Order: 2014

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Served: July 8 , 2014


### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on th e 8 th day of July , 20 1 4

ORDER

Summary By this O rder, the Department is selecting Erickson Helicopters, Inc. (Erickson), a wholly

- owned subsidiary of Erickson Air Crane, Incorporated , in partnership with Kawerak, Inc. (Diomede’s community representat ive) , to provide Air Transportation to Noneligible Places (ATNEP) at Diomede, Alaska, with an annual subsidy of $377,520 for the period from July 1, 2014 through June 30, 2015. 1 Service is to consist of one round trip per week, 44 weeks per year, routed N ome to Diomede to Wales to Diomede to Nome, with four

- seat B

- 105 helicopters. 2

Background By Order 20 1 3

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, June, 11, 2013 , the Department re

- selected Evergreen Helicopters,

Inc.

, 3 to provide ATNEP at Diomede , Alaska, through June 30 , 20 1 4

. 4 Under that O rder,

Erickson p rovides one round trip per week, up to 44 weeks per year, routed Nome to Diomede to Wales to Diomede to Nome, with four

- seat B

- 105 helicopters.

As the end of the current contract was approaching, we contacted the State of Alaska to inqui re if funding would be available for Alaska/Kawerak to continue payment of its 50 percent share of the costs to provide ATNEP at Diomede. On May 30, 2 0 14, we received

1 Under 49 U. S.C. 41736(a)(1)(B), one

- half of the total subsidy requested must be paid by a party other than the Federal Government. Thus, the Department’s share of funding is $188,760. Such subsidy is calculated and distributed on a fiscal year basis, and is subject to the availability of funds.

2 The subsidized service is not required during the winter period when an ice

- runway forms, permitting the operations of non

- subsidized, fixed

- wing air service.

3 On January 28, 2014, Erickson Air

- Crane, Incorporated, informe d the Department that it had acquired Evergreen Helicopters and was re

- branding the company as Erickson Helicopters, effective February 6,

2014. Eri c kson remains a separate legal entity and wholly

- owned subsidiary of Erickson Air

- Crane

, Incorporated.

4 Th e State’s fiscal year ends on June 30 of each year. Air Transportation to Noneligible Places

DIOMEDE, ALASKA

Under 49 U.S.C. § 4173 6 DOCKET DOT

- OST

- 2009

- 0260- 2

-

a letter from Scott Ruby, Director of Community and Regional Affairs for the Alaska Depa rtment of Commerce, Community, and Economic Development, stating:

On May 28, 2014 Governor Sean Parnell signed Alaska’s operating budget bill for SFY2015. The budget period is July 1, 2014

– June 30, 2015. Within the operating budget for the Department of Commerce, Community, and Economic Development, Division of Community and Regional affairs (DCCED/DCRA), is a $200,000 allocation for a grant to Kawerak, Inc. The purpose of the grant is to pay the 50% local share under a contract for the Air Transporta tion to Non

- Eligible Places (ATNEP) program for Diomede, Alaska.

Subsequently, on June 3, 2014, we received a proposal from Erickson to continue ATNEP service at Diomede for the upcoming year (July 1, 2014

– June 30, 2015) for the same service pattern and subsidy requirement as set by Order 2013

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.

Community and State Comments On June 24, 2014, we received a letter from the Alaska Department of Transportation and Public Facilities, Division of Statewide Aviation. The letter supports continuation of th e ATNEP program at Diomede, citing the community’s dependence on the service for provision of basic necessities, medical and health services, and passenger transportation.

On June 30, 2014, we received a letter from Kawerak expressing their support for th e continuation of ATNEP at Diomede with Erickson. The letter states that Kawerak is deeply thankful for the past two years of service from Evergreen Helicopters (now Erickson) and that the residents of Diomede have provided positive feedback regarding

the service.

Decision

49 U.S.C. § 41736(a)(1)(B) states that the Department may approve a proposal under ATNEP “...if the State or local government or a person is willing and able to pay 50 percent of the compensation for providing the transportation .” The Department is responsible for paying the remaining 50 percent. The decision at Diomede is straightforward. Erickson is the incumbent carrier, has proven reliable in providing ATNEP at Diomede, and has the support of the State of Alaska and Kawerak, Diome de’s community representative. The level of service and subsidy is reasonable and is the same as that set by Order 2013

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- 11.

Special ATNEP Provisions

Contract Following issuance of this Order, the Department will enter into a contract with Erickson

and Kawerak. Kawerak is the applicable non

- Federal party responsible for payment of the 50 percent local share, while the Department is responsible for paying the remaining 50 percent share. The Department will not authorize payments for air service until t he

contract is executed.- 3

-

The Department will continue to pay its 50 percent share as long as Erickson maintains the established level of air transportation, Kawerak continues to pay its 50 percent share, and the Secretary of Transportation (Secretary) dec ides that the Department’s 50 percent compensation is necessary to maintain transportation at Diomede. 5 The Secretary may also withdraw the designation of Diomede as eligible to receive compensation for ATNEP after at least 2 years if the Secretary decide s the withdrawal is in the public interest per 49 U.S.C. § 41736(f). Moreover, Erickson may end, suspend, or reduce ATNEP at Diomede provided that it gives the Secretary, Alaska Department of Commerce, Community, and Economic Development, Division of Comm unity and Regional Affairs and Kawerak at least 30 days’ notice before ending, suspending, or reducing the transportation. 6

Billings

Erickson must file a monthly claim with the Department indicating the level of service it has provided as described in App endix B. 7 The Department will then review Erickson’s monthly claim for accuracy and conformance with Appendix B and will immediately notify Kawerak of the 50 percent share it is obligated to pay. After Kawerak has made
payment to Erickson and supplies th e Department with proof of such payment, the Department will pay its own 50 percent share of the total monthly claim. 8

Carrier Fitness 49 U.S.C. §§ 41737(b) and 41738 require that the Department find an air carrier fit, willing, and able to provide reliab le service before the Department may subsidize it to provide ATNEP. Erickson Helicopters, Inc., is subject to the Department’s continuing fitness requirements. The Department has contacted the Federal Aviation Administration,

and it has raised no concern s 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 1.25a(b).

