Order 2012-9-10

Served: September 11, 2012

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

Issued by the Department of Transportation

on the 11th day of September, 2012

Essential Air Service at

ADAK, ALASKA

Under 49 U.S.C. 41731 et seq. 

 DOCKET DOT-OST-2000-8556

ORDER RE-SELECTING CARRIER

Summary

By this Order, the Department is re-selecting Alaska Airlines, Inc. to provide Essential Air Service 

(EAS) at Adak, Alaska, consisting of two nonstop or one-stop round trips per week with 

Boeing 737 combi aircraft between Adak and Anchorage for an annual rate of $1,675,703.1 2 

However, that rate would not be for the typical two-year period but would extend for only a oneyear period.

Background

By Order 2010-7-9, July 15, 2010, the Department selected Alaska Airlines, Inc. to provide two 

nonstop or one-stop round trips per week between Adak and Anchorage with Boeing 737-400 

aircraft for $1,675,703 annually through June 30, 2012.3 

As the end of the current rate term was approaching, by Order 2012-2-8, February 10, 2012, we 

requested proposals from carriers interested in providing service to Adak no later than March 9, 

2012. By notice dated March 2, 2012, we granted an extension until March 23, 2012, to submit

 1 The $1,675,703 rate is the same as the rate set by Order 2010-7-9, July 15, 2010, that expired June 30, 2012, but 

less than the hold-in rate set by Order 2012-6-17, June 22, 2012, of $2,023,313, effective July 1, 2012. Alaska 

Airlines indicates the decrease in subsidy is from lower fuel prices.

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

3 That Order also selected PenAir at Atka and Nikolski, Alaska. By Order 2012-5-20, May 23, 2012, we selected 

Grant to replace PenAir. This Order discusses Adak only.
- 2 -

proposals. By notice dated March 22, 2012, we granted an additional extension to March 30, 

2012, to submit proposals at Adak. 

On March 30, 2012, we received a proposal from only one carrier, Peninsula Airways, Inc., 

(PenAir). PenAir requested $3,440,097 annual subsidy to provide four nonstop round trips per 

week between Adak and Anchorage with a 34-seat Saab 340 aircraft.4 On May 11, 2012, the 

community expressed dissatisfaction with the level of service proposed by PenAir, especially 

compared to that historically provided by the incumbent, Alaska Airlines. Order 2012-5-24, 

May 24, 2012, rejected PenAir’s proposal, the only proposal before the Department, and resolicited proposals, with proposals due June 26, 2012. As the Order indicated:

“We have decided to re-bid proposals for Adak. While both the community and 

Department are dissatisfied with the current options before us, we wish to highlight the 

fact that the sources of our dissatisfactions are different. We are concerned that the 

level of subsidy PenAir requests is very high -- more than twice the level we have been 

paying Alaska Airlines for its current contract provided with full-sized jet aircraft. 

Based on all of the above, we have decided that the best option is to re-solicit 

proposals.”

On June 19, 2012, we received a request from Tatonduk Outfitters, Ltd., d/b/a Everts Air Cargo 

(Everts Air) for an extension to July 12, 2012, to submit a proposal. By notice dated June 21, 

2012, we granted that request. On July 11, 2012, Alaska Airlines requested an extension to 

July 24, 2012. By notice dated July 12, 2012, we granted that request as well. In response to 

Order 2012-5-24, we received timely-filed proposals from Everts Air; Northern Air Cargo, Inc. 

(NAC); Era Aviation, Inc., (Era Alaska), and from Alaska Airlines, Inc. PenAir did not submit a 

proposal.

Proposal, Everts Air

Option 1 Everts Air proposed one round trip per week between Anchorage and Adak for all-cargo 

service with DC-9-33 jet aircraft. Everts Air requested $1,822,496 annual subsidy for this service, 

subject to certain revenue-sharing provisions.

Option 2 Everts Air proposed one round trip per week between Anchorage and Adak for all-cargo 

service with DC-9-33 jet aircraft and requested $2,155,216 annual subsidy, subject to certain 

revenue-sharing provisions.

Both options allowed for up to two intermediate stops, one stop to pick up additional fuel for the 

almost 1,200 mile flight between Adak and Anchorage, and another stop if opportunities to pick 

up revenue materialized. Option 1 differed from Option 2 by assuming that the Postal Service 

would tender a significant amount of mail to Everts Air. Everts Air recognized that its selection 

would require the additional selection of a passenger carrier to transport Adak passengers, and 

that passenger carrier’s presumably more frequent service might lead the Postal Service to tender 

more time-sensitive delivery mail to that carrier. 

