Order: 2014-12-4 

Served: December 3, 2014 

 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 December, 2014 

Essential Air Service at 

 

 SILVER CITY/HURLEY/DEMING, 

 NEW MEXICO 

DOT-OST-1996-1903 

 

under 49 U.S.C. § 41731 et seq. 

ORDER SELECTING CARRIER ESTABLISHING SUBSIDY RATES 

AND EXTENDING SERVICE PERIOD 

Summary 

By this Order, the Department is selecting Boutique Air (“Boutique”) to provide Essential 

Air Service (“EAS”) at Silver City/Hurley/Deming, New Mexico, (“Silver City”) for the 

two-year period beginning January 1, 2015, through December 31, 2016. Boutique will 

provide 24 nonstop round trips each week to Albuquerque International Sunport (“ABQ”), 

using pressurized 9-seat Pilatus PC-12 aircraft, at an annual subsidy rate of $3,377,495.1

 

Additionally by this Order, the Department is extending the service period for Great Lakes 

Aviation, Ltd. (“Great Lakes”) to provide EAS at Silver City, from December 1, 2014, or 

until Boutique commences full EAS at the community, but no later than March 31, 2015. 

Great Lakes will continue to provide Silver City with 12 nonstop round trips per week 

between Silver City to Phoenix, Arizona, using Beechcraft 1900D aircraft, at an annual 

subsidy of $2,237,812.2 

 

1

 Such subsidy is calculated and distributed on a fiscal year basis, subject to the availability of funds. 2

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

Background 

By Order 2012-11-33, issued on November 29, 2012, the Department re-selected Great 

Lakes Aviation, Ltd. (“Great Lakes”) to provide EAS at Silver City with 12 one-stop 

round trips per week between Silver City and Denver, via Alamosa, Colorado; Santa Fe, 

New Mexico; or Pueblo, Colorado, or nonstop to Phoenix, Arizona, using 19-seat 

Beechcraft 1900D aircraft, for the period from December 1, 2012, through 

November 30, 2014, at an annual subsidy rate of $2,098,460. 

In anticipation of the end of the current rate term, the Department issued Order 2014-7-6, 

on July 10, 2014, soliciting proposals from air carriers interested in providing EAS at 

Silver City, with subsidy support if necessary, for a new term beginning 

December 1, 2014. In response to that Order, the Department received proposals from 

Great Lakes, Boutique, Mokulele Flight Service, Inc., d/b/a Mokulele Airlines 

(“Mokulele”), and Pacific Wings, LLC. 

Those proposals, as well as the complete public file for EAS at Silver City, may be 

accessed online through the Federal Docket Management System at 

http://www.regulations.gov by entering Docket number “DOT-OST-1996-1903” in the 

“SEARCH for: Rules, Comments, Adjudications or Supporting Documents:” field. 

Proposal of Great Lakes 

Great Lakes proposed to provide Silver City with 12 nonstop round trips per week to 

Phoenix, using 9-seat Beechcraft 1900D aircraft, at an annual subsidy request of 

$2,237,812. 

Proposal of Boutique 

Boutique proposed to provide the community with 24 nonstop round trips per week to 

Albuquerque, using pressurized 9-seat Pilatus PC-12 aircraft, at an annual subsidy request 

of $3,377,495. 

Proposal of Mokulele 

Mokulele proposed to provide 12 nonstop round trips per week to Albuquerque, using 9-

seat Cessna Caravan 208EX aircraft, at an annual subsidy request of $1,499,877. 

Proposal of Pacific Wings, LLC 

Pacific Wings proposed to provide 12 nonstop round trips per week to Albuquerque, using 

9-seat Cessna Caravan 208B aircraft, at an annual subsidy request of $1,641,869. 

Community Comments 

By letter dated September 5, 2014, the Department requested community comments 

regarding this EAS selection case. In response, by letter dated October 10, 2014, 

Honorable Michael Morones, Mayor of Silver City, provided support for Boutique. That 

letter explained the community reviewed all the proposals, received presentations and 

clarification from the interested airlines, and the community recommended the selection of 
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Boutique. In that letter, the Mayor waived the community’s right to twin engine aircraft.3

 

Additionally, by letter dated October 7, 2014, Mr. Brett Kasten, Chairman of the Grant 

County Commissioners, recommended the selection of Boutique. In that letter, Mr. Kasten 

stated “we believe that Boutique Air will provide both reliable service and the routes that 

will best serve our community.” Additionally, the Department received over 50 letters 

from concerned citizens, the majority of which support air service to Albuquerque. 

Decision 

In selecting an air carrier to provide subsidized EAS not in Alaska, 49 U.S.C. 

