Order 2011-3-31

Served: March 25, 2011

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

Issued by the Department of Transportation

on the 25th of March, 2011

Essential Air Service at

AKUTAN, ALASKA 

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

DOCKET OST-2000-7068

ORDER RESELECTING CARRIER

Summary

By this order, the Department is reselecting Peninsula Airways, Inc., (PenAir) to provide 

essential air service (EAS) at Akutan, Alaska, at annual subsidy rate of $710,157, from May 1, 

2011, through April 30, 2013.

1

Background

Order 2009-5-4 selected PenAir to provide service with 9-seat Grumman Goose aircraft at an 

annual subsidy of $654,964 from May 1, 2009, through April 30, 2011. Under that contract,

Akutan receives eleven nonstop round trips per week year round to Dutch Harbor. In 

anticipation of the end of the current contract, by Order 2010-11-3 we requested proposals for 

replacement service. We received a proposal from only one carrier, PenAir, and requested 

comments from the communities and state. We received comments from the state, and the issue 

is ripe for decision.

PenAir proposes to continue the current level of service, from May 1, 2011, through April 30, 

2013 and requests $710,157 annual subsidy.2 All of the service would continue to be operated 

with Grumman Goose aircraft.

 

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

2 The carrier initially requested $874,887 the first year and $918,631 the second year for this service. 
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Community Comments

The community and state continue to support the EAS provided by PenAir, and the state 

indicates that:

“Due to the isolated location of these communities [such as Akutan] and the complete 

lack of any road-system connection, this subsidized air service is their only form of 

scheduled transportation. The communities of Akutan depend on scheduled air freight, 

passenger, and mail service for basic necessities, routine medical and health services, 

and economic welfare.” 

Decision

PenAir is the only carrier to submit a proposal, it submitted only one option, and we have 

decided to select it for the two-year period it proposed, May 1, 2011, through April 30, 2013. 

We find that the carrier’s proposed service and subsidy levels are reasonable, and we are not 

aware of any reason why we should not re-select the carrier to provide the proposed level of 

service. 

The Department shall make this selection contingent upon our receiving properly executed 

certifications from the carrier that it is in compliance with the regulations regarding drug-free 

workplaces and nondiscrimination, as well as the regulations governing lobbying activities. 

Carrier Fitness

49 U.S.C. 41737(b) and 41738 require that DOT find an air carrier fit, willing, and able to provide 

reliable service before DOT may subsidize it to provide essential air service. PenAir is subject 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. 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 in 49 CFR 1.56a(f).

ACCORDINGLY,

1. We reselect Peninsula Airways, Inc., to provide essential air service at Akutan, Alaska, as 

described in Appendix C;

2. We direct 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;
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3. We find that Peninsula Airways, Inc., continues to be fit, willing and able to operate as a 

certificated carrier and capable of providing reliable essential air service at Akutan, Alaska; 

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

5. We will serve copies of this order on the Office of Statewide Aviation of the Alaska 

Department of Transportation and Public Facilities, and Peninsula Airways, 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

AS KS

Nonstop, Great Circle Miles

Akutan (KQA) to Dutch Harbor (DUT) 35

Akutan to Nikolski (IKO) 151

Dutch Harbor to Anchorage (ANC) 792

Akutan to Anchorage 759

Akutan to Atka (AKB) 374

This map is provided by Planet Profitability Forecasting System and is being used with express 

permission of the copyright holder, Sabre Airline Solutions®.
Appendix B

PenAir, Revised Proposal at Akutan, Alaska, Docket 2000-7068

Akutan, Alaska

Time Period May 1, 2011, thru April 30, 2013

Aircraft Type: Grumman Goose

Departures 1,144 1/

Block Hours 477 1/

Passengers 3,000

Mail Pounds 125,000

Freight Pounds 46,600

Passenger Revenue $369,000

Mail Revenue $124,875

Freight Revenue $23,766

 Total Revenue $517,641

Flying Operations $303,582

Fuel/Oil $143,625

Insurance $82,360

Maintenance $378,189

Depreciation/Rent $26,675

 Total Directs $934,431

TR as % of Revenue $46,782

DR per Wtd. Departure $134,978

CR per Wtd. Block Hour $28,075

 Total Indierects $209,835

Operating Expense $1,144,266

Profit @ 5% $57,213

Interest @ 2.3% $26,318

Economic Cost $1,227,798

Annual Subsidy $710,157

1/

22 flights/week * 52 weeks 1,144

Blk. Min./Flight 25

Blk. Hrs. 477
Appendix C

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

Akutan, Alaska, Docket OST-2000-7068

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

Scheduled Service: 11 nonstop round trips per week to Dutch Harbor.

Aircraft: 9-seat Grumman Goose

Rate per Eligible Flight: $6211

Weekly Ceiling: $13,662 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 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 April 8, 2011. The Government’s 

obligation for performance under this order beyond April 8, 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 April 8, 2011, until funds are made available to the Department for 

performance. If funds are not made available for performance beyond April 8, 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 $710,157 annual subsidy ÷ divided by 1,144 annual flights, calculated as follows: 

11 round trips * 2 directions * 52 weeks.

2 22 flights x $621 = $13,662.