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 19 th 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

- 200 0

- 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, 201 3

. 1

Background By Order 20 11

- 4

- 23 , in an t i c ipation 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. Als o, 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.- 2

-

Island Air All of its service would be to Kodiak (ADQ) , and e ach community would receive the service contemplated in t he 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 servic e 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, Kodia k to Por t 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 Ba y to Kodiak;

18

- Weeks, Kodiak to Port B ai ley 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 B ai ley to Uganik to West Point to Kodiak

Island Air submitted two proposal s. Under Option 1, Island Air would provid e 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 t he 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 $1 38,113 annual subsidy.

Community Comments

W e received a number of comments, including State Senator Gary S tevens 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 wa s one from Robin Barefield of Amook Bay. “Island Air has provided the best Essential Air Service of any carrier we have had over the- 3

-

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 communit ies’ 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

lar ger capacity of Island Air’s DeHavilland Beaver compared to its Cessna 206. The reas ons 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 communit i es 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 discuss ed 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 certifica tions 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 Departme nt 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 n o 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 finding s

. The Department

therefore concludes that the carrier remain s 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.- 4

-

ACCORDINGLY,

1. We re

- select Redemption, Inc., d/b/a Island Air Service , to pr ovide 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 provi sion 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 continue s to be fit, willing and a ble to operate as a certificated

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

5 . Th is 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.govAppendix 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, Amoo k 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 ® AirVision TM Profit Essen tials 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 $144,972Appendix C Page 1 of 2

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

to be Provided to the Kodiak 11 , Docket DOT

- OST

- 200 0

- 6945

Effective Period : November 1 , 20 11 , through October 31, 201 3

Scheduled Service : 18

- week peak period

, 21

- week shoulder, 13

- week off

- peak 1

Aircraft : DHC

- 2, Beaver, 6 seats Rate per Eligible One

- Way F light: $ 97 2

Weekly Ceiling Peak 3 Shoulder 4 Off

- Peak 5

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

K PY, 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 2 1 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 directi ons*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, th r u March 30, 201 3 ;

Shoulder: November 1, 2011, thr u 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 Ann ual 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 Page 2 of 2

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 significan t 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 per iod, it may jeopardize its entire subsidy claim for the period in que stion. 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 tra ffic 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 tr ansportation 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 en d 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. T hose 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 refer ence, 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 pe rformance under this order beyond September 30 , 201 1 . The Government’s obligation for performance under this order beyond September 3 0 , 2011 , is subject to the availability of appropriated funds from which payment for services can be made. No legal liabi lity on the part of the Government for any payment may arise for performance under this order beyond September 3 0 , 2011 , until funds are made available to the Department for performance. If funds are not made available for performance beyond September 3 0

, 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.