Order: 2010-9-28

 Served: September 28, 2010

 UNITED STATES OF AMERICA

 DEPARTMENT OF TRANSPORTATION

 OFFICE OF THE SECRETARY

 WASHINGTON, D.C.

Issued by the Department of Transportation

on the 28th day of September, 2010

Essential Air Service at

AUGUSTA/WATERVILLE, MAINE

BAR HARBOR, MAINE

ROCKLAND, MAINE

Docket DOT-OST-1997-2784

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

ORDER SELECTING CARRIERS

Summary

By this order, the Department is selecting Hyannis Air Service, Inc., operating as Cape Air 

(Cape Air), to provide essential air service (EAS) at Augusta/Waterville and Rockland, 

Maine, for the four-year period from November 1, 2010 to October 31, 2014, for a 

combined annual subsidy of $2,783,161, and Colgan Air Inc., operating as US Airways 

Express (Colgan Air), to provide EAS at Bar Harbor, Maine, for the two-year period from 

November 1, 2010 to October 31, 2012, for an annual subsidy of $2,298,533.

1

Background

These three communities are served by two carriers under two different contracts. By 

Order 2008-9-7, the Department selected Colgan Air to provide three round trips each 

weekday and four over each weekend (19 a week), over a Bar Harbor-Augusta/WatervilleBoston or Augusta/Waterville-Bar Harbor-Boston routing for a combined annual subsidy 

rate of $4,172,501. By Order 2008-7-35, the Department selected Cape Air to provide 

Rockland with three nonstop round trips per day (21 per week) from October through May, 

four nonstop round trips per day (28 per week) for June and September, and five nonstop 

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

funds.
- 2 -

round trips per day (35 per week) for July and August between Rockland and Boston for 

an annual subsidy rate of $1,522,770.

As the end of the contract was approaching, we issued Order 2010-6-22, June 24, 2010, 

requesting proposals to serve the three communities for a new term. In response, we 

received proposals from Cape Air and Colgan Air.

Each carrier’s complete proposal and community comments may be accessed online at 

http://www.regulations.gov/ by entering in the search block DOT-OST-1997-2784.

Proposal of Cape Air

Cape Air proposed one service option for Augusta/Waterville and Rockland, each option 

to be considered on a stand-alone basis. Service at both communities would be to Boston 

Logan International Airport (Boston) using 9-seat Cessna 402 aircraft. At 

Augusta/Waterville, Cape Air proposed four daily nonstop round trips (28 a week) from 

June through September, and three daily nonstop round trips (21 a week) from October 

through May, for an annual subsidy of $1,402,046 for a two-year contract, or $1,362,616 

for a four-year contract. Service to Rockland would be five daily nonstop round trips in 

July and August (35 a week), four daily nonstop round trips (28 a week) in June and 

September, and three daily nonstop round trips (21 a week) from October through May, for 

an annual subsidy of $1,461,651 for a two-year contract, or an annual subsidy of 

$1,420,545 for a four-year contract.

Proposal of Colgan Air

Colgan Air proposed two options, both serving Boston using 34-seat Saab 340 aircraft and 

operating as US Airways Express. Option 1 would serve both Augusta/Waterville and Bar 

Harbor to Boston with three round trips each weekday and two each weekend with a mix 

of nonstops and one-stop service over an Augusta/Waterville-Bar Harbor-Boston routing, 

or Bar Harbor-Augusta/Waterville-Boston routing for an annual subsidy of $4,439,041. 

Option 2 would serve Bar Harbor only, with two daily nonstop round trips (14 a week) to 

Boston for an annual subsidy of $2,298,533.

Community Comments

On July 28, 2010, we requested community comments regarding this carrier-selection case. 

With respect to Augusta/Waterville, both the mayor and airport manager submitted letters 

in support of Cape Air’s proposal to the serve the communities under a four-year contract, 

stating that the carrier’s schedule and destinations offered would accommodate the 

business and leisure travelers in their market. By accepting Cape Air’s proposal they 

understand that they are waiving their right to 15-seat-or-larger passenger aircraft for the 

duration of the four-year selection term.

