Order 201 1

- 1

- 6

Served: January 7 , 20 1 1



### UNITED STATES OF AMERICA
DEPARTMENT OF TRANSPORTATION
OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 7 th day of January, 2011

ORDER SELECTING CARRIER

, ESTABLISHING SUBSIDY RATE S

AND REQUESTING PROPOSALS

Summary By this order, the Department is select ing Hyannis Air Service, Inc. d/b/a Cape Air ( Cape Air )

, to
continue provid ing subsidized essential air service (EAS) at Massena ( for two year s), at the annual subsidy rate of $1,708, 911, and at Ogdensburg ( for four year s), at the annual subs idy rate

of $ 1, 702

, 697 , beginning when the carrier inaugurates the new service pattern

. 1 Also, by this order, we are requesting proposals , by February 9, from carriers interested in providing EAS at

Watertown , with or without subsidy, for a new rate term

. (See Appendix A for a map of the

service area

. )

Background By Order 2008

- 3

- 15, March 14, 2008, the Department selected Cape Air to provide EAS at the

three communities for the two

- year period through September 30, 2010. That order established a

total combined annual subsidy rate of $3,879,863 for service consisting of three daily nonstop round trips (21 per week ) between each community and Albany County Airport, with 9

- seat
Cessna 402 aircraft

.

In anticipation of the end of the rate term, the Department issue d Order 20 10

- 5

- 32

, Ma y 28

, 20 10 , requesting proposals from carriers interested in providing replacement service at

1 Such subsidy is calculated and distributed on a fiscal year basis, subject to the availability of appropriated funds. Essential Air Service at

MASSENA, OGDENSBURG and WATERTOWN, NEW YORK

Under 49 U.S.C. 41731 et seq

. DOCKET DOT

- OST

- 1997

- 28422

the communit ies , with subsidy support if necessary, for a new two

- year period beginning

October 1, 2010

.

In response to that order, we received proposals from the incumbent, Cape Air, as well as Gulfstream International Airlines, Inc. (Gulfstream) , a nd Charter Air Transport, Inc. (Charter Air).

The City of Ogdensburg and the Ogdensburg Bridge and Port Author ity supported Cape Air,

while the Massena Town Council and the City of Watertown both endorsed Gulfstream. Moreover, neither Massena nor Watertown w as willing at that time to waive its statutory
entitlement to service with 15

- seat or larger aircraft. 2

We attempt to accede to community views when practical and within budget

, but, given the way the first round of proposals were packaged, that was not possible. Therefore, by

Order 2010

- 10

- 7, October 8, 2010, we again solicited proposals in an effort to obt ain proposals that would satisfy the needs of all three communities at competitive subsidy levels.

Carrier Proposals Again, we received proposals from the same three carriers, Cape Air, Gulfstream and Charter Air Transport , all slightly different from the first round of submissions

.

Cape Air proposed two service options, both with an associated two

- year and four

- year subsidy

rate. 3 U nder Option 1, for any combination of cities, Cape A ir proposes to continue to provide each community with three daily nons top round trips (21 per week ) to Albany

, but with funnel flights continuing on to Boston

, at the annual subsidy rate s as follows: $ 1,708,911 ($1,657,644,

4

- yr) for Massena, $1,755,357 ($1,702,697, 4

- yr) for Ogdensburg, and $1,665,889 ($ 1 ,615,912,

4

- yr) for Watertown

. Under Option 2 , requiring being selected to serve at least two cities, Cape

Air proposes to provide three daily nonstop round trips (21 a week) from each community to Albany at the annual subsidy rates of $ 1

, 519

, 732 ($1,474,140, 4

- yr) for Massena, $1,566,178 ($1,519,193, 4

- yr) for Ogdensburg, and $1,476,709 ($1,432,408, 4

- yr) for Watertown

. Cape Air would continue providing all service with 9

- seat Cessna 402 aircraft.

