Order 20 1 4

- 2

- 19

Served: February 25

, 20 1 4



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 25 t h day of February , 20 1 4

ORDER RE SELECTING CARRIER

Summary By this Order , we are re selecting Hyannis Air Service, Inc., d/b/a Cape Air ( Ca pe Air ), to provide subsidiz ed Essential A ir S ervice (EAS) at Saranac Lake/Lake Placid, New York

, with twin

- engine, 9

- passenger Cessna 402 air craft

, for the four

- year period from

March 1, 2014, through February 28 , 201 8, at an annual subsidy rate of $ 1,832 ,064

. 1 See Appendix A for a map.

Background By Order 2010

- 3

- 27, March 25 , 20 1 0

, the Department re selected Cape Air to provide

subsidized EAS at Saranac Lake/Lake Placid for the period from March 1, 2010, through February 2 8 , 2014

. Under that O rder, Cape Air provides the community with three daily (21 weekly) nonstop round trips to Boston ’s Logan International Airport (BOS) with twin

engine, nine

- passenger Cessna 402 aircraft for an annual subsidy of $1,366,538

.

In anticipation of the end of the curren t rate term

, the Department issued Order 20 1 3

- 9

- 21, September 30, 2013 , solicit ing proposals to provide EAS , with subsidy support if necessary,

at Saranac Lake/Lake Placid

. In response to our solicitation we received one proposal from Cape Air, the incumb ent

.

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

Essential Air Service at :

SARANAC LAKE/LAKE PLACID, NEW

YORK

Under 49 U.S.C. 41731 et seq

. DOT

- OST

- 2000

- 8025- 2

-

Proposals The proposal is briefly summarized below

. A f ull cop y of the proposal and all public

comments received can be accessed at www.regulations.gov by searching for docket

DOT

- OST

- 200 0

- 8025

.

Cape Ai r Cape Air’s proposal consist s of two service options, each offered as either a two or four

- year

contract. All service would be provided with twin

- engine, nine

- passenger Cessna 402

aircraft. Cape Air’s Option A would continue to provide the community’s c urrent level of service, namely three daily (21 weekly) nonstop round trips to BOS. This option would require an annual subsidy of $1,891,456 (two years) or $1,832,064 (four years). Cape Air’s Option B would also provide three daily nonstop round trips t o BOS, but would also include one daily nonstop round trip to the New York City area via the Westchester County Airport (HPN). This service option would require an annual subsidy of $2,662,802 (two years) or $2,579,190 (four years).

Community Comments

On November 1, 2013, we requested community comments on Cape Air’s proposal. We received comments from U.S. Congressman Bill Owens, New York State Senator Elizabeth O’C. Little, as well as several local individuals, businesses and other institutions . All o f the comments received were supportive of Cape Air’s past service at the community and urged us to consider choosing Option B to include service to HPN. The community also provided a list of over 200 local citizens who had signed an online petition to su pport the expanded

service.

Decision

As Cape Air was the only carrier to submit a proposal in this carrier

- selection case , the

dec ision to reselect them is straight forward . However, the decision as to which of Cape

Air’s two service options to select is more complicated.

The community made it quite clear in their comments that they support Cape Air’ s O ption B (expanded service to HPN) . While we place significant weight on the comments of the community, it is not our only consideration. 2 It is also hig hly important that we consider our fiduciary responsibilities. The purpose of the EAS program is to provide a safety

- net level of air service to connect communities to the national air transportation system that otherwise would not have air service. Cape Air’s O ption A for status

- quo service fully meets the community’s EAS needs. Based on the most recent 12

- months of data available (July 1

, 2012

- June 30

, 2013)

, Saranac Lake/Lake Placid generated 5,490 outbound passengers
, or

2 When selecting a carrier, 49 U.S.C. § 41733(c)(1) directs us to consider five factors: (1) service reliability; (2) contractual and marketing arrangements with a larger carrier at the hub; (3) interline arrangements with a larger carrier at the hub; (4) community views, giving substantial weight to the views of the elected officials representing the users, and; (5) whether the carrier has included a plan to market its services to the co mmunity.

In addition , t he Consolidated and Further Continuing Appropriations Act, 2012, Public Law No. 112

- 55, and continued by the Full

- Year Continuing Appropriations Act, 2013, Public Law No. 113

- 6, and Continuing Appropriations Act, 2014, Public Law No . 113

- 46, provides that when selecting a carrier to provide EAS, the Department may consider the relative subsidy requirements, thus codifying a factor that we have considered since the inception of the program.- 3

-

about 15 passengers per day

. Cape’s Air’s existing service providing 27 seats per day more than adequately meets the community’s EAS needs.

