The U.S. Department of Transportation has canceled Evergreen International Inc.’s $1.5 million federal contract for Adak after the airline failed to provide promised jet service to the Aleutian Island community.Bids reopened in early July for the federal subsidy, the nation’s most costly under the Department of Transportation’s Essential Air Service program."(Evergreen) said they would provide passenger jet service to Adak and they haven’t," said Bill Mosely, spokesman for the Department of Transportation in Washington, D.C. "They didn’t do what they were expected to do."The McMinnville, Ore.-based airline was awarded the two-year contract in July 2001 based on its proposed purchase of a Boeing 727-100 passenger and cargo airplane. The "combi" aircraft is better able to handle cargo and the region’s notoriously bad weather than prop aircraft, according to a written decision last summer by the federal Transportation Department.The airline said it would provide Adak with two one-stop 2,600-mile round trips a week to Anchorage, year round, with passenger and cargo jet service.Evergreen last summer also said it would provide service to the Russian Far East, a route that would be largely underwritten by the Adak federal subsidy.But over the last year, Evergreen has only provided once-a-week mail and freight service with its DC-9 cargo jet to Adak. Peninsula Airways Inc. has been providing passenger service with prop aircraft, under an interim federal award of about $4,000 weekly. Evergreen has been paid roughly $7,000 for each of its weekly cargo flights, according to DOT’s Mosely.Jerry Rock, president of Evergreen’s Alaska operations, said the airline has actively shopped for planes, but the events of Sept. 11 and new bypass mail rules have stalled the purchase.Evergreen and a few other airlines in Alaska have been critical of new legislation affecting Alaska’s bypass mail service to rural villages. Sen. Ted Stevens, R-Alaska, says the new legislation, slated to take affect next year, is intended to close loopholes that allow carriers to transport mail without providing passenger or freight service.The U.S. Postal Service is losing about $100 million annually in Alaska, and the program faces extinction, according to Stevens.The new legislation should reduce the loss by up to 30 percent and increase passenger service to the Bush, Stevens said.But Rock says the new legislation closes the door to any new airline wanting to get into the bypass mail business, and protects incumbent mainline carriers, Air Cargo Express, Alaska Airlines, Lynden Air Cargo and Northern Air Cargo.Rock said Evergreen had hoped to use the jet intended for Adak to service other parts of Alaska with bypass mail."The legislation has held us up," said Rock. "We’re not going to go out and purchase aircraft when we are not allowed to compete fairly." Meantime, Evergreen in June filed with the U.S. Postal Service to haul bypass mail to Nome, Kotzebue and Bethel, hoping to get revenue before the legislation is enacted. It’s unclear whether Evergreen will resubmit a bid for the subsidy to Adak, or will challenge DOT’s decision.Four other carriers had bid on the two-year contract to Adak last year, but only Evergreen offered jet service. City, borough and Native leaders in the Aleutian Island community lobbied hard for jet service, and specifically Evergreen’s proposal.Now, there has been a change of heart.The Aleutians East borough, City of Adak and the Aleut Corp. have each formally asked that the service be rebid.David Jensen, chief executive officer of the Aleut Corp., said he and others are "horribly disappointed" that Evergreen has failed to live up to its contract."It’s an outrage -- and I’m being nice," Jensen said.The Aleut Corp., which now owns the abandoned U.S. Navy base at Adak, has been planning to use the airfield and deep-water port for such things as a refueling and reprovisioning facility, and as a fish processing center for the Aleutian area.Jet service would greatly help the plans for economic development in the region, Jensen said.Orin Seybert, president of Pen- Air, has been flying in the Aleutian Islands since 1955, and said he’s got a good handle on what level of service is needed.Time was, when the island was flush with some 5,000 Navy personnel, jet service made economic sense. But with a population of just a couple of hundred people now, jet service doesn’t fly financially, Seybert said.Seybert’s airline has made more than 150 flights to Adak under its interim award given last July. Seybert said his airline can handle all the cargo Evergreen is given under the contract."We could have handled all of it on our own," Seybert said.PenAir is lobbying hard for the entire Adak contract, but the Transportation Department’s new bid offering stipulates that an airline must provide service with an airplane that has at least a 60-passenger capacity.PenAir’s Saab 340Bs only have 30 seats, which Seybert points out, is a big chunk of the island’s population currently."It doesn’t seem fair," said Seybert, adding that he’s pushing legal and congressional avenues to have the 60-seat requirement changed."You gotta crawl before you can walk," Seybert said. "If the demand grows to the point it warrants a jet, we’ll get a jet. But we aren’t there yet."PenAir has been flying to Adak since December 2001 when Reeve Aleutian Airways went out of business. Reeve had operated two Boeing 727-100 combis that serviced Adak and other Aleutian destinations, as well as the Russian Far East.Reeve operated its flights with no government subsidy.