### Order 2013

- 11

- 19

Served: November 25, 2013



## UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

Issued by the Department of Transportation

on the 25 th 

### day o f November , 20 1 3

Essential Air Service at

PUEBLO, COLORADO DOCKET DOT

- OST

- 1999

- 6589

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 SkyWest Airlines (“ SkyWest” )

, to provide

Essential Air Service ( “ EAS ” ) at Pueblo, Colorado

, for an annual subsidy of $ 1,737,732

. 1



### The s ervice to be provided will be 12 non stop round trips per week to Denver International

Airport

, using 30

- seat Embraer Brasilia 120 aircraft for the two

- year period from

February 1, 2014, through January 31, 2016.

B a c k g r o un d

By Order 2011

- 12

- 4 , served on December 13 , 2011, the Department selected Great Lakes

Aviation, Ltd. (“Great Lakes”) to provide subsidized EAS consisting of 12 nonstop round

trips per week to Denver International Airport using 19

- passenger Beech 1900

- D aircraft

, for the two

- year period from February 1, 2012, through January 31, 2014, at an annual

subsidy rate of $1,592,2 76.

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

### - 2

-

In a nticipation of the end of the current rate term, the Department issued Order 2013

- 8

- 4,

on August 13, 2013, soliciting proposals to provide EAS, with or without subsidy suppo rt,

at Pueblo, for a new two

- year term. In response to that Order, the Department received two

proposals.

Those proposals, as well as t he complete public file for EAS at Pueblo

, may be accessed

online through the Federal Dockets Management System at: http://www.regulations.gov by

entering “DOT

- OST

- 1999

- 6589 ” in the “SEARCH for: Rules, Comments, Adjudications

or Supporting Documents:” field.

Proposal of Great Lakes

Great Lakes, the incumbent air carrier at Pueblo, proposed to continue to provide 12

non stop round trips per week to Denver International Airport using 19

- seat Beech 1900

- D

aircraft for an annual subsidy of $1,549,558.

Proposal of SkyWest

SkyWest proposed 12 nonstop round trips per week to Denver Int ernational Airport using

30

- seat Embraer Brasilia 120 aircraft for an annual subsidy of $ 1,737,732

.

Community Comments

On September 20, 2013, the Department requested community comments regarding the

carrier selection at Pueblo. We received a letter fro m the Office of the City Council of

Pueblo dated October 15, 2013. The letter says that over 90% of Pueblo passengers

connect to United Airlines at Denver International Airport and it states “[t]the benefits of a

seamless processing system which a dedicated express carrier and reservation system

provide are obvious, espec ially during irregular operations.” It states that while both

proposals offer code share flights, “exclusively operating on the primary hubbing carrier

(United Airlines) reservation system is a significant advantage.” Finally , “[a]lthough

slightly more co stly, we feel the performance and product SkyWest Airlines offers best fit

our strategy for the present and future of the City of Pueblo. ” Additionally, by letter dated

October 29, 2013, Mr. Dave Cardinal, representing the Pueblo Airport Advisory

Committe e, expressed strong support for SkyWest’s proposal

.

D ecision

In selecting a n air carrier to provide subsidized EAS, 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 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 carrie r 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.

### - 3

-

After careful consideration, including the comments provided by the City Council of

Pueblo and the Pueblo Airport Advisory Committee

, the Department has decided to select

SkyWest to provide subsidized EAS at Pueblo for a two

- year term from February 1, 2014,

through January 31, 2016. The community fully supports SkyWe st’s proposal

, and the

airline provides reliable EAS at many other communities. In addition, SkyWest’s

operating agreement with United Airlines at Denver International Airport allows

passengers to seamlessly connect to the national and global air transpor tation network. We

acknowledge that SkyWest’s subsidy request is higher than the current subsidy; however,

the subsidy requested is reasonable for the service provided.

We shall make this selection of SkyWest at Pueblo contingent upon the Department ’s

receiving properly executed certifications from the air carrier that it is in compliance with

the Department’s regu lations regarding drug

- free workplaces and nondiscrimination, as

well as the regulations concerning lobbying activities

. 2



### S ervice Transitio n

We expect Great Lakes and SkyWest to work together to make a smooth transition at

Pueblo

. In that regard, before Great Lakes suspends its service it must notify any

passengers holding reservations for travel after the suspension date, assist those passe ngers

in making alternate air transportation arrangements, or provide a refund of the ticket price,

without penalty, if requested.

