Order 2010

- 3

- 20

Served: March 16 , 20 10



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

Issued by the Department of Transportation

on the 16 th day of March, 2010

ORDER EXTENDING ESSENTIAL AIR SERVICE ELIGIBILITY

Summary By this order, the Department is extending the curr e n t subsidy contract of Cape Air to prov ide subsidized essential air service (EAS) at Hagerstown , Maryland

, and Lancaster, P ennsylvania

, through September 30, 2010

. 1

Background By Order 2008

- 12

- 33 , the Department selected Cape Air to provide subsidized EAS at both communities through September 30, 2009. S ervice consist s of 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 Baltimor e

Washington International Airport with 9

- seat Cessna 402 aircraft.

Over the last several years, both communities have been in and out of the EAS program because they did not meet statutory eligibility standards , i.e., they are within 7 0 driving miles of a large

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

Essential Air Service at

HAGERSTOWN, MARYLAND LANCASTER, PENNSYL VANIA

Under 49 U.S.C. 41731 et seq

. DOCKET DOT

- OST

- 2006

- 25228 DOCKET DOT

- OST

- 2002

- 114502

hub

-- Washington Dulles International for Hagerstown and Philadelphia International for

Lancaster

. 2

Section 409 of Vision 100 (Public Law 108

- 176, Vision 100

– Century of Aviation Reauthorization Act of 2003) entitled communities that lost subsid y eligibility during the two

year period ending on the date of enactment, December 12, 2003, to petition the Department to review the mileage determination. The law directed the Secretary of Transportation to consult

with the Governors of the States or th e Governors’ designees, and to consider their certification as to the “most commonly used route” between the community and the nearest large or medium hub airport. If a community was reinstated, its eligibility was renewed effective through September 30, 2007, the end of the then

- current Federal Aviation Administration Reauthorization. The Department reinstated the communities’ subsidy eligibility under the “most commonly used route” statute through September 30, 2007, at which time we allowed the

incumbe nt carrier s to suspend service.

On February 28, 2008, the President signed into law the Airport and Airway Extension Act of

2008 (P.L. 110

- 190) , reinstating the “most commonly used route” standard in measuring distance from EAS communities to hub airports

, through September 30, 2008.

On September 30, 2008, the Pres ident signed into law the Federal Aviation Administration Extension Act of 2008, Part II (P.L. 110

- 330), once again reinstat ing the “most commonly used

route” standard , thereby guaranteeing the communit ies ’ eligib ility for subsidized EAS , this time through September 30, 200 9

. The Department issued an order requesting proposals and by

Order 2008

- 12

- 33, the Department selected Cape Air to provide service to the communities

, through September 30, 2009

.

In August 2009, as the communities’ eligibility was coming to an end, Congress was considering a number of aviation bills, some of which would have extended these communities’ eligibility. Therefore, b y Order 2009

- 8

- 16, the Department found that go od cause existed to extend the subsidy eligibility of these communities through March 31, 2010, based on a statutory provision that g a ve the Department the discretion to continue to authorize subsidy beyond September 30

. (See Order 2009

- 8

- 16 for a complet e discussion.) Section 205 of P.L. 106

- 181 states that the Secretary may authorize subsidy for EAS communities located within 70 highway miles of a hub airport, if the most commonly used highway route between the community and the airport

exceeds 70 miles

.

Recent Developments

On September 23 , 20 09 , the President signed into law the Fiscal Year 2010 Federal Aviation

Administration Extension Act (P.L. 111

- 69) . Among other things, that law re

- imposed the “most commonly used route” standard , thereby once aga in guaranteeing the communities’ eligibility for

subsidized EAS , this time through September 30, 2010

.

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 2000.3

Decision Congress has now guaranteed Hagerstown and Lancaster subsidized EAS through September 30,

2010 . Cape Air’s current contract expires on March 3 1, 2010. Therefore, we must take action to ensure the continued, uninterrupted air service for these communiti es. Our options are to extend Cape Air’s contract or issue a Request for Proposals for a new two

- year contract. Cape Air inaugurated service at both communities in March 2009, so it will have been in place for only a year when its contract expires this March 31, well short of the typical two

- year contract. Moreover, as a practical matter, there is not sufficient time to issue a request for propo sals, process a carrier

- selection case, and have a new carrier in place much prior to September 30.

We will hereby extend the contract of Cape Air for the provi sion of EAS at Hagerstown and

Lancaster through September 30, 201 0

.

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

ACCORDINGLY,

1. The Department extends the contract of Hyannis Air Service, Inc. d/b/a Cape Air

., for the provision of EAS at Hagerstown, Maryland, and Lancaster, Pennsylvania

, first established by

Ord er 2008

- 12

- 33 and a s set forth in Appendix B , through September 3 0 , 201 0 ;

2 . Docket s DOT

- OST

- 2006

- 25228 and DOT

- OST

- 2002

- 11450 will remain open until further order of the Department; and

3 . The Department will serve a copy of this order on the m ayor s a nd a irport m a nager s 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 on line 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, PENNSYLVA NIA

### 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: April 1, 20 10

, through September 3 0 , 20 1 0

.

Service: 28 nonstop round trip s 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 we ll

- spaced in order to ensure full compensation.

Annual compensation: $1,203,167

Subsidy Rate Per Arrival/Departure: $426 1

Weekly Compensation Ceiling: 2 $23,85 6 3

___________________________ 1 Annual compensation of $1,203,167 divi ded 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/departur e of $426 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: April 1, 20 10

, through September 3 0 , 20 1 0

.

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: $1,372,474

Subsidy Rate Per Arrival/Departure: $389 1

Weekly Compensation Ceiling: 2 $27,230 3

___________________________ 1 Annual compensation of $1,372,474 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 canno t make up for service shortfalls

in another week.

3 Subsidy rate per arrival/departure of $389 multiplied by 70 eligible arrivals and departures.

### Appendix C Page 3 of 3

General Terms and Conditions for Essential Air Service

The carrier understands tha t 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, witho ut 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 we ather 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 f or 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 Depart ment 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, a nd 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 , 20 10

. The Government's obligation for performance under this order beyond September 30 , 20 10 , is contingent upon 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 , 20 10 , until funds are made available to the Department for performance. If funds are not made available for perf ormance beyond September 30 , 20 10 , the carrier will receive notice in writing by the Department.

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

under this order.