Order 2012

- 7

- 9 Served: July 9, 2012



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 9 th of July, 2012

Air Service at

DIOMEDE , ALASKA

Under 49 U.S.C. 41731 et seq

. DOCKET DOT

- OST

- 200 9

- 0260

ORDER REQUESTING PROPOSALS Summary By this Order , the Department is requesting proposals by August 7

, 201 2

, from carriers interested in providing service at Diomede

, Alaska

, with or without subsidy.

Background On October 5, 2009, Kawerak, Inc., 1 requested that the Department add D i omed e to the list of communities eligible for EAS subsidies. Kawerak indicated that :

“This community has approximately 128 inhabitants, and is located on a small island off the coast of Alaska. It lies 2.5 miles from Russia, 28 miles from the nearest community of Wales, Alaska, and 135 miles from the nearest hub

communit y of Nome. It is possibly the most remote community in the United States as it is accessible only by helicopter for the majority of the year, until the sea ice freezes solid enough to allow for an ice runway to be built to allow for

small 9

- seater airplan e service.

Kawerak indicate d that the Postal Service pa id Evergreen Helicopters, Inc., to provide helicopter service to Diomede to deliver the mail under a direct air taxi contract. However, under the terms of such contracts Evergreen must focus first on moving the mail and second

on passengers and freight on a space

- available basis.

Kawerak indicate d Diomede’s air service needs as critical.

Currently, medical professionals, social service providers, telecommunications service providers, and other pro viders of basic services to the community have no way of flying to D iomede. The Alaska Air Nat i onal Guard will fly a

1 Kawerak is a non

- profit tribal consortium authorized to compact and provide services on behalf of 20 tribes in the Bering Strait Region of Alaska.- 2

-

helicopter to Diomede to pick up med

- evac patients for life and death situations,

but when the patients are discharged from Nor ton Sound H ealth Corporation they are stranded in Nome with no place to stay and no way to return to

Diomede.”

By letter dated October 15, 2009, the Department advised the State of Alaska that

“Because Diomede did not receive regularly scheduled air service from a certificated carrier on October 24, 1978, the date the Airline Deregulation Act of 1978 was signed into law, it is not eligible to be an EAS community. However, there are two possible options within this Department that may be worth exploring, and I wil l describe them briefly. The first program

allows non

- EAS communities to apply for subsidized air service. In order to be approved, the community or state must submit a proposal to the Department to provide compensation to an air carrier to provide transp ortation to the community; the state, local government, or an individual must pay 50% of the required subsidy; and, the Department must find the proposals “reasonable,” according to statutory criteria [under 49 USC Section 41736.] The second

pr o gram admin istered by this Department that could possibly be of some assistance is called the Small Community Air Service Development Program (SCASDP).

By letter dated January 13, 2010, we indicated to the State that

“We are pleased to inform you that we have reached agreement with Evergreen Helicopter s , Inc., to provide subsidized air service at Diomede, Alaska. While the agreement was only between Evergreen and the Depart m ent, it is the first step before we issue an order selecting Evergreen to inaugurate ai r service to Diomede. The next step is for the state to concur with the terms and conditions of Evergreen’s proposal. Once that is done, we will draft an order and forward

it to the Assistant Secretary for decision.”

F unding was not forthcoming from the S tate at that time and the case went dormant until now

. After more recent discussions with Kawerak, we received a letter from Mr. Curtis Thayer,

Assistant Commissioner , Alaska Department of Commerce, Community, and Economic Development dated June 20, 201 2. The letter states:

“I understand the community would be satisfied if there was at least one scheduled round trip flight per week to Nome, Alaska, above and bey o nd the
current space

- available mail service flights. The State of Alaska proposes to the

S ecretary of Tr a nspor t ation that compensation be provided to an air carrier to supply air transportation to/from Diomede. I am submitting this proposal under 49 U.S.C. §41736, Air Transportation to Non

- el i gible Places, because Diomede is not eligible for s ubsidy support under 49 U.S.C. 41731, et se q , Basic Es s ential Air Service. Based on this request, I anticipate that the U.S. Department of

Tr a nsportation (U.S. DOT) would issue a Request for Proposals (RFP), select an air carrier, and administer/pay the selected carrier for air service provided in a similar manner that it administers carrier selections and subsidy payments under

Basic EAS.- 3

-

Th e [ S tate of Alaska’s] FY13 operating budget has been signed and becomes effective July 1, 201 2 . The funding was included as part of the Department’s base budget and would be subject to legislative appropriations and approvals by the Governor in subsequent years. The [State] is in the process of offering a grant to Kawerak, Inc. in the amount of $200,000. We have systems in place to provide the full amount of the grant as an advance payment. Kawerak, Inc., has indicated in the grant budget that they will be providing $190,476 in funding directly to the U

. S

. DOT for use in the project.”