Hold

- I n R ate

The subsidy rate for Great Lakes’ current service ends on January 31, 2014. If SkyWest

does not inaugurate service by February 1, 2014, we will establish a bridge rate to

compensate Great Lakes until SkyWest commences full EAS at Pueblo . Consistent with

established program policy, we typically use a carrier’s prospective proposal that was

submitted during the competitive bid process to establish a bridge rate until the new carrier

inaugurates service. After reviewing Great Lakes’ proposed rate, we have concluded that it

appears reasonable for the service at issue. We will therefore establish it as the final rat e for

the carrier’s hold

- in service at Pueblo, for the period from February 1, 2014, until SkyWest

inaugurates full EAS, but no later than February 28, 2014

.

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

. SkyWest is subject to

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

attention that would caus e 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 cond uct the operations proposed here.

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

2 The certifications are available on the Web at http://www.dot.gov/policy/aviation

- policy

.

### - 4

-

ACCORDINGLY,

1. The Department selects SkyWest Airlines at Pueblo, Colorado , and establishes the

subsidy rate, as detailed in Appendix B , page 1 ;

2

. We direct SkyWest Airlines 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

representat ives 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 dispos ed of

must be retained. The air carrier may forfeit its compensation for any claim that is not

supported under the terms of this Order ;

3 . We f i nd that SkyWest Airlines , Inc. is fit, willing and able to operate as a certificated air

carrie r

, and capable of providing reliable Essential Air S ervice at Pueblo, Colorado ;

4. We set the hold

- in rate of compensation for Great Lakes Aviation, Ltd. for EAS

service at Pueblo, Colorado, as described in Appendix C, page 2;

5. We direct Great Lakes Aviat ion, Ltd. 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 Departmen t. 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 carrier may forfeit its compensation for any claim that is not

supported under the terms of this order;

6

. D ocket DOT

- OST

- 1999

- 6589 will remain open pending further Department action ; and

### - 5

-

7 . We will serve copies of this Order on the City Manager of Pueblo, the City Council of

Pueblo, the Director of Aviation at Pueblo Memorial Airport, Great Lakes Aviation, Ltd.,

and SkyWest Airlines.

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.gov

### Appendix A

Page 1 of 2



# SkyWest Airlines

Annual Compensation Requirements for

Essential Air Service at Pueblo , Colorado

Twelve Round trips per week

98.0% Completion Factor

Passenger Revenue

Passengers 9,500

Average fare $ 69.00

Revenue $ 655,500

Block Time

Trip block time (minutes) 48

Total scheduled block time 998

Total completed block time 98% 978

RPMS

Passengers 9,500

Stage length 109

1,035,500

ASMs

Scheduled departures 1,248

Competed departures 98% 1,223

Stage length 109

Available Seats 30

4,080,960

Revenue $ 655,500

Direct operating expenses $ 1,638,874

Indirect operating expenses $ 151,179

Departure related $ 489,216

Total expenses $ 2,279,268

Operating income (loss) $ (1,623,768)

5% profit margin $ 113,963

Subsidy requirement $ 1,737,732

SkyWest effective rates per unit

Cost per trip $ 1,864

Cost per passenger $ 240

SkyWest cost per block hour $ 2,330

Effective Subsidy rate per unit

Subsidy per trip $ 1,421

Subsidy per passenger $ 183

Passengers / Departure 8

Load factor 25%

### Appendix A

Page 2 of 2

### Appendix B

Page 1 of 2

SkyWest Airlines

Essential Air Service to be Provided at Pueblo, Colorado

Effective Period : February 1, 2014 , through January 31 , 201 6

Scheduled Service : 12 weekly nonstop round trips to Denver International Airport

Aircraft : 30

- Seat Embraer 120

Rate per Eligible Flight: $ 1,421 1



### Weekly Ceiling for each community : $ 34,104 2

Note: The air c a rr i e r un d er st a nds t h a t it m a y f o rfe it its c omp e ns a tion f or a n y f li g hts th a t it do e s not op era te in

c o n f o r m a n c e with the t er ms a nd stipul a tions of the ra te Order

, i n c luding the s er vi c e pl a ns outlin e d in the Order a nd

a n y oth e r s i g ni f i c a nt e l e m e nts of the re qui re d s er vi ce , without p r ior a p p r ov a l. The air c arr i e r und e r st a nds th a t a n

a i r cr a f t t a k e

- o f f a nd l a nding a t its s c h e du l e d d e stin a tion c onstitut e s a c ompl e t e d f li g ht; a bs e nt a n e x pl a n a tion

suppo r ting subsi d y e li g i b ili t y f o r a f l i g ht th a t h a s n ot b ee n c ompl e t e d, su c h a s cer t a in w ea th e r ca n ce ll a tions, o n l y

c ompl e t e d f li g hts a r e c onsid ere d e l i g ible f or su b si d y

. I n a ddition, if the air carr i e r d o e s not s c h e dule or o p era t e its

