Or der: 20 1 2

- 7

- 25

Served : Ju ly 23 , 201 2



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 23 rd of July, 201 2

Essential Air S ervice at

KIRKSVILLE, MISSOURI

under 49 U.S.C. § 41731 et seq. Docket DOT

- OST

- 1997

- 2515

ORDER RE

- SELECTING CARRIER

Summary By this O rder

, the Department is re

- s electing Hyannis Air Service, Inc. dba Cape Air ( “ Cape

Air ” ) to provide E ssential A ir S ervice (EAS) at Kirksville, Missouri , at a n an nual subsidy rate of $1,649,248

, for a four

- year term, from October 1, 2012, through September 30, 2016

. 1

Background By Order 20 10

- 6

- 6

, June 3 , 20 10 , the Department selected Cape Air to provide 2 1 weekly

nonstop round trips on Cessna 402 aircraft from Kirksville to Lambert

- St. Louis International Airport (“St. Louis”) , for the two

- year period beginning when the carrier inaugurated service through the end of the 24 th month thereafter, at an annual subsidy of $ 1,422,110

. Cape Air inaugurated service to Kirksville on September 17, 2010, making the expiration date September 30, 20 12

.

In anticipation of the end of Cape Air’s curr ent contract , the Department issued Order 201 2

- 5

- 10, May 9, 2012 , to solicit proposals from all interested air carriers to provide service at Kirksville

, and several other communities

.

Proposal s In response to the request for proposals, we received a proposal from one carrier, Cape Air. Cape Air’s complete proposal may be accessed online at http://www.regulations.gov/ entering

“DOT

- OST

- 1997

- 2 515” in the “ SEARCH ” field.

1 Such subsidy is calculated and distributed on a fiscal year basis, subject to the availability of appropriated funds.- 2

-

Community and State Comments

On June 8 , 201 2 , we requested co mmunity co mment s regarding the carrier selection at
Kirksville

.

We received a June 27 , 2012

, letter from the Mayor of Kirksville. He states that “City Council is recommending Cape Air continue services at Kirksville Regional Airport with nine

- seat service.”

Decision The decision here is straightforward. Cape Air, the incumbent

, was the only carrier to submit a

propo sal

, and the community supports Cape Air to continue serving the community

.

The selection of Cape Air satisfies all four factors the Department is directed to consider. 1 Cape

Air is a well

- established carrier, providing a s ignificant amount of subsidized EAS throughout the country . When Cape Air was selected to serve Kirksville in 2010, the community had 1,877 enplanements and deplanements in CY2009. 2 Ca pe Air dramatically increased passenger traffic

at Kirksville

, by over 500% in CY 201 1, when the community had 9,952 enplanements and deplanements . Cape Air’s commitment to the community through extensive marketing and advertising efforts, attractive pricing and schedule options, its American Airlines code share at

St. Louis

, and availability of its flights and connecting flights on other major air lines through computerized reservations syste ms and online travel agencies, have contributed to its success at

Kirksville.

Cape Air proposed a four

- year rate for its Kirksville service. The Department has selected Cape Air, as well as other carriers, to provide service for four years or longer at more than a dozen communities. When the community supports a proposal tha t exce eds the typical two

- year period

and

, we find that the proposed rate will provide the Department a higher level of certainty against future rate increases, we are inclined to select a longer

- term rate, which we will do here.

W e also find that the subsidy l evels are reasonable for the service levels to be provided.

Based on all of the above , we will select Cape Air to provide status

- quo service of three daily round trips (21 per week) from Kirksville to St. Louis, for four years, from October 1, 2012,

throu gh September 30, 2016, at an annual subsidy rate of $1,649,248

.

We shall make Cape Air’s selection at Kirksville contingent upon the Department’s receiving properly executed certifications from Cape Air that it is in compliance with the Department’s regulations regarding drug

- free workplaces and nondiscrimination, as well as the regulations governing lobbying activities.

