Order 2013

- 12

- 17 Served: December 30, 2013



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION


### OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 30 th of December, 2013

Essential Air Service at

KAMUELA, HAWAII

Under 49 U.S.C. 41731 et seq

. DOCKET DOT

- OST

- 1997

- 2833

ORDER SETTING FINAL RATE

Summary

This Order sets a final past

- period rate for the hold in service provided by Pacific Wings

, LLC (Pacific Wings)

, at Kamuela, Hawaii , for the period June 12, 2013, through September 21,

2013

.

Background

On March 14, 2013

, Pacific Wings filed a 90

- day notice of intent to suspend its subsidy

- free Essential Air Service (EAS) at Kamuela

. By Order 20 1 3

- 4

- 17, April 25, 2013, we requested proposals for EAS. Th at Order also requir ed Pacific Wings to provide 12 nonstop round trips a

week with 9

- seat aircraft from June 12, 2013, until replacement service could be secured. By

Order 2013

- 7

- 3, July 2, 2013, we selected Mokulele Flight Services, Inc. (Mokulele) , to provide EAS, and it inaugurated that service on September 21, 2013.

Under 49 U.S.C. § 41734(e) Pac ific Wings is entitled to compensation for its hold

- in service

at Kamuela . On November 15, 2013, the carrier submitted a proposal for its hold

- in compensation , as shown in Appendix B

. We have reviewed the carrier’s proposal , and find it

reasonable , as di scussed below

.

Pacific Wings requests that we establish an annual rate of $816,177. 1 However, the carrier acknowledges in its proposal that it is only eligible for compensation for the period June 12, 2013, 2 thru September 21, 2013

, 3 so t his annual rate would apply for

1 Appendix C shows that annual rate produces a per

- flight subsidy of $667 and a weekly ceiling of $16,008.

2 90

- days after it filed notice.

3 The date w hen Mokulele replaced Pacific Wings

.- 2

-

only a 14.5 week period . Likewise, the carrier’s proposal projects a 98 percent completion factor . However, its T

- 100 Segment report for the eligible period (the months of June, July, August, and September ) , shows a 64 percent comple tion factor . Because subsidy is paid on a flight completed basis, this low completion level would reduce the amount of compensation Pacific Wings actually receives compared to its pro forma projection of 98 percent . In brief, we estimate that Pacific Win gs ’ will receive $1 49 ,000

for its hold

- in service. 4 5

This Order is issued under authority delegated in 49 CFR 1. 2 5a( b ).

A CCORDINGLY ,

1. We set the final rate for Pacific Wings for its provision of E AS at Kamuela, Hawaii, as descri bed in Appendices B and C ;

2 . We direct Pacific Wings 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 the audit and examination by

represe ntatives of the Department. Such documentation shall be retained for seven years

from the service date 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 d isposed of must be retained. The carrier may forfeit its compensation for any claim that is not supported under the terms of this Order ;

3 . Th is Docket will remain open until further Department action; and

4 . The Department will serve copies of this O r der on Pacific Wings

.

By:

SUSAN L. KURLAND Assistant Secretary for

Aviation and International Affairs

(SEAL)

An electronic version of this document is available at http://www.regulations.gov

4 14.5 weeks (June 12, 2013, through September 21, 2013) x $16,008 weekly ceiling = $232,116 ; $232,116 x 0.64 completion = $148,554 total compensation.

5 The carrie r will need to bill the Department for the service, and will then specify its eligible flights.Appendix A

Nonstop Great Circle Miles to Kamuela (MUE) Kona (KOA) 30 Hilo (ITO) 45 Kahului (OGG) 79 Honolulu (HNL) 172Appendix B

Past-Period Essential Air Service at Kamuela, Hawaii
Provided by Pacific Wings, LLC, Docket 1997-2833

Nonstop round trips per week 12
Aircraft Type C-208
Seats/Departure 9
Completion 98.00%
Departures Performed 1,223

Block Hours 1/ 775

Hub Kahului, OGG

Passengers 1,000
Average Fare $88.10

Passenger Revenue $88,100

Other Revenue $441

Total Revenue $88,541

Flying Operations $116,189

Fuela nd Oil $224,244

Aircraft and Hull Insurance $82,001

Maintenance $104,570

Into Aircraft and Lease $152,076

Total Directs $679,080

Indirects $182,556

Total Operating Expense $861,636

Profit @ 5% $43,082

Economic Cost $904,718

Annual Subsidy Need $816,177

1/ 12 flights/week x 2 directions x 52 weeks = 1,223 deps.

38 minutes x 1,223 ÷ 60 = 775 blk. hrs.Appendix C

Essential Air Service by Pacific Wings, LLC, at Kamuela, Hawaii , Docket 1997

- 2833

EFFECTIVE: June 12, 2013 thru September 21 , 201 3

SERVICE: 1 2 nonstop round trips per week to Kahului (Maui) , Hawaii (OGG)

AIRCRAFT TYPE: Cessna 208, 9 seats TIMING OF FLIGHTS: Flights must be well

- timed and well

- spaced to ensure full compensation.

ANNUAL SUBSIDY RATE: $ 816,177

ANNUAL FLIGHTS: 1, 223 1

SUBSIDY RATE PER FLIGHT: $ 667 2

WEEKLY CEILING $ 16,008 3

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 co mpleted, 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 per iod, it may jeopardi ze 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 Analysis in writing and receiv e wri tten 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 op erated; flights that overfly points for lack of traffic will not be compensated. In determining whether subsidy payment for a deviat ing 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 loca tion 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 spec ific 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 pa yment.

Subsid y contracts are subject to, and incorporate by reference, relevant statutes and Department regulations, as they may be amende d from time to time. However, any such statutes, regulations, or amendments thereto shall not operate to controvert the forego ing paragraph.

Funds may not be available for performance under this Order beyond January 15, 2014 . The Government’s obligation for performance under this Order beyond January 15, 2014 , is subject to the availability of funds from which payment for services c an be made. No legal liability on the part of the Government for any payment may arise for performance under this Order beyond January 15, 2014 , until funds are made available to the Department for performance. If sufficient funds are not made available f or performance beyond January 15, 2014, the Department will provide notice in writing to the carrier.

All claims for payment, including any amended claims, must be submitted within 90 days of the last day of the month for which compensation is being claimed. For example, claims filed for service provided in July must be filed by October 31; August claims must be submitted by November 30, and so on.

1 1 2 one

- way flights x 2 directions x 52 weeks x .9 8 completion x = 1, 223

. 2 $ 816,177 ÷ 1, 223 annual flights.

3 $ 667 * 2 4 flights per week.