July 22, 2010 Proposal of Hyannis Air Service, Inc., dba Cape Air to provide subsidized Essential Air Service for:



# Augusta/Waterville and Rockland, Maine Docket DOT - OST - 1997 - 2784 

### Each Non - Stop 

## To/From Boston: RKD: 5 daily round trips Jul - Aug, 4 Jun + Sep, 3 Oct - May AUG: 4 daily round trips Jun - Sep, 3 Oct - May For a two - or four - year term

Hyannis Air Service, Inc., dba Cape Air Attn: Andrew Bonney, 660 Barnstable Road, Hyannis, MA 02601 , ( 508) 862 - 9719 Media inquiries to Chuck Ferrara, VP Corporate Affairs: (617) 567 - 3597 Cape Air proposes to serve both Augusta/Waterville and Rockland, but is willing and able to operate either route without the other.1 

# Cape Air is delighted to have served Rockland since

2008, and would be honored to serve Augusta, too

• Cape Air’s Rockland – Boston service commenced November 1, 2008

• Annualized passengers carried YE2Q10 are 12,691, and growing at a 28% rate !

• As promised, Cape Air has kept fares low , averaging just $69

• Cape Air proposes exclusively non - stop service to/from Boston

• Cape Air offers interline connectivity with most major airlines including both US Airways and JetBlue Key points Cape Air Boston service, with Augusta

**Thank you, Knox County, for a fabulous first two years serving**  **your community!**2 

# Cape Air is a small but robust commuter airline, operating and growing since 1989

 First route was Boston – Provincetown, begun in October 1989 with three aircraft  Presently flying 59 Cessna 402s in five regions, and two ATR - 42s in Micronesia  Operating up to 600 flights daily  In 2009 flew more than 610,000 passengers  Stable, mature and growing company Key facts Cape Air: Leading the pack nine at a time

Photo courtesy Mark Garfinkel (August 7, 2000, Boston )3 

# For smaller communities and niche markets, Cape Air’s nine - seat planes have proven to be a good fit

 High - frequency, non - stop service  Interline e - ticketing and baggage agreements  Complete GDS sales channels:  866 - Cape - Air  In - house “Sabre” reservations office  Reliability  Subsidies used to lower fares  MOCHA HAGoTDI † culture and community investment Cape Air highlights “Key West Express”

† Make Our Customers Happy And Have A Good Time Doing It4 

# Today, Cape Air serves 16 communities in the Northeast... Northeast route map

Nantucket Martha’s Vineyard Provincetown Boston
Hyannis

New Bedford Rockland Lebanon Saranac Lake

Rutland

Albany Watertown Ogdensburg Massena

July 2010 route map White Plains Providence5 

# ...And has developed niches along the East Coast, in the Caribbean, Midwest and Micronesia Caribbean Florida Keys Micronesia Continental Connection Ft. Myers

Key West Florida

Mid - Atlantic Ponce Mayaguez San Juan Vieques

St. Croix St. Thomas Tortola

July 2010 route maps; Maps not to scale Midwest Illinois

Missouri Cape Girardeau Marion Quincy Kirksville

St. Louis6 

# Cape Air has been an interline carrier since 1993 enabling connectivity with most major airlines, now including ______

• Twenty - five interline agreements are in place, with almost all legacy airlines

• Cape Air has completed migration to interline e - ticketing , the updated industry norm

• Cape Air operates flights in Micronesia as

• Flights in the Caribbean have a code

• Five Boston routes have a code, and Cape Air can interline with JetBlue for Augusta and Rockland

• Flights in the Midwest operate with the code of Interline highlights7 

# Cape Air participates in the global distribution systems (GDS), giving Augusta and Rockland access to the world, and the world access to Augusta and Rockland Cape Air is sold through:

# You can fly anywhere from Augusta or Rockland via Cape Air

• Cape Air’s interline agreements allow single - ticket connecting itineraries and through - check of luggage with other airlines

• Purchase interline tickets via:

–

– Any legacy airline’s reservation center can book interline with Cape Air (including US Airways!)

