Order: 2 014

- 10

- 12

Served: October 16, 2014



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 16 h of October

, 2014



### ORDER SELECTING AIR CARRIER

Summary By th is O rder, the Department is selecting Kalinin Aviation, LLC d / b / a Alaska Seaplanes, (Alaska Seaplanes) to provide E ssential Air Service (E AS ) at Excursion Inlet for a four

- year term at a first

year annual subsidy of $28,889, second

- year of $29,827, third

- year of $30,792, and fourth

- year of $31,785, from October 1, 2014, through September 30, 2018. The airline will provide three weekly nonstop round trips to Juneau

, Alaska, during the 21

- week peak summer season with Cessna 206/207 and Piper Cherokee aircraft, and one weekly nonstop round trip during the 31

- week off

- peak w inter season.

We are selecting Alaska Se a planes to provide EAS at Kake, Alaska, using 9

- passenger Cessna

Caravan or Piper Nava j o aircraft to Juneau to provide two round trips per day during the 21

- week peak summer season

, and one round t rip per day during the 31

- week

, off

- peak winter season

, 1 for a

one

- year term from October 1, 2014, through September 30

, 201 5

, at an annual subsidy of $ 205,232

. 2

1 Peak = May through September; Off

- peak = October through April

. 2 Such subsidy is calculated and distributed on a fiscal year basis, subject to the availability of funds

.

Essential Air Service at

EXCURSION INLET, ALASKA KAKE, ALASKA

Under 49 U.S.C. 41731 et seq

. DOT

- OST

- 2002

- 12014

DOT

- OST

- 2008

- 0217- 2

-

Background By Order 2012

- 9

- 8 ( September 10, 2012 ), the Department selected Alaska Seaplanes , to provide

subsidized EAS at Kake

, for a first year annual subsidy of $163,621

, and a second

- year annual subsidy of $177,574

.

At Excursion Inlet, the Department selected Alaska Seaplanes to provide EAS for a first

- year annual subsidy of $27,111 and a se cond

- year annual subsidy of $28,835.

As the end of the contract s were approaching, we issued Order 2014

- 3

- 15 ( March 28

, 2014 ) requesting proposals from air carriers interested in providing EAS at the above communities for a new term beginning October 1, 2014

. In response to that Order, we receiv ed proposals from

Ala ska Seaplanes

, Harris Aircraft Services, Inc. (Harris Air), and SeaPort Airlines, Inc., d / b / a Wings of Alaska (Wings).

Summary of Proposals

Alaska Seaplanes Alaska Seaplanes submitted a proposal for Kake and Excursion Inlet for a four

- year term , with

service to Juneau . At Kake their proposal consists of using 9

- passenger
, Cessna Caravan or Piper Navajo aircraft to Juneau, Alaska, for two round trips per day, and one , one

- stop (through Sitka ) per day, duri ng the peak summer season; and one round

- trip per day, and one , one

- stop (through Sitka) per day, during the 31

- week

, off

- peak winter season, for a first

- year annual subsidy of $205,232.

At Excursio n Inlet, their proposal consists of using Cessna 207 and Piper Cherokee Six wheel planes, and a Cessna 206 on amphibious floats for occasions when the community is only accessible by water , with three weekly nonstop round trips to Juneau during the 21

- week peak

summer season, and one weekly nonstop round trip during the 3 1

- week

, off

- peak winter season

, for a first

- year annual subsidy of $28,889.

Harris Air

Harris Air submitted a stand

- alone proposal f or Kake for a two

- year term, with service to Juneau. They did not submit a bid for Excursion Inlet. Their proposal consists of utilizing 9

- passenger, twin

- engine, Piper Chieftans

, for 14 weekly round trips during the peak season running from May through September , and 7 weekly round trips during the off

- peak season running from October through April, for an annual subsidy of $136,123

.

SeaPort Airlines, Inc. dba Wings of Alaska (Wings) Wings of Alaska submitted a stand

- alone proposal for Kake for a two

- year term, with service to Juneau. They did not sub mit a bid for Excursion Inlet. T heir proposal consists of using a 9

- passenger, Cessna Caravan

, for 14 weekly round trips duri ng the 31

- week peak season, and 7 weekly round trips during the 31

- week of f

- peak season , for an annual subsidy of $36 8

, 623.- 3

-

Community Comments On April 29, 2014, the Department solicited comments from the communities and the State of

Alaska regarding this air carrier selection case.