Carrier Fitness

49 U.S.C. § 41737(b) requires that we find an air carrier fit, willing, and able to provide reliable

service before we may subsidize it to provide EA S

. Cape Air is sub j ect to the Department’s

1 In selecting a carrier to provide subsidized EAS , 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) i nterline arrangements with a larger c arrier at the hub; and (4) community views.

2 See Order 2012

- 5

- 10- 3

-

continuing fitness requirements, and no information has come to our attention that would cause us to question the carrier's fitness at this time. We have contacted the Federal Av iation Administration, and it has raised no concerns that would negatively affect our fitness finding. We therefore conclude that the carrier remains fit to conduct the operations proposed here.

This O rder is issued under authority delegated in 49 CFR 1. 56a(f).

ACCORDINGLY,

1. We select Hyannis Air Service, Inc. dba Cape Air to provide E ssential A ir S ervice at Kirksville, Missouri ;

2 . We set the final rate of compensation for Hyannis Air Service, Inc. dba Cape Air

, for the provision of E ssential A ir S ervice at Kirksville, Missouri , as described in Appendix C ;

3 . We direct Hyannis Air Service, Inc. dba Cape Air to retain all books, records, and other source and summary documentation to support claims for payment, and to preserve and maintain

such docu mentation in a manner that readily permits its audit and examination by representatives of the Department. Such documentation shall be retained for seven years from when EAS begins or until the Department indicates that the records may be destroyed, which ever comes first. Copies of flight logs for aircraft sold or disposed of must be retained. The carrier may forfeit its compensation for any claim that is not supported under the te rms of this O rder;

4 . We find that Hyannis Air Service, Inc. dba Cape Ai r continue s to be fit, willing and able to

operate as a certificated carrier and capable of providing reliable E ssential A ir S ervice at Kirksville, Missouri ;

5. Th is docket will r emain open until further o rder of the Department; and

6 . We will serve copies of this O rder on the Mayor of Kirksville , the manager at Kirksville Regional Airport, and Hyannis Air Service, Inc. dba Cape Air

.

By:

SUSAN L. KURLAND Assistant Secretary

for Aviation and International Affairs

(SEAL)

An electronic version of this document is available at http://www.regulations.govAppendix A



## AREA MAP

This map is provided by Sabre ® AirVision TM Profit Essentials and is being used with express permission of the copyright holder,

Sabre Airline Solutions®.Appendix B

Proposal of Hyannis Air Service, Inc. dba Cape AirAppendix C

Hyannis Air Service, Inc. dba Cape Air

Essential Air Service to be Provided at Kirksville, Missouri

Effective Period : October 1, 2012, through September 30, 2016

Scheduled Service : Three nonstop round trip each day ( 21 per week) t o Lamber t

- St. Louis International Airport

Aircraft : Cessna 402

, 9 seats Rate per Eligible Flight: $ 776 1
Weekly Ceilin g : $ 32,592 2

Note: 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 O rder, including the service plans outlined in the O rder 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 oper ate its flight s in full conformance with the O rder 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 O rder 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 p rovide 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 o r 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 complete ly , t erminates or reduces payments for service or changes service requirements at a specific lo cation provided for under this O rder, then, at the end of the period for which the Department does make payments in the stipulated amounts or at the stipulated servic e 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 availa ble for performance under this O rder beyond September 30 , 20 1 2

. The Governmen t’s obligat ion for performance under this O rder beyond September 30 , 20 1 2 , 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 ar ise for performance under this O rder beyond September 30 , 20 1 2 , until funds are made available to the Department for performance. If funds are not made available for performance beyond September

30 , 20 1 2 , 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 O rder.

1 Annual compensation of $1,648,249 , divided by 2,124 annual departures (6 flights per day x 365 service days x 97 percent completion)

. 2 42 flights per week multiplied by $ 776 per flight.