Gulfstream proposes four service options

– all three

- city, all

- or

- nothi ng options

– all to be provided using 19

- seat Beech 1900D aircraft. Option 1 proposes two nonstop round trips per day, six days a week, between each community and Boston, at the combined annual subsidy rate of $7,705,513. Option 2 requires a total annual combined subsidy of $6,392,270 for the following service: Watertown

– two nonstop round trips per day, six days a week, to Boston;

Massena

– two one

- stop round trips per day to Albany , six days a week , and one nonstop round trip per day, six days a week, to Boston; Ogdensburg

– two nonstop round trips per day to Albany , six days a week, and one nonstop round trip a day, six days a week, to Boston. Option 3 requires a total combined subsidy of $7,030,239 for the following service: Watertown

– two

2 49 U.S.C. 41732 guarantees certain service minimums, including service with 15

- seat or larger aircraft for most communities, including all three communities at issue here.

3 Cape Air proposed two

- and four

- year subsidy rates for both service options, of fering a 3% annual savings for the longer term period.3

nonstop round trips per week, six days a week, to Boston; Massena

– one one

- stop round trip per day, six days a week, to Albany and two nonstop round trips per day, six days a week, to Boston; Ogdensburg

– two nonstop round trips per week, six days a week, to Albany and one one

- stop round trips per day, six days a week, to Boston. Lastly, Option 4 would serve only Massena and

Watertown and would require a combined subsidy of $4,650,963 for the following service:

Watertown

– two nonstop and one one

- stop ro und trips per day, six days a week to Boston;

Massena

– one nonstop and two one

- stop round trips per day, six days a week, to Boston.

Charter Air Transport also proposed several service options, either to Albany or Boston, all to be provided with 30

- seat Embraer EMB

- 120 aircraft ; f or Massena

– 12 nonstop round trips per

week to Boston at the annual subsidy of $ 2,830,806 , or 12 nonstop round trips per week to Albany for $2,331,237 ; f

or Ogdensburg

– 12 nonstop round trips per week to Boston at $2,830,806, or 12 nonstop round trips per week to Albany at $2,331,237; and, finally, Watertown service would require $2,411,727 for any of these patterns

– 12 nonstop round trips per week to Buffalo, 12 nonstop round trips per week to Albany, or a combination of 12 non stop round trips per week to Buffalo and Albany.

Community Comments We received a large number of comments in response to the carriers’ proposals, both from community officials and from the general public.

Mr. Joseph Gray, on behalf of the Town of Massena and its Town Council, supports Cape Air for

a new two

- year term, noting that the community ’s needs would be best met with service to Albany with a connecting flight to Boston.

The Executive Director of the Ogdensburg Bridge & Port Authority, Mr. W ade Davis, recommends that the Department select Cape Air’s Option 1 (Albany/Boston service) for a four

year term, stating that the Authority has found the carrier to be reliable with a superior performance record.

Mayor William D. Nelson, of Ogdensburg, says the City Council voted unanimously to endorse Cape Air’s Option 1 for a four

- year term , noting that the carrier has maintained exceptional service, high customer satisfaction, and exceptional on

- time ratings. Additionally, Mayor Nelson

advised that t he Council also voted unanimously to waive the 15

- passenger requirement.

Mr. Robert F. Hagemann, Jefferson County Administrator, endorses Gulfstream and believes that

the carrier most closely matches the progressive business plan for the community of Wate rtown, and can provide the best opportunity to expand air transportation to the region.

Decision The EAS program’s governing statute ( see 49 U.S.C. 41732(b)) guarantee s certain service

minimums . W hen selecting a carrier to provide EAS, we must also take into consideration

certain statutory factors , such as service reliability

, interline and baggage arrangements with a larger carrier to allow for seamless connections beyond the hub, as well as community views (49 U.S.C 41733(c)).4

In narrowing the field of options, we first looked at Charter Air Transport

. 4 The carrier has

received no community support

, has no interline baggage arrangements , and requires mor e subsidy than other carriers’ options that are supported by the communities

. For these reasons, we have decided not to select Charter Air Transport

.

