Order: 2011 - 3 - 28 Served: March 22, 2011 

### UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C. Issued b y the Department of Transportation

on the 22 nd day

of March , 20 1 1 Essential Air Service at MAYAGUEZ, PUERTO RICO DOCKET DOT - OST - 2004 - 19622 under 49 U.S.C. 41731 et seq.



### ORDER RE - SELECTING CARRIER Summary By this order, the Department is re - selecting Hy annis Air Service Inc., operating as Cape Air (Cape Air) , to provide essential air service (EAS) using 9 - seat Cessna 402 aircraft at Mayaguez, Puerto Rico , for the five - year period beginning May 1, 2011, thro ugh April 30, 2016 , for an annual subsidy of $ 1,198,824 . 1 Background By O rder 20 0 9 - 3 - 1, March 3, 2009, the Department selected Cape Air to continue providing EAS at Mayaguez and Ponce from May 1, 2009, through April 30, 2011. That order established annual subsidy rates of $980,980 and $740,416 at May aguez and Ponce, respectivel y, for service consisting of four daily nonstop round trips to San Juan, with 9 - seat Cessna 402 aircraft. As the end of the contract was approaching, we issued Order 2010 - 12 - 31, December 23, 2010, requesting proposals to serve o nly May aguez for a new term. In response to our request, three airlines submitted proposals: Air Sunshine, Inc.

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

(Air Sunshine), Cape Air, and Seaborne Virgin Islands, Inc., (Seaborne). Because Ponce also receives subsidy - free jet service on a dail y basis

– one round trip to Orlando and one round trip to New York

– provided b y J etBlue, using 150 - s eat Airbus A320 aircraft, we decided not see k proposals for EAS replacement service . 2 Each carrier’ s complete proposal and community comments may

be accessed online at http://www.regulations.gov/ by entering Docket number DOT - OST - 2004 - 19622 in the search block . Proposal of Air Sunshine Air Sunshine proposed four nonstop round trips a day (28 round trips a week) to San Juan using 9 - seat Cessna 402 Caravan aircraft for an annual subsidy of $980,000 . Proposal of Cape Air Cape Air proposed four nonstop round trips a day (28 round trips a week) to San Juan using 9 - seat Cessna 402 aircraft for an annual subsidy of $1,228,923 for a two - year contract, or an annu al subsidy of $1,198,824 for a five - ye ar contract. Proposal of Seaborne Seaborne proposed two daily nonstop round trips (14 round trips a week) to San Juan using 19 - seat de Havilland DHC - 6 - 300 aircraft for an annual subsidy of $855,532. Community Comments On January 24, 2011 , we requested community comments regarding this carrier - selection case, and , in response , we recei ved two letters , both supporting Cape Air’s proposal. José Gui llermo Rodriguez, Mayor of May aguez , strongl y recommended that the Department re select Cape Air, and requested the airline’s five - ye ar option, stating the airline “has been efficient and accep table to our community”, and Arnaldo Deleo, General Manager for Luiz Munoz Marin International and Regional Airports, also wrote in support of Cape Air’s p roposal, pointing out that Cape Air has successfully served the community since 2005 and that it provides an important air link between Mayaguez and San Juan. Decision After carefully

reviewing each carrier’s proposal and taking into account community feedback, we have decided to select Cape Air’s five - year proposal of four May aguez - San Juan nonstop round trips a day (28 a week) for an annual subsidy of $1,198,824 . We ba se our decision on the four carrier - selection criteria contained in 49 U.S.C. §41733(c) : 1) the demonstrated reliabilit y providing scheduled air service; 2) the contractual and marke ting arrangements with a larger carrier to ensure service beyond a hub airport; 3) interline agreements with a larger carrier; and 4) support by the community ’s elected officials for the applicant’s proposal.