The City of Rockland and its airport, the Knox County Regional Airport, also supported 

Cape Air’s proposal to serve their community under a four-year contract. They found 

Cape Air’s proposal to be complete and reasonable, and, as with Augusta/Waterville, they 

understand that they are waiving their right to 15-seat-or-larger passenger aircraft for the 

duration of the four-year selection term.
- 3 -

With respect to Bar Harbor, we received a letter from the Honorable Percy L. Brown Jr., 

Chairman of the Hancock County Commissioners, supporting Colgan Air’s Option 1 

proposal. Chairman Brown stated that “Colgan Air has continued to improve its 

relationship with airport management, operators and the customers” and has built “a 

reputation for excellent customer service.” Chairman Brown does state that Colgan Air’s

Option 2, with 14 weekly flights, is unacceptable and, if chosen, would have an adverse 

effect on the community’s air service. The Chairman states that negotiations would be 

necessary to secure an acceptable flight schedule should the Department choose Colgan 

Air’s Option 2.

Decision

The decision at Rockland is clear. Cape Air is the only carrier to submit a proposal to 

serve the community and the four-year option received full community support. In 

addition, the four-year option affords the Department some savings. We find that the 

service and subsidy levels are reasonable, and will meet the community’s needs.

Because of the way the two carriers’ proposals for Augusta/Waterville and Bar Harbor are 

packaged, we are faced with two options and we looked at the subsidy cost and community 

comments to base our decision. Our first option is to select Colgan Air at both 

communities while the second option is a split award of Cape Air to serve 

Augusta/Waterville and Colgan Air to serve Bar Harbor. Colgan Air’s proposal to serve 

Augusta/Waterville and Bar Harbor would cost $4,439,041, but Augusta/Waterville

supports Cape Air. On the other hand, a split award would give both communities their 

carrier of choice and save nearly $800,000 per year. Cape Air’s proposal to serve 

Augusta/Waterville received strong community support, and that proposal, combined with 

Colgan Air’s Option 2 proposal to serve only Bar Harbor, would require $3,661,149 in 

subsidy ($1,362,616 at Augusta/Waterville plus $2,298,533 at Rockland). Under this 

scenario, both communities receive the carrier they want. We understand that while Bar 

Harbor supported Colgan Air (the only carrier to submit a proposal to serve that 

community), the community did not support its Option 2, which would provide Bar Harbor 

with 14 nonstop round trips a week to Boston. While we place strong emphasis on the 

community feedback, EAS statues do not guarantee a desired level of service but rather a 

safety-net level of service to connect the community to the national air transportation 

system. The maximum capacity that we underwrite in the EAS program is 67 seats a day 

in each direction, and Colgan Air’s 2 round trips a day on 34-seat Saab 340 aircraft fully 

meet that maximum seat guarantee. Nevertheless, we expect Colgan Air to work with Bar 

Harbor community leaders to address any concerns they have regarding the airline’s

schedule frequency. We therefore select Cape Air to serve Augusta/Waterville and 

Colgan Air to serve Bar Harbor. Regarding Cape Air’s two- and four-year options at 

Augusta/Waterville, the community supports the four-year option and, as with Rockland, 

Cape Air’s four-year option requires slightly less subsidy on an annual basis and we will, 

therefore, select it.

We shall make these selections of Cape Air at Augusta/Waterville and Rockland, and 

Colgan Air at Bar Harbor contingent upon the Department’s receiving properly executed 
- 4 -

certifications from the carriers that they are 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 and 

Colgan Air are subject to the Department’s continuing fitness requirements, and no 

information has come to our attention that would cause us to question either 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 findings. We therefore conclude that the 

carriers remain fit to conduct the operations proposed here.

This order is issued under authority delegated in 49 CFR 1.56a(f).

ACCORDINGLY,

1. We select Hyannis Air Service, Inc. to provide essential air service at 

Augusta/Waterville and Rockland, Maine, and establish annual subsidy rates of $1,362,616 

and $1,420,545, respectively, as described in Appendix C; 

2. We select Colgan Air, Inc. to provide essential air service at Bar Harbor, Maine, and 

establish an annual subsidy rate of $2,298,533, as described in Appendix C;

3. We direct Hyannis Air Service, Inc. and Colgan Air Inc. 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;

4. We find that Hyannis Air Service, Inc. and Colgan Air Inc., continue to be fit, willing 

and able to operate as a commuter and certificated carrier, respectively, and capable of 

providing reliable essential air service at Augusta/Waterville, Bar Harbor, and Rockland;

5. This docket will remain open pending further Department action; and
- 5 -

6. We will serve copies of this order on the City and Airport Managers of 

Augusta/Waterville, Bar Harbor, Rockland, Hyannis Air Service, Inc. and Colgan Air Inc.

