### July 14, 2010 Proposal of Hyannis Air Service, Inc. dba Cape Air to provide subsidized Essential Air Service for 

# Massena, Ogdensburg and Watertown, NY
To/From 

# Albany and/or Boston
Docket DOT-OST- 1997-2842

Hyannis Air Service, Inc., dba Cape Air Attn: Andrew Bonney, 660 Barnstable Road, Hyannis, MA 02601 (508) 862 -9719 Media inquiries to Charles Ferrara, VP Corporate Affairs: 617-567-3597

# Cape Air is delighted to have served Massena, Ogdensburg and Watertown for almost two years

• Cape Air started serving Massena, Ogdensburg and Watertown on September 16, 2008

• Since then we have flown thousands of passengers (through May 2010):

– Massena: 10,572

– Ogdensburg: 6,738

– Watertown: 7,997

• Cape Air serves each community non -stop to Albany, three times daily

• As promised, Cape Air has kept fares low:

– Massena: $58

– Ogdensburg: $57

– Watertown: $64 1 Overview

Albany Watertown Ogdensburg Massena 

### Cape Air’s North Country route map

# Cape Air is carrying more than 6,000 passengers annually at Massena; Watertown and Ogdensburg traffic is growing

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000

Sep-09 Oct-09 Nov-09 Dec-09 Jan - 10 Feb- 10 Mar- 10 Apr- 10 May- 10 MSS ART OGS



### 2 Passengers served in the year ending... Sum of both directions

### 3 

# Cape Air is a small but robust commuter airline, operating and growing since 1989

 First route was Boston – Provincetown, begun in October 1989 with three aircraft  Presently flying 59 Cessna 402s in five regions, and two ATR-42s in Micronesia  Operating up to 570 flights daily  In 2009 flew more than 610,000 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 )

### 4 

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

 High-frequency, non-stop service  Interline eticketing and baggage agreements  Complete GDS sales channels  Reliability  Subsidies used to lower fares  MOCHA HAGoTDI † 

### culture and community investment Cape Air highlights “Key West Express”

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

### 5 

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

• Twenty-five interline agreements are in place, with almost all 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

• Five Boston routes have a code, and Cape Air can interline with JetBlue

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

### 6 

# Cape Air is embedded in the global distribution systems (GDS) Cape Air is sold through:

### 7 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!

# Cape Air’s independence offers numerous benefits

• Complete control of:

– Fares

– Marketing and advertising

– Community sponsorships

– Schedule

• Direct relationships with the decision makers at Cape Air

• Independent reservations center:

– 866- Cape-Air

– Capeair.com

• No fees to book tickets with a live Cape Air reservations agent or at the counter

• No first checked bag fee; no change fees • Financially strong airline

• Aircraft isolated on routes to provide reliability

– Good availability of spare aircraft

• Same connectivity as a network affiliate, since Cape Air has e-ticket and baggage agreements with most major airlines

8 Benefits of independence

# To enhance connectivity, Cape Air proposes an option for “through” service to Boston, via Albany

• Each flight would operate non -stop to Albany, then continue on to Boston on a combined “funnel” flight

– Retains the intra-state link with Albany

• In distribution systems the service will show as a one-stop “direct” flight with a single through flight number

– As a practical matter, the service is an exquisitely timed Cape Air connection

• Provides access to Boston’s world -class hub and major metropolitan area

9 Through service to Boston highlights

Massena Ogdensburg

Watertown

Albany Boston 

### Through service to Boston map

The incremental subsidy to add Boston is

modest compared with the benefit to the communities, and the per- passenger subsidy markedly decreases

# Albany has service to 25 non -stop destinations, but...

10 Destination Wkly Dpts 1 Chicago-O'Hare, IL 41 2 Baltimore, MD 40 3 Philadelphia, PA 35 4 Detroit, MI 31 5 Newark, NJ 28 6 Washington-Dulles, VA 27 7 Cleveland, OH 23 8 Watertown, NY 21 9 Charlotte-Douglas, NC 21 10 Massena, NY 21 11 Ogdensburg, NY 21 12 Atlanta, GA 20 13 Washington-National, DC 20 14 New York-La Guardia, NY 18 15 Toronto, ON, CA 18 16 Orlando, FL 14 17 Chicago-Midway, IL 14 18 Boston, MA 12 19 Cincinnati, OH 7 20 Fort Lauderdale, FL 7 21 New York-JFK, NY 7 22 Las Vegas, NV 7 23 Minneapolis/St. Paul, MN 7 24 Tampa, FL 7 25 Buffalo, NY 6 Total 473 

