Order 20 1 3

- 8

- 22 Served: August 27 , 20 1 3



### UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation on the 27 th day of August , 20 1 3

ORDER ON PETITION FOR RECONSIDERATION

Summary By this O rder, the Department is accepting th e p etition for r econsideration submitted by Boutique Air, Inc. (Boutique) of Order 2013

- 5

- 5 , issued on May 6, 2013

. U pon review, the Department is denying the relief requested and affirming its selection of Pacifi c Wings, L.L.C. d/b/a New Mexico Airlines (New Mexico Airlines) to provide subsidized Essential Air Service (EAS) at Carlsbad, New Mexico

. Background By Order 2011

- 4

- 1 9 ( April 2 2 , 20 11) , the Department re

- selected New Mexico Airlines to provide subsidized EAS at Carlsbad, New Mexico, through May 31, 201 3 . Under that O rder, New Mexico Airlines provide d 12 nonstop round trips each week between Carlsbad and Albuquerque utilizing single

- engine, 9

- passenger Cessna Grand Caravan (C

- 208B)
t urboprop aircraft for an annual subsidy rate of $ 1, 350,253

. In anticipation of the end of that contract

, t he Department issued Order 20 12

- 12

- 4 (December 12, 2012) , soliciting proposals to provide EAS at Carlsbad, NM , wi th subsidy support if necessary. In response to that request, we received proposals from three carriers: New Mexico Airlines (the incumbent), Boutique Air, and Sovereign Air, Inc.

By Order 2013

- 5

- 5, the Department re

- selected New Mexico Airlines to continue providing EAS at Carlsbad for an annual subsidy of $1,397,081. Under that Order, the carrier is continu ing to provide 12 weekly nonstop round trips to Albuquerque using single

- e ngine, 9

- passenger Cessna Caravan aircraft. Essential Air Service at

CARLSBAD, NEW MEXICO

Under 49 U.S.C. § 41731 et seq

. Docket DOT

- OST

- 2002

- 12802- 2

-

Petition for Reconsideration of Boutique On May, 28, 2013, Boutique filed a p etition for r econsideration of Order 2013

- 5

- 5. In addition, the Department on June 3, 2013, received a n a nswer to Boutique’s p etition from New Mexico Airlines . Boutique alleges that the Department did not consider relevant information in deciding to re

- select New Mexico Airlines.

Specifically , Boutique maintains that New Mexico Airlines regularly operates its Carlsbad

- Albuquerq ue service in excess of 8,000 feet in altitude with un

- pressurized aircraft in violation of 49 U.S.C. § 41732(b)(6), which states that basic EAS shall include “service provided by pressurized aircraft when the service is provided by aircraft that regularly fly above 8,000 feet in altitude.”

Boutique further contends that the seat capacity provided by New Mexico airlines (18 seats per day, each way) does not meet the minimum seat capacity that Carlsbad is entitled to under Civil Aeronautics Board (CAB) O rder 84

- 10

- 10 (October 3, 1984). Under that Order, the CAB set Carlsbad ’s EAS determination as 54 inbound and 54 outbound seats per day, when service is provided with 9

- seat or smaller aircraft.

Response from New Mexico Airlines On June 3, 2013, New Mexico Airlines filed an a nswer to Boutique’s p etition, addressing Boutique’s claims. New Mexico Airlines states that in any given year, over 95 percent of its flights between Carlsbad and Albuquerque operate under Visual Flight Rules (VFR)

c onditions, and that a majority of these flights operate below 8,000 feet. Additionally, New Mexico Airlines asserts that since it operates mainly under VFR conditions, using company approved flight following procedures, the Federal Aviation Administration (FAA) would not maintain records of those operations.

New Mexico Airlines further contends that its service, which consists of 108 seats each way, per week, fully meets the requirements of CAB Order 84

- 10

- 10.

