Order 201 5

- 1

- 23

Served: January 29 , 2015



### UNITED STATES OF AMERICA
DEPARTMENT OF TRANSPORTATION
OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 29 th of January , 201 5

ORDER SELECTING CARRIER S
AND ESTABLISHING SUBSIDY RATE S

Summary By this O rder, the Department is re select ing Copp er Valley Air Service (Copper Valley )

, t o provid e subsidized E ssential Air S ervice (EAS) at May Creek, and McCarthy, Alaska, for the

two

- year period beginning February 1, 20 1 5

, through January 31, 2017 at the combined annual

subs idy rate of $ 20 6

, 198 for both May Creek and McCarthy

. The Departme nt is also selecting Reeve Air Alaska, LLC (Reeve) to provide subsidized EAS at Gulkana, Alaska, for the two year period beginning February 1, 2015 through January 31, 2017, at an annual subsidy rate of $223,298. 1 (See Appendix A for a map of the service area

. )

Background By Order 201 2

- 1 1

- 34 ( November 30, 2012 ) , the Department re selected Copper Valley to continue providing EAS at Gulkana, May Creek, and McCarthy, Alaska, for the two

- yea r period from February 1, 2013, through January 31, 201 5 , for a combin ed annual subsidy rate of $475,387 ( $ 269,189 at Gulkana and $206,198 combined at May Creek and McCarthy)

. Under that Order, Gulkana currently receives two nonstop round trips per week to Anchorage with six

seat Piper PA

- 31 aircr aft; May Creek and McCarthy each receive two nonstop or one

- stop

1 Such subsidy is calculated and distributed on a fiscal year basis, subject to the availability of appropriated funds. Essential Air Service at

GULKANA, ALASKA MAY CREEK, ALASKA MCCARTHY, ALASKA

Under 49 U.S.C. § 41731 et seq

. DOCKET DOT

- OST

- 1995

- 492- 2

-

round trips per week to Gulkana using three

- seat Cessna 185 aircraft during winter months and

four

- seat Cessna 206 aircraft during summer months.

With the end of the contract approaching

, the Department issued Order 2 0 1 4

- 10

- 3 ( October 9, 2014 ) , requesting proposals from carriers int erested in providing EAS at the

communit ies , w ith or without subsidy, for a new contract period beginning February 1, 201 5

. In respon se, the Department received two proposals. Copper Valle y submitted a proposal to continue its existing service at the three communities. Additionally, Reeve submitted a proposal to provide EAS at Gulkana only. The proposals are summarized below. The complete proposals of both carriers, along with all public comments received, can be accessed online at www.regulations.gov by searching for docket DOT

- OST

- 1995

- 492.

Copper Valley Copper Valley proposed one serv ice option to continue providing its existing service level s at
the communities. A t Gulkana , it would use six

- seat twin engine Piper PA

- 31 aircraft and
operate two nonstop round trips each week year

- round to Anchora ge for an annual subsidy of $ 294,278

. 2 At May Creek and McCarthy, Copper Valley propose s to provid e two nonstop or

one

- stop round trips per week to Gulkana using three

- seat Cessna 185 aircraft during winter

months and four

- seat Cessna 206 aircraft during summer months for an annual subsidy of $ 256,847

. 3

Reeve Reeve submitted a proposal to provide EAS at Gulkana only. Under its proposal, Reeve would provide two weekly nonstop round trips to Anchorage using Piper PA

- 31 Navajo aircraft with up to seven passenger seats. Reeve would require an annual subsidy of $223,298.

Community Comments

On November 17 , 201 4

, the Department requested community comments regarding the carrier

selection decision at the three communities. In response, we received several comments in support of Reeve’s selection at Gulkana. All of the commenters noted that Reeve has a reco rd of safe, reliable air service and excellent customer service.

