Order: 2011-10-14

 Served: October 20, 2011

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

Issued by the Department of Transportation

on the 20th of October, 2011

Essential Air Service at

OWENSBORO, KENTUCKY

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

 Docket DOT-OST-2000-7855

ORDER TENTATIVELY SELECTING CARRIER

Summary

By this order, the Department is tentatively selecting Hyannis Air Service, Inc. d/b/a Cape Air

(Cape Air) to provide subsidized essential air service (EAS) at Owensboro, Kentucky, for a fouryear period.

1 The four-year period will begin when Cape Air inaugurates full EAS and will run

through the end of the 48th month thereafter. This tentative selection of Cape Air will provide 

Owensboro with 18 nonstop round trips per week to Lambert-St. Louis International Airport 

using 9-passenger Cessna 402 aircraft at an annual subsidy rate of $1,529,913.

Background

By Order 2009-6-17, June 22, 2009, the Department selected Pacific Wings to provide 18 

nonstop round trips per week from Owensboro to Nashville using 9-passenger Cessna Grand 

Caravan, for 24 months from when the carrier inaugurated service, for an annual subsidy rate of 

$1,068,773. Pacific Wings inaugurated service at Owensboro on August 31, 2009, meaning the 

current contract expired August 31, 2011. Pacific Wings operates the service under the brand 

names Kentucky Skies and Tennessee Skies.

Prior to Pacific Wings’ inaugurating service at Owensboro, the community experienced an 

extended service hiatus. The previous carrier, Big Sky Airlines, ceased operations at Owensboro 

on January 6, 2008. Great Lakes Aviation, Ltd. (Great Lakes) was selected to serve Owensboro 

 

1 Subsidy is calculated and distributed on a fiscal year basis, subject to the availability of appropriated funds.
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by Order 2008-2-1, February 6, 2008, but Great Lakes did not inaugurate service. Thus, 

Owensboro was without scheduled air service from January 7, 2008, until August 31, 2009.

In anticipation of the expiration of Pacific Wings’ contract on August 31, the Department issued 

Order 2011-1-19, January 21, 2011, soliciting proposals from interested carriers to provide 

service at Owensboro. Prior to the due date of proposals (March 16), Pacific Wings notified the 

Department of its intention to provide subsidy-free service at Owensboro, effective September 1, 

2011, the end of the current contract.

On June 30, Pacific Wings filed with the Department a 90-day notice of its intent to terminate 

service at Owensboro, as well as Jackson, Tennessee,2 effective September 30, 2011. Pacific 

Wings stated that despite many attempts, it has been “unable to procure counter or gate space at 

[Nashville International Airport] on reasonable terms.” The carrier states that [these] “barriers to 

access continue to impede and frustrate our service delivery efforts.”

In response to Pacific Wings’ 90-day notice to suspend service, the Department issued 

Order 2011-8-6, August 19, 2011, prohibiting Pacific Wings from terminating subsidized service 

for 30 days beyond the end of its 90-day notice period, and requesting long-term proposals from 

carriers interested in providing EAS at Owensboro. Proposals were due September 13.

Proposals

In response to that order, we received proposals from Hyannis Air Service, Inc. d/b/a Cape Air 

(Cape Air), Multi-Aero, Inc. d/b/a Air Choice One (Air Choice One), SeaPort Airlines, Inc. 

(SeaPort), and TransportAzumah. 

Copies of each proposal may be accessed online at http://www.regulations.gov by entering DOTOST-2000-7855 in the “Enter Keyword or ID” section.

Cape Air proposes three daily nonstop round trips (21 per week) to Lambert-St. Louis 

International Airport (St. Louis) using 9-passenger Cessna 402 aircraft. The carrier expects to 

offer a code-share agreement with American Airlines. Cape Air proposes an annual subsidy of 

$1,829,680, for a two-year term, or an annual subsidy of $1,784,898 for a four-year term.

Air Choice One proposed four options, each operating with 9-passenger Cessna Grand Caravan 

aircraft. Option 1 is three nonstop round trips each weekday and weekend (18 per week) to St. 

