Order: 2014

- 6

- 3 Served: June 6 , 2014



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

Issued by the Department of Transportation on the 6 th day of June , 2014

ORDER REQUESTING PROPOSALS Summary By this Order, the Department requests proposals from air carriers interested in providing Essential Air Service (EAS) at Akutan , Alaska, for a new contract period beginning
October 1, 2014, with or without subsidy. Proposals should be filed no later than July 9 , 2014. (See Appendix A for a map.)

Background By Order 2012

- 11

- 15, November 16, 2012, the Department selected Grant Aviation, Inc. (Grant) to provide EAS at Akutan for an initial annual subsidy rate of $724,025 for the first six months of service, and $579,220 annually for the remainder of the contract term ( through September 30, 2014). Under that contract, Akutan receives 12 nonstop round trips per week to
Dutch Harbor with 9

- seat Piper PA

- 31 Navajo aircraft. Grant began service to the community on November 28, 2012.

Unique Situation at Akutan EAS at Akutan had traditionally bee n provided via the Akutan S eaplane B ase. For years , that service was operated by Peninsula Airways, Inc. (PenAir) using a Grumman Goose aircraft, which was particularly suited to land on waters that are typical for the Aleutians that were too rough for ot her seaplanes to land on. However, the aircraft was very old with no suitable replacement , and, thus, its retirement was forthcoming. 1 In September 2012, the Alaska Department of Transportation and Public Facilities commissioned a new airport (7AK) with a paved 4,500 foot runway, on Akun Island, about 7 miles from Akutan. Prior to the last EAS
carrier

- selection case, both the State and community indicated that they would prefer service to

1 PenAir retired the aircraft in November 2012. Essential Air Service at

AKUTAN, ALASKA

Under 49 U.S.C. §41731 et seq

. DOCKET DOT

- OST

- 2000

- 7068- 2

-

the new airport rather than the seaplane base at Akutan. Under th e current EAS contract, Grant provides service between Dutch Harbor and 7AK. Initially, the Aleutians East Borough subsidized a hovercraft operation to transport passengers, cargo, and mail between 7AK and Akutan. This service proved to be financially un sustainable. Currently, the community has contracted with a helicopter service to provide a link between 7AK and Akutan. While helicopter service has proven more reliable, it still presents a significant financial burden for the community. Under either scenario, passengers are required to buy a separate ticket, in addition to the EAS service, for passage between 7AK and Akutan. Because of this unique situation, the State has requested assistance through EAS in transporting passengers between 7AK and
Aku tan.

Request for Proposals We are here requesting proposals from carriers interested in providing EAS at Akutan, with or without subsidy support, for a new contract period beginning October 1, 2014. Carriers should file their proposals no later than July 9 , 2014. After that date, our staff will docket the proposals, thereby making them public. Shortly afterwards, we will provide a summary of the proposals to community officials and ask them to submit their final comments. We will give full consideration to all proposals filed in a timely manner. 2

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 with carriers when we deem it desirable. We also retain the discretion to reject outright all unreasonable or unrealistic proposals and solicit a new round of proposals.

We are here providing interested carriers with some basic information to serve as guidance when
th ey 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. The applicants can make their own judgment s as to the level of detail they wish to present; however, we recommend they include information concerning proposed
schedules and projected block hours. In addition, applicants are encourage d to provide financial data supporting their subsidy requests, i ncluding information on their projected revenues and

expenses . We strongly encourage clear, well

- documented proposals that will facilitate their evaluation by the affected community and the Department. 3

2 Carriers should not expect the Department to accept late fillings. 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 car rier

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

- free service as proposed.

3 In selecting a carrier to provide subsidized EAS for an eligible place in Alaska, 49 U.S.C. § 41733(c)(1) directs us to consider six factors: (a) service r eliability; (b) contractual and marketing arrangements with a larger carrier at the hub; (c) interline arrangements with a larger carrier at the hub; (d) community views, giving substantial weight to the views of the elected officials representing the user s; and (e) whether the carrier has included a plan in its proposal to market its service to the community , and; (f) the experience of the applicant in providing, in Alaska, scheduled air service or significant non

- scheduled service

. In addition, the Conso lidated Appropriations Act, 2014, Public Law No. 113

- 76, provides that when selecting a carrier to provide EAS, the Department may consider the- 3

-

As stated above, a unique situation exists at Akutan whereby the airport serving the community is located on a different island , without any ability to access it via roads

. Rather than request a specific number of minimum weekly frequencies as we would in a typical solicitation for proposals, we will work with the State and community to craft a flexible solution. 4 In recognition of the unique circumstances here , we are willing to entertain proposals for EAS that would also contemplate connecting passengers between 7AK and Akutan. Because there is already a working helipad on Akutan, we would also consider proposals for nonstop helicopter service from Dutch Harbor directly to Akutan, thus eliminating the need for passengers (and freight and mail) to connect at 7AK for the s even

- mile trip from 7AK to Akutan.

