Order: 2010-4-15 

Served: April 23, 2010 

*~' ^ UNITED STATES OF AMERICA 

i0WK^ DEPARTMENT OF TRANSPORTATION 

"SmMf OFFICE OF THE SECRETARY 

^^^5 ^ WASHINGTON, D.C. 

Issued by the Department of Transportation 

on the 23"^ day of April, 2010 

Essential Air Service at 

CHISANA, ALASKA 

HEALY LAKE, ALASKA 

Under 49 U.S.C. 41731 etseq. 

DOCKET OST-1998-4574 

DOCKET OST-1998-3546 

ORDER SELECTING CARRIER 

AND ESTABLISHING SUBSIDY RATES 

Summary 

By this order, the Department is (a) selecting 40-Mile Air, Inc., to continue providing 

essential air service (EAS) at Chisana and Healy Lake, Alaska, and (b) establishing annual 

subsidy rates of $74,345 and $98,915, respectively, for a new two-year period, through 

May 31, 2012.' (See Appendix A for map of the service area.) 

Background 

By Order 2008-4-41, issued April 29, 2008, the Department selected 40-Mile Air, Inc. (40-

Mile Air), to continue providing subsidized EAS at Chisana and Healy Lake for the two-year 

period through May 31,2010. That order established an annual subsidy rate of $65,546 for 

two nonstop round trips per week between Chisana and Tok with 3-seat Cessna 185 or 4-seat 

Cessna 206-207 aircraft; and $77,683 for two nonstop round trips per week between Healy 

Lake and Fairbanks with 5-seat Cessna 206 or 207 aircraft. 

Chisana and Healy Lake are guaranteed to receive at least a minimum level of air service 

under the EAS program by virtue of the fact that the communities appeared on a certificated 

carrier's Civil Aeronautics Board-issued certificate on October 24, 1978, the date the Airline 

Deregulation Act of 1978 was signed into law. (See 49 U.S.C. 41731-41744 for the EAS 

program's governing statutes.) In keeping with our normal procedure, in anticipation of the 

end of the rate term, the Department issued Order 2010-1-18, January 26, 2010, requesting 

proposals from carriers interested in providing replacement service at the communities, with 

subsidy support if necessary, for a new two-year period beginning June 1, 2010. 

' Such subsidy is calculated and distributed on a fiscal year basis, subject to the availability of appropriated 

fiinds. 
Carrier Proposals 

In response to our request, 40-Mile Air (the only carrier to respond) submitted a proposal, 

offering to continue to provide the same level of service it currently operates, consisting of 

two nonstop round trips per week between Chisana and Tok with 3-seat Cessna 185 or 4-seat 

Cessna 206-207 aircraft; and two nonstop round trips between Healy Lake and Fairbanks with 

5-seat Cessna 206 or 207 aircraft. The carrier proposes to provide this service at the aimual 

subsidy rates of $74,345 for Chisana and $98,915 for Healy Lake. 

Community Comments 

In response to our request for comments, we received several letters fi-om members of both 

communities. Generally, they express the importance of this air service, noting that since 

there is no road access, it is the only means of transportation to and fi-om Chisana and Healy 

Lake. In addition, they note that they rely on this air service to send and receive mail, get 

groceries and gain access to medical appointments, supplies and prescriptions. Finally, 

members of both communities express support and satisfaction with the service provided by 

40-Mile Air. 

Decision 

We have decided to select 40-Mile Air to continue to provide service at Chisana and Healy 

Lake for the two-year period through May 31, 2012, at the annual subsidy rates of $74,345 

and $98,915, respectively. The carrier will continue to provide its current level of service, 

consisting of two nonstop round trips per week between Chisana and Tok with 3-seat 

Cessna 185 or 4-seat Cessna 206-207 aircraft; and two nonstop round trips between Healy 

Lake and Fairbanks with 5-seat Cessna 206 or 207 aircraft. We find that the proposed rates 

are reasonable and the carrier's performance continues to be satisfactory. 