Louis for an annual subsidy of $1,504,893. Option 2 is three daily nonstop round trips (21 per 

week) to St. Louis for an annual subsidy of $1,579,756. Option 3 is three nonstop round trips 

each weekday and weekend (18 per week) to Nashville International Airport (Nashville) for an 

annual subsidy of $1,426,475. Option 4 is three daily round trips to Nashville (21 per week) for 

an annual subsidy of $1,566,823. In addition, Air Choice One states that each of its four options 

would offer 10 nonstop round trips each week on an unsubsidized basis. Under Options 1 and 2,

which would serve St. Louis, it proposes five nonstop round trips each week to Chicago O’Hare 

and five additional nonstop round trips each week to St. Louis. Under Options 3 and 4, which 

would serve Nashville, it proposes five nonstop round trips each week to Chicago O’Hare and 

five additional nonstop round trips each week to Nashville. However, the proposed unsubsidized

 

2 Air service at Jackson, Tennessee, was addressed in separate Orders.
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service is outside the scope of the EAS program, and, thus, if selected, we could not require that 

Air Choice One provide the service and we will not consider it in our carrier-selection decision.

SeaPort proposes three options, all using 9-passenger Cessna Caravan aircraft. Option 1 is three 

nonstop round trips each weekday and weekend (18 per week) to Nashville for an annual subsidy 

of $1,029,080 (first year) and $1,024,114 (second year). Option 2 is two nonstop round trips 

each weekday and weekend (12 per week) to St. Louis and one nonstop round trip each weekday 

and weekend (6 per week) to Memphis International Airport for an annual subsidy of $1,297,492 

(first year) and $1,353,557 (second year). Option 3 is two nonstop round trips each weekday and 

weekend (12 per week) to St. Louis and one nonstop round trip each weekday and weekend (6 

per week) to Nashville for an annual subsidy of $1,278,929 (first year) and $1,254,171 (second 

year).

TransportAzumah proposes two ground transportation options, both utilizing a 47-passenger bus. 

Option 1 is four daily round trips to Nashville International Airport for an annual subsidy of 

$377,151. Option 2 is six daily round trips to Nashville International Airport for an annual 

subsidy of $545,727.

Community Comments

On September 15, we requested community comments regarding the carrier selection at 

Owensboro.

We received a joint letter from Mayor Ron Payne, the Mayor of the City of Owensboro, and Al 

Mattingly, County Judge Executive. The letter stated that the community assembled a tenmember panel consisting of airport board members, and representatives from the City, County, 

Chamber of Commerce, and the Economic Development Corporation to evaluate the three airline 

proposals. The Mayor states that from that panel’s interviews and criteria, it is recommending 

Cape Air as the EAS carrier at Owensboro-Daviess County Regional Airport. The City and 

County leaders also encouraged the Department to select Cape Air for a four-year contract.

Decision

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

we have decided to select Cape Air’s four-year proposal of three Owensboro-St. Louis nonstop 

round trips. We will tentatively select the carrier to provide 18 round trips per week, rather than 

the 21 round trips it originally proposed for an annual subsidy of $1,529,913. We base our 

decision to select Cape Air on the four carrier-selection criteria contained in 49 U.S.C. 

§41733(c): 1) the demonstrated reliability providing scheduled air service; 2) the contractual and 

marketing 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.

Cape Air’s proposal meets all four statutory criteria. Cape Air is a well-established scheduled air 

carrier serving communities throughout the U.S. Cape Air has a code-share with American 

Airlines and, therefore, can provide its passengers connections beyond St. Louis to the national 

air transportation network with relative ease. In addition to Cape Air’s code-share arrangement 

with American Airlines, it has interline agreements with most major air carriers, enabling 
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passengers to reach their destinations with one reservation through electronic ticketing and 

baggage check-in. Lastly, the Mayor of Owensboro states that the community supports 

Cape Air’s proposal. Neither Air Choice One nor SeaPort received any community support. 

Regarding TransportAzumah, it proposes ground transportation, which was not responsive to the 

Department’s request for proposal for air service. Moreover, the community is entitled to air 

service, which TransportAzumah would not provide.

