Order 20 1 2

- 8

- 9

Served: August 3 , 20 1 2



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 3rd day of August , 20 1 2

ORDER SELECTING CARRIER AND SETTING FINAL SUBSIDY RATES

Summary By this Order , we are selecting Sun Air Express, LLC d/b/a Sun Air International (Sun Air)

, to provide subsidiz ed Essential Air S ervice (EAS) with nine

- passenger twin

- engine Piper

Chieftain air craft at Hagerstown, Maryland, and Lancaster

, Pennsylvania

, through Septe mbe r 3 0

, 201 5

. 1 The annual subsidy rate for Hagerstown will be set at $ 1,785,638, and $2,504,174 for Lancaster, or a combined total of $4,289,81 2 . See Appendix A for a map.

Background

On February 14 , 201 2

, the President signed the FAA Modernization and Reform Act of 2012, (P. L. 112

- 95). T h is law, among other t hings, extend ed both communities’ eligibility

for subsidized EAS through September 30, 2015

.

By Order 2012

- 2

- 13, February 17, 2012, the Department extended the contract of Hyannis Air Service, In c. d/b/a Cape Air (Cape Air) to provide subsidized EAS at Hagerstown and

Lancaster until further notice and requested proposals from carriers interested in providing

EAS at Hagerstown and/or Lancaster, through September 30, 2015, with or without subsidy. Proposals were due on March 15, 2012; however, no proposals were submitted. On

March 23, 2012, by Order 2012

- 3

- 16, the Department requested proposals for EAS at either

or both communities for a second time.

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

funds.

Essential Air Service at :

HAGERSTOWN, MARYLAND LANCASTER, PENNSYLVANIA

Under 49 U.S.C. 41731 et seq

. DOT

- OST

- 2006

- 25228

DOT

- OST

- 2002

- 11450- 2

-

Based on historic al service levels and the statutory limitations described above, in order to attract as broad an array of proposals as possible, we stated in the Request for Proposals that

we would entertain proposals for two round trips a day (12 a week) to Washington, Pittsburgh, New York, o r any other large or medium hub airport offering numerous connections to the national air transportation system, utilizing 19

- seat or larger aircraft. If

8/9

- seat aircraft were proposed, we expected four or five round trips a day (24 or 30 a week)

to main tain the current level of service. 2 Carriers were encouraged to propose more than one service option if they chose and were not limited to those requirements if they envisioned other, potentially more attractive possibilities

– different hubs, for example

– with subsidy requirements that remain competitive.

Proposals

The entire public docket, including the proposals for EAS at the two communities

, may be accessed online through the Federal Docket Management System at: http://www.regulations.gov , by entering “DOT

- OST

- 2006

- 25228 ” ( Hagerstown ) or “DOT

OST

- 2002

- 11450 ” (Lancaster ) in the “ SEARCH for: Rules, Comments, Adjudications or Supporting Documents : ” field.

Sun Air wa s the onl y carrier to submit a proposal for service at either community. It would

utilize nine

- passenger twin

- engine Piper Chieftain aircraft with service to either Baltimore/Washington International Thurgood Marshall Airport (BWI) or Washington

Dulles Internation al Airport (IAD). At Hagerstown, the carrier would provide 24 nonstop round trips a week to BWI for an annual subsidy requirement of $1,724,486, or to IAD for $1,785,638. At Lancaster, the carrier proposed to provide 30 nonstop round trips a week to

BWI for an annual subsidy rate of $2,350,403, or to IAD for $2,504,174.

Community Comments

On May 4, 2012

, the Department sent letters to the airport managers of both communities summarizing Sun Air’s proposal and requesting their comments on the carrier

- selection

decision

.

In response , the Department received community comments from both airport directors

. Lancaster’s Airport Director stated that the airport was “pleased with the service outlined in Sun Air’s proposal

. ” H owever, the airport was concerned that there was no mention of any marketing commitments contained in the carrier’s proposal. The Lancaster Airport Authority endorsed Option 2, which would provide service to IAD.

T he Ha gerstown Airport Director stated that the EAS contract “sho uld be awarded to Sun Air with service to IAD to commence as soon as possible.” The Airport Director also noted that Sun Air has addressed its concerns and looks forward to working together to establish the new service at the airport.

2 Previously, most EAS communities were entitled to service with 15

- seat or larger aircraft. However, for

FY 2012, Congress revoked the minimum requirement that basic EAS include servic e with at least 15

- seat or larger aircraft. See Consolidated and Further Continuing Appropriations Act, P.L. 112

- 55, November 18, 2011.

Communities are still entitled to service with twin

- engine aircraft.- 3

-

Decision on Carrie r Selection After careful consideration, including the comments of local officials, the Department has

decided to select Sun Air to provide EAS at both communities, in accordance with its proposal. At Hagerstown, the carrier would provide 24 nonstop round trips a week to IAD for an annual subsidy rate of $1,785,638. At Lancaster, the carrier proposed to provide 30 nonstop round trips a week to IAD for an annual subsidy rate of $2,504,174.

The carrier

- selection decision is straightforward. Sun Air was the only carrier to submit a proposal and the communities endorse its’ IAD proposal

. We find that both the service and subsidy levels proposed by Sun Air to be reasonable. We shall make our selection of Sun Air contingent upon its receiving final operati ng authority the Federal Aviation Administration.

