Order 20 10

- 1 1

- 13

Served: November 12 , 20 10



### 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 , 20 10

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 ser vice (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 , 200 8 , the Department selected Hyannis Air Service, Inc. d/b/a Cape 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 Coun ty 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. W e received several responses to that request; however, community support wa s split bet ween carriers

. T herefore, 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 pr oposed 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

- ye ar and four

- year subsidy rate.- 2

-

Its Option 1 is consistent with the service the communiti es 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 Depa rtment 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, Ogdensbur g 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 a nd 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, 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 terms of this order;

3 . Docket DOT

- OST

- 1997

- 2842 will remain open until fur ther 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 on line 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 acti on

Service: 21 nonstop round trips per week to Albany

Aircraft type: Cessna 402 aircraft (9 seats)

Intermediate Stops and

t iming of flights: No other service to any intermediate or upline communities except Ogdensburg and Watertown, New York, is

con templated; accordingly, no such service may be provided without prior Department approval. Flights must be well

timed and well

- spaced in order to ensure full compensation.

Annual compensation: $ 1

, 5 19

, 732

Subsidy Rate Per Arrival/Departure: $ 716 1

Weekly Compensation Ceiling: 2 $ 30

, 072 3

___________________________ 1 Annual compensation of $ 1

, 5 19

, 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

t iming of flights: No other service to any intermediate or upline communities except Massena and Watertown, New York, is contemplate d; accordingly, no such service may be provided without prior Department approval. Flights must be well

- timed and well

spaced in order to ensure full compensation.

Annual compensation: $ 1

, 5 66

, 178

Subsidy Rate Per Arrival/Departure: $ 7 37 1

Weekly Compensation Ceiling: 2 $ 30

, 954 3

___________________________ 1 Annual compensation of $ 1

, 5 66

, 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 ass umes 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

t iming of flights: No other service to any intermediate or upline communities

except Massena and Ogdensburg , New York, is contemplated;

accor dingly, no such service may be provided without prior Department approval. Flights must be well

- timed and well

spaced in order to ensure full compensation.

Annual compensation: $ 1

, 476

, 709

Subsidy Rate Per Arrival/Departure: $ 695 1

Weekly Compensa tion Ceiling: 2 $ 29,190 3

___________________________ 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 multipl ied 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 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 December 3, 2010. The Department’s obligation for performan ce 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 thi s 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 payme nt must be submitted within 60 days of the last day of service provided

under this order.