– 800 - JetBlue (JetBlue’s website coming soon, too !) • Cape Air is the only regional airline that can interline with JetBlue

– 866 - Cape - Air

– Any travel agent

8 With Cape Air, the world is your oyster lobster!

# Cape Air’s independence offers numerous benefits

• Complete control of:

– Fares and fees

– Marketing and advertising

– Community philanthropy

– Schedule

• Direct relationships with the decision makers at Cape Air

• Independent reservations center:

– 866 - Cape - Air

– Capeair.com

• No fees to book tickets with a live Cape Air reservations agent or at the counter

• No first checked bag fee; no change fees • Financially healthy airline

• Aircraft isolated on routes to provide reliability

– Good availability of spare aircraft

• Same connectivity as a network affiliate, since Cape Air has e - ticket and baggage agreements with most major airlines

9 Benefits of independence

# So, how has Cape Air performed over the last two years serving Rockland?

10

# At Rockland, passengers are up 14% compared to the predecessor and the trend is positive

11,333 11,564 11,744 11,840 11,833 12,028 12,205 12,301 12,691

10,500 10,750 11,000 11,250 11,500 11,750 12,000 12,250 12,500 12,750 13,000

Oct - 09 Nov - 09 Dec - 09 Jan - 10 Feb - 10 Mar - 10 Apr - 10 May - 10 Jun - 10 11 Rockland passengers Sum of both directions, year ending

Predecessor’s last year: 11,090 +14%

# On a year/year basis for comparable months, Rockland traffic is up 28%...

12 461 542 400 520 500 621 798 1,073
692 722 496 513 695 798 894 1,463

0 200 400 600 800 1000 1200 1400 1600

Nov Dec Jan Feb Mar Apr May Jun 

## Last Year This Year Rockland passengers Sum of both directions

# In June 2010, Cape Air enplaned more passengers than in any previous June back through at least 1985

628 571 502 490

274 334 335 249 266 283 460 451 457 421 701 621 641
492 478 568 530 443 550
422 502 711

0 100 200 300 400 500 600 700 80019851986198719881989199019911992199319941995199619971998199920002001200220032004200520062007200820092010 13 Rockland June enplanements14 

# Cape Air has kept Rockland fares low ensuring Rockland’s air service is accessible

$64 $63 $62 $61 $63 $64 $65 $66 $70 $66 $68 $66 $66 $67 $67 $68 $73 $72 $71 $75

$0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100Nov-08Dec-08Jan-09Feb-09Mar-09Apr-09May-09Jun-09Jul-09Aug-09Sep-09Oct-09Nov-09Dec-09Jan-10Feb-10Mar-10Apr-10May-10Jun-10 Actual Proposed Rockland fare, net each way Excludes government - mandated taxes and fees15 

# Now that JetBlue has switched to the Sabre reservations system, Augusta and Rockland can connect seamlessly within Logan’s Terminal C to Boston’s largest low - cost carrier Boston Logan Terminal “C”

Note: Not to scale Ticket counters TSA Security
As an interline carrier for 15 years, Cape Air facilitates through ticketing and bag transfer to most major airlines Customer service center

JetBlue is Boston’s largest low - cost carrier by either departures or ASMs, July 2010 OAG

