Order 201 2

- 2

- 3

Served: February 1 , 2012



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

Issued by the Department of Transportation

on the 1st day of Febr uary, 2012

ORDER EXTENDING ESSENTIAL AIR SERVICE CONTRACT S

Summary By this O rder, the Depa rtment is extending the contract of Cape Air to provide subsidized

E ssential A ir S ervice (EAS) at Hagerstown, Maryland, and Lancaster, Pennsylvania, through February 17 , 2012. Annual subsidy rates will continue to be set at $1,368,273 for Hagerstown and $1,647,112 for Lancaster. 1

Background

B oth communities are within 70 driving miles of a large hub

-- Washington Dulles International for Hagerstown and Philadelphia International for Lancaster

-- and thus temporarily lost eli gibility 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) allow ed these two communities to pet ition the Department

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

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

certification s as to the “most commonly used route” between the communit ies and the

nearest lar ge or medium hub airport. Subsequently, the communities petitioned the Department to reconsider their mileage determination s

. The Department received

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- 2

-

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

Order s 2004

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- 26 ( Lancaster ) and 2005

- 4

- 17 ( Hagerstow n )

, 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, s imilar extensions of the “most commonly used route” standard, as described above, have been signed into law extendin g eligibility for both

communities to receive subsidized EAS , through January 31

, 2012

. 3

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

amendm ent 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 acces sing the nearest medium or large hub airpor t.” 49 U.S.C. § 41731(d). The Department is currently working on a Notice of Proposed Rulemaking (NPRM) regarding the new provisions unde r 49 U.S.C. § 41731, as amended , which it plans to issue in the future

. The Department will not apply the new eligibility criterion at any community until the rulemaking is complete

. 4

On January 3 1 , 201 2

, the President signed the Airport and Airway Extension Act of

2012

. 5 T hat law, among other things, extend s the “most com m only used route” standard

and bo th communities’ eligibility to receive subsidized EAS under that standard through February 17 , 2012

.

Decision Cape Air’s current contract expires on January 3 1, 2012 . Therefore, the Department must once again take action to ensure uninterrupted subsidized EAS at the two communities.

Similar to the determination made in Order 2011

- 9

- 20, the Department will extend the

3 By Order 2008

- 12

- 33, December 3 1, 2008, the Department selected Cape Air to provide four nonstop round trips per day at Hagerstown at an annual subsidy rate $1,203,167, and five nonstop round trips per day at Lancaster for an annual subsidy rate of $1,372,474, with all service being pro vided to Baltimore

Washington International Airport using 9

- seat Cessna 402 aircraft through September 30, 2009. Orders

2009

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- 16, 2010

- 3

- 20, and 2010

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- 1 extended Cape Air’s contract at the communities through September 30, 2011. To serve the public in terest, and because as a practical matter there was 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, the Department, by Order 2011

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- 20, September 30, 2011, de termined that it should continue to subsidize Cape Air to provide EAS at these two communities at the revised annual rates, from October 1, 2011, through May 15, 2012, subject to their continued eligibility

. 4 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.

5 A Public Law number was not available at the time of this Order, although the text of the legislation can

b e found in H.R. 3800.- 3

-

expiration date of Cape Air’s EAS cont ract for Hagerstown and Lancaster through

Febr uary 17 , 2012 , at annual subsidy rates approved in Order 2011

- 9

- 20, or $1,368,273 for Hagerstown and $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 February 17

, 2012;

2 . Dockets 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 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: February 1 , 2012 , through February 17 , 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: $ 484 1

Weekly Compensation Ceiling: 2 $ 27,104 3

___________________________ 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 comple tion 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 $4 84 multiplied by 56 eli gible 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: Febr uary 1, 2012, through February 17 , 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: $ 466 1

Weekly Compensation Ceiling: 2 $ 32,620 3

___________________________ 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 compensatio n 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

it s 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 disa llowed, 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

, 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 servi ce 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 Departmen t 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 suc h 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 , 201 2

. The Department’s obligation for performance unde r this o rder beyond September 30, 201 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 arise for performance under this order beyond September 30, 201 2 , until funds are made available to the Department for performance. If funds are not made available for performance beyond September 30, 201 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 se rvice provided

under this order.