Order: 20 1 5

- 4

- 23

Served: April 29 , 20 1 5



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 29 th of April, 2015

Essential Air S ervice at

ALLIANCE AND CHADRON, NEBRASKA

under 49 U.S.C. § 41731 et seq. Docket DOT

- OST

- 2000

- 8322

ORDER SELECTING CARRIER AND ESTABLISHING HOLD

- IN TERMS

Summary By this O rder

, the Department is s electing Boutique Air ( Boutique ) to provide E ssential Air

S ervice (EAS) at Alliance and Chadron

, Nebraska

, for a combined annual subsidy rate of $ 4,192,465 , for the two

- year period from June 1, 201 5 , through May 31, 201 7

. 1

Also by this Order, the Department extends the EAS obligation of Great Lakes Aviation, Ltd. (Great Lakes) at Alliance and Chadron for 30

- days beyond its 90

- day termination notice, through July 16, 2015, or until Boutique commences full EAS, whichever comes first.

Background By Order 201 3

- 2

- 13, issued February 11, 2013 , the Department res elected Great Lakes to provide 12 nonstop or one

- stop round trips per week from Alliance and Chadron to Denver using

19

- passenger Beech 1 900D aircraft, from June 1, 2013 , through May 31, 201 5 , for a combined annual subsidy rate of $ 2,619,729.

I n anticipation of the end of the current rate term, the Department issued Order 20 1 4

- 1 1

- 10 on November 12, 2014 , solicit ing proposals to provide EAS , with or without subsidy, at Alliance

and Chadron , for a new contract period. In response to our request, we received proposals from

four carriers: Great Lakes (the incumbent) , Boutique, Via Air, LLC (Via Air), and Gem Air, LLC (Gem Air) . The proposals are summarized below. The full proposals may be accessed at www.regulations.gov by searching fo r docket DOT

- OST

- 2000

- 8322.

1 Such subsidy is calculated and distributed on a fiscal year b asis, subject to the availability of funds.- 2

-

Proposal of Great Lakes Great Lakes, the incumbent, proposed two service options. Both options would provide Alliance and Chadron two daily (12 per week) nonstop or one

- stop round trips between each community

and D enver Inter national Airport . Service would be provided on twin

- engine, Beech 1900D

aircraft. Under the first service option, the aircraft would be configured with nine passenger seats. This option would require a combined annual subsidy of $2,998,295. Under the s econd service option

, the aircraft would be configured with 19 seat s, requiring a combined annual subsidy of $2,690,607. Great Lakes notes that it offers connections with its code

- shar e partner

Un ited Airlines beyond Denver

, and the carrier maintains interline ticket and baggage agreements with the majority of the other carriers serving Denver

.

Proposal of Boutique Boutique submitted a proposal to offer 12 weekly nonstop round trips between each community and Denver. The service would be provided o n nine

- seat, single

- engine Pilatus PC

- 12 aircraft. Boutique would require a combined annual subsidy of $ 4,192,465

. 2

Proposal of Via Air Via Air proposed two service options. The first would provide each community with 12 weekly nonstop roundtrips from each community to Denver utilizing nine

- passenger aircraft. 3 This service option would require a combined annual subsidy of $3,726,077. Via Air’s second service option would consist of 12 one

- stop round trips routed Chadron

- Alliance

- Denver. The

service would be provided on 30

- seat Embraer EMB

- 120 aircraft. Under this option, Via Air would operate as an indirect air carrier under 14 CFR Part 380 , contracting with Via Airlines operating as the direct air carrier. This option would require a combined annu al subsidy of $4,739,592 and the community would have to apply, and be approved, under the Alternative Essential Air Service program. 4

Proposal of Gem Air

Gem Air proposed one service option consisting on 12 weekly nonstop round trips from each community to Denv er utilizing twin

- engine, nine

- passenger P iper Navajo aircraft. Gem Air would require a combined annual subsidy of $3,177,640.

Community Comments

On January 15 , 20 1 5 , we requested community comment s regarding the carrier selection at
Alliance and Chadron

. On March 4 , 201 5

, we received a letter from the Airport Manager for the City of Alliance , as well as City Resolutions from both Alliance and Chadron, all endorsing the selection of Boutique. The communities state that they were pleased with all of the proposals received from Gem Air, Via Air, and Boutique, but that Boutique was the communiti es’ preferred choice, with the caveat that before it commences service, Boutique must achieve approval from the Transportation Security Administration (TSA) for sterile operations

.

