Order : 20 10

- 10

- 7

Served: October 8 , 20 10



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

Issued by the Department of Transportation

on the 8 th day of October , 20 10

Essential Air Service at

MASSENA, O GDENSBURG AND WATERTOWN, NEW YORK

Under 49 U.S.C. 41731 et seq

. DOCKET DOT

- OST

- 1997

- 2842



### ORDER RE SOLICI TING CARRIER PROPOSALS

Summary By this order, the Department is re soliciting proposals

, with or without subsidy, from carriers

interested in providing essential air service (EAS) at any or all of the above

- captioned

communities. Proposals are due by October 2 7

. (See Appendix A for map.)

Background By Order 2008

- 3

- 15

, March 14 , 200 8 , the Department selected Hyannis Air Service, Inc. d/b/a Cap e Air (Cape A ir) to provide EAS at the three communities for the two

- year period through September 3 0 , 20 10 . That order established a total annual subsidy rate of $ 3

, 879

, 863 for s ervice

consist ing of 21 nonstop round trips per week between each community and Albany County Airport

, with 9

- seat Cessna 402 aircraft

.

By Order 2010

- 5

- 32, May 28, 2010, the Department requested proposals for a new two

- year period beginning October 1, 2010. In response to that order, we received proposals from the incumbent, Cap e Air, Gulfstream International Airlines, Inc. (Gulfstream) , a nd Charter Air Transport, Inc. (Charter Air).

Proposals Cape Air proposed three service options, each with an associated two

- year and four

- year subsidy

rate. 1

1 Cape Air proposed two

- and four

- year subsidy rate s for each service option, offering a 3% savings for the longer term period. U nder Option 1, Cape air proposed to provide each community with 21 nonstop round trips per week to Albany at the two

- year and four

- year combined annual subsidy rates of- 2

-

$ 4,562,619 and $ 4,425,741 , respectively. Option 2 is for the same service as Option 1, but for only Massena and Ogdens burg for two

- year and four

- year annual rates of $3,134,907 and $ 3,040,861 , respectively. Option 3 is the same as Option 1 except that three of the nine daily round trips (morning, mid

- day and evening) would continue to/from Boston for two

- year and

four

- ye ar subsidy rates of $ 4,880,040 and $ 4,733,639 , respectively.

Charter A ir proposed two options. Option 1 , which includes several sub

- options, proposes 12 nonstop and one

- stop round trips to New York’s JFK airport (provided the carrier could obtain

slots a t the airport) with 30

- seat Embraer EMB

- 120 aircraft

. This Option is a two

- city only option, which would leave one community without service. Specifically, Option 1.1 proposes Ogdensburg / Watertown service at $2,847,311 annually ; Option 1.2 proposes

M asse na /O gdensburg service at $2,759,171 annually ; and Option 1.3 proposes
M assena / W atertown service at $2,985,816 annually. Option 2 would provide each community

with 12 round trips a week to JFK. All of Massena’s service would be one

- stop; all of

Watertown’ s would be nonstop; and Ogdensburg’s service would consist of a mix of nonstop and

one

- stop. All service would be provided with 30

- seat Embraer EMB

- 120 aircraft at a combined annual subsidy rate of $4,568,040.

Gulfstream proposed a three

- city, all

- or

- not hing package to provide each community with 12 nonstop round trips per week to Boston with 19

- seat Beech 1900D aircraft at an annual combined subsidy rate of $7,583,211. C urrently operating as Continental Connection, the carrier proposed to operate this s ervice as Gulfstream Airlines, i.e., without a code

- share.

Community and State Comments We received a large number of comments in response to the carriers’ proposals, both from community officials and from the general public

.

The City of Ogdensburg and t he Ogdensburg Bridge and Port Authority strongly support Cape Air, in fact for the carrier’s proposed four

- year option. The City of Watertown endorses Gulfstream, while the majority of individual responses support Cape Air. A t Massena , the Town

C ouncil v oted to support Gulfstream , although not unanimously, while stating that the community has no complaints against Cape Air’s service

. A majority of the Town C ouncil and some individuals said that they prefer the larger aircraft proposed by Gulfstream.

