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 13 th day of July, 2010

Essential Air Service at

MANLEY HOT SPRINGS AND

MINTO, ALASKA

U nder 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 an nual subsidy rate of $ 95,481

, 1 for a new two

- year period, through

September 3 0 , 20 1 2

. 2 (See Appendix A for map of the service area.)

Background

By Order 2008

- 7

- 20

, issued July 15 , 2 00 8 , the Department selected Warbelow’s to continue

provid ing subsidized EAS at Manley Hot Springs and Minto for the two

- year period through

August 31 , 20 10 . That order established an annual subsidy rate of $ 84,170 for three flights

per week over a Fairba nks

- 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 communit ies 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. 4173 1

- 41744 for

the EAS program’s governing statutes.) In k eeping with our normal procedure

, i n anticipation

of the end of the rate term, the Department issued Order 2010

- 4

- 1 1

, April 19 , 20 10

, 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

communit ies , with subsidy support if necessary, for a new t wo

- year period beginning

September 1, 2010

.

Carrier Proposals

In response to our request, Warbelow’s (the only carrier t o respond) submitted a proposal

offering to 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

. The

carrier proposes to provide this ser vice at the annual subsidy rate of $ 95,481

.

Community Comments

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

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 serv ice is essential in send ing and

receiv ing mail, and gain ing access to medical appointments, supplies and prescriptions , as

well as providing transportation during medical emergencies

. Finally

, community members

express support and satisfaction with the se rvice provided by Warbelow’s

.

Decision

W e 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 , 20 12 , at the annual subsidy rate of

$ 95,481

. The carrier will continue p roviding 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 rate s are reasonable and the carrier’s performance

continues to be satisfactor y.

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 requir ements, 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 3 0 , 20 1 2 ; 3

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

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

Springs and Minto , A laska ;

3 See Appendix C for the calculation of the subsidy rates, which assumes the use of the aircraft des ignated. 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 pay ment, 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 w ill 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.govAppendix A



### AREA MAPAppendix B

WARBELOW’S AIR VEN TURES

, 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

Mint o 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 Elem ent 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 $62,47 9.30

Subsidy need at 100% Completion $95,480.56

Subsidy on an annual basis $95,480.56Appendix C

Page 1 of 2

WARBELOW’S AIR VENTURES, INC.

ANNUAL COMPENSATION REQUIREMENT FOR ESSENTIAL AIR SERVICE AT

MANLEY HOT SPRINGS AND MINTO , ALASKA

Effe ctive period: September 1 , 2010

, through September 3 0 , 20 12

.

Scheduled s ervice: Three weekly flights routed Fairbanks

- Minto

- Manley

- Fairbanks

Intermediate

stops and upline service: No upline or intermediate service is permitted without prior Depart ment

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: $ 153 1

Weekly Com pensation

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/ depar ture ($ 153 ) multiplied by 12 eligible arrivals and

departures each week

.Appendix C

Page 2 of 2

General Term s and Conditions for Essential Air Service

The carrier understands that it may forfeit its compensation for any flights that it does not

operat e 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 s ubsidy. 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, t he 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 wheth er 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 se rvice 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,

20 10. 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 pa yment 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

wri ting by the Department.

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

provided under this order.