Order 201 4

- 8

- 13

Served: August 14 , 201 4



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION


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

Issued by the Department of Transportation

on the 1 4 th of August , 201 4

Essential Air Service at

ATKA , ALASKA

NIKOLS KI
, ALASKA

Under 49 U.S.C. § 41731 et seq

. DOCKET DOT

- OST

- 1995

- 363

ORDER RESELECTING CARRIER

Summary By this O rder

, the Department is reselecting Grant Aviation, Inc., ( Grant ) to provide Essential

Air S ervice (EAS) at Atka and Nikolski

, Alaska

, at a combined annual subsidy rate of $ 1,352,284 ( $1,031,793 at Atka and $ 320,491 at Nikolski ) for the period from October 1, 2014 through September 30 , 2016. 1

Background By Order 20 1 2

- 5

- 2 0 , issued May 23, 2012, we selected Grant to provide EAS at Atka and

Ni kolski through September 30 , 2014 . Under that contract, Grant provides Atka with three weekly nonstop round trips to Dutch Harbor for an annual subsidy in the first year of $842,574, and $822,445 in the second year. At Nikolski , Grant provides two weekly nonstop round trips to

Dutch Harbor for an annual subsidy in the first year of $331,431, and $324,998 in the second

year

. All service is provided with nine

- seat, twin

- engine Beech King Air 200 aircraft

.

In anticipation of the end of the current contra ct, on April 8 , 2014 we issued Order 201 4

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- 7

, request ing proposals from carriers interested in providing EAS at the communities for a new contract period, beginning October 1, 201 4

. We received two proposal s, from Grant , the incumbent, and Servant Air, I nc. ( Servant ).

1 Such subsidy is calculated on a fiscal year basis, subject to the availability of funds.- 2

-

The carrier s’ complete proposal s and community comments may be accessed online at www.regulations.gov by entering “DOT

- OST

- 1995

- 363 ” in the search box . Therefore, we will only briefly summarize th e proposal s and comments below.

Proposal of Grant

Grant’s prop osal included only one service option, to continue its existing service , consisting of

three nonstop round trips per week between Atka and Dutch Harbor, and two nonstop round trips per week bet ween Nikolski and Dutch Harbor. Service will be provided on Beech King Air 200

aircraft with two engines and nine passenger seats. For this service, Grant will require an annual subsidy of $1,031,793 at Atka and $ 320,491 at Nikolski. 2

Proposal of Servan t
Servant also propos es to provide three weekly nonstop round trips between Atka and Dutch

Harbor , and two weekly round trips between Nikolski and Dutch Harbor. Servant would also

utilize twin

- engine , nine

- passenger Beech King Air 200 aircraft. For its p roposed service, Servant would require a co mbined annual subsidy of $1,978,1 03.

Community Comments On May 15 , 2014, we requested comments from the community and state regarding this carrier

selection case. On May 22, 2014, we received comments from the City of Atka. While noting some operational issues, the City expressed support for the continuation of air service from

Grant. We did not receive any community comments from Nikolski.

Decision

The carrier selection decision in this case is straightforw ard. 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 larg er carrier at the hub; (4) community 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 addition, the

C ontinuing Appropriations Act, 2014, Public Law No. 113

- 46, provides that when selecting a carrier to provide EAS, the Department may consider the relative subsidy requirements, thus codifying a factor that we have considered sin ce the inception of the prog ram.

Grant proposal requires significantly less subsidy ($625,819 per year) than Servant’s proposal for the same level of service. Additionally, Grant received the support of the City of Atka. Given these factors, and the demonstrated ability of Grant to provide reliable EAS at these communities for the past two years, we will select Grant’s proposal.

2 We have allocated the total annual subsidy request to ea ch community based on each community’s share of total block hours.- 3

-

Carrier Fitness

49 U.S.C. §§ 41737(b) and 41738 require that DOT find an air carrier fit, willing, and able to provide reliable service before DOT ma y subsidize it to provide E ssential A ir S ervice. Grant 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 contacted the

F ederal Aviation Administration, and it has raised no concerns that would negatively affect our fitness finding s . DOT therefore concludes that the carrier remain s fit to conduct the operations proposed here.

This order is issued under authority delegated in 49 CFR Part 1. 25 a( b ).

