October 11, 2011 Proposal of Hyannis Air Service, Inc. dba “Cape Air” to provide subsidized Essential Air Service for:



### Non - stop to/from Lambert - St. Louis International Airport With --------------------------- codeshare expected

Hyannis Air Service, Inc., dba Cape Air Attn: Andrew Bonney, 660 Barnstable Road, Hyannis, MA 02601 (508) 862 - 9719 Community Docket Weekly Round Trips 

## Burlington, Iowa DOT - OST - 2001 - 8731 24



## Decatur, Illinois DOT - OST - 2006 - 23929 361 

# Cape Air is a small but robust commuter airline, operating and growing since 1989
 First route was Boston – Provincetown, begun in October 1989 with one aircraft  64 Cessna 402s in five regions, and two ATR - 42s in Micronesia  Operating up to 600 flights daily  In 2010 flew almost 650,000 passengers  Stable, mature and growing company Key facts Cape Air: Leading the pack nine at a time

Photo courtesy Mark Garfinkel (August 7, 2000, Boston )

# Cape Air 2011

• Cape Air is flying toward our fourth consecutive profitable year

• 2011 revenue will approach $100M

• Cape Air has purchased six more Cessnas, which will bring the fleet total to 70

• 38 airports served (16 in EAS) in six regions

– Northeast/New England

– Caribbean

– Florida

– Mid - Atlantic

– Midwest

– Micronesia 2 Captain Krista Poppe Hyannis based3 

# For smaller communities and niche markets, Cape Air’s nine - seat planes have proven to be a good fit

 High - frequency, non - stop service  branded service at St. Louis  Interline e - ticketing and baggage agreements  Complete GDS sales channels:  866 - Cape - Air  In - house Sabre reservations office  Reliability thanks to spare aircraft availability  MOCHA HAGoTDI † culture and community investment Cape Air highlights “Key West Express”

† Make Our Customers Happy And Have A Good Time Doing It4 

# Over more than 20 years Cape Air has invested in the airline features smaller communities need Feature Established Reliability Tickets sold through Expedia, Orbitz, Travelocity Interline e - ticketing with all legacy airlines Checked luggage transfer with all legacy airlines TSA security program5 

# Cape Air began service in 1989 with three aircraft...6 

# ...And one route: Boston – Provincetown

Provincetown Boston Original Cape Air route map

November 1989 schedule7 

# Today, Cape Air serves 17 communities in the Northeast... Northeast route map

Nantucket Martha’s Vineyard Provincetown Boston Hyannis

New Bedford Rockland Lebanon Saranac Lake

Rutland

Albany Watertown Ogdensburg Massena

September 2011 route map White Plains Providence AugustaMidwest Illinois

Missouri Cape Girardeau Marion Quincy

St. Louis
Ft. Leonard Wood 8 

# ...And has developed niches along the East Coast, in the Caribbean, Midwest and Micronesia

Florida Keys Ft. Myers

Key West Florida Mid - Atlantic

September 2011 route maps; Maps not to scale Kirksville Micronesia

Guam Rota Saipan Mayaguez San Juan Vieques St. Croix Nevis Anguilla St. Thomas Tortola Caribbean9 

# The Cessna 402 is the workhorse of Cape Air’s fleet10 

# Cape Air has been an interline carrier since 1993 enabling connectivity with most major airlines

• Interline agreements are in place with all US legacy airlines

• Cape Air has completed migration to interline e - ticketing , the updated industry norm

• Cape Air operates flights in Micronesia as

• Flights in the Caribbean have a code

• Cape Air is one of the only airlines that can interline with

• Flights in the Midwest operate with the code of Interline highlights11 

# Participation in the global distribution system gives Cape Air’s communities access to the world Cape Air is sold through:12 Cape Air’s Telephone Reservations Center 

# Cape Air has had its own reservations center, using the industry - standard , system, for more than 15 years

Toll free reservations: 866 - CAPE -

AIR Never a booking fee!13 

# The key to Cape Air’s success is our friendly people... Daffodil “Daffy” Day at Cape Air reservations14 

# ...And our mantra:

H ave A Go od T ime D oing I t! M ake O ur C ustomers H appy, A nd Cape Air celebrates Valentine’s Day in the Caribbean

# Cape Air’s St. Louis service began operations on November 8, 2009

15 Cape Air’s St. Louis region route map As of November 2009 Cape Air’s first St. Louis arrival taxis in! November 8, 2009; Sandi Dorrin, STL Asst. Station Manager

# Cape Air’s St. Louis operation now includes five EAS cities, eight aircraft and up to 54 flights per day

16 Cape Air’s St. Louis route map As of September 2011

# In each community Cape Air serves from St. Louis, ridership has increased dramatically

17 Passenger enplanements Year - ending

Data source: US DOT T100 database 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000Feb-08Apr-08Jun-08Aug-08Oct-08Dec-08Feb-09Apr-09Jun-09Aug-09Oct-09Dec-09Feb-10Apr-10Jun-10Aug-10Oct-10Dec-10Feb-11Apr-11 Predecessors

# July ridership in same - store markets was up 37%

18 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000Nov-09Dec-09Jan-10Feb-10Mar-10Apr-10May-10Jun-10Jul-10Aug-10Sep-10Oct-10Nov-10Dec-10Jan-11Feb-11Mar-11Apr-11May-11Jun-11Jul-11 Cape Girardeau Marion Quincy St. Louis passengers
+37%