2 Boutique proposed an annual subsidy of $2,359,650 for Alliance and $2,407,815 for Chadron, and offered a $575,000 reduction if it was selected at both communities.

3 Via Air did not provide any further the description of the aircraft that would be used other than having nine seats.

4 See 49 U.S.C. § 41745(a).- 3

-

On March 27, 2015, the Airport Manager of Alliance submitted an e

- mail t o the Department stating that both communities understand that the recommendation and acceptance of Boutique using single engine aircraft means that in the future, Alliance and Chadron cannot reject, out of hand, future single engine air service bids.

Dec ision

Both Gem Air and Via Air su bmitted competitive proposals, despite their relative lack of experience in supplying EAS. We note that Gem Air recently received its economic operating authority from the Department for commuter operations. Via Air is pr oviding service through the Alternate EAS program at Beckley, West Virginia, but as a public charter operation using 30

- seat EMB

- 120 aircraft. We welcome both entities to submit proposals for service at other

communities in the future.

Due to operational issues at Great Lakes (the incumbent), the carrier has been providing less than

full

- EAS (only one round trip during any given day and not seven days per week) at A lliance and Chadron since early 2014. As stated above, Great Lakes provided the Department with a 90

- day

notice of intent to terminate EAS at Alliance and Chadron indicating its wish to leave these

communities

. Considering that Great Lakes has not fulfilled their contractual requirements for much of the existing rate

- term

, the ir lack of commun ity support, and their early termination request, the Department will not select Great Lakes.

Regarding the longer

- term carrier selection, a fter carefully considering each of the remaining proposal s and taking into account the communities’ views, the Dep artment has decided to select Boutique to provide EAS at Alliance and Chadron for a new two

- year term. When selecting a carrier, 49 U.S.C. § 41733(c)(1) directs us to consider five factors: (1) service reliability; (2) contractual and marketing arrangemen ts with a larger carrier at the hub; (3) interline arrangements with a larger carrier at the hub; (4) community views, giving substantial weight to the views of the elected officials representing the users; and (5) whether the carrier has included a plan t o market its services to the community. In addition, The Consolidated and Further Continuing Appropriat ions Act, 2015 5 , provides that when selecting a carrier 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.

Boutique has recently begun providing EAS at Clovis and Silver City/Hurley/Deming, N ew
M exico , and has to date provided reliable service at those communities. Elected officials of both

Alliance and Chadron also preferred the Boutique proposal over the two remaining carrier proposals

. The Department also finds the proposed service levels and subsidy requests to be reasonable. Given these factors, combined with the communities ’ recent st ruggles with EAS service from Great Lakes, the Department has decided to select Boutique.

Boutique’s subsidy request is higher than some of the other proposals submitted in this case. Given the communities’ recent experiences with poor and unreliable ser vice, in selecting Boutique the Department is giving the communities’ preference more deference than we

5 Public Law No: 113

- 235.- 4

-

otherwise might. However, the Department wishes to remind Boutique and the communities of Alliance and Chadron about the recently enacted law that esta blished a new subsidy cap of $1,000 per passenger, regardless of distance from hub airports. The Department expects both

the communities and air carrier to prudently manage the costs of the service to ensure subsidy rates remain in compliance with the $1 ,000 subsidy per passenger cap to remain eligible for the EAS program.

The Department therefore selects Boutique to provide EAS at alliance and Chadron, for the two

year period from June 1, 2015, through May 31, 2017, at a combined annual subsidy rate of $ 4,192,465

. This selection at Alliance and Chadron is contingent upon the Department’s receiving properly executed certifications from Boutique that it is in compliance with the Department’s regulations regarding drug

- free workplaces and nondiscrimination, as well as the regulations concerning lobbying activities.

Great Lakes’ Early T ermination Request On March 18, 2015, Great Lakes filed 90

- day notices to terminate service at Alliance and Chadron, with the last day of scheduled air service to be June 16, 2015. The carrier requests that since the communities recommended that the Department select Boutique, it be allowed to

terminate service earl ier than prescribed in the notice.

