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H!! i U. & Departmen t o f ; L ,M,:; | 120 0 Ne wJerseyAvenue , S E Transportatio n Washington , D C 2059 0 Offic e O f th e Secretar

y- : : : 7 1 o n h o f Transportatio n ^ : '

^ ^
Steve n D

. Hatte r

Januar y 25 , 201 2 Deput y Commissioner , Aviatio n 411 1 Aviatio n Avenu e P O Bo x 19690 0 Anchorage , A K

99519-690 0 Dea r Mr

. Hatter : A s yo u know , Redemption , Inc. , d/b/ aIslan dAi r Service , provide s subsidize dai r servic e unde r th e essentia l ai r

servic e (EAS ) progra ma t Karluk

. Th e Department' s curren t contrac t withIslan dAi r

a t Karlu k call s for an annua l subsid y of

$44,34 9 wit

hthre e nonsto p roun dtrip s pe r

wee k t o Kodiak

(ADQ ) with5-seat

Pipe r PA-3 2 aircraft , an di t expire s Marc h31 , 2012

. In anticipatio n of th e en do f

tha t contract , b y Orde r

2011-12- 7 th e Departmen t

requeste d"bes t

an dfinal " proposal s t o serv e Karlu k for anew , two-year period , an dw e receive dtimely-file dproposal s fro mIslan dAi r an dfro mAndre w Airways , Inc

. I amrequestin g you r

commen t

o n th e carriers ' servic e an dsubsid y proposal s before w e submi t arecommendatio n o n th e carrier-selectio n issu e t o th e Assistan t Secretary for Aviatio n an dInternationa l Affair s for decision

. Copie s of

eac hcarrier' s full proposa l may b e accesse donlin e throug hth e Department' s Docket s Managemen t Syste ma

t http://www.regulations.gov / b y enterin g "DOT-OS T 2004-19342 " i n th e "ente r Keywor d o r ID " field , s o w e wil l onl y summariz e the mhere

. Islan dAi r

Th e carrie r

propose s t o provid e atota l o f thre e nonsto p roun dtrip s pe r wee k t o Kodiak , Alask a(ADQ) , fo r $44,20 3 annua l subsid y for atwo-year

period

. Al l servic e woul db e with5-seat , Pipe r PA-3 2 aircraft

. Se e Appendi x A

. Andre w Airway s Th e carrie r propose s t o operat e thre e nonsto p roun dtrip s pe r wee k t o Kodiak , Alask a(ADQ) , for $38,49 2 annua l subsid y for atwo-year

period

. Al l servic e woul db e with6-seat , Pipe r PA-3 2 aircraft

. Se e Appendi x B

. Pleas e not e that

an y passenge r

fare s show n i n th e carriers ' proposal s d o no t necessaril y reflec t th e averag e loca l fare s passenger s woul dpay , bu t rathe r reflec t th e prorate dportio n o f th e tota l ticke t

price , e.g. , th e Karlu k

- Kodiak portio n of

aKarlu k - Kodiak

- Anchorag e ticke t

that th e carrie r

woul drealize

. Also , th e implici t average fare , a s reflecte d i n th e carriers ' subsid y calculation s i s ne t of certai n charge s suc ha s federal transportatio n security fees , excis e an dticke t taxes , an dpassenge r

facility charges

. O f

course , carrier s hav e th e discretio n t o charg e fare s the y deemappropriate , an dth e propose dpassenge r fare s were develope dfor

subsid y rat e computatio n purpose s only

. Eac hcarrie r woul dhav e t orealiz e passenge r fare s comparabl e t o th e average s show n i n it s proposa l i n orde r t o achiev e break-eve n o r

profitabl e operation s eve n withsubsidy

. Yo u shoul dals o not e that an y schedule s submitte db y th e carrier s ar e illustrativ e only , an d th e carrie r

selecte dmay mak e schedul e change s t o reflec t changin g conditions , e.g. , t o bette r mee t shiftin g connectin g ban k time s a t th e hub

. Th e Departmen t expect s subsidize d ai r carrier s t o maintai n well-time dan dwell-space dflight s i n orde r t o ensur e full compensation

. W e kno w thi s matte r

i s importan t

t o yo u an dw e wil l ac t

a s quickl y a s possibl e upo n receip t o f you r letter

. I n orde r t o expedit e th e case , pleas e submi t you r comment s b y emai l t o EAS@dot.go v an dt o Kevin.Adams@dot.gov , b y February 21

