Order: 2011-3-34

Served: March 29, 2011

 UNITED STATES OF AMERICA

 DEPARTMENT OF TRANSPORTATION

 OFFICE OF THE SECRETARY

 WASHINGTON, D.C.

Issued by the Department of Transportation

on the 29th day of March, 2011

Essential Air Service at

WATERTOWN, NEW YORK DOCKET DOT-OST-1997-2842

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

ORDER SELECTING CARRIER

Summary

By this order, the Department is selecting American Eagle Airlines, a wholly owned 

subsidiary of AMR Corporation (American Eagle) to provide essential air service (EAS) at 

Watertown, New York, using 44-seat Embraer ERJ 140 aircraft for a two-year period

beginning when it inaugurates full EAS, through the end of the 24th month thereafter, for an 

annual subsidy of $3,047,972.

1

Background

Watertown has traditionally been packaged with Massena and Ogdensburg, New York. By

Order 2008-3-15, March 14, 2008, the Department selected Cape Air to provide EAS at 

the three communities for the two-year period through September 30, 2010. That order 

established a total combined annual subsidy rate of $3,879,863 for service consisting of 

three daily nonstop round trips (21 a week) between each community and Albany

International Airport, with 9-seat Cessna 402 aircraft. 

 

1

Such subsidy is calculated and distributed on a fiscal year basis, subject to the availability of appropriated 

funds.
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As the end of the contract was approaching, we issued Order 2010-5-32, May 10, 2010, 

requesting proposals from carriers interested in providing replacement service at the

communities, for a new two-year period beginning October 1, 2010. In response to that 

order, we received proposals from the incumbent, Cape Air, as well as Gulfstream 

International Airlines, Inc. (Gulfstream), and Charter Air Transport, Inc. (Charter Air).

The City of Ogdensburg and Ogdensburg Bridge and Port Authority supported Cape Air, 

while the Massena Town Council and the City of Watertown both endorsed Gulfstream. 

Moreover, neither Massena nor Watertown was willing at that time to waive its statutory

entitlement to service with 15-seat or larger aircraft.2 However, Cape Air’s proposal was 

for a two-community minimum, and Gulfstream’s was a three-community, all-or-nothing 

proposal, so no option was selectable. Therefore, by Order 2010-10-7, October 8, 2010, 

we again solicited proposals in an effort to obtain proposals that would satisfy the needs of 

all three communities at competitive subsidy levels. Again, we received proposals from 

Cape Air, Charter Air, and Gulfstream, all slightly different from the first round of 

submissions. During this round of proposals, the communities of Massena and 

Ogdensburg fully supported Cape Air’s proposal, but Watertown maintained its preference 

for Gulfstream. However, Gulfstream’s proposal was again a three-city, all-or-nothing 

package, and did not offer a Watertown-only option. In addition, Watertown did not waive 

its right to 15-seat or larger aircraft as was proposed by Cape Air. We therefore issued an 

order selecting Cape Air to serve Massena and Ogdensburg and rebid the Watertown case

by Order 2001-1-6, January 7, 2011. In response, we received proposals from 

American Eagle, Cape Air, and Charter Air.

Each carrier’s complete proposal and community comments may be accessed online at 

http://www.regulations.gov/ by entering Docket number DOT-OST-1997-2842 in the 

search block. 

Proposal of American Eagle

American Eagle proposed two weekday and weekend round trips (12 round trips a week) 

to Chicago O’Hare International Airport (Chicago) using 44-seat Embraer ERJ 140 aircraft 

for an annual subsidy of $3,047,972. As a condition of its proposal, American Eagle 

requested that the DOT and Watertown waive the right to hold-in upon its filing of a 120-

day notice to terminate service.

Proposal of Cape Air

Cape Air proposed three round trips a day (21 round trips a week) over a WatertownAlbany-Boston routing using 9-seat Cessna 402 aircraft for an annual subsidy of 

$1,665,889 for a two-year contract, or an annual subsidy of $1,615,912 for a four-year 

contract.

 

2

49 U.S.C. 41732 guarantees certain service minimums, including service with 15-seat or larger aircraft for 

most communities, including all three communities here.
- 3 -

Proposal of Charter Air

Charter Air proposed charter service that would operate as a public charter under the 

Alternate Essential Service program established by 49 U.S.C. 41745(a)(3)(f) in accordance 

with 14 CFR Part 380. The service would provide two nonstop round trips each day (12 

round trips a week) except Tuesday to Washington Dulles International Airport using 30-

seat Embraer EMB 120 aircraft for an annual subsidy of $1,944,152.

Community Comments

On February 11, 2011, we requested community comments regarding this carrier-selection 

case. In response, we received a letter from Robert F. Hagemann, III, County

Administrator for the County of Jefferson, expressing support for American Eagle’s 

proposal. Mr. Hagemann states, “American Eagle was able to provide both our military

and civilian travel market with the opportunity to fly directly on a legacy carrier with a 44-

seat regional jet to a major market at Chicago’s O’Hare International Airport”, adding, 

“...the ability to easily fly to almost any destination within the country, along with the 

accompanying national marketing program that would be available immediately to this 

region, were other very strong factors that weighed heavily in favor of this particular 

airline.”

Decision

After carefully reviewing each carrier’s proposal and taking into account community

feedback, we have decided to select American Eagle’s proposal of two weekday and 

weekend round trips to Chicago for an annual subsidy of $3,047,972.

