Order 2013

- 6

- 6 Served: June 7, 2012



### UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation on the 7 th of June, 2012

Essential Air Service at

TATITLEK , ALASKA

Under 4 9 U.S.C. 41731 et seq

. DOCKET DOT

- OST

- 2013

- 0030

ORDER RE

- SOLICITING PROPOSALS Summary By this Order , the Department is re

- soliciting proposals by June 20 , 2013

, from carriers interested in providing Essential Air Service (EAS) at Tatitlek

, Alaska

, for a two

- year period

, with or without subsidy.

Background Order 2013

- 2

- 22, February 22, 2013, requested proposals for EAS at Tatitlek . Th at RFP noted that Tatitlek’s EAS determination had been established by Order 1980

- 1

- 167, January 25, 1980, which set Tatitlek’s level of air service to be one scheduled round trip per week during the peak season and one flag

- stop round trip per week during the off

peak to Cordova with small aircraft having ten or fewer seats and up to two intermediate stops. In addition , the RFP encouraged:

“proposals that meet the community’s requirements in an efficient manner. Consistent with the EAS determination, proposals should propose to provide one scheduled passenger round trip per week [emphasis added]. Carriers are also

we lcome to propose more than one service option, if they choose; they need not limit themselves to a single specific service pattern if they envision other, potentially more attractive service possibilities

– different hubs, or longer terms for the contracte d service

– with subsidy requirements that remain competitive.”

Th at RFP set March 21, 2013, as the deadline for proposals. On March 11, 2013, J&M Alaska Air Tours, Inc., d/b/a Alaska Air Transit (AAT), requested an extension of the deadline, and by no tice dated March 12, 2013, we extended the deadline to April 4, 2013. We received timely

- filed proposals from AAT, Reeve Air Alaska, LLC (Reeve) , and from Security Aviation. Below is a summary of each carrier’s proposal, and Appendix C provides a detaile d outline of the subsidy calculations.- 2

-

Proposal of AAT AAT submitted three options, all of which propose three round trips a week to Anchorage. The carrier notes that it currently provides flag

- stop service to Tatitlek in conjunction with its three sched uled round trips per week to nearby Chenega Bay, and has been providing some level of service to Tatitlek for the last nine years.

Option 1 : $170,373 annual subsidy for three nonstop round trips per week to ANC with IFR

- equipped Piper Navajos configured to 7 seats. 1 Option 2 : $137,301 annual subsidy for three round trips per week to ANC with IFR

equipped Piper Navajos configured to 7 seats. Two of the round trips would be operated on a nonstop basis, and one would be operated as a triangle flight: Anc horage to Chenega Bay to Tatitlek to Anchorage. Option 3 : $140,606 annual subsidy for three nonstop round trips per week to ANC with Piper Navajo s configured to 7 seats. The only difference from Option 1 is that Option 3 is contingent upon AAT ’s being aw arded the Postal Service contract to transport mail directly between Anchorage and Tatitlek, without requiring routing through any other terminal. 2

Proposal of Security Aviation 3 The carrier indicated that the “Tatitlek stop may be incorporated in [an]ot her routing,” and thus does not specify whether or not the service would be operated on a nonstop basis.

Option 1 : $111,488 annual subsidy for one round trip per week to ANC with IFR

equipped Piper Navajo 4 aircraft. Option 2 : $222,976 annual subsidy for t wo round trips per week to ANC with IFR

equipped Piper Navajo aircraft.

Proposal of Reeve The carrier indicated that “due to the strong ties and family connections between neighboring communities, Tatitlek passengers will have the option to include Cheneg a, Alaska, in this routing on a flag

- stop basis at no additional fare or subsidy cost.” Thus, we cannot specify whether or not Reeve’s service would be operated on a nonstop basis.

