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 16th 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 October 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 $1,675,703 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 2013-4-7, April 12, 2013, requesting EAS proposals 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 -

Proposal 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 scheduled 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 lifeline of infrastructure. The Adakbased fisheries have relied on Alaska Airlines for shipping fish and transporting employees for 

many years.” The Adak Community Development Corporation indicates that Alaska Airlines’ 

service “is critical for the continued 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 Alaska 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 current service level but requests an 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 processors on Adak. The city 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 find 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 

contacted the Federal Aviation Administration, and it has raised no concerns that would 

negatively affect our fitness findings. We therefore conclude that the carrier remains fit to 

conduct the operations proposed here.

This Order is issued under authority delegated 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 direct 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 be 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., continues to be fit, willing and able to operate as a 

certificated carrier and capable of providing reliable Essential Air Service at the these 

communities

4. This 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.gov
Appendix A

Nonstop Great Circle Miles from Anchorage (ANC))

Shemya (SYA) 1,455

Adak (ADK) 1,192

Atka (AKB) 1,100

Dutch Harbor (DUT) 791

Akutan (7AK) 753

Cold Bay (CDB) 620

Other Nonstop Great Circle Miles

ADK-AKB 107

ADK-DUT 445

ADK-7AK 486

ADK-CDB 617
Appendix 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.
Appendix 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, ANC1 Weekly Ceiling 2

$9,890 $39,5603

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 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 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, 2013, until funds are made available to the Department 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 under 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 for the purpose of 

calculating both calendar weeks per month and the monthly compensation.

3 4 departures/arrivals per week between Adak and Anchorage x $9,890.