Cape Air proposes service to all three communities and has the support of Massena and Ogdensburg. The carrier has bee n providing reliable service at the communities since 2008 and the carrier’s interline ticketing and baggage

- handling agreements with most major carriers will continue to ensure convenient connecting opportunities beyond the hub. While Watertown

endorses Gulfstream , the carrier ’s proposal is a three

- city, all

- or

- nothing package, and does not

offer a Watertown

- only option.

Therefore, c onsidering all the facts

, including community views and preferences, we have decided to select Cape Air to continue providi ng subsidized EAS at Massena and Ogdensburg, and we will again resolicit proposals from carriers interested in providing service at Watertown.

Massena and Ogdensburg Both communities fully support Cape Air ’s proposed service , specifically its Albany/Boston option

, which would provide each community with three nonstop round trips per day to Albany,

with service continuing on to Boston

. Massena supports Cape Air’s two

- year option, while Ogdensburg prefers its four

- year option. In endorsing Cape Air , the communities understand that

the carrier would continue providing this service with 9

- seat Cessna 402 aircraft and, thereby, waive the right to the 15

- seat requirement

.

Therefore, after taking all of the above into careful consideration, w e are h ereby select ing Cape

Air to continue provid ing subsidized EAS at Massena and Ogdensburg , as proposed, for two

- year and four

- year terms, respectively

. Because these options require a change in service pattern that includes through service to Boston, we wil l start the two

- and four

- year contracts when Cape Air inaugurates the new service pattern

. We find that the proposed service and subsidy levels are

reasonable.

We shall make th ese selection s contingent upon the Department’s receiving properly executed

c ertifications 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.

Watertown
As discussed above, Watertown indicated its preference for Gulfstream

, stating that the carrier’s proposed service would best suit the community’s needs. However , the carrier’s proposal is a

three

- city, all

- or

- nothing package, and does not offer a Watertown

- only option. In addition

, Watertown has not waived its right to service with 15

- seat or larger aircraft as is proposed by Cape Air

. Therefore, g iven all of the facts, we are left with no choice but to reject the current

4 See Order 2010

- 9

- 26 for a complete discussion of Charter Air Transport’s authority to provide EAS.5

proposals and rebid the case in an effort to obtain proposals offering serv ice that would satisfy

Watertown ’s EAS needs at subsidy levels that are competitive.

Request for Proposals

W e are again requesting proposals from carriers interested in providing service at Watertown

, with or without subsidy support, for a new rate term . Carriers should file their proposals no later

than Febru ary 9

. Staff will then docket proposals, thereby making them public, and shortly afterwards will provide a summary of the proposals to the communities and ask them for their

final comments. We wi ll give full consideration to all proposals filed in a timely manner. 5

Interested carriers should prepare their proposals with every expectation that their initial proposals will also be their final and only proposals. We retain the discretion to negotia te proposals with carriers when we deem it desirable. We also retain the discretion to reject outright all unreasonable or unrealistic proposals and solicit a new round of proposals.

We are here providing interested carriers with some basic information t o serve as guidance when they prepare their proposals, but we will not prescribe a precise format for their proposals. We expect proposals to adequately describe the service being proposed and the annual amount of subsidy being requested. The applicants can make their own judgments as to the level of detail they wish to present; however, they might want to include proposed schedules as well as supporting data for their subsidy requests, such as projected block hours, revenues and expenses. We strongly en courage clear, well

- documented proposals that will facilitate their evaluation by the affected community and the Department. 6

Proposals should provide sufficient capacity to accommodate historical levels of traffic. In order to assist carriers in developing traffic and revenue projections for their proposals, we have summarized historical passengers in Appendix B. For carriers proposing 15

- seat or larger aircraft, we expect proposals for two round trips a day (12 per week). Service should be to Albany, Boston, New York or any hub that offers access to the national air transportation system.