Lynn Placek, airport manager at Alliance Municipal Airport, submitted comments on Great Lakes’ early termination request on behalf of both Alliance on Chadron in an April 2 e

- mail to the Depa rtment. Ms. Placek states t hat in May (2015), they are seeing that Great Lakes has

reduced its service schedule once again to one flight per day, lower than the contracted amount and she requests that the Department not grant Great Lakes permission to leave until a new

carrier is se lected, as has been the normal practice for EAS communities.

Alliance and Chadron are guaranteed a minimum of two round trips to a suitable hub. Great Lakes’ proposed termination of service would cause the two communities to be left with no air

service

. T herefore, the Department will require Great Lakes to continue to maintain its current level of service at the community for successive 30

- day periods until Boutique Air has initiated

service

.

As required by 49 USC § 41733(d), the Department will requi re Great Lakes to continue to serve Alliance and Chadron for 30 days beyond its 90

- day t ermination notice, through July 16, 2015, or earlier if Boutique begins full EAS at the communities before July 16 . Since Great Lakes’ contract ends May 31, 2015, consistent with longstanding program practice, the Department will compensate the carrier from June 1, 2015, through July 16, 2015, at the rate it proposed in the competitive carrier selection proceeding. 6

Service Transition The Department expect s Great Lakes to maintain its current service levels , which meet minimum EAS requirements of two round trips per day, six days per week. Since Great Lakes’ current rate expires May 31, 2015, the Department will set a new rate of compensation for Great

6 In accordance with 49 U.S.C. § 4 1734(c), the Department will extend Great Lakes’ s ervice obligation for

successive 30

- day periods as necessary until replacement service begins.- 5

-

Lakes star t ing June 1, 2015, which will cover its hold

- in period. The Department expects Great Lakes to provide both communities with 12 round trips per week until Boutique begins full EAS at both communities, which, at this time, is expected to occur in June, 2015 , pending Boutique’s certification for sterile operations by the appropriate federal agencies

.

We expect Great Lakes and Boutique to work together to make a smooth transition at both communities. In that regard, before Great Lakes suspends its service, it must notify all passengers holding reservations for travel after the suspension date, to assis t those passengers in making alternate air transportation arrangements, or to provide a refund of the ticket price, without penalty, if requested.

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

. Boutiq u e and Great Lakes

are sub j ect to the Department’s continuing fitness requirements, and no information has come to our attention that would cause us to question the carriers ’ fi tness 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 carrier s remain fit to conduct the operations proposed here.

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

ACCORDINGLY,

1. We select Boutique Air to provide E ssential Air S ervice at Alliance and Chadron

, Nebraska ;

2 . We set the final rate of compensation for Boutique Air

, for the provisio n of E ssential A ir

S ervice at Alliance and Chadron

, Nebraska , as described in Appendix C , pages 1 and 2 ;

3 . 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 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 O rder;

4 . We find that Bo utique Air continue s to be fit, willing and able to operate as a commuter
carrier an d capable of providing reliable Es sential A ir S ervice at Alliance and Chadron

, Nebraska ;

5. We prohibit Great Lakes Aviation, Ltd. from suspending E ssential Air S ervice at Alliance and

Chadron

, Nebraska, until July 16, 2015 , or until Boutique Air begins full EAS at both communities, whichever comes first ;

6 . We set the interim rate of compensation for Great Lakes Aviation, Ltd. , for the provision of

E ssential A ir S ervice at Alliance and Chadron

, Nebraska , as described in Appendix C , page 3;- 6

-

7 . We direct Great Lakes Aviation, Ltd. to retain all books, records, and other source and summary documentation to support claims for payment, and to preserve and maintain su ch 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 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 O rder;

8 . Th is docket will remain ope n until further O rder of the Department; and

9 . We will serve copies of this O rder on the Mayor and City Manager of Chadron, Nebraska, the Mayor of Alliance, Nebraska, and the Airport Manager of Alliance Municipal Airport

, Great

Lakes A viation , Ltd.

, Boutique Air, Via Air, LLC, and Gem Air, LLC.

