Order 2012-8-39

Served: August 31, 2012

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

Issued by the Department of Transportation

on the 31st of August, 2012

Ninety-day Notice of Peninsula Airways, 

Inc., to terminate service at: 

AKUTAN, ALASKA

under 49 U.S.C. 41731 et seq. 

Docket DOT-OST-2000-7068

ORDER PROHIBITING SUSPENSION OF SERVICE 

AND REQUESTING PROPOSALS 

Summary

By this Order, the Department prohibits Peninsula Airways, Inc., (PenAir) from 

terminating its subsidized Essential Air Service (EAS) at Akutan, Alaska, and requests

proposals be submitted no later than October 3, 2012.

Background

Order 2011-3-31, March 25, 2011, re-selected PenAir to provide EAS at Akutan for an 

annual subsidy rate of $654,964 through April 30, 2013. Under that contract, Akutan 

receives eleven nonstop round trips per week year round to Dutch Harbor with 9-seat 

Grumman Goose aircraft. On August 2, 2012, PenAir filed a 90-day notice of its intent to 

suspend its subsidized EAS at Akutan.

Subsequent Developments

On August 6, 2013, the State of Alaska submitted the following comments:

“I want to inform you that the Alaska Department of Transportation and Public 

Facilities built a new airport in the Aleutian Islands called Akutan airport. The 

runway is paved and is 4,500 feet long by 75 feet wide.1 ....We anticipate that 

[the new] Akutan airport will begin operations on or about September 1, 2012, 

and will serve the community of Akutan, Alaska. ....Therefore I request that 

Essential Air Service change the air service location from Akutan Seaplane Base 

 1 The current airport serving the community of Akutan (KQA), is a seaplane base at Akutan. The new 

airport with a paved runway is located on Akun Island (7AK). The community has informally indicated 

that Akutan passengers will be shuttled by hovercraft from Akutan to nearby Akun. 
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(KQA) to our new ground based Akutan airport (7AK). I believe our new 

airport will greatly improve access to the community of Akutan, Alaska.”

On August 7, 2012, the City of Akutan submitted the following comments:

“[T]the new Akutan Airport is scheduled to begin operations on 1 September 

2012. This $71 million project is the result of significant Federal, State, local 

and private investment, and in no small measure PenAir’s consistent 

commitment to provide air service, including continuation of its existing EAS 

contract with the U.S. Department of Transportation. 

The City of Akutan also expressed concern about the likelihood of finding replacement 

service for the Grumman Goose “in time for the 1 September opening of Akutan 

Airport.” It is also concerned with the level of service that we will require of PenAir 

after September 1. However, in the community’s view, “continuation of service by the 

Grumman Goose beyond 1 September is not a reasonable option, other than as a backup 

to a new service plan.” 

Hold-In

PenAir’s proposed termination of service would leave the community of Akutan with no 

scheduled air service. Consistent with our governing statutes, the Department must 

prohibit the carrier from terminating such service at the end of its 90-day notice period, 

i.e., November 3, 2012. We will require PenAir to continue providing the level of service 

specified in Order 2011-3-31 outlined above, and to maintain that level of service for 

successive 30-day periods until we have completed processing the carrier-replacement 

case and the selected carrier has actually started service. 

Request for Proposals 

Carriers interested in filing proposals for Akutan -- with or without subsidy -- should email them to our staff at EAS@dot.gov, no later than October 3, 2012. Our staff will 

then docket the proposals, thereby making them public, and direct each carrier to serve a 

copy of its proposal on the civic parties and other applicants. Shortly afterwards, we will 

provide a summary of the proposals to the community officials and ask 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 expectation 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. In such cases, of course, we will give 

all applicants the same opportunity. We also retain the discretion to reject outright all 

unreasonable or unrealistic proposals and solicit a new round of proposals. 

 2 Carriers should not expect the Department to accept late filings. In cases where a carrier proposes to 

provide EAS without subsidy and we determine that service can be provided reliably 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.
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We are here providing interested carriers with some basic information to serve as 

guidance when they prepare their proposals, but we will not prescribe a precise format for 

their proposals. We expect proposals to adequately describe the service being proposed 

and the annual amount of subsidy being requested. 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 and routings as well as supporting data for their subsidy 

requests, such as projected block hours, revenues and expenses. We strongly encourage 

clear, well-documented proposals that will facilitate their evaluation by the affected 

community and the Department.3 

We encourage proposals that meet the community’s requirements in an efficient manner. 

