Order: 2010-6-6

 Served: June 3, 2010

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

Issued by the Department of Transportation

on the 3rd of June, 2010

Essential Air Service at

KIRKSVILLE, MISSOURI

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

Docket DOT-OST-1997-2515

ORDER SELECTING CARRIER

Summary

By this order, the Department is selecting Hyannis Air Service, Inc. dba Cape Air (Cape Air) to 

provide essential air service (EAS) at Kirksville, Missouri, at an annual subsidy rate of

$1,422,110, for a two-year period beginning when the carrier inaugurates service through the end 

of the 24th month thereafter.1

Background

By Order 2008-5-2, May 5, 2008, the Department selected Multi-Aero, Inc. d/b/a Air Choice 

(Air Choice One) to provide 11 weekly nonstop flights using 6- or 9-seat twin-engine aircraft 

from Kirksville to Lambert-St. Louis International Airport, for a two-year period beginning when 

the carrier inaugurated service through the end of the 24th month thereafter, at an annual subsidy 

of $806,169. Air Choice One inaugurated service to Kirksville on July 28, 2008. Currently, it 

operates a 7-seat Piper Navajo for Kirksville’s service.

 1 Such subsidy is calculated and distributed on a fiscal year basis, subject to the availability of appropriated funds.
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In anticipation of the end of Air Choice One’s current contract on July 31, 2010, the Department 

issued Order 2010-3-31, March 25, 2010, to solicit proposals from all interested air carriers to 

provide service at Kirksville. In that Order, we stated that, based on 12-month traffic levels 

ending December 31, 2009, 1,877 passengers (enplaned and deplaned) used Air Choice One’s 

service at Kirksville Regional Airport, resulting in a per-passenger subsidy of $429. We 

reiterated that the Department is prohibited from subsidizing service at communities whose 

subsidy-per-passenger exceeds $200 unless the community is more than 210 miles from the 

nearest medium or large hub airport, which is not the case here. Kirksville is 163 highway miles 

from Kansas City International Airport, the closest medium hub airport.2

Proposals

 We did not commit, at 

that stage, to continue Kirksville’s eligibility in the program, but, rather, committed only to 

explore what options the request for proposals might elicit.

In response to that order, we received proposals from four carriers: Air Choice One, Cape Air, 

Charter Air Transport, and Sovereign Air. The proposals are summarized in the chart below. 

 

Carrier/Option Hub (# of round trips per day) Aircraft Annual subsidy amount

Air Choice One Option 1 St. Louis (2), Chicago O'Hare (1) Navajo/Caravan $836,605

Air Choice One Option 2 Chicago O'Hare (2), St. Louis (1) Navajo/Caravan $739,841

Air Choice One Option 3 St. Louis (3) Navajo $847,618

Air Choice One Option 4 St. Louis (3) Caravan $899,254

Air Choice One Option 5 Chicago O'Hare (3) Caravan $582,938

Cape Air St. Louis (3) Cessna 402 $1,422,110

Charter Air Transport Kansas City (2)* Jetstream 32 $1,383,015

Sovereign Air Kansas City (2) Cessna 401 $371,636

* Charter Air Transport proposes one round trip per week to Branson, Missouri,

that would not be subsidized

The complete proposals of all four carriers may be accessed online at

http://www.regulations.gov/ entering “DOT-OST-1997-2515” in the “Enter Keyword or ID” 

field.

Community and State Comments

On April 28, 2010, we requested community comments regarding the carrier selection at 

Kirksville. 

An April 23 letter from American Airlines says the carrier “enthusiastically supports” Cape Air’s 

proposal to service Kirksville. It states “[i]f Cape Air is selected to serve Kirksville, American 

Airlines expects to expand our existing codeshare agreement with Cape Air into the Kirksville 

market, providing to the Kirksville community seamless booking and travel on American 

Airlines’ worldwide network.”

 2 Congress first established the $200 ceiling under P.L. 101-164 for fiscal year 1990, and reestablished it in fiscal 

years 1994-1999. The ceiling was made permanent by P.L. 106-69, the Department of Transportation and Related 

Agencies Appropriations Act of 2000.
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The Department received letters from Todd Kuhns, Mayor of Kirksville. The letters state that 

the Kirksville City Council voted to recommend “Cape Air to serve as the essential air carrier at 

the Kirksville Regional Airport for the 2010 contract,” and, as a result, to waive their right to 15-

seat or larger aircraft.

Decision

We have decided to select Cape Air to provide Kirksville’s EAS.

Sovereign Air does not have the requisite operating authority from either the Federal Aviation 

Administration or the Department of Transportation to operate its proposed service. Moreover, 

there was no community support for the carrier’s proposal. Although the community is waiving 

its right to 15-seat aircraft, it is doing so only in conjunction with its recommendation of Cape 

Air.

While Air Choice One offers a choice of proposals with annual subsidy amounts similar to the 

current rate, the Department has reservations about its ability to significantly increase 

Kirksville’s enplanements to lower the per passenger subsidy below $200, to avoid terminating 

Kirksville’s eligibility in the EAS program. While the community has conveyed its satisfaction 

with Air Choice One’s on-time performance and completion factors, it has told us that the lack of 

distribution channels and interline agreements has prevented enplanements from realizing their 

full potential. When the Department selected Air Choice One, under Order 2008-5-2, we stated

that Air Choice One needed to work with the community to maximize the use of its services to 

avoid exceeding the $200 per passenger cap. In our request for proposals, Order 2010-3-31, we 

stated that the subsidy per passenger for Kirksville was well over the $200 cap, and we requested 

proposals from carriers that would demonstrate that it would carry enough passengers to produce 

a subsidy per passenger cap of less than $200. Air Choice One’s proposals offer limited details 

on its plan to increase usage of its services. Its responsiveness to community concerns regarding 

its flight schedules was very slow and it continues to experience difficulties in securing interline 

ticketing and baggage agreements with major airlines, and its flights are not yet available online 

at consumer websites (online ticketing agencies). All of these factors give us serious concern 

about its ability to substantially increase enplanements at Kirksville.

