Order 2013

- 2

- 20 Served: February 21, 2013



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 21 st of February, 2013

Air Service at

DIOMEDE , ALASKA

Under 49 U.S.C. 41731 et seq

. DOCKET DOT

- OST

- 200 9

- 0260

ORDER REQUESTING PROPOSALS

Summary By this Order , the Department is requesting proposals by March 21

, 201 3

, from carriers interested in providing air service to Diomede

, Alaska

, for the two

- year period July 1, 2013, through June 30, 2015

. The service is requested under 49 U.S.C § 41736, Air Transportation to Non

- eligible Places (ATNEP). 1

Background By letter dated June 20, 2012, the Alaska Department of Commerce, Community, and Economic Development, on behalf of Kawerak , Inc. (“Kawerak”)

, 2 proposed to the Secretary of Transportation that air compensation be provided to an air carrier as part of ATNEP. By

Ord er 2012

- 9

- 25

, the Department selected Evergreen Helicopters, Inc., to provide ATNEP t o Diomede, Alaska, through June 30, 2013. 3 The rate was set at $377,520 from the start of service through June 30, 2013, 4 with half of that amount, $188,760, funded by the Department

and the other half by Kawerak through funding from the State of Alaska

. The level of service

was set at one nonstop round trip per week to Nome and one nonstop round trip per week to Wales, Alas ka, with 4

- seat

, BO

- 105 twin

- engine helicopters. The subsidized service was only to be provided during the warmer months of the year when the ocean near Diomede did not

freeze . For some periods of time during the coldest months of the year an ice runway forms,

1 A State or local government may propose to the Secretary that compensation be provided to an air carrier to provide air transportation to a place not eligible to rec eive Essential Air Service (aka ATNEP)

. ATNEP provides th at the Department will pay its share of the subsidy only so long as the State or local government or a person is willing and able to pay 50 percent of the compensation . T he subsidized carrier may end, suspend

, or reduce its service by filing a 30

- day noti ce.

2 Kawerak is a non

- profit tribal consortium authorized to make compact s and provide services on behalf of 20 tribes in the Bering Strait Region of Alaska. The funding ultimately comes from the State of Alaska, but passes through to Kawerak which is the local partner matching the Department’s subsidy payments.

3 The State’s a nnual fiscal periods end on June 30 of each year.

4 The $377,520 level of subsidy was assumed to be required for one year of service , but Evergreen did not begin subsidized operations until November 26, 201 2 . While Order 2012

- 9

- 25 contemplated one

subsidi zed round trip per week, it did not preclude Evergreen from providing additional service each week, up to the $377,520 ceiling. I t was unclear when Evergreen would be able to start the subsidized service

, and the very difficult operating conditions at Dio mede facing Evergreen make weekly subsidy ceilings problematic.- 2

-

allowing fixed

- wing aircraft to land at Diomede and making the subsidized service

unnecessary

.

Because we are nearing the end of the current contract on June 30, 2013, and because State funding is a prerequisite to our paying compensation, we con tacted the State of Alaska to ask if funding would be available in future years for Alaska/Kawerak to continue payment of its 50 percent share of the costs to provide ATNEP at Diomede

. On February 4, 2013, we received an email from Scott Ruby, Director of Community and Regional Affairs for the State of Alaska . Mr. Ruby indicates that:

“ The [ State’s contribution for Diomede] is funded through General funds and is embedded in our operating budget. This means that unless the legislature specifically removed it, it will continue to be available. The Governor’s budget kept the Divis i on’s GF budget at status quo. I do not anticipate that this funding

will be an issue.”

Based on the above, it appears that continued state funding will be available, and we will accordingly request propos als for ATNEP at Diomede.

Request for Proposals As the end of the current rate term approach es , we are requesting proposals from carriers

int erested in providing ATNEP at Diomede under 49 U.S.C. § 41736(c)(2) 5 for the tw o

year period beginning July 1, 2013 . Carriers should file their proposals by March 21

, 201 3

. S taff will then docket the proposals, thereby making them public. Shortly afterwards, we will provide a summary of the proposals to the community and S tate and ask them to submit their final comments. We will give full consideration to all proposals filed in a timely manner. Interested carriers should prepare their proposals with every expectation that their initial proposals will also be their final a nd only proposals. We retain the discretion to negotiate proposals with carriers when we deem it desirable. We also retain the discretion to reject outright all unreasonable or unrealistic proposals and , if

necessary, solicit a new round of proposals. H owever, we anticipate that negotiation or rejection will remain only occasional exceptions to the rule.