# Cape Air is the only regional airline that can connect passengers and checked luggage with JetBlue

1617 Cape Air’s Telephone Reservations Center 

# Cape Air has had its own reservations center, using the industry - standard , system, for more than 15 years

Toll free reservations: 866 - CAPE -

AIR Never a booking fee!18 

# Connectivity with JetBlue is valuable to Augusta and Rockland because from Boston JetBlue has 535 weekly departures, to 33 cities , and... City Wkly Dpts 1 New York-JFK, NY 52 2 Washington-Dulles, VA 47 3 Orlando, FL 42 4 Baltimore, MD 34 5 Charlotte-Douglas, NC 28 6 Fort Lauderdale, FL 28 7 Buffalo, NY 21 8 Chicago-O'Hare, IL 21 9 Pittsburgh, PA 21 10 Raleigh/Durham, NC 21 11 Tampa, FL 21 12 Denver, CO 14 13 Los Angeles, CA 14 14 West Palm Beach, FL 14 15 Richmond, VA 14 16 Fort Myers, FL 14 17 San Diego, CA 14 18 Seattle/Tacoma, WA 14 19 San Juan, PR 14 20 San Francisco, CA 13 21 Austin, TX 7 22 Bermuda, BM 7 23 Jacksonville, FL 7 24 Las Vegas, NV 7 25 Long Beach, CA 7 26 New Orleans, LA 7 27 Oakland, CA 7 28 Santo Domingo, DO 7 29 San Jose, CA 7 30 Aruba, AW 4 31 Cancun, MX 3 32 Montego Bay, JM 2 33 Punta Cana, DO 2 Total 535 JetBlue’s Boston service July 2010 schedule

Source: OAG JetBlue’s Boston route map July 201019 

# ...Among the nine largest carriers at Boston, JetBlue has among the lowest yield, or fare per mile flown, meaning low total travel costs for Augusta and Rockland

$0.102 $0.102 $0.104 $0.106 $0.112 $0.132 $0.139 $0.143 $0.165

$0.00 $0.05 $0.10 $0.15 $0.20

United Southwest JetBlue American AirTran Continental Delta Air Canada US Airways Boston yield by carrier YE1Q10, revenue per passenger - mile flown

Source: US DOT O&D Survey Note: Largest carriers by departure frequency, OAG July 2010, excluding Cape Air

Cape Air’s connections to JetBlue mean low total trip costs Wkly Dpts 200 144 535 137 139 488 124 591 43920 

# JetBlue serves non - stop 13 of the most popular 15 markets at Boston

Rank Daily Passengers US Airways JetBlue 1 San Francisco, CA 1255 JetBlue 2 Los Angeles, CA 1204 JetBlue 3 Orlando, FL 1152 JetBlue 4 Chicago-O'Hare, IL 1134 JetBlue 5 New York-La Guardia, NY 1072 US Airways JFK 6 Baltimore, MD 1038 JetBlue 7 Atlanta, GA 1004 8 Fort Lauderdale, FL 799 JetBlue 9 Washington-National, DC 781 US Airways Dulles 10 Washington-Dulles, VA 621 DCA JetBlue 11 Dallas/Fort Worth, TX 603 12 Fort Myers, FL 595 JetBlue 13 Denver, CO 579 JetBlue 14 Tampa, FL 547 JetBlue 15 West Palm Beach, FL 537 JetBlue Top Boston markets YE1Q10passenger data, ranked by daily passengers each way; July 2010 schedule; alternative service noted

Source: “O&D” Survey and Official Airline Guide21 

# “JetBlue Airways Announces Major Expansion in Boston...”

BOSTON, Oct. 29, 2009 /PRNewswire - FirstCall/ -- JetBlue Airways (Nasdaq: JBLU) today announces a major expansion of service from its focus city at Boston Logan International Airport. The airline, which already offers service to the most nonstop destinations of any carrier from Boston, plans to boost daily departures by 30% by summer 2010 . With its expanded schedule, JetBlue and its growing base of 1,300 Boston crewmembers will offer travelers up to 78 daily flights to 33 top destinations....

" Here at JetBlue we are officially declaring Summer 2010 the Summer of Boston ," said Robin Hayes, Chief Commercial Officer for JetBlue. "Today's added flights represent an important next step in our commitment to offering Boston travelers the most robust schedule as well as the most destinations of any airline. http://www.newscom.com/cgi - bin/prnh/20090217/NY71475LOGO - b Reuters, October 29, 2009 http ://www.reuters.com/article/pressRelease/idUS203603+29 - Oct - 2009+PRN20091029 

