### UNITED STATES OF AMERICA **DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY**  **WASHINGTON, D.C.** Issued b y the Department of Transportation on the 15 th day

of September , 20 1 1 Essential Air Service at **CENTRAL , ALASKA**  **CIRCLE, ALASKA DOCKET DOT**  **- OST**  **- 1998**  **- 3621**  under 49 U.S.C. 41731 et seq.



### ORDER **RE -**  **SELECTING CARRIER Summary**  By this order, the Department is re - selecting Warbelow’s Air Ventures, Inc. (Warbelow’s ), to provide essential air service (EAS) at Central and Circle , Alaska , for a combined annual subsidy of $275,598 ($137,799 for each community) . Warbelow’s will provide five weekl y round trips over a Fairbanks - Central - Circle - Fairbanks routing from December 1, 2011, through November 30, 2013. 1 Warbelow’s will use 8 - seat Piper PA31 - 350 aircraft but will graduall y phas e in 9 - seat Cessna 208 B aircraft as the carrier retires the PA31 - 350 . **Background** By Order 2009 - 9 - 17 , September 25, 2009 , the Dep artment selected Warbelow’s to provide EAS at Central and Circle for the contract period from December 1 , 2009 , through November 30 , 2011, for an annual subsidy of $ 203,360 ($101,680 for each community) for five weekl y round trips over a Fairbanks - Central - Circle - Fairbanks routing using 8 - seat Piper Navajo aircraft. As the end of the contract was approaching, we issued Order 2011 - 5 - 14 , May 17 , 2011, requesting proposals from carriers interested in providing EAS at the communities , for a term

1 Such subsidy is calculated and distributed on a fiscal year basis, subject to the availability of appropriated funds. Order: 2011 - 9 - 11 Served: September 15, 2011- 2 -

beginning December 1, 2011 . In response to that order, we received a prop osal from only the incumbent carrier , Warbelow’s . The carrier’s complete proposal and community comments may

be accessed online at http://www.regulations.gov/ by entering Docket number DOT - OST - 1998 - 3621 in the search block , so we will only briefly summarize the proposal below . **Proposal of Warbelow’s**  Warbelow’s proposed two options at Central and Circle. The first option is status - quo service of five weekl y round trips five days a week over a Fairbanks - Central - Circle - Fairbanks routing for an annual subsidy of $275,598, using either 8 - seat Piper PA31 - 350 aircraft or 9 - seat Cessna 208B aircraft. The second option will provide five weekl y round trips over a four- day period for an annual subsidy of $335,991. For three days a week Warbelow’ s would provide one round trip each of the three days over a Fairbanks - Central - Circle - Fairbanks routing, and one day a week it would provide two round trips over a Fairbanks - Fort Yukon - Central - Circle - Fort Yukon - Fairbanks routing . **Community Comments** The Department solicited comments from the community leaders of Central and Circle, as well as the Alaska Department of Transportation. On August 4, Stephen D. Hatter, Deputy Commissioner

– Aviation with the Alaska DOT, expressed support for the c ontinuati on of EAS in Alaska. No comments were received b y officials from either Central or Circle. **Decision** Warbelow’s was the onl y carrier to submit a proposal to provide EAS at Central and Circle. Warbelow’s has served Central and Circle reliably for a number of ye ars and it is an established EAS carrier. As between Warbelow’s Option 1 or Option 2 , the Department is unable to select the carrier’s second option . The only difference in service between the two options is that Option 2 would serve Fort Yukon

– the frequencies and aircraft ty pe would be the same. Because Option 2 requires more subsidy than Option 1, we would effectively be subsidizing service at Fort Yukon, which already receives its EAS on a subsidy- free basis. The Department is prohibited from subsidi zing service at a community already receiving subsidy- free EAS . We find the subsidy

and service levels proposed b y Warbelow’s Option 1 to be reasonable. W e shall make this sele ction of Warbelow’s at Central and Circle contingent upon the Department’s receiving properl y executed certifications from the carrier that it is in compliance with the Department’s regulations regarding drug - free workplaces and nondiscrimination, as well as the regulations concerning lobb ying activities. **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 essential air service . Warbelow’s is subj ect to the Department’s continuing fitness requirements, and no information has come to our attention that would cause us to question the carrier's fitness at this time. We have contacted the Federal Aviation Administration, and it has raised no concerns that would negativel y affect our- 3 -

fitness finding s . We therefore conclude that the carrier is reliable and remain s fit to conduct the operations proposed here. This order is issued under authority delegated in 49 CFR 1.56a(f). **AC CORDINGLY,**  1. We select Warbelow’s Air Ventures, Inc. to provide essential air service at Central and Circle , Alaska, and establish a combined annual subsidy rate of $ 275,598 , as described in Appendix C; 2. We direct Warbelow’s Air Ventures, 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 f or 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 f ind that Warbelows’s Air Service , continue s to be fit, willing and able to operate as a certificated carrier , and capable of providing reliable essential air service at Central and Circle ; 4. This docket will remain open pending further Department action ; and 5 . We will serve copies of this order on the Alaska Department of Transportati on, the community

leaders of Central and Circle, and Warbelow’s Air Ventures, Inc. . 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.gov

