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US. Department of 

Transportation 

Office of fhe Secretary 

of Transportation 

1200 New Jersey Avenue, SE 

Washington, DC 20590 

Mr. Marc Luiken 

Deputy Commissioner of Aviation 

Statewide Aviation 

Department of Transportation 

and Public Facilities 

4111 Aviation Avenue 

P.O. Box 196900 

Anchorage, AK 99519-6900 

Dear Commissioner Luiken: 

June 15, 2010 

As you know, Ward Air, Inc., provides subsidized air service under the essential air service 

(EAS) program at Chatham and Funter Bay. Our current contract with Ward Air, 

Order 2008-6-27, calls for a combined annual subsidy of $17,280 to provide Chatham with one, 

one-stop round trip per month to Juneau, and Funter Bay with one nonstop round trip per week to 

Juneau, except that for once a month an intermediate stop would be allowed. All of the service 

was to be provided with single-engine piston aircraft, and the rate expires September 30. In 

anticipation of the end of that contract, by Order 2010-5-11 the Department requested "best and 

final" proposals to serve Chatham and Funter Bay for a new, two-year period, and we received a 

timely-filed proposal from only one carrier. Ward Air. 

My purpose in writing is to inform you of the results of the carrier's service and subsidy proposal 

before we submit a recommendation on the carrier-selection issue to the Assistant Secretary for 

Aviation and International Affairs for decision. Since there are no other options before the 

Department at this time, you need not respond to this letter. However, we wanted to give you the 

opportunity to submit any comments if you wish. Copies of the carrier's full proposal may be 

accessed online through the Department's Dockets Management System at 

http://www.rcgulations.gov/ by entering "DOT-OST 1997-3134" in the "enter Keyword or ID" 

field, so we will only summarize it here. 

Proposed Service: 

Ward Air's proposal, attached as Appendix A, calls for an annual subsidy of $19,584 to provide 

Chatham with one, one-stop round trip per month to Juneau, and Funter Bay with one nonstop 

round trip per week to Juneau, except that for once a month an intermediate stop would be 

allowed, presumably over Funter Bay. All of the service is to be provided with single-engine 

piston aircraft, and the rate expires September 30. Of course, the only difference between the 

current contract and Ward Air's proposal is a $2,304 increase in annual subsidy to $19,584, and 

the new contract would expire on September 30, 2012. 
Please note that the average passenger fares shown in Appendix A do not necessarily reflect the 

average local fare passengers would pay, but, rather the prorated portion of the total ticket price; 

e.g., the Funter Bay -Juneau portion of a Funter Bay- Juneau - Anchorage ticket that the carrier 

would realize. Also, the. fare shown is net of certain charges such as federal transportation 

, security fees, excise-or ticket taxes, and passetiger facility charges. Of course, carriers have the 

discretion to charge fares they deem appropriate, and the passenger fares presented have been 

developed for subsidy rate computation purposes only. Based on the cost elements incorporated 

in the carrier's computation summaries, a carrier would have to realize passenger fares 

CQmparable to the averages shown in its proposal in order to achieve break-even or profitable 

operations even with subsidy. 

Ward Air's schedule would continue as before in terms of frequency and routing, and the carrier 

may make schedule changes to reflect changing conditions, e.g., to better meet shifting 

connecting bank times at the hub. The Department expects subsidized air carriers to maintain 

well-timed and well-spaced flights in order to ensure full compensation. 

We know this matter is important to you and we will act as quickly as possible upon receipt of your 

letter. In order to expedite the case, please submit your comments by email to EAS@dot.gov and 

Kevin.Adams@dot.gov by June 24. If you have any questions or do not wish to submit formal 

conimeftts, please contact Kevin Adams at (202) 366-1047. 

Sincerely, 

Dennis J. DeVany ^ 

Chief, Essential Air Service Division 

Office of Aviation Analysis 

cc: Ward Air 
ANNUAL COMPENSATION PROJECTION 

FOR ESSENTIAL AIR SERVICE AT 

CHATHAM AND FUNTER BAY/ALASKA 

For the Two Year Period Beginning October 1, 2010 

h\9oeu,J^i y A 

Block Hours: (See Note A) ^ 

Revenue Estimates 

Passengers FNR 

Passengers CYM 

Cargo (pounds) FNRCargo (pounds) CYM 

Total Revenue 

Direct Expense • 

Mail Sorting: 312 days @ 2 1/2 minutes day 

Pilot (Including Benefits & WC Ins) 

Fuel & Oil • 

lnsurance,(Aircraft & Liability) 

Maintenance 

Depreciation 

Total Direct Expenses 

Indirect Expense 

Hangar ^ ' 

Overhead 

Total Indirect Expenses 

Total Operating Expenses (TOE) 

Return at 10% of TOE 

Total Economic Cost 

56 

10 

0 

639 

Hours 

13 

38 

38 

38 

38 

38 

38 

38 

10% 

Fare/Rate 

$77.00 

155.00 

0.20 

0.40 

Rate per 

Hour 

50.00 

134.30 

112.05 

64.22 

93.86 

17.41 

76.16 

99.77 

647.76 

64.78 

712,54 

Totals 

$4,312 

1,550 

0 

256 

6,118 

Totals 

650 

5,103 

4,258 

2,440 

3,567 

662 

16.680 

2,894 

3,791 

6,685 

23,365 

2.337 

25,702 

Annual Subsidvfor 100% Completion 19.584 

Note A. 

Block Hour Calculation 

JNU-FNR-CYM-JNU 

JNU-FNR-JNU 

Total Annual Block Hours 

Trips 

per Yr 

12 

40 

§2 

Hours 

per Trip 

1.5 

0.5 

Block 

Hours 

18 

20 

38 

Aircraft: DeHavilland Beaver DHC-2, Cessna 206 or Cessna 185. 

2010 USDOTMail Contract Appendix B 2010-06-09 Page 1 of 1