Order 2011-9-20

Served: September 30, 2011

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

Issued by the Department of Transportation

on the 30th day of September, 2011

ORDER EXTENDING ESSENTIAL AIR SERVICE CONTRACTS

Summary

By this Order, the Department is extending the contract of Cape Air to provide subsidized 

Essential Air Service (EAS) at Hagerstown, Maryland, and Lancaster, Pennsylvania, 

through January 31, 2012. The annual subsidy rates for service between October 1, 2011

and January 31, 2012, will be set at $1,368,273 for Hagerstown and $1,647,112 for 

Lancaster.1

Background

Both communities are within 70 driving miles of a large hub -- Washington Dulles 

International for Hagerstown and Philadelphia International for Lancaster -- and thus 

temporarily lost eligibility to receive EAS subsidy under P.L. 106-69 in 2000.2 However, 

Section 409 of Vision 100 (Public Law 108-176, Vision 100 -- Century of Aviation 

Reauthorization Act of 2003) allowed these two communities to petition the Department 

to review their mileage determinations. The law directed the Secretary of Transportation 

to consult with the Governors of the States or their designees, and to consider their 

certifications as to the “most commonly used route” between the communities and the 

nearest large or medium hub airport. Subsequently, the communities petitioned the 

 1 Such subsidy is calculated and distributed on a fiscal year basis, subject to the availability of appropriated 

funds.

2 Congress first established these eligibility standards under P.L. 101-164 for fiscal year 1990, and 

reestablished them in fiscal years 1994-1999. Subsequently, the standards were made permanent by 

P.L. 106-69, The Department of Transportation and Related Agencies Act of 2000.

Essential Air Service at

HAGERSTOWN, MARYLAND

LANCASTER, PENNSYLVANIA

Under 49 U.S.C. 41731 et seq.

 DOCKET DOT-OST-2006-25228

 DOCKET DOT-OST-2002-11450
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Department to reconsider their mileage determinations. The Department received 

certifications from the Governors of each State that their communities were more than 70 

miles from the nearest medium or large hub via the “most commonly used route.” By 

Orders 2004-3-26 (Lancaster) and 2005-4-17 (Hagerstown), the Department affirmed the 

States’ certifications and reinstated both communities’ eligibility for EAS subsidy 

through September 30, 2007, the end of the then-current Federal Aviation Administration 

Reauthorization period.

Since September 30, 2007, similar extensions of the “most commonly used route” 

standard, as described above, have been signed into law extending eligibility for both 

communities to receive subsidized EAS, through September 30, 2011.3

By Order 2008-12-33, December 31, 2008, the Department selected Cape Air to provide 

four nonstop round trips per day at Hagerstown at the annual subsidy rate of $1,203,167, 

and five nonstop round trips per day at Lancaster at the annual subsidy rate of 

$1,372,474, with all service being provided to Baltimore-Washington International 

Airport using 9-seat Cessna 402 aircraft, through September 30, 2009. By various 

subsequent orders,4 the Department has extended Cape Air’s EAS contract at the two 

communities through September 30, 2011.

Recent Developments

Public Law 112-27, signed into law on August 5, 2011, amended the definition of 

“eligible place” for the purpose of receiving EAS. See 49 U.S.C. § 41731. The 

amendment states that to be eligible, a community must be located not less than 90 miles 

from the nearest medium or large hub airport and must have had an average subsidy per 

passenger of less than $1,000 during the most recent fiscal year, as determined by the 

Secretary of Transportation. Section 41731, as amended, also grants the Secretary the 

authority to issue a waiver of the 90-mile criterion if the Secretary determines that the 

“geographic characteristics of the location result in undue difficulty in accessing the 

nearest medium or large hub airport.” 49 U.S.C. § 41731(d). The Department is 

currently working on a Notice of Proposed Rulemaking (NPRM) regarding the new 

provisions under 49 U.S.C. § 41731, as amended, which it plans to issue in the near 

future. The Department will not apply the new eligibility criterion at any community 

until the rulemaking is complete.5

On September 16, 2011, the President signed into law the Surface and Air Transportation 

Programs Extension Act of 2011 (P.L. 112-30). That law, among other things, extended 

the “most commonly used route” standard and both communities’ eligibility to receive 

subsidized EAS under that standard through January 31, 2012.

 3 For a complete history on the extensions and the Department’s actions, see Order 2010-10-1, 

October 1, 2010. 4 See Orders 2009-8-16, 2010-3-20 and 2010-10-1. 5 We are taking this action pursuant to 49 U.S.C. §§ 40101(a) (7), (11), and (16), 40109(c), and 41731-42; 

see also 14 CFR Parts 271, 323, and 325.
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Decision

Cape Air’s current contract expires on September 30, 2011. Therefore, the Department

must take action to ensure uninterrupted subsidized EAS at the two communities. Our 

options are to extend Cape Air’s contract or issue a Request for Proposals for a new 

contract period. Cape Air inaugurated service at both communities in March 2009, so it 

will have been in place for two and one-half years when its contract expires this 

September 30, beyond the typical two-year contract. To serve the public interest, and 

because as a practical matter there is not sufficient time to issue a request for proposals, 

process a carrier-selection case, and have a new carrier in place prior to October 1, 2011, 

we will continue to pay subsidy to Cape Air for service to these two communities.

