Order 2011-2-1

Served: February 1, 2011

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

Issued by the Department of Transportation

on the 1st of February, 2011

Essential Air Service at

CORDOVA, GUSTAVUS, PETERSBURG, 

WRANGELL, AND YAKUTAT, ALASKA

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

DOCKET OST-1998-4899

ORDER SELECTING CARRIER

Summary

By this order, the Department is re-selecting Alaska Airlines, Inc., to provide essential air service 

(EAS) at Cordova, Gustavus, and Yakutat, for an annual subsidy rate of $4,486,951 and at 

Petersburg and Wrangell at an annual subsidy rate of $3,415,987, from May 1, 2011 through 

April 30, 2013.1

Background

By Order 2009-2-3, February 9, 2009, the Department re-selected Alaska Airlines, Inc, (Alaska) 

to provide subsidized EAS at Cordova, Gustavus, Petersburg, Wrangell, and Yakutat, Alaska, 

through April 30, 2011. Under that order, Alaska provides service to Petersburg and Wrangell 

over a Juneau-Petersburg-Wrangell-Ketchikan routing for an annual subsidy of $1,347,195; and 

to Cordova and Yakutat over an Anchorage-Cordova-Yakutat-Juneau routing, and nonstop 

turnaround service between Gustavus and Juneau for a total annual subsidy of $5,793,201. All of 

the communities receive service with B-737 equipment year round except Gustavus, which 

receives subsidized service for only a 13-week summer period.2

As the end of the current contract on April 30 was approaching, we issued Order 2010-11-26 

requesting EAS proposals for a new contract period beginning May 1.

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

2 During the remainder of the year, Gustavus’s EAS is provided on a subsidy-free basis with small aircraft.
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Proposal of Alaska Airlines

Only Alaska Airlines submitted a proposal, and it submitted only one option. The carrier 

proposes to continue to provide the same level of service described above, and requests 

$4,846,951 annual subsidy at Cordova, Gustavus, and Yakutat, and $3,415,987 at Petersburg and 

Wrangell. 

Community Comments

Although there were no options from which the communities could choose, we afforded them an 

opportunity to submit any comments on the record. We received a great number of comments 

from the five communities, too numerous to list, all supporting the reselection of Alaska Airlines. 

We also received comments from the Cities of Cordova and Wrangell, and the State of Alaska. 

The City of Cordova noted that Alaska Airlines’ daily jet service was its “transportation lifeline,” 

and that commercial fishing, its main industry, was “dependent upon regularly scheduled jet 

service for getting fresh products to market.” The City of Wrangell noted that Alaska Airlines’ 

737-400 combi aircraft “provides freight, mail, and cargo capacity that a non-jet carrier simply 

cannot provide.” In addition, that aircraft has Required Navigation Performance Technology 

which enables more reliable access to the airport during inclement weather.” The State of Alaska 

indicates that the “communities of Cordova, Gustavus, Petersburg, Wrangell, and Yakutat 

depend on [Alaska Airlines’] scheduled airfreight, passenger, and mail service for basic 

necessities, routine medical and health services, and economic welfare.”

Decision

We have decided to reselect Alaska Airlines. It proposes to continue the current service level but 

requests an increase in subsidy. Alaska Airlines is the only carrier to submit a proposal, and it 

submitted only one option. We have reviewed that proposal and the level of subsidy appears 

reasonable. The carrier’s proposal is based on its results for the base year – the year ended 

September 30, 2010, the most recent period available. Compared to the rates set in 

Order 2009-2-3, the biggest changes are for a decrease in revenue of $480,818,3 and by a 

$650,114 increase in direct expenses. Of the increase in direct expenses, $246,455 is from the 

carrier projecting increased fuel expenses to $90 per barrel of oil from that experienced in the 

base year. 

While we recognize the significant community support for Alaska Airlines, we are concerned 

that the subsidy level for these communities has increased by more than $1 million annually. We 

encourage the communities and Alaska Airlines to work together to maximize use of the service 

awarded under this Order, and to reduce the subsidy support required for this service in the next 

selection cycle. 

Carrier Fitness

49 U.S.C. 41737(b) requires that DOT find an air carrier fit, willing, and able to provide reliable 

service before DOT may subsidize it to provide essential air service. Alaska Airlines, Inc., is 

subject to the Department’s continuing fitness requirements, and no information has come to our 

 

3 Passenger revenue is down by $854 thousand, but that decrease is offset by increases in freight and mail revenue.
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attention that would cause us to question the carrier’s fitness at this time. DOT has contacted the 

Federal Aviation Administration, and it has raised no concerns that would negatively affect our 

fitness findings. DOT therefore concludes that the carrier remains fit to conduct the operations 

proposed here.

This order is issued under authority delegated by the Assistant Secretary for Aviation and 

International Affairs in 49 CFR 1.56a(f).

ACCORDINGLY,

1. We select Alaska Airlines, Inc., to provide essential air service at Cordova, Gustavus, 

Petersburg, Wrangell, and Yakutat, Alaska, as described in Appendix C;

2. We direct Alaska Airlines 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 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 Alaska Airlines continues to be fit, willing and able to operate as a certificated 

carrier and capable of providing reliable essential air service at Cordova, Gustavus, Petersburg, 

Wrangell, and Yakutat, Alaska; 

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

5. We will serve copies of this order on the State of Alaska, the Mayors and Airport Managers of 

Cordova, Gustavus, Petersburg, Wrangell, and Yakutat, and on Alaska Airlines, Inc.