We encourage proposals that meet these requirements in an efficient manner. Carriers are also welcome to propose more than one option, if they choose; they need not limit themselves to those requirements if they envision other, potentially more attractive service possibilities

-- different hubs, for example

-- with subsidy requirements that remain competitive. Applicants are

enc ouraged to work together with the community of Watertown in advance of the due date for

5 Carriers should not expect the Department to accept late filings. In cases where a carrier propo ses to provide essential air service without subsidy and we determine that service can be reliably provided without such compensation, we do not proceed with the carrier

- selection case. Instead, we simply rely on that carrier’s subsidy

free service as pro posed.

6 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 arra ngements with a larger carrier at the hub; and (4) community views. In addition, the Consolidated Appropriations Act, 2008, Public Law 110

- 161 , provides that when selecting a carrier to provide EAS, the Department may consider the relative subsidy require ments, thus codifying a factor that we have considered since the inception of the program. Interested carriers should also be aware that our general provisions governing EAS will be included in the selection order as part of our authorization of subsidy f or the selected service. Appendix C of this order contains those general provisions.6

proposals to craft a service pattern that is desirable to the communit y and meets the operational needs of the airline interested in submitting a proposal.

New Filing Procedures Carrier proposals should be submitted to the Department with all materials merged into a single document. In addition, because the document will be published on Regulations.gov, each page

should be formatted to be viewed online.

Other Carrier Requirements The Department is responsible for implementing various Federal statutes governing lobbying activities, drug

- free workplaces and nondiscrimination. 7 Consequently, all carriers receiving Federal subsidy to support essential air service must cer tify that they are in compliance with Department regulations regarding drug

- free workplaces and nondiscrimination, and those carriers whose subsidies exceed $100,000 over the life of the rate term must also certify that they are in compliance with the regu lations governing lobbying activities. All carriers that plan to submit proposals involving subsidy should submit the required certifications along with their proposals. Interested carriers requiring more detailed information regarding these requirements , as well as copies of the certifications, should contact the Office of Aviation Analysis at (202) 366

- 5903. The Department is prohibited from paying subsidy to carriers that do not submit these

documents. 8

Community and State Comments

Civic officials ar e welcome to submit comments on the proposals at any time. As noted earlier, we will provide a summary of the proposals to the civic parties and ask them to submit their final comments shortly after Febru ary 9 , the due date for carrier proposals.

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 n o 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 finding. We therefor e conclude that the carrier remains fit to conduct the operations proposed

here.

7 The regulations applicable to these areas are: (1) 49 CFR Part 20

– New restrictions on lobbying; (2) 49 CFR

Part 21

– Nondiscrimination in federally

- assisted program s of the Department of Transportation

– Effectuation of title VI of the Civil Rights Act of 1964; 49 CFR Part 27

– Nondiscrimination on the basis of disability in programs and activities receiving or benefiting from Federal financial assistance; and 14 CFR Part 382

– Nondiscrimination on the basis of disability in air travel; and (3) 49 CFR Part 29

– Government

- wide debarment and suspension (non

procurement) and government

- wide requirements for drug

- free workplace (grants).

8 The certifications are also av ailable on the web at http://ostpxweb.dot.gov/aviation/index.html.7

Transitional Subsidy Rates Cape Air’s previous rate term expired on September 30, 2010. However, the carrier has continued to provide service to the communities during the carrier

- selection process, and is entitled to fair compensation. B y Order 2010

- 11

- 13, November 12, 2010, the Department set

short

- term subsidy rates from October 1 until further Department action for Cape Air’s provision of service, based on its proposed Option 1 (from the first round of proposals) , consistent wi th its

current level of service

– 21 nonstop round trips per week to Albany

– requiring a total combined annual subsidy of $4,562,619. Those rates will remain in effect until Cape Air changes its service pattern to incorporate funnel flights to Boston. At that time, the rates not only for Massena and Ogd ensburg, but also for Watertown, will be set at Cape Air’s proposed rates for its option including funnel flights to Boston , as set forth in detail in Appendix C

.

