Order 2011-7-6

Served: July 19, 2011

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

Issued by the Department of Transportation

on the 19th of July, 2011

Essential Air Service at

ALITAK, AMOOK BAY, KITOI BAY, 

MOSER BAY, OLGA BAY, 

PORT BAILEY, PORT WILLIAMS, 

SEAL BAY, WEST POINT, UGANIK, and 

ZACHAR BAY

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

DOCKET DOT-OST-2000-6945

ORDER RE-SELECTING CARRIER

Summary

By this order, the Department is re-selecting Redemption, Inc., d/b/a Island Air Service, (Island 

Air) to provide essential air service at Alitak, Amook Bay, Kitoi Bay, Moser Bay, Olga Bay, Port 

Bailey, Port Williams, Seal Bay, West Point, Uganik, and Zachar Bay, Alaska (Kodiak 11), at a

combined annual subsidy rate of $144,972, from November 1, 2011, through October 31, 2013.1

Background

By Order 2011-4-23, in anticipation of the end of the current contract, the Department requested 

proposals at the Kodiak 11. The order requested proposals consistent with the historical service 

pattern. However, because of decreasing traffic, we requested proposals having two round trips a 

week in the 18-week peak summer period at Alitak, Moser Bay, and Olga Bay, in lieu of the 

three round trips a week currently provided. Also, because Moser Bay and Olga Bay generated 

no passengers, freight, or mail in the first quarters of 2010 and 2011, we requested proposals 

offering no service at those communities in the first quarters of 2012 and 2013. We received 

timely-filed proposals from Island Air and Servant Air, Inc. We received comments on June 30 

from local representatives, and the issue is ready for decision. 

 

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

All of its service would be to Kodiak (ADQ), and each community would receive the service 

contemplated in the request for proposals: two round trips per week in the 18-week peak period, 

and one round trip per week in the 34-week off-peak period, except that Moser Bay and Olga Bay 

would receive flag stop service during the first quarter of each year. The service pattern 

proposed by Island Air would be as follows:

Off-Peak, 1 Round Trip per Week

13 Weeks, Kodiak to Zachar Bay to Amook Bay to Alitak to Kodiak;

13 Weeks, Kodiak to Kitoi Bay to Seal Bay to Port Williams to Kodiak;

13 Weeks, Kodiak to Port Bailey to Uganik to West Point to Kodiak.

Peak, 2 Round Trips per Week

18 Weeks, Kodiak to Olga Bay to Moser Bay to Alitak to Kodiak;

18-Weeks, Kodiak to Kitoi Bay to Seal Bay to Port Williams to Kodiak;

18-Weeks, Kodiak to Zachar Bay to Amook Bay to Kodiak;

18-Weeks, Kodiak to Port Bailey to Uganik to West Point to Kodiak

Shoulder, One Round Trip per Week, (Service to Olga Bay and Moser Bay not Required)

21 Weeks, Kodiak to Olga Bay to Moser Bay to Alitak to Kodiak;

21-Weeks, Kodiak to Kitoi Bay to Seal Bay to Port Williams to Kodiak;

21-Weeks, Kodiak to Zachar Bay to Amook Bay to Kodiak;

21-Weeks, Kodiak to Port Bailey to Uganik to West Point to Kodiak

Island Air submitted two proposals. Under Option 1, Island Air would provide service with 6-

seat DeHavilland Beaver aircraft, and requests $144,972 annual subsidy for this service. Under 

Option 2, Island Air would provide service with 5-seat Cessna 206 aircraft, and requests 

$119,653 annual subsidy. The carrier indicates that the historical volumes at these communities 

coupled with the lower capacity of the Cessna 206 would require it to occasionally supplement 

the service provided under Option 1 with extra sections.

Servant Air 

All of its service would be to Kodiak (ADQ), and each community would receive the service 

contemplated in the request for proposals: two round trips per week in the 18-week peak period, 

and one round trip per week in the 34-week off-peak period, except that Moser Bay and Olga Bay 

would receive flag stop service during the first quarter of each year. Island Air submitted one 

proposal, contemplating service with Cessna 206 aircraft, and requests $138,113 annual subsidy. 

