Order 2012

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Served: December 28, 2012



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 28th day of December , 20 12

Essential Air Service at

EXCURSION INLET, ALASKA KAKE, ALASKA

Under 49 U.S.C. 41731 et seq

. DOCKET DOT

- OST

- 2002

- 12014

DOCKET DOT

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- 2008

- 0217



### ORDER GRANTING MOTION TO FILE AND DENYING PETITION FOR

REVIEW OF STAFF ACTION

Summary By this O rder, the Departme nt is granting the Petition for Reconsideration of SeaPort Airlines, Inc. dba Wings of Alaska (SeaPort)

, of Order 2012

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- 8

, September 10

, 2012 , and

, upon review, denying their P etition.

Background By Order 2010

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- 9, August 17, 2010, the Department selected Air Excursions, LLC (Air Excursions) to provide Essential Air Service (EAS) at Kake, Alaska, for a first

- year subsidy rate of $213,405 and a second

- year su bsidy rate of $229,939 for the two

- year period ending August 31, 2012. At Excursion Inlet, Alaska Juneau Aeronautics, Inc. dba Wings of Alaska, later merged with SeaPort Airlines, Inc. (SeaPort)

, was selected to provide EAS for an annual subsidy rate of $33,919.

As the end of the contracts were approaching, we issued Order 2012

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- 13, April 10, 2012,

reque sting proposal s from air carriers interested in providing EAS at the communities for a new term beginning September 1, 2012. In response to that Order, we received proposals from Air Excursions, SeaPort, and Ward Air Inc. (Ward Air).2

By Order 2012

- 9

- 8, S eptember 10, 2012, the Department re

- selected Air Excursions to provide

EAS at Kake for a first

- year annual subsidy of $163,621 and a second

- year annual subsid y of $177,574. The airline provide s 14 weekly nonstop round trips to Juneau during the 21

- week

p eak season and 7 weekly nonstop round trips during the 31

- week off

- peak season using 9

- passenger Piper PA

- 31 Navajo aircraft

.

In addition, we selected Air Excursions over SeaPort and Ward Air to provide EAS at Excursion

Inlet for a first

- year annual sub sidy of $27,111 and a second

- year annual subsidy of $2 8,835. The airline began EAS on September 15, 2012, and provide s three weekly nonstop round trips a week to Juneau during the 21

- week peak season with PA

- 32 Cherokee 6 aircraft, and one weekly nonstop round trip during the 31

- week off

- peak using the Cessna 206 aircraft.

Pet ition for Reconsideration of SeaPort On September 21, 2012, SeaPort filed a P etition for R econsideration of Order 2012

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, as well as a supplement to that petition. In addition, the Department received a response from Air

Excursion s regarding SeaPort’s petition. SeaPort alleges that the Department included facts in

four different areas that were incorrect, incomplete, or mischaracterized, as summarized below.

First, SeaPort maintains that the Department mischaracterized an event on August 2, 2012, involving the destruction of Air Excursions ’ aircraft and subsequent death of its pilot ( the only

occupant of the aircraft ). Specifically, the selection o rder referred to that event as an “incident”

when it should have been referred to as an “accident .” 1

Second, SeaPort asserts that the majority of comments received from the community of Kake favored the selection of SeaPort, contrary to what the selection order says. By SeaPort’s calculations, 7 of 14 commenters favor SeaPort, 5 favored Air Excursions, a nd 2 did not specify

a carrier of choice.

Third, SeaPort questions Air Exc ursions ’ reliability and says the Department “ glosses over the high number of flights the airline flies with small aircraft. ” SeaPort states that during the last

contract term

, Air Excursions used the proposed 9

- passenger Piper PA

- 31 Navajo twin

- engine

aircraft o nly 12 percent of the time.

Finally

, since Air Excursion s was recently acquired by a company owned by Mr. Kent Craford

, who resides in Portland, Oregon , it is not a local ly owned Alaska airline as stated in the Order

.

Additionally, SeaPort later filed a Supplement requesting that the two communities be given the opportunity to submit additional comments on the selection of Air Excu rsions. SeaPort’s basis for this reque st is that SeaPort anticipated finalizing an interline agreement with Alaska Airlines by th e end of October 2012. SeaPort also notes that no additional subsidy would be required as a result of the new agreement.