Carrier Fitness 

49 U.S.C. 41737(b) requires that we find an air carrier fit, willing, and able to provide reliable 

service before we may subsidize it to provide essential air service. 40-Mile Air 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. We have contacted 

the Federal Aviation Administration, and it has raised no concerns that would negatively 

affect our fitness finding. We therefore conclude that the carrier remains fit to conduct the 

operations proposed here. 

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

ACCORDINGLY, 

1. The Department selects 40-Mile Air, Inc., to continue to provide subsidized essential air 

service at Chisana and Healy Lake, Alaska, as described in Appendix C, for a new two-year 

term, through May 31, 2012; 2 

2. The Department finds that 40-Mile Air is fit, willing and able to operate as a certificated air 

carrier and capable of providing reliable essential air service at Chisana and Healy Lake, 

Alaska; 

2 See Appendix C for the calculation of the subsidy rates, which assumes the use of the aircraft designated. If 

the carrier reports a significant number of aircraft substitutions, a revision of this rate may be required. 
3. We direct 40-Mile Air 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 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; and 

4. Dockets DOT-OST-1998-4574 and DOT-OST-1998-3546 will remain open undl fiirther 

order of the Department; and 

5. The Department will serve a copy of this order on the Alaska Department of Transportation 

and Public Facilities and 40-Mile Air, Inc. 

By: 

SUSAN L. KURLAND 

Assistant Secretary for Aviation 

and International Affairs 

(SEAL) 

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

www, regulations, gov 
AREA MAP 

Appendix A 

AJuAOlvA 

maim 

.etchikan 
Appendix B 

Page 1 of2 

40-MILE AIR, INC. 

A>fNUAL COMPENSATION REQUIREMENT FOR ESSENTL\L AIR SERVICE AT 

CHISANA, ALASKA 

Route TKJ-C2N-TKJ 

Frequency: 2 Round Trips per Week 

Aircraft Type: Cessna 185(3 seats). 206 or 207(4 seats) 

Annual Block Hours 1 190.7 

Revenue 

Passenger 

Cargo 

Space Available Cargo 

Mail 

Total Operating Revenue 

Direct OoeratiM EKDenses 

Pilot & Copilot 

Fuel & Oil 

Maintenance 

Depreciation 

insurance 

Agent fee 

Total Direct Operating Expenses 

IndlrKt Ooeratlns ExoensM 19 40% 

Total Operating ExDenses 

SfltritiCULiffif 

Rate 

$105.00 

S .35 

$ .18 

$ .941465 

Unit cost 

$91.00 per BH 

$94.00 per BH 

$93.00 per BH 

$22.85 per BH 

$57.14 per BH 

Antt/ib$. 

80 

20OO 

38,000 

12.000 

$20.00 per CZNdept. 

^vrPirfct«^9fP( 

?Ml?fH»Vl^Wtfff*PW 

IBfWlatfgn 

Revenue 

$8,400.00 

$ 700.00 

$6,840.00 

$11,297.55 

$27,237.58 

Expense 

$17,353.70 

$17,925.80 

$17,735.10 

$ 4,357.495 

$10,896.60 

$ 2.08P.OP 

$70,348.70 

$26,396.48 

$96,745.18 

$69,507.60 

$ 4,837.26 

$74,344.86 

IBIock hours = (TKJ - CIN -TKJ, 1.83 hours) x 2 flights/week x 52 = 190.7 iiours 
Appendix B 

Page 2 of2 

40-MILE AIR, INC. 

ANNUAL COMPENSATION REQUIREMENT FOR ESSENTIAL AIR SERVICE AT 

HEALY LAKE, ALASKA 

Route FAI - HKB - FA! 