Carriers are also welcome to propose more than one service option, if they choose; they

need not limit themselves to the current service pattern if they envision other, potentially

more attractive service possibilities with subsidy requirements that remain competitive –

different hubs, linking service to the hubs with service to other communities, or longer 

terms for the contracted service.

The state and community have indicated they favor proposals that would use the airport 

located at nearby Akun Island (7AK), rather than the seaplane base located on Akutan 

Island, (KQA).4 In that regard, the community and State have informally indicated that 

they will be able to secure transportation for passengers, as well as freight and mail, 

between Akutan and the new airport on Akun Island without EAS funding. Under the 

EAS program, communities are guaranteed EAS – access to national transportation 

system, not specific airports. Carriers should be aware of this fact when they submit their 

proposals. We fully anticipate that the proposals will avail themselves of this new 

opportunity for providing access between Akutan and the national transportation system

via 7AK. We note that for many years we have indicated that EAS to the community of 

Akutan would require little or no subsidy, but for the fact that the only aircraft able to 

serve Akutan reliably has been the very old and very expensive Grumman Goose. 

However, we cannot require that carriers only propose service to Akun (7AK). Carriers 

are free to propose service to either airport, and we will select a carrier based on the usual 

carrier-selection criteria. 

We encourage carriers to work with the community in advance of the due date for 

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

 3 In selecting a carrier to provide subsidized EAS in Alaska, 49 U.S.C. §41733(c) (1) directs us to consider 

five factors: (1) service reliability; (2) contractual and marketing arrangements with a larger carrier at the 

hub; (3) interline arrangements with a larger carrier at the hub; (4) community views; and (5) experience of 

the applicant in providing, in Alaska, scheduled air service or significant non-scheduled air service. In 

addition, The Consolidated Appropriations Act, 2008, Public Law 110-161, provides that when selecting a 

carrier to provide EAS, the Department may consider the relative subsidy requirements, thus codifying a 

factor that we have considered since the inception of the program. Interested carriers should also be aware 

that our general provisions governing EAS will be included in the selection Order as part of our 

authorization of subsidy for the selected service. Appendix C of this Order contains those general 

provisions.

4 That airport, 7AK, is not currently listed in general airport data bases, but we it is on a separate island 

approximately five miles from the community of Akutan.
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community’s needs. As always, we will fully consider the community’s views before 

making a long-term carrier-selection decision. 

At Akutan, as with most of Alaska, freight and mail volumes on the outbound leg from 

the hub to the community far exceed those volumes in the other direction. Proposals for 

EAS at Akutan should provide sufficient capacity so that passengers, mail, and freight 

can be accommodated at a reasonable load factor on the critical outbound leg. We 

encourage any proposal that would simultaneously satisfy the community’s needs and 

minimize taxpayer expenditures. 

Carriers are also welcome to propose more than one service option, if they choose. They 

need not limit themselves to the current service pattern if they envision other, potentially 

more attractive service possibilities -- different hubs or lengths of term -- with subsidy 

requirements that remain competitive. In order to assist carriers in making their 

passenger and revenue forecasts, we have included historical traffic data in Appendix B. 

Specific Response to Comments of the City of Akutan

The city is concerned that there be no hiatus in service with the transfer of service to a 

replacement carrier. At the same time, the community would like to receive more air 

service than we currently subsidize as quickly as possible, and it would like that service 

to be through the new airport. 

As we have stated, we can assure the community that PenAir will not be permitted to 

terminate service until replacement service has been secured. We cannot require PenAir 

to provide more service than Order 2011-3-31 required it to provide, and the carrier 

understands that it must provide the level of service it contracted to provide. Because 

PenAir is subsidized, it will not be eligible for increased compensation until 180 days 

after it filed notice.5 However, we anticipate resolving this case before then. We share 

the community’s concern that replacement service to the new airport begin as soon as 

possible. We will accordingly expedite our request for proposals, and require that 

proposals be submitted no later than October 3, 2012. We will not specify the required 

level of service because carriers may propose different-sized aircraft, except that it be 

sufficient to accommodate historical traffic flows at reasonable load factors. As we 

indicated, the community will have an opportunity to comment on the proposals from 

carriers once they are received, and we will give their position great weight when we 

make our carrier-selection decision. 

New Filing Procedures

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 

Regulations.gov, each page should be formatted to be viewed online.

