Order: 2012-9-8

Served: September 10, 2012

 UNITED STATES OF AMERICA

 DEPARTMENT OF TRANSPORTATION

 OFFICE OF THE SECRETARY

 WASHINGTON, D.C.

Issued by the Department of Transportation

Essential Air Service at

EXCURSION INLET, ALASKA

KAKE, ALASKA

DOCKET DOT-OST-2002-12014

DOCKET DOT-OST-2008-0217

under 49 U.S.C. 41731 et seq.

ORDER SELECTING AIR CARRIER

Summary

By this Order, the Department is re-selecting Air Excursions, LLC (Air Excursions) to 

provide Essential Air Service (EAS) at Kake for a first-year annual subsidy of $163,621

and a second-year annual subsidy of $177,574. The airline will provide 14 weekly nonstop 

round trips to Juneau during the 21-week peak season and 7 weekly nonstop round trips 

during the 31-week off-peak season. 

In addition, we are selecting Air Excursions to provide EAS at Excursion Inlet for a firstyear annual subsidy of $27,111 and a second-year annual subsidy of $28,835. The airline 

will provide three weekly nonstop round trips 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 Cessna 206 float aircraft, beginning when the airline commences full EAS.1

 1 Such subsidy is calculated and distributed on a fiscal year basis, subject to the availability of appropriated 

funds.

on the 10th day of September, 2012
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The contract term for both communities will be through the 24th month from the date Air 

Excursions begins full EAS at Excursion Inlet.

Background

By Order 2010-8-9, August 17, 2010, the Department selected Air Excursions to provide 

EAS at Kake for a first-year subsidy rate of $213,405 and a second-year subsidy rate of 

$229,939 for the two-year period through August 31, 2012. At Excursion Inlet, Alaska 

Juneau Aeronautics, Inc. dba Wings of Alaska (Wings), was selected to provide EAS for 

an annual subsidy rate of $33,919.

As the end of the contracts were approaching, we issued Order 2012-4-13, April 10, 2012, 

requesting proposals 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, Ward Air, Inc. (Ward Air), and SeaPort Airlines, Inc., dba Wings of 

Alaska (Wings).

All three air carriers’ complete proposals and the communities’ comments may be 

accessed online at http://www.regulations.gov/ by entering each community’s Docket 

number in the search block: Kake, Docket DOT-OST-2008-0217 and Excursion Inlet, 

Docket DOT-OST-2002-12014.

Proposal of Air Excursions

Air Excursions proposed to serve Excursion Inlet and Kake, each on a stand-alone basis.

2

 

At Kake, the airline proposed 14 weekly nonstop round trips per week in the 21-week 

summer peak season, and 7 weekly nonstop round trips during the 31-week off-peak season 

to Juneau using 9-passenger PA-31 Navajo aircraft for a first-year annual subsidy of 

$163,621, and a second-year annual subsidy of $177,574.

At Excursion Inlet, the airline proposed three nonstop round trips a week during the peak 

season and one weekly nonstop round trip during the off-peak season using Cherokee 6 

aircraft for a first-year annual subsidy of $27,111, and a second-year annual subsidy of 

$28,835. During the winter when the runway is unavailable, the only way to provide 

scheduled service is to land on water. The airline states in its proposal that it has in its fleet 

a float aircraft that can land on water to ensure continued year-round scheduled service. 

Proposal of Ward Air 

Ward Air proposed to serve Excursion Inlet with three weekly nonstop round trips during

the 16-week peak season and one weekly nonstop round trip during the 36-week off-peak 

season to Juneau using either Cessna 206 aircraft or Cessna 185 aircraft for a first year 

annual subsidy of $32,262, and a second-year annual subsidy of $33,774. Ward Air 

maintains a float plane in its fleet and, therefore, would be able to provide year-round 

service at Excursion Inlet on its own without having to contract out service to an air carrier 

that has seaplanes. 

 2 Later clarification with the airline indicated that the proposal put forth was a two- or four-year proposal, at 

the discretion of the Department.
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Proposal of Wings

Wings proposed to serve both Excursion Inlet and Kake, each on a stand-alone basis. At 

Excursion Inlet Wings proposes status-quo service of three weekly nonstop round trips 

during the 16-week peak season and one weekly nonstop round trip during the 36-week 

off-peak to Juneau using Cessna 207 aircraft for an annual subsidy of $33,527. The 

proposal also states that, as it has done in the past, the airline will contract with another air 

carrier (such as Alaska Seaplane or Ward Air) with float planes to provide service at the 

community when the runway becomes unusable during the winter months. 