 4 Alaska Airlines chose not to submit a proposal during this initial round of proposals.
- 3 -

Proposal, NAC

NAC proposes to provide 34 one-stop round trips a year to Anchorage for all-cargo service with 

B-737-200 aircraft, and requests $1,017,790 annual subsidy subject to certain revenue sharing 

provisions. For five months of the year of heavier demand, the carrier would provide four round trips 

per month; during the remaining seven months of the year NAC would provide two round trips per 

month. NAC recognized that its selection would require the additional selection of a passenger 

carrier to transport Adak passengers, and that passenger carrier’s presumably more frequent 

service might lead the Postal Service to tender more time-sensitive delivery mail to that carrier. 

Proposal, Era Alaska

Era Alaska proposed two round trips per week between Anchorage and Adak with 37-seat Dash 8 

combi aircraft transporting passengers. Era Alaska requested $2,208,808 annual subsidy for this 

service. The carrier noted that mail and freight revenues were excluded from its revenue estimates 

because it assumed that that traffic would be transported by an all-cargo operator.5

Alaska Airlines Alaska Airlines proposed two nonstop round trips per week between Adak and 

Anchorage with B-737 aircraft and requested $1,675,703 annual subsidy. 

Community Response

On August 7, 2012, we received comments from the community of Adak, including a letter from the 

city council endorsing the proposal of Alaska Airlines. The letter incorporated by reference an 

earlier letter dated May 11, 2012. That earlier letter noted that Alaska Airlines’ service was highly 

reliable and required far less time to transport passengers to Anchorage than non-jet service. In 

addition, it noted the following:

“Adak Island does not have regular barge service and the community is entirely dependent 

on air service for all items, including but not limited to dry goods, groceries, medicine, 

perishable and other time-sensitive goods. While the community expects regular barge 

service in the future, this is a long-term expectancy.” 

In its letter dated August 7, 2012, the community noted that it strongly supported the proposal of 

Alaska Airlines. It further recognized that the only logical choice for the Department would be 

Alaska Airlines because “for the first time, Alaska’s proposal is the lowest cost proposal, something 

we feel is in USDOT’s best interest to recognize and therefore accept.” The community’s letter 

specially thanked Everts Air, NAC, and Era Alaska for their efforts in submitting proposals when it 

had appeared that Alaska would not submit a proposal. 

On August 16, 2012, Offshore Systems, Inc., voiced its support for Alaska Airlines. On August 20, 

2012, the Adak Community Development Corporation supported Alaska Airlines, noting that its 

pattern of service “is critical for the continued access and economic well being of Adak as well as 

that of the entire region of the state.” On August 20, 2012, Icicle Seafoods, Inc., supported Alaska 

Airlines, indicating that “Our needs require a reliable airline to move freight, fresh seafood, 

 5 The staff had informed Era Alaska that it could propose full service to Adak, i.e., that it would transport all of the 

historical traffic -- passengers, freight, and mail -- by itself. However, it could choose, in the interest of perhaps 

providing Adak with better service and lower subsidy, to also submit a proposal that would provide passenger-only 

service in conjunction with service from an all-cargo operator. 
- 4 -

employees, and fishermen.” On August 21, 2012, the State of Alaska expressed its strong 

support for the EAS program. Though it did not endorse any particular carrier, it noted that it 

usually deferred to the wishes of the community, which would in this instance indicate support 

for the proposal of Alaska Airlines. On August 22, the electric utility at Adak supported Alaska 

Airlines. “Barge service is generally limited to one trip annually, thus our ability to move larger 

equipment and material is severely hampered without jet service.”

Decision

Other than the proposal by Alaska Airlines, Era Alaska proposes the only passenger service, and 

it must be coupled with the all-cargo options of either NAC or Everts. Thus the options before 

the Department in terms of annual subsidy are as follows: 1. Era Alaska and Everts Air Option 1 

for a total of $4,031,304; 2. Era Alaska and Everts Air Option 2 for a total $4,364,416; 

3. Era Alaska and NAC for a total of $3,226,598; and 4. Alaska Airlines by itself for a total of 

$1,675,703. In view of the strong community support for Alaska Airlines and its significantly

lower subsidy need, the decision to select Alaska is straightforward. 

