Order 2012-5-14

Served: May 17, 2012

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

Issued by the Department of Transportation

on the 17th of May, 2012

Essential Air Service at

BAR HARBOR, MAINE

PRESQUE ISLE/HOULTON, MAINE

PLATTSBURGH, NEW YORK

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

DOCKET DOT-OST-2011-0185

DOCKET DOT-OST-2000-8012

DOCKET DOT-OST-2003-14783

ORDER SETTING FINAL RATES

Summary

This Order sets final past-period and prospective rates for the forced service of Colgan 

Air, Inc., d/b/a USAirways Express, (Colgan), at Bar Harbor and Presque Isle, Maine, 

and Plattsburgh, New York. 

Background

On September 9, 2011, Colgan filed 90-day notices of intent to suspend its subsidized service 

at the three above-captioned communities. By Order 2011-11-26 we requested proposals and 

required Colgan to maintain the levels of service it had been selected to provide. See the 

chart below.

Colgan is entitled under 49 USC, Section 41734 (d), to increased compensation at these 

communities effective 180-days after it filed notice, i.e., March 6, 2012. The following 

chart details the subsidy rates set by the three earlier selection Orders, Colgan’s initially 

requested subsidy, the level of subsidy it has agreed to, and the differences. 

Selection Effective Weekly Intermediate Aircraft

Community Order Thru Hub Trips Stops Type

Bar Habor 2010-9-28 10/31/2012 Boston 14 0 Saab 340

Plattburgh 2010-3-27 6/30/2012 Boston 12 0 Saab 340

Presque Isle 2010-6-5 5/31/2012 Boston 19 0 Saab 340
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1 2

Decision

The EAS staff contacted Colgan because its subsidy requests had increased so

dramatically from what it had proposed during the earlier competitive carrier-selection 

proceedings, especially at Presque Isle. During discussions with the staff, Colgan 

documented that its expenses and subsidy had increased in part because of increased fuel 

expenses, but that the bulk of the increase in expenses were caused by the carrier’s 

shrinking operations at the Boston hub. In brief, the carrier provided a substantial 

amount of subsidy-free service to its Boston hub when the earlier orders selecting Colgan 

to provide EAS were issued. Colgan indicated that, since that time, in response to 

competitive pressures, it had virtually eliminated its subsidy-free operations in the Boston

area, leaving only the subsidized service to these three communities. As a result, 

Colgan’s aircraft, flight crew, maintenance, and overhead for this “stranded” subsystem 

had to be spread over far fewer operating elements. Its unit costs, thus, were substantially 

higher than reflected in the carrier’s system averages reported in its Form 41. 

We have confirmed that Colgan’s subsidy-free operations at Boston have been largely 

eliminated, thus driving up the cost of the subsidized service to levels substantially higher 

than its system averages, and have agreed to unit costs that reflect those increases. 

Nonetheless, Colgan has agreed to significantly reduce its subsidy request from its initial 

hold-in proposal. At Presque Isle, the carrier reduced its projected block times and block 

hours, which drive most direct expenses such as fuel and maintenance. Also, it

recognized that some of its overhead items were not as significantly affected by its 

reduced Boston operations as it had initially projected. As a result, Colgan reduced its 

requested annual subsidy as shown in the chart above. We have reviewed the subsidy 

rates the carrier has agreed to and find them reasonable. 

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

ACCORDINGLY,

1. We set the final rates for Colgan Air, Inc., for its provision of Essential Air Service at 

Plattsburgh, New York, and Bar Harbor and Presque Isle, Maine, as described in 

Appendices B and C;

2. These rates are in lieu of, and not in addition to, those set by Order 2010-3-27, 

2010-6-5, and 2010-9-28;

 

1 These rates will be effective until Colgan is replaced. See Order 2012-3-2 selecting Peninsula Airways, 

Inc., and Cape Air. 

2 The annual subsidy at Presque Isle has increased disproportionately more than at the other two 

communities while unit costs increased consistently at all three. However, large increases in revenue at Bar 

Harbor and Plattsburgh somewhat offset those higher costs. Presque Isle’s revenue increased, but only 

slightly. 

Bar Harbor Plattsburgh Presque Isle 2/

Subsidy Rates per Earlier Selection Orders $2,298,533 $2,117,101 $2,812,853

Intiallly Requested Subsidy $2,825,436 $2,834,864 $5,565,274

Agreed Subsidy 1/ $2,531,807 $2,654,135 $4,359,821

Decrease in Subsidy from Requested $293,629 $180,729 $1,205,453
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3. We direct Colgan 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 the audit and examination by

representatives of the Department. Such documentation shall be retained for seven years 

from the service date of this Order, 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; 

4. These Dockets will remain open until further Department action; and

5. The Department will serve copies of this Order on Colgan Air, Inc.

By:

Susan Kurland

Assistant Secretary for

Aviation and International Affairs

(SEAL)