Wings also proposed to serve Kake with 14 weekly nonstop round trips during peak season 

and 7 nonstop weekly round trips during off-peak season with Cessna Caravan aircraft for 

an annual subsidy of $364,506.

Community Comments

On May 9, 2012, we requested comments from both communities regarding this EAS 

selection case. In response, we received official letters from the State of Alaska 

Department of Transportation, City of Kake, and the Organized Village of Kake (OVK). 

The City of Kake supported the proposal put forth by Wings, primarily because of Air 

Excursions’ “diminished reliability during winter months.” However, the OVK supported

the Air Excursion’s proposal, stating the carrier “best meets the needs of our community.” 

Later we received a letter dated June 14, 2012, from Mayor John Janik acknowledging the 

difference in opinion of the two groups and added that Air Excursions had additionally 

obtained the support of the Kake Community School District. Mayor Janik added, “While 

the mayor and city council do not wish to retract the earlier Letter of Support for Wings of 

Alaska, they also do not wish to see that letter take precedence over the recommendations 

by [Organized Village of Kake] or the school district. That said, when you review public 

comment and public recommendation, please consider the recommendations of the 

Organized Village of Kake and the Kake Community School District ahead of those of the 

City of Kake.” 

We also received a letter from Mr. Steven D. Hatter, Deputy Commissioner – Aviation for 

the State of Alaska, expressing support for the continuation of the EAS program and the 

important role it plays at Kake and Excursion Inlet as their only form of scheduled 

transportation. In addition, Mr. Hatter stated, “The State of Alaska continues to assert that 

the local residents are generally best positioned to comment on particular schedules or air 

carriers, and, therefore, we think the community should provide comments to you on those 

specific areas.”

Excursion Inlet, a small community that is part of Haines Borough, technically does not 

have an elected official, and therefore no official comments were received. A member of 

the community, Mr. Bruce Gordon, did submit comments, unofficially, for the residents of 

Excursion Inlet. Mr. Gordon stated, “...we really do not care which of the [two] 

alternative carriers are chosen, as long as they deliver the mail on time.” Mr. Gordon also 

mentioned that the community did prefer that the chosen airline be locally owned and 
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operated. Of the three air carriers that submitted proposals at Excursion Inlet, Air 

Excursions and Ward Air are locally owned.

Decision

At Kake we are faced with a choice between Air Excursions and Wings. Since the service 

proposed by the airlines is virtually identical and the community support was not 

unanimous, we decided to look at the subsidy request of both airlines. In this case, Air 

Excursions’ annual subsidy is significantly less than Wings ($163,621 in the first year for

vs. Wings’ $364,506). After carefully reviewing all of the civic comments, it appears that 

the preponderance of community views support Air Excursions. Therefore, we will reselect Air Excursions at Kake.

At Excursion Inlet, the decision is more complicated. All three air carriers submitted 

proposals and we received no official comments from the community. Furthermore, all 

three air carriers have experience in providing air service within Alaska, an essential 

criterion for selecting an air carrier to provide EAS in that state. That leaves us to look 

more closely at the subsidy requests proposed. Wings, the incumbent, proposed an annual 

subsidy of $33,527. Air Excursions proposed a first-year annual subsidy of $27,111, and a 

second-year annual subsidy of $28,835, which is less than Wings’ proposed subsidy. 

Ward Air proposed a first-year subsidy request of $32,262, which is slightly less than 

Wings but more than Air Excursions, and a second-year subsidy request of $33,774, which 

is more than both Wings’ and Air Excursions’. Since Air Excursions is an experienced 

EAS air carrier in Alaska with a proven record of reliability and its proposal was the least 

expensive of all three proposals, we are selecting Air Excursions to provide EAS at 

Excursion Inlet. We find the service and subsidy levels reasonable.

Lastly, Air Excursions submitted proposals for two- or four-year terms. Since neither 

community stated which length of term was preferable, we have decided to select Air 

Excursions for a traditional two-year term, since it provides some savings for the 

Department.

We shall make this selection of Air Excursions at both communities contingent upon the 

Department’s receiving properly executed certifications from the air carriers that they are

in compliance with the Department’s regulations regarding drug-free workplaces and 

nondiscrimination, as well as the regulations concerning lobbying activities.3

Service Transition

Wings’ current EAS contract at Excursion Inlet expires on August 31, 2012, and Air 

Excursions may not start full EAS by then. We expect Air Excursions and Wings to work 

together to make a smooth service transition at Excursion Inlet. In that regard, before 

Wings suspends its service they must notify any passengers holding reservations for travel 

after the suspension date, to assist those passengers in making alternate air transportation 

arrangements, or to provide a refund of the ticket price, without penalty, if requested.