§ 41733(c)(1) directs the Department 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, giving substantial 

weight to the views of the elected officials representing the users of the serve; and (5) 

whether the air carrier has included a plan in its proposal to market the service. In addition, 

the Consolidated Appropriations Act, 2014, Public Law No. 113-76, and continued in the 

Continuing Appropriations Resolution, 2015, Public Law No. 113-164, 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. 

The majority of comments that the Department received support service to Albuquerque; 

therefore, the Department will eliminate from consideration Great Lakes’ proposed service 

to Phoenix. Additionally, Great Lakes did not receive any community support. Pacific 

Wings, Mokulele, and Boutique all proposed service to Albuquerque and the elected 

officials representing the users of the service, including the Mayor of Silver City, support 

the selection of Boutique. 

In this case, the community’s support of Boutique is clear. As described above in the 

Department’s statutory selection criteria, the Department is directed to give substantial 

weight to the views of elected officials. In addition, only Boutique’s proposal offers 

approximately the same number of seats that the Department is currently subsidizing. The 

selection of Boutique will provide the community with 36 seats inbound and 36 seats 

outbound each day, still slightly fewer than the 38 per day that Great Lakes is currently 

contracted to provide. The increased number of arrivals and departures, albeit with aircraft 

seating fewer seats than what the Department selected for Silver City in the last carrier 

selection in 2012, will provide numerous connecting opportunities at ABQ and has 

potential to encourage passenger usage. 

 

3

 49 U.S.C. § 41732 (b)(5) outlines minimum requirements for basic EAS, including service provided in 

aircraft with at least 2 engines and using 2 pilots, unless scheduled air transportation has not been provided to 

the place in aircraft with at least 2 engines and using 2 pilots for at least 60 consecutive operating days at any 

time since October 31, 1978. 
- 4 - 

Note Regarding Eligibility

Silver City is exempt from the $200 per passenger statutory limit4 because it is more than 

210 miles from the nearest large- or medium-hub airport; however, the Department wishes 

to remind Boutique and Silver City about the recently enacted law that established a new 

subsidy cap at $1,000 per passenger, regardless of distance from hub airports.5

 The 

Department fully expects both parties to work cooperatively to ensure subsidy rates remain 

below the $1,000 per passenger level to remain eligible for the EAS program. 

 

The Department shall make this selection of Boutique at Silver City contingent upon the

Department’s receiving properly executed certifications from the air carrier that it is in 

compliance with the Department’s regulations regarding drug-free workplaces and 

nondiscrimination, as well as the regulations concerning lobbying activities.6 

Service Transition 

The Department expects Great Lakes and Boutique to work together to make a smooth 

transition at Silver City. In that regard, before Great Lakes suspends their service, it must 

notify any passengers holding reservations for travel after the suspension date, assist those 

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

ticket price, without penalty, if requested. 

Air Carrier Fitness

49 U.S.C. §§ 41737(b) and 41738 require that the Department finds an air carrier fit, 

willing, and able to provide reliable service before it can provide subsidized EAS. 

Boutique and Great Lakes are subject to the Department’s continuing fitness requirements, 

and no information has come to the Department’s attention that would bring into question 

the air carriers’ fitness at this time. The Department has contacted the Federal Aviation 

Administration, and it has raised no concerns that would negatively affect our fitness 

findings. The Department therefore concludes that the air carrier is reliable and remains fit 

to conduct the operations proposed here. 

This Order is issued under authority delegated in 49 CFR Part 1.25a(b). 

ACCORDINGLY,

1. The Department selects Boutique Air to provide Essential Air Service at Silver 

City/Hurley/Deming, New Mexico, at the service levels and subsidy rate as described in 

Appendix B, for the period from January 1, 2015, through December 31, 2016; 

 

4 Congress first established the $200 ceiling under P.L. 101-164 for fiscal year 1990, and reestablished it in 

fiscal years 1994-1999. The ceiling was made permanent by P.L. 106-69, the Department of Transportation 

and Related Agencies Appropriations Act of 2000. 

5 See 49 U.S.C. § 41731(a)(1)(C). 

6 The certifications are internet accessible at: http://www.dot.gov/policy/aviation-policy/small-communityrural-air-service/essential-air-service. 
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2. The Department requires Great Lakes Aviation, Ltd., to continue to provide Essential 

Air Service at Silver City/Hurley/Deming, New Mexico, from December 1, 2014, or until 

Boutique commences full EAS at the community, but no later than March 31, 2015; 

3. The Department directs Great Lakes Aviation, Ltd. and 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 air carrier may forfeit its compensation for any claim 

that is not supported under the terms of this Order; 

4. The Department finds that Boutique Air is fit, willing and able to operate as a commuter 

air carrier, and capable of providing reliable Essential Air Service at Silver 

City/Hurley/Deming, New Mexico; 

5. This docket will remain open pending further Department action; and 

6. The Department will serve copies of this Order on the civic officials of Silver City, 

Hurley, and Deming, New Mexico, The Director of the Grant County Airport, Great 

Lakes Aviation, Ltd., Mokulele Flight Services, Inc., Pacific Wings, LLC, Boutique Air, 

and the service list for this docket. 