f li g hts in f ull c on f o r m a n c e with the Order f o r a s i g ni f i ca nt p e r iod, it m a y j e op ar di z e its e nti r e subsi d y c l a im f or t he

p er iod in qu e stion. I f the air c a rr i e r c ont e mpl a t e s a n y su c h c h a ng e s b e y ond the s c ope o f the Order du r ing the

a ppli ca ble p e r iod of th e se ra t e s, it must f i r st noti f y the O ff i c e of Avi a tion An a l y sis in w r iti n g a nd r ece ive w r itt e n

a pp r o v a l f r om the D e p a r tm e nt to be e nsu re d o f f ull c omp e ns a tion. S hould c i rc umst a n ce s w ar r a n t , the D e p ar tm e nt

m a y l o c a te a nd s e l e c t a re pl a ce m e nt air c arr i e r to p r ovide s er vi c e on th e se r out e s. The air c a rr i e r must c ompl e te a ll

f li g hts th a t ca n b e s a f e l y op era t e d; f l i g hts th a t ov e rf l y points f o r l ac k of t r a f f ic will not be c omp e ns a t e d. I n

d e t er m i ning wh e t h e r subsi d y p a y m e nt f o r a d e v i a ting f l i ght should be a djust e d or dis a llow e d, t he D e p a r tm e nt will

c onsid e r the e x t e nt to whi c h the g o a ls of the p r og ra m a r e m e t a nd the e x t e nt of acce ss to the n a tion a l a ir

t ra nspo r t a tion s y s t e m p r ovid e d to the c ommuni t y

.

I f the D e p ar tm e nt unil a t e ra l l y

, e ith e r p a r ti a l l y or c ompl e t e l y , t er min a t e s or re du ce s p a y m e nts f or s e r vi c e or c h a ng e s

s er vi c e r e qui re m e nts a t a sp ec i f ic lo c a tion p r ovid e d f or und e r this Order, th e n, a t the e nd of the p e r iod f or whi c h the

D e p ar tm e nt d o e s m a ke p a y m e nts in the stipul a t e d a mounts or a t the stipul a t e d s er vi c e l e v e ls, the air c a rr i e r m a y

cea se to p r ovide s er v i c e t o th a t sp ec i f ic lo c a tion without re g a r d to a n y r e qui re m e nt f or noti c e of su c h c e ss a tion.

Those a djustm e nts in the l e v e ls of subsi d y a nd/or s er vi c e th a t ar e mutu a l l y a g r ee d to in w r iting b y the D e p ar tm e nt

a nd air ca r r i e r do not c on s titute a tot a l or p ar ti a l re d u c tion or ce ss a tion of p a y m e nt.

S ubsi d y c ont r a c ts ar e su b j ec t to, a nd in c o r po r a te b y r ef e re n c e

, r e l e v a nt st a t ut e s a nd D e p ar tm e nt r e g ul a tions, a s th e y

m a y be a m e nd e d fr om time to tim e . How e v er

, a n y su c h st a tut e s, r e g ul a tions, or a m e ndm e nts th ere to sh a ll not

op era te to c ont r o v er t the f o r e g oi n g p ar a g r a ph.

Funds may not be available for performance under this Order beyond January 15, 2014 . The Government’s

obligation for performance under this Order beyond January 15, 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 perf ormance under this Order beyond January 15, 2014 , until funds are made available to the Department for

performance. If sufficient funds are not made available for performance beyond January 15, 2014 , the Department

will provide notice in writing to the car rier.

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 st ; August clai ms must be submitted by November 30 th , and so on.

1 Annual compensation of $1,737,732 divided by 1,2 23 annual departures (24 departures per week x 313 days x 98

percent completion).

2 24 arrivals and departures per week multiplied by $1,421 per flight

.

### Appendix B

Page 2 of 2

G r e at L a k e s Avia t io n , L t d

. E ss e n t ial Air S er vi c e t o b e P r ovi d e d at

P u e b lo, Colo r a d o

E ffec tive Pe r iod : February 1, 2014, until SkyWest inaugurates full EAS, but no later than

February 28, 2014

S c h e dul ed S er vi ce : 12 n o nstop r ound t r ips eac h w ee k to D e n v e r I nt e r n a ti o n a l Ai r po r t