By:

BRANDON M. BELFORD Deputy Assistant Secretary

for Aviation and International Affairs

(SEAL)

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



## AREA MAP

This map is provided by Sabre ® AirVision TM Profit Essentials and is being used with express permission of the copyright holder,

Sabre Airline Solutions®.Appendix B Page 1 of 3Appendix B Page 2 of 3Appendix B Page 3 of 3Appendix C Page 1 of 3

Boutique Air

Essential Air Service to be Provided at Alliance

, Nebraska

Effective Period : June 1, 201 5 , through May 31, 201 7

Scheduled Service : 1 2 weekly nonstop r ound trips t o Denver International Airport

Aircraft : Pilatus PC

- 12

, 9 seats Annual Subsidy: $2, 072,1 50 1
Rate per Eligible Flight: $ 1, 694 2 Weekly Ceilin g : $ 40,65 6 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 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 signifi cant 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 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 warrant, the Department may locate and select a replacement carrier to provide service on these routes. The carrier must complete all fli ghts 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 requi rements 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 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 par agraph.

Funds may not be available for performance under this Order beyond September 30, 2015

. The Government’s obligation for performance under this Order beyond September 30, 2015 , 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 September 30, 2015 , until funds are made available to the Department for performance. If sufficient funds are not made availa ble for performance beyond September 30, 2015 , 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 Reflects reduction of $575,000 annually ($287,500 per community) as outlined in Boutique’s proposal.

2 Annual compensation of $ 2, 072,150 divided by 1,223 annual operations (24 weekly operations x 52 weeks x 98 percent completion)

. 3 24 operations per week multiplied by $ 1, 694 per flight

.Appendix C Page 2 of 3

Boutique Air

Essential Air Service to be Provided at Chadron, Nebraska

Effective Period : June 1, 201 5

, through May 31, 201 7

Scheduled Service : 12 weekly nonstop r ound trips to Denver International Airport

Aircraft : Pilatus PC

- 12 , 9 seats Annual Subsidy: $2, 120,31 5 4 Rate per Eligible Flight: $ 1, 734 5 Weekly Ceiling : $ 4 1,61 6 6

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 significant elements of the required service, wi thout 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 clai m for the period in question. If the carrier contemplates any such changes 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 Depar tment 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 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 un der this Order beyond September 30, 2015

. The Government’s obligation for performance under this Order beyond September 30, 2015 , is subject to the availability of funds from which payment for services can be made. No legal liability on the part of the G overnment for any payment may arise for performance under this order beyond September 30, 2015 , until funds are made available to the Department for performance. If sufficient funds are not made available for performance beyond September 30, 2015 , the Dep artment 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.

4 Reflects reduction of $575,000 annually ($287,500 per community) as outlined in Boutique’s proposal.

5 Annual compensation of $2, 120,3 15 divided by 1,223 annual operations (24 weekly operations x 52 weeks x 98 percent completion)

. 6 24 operations per week multiplied by $ 1, 734 per flight

.Appendix C Page 3 of 3

Great Lakes Aviation, Ltd.

Essential Air Service to be Provided at Alliance and Chadron , Nebraska

Effective Period : June 1, 201 5 , through July 16, 2015

Scheduled Service : 12 weekly nonstop r ound trips from each community to D EN

Aircraft : Beechcraft 1900D , 9 seats Annual Subsidy: $ 2,998,295 1 Rate per Eligible Flight: $ 1, 226 2 Weekly Ceiling : $ 58,858 ($29,424 per community) 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 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 e ligibility 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 this rate, it must first notify the Office of Avia tion 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 co mplete 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 exten t 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 service levels, the carrier may cease to provide service to that specific location with out 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 paym ent.

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, 2015

. The Government’s obligation for performance under this Order beyond September 30, 2015 , is subject to the availability of funds from which paymen t 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, 2015 , until funds are made available to the Department for performance. If sufficient funds are n ot made available for performance beyond September 30, 2015 , 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 compen sation 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 See Appendix B , page 3

. 2 Annual compensation of $2, 998,295 divided by 2 communities, divided by 1,223 annual operations (24 weekly operations x 52 weeks x 98 percent completion)

. 3 24 operations per week multiplied by $ 1, 226 per flight

.