ACCORDINGLY,

1. We sel ect Erickson Helicopters, Inc ., to provide Air Transportation to Noneligible Places at Diomede, Alaska;

5 49 U.S.C. § 41736(d).

6 49 U.S.C. § 41736(g).

7 The Postal Service (USPS) has a direct air taxi contract with Erickson for delivery of mail to Diomede. The service provided by that contract is designed to transport mail, but passengers or freight may be transported on a space

- available basis. For service compensable under this order, passenger service comes first, but mail and freight may be transported on a space available basis. In order that the separ ate USPS and ATNEP service not be double counted, we will require Erickson to submit with its monthly claim the entire service it provided to Diomede in that month, and to distinguish between the service provided pursuant to the USPS contract and that prov ided under this Order.

8 We typically establish weekly ceilings for billing purposes to ensure reliable, consistent service. However, because Diomede is so isolated and its air service needs may be somewhat unpredictable

-- e.g., for medical emergencies, we will establish only an annual ceiling. We still expect Erickson to strive to provide a minimum of one round trip per week under ATNEP.- 4

-

2. We set the final rate of compensation for Erickson Helicopters, Inc

., for the provision of Air Transportation to Noneligible Places at Diomede, Alas ka, as described in Appendix B and the agreement between the Department, Erickson and Kawerak in which the Department will only pay 50 percent of each monthly bill from Erickson after Kawerak directly pays Erickson the remaining 50 percent;

3. The Departm ent will only continue to pay its 50 percent share as long as Erickson Helicopters, Inc

., maintains the level of air transportation established by this Order and the Department’s agreement with Erickson and Kawerak , Kawerak continues to pay its 50
percent share, and the Secretary of Transportation decides that the Department’s 50 percent compensation is necessary to maintain transportation at Diomede;

4. We direct Erickson Helicopters, Inc

., to retain all books, records, and other source and summary docume ntation 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 sh all 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

supp orted under the terms of this Order;

5. We make specific note that Erickson Helicopters, Inc

., must retain records of all of its

service to Diomede

– both that provided for under this O rder, as well as that provided under the Postal Service contract, as w ell as any charter or other service not so required;

6. We find that Erickson Helicopters, Inc

., continues to be fit, willing and able to operate as a certificated carrier and capable of providing reliable Air Transportation to Noneligible Places at Diome de;

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

8. We will serve copies of this Order on the civic officials of Diomede, Alaska, Kawerak, Inc., the Alaska Department of Transportation and Public Facilities, and on Erickson Helicopters, Inc.

By:

SUSAN L. KURLAND Assistant Secretary for

Aviation and International Affairs (SEAL)

An electronic version of this document is available online at www.regulations.govAPPENDIX AAPPENDIX B

Air Transporta tion to Noneligible Places to be Provided to Diomede, Alaska

Docket DOT

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Effective Period : July 1, 2014, through June 30, 2015

Scheduled Service : Nome (OME) to Diomede (DIO) to Wales (WAA) to Diomede (DIO) to Nome (OME) Frequency : One r ound trip per week to Nome (OME) and one to Wales (WAA)

. Aircraft Type : BO

- 105, 4

- seat, twin

- engine helicopter

US

- DOT Kawerak Total Subsidy $188,760 $188,760 $377,520 Rate per Flight: 1

DIO

- OME $1,609 $1,609 $3,218

DIO

- W AA $536 $536 $1,072

Note: The carrier understands that it may forfeit its compensation for any flights that it does not operate in conformance wi th 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 eligibilit y 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 si gnificant 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 these rates, it must first notify the Office of Aviation An alysis 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

wh ich 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 complete, 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 do es make payments in the stipulated amounts or at the stipulated service levels, the carrier may cease to provide service to that

sp ecific 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 redu ction

o r cessation of payment.

Funds may not be available for performance under this order beyond September 30, 2014. The Government’s obligation for performance under this order beyond September 30, 2014, is subject to the availability of funds from which paym ent 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, 2014, until funds are made available to the Department for performance. If funds are not made

a vailable for performance beyond September 30, 2014, the Department will provide notice in writing to the carrier.

S ubsidy contracts are subject to, and incorporate by reference, relevant statutes and Department regulations, as they may be

amended from tim e to time. However, any such statutes, regulations, or amendments thereto shall not operate to controvert the foregoing paragraph.

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

1 $188,760 ÷ 44 trips ÷ 2 directions = $2,145

. Allocated by time: 20 minutes D IO

- WAA; 60 minutes DIO

- OME. $2,145 ÷( 60 + 20 ) = $ 26.8125 per minute

. DIO

- WAA : $ 26.8125 x 20 = $5 36; DIO

- OME, $ 26.8125 x 60 = $ 1,609

.