We are here providing interested carriers with some basic information to serve as guidance when they prepare their proposals, but we will not prescribe a precise format for their proposals. We expect proposals to adequately describe the service being proposed and the annual amount of subsidy being requested. 6 The applicants can make their own judgments as to the level of detail they wish to present; ho wever, they might want to include proposed schedules as well as supporting data for their subsidy requests, such as projected block hours, revenues

, and expenses. We strongly encourage clear, well

documented proposals that will facilitate their evaluation by the affected community and the Department.

As always, we will formally solicit the community ’ s views on any service options we receive before making a long

- term carrier

- selection decision. The community and air carriers are encouraged to work togethe r in advance of the due date for proposals to craft

5 In determining whether to approve a proposal, the Secretary shall consider, among other factors, (A) the

factors listed in 49 U.S.C. § 4173 3(c) (1), and (B) the views of the state or local government or person agreeing to pay compensation for the transportation.

6 We note that the amount of subsidy available will be limited by the amount of subsidy made available by

the State to Kawerak.- 3

-

a service pattern that is both desirable to the community and meets the operational needs of the airlines, as carriers cannot amend their proposal after the due date.

We encourage proposals that meet the community ’ s requirements in an efficient manner. Carriers are also welcome to propose more than one service option, if they choose; they need not limit themselves to the current service pattern if they envision other, potentially more attractive service possibilities

– different hubs, or longer terms for the contracted

service

– with subsidy requir e ments that remain competitive and remain within the budget jointly provided by Kawerak and the Department.

With specific r espect to Diomede, we expect proposals that request no mo re than $380,952 7 annual subsidy

-- the same level as the current year

. Carriers are free to request less subsidy for a given service level. As the State has indicated, one round trip per week conn ecting the community to the national transportation system during the ice

free months of the year is the goal, but carriers are free to offer more than one

- round trip per week or less than that level of service . In any event, the ceiling level of

compensa tion will be dictated by the State’s funding level

. 8 Consistent with the State’s

email , a typical two

- year contract may be proposed, with service in both years contingent on funding being available from the State. 9

Assuming that we approve a proposal for air service, we would then intend to enter into a contract with a carrier and the applicable non

- Federal party or parties (i.e., Kaw e r a k, a

relevant State of Alaska government entity, etc.) responsible for payment of its

50 percent share to ensure funding for ATNEP at Diomede based on 49 U.S.C. §

41736 (a)(1)(B), in which the Department will only pay 50 percent of each monthly bill

from the carrier after the applicable non

- Federal party or parties directly pays the carrier the remaining 50 percent. The Department will continue to pay its 50 percent share as long as the carrier maintains the established level of air transportation, Kawerak continues to pay its 50 percent share, and the Secretary of Transportation decides that the Department's 50 percent compensation is necessary to maintain transportation at

Diomede. 10

Filing Format Carrier proposals should be submitted to the Department with all materials merged into a single document. In addition, because the document will be published on Regulations.gov, each page should be formatted to be viewed online.

Historical Traffic

In order to assist carriers in making their traffic and revenue projections, we have

included historical traffic for the community in Appendi ces B

- F for the most recent annual periods.

7 Kawerak made $190,476 of funds available for Diome de through funding from the State of Alaska , but Evergreen requested only $188,760 from Kawerak and the Department.

8 Carriers should also recognize that in some undetermined periods of time during the winter an ice runway may or may not form, which would obviate the need for helicopter service. As shown in Appendix B, that period of time varies from year to year.

9 If carriers wish, they can request longer contract periods than the typical two

- year period.

10 49 U.S.C. § 41736(d).- 4

-

Other Carrier Requirements The Department is responsible for implementing various Federal statutes governing lobbying activities, drug

- free workplaces

, and nondiscrimination. 11 Consequently, all carriers receiving

Fed eral subsidy to support EAS must certify that they are in compliance with Department regulations regarding drug

- free workplaces and nondiscrimination, and those carriers whose subsidies exceed $100,000 over the life of the rate term must also certify that they are in compliance with the regulations governing lobbying activities. Because the Department is prohibited from paying subsidy to carriers that do not submit these documents, the selected carrier will be required to submit them in order to receive subsidy. Interested carriers requiring more detailed information regarding these requirements, as well as copies of the certifications, should contact the Office of Aviation Analysis at (202) 366

- 5903. The Department is prohibited from paying subsidy to carriers that do not submit t hese documents.

