Order 2010-7-9

Served: July 15, 2010

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

Issued by the Department of Transportation

on the 15th of July, 2010

Essential Air Service at

ADAK,

ATKA, AND

NIKOLSKI, ALASKA

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

DOCKET OST-2000-8556

DOCKET OST-1995-363

DOCKET OST-1995-363

ORDER RESELECTING CARRIERS

Summary

By this order, the Department is reselecting Alaska Airlines to provide essential air service 

(EAS) at Adak, Alaska, at an annual subsidy rate of $1,675,703, and Peninsula Airways, Inc. 

(PenAir), for $290,780 at Atka and $639,008 at Nikolski. The three rates extend through 

June 30, 2012.

1

Background

Order 2008-3-36 reselected Alaska Airlines to provide two one-stop round trips a week with 

Boeing 737-400 aircraft between Adak and Anchorage, for the two-year period ending June 30, 

2010, at the annual subsidy rate of $1,483,122. That order also reselected PenAir to provide 

Atka with four nonstop round trips per week to Dutch Harbor with Piper T-1040 aircraft for 

$513,803 annual subsidy, and Nikolski with two nonstop round trips per week to Dutch Harbor 

for $469,786 annual subsidy, both through June 30, 2010. By Order 2009-6-28 we approved an 

alternate service pattern at Atka, whereby the community would receive a reduced frequency of 

three round trips per week but with a larger Metro III aircraft.2 In anticipation of the end of the 

current contracts on July 1, by Order 2010-2-5 we requested proposals at all three communities, 

with proposals due April 14. We received timely filed proposals from Alaska Airlines (for 

 

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

2 PenAir configures the aircraft with eight seats, but the aircraft can be certified for up to 19 seats.
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Adak) and PenAir (for all three communities), and requested comments from the communities. 

On April 6 the state of Alaska requested an extension to May 5, 2010, to submit comments, and 

by notice dated April 7 we granted the state’s request. On April 16 we received comments from 

the state, and the issue is ripe for decision.

Carrier Proposals

Adak 

Alaska Airlines proposes to operate two nonstop or one-stop round trips per week to Anchorage 

with B-737-400 aircraft for $1,675,703 annual compensation. This reflects the same frequency

and aircraft that Alaska Airlines currently provides Adak. PenAir proposes to operate five (four 

combis and one all-cargo) one-stop round trips per week to Anchorage with Saab 340 aircraft for 

$849,435 annual subsidy. 

Atka

PenAir was the only carrier to submit a proposal at Atka. PenAir submitted two proposals at 

Atka. Under Option 1, the carrier would provide three nonstop round trips per week to Dutch 

Harbor with Metro III aircraft for $290,780 annual subsidy. This reflects the same level of 

service PenAir currently provides Atka. Under Option 2, PenAir would provide two nonstop 

round trips per week to Dutch Harbor with Metro III aircraft for $154,215 annual subsidy.

Nikolski

PenAir was the only carrier to submit a proposal at Nikolski. PenAir proposes to operate two 

nonstop round trips per week to Dutch Harbor with 9-seat Grumman Goose aircraft for $639,008

annual subsidy. This reflects the same level of service PenAir currently provides Nikolski.3

Community Comments

We have received community comments regarding the carrier selection at Adak, and PenAir’s 

two proposals at Atka. There was only one option for consideration at Nikolski, where only

PenAir submitted a proposal, and after the deadline for proposals, we received a number of 

comments.

Adak

At Adak, we received comments from the Adak Community Development Corporation, The 

Boeing Company, Adak Eagle Enterprises, Aleut Corporation, Mr. Dave Fraser, M/V Savage, 

Inc., The Adak General Store, The Fishing Company of Alaska, and the Alaska Department of 

Transportation and Public Facilities. There was unanimous support for Alaska Airlines.