. I f yo u hav e an y question s o r d o no t wis ht o submi t

formal comments , pleas e contac t Kevi n Adam s a

t (202 ) 366-1047

. Sincerely ,

Denni s J

. DeVan y Chief , Essentia l Ai r

Servic e Divisio n Offic e o f Aviatio n Analysi s Enclosure s
cc : Karlu k

Villag e Council , Unite dState s Posta l Service , Islan dAir, an dAndre w Airway sAppendi xA Pag e 1 o f 2

Tota l blocl < inours Aircraf t Type : PA-3 2 Tota l Hour s wit h 10 % weathe rdelay s Departure s REVENU E Redemption , In c d/b/ a Islan d Ai rServic e Calculatio n o f Subsid yRequiremen t 201 2

Karluk , Alask a

28 0 30 8 31 2

Passenger&Carg o Mai l Tota l Operatin g Revenu e 91,07 3 20,27 7 111,34 9

DIRECT OPERATIN G EXPENSE S Pilo t Fue l & Oi l Maintenanc e Aircraf t Leas e Insuranc e Tota l Direc t Operatin g Expense s 7 1 10 5 7 6 4 0 3 0 p h p h p h p h p h 21,89 0

32,29 5 23,43 1 12,33 2 9,24 9 99,19 8

Indirec t Operatin g Expense s Traffi cRelate d 11.5 % o f Revenue s 12,80 5 departur e Relate d 30.9 0 pe rdepar t 9,64 1 Capacit yRelate d 23.8 % o f Revenue s 26,50 1 Tota l Indirec t Operatin g Expense s 48,94 7 TOTA L OPERATIN G EXPENSE S 148,14 5 Operatin g Loss -36,79 6 Profi t elemen t @ 5 percen t o f Tota l Operatin g Exp e 7,40 7 Compensatio n Requiremen t 44,20 3

Not e 1 Bi d i s schedule d servic e int o Karlu k an d no t o n a fla g sto p basis , schedule d servic e wil l b e maintaine d eve n wit h an yminimu m load s o f paxo rmai l a s pe rth e contrac t an d OAG listing

. Not e 2 Backu p aircraf t i s twi n engin e BN-2 AIslander

. Wit h increase d performanc e an d capabilitie s i n lo wweathe ran d poo rrunwa ycondition s i t get s frequen t use
.Redemption , In cd/b/ a Islan d AirServic e Calculatio n o f Subsid yRequiremen t 201 2 Karluk , Alask a Appendi xA Pag e 2 o f 2

Schedul e MI N MI N MI N MI N TFIIP S WEEK S Hour s Dep./w k

Tota l Pep

. ADQ-KYK-AD Q 4 9 4 9 5 2 254. 8 31 2 Tota l Hours Tota l Hour

s wit h weathe radjustmen t - se e not e 2

. 254. 8 280.2 8

PA X RAT E RE V CARGO RAT

E RE

V MAI L RAT

E RE

V KARLU K 47 1 11 8 5557 8 4774 0 0.743 5 35494. 7 17480. 0 1.1 6 20276. 8

Not e 2. : A n additiona l 1 0 percen t fo rba d weathe rha s bee n adde d t o th e calculate d tota l t o accoun t fo radvers e weathe rdelay sAppendi x B Subsid y Calculatio n o f

Andre w Airways , Inc

.
TOTA LBLOC K

HOURS
AlrcraJftTyp e Passenge r Freigh t Mai l Tota l Revenu e Pilo t Fue l Oi l Maintenanc e Leas e Insuranc e Tota l Direct s Groun dCre w Accountin g Tota l i n direct s Operatin g Expens e 5 % Margi n Tota l Cos t ANNUA L COMPENSATIO

N 28 0 Pipe r Saratog a- 6 Passenge r Seat s Subjec t t o 1000 #Tota l Weigh t Capacit y $ 93,74 4 $ 26,65 6 $ 0 $120,40 0 $ 27,21 0 $ 26,25 2 $ 42 0 $ 30,03 0 $ 22,40 0 $ 7.42 8 $113,74 0 $ 25,05 6 $ 12,52 8 $ 37,58 4 $ 151,32 4 $ 7,55 6 $ 158,89 2 $ 30,49 2