Community Comments

We received a number of comments, including State Senator Gary Stevens and State 

Representative Alan Austerman, Afognak Wilderness Lodge, and a number of residents residing 

in the subsidized communities. All comments strongly favored Island Air, and many favored 

Island Air’s Option 1. Typical of the local comments was one from Robin Barefield of Amook 

Bay. “Island Air has provided the best Essential Air Service of any carrier we have had over the 
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past 30 years. They are very professional and accommodating, from management to the office 

staff to the freight personnel to the pilots. We have come to depend on them.” 

The comments favoring the selection of Option 1, DeHavilland Beaver for $144,972, focused on 

the greater payload of the Beaver relative to the Cessna 206, noting that with the multi-stop 

service proposed, the smaller aircraft quickly maxed out in terms of payload, requiring an extra 

section with perhaps the splitting up of large families, or the setting aside of mail in order to first 

take the higher priority passengers. 

Decision

We have reviewed each carrier’s proposal and the communities’ comments, and have decided to 

re-select Island Air. There is strong community support for Island Air, and for either of its two 

proposals, compared to Servant’s single proposal. The $6,859 annual difference between Island 

Air’s most expensive option and Servant’s single option is not significant. The remaining issue 

is which of Island Air’s two proposals to choose. 

We note that the community strongly endorses the slightly more expensive option because of the 

larger capacity of Island Air’s DeHavilland Beaver compared to its Cessna 206. The reasons 

given are the fear that on occasion Island Air, with the smaller capacity aircraft, would not be 

able to handle all of the passengers, freight, and mail on a given day.2 In addition, we note that 

the communities have agreed to reduced service from the historical level – reduced frequency in 

the peak from three round trips a week to two, and substitution of flag-stop service at two 

communities in one quarter, as discussed above. Under these circumstances, we find that 

selecting Option 1, service with DeHavilland Beaver aircraft, is appropriate. 

We shall make Island Air’s selection at the Kodiak 11 contingent upon the Department’s 

receiving properly executed certifications from the carrier that it is in compliance with the 

Department’s regulations regarding drug-free workplaces and nondiscrimination, as well as the 

regulations governing lobbying activities.

Carrier Fitness

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

provide reliable service before Department may subsidize it to provide essential air service. 

Redemption Inc., d/b/a Island Air Service, 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. The Department has contacted the Federal Aviation Administration, 

and it has raised no concerns that would negatively affect our fitness findings. The Department 

therefore concludes that the carrier remains fit to conduct the operations proposed here.

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

 2 This is not unrealistic, given the small size of even the larger aircraft, and the multi-stop service pattern Island Air 

proposes.
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ACCORDINGLY,

1. We re-select Redemption, Inc., d/b/a Island Air Service, to provide essential air service at 

Alitak, Amook Bay, Kitoi Bay, Moser Bay, Olga Bay, Port Bailey, Port Williams, Seal Bay, 

West Point, Uganik, and Zachar Bay (Kodiak 11), Alaska;

2. We set the final rate of compensation for Island Air Service, for the provision of essential air 

service at the Kodiak 11, Alaska, as described in Appendix C;

3. We direct Island Air Service, 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. We find that Island Air Service continues to be fit, willing and able to operate as a certificated 

carrier and capable of providing reliable essential air service at the Kodiak 11; 

5. This docket will remain open until further order of the Department; and

6. We will serve copies of this order on the State of Alaska, the civic parties, Servant Air, Inc., 

and Redemption, Inc., d/b/a Island Air Service.

By:

TODD M. HOMAN

Director

Office of Aviation Analysis

(SEAL)

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

http://www.regulations.gov
Appendix A

Subsidized Communities on Kodiak and Afognak Island at Issue

Nonstop, Great Circle Mileages to Kodiak (ADQ)

ALZ, Alitak, 89

Kodiak Island 

KMY, Moser Bay, 80

KOY, Olga Bay, 77

AOS, Amook Bay, 54

KZB, Zachar Bay, 49

KWP, West Point, 39

UGI, Uganik, 31

KPY, Port Bailey, 24

KPR, Port Williams, 47

Afognak Island (Northeast of Kodiak Island)

SYB, Seal Bay, 44

KKB, Kitoi Bay, 31

This map is provided by Sabre® AirVisionTM Profit Essentials and is being used with express permission of the copyright holder, 