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

ACCORDINGLY,

1. The Dep artment selects Hyannis Air Service, Inc. d/b/a Cape Air

, to continue provid ing

essential air service at Massena, New York , a nd establishes the subsidy rate , as detailed in Appendix B

, beginning on the service date of this order, until the carrier inaugurates the new service pattern , then until the 24 th month thereafter ;

2

. The Department selects Hyannis Air Service, Inc. d/b/a Cape Air, to continue providing

essential air service at Ogdensburg, New York , and establishes the subsidy rate, as detailed in Appendix B, beginning on the service date of this order, until the carrier inaugurates the new service pattern, then until the 48 th month thereafter ;

3

. We set the final rate of compensation for Cape Air for the provision of essential air service at

Massena , Ogdensburg and Watertown, payable as set forth in detail in Appendix C ; 9

4 . The Department finds that Cape Air continues to be fit, willing and able to operate as a

commuter air carrier and capable of providing reliable EAS at Massena and Ogdensburg,

New York ;

5

. We request that carriers interested in providing essential air service at Watertown, New York

, submit their proposals, with or without subsidy requests, no later th an Febru ary 9 , 201 1 . The proposals should be emailed to: EAS@dot.gov with the title “Proposal to Provide Essential Air

Service at Watertown, New York , Docket DOT

- OST

- 199 7

- 2842 ” ; 10

6 . We direct 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

d ocumentation shall be retained for seven years or until the Department indicates that the records

9 See Appendix C for the calculation of this rate, which assumes the use of the aircraft designated. If the carrier reports a significant number of aircraft substitutions, a revision of t his rate may be required.

10 Questions regarding filings in response to this order should be directed to Dennis DeVany at 202

- 366

- 10 61 , or via email at dennis.devany@dot.gov

.8

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 f or any claim that is not supported under the terms of this order;

7 . Docket DOT

- OST

- 1997

- 2842 will remain open until further order of the Department; and

8 . The Department will serve a copy of this order on the m ayor s and airport managers of Massena, O gdensburg and Watertown

, Hyannis Air Service, Inc. d/b/a Cape Air

, Gulfstream International Airlines, Inc., Charter Air Transport, Inc., and the parties listed in Appendix E.

By:

SUSAN L. KURLAND Assistant Secretary for Aviation

and International Affairs

(SEAL)

An electronic version of this document is available on line at www.regulations.gov

### Appendix A

Area Map

### Appendix B Page 1 of 2

HYANNIS AIR SERVICE, INC. d/b/a CAPE AIR ANNUAL COMPENSATION REQUIREMENT FOR ESSENTIAL AIR SERVICE AT

MASSENA

, OGDENSBURG, and WATERTOWN, NEW YORK (beginning on the service date of this order , until the carrier inaugur ates the new service pattern)

### Appendix B Page 2 of 2

HYANNIS AIR SERVICE, INC. d/b/a CAPE AIR ANNUAL COMPENSATION REQUIREMENT FOR ESSENTIAL AIR SERVICE AT

MASSENA

, OGDENSBURG, and WATERTOWN, NEW YORK (beginning when the carrier inaugurates the new service pattern, thru the 24 th month thereafter for

MSS , the 48 th month thereafter for OGS, and until further notice for ART )

### APPENDIX C Page 1 of 7

HYANNIS AIR SERVICE, INC. d/b/a CAPE AIR ANNUAL COMPENSATION REQUIREMENT FOR ESSENTIAL AIR SERVICE AT MASSENA, NEW YORK

Effective period: Beginning on the service date of this order, until the carrier inaugurates the new service pattern

.

Service: 21 nonstop round trips per week to Albany

Aircraft type: Cessna 402 aircraft (9 seats)

Intermediate Stops and

t iming of flights: No other service to any intermediate or upline communities is contemplated; accordingly, no such service would be subsidy

eligible without prior Department approval. Flights must be

well

- timed and well

- spaced in order to ensure full compensation.