## While22 

# ...US Airways is shrinking in Boston, with capacity in the last two years down 19 %

0 50 100 150 200 250 300 350 400 450 500Sep-08Oct-08Nov-08Dec-08Jan-09Feb-09Mar-09Apr-09May-09Jun-09Jul-09Aug-09Sep-09Oct-09Nov-09Dec-09Jan-10Feb-10Mar-10Apr-10May-10Jun-10Jul-10Aug-10Sep-10 

## - 19% US Airways available seat miles at Boston Year - ending weekly ASMs, in millions

Source: Official Airline Guide

# Cape Air has had a wonderful time marketing in Knox County, and looks forward to expanding marketing efforts if selected for Augusta

• More than $ 46,000 annual marketing budget proposed for each community

• Experienced, professional , in - house marketing department to promote Cape Air’s service

• Features in Cape Air’s in - flight magazine, The Birds’ Eye View

• Community sponsorships, like the 2010 Wings & Wheels at the Owls Head Transportation Museum

23 Marketing highlights

# To better serve these seasonal markets, Cape Air proposes increased frequency in summer months Augusta daily non - stop round trips



## 0 1 2 3 4 5JanFebMarAprMayJunJulAugSepOctNovDec Rockland daily non - stop round trips

24 

## 0 1 2 3 4 5JanFebMarAprMayJunJulAugSepOctNovDec

# Cape Air proposes service at the following subsidy rates, including a preferred, discounted four - year selection option

25 AUG RKD Stage (naut. miles) 129 135 Seats/Dpt 9 9 Sched. Dpts/Day 3.3 3.5 Annual Actual Dpts 2,328 2,481 PDEW 12.1 16.7 Pax/Dpt 3.7 4.8 Load Factor 41% 53% Annual Passengers 8,856 12,202 Avg. Net Fare $64 $69 Passenger Rev. $549,780 $816,657 AUG RKD Fuel $645,672 $705,675 Maintenance $516,338 $553,830 Pilots $166,667 $183,105 Ownership $100,590 $134,046 Stations $205,989 $374,748 Marketing $46,154 $49,192 De-icing $24,175 $25,767 General & Admin./Other $148,650 $138,030 Operating Expense $1,854,235 $2,164,393 Return of 5% $97,591 $113,915 Economic Expense $1,951,826 $2,278,308 Passenger Revenue $549,780 $816,657 Profit ($1,402,046) ($1,461,651) Subsidy Required $1,402,046 $1,461,651 Per Departure $602 $589 Per Passenger $163 $123 Subsidy Required $1,362,616 $1,420,545 Per Departure $585 $573 Per Passenger $159 $120 Expenses Drivers

2 - year 4 - year Selection term

Preferred26 

# Cape Air is proud to be a great air service provider for Rockland, and would be honored to serve Augusta, too

 A thriving, growing, successful air service, increasing enplanements at Rockland  Full interline connectivity, allowing same - ticket connections with the world on most major airlines  Seamless connectivity with Boston’s largest low - cost airline  High - frequency, non - stop service to Boston for each community:  RKD: 5 daily non - stop flights in Jul and Aug; 4 in Jun and Sep; 3 Oct - May  AUG: 4 daily non - stop flights Jun - Sep; 3 in Oct - May Cape Air offers the airline amenities Augusta and Rockland need:



## Thank you for inviting Cape Air to serve Augusta and Rockland!

Hyannis Air Service, Inc., dba Cape Air Attn: Andrew Bonney, 660 Barnstable Road, Hyannis, MA 02601 , ( 508) 862 - 9719 Media inquiries to Chuck Ferrara, VP Corporate Affairs: (617) 567 - 3597

## Appendix 

# Interline Examples on Online Travel Agencies28 

# Cape Air is on Expedia.com Screenshot from Expedia.com showing Cape Air LNS - PHX search for travel 22SEP0929 

# Cape Air is on Travelocity.com Screenshot from Travelocity.com showing Cape Air ATL - MAZ search for travel 22SEP0930 

# Cape Air is on Orbitz.com Screenshot from Orbitz.com showing Cape Air ART - DCA search for travel 22SEP0931 

# And on the Continental Airlines website