 5 See 49 U.S.C. § 41734(d).
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Other Carrier Requirements

The Department is responsible for implementing various Federal statutes governing 

lobbying activities, drug-free workplaces and nondiscrimination.6 Consequently, all 

carriers receiving Federal subsidy to support EAS must certify that they are in 

compliance with Department regulations regarding drug-free workplaces and 

nondiscrimination, and those 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. All carriers that plan to submit proposals involving subsidy should 

submit the required certifications along with their proposals. 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) 366-5903. The 

Department is prohibited from paying subsidy to carriers that do not submit these 

documents.7 

Community Comments

The community and State are welcome to submit comments on the proposals at any time. 

As noted earlier, we will provide a summary of the proposals to the civic parties and 

States and ask them to submit their final comments shortly after October 3, the due date 

for carrier proposals.

This Order is issued under authority delegated in 49 CFR Part 1.56a(f).

ACCORDINGLY;

1. The Department requests proposals from carriers interested in providing Essential Air 

Service, with subsidy if necessary, by October 3, 2012. Proposals should include all the 

data required by section 204.4 of the Department’s Regulations (14 CFR Part 204.4). 

Proposals should be emailed to EAS@dot.gov and be entitled “Proposals to Provide 

Essential Air Service” at Akutan. Questions regarding filings may be directed to 

Kevin.Adams@dot.gov or 202-366-1047;

2. We prohibit Peninsula Airways, Inc., from suspending service at the end of its 90-day notice 

period and require it to continue providing service consistent with the level we are currently 

subsidizing through November 3, 2012, or until a carrier capable of providing reliable Essential 

Air Service actually begins service, whichever comes first;8

 6 The regulations applicable to these areas are: (1) 49 CFR Part 20 – New restrictions on lobbying; 

(2) 49 CFR Part 21 – Nondiscrimination in federally-assisted programs of the Department of 

Transportation – Effectuation of title VI of the Civil Rights Act of 1964; 49 CFR Part 27 –

nondiscrimination on the basis of disability in programs and activities receiving or benefiting from Federal 

financial assistance; and 14 CFR Part 382 – Nondiscrimination on the basis of disability in air travel; and 

(3) 49 CFR Part 29 – Government-wide debarment and suspension (non-procurement) and governmentwide requirements for drug-free workplace (grants).

7 The certifications are also available on the web at http://ostpxweb.dot.gov/aviation/index.html.

8 In accordance with 49 U.S.C. §41734(c), we will extend the carrier’s service obligation for successive 30-

day periods as necessary until replacement service actually begins.
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3. The Department directs Peninsula Airways, Inc., to retain all books, records, and other source 

and summary documents to support subsidy 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 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 disposed of must be 

retained. The carrier may forfeit its compensation for any claim that is not supported under the 

terms of this Order; 

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

5. The Department will serve a copy of this Order on the civic officials of Adak, on the Alaska 

Department of Transportation and Public Facilities, and on the carriers in our service list. 