Frequency: 2 Round Trips per Week 

Aircraft Type: Cessna 206 or 207(5 seats) 

Annual Block Hours 1 208 

Passenger 

Cargo 

Space Availatile Cargo 

Mail 

Total Operating Revenue 

Direct Goeratina EKoenses 

Pilot 8i Copilot 

Fuel & Oil 

Maintenance 

Depreciation 

Insurance 

Agent fee 

Total Direct Operating Expenses 

Indirect Ot>eratimi Exoenses O 40M 

QpfritfngtffS 

Profit Element ASM of Total Ooera 

fvt^si^Kffedffigm 

Rate Amt/lbs. 

$ 70.00 80 

$ .40 6,000 

$ .18 38,000 

$ 1.069505 2,000 

Unit cost 

$91.00 per BH 

$94.00 per BH 

$93.00 per BH 

$22.85 per BH 

$57.14 per BH 

$20.00 per CZNdept. 

1 of Direct Net of Deoredation 

tinslSBf^nKf 

Revenue 

$ 5,600.00 

$ 2,400.00 

$ 6.840.00 

S 2.139.01 

$10,139.01 

Expense 

$18,928.00 

$18,552.00 

$19,344.00 

$ 4,752.80 

$11,885.12 

$ 2.080.00 

$75,544.92 

$28,315.65 

$103,860.57 

$93,721.56 

S 5,193.03 

$98,914.59 

JLBIock hours ^ (FAI - HKB, 1 hour) x 4 flights/week x 52 ^^ 208 hours 
Appendix C 

Page 1 of 3 

40-MILE AIR, INC. 

ANNUAL COMPENSATION REQUIREMENT FOR ESSENTIAL AIR SERVICE AT 

CHISANA, ALASKA 

Effective period: June 1, 2010, through May 31, 2012. 

Scheduled service: Two nonstop round trips each week to Tok. 

Intermediate 

stops and upline No upline or intermediate service is permitted without prior Department 

service: approval. 

Aircraft type: Cessna 185 (3 seats) or Cessna 206/207 (4 seats) 

Timing of flights: Flights must be well-timed and well-spaced in order to ensure full 

compensation. 

Annual 

compensation: $74,345 

Subsidy Rate Per 

Arrival/Departure: $357' 

Weekly 

Compensation 

Ceiling:' $1,428 

' Annual compensation of $74,345 divided by 208 arrivals and departures: 4 flights per week x 

52 weeks. 

^ The subsidy rate for each arrival/departure ($357) multiplied by four (4) eligible arrivals and 

departures each week. 
Appendix C 

Page 2 of3 

40-MILE AIR, INC. 

ANNUAL COMPENSATION REQUIREMENT FOR ESSENTIAL AIR SERVICE AT 

HEALY LAKE, ALASKA 

Effective period: June 1, 2010, through May 31, 2012. 

Scheduled service: Two nonstop round trips each week to Fairbanks. 

Intermediate 

stops and upline 

service: 

Aircraft type: 

No upline or intermediate service is permitted without prior Department 

approval. 

Cessna 206 or 207 (5 seats) 

Timing of flights: Flights must be well-timed and well-spaced in order to ensure ftill 

compensation. 

Amiual 

compensation: $98,915 

Subsidy Rate Per 

Arrival/Departure: $476' 

Weekly 

Compensation 

Ceiling:' $1,904 

' Aimual compensation of $98,915 divided by 208 arrivals and departures: 4 flights per week x 

52 weeks. 

' The subsidy rate for each arrival/departure ($476) multiplied by four (4) eligible arrivals and 

departures each week. 
Appendix C 

Page 3 of 3 

General Terms and Conditions for Essential Air Service 

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 fiill 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 

fiill 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 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 are not currently available for performance under this order beyond September 30, 

2010. The Government's obligation for performance under this order beyond 

September 30, 2010, is contingent upon 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, 2010, 

until funds are made available to the Department for performance. If fiinds are not made 

available for performance beyond September 30, 2010, the carrier will receive notice in 

writing by the Department. 

All claims for payment must be submitted within 60 days of the last day of service 

provided under this order.