The Adak Community Development Corporation notes that it “has been discussing plans with 

[Alaska Airlines] for the shipment of live crab ...that could conceivably begin as early as in the 

coming year. [Alaska Airlines’ jet service] will greatly help towards the development of Adak as

 

3 In Order 2008-3-36 we allowed PenAir to substitute other, less expensive aircraft for the Grumman Goose, albeit 

at a prescribed lower subsidy rate. PenAir has since disposed of those aircraft. PenAir indicates it will no longer

substitute any aircraft for the Goose. 
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a major economic hub for the Western Aleutians – and a major crossroad for the continents that 

it was meant to be.” The Boeing Company noted that it had a presence in Adak and found that 

Alaska Airline’s service met its freight and passenger requirements with “freight, mail, and cargo 

capacity that a non-jet carrier simply cannot provide. All of these jet service capabilities are 

critical to the success of the Adak community in maintaining and growing our economy.” Mr. 

Dave Fraser notes that Alaska Airlines’ service “is truly essential to the survival and economic 

development of Adak as a struggling community in the Aleutian Islands.” The Adak General 

Store notes that “especially in the absence of barge service at Adak, all grocery and other needs 

are provided at Adak through air service. We have had PenAir service in the past and they

proved they could not handle the mail, let alone freight. They promised their Saab would come 

at least once a week, and it never came, except for perhaps three times during their whole 

contract period.” The Fishing Company of Alaska states that picking PenAir “would cause Adak 

to cease to exist as a community [because] we would lose the housing and emergency medical 

services that this remote location provides. This community is part of the community/industry

that feeds the world and provides thousands of jobs for people all over this country. [Alaska 

Airlines’ jet service] provides freight, mail, and cargo capacity that a non-jet carrier simply

cannot provide. The 737-400 combi aircraft is equipped with Required Navigation Performance 

Technology, which enables the airline to reliably access the airport during inclement weather, 

thus reducing diversions and cancellations and, in turn enabling people and products to 

dependably reach the community.” M/V Savage, Inc., utilizes “Adak Island for all of our 

logistical support while we are fishing in the Aleutian Islands. Adak has the only reliable air 

service in the Aleutian Island fisheries management area. [The company] depends on Alaska 

Airlines to do large crew changes and shipping foods and parts into Adak. [Alaska Airlines’ 

737-400] has been very reliable in making it into Adak in the adverse weather conditions which 

are so common in Adak.” Finally, the State of Alaska maintains that Alaska Airlines’ service 

provides “critical connections to one of the most remote communities in our nation. [T]he 

community is the best judge of the level and type of service required to meet the essential needs 

of the people.” 

Atka

We received comments from the City supporting PenAir’s Option 1, three round trips a week to 

Dutch Harbor. It notes that regular air service is essential to the community.

Nikolski

After the deadline for comments had expired, we received comments from the Chaluka 

Corporation, the village corporation of Nikolski, and from Four Mountains, LLC. While those 

comments had been addressed to the State of Alaska and subsequently forwarded to us, we will 

consider them on the record. We also received responses from the State of Alaska and from 

PenAir to those comments.

Four Mountains states that 

“We have worked in the Aleutians since 1994 and certainly understand the problems with 

weather and equipment, but since [the beginning of] PenAir’s Goose-only flights to 

Nikolski, there has been a dramatic degradation of service. No one in Nikolski is happy
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with PenAir. One resident said that this winter and spring PenAir has had on average one 

flight every three weeks. It is remarkable to us when we read the Essential Air Service 

requirements that PenAir gets paid whether they really service Nikolski or not.”

4

Chaluka Corporation confirms the difficulty PenAir encounters operating in the area. They note 

that a flight was attempted on March 29, but turned around 15 minutes after departure due to a 

massive snow squall. Pursuant to that cancellation, Chaluka notes the following:

“Due to bad weather between Dutch Harbor and Nikolski, the [next day] flight never 

happened until April 13, 2010. It is difficult for people in Nikolski to make their doctor 

appointments, get their medication refilled, and even pay their bills on time. The only

times that people are able to get out of Nikolski is when a charter shows up. That can 

get costly for individuals.”

In response, the state indicates that they have met with PenAir to discuss options for increased 

reliability of service, notwithstanding inadequate airfield maintenance and facilities at Nikolski 

beyond the control of it or PenAir. 

