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 22 nd day of April , 20 1 4

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 th is O rder, the Department is re

- selecting 40

- Mile Air, Inc. (“40

- Mile Air”)

, to provide

Essential Air S ervice ( “ EAS ” ) at Chisana with two round trips per week to Tok, Alaska, using 3

- seat Cessna 185 or 4

- seat Cess na 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 rate s of $86,247 and $112,459, respectively, for the two

- year period from

June 1, 201 4 , through May 31 , 201 6

. 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 a nnual subsidy rate s 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.- 2

-

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 A irline 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 t he 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 “DOT

OST

- 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 cont inue 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 propo ses to provide this service at an annual subsidy rate of $86,247 for Chisana and $112,459 for Healy L ake, for a total annual subsidy of $ 198,706 for air transportation at both communities.

Community Com ments

On February 19 , 201 4

, the Department r equested community comments regard ing 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 provid e 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 w e 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 subj ect to the Department’s continuing fitness requirements, and no information has

come to our attention tha t would cause us to questio n the air carrier's fitness at this time. We have contacted the Federal Aviation Administration, and it has raised no concerns that- 3

-

would negatively affect our fitness finding s . We therefore conclude that the air carrier is

reliable and remain s 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

- select s 40

- Mile Air, Inc., to continue to provide Essential Air

S ervice at Chisana and Healy Lake, Al aska

, at the service levels and subsidy rate s 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

documenta tion 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 f i nd that 40

- Mile Air, Inc., continues to be fit, willing and able to operate as a certificated air carrier and capable of providing reliable E ssential Air S ervice at Chisana and Healy Lake, Alaska ;

4. This docket will remain open pending further Department action ; and- 4

-

5

. The Department will serve cop i es of this Order on the civic offic i als of Chisana and Healy Lake, Alaska

, the Alaska Department of Transportation and Public Facilities, and

the service list for this docket.

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.govAppendix 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% $86,247.44Appendix 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% $112,459.12Appendix 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

, 201 4 , through May 31 , 201 6

Scheduled Service : T w o nonstop round trips each week to Tok, Alaska

Aircraft : Cessna 185 (3

- Seat) or Cessna 206/207 (4

- Seat) Rate per Eligible Flight: $ 415 1
Weekly Ceiling : $ 1,660 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 significan t 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, suc h 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 per iod, 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 fr om 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 exte nt 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 fo r 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 cessat ion. 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 b y 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 pe rformance 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 p art 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, 2 014, 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 arriv al/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 : T wo nonstop round trips each week to Fairbanks, Alaska

Aircraft : Cessna 206/207 (5

- Seat) Rate per Eligible Flight: $ 541 3
Weekly Ceiling : $2, 164 4

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 significan t elements of the required service, without prior approval. The carrier understand s 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 flight s 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 per iod, 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. Sh ould 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 compe nsated. 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

pr ovided 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 wh ich 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 s ervice 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. Th e 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 perfo rmance 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 f our eligible arrival and departure each week.