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 MAP
Appendix B

Page 1 of 2
Appendix B

Page 2 of 2
 Appendix C

Page 1 of 3

Hyannis Air Service, Inc.

Essential Air Service to be Provided at Augusta/Waterville, Maine

Effective Period: November 1, 2010, through October 31, 2014

Scheduled Service: 28 weekly nonstop round trips between Augusta/Waterville and Boston in 

peak season (Memorial Day through Columbus Day), and 21 weekly nonstop round trips in off 

peak

Aircraft: 9-seat Cessna 402 aircraft

Rate per Eligible Flight: $568;

1

Weekly Ceiling: Peak: $31,808; Off-peak: $23,8562

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 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 the 

carrier do not constitute a total or partial reduction or cessation of payment.

Funds are not currently available for performance under this order beyond September 30, 2010. The Department’s 

obligation for performance under this order beyond September 30, 2010, 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, 2010, until funds are made available to 

the Department for performance. If funds are not made available for performance beyond September 30, 2010, the 

Department will provide notice in writing to the carrier.

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.

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

 1 Upon questioning from the EAS staff regarding the duration of the peak period, Cape Air clarified that, in fact, the 

peak period was from Memorial Day through Columbus Day. Annual compensation of $1,362,616 divided by the 

estimated annual completed departures and arrivals:

Peak: 141 days x 8 flights a day x 97 percent completion

Off-peak: 224 days x 6 flights a day x 97 percent completion. 2 Peak 56 arrivals and departures per week multiplied by $568 per flight;

Off-peak: 42 arrivals and departures per week multiplied by $568 per flight
 Appendix C

Page 2 of 3

 

Colgan Air, Inc.

Essential Air Service to be Provided at Bar Harbor, Maine

Effective Period: November 1, 2010, through October 31, 2012

Scheduled Service: 14 weekly nonstop round trips between Bar Harbor and Boston

Aircraft: 34-seat Saab 340 aircraft

Rate per Eligible Flight: $1,6271

Weekly Ceiling: $45,5802

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 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 the 

carrier do not constitute a total or partial reduction or cessation of payment.

Funds are not currently available for performance under this order beyond September 30, 2010. The Department’s 

obligation for performance under this order beyond September 30, 2010, 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, 2010, until funds are made available to 

the Department for performance. If funds are not made available for performance beyond September 30, 2010, the 

Department will provide notice in writing to the carrier.

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.

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

 1 Annual compensation of $2,298,533 divided by 1,412 annual departures (28 weekly departures x 52 weeks x 97 

percent completion).

2 28 arrivals and departures per week multiplied by $1,627 per flight.
 Appendix C

Page 3 of 3

Hyannis Air Service, Inc.

Essential Air Service to be Provided at Rockland, Maine

Effective Period: November 1, 2010, through October 31, 2014

Scheduled Service: 35 weekly nonstop round trips between Rockland and Boston in July and 

August; 28 weekly nonstop round trips in June and September; and 21 weekly nonstop round 

trips from October through May

Aircraft: 9-seat Cessna 402 aircraft

Rate per Eligible Flight: $5731

Weekly Ceiling: July-August, $40,110; June and September, $32,088; October through May 

$24,0662

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 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 the 

carrier do not constitute a total or partial reduction or cessation of payment.

Funds are not currently available for performance under this order beyond September 30, 2010. The Department’s 

obligation for performance under this order beyond September 30, 2010, 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, 2010, until funds are made available to 

the Department for performance. If funds are not made available for performance beyond September 30, 2010, the 

Department will provide notice in writing to the carrier.

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.

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

 1 Annual compensation of $1,420,545 divided by the estimated annual completed departures and arrivals: July & 

August (62 days x 10 flights a day x 97 percent completion) + June & September (60 days x 8 flights a day x 97 

percent completion) + October through May (243 days x 6 flights a day x 97 percent completion) 2 July-August 70 arrivals and departures per week multiplied by $573 per flight; June and September 56 arrivals and 

departures per week multiplied by $573; October-May 42 arrivals and departures multiplied by $573