“The State of Alaska has no operational interest at the Nikolski air strip; this is a 

community-owned facility and resources for airfield maintenance and improvements are 

nonexistent. The extreme weather conditions prevalent in the area contribute further to 

the challenges faced by air carriers attempting to operate regular service in this remote 

region of Alaska. We have met with PenAir to discuss options for increased reliability

of service and after careful consideration of the issues, it is our position that the air 

carrier is providing the best service currently available. Several efforts are in process 

that might contribute to improved service, reliability, and competition. It is unclear 

when the Automated Weather Observing System (AWOS) will be certified and even 

these changes will not overcome the extreme weather conditions that make regular 

scheduled service to Nikolski problematic. Should we discover changes that improve 

reliability of service to Nikolski, we will communicate them to USDOT.” 

Department staff discussed the situation with PenAir as well. In a letter to the Department, 

PenAir states:

“We share the frustration of the commenters... The recent cancellations to which 

Chaluka and Four Mountains refer are the direct result of the harsh weather. Adverse 

weather is, of course, beyond PenAir’s control. And, PenAir’s Grumman Goose is the 

only aircraft in its fleet that can safely operate to that community because it has 

oversized tires that are designed to be used on harsh gravel runways. PenAir cannot 

operate any other aircraft type to Nikolski without the serious risk of causing damage to 

the aircraft.”

 

4 We note that compensation under the EAS program is paid on a completed-flight basis, so the concern that PenAir 

was being paid regardless of whether it completed its flights or not is unfounded.
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PenAir goes on to note that in 2009, out of 102 flights scheduled to Nikolski, 39 operated as 

scheduled, while 63 were cancelled for reasons beyond PenAir’s control. However, PenAir 

undertook extra efforts and made up those flights, so that 92 its 102 scheduled operations were 

eventually completed.

Decision-Adak

As we have previously stated, while required by statute to give great weight to community

preferences, the Department has traditionally given even more significant weight to the desires of 

Alaska communities vs. non-Alaska communities since they are more dependent on air service.5 

In this case, the community is unanimous in its support for Alaska Airlines’ service because of 

the long distances involved and the jet’s extra freight capacity that can address the special needs 

of Adak’s fishing industry. While PenAir’s proposed subsidy is $826,268 less than Alaska’s, the 

community’s desire to continue to have Alaska Airlines provide EAS carries great weight with 

us. When we first selected Alaska Airlines to provide service to Adak in 2003, we noted that the 

$749,095 difference in subsidy request, while substantial, was overridden by the community’s 

desire to have Alaska Airlines as their carrier. We also cautioned that if either traffic did not 

increase or the level of subsidy support needed did not decline, we would not be receptive to 

making a similar decision in future cases. Since then, the traffic generated by Alaska Airlines 

has almost doubled, from 3,913 passenger equivalents6 in 2003 to 7,769 in 2009. Traffic appears 

to have plateaued in recent years and subsidy has increased slightly. Finally, we have reviewed 

Alaska Airlines proposal, and it appears reasonable for the level of service proposed. Therefore, 

even though we remain concerned by the high level of subsidy required for Adak service, the 

additional subsidy is justified under these circumstances and we will therefore reselect Alaska 

Airlines for an additional two years. 

Decision-Atka

PenAir’s Option 1 proposes to continue the same three round trips per week with Metro III 

aircraft that it currently provides -- Order 2009-6-28 allowed for alternate service from what had 

been selected. Option 2 would reduce this level of service to two round trips per week with a 

Metro III for $154,215 annual subsidy. PenAir’s proposed annual subsidy at Atka under 

Option 1, status quo service, reflects a decrease of $223,023 from the current rate. Moreover, the 

community strongly supports the continuation of the three-round-trip-a-week service, and Atka is 

an extremely isolated island with no other access to the national transportation system. We have 

reviewed PenAir’s proposal, and it appears reasonable for the level of service proposed. Under 

these circumstances, we will not reduce Atka’s level of service. 