Request for Proposals

W e request proposals from carriers interested in providing service at Diomede . The level of

service is limited to what can be provided with an ann ual subsidy of $380,952

– half of that

total from the S tate /Kawerak , and other half f ro m the U.S. DOT

. Carriers should file their proposals by August 7 , 2012

. S taff will then docket the proposals, thereby making them public. Shortly afterwards, we will provide a summary of the proposals to the communities

and S tate and as k them to submit their final comments. We will give full consideration to all proposals filed in a timely manner. 2

Interested carriers should prepare their proposals with every expec tation that their initial proposals will also be their final and only proposals. We retain the discretion to negotiate proposals with carriers when we deem it desirable. We also retain the discretion to reject outright all unreasonable or unrealistic proposals and , if necessary, solicit a new round of proposals. However, we anticipate that negotiation or rejection will remain only occasional exceptions to the rule.

We are here providing interested carriers with some basic information to serve as guid ance when they prepare their proposals, but we will not prescribe a precise format. We expect proposals to adequately describe the service being proposed and the annual amount of subsidy being requested. 3 The applicants can make their own judgments as to the level of detail they wish to present; however, they might want to include proposed schedules as well as supporting data for their subsidy requests, such as projected block hours, revenues

, and expenses. We strongly encourage clear, well

- documented pr oposals that will facilitate their evaluation by the affected community and the Department. Our selection criteria are stated in 49 U.S.C. §41736 (a)(2). 4

With specific respect to Diomede , we expect proposals that request no more than $380,952 annual s ubsidy. Carriers are free to request less subsidy for a given service

level. As the S tate has indicated, one round trip per week connecting the community to the national transportation system is the goal, but carriers are free to offer more service

2 Carriers should not expect the Department to accept late filings. In cases where a carrier proposes to provide s ervice without subsidy and we determine that service can be reliably provided without such compensation, we typically do not proceed with the carrier

- selection case. Instead, we simply rely on that carrier’s subsidy

- free service as proposed.

3 The $380,95 2 subsidy level is the ceiling level of subsidy.

4 “ In determining whether a proposal is reasonable, the Secretary shall consider, among other factors

– (A)

the traffic

- generating potential of the place; (B) the cost to the United States Government of pr oviding the proposed transportation; and (C) the distance of the place from the closest hub airport. At this time, we would note that since Diomede is an island with no scheduled air or surface transportation, it can be said to be extremely far from the c losest hub.- 4

-

than that if they require the ceiling level of subsidy or less. Carriers may propose service

for a one

- year period. 5 Consistent with the State’s letter, a typical two

- year contract may be proposed, with service in the second year contingent on funding be ing available from

the S tate. 6

We encourage proposals that meet the communit y’s requirements in an efficient manner. Carriers are also welcome to propose more than one service option, if they choose . When submitting their proposals, carriers need not limit themselves to connecting Diomede over either Nome or Wales, so long as subsidy requirements remain competitive.

We note that Evergreen Helicopters currently provides service to Diomede pursuant to a

direct contract with the Postal Service. Th is contract would not necessarily supplant the

Postal Service contract. 7 We could select a different carrier, or we could select Evergreen, should it choose to submit a proposal, for service over and above the level it provides to Diomede pursuant to its contract with the Postal Service.

We enco urage carriers to work with the communit y and State in advance of the due date

for proposals when proposals can still be adjusted so that they can craft them to best meet

the communit ies’ needs. As always, we will fully consider the community ’ s views before making a long

- term carrier

- selection decision.

Filing Format Carrier proposals should be submitted to the Department with all materials merged into a single document. In addition, because the document will be published on www.regulations.gov , each page should be formatted to be viewed online.

Historical Traffic In order to assist carriers in making their traffic and revenue projections, we have

included historical traffic for the community in Appendix B . As typical in Alaska, freight and mail are very directional. However, A ppendix B shows only service with fix ed

- wing

aircraft when the ice

- runway forms, because Evergreen Helicopters does not file the T

100 Market report, the source of the data on Appendix B. In this instance, a fixed amount of subsidy support is available. To the extent carriers can maximize r evenue by charging higher fares, or reducing service, additional service could be proposed.

Other Carrier Requirements The Department is responsible for implementing various Federal statutes governing lobbying activities, drug

- free workplaces

, and nondis crimination. 8 Consequently, all carriers receiving Federal subsidy to support Air Service must certify that they are in compliance with Department regulations regarding drug

- free workplaces and nondiscrimination, and those

5 Carriers should also recognize that in some undetermined periods of time during the winter an ice runway may or may not form, which would obviate the need for helicopter service. As shown in Appendix B, that period of time varies from year to year.

6 If carriers wish, they can request longer contract periods than the typical two

- year period.

7 Under the mail statute, if a certificated air carrier inaugurates service to a community where a direct air taxi contract is in place, that contract is vacated, pr ovided that the certificated carrier’s service meets the

needs of the Postal Service.

8 The certifications are available on the web at http://ostpxweb.dot.gov/aviation/index.html.- 5

-

carriers whose subsidies exceed $100,000 over the life of the rate term must also certify that they are in compliance with the regulations governing lobbying activities. Because the Department is prohibited from paying subsidy to carriers that do not submit these documents,

the selected carrier will be required to submit them in order to receive subsidy. Interested carriers requiring more detailed information regarding these requirements, as well as copies of the certifications, should contact the Office of Aviation Analysis at (202) 36 6

- 5903 . The Department is prohibited from paying subsidy to carriers that do not submit these documents.