Annual compensation: $1, 519

, 732

Subsidy Rate Per Arrival/Departure: $ 716 1

Weekly Compensation Ceiling: 2 $ 30,072 3

___________________________ 1 Annual compensation of $ 1

, 519

, 732 divided by 2,124 annual arrivals and departures calculated as follows: 6 flights per day x 365 days x 97% completion = 2,124.

2 This rate assumes an annual completion factor of 97 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.

3 Subsidy rate per arrival/de parture of $ 805 multiplied by 42 eligible arrivals and departures.

### APPENDIX C Page 2 of 7

HYANNIS AIR SERVICE, INC. d/b/a CAPE AIR ANNUAL COMPENSATION REQUIREMENT FOR ESSENTIAL AIR SERVICE AT MASSENA, NEW YORK

Effective period: Beginning when the carrier inaugurates the new service pattern

, until the 24 th month thereafter (two years)

.

Service: 21 nonstop round trips per week to Albany , with continuing

service to Boston.

Aircraft type: Cessna 402 aircraft (9 seats)

Intermediate Stops and

t iming of flights: No other service to any intermediate or upline communities is contemplated; accordingly, no such service would be subsidy

eligible without prior Department approval. Flights must be

well

- timed and well

- spaced in order to ensure full

co mpensation.

Annual compensation: $1,708,911

Subsidy Rate Per Arrival/Departure: $ 805 1

Weekly Compensation Ceiling: 2 $ 33

, 810 3

___________________________ 1 Annual compensation of $ 1

, 708

, 911 divided by 2,124 annual arrivals and departures calculated as follows: 6 flights per day x 365 days x 97% completion = 2,124.

2 This rate assumes an annual completion factor of 97 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.

3 Subsidy rate per arrival/de parture of $ 805 multiplied by 42 eligible arrivals and departures.

### APPENDIX C Page 3 of 7

HYANNIS AIR SERVICE, INC. d/b/a CAPE AIR ANNUAL COMPENSATION REQUIREMENT FOR ESSENTIAL AIR SERVICE AT

OGDENSBURG , NEW YORK

Effective period: Beginning on the service date of this order, until the carrier inaugurates the new service pattern

.

Service: 21 nonstop round trips per week to Albany

Aircraft type: Cessna 402 aircraft (9 seats)

Intermediate Stops and

t iming of flights: No other service to any intermediate or upline communities is contemplated; accordingly, no such service would be subsidy

eligible without prior Department approval. Flights must be

well

- timed and well

- spaced in order to ensure full compensation.

Annual compensation: $ 1

, 566

, 178

Subsidy Rate Per

A rrival/Departure: $ 737 1

Weekly Compensation Ceiling: 2 $ 30,954 3

___________________________ 1 Annual compensation of $ 1

, 566

, 178 divided by 2,124 annual arrivals and departures calculated as follows: 6 flights per day x 365 days x 97% completion = 2,124.

2 This rate assumes an annual completion factor of 97 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.

3 Subsidy rate per arrival/departure of $ 737 multiplied by 42 eligible arrivals and departures.

### APPENDIX C Page 4 of 7

HYANNIS AIR SERVICE, INC. d/b/a CAPE AIR ANNUAL COMPENSATION REQUIREMENT FOR ESSENTIAL AIR SERVICE AT

OGDENSBURG , NEW YORK

Effective period: Beginning when the carrier inaugurates new service pattern,

until the 48 th month thereafter (four years)

.

Service: 21 nonstop round trips per week to Albany , with continuing

service to Boston.

Aircraft type: Cessna 402 aircraft (9 seats)

Intermediate Stops and

t iming of flights: No other service to any intermediate or upline communities is contemplated; accordingly, no such service would be subsidy

eligible without prior Department approval. Flights must be

well

- timed and well

- spaced in order to ensure full

comp ensation.

