Order: 2014-4-21

Served April 22, 2014

 UNITED STATES OF AMERICA

 DEPARTMENT OF TRANSPORTATION

 OFFICE OF THE SECRETARY

 WASHINGTON, D.C.

Issued by the Department of Transportation

on the 22nd day of April, 2014

Essential Air Service at

CHISANA, ALASKA

HEALY LAKE, ALASKA

DOCKET DOT-OST-1998-4574

DOCKET DOT-OST-1998-3546

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

ORDER RE-SELECTING CARRIER AND

ESTABLISHING SUBSIDY RATES 

Summary

By this Order, the Department is re-selecting 40-Mile Air, Inc. (“40-Mile Air”), to provide 

Essential Air Service (“EAS”) at Chisana with two round trips per week to Tok, Alaska, 

using 3-seat Cessna 185 or 4-seat Cessna 206-207 aircraft, and at Healy Lake with two 

round trips per week to Fairbanks using 5-seat Cessna 206 or 207 aircraft, at annual 

subsidy rates of $86,247 and $112,459, respectively, for the two-year period from 

June 1, 2014, through May 31, 2016.

1

Background

By Order 2012-6-18, issued on June 22, 2012, the Department re-selected 40-Mile Air to 

provide subsidized EAS at Chisana with two round trips per week to Tok, Alaska, using 3-

seat Cessna 185 or 4-seat Cessna 206-207 aircraft, and at Healy Lake with two round trips 

per week to Fairbanks using 5-seat Cessna 206 or 207 aircraft, for the two-year period from

June 1, 2012, through May 31, 2014, at annual subsidy rates of $81,040 (Chisana) and 

$104,703 (Healy Lake). 

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

funds.
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Chisana and Healy Lake are guaranteed to receive at least a minimum level of air service 

under the EAS program by virtue of the fact that it appeared on a certificated carrier’s 

Civil Aeronautics Board-issued certificate on October 24, 1978, the date the Airline 

Deregulation Act of 1978 was signed into law. (See 49 U.S.C. §§ 41731 and 41744 for the 

EAS program’s governing statutes). In keeping with our normal procedure, in anticipation 

of the end of the rate term, the Department issued Order 2014-1-12, on January 16, 2014, 

soliciting proposals from air carriers interested in providing EAS at Chisana and Healy 

Lake, with subsidy support if necessary, for a new term beginning June 1, 2014. 

That order, as well as the complete public file for EAS at Chisana and Healy Lake, may be 

accessed online through the Federal Docket Management System at 

http://www.regulations.gov, by entering “DOT-OST-1998-4574” for Chisana and “DOTOST-1998-3546” for Healy Lake in the “SEARCH for: Rules, Comments, Adjudications or 

Supporting Documents:” field.

Proposal of 40-Mile Air

In response to the Department’s request for proposals, we received one inseparable 

proposal from the incumbent air carrier, 40-Mile Air, offering to continue to provide the 

same level of service it currently operates, consisting of two round trips per week between 

Chisana and Tok with 3-seat Cessna 185 or 4-seat Cessna 206 and 207 aircraft; and two 

nonstop round trips between Healy Lake and Fairbanks with 5-seat Cessna 206 or 207 

aircraft. 40-Mile Air proposes to provide this service at an annual subsidy rate of $86,247 

for Chisana and $112,459 for Healy Lake, for a total annual subsidy of $198,706 for air 

transportation at both communities.

Community Comments

On February 19, 2014, the Department requested community comments regarding this 

EAS case. In response, we received several comments from concerned citizens urging the 

Department to maintain the status quo and re-select 40-Mile Air to provide the same level 

of service it currently provides. 

Decision

The decision is straight forward and clearly points to the re-selection of 40-Mile Air (the 

only air carrier to respond to the Department’s solicitation for proposals), to continue to 

provide air transportation at Chisana and Healy Lake. The selection of 40-Mile Air will 

ensure the citizens of Chisana and Healy Lake will continue to have access to the National 

Air Transportation system. 40-Mile Air will continue to provide its current level of 

service, and we find the proposed rates to be reasonable and the air carrier’s performance 

satisfactory. 

Air Carrier Fitness

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

provide reliable air transportation before we may subsidize it to provide EAS. 40-Mile Air

is subject to the Department’s continuing 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 
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would negatively affect our fitness findings. We therefore conclude that the air carrier is 

reliable and remains fit to conduct the operations proposed here.

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

the Director, Office of Aviation Analysis.

ACCORDINGLY,

1. The Department re-selects 40-Mile Air, Inc., to continue to provide Essential Air 

Service at Chisana and Healy Lake, Alaska, at the service levels and subsidy rates

described in Appendix B, for the period from June 1, 2014, through May 31, 2016; 

2. We direct 40-Mile Air, 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 

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 air carrier may forfeit its compensation for any claim that is not 

supported under the terms of this Order;

3. We find that 40-Mile Air, Inc., continues to be fit, willing and able to operate as a 

certificated air carrier and capable of providing reliable Essential Air Service at Chisana 

and Healy Lake, Alaska;

4. This docket will remain open pending further Department action; and
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5. The Department will serve copies of this Order on the civic officials of Chisana and 

Healy Lake, Alaska, the Alaska Department of Transportation and Public Facilities, and 

the service list for this docket.