As always, w e 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 e nvision other, potentially more attractive service possibilities with subsidy requirements that remain competitive

– different hubs, linking service to hubs with service to other communities, or longer terms for the contracted service. With respect to Aku tan, a single carrier or two carriers presenting a joint proposal that would address the community’s air service needs may respond to this solicitation. As noted in footnote 2, the Department may consider the relative subsidy requirements when reviewing c arrier proposals.

We will formally solicit the State and 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 together in advance of the due date for proposals to craft a service pattern that is desirable to the communities and meets the operational needs of the airline submitting the proposal.

Service and Traffic History In order to assist carriers in developing traffic and revenue projections for their proposals, we have provided historical traffic in Appendix B. At Akutan, as with most of Alaska, freight and mail volumes on the outbound leg from the hub to the community far exceed those volumes in the other direction. Proposals for EAS at Akuta n should provide sufficient capacity so that passengers, mail, and freight can be accommodated at a reasonable load factor on the critical outbound leg.

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

- free workplaces, and nondiscrimination. 5 Consequently, all carriers receiving

relative subsidy requirements, thus codifying a factor that we have considered since the inception of the progra m. Interested carriers should also be aware that our general provisions governing Essential Air Service will be included in the selection Order as part of our authorization of subsidy for the selected service. Appendix C of this Order contains those gener al provisions.

4 See 49 U.S.C. § 41732(b)(1)(B).

5 The regulations applicable to these areas are: (1) 49 CFR Part 20

-- New restrictions on lobbying; (2)
49 CFR Part 21

-- Nondiscrimination in federally

- assisted programs of the Department of Transportation

-- Effectuation of title VI of the Civil Rights Act of 1964; 49 CFR Part 27

-- Nondiscrimination on the basis of disability in programs and activities receiving or benefiting from Federal financial assistance; and 14 CFR Part 382

-- 4

-

Federal subsidy for EAS must certify that they are in compliance with Department regulations regarding drug

- free workplaces and nondiscrimina tion, 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, all carriers that plan to submit proposals involving subsidy should be aware that the selected carrier will be required to complete the required certifications. Interested carriers requiring more detailed information re garding these requirements should contact the Office of Aviation Analysis at (202) 366

- 5903. 6

Community and State Comments The communities and State are welcome to submit comments at any time. As noted earlier, we will provide a copy of the proposals to the civic parties and ask them to submit their final comments shortly after July 9 , 2014, the due date for proposals.

This Order is issued under authority delegated in 49 CFR 1.25a(b) and re

- delegated to the Director, Office of Aviation Analysis.

- Nondiscrimination on t he basis of disability in air travel; and (3) 49 CFR Part 29

-- Government

- wide debarment and suspension (non

- procurement) and government

- wide requirements for drug

- free workplace (grants).

6 The certifications are also available on the web at http://www.dot.gov/policy/aviation

- policy/small

- community

rural

- air

- service/essential

- air

- service

.- 5

-

ACCORDINGLY, 1. We request that carriers interested in providing E ssential A ir S ervice at Akutan, Alaska, submit their proposals, with or without subsidy requests, no later than July 9 , 2014. The proposals should be e

- mailed to: EAS@dot.gov with the title “Proposal to Provide E AS at Akutan, Alaska”; 7

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

3. We will serve copies of this Order on the community of Akutan , Alaska, the Alaska Department of Transportation and the service list for this docket.

Persons entitled to petition the Department for review of this Order under the Department’s Regulations, 14 CFR 385.31(a), must file such petitions within seven (7) days after the date of service of this Order.

This Order will be effective immediately, and the filing of a petition for review shall not preclude its effectiveness.

By:

TODD M. HOMAN

Director Office of Aviation Analysis

(SEAL)

An electronic version of this document is available

at http://www.regualtions.gov

7 Questions regarding filings in response to this Orde r may be directed to A.J. Muldoon at (202) 366

- 1058 or albert.muldoon@dot.gov

.APPENDIX A Page 1 of 2

AREA MAPAPPENDIX A Page 2 of 2APPENDIX B

Historical Traffic at Akutan

– T

- 100 Segment ReportAPPENDIX C

Example of General Terms and Conditions for Essential 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 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 com pleted, 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 i ts 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 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 complete, terminates or reduces payments for service or changes service requirements at a specific location prov ided 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 re quirement 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 contrac ts 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 may not be available for performance under this Order beyond [DATE]. The Government’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 liabilit y 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 Department for performance. If sufficient funds are not made available for performance beyond [DATE], the Depart ment will provide notice in writing to the carrier.

All claims for payment, including any amended claims, must be submitted within 90 days of the last day of the month for which compensation is being claimed. For example, claims for service provided in J uly must be filed by October 31st; August claims must be submitted by November 30th, and so on.