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O \MSPORWION ^ ^ ^ i-Lc nx-i 2 

•rT OPERATIONS 

u s . Department of 1200 New jersey Avenue, SE 

'**'"*POrtatk»n 7i;ri -i^fj | q P 3: hl j Washington, DC 20590 

Office of the Secretary 

of Transportation 

Mark Liiiken January 13, 2011 

Statewide Aviation Planner 

Department of Transportation and Public Facilities 

4111 Aviation Ave. 

PO Box 196900 

Anchorage, AK 99519 

Dear Mr. Luiken: 

As you know, Alaska Airlines provides subsidized air service under the essential air service 

(EAS) program at Cordova, Gustavus, Petersburg, Wrangell, and Yakutat, Alaska. By 

Order 2010-11-26 the Department requested "best and final" proposals to serve all five 

communities, and Alaska Airlines was the only carrier to apply. The Department's current 

contract with Alaska Airlines calls for an annual subsidy of $5,793,201 to provide Cordova and 

Yakutat with one daily round trip over a routing Anchorage-Cordova-Yakutat-Juneau, as well as 

one round trip per day between Gustavus and Juneau for a thirteen-week peak period; at 

Petersburg and Wrangell the rate is $1,347,195 for one daily round trip over a routing JuneauPetersburg-Wrangell-Ketchikan year round. Currently, the combined annual subsidy for all five 

communities is $7,140,396. 

My purpose in writing you at this time is to inform you of the results of the carrier's service and 

subsidy proposal before we submit a recommendation on the carrier selection issue to the 

Assistant Secretary for Aviation and International Affairs for decision. Since there are no other 

options before the Department at this time, you need not respond to this letter. However, we 

wanted to give you the opportunity to submit any comments if you wish. 

Alaska Airlines requests $8,262,938 annual subsidy — $1,122,542 more than the current rate, 

which was agreed to two years ago. The calculations are attached. 

We know this matter is important to you and we will act as quickly as possible upon receipt of your 

letter. In order to expedite the case, please submit your comments by email to EAS@dot.gov by 

Febaiary 2. If you have any questions or need additional time, please contact Kevin Adams 

at (202) 366-1047. 

Sincerely, 

Dennis J. DeVany "^ 

Ciiief, Essential Air Service Division 

Office of Aviation Analysis 
Subsidy Request 

Alaska Airlines, Inc 

Annual Compensation Requirement 

Essential Air Service at Cordova. Gustavus. Petersburg. Wrangell and Yakutat 

May 1, 2011 and Fonvard 

Based on Need for Year Ended September 30, 2010 

Actuals 

AS-2 

Page 1 of 1 

Ooeratlnp Revenuq 

Passenger 

U.S. Mail 

Freight 

Excess Baggage 

Charter 

Trans. Related & Other 1/ 

operatlpq ^wen?? 

Direct 

Flying Operation 3/ 

Maintenance - Flight 

Depreciation - Flight 

Indirect 

Maintenance - Ground 

Flight Attendant 

other Passenger Svc. At 

Aircraft & Traffic Svc. 4/ 

Promotion & Sales 4/ 

General & Admin. 4/ 

Depreciation - Ground 

Transport Related 4/ 

Cordova 

Yakutat 

Qu^.tsvvs 

5,750,006 

404,374 

1,655,264 

139,748 

0 

913,023 

$ 8,862,415 $ 

5,614,210 

1,648,318 

411,539 

$ 7,674,067 $ 

4,058 

548,821 

26,862 

3,609,393 

453.245 

1.422,099 

665,454 

1,121.398 

Petersburg 

Wrangell 

6,232,404 

394,281 

959,182 

74,468 

0 

1,248,577 

8,908,912 \ 

3.827,810 

1.128,854 

279.473 

5,236,138 % 

2,819 

377,463 

10.788 

2.481,025 

596.986 

1,101,315 

629,626 

790,650 

Consolidated 

Total 

11,982.410 

798,654 

2,614.446 

214.217 

0 

2,161,599 

, 17.771,327 

9.442.020 

2.777,172 

691.013 

12,910,203 

6,878 

926.274 

37.650 

6,090,418 

1.049,231 

2,523.414 

1,295.080 

1,911.948 

Total Operating Exp. 

Operating Profit ^Losa^ 

Return 2/ 

Compensation 

$ 7,850,501 $ 5,990.391 $ 13,840,892 

$ 15,524,568 $ 11,226.529 $ 26,751.097 

$ (6,662,153) $ (2,317,617) $ (8,979,770) 

$ 776.228 $ 561.326 $ 1.337,555 

$ 7.438,382 $ 2.878.944 \ $10,317,32'5~| 

EAS Cost per Passenger 

Alaska's proposal offers a low EAS cost per passenger: 

$8,262,938 Proposed EAS compensation 

67% Ratio of passenger revenue to total revenue 

$5,571,329 EAS compensation allocated to passengers 

209.000 Estimated annual passengers 

$26.66 Average EAS cost per passenger 

Notes 

1/ Excludes public service revenue 

2/ 5 % of Operating Expense 

3/F«et«ljwsted-l»accotmtforbudgeted $90/barrel oil 

4/ Costs frozen from last bid 

Proposal 

ConJova 

Yakutat 

Gustavus 

Petersburg Consolidated 

Wrangell Total 

$ 8,862,415 $ 

5,760,774 

1,648,318 

411,539 

$ 7,820,631 $ 

4,058 

548,821 

12,033 

2,477,882 

404,008 

556.194 

665.454 

567.458 

8,908,912 $ 

3,927,701 

1,128,854 

279,473 

5,336,029 $ 

2.819 

377,463 

14,401 

3,336,825 

412,338 

807,963 

629.626 

820,545 

17,771,327 

9,688,475 

2,777,172 

691,013 

13,156,660 

6,878 

926,274 

26.435 

5.814,707 

816.346 

1.384,156 

1,296,080 

1,388.003 

$ 5,235,908 $ 6,401.970 $ 11,637,877 

$ 13,056.538 $ 11.737,999 S 24,794,537 

$ (4,194.124) $ (2.829.087) $ (7,023,211) 

$ 652,827 $ 586,900 $ 1,239,727 

$ 4,846,951 $ 3,415,987 } $8,262,938"]