1 Piper Navajos can be configured for up to 9 seats. The carrier indicated that it might upgrade its service to Cessna Caravan or Pilatus PC

- 12 a ircraft . However, parties should be aware that because such service upgrades could not be required

, we w ould not assign them any decisional weight : c arriers are always allowed to provide superior service to what they are contracted to provide.
2 We have i nformally discussed this matter with the Postal Service. The Postal Service is concerned that because Tatitlek has the same zip code as Cordova it would incur additional costs to separate Tatitlek’s mail in Anchorage from Cordova’s, rather than sending al l of that mail to Cordova where the Tatitlek bound mail would be forwarded to Tatitlek.
3 The carrier did not specify an annual level of subsidy, but rather indicated it would require “$2,144.00 per trip [with] additional charters available as needed at th e same cost.” We arrived at the annual subsidy figures by multiplying $2,144 per round trip by one round trip per week in Option 1 and two round trips per week in Option 2 by 52 weeks.
4 Security Aviation indicated that on the critical outbound leg, Anc horage to Tatitlek, its Navajo would offer a maximum payload of 1,700 pounds.- 3

-

Option 1 : $117,250 annual subsidy for one round trip per week to ANC wi th IFR

equipped Piper Navajo aircraft. Option 2 : $187,430 annual subsidy for two round trips per week to ANC with IFR

equipped Piper Navajo aircraft.

Comments The North Pacific Rim Housing Authority (NPRHA) recommends that we select AAT, preferring the ad ditional frequency it proposed.

“NPRHA many times has to send out staff to Tatitlek ...and these trips usually are 2

- 3 days in length. ......... If service is only once per week as the other proposers have submitted (Reeve does provide a proposal with 2 fligh ts per week but at a significantly higher cost).... it would require a costly charter [by NPRHA] for one leg of the trip.”

The Village of Tatitlek indicated it was “excited to have this happen, and we looked at all three [carriers’] proposals. We are in fa vor of Alaska Air Transit.”

On May 2 the Postal Service indicated the following:

“The mail for both locations presently originate s from Cordova [CDV] and not [Anchorage] ANC. Making ANC the head out point has the potential to exclude mail as one of t he traffic elements to support the s ervice. If CDV was a point on the [subsidized] itinerary enroute to both locations it would capture that volume. In addition, it is possible that none of the potential carriers interested in the subject service are cer tificated carriers. If so, this would create a potential issue for the Postal Service because the Postal Service may only provide payment for domestic air service to certificated carriers.

Decision The RFP stated the following:

“We retain the discretio n 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.”

In this instance we have decided to solic it a new round of proposals. Three carriers submitted proposals for Tatitlek

, but there are material weaknesses with each . Neither Reeve nor Security Aviation clearly specifies whether their service would be operated on a nonstop or one

- stop basis. 5 In addition, Security Aviation’s proposal does not make clear whether or not its Option 2 would be for two round trips per week year round or something less than that level of service. It also refers to chartering the aircraft. 6 AAT submitted three options. However, all three options are based on three round trips per week

– three times the one

- round

- trip

- per

- week level specified by the RFP

.

5 Although the RFP allowed for nonstop, one

- stop, or two

- stop service, carriers must accurately describe exactly what service level they are proposing so that the community and state officials can make an informed recommendation and we can make an informed decision. Also, when carriers contract for nonstop service, unauthorized intermediate stops are not fully compensated.
6 49 U.S.C. § 41732(a) requires that EAS be provided on a scheduled basis.- 4

-

Based on the above, we will re

- solicit proposals. However, w e will make one adjustment to our earlier request for proposals. In its response to the first RFP
, the community argued that one round trip per week might not be sufficient. We will therefore request proposals for one or two round trips per week , year round, at Tatitlek.

Request for Proposals W e are requ esting proposals from carriers int erested in providing service at Tatitlek

, with or without subsidy, from the start of their service pursuant to a carrier

- selection Order for

a two

- year period. Carriers should file their proposals by June 20 , 2013

. S taff will then docket the proposals, thereby making them public.