While Charter Air Transport offers 15-seat or larger aircraft, and its requested annual subsidy is 

comparable to Cape Air’s, it was not recommended for selection by the community. Its proposal 

offers some details of its distribution strategies, but it does not yet have a track record of success 

in providing scheduled air service.

Cape Air’s proposal contains all of the key elements that give it a very good chance to increase 

enplanements and significantly lower the subsidy per passenger below the $200 cap.3

 3 In selecting a carrier to provide subsidized essential air service, 49 U.S.C. 41733(c) (1) directs us to consider four 

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; and (4) community views.

 Cape Air 

is a well-established carrier, providing a significant amount of subsidized EAS throughout the 

country and it has a proven record of dramatically increasing enplanements in several 

communities, including Rutland, Vermont, Saranac Lake, New York, Marion and Quincy, 
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Illinois, and Cape Girardeau, Missouri. These communities had suffered from air service 

deficiencies, such as a carrier hiatus, or market damage due to less than full EAS or lack of 

interline ticketing/baggage agreements. The communities it serves have provided very positive 

comments about Cape Air, including its on-time performance, completion factor, availability of 

its flights and connecting flights on major airlines through computerized reservations systems 

and online travel agencies, its marketing plans, and community involvement. The online 

distribution systems and ticketing/baggage agreements that Cape Air offers are key components 

in our selection of Cape Air. Moreover, Cape Air currently has a code-share arrangement with 

American Airlines at St. Louis, and American Airlines has stated on the record that it will extend 

that agreement to include the Kirksville-St. Louis service. We also find that the subsidy levels 

are reasonable for the service levels to be provided.

Based on all of the above, we will select Cape Air to provide service from Kirksville to St. 

Louis, for a two-year beginning when it inaugurates full service, at an annual subsidy rate of 

$1,422,110. 

Although we are selecting Cape Air to serve Kirksville for a two-year period, we remain 

concerned that Kirksville is currently well over the $200 cap. We plan to afford the community 

and new carrier a three-month ramp up period, and then examine the next 12 months of data, i.e., 

months 4 through 15 after start up. Even though we are confident that Cape Air will increase 

passenger levels substantially, if we find that the subsidy level still exceeds the statutory $200 

per passenger cap, we will take appropriate action. We encourage the community and Cape Air 

to work together to maximize use of the service awarded under this Order to avoid exceeding the 

$200 per passenger cap, which could result in the termination of eligibility for subsidy under the 

EAS program.

We shall make Cape Air’s selection at Kirksville contingent upon the Department’s receiving 

properly executed certifications from Cape Air that it is in compliance with the Department’s 

regulations regarding drug-free workplaces and nondiscrimination, as well as the regulations 

governing lobbying activities.

Carrier Transition

We expect Air Choice One and Cape Air to coordinate a smooth transition in service at 

Kirksville, including setting a date to switch services from Air Choice One to Cape Air. We 

expect Air Choice One to contact all passengers holding reservations for travel after that date, to 

notify them of the suspension of service, and to secure alternate air transportation for such 

passengers or to provide a full refund of the ticket price, without penalty, if requested. We will 

compensate Air Choice One at its current subsidy rates, set in Order 2008-5-2, May 5, 2008, for 

its service until Cape Air inaugurates full EAS. 

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 is subject to the 

Department’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 negatively affect our fitness 
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finding. We therefore conclude that the carrier remains 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. dba Cape Air to provide essential air service at 

Kirksville, Missouri;

2. We set the final rate of compensation for Hyannis Air Service, Inc. dba Cape Air, for the 

provision of essential air service at Kirksville, Missouri, as described in Appendix C;

3. We direct Hyannis Air Service, Inc. dba Cape Air 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. dba Cape Air continues to be fit, willing and able to 

operate as a certificated carrier and capable of providing reliable essential air service at 

Kirksville, Missouri; 

5. We will extend the subsidy rate per flight and weekly compensation set for Multi-Aero d/b/a 

Air Choice One in Order 2008-5-2, May 5, 2008, until Cape Air inaugurates service;

6. This docket will remain open until further order of the Department; and

7. We will serve copies of this order on the Mayor of Kirksville, the manager at Kirksville

Regional Airport, Charter Air Transport, Hyannis Air Service, Inc. dba Cape Air, Multi-Aero, 

Inc. d/b/a Air Choice One, and Sovereign Air.

By:

SUSAN L. KURLAND

Assistant Secretary

for Aviation and International Affairs

(SEAL)

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

AREA MAP

This map is provided by Sabre® AirVisionTM Profit Essentials and is being used with express permission of the copyright holder, 

Sabre Airline Solutions®.
Appendix B

Proposal of Hyannis Air Service, Inc. dba Cape Air
Appendix C

Hyannis Air Service, Inc. dba Cape Air

Essential Air Service to be Provided at Kirksville, Missouri

Effective Period: Two years beginning when Cape Air inaugurates service through the end of the 

24th month thereafter.

Scheduled Service: 21 nonstop round trips to Lambert-St. Louis International Airport each week

Aircraft: Cessna 402, 8 or 9 seats

Rate per Eligible Flight: $6701

Weekly Ceiling: $28,1402

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 

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 paragraph.

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

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

 1 Annual compensation of $1,422,110, divided by 2,124 annual departures (6 flights per day x 365 service days x 97 

percent completion).

2 42 flights per week multiplied by $670 per flight.