# The popularity of Cape Air’s St. Louis service is due to complex, inter - related contributions by Cape Air and our community partners Low fares: $49
Reliable service

Convenient schedules timed for connections
Interline ability with all network

carriers at St. Louis Codeshare with Fully - functioning global distribution Community partnership

19 

## Popular service

# St. Louis has 1,591 weekly departures to 59 non - stop destinations — including all the major markets

20 Non - stop St. Louis service — October 2011

Source: OAG

# In addition to interline ability with all network carriers at St. Louis, Cape Air’s service is codeshared with American Airlines

21 Codeshare partners: American Airlines and Cape Air

Photo source: Jim Schnobrich ; Used with permission

# Connecting itineraries are sold on

-------------------- website

22

# St. Louis’s Concourse C was closed due to tornado damage, so Cape Air and American temporarily relocated to Concourse D

23 Cape Air

Expected to move back to Concourse C in April 2012

# Cape Air interlines checked luggage at Lambert - St. Louis with: American, Continental, Delta, Frontier, United and US Airways

24 A Cape Air interline bag cart in action at Lambert - St. Louis

Cape Air’s interline bag cart at St. Louis

# By year end we expect to have a ramp - side inter - terminal shuttle, facilitating seamless connections between terminals at St. Louis, without having to re - clear security

25 

## Eliminates TSA rescreening to connect between terminals! St. Louis terminal shuttle

# Cape Air has built its business over 20 years by providing reliable service for communities like Burlington and Decatur

26 

# Planes and pilots based in Burlington and Decatur Full service Cape Air maintenance base in St. Louis Spare aircraft located in St. Louis Factors in reliability

# To promote ridership the fare each way will be $49. 99

• The $49. 99 price includes all taxes and fees

• Fare is valid on all seats on all flights

• No advance purchase is required

• Commuter books (a 10 - pack of tickets) will be available for $469, equal to $46.90 per ticket

– Good for any seat on any flight

– No black - out dates

– No advance purchase required

– Virtually no restrictions

• Simplified pricing makes the service user - friendly

27 Simple fare structure

# Cape Air’s proposal includes a city ticket offices in each community to enhance airline and airport awareness

• Increases the visibility of the airport and air service within the community

• Provides a welcoming place for people to learn about the air service from a friendly Cape Air agent

• Enables the redemption of targeted promotions, providing wide latitude in marketing the air service

• Enhances the central business district with a vibrant new retail space 28 City ticket office highlights A typical city ticket office

# Cape Air’s service has an excellent prospect of reducing subsidy per passenger below $200  Low absolute subsidy amounts  Cape Air’s proposal would only require a 24% and 33% load factor at Decatur and Burlington, respectively, to keep subsidy per passenger under $200.  Global distribution in all legacy systems — in place for years  eTicketing with all legacy airlines at St. Louis  American Airlines codeshare expected  A proven marketing program and $42,000 allocated annually per community for advertising  City ticket offices to enhance community awareness of the air service  Track record of similar successes keeping subsidy per passenger below $200
29 Cape Air’s plan

# Cape Air proposes service with annual subsidies of $1.4M at Burlington and $1.5M at Decatur

30 Drivers Economics Two - year term

Cape Air proposes to serve both Burlington and Decatur, but is willing and able to operate either without the other DEC BRL Daily RTs 5.1 3.4 Pax/Dpt 3.7 3.7 LF 41% 41% Fare (net) $41.00 $41.00 Pax Rev/Dpt $151 $151 Annual Sched Dpts 3,642 2,428 Annual Passengers 13,438 8,958 DEC BRL Fuel $590,332 $482,999 Maintenance $556,151 $458,082 Pilots $173,387 $173,387 Ownership $138,908 $115,192 Rents $33,873 $29,492 Staff $94,141 $94,141 Landing Fees $130,486 $86,480 Marketing $42,000 $42,000 Customer Svc. $69,467 $69,467 General & Admin./Other $147,519 $122,976 Operating expense $1,976,266 $1,674,216 Return of 5% $104,014 $88,117 Economic Expense $2,080,280 $1,762,333 Passenger Revenue $550,946 $367,298 Profit ($1,529,333) ($1,395,035) Proposed Subsidy $1,529,333 $1,395,035 Per Departure $420 $575 Discount for 4 - year term Proposed Subsidy $1,491,902 $1,360,891 Per Departure $410 $56131 

# Cape Air would be honored to serve Decatur and Burlington

 High - frequency flights to St. Louis at a fare of only $49 each way  Spare aircraft in the region helps ensure a reliable operation  ----------------------------- codeshare, plus interline connections , ticketing and bag transfer with most major airlines; global distribution  A healthy, strong, independent airline that cares passionately about serving communities Proposal highlights



## Cape Air is a smart and economical choice for Burlington and Decatur

Hyannis Air Service, Inc., dba Cape Air Attn: Andrew Bonney, 660 Barnstable Road, Hyannis, MA 02601 (508) 862 - 971932 

# Thank you!

## Appendix 

# Interline Examples on Online Travel Agencies34 

# Cape Air is on Expedia.com Screenshot from Expedia.com showing Cape Air LNS - PHX search for travel 22SEP0935 

# Cape Air is on Travelocity.com Screenshot from Travelocity.com showing Cape Air ATL - MAZ search for travel 22SEP0936 

# Cape Air is on Orbitz.com Screenshot from Orbitz.com showing Cape Air ART - DCA search for travel 22SEP09