Typically we provide a 30

- day deadline from the issuance of the RFP for proposals to be submitted

. Because Tatitlek is currently without scheduled air service , and because this is a re

- solici tation, w e will shorten the time for carriers to submit proposals in response to this RFP to June 20 . Likewise, our staff will contact community officials after we receive proposals to establish a shorter

- than

- usual comment period.

We will give full con sideration to all proposals filed in a timely manner. 7 Interested carriers should prepare their proposals with every expectation that their initial proposals will also be their final and only proposals. We retain the discretion to negotiate proposals wit h 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. However, we anticipate that negotiation or rejection will remain only

oc casional 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 adequate ly describe the service being proposed and the annual amount of subsidy being requested. The applicants can make their own judgments as to the level of detail they wish to present; however, they might want to include proposed schedules as well as supporti ng 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. We anticipate applying o ur usual carrier

- selection criteria and the general provisions governing subsidy payments for EAS

. 8

7 Carriers should not expect the Department to accept late filings. In cases where a carrier proposes to provide EAS without subsidy and we determine that service can be reliably provided without such compensation, we typically do not proceed with the carrier

- selection case. Instead, we simply rely on that carrier’s subsidy

- free service as proposed.
8 In selecting a carrier to provide subsidized EAS in Alaska, 49 U.S.C. § 41733(c) (1) directs us to consider six factors: (1) service rel iability; (2) contractual and marketing arrangements with a larger carrier at the hub; (3) interline arrangements with a larger carrier at the hub; (4) community views; (5) whether the carrier has included a plan in its proposal to market the service; and (6) experience of the applicant in providing, in Alaska, scheduled air service or significant non

- scheduled air service. In addition , The Consolidated Appropriations Act, 2008, Public Law 110

- 161, provides that when selecting a carrier to provide EAS, the Department may consider the relative subsidy requirements, thus codifying a factor that we have considered since the inception of the program. Interested carriers should also be aware that our general provisions governing EAS will be included in the select ion Order as part of our authorization of subsidy for the selected service. Appendix C of this Order contains those general provisions.- 5

-

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 com munity and air carriers are encouraged to work together in advance of the due date for proposals to craft a service pattern that is both desirable to the community and meets the operational needs of the airlines, as carriers cannot amend their proposal aft er the due date.

We encourage proposals that meet the community ’ s requirements in an efficient manner. P roposals should offer either one or two scheduled passenger round trip s per week. Carriers are also welcome to propose more than one service option, if they choose; they need not limit themselves to a single specific service pattern if they envision other, potentially more attractive service possibilities

– different hubs, or longer terms for the contracted service

– with subsidy requirements that rem ain competitive.

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 on line.

Historical Traffic In o rder to a ssist carriers in making their traffic and revenue projections, we have included historical traffic for the community in Appendi x B for the most recent annual periods.

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

- free workplaces

, and nondiscrimination. 9 Consequently, all carriers receiving Federal 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 t he Department is prohibited from paying subsidy to carriers that do not submit these documents, the selected carrier will be required to submit them in o rder to receive subsidy. Interested carriers requiring more detailed information regarding these requi rements, 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 these documents.

Community Comments Civic officials and th e 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, after consultation with them, establish a deadline for community comments.

This Order is issued un der authority delegated in 49 CFR Part 1. 25 a( b ).

9 http://www.dot.gov/policy/aviation

- policy/small

- community

- rural

- air

- service/essential

- air

- service

.- 6

-

ACCORDINGLY,

1

. The Department requests proposals from carriers interested in providing EAS at Tatitlek

, Alaska . Carriers should submit their proposals, with subsidy if necessary, by June 20 , 2013 . Prop osals should be emailed to EAS@dot.gov, with the title “Proposal to Provide EAS at Tatitlek

, Docket DOT

- OST

- 2013

- 0030

. ” 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 un til further Order of the Department; and

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

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 http://www.regulations.govAppendix A

