PenAir Requests $3.4m Subsidy for Adak Flights
Tuesday, April 17 2012
Last month, PenAir landed the country’s most expensive Essential Air Service contract for a flight from Presque Isle, Maine to Boston. Now, PenAir is on track to receive the second most expensive EAS subsidy in the nation as well, for flight service between Anchorage and Adak.
For the last decade, Alaska Airlines has flown a Boeing 737 combi plane out to Adak, twice a week. The plane can hold 72 passengers and enough cargo to keep the community of 300 people well stocked. In exchange for the service, Alaska Airlines receives a $1.6 million annual subsidy from the Department of Transportation as part of the Essential Air Service – or EAS – program, which compensates airlines for flying routes that would otherwise be unprofitable.
In February, Alaska Airlines announced that it wouldn’t be bidding on Adak’s Essential Air Service subsidy this year. Company spokesperson Scott Habberstad says rising fuel costs and decreasing revenues would have required a substantial increase in the airline’s bid, which it didn’t think the DOT would accept.
It turns out that evaluation might have been premature. Only one airline ended up bidding on the route and it’s asking for double what Alaska Airlines was being paid.
PenAir is proposing to purchase a 30-seat Saab turboprop and fly it out to Adak four times a week, in exchange for a $3.4 million subsidy. In addition to being double Alaska’s rate, that’s three times what the airline bid the last time they went through the EAS process for Adak.
PenAir President Scott Bloomquist says it’s a good thing they weren’t awarded the contract last time.
“Overall, on all revenue, with passenger revenues, freight revenues, and mail revenues, we projected a pretty high number two year ago when we bid it and when it comes out in the end, those revenues weren’t there. Alaska [Air] bid it with a far less projection of revenues than we did and they were much closer two years ago in their bid than we were.”
PenAir’s revenue projection this time around is about $300,000 less than Alaska Airlines’ in 2010 and $2.4 million less than it’s own 2010 proposal.
DOT is reviewing the numbers, but Bloomquist says he’s confident they’ll come to conclusion that his passenger revenue calculations are correct.
“Everything we’ve gone through so far, they’ve had to agree with. The only question is the revenue. They had a higher revenue number and we had a conversation with them yesterday and they’re going to go back and look at where they got theirs from and we’re going to go back and look at where we got ours from and compare them once again. If the revenue number is higher, then I adjust it.”
Bloomquist pegged net revenue per roundtrip passenger at $786 in the proposal. Tickets to Adak on Alaska Air run between $1200 and $1500 at the moment, including tax and fees.
However, Bloomquist says even if he’s off in his numbers, the difference won’t change the fundamental economics of the situation: so long as the market in Adak isn’t growing and fuel costs continue to rise, the need for a subsidy will continue to grow. He says ultimately, if DOT thinks the proposal is too much, they’ll have to decide what level of service is necessary in Adak.
“I think DOT has to look at it very closely and decide what they can live with in the EAS market. They know there’s going to be increases, just because of fuel alone.”
DOT spokesperson Bill Mosley said he couldn’t talk about the proposal while it’s still open for public comment, but did say the department reserves the right to negotiate or reject a bid that doesn’t meet the community’s needs.
Adak, for its part, hasn’t weighed in yet. City Manager Layton Lockett says a public meeting about the issue drew a crowd, but he isn’t willing to comment further until he’s had a chance to speak with PenAir.
Suzy Q on Sunday, July 15 2012:
It is obvious that some fatcat politicians are in bed with Penair executives. Giving this airline my tax dollar to provide below standard services is negligent and smacks of corruption.
RIDuh on Thursday, June 28 2012:
I used to work for an airline, which flew the Saab 340's in and out of our airport. I've also lived on Adak on two different occasions. I can concur that this type of aircraft will NOT suit the needs of Adakians. The long flight to Adak, as well as unpredictable weather, will limit weight onboard due to fuel alone. No doubt that mail, perishables, and luggage WILL be left behind. You can't bring out birders and hunters without their luggage (airlines will always remove luggage out of the cargo bin over people for weight & balance). You'll loose your business on birding and hunting, just on bad air service. Personally, I would like to visit next year. However, if a Saab 340 is the only means to get out there? No thank you.
AKpilot on Thursday, April 26 2012:
EAS is a taxpayer government subsidy. It is a gift not an entitlement. The government is in trillions of dollars in debt. EAS was close to being chopped from the budget last year. Be thankful for any subsidized air service as the writing is on the wall that it will not be around much longer.
Alaskans are an independent spirited people and survived without EAS years ago and will continue to survive without it in the future.
Concerned Citizen on Thursday, April 19 2012:
After receiving some facts from Pen Air, I am more than concerned for the future of air travel to and from Adak. The Saab that Pen Air flies, has a pay load cargo of 4500 pounds. This includes passengers, luggage, and freight. How on earth are they even going to get the passengers luggage here. If you get a full plane of 30 passengers at 150 pounds you've already reached your payload, and that does not include any of the two bags of luggage you are supposed to be able to carry with you. I can only hope that Alaska Air would have a last minute epiphany realizing that since Icicle has re-opened the fish plant on Adak, there will be more freight and passengers flying to and from Adak. Alaska Air should remember that two years of their revenue and expense data does not include income from freight or passengers for the Fish plant. I wish Alaska Airlines would hold on for one more year, to get revenue data with the fish plant open. At this time Icicle has made a three year commitment - come on Alaska AIr pony up and make a commitment to the future of Adak.
Unhappy Mother/Adakian on Thursday, April 19 2012:
I think this is a sad sad thing. This is forcing a lot of families out of the village, which in the long run is just going to hurt the town/school system. It is hard enough only getting mail 2x a week, But at least with AK Air we can depend on those 2 flights weekly, with Pen Air I am almost sure that out of the 4 flights per week they may make one. And who knows if on that one flight if our GROCERIES, MEDICATIONS, BABY FORMULA, DIAPERS, WIPES (NECESSARY SUPPLIES) will even make it. This is going to make it nearly impossible to live in Adak. I am a mother and have decided to take my family off the island due to this, It is very hard but I know that it is what is best for my family. I really hope some miracle happens and Pen Air is not given the contract.
XYZ on Wednesday, April 18 2012:
You can't expect a company to risk losing money on the contract and you can't expect the Federal Government to spend more and more money on a community of 300. I don't know what the answer to the problem is. Maybe Alaska will be again in the future when their regional company Horizon starts flying in AK. They could bid Adak with a stop in Dutch on the way, that might solve a few problems
An Adakian on Wednesday, April 18 2012:
Pen Air is not able to serve Adak's needs. Let alone the passenger,mail and luggage issues, the freight issues are huge. We have NO other means of moving freight on and off the island on a regular basis except by air...no barge, no road, nothing. Every bit of groceries, mail, supplies must come by plane if you want more often than once a year! A shame Alaska did not come through like their name implies, the Alaska spirit of "never give up", lives in Adak, but not with AK Air, and definitely not with Pen Air. A aad day after some small triumphs, getting kicked in the gut!! Thanks for your support!!!
Unhappy Passenger on Wednesday, April 18 2012:
Penn Air has Terrible service to Dutch Harbor with luggage routinely left behind in Anchorage for days at a time. Cancelled flights for "Maintenance" is the Norm for the airline and Being the sole contract provider for Akutan island we go WEEKS AND WEEKS with no mail delivery what so ever. Sad to think another community will suffer from this extremely poor service. Good Luck to you Adak!!!