Further, we find Cape Air’s revised annual subsidy rates to provide EAS at the two 

communities from October 1, 2011, to January 31, 2012, to be reasonable.6

Therefore, the Department will extend the expiration date of Cape Air’s EAS contract for 

Hagerstown and Lancaster through January 31, 2012, at new rates that represent slightly 

higher annual subsidy levels: from $1,203,167 to $1,368,273 for Hagerstown and from 

$1,372,474 to $1,647,112 for Lancaster.

This Order is issued under the authority delegated in 49 CFR Section 1.56a(f).

ACCORDINGLY,

1. The Department extends the expiration date of the EAS contract of Hyannis Air 

Service, Inc. d/b/a Cape Air, for the provision of EAS at Hagerstown, Maryland, and

Lancaster, Pennsylvania, as set forth in Appendix B, through January 31, 2012;

2. Dockets DOT-OST-2006-25228 and DOT-OST-2002-11450 will remain open until 

further order of the Department; and

 6 By letter dated August 24, 2010, Cape Air proposed updated annual subsidy rates to continue its existing 

EAS service patterns at the two communities, through May 15, 2012.
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3. The Department will serve a copy of this order on the airport managers of Hagerstown 

and Lancaster, and Hyannis Air Service, Inc. d/b/a Cape Air.

By:

SUSAN L. KURLAND

Assistant Secretary for Aviation

and International Affairs

(SEAL)

An electronic version of this document is available online at

www.regulations.gov
Appendix A

AREA MAP
Appendix B

HYANNIS AIR SERVICE, INC. d/b/a CAPE AIR

ANNUAL COMPENSATION REQUIREMENT FOR ESSENTIAL AIR SERVICE AT

HAGERSTOWN, MARYLAND, AND LANCASTER, PENNSYLVANIA
Appendix C

Page 1 of 3

HYANNIS AIR SERVICE, INC. d/b/a CAPE AIR

ANNUAL COMPENSATION REQUIREMENT FOR ESSENTIAL AIR SERVICE AT

HAGERSTOWN, MARYLAND

Effective period: October 1, 2011, through January 31, 2012.

Service: 28 nonstop round trips per week to Baltimore-Washington International 

Airport

Intermediate stops and 

upline service: No upline service is permitted without prior Department approval.

Aircraft type: Cessna 402 (9 seats)

Timing of flights: Flights must be well-timed and well-spaced in order to ensure full 

compensation.

Annual compensation: $1,368,273

Subsidy Rate Per

Arrival/Departure: $4841

Weekly Compensation 

Ceiling: 2 $27,1043 

___________________________

1

 Annual compensation of $1,368,279 divided by 2,825 annual arrivals and departures, assuming a 97% 

completion factor. (56 flights per week x 52 weeks x 97% completion = 2,825)

2

 This rate assumes an annual completion factor of 97 percent. A compensation ceiling is to be applied 

per calendar week such that service above that ceiling in one week cannot make up for service shortfalls 

in another week.

3

 Subsidy rate per arrival/departure of $484 multiplied by 56 eligible arrivals and departures.
Appendix C

Page 2 of 3

HYANNIS AIR SERVICE, INC. d/b/a CAPE AIR

ANNUAL COMPENSATION REQUIREMENT FOR ESSENTIAL AIR SERVICE AT

LANCASTER, PENNSYLVANIA

Effective period: October 1, 2011, through January 31, 2012.

Service: 35 nonstop round trips per week to Baltimore-Washington International 

Airport

Intermediate stops and 

upline service: No upline service is permitted without prior Department approval.

Aircraft type: Cessna 402 (9 seats)

Timing of flights: Flights must be well-timed and well-spaced in order to ensure full 

compensation.

Annual compensation: $1,647,112

Subsidy Rate Per

Arrival/Departure: $4661

Weekly Compensation 

Ceiling: 2 $32,6203 

___________________________

1

 Annual compensation of $1,647,112 divided by 3,531 annual arrivals and departures, assuming a 97% 

completion factor. (70 flights per week x 52 weeks x 97% completion = 3,531)

2

 This rate assumes an annual completion factor of 97 percent. A compensation ceiling is to be applied 

per calendar week such that service above that ceiling in one week cannot make up for service shortfalls 

in another week.

3

 Subsidy rate per arrival/departure of $466 multiplied by 70 eligible arrivals and departures.
Appendix C

Page 3 of 3

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 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 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 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 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 requirement 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 contracts 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 are not currently available for performance under this order beyond September 30, 2011. 

The Department’s obligation for performance under this order beyond September 30, 2011, is 

subject to the availability of appropriated funds from which payment for services can be made. 

No legal liability on the part of the Government for any payment may arise for performance 

under this order beyond September 30, 2011, until funds are made available to the Department 

for performance. If funds are not made available for performance beyond September 30, 2011, 

the Department will provide notice in writing to the carrier.

All claims for payment must be submitted within 60 days of the last day of service provided 

under this order.