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.gov 

 
Appendix A 

Page 1 of 2 

Boutique Air 

Annual Compensation Requirements for Essential Air Service at 

Silver City, New Mexico to Albuquerque International Sunport (“ABQ”), 

For 24 Round Trips per Week at 98.0% Completion Factor 

Operations

Scheduled

Flights 2,496

Completion Factor of 98% 2,446

Scheduled Block Hours 2,424

Scheduled Seats 22,464

Scheduled ASMs 4,245,696

Revenue

Passengers 3,662

Average Fare $79.25  

Fare Revenue $290,214  

Total Revenue $290,214  

Expenses

Fuel $975,660  

Ownership $792,000  

Maintenance and Reserves $775,680  

Staff $374,620  

Marketing and Distribution $14,648  

Other Indirect Costs $560,448  

Total Costs $3,493,056  

Profit Element $174,653  

Margin 5.00%

Total Subsidy Requirement $3,377,495  

PHX may be used instead of ABQ for up to 12 frequencies at Boutique’s discretion. No upline 

or downline restrictions. 
 Appendix A 

 Page 2 of 2 

Great Lakes Aviation, Ltd. 

Annual Compensation Requirements for Essential Air Service at 

Silver City/Hurley/Deming, New Mexico to Phoenix (PHX) 

Two Round Trips - Nine seat - B1900 - Historical schedules should be used as sample pattern of 

service 

(at 98 percent completion)

Departures: 1,227

Block Hours: 1,329

Revenue Passenger Miles: 924,000

Available Seat Miles: 2,550,933

Operating Revenues: 

Passenger: SVC-PHX 4,000 psgrs at $98.36 $393,440 

Other: (at 0.62% of passenger revenue) $2,439 

Total Operating Revenues: $395,879 

Operating Expenses: 

Direct: Aircraft and Hull Insurance $365,710

Fuel and Oil $858,160

Flying Operations $262,132

Maintenance $447,674

Total Direct Expenses: $1,933,676

Total Indirect Expenses: $574,601

Total Operating Expenses: $2,508,277

Operating Loss ($2,112,398)

Profit Element (5.0% of Total Operating Expenses) $125,414

Annual Compensation Requirement: $2,237,812

 

ALL SVC – PHX – SVC Service is Non-Stop 

This Proposal is submitted with no upline scheduling restrictions 
 Appendix B 

Page 1 of 2 

 

 

Boutique Air

Essential Air Service to be provided at Silver City/Hurley/Deming, New Mexico 

Effective Period: January 1, 2015, through December 31, 2016 

Scheduled Service: Twenty-four (24) nonstop round trips each week to Albuquerque 

Aircraft: 9-Seat Pilatus PC-12 

Rate per Eligible Flight: $1,3761 

Weekly Ceiling: $66,0482

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 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 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 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 under this order beyond December 11, 2014. The Government’s obligation for 

performance under this order beyond December 11, 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 December 11, 2014, until funds are made available to the Department for performance. If sufficient funds are 

not made available for performance beyond December 11, 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; August claims must be submitted by November 30, and so on. 

 

1

 Annual compensation of $3,377,495 divided by 2,454 annual departures (313 service days x 8 flights per service x 

98 percent completion). 

2 48 flights per week multiplied by $1,376 per flight. 
 Appendix B 

Page 2 of 2 

 

 

Great Lakes Aviation, Ltd. 

Provision of Essential Air Service at Silver City/Hurley/Deming, New Mexico 

Effective Period: December 1, 2014, or until Boutique commences full EAS at the community, 

but no later than March 31, 2015 

Scheduled Service: 12 round trips a week to Phoenix 

Aircraft: 9-Seat Beechcraft

Rate per Eligible Flight: $1,8241 

Weekly Ceiling: $43,7762

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 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 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 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 under this order beyond December 11, 2014. The Government’s obligation for 

performance under this order beyond December 11, 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 December 11, 2014, until funds are made available to the Department for performance. If sufficient funds are 

not made available for performance beyond December 11, 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; August claims must be submitted by November 30, and so on. 

 

1

 Annual compensation of $2,237,812 divided by 1,227 annual departures (313 service days x 4 flights per service 

day x 98 percent completion). 

2 24 flights per week multiplied by $1,824 per flight.