Decision After careful consideration of this matter, the Department has decided to accept Boutique’s
p etition for r econsideration

. U pon review, the Department is denying the relief requested and affirm ing the decision reach ed in Order 2013

- 5

- 5 to re

- select New Mex ico Airlines to provide subsidized EAS at Car lsbad. We will address Boutique’s Petition point by point below

. First, in any EAS carrier

- selection case, after the bid

- period has closed, we provide all bids received to the community and civic officials and request their comments. During the comment period

, we received replies from the Carlsbad Air Service Committee (CASC) 1 and C arlsbad Mayor Dale Janway. In its letter, the C ASC stated that its recommendation

was that the Department select Boutique’s service option 1

, which offered service to both Dallas

- Ft. Worth and Albuquerque , while its service option 3

, for Dallas

- Ft. Worth

- only

1 The CASC is a civic group, appointed by the mayor, and charged with evaluating the EAS proposals and providing a recommendation to the mayor.- 3

-

service

, would be unacceptable since the community requires service to Albuquerqu e. 2 Additionally, the CASC stated that Boutique’s pressurized aircraft “will significantly improve the comfort level of our community’s frequent travelers.” 3 In Mayor Janway’s subsequent letter affirming the CASC’s recommendation, no mention was made of aircraft pressurization.

After receiving these community comments, we responded noting that we could not consider either option for dual

- hub service from Boutique as both would provide capacity greatly i n excess of what was requested in the RFP and would require subsidy levels that the Department cannot justify given current budget constraints. 4 In response, we received a second letter from the CASC stating that it would compromi se and accept Boutique’s option 2 (service to both Dallas

- Ft. Worth and Albuquerque but with less frequency than option 1) and that “ T his option meets our need for a pressurized plane...” and that

“ P ressurized flight service in a mountainous state is critical.” 5 We also received a second letter from Mayor Janway stating that Bo utique’s option 2 “meets the need for a pressurized plane and includes 12 weekly flights to DFW and Albuquerque. This is the minimum service that we determine will fit the essential economic needs of the community and area.” 6

None of the community commen ts received during the carrier

- selection proceeding asserted that New Mexico Airlines’ flights “regularly” exceed 8,000 feet or provided any evidence towards such a finding . Rather, the comments only cited the community’s desire for pressurized aircraft i n order to enhance passenger comfort. However, as Boutique has raised the issue in its p etition, we have sought to gather any available evidence to determine the actual operating altitude of New Mexico Airlines ’ Carlsbad

- Albuquerque flights. We have
cont acted both the FAA ’s Air Traffic Organization as well as the Flight Standards District Office that is responsible for monitoring New Mexico Airlines’ compliance with safety and operational standards. Neither office was able to provide the Department with sufficient evidence that clearly demonstrates that New Mexico Airlines’ flights regularly operate above 8,000 feet. T he FAA confirmed New Mexico Airlines’ assertion that when it operate s under VFR conditions, the FAA does not maintain records of such operations.

Secondly, Boutique maintains that we must select their service option 1 since it is the only proposal at hand that provides the daily seat capacity as determined under CAB Order 84

- 10

- 10, specifically 54 seats per day

, each way

. Here, New Mexico Airlines is factually incorrect in its a nswer. The capacity levels specified in CAB Order 84

- 10

- 10 are daily capacities, not weekly as New Mexico Airlines asserts. This point aside

, the Department must take a practical approach in our management t he EAS program.

As stated in CAB Order 84

- 10

- 10, Carlsbad enplaned 4,546 passengers in 1983 . Even then the CAB recognized that the level of traffic Carlsbad was generating was likely too l ow to warrant 54 daily seats:

2 Boutique’s EAS proposal consisted of three different service options. They are summarized in Order 2013

- 5

- 5, and their full proposal can be found in docket DOT

- OST

- 2002

- 12802. 3 Letter of Carlsbad Air Service Committee, February 7, 2013. DOT

- OST

- 2002

- 12802

- 0083.
4 DOT Request for Additional Comments, February 8, 2013. DOT

- OST

- 2002

- 12802

- 0081. 5 Letter from City of Carlsbad Air Service Committee, February 14, 2013. DOT

- OST

- 2002

- 12802

- 0087.
6 Letter from Mayor Janway, February 20, 2013. DOT

- OST

- 2002

- 12802

- 0086.- 4

-

“ ...[T]he Board also noted that Carlsbad’s enplanement s for the second quarter of 1984 (17 per day) had risen only moderately over the 1983 levels. Thus, if traffic does not continue to respond to the service and we have to readdress the service needs of the community in the event the s elected carrier were to file a notice, we would consider reducing the service requirement at that time.” 7

Today Carlsbad is enplaning only 2,775 passengers per year, significantly lower than in 1983. 8