The City of Kake, the Kake City School District, and multiple businesses support the incumbent, Alaska Seaplanes. Mayor Henrich Kadake, Sr. stated the City of Kake Council formally supports Alaska Seaplanes. The Kake City School Board supports Alaska Se aplanes, based on its

fulfillment of the IFR requirement prior to August 1, 2014, the size of its fleet, and the addition of larger planes making it more appealing. Mr. Dennis Gray of Rocky Pass Seafoods, LLC, supports Alaska Seaplanes and stated that it’s vital their business have reliable fli ght service for moving

p arts and people to keep its operation running smoothly.

The Organized Village of Kake, the Kake Senior Center, as well as private citizens support Harris Air’s proposal. The Kake Tribal Corporation also recommends the carrier, sta ting “Harris Air has done an excellent job at serving the community of Kake, Alaska with safe and reliable service for years”

. Factors included in their support are Harris’ s employment of local workers, its strong customer service, and its IFR capable air craft.

Neither Excursion Inlet nor the State of Alaska submit ted comments supporting any particular air

carrier.

Decision When selecting a carrier to provide EAS in Alaska, 49 U.S.C. §41733(c)(1) directs us to consider six 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; (5) the carrier’s plan to market its service to the community; and (6) the experienc e of the applicant in providing scheduled air service or significant patterns of non

- scheduled air service. In addition, the Continuing Appropriations Act, 2014, Public Law No. 113

- 46, provides that when selecting a carrier to provide EAS, the Department m ay consider the relative subsidy requirements, thus codifying a factor that we have considered since the inception of the program.

At Excursion Inlet, only Alaska Seaplanes submitted a proposal, and its subsidy request is virtually the same as the current rate ($28,835 vs. $28,889) for the same level of service. Therefore, we will select it for four more years.

In the case of Kake, the two elected bodies representing the community, the City of Kake and the Organized Village of Kake (OVK) submitted diverg ent support letters. The City of Kake supported t he proposal put forth by Alaska Seaplanes , but the OVK supported Harris Air ’s proposal

.

Since Wings did not receive community support for its proposal and requires the highest subsidy, the Department will n ot further consider Wings’ proposal.

Harris Air filed an application for a Certificate of Public Convenience & Necessity on August 25, 2014, which is required for Harris Air to provide its proposed service. T hat application is currently pending before the Department. While a number of commenter s
, including the City of- 4

-

Kake

, support Alaska Seaplanes, the OVK supports Harris Air and Harris Air requests a significantly lower annual subsidy. Therefore, we will make our selection of Ala ska Seaplanes for

on ly one year, at which time we may be in a better position to re

- examine the community’s service needs together with the participation of all carriers holding the necessary certificate authority.

We make this selection of Alaska Seaplanes at Kake and Excur sion Inlet contingent upon the Department’s receiving properly executed certifications from the air carrier that it is in compliance with the Department’s regulations regarding drug

- free workplaces and nondiscrimination, as well as the regulations concerni ng lobbying activities. 3

Carrier Fitness

49 U.S.C. §§ 41737(b) and 41738 require that we find an air carrier fit, willing, and able to provide reliable service before we may subsidize it to provide EAS. Alaska Seaplanes is subject to the Department’s con tinuing fitness requirements, and no information has come to our attention that would cause us to question the air carrier’s fitness at this time. We have contacted the Federal Aviation Administration, and it has raised no concerns that would negatively a ffect our fitness

findin gs . We therefore conclude that Alaska Seaplanes is reliable and fit to conduct the operations proposed here.

This Order is issued under authority delegated in 49 CFR Part 1.25a(b)

.

ACCORDINGLY,

1. We select Kalinin Aviation, LLC d/b/a Alaska Seaplanes t o provide Essential Air Service at Excursion Inlet and Kake, Alaska

, and establish the annual subsidy rate as described in Appendix C.

