Order 2013

- 8

- 1 Served: August 2, 2013



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION


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

Issued by the Department of Transportation

on the 2 nd of August, 2013

Essential Air Service at

TATITLEK
, ALASKA

Under 49 U.S.C. 41731 et seq

. DOCKET DOT

- OST

- 2013

- 0030

ORDER SELECTING CARRIER Summary By this Order

, the Department selects Reeve Air Alaska, LLC (Reeve)

, to provide Essential Air

Service (EAS) at Tatitlek

, Alaska

, with two nonstop round trips per week to Anchorage with Piper Navajo PA

- 31 aircraft for a two

- year period for $ 93,080 annual subsidy

. 1

Background

Order 2013

- 2

- 22, February 22, 2013, requested proposals for EAS at Tatitlek. That RFP noted

that Tatitlek’s EAS determination had been establ ished by Order 1980

- 1

- 167, January 25, 1980, which set Tatitlek’s level of air service to be one scheduled round trip per week during the peak season and one flag

- stop round trip per week during the off

- peak to Cordova with small aircraft having ten or few er seats and up to two intermediate stops. In addition, the RFP encouraged:

“proposals that meet the community’s requirements in an efficient manner. Consistent with the EAS determination, proposals should propose to provide one scheduled

passenger roun d trip per week [emphasis added]. Carriers are also welcome to propose more than one service option, if they choose; they need not limit themselves to a single specific service pattern if they envision other, potentially more attractive service possibilit ies

– different hubs, or longer terms for the contracted service

– with subsidy requirements that remain competitive.”

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

-

That RFP set March 21, 2013, as the deadline for proposals. On March 11, 2013, J&M Alaska Air Tours, Inc., d/b/a Alaska Air Transit ( AAT), requested an extension of the deadline, and by notice dated March 12, 2013, we extended the deadline to April 4, 2013. We received timely

filed proposals from AAT, Reeve, and from Security Aviation.

Order 2013

- 6

- 6, June 7, 2013, rejected the prop osals from all three carriers, as described in that

Order. However, during the period for community comments, the civic officials made a strong

case that two round trips a week were required, rather than the one round trip we had requested in the original RFP. Order 2013

- 6

- 6 re

- solicited proposals but requested proposals for one or two round trips a week. P roposals were due June 20, 2013 , and we received timely

- filed proposals

from the same three carriers

– AAT, Security Aviation, and Reeve . All proposa ls were responsive to our second RFP. O n June 21, 2013, we requested community comments , with comments due July 1, 2013

. The carriers’ proposals are summarized below.

Proposal of AAT Option 1 : $1 55,168 annual subsidy for two nonstop round trips per wee k to A nchorage with Piper Navajo s configured to 7 seats. 2

Option 2 : $13 9,828 annual subsidy for one nonstop round trip per week to ANC with Piper Navajo s configured to 7 seats.

Proposal of Security Aviation

The carrier submitted a single option for t wo nonstop round trips per week to ANC for $1,917

per round trip, or we infer $199,368 annual subsidy with Piper Navajo, PA

- 31 equipment.

Proposal of Reeve Air Alaska Option 1 : $ 46,540 annual subsidy for one nonstop round trip per week to ANC with Piper Navajo aircraft.

Option 2 : $ 93,080 annual subsidy for two nonstop round trips per week to ANC with Piper Navajo aircraft.

Comments Mr. David Totemoff, the Village President, stated that “In our view we are hoping that AAT will be our designated air carri er.” Mr. Bob Crum ley , superintendent of the Chugach school district

, which includes Tatitlek, stated that “The Chugach School District has reviewed the proposals and continues to believe the Alaska Air Transit proposal is best for our school, district, st udents, and

staff.” Mr. Brandon Moonin, a community health aide, endorsed AAT, i nd i c ating they have a “great relationship with the community.”

2 Piper Nav a jos can be configured for up to 9 seats. The carrier indicates that it might upgrade its service to Cessna

Caravan or Pilatus PC

- 12 aircraft, but because we cannot require such service, we do not assign that any decisional weight. Carriers are always allowed to provide superior service to what they are contracted to provide.- 3

-

Mr. Tim Sullivan with the North Pacific Fisheries Management Council and Deputy Director of

the Alaska Fisher ies Development Foundation wrote in support of Reeve based on its safety

record and customer service. Mr. Hyde Vernon, Construction Manager for the Alaska Native Tribal Health Consortium, indicates he regularly uses Reeve for passenger and freight service to Tatitlek, and fully endorses them. Mr. Chris Gill, Director of Project Management and Implementation for GCI Communications indicates he and his teams have used Reeve and were pleased with the carrier.

We also received several late

- filed comments. Ms. Victoria Vlassof and David Totemoff were concerned that some of the support letters for Reeve were from people who are not village residents. Mr. Olen Harris, Executive Director for the North Pacific Rim Housing Authority reiterated the need for freq uent air service to Tatitlek, and indicated that his organization had a long and very positive relationship with AAT, and had regularly utilized their charters for both passenger and freight service. Chugachmiut, the regional health care provider for Tati tlek, indicates they regularly

use AAT and that it takes “a sincere interest in the well

- being of our communities and

beneficiaries.”

