Objection of Hyannis Air Service, Inc. dba Cape Air

To the application of LIAT (1974) Limited

For exemption from 49 USC §41301

Docket: DOT-OST-1998-3771

To: 

U.S. Department of Transportation

Office of International Aviation

From:

Andrew Bonney

Senior Vice President of Planning

Cape Air

660 Barnstable Rd.

Hyannis, MA 02601

508-862-9719

andrew.bonney@capeair.com

Re: Application of LIAT (1974) Limited for exemption from 49 USC §41301

Date: June 1, 2015
1

Introduction

Hyannis Air Service, Inc. dba Cape Air, a United States airline headquartered in Hyannis, Massachusetts 

objects to the petition of LIAT (1974) Limited, an airline certificated in Antigua and Barbuda, on May 18,

2015 for exemption from 49 USC §41301 to the extent that it could permit LIAT to compete directly in a 

non-stop market between a U.S. point and a foreign point not party to LIAT’s country of registration or 

multi-state ownership (a “Seventh Freedom” route) when at least one U.S. flagged airline serves that 

route. Such appears to be the case in LIAT’s May 2015 announcement of non-stop service between San 

Juan and Tortola effective July 15, 2015. Cape Air has no objection to the other components of the 

exemption request. 

Service History

Cape Air has been serving the San Juan – Tortola non-stop market since 1999. Cape Air presently 

markets its service with indigenous “9K” code, but also United Airlines puts their “UA” code on Cape 

Air’s San Juan – Tortola service. 

San Juan-based Seaborne Airlines operates Saab 340 aircraft on the San Juan – Tortola market with 

multiple daily frequencies, marketed under their BB code and also with American Airlines’ “AA” code. 

Air Sunshine (“YI”) operates scheduled service in the San Juan – Tortola market as well. 

For a relatively small market the San Juan – Tortola route has robust competition. No fewer than three 

U.S. airlines offer consumers choices. Two of the largest airlines in the world, American Airlines and 

United Airlines, each offer their code in this market. 

Capacity in the San Juan – Tortola market is growing

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

San Juan - Tortola Seats

Source: Official Airline Guide (OAG)

Air Sunshine

Seaborne Airlines

Cape Air
2

Furthermore, capacity in the San Juan – Tortola market is growing. In the first half of 2015 capacity was 

up 17% compared with the first half of 2014. 

Seat share in the San Juan – Tortola market 1H15 is diverse. No one carrier dominates. 

Load factors on the San Juan – Tortola route are low

Cape Air’s load factor on the San Juan – Tortola market is low. There are plenty of seats for the market 

to grow into.

Cape Air, 

19,080, 40%

Seaborne 

Airlines, 

21,522, 45%

Air Sunshine, 7,240, 

15%

San Juan - Tortola Seats

1H15; Source: OAG

Cape Air

Seaborne Airlines

Air Sunshine

67% 68%

73%

66%

60%

68% 67%

56% 54%

60%

67%

58%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Cape Air SJU-EIS Load Factor

Source: Cape Air
3

Foreign government subsidized competitor

LIAT is government-owned and subsidized. Therefore, competition by an unsubsidized US carrier 

against LIAT can not be expected to be fair. Meanwhile, privately owned Cape Air has invested in and 

grown its San Juan – Tortola business over 15 years. Approximately 20% of Cape Air is employee-owned 

through an ESOP. Cape Air regrets to see that patient investment upended by a foreign-governmentfunded competitor no party to either the BVIs or the US. The consumer also has a keen interest in 

sustainable service. Cape Air provides that sustainable service today after considerable struggle. 

Impossibility of true reciprocity

Past DOT grants of exemption authority to LIAT have cited reciprocity as a reason for permitting the 

request. However, for reciprocity to exist a U.S. airline would have to apply to the very owners of LIAT 

for permission to compete directly against them, a situation which is a patent conflict of interest. Under 

these circumstances no reciprocity in the sense that it is commonly understood can possibly exist. Even 

if an exemption authority were granted by the foreign government there could always be the implicit 

threat of revocation or, due to the intensely regulated nature of the airline business, imposition of 

regulatory hurdles that would make continuation of service effectively impossible. This point makes no 

accusation against the demonstrably good character of LIAT’s management and ownership, but merely 

speaks to the inherent conflict of interest in the regulatory and political structure. 

Material factual error in the stated merits of applicant’s case

Paragraph 4 of LIAT’s exemption request states that “the proposed air transportation services are the 

same as those it performed between the Caribbean region and the United States during the past year.” 

This is incorrect. LIAT has not flown San Juan – Tortola in the last year, but announced the route in May 

2015 for summer service effective July 15, 2015, and has it for sale on their website as of the week of 

May 18, 2015.
4

Possible procedural omission in the application

Seaborne Airlines does not appear on the service list, yet is required to be notified of this application as 

they are an incumbent U.S. airline in the San Juan – Tortola market directly impacted by the applicant’s 

exemption request. 

Conclusion and suggested remedy

Permitting Seventh Freedoms to LIAT is decidedly not in the public interest because it would materially 

disrupt the healthy competitive market between San Juan and Tortola, which already has unusually

vibrant service for a small market. Furthermore, entrance of a foreign-subsidized airline in a market that 

has been carefully cultivated and invested in by Cape Air and other U.S. carriers would undermine the 

rationale for future investments in air service. Cape Air objects to LIAT’s exemption request only to the 

extent that it could allow LIAT to compete directly in non-stop markets between a U.S. point and a 

foreign point (where such foreign point is neither in the country in which LIAT is flagged nor is it in a 

country party to LIAT’s ownership structure), and which is served by a U.S. carrier. If LIAT removes that 

portion of their request for exemption authority and suspends sales activity in such markets, Cape Air 

would have no further objection.

Thank you for your consideration.

Very respectfully,

Andrew W. Bonney

Senior Vice President of Planning

Cape Air