Decision Based on the above, the Department is reselecting Copper Valley to provide subsidized EAS at May Creek and McCarthy and selecting Reeve to provide subsidized EAS at Gulkana

. At May Creek and McCarthy, the carrier selection decision is straightforward. Copper Valley was the only appl icant and it meet s all of the required selection criteria

. The Department find s the service and subsidy levels proposed by Copper Valley to be reasonab le.

2 Copper Valley wet leases a PA

- 31

- 350 from Security Aviation. Copper Valley may substitute a nine

- passenger Cessna 441Conquest as a backup aircraft or to accommodate increased passenger demand.

3 Copper Valley may substitute a six

- passenger DHC

- 2 Beaver as a backup aircraft or to accommodate increased passenger demand.- 3

-

At Gulkana, the Department must look to the statutory carrier selection criteria contained in 49

U.S.C. § 41733(c) (1)

. 4 When applying those criteria, the Department find s that Reeve has provided reliable service both in its unsubsidized operations, as well as under the EAS program. Additionally, Reeve received unanimous support from those who submitted comments on the decision and requires an annual subsidy that is $70,980 less than Copper Valley for the same

level of service.

As these three commun ities have traditionally been served by the same carrier, the Department
expect s that Reeve and Copper Valley will work together in order to provide service which is

well

- timed to allow connections at Gulkana for May Creek and McCarthy passengers to access Anchorage.

The Department shall make this selection contingent upon the Department’s receiving properly

executed certifications from Reeve and Copper Valley that they are in compliance with the Department’s regulations regarding drug

- free workplaces and nondiscrimination, as well as the regulations governing lobbying activities.

Service Transition We expect Reeve and Copper Valley to work together to make a smooth transition at Gulkana. In that regard, before Copper Valley suspends its service at Gulkan a, they must notify any passengers holding reservations for travel after the suspension date, and assist those passengers in making alternate air transportation arrangements, or provide a refund of the ticket price, without penalty, if requested.

Copper V alley’s current EAS contract at Gulkana expires on January 31, 2015 , and Reeve may

not be able to inaugurate service by then. In that event, consistent with established pr ogram policy, we typically use the incumbent air carrier’s prospective proposal that was submitted during the competitive bid process to establish a bridge rate until the new a ir carrier inaugurates

service. After reviewing Copper Valley’s proposed rate for Gulkana , we find that they appear reasonable for the proposed service levels. We will therefore establish those rates as the final

rate s for the air carrier’s service at Gulkana for the period from February 1, 201 5 , until Reeve inaugurates full EAS , but no later than April 30, 2015

.

Carrier Fitness 49 U.S.C. §§ 41737(b) and 41738 requ ire that the Department find an air carrier fit, willing, and able to provide reliable service before the Department may subsidize it to provide EAS. Copper Valley and Reeve are registered air taxis operating under 14 CFR Part 298 of the

4 When selecting a carrier to provide EAS in Alaska, 49 U.S.C. §41733(c)(1) directs us to consider six factors: (1) service reliability; (2) contractual and marketing arrangements with a larger carrier at the hub; (3) interline arrangements with a larger carrier at the hub; (4) comm unity views; (5) the carrier’s plan to market its service to the community; and ( 6 ) the experience of the applicant in providing scheduled air service or significant patterns of

non

- scheduled air service in Alaska. In addition, the Consolidated Appropria tions Act, 2012, Public Law 112

- 55, and continued by the Consolidated and Further Continuing Appropriations Act, 2015, Public Law No. 113

- 235

, provides that when selecting a carrier to provide EAS, the Department may consider the relative subsidy requireme nts, thus codifying a factor that we have considered since the inception of the program

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Department’s regu lations and hold Part 135 operating certificates from the FAA. The Department has contacted the Federal Aviation Administration, and it has confirmed the two carrier’s air taxi registrations and relevant operating certificates.

This Order is issued under authority delegated in 49 CFR Part 1.25a(b).

