Or der: 20 11
- 10
- 14 Served : October 20 , 20 11 

### UNITED STATES OF AMERICA **DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY**  **WASHINGTON, D.C.** Issued b y the Department of Transportation on the 20 th of October , 20 11 Essential Air S ervice at **OWENSBORO ,**  **KENTUCKY** under 49 U.S.C. 41731 et seq. **Docket DOT -**  **OST -**  **2000 -**  **7855**

**ORDER TENTATIVELY**  **S ELECTING CARRIER**  **Summary** By this order , the Department is tentatively s electing Hyannis Air Service, Inc. d/b/a Cape Air ( Cape Air) to provide subsidized essential air service (EAS) at Owensboro , Kentucky , for a four
ye ar period
. 1 The four
- ye ar period will begin when Cape Air inaugurates full EAS and will run through the end of the 48 th month thereafter. This tentative selection of Cape Air will provide Owensboro with 18 nonstop round trips per week to L ambert
- St. L ouis 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 Gr and 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 expire d August 31, 2011 . Pacific Wings operate s the service under the brand names K entucky 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 Owensbor o 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.- 2
-

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 p roposals (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 reaso nable 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, proh ibiting Pacific Wings from terminating subsidized service for 30 day s 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 acce ssed online at http://www.regulations.gov by entering DOT
OST
- 2000
- 7855 in the “ Enter Key word or ID ” section. Cape Air propos es three daily nonstop round trips (21 per week) to Lambert
- St. L ouis 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
- ye ar term, or an annual subsidy of $1,784,898 for a four
- y ear 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 dail y 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 subsid y of $1,566,823. Inaddition, 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. L ouis. 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, th e proposed unsubsidized 2 Air service at Jackson, Tennessee, was addressed in separate Orders.- 3
-

service i s outside the scope of the EAS program, and, thus, if selected, we could not require that Air Choice One provide the se rvice and we will not consider it in our carrier
- selection decision. SeaPort proposes three options, all using 9
- passenger Cessna Caravan aircraft. O ption 1 is three nonstop round trips each weekday and weekend (18 per week) to Nashville for an annual su bsidy of $1,029,080 (first year) and $1,024,114 (second ye ar). O ption 2 is two nonstop round trips each weekday

and weekend (12 per week) to St. Louis and one nonstop round trip each weekda y and weekend (6 per week) to Memphis International Airport for an annual subsidy of $1,297,492 (first ye ar) and $1,353,557 (second y ear). Option 3 is two nonstop round trips each weekday and weekend (12 per week) to St. Lo uis and one nonstop round trip each weekday and weekend (6 per week) to Nashville for an annual subsidy o f $1,278,929 (first ye ar) and $1,254,171 (second ye ar). 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 comment s regarding the carrier selection at Owensboro. We received a joint letter from M ayor Ron Pay ne , the Mayor of the Cit y of Owensboro , and Al Mattingly , Count y Judge Executive. The letter stated that the community assembled a ten
member panel consisting of airport board members, and representatives from the City , Count y, C hamber of Commerce, and the Economic Development Corporation t o 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 Airp ort. 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
- ye ar proposal of three Owensboro
- St. L ouis nonstop round trips . We will tentatively select the carrier to provide 1 8 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 air port; 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 bey ond 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- 4
-

passengers to reach their destination s with one reservation through electronic ticketing and baggage check
- in. Lastly , the Mayor of Owensboro states that th e community supports Cape Air’s proposal. Neither Air Choice One nor SeaPort received an y 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 ye ars and one of four ye ars . Cape Air proposed annual subsidy amounts of $ 1,829,680 (two
- year term) and $ 1,784,898 (four
- ye ar term), respectivel y, for 21 round trips per week. As discussed above, Owensboro supports the selection of Cape Air and Cape Air full y meets the carrier selection criteria
. Inorder to accommodate the community ’s recommendation of Cape Air, we will authorize subsidy levels that are prorated from 21 round trips a week to 1 8 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 A ir’s two
- ye ar or four
- ye ar option, the community

supports Cape Air’s four
- ye ar proposal, and it offers subsidy savings to the Department, so we will select the four
- ye ar option. T he revi sed annual subsidy for 1 8 round trips per week is $1,529,913 , resulti ng in a savings of over $1,000,000 over the course of the four
- ye ar period and provide s the community with access to the national air transportation sy stem. 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 day s 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 properl y 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 sub j ect 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).- 5
-

**ACCORDINGLY,** 1. We tentatively select Hyannis Air Service, Inc. d/b/a Cape Air , to provide essential air s ervice 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) day s of the issue date of this order wh y we should not select Cape Air at the service and subsidy levels described in the text of this order comprising 1 8 round trips a week to Ow ensboro ; 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 Anal ysis, to issue an order making this tentative decision final; 5 . We direct Hyannis Air Service, In c. d/b/a Cape Air , to retain all books, records, and other source and summary

documentation to support claims for pay ment, and to preserve and maintain such documentation in a manner that readil y permits its audit and examination by representatives of th e Department. Such documentation shall be retained for seven ye ars or until the Department indicates 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 forfe it 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 , continue s to be fit, willing and able to operate as a commuter carrier and capable of providing reliable essential air service at , Owensboro , Kentucky ; 7 . Th is 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, Hy annis Air Service, Inc. d/b/a Cape Air , Multi
Aero, In c. 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.govAppendix 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, KentuckyAppendix C **Hyannis Air Service, Inc. d/b/a Cape Air Essential Air Service to be Provided**  **at Owensboro**  **, Kentucky**  Effective Period : Four ye ars beginning when Cape Air inaugurates full EAS through the end of the 48 th month thereafter Scheduled Service : 3 round trips each weekday (Monday through Friday) and 3 nonstop round trips each weekend ( 1 8 total round trips per week) t o Lambert
- St. Louis In ternational Airport Aircraft : Cessna 402 , 9 seats Rate per Eligible Flight 1 : $ 8 43 Weekly Ceilin g 2 : $ 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 fl ight 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 flight s 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 disallow ed, the Department will consider the extent to which the go als 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 complete ly , terminates or reduces payments for service or changes service requirem ents 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 l ocation 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 carrier do not constitute a total or partial reduction or cessat ion 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 w riting to the carrier. All claims for payment must be submitted within 60 days of the last day o f service provided under this order
.

1 Annual compensation of $1,529,913 , divided by 1,8 16 annual departures (36 w eekly departures x 52 w eeks x 97 percent completion). 2 36 flights per week multiplied by $ 8 43 per flight.