Decision-Nikolski

As all parties agree, operating bush aircraft out of Dutch Harbor is very difficult. The three 

subsidized bush communities with Dutch Harbor as a hub, as well as Dutch Harbor itself, face 

the notorious Aleutian weather conditions and are extremely isolated. Dutch Harbor, the regional 

hub, is 792 miles from PenAir’s hub at Anchorage, while Akutan, Nikolski, and Atka are 35, 

116, and 340 miles, respectively, beyond Dutch Harbor from Anchorage. Each of the three 

 

5 See Order 2003-1-8.

6 200 pounds of mail or freight is one passenger equivalent.
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communities faces different operating problems from the others. Akutan, the largest bush 

community, can only be served with a seaplane, and PenAir’s Grumman Goose is the best 

seaplane available for the task.7 At Atka a new runway was completed in 2009, allowing PenAir 

to replace its slower, less weather-capable Piper T-1040 aircraft with larger Metro III aircraft, 

allowing PenAir to dispose of its Piper T-1040 aircraft which until then had been subsidized.8 

Unfortunately, as PenAir indicates, PenAir’s Metro III cannot serve Nikolski. 

We are very concerned with the poor service at Nikolski highlighted by the community’s 

comments. PenAir indicates that it completed 92 of 102 operations at Nikolski in 2009, which is 

commendable given the operating conditions. However, as Four Mountains asserted, and as 

confirmed by PenAir’s monthly billings, PenAir’s service has deteriorated since then. For the six 

months from May 2009 thru October 2009, PenAir completed almost 80 percent of its flights at 

Nikolski, but for the following six months, November 2009 thru April 2010, only slightly more 

than a third of its flights. 

Because no other carrier submitted a bid at Nikolski, we are required to continue to rely on 

PenAir to provide service at the community for the foreseeable future. While a 37 percent 

completion factor is very poor, the state of Alaska has indicated that PenAir is doing as good a 

job as possible, and notes that “[s]everal efforts are in process that might contribute to improved 

service, reliability, or competition” such as certification of an Automated Weather Observing 

System (AWOS). We will therefore reselect PenAir for a two-year period at the rate it has 

proposed at Nikolski. We encourage the carrier, community, and state to continue to work 

together to provide improved service. We will, of course, work with the parties to work out any

possible air service improvements.

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., and 

Peninsula Airways, Inc., are subject to the Department’s continuing fitness requirements, and no 

information has come to our attention that would cause us to question the carriers’ 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 carriers remain fit 

to conduct the operations proposed here.

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

 

7 The Grumman Goose was first certificated in the 1930’s, and thus has extraordinarily high maintenance costs. 

Nevertheless, its operating characteristics – it is essentially a flying boat – that allow it to land and takeoff reliably 

and safely from Dutch Harbor to nearby Akutan’s relatively rough open water that more modern seaplanes could not. 

A landing strip is under construction at Akutan, which would allow operations with wheeled aircraft, but it is not 

clear when that landing strip will be completed.

8 Order 2009-6-28, June 30, 2009, allowed PenAir to replace its Piper T-1040 aircraft with the Metro III. Until 

then, the Piper T-1040 was able to not only serve Atka but provide backup at Nikolski when the Grumman Goose 

was unavailable.
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ACCORDINGLY,

1. We reselect Alaska Airlines, Inc., to provide essential air service at Adak, Alaska, as 

described in Appendix C-1;

2. We reselect Peninsula Airways, Inc., to provide essential air service at Atka and Nikolski, 

Alaska, as described in Appendices C-2 and C-3;

3. We direct Alaska Airlines, Inc., and Peninsula Airways, Inc., 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;

4. We find that Alaska Airlines, Inc., continues to be fit, willing and able to operate and capable 

of providing reliable essential air service at Adak, Alaska; 

5. We find that Peninsula Airways, Inc., continues to be fit, willing and able to operate and 

capable of providing reliable essential air service at Atka and Nikolski, Alaska; 

