Order 2010-10-12

Served: October19, 2010

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

Issued by the Department of Transportation

on the 19th day of October, 2010

ORDER SELECTING CARRIER

AND ESTABLISHING SUBSIDY RATES

Summary

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

to continue providing subsidized essential air service (EAS) at Lebanon, NH/White River 

Junction, VT (Lebanon), for the four-year period beginning December 1, 2010, through 

November 30, 2014, at the annual subsidy rate of 2,347,744.

1 (See Appendix A for a map of 

the service area.)

Background

Lebanon is guaranteed to receive at least a minimum level of air service under the EAS 

program by virtue of the fact that it appeared on a certificated carrier’s Civil Aeronautics 

Board-issued certificate on October 24, 1978, the date the Airline Deregulation Act of 1978 was

signed into law. (See 49 U.S.C. 41731-41744 for the EAS program’s governing statutes.) By

Order 2008-7-27, July 25, 2008, the Department selected Cape Air to provide EAS at the 

community for the two-year period through November 30, 2010. That order established an

annual subsidy rate of $2,245,669 for service consisting of six daily nonstop round trips (42 

round trips per week) between Lebanon and Boston International Airport, with 9-seat 

Cessna 402 aircraft. On February 5, 2010, Cape Air requested permission to alter Lebanon’s 

service pattern by eliminating two of its six daily nonstop round trips to Boston and replacing 

them with two daily nonstop round trips to Westchester County Airport in White Plains, New 

York. By Order 2010-2-21, with the full support of the community, the Department granted 

Cape Air’s request.

 

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

Essential Air Service at

LEBANON, NH/WHITE RIVER JCT., VT

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

DOCKET DOT-OST-2003-14822
2

In anticipation of the end of the rate term, the Department issued Order 2010-8-3, August 2,

2010, requesting proposals from carriers interested in providing replacement service at 

Lebanon, with subsidy support if necessary, for a new rate term beginning December 1, 2010.

Carrier Proposals

In response to our request, Cape Air (the incumbent) was the only carrier to submit a proposal.

The carrier proposes to continue to provide its current level of service, consisting of four 

nonstop round trips per day to Boston Logan International Airport, and two nonstop round trips 

per day to Westchester County Airport in White Plains, New York, with 9-seat Cessna 402 

aircraft. The carrier offers two-year and four-year subsidy rates of $2,434,435 and $2,347,744, 

respectively.

Community Comments

In response to our request, we received a letter from Richard Dyment, the Manager of Lebanon 

Airport. In his letter, Mr. Dyment included minutes from the City Council meeting where the 

community voted unanimously to (1) support Cape Air’s 4-year service option, and (2) waive 

its right to receive EAS with 15-seat or larger aircraft.

Decision

After careful consideration of the carrier’s proposal, as well as the community’s comments, we 

have decided to select Cape Air to continue to provide EAS at Lebanon, as proposed, for the 

four-year period through November 30, 2014. We find that the proposed service and subsidy

levels are reasonable.

We note that EAS at Lebanon calls for service with 15-seat aircraft. However, as noted earlier, 

the community has waived its right to receive service with 15-seat or larger aircraft, in essence

approving the service with nine-seat aircraft.

We shall make this selection 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 governing 

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).
3

ACCORDINGLY,

1. The Department selects Hyannis Air Service, Inc. d/b/a Cape Air, to continue to provide 

EAS at Lebanon, NH/White River Junction, VT, and establishes an annual subsidy rate of 

$2,347,744, as detailed in Appendix B, for the four-year period beginning December 1, 2010;

2. We set the final rate of compensation for Cape Air, for the provision of essential air service 

at Lebanon, payable as follows: for each month during which EAS is provided, the amount of 

compensation shall be subject to the weekly ceiling set forth in Appendix C and shall be 

determined by multiplying the subsidy-eligible arrivals and departures completed during the 

month by $554;

2

3. The Department finds that Cape Air continues to be fit, willing and able to operate as a 

commuter air carrier and capable of providing reliable EAS at Lebanon;

4. We direct 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;

5. Docket DOT-OST-2003-14822 will remain open until further order of the Department; and

6. The Department will serve a copy of this order on the mayor and airport manager of 

Lebanon, and Cape Air.

By:

SUSAN L. KURLAND

Assistant Secretary for Aviation

 and International Affairs

(SEAL)

An electronic version of this document is available online at

www.regulations.gov

 

2 See Appendix C for the calculation of this rate, which assumes the use of the aircraft designated. If the carrier 

reports a significant number of aircraft substitutions, a revision of this rate may be required.
Appendix A

Area Map
Appendix B

HYANNIS AIR SERVICE, INC. d/b/a CAPE AIR

ANNUAL COMPENSATION REQUIREMENT FOR ESSENTIAL AIR SERVICE AT

LEBANON, NH/WHITE RIVER JUNCTION, VT
Appendix C

Page 1 of 2

HYANNIS AIR SERVICE, INC. d/b/a CAPE AIR

ANNUAL COMPENSATION REQUIREMENT FOR ESSENTIAL AIR SERVICE AT

LEBANON, NH/WHITE RIVER JUNCTION, VT

Effective period: December 1, 2010, through November 30, 2014

Service: 4 nonstop round trips per day to Boston Logan Int’l Airport

2 nonstop round trips per day to Westchester Co. Airport 

(White Plains, NY)

Aircraft type: Cessna 402 aircraft (9 seats)

Timing of flights: No upline or intermediate service is permitted without prior 

Department approval. Flights must be well-timed and wellspaced in order to ensure full compensation.

Annual compensation: $2,347,744

Subsidy Rate Per

Arrival/Departure: $5541

Weekly Compensation 

Ceiling: 2$46,5363

___________________________

1

 Annual compensation of $2,347,744 divided by 4,237 annual arrivals and departures calculated as 

follows: 84 flights x 52 weeks x 97% completion = 4,237.

2

 This rate assumes an annual completion factor of 97 percent. A compensation ceiling is to be applied 

per calendar week such that service above that ceiling in one week cannot make up for service shortfalls

in another week.

3

 Subsidy rate per arrival/departure of $554 multiplied by 84 eligible arrivals and departures.
Appendix C

Page 2 of 2

General Terms and Conditions for Essential Air Service

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 solicitation beyond December 3, 

2010. The Department’s obligation for performance under this solicitation beyond December 3, 

2010, is contingent upon 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 December 3, 2010, until funds are made available to the 

Department for performance. If funds are not made available for performance beyond 

December 3, 2010, the carrier will receive notice in writing by the Department.

All claims for payment must be submitted within 60 days of the last day of service provided 

under this order.