Annual compensation: $ 1

, 702

, 697

Subsidy Rate Per Arrival/Departure: $ 802 1

Weekly Compensation Ceiling: 2 $ 33

, 684 3

___________________________ 1 Annual compensation of $ 1

, 702

, 697 divided by 2,124 annual arrivals and departures calculated as follows: 6 flights per day x 365 days x 97% completion = 2,124.

2 This rate assumes an annual completion factor of 97 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.

3 Subsidy rate per arrival/departure of $ 802 multiplied by 42 eligible arrivals and departures.

### APPENDIX C Page 5 of 7

HYANNIS AIR SERVICE, INC. d/b/a CAPE AIR ANNUAL COMPENSATION REQUIREMENT FOR ESSENTIAL AIR SERVICE AT

WATERTOWN , NEW YORK

Effective period: Beginning on the service date of this order, until the carrier inaugurates the new service pattern

.

Service: 21 nonstop round trips per week to Albany

Aircraft type: Cessna 402 aircraft (9 seats)

Intermediate Stops and

t iming of flights: No other service to any intermediate or upline communities is contemplated; accordingly, no such service would be subsidy

eligible without prior Department approval. Flights must be

well

- timed and well

- spaced in o rder to ensure full compensation.

Annual compensation: $ 1

, 476

, 709

Subsidy Rate Per Arrival/Departure: $ 695 1

Weekly Compensation Ceiling: 2 $ 29,190 3

___________________________ 1 Annual compensation of $ 1

, 476

, 709 divided by 2,124 annual arrivals and departures calculated as follows: 6 flights per day x 365 days x 97% completion = 2,124.

2 This rate assumes an annual completion factor of 97 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.

3 Subsidy rate per arrival/departure of $ 695 multiplied by 42 eligible arrivals and departures.

### APPENDIX C Page 6 of 7

HYANNIS AIR SERVICE, INC. d/b/a CAPE AIR ANNUAL COMPENSATION REQUIREMENT FOR ESSENTIAL AIR SERVICE AT

WATERTOWN , NEW YORK

Effective period: Beginning when the carrier inaugurates new service pattern,

until further notice

.

Service: 21 nonstop round trips per week to Albany, with continuing

service to Boston.

Aircraft type: Cessna 402 aircraft (9 seats)

Intermediate Stops and

t iming of flights: No other service to any intermediate or upline communities is contemplated; accordingly, no such service would be subsidy

eligible without prior Department approval. Flights m ust be

well

- timed and well

- spaced in order to ensure full compensation.

Annual compensation: $ 1

, 665

, 889

Subsidy Rate Per Arrival/Departure: $ 784 1

Weekly Compensation Ceiling: 2 $ 32,928 3

___________________________ 1 Annual compensation of $ 1

, 665

, 889 divided by 2,124 annual arrivals and departures calculated as follows: 6 flights per day x 365 days x 97% completion = 2,124.

2 This rate assumes an annual completion factor of 97 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.

3 Subsidy rate per arrival/de parture of $ 784 multiplied by 42 eligible arrivals and departures.

### APPENDIX C Page 7 of 7

Example of General Terms and Conditions for Essential Air Service

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 s cheduled 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 addit ion, 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 paymen t 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 un ilaterally, 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 s tipulated 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 mu tually 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 solicitation beyond December 3, 2010. The Dep artment’s obligation for performance under this solicitation beyond December 3, 2010, is contingent upon 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 m ay arise for performance under this order beyond December 3, 2010, until funds are made available to the Department for performance. If funds are not made available for performance beyond

December 3, 2010, the carrier will receive notice in writing by the Department.

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

under this order.

### Appendix D

Historical O&D Traffic and Average Daily Enplanements 1



### a t Watertown, New York

Average Daily

O&D Traffic Enplanements 2



### 2007 18,232 29.1

2008 * 1,217 1.9

2009 4,832 7.7

________________________________ 1 Source: Bureau of Transportation Statistics; TranStats Form 41, Schedule T

- 100.