2. We direct Kalinin Aviation, LLC d / b / a Alaska Seaplanes 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 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;

3. We find that Kalinin Aviation, LLC d/b/a Alaska Seaplanes is fit, willing and able to operate as

a certificated air carrier, and capable of providing reliable Essential Air Service at Excursion Inlet

and Kake ;

4. These docket s will remain open pending further Department action; and

3 The certifications are available online under “Reports and Publications” at http://www.dot.gov/policy/aviation

policy/small

- community

- rural

- air

- service/essential

- air

- service- 5

-

5. The Department will serve a copy of this O rder on the Alaska Department of Transportation

, the Mayor of Kake, Alaska , the President of the Orga nized Village of Kake, the airport manager of

Kake Airport

, Kalinin Aviation, LLC d/b/a Alaska Seaplanes, Harris Aircraft Services, and SeaPort Airlines, Inc. dba Wings of Alaska

B y:

SUSAN L. KURLAND Assistant Secretary for

Aviation and International Affairs

(SEAL)

An electronic version of this document is ava ilable at http://www.regulations.govAppendix A



### AREA MAP

Maps generated by the Great Circle Mapper

- copyright © Karl L. SwartzAppendix B



### Alaska Seaplanes Proposal for EAS at Excursion Inlet and Kake

KALININ AVIATION, LLC PROJECTED E.A.S. REVENUE, EXPENSE & SUBSIDY NEED

BLOCK TIMES: OW TRIPS BLK HRS.

JNU-KAE 56 511 476.9

KAE-JNU 54 511 459.9

1022 936.8

JNU-EXI 27 94 42.3

EXI-JNU 23 94 36.0

188 78.3

OPERATING EXPENSE:

KAKE YE 12/2013 YE 6/2014 YE 6/2015 YE 6/2016 YE 6/2017 YE 6/2018

Direct 450,736 $ 468,766 $ 487,516 $ 507,017 $ 527,298 $ 548,390 $

Indirect 338,052 $ 351,574 $ 365,637 $ 380,263 $ 395,473 $ 411,292 $

subtotal 788,789 $ 820,340 $ 853,154 $ 887,280 $ 922,771 $ 959,682 $

Profit 39,439 $ 41,017 $ 42,658 $ 44,364 $ 46,139 $ 47,984 $

TOTAL 100% 828,228 $ 861,357 $ 895,812 $ 931,644 $ 968,910 $ 1,007,666 $

96% Completion 862,738 $ 897,247 $ 933,137 $ 970,462 $ 1,009,281 $ 1,049,652 $

EXCURSION INLET

Direct 25,458 $ 26,477 $ 27,536 $ 28,637 $ 29,783 $ 30,974 $

Indirect 19,094 $ 19,858 $ 20,652 $ 21,478 $ 22,337 $ 23,230 $

subtotal 44,552 $ 46,334 $ 48,188 $ 50,115 $ 52,120 $ 54,204 $

Profit 2,228 $ 2,317 $ 2,409 $ 2,506 $ 2,606 $ 2,710 $

TOTAL 46,780 $ 48,651 $ 50,597 $ 52,621 $ 54,726 $ 56,915 $

KAKE Traffic Type EAS Traffic Yield YE 6/14 YE 6/15 YE 6/16 YE 6/17 YE 6/18

Passengers 3220 143.0000 $ 488,088 $ 522,254 $ 558,811 $ 597,928 $ 639,783 $

Freight 103043 0.6000 $ 66,154 $ 70,784 $ 75,739 $ 81,041 $ 86,714 $

Mail 105748 1.1568 $ 128,445 $ 134,867 $ 141,610 $ 148,691 $ 156,125 $

TOTAL 682,686 $ 727,905 $ 776,161 $ 827,660 $ 882,622 $

ANNUAL SUBSIDY NEED 205,232 $ 194,302 $ 181,621 $ 167,030 $

EXCURSION Traffic Type EAS Traffic Yield YE 6/14 YE 6/15 YE 6/16 YE 6/17 YE 6/18

Passengers 30 98.0000 $ 3,087 $ 3,241 $ 3,403 $ 3,574 $ 3,752 $

Freight 3500 0.5000 $ 1,838 $ 1,929 $ 2,026 $ 2,127 $ 2,233 $

Mail 12000 1.2500 $ 15,750 $ 16,538 $ 17,364 $ 18,233 $ 19,144 $

TOTAL 20,675 $ 21,708 $ 22,794 $ 23,933 $ 25,130 $

ANNUAL SUBSIDY NEED 28,889 $ 29,827 $ 30,792 $ 31,785 $Appendix C Page 1 of 2

Kalinin Aviation, LLC d/b/a Alaska Seaplanes Essential Air Service to be provided at Excursion Inlet, Alaska

