## Before the United States Department of Transportation 

# Washington, DC

January 20, 2015

Essential Air Service at PAGE, ARIZON A Docket OST-1997-2694 PRESCOTT, ARIZON A Docket OST-1996-1899 SHOW LOW, ARIZON A Docket OST-1998-4409 under 49 U.S.C. 41731 et.seq.
This document contains the response of Great Lakes Aviation, Ltd. to Order Requesting Proposals 2014-11-15 Great Lakes Aviation, Ltd. is pleased to submit these proposals to provide essential air transportation to these Arizona communities addressed in the Order as stand alone proposals. Our proposals provide conveniently timed schedules to our Denver, Phoenix and Los Angeles hubs, whereby passengers may utilize our code-share agreement with United Airlines. In addition to our code share agreement with United Airlines, Great Lakes maintains electronic interline ticketing and baggage agreements with American, Delta and United. Passengers will also be eligible for Delta Sky Miles Frequent Flyer program when travel is booked through Delta's sales channels. All of which will offer passengers traveling to and from these communities supplemental access to the domestic and international air transportation system. Great Lakes is proposing multiple service alternatives for all three communities. The proposals consist of Beech 1900D service configured with nine seats and Beech 1900D service configured with 19 seats. Due to pilot supply, in the near term, we have been forced to offer nine seat service. To illustrate the economic impact of the effect of the pilot shortage on small community air service, the Beech 1900D service with 19 seats offers a substantial reduction in subsidy requirement due to the availability of more seats which can generate more passenger traffic and revenue. We have also offered a service option for Prescott utilizing pressurized 30 seat Embraer EMB-120 Brasilia aircraft. Please refer to the attached proposals for the the s p ecific service p atterns bein g offered for each communit y
.

Changes to FAA pilot qualification rules have created an industry-wide pilot shortage which has had an acute impact on Great Lakes. These rules mandated that first officers obtain an Airline Transport Pilot certification (“ATP”) prior to being qualified to perform crewmember duties in scheduled airline passenger service under FAR Part 121 regulatory requirements. A key factor to enable a pilot to receive an ATP certificate is the accumulation of 1,500 flight hours. Great Lakes received FAA operations specifications allowing us to hire pilots under its FAR Part 121 certificate utilizing FAR Part 135 regulatory hiring requirements. This allows our new hire pilots to operate the Beech 1900D aircraft in a nine seat configuration and will enable Great Lakes to restore pilot staffing levels while maintaining FAR Part 121 pilot training and aircraft maintenance standards. For illustrative and comparison purposes, we have also provided a Phoenix service option for Prescott that would be subject to significant modifications at the Phoenix hub gate facilities.Questions and comments may be referred to: Michael O. Matthews Chief Financial Officer Great Lakes Aviation, Ltd. 1022 Airport Parkway Cheyenne, WY 82001 (307) 432-7000 It is Great Lakes' belief that the unintended consequences of the changes in pilot qualification rules have debilitated small community air service whereby excessive subsidy requirements will force communities to loose EAS service eligibility. To avert these unintended consequences and revitailize small community air service, will necessitate regulatory relief. Great Lakes stands ready to participate in creative solutions to assist small communities in their efforts to remain in the National Air Transportation System.Table of Contents:SubsidyPassengersAverageSubsidy CostBid Service PointsHub Options Equipment RequirementForecastFare per Passenger1 Page Phoenix (non-stop) and/or Nine Seat Beech 1900D$2,690,6369,500$125.72 $283.22Denver (one-stop) and/orLos Angeles (one-stop)2 Page Phoenix (non-stop) and/or 19 Seat Beech 1900D$2,275,11114,250$117.94 $159.66Denver (one-stop) /and orLos Angeles (one-stop)Cost of 1,500 hour ATP to EAS program $415,525(4,750)$123.573 Prescott Los Angeles (non-stop) and/or Nine Seat Beech 1900D$3,152,5658,500$139.18 $370.89Denver (one-stop)4 Prescott Los Angeles (non-stop) and/or 19 Seat Beech 1900D$2,721,88414,000$124.92 $194.42Denver (one-stop)Cost of 1,500 hour ATP to EAS program $430,682(5,500)$176.475 PrescottLos Angeles (non-stop)30 Seat EMB-120$2,657,00215,200$119.10 $174.806 Show Low Phoenix (non-stop) and/or Nine Seat Beech 1900D$2,275,3395,000$106.74 $455.07Denver (one-stop)7 Show Low Phoenix (non-stop) and/or 19 Seat Beech 1900D$1,894,3849,500$102.98 $199.41Denver (one-stop)Cost of 1,500 hour ATP to EAS program $380,955(4,500)$255.66Total Annual Cost of 1,500 hour ATP to US DOT for Arizona EAS Communities$1,227,162(14,750)