ACCORDINGLY,

1. The Department selects Copper Valley Air Service, to continue to provide EAS at May Creek and McCarthy, Alaska, at the service and subsidy levels detailed in Appendix C, for the

two

- year period beginning February 1, 2015, through January 31, 2017;

2

. The Department selects Reeve Air Alaska, LLC to provide EAS at Gulkana, Alaska, at the service and subsidy levels detailed in Appendix C, for the two

- year period beginning February 1, 2015, throug h January 31, 2017;

3. If Reeve Air Alaska, LLC is not able to begin full Essential Air Service at Gulkana, AK, by February 1, 2015, the Department will continue to provide subsidy to Copper Valley Air Service at the rates described in Appendix C, until s uch time as Reeve Air Alaska, LLC inaugurates full Essential Air Service, but no later than April 30 , 2015;

4

. The Department direct s Reeve Air Alaska, LLC and Copper Valley Air Service to retain all books, records, and other source and summary documenta tion 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 date of serv ice 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 s may forfeit their compensation for any claim that is

not s upported under the terms of this O rder;

5

. The Department finds that Reeve Air Alaska, LLC and Copper Valley Air Service are registered air taxis operating under 14 CFR Part 298 of the Department’s regulations and hold Part 135 operating certificates fro m the FAA , and are capable of providing reliable EAS at Gulkana, May Creek, and McCarthy, Alaska;

6

. Docket OST

- 1995

- 492 will remain open until further O rder of the Department; and- 5

-

7 . The Department w ill serve a copy of this O rder on the communities o f Gulkana, May Creek

, and McCarthy

, Alaska, Reeve Air Alaska, LLC, Copper Valley Air Service

, and the State of Alaska Department of Transportation and Public Facilities

.

By:

BRANDON M. BELFORD Deputy Assistant Secretary for

Aviation and International Affairs

(SEAL)

An electronic version of this document is available on line at www.regulations.govAppendix AAppendix B Page 1 of 5

Copper Valley Air ServiceAppendix B Page 2 of 5Appendix B Page 3 of 5Appendix B Page 4 of 5Appendix B Page 5 of 5Appendix C Page 1 of 4

Copper Valley Air Service

Essential Air Service to be Provided at May Creek , Alaska

Effective Period : February 1, 201 5 , through January 31, 201 7

Scheduled Service : 2 nonstop or one

- stop round trips per week to Gulkana

Aircraft : 3

- seat Cessna 185 (winter months)

4

- seat Cessna 206 (summer mont hs) Annual Subsidy: $128,424 1 Rate per Eligible Flight: $ 617 2 Weekly Ceiling : $ 2,468 3

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 ra te 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 weather cancellations, only completed flights are considered eligible for subsidy. In addition, if the carrier does not schedule or op erate 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 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 p rovide 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 complete, term inates 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 l evels, 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 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 sta tutes, regulations, or amendments thereto shall not operate to controvert the foregoing paragraph.

Funds may not be available for performance under this Order beyond February 14, 2015. The Government’s obligation for performance under this Order beyond F ebruary 14, 2015, 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 February 14, 2015, until funds are mad e available to the Department for performance. If sufficient funds are not made available for performance beyond February 14, 2015, the Department will provide notice in writing to the carrier.

All claims for payment, including any amended claims, must b e submitted within 90 days of the last day of the month for which compensation is being claimed. For example, claims for service provided in July must be filed by October 31st; August claims must be submitted by November 30th, and so on.