It is clear that the proposals of Everts Air, Era Alaska, and NAC were submitted with the express 

intent of helping the Department secure the best service for Adak at the least cost to taxpayer, as 

none of those carriers normally submit proposals. All three assumed that Alaska Airlines would 

not submit a bid, and that DOT would need to make a selection of an all-cargo operator to meet 

Adak’s mail and freight requirements as well as a carrier focused primarily on serving 

passengers. 

As expressed by Tatonduk in its proposal,

“The Order re-soliciting proposals for the next period of the EAS subsidy at Adak is 

attempting to receive alternative bids to what is currently proposed by the previous 

single respondent, i.e., more lift and less requested subsidy. This is a tall order with the 

current known aircraft types currently being operated in the state. Utilization of Alaska 

Airlines’ combi jet truly provides a beneficial service to the community of Adak. 

Everts Air encourages the Department to negotiate with Alaska Airlines’ to determine if 

there is a possibility for them to continue their jet service to Adak for an additional time 

period.” 

Therefore, along with the community, we wish to express our appreciation to those three carriers 

for their efforts. 

Carrier Fitness

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

able to provide reliable service before Department may subsidize it to provide EAS. Alaska 

Airlines, Inc., is subject to the Department’s continuing fitness requirements. 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 carrier 

remains fit to conduct the operations proposed here.

This Order is issued under authority delegated in 49 CFR Part 1.56a(f).
- 5 -

ACCORDINGLY,

1. We select Alaska Airlines, Inc., to provide EAS at Adak, Alaska;

2. We set the final rate of compensation for Alaska Airlines, Inc., for the provision of EAS at 

Adak, Alaska, as described in Appendix B;

3. We direct Alaska Airlines, Inc., 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 data 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;

4. We find that Alaska Airlines, Inc., continues to be fit, willing and able to operate as a 

certificated carrier and capable of providing reliable EAS at the these communities;

5. This docket will remain open until further order of the Department; and

6. We terminate the subsidy rate set by Order 2012-6-17, June 22, 2012, on the service date of 

this Order; and

7. We will serve copies of this Order on the civic officials of Adak, Alaska, the Alaska 

Department of Transportation and Public Facilities, Tatonduk Outfitters, Ltd, Northern Air 

Cargo, Inc., Era Aviation, Inc., and on Alaska Airlines, Inc.

By:

Susan L. Kurland

Assistant Secretary for

Aviation and International Affairs

(SEAL)

An electronic version of this document is available on the World Wide Web at

http://www.regulations.gov
Order 2012-9-10

Served: September 11, 2012

Appendix A

Nonstop Great Circle Miles from Anchorage (ANC))

Adak (ADK) 1,192

Atka (AKB) 1,100

Adak (IKO) 905

Dutch Harbor (DUT) 791

Cold Bay (CDB) 620

Other Nonstop Great Circle Miles

Adak to Atka 107

Atka to Adak 231

Adak to Dutch Harbor 116

Adak to Dutch Harbor 445

Atka to Dutch Harbor 339
Order 2012-9-10

Served: September 11, 2012

Appendix B

Essential Air Service to be Provided to Adak, Alaska, Docket 2000-8556

Effective Period: Issue date of this Order until the end of the 12th month thereafter.1

Scheduled Service: Two one-stop round trips per week to Anchorage.

Aircraft Type: Boeing 737 Combi aircraft.

Annual Subsidy $1,675,703

Annual Flights2 208

Rate per Flight3 $8,056

Weekly Ceiling 4 $32,224

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 amounts or at the stipulated service levels, the carrier may cease to 

provide service to that specific location without regard 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 are not currently available for performance under this Order beyond September 30, 2012. The Government’s 

obligation for performance under this Order beyond September 30, 2012, is subject to the availability of 

appropriated 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, 2012, until funds are made 

available to the Department for performance. If funds are not made available for performance beyond September 

30, 2012, the Department will provide notice in writing to the carrier.

All claims for payment must be submitted within 60 days of the last day of service provided under this Order.

 1 The interim rate set by Order 2012-6-17, June 22, 2012, of $2,023,313, terminates with the issuance of this Order.

2 Two round trips per week x two directions x 52 weeks = 208 flights.

3 Annual subsidy of $1,675,703 ÷ 208 .

4 $8,056 per flight x four one-way flights per week.