While the community supports the additional service to HPN , Cape Air’s Option B four

- year proposal is $ 747,126 more than the Option A four

- year proposal

. We cannot reasonably justify providing Federal subsidy to support increased service to a community that already

has sufficient air service connecting it to the natio nal air transportation system. Therefore, we will select Cape Air’s Option A f or Boston

- only service.

Regarding whether to select the two or four

- year contract option , the community was silent on which option they would prefer. Given that it requires slightly less annual subsidy than

the two

- year option, we will select the four

- year contract at an annual subsidy of $1, 832,064

. However, if the community informs us that they want only a two

- year contract , we will honor that request.

In addition, given that the community supported service to HPN , we will allow Cape Air, if it

so c hooses, to substitute one or more flights to HPN for the same annual subsidy, with the community’s concurrence. The carrier is also free to operate additional unsubsidized

services if it chooses.

We shall make this selection of Cape Air at Saranac Lake/L ake Placid contingent upon the Department’s receiving properly executed certifications from the air carrier that it is in compliance with the Department’s regulations regarding drug

- free workplaces and nondiscrimination, as well as the regulations concerni ng lobbying activities. 3

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

. Cape Air is subj ect to the Depart ment’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 negati vely affect our fitness finding. We therefore conclude that the carrier remains fit to conduct the operations proposed here.

This O rder is issued under authority delegated in 49 CFR Part 1. 25a(b)

.

ACCORDINGLY,

1. We re select Hyannis Air Service, Inc., d/b/a Cape Air t o provide E ssential A ir S ervice at Saranac Lake/Lake Placid, NY

, at the service levels and subsidy rates as described in Appendix C , f or the period from March 1, 201 4 , through February 28, 2018 ;

2. We direct Hyannis Air Service, Inc., d/ b/a Cape Air to retain all books, records, and other source and summary documentation to support claims for payment, and to preserve and

3 T h e ce r ti f icati o n s a r e a v a i la b le o n t h e W e b at http://www.dot.gov/policy/aviation

- policy/small

- community

rural

- air

- service/essential

- air

- service

.- 4

-

maintain such documentation in a manner that readily permits its audit and examination by representatives of the Depart ment. 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 c ompensation for any claim that is not sup ported under the terms of this O rder;

3 . We find that Hyannis Air Service, Inc., d/b/a Cape Air continues to be fit, willing and able

to operate as a certificated air carrier and capable of providing reliable E sse ntial A ir S ervice

at Saranac Lake/Lake Placid, NY ;

4

. This d ocket will remain open until further Order of the Department; and

5

. We will serve copies of this O rder on the mayors of Saranac Lake and Lake Placid,

New York, the town supervisor of Harriets town, New York, the airport manager of Adirondack Regional Airport, and Hyannis Air Service, Inc., d/b/a Cape Air.

By:

SUSAN L. KURLAND Assistant Secretary for Aviation

and International Affairs

(SEAL)

An electronic version of this document is avail able at: http://www.regulations.gov/Appendix A

SARANAC LAKE/LAKE PLACID, NEW YORK

REGIONAL MAPAPPENDIX BAPPENDIX C

Hyannis Air Service, Inc. d/b/a Cape Air
Essential Air Service to be Provided at Saranac Lak e/Lake Placid, New York

DOT

- OST

- 2000

- 8025

Effective Period: March 1, 2014

, through February 28 , 201 8

Scheduled Service: 21 weekly nonstop round trips to Boston Logan International (BOS)

. Aircraft type: Cessna 402 ( 9 passenger seats). Annual compensation : $1, 832,064 1 Subsidy Rate per Flight: $ 865 2 Weekly Ceiling: $ 36,330 3

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, includi ng 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; absen t 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 fligh ts 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 servic e 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 complete, terminates or re duces 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 c arrier 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.

Funds may not be available for performance under this Order beyond March 18, 2014 . The Government’s obligation for performance under this Order beyond March 18, 2014 , is subject to the availability of 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 March 18, 2014 , until funds are made available to the Department for per formance. If sufficient funds are not made available for performance beyond March 18, 2014 , the Department will provide notice in writing to the carrier.

Subsidy contracts are subject to, and incorporate by reference, relevant statutes and Department reg ulations, 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, including any amended claims, must be submitted within 9 0 days of the last day of the month for which compensation is being claimed. For example, claims for service provided in July must be filed by October 31 st ; August claims must be submitted by November 30 th , and so on.

1 See Appendix B.

2 $1, 832,064 annual compensation divided by 2,118 annual flights ( 42 weekly flights x 52 weeks x 9 7 % completion factor).

3 $ 865 per flight x 42 weekly flights.