Order 2013

- 7

- 14 Served: July 16, 2013



### UNITED STATES OF AMERICA
DEPARTMENT OF TRANSPORTATION


### OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation
on the 16 th of July, 2013

Essential Air Service at

ADAK
, ALASKA

Under 49 U .S.C. 41731 et seq

. DOCKET DOT

- OST

- 2000

- 8556

ORDER RE

- SELECTING CARRIER Summary By this Order

, the Department is re

- selecting Alaska Airlines , Inc., to provide Essential Air
Service (EAS) at Adak

, Alaska

, for $ 2,057,114 annual subsidy from Oc tober 1, 2013, through September 30, 2015. 1

Background By Order 2012

- 9

- 10, September 11, 2012, the Department selected Alaska Airlines, Inc., to provide EAS at Adak, Alaska, for a one

- year period through September 30, 2013. An annual subsidy of $1,675,70 3 was established for two nonstop or one

- stop round trips per week to Anchorage with Boeing 737

- 400 combi

- aircraft.

As the end of the current contract on September 30 , 2013, was approaching, we issued
Order 201 3

- 4

- 7

, April 12 , 201 3 , requesting EAS prop osals for a new contract period beginning
October 1 , 2013

.

1 Such subsidy is calculated and distributed on a fiscal year basis, subject to the availability of funds.- 2

-

Propos al of Alaska Airlines Only Alaska Airlines submitted a proposal, and it submitted only one option. The carrier proposes to continue to provide the same level of service described above, 2 and requests $ 2,057,114 annual subsidy at Adak

.

Community Comments We received comments from numerous civic parties and local citizens. The City of Adak indicates that Alaska Airlines’ “jet service to Adak has been highly successful and beneficial to the community, including but not limited to various government entities, businesses, including the seafood industry and residents of the island.” The Southwest Alaska Municipal Conference
indicates that “EAS

- supported air service is [Adak’s] only form of schedule d transportation. Adak depends on scheduled air carrier service for freight, passenger, and mail service for basic necessities, access to routine health services and economic welfare.” The Aleut Corporation
indicates that without EAS Adak would “ be cut off from the li f eline of infrastructure. The Adak

based fisheries have relied on Alaska Airlines for shipping fish and transporting employees for

man y years.” The Adak Community Development Corporation indicates that Alaska Airlines’
service “is c ritical for the continue d access and economic well

- being of Adak as well as that of this entire region of the state.” Hart Sales Corp

. operates as a seafood purchaser and processor at
Adak , and indicates that “Simply put, without the jet services of Alask a Airlines to the lower 48 markets I will have to cease our operation on Adak island.” Mr. and Mrs. Nelson, long

- term local residents, fully support Alaska Airlines’ historical and proposed service

.

Decision
Alaska Airlines proposes to continue the curr ent service level but requests a n increase in subsidy

, from $1,675,703 to $2,057,114

. Alaska Airlines is the only carrier to submit a proposal, and it submitted only one option. As shown in Appendix B, the expense of operating to Adak has been
constant, and that almost all of the increase in subsidy is due to projected decreases in revenue, notwithstanding that the most recent traffic figures show growth. The carrier attributes this
decrease to the closure of one of the seafood processor s on Adak. The c ity manager of Adak, Mr. Layton Lockett, anticipates that this closure will be temporary.

Based upon our review, the level of subsidy appears reasonable, and as noted there is strong community support for the proposal of Alaska Airlines. We are hopeful that during the two

- year contract the second, larger seafood plant is able to restart and the community can secure other industry so as minimize future increases in subsidy.

2 Order 2012

- 9

- 10 selected the carrier to provide either nonstop or one

- stop service, but the bulk of Alaska Airlines’
service has been provided on a nonstop basis.- 3

-

Carrier Fitness
49 U.S.C. §§ 41737(b) and 41738 require that the Department f ind an air carrier fit, willing, and able to provide reliable service before the Department may subsidize it to provide EAS

. Alaska
Airlines 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

contact ed the Federal Aviation Administration, and it has raised no concerns that would negatively affect our fitness finding s

. We therefore conclude that the carrier remain s fit to

c onduct the operations proposed here.

This Order is issued under authority delega ted in 49 CFR Part 1. 25 a(b)

.

ACCORDINGLY,

1. We re

- select Alaska Airlines , Inc., to provide Essential Air Service at Adak

, Alaska , as described in Appendix C ;

2 . We dire ct Alaska Airlines

, 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 the 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 b e retained. The carrier may forfeit its compensation for any claim that is not supported under the terms of this Order ;

3 . We find that Alaska Airlines

, Inc., continue s to be fit, willing and able to operate as a certificated carrier and capable of prov iding reliable Essential Air Service at the these
communities

4 . Th is docket will remain open until further Order of the Department; and

5 . We will serve copies of this Order on the civic officials of Adak

, Alaska

, and on Alaska
Airlines , Inc.

By:

Susan 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.govAppe ndix A

Nonstop Great Circle Miles from Anchorage (ANC)) Shemya (SYA) 1

, 455 Adak (ADK) 1,192 Atka (AKB) 1,100
Dutch Har bor (DUT) 791
Ak utan (7AK) 753 Cold Bay (CDB) 620

Other Nonstop Great Circle Miles
ADK

- AKB 107
ADK

- DUT 445
ADK

- 7AK 486
ADK

- CDB 617Appendix B

Historical Subsidy Comparisons

Order

2010-7-9 1/ Proposed Passenger $1,467,709 $1,137,026 Freight/Mail $585,058 $828,146

Other $615,143 $296,209

Total Revenue $2,667,910 $2,261,381

Flying Ops $838,657 $684,503

Fuel $1,080,758 $1,646,113

Maintenance $683,006 $497,528

Aircraft $152,266 $232,767

Total Directs $2,754,687 $3,060,911

Total Indirects $1,382,087 $1,051,941

Total Operating $4,136,774 $4,112,852

Return $206,839 $205,643

Economic Cost $4,343,613 $4,318,495

Annual Subsidy $1,675,703 $2,057,114

1/ Order 2010-7-9 selected Alaska Airlines through September 30, 2012. Alaska Airlines proposed, and Order 2012-9-10 selected Alaska Airlines for that same level of subsidy.Appendi x C

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

, Alaska

, Docket 2000

- 8556

Effective Period : October 1, 2013 , through September 30, 2015
Aircraft : B

- 737

- 400
Scheduled Service : Two nonstop round trips per week to Anchorage (ANC).

$/Flight, ANC 1 Weekly Ceiling 2
$ 9,890 $ 39,560 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 pl ans 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 confor mance 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 notif y 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. I n determining whether subsidy payment for a deviating flight should be adjusted or disallowed, the Department wil l 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 fo r 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 amendm ents thereto shall not operate to controvert the foregoing paragraph.

Funds may not be available for performance under this order beyond September 30, 2013. The Government’s obligation for performance under this order beyond September 30, 2013, is subj ect 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, 2013, until funds are made available to the Depa rtment for performance. If funds are not made available for performance beyond September 30, 2013, 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 u nder this Order.

1 $ 2,057,114 annual compensation ÷ 208 annual flights, calculated as follows:
52 weeks x 2 trips x 2 directions = 208.
2 Calendar weeks that fall into separate calendar months will be treated as part of the later month fo r the purpose of calculating both calendar weeks pe r month and the monthly compensation.
3 4 departures/arrivals per week between Adak and Anchorage x $ 9,890.