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Megan Lawrence 

Managing Director, Government and Community Relations 

January 11, 2011 

Mr. Dennis DeVany 

Chief, EAS and Domestic Analysis 

Office of Aviation Analysis 

U.S. Department of Transportation 

1200 New Jersey Avenue, S.E. 

Washington, D.C. 20590 

Subject: Proposal to Provide Essential Air Service at Cordova, Gustavus, 

Petersburg, Wrangell and Yakutat, Alaska, Docket OST-1998-4899 

Dear Mr. DeVany: 

Please see the attached proposal from Alaska Airlines, Inc. to provide essential 

air service to the communities of Cordova, Gustavus, Petersburg, Wrangell and 

Yakutat, Alaska. The proposal includes a subsidy request to provide this service. 

Also attached are the certifications pertaining to compliance with a drug-free 

workplace, nondiscrimination and lobbying regulations. 

Please contact me if you need additional information. 

Sincerely, 

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Attachments 

• ft O X 6 S 9 0 0 8 P. A T T 1. I-, W A 9 8 I 6 8 - 0 9 C 0 / 2 0 6 - 4 5 i - ? 2 0 0 
Page 1 of 1 

Alaska Airlines, Inc. 

Compensation Requirement 

Essential Air Service to Cordova, Gustavus, Petersburg, Wrangell and Yakutat 

Exhibit 

AS-1 

AS-2 

AS-3 

Index of Exhibits 

Title 

Narrative Statement 

Subsidy Request 

Schedule 

Pages 

1 

1 

1 
AS-1 

Page 1 of 1 

Alaska Airlines, Inc. 

Compensation Requirement 

Essential Air Service to Cordova, Gustavus, Petersburg, Wrangell and Yakutat 

Narrative Statement 

Alaska Airlines, Inc. ("Alaska" or "company") is pleased, in response to Order 2010-11-26, to 

submit its integrated Southeast Alaska EAS proposal for service to Cordova, Gustavus, 

Petersburg, Wrangell and Yakutat. Alaska requests an EAS compensation level of $8,262,938 

for its aggregated proposal ~ $4,846,951 for Cordova, Yakutat and Gustavus and $3,415,987 

for Petersburg and Wrangell. 

The compensation request represents a 16% reduction in the company's actual results for the 

12-month period ended September 30, 2010 and provides for a 5% margin, based on 

substantially lower adjusted rather than actual costs. Alaska is voluntarily offering this 

"substantially lower than actual cost" proposal, in large part, because, Alaska believes it has a 

special obligation to continue its longstanding role as the vital transportation link for each of 

these five Southeast Alaska communities to hubs within and beyond the state of Alaska. 

In formulating its proposal, Alaska has assumed flat revenue, based on actual financial results 

for the 12-month period ended September 30, 2010. With respect to direct expenses, the sole 

adjustment Alaska has made to its actual September 30, 2010 results is to increase its 

projected fuel costs. Alaska projects average fuel costs for the two year period beginning May 

1, 2011 of $90 per barrel. In fact, Alaska's $90 per barrel assumption is almost identical to what 

Alaska is currently paying -and, by any objective measure, $90 represents a conservative fuel 

cost estimate. 

Insofar as indirect expenses are concerned, Alaska reduced its actual September 30, 2010 

expenses in all but two subaccounts to the same level Alaska proposed in its 2009 Southeast 

Alaska submission to the Department. The other two indirect expense subaccounts, flight 

attendant and ground maintenance expenses, were kept at the same level that Alaska 

experienced for the twelve months ended September 30, 2010. The net effect of these indirect 

expense adjustments lowers those indirect costs by more than $2 million below Alaska's most 

recent actual cost levels. 

Alaska proposes to continue its established pattern of daily B-737-400 combination ("combi") 

passenger and cargo service, with each flight offering passengers from all of the affected 

Southeast Alaska communities (except for Alaska's summer-only Gustavus service) singleplane sen/ice to Juneau as well as to Alaska's Anchorage and Seattle hubs. Alaska's speciallyconfigured 737-400 aircraft provide enhanced cargo capacity which is critically important to 

these isolated communities. These aircraft are also equipped with the latest Required 

Navigation Performance (RNP) technology, which enables the airline to reliably access the 

weather-sensitive airports in Southeast Alaska and to maintain a high completion factor. 

Alaska has provided service to Southeast Alaska under the EAS program for more than 30 

years and is committed to continuing to serve this critically important transportation function, 

connecting these remote, wholly aviation-dependent communities to points within and beyond 

Alaska. 
Subsidy Request 

Alaska Airlines, Inc 

Annual Compensation Requirement 

Essential Air Service at Cordova. Gustavus. Petersburg. Wrangell and Yakutat 

May 1, 2011 and Forward 

Based on Need for Year Ended September 30, 2010 

Actuals 

AS-2 

Page 1 of 1 

0p?ratlnq Revenue 

Passenger 

U.S. Mail 

Freight 

Excess Baggage 

Charter 

Trans. Related & Other 1/ 

Operating Expense 

Direct 

Flying Operation 3/ 

Maintenance - Flight 

Depreciation - Flight 

Indirect 

Maintenance - Ground 

Flight Attendant 

other Passenger Svc. 4/ 

Aircraft & Traffic Svc. 4/ 

Promotion & Sales 4/ 

General & Admin. 4/ 

Depreciation - Ground 

Transport Related 4/ 

Cordova 

Yakutat 

Gustsvy? 