1 See Appendix B. Annual compensation of $256,847 divided by 2 = $128,424.

2 Annual compensation divided by annual flights ($128,424 divided by 2 weekly trips X 2 dir ections X 52 weeks).

3 Rate per flight multiplied by weekly flights ($617 X 4).Appendix C Page 2 of 4

Copper Valley Air Service

Essential Air Service to be Provided at McCarthy , Alaska

Effective Period : February 1, 201 5 , through January 31, 201 7

Scheduled Service : 2 nonstop or one

- stop round trips per week to Gulkana

Aircraft : 3

- seat Cessna 185 (winter months)

4

- seat Cessna 206 (summer months) Annual Subsidy: $128,424 4 Rate per Eligible Flight: $ 617 5 Weekly Ceiling : $ 2,468 6

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 schedul ed 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 O rder during the applicable period 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 a nd 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 dev iating 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 complete, 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 am ounts 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 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 February 14, 2015. The Government’s obligation for p erformance under this Order beyond February 14, 2015, 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 Fe bruary 14, 2015, until funds are made available to the Department for performance. If sufficient funds are not made available for performance beyond February 14, 2015, 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. For example, claims for service provided in July must be filed by October 31st; August claims must be submitted by November 30th, and so on.

4 See Appendix B. Annual compensation of $256,847 divided by 2 = $128,424.

5 Annual compensation divided by annual flights ($128,424 divided by 2 weekly trips X 2 directions X 52 weeks).

6 Rate per flight X weekly flights ($617 X 4).Appendix C Page 3 of 4

Reeve Air Alaska, LLC

Essential Air Service to be Provided at Gulkana , Alaska

Effective Period : February 1, 201 5 , through January 31, 201 7

Scheduled Service : 2 nonstop round trips per week to Anchorage

Aircraft : 7

- seat Piper P A

- 31 Navajo or 9

- seat Cessna 441 Conquest Annual Subsidy: $223,298 7 Rate per Eligible Flight: $ 1,074 8 Weekly Ceiling : $ 4,296 9

Note: The carrier understands that it may forfeit its compensation for any flights that it does not operate in

conformance w ith 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 sch eduled 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 t he Order during the applicable period 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 loca te 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 unilater ally, either partially or complete, 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 stipulate d 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 ag reed to in writing by the Department 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 February 14, 2015. The Government’s obligation f or performance under this Order beyond February 14, 2015, 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 beyon d February 14, 2015, until funds are made available to the Department for performance. If sufficient funds are not made available for performance beyond February 14, 2015, the Department will provide notice in writing to the carrier.

All claims for payme nt, including any amended claims, must be submitted within 90 days of the last day of the month for which compensation is being claimed. For example, claims for service provided in July must be filed by October 31st; August claims must be submitted by Nove mber 30th, and so on.

7 See Appendix B.

8 Annual compensation divided by annual flights ($ 223,298 divided by 2 weekly trips X 2 directions X 52 weeks).

9 Rate per flight X weekly flights ($1,074 X 4).Appendix C Page 4 of 4

Copper Valley Air Service

Essential Air Service to be Provided at Gulkana , Alaska

– Bridge Rate

Effective Period : February 1, 201 5 , through no later than April 30, 2015 10

Scheduled Service : 2 nonstop round trips per week to Anch orage Aircraft : 6

- seat twin engine Piper PA

- 31 Navajo Annual Subsidy: $289,190 11 Rate per Eligible Flight: $ 1,390 12 Weekly Ceiling : $ 5,560 13

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 l anding 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 sub sidy. 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 beyo nd the scope of the Order during the applicable period 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 De partment 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 subs idy 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 De partment unilaterally, either partially or complete, 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 tha t are mutually agreed to in writing by the Department 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

the y 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 February 14, 2015. The Governme nt’s obligation for performance under this Order beyond February 14, 2015, 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 February 14, 2015, until funds are made available to the Department for performance. If sufficient funds are not made available for performance beyond February 14, 2015, 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. For example, claims for service provided in July must be filed by October 31st; August claims must be submitted by November 30th, and so on.

10 Subsidy for Copp er Valley’s Gulkana

- Anchorage service will terminate when Reeve begins service.

11 See Appendix B.

12 Annual compensation divided by annual flights ($223,298 divided by 2 weekly trips X 2 directions X 52 weeks).

13 Rate per flight X weekly flights ($1,390 X 4 ).