Order: 2015-2-5

Served: February 1 2 , 2015



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 1 2 th of February , 2015



### ORDER RE -SELECTING AIR CARRIER

Summary By th is O rder, the Department is re

- selecting Alaska Airlines, Inc. ( “ Alaska ”) to provide E ssential Air Service (E AS ) at Cordova, Gustavus, 1 Pete rsburg, Wrangell, and Yakutat, Alaska

, for the two

year term from May 1, 2015, through April 30, 2017. T he combined annual subsidy rate will be $7,853,147 2

, utilizing Boeing 737-400 (B -737) aircraft, with service to Alaska Airlines’ hubs and major airports, including Anchorage and Juneau, which will continue to give these communities access to the national air transportation system

.

1 Gustavus receives subsidized service for a 13

- week period during the summer. During the remainder of the year,

Gustavus ’ s EAS is provided on a subsidy

- free basis by other airlines with small aircraft.

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

CORDOVA, ALASKA GUSTAVUS, ALASKA PETERSBURG, ALASKA WRANGELL, ALASKA YAKUTAT, ALASKA

Under 49 U.S.C. 41731 et seq

. DOT

- OST -1998-4899- 2 -

Background By Order 2013-2-10 (February 11, 2013), t he Department re

- selected Alaska Airlines , to provide EAS at the above communities for a combined annual subsidy of $8,303,631, from May 1, 2013, through April 30, 2015, with the same aircraft type and service pattern that A laska Airlines had

served the com munities with for several years.

Proposal of Alaska Airlines Only Alaska Airlines submitted a proposal with o ne option. The carrier proposed to continue to provide the same level of service descr ibed above, and requested $4,609,687 annual subsidy at Cordova, Yakutat , and Gustavus, and $3,243,460 at Petersburg and Wrangell, for a total combined annual subsidy of $7,853,147.

Community Comments

On December 2 , 2014, the Department solicited comments from the communities and the State of Alaska regarding this air carrier

- selection case.

The Mayors of the c ities of Cordova, Petersburg, and Yakutat, the Borough Ma nager of Wrangell,

other civic officials, multiple businesses and private citizens , strongly support the incumbent,

Alaska Airlines. Cordova Mayor Jim Kacsh stated, “Alaska Air service connects passengers in rural communities to one or more major c ities either inside the state or thru Seattle. From these hubs, Cordovans can access the airline’s extensive route s ystem and benefit from its market ing relationship with other carriers”. Petersburg Mayor Mark Jensen stated, “The passenger and cargo aircraft, which Alaska Airlines proposes to continue using on this route, provides freight, mail and cargo capacity that other carriers simply cannot provide”. The State of Alaska did not submit any comments in response to the Department’ s request.

Decision When selecting a carrier to provide EAS in Alaska, 49 U.S.C. § 41733(c)(1) directs us to consider six factors: (1) s ervice reliability; (2) contractual and marketing arrangements with a larger carrier at the hub; (3) interline arrangements with a larger carrier at the hub; (4) community views; (5) the carrier’s plan to market its service to the community; and (6) the ex perience of the applicant in providing scheduled air service or significant patterns of non- scheduled air service. In addition, the Consolidated Appropriations 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 requirements, thus codifying a factor that we have considered since the inception of the

program.

Only Alaska Airlines proposed to serve these communities and it proposed $450,484 less than the previous annual rate of $8,303,631. The Department finds the subsidy amount reasonable and

there is continued strong community support for Alaska Airline’s proposal where Alaska has provided reliable service at these five communities for many years

. Alaska ’s service will continue to provide the communities with access to the national air transportation system . Based on all of the above, we will re- select Alaska Ai rlines to provide EAS for a new two

- year period at Cordova, Gustavus, Petersburg, Wrangell, and Yakutat.- 3 -

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. Alaska Airlines is subject to the Department’s continuing fitness requirements, and no information has come to our attention that

wo uld cause us to question the air carrier’s fitness at this time. We have contacted the Federal Aviation Administration, and it has raised no concerns that would negatively affect our fitness findings. We therefore conclude that Alaska Airlines is reliabl e and fit to conduct the operations proposed here.