# Great Lakes Aviation, Ltd. Annual Compensation Requirements for Essential Air Service at 

## Page, Arizona B1900 - (nine seat configuration) (at 98 percent completion) Departures: 1936

Operating Revenues: Passenger: PGA 9,500 psgrs at $125.72 $1,194,340

Other: (at 0.62% of passenger revenue) $7,405 Total Operating Revenues: $1,201,745
Operating Expenses: Direct: Aircraft and Hull Insurance $365,710 Fuel and Oil $1,101,034 Flying Operations $471,364 Maintenance $806,661 Total Direct Expenses: $2,744,769 Total Indirect Expenses: $962,260 Total Operating Expenses: $3,707,029 Operating Loss ($2,505,284) Profit Element (5.0% of Total Operating Expenses) $185,351 Annual Compensation Requirement: $2,690,636 Current published schedules should be used as sample service levels. Hub options eligible for subsidy are Phoenix (non-stop) and/or Denver (one-stop) or Los Angeles (one-stop). At Great Lakes discretion, Great Lakes would operate four peak day round trip departures with reduced service to two round trip s per day in off peak seasonal periods. No less than 1,936 annual departures would be operated assuming a 98% completion factor.

# Great Lakes Aviation, Ltd. Annual Compensation Requirements for Essential Air Service at 

## Page, Arizona B1900 - (19 seat configuration) (at 98 percent completion) Departures: 1936

Operating Revenues: Passenger: PGA 14,250 psgrs at $117.94 $1,680,645

Other: (at 0.62% of passenger revenue) $10,420 Total Operating Revenues: $1,691,065
Operating Expenses: Direct: Aircraft and Hull Insurance $365,710 Fuel and Oil $1,101,034 Flying Operations $471,364 Maintenance $806,661 Total Direct Expenses: $2,744,769 Total Indirect Expenses: $1,032,541 Total Operating Expenses: $3,777,310 Operating Loss ($2,086,245) Profit Element (5.0% of Total Operating Expenses) $188,866 Annual Compensation Requirement: $2,275,111 Current published schedules should be used as sample service levels. Hub options eligible for subsidy are Phoenix (non-stop) and/or Denver (one-stop) or Los Angeles (one-stop). At Great Lakes discretion, Great Lakes would operate four peak day round trip departures with reduced service to two round trip s per day in off peak seasonal periods.

# Great Lakes Aviation, Ltd. Annual Compensation Requirements for Essential Air Service at 

## Prescott, Arizona to Los Angeles (LAX) Three Round Trips - B1900 - (nine seat configuration) (at 98 percent completion) Departures: 1835 Block Hours: 2,860 Revenue Passenger Miles: 2,924,000 Available Seat Miles: 5,681,160

Operating Revenues: Passenger: PRC 8,500 psgrs at $139.18 $1,183,030

Other: (at 0.62% of passenger revenue) $7,335 Total Operating Revenues: $1,190,365
Operating Expenses: Direct: Aircraft and Hull Insurance $365,710 Fuel and Oil $1,284,941 Flying Operations $568,339 Maintenance $877,672 Total Direct Expenses: $3,096,662 Total Indirect Expenses: $1,039,462 Total Operating Expenses: $4,136,124 Operating Loss ($2,945,759) Profit Element (5.0% of Total Operating Expenses) $206,806 Annual Compensation Requirement: $3,152,565
Current published schedules should be used as sample service levels. Hub options eligible for subsidy are Los Angeles non-stop and/or Denver (one-stop alternative hub).

# Great Lakes Aviation, Ltd. Annual Compensation Requirements for Essential Air Service at 

## Prescott, Arizona to Los Angeles (LAX)

Three Round Trips - B1900 - (19 seat configuration) (at 98 percent completion) Departures: 1835 Block Hours: 2,860 Revenue Passenger Miles: 4,816,000 Available Seat Miles: 11,993,560

Operating Revenues: Passenger: PRC 14,000 psgrs at $124.92 $1,748,880 $0
Other: (at 0.62% of passenger revenue) $10,843 Total Operating Revenues: $1,759,723
Operating Expenses: Direct: Aircraft and Hull Insurance $365,710 Fuel and Oil $1,284,941 Flying Operations $568,339 Maintenance $877,672 Total Direct Expenses: $3,096,662 Total Indirect Expenses: $1,171,535 Total Operating Expenses: $4,268,197 Operating Loss ($2,508,474) Profit Element (5.0% of Total Operating Expenses) $213,410 Annual Compensation Requirement: $2,721,884
Current published schedules should be used as sample service levels. Hub options eligible for subsidy are Los Angeles non-stop and/or Denver (one-stop alternative hub).

# Great Lakes Aviation, Ltd. Annual Compensation Requirements for Essential Air Service at 

## Prescott, Arizona to Los Angeles (LAX) Two Round Trips - EMB-120 (30 seat aircraft) (at 98 percent completion) Departures: 1431 Block Hours: 2,230 Revenue Passenger Miles: 5,228,800 Available Seat Miles: 14,767,920

Operating Revenues: Passenger: PRC 15,200 psgrs at $119.10 $1,810,320

Other: (at 0.62% of passenger revenue) $11,224 Total Operating Revenues: $1,821,544
Operating Expenses: Direct: Aircraft and Hull Insurance $365,975 Fuel and Oil $1,326,966 Flying Operations $535,022 Maintenance $829,807 Total Direct Expenses: $3,057,770 Total Indirect Expenses: $1,207,512 Total Operating Expenses: $4,265,282 Operating Loss ($2,443,738) Profit Element (5.0% of Total Operating Expenses) $213,264 Annual Compensation Requirement: $2,657,002