2 The community has filed a Petition for Review of that decision and we are handling that in a separate proceeding in the Ponce Docket, D OT - OST - 1999 - 6592.- 3 -

Cape Air’s proposal meets all four statutory criteria. Cape A ir is a well - established schedule d air carrier serving communities throughout the U.S., and, in the case of Mayaguez, has provided the community reliable air s ervice for several ye ars. Cape Air has a code share with Continental Airlines and, therefore, can provide its passengers connections beyond the San Juan hub to the national air transportation network with relative ease. Cape Air, through its code share with Continental Airlines, has interline agreements with most major air carriers , enabling passengers to reach their destination with one reservation, ticket, and baggage check - in. Lastly , the community , in particular, the elected offici als, overwhelming supports Cape Air’s proposal. Neither Air Sunshine nor Seaborne received an y co mmunity support, and in the case of Seaborne, the airline currentl y does not have any interline agreements with a larger airline, which we note above is a requirement for selection to provide EAS. Finally , as between Cape Air’s two - ye ar or five - ye ar optio n, the com munity supports Cape Air’s five - ye ar proposal, and it offers some subsidy savings to the Department, so we will select the five - ye ar option. We shall make this selection of Cape Air at Mayaguez contingent upon the Department’s receiving properl y executed certifications from the carrier s that they are in compliance with the Department’s regulations regarding drug - free workplaces and nondiscrimination, as well as the regulations concerning lobb yi ng 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 essential air service . Cape Air is subj ect to the Department’s continuing fitness requirements, and no information has come to our attention that would cause us to questio n the carrier's fitness at this time. We have contacted the Federal Aviation Administration, and it has raised no concerns that would negativel y affect our fi tness finding s . We therefore conclude that the carrier s remain fit to conduct the operations proposed here. This order is issued under authority delegated in 49 CFR 1.56a(f). AC CORDINGLY, 1. We select Hyannis Air Service, Inc. to provide essential air service at Mayaguez , Puerto Rico , an d establish an annual subsidy rate of $1,198,824 , as described in Appendix C; 2. We direct Hyannis Air Service, Inc. to retain all books, records, and other source and summary documentation t o 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 ye ars or until the Department ind icates that the records may be destroy ed, whichever comes first. Copies of flight logs for aircraft sold or disposed of must be retained. The carrier may forfeit its compensation for an y claim that is not supported under the terms of this order; 3 . We f i nd that Hyannis Air Service, Inc. continue s to be fit, willing and able to operate as a commuter carrier , and capable of providing reliable essential air service at Mayaguez ;- 4 -

4 . This docket will remain open pending further Department action ; and 5 . We will serve copies of this order on the Mayor of Mayaguez , Air Sunshine, Inc., Hyannis Air Service, Inc., and Seaborne Virgin Islands, Inc. B y:

SUSAN L. KURLAND Assistant Secretary for Aviation and International Affairs (SEAL) An electronic version of this document is ava ilable on the World W ide Web at http://www.regulations.govAppendix A 

## AREA MAPAppendix BAppendix C Hyannis Air Service, Inc. Essential Air Service to be Provided at Mayaguez, Puerto Rico Effective Period : Ma y 1, 2011 through April 30, 2016 Scheduled Service : 2 8 weekl y nonstop round trips between Mayaguez and San Juan Aircraft : 9 - seat Cessna 402 Rate per Eligible Flight: $ 423 ; 1 Weekly Ceiling : $2 3,688 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 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 carr ier 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 dur ing 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 sele ct 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 deviatin g 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, eith er 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 amount s 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 w riting by the Department and the carrier do not constitute a total or partial reduction or cessation of payment. Funds are not currently available for performance under this order beyond March 18 , 2011 . The Department’s obligation for performance under this order beyond March 18 , 2011 , 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 March 18 , 2011 , until funds are made available to the Department for performance. If funds are not made available for perf ormance beyond March 18 , 2011 , the Department will provide notice in w riting to the carr ier. 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. All claims for payment must be submitted within 60 days of the last day of service provided under this order.

1 Annual compensation of $1,198,824 divided by 2,832 annual departures (8 flights a day x 365 days a year x 97 percent completion). 2 56 arrivals and depart

ures per w eek multiplied by $423 per flight .