Community Comments Civic officials and the State are welcome to submit comments on the proposals at any time. As noted earlier, we will provide a summary of the proposals to the civic parties and ask

them to submit their final comments sh ortly after March 21

, 2013, the due date for carrier proposals.

This Order is issued under au thority delegated in 49 CFR Part 1.56a(f) and re

- delegated

to the Directo r, Office of Aviation Analysis.

ACCORDINGLY,

1

. The Department requests proposals from carriers interested in providing ATNEP at
Diomede

, Alaska . Carriers should submit their proposals, with subsidy if necessary, by

March 21 , 201 3 . Proposals should be emailed to EAS@dot.gov, with the title “Proposal t o Provide ATNEP at Diomede

, Docket DOT

- OST

- 2009

- 0260 .” Questions regarding filings may be directed to Kevin Adams at 202

- 366

- 1047 or Kevin.Adams@dot.gov;

2 . Th is D ocket will remain open until further Order of the Department; and

3 . We will serve this Order on the s ervice l ist for th is Docket.

Persons entitled to petition the Department for review of this staff action under the Department’s Regulations, 14 CFR Part 3 85.31(a) , must file such petitions within seven ( 7 ) days after the date of service of t his Order

.

11 The certifications are available on the web at http://ostpxweb.dot.gov/aviation/index.html.- 5

-

This Order will be effective immediately, and the filing of a petition for the Department

to review this staff action shall not preclude its effectiveness.

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

Nonstop Great Circle Miles Diomede (DIO) to Wales (WAA) 26 Diomede (DIO) to Nome ( OME ) 134 Nome (OME) to Wales (WAA) 109 Nome (OME) to Bethel (BET) 283 Nome (OME) to Savoonga (SVA) 163 Diomede (DIO) to Savoonga (SVA) 151Appendix B

Evergreen Helicopters, Inc., Monthly Traffic Report

Pax. Equivalents (PEQs) Pax. Equivalents (PEQs) Pax. Equivalents (PEQs)



### Essential Air Service

Diomede to Wales Wales to Diomede Diomede-Wales O&D

Year Month Pax. Freight Mail Total Pax. Freight Mail Total Pax. Freight Mail Total

2012 12 11 1.4 0.0 12.4 9 1.0 0.0 10.0 20 2.4 0.0 22.4

2013 1 0 0.0 0.0 0.0 9 1.1 0.0 10.1 9 1.1 0.0 10.1

Diomede to Nome Nome to Diomede Diomede-Nome O&D

2012 12 9 1.3 0.0 10.3 15 2.0 0.0 17.0 24 3.3 0.0 27.3

2013 1 6 0.8 0.0 6.8 13 1.9 0.0 14.9 19 2.6 0.0 21.6

Total EAS Outbound Total EAS Inbound Total, EAS O&D

2012 12 20 2.6 0.0 22.6 24.0 3.0 0.0 27.0 44.0 5.6 0.0 49.6

2013 12 6 0.8 0.0 6.8 22.0 3.0 0.0 25.0 28.0 3.8 0.0 31.8



### Mail Runs, Postal Service

Diomede to Wales Wales to Diomede Diomede-Wales O&D

Year Month Pax. Freight Mail Total Pax. Freight Mail Total Pax. Freight Mail Total

2012 12 19 1.1 3.9 24.0 4 0.4 102.1 106.5 23 1.5 106.0 130.5

2013 1 22 0.4 1.3 23.7 4 2.0 63.0 69.0 26 2.4 64.3 92.7

Diomede to Nome Nome to Diomede Diomede-Nome O&D

2012 12 1 0.0 3.9 4.9 1 1.8 12.2 14.9 2 1.8 16.1 19.8

2013 1 9 1.1 1.0 11.1 2 0.4 13.6 16.0 11 1.5 14.6 27.1

Diomede to Nome Nome to Diomede Diomede-Nome O&D

2012 12 20 1.1 7.8 29.0 5.0 2.1 114.3 121.4 25.0 3.3 122.1 150.4

2013 12 31 1.5 2.3 34.8 6.0 2.4 76.6 85.0 37.0 3.9 78.9 119.8

Source: special report of Evergreen.Appendix C

Example of General Terms and Conditions for 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 outl ined 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 supporti ng 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 wi th 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 c arrier 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 cons ider 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 ma ke 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 regulati ons, 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 may not be available for performance under this order beyond [DATE]. The Departm ent ’s obligation for performance under this order beyond [DATE]

, is subject to the availability of 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 [DATE], until funds are made available to the Departme nt for performance. If funds are not made available for performance beyond [DATE], 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.