When possible, and within budgetary limitations, we accede to a community’s recommendations 

for its air carrier choice; however, this does not mean we will also accept carriers’ proposals for 

service levels that exceed what the Department solicits in its requests for proposals. The EAS 

program is operating under heightened budget constraints. Cape Air’s proposal is based on three 

daily round trips (21 per week), with a proposed term of two years and one of four years. Cape 

Air proposed annual subsidy amounts of $1,829,680 (two-year term) and $1,784,898 (four-year 

term), respectively, for 21 round trips per week. As discussed above, Owensboro supports the 

selection of Cape Air and Cape Air fully meets the carrier selection criteria. In order to 

accommodate the community’s recommendation of Cape Air, we will authorize subsidy levels 

that are prorated from 21 round trips a week to 18 round trips per week, in accordance with the 

18 round trips per week with aircraft seating fewer than 15 passengers that the Department 

solicited in its request for proposals (Order 2011-8-6). Cape Air’s Cessna 402 aircraft has a 

capacity of 9 passenger seats. As between Cape Air’s two-year or four-year option, the 

community supports Cape Air’s four-year proposal, and it offers subsidy savings to the 

Department, so we will select the four-year option. The revised annual subsidy for 18 round 

trips per week is $1,529,913, resulting in a savings of over $1,000,000 over the course of the 

four-year period and provides the community with access to the national air transportation 

system.

Because we are selecting an option that is different from the one that Cape Air submitted, we 

will give Cape Air and the community 10 days following the service date of this order to object 

to this tentative award.

We shall make this selection at Owensboro contingent upon the Department’s receiving properly 

executed certifications from Cape Air 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 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 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 

finding. We therefore conclude that the carrier remains fit to conduct the operations proposed 

here.

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

1. We tentatively select Hyannis Air Service, Inc. d/b/a Cape Air, to provide essential air service 

at , Owensboro, Kentucky;

2. We tentatively set the final rate of compensation for Hyannis Air Service, Inc. d/b/a Cape Air, 

for the provision of essential air service at Owensboro, Kentucky, as described in Appendix C;

3. We direct Hyannis Air Service, Inc. d/b/a Cape Air and the community to show cause within 

ten (10) days of the issue date of this order why we should not select Cape Air at the service and 

subsidy levels described in the text of this order comprising 18 round trips a week to Owensboro;

4. If we receive no objections within ten (10) days of the issue date of this order, we delegate 

authority to the Director, Office of Aviation Analysis, to issue an order making this tentative 

decision final;

5. We direct Hyannis Air Service, Inc. d/b/a Cape Air, 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;

6. We find that Hyannis Air Service, Inc. d/b/a Cape Air, continues to be fit, willing and able to 

operate as a commuter carrier and capable of providing reliable essential air service at , 

Owensboro, Kentucky; 

7. This docket will remain open until further order of the Department; and

8. We will serve copies of this order on the Mayor of Owensboro and the Airport Manager of 

Owensboro-Daviess County Regional Airport, Hyannis Air Service, Inc. d/b/a Cape Air, MultiAero, Inc. d/b/a Air Choice One, SeaPort Airlines, and TransportAzumah.

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

This map is provided by Planet Profitability Forecasting System and is being used with express permission of the 

copyright holder, Sabre Airline Solutions®.
Appendix B

Proposal of Hyannis Air Service, Inc. d/b/a Cape Air

Owensboro, Kentucky
Appendix C

Hyannis Air Service, Inc. d/b/a Cape Air

Essential Air Service to be Provided at Owensboro, Kentucky

Effective Period: Four years beginning when Cape Air inaugurates full EAS through the end of 

the 48th month thereafter

Scheduled Service: 3 round trips each weekday (Monday through Friday) and 3 nonstop round 

trips each weekend (18 total round trips per week) to Lambert-St. Louis International Airport

Aircraft: Cessna 402, 9 seats

Rate per Eligible Flight1: $843

Weekly Ceiling2: $30,348

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 

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 order beyond November 18, 2011. The Government’s 

obligation for performance under this order beyond November 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 November 18, 2011, until funds are made available to 

the Department for performance. If funds are not made available for performance beyond November 18, 2011, 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 Annual compensation of $1,529,913, divided by 1,816 annual departures (36 weekly departures x 52 weeks x 97 

percent completion).

2 36 flights per week multiplied by $843 per flight.