The Department shall also make this selection at both communities contingent upon the Department’s receiving properly executed certifications from Sun Air that it is in compliance with the Department’s reg ulations regarding drug

- free workplaces and nondiscrimination, as well as the regulations governing lobbying activities.

Carrier Transition We expect Cape Air and Sun Air to work together to make a smooth transition at these communities. In that regard, before Cape Air suspends its service it must notify any passengers holding reservations for travel after the suspension date, to assist those passengers in making alternate air transportation arrangements, or to provide a refund of the ticket price,

withou t penalty, if requested.

Carrier Fitness 49 U.S.C. 41737(b) and 41738, require that we find an air carrier fit, willing, and able to provide reliable service before we may subsidize it to provide essential air service. The Department recently found Sun Air fit to conduct scheduled passenger operations as a

commuter carrier by Order 2012

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- 1 1, June 18, 2012. We therefore conclude that the carrier

is reliable and fit to conduct the operations proposed here.

This Order is issued under authority delega ted in 49 CFR 1.56a (f).

ACCORDINGLY,

1. We select Sun Air Express, LLC d/b/a Sun Air International t o provide Essential Air

S ervice at Hagerstown, Maryland, and Lancaster

, Pennsylvania

, contingent upon its receiving full operating authority from both the Department and Federal Aviation Administration. We

establish the subsidy rates

, as described in Appendix C , f or the period when the carrier inaugurates full service at both communities

, through September 3 0

, 2015 ;

2 . The Department direct s Sun Air Express, LLC d/b/a Sun Air International 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 examin ation by representatives of the Department. Such documentation shall be retained for seven years from the date of this Order or until the Department indicates that the records may be destroyed, whichever comes first. Copies of flight logs for aircraft so ld or disposed- 4

-

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 will continue to require Hyannis Air Service, Inc. d/b/a Cape Air to provide Essential Air Service at these two communities, as de scribed in Appendix D of Order 2012

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- 13, until Sun Air Express, LLC d/b/a Sun Air International inaugurates full service at both communities;

4 . Th e s e Docket s will remain open until furthe r Order of the Department; and

5 . Docket Operations will serve copies of this Order on the parties listed in Appendix D

.

By:

SUSAN L. KURLAND Assistant Secretary for Aviation

and International Affairs

(SEAL)

An electronic version of this document is available on the World Wide Web at: http://www.regulations.gov/Appendix A



### AREA MAPAppendix B

Sun Air Express, LLC d/b/a Sun Air International

Provision of Essential Air Service a t Hagerstown, Maryland and Lancaster, Pennsylvania Calculation of Compensation RequirementAppendix C Page 1 of 2

Sun Air Express, LLC d/b/a Sun Air International

Provis ion of Essential Air Service at Hagerstown, Maryland and Lancaster, Pennsylvania Summary of Service To Be Provided

Effective Period : When the carrier inaugurates full service at both communities, through Sept ember 30 , 20 1 5

. Scheduled Service : Hagerstown, MD : 24 nonstop round tri ps a week to Washington

Dulles International Airport Lancaster, PA : 30 nonstop round tri ps a week to Washi ngton

Dulles International Airport Intermediate stops and upline

service : No service to any intermediate point is contemplated under the terms of the carrier’s proposal; accordingly, no such service may be provided on subsidized flights without prior Department approval. Aircraft type: Nine passenger twin

- engine Piper Chieftain Timing of flights: Flights must be well

- timed and well

- spaced in order to ensure full compensation. Annual compensation: Hagerstown, MD : $ 1, 785,638 Lancaster, PA : $ 2

, 504,174 This rate assumes an annual completion factor of 9 8 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. Subsidy Rate per Flight : Hagerstown, MD : $ 730 1 Lancaster, PA : $ 819 2 Weekly Compensation Ceiling: Hagerstown, MD : $ 3 5, 040 3 Lancaster, PA : $ 49,140 4

1 $ 1,785,638 divided by 2,446 annual departures: 48 flights x 52 weeks x .98 (completion factor) = 2,446.

2 $2,504,174 divided by 3,058 annual departures: 60 flights x 52 weeks x .98 (completion factor) = 3,058.

3 48 flights per week multiplied by $730 per flight

4 60 flights per week multiplied by $819 per flightAppendix C Page 2 of 2

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 co mpleted, 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 writt en 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 oper ated; 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 me t 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 requirements at a specific locati on 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 pa ragraph.

Funds are not currently available for performance under this Order beyond September 30 , 201 2

. The Department’s obligation for performance unde r this Order beyond September 30, 2012 , 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 September 30, 2012 , until funds are made available to the Department for performance. If funds are not made available for performance beyond Sept em ber 30, 2012

, 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 se rvice provided

under this Order

.Appendix D

SERVICE LIST

Cape Air, Andrew W. Bonney Hagerstown Regional Airport, Phillip G. Ridenour, C.M. Hagerstown Regional Airport, Greg Larsen Lancaster Airport, David Eberly, Jr. Lancaster Airport, Kim Huber

Sun Air International

, Thomas L. Cooper