By:

 SUSAN L. KURLAND

 Assistant Secretary for

 Aviation and International Affairs

(SEAL)

 An electronic version of this document is available at

 http://www.regulations.gov
Appendix A

Page 1 of 2

40-Mile Air, Inc.

Annual Compensation Requirements for Essential Air Service at

Chisana, Alaska

Route: TKJ-CZN-TKJ

Frequency: Two Round Trips per Week

Aircraft Type: Cessna 185 (3-Seat), 206 or 207 (4-Seat)

Annual Block Hours: (TKJ - CZN - TKJ, 1.83 hours) x 2 flights/week x 52 = 190.7 hours

Revenue Rate Amt/lbs. Revenue

Passenger $97.67 100 $9,767.00

Cargo $0.42 3,000.00 $1,260.00

Space Available Cargo $0.21 26,000.00 $5,460.00

Mail $1.0012 7,000.00 $7,008.37

Total Operating Revenue $23,495.37

Direct Operating Expenses Unit Cost Expenses

Pilot $103 per BH $19,642.10

Fuel & Oil $102 per BH $19,451.40

Maintenance $112 per BH $21,358.40

Depreciation $22.85 per BH $4,357.49

Insurance 47.25 per BH $9,010.58

Agent Fee $20.00 per CZN dept. $2,080.00

Total Direct Operating Expenses $75,899.97

Indirect Operating Expenses @ 40% of Direct Net of Depreciation $28,616.99

Total Operating Expenses $104,516.96

Operating Loss $81,021.59

Profit Element @ 5% of Total Operating Expenses $5,225.85

Subsidy Need @ 100% $86,247.44
Appendix A

Page 2 of 2

40-Mile Air, Inc.

Annual Compensation Requirements for Essential Air Service at

Healy Lake, Alaska

Route FAI-HKB-FAI

Frequency: Two Round Trips per Week

Aircraft Type: Cessna 206 or 207 (5-Seat)

Annual Block Hours: (FAI - HKB, 1 hour) x 4 flights/week x 52 = 208 hours 

Revenue Rate Amt/lbs. Revenue

Passenger $65.12 50 $3,256.00

Cargo $0.47 5,000.00 $2,350.00

Mail $1.13 1,200.00 $1,356.00

Total Operating Revenue $6,962.00

Direct Operating Expenses Unit Cost Expenses

Pilot $103 per BH $21,424.00

Fuel & Oil $102 per BH $21,216.00

Maintenance $112 per BH $23,296.00

Depreciation $22.85 per BH $4,752.80

Insurance 47.25 per BH $9,828.00

Agent Fee

$20.00 per HKB 

dept. $2,080.00

Total Direct Operating Expenses $82,596.80

Indirect Operating Expenses @ 40% of Direct Net of Depreciation $31,137.60

Total Operating Expenses $113,734.40

Operating Loss $106,772.40

Profit Element @ 5% of Total Operating Expenses $5,686.72

Subsidy Need @ 100% $112,459.12
 Appendix B

 Page 1 of 2 

40-Mile Air, Inc.

Essential Air Service to be provided at Chisana, Alaska, DOT-OST-1998-4574

Effective Period: June 1, 2014, through May 31, 2016

Scheduled Service: Two nonstop round trips each week to Tok, Alaska

Aircraft: Cessna 185 (3-Seat) or Cessna 206/207 (4-Seat)

Rate per Eligible Flight: $4151

Weekly Ceiling: $1,6602

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 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 order beyond September 30, 2014. The Government’s obligation for 

performance under this order beyond September 30, 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 for any payment may arise for performance under this 

order beyond September 30, 2014, until funds are made available to the Department for performance. If sufficient funds are 

not made available for performance beyond September 30, 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 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 Annual compensation of $86,247 divided by 208 arrivals and departures: 4 flights per week x 52 weeks. 2 The subsidy rate for each arrival/departure ($415) multiplied by four eligible arrival and departure each week. 
Appendix B

Page 2 of 2

40-Mile Air, Inc.

Essential Air Service to be provided at Healy Lake, Alaska, DOT-OST-1998-3546

Effective Period: June 1, 2014, through May 31, 2016

Scheduled Service: Two nonstop round trips each week to Fairbanks, Alaska 

Aircraft: Cessna 206/207 (5-Seat)

Rate per Eligible Flight: $5413

Weekly Ceiling: $2,1644

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 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 order beyond September 30, 2014. The Government’s obligation for 

performance under this order beyond September 30, 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 for any payment may arise for performance under this 

order beyond September 30, 2014, until funds are made available to the Department for performance. If sufficient funds are 

not made available for performance beyond September 30, 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 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.

 3 Annual compensation of $112,459 divided by 208 arrivals and departures: 4 flights per week x 52 weeks. 4 The subsidy rate for each arrival/departure ($541) multiplied by four eligible arrival and departure each week.