Dec ision We try to accede to community views when practical and within budget but, given the way the proposals are packaged, that is not possible in this case . First, Charter Air Transport has received no community support and its 3

- city package requires more subsidy than Cape Air’s

. Cape Air’s proposal requires at least a two

- city minimum and is supported by only Ogdensburg. Gulfstream’s pr oposal is a three

- city, all

- or

- nothing package

, is not supported by Ogdensburg,

and requir es an additional $2.5 million over the combination proposed by Cape Air. Since community support is split between carriers, we cannot

, therefore, accede to the preferences of each community. Thus, we have decided to rebid the case in an effort to obtain proposals that would satisfy the needs of all three communities at subsidy levels that are competitive

.

Request for Proposals

W e are again requesting proposals from carriers interested in providing service at Massena, Ogdensburg and Watertown , with or without subsidy support, for the two

- year period. Carriers- 3

-

should file their proposals no later than October 27 . After that date , our staff will docket proposals, thereby making them public, and direct each carrier to serve a copy of its proposal on the civic parties and other applic ants. Shortly afterwards, we will provide a summary of the proposals to communit y officials and ask them to submit their final comments. We will give full consideration to all proposals filed in a timely manner. 2

Interested carriers should prepare their proposals with every expectation that their initial proposals will also be their final and only proposals. We retain the discretion to negotiate proposals with carriers when we deem it desirable. We also retain the discretion to reject outright all unre asonable or unrealistic proposals and solicit a new round of proposals.

We are here providing interested carriers with some basic information to serve as guidance when they prepare their proposals, but we will not prescribe a precise format for their prop osals. We expect proposals to adequately describe the service being proposed and the annual amount of subsidy being requested. The applicants can make their own judgments as to the level of detail they wish to present; however, they might want to include proposed schedules as well as supporting data for their subsidy requests, such as projected block hours, revenues and expenses. We strongly encourage clear, well

- documented proposals that will facilitate their evaluation by the affected community and the Department. 3

Proposals should provide sufficient capacity to accommodate historical levels of traffic. In order to assist carriers in developing traffic and revenue projections for their proposals, we have summarized historical passengers in Appendix B. Specifically for these three communities

, we expect proposals that are consistent with what the communities currently receive (three daily round trips with nine

- seat aircraft)

. We note that EAS at the communities calls for service with

15

- seat aircraft. However, during the current two

- year contract, the communities approved the

service with nine

- seat aircraft

. For carriers proposing 15

- seat or larger aircraft, we expect proposals for two round trips a day (12 per week). If the proposed service contemp lates serving two communities on the same flight s with 15

- seat aircraft, then proposals should reflect three round trips a day (18 per week). Service should be to Albany, Boston, New York or any hub that offers access to the national air transportation sy stem. Carriers are also welcome to propose more than one option, if they choose; they need not limit themselves to those requirements if they envision other, potentially more attractive service possibilities

-- different hubs, for example

-- with subsidy requirements that remain competitive. The communities and air carriers are encouraged to work together in advance of the due date for proposals to craft a service pattern

that is desirable to the communit ies and meets the operational needs of the airline interested in submitting a proposal.

2 Carriers should not expect the Department to accept late filings. In cases where a carrier proposes to provide essential air service without subsidy and we determine that serv ice can be reliably provided without such compensation, we do not proceed with the carrier

- selection case. Instead, we simply rely on that carrier’s subsidy

free service as proposed.

3 In selecting a carrier to provide subsidized essential air service, 49 U.S.C. 41733(c)(1) directs us to consider four factors: (1) service reliability; (2) contractual and marketing arrangements with a larger carrier at the hub; (3) interline arrangements with a larger carrier at the hub; and (4) community views. In additio n, the Consolidated Appropriations Act, 2008, Public Law 110

- 161 , provides that when selecting a carrier to provide EAS, the Department may consider the relative subsidy requirements, thus codifying a factor that we have considered since the inception of t he program. Interested carriers should also be aware that our general provisions governing EAS will be included in the selection order as part of our authorization of subsidy for the selected service. Appendix C of this order contains those general provi sions.- 4

-

New Filing Procedures Carrier proposals should be submitted to the Department with all materials merged into a single document. In addition, because the document will be published on Regulations.gov, each page

should be formatted to be viewed online.