1 According to the National Transportation Safety Board (NTSB), an accident is defined as an occurrence associated with the operation of an aircraft that takes place between the time any person boards the aircraft with the intention of flight and all such p ersons have disembarked, and in which any person suffers death or serious injury, or in which the aircraft receives substantial damage. An incident is defined as an occurrence other than an accident that affects or could affect the safety of operations.3

Response from Air Excursions
On October 1, 2012, Air Excursions filed an Answer to SeaPort’s Petition addressing some of

SeaPort’s assertions . First, Air Ex cursions states that there are no disqualif ying safety issue s at the airline and that subsequent N ational Transportation Safety Board (N TSB ) and Federal Aviation Administration ( FAA ) investigations into recent incidents and accidents have not

re vealed any operational deficienc y on the part of the company.

Second, Air Excursions refutes S eaPort’s claim that the airline is not a locally owned airline. Air Excursions states that it has operated from bases in Juneau , where it serves more communities than any other scheduled airline, and Gustavus for over twenty years and the airline’s only operation is in Southeast Alaska. Air Excursions also s tates that Mr. Mike Stea dman, the co

owner with Mr. Craford, was born in Sitka and has lived in Juneau for the last 24 years.

Decision We have decided to grant SeaPort’s P etition for Reconsideration and , upon review , we affirm the

decision to select Air Excursion s to provide EAS at Kake and Excursion Inlet. We will address SeaPort’s Petition point by point.

First, b efore issuing any selection order

, 49 U.S.C

. § § 41737(b) and 41738 require that we find an air carrier fit, willing, and able to provide re liable service before we may subsidize it to provide EAS. I t is standard practice for EAS staff to verify that an air carrier has been found fit

to : 1) operate by the Department and 2) operate safely by the FAA . In this selection case, the Department’s obligation to verify the air carrier’s fitness was satisfied. With respect to the air carrier’s safety, we specifically ask ed the FAA if it is taking what is called “certificated action” against an air carrier ; in other words, is the FAA taking steps to revoke an air carrier’s

certification to operate as a result of safety violations ? P rior to selecting Air Excursions, EAS staff inquired with the FAA if any certificated action was be ing taken against the air carrier

, especially in li ght of an air crash on August 2 , 2012

. At the time of our inquiry

, the FAA stated that, while an investigation was being co nducted by the NTSB into the cause of the crash, the FAA was not taking any certificate action against Air Excursions. F urthermore, the FAA stated

no facts at that time had come to light that would negatively affect t he air carrier’s safety that would prevent us from selecting Air Excursions to provide EAS at Excursion Inlet. While t he Order did incorrectly refer to the August 2 , 201 2, accident as an “incident,” that does not automatically invalidate the Department’s decision to select Air Excursions. In addition, a

s ubsequent inquiry with t he FAA regarding Air Excursion s’ status has pr esented no facts that

would negatively affect our previous fitness finding

. Lastly

, SeaPort contends that the Department failed to mention in the selection order an earlier accident , as well as an incident that

involved Air Excursions. Per the above r eferenced governing statutes, the Department is not required nor is it the pra ctice of EAS staff to detail all incident s or accident s in a selection order.

Second, SeaPort contends that the order incorrectly stated that the majority of the comments from Kake supported their proposa l over Air Excursions ’ . We did, in fact, receive a number of

letters (seven) from private citizens who expressed their support for SeaPort’s proposal. The concerns of these citizens were given due consideration as part of the D epartment’s analysis of

whi ch air carrier to select. In addition , 49 U

. S

. C

. §41733(c)(d) states that in selecting an air carrier to provide EAS, the Department shall consider “...the preferences of the actual and potential users of air transportation at the eligible place, giving sub stantial weight to the views of the elected officials representing the users.” In the case of Kake, the two elected bodies4

representing the community, the City of Kake and the Organized Village of Kake (OVK) submitted conflicting support letters. The Cit y of Kake supported the proposal put forth by

SeaPort

, but the OVK supported Air Excursions ’ proposal. As mentioned in the Order selecting

Air Excursions , a letter dated June 14, 2012

, from Mayor John Janik o f the City of Kake acknowledged the two groups’ difference in opinion