Congress has made clear its intent that we operat e the EAS program in an efficient, cost

effective manner. Demonstrative of that intent , Congress has implemented many reforms over the years aimed at reducing waste and inefficiencies in the program such as : the $200 per passenger subsidy cap when a commu nity is less than 210 miles from a large or medium hub airport 9 ; eliminating the 15

- seat requirement 10 ; and more recently instituting the $1,000 per passenger subsidy cap 11 and the 10

- enplanement per day requirement. 12

Recognizing this intent, we have sought to reduce excess capacity and save program funds wherever possible by matching capacity to demand

. I n the most recent year

- ended period for which data are available ( February 1 , 2012

- January 31 , 201 3 )

, Carlsbad enplaned 2,775
passengers, or on average 8.9 passengers per day , or about 4 .5 passengers per flight

. 13 New Mexico Airlines currently provides 18 outbound seats per day in the market, resulting in an average load factor of approximately 50 percent

. 14 Given that the current service is operati ng at half capacity, and considering Congress’ s intent that we reduce program costs,

we simply cannot justify tripling capacity in the market at a cost of almost three times the current subsidy. 15

7 Civil Aeronautics Board Order 84

- 10

- 10, October 3, 1984

, at 8. 8 Based on Bureau of Transportation Statistics (BTS) T

- 100 Market data for the 12

- month period ended January 31 , 2013. 9 Congress first established the $200 ceiling under P ublic Law No. 101

- 164 for fiscal year 1990, and reestablished it in fiscal years 1994

- 1999. The ceiling was made permanent by P ublic Law No. 106

- 69, the Department of Transportation and Related Agencies Appropriations Act of 2000. 10 The Consolidated and Further Continuing Appropriations Act, 2012 ( Public Law No. 112

- 55 ) and continued by th e Full

- Year Conti nuing Appropriations Act, 2013 ( Public Law No. 113

- 6 )

. 11 The FAA Modernization and Reform Act of 2012 (Public Law No. 112

- 95), signed into law on February 14, 2012, amended the definition of “eligible place” for the purpose of receiving EA S. The amendment, among other things, states that to be eligible, a community must have had an average subsidy per passenger of less than $1,000 during the most recent fiscal year, as determined by the Secretary of Transportation.
12 The FAA Modernization and Reform Act of 2012 (Public Law No

. 112

- 95) also states that to be eligible for subsidized EAS , a community must maintain an average of 10 enplanements or more per service day, as determined by the Secretary, during the most recent fiscal year beginning after September 30, 2012. The legislation exempts locations in Alaska and Hawaii and communities that are more than 175 driving miles from the nearest large or medium hub airport.
13 Source: BTS T

- 100 Market Report. Passengers per day = 2,775 passengers per year divided by 313 service days per year. Passengers per flight = 8.9 passengers per day divided by 2 flights per day.
14 8.9 passengers per day divided by 18 seats per day. 15 Congress has also directed us to consider the carriers’ relative subsidy requirements when selecting a n EAS provider . See: The Consolidated and Further Continuing Appropriations Act, 2012 ( Public Law No. 112

- 55 ) and later continued by the Full

- Year Cont inuing Appropriations Act, 2013 ( Public Law No. 113

- 6 )

.- 5

-

Based on all of the above, we affirm our decision in Order 2013

- 5

- 5 to re

- select New Mexico Airlines to provide EAS at Carlsbad, New Mexico.

This O rder is issued under authority delegated in 49 CFR Part 1. 25a(b)

. ACCORDINGLY,

1. We accept the p etition for r econsideration of Order 2013

- 5

- 5 submitted by Boutique Air, Inc. and, upon review , affirm our decision in Order 2013

- 5

- 5 re

- selecting Pacific Wings, L.L.C. d/b/a New Mexico Airlines to provide EAS at Carlsbad, New Mexico;

2 . This docket will remain open u ntil further Order of the Department, and;

3 . We will serve copies of this Order on the Mayor and Airport Manager of Carlsbad, New Mexico, Pacific Wings L.L .C., d/b/a New Mexico Airlines, and Boutique Air.

By:

SUSAN L. KURLAND Assistant Secretary for Aviation and International Affairs

(SEAL)

An electronic version of this document is available i n the Federal Docket Management System (FDMS) at http://www.regulations.go v