### Albany route map

Source: OAG June 2010 

### Albany destinations served

# ...Boston has service to 95 non -stop destinations, including 25 international destinations and comprehensive transcon service

11 Rank Destination Wkly Dpts Rank Destination Wkly Dpts Rank Destination Wkly Dpts Rank Destination Wkly Dpts 1 New York-La Guardia, NY 228 25 Buffalo, NY 42 49 Memphis, TN 20 73 Santo Domingo, DO 8 2 Washington-National, DC 176 26 Miami, FL 42 50 Augusta, ME 19 74 Austin, TX 7 3 Chicago-O'Hare, IL 147 27 Minneapolis/St. Paul, MN 39 51 Paris-De Gaulle, FR 19 75 Dublin, IE 7 4 New York-JFK, NY 142 28 Montreal-PET, QC, CA 39 52 Presque Isle, ME 19 76 Rome-Da Vinci, IT 7 5 Baltimore, MD 137 29 Lebanon, NH 38 53 Syracuse, NY 19 77 Jacksonville, FL 7 6 Atlanta, GA 113 30 Houston-Intercontinental, TX 36 54 Columbus, OH 18 78 New Orleans, LA 7 7 Philadelphia, PA 103 31 Fort Lauderdale, FL 34 55 Rochester, NY 17 79 Munich, DE 7 8 Washington-Dulles, VA 96 32 Chicago-Midway, IL 34 56 Ottawa, ON, CA 17 80 Portland, OR 7 9 Nantucket, MA 94 33 Toronto-City, ON, CA 31 57 Bermuda, BM 14 81 San Jose, CA 7 10 Charlotte-Douglas, NC 83 34 Richmond, VA 29 58 Las Vegas, NV 14 82 Zurich, CH 7 11 Martha's Vineyard, MA 75 35 Rockland, ME 28 59 Newport News, VA 14 83 Kansas City, MO 6 12 San Francisco, CA 73 36 Cleveland, OH 26 60 Fort Myers, FL 14 84 Myrtle Beach, SC 6 13 Raleigh/Durham, NC 72 37 Cincinnati, OH 25 61 St. Louis, MO 14 85 Aruba, AW 4 14 Toronto, ON, CA 71 38 Indianapolis, IN 25 62 Atlantic City, NJ 13 86 Cancun, MX 4 15 Newark, NJ 70 39 West Palm Beach, FL 24 63 Bar Harbor, ME 13 87 Madrid, ES 4 16 Los Angeles, CA 69 40 San Juan, PR 24 64 Akron/Canton, OH 13 88 Shannon, IE 4 17 Provincetown, MA 61 41 Hyannis, MA 21 65 Frankfurt, DE 13 89 Oakland, CA 3 18 Dallas/Fort Worth, TX 58 42 Plattsburgh, NY 21 66 San Diego, CA 13 90 Ponta Delgada, PT 3 19 Denver, CO 56 43 Phoenix, AZ 21 67 Salt Lake City, UT 13 91 Montego Bay, JM 2 20 Orlando, FL 52 44 Rutland, VT 21 68 Albany, NY 12 92 Praia, CV 2 21 London-Heathrow, EN, GB 49 45 Seattle/Tacoma, WA 21 69 Long Beach, CA 12 93 Lisbon, PT 1 22 Detroit, MI 48 46 Saranac Lake, NY 21 70 Harrisburg, PA 11 94 Punta Cana, DO 1 23 Milwaukee, WI 45 47 Tampa, FL 21 71 Amsterdam, NL 10 95 Terceira, PT 1 24 Pittsburgh, PA 45 48 Halifax, NS, CA 21 72 Reykjavik, IS 10 Total 3,310 Shading denotes international 

### Boston destinations served

Source: OAG June 2010

# Cape Air proposes three service options for two-year selection periods, but also offers DOT savings if the selection is for four years
Option Description 1 Each community served 3x daily to Albany (status quo) 2 MSS and OGS only to Albany only, 3x daily 3 Two or three of the communities served 3x daily to Boston via Albany

12 Cape Air prefers a four-year selection, which provides a slight savings to DOT and a better return on marketing and community investment, making both more attractive Preferred