6. These dockets will remain open until further order of the Department; and

7. We will serve copies of this order on the cities of Adak, Atka, and Nikolski, the State 

Department of Transportation and Public Facilities, Peninsula Airways, Inc., 

and 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

Nonstop Miles to Anchorage

ADK, Adak 1,192

AKB, Atka 1,101

IKO, Nikolski 905

DUT, Dutch Harbor 792

CDB, Cold Bay 621

PTH, Port Heiden 424

BET, Bethel 399

AKN, King Salmon 289

Other Mileages

Atka to Adak 107

Atka to Nikolski 231

Atka to Dutch Harbor 340

Nikolski to Adak 337

Nikolski to Dutch Harbor 116

Adak to Dutch Harbor 445
Appendix B

Annual Subsidy at Adak, Atka, and Nikolski, Alaska

Adak Atka Nikolski

Carrier Alaska Airlines PenAir PenAir

Docket Numbers 2000-8556 1995-363 1995-363

Hub Anchorage Dutch Harbor Dutch Harbor

Weekly Round Trips 2 3 2

Passenger Revenue $1,467,709 $241,695 $62,115

Freight Revenue $391,159 $65,075 $15,337

Mail Revenue $193,899 $167,041 $59,117

Tpt. Related, Other $615,143 $0 $0

Total Revenue $2,667,910 $473,811 $136,569

Flying Ops $838,657 $175,863 $224,407

Fuel $1,080,758 $144,703 $66,649

Maintenance $683,006 $207,820 $252,727

Aircraft $106,030 $20,808 $39,448

 Total Directs $2,708,451 $549,194 $583,231

Total Indirects $1,382,087 $178,987 $155,413

Total Operating $4,090,538 $728,183 $738,645

Return @ 5% $204,527 $36,409 $36,932

Interest $48,548 $0 $0

Total Economic Cost $4,343,613 $764,592 $775,577

Annual Subsidy $1,675,703 $290,780 $639,008
Appendix C-1

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

Adak, Alaska, Dockets OST-2000-8556

Effective Period: July 1, 2010, through June 30, 2012.

Scheduled Service: 2 nonstop or one-stop round trips per week to Anchorage.

Aircraft: B-737-400

Rate per Eligible Flight: $8,056 1

Weekly Ceiling: $32,224 2

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 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 order beyond September 30, 2010. The Government’s 

obligation for performance under this order beyond September 30, 2010, 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 September 30, 2010, until funds are made available to 

the Department for performance. If funds are not made available for performance beyond September 30, 2010, 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 Annual compensation of $1,675,703 divided by the estimated annual completed departures and arrivals: 

4 flights/week x 52 weeks = 208 total.

2 4 flights/week x $8,056.
Appendix C-2

Peninsula Airways, Inc., Essential Air Service to be Provided to 

Atka, Alaska, Docket OST-1995-363

Effective Period: July 1, 2010, through June 30, 2012.

Scheduled Service: 3 nonstop round trips per week to Dutch Harbor.

Aircraft: Metro III, 8-seats

Rate per Eligible Flight: $932 1

Weekly Ceiling: $5,592 2

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 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 order beyond September 30, 2010. The Government’s 

obligation for performance under this order beyond September 30, 2010, 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 September 30, 2010, until funds are made available to 

the Department for performance. If funds are not made available for performance beyond September 30, 2010, 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 Annual compensation of $290,780 divided by the estimated annual completed departures and arrivals: 

6 flights/week x 52 weeks = 312 total.

2 6 flights/week x $932.
Appendix C-3

Peninsula Airways, Inc., Essential Air Service to be Provided to 

Nikolski, Alaska, Docket OST-1995-363

Effective Period: July 1, 2010, through June 30, 2012.

Scheduled Service: 2 nonstop round trips per week to Dutch Harbor.

Aircraft Type: Grumman Goose, 9-seats1

Rate per Eligible Flight: $3,072 2

Weekly Ceiling: $12,288 3

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 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 order beyond September 30, 2010. The Government’s 

obligation for performance under this order beyond September 30, 2010, 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 September 30, 2010, until funds are made available to 

the Department for performance. If funds are not made available for performance beyond September 30, 2010, 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 PenAir proposes to operate the Grumman Goose, a very expensive aircraft type for its size. If an aircraft type is 

substituted more than once a month, an adjustment to the subsidy rate may be required. 

2 Annual compensation of $639,008 divided by the estimated annual completed departures and arrivals: 

4 flights/week x 52 weeks = 208 total.

3 4 flights/week x $3,072.