Order 2010-11-13

Served: November 12, 2010

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

Issued by the Department of Transportation

on the 12th day of November, 2010

Essential Air Service at

MASSENA, OGDENSBURG AND

WATERTOWN, NEW YORK

Under 49 U.S.C. 41731 et seq. 

DOCKET DOT-OST-1997-2842

ORDER SETTING SHORT-TERM SUBSIDY RATES

Summary

By this order, the Department is extending the subsidy rates for Cape Air’s provision of essential 

air service (EAS) at the above-captioned communities, beginning October 1, 2010, until further 

Department action. (See Appendix A for map.)

Background

By Order 2008-3-15, March 14, 2008, the Department selected Hyannis Air Service, Inc. d/b/a 

Cape Air (Cape Air) to provide EAS at the three communities for the two-year period through 

September 30, 2010. That order established a total annual subsidy rate of $3,879,863 for service 

consisting 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. We received several responses to that request; however, 

community support was split between carriers. Therefore, we issued Order 2010-10-7, 

October 8, 2010, resoliciting proposals.

Decision

Cape Air is entitled to fair compensation while we continue to process the carrier-selection case. 

Typically, we use the subsidy rate the incumbent proposed during the competitive-bid process as 

the temporary rate of compensation. In this case, Cape Air proposed three service options, each 

with an associated two-year and four-year subsidy rate.
- 2 -

Its Option 1 is consistent with the service the communities currently receive – 21 nonstop round 

trips per week to Albany – and requires a total annual subsidy of $4,562,619 for the two-year 

option. Therefore, we will establish that rate of compensation for Cape Air beginning October 1, 

2010, until further Department action. We find both the service and subsidy levels to be 

reasonable.

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

ACCORDINGLY,

1. We set the final rate of compensation for Cape Air’s provision of EAS at Massena, 

Ogdensburg and Watertown, NY, as described in Appendix B, from October 1, 2010, until 

further Department action; 

2. We direct Cape Air, Inc. to retain all books, records, and other source and summary 

documentation to support claims for payment, and to preserve and maintain such documentation 

in a manner that readily permits its audit and examination by representatives of the Department. 

Such documentation shall be retained for seven years or until the Department indicates that the 

records may be destroyed, whichever 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 terms of this order;

3. Docket DOT-OST-1997-2842 will remain open until further order of the Department; and

4. The Department will serve a copy of this order on the mayors and airport managers of 

Massena, Ogdensburg, and Watertown, 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

HYANNIS AIR SERVICE, INC. d/b/a CAPE AIR

ANNUAL COMPENSATION REQUIREMENT FOR ESSENTIAL AIR SERVICE AT

MASSENA, OGDENSBURG, and WATERTOWN, NEW YORK
Appendix B

Page 1 of 3

HYANNIS AIR SERVICE, INC. d/b/a CAPE AIR

ANNUAL COMPENSATION REQUIREMENT FOR ESSENTIAL AIR SERVICE AT

MASSENA, NEW YORK

Effective period: October 1, 2010, until further Department action

Service: 21 nonstop round trips per week to Albany

Aircraft type: Cessna 402 aircraft (9 seats)

Intermediate Stops and 

timing of flights:

No other service to any intermediate or upline communities 

except Ogdensburg and Watertown, New York, is 

contemplated; accordingly, no such service may be provided

without prior Department approval. Flights must be welltimed and well-spaced in order to ensure full compensation.

Annual compensation: $1,519,732

Subsidy Rate Per

Arrival/Departure: $7161

Weekly Compensation 

Ceiling: 2$30,0723

___________________________

1

 Annual compensation of $1,519,732 divided by 2,124 annual arrivals and departures calculated 

as follows: 6 flights per day x 365 days x 97% completion = 2,124.

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/departure of $716 multiplied by 42 eligible arrivals and departures.
Appendix B

Page 2 of 3

HYANNIS AIR SERVICE, INC. d/b/a CAPE AIR

ANNUAL COMPENSATION REQUIREMENT FOR ESSENTIAL AIR SERVICE AT

OGDENSBURG, NEW YORK

Effective period: October 1, 2010, until further Department action

Service: 21 nonstop round trips per week to Albany

Aircraft type: Cessna 402 aircraft (9 seats)

Intermediate Stops and 

timing of flights:

No other service to any intermediate or upline communities 

except Massena and Watertown, New York, is contemplated; 

accordingly, no such service may be provided without prior 

Department approval. Flights must be well-timed and wellspaced in order to ensure full compensation.

Annual compensation: $1,566,178

Subsidy Rate Per

Arrival/Departure: $7371

Weekly Compensation 

Ceiling: 2$30,9543

___________________________

1

 Annual compensation of $1,566,178 divided by 2,124 annual arrivals and departures calculated 

as follows: 6 flights per day x 365 days x 97% completion = 2,124.

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/departure of $737 multiplied by 42 eligible arrivals and departures.
Appendix B

Page 3 of 3

HYANNIS AIR SERVICE, INC. d/b/a CAPE AIR

ANNUAL COMPENSATION REQUIREMENT FOR ESSENTIAL AIR SERVICE AT

WATERTOWN, NEW YORK

Effective period: October 1, 2010, until further Department action

Service: 21 nonstop round trips per week to Albany

Aircraft type: Cessna 402 aircraft (9 seats)

Intermediate Stops and 

timing of flights:

No other service to any intermediate or upline communities 

except Massena and Ogdensburg, New York, is contemplated; 

accordingly, no such service may be provided without prior 

Department approval. Flights must be well-timed and wellspaced in order to ensure full compensation.

Annual compensation: $1,476,709

Subsidy Rate Per

Arrival/Departure: $6951

Weekly Compensation 

Ceiling: 2$29,1903

___________________________

1

 Annual compensation of $1,476,709 divided by 2,124 annual arrivals and departures calculated 

as follows: 6 flights per day x 365 days x 97% completion = 2,124.

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/departure of $695 multiplied by 42 eligible arrivals and departures.
Appendix C

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 

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 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, 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 available for performance under this solicitation beyond December 3, 

2010. The Department’s obligation for performance under this solicitation beyond December 3, 

2010, 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 December 3, 2010, until funds are made available to the 

Department for performance. If funds are not made available for performance beyond 

December 3, 2010, 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.