5,750,006 

404,374 

1,655,264 

139,748 

0 

913,023 

$ 8,862,415 i 

5,614,210 

1.648,318 

411,539 

$ 7,674,067 1 

4,058 

548,821 

26,862 

3,609,393 

453,245 

1,422,099 

665,454 

1,121,398 

Petersburg 

Wranqell 

6,232,404 

394,281 

959,182 

74,468 

0 

1,248,577 

8,908,912 $ 

3,827.810 

1,128,854 

279,473 

5,236,138 $ 

2,819 

377,453 

10,788 

2,481,025 

595,986 

1.101,315 

629,626 

790,550 

Consolidated 

Total 

11,982,410 

798,654 

2,614,446 

214,217 

0 

2,161,599 

17,771,327 

9,442,020 

2,777,172 

691,013 

12,910,205 

6,878 

926.274 

37,650 

6,090,418 

1,049,231 

2.523,414 

1,295.080 

1,911,948 

Total Operating Exp. 

Operating Profit (Loss) 

Return 2/ 

Compensation 

$ 7,850,501 $ 5,990,391 $ 13,840,392 

$ 15,524,568. $ 11,226,529 $ 26,751,097 

$ (6,662,153) $ (2,317,617) $ (8,979,770) 

$ 776,228 $ 561,326 $ 1,337,555 

$ 7,438,382 $ 2,878,944 | $10,317.32F~{ 

EAS Cost per Passenger 

Alaska's proposal offers a tow EAS cost per passenger: 

$8,262,938 Proposed EAS compensation 

67% Ratio of passenger revenue to total revenue 

$5,571,329 EAS compensation allocated to passengers 

209,000 Estimated annual passengers 

$26.66 Average EAS cost per passenger 

Notes 

1/ Excludes public service revenue 

2/ 5 % of Operating Expense 

3/ Fuel adjusted to account for budgeted $90/barrel oil 

4/ Costs frozen from last bid 

Proposal 

Cordova 

Yakutat 

Gustavus 

Petersburg 

Wrangell 

Consolidated 

Total 

$ 8,862,415 $ 

5,760,774 

1,648,318 

411,539 

$ 7,820,631 5 

4,058 

548.821 

12,033 

2,477,882 

404.008 

556,194 

665,454 

567,458 

8,908.912 $ 

3.927,701 

1,128,854 

279,473 

5,336,029 $ 

2.819 

377.453 

14.401 

3.336.825 

412,338 

807,963 

629,626 

820,545 

17,771.327 

9,688,475 

2,777,172 

691,013 

13,156.660 

6,878 

926.274 

26,435 

5,814.707 

816,346 

1,364,156 

1,295,080 

1,388,003 

$ 5.235,908 S 6,401,970 $ 11,637,877 

$ 13,056,538 $ 11,737.999 $ 24.794,537 

$ (4,194,124) $ (2,829.087) $ (7,023,211) 

$ 652,827 S 586,900 S 1,239,727 

$ 4,846,951 $ 3,415,987 ] $8,262,938^1 
BAS Schedule 

EAS Schedule Times 27Dec10 

AS-3 

Page 1 of 1 

Summer^ 

Flt# 

Seattle 

Ketchikan 

Wrangel 

Petersburg 

Juneau 

55 

•i700 

813 

900 

953 

1033 

1058 

1136 

1220 

1300 

61 

-i750 

922 

1016 

64 

t 

2053 

1802 

1713 

1640 

1557 

1528 

1448 

1402 

1317 

66 

t 

2316 

2000 

1919 

Flt# 6S 

4-

Seattle 720 

Ketchikan l ^ 

Wrange. f^^O 

Petersburg J°*^ 

Gustavus 

61 

•J755 

71 

4-

1410 

77 

4-

64 

t 

2116 

1825 

1744 

1711 

1631 

1608 

1528 

66 

t 

2318 

1739 

Yakutat 

Cordova 

Anchorage 1449 

1121 

1201 

1253 

1333 

1419 1135 

1830 

1746 

1658 

1618 

1526 

Juneau 

Gustavus 

1202 

1245 

927 

1012 

1544 

1624 

1607 

1849 

1445 

1400 

2000 

1917 

1658 

Yakutat 

Cordova 

Anchorage 1431 

1107 

1147 

1236 

1316 

1407 2031 1215 

1830 

1750 

1700 

1620 

1528 

Source.- Winter (Jan '10) & Summer (Jul '11 Draft)