Docket DOT

- OST

- 2002

- 12014

Effective Period : October 1, 2014, through September 30

, 201 8

Scheduled Service : Peak (21 weeks): Three weekly nonstop round trips to Juneau

Off

- peak (31 weeks): One nonstop round trip per week to Juneau

. Aircraft : Cessna 206/207 and Piper Cherokee aircraft Rate per Eligible Flight: $ 154 1 (Oct. 2014

- Sep. 2015); $159 (Oct. 2015

- Sep. 2016); $164 (Oct. 2016

- Sep. 2017); $169 (Oct. 2017

- Sep. 2018) Weekly Ceiling : Peak = $924 (Oct. 2014

- Sep. 2015); $ 954 (Oct. 2015

- Sep. 2016): $ 984 (Oct. 2016

- Sep. 2017); $ 1,014 (Oct. 2017

- Sep. 2018) 2

Off

- peak = $ 308 (Oct. 2014

- Sep. 2015): $318 (Oct. 2015

- Sep. 2016; $328 (Oct. 2016

- Sep. 2017; $338 (Oct. 2017

- Sep. 2018)

Note: 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 significan t 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 can cellations, 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 jeopardize its entire subsidy claim for the pe riod in question. If the carrier contemplates any such changes beyond the scope of the Order during the applicable period of this rate, 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 nati onal 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 make payments in the stipulated service levels, the carrier may cease to provide service to that specific location without regards 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 contract 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 may not be available for performance under this o rder beyond December 11, 2014

. The Government’s obligation for performance under this order beyond December 11, 2014 , is subject to the availability of funds from which payment for

services can be made. No legal liability on the part of the Government fo r any payment may arise for performance under this order beyond December 11, 2014 , until funds are made available to the Department for performance. If sufficient funds are not made available for perfo rmance beyond December 11, 2014 , the Department will p rovide 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 for service provided in July must be filed by

October 31; August claims must be submitted by November 30, and so on.

1 A nnual compensation of $28,889 divided by 188 flights ( 6 weekly flights x 21 peak weeks + 2 weekly flights x 31

we eks)

. 2 Peak: 6 flights x $154; Off

- peak: 2 flights x $154Appendix C Page 2 of 2

Kalinin Aviation, LLC d/b/a Alaska Seaplanes Essential Air Service to be provided at Kake, Alaska

Docket DOT

- OST

- 2008

- 0217

Effective Period : October 1, 2014, through September 30, 201 5

Scheduled Service : Peak (21 weeks): Two round trips each day to Juneau

Off

- peak (31 weeks): One round trip each day to Juneau

. Aircraft : Cessna Caravan or Piper Navajo Chieftain 3
Rate per Eligible Flight: $ 201 4
Weekly Ceiling: Peak = $5,628 ; Off

- peak = $ 2,814 5

Note: 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 othe r 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 f light 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 this rate, it must first notify the Office of Aviation Analysis in

w riting 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 goa ls 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 requireme nts 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 service levels, the carrier may cease to provide service to that specific location without regards 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 cessat ion of payment.

Subsidy cont ract 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 paragra ph.

Funds may not be available for performance under this order beyond December 11, 2014. The Government’s obligation for performance under this order beyond December 11, 2014, is subject to the availability of funds from which payment for

services can b e made. No legal liability on the part of the Government for any payment may arise for performance under this order beyond December 11, 2014, until funds are made available to the Department for performance. If sufficient

funds are not made available for performance beyond December 11, 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 claime d. For example, claims for service provided in July must be filed by October 31; August claims must be submitted by November 30, and so on.

3 Per the carrier’s proposal, when Alaska Seaplanes substitutes the Piper Cherokee, Cessna 206/207, or DeHavilland

Beaver aircraft , we will pay the air carrier $112 flight ($ 201 x 5 /9ths )

. 4 Annual compensation of $205,232 divided by 1,022 flights (4 daily flights x 7 days x 21 peak weeks + 2 daily flights x 7 days x 31 weeks ).

5 Peak: 28 flights x $201; Off

- peak: 14 flights x $201