By:

Susan L. Kurland

Assistant Secretary for

Aviation and International Affairs

(SEAL)

An electronic version of this document is available on the World Wide Web at

http://www.regulations.gov
Appendix A

Anchorage to Cordova 160

Nonstop, Great Circle Miles, North to South

Cordova to Yakutat 213

Yakutat to Juneau 199

Gustavus to Juneau 41

Juneau to Petersburg 123

Petersburg to Wrangell 31

Wrangell to Ketchikan 82

Ketchikan to Seattle 680
Appendix B

Alaska Airlines, Inc., Annual Subsidy Need at Cordova, Gustavus, and Yakutat,

and at Petersburg and Wrangell, Alaska, Docket 4899

Cordova, Yakutat Petersburg &

& Gustavus Wrangell Total

AS Passengers 49,645 55,639 105,284

Passenger $5,750,006 $6,232,404 $11,982,410

Mail $404,374 $394,281 $798,655

Freight $1,655,264 $959,182 $2,614,446

Baggage $139,748 $74,468 $214,216

Tpt. Related, Other $913,023 $1,248,577 $2,161,600

Total Revenue $8,862,415 $8,908,912 $17,771,327

Flying Operations $5,760,774 $3,927,701 $9,688,475

Maintenance $1,648,318 $1,128,854 $2,777,172

Depreciation $411,539 $279,474 $691,013

Total Directs $7,820,631 $5,336,029 $13,156,660

Ground Maintenance $4,058 $2,819 $6,877

Flight Attendant $548,821 $377,453 $926,274

Other Pax. Svc. $12,033 $14,401 $26,434

A/C & Tff. Svc. $2,477,882 $3,336,825 $5,814,707

Promotion & Sales $404,008 $412,338 $816,346

G&A $556,194 $807,963 $1,364,157

Ground Depr. $665,454 $629,626 $1,295,080

Tpt. Related $567,458 $820,545 $1,388,003

Total Indirects $5,235,908 $6,401,970 $11,637,878

Total Operating $13,056,539 $11,737,999 $24,794,538

Return @ 5% $652,827 $586,900 $1,239,727

Economic Costs $13,709,366 $12,324,899 $26,034,265

Annual Subsidy $4,846,951 $3,415,987 $8,262,938

Subsidy/Passenger $98 $61 $78
Appendix C-1

Alaska Airlines, Inc., Essential Air Service to be Provided to Cordova, Gustavus, and 

Yakutat, Alaska, Docket OST-98-4899 

Effective Period: May 1, 2011, through April 30, 2013

Scheduled Service:

Cordova: 7 nonstop trips/week to Anchorage and 7 one-stop (Yakutat) trips/week to Juneau;

Yakutat

Gustavus: 7 nonstop round trips per week to Juneau, 13-week summer season only.

: 7 nonstop trips/week to Juneau and 7 one-stop (Cordova) trips/week to Anchorage

Aircraft: Boeing 737 or larger.

Rate per flight:

Juneau or Anchorage1 Weekly Compensation Ceiling 2

Cordova, $1,602 $44,856 3

Yakutat, $1,602 $44,856

Gustavus, $1,602 $22,4284

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 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 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 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 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 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 are not currently available for performance under this order beyond March 3, 2011. The Government’s obligation for performance 

under this order beyond March 3, 2011, is subject to 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 March 3, 2011, until 

funds are made available to the Department for performance. If funds are not made available for performance beyond March 3, 2011, the 

Department will provide notice in writing to the carrier.

All claims for payment must be submitted within 60 days of the last day of service provided under this order.

 1 $4,846,951 annual compensation, divided by 3,026 annual flights at the eligible points and their hubs, calculated as follows: 

52 weeks x 2 communities x 28 flights in each directions per community x .978 = 2,848;

13 weeks x 1 community x 14 flights in each direction x .978 = 178.

2 Calendar weeks that fall into separate calendar months will be treated as part of the later month for the purpose of 

calculating both calendar weeks per month and the monthly compensation.

3 28 departures/arrivals per week between each point and Anchorage/Juneau x $1,602.

4 14 departures/arrivals per week at Juneau x $1,602.
Appendix C-2

Alaska Airlines, Inc., Essential Air Service to be Provided to 

Petersburg, and Wrangell, Alaska, Docket OST-98-4899 

Effective Period: May 1, 2011, through April 30, 2013

Scheduled Service:

Petersburg: 7 nonstop trips/week to Juneau and 7 one-stop (Wrangell) trips/week to Ketchikan;

Wrangell: 7 nonstop trips/week to Ketchikan and 7 one-stop (Petersburg) trips per week to Juneau;

Aircraft: Boeing 737 or larger.

Rate per flight:

Juneau or Ketchikan1 Weekly Compensation Ceiling 2

Petersburg, $1,199 $33,5723

Wrangell, $1,199 $33,572

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 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 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 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 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 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 are not currently available for performance under this order beyond March 3, 2011. The Government’s obligation for 

performance under this order beyond March 3, 2011, is subject to 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 March 3, 2011, until funds are made available to the Department for performance. If funds are not made available 

for performance beyond March 3, 2011, the Department will provide notice in writing to the carrier.

All claims for payment must be submitted within 60 days of the last day of service provided under this order.

 

1 $3,415,987 annual compensation, divided by 2,848 annual flights at the eligible points and their hubs, calculated as 

follows: 52 weeks x 2 communities 28 flights in each directions per community x .978 = 2,848.

2 Calendar weeks that fall into separate calendar months will be treated as part of the later month for the purpose of 

calculating both calendar weeks per month and the monthly compensation.

3 28 departures/arrivals per week between each point and Juneau/Ketchikan x $1,199.