Other Carrier Requirements The Department is responsible for implementing various Federal statutes governing lobbying activities, drug

- free workplaces and nondiscrimination. 4 Consequently, all carriers receiving

Federal subsidy to support essential air service must certify that they are in compliance with Department regulations regarding drug

- free workplaces and nondiscrimination, and those carriers whose subsidies exceed $100,000 over the life of the rate term must also certify that they are in compliance with the regulations governing lobbying activities. All carriers that plan to submit proposals involving subsidy should submit the required certifications along with their proposals. Interested carriers requiring more detailed information regarding these requirements, as well as copies of the certifications, should contact the Office of Aviation Analysis at (202) 366

- 5903. The Department is prohibited from paying subsidy to carriers that do not

submit these documents. 5

Community and State Comments Civic officials are welcome to submit comments on the proposals at any time. As noted earlier, we will provide a summary of the proposals to the civic parties and ask them to submit their final comments shortly after October 27 , the due date for carrier proposals.

This order is issued under authority delegated in 49 CFR 1.56a(f).

ACCORDINGLY, 1. We request that carriers interested in providing essential air service at Massena, Ogdensburg,

and W atertown, New York

, submit th eir proposals, with or without subsidy requests, no later

than October 27 , 20 10 . The proposals should be emailed to: EAS@dot.gov with the title “Proposal to Provide Essential Air Service at Massena, Ogdensburg and Wate rtown, New York,

Docket DOT

- OST

- 1997

- 2842 ” ; 6

2. Docket DOT

- OST

- 1997

- 2842 will remain open until further order of the Department; and

4 The regulations applicable to these areas are: (1) 49 CFR Part 20

– New restrictions on lobbying; (2) 49 CFR

Part 21

– Nondiscrimination in federally

- assisted programs of the Department of Transportation

– Effectuation of

title VI of the Civil R ights Act of 1964; 49 CFR Part 27

– Nondiscrimination on the basis of disability in programs and activities receiving or benefiting from Federal financial assistance; and 14 CFR Part 382

– Nondiscrimination on the basis of disability in air travel; and (3) 49 CFR Part 29

– Government

- wide debarment and suspension (non

procurement) and government

- wide requirements for drug

- free workplace (grants).

5 The certifications are also available on the web at http://ostpxweb.dot.gov/aviation/index.html.

6 Questions regarding filings in response to this order should be directed to Renée Williams at 202

- 366

- 1058, or via

email at renee.williams@dot.gov . Parties may call 202

- 366

- 5903 to confirm receipt of their EAS proposa ls.- 5

-

3. The Department will serve a copy of this order on the mayors and airport managers of Massena, Ogdensburg, and Water town, Hyannis Air Service, Inc. d/b/a Cape Air

, and the parties listed in Appendix D.

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

Historical O&D Traffic and Average Daily Enplanements 1

Massena, NY



### Average Daily

O&D Traffic Enplanements 2



### 2007 3,420 1.5

2008 1,793 2.9

2009 6,402 10.2

O gdensburg, NY



### Average Daily

O&D Traffic Enplanements 2



### 2007 4,784 7.6

2008 1,166 1.9

2009 3,976 6.4

Watertown, NY



### Average Daily

O&D Traffic Enplanements 2



### 2007 18,232 29.1

2008 1,217 1.9

2009 4,832 7.7

________________________________ 1 Source: Bureau of Transportation Statistics; TranStats Form 41 , Schedule T

- 1 00

. 2 Daily averages are based on one

- half of the O&D passengers

, divided by 3 13 service days (314 during leap years).

NOTE: Due to Big Sky’s shutdown, the communities were without service for most of 2008.