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

ACCORDINGLY,

1. The Department select s Alaska Airlines, Inc. to p rovide Essential Air Service at Cordova, Gustavus, Petersburg, Wrangell, and Yakutat

, Alaska , and establish the annual subsidy rate s as described in Appendix C.

2. The Department direct s Alaska Airlines, 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 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;

3. The Department find s that Alaska Airlines, Inc

. is fit, willing and able to operate as a

certificated air carrier, and capable of providing reliable Essential Air Service at Cordova, Gustavus, Petersburg, Wrangell, and Yakutat;

4. This docket will rem ain open pending further Department action; and

5. The Department will serve a copy of this O rder on the Alaska Department of Transportation &

Public Facilites , the Mayor s of Cordova, Gustavus, Petersburg, Wrangell, and Yakutat, and Alaska Airlines, Inc.

B y:

B RANDON M. BELFORD Deputy Assistant Secretary for

Aviation and International Affairs

(SEAL)

An electronic version of this document is available at http://www.regulations.govAppendix A



### AREA MAP

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



### Alaska Airlines Proposal for EAS at Cordova, Gustavus, Petersburg, Wrangell,

and YakutatAppendix C Page 1 of 2

Alaska Airlines, Inc. Essential Air Service to be provided at Cordova, Yakutat, and Gustavus, Alaska

Docket DOT

- OST -1998-4899

Effective Period : May 1, 2015, through April 30, 2017

Aircraft : B-737-400

Scheduled Service : Cordova: 7 weekly nonstop round trips to Anchorage, and 7 weekly one -stop ( via Yakutat) round trips to

Juneau

Yakutat : 7 weekly nonstop round trips to Juneau and 7 weekly one -stop ( via Cordova) round trips to Anchorage Gustavus: 7 weekly nonstop round trips to Juneau, for the two peak summer seasons

– June 7, 201 5, thru August 22, 2015, and June 5, 2016, thru August 20, 2016.

Sub sidy Rate per Eligible Fligh t 1 Weekly Ceiling

Cordova (CDV) $1,534 $42,952 2

Yakutat (YAK) $1,534 $42,952

Gustavus (GST) $1,534 $21,476 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 rate Order, including t he 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 D epartment 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 reduce s 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 servi ce 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 parti al 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 may not be available for performance under this order beyond February 14 , 2015

. The Government’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 with in 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 31; August claims must be submitted by November 30, and so on.

1 $4,609,687 annual compensation ÷ 3,0 05 annual flights (28 flights x 2 communiti es x 52 weeks x 98% completion = 2,854 flights at CDV and YAK plus 2 flights per day x 77 days x 98% = 151 flights at GST ).

2 28 weekly flights x $1,5 34

. 3 14 weekly flights x $1,5 34

.Appendix C Page 2 of 2

Alaska Airlines, Inc. Essential Air Service to be provided at Petersburg and Wrangell , Alaska

Docket DOT

- OST -1998-4899

Effective Period : May 1, 2015, through April 30, 2017

Aircraft : B-737-400

Scheduled Service : Petersburg : 7 nonstop round trips/week to Juneau and 7 one-stop (Wrangell) trips/week to Ketchikan Wrangell : 7 nonstop round trips/week to Ketchikan and 7 one- stop (Petersburg) trips/week to Juneau

Subsidy Rate per Eligible Flight 4 Weekly Ceiling 5 Petersburg (PSG) $1,137 $31,836 Wrangell (WRG) $1,137 $31,836 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 comple ted, 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 app roval 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 pro vided 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 suc h 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 may not be available for performance under this order beyond February 14 , 2015. The Government’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 1 4 , 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 ser vice provided in July must be filed by

October 31; August claims must be submitted by November 30, and so on.

4 $3,243,460 annual compensation ÷ 2,854 annual flights (28 flights x 2 communities x 52 weeks x 98% co mpletion) = 2,854 flights at PSG and WRG.

5 28 weekly flights x $1,137

.