Order 2010-7-6

Served: July 13, 2010

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

Issued by the Department of Transportation

on the 13th day of July, 2010 

Essential Air Service at

MANLEY HOT SPRINGS AND

MINTO, ALASKA

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

DOCKET OST-2004-17563

ORDER SELECTING CARRIER

AND ESTABLISHING SUBSIDY RATES

Summary

By this order, the Department is (a) selecting Warbelow’s Air Ventures, Inc. (Warbelow’s), to 

continue providing essential air service (EAS) at Manley Hot Springs and Minto, Alaska, and 

(b) establishing an annual subsidy rate of $95,481,1 for a new two-year period, through 

September 30, 2012.2 (See Appendix A for map of the service area.)

Background

By Order 2008-7-20, issued July 15, 2008, the Department selected Warbelow’s to continue 

providing subsidized EAS at Manley Hot Springs and Minto for the two-year period through 

August 31, 2010. That order established an annual subsidy rate of $84,170 for three flights

per week over a Fairbanks-Manley Hot Springs-Minto-Fairbanks routing with 3-seat 

Cessna 206/207 aircraft.

Manley Hot Springs and Minto 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 2010-4-11, April 19, 2010, 

requesting proposals from carriers interested in providing replacement service at the 

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

funds.

2 We are establishing a 25-month contract in order to synchronize it with the contract at nearby Rampart, which 

currently expires on September 30, 2010.
2

communities, with subsidy support if necessary, for a new two-year period beginning 

September 1, 2010.

Carrier Proposals

In response to our request, Warbelow’s (the only carrier to respond) submitted a proposal 

offering to continue providing service consisting of three flights per week over a FairbanksManley Hot Springs-Minto-Fairbanks routing with 3-seat Cessna 206/207 aircraft. The 

carrier proposes to provide this service at the annual subsidy rate of $95,481.

Community Comments

In response to our request for comments, we received letters from several community 

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

roads are not maintained during winter months, it is usually the only means of transportation

in and out of these villages. In addition, they note that the service is essential in sending and 

receiving mail, and gaining access to medical appointments, supplies and prescriptions, as 

well as providing transportation during medical emergencies. Finally, community members 

express support and satisfaction with the service provided by Warbelow’s.

Decision

We have decided to select Warbelow’s to continue to provide service at Manley Hot Springs 

and Minto for the two-year period through August 31, 2012, at the annual subsidy rate of 

$95,481. The carrier will continue providing service consisting of three flights per week over 

a Fairbanks-Manley Hot Springs-Minto-Fairbanks routing with 3-seat Cessna 206/207 

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. Warbelow’s 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 Warbelow’s Air Ventures, Inc., to continue to provide subsidized 

essential air service at Manley Hot Springs and Minto, Alaska, as described in Appendix C, for 

a new two-year term, through September 30, 2012;3

2. The Department finds that Warbelow’s Air Ventures is fit, willing and able to operate as a 

certificated air carrier and capable of providing reliable essential air service at Manley Hot 

Springs and Minto, Alaska;

 3 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

3. We direct Warbelow’s Air Ventures 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;

4. Docket DOT-OST-2004-17563 will remain open until further 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 Warbelow’s Air Ventures, 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
Appendix A

AREA MAP
Appendix B

WARBELOW’S AIR VENTURES, INC.

ANNUAL COMPENSATION REQUIREMENT FOR ESSENTIAL AIR SERVICE AT

MANLEY HOT SPRINGS AND MINTO, ALASKA

Projected Revenue

Passenger Revenue Pax Fare Totals

Manley 32 85.00 2,720.00

Minto 210 79.00 16,590.00

 Less Passenger Tax 7.5% 1,347.21

Passenger Total 17,962.79

Cargo Revenue Pounds Rate

Manley 1535 0.49 752.15

Minto 2757 0.40 1,102.80

Cargo 

Total 1,854.95

Mail 

Revenue Pounds Rate

Manley 27970 0.94 26,291.80

Minto 23056 0.71 16,369.76

Mail Total 42,661.56

Total Revenue $62,479.30

Allocated Block Hours 296.4

Direct Expense 

Pilot & Co-pilot 69.54 20611.66

Fuel & Oil 51.77 15344.63

Other 16.25 4816.50

Maintenance 131.41 38949.92

Depreciation/Rental 80.00 23712.00

Total Direct Expense $103,434.71

Indirect Expense 

296.4 hr @ $135.51 pr hr 40165.16

Total Operating Cost 143599.87

Profit Element of TOC= 0.10 14359.99

Total Economic Cost $157,959.86

Subsidy Request

Total Operating Cost $143,599.87

Profit Element @ 10% of TOC 14,359.99

Total Economic Cost $157,959.86

Projected Revenue $62,479.30

Subsidy need at 100% Completion $95,480.56

Subsidy on an annual basis $95,480.56
Appendix C

Page 1 of 2

WARBELOW’S AIR VENTURES, INC.

ANNUAL COMPENSATION REQUIREMENT FOR ESSENTIAL AIR SERVICE AT

MANLEY HOT SPRINGS AND MINTO, ALASKA

Effective period: September 1, 2010, through September 30, 2012.

Scheduled service: Three weekly flights routed Fairbanks-Minto-Manley-Fairbanks

Intermediate

stops and upline service:

No upline or intermediate service is permitted without prior Department 

approval.

Aircraft type: Cessna 206/207 (3 seats)

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

compensation.

Annual compensation:

$95,481

Subsidy Rate Per

Arrival/Departure: $1531

Weekly Compensation 

Ceiling: 2

$1,836

___________________________

1

 Annual compensation of $95,481 divided by 624 arrivals and departures: 3 flights per week x 

4 arrivals/departures per flight x 52 weeks. 2

 The subsidy rate for each arrival/departure ($153) multiplied by 12 eligible arrivals and 

departures each week.
Appendix C

Page 2 of 2

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 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 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 funds 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.