Nonstop Grea t Circle Miles to Tati t lek (TEK) Anchorage, ANC 113 Cordova, CDV 49 Chen e ga, NCN 71 Valdez, VDZ 24Appendix B
Historical Traffic at Tatitlek (TEK) Origin, Tatitlek Dest, Tatilek O&D, Tatilek

Year Month Freight Mail Freight Mail Freight Mail 2010 1 0.1 0.8 8.4 11.8 8.5 12.6 2010 2 0.0 0.7 2.1 10.8 2.1 11.5 2010 3 0.0 0.2 1.1 9.1 1.2 9.3 2010 4 0.0 1.1 2.2 11.1 2.2 12.2 2010 5 0.2 0.9 0.8 6.1 1.0 6.9 2010 6 0.2 1.7 1.6 10.1 1.8 11.7 2010 7 0.1 1.0 0.3 7.4 0.4 8.4 2010 8 0.0 0.4 7.1 6.2 7.2 6.6 2010 9 0.0 0.2 6.6 11.8 6.6 12.0 2010 10 0.0 0.2 0.5 12.4 0.5 12.5 2010 11 5.0 0.2 3.3 12.3 8.3 12.6 2010 12 10.1 0.7 1.2 19.1 11.2 19.8 Total 15.8 8.0 35.1 128.2 50.9 136.2

2011 1 0.0 0.6 2.0 6.0 2.0 6.6 2011 2 0.1 0.3 0.1 9.3 0.2 9.6 2011 3 0.0 1.1 0.9 8.0 0.9 9.1 2011 4 0.0 0.3 3.9 8.3 3.9 8.6 2011 5 0.0 0.6 6.8 9.1 6.8 9.7 2011 6 0.0 0.2 4.9 17.7 4.9 17.9 2011 7 0.0 0.4 0.7 11.6 0.7 12.0 2011 8 0.0 1.6 4.0 19.3 4.0 20.9 2011 9 0.2 0.3 3.3 20.7 3.5 21.0 2011 10 0.0 0.6 4.2 13.9 4.2 14.5 2011 11 0.0 0.2 2.0 19.0 2.0 19.2 2011 12 0.0 1.4 8.1 15.9 8.1 17.3 Total 0.3 7.6 40.9 158.9 41.1 166.5

2012 1 0.0 0.5 6.9 16.8 6.9 17.3 2012 2 0.7 0.4 10.7 12.6 11.4 13.0 2012 3 0.0 0.0 4.1 18.8 4.2 18.8 2012 4 0.1 0.1 0.6 10.2 0.8 10.4 2012 5 0.2 1.3 0.6 9.6 0.9 10.9 2012 6 0.0 1.6 0.9 13.6 0.9 15.2 2012 7 0.0 0.9 1.6 9.6 1.6 10.5 2012 8 0.0 4.4 8.0 15.6 8.0 20.0 2012 9 0.0 0.9 1.4 17.1 1.4 18.0 2012 10 0.1 0.9 4.8 16.6 4.8 17.4 2012 11 0.0 1.6 8.4 8.0 8.4 9.6 2012 12 0.0 0.6 1.4 15.2 1.4 15.9 Total 1.2 13.2 49.5 163.7 50.7 176.9

Source: T-100 Market Report Note: All data in passenger equivalents -- 200 pounds of mail or freight is one passenger equivalent (PEQ).
Note: There was a de minimis level of charter, or of scheduled passenger service reported.Appendix C

Example of General Terms and Conditions for Essential Air Service The carrier understands that it may forfeit its compensation for any fl ights 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 c ontemplates 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. Sh ould 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
compe nsated. 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
pr ovided 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 wh ich 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 th e 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 statut es 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 may not be available for performance under this solicit ation beyond [DATE]. The Department’s obligation for performance under this solicitation beyond [DATE], is contingent upon the availability of funds from which payment for services can be made. No legal liability on the part of the Government for any pay ment may arise for performance under this Order beyond [DATE], until funds are made available to the Department for performance. If funds are not made available for performance beyond [DATE], 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