# Option 1 3x daily each to Albany

13 To/From Albany Only ART MSS OGS Daily RTs 3 3 3 Pax/Dpt 2.8 3.0 2.6 LF 31% 33% 29% Fare (net) $59.00 $58.00 $57.00 Rev/Dpt $165 $172 $149 ART MSS OGS Fuel $422,205 $471,993 $485,934 Maintenance $411,583 $459,380 $475,312 Pilots $156,436 $156,436 $156,436 Ownership $87,690 $87,690 $87,690 Stations $460,757 $438,832 $410,243 Operating fees $39,661 $18,309 $18,309 Marketing $32,850 $32,850 $32,850 General & Admin./Other $123,889 $125,891 $121,327 Operating expense $1,735,071 $1,791,381 $1,788,100 Return of 5% $91,320 $94,283 $94,111 Economic Expense $1,826,390 $1,885,664 $1,882,210 Revenue $349,681 $365,932 $316,032 Profit ($1,476,709) ($1,519,732) ($1,566,178) Subsidy Required $1,476,709 $1,519,732 $1,566,178 Per Departure $695 $715 $737 Subsidy Required $1,432,408 $1,474,140 $1,519,193 Per Departure $674 $694 $715 

### 4-year Discount 

### Expenses Two-year selection 

### Drivers

# Option 2 Massena and Ogdensburg only 3x daily to Albany

14

To/From Albany MSS OGS Daily RTs 3 3 Pax/Dpt 3.0 2.6 LF 33% 29% Fare (net) $58.00 $57.00 Rev/Dpt $172 $149 MSS OGS Fuel $471,993 $485,934 Maintenance $482,257 $498,983 Pilots $156,436 $156,436 Ownership $87,690 $87,690 Stations $438,832 $410,243 Operating fees $18,309 $18,309 Marketing $32,850 $32,850 General & Admin./Other $125,891 $121,327 Operating expense $1,814,258 $1,811,770 Return of 5% $95,487 $95,356 Economic Expense $1,909,745 $1,907,127 Revenue $365,932 $316,032 Profit ($1,543,813) ($1,591,094) Subsidy Required $1,543,813 $1,591,094 Per Departure $727 $749 Subsidy Required $1,497,499 $1,543,362 Per Departure $705 $727 

### Expenses Two-year selection 

### Drivers

4-year Discount

# Option 3 Two or three of the communities served 3x daily to Boston via Albany

15 To/From Boston ART MSS OGS Daily RTs 3 3 3 Pax/Dpt 4.5 4.7 4.3 LF 50% 52% 48% Fare (net) $71.12 $70.01 $70.41 Rev/Dpt $319 $327 $303 Local ALB-BOS rev $120 $120 $120 ART MSS OGS Fuel $673,747 $723,535 $737,476 Maintenance $656,253 $704,049 $719,982 Pilots $230,052 $230,052 $230,052 Ownership $128,956 $128,956 $128,956 Stations $460,757 $438,832 $410,243 Operating fees $73,269 $51,916 $51,916 Marketing $32,850 $32,850 $32,850 General & Admin./Other $134,072 $136,074 $131,510 Operating expense $2,389,955 $2,446,265 $2,442,984 Return of 5% $125,787 $128,751 $128,578 Economic Expense $2,515,742 $2,575,016 $2,571,562 Revenue $933,226 $949,477 $899,577 Profit ($1,582,516) ($1,625,539) ($1,671,985) Subsidy Required $1,582,516 $1,625,539 $1,671,985 Per Departure $745 $765 $787 Subsidy Required $1,535,041 $1,576,773 $1,621,825 Per Departure $723 $742 $763 Note: Cape Air requires at least two communities for Option 3 to be viable



### Drivers Expenses Two-year selection



### 4-year Discount

### 16 

# Cape Air is proud to be a partner in air service for Massena, Ogdensburg and Watertown

 Three daily flights to Albany and/or Boston  Subsidy used to lower fares  Interline connections, ticketing and bag transfer with most major airlines; global distribution  A healthy, strong, independent airline that cares passionately about serving communities Summary



# Cape Air is a great choice for Massena, Ogdensburg and Watertown

Hyannis Air Service, Inc., dba Cape Air Attn: Andrew Bonney, 660 Barnstable Road, Hyannis, MA 02601 (508) 862 -9719 Media inquiries to Charles Ferrara, VP Corporate Affairs: 617-567-3597