 3 The certifications are available on the Web at http://ostpxweb.dot.gov/aviation/index.html.
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Consistent with established program policy, we typically use an air carrier’s prospective 

proposal that was submitted during the competitive bid process to establish a bridge rate 

until the new air carrier inaugurates service. After reviewing Wings’ proposed rate at

Excursion Inlet, we find that it appears reasonable for the proposed service levels. We will 

therefore establish it as the final rate for the air carrier’s service at Excursion Inlet from 

September 1, 2012, until Air Excursions begins full EAS.

Carrier Fitness

49 U.S.C. §§ 41737(b) and 41738 require that we find an air carrier fit, willing, and able to 

provide reliable service before we may subsidize it to provide EAS. Air Excursions is

subject to the Department’s continuing fitness requirements, and there is no basis to alter 

that fitness finding at this time. We have contacted the Federal Aviation Administration

(FAA), and it has presented no facts that would negatively affect our fitness finding.

4

 We 

therefore conclude that the carriers are reliable and remain fit to conduct the operations 

proposed here.

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

ACCORDINGLY,

1. We re-select Air Excursions, LLC to provide Essential Air Service at Kake, Alaska, and 

establish an annual subsidy rate as described in Appendix C;

2. We select Air Excursions, LLC to provide Essential Air Service at Excursion Inlet, 

Alaska, and establish an annual subsidy rate as described in Appendix C;

3. We direct Air Excursions, LLC 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 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 carrier may forfeit its compensation for any claim that is not 

supported under the terms of this Order;

4. We find that Air Excursions, LLC, continues to be fit, willing and able to operate as a

commuter air carrier, and capable of providing reliable Essential Air Service at Kake and 

Excursion Inlet, Alaska;

 4 The National Transportation Safety Board (NTSB) and the FAA are currently in the preliminary states of an 

investigation of an Air Excursions incident on August 3, 2012. Should the investigation final reports reveal 

findings adverse to the air carrier, we would reassess the air carrier’s fitness in light of those findings. 
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5. These dockets will remain open pending further Department action; and

6. We will serve copies of this Order on the State of Alaska Department of Transportation, 

the Mayor of Kake, Excursion Inlet officials, Air Excursions, LLC, SeaPort Airlines, Inc. 

dba Wings of Alaska, and Ward Air, Inc.

By:

SUSAN L. KURLAND

Assistant Secretary for

Aviation and International Affairs

(SEAL)

An electronic version of this document is available at

http://www.regulations.gov
Appendix A

AREA MAP

Maps generated by the Great Circle Mapper - copyright © Karl L. Swartz.