2 Daily averages are based on one

- half of the O&D passengers

, divided by 3 13 service days (314 during leap years).

*Service Hiatus

### Appendix E

Scheduled Air Carriers, Contiguous US and Puerto Rico

Air Sunshine, Inc. Jet Air, Daniel Wolford
Air Sunshine, Mirmohammad Adili Kenmore Air, Tim Brooks
Air West, Inc., John Raatz McCall Aviation and Salmon Air, Dan Scott Air Wisconsin, Annette Daly McCall Aviation, Michelle
Airline Associates, Bill Mishk Mesa Air, Jonathan Ornstein
Alaska Airlines, Jeff Cole Mesa Air, Michael Lotz Alaska Airlines, Sandy Sinick Mesa Air, Mike Holcomb Allegiant Air, Robert Ashscroft Mesaba, John Spanjers
American Airlines, Carl Nelson Mesaba, Max Shemesh American Eagle, Jeffrey Hartz Midstar Airlines, Jeffrey Fonner
Atlantic Southeast, Jon Lindlief Midwest Airlines, Anthony Intravia Atlantic Southeast, Roger Weston Midwest Airlines, Greg Aretakis Bemidji Aviation, Cori Rude Midwest Airlines, J.C. Augustson Bemidji Aviation, Arlen Rinkenberger MN Aviation, Jose Maldonado Cape Air, Andrew Bonney Multi Aero, Darnea Cape Air, Dan Wolf Multi Aero, Shane Storz Cape Air, J.Flaherty Northwest, Tim McDonald Classic Aviation, Tony Henderson NYDC, Henok Araya Colgan Air, Mike Colgan OST, Brian Swanson CommutAir, Andy Price OST, Dennis DeVany CommutAir, Joel Raymond OST, Kevin Adams Consultant, Robert Silverberg OST, Kevin Schlemmer
Continental, Bruce Keiner OST, Michael Martin
Continental, Dan Weiss OST, Renee Williams Continental, Lorry Halloway Pacific Wings, Frank Ford Delta, Amy Martin Pacific Wings, Greg Kahlstorf
Delta, Dan Shuman PenAir, Danny Seybert Delta, Jeff Morgan PenAir, Scott Bloomquist Delta, Joe Esposito Pinnacle Airlines, Joe Williams Delta, Karen Zachary Pinnacle Airlines, Phil Reed
Delta, Sascha Vanderbellen Public Charters, Jim Gallagher

Dorato Jets Scenic, Mary Schneider
Dorato Jets, Mark McKenna Scenic, Mitzi Daines

Era Aviation, Mike Lenorman Seaborne Airlines, Wayne D'Amico
Executive Airlines, Kate Soled SeaPort Airlines, Jim Day Frontier Flying, Bob Hajducovich SeaPort Airlines, Rob McKinney
Gem Air, Dan Schroeder Shuttle America, Jerry Balsano
Gem Air, JoAnn Wol ters SkyWest, Eric Christensen
Great Lakes, Chuck Howell SkyWest, Michael Thompson Great Lakes, Doug Voss Sovereign Air, Bob Karns Great Lakes, Greg Stephens Sovereign Air, Lois R. Barton
Gulfstream, Dave Hackett Tradewind, Eric Zipkin
Gulfstream, Mickey Bowman TransStates, Fred Oxley Gulfstream, T. Cooper Transtates, Gerry Wigmore Homeland Security, Bill Ragan United, Alicia Gabriel Homeland Security, David Bernier United, James Starnes Homeland Security, Randy Webb US Airways, Benjamin Slocum
Horizon Airlines, Dan Russo US Airways, Howard Kass Horizon Airlines, Jennifer Thompson US Airways, Jason Reisinger
Horizon, Jeff Cole Warbelows Air Ventures, Art Warbelow ICEPR, Luis Irizarry Wings Air (Air Greco), Aaron Goerlich

Island Air Charters, Linda House