Sabre Airline Solutions®.
Appendix B

Proposal of Island Air Service for the Kodiak 11, Docket 2000-6945

Aircraft Beaver

Block Hours 402

Passenger Revenue $61,873

Cargo Revenue $7,076

Mail Revenue $30,570

Total Revenue $99,519

Pilot $30,141

Fuel & Oil $68,723

Maintenance $21,702

Aircraft $34,161

Insurance $24,113

Total Directs $178,840

Traffic @ 7.2% of Revenue $7,167

Departure @ $$33.93 per Dep. $34,303

Cpaacity at 12.6% of revenue $12,539

Total Indirects $54,009

Total Operating $232,849

Profit at 5% $11,642

Economic Cost $244,491

Compensation $144,972
Appendix C

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Redemption Inc., d/b/a Island Air Service, Inc., Inc., Essential Air Service 

to be Provided to the Kodiak 11, Docket DOT-OST-2000-6945

Effective Period: November 1, 2011, through October 31, 2013

Scheduled Service: 18-week peak period, 21-week shoulder, 13-week off-peak1

Aircraft: DHC-2, Beaver, 6 seats

Rate per Eligible One-Way Flight: $97 2

Weekly Ceiling Peak 3 Shoulder 4 Off-Peak5

ALZ,Alitak, $388 $194 $194

AOS, Amook Bay $388 $194 $194

KKB, Kitoi Bay $388 $194 $194

KMY, Moser Bay $388 $194 0

KOY, Olga Bay $388 $194 0

KPR, Port Williams $388 $194 $194

KPY, Port Bailey $388 $194 $194

SYB, Seal Bay $388 $194 $194

UGI, Uganik $388 $194 $194

KWP, West Point $388 $194 $194

KZB, Zachar Bay $388 $194 $194

Shoulder, 11 Communities One-Way Flights for Each Community Flights

ADQ-KOY-KMY-ALZ-ADQ 21 weeks*2 directions*1 trips*3 Communities = 126

ADQ-KKB-SYB-KPR-ADQ 21 weeks*2 directions*1 trips*3 Communities = 126

ADQ-KZB-AOS-ADQ 21 weeks*2 directions*1 trips*2 Communities = 84

ADQ-KPY-UGI-KWP-ADQ 21 weeks*2 directions*1 trips*3 Communities = 126

Peak, 11 Communities

ADQ-KOY-KMY-ALZ-ADQ 18 weeks*2 directions*2 trips*3 Communities = 216

ADQ-KKB-SYB-KPR-ADQ 18 weeks*2 directions*2 trips*3 Communities = 216

ADQ-KZB-AOS-ADQ 18 weeks*2 directions*2 trips*2 Communities = 144

ADQ-KPY-UGI-KWP-ADQ 18 weeks*2 directions*2 trips*3 Communities = 216

Off-Peak, 9 Communities

ADQ-KZB-AOS-ALZ-ADQ 13 weeks*2 directions*1 trip*3 Communities = 78

ADQ-KKB-SYB-KPR-ADQ 13 weeks*2 directions*1 trip*3 Communities = 78

ADQ-KPY-UGI-KWP-ADQ 13 weeks*2 directions*1 trip*3 Communities = 78

1,488

Peak: May 20, 2012, thru September 22, 2012; and May 19, 2013, thru September 21, 2013;

Off-Peak: January 1, 2012, thru March 31, 2012; December 30, 2012, thru March 30, 2013;

Shoulder: November 1, 2011, thru December 31, 2011; April 1, 2012, thru May 19, 2012;

September 23, 2012, thru December 29, 2012; March 31, 2013, thru May 18, 2013;

September 22, 2013, thru October 31, 2013

 

1 During the off-peak, service to Olga Bay and Moser Bay is not required.

2 Annual compensation of $144,972 ÷ 1,488 annual flights, calculated above, = $97.

3 2 round trips/week * 2 directions * $97.

4 1 round trip/week * 2 directions * $97.

5 1 round trip/week * 2 directions * $97.
Appendix C

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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, 2011. The Government’s 

obligation for performance under this order beyond September 30, 2011, 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, 2011, until funds are made available to 

the Department for performance. If funds are not made available for performance beyond September 30, 2011, 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.