 
 Appendix B

Page 1 of 2

Air Excursions Proposal - Kake

OPERATIONS

JNU-KAE Average Block Time 1 way 45.5 minutes

Total Annual Block Time 775.02 hours 1/

EXPENSE AND SUBSIDY NEED

ITEM YE 6/13 YE 6/14 YE 6/15 YE 6/16

Direct Expense PA-31 @$324.60 $264,149 $279,998 $296,797 $314,606

Indirect Expense $234,246 $248,301 $263,199 $278,991

G&A @ 10.29% $ 51,285 $ 54,362 $ 57,624 $ 61,081

TOTAL EXPENSE $549,680 $582,661 $617,620 $654,678

Profit Margin (5%) $ 27,484 $ 29,133 $ 30,881 $ 32,734

TOTAL INCLUDING R.O.I. $577,164 $611,794 $648,501 $687,412

COMMERCIAL REVENUE $413,543 $434,220 $455,931 $478,727

SUBSIDY NEED, TOTAL $163,621 $177,574 $192,570 $208,685

SCHEDULED DEPARTURES 1,022 1,022 1,022 1,022

SUBSIDY PER PA-31 DEPARTURE $ 160.10 $ 173.75 $ 188.42 $ 204.19

SUBSIDY PER PA-32 DEPARTURE $ 143.57 $ 156.23 $ 169.85 $ 184.51

CEILING PER WEEK – PEAK $4,482.80 $4,865.00 $5,275.76 $5,717.32

CEILING PER WEEK – OFF-PEAK $2,241.40 $2,432.50 $2,637.88 $2,858.66

1/ 100% completion at with PA-31 Navajo aircraft
 Appendix B

Page 2 of 2

Air Excursions Proposal – Excursion Inlet

OPERATIONS

JNU-EXI Average Block Time 1 way 25 minutes

Total Annual Block Time 78.33 hours 1/

EXPENSE AND SUBSIDY NEED

ITEM YE 6/13 YE 6/14 YE 6/15 YE 6/16

Direct Expense PA-32 @$244.25 $ 19,132 $ 20,280 $ 21,497 $ 22,786

Indirect Expense $ 12,729 $ 13,492 $ 14,302 $ 15,160

G&A @ 10.29% $ 3,278 $ 3,475 $ 3,684 $ 3,905 

TOTAL EXPENSE $ 35,139 $ 37,247 $ 39,483 $ 41,851

Profit Margin (5%) $ 1,757 $ 1,862 $ 1,974 $ 2,093

TOTAL INCLUDING R.O.I. $ 36,896 $ 39,109 $ 41,457 $ 43,944

COMMERCIAL REVENUE $ 9,785 $ 10,274 $ 10,788 $ 11,327

SUBSIDY NEED, TOTAL $ 27,111 $ 28,835 $ 30,669 $ 32,617

SCHEDULED DEPARTURES 188 188 188 188

SUBSIDY PER PA-32 DEPARTURE $ 144.21 $ 153.38 $ 163.13 $ 173.49

CEILING PER WEEK – PEAK $ 432.63 $ 460.14 $ 489.39 $ 520.47

CEILING PER WEEK – OFF-PEAK $ 144.21 $ 153.38 $ 163.13 $ 173.49

__________________________________________________

1/ 100% completion at with PA-32 Cherokee Six aircraft, 21 week peak season
 Appendix C

Page 1 of 2

Air Excursions, LLC

Essential Air Service to be Provided at Kake, Alaska

Effective Period: From September 1, 2012 through the 24th month after Air Excursions begins 

full EAS at Excursion Inlet

Scheduled Service: Peak (21 weeks): Two round trips each day to Juneau

 Off-peak (31 weeks): One round trip each day to Juneau

Aircraft: 9-passenger Piper PA-31 Navajo1 

Rate per Eligible Flight: First year: $160; Second year: $1742

Weekly Ceiling for each community: 

First year peak: $4,480; off-peak: $2,240

Second year peak: $4,872; off-peak: $2,4363

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 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 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 are not currently available for performance under this Order beyond September 30, 2012. The Government’s obligation for 

performance under this Order beyond September 30, 2012, is subject to the availability of appropriated 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, 2012, until funds are made available to the Department for performance. If funds are not made available for performance 

beyond September 30, 2012, 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 As previously agreed, when Air Excursions substitutes the PA-31 with PA-32 aircraft, we will pay the air carrier 

$117 per flight ($160 x6.6 seats divided by 9) for the first year and $128 per flight ($174 x 6.6 seats divided by 9). 2 Annual compensation of $163,621 for the first year, and $177,574 for the second year, divided by the estimated 

annual completed departures and arrivals: Peak: 14 weekly round trips multiplied by 21 weeks; off-peak: 7 round 

trips per week multiplied by 31 weeks = 511 flights in each direct multiplied by 2 = 1,022. 3 Peak: 28 flights multiplied by $160 for the first year, and $174 for the second year; Off-peak: 14 flights multiplied 

by $160 for the first year, and $174 for the second year. 
 Appendix C

Page 2 of 2

Air Excursions, LLC

Essential Air Service to be Provided at Excursion Inlet, Alaska

Effective Period: Beginning with full EAS through the end of the 24th month thereafter

Scheduled Service: Peak (21 weeks): Three weekly nonstop round trips to Juneau

 Off-peak (31 weeks): One nonstop round trip per week to Juneau

Aircraft: Cherokee 6

Rate per Eligible Flight: First year: $144; Second year: $1531

Weekly Ceiling for each community: 

First year peak: $864; off peak: $288

Second year peak: $918; off-peak: $3062

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 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 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 are not currently available for performance under this Order beyond September 30, 2012. The Government’s obligation for 

performance under this Order beyond September 30, 2012, is subject to the availability of appropriated 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, 2012, until funds are made available to the Department for performance. If funds are not made available for performance 

beyond September 30, 2012, 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 Annual compensation of $27,111 for the first year, and $28,835 for the second year, divided by the estimated 

annual completed departures and arrivals: Peak: 3 weekly round trips multiplied by 21 weeks; off-peak: 1 round trip

per week multiplied by 31 weeks = 94 flights in each direct multiplied by 2 = 188. 

Peak: 3 flights per week multiplied by 21 weeks; off-peak: 1 flight per week multiplied by 31 weeks = 94 flights in 

each direction multiplied by 2 = 188

2 Peak: 6 flights multiplied by $144 for the first year, and $153 for the second year; Off-peak: 2 flights multiplied by 

$144 for the first year, and $153 for the second year.