Ai rcr a f t : B e ec h cr a f t 1900

- D, 19 s ea ts

R a te p er El i g ible F l i g ht: $1,29 8 1



### W ee k l y C e ilin g : $31,15 2 2

Note: The air c a rr i e r un d er st a nds t h a t it m a y f o rfe it its c omp e ns a tion f or a n y f li g hts th a t it do e s not op era te in

c o n f o r m a n c e with the t er ms a nd stipul a tions of the ra te Order

, i n c luding the s er vi c e pl a ns outlin e d in the Order a nd

a n y oth e r s i g ni f i c a nt e l e m e nts of the re qui re d s er vi ce , without p r ior a p p r ov a l. The air c arr i e r und e r st a nds th a t a n

a i r cr a f t t a k e

- o f f a nd l a nding a t its s c h e du l e d d e stin a tion c onstitut e s a c ompl e t e d f li g ht; a bs e nt a n e x pl a n a tion

suppo r ting subsi d y e li g i b ili t y f o r a f l i g ht th a t h a s n ot b ee n c ompl e t e d, su c h a s cer t a in w ea th e r ca n ce ll a tions, o n l y

c ompl e t e d f li g hts a r e c onsid ere d e l i g ible f or su b si d y

. I n a ddition, if the air carr i e r d o e s not s c h e dule or o p era t e its

f li g hts in f ull c on f o r m a n c e with the Order f o r a s i g ni f i ca nt p e r iod, it m a y j e op ar di z e its e nti r e subsi d y c l a im f or t he

p er iod in qu e stion. I f the air c a rr i e r c ont e mpl a t e s a n y su c h c h a ng e s b e y ond the s c ope o f the Order du r ing the

a ppli ca ble p e r iod of th e se ra t e s, it must f i r st noti f y the O ff i c e of Avi a tion An a l y sis in w r iti n g a nd r ece ive w r itt e n

a pp r o v a l f r om the D e p a r tm e nt to be e nsu re d o f f ull c omp e ns a tion. S hould c i rc umst a n ce s w ar r a n t , the D e p ar tm e nt

m a y l o c a te a nd s e l e c t a re pl a ce m e nt air c arr i e r to p r ovide s er vi c e on th e se r out e s. The air c a rr i e r must c ompl e te a ll

f li g hts th a t ca n b e s a f e l y op era t e d; f l i g hts th a t ov e rf l y points f o r l ac k of t r a f f ic will not be c omp e ns a t e d. I n

d e t er m i ning wh e t h e r subsi d y p a y m e nt f o r a d e v i a ting f l i ght should be a djust e d or dis a llow e d, t he D e p a r tm e nt will

c onsid e r the e x t e nt to whi c h the g o a ls of the p r og ra m a r e m e t a nd the e x t e nt of acce ss to the n a tion a l a ir

t ra nspo r t a tion s y s t e m p r ovid e d to the c ommuni t y

.

I f the D e p ar tm e nt unil a t e ra l l y

, e ith e r p a r ti a l l y or c ompl e t e l y , t er min a t e s or re du ce s p a y m e nts f or s e r vi c e or c h a ng e s

s er vi c e r e qui re m e nts a t a sp ec i f ic lo c a tion p r ovid e d f or und e r this Order, th e n, a t the e nd of the p e r iod f or whi c h the

D e p ar tm e nt d o e s m a ke p a y m e nts in the stipul a t e d a mounts or a t the stipul a t e d s er vi c e l e v e ls, the air c a rr i e r m a y

cea se to p r ovide s er v i c e t o th a t sp ec i f ic lo c a tion without re g a r d to a n y r e qui re m e nt f or noti c e of su c h c e ss a tion.

Those a djustm e nts in the l e v e ls of subsi d y a nd/or s er vi c e th a t ar e mutu a l l y a g r ee d to in w r iting b y the D e p ar tm e nt

a nd air ca r r i e r do not c on s titute a tot a l or p ar ti a l re d u c tion or ce ss a tion of p a y m e nt.

S ubsi d y c ont r a c ts ar e su b j ec t to, a nd in c o r po r a te b y r ef e re n c e

, r e l e v a nt st a t ut e s a nd D e p ar tm e nt r e g ul a tions, a s th e y

m a y be a m e nd e d fr om time to tim e . How e v er

, a n y su c h st a tut e s, r e g ul a tions, or a m e ndm e nts th ere to sh a ll not

op era te to c ont r o v er t the f o r e g oi n g p ar a g r a ph.

Funds may not be available for performance under this Order beyond January 15, 2014 . The Government’s

obligation for performance under this Order beyond January 15, 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 beyond January 15, 2014 , until funds are made available to th e Department for

performance. If sufficient funds are not made available for performance beyond January 15, 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 st ; August claims must be submitted by November 30 th , and so on.

1 A n n u al c o m p e ns a t i o n o f $1,592,2 7 6

, d i v i d ed b y 1,22 7 a nn u al d e p a r t u r es (31 3 s e r v ice d a y s x 4 f l i g h ts p er

s e r v ice d ay x 9 8 p e r ce n t c o m p le t i o n )

. 2 2 4 a rr i v als a n d d e p a r t u r es p er w e e k (p er c o mm u n i t y ) mu l ti p lied b y $ 1,29 8 p e r f li g h t.