Order 2012-6-17

Served: June 22, 2012

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

Issued by the Department of Transportation

on the 22nd of June, 2012

ORDER SETTING FINAL RATE AT ADAK, ALASKA

By Order 2010-7-9, July 15, 2010, the Department selected Alaska Airlines, Inc. to provide 

Essential Air Service (EAS) of two nonstop or one-stop round trips per week between Adak and 

Anchorage with Boeing 737-400 aircraft for $1,675,703 annually through June 30, 2012. The 

Order also selected Peninsula Airways, Inc., (PenAir) to provide EAS at Atka and Nikolski, 

Alaska, for $290,780 and $639,008 annually, respectively. 

As the end of the current rate term was approaching, by Order 2012-2-8, February 10, 2012, we 

requested proposals from carriers interested in providing EAS at all three communities no later 

than March 9, 2012. On March 1, 2012, PenAir requested a two-week extension, until March 23, 

2012, to submit proposals, and by notice dated March 2, 2012, we granted that request. On 

March 21, 2012, Grant Aviation, Inc., requested a one-week extension to March 30, 2012. By notice 

dated March 22, 2012, we granted that request. On March 30, 2012, we received proposals for all 

three communities. By Order 2012-5-20, May 27, 2012, we selected Grant Aviation to provide 

EAS at Atka and Nikolski. This Order addresses Adak only.

Only PenAir submitted a proposal at Adak, and it requested $3,440,097 annual subsidy. 

As discussed in Order 2012-5-24, May 24, 2012, we decided to re-solicit proposals, 

primarily because PenAir’s requested subsidy level was double that which we had been 

paying Alaska Airlines. While Alaska Airlines did not file a notice to suspend service, it 

has no long-term plans to continue serving Adak, and it did not submit a proposal. The 

fact that Alaska Airlines did not file a notice to suspend service is of no great 

significance: we are required to find a replacement carrier as quickly as possible, and the 

carrier is entitled to compensation for its forced service beyond the end of the current 

contract on June 30, 2012. 

On June 4, 2012, Alaska Airlines requested $2,023,313 annual subsidy for its forced 

service. The increase in subsidy from the current rate of $1,675,703 is driven by the 

increase in fuel prices the carrier has experienced since Order 2010-7-9 selected Alaska 

Essential Air Service at

ADAK, ALASKA

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

 DOCKET OST-2000-8556
Airlines. We have reviewed that proposal and find it reasonable for the service provided. 

That rate is reflected in Appendices B and C, and will be effective from July 1, 2012, 

until a new carrier inaugurates full EAS. 

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

ACCORDINGLY,

1. We set the final rate for Alaska Airlines, Inc., for its provision of Essential Air Service 

at Adak, Alaska, as described in Appendices B and C;

2. We direct 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 the audit and examination by 

representatives of the Department. Such documentation shall be retained for seven years 

from 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 claim that 

is not supported under the terms of this order; 

3. This Docket will remain open until further Department action; and

4. The Department will serve copies of this Order on Alaska Airlines, Inc.

By:

Susan Kurland

Assistant Secretary for

Aviation and International Affairs

(SEAL)

An electronic version of this document is available on the World Wide Web at

http://www.regulations.gov
Appendix A

Nonstop Great Circle Miles from Anchorage (ANC))

Adak (ADK) 1,192

Atka (AKB) 1,100

Nikolski (IKO) 905

Dutch Harbor (DUT) 791

Cold Bay (CDB) 620

Other Nonstop Great Circle Miles

ADK-AKB 107

AKB-IKO 231

IKO-DUT 116

ADK-DUT 445

AKB-DUT 339

ADK-CDB 616
Appendix C

Subsidy Rate for the Provision of Essential Air Service at Adak, Alaska, 

by Alaska Airlines

EFFECTIVE PERIOD: July 1, 2012, until further notice. 

SERVICE: Two nonstop or one-stop round trips per week between Adak and 

Anchorage, Alaska. 

AIRCRAFT TYPE: Boeing 737-400

TIMING OF FLIGHTS: Flights must be well-timed and well-spaced to ensure full 

compensation. 

ANNUAL SUBSIDY RATE: $2,023,313

ANNUAL FLIGHTS: 2081

RATE PER FLIGHT: $9,727 2

WEEKLY CEILING: $38,908 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 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 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 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 2 trips per week x 2 directions x 52 weeks.

2 Annual compensation of $2,023,313 ÷ 208 annual flights. 

3 $9,727 x 4 flights per week.