### Appendix C

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 sched ule 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 c arrier 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 co mpletely, 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 stipul ated 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. Howeve r, any such statutes, regulations, or amendments thereto shall not operate to controvert the foregoing paragraph.

Funds are not currently available for performance under this solicitation beyond [DATE]. The Department’s obligation for performance under t his solicitation beyond [DATE], 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 [DATE ], until funds are made available to the Department for performance. If funds are not made available for performance beyond [DATE], the carrier will receive notice in writing by the Department.

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

under this order.

### Appendix D

Scheduled Air Carriers, Contiguous US and Puerto Rico

Air Greco/Wings Air Air Sunshine, Inc. Air Sunshine, Mirmohammad Adili Air Wisconsin, Annette Daly Air Wisconsin, Jim Rankin

Airline Associat es, Bill Mishk Alaska Airlines, Jeff Cole Alaska Airlines, Sandy Sinick Allegiant Air, Brian Davis American Airlines, Carl Nelson American Eagle, Jeffrey Hartz Bemidji Aviation, Cori Rude Bemidji Aviation, Arlen Rinkenberger Cape Air, Andrew Bonn ey Cape Air, Dan Wolf Cape Air, J.Flaherty Colgan Air, Kevin Scott Colgan Air, Mike Colgan CommutAir, Andy Price CommutAir, Joel Raymond Consultant, Robert Silverberg Continental, Bruce Keiner Continental, Dan Weiss Continental, Lorry Halloway Delta, Anthony Canitano Delta, Dan Shuman Delta, Jeff Morgan Delta, Joe Esposito Delta, Karen Zachary Delta, Kristal Murphy Delta, Sascha Vanderbellen DHS, Bill Ragan DHS, David Bernier Era Aviation, Mike Lenorman Executive Airlines, Kate So led Frontier Flying, Bob Hajducovich GemAir/Salmon Air, Dan Schroeder GemAir/Salmon Air, JoAnn Wolters Great Lakes, Chuck Howell Great Lakes, Doug Voss Great Lakes, Greg Stephens Gulfstream, Dave Hackett Gulfstream, Mickey Bowman Gulfstream, T. C ooper Horizon Air, Dan Russo Horizon Air, Jennifer Thompson Horizon Air, Mike McQueen Horizon, Jeff Cole ICEPR, Luis Irizarry Intrepid Interntl Air, Rick Eyk Island Air Charters, Linda House Jet Air, Daniel Wolford Kenmore Air, Tim Brooks

Mesa Air, Michael Lotz Mesaba, John Spanjers Mesaba, Max Shemesh Midwest Airlines, Greg Aretakis MN Aviation, Jose Maldonado Multi Aero, Darnea Multi Aero, Shane Storz Northwest Airlines, Aaron Murray Northwest, Tim McDonald NYDC, Henok Araya
OST, Brian Swanson OST, Dennis DeVany OST, Kevin Adams OST, Kevin Schlemmer OST, Michael Martin OST, Renee Williams Pacific Wings, Greg Kahlstorf PenAir, Danny Seybert PenAir, Scott Bloomquist Pinnacle Airlines, Joe Williams Pinnacle Airlines, Phil Reed Planemasters, Inc., John Kessler Planemasters, Inc., Paul Berliner Planemasters, Inc., Todd DeSimone Public Charters, Jim Gallagher Scenic, Mary Schneider Scenic, Mitzi Daines SeaPort/Wings of Alaska, Jim Day SeaPort/Wings of Alaska, Nate Val lier Seaport/Wings of Alaska, Rob McKinney Shuttle America, Jerry Balsano SkyWest, Eric Christensen SkyWest, Michael Thompson SkyWest, Steve Hart Sovereign Air, Bob Karns Sovereign Air, Lois R. Barton Tradewind, Eric Zipkin Trans States, Fred Ox ley Trans States, Gerry Wigmore United, Alicia Gabriel United, James Starnes US Airways, Benjamin Slocum US Airways, Howard Kass US Airways, Jason Reisinger Warbelows Air Ventures, Art Warbelow