Community Comments Civic officials and the State are welcome to submit comments on the proposals at any time. As noted earlier, we will provide a su mmary of the proposals to the civic parties and ask them to submit their final comments shortly after June 2 1 , the due date for carrier proposals.

This Order is issued under authority delegated in 49 CFR 1.56a(f) and re

- delegated to the

Directo r, Office of Aviation Analysis.

ACCORDINGLY,

1. The Department requests proposals from carriers interested in providing S ervice at

Diomede

, Alaska

. Carriers should submit their proposals, with subsidy if necessary, by August 7

, 201 2

. Proposals should be emailed to EAS@dot.gov, with the title “Proposal to

Provide Air Service at Diomede

, Alaska , DOT

- OST

- 200 9

- 0260

. ” Questions regarding filings may be directed to Kevin Adams at 202

- 366

- 1047 or Kevin.Adams@dot.gov ;

2

. Th is D ocket will re main open until further Order of the Department; and

3 . We will serve this Order on the s ervice l ist for th is Docket.

Persons entitled to petition the Department for review of this Order under the Department’s Regulations, 14 CFR 385.50, must file such petitions within ten (10) days

after the date of service of this Order

.

This Order will be effective immediately, and the filing of a petition for review shall not preclude its effectiveness.

By:

TODD M. HOMAN

Director Office of Aviation Analysis (SEAL)

An electronic version of this document is available on the World Wide Web at http://www.regulations.govAppendix A

Nonstop Great Circle Miles Diomede (DIO) to Wales (WAA) 26 Diomede (DIO) to Nome ( OME ) 134 Nome (OME) to Wales (WAA) 109 Nome (OME) to Bethel (BET) 283 Nome (OME) to Savoonga (SVA) 163 Diomede (DIO) to Savoonga (SVA) 151Appendix B

Diomede, T-100 Market Report, Scheduled Air Service, Historical Traffic

Origin of Diomede (DIO) Dest of Diomede (DIO) O&D of Diomede (DIO)

Passenger Equivalents (PEQ) Passenger Equivalents (PEQ) Passenger Equivalents (PEQ)

Year Month Pax Frt. Mail Total Pax. Frt. Mail Total Pax. Frt. Mail Total

2008 4 60 7.1 1.5 68.5 77 56.2 85.3 218.5 137 63.3 86.8 287.0

2008 5 26 1.4 1.2 28.6 20 18.4 36.2 74.6 46 19.8 37.4 103.2

Total 86 8.4 2.7 97.2 97 74.6 121.5 293.0 183 83.0 124.2 390.2

2010 2 44 1.2 1.5 46.7 54 26.8 44.9 125.7 98 28.0 46.4 172.4

2010 3 93 2.3 4.4 99.7 88 38.5 70.0 196.5 181 40.8 74.4 296.2

2010 4 67 1.7 0.9 69.6 62 44.2 96.4 202.6 129 45.9 97.3 272.2

2010 5 28 2.0 2.1 32.1 45 14.3 20.3 79.6 73 16.3 22.4 111.7

Total 232 7.2 8.9 248.1 249 123.7 231.6 604.3 481 130.9 240.5 852.4

2011 2 12 0.4 1.3 13.7 16 8.8 9.0 33.9 28 9.2 10.3 47.6

2011 3 69 2.4 4.3 75.7 99 37.9 80.3 217.3 168 40.4 84.6 293.0

2011 4 65 3.9 3.1 72.0 53 39.2 33.5 125.7 118 43.1 36.7 197.7

Total 146 6.7 8.7 161.4 168 86.0 122.9 376.9 314 92.7 131.6 538.3

2012 2 14 0.3 0.3 14.6 13 5.2 4.3 22.4 27 5.4 4.6 37.0

2012 3 67 4.2 0.7 71.9 66 50.9 88.2 205.1 133 55.1 88.9 277.0

2012 4 54 2.8 3.1 59.9 65 36.3 71.2 172.4 119 39.1 74.3 232.4

2012 5 45 0.7 9.2 54.9 55 19.4 25.6 100.0 100 20.1 34.8 154.9

Total 180 8.0 13.3 201.3 199 111.7 189.3 500.0 379 119.7 202.6 701.3

For payload purposes, 200 lbs. of mail or freight is one passenger equivalent, PEQ.

Evergreen does not submit the T-100 report. For periods of time when no traffic is shown, presumably
the ice runway did not form sufficiently for scheduled air service with fixed-wing aircraft to operate.Appendix C

Example of General Terms and Conditions for Air Service 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 rat e 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 complet ed 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 o perate 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 these rates, 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 t o 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 adjuste d 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 ma ke 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 contracts are subject to, and incorporate by reference, relevant statutes and Department regulati ons, 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 solicitation beyond [DATE]

. The Department’s obligation for performance under this solicitation beyond [DATE], is contingent upon 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 m ay arise for performance under this Order beyond [DATE], until funds are made available to the Department for performance. If funds are not made available for performance beyond [DATE], the carrier will receive notice in writing by the Department.

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