ACCORDINGLY,

1. We re select Grant Aviation , Inc., to provide Essential Air S ervice at Atka and Nik olski

, Alaska , as described in Appendix C ;

2 . We direct Grant Aviation , Inc., 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 fro m the date of service 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 cla im that is not sup ported under the terms of this O rder;

3 . We find that Grant Aviation , Inc., continue s to be fit, willing and able to operate as a certificated air carrier and capable of providing reliable E ssential A ir S ervice at Atka and

Nikolski

, Ala ska ;

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

-

5 . We will serve copies of this O rder on the Division of Statewide Aviation of the Alaska Department of Trans portation, the civic parties of Atka and Nikolski , Alaska, Gra nt Aviation, Inc. and Servant 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.regulation s.govAPPENDIX A

SERVICE AREA MAPAPPENDIX B Page 1 of 2APPENDIX B Page 2 of 2APPENDIX C Page 1 of 2

Grant Aviation, Inc.
Essential Air Service to be Provided at Atka, Alaska
DOT

- OST

- 1995

- 363

Effective Period: October 1 , 2014

, through September 3 0 , 2016

Scheduled Service: Three weekly nonstop round trips to Dutch Harbor Aircraft type: Nine

- seat Beech King Air 200

Annual Subsidy : 1 $ 1,031,793 Annual Flights: 2 312 Subsidy per Flight: 3 $ 3,307 Weekly Ceiling: 4 $19,842

Note: The carrier understands that it may forfeit its compensation for any flights tha t 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 t he required service, without prior approval. The carrier understands that an a ircraft 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 cert ain weather cancellations, only completed flights are consi dered 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 perio d in question. If the carrier contemplat es 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 comp ensation.

Should circ umstances 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 co mpensated. 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, terminates or reduces payments for service or changes service r equirements at a specific location provided for under this Order, then, at the end of the period for which the Dep artment does make payments in the stipulated amounts or at the stipulated service levels, the carrier may cease to provide service to that specific location wi thout 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.

Funds may not be available for performance under this Order beyond September 30 , 2014 . Th e Government’s obligation for performance under this Order beyond September 30, 2014 , 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 perfo rmance under this Order beyond September 30, 2014 , until funds are made available to the Department for performance. If sufficient funds are not made available for performance beyond September 30, 2014 , the Department will provide notice in writing to the carrier.

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 controve rt the foregoing paragraph.

All claims for payment, including any amended claims, must be submitted within 9 0 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 Oct ober 31 st ; August claims must be submitted by November 30 th , and so on.

1 See Appendix B. Annual subsidy of $ 1,352,284 allocated 76.3% to Atka based on block hours

. 2 3 round trips per week x 2 directions x 52 weeks = 316.

3 Annual subsidy divided by annual fl ights.

4 Subsidy per flight x weekly flights.APPENDIX C Page 2 of 2

Grant Aviation, Inc

. Essential Air Service to be Provided at Nikolski, Alaska

DOT

- OST

- 1995

- 363

Effective Period: October 1 , 2014

, through September 30, 2016

Scheduled Service: Tw o weekly nonstop round trips to Dutch Harbor Aircraft type: Nine

- seat Beech King Air 200

Annual Subsidy : 1 $320,491 Annual Flights: 2 208 Subsidy per Flight: 3 $1,541 Weekly Ceiling: 4 $6,164

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 t he 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 cert ain 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 perio d in que stion. If the carrier contemplates any such changes beyond the scope of the Order during the applicable period of these rates, it mu st first notify the Office of Aviation Analysis in writing and receive written approval from the Department to be ensured o f 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 t raffic 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, terminates or reduces payments for service or changes service r equirements at a specific location provided for under this Order, then, at the en d 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 wi thout regard to any requirement for notice of such cessation. T hose 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.

Funds may not be available for performance under this Ord er beyond September 30, 2014 . The Government’s obligation for performance under this Order beyond September 30, 2014 , is subject to the availability of funds from which payment for services can be made. No legal liability on the part of the Government fo r any payment may arise for performance under this Order beyond September 30, 2014 , until funds are made available to the Department for performance. If sufficient funds are not made available for performance beyond September 30, 2014 , the Department will provide notice in writing to the carrier.

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 ther eto shall not operate to controvert the foregoing paragraph.

All claims for payment, including any amended claims, must be submitted within 9 0 days of the last day of the month for which compensation is being claimed. For example, claims for service prov ided in July must be filed by October 31 st ; August claims must be submitted by November 30 th , and so on.

1 See Appendix B. Annual subsidy of $1,352,284 allocated 23.7% to Nikolski based on block hours.

2 2 round trips per week x 2 directions x 52 weeks = 208.

3 Annual subsidy divided by annual flights.

4 Subsidy per flight x weekly flights.