Essential Air Service at Merced, California

Order 04-1-21
OST-98-3521

Issued and Served January 26, 2004

Order Setting Final Rates

By Order 2001-10-9, October 18, 2001, the Department selected Eagle Canyon Airlines, Inc., dlb/a Scenic Airlines, to provide subsidized essential air service (EAS) at Merced, California, through October 31, 2003. Under that order, Scenic operates 14 nonstop round trips a week with 19-seat Beech 1900 aircraft to Las Vegas. First and second-year subsidy rates were set at $949,458 and $749,433. Most recently, by Order 2004-1-9 we requested proposals for EAS at Merced, because our selection of Scenic expired on October 31, 2003. Proposals are due February 17.

The carrier has agreed to continue providing the service set by Order 2002‑5‑20 at the lower second year rate of $844,479 temporarily while we complete a carrier‑selection case. We have reviewed that rate and find it reasonable. By extending the second‑year rate the carrier will be continue to be compensated and the Department will have certainty as to its ultimate subsidy exposure in the interim. The rate is significantly lower than the first‑year rate of $1,031,224 that expired on October 31, 2002. We will continue to process the carrier‑selection proceeding.

By: Karan Bhatia