This Proposal is submitted with no upline scheduling restrctions

# Great Lakes Aviation, Ltd. Annual Compensation Requirements for Essential Air Service at 

## Show Low, Arizona B1900 - (nine seat configuration) (at 98 percent completion) Departures: 1792 Three Round Trips in Summer Schedules - Two Round trips in Winter Schedules

Operating Revenues: Passenger: SOW 5,000 psgrs at $106.74 $533,700

Other: (at 0.62% of passenger revenue) $3,309 Total Operating Revenues: $537,009
Operating Expenses: Direct: Aircraft and Hull Insurance $365,710 Fuel and Oil $714,108 Flying Operations $276,022 Maintenance $597,551 Total Direct Expenses: $1,953,391 Total Indirect Expenses: $725,036 Total Operating Expenses: $2,678,427 Operating Loss ($2,141,418) Profit Element (5.0% of Total Operating Expenses) $133,921 Annual Compensation Requirement: $2,275,339 Current published schedules should be used as a sample service level. Hub options eligible for subsidy are Phoenix hub (non-stop) and/or Denver (one-stop alternate hub) No less than 1,082 departures would be opera ted from May 1st through October 31st and no less than 710 departures w ould be operated fr om November 1st through April 30th. No upline scheduling restrictions.

# Great Lakes Aviation, Ltd. Annual Compensation Requirements for Essential Air Service at 

## Show Low, Arizona B1900 - (19 seat configuration) (at 98 percent completion) Departures: 1792 Three Round Trips in Summer Schedules - Two Round trips in Winter Schedules

Operating Revenues: Passenger: SOW 9,500 psgrs at $102.98 $978,310

Other: (at 0.62% of passenger revenue) $6,066 Total Operating Revenues: $984,376
Operating Expenses: Direct: Aircraft and Hull Insurance $365,710 Fuel and Oil $714,108 Flying Operations $276,022 Maintenance $597,551 Total Direct Expenses: $1,953,391 Total Indirect Expenses: $788,285 Total Operating Expenses: $2,741,676 Operating Loss ($1,757,300) Profit Element (5.0% of Total Operating Expenses) $137,084 Annual Compensation Requirement: $1,894,384 Current published schedules should be used as a sample service level. Hub options eligible for subsidy are Phoenix hub (non-stop) and/or Denver (one-stop alternate hub) No less than 1,082 departures would be opera ted from May 1st through October 31st and no less than 710 departures w ould be operated fr om November 1st through April 30th. No upline scheduling restrictions.

# Great Lakes Aviation, Ltd. Annual Compensation Requirements for Essential Air Service at

** 

## Prescott, Arizona to Phoenix (PHX) Four Round Trips - B1900 - (nine seat configuration) (at 98 percent completion) Departures: 2454 Block Hours: 1,718 Revenue Passenger Miles: 739,500 Available Seat Miles: 1,921,482

Operating Revenues: Passenger: PRC 8,500 psgrs at $54.10 $459,850

Other: (at 0.62% of passenger revenue) $2,851 Total Operating Revenues: $462,701
Operating Expenses: Direct: Aircraft and Hull Insurance $365,710 Fuel and Oil $791,689 Flying Operations $341,401 Maintenance $784,259 Total Direct Expenses: $2,283,059 Total Indirect Expenses: $867,158 Total Operating Expenses: $3,150,217 Operating Loss ($2,687,516) Profit Element (5.0% of Total Operating Expenses) $157,511 Annual Compensation Requirement: $2,845,027

This illustrative option assumes no upline scheduling restrctions

** For illustrative and comparison purposes, we hav e also provided a Phoenix service option for Prescott that would be subject to significant modifications at the Phoenix hub gate facilities.

# Great Lakes Aviation, Ltd. Annual Compensation Requirements for Essential Air Service at

** 

## Prescott, Arizona to Phoenix (PHX) Four Round Trips - B1900 - (19 seat configuration) (at 98 percent completion) Departures: 2454 Block Hours: 1,718 Revenue Passenger Miles: 1,044,000 Available Seat Miles: 4,056,462

Operating Revenues: Passenger: PRC 12,000 psgrs at $50.72 $608,640

Other: (at 0.62% of passenger revenue) $3,774 Total Operating Revenues: $612,414
Operating Expenses: Direct: Aircraft and Hull Insurance $365,710 Fuel and Oil $791,689 Flying Operations $341,401 Maintenance $784,259 Total Direct Expenses: $2,283,059 Total Indirect Expenses: $905,548 Total Operating Expenses: $3,188,607 Operating Loss ($2,576,193) Profit Element (5.0% of Total Operating Expenses) $159,430 Annual Compensation Requirement: $2,735,624

This illustrative option assumes no upline scheduling restrctions

** For illustrative and comparison purposes, we hav e also provided a Phoenix service option for Prescott that would be subject to significant modifications at the Phoenix hub gate facilities.