 

Operating 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 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 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 Restrictions
Appendix B

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GREAT LAKES AVIATION, LTD.

ANNUAL COMPENSATION REQUIREMENT FOR ESSENTIAL AIR SERVICE AT

ALAMOSA, COLORADO

Effective period: August 1, 2012, through July 31, 2014

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 wellspaced in order to ensure full compensation.

Annual compensation: $2,078,6761

Subsidy Rate Per

Arrival/Departure: $1,1292

Weekly Compensation 

Ceiling: 2 $40,6443

 

1 This rate assumes an annual completion factor of 98%. 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 $1,080 multiplied by 36 eligible arrivals and departures.
Appendix B

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GREAT LAKES AVIATION, LTD.

ANNUAL COMPENSATION REQUIREMENT FOR ESSENTIAL AIR SERVICE AT

CORTEZ, COLORADO

Effective period: August 1, 2012, through July 31, 2014

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 wellspaced in order to ensure full compensation.

Annual compensation: $2,240,7661

Subsidy Rate Per

Arrival/Departure: $1,2182

Weekly Compensation 

Ceiling: 2 $43,8413

 

1 This rate assumes an annual completion factor of 98%. 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 $2,240,766 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 arrivals and departures.
Appendix 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 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 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 routes. 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 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 

amounts or at the stipulated service levels, the carrier may cease 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 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 paragraph.

Funds are not currently available for performance under this order beyond September 30, 2012. 

The Government's obligation for performance under this order beyond September 30, 2012, 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, 2012, until funds are made available to the 

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

September 30, 2012, the carrier will receive notice in writing by the Department.

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

under this order.