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
Appendix A

Nonstop Great Circle Miles on the Aleutian Chain, Starting 

with the Farthest Community From Anchorage

Adak (ADK) – Atka (AKB), 107

Atka (AKB) – Nikolski (IKO), 231

Nikolski (IKO) – Dutch Harbor (DUT) 116

Dutch Harbor (DUT) – Akutan (KQA) 35

Akutan (KQA) – Cold Bay (CDB) 143

Cold Bay (CDB – King Salmon (AKN) 332

King Salmon (AKN) to Anchorage (ANC) 288
Appendix B

Historical Scheduled Traffic at Akutan, Alaska, T-100 Segment Report

Origin of KQA Dest of KQA Origin and Destination

PEQs PEQs PEQs

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

2009 7 109 2.1 18.2 129.3 98 20.2 55.3 173.5 207 22.3 73.5 302.9

2009 8 76 7.0 10.0 93.0 82 10.2 46.6 138.8 158 17.3 56.5 231.8

2009 9 108 4.8 7.1 119.9 80 20.0 56.9 156.8 188 24.8 63.9 276.7

2009 10 294 2.7 14.3 311.0 105 13.9 36.6 155.5 399 16.6 50.9 466.5

2009 11 36 0.0 5.5 41.5 23 4.0 24.9 51.9 59 4.0 30.4 93.4

2009 12 38 0.9 4.7 43.6 92 10.0 46.1 148.1 130 11.0 50.7 191.7

2010 1 32 0.2 4.3 36.4 169 8.3 36.4 213.7 201 8.5 40.6 250.1

2010 2 74 29.3 6.0 109.2 77 19.7 39.9 136.6 151 49.0 45.9 245.8

2010 3 72 12.1 13.6 97.7 60 13.3 45.3 118.6 132 25.4 58.9 216.3

2010 4 150 0.2 11.3 161.5 34 5.3 36.6 76.0 184 5.5 48.0 237.5

2010 5 286 1.2 11.3 298.5 121 22.9 40.2 184.0 407 24.1 51.5 482.5

2010 6 61 0.2 5.2 66.4 243 14.4 50.9 308.3 304 14.6 56.1 374.7

YE 6-30-10 1,336 60.6 111.4 1,508.0 1,184 162.2 515.6 1,861.8 2,520 222.9 627.0 3,369.8

2010 7 95 0.3 10.0 105.3 107 42.2 51.4 200.6 202 42.4 61.4 305.9

2010 8 57 0.0 11.3 68.3 70 15.8 70.3 156.1 127 15.8 81.6 224.3

2010 9 58 0.0 7.4 65.4 56 16.1 43.0 115.1 114 16.1 50.4 180.4

2010 10 170 0.7 6.0 176.6 98 13.9 44.3 156.1 268 14.5 50.3 332.8

2010 11 162 0.0 2.3 164.3 41 8.6 34.5 84.2 203 8.6 36.8 248.4

2010 12 10 0.0 0.9 10.9 30 0.0 20.6 50.6 40 0.0 21.5 61.5

2011 1 47 5.8 5.8 58.6 408 16.2 60.6 484.8 455 22.1 66.4 543.4

2011 2 66 2.3 2.4 70.6 65 9.1 42.5 116.6 131 11.4 44.9 187.2

2011 3 118 17.3 5.0 140.3 131 14.3 56.5 201.9 249 31.6 61.5 342.1

2011 4 111 0.2 4.8 116.0 63 11.0 37.8 111.8 174 11.2 42.5 227.7

2011 5 72 0.3 2.3 74.6 104 28.4 26.6 158.9 176 28.7 28.9 233.6

2011 6 56 0.0 4.9 60.9 277 4.5 40.0 321.5 333 4.5 44.9 382.4

YE 6-30-11 1,022 26.8 62.9 1,111.8 1,450 180.0 528.2 2,158.1 2,472 206.8 591.1 3,269.9

2011 7 133 0.5 9.7 143.2 159 19.4 52.7 231.0 292 19.8 62.4 374.2

2011 8 82 2.7 3.5 88.2 97 18.6 62.6 178.2 179 21.3 66.1 266.4

2011 9 70 0.6 2.0 72.6 98 14.3 42.3 154.6 168 14.9 44.2 227.2

2011 10 79 1.6 8.0 88.5 119 16.9 41.9 177.8 198 18.5 49.8 266.3

2011 11 89 0.6 6.9 96.5 76 9.7 34.9 120.7 165 10.3 41.8 217.1

2011 12 78 0.9 2.6 81.6 99 12.2 35.5 146.7 177 13.1 38.2 228.3

2012 1 14 0.1 2.8 16.9 63 6.6 52.2 121.8 77 6.7 55.0 138.6

2012 2 81 0.1 8.2 89.3 90 9.5 33.2 132.7 171 9.6 41.4 221.9

2012 3 44 0.2 8.5 52.7 53 12.4 53.1 118.5 97 12.6 61.5 171.2

2012 4 50 0.0 4.3 54.3 48 9.3 38.2 95.4 98 9.3 42.5 149.7

2012 5 98 1.2 3.9 103.1 119 21.5 31.9 172.3 217 22.7 35.7 275.4

2012 6 94 0.0 1.4 95.4 202 7.6 67.4 277.0 296 7.6 68.8 372.5

YE 6-30-12 912 8.5 61.7 982.2 1,223 157.9 545.7 1,926.6 2,135 166.4 607.4 2,908.8

Note: PEQs, passenger equivalents, 200 pounds of mail or freight is equivalent to one PEQ.
Appendix C

Example of General Terms and Conditions for Essential 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 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 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 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 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 which the goals of the 

program are met and the extent of access to the national air transportation system 

provided to the communities.

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 make 

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 regulations, 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 may 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 claims for payment must be submitted within 60 days of the last day of service 

provided under this Order