Decisio n Based on the proposals before us, we will select Reeve Air Alaska’s Option 2, two nonstop round trips per week to Anchorage with Piper Navajo aircraft for $93,080 annual subsidy.

Order 2013

- 6

- 6 requested proposals for either one or two round trips per week. First, w e have

decided to require two round trip s per week rather one, eliminating Reeve’s Option 1, the least expensive option

-- one nonstop round trip per week to Anchorage for $46,540. As noted in

Order 2013

- 6

- 6, if the community had only one round trip per week, visitors to the community would either incur the expense of staying an entire week at Tatit lek, or Anchorage, for that matter, or need to charter an aircraft for more immediate access. With two scheduled round trips per week, that period when a passenger would be unable to leave Tatitlek would be cut in half,

and the community would thereby hav e much better access to the national air transportation
system.

Of the remaining proposals that offer two round trips per week, Security Aviation requests $199,368 annual subsidy, AAT $ 155,168, and Reeve $ 93,080. 3 We will eliminate Security

Aviation ’s proposal from further consideration because it was the most expensive and received no community support. Of the two remaining proposals, AAT and Reeve, Tatitlek’s civic

officials indicate that they favor AAT , while Reeve received significant support from some of its customers. Although 49 U.S.C. § 41733(c)(1)( d ) requires that we consider “ the preferences of the actual and potential users of air transportation at the eligible place, giving substantial weight to the views of the elected officials representi ng the users

, ” the Department may also consider the relative subsidy req u ir e ments when determining between or among carriers competing to provide

that service. 4

3 Each of these proposals contemplate s nonstop service to Anchorage with Piper Navajo aircraft.

4 See The Consolidated and Further Cont inuing Appropriations Act, 2012, Public Law No. 112

- 55, and continued by the Full

- Year Continuing Appropriations Act, 2013, Public Law No

. 113

- 6.- 4

-

In this instance, the difference in subsidy between the two proposals is decisional. AAT requ ests

two

- thirds 5 more subsidy than Reeve for the same level of service. In the initial round of proposals that we rejected, AAT requested $170,373 for three nonstop round trips per week with the same hub and same aircraft type. A simple pro

- rate of that earlier proposal would have produced an annual subsidy of $113,582, 6 close to the $93,080 that Reeve has now proposed. We are disappointed, given the community’s preference for AAT

, that the carrier did not reduce its subsidy request proportionally with the reduction in service. 7 Based on the information before us, we will select Reeve.

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. Reeve 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 findings. We therefore conclude that the carrier remains fit to conduct the operations proposed here.

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

.

ACCORDINGLY,

1. We select Reeve Air Alaska, LLC., to provide EAS at Tatitlek, Alaska, as described in Appendix B ;

2 . We direct Reeve Air Alaska, LLC., to retain all books, records, and other source and summary documentation to support claims f or 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

t he 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 thi s Order ;

3 . We find that Reeve continue s to be fit, willing and able to operate as a commuter air carrier and capable of providing reliable Essential Air Service at Tatitlek;

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

5 ( $155,168

- $93,080 ) ÷ $93,080 = 66.70 percent.

6 $170,373 x 2 round trips per week ÷ 3 round trips per week = $113,582.

7 The carrier reduced its projected revenue proportionally with its reduced service, but reduced its projected Insurance, Aircraft, Hangar, and Indirect expenses not at all.- 5

-

5 . We will serve copies of this Order on the civic officials of Tatitlek, Alaska, the State of Alaska Department of Transportation and Public Facilities, on Security Aviation, Inc., on J&M Alaska Air Tours, Inc., d/b/a Alaska Air Transit , and on Reeve Air Alaska, LLC

.

By:

Susan L. 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.govAppendix A

Nonstop Great Circle Miles to Tatitlek (TEK) Anchorage, ANC 113 Cordova, CDV 49 Chenega, NCN 71 Valdez, VDZ 24Appendix B

Reeve, Essential Air Service to be Provided to Tatitlek, Alaska

, Docket 2013

- 0030

Effective Period : October 1 , 2013, September 30, 2015

. Service : Two nonstop round trips per week to Anchorage with Piper Navajo aircraft;

Annual Subsidy : $ 93,080 Annual Flights : 208 1
Subsidy per Flight : $ 448 2
Weekly Subsidy Ceiling : $ 1,792 3

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 rat e 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 complet ed flight; absent an explanation supporting subsidy eligibility for a flight that has not been completed, such as certain wea ther 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 scop e of the order during the applicable perio d of these rates, 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 deviat ing flight should be adjus ted 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 complete ly, 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 do es make payments in the stipulated amounts or at the stipulated s ervice 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 th at are mutually agreed to in writing by the Depar tment and carrier do not constitute a total or partial reduction or cessation of payment.

Subsidy contracts 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 fu nds are made available to the Department for performance. If funds are not made available for performance beyond September 30, 2013 or if the funds made available are insufficient to cover the full appropriations period , 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.

1 Two round trips per week x two directions x 52 weeks.

2 $ 93,080 ÷ 208 flights.

3 $ 448 per flight x 4 flights per week.