. Mayor Janik also stated that Air Excursions had obtained additional support from the Kake Community School District. Mayor Janik stated, “While the mayor and city council do not wish to retract the earlier Letter of Support for [S eaPort], they also do not wish to see that letter take precedence over the recommendations by [OVK] or the school district. That said, when you review public comment and public recommendation, please consider the recommendations of the [OVK] and the Kake Community School District ahead of those of the City of Kake. ” Lastly, in an e

- mail da ted October 10, 2012, the OVK affirmed their earlier decision to support the proposal put forth by Air Excursions. Thus, based on the statute cited above, the community , through its elected representatives clearly favored the selection of Air Excursions.

Third, SeaPort assert s Air Excursions is not a locally owned airline. W e acknowledge that Air

Excursions ’ primary owner, Mr. Kent Craford, is located in Portland, Oreg on. Nevertheless

, nowhere in our Decision did we rely on Air Excursio ns ’ being a locally owned airline. We state

that t he airline was selected because it was experienced in providing EAS in Alaska (a key criterion)

, and its proposal was the least expensive of the three air carriers that submitted proposals

. We noted, however, that an Excursion Inlet resident’ s feedback mentioned that their preference was that the chose n airline be locally owned.

Fourth, SeaPort cal ls into question Air Excursion s ’ reliability as an EAS air carrier because it failed to operate the proposed Piper 31 aircraft as detailed in Order 2010

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- 9. In fact, we were

made aware of the airline ’s desire to substitute smaller aircraft when there was not demand for the larger aircraft. Air Excursions requested the ability to substitute the smaller aircraft at a lower subsidy per flight, and we approved that request by a n internal e

- mail dated February 9, 2011. In that e

- mail, we detailed a payo ut schedule that would pay Air Excursions substantially less when it substituted the smaller Piper Cherokee aircraft

. 2 Since Air Excursions

used smaller Piper 32 aircraft the majority of the time, the subsidy paid out was substantially less

than had the air carrier flown the Piper 31 the entire time. Thus, Air Excursions was able to better match capacity to demand and save EAS funds.

Lastly, in its supplement to the Petition for Reconsideration, SeaPort stated that th e airline would finalize an interline ag reement with Alaska Airlines. Per 49 U.S.C. §41733(c) (1)(c) , one of the

five factors that we consider when selecting an carrier to provide EAS is “The interline agreements the applicant has made with a larger carrier to allow passengers and cargo of the applicant at the hub airport to be transported by the larger carrier through one reservation, ticket, and baggage check

- in.” This is a moot poin t because

, as stated earlier, no where in our Decision

did we mention that SeaPort was not selected because of a lack of an interline agreement with a larger airline. Air Excursions was selected because they are a reliable EAS air carrier , had the majority of support from community officials, and their subsidy was significantly less than SeaPort’s proposed subsidy at both Kake and Excursion Inlet. Furthermore, even if we were to reconsider our decision based on SeaPort’s interline agreement with Alaska Airlines, it has been

2 This e

- mail was added to the Docket on November 23, 2012.5

confirmed that

, as of this writing

, no interline agreement has been finalized between the two

airlines.

Based on all of the above, we affirm our decision in Order 2012

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- 8 to select Air Excursions to provide EAS at Kake and Excursion Inlet, Alaska.

This Order is issued under authority delegated in 49 CFR 1.56(a)(f).

ACCORDINGLY,

1. We grant the Petition for Reconsideration of Order 2012

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- 8 , filed by SeaPort Airlines, Inc. dba Wings of Alaska and , upon reconsideration

, affirm our decision in Order 2 012

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- 8 selecting Air Excursions to provide EAS at Excursion Inlet and Kake, Alaska;

2. These dockets will remain open until further order of the Department; and

3. We will serve a copy of this order on SeaPort Airlines, Inc. dba Wings of Alaska; Air

Excursio ns, LLC; the City Manager of Kake; Organized Village of Kake; Excursion Inlet officials; Ward Air Inc. ; and the State of Alaska Department of Transportation.

By:

SUSAN L. KURLAND Assistant Secretary for

Aviation and International Affairs

(SEAL)

An electronic version of this document is available on line at www.regulations.gov