An electronic version of this document is available on the World Wide Web at

http://www.regulations.gov
Appendix A

Nonstop Great Circle Miles to Boston

Bar Harbor (BHB), 196

Plattsburgh (PBG), 201

Presque Isle (PQI), 333
Appendix B

Essential Air Service to be Provided by Colgan Air, Inc.,

Bar Harbor Plattsburgh Presque Isle

Docket 2011-0185 2003-14783 200-8012

Effective From March 6, 2012 March 6, 2012 March 6, 2012

Effective To: April 14, 2012 UFN 2/ UFN

Distance 196 201 332

Weekly Round Trips 14 12 19

Segments 1/ 1,417 1,214 1,923

Saab 340, 34 Seats 48,178 41,276 65,382

Block Times 1.28 1.34 1.78

Block Hours 1,814 1,627 3,423

Wtd. Blk. Hrs. 61,676 55,318 116,382

ASMs 9,442,888 8,296,476 21,706,824

Pax. 17,000 15,000 29,000

Fare $130.00 $95.00 $128.00

Revenue $2,210,000 $1,425,000 $3,712,000

Directs $3,410,303 $3,118,945 $6,259,223

Indirects $1,105,704 $765,945 $1,428,226

Operating $4,516,007 $3,884,890 $7,687,449

Profit @ 5% $225,800 $194,245 $384,372

Economic $4,741,807 $4,079,135 $8,071,821

$/Hr.

Requested Subsidy @ 97% $2,531,807 $2,654,135 $4,359,821

1/ BHB: 14 trips x 2 directions x 52 weeks x 313/312 x .97 = 1,417

 PBG: 12 trips x 2 directions x 52 weeks x 313/312 x .97 = 1,214

 PQI: 19 trips x 2 directions x 52 weeks x 313/312 x .97 = 1,923

2/ UFN, until further notice, i.e., when Colgan is replaced by Peninsula Airways, Inc.
Appendix C-1

Subsidy Rate Agreement for the Provision of Essential Air Service by 

Colgan Air, Inc., at Bar Harbor, Maine, Docket 2011-0185

EFFECTIVE: March 6, 2012, thru April 14, 2012, when Cape Air inaugurated service.1

SERVICE: 14 nonstop round trips per week to Boston (BOS)

AIRCRAFT TYPE: Saab 340, up to 34 seats

TIMING OF FLIGHTS: Flights must be well-timed and well-spaced to ensure full compensation. 

ANNUAL SUBSIDY RATE: $2,531,807

FLIGHTS:2 1,417

RATE PER FLIGHT: $1,787 3

WEEKLY CEILING: $50,036 4

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 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 this rate, 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 contract 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 Order beyond September 30, 2012. The Government’s obligation for 

performance under this Order beyond September 30, 2012, 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, 2012, until funds are made available to the Department for performance. If funds are not made available for 

performance beyond September 30, 2012, 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 Order.

 

1 PenAir will provide subsidy-free service during the summer peak season.

2 14 flights x 2 directions x 52 weeks x .97 completion x 313/312 days = 1,417.

3 $2,531,807 ÷ 1,417 annual flights.

4 $1,787 * 28 flights per week.
Appendix C-2

Subsidy Rate Agreement for the Provision of Essential Air Service by 

Colgan Air, Inc., at Plattsburgh, New York, Docket 2003-14783

EFFECTIVE: March 6, 2012, until further notice.

SERVICE: 12 nonstop round trips per week to Boston (BOS)

AIRCRAFT TYPE: Saab 340, up to 34 seats

TIMING OF FLIGHTS: Flights must be well-timed and well-spaced to ensure full compensation. 

ANNUAL SUBSIDY RATE: $2,654,135

FLIGHTS:1 1,214

RATE PER FLIGHT: $2,186 2

WEEKLY CEILING: $52,464 3

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 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 this rate, 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 contract 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 Order beyond September 30, 2012. The Government’s obligation for 

performance under this Order beyond September 30, 2012, 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, 2012, until funds are made available to the Department for performance. If funds are not made available for 

performance beyond September 30, 2012, 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 Order.

 

1 12 flights x 2 directions x 52 weeks x .97 completion x 313/312 days.

2 $2,654,135 ÷ 1,214 annual flights.

3 $2,186 * 24 flights per week.
Appendix C-3

Subsidy Rate Agreement for the Provision of Essential Air Service by 

Colgan Air, Inc., at Presque Isle, Maine, Docket 2000-8012

EFFECTIVE: March 6, 2012, until further notice.

SERVICE: 19 nonstop round trips per week to Boston (BOS)

AIRCRAFT TYPE: Saab 340, up to 34 seats

TIMING OF FLIGHTS: Flights must be well-timed and well-spaced to ensure full compensation. 

ANNUAL SUBSIDY RATE: $4,359,821

FLIGHTS:1 1,923

RATE PER FLIGHT: $2,267 2

WEEKLY CEILING: $86,146 3

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 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 this rate, 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 contract 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 Order beyond September 30, 2012. The Government’s obligation 

for performance under this Order beyond September 30, 2012, 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, 2012, until funds are made available to the Department for performance. If funds are not 

made available for performance beyond September 30, 2012, 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 Order.

 

1 19 flights x 2 directions x 52 weeks x .97 completion x 313/312 days = 1,923.

2 $4,359,821 ÷ 1,923 annual flights.

3 $2,267 * 38 flights per week.