Before arriving at this decision, we looked at the proposals of Charter Air and Cape Air. 

Charter Air’s proposal to operate charter service under the Alternate Essential Air Service 

Program did not receive any community support. Since community support is a 

requirement for the Alternate Essential Air Service Program, we had no choice but to rule 

out Charter Air as an option.3 As for Cape Air, the incumbent airline, the community did 

not waive its right to service with 15-seat or larger aircraft as Cape Air proposed, thus 

eliminating Cape Air.

We find both the service and subsidy levels proposed by American Eagle to be reasonable. 

We also recognize that a key component of American Eagle’s proposal is its ability to 

terminate service on 120 days’ notice. In supporting American Eagle’s proposal, the 

community has effectively agreed to the carrier’s 120-day termination clause. Finally, we 

find that American Eagle offers the best opportunity to significantly increase passenger 

levels and lower subsidy levels in the out years. We caution the community, however, that 

if these twin goals are not attained, we would be inclined to revert to subsidizing 19-seat 

aircraft at the end of this two-year contract. Based on all of the above, we will select 

American Eagle to provide EAS at Watertown for a two-year period.

 

3

In fact, a community must request participation in the Alternate Essential Air Service Program for us to 

consider it.
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Although we are selecting American Eagle to serve Watertown for a two-year period, the 

community is currently over the $200 subsidy cap with a per passenger subsidy of $324. 

The Department is prohibited from subsidizing air service at a community where the 

subsidy per passenger exceeds $200, unless the community is more than 210 highway 

miles from the nearest large or medium hub airport.4 Watertown is 172 miles from Buffalo 

Niagara International Airport, a medium hub; therefore the community is subject to the 

cap. Moreover, based on American Eagle’s prospective subsidy rate of $3,047,972 and 

calendar year 2010 passengers of 5,143, the subsidy per passenger will be $593. While we 

believe, that American Eagle’s proposal to serve Chicago has the potential to increase

traffic levels at Watertown, thus lowering its per passenger subsidy, we expect the 

community and American Eagle to work together to maximize use of the service. We will 

continue to monitor enplanements during the course of American Eagle’s contract and will 

take appropriate action, including possible termination of eligibility for subsidy under the 

EAS program.

We shall make this selection of American Eagle at Watertown contingent upon the 

Department’s receiving properly executed certifications from the carrier that it is in 

compliance with the Department’s regulations regarding drug-free workplaces and 

nondiscrimination, as well as the regulations concerning lobbying activities.

Carrier Transition

By Order 2010-11-13, November 12, 2010, the Department set a short-term subsidy rate to 

compensate Cape Air to serve Watertown until a new airline selection order has been 

issued and the airline inaugurates full EAS. We will continue to compensate Cape Air at 

that subsidy rate until American Eagle inaugurates full EAS. We expect Cape Air and 

American Eagle to coordinate a smooth transition in service at Watertown, including 

setting a date to switch services from Cape Air to American Eagle. We expect Cape Air to 

contact all passengers holding reservations for travel after that date, to notify them of the 

suspension of service, and to secure alternate air transportation for such passengers or to 

provide a full refund of the ticket price, without penalty, if requested. 

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. American Eagle

is subject to the Department’s continuing fitness requirements, and no information has 

come to our attention that would cause us to question the carrier's fitness at this time. We 

have contacted the Federal Aviation Administration, and it has raised no concerns that 

would negatively affect our fitness findings. We therefore conclude that the carriers 

remain fit to conduct the operations proposed here.

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

 

4 Congress first established the $200 ceiling under P.L. 101-164 for fiscal year 1990, and reestablished it in 

fiscal years 1994-1999. The ceiling was made permanent by P.L. 106-109, the Department of Transportation 

and Related Agencies Appropriations Act of 2000.
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ACCORDINGLY,

1. We select American Eagle Airlines to provide essential air service at Watertown,

New York and establish an annual subsidy rate of $3,047,972, as described in Appendix C; 

2. We direct American Eagle Airlines 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. We find that American Eagle Airlines continues to be fit, willing and able to operate as 

a commuter carrier, and capable of providing reliable essential air service at Watertown;

4. Under our authority in 49 U.S.C. 40109, we will allow American Eagle to cease 

operations at Watertown on 120 days’ notice; 

5. This docket will remain open pending further Department action; and

6. We will serve copies of this order on the Mayor of Watertown, the County

Administrator for the County of Jefferson, American Eagle Airlines, Hyannis Air Service, 

Inc., and Charter Air Transport, Inc.

By:

SUSAN L. KURLAND

Assistant Secretary for

Aviation and International Affairs

(SEAL)

An electronic version of this document is available at

http://www.regulations.gov
Appendix A

AREA MAP

 
Appendix B
 Appendix C

American Eagle Airlines

Essential Air Service to be Provided at Watertown, New York

Effective Period: Two years beginning when American Eagle inaugurates full EAS through the 

end of the 24th month thereafter

Scheduled Service: 2 weekday and weekend nonstop round trips (12 a week) between 

Watertown and Chicago

Aircraft: 44-seat Embraer ERJ 140

Rate per Eligible Flight: $2,492;

1

Weekly Ceiling: $59,8082

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 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 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 performance beyond March 18, 2011, the 

Department will provide notice in writing to the carrier.

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 $3,047,972 divided by 1,223 annual departures (24 weekly departures x 52 weeks x 98 

percent completion).

2

24 arrivals and departures per week multiplied by $2,492 per flight.