## AREA MAP Appendix AAppendix B Page 1 of 2 **Direct Expense 1Q 2009**  **2Q 2009 3Q 2009**  **4Q 2009** Pilot/Co - pilot 259225 242598 253560 256248 Fuel/Oil 274526 420740 499485 390165 Other 40066 37638 37638 37638 Maintenance 436700 610021 588454 929451 Deprec/Rental 38388 44688 47913 42678 Total Direct Exp 1048905 1355685 1427050 1656180 Hours Flown 2607 3042 3240 2731 Cost per hour 402 446 440 606 **Indirect Expense 1Q 2009**  **2Q 2009 3Q 2009**  **4Q 2009** Traffic Related 82549 93015 234775 125617 Departure Related 195907 194421 204000 236797 Capacity Related 155395 170168 187232 249826 Total Indirect Exp 433851 457604 626007 612240 Hours Flown 3229 4159 4358 3983 Cost per hour 134 110 144 154

**Direct Expense 1Q 2010**  **2Q 2010 3Q 2010**  **4Q 2010 Ad** **justed Av**  **erage Per Hour**  **Historica**

**l Data** Pilot/Co - pilot 248675 281741 277451 278865 89.95 Fuel/Oil 354299 461998 512658 456643 199.72 144.49 Other 36509 34250 34250 34250 12.53 Maintenance 409055 421867 552077 810947 203.99 Deprec/Rental 37566 40965 43905 39969 47.00 14.41 Total Direct Exp 1086104 1240821 1420341 1620674 553.20 Hours Flown 2663 2869 3176 2999 23327.00 Cost per hour 408 432 447 540 **Indirect Expense 1Q 2010**  **2Q 2010 3Q 2010**  **4Q 2010 Av**  **erage Per Hour**  Traffic Related 103626 120459 205180 195498 34.07 Departure Related 196964 203518 224325 222681 52.84 Capacity Related 171552 172953 188208 126546 48.49 Total Indirect Exp 472142 496930 617713 544725 **129.75** Hours Flown 3798 4300 4861 4153 15729 Cost per hour 124 116 127 131 **129.98**Appendix B Page 2 of 2 **Revenue Data 2009**  **- 2010**  **Passenger Revenue Pax**  **Fare Totals**  Central 40 97.00 3,880.00 Circle 877 99.00 86,823.00 Passenger Total 90,703.00 **Cargo Revenue** Pounds Rate Central 8600 0.45 3,870.00 Circle 17000 0.51 8,670.00 Cargo Total 12,540.00 **Ma il Revenue**  Pounds Rate Central 72400 1/ 67,797.44 Circle 54600 1/ 59,321.65 Mail Total 127,119.09 **Total Revenue** $230,362.09 1/ Mail Revenue:

Central: (72400/2000) x 104 miles = 3765 ton miles Circle: ( 54600/2000) x 131 miles = 3576 ton miles Central: **Weight Rate** 

Terminal charge 72400 0.35808 25924.99 Ton - mi le m ileage charge 3765 11.1215 41872.45 **67797.44** Circle: **Weight Rate** 

Terminal charge 54600 0.35808 19551.17 Ton - mi le m ileage charge 3576 11.1215 39770.48 **59321.65 Subsidy Calculation 2011**  **- 2013**  Total Direct Expense $575,328 Total Indirect Expense $135,179 =========== Total Operating Cost $710,507 Profit Element @ 10% of TOC $71,051 =========== Total Economic Cost $781,558 Total Revenue $230,362 Subsidy need at 100% Completion 2 yr subsidy $551,196 1 yr subsidy $275,598Appendix C **Warbelow’s Air Ventures, Inc. Essential Air Service to be Provided**  **at Central and Circle**  **, Alaska** Effective Period : December 1, 2011, through November 30, 2013 Scheduled Service : Five weekl y round trips over a Fairbanks - Central - Circle - Fairbanks routing Aircraft : 8 - seat Piper PA31 - 350 or 9 - seat Cessna 208B Rate per Eligible Flight: $ 265 ; 1 Weekly Ceiling : $ 2,65 0 2 for each community 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 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 community. If the Department unilaterally, either partially or complete ly, 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 w riting by the Department and the carrier do not constitute a total or partial reduction or cessation of payment. Funds are not currently available for performance under this order beyond September 30, 2011 . The Department’s obligation for performance under this order beyond September 30, 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 September 30, 2011 , until funds are made available to the Department for performance. If funds are not made available for perf ormance beyond September 30, 2011 , the Department will provide notice in w riting to the carrier. 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. All claims for payment must be submitted within 60 days of the last day of service provided under this order.

1 Annual compensation of $275,598 divided by 1 , 040 annual departures (10 weekly departures x 2 communities x 52 weeks x 100 percent completion). 2 10 arrivals and depart

ures per week multiplied by $265 per flight.