250 Federal Register / Vol. 67, No. 1 / Wednesday, January 2, 2002 / Rules and Regulations 

DEPARTMENT OF TRANSPORTATION

Office of the Secretary 

14 CFR Part 330 

[Docket OST–2001–10885] 

RIN 2105–AD06 

Procedures for Compensation of Air 

Carriers

AGENCY: Office of the Secretary, DOT.

ACTION: Final rule; response to 

comments. 

SUMMARY: On September 22, 2001, 

President Bush signed into law the Air 

Transportation Safety and System 

Stabilization Act (‘‘the Act’’). The Act 

makes available to the President funds 

to compensate air carriers, as defined in 

the Act, for direct losses suffered as a 

result of any Federal ground stop order 

and incremental losses beginning 

September 11, 2001, and ending 

December 31, 2001, resulting from the 

September 11 terrorist attacks on the 

United States. In order to fulfill 

Congress’ intent to expeditiously 

provide compensation to eligible air 

carriers, the Department used 

procedures set out in Program Guidance 

Letters to make initial estimated 

payments amounting to about 50 

percent of the authorized funds. On 

October 29, 2001, the Department 

published a final rule and request for 

comments establishing application 

procedures for air carriers interested in 

requesting compensation under this 

statute. This document makes 

amendments to the rule and otherwise 

responds to the comments the 

Department received.

DATES: This rule is effective January 2, 

2002.

FOR FURTHER INFORMATION CONTACT:

Steven Hatley, U.S. Department of 

Transportation, Office of International 

Aviation, 400 7th Street, SW., Room 

6402, Washington, DC 20590. 

Telephone 202–366–1213.

SUPPLEMENTARY INFORMATION: As a 

consequence of the terrorist attacks on 

the United States on September 11, 

2001, the U.S. commercial aviation 

industry suffered severe financial losses. 

These losses placed the financial 

survival of many air carriers at risk. 

Acting rapidly to preserve the continued 

viability of the U.S. air transportation 

system, President Bush sought and 

Congress enacted the Air Transportation 

Safety and System Stabilization Act 

(‘‘the Act’’), Public Law 107–42. 

Under section 101(a)(2)(A–B) of the 

Act, a total of $5 billion in 

compensation is provided for ‘‘direct 

losses incurred beginning on September 

11, 2001, by air carriers as a result of 

any Federal ground stop order issued by 

the Secretary of Transportation or any 

subsequent order which continues or 

renews such stoppage; and the 

incremental losses incurred beginning 

September 11, 2001 and ending 

December 31, 2001, by air carriers as a 

direct result of such attacks.’’ The 

Department of Transportation 

previously disbursed initial estimated 

payments of nearly $2.5 billion of the $5 

billion amount that Congress 

authorized, using procedures set forth in 

the Department’s Program Guidance 

Letters that were widely distributed and 

posted on the Department’s Web site. 

On October 29, 2001 (66 FR 54616), 

the Department published in the 

Federal Register a final rule and request 

for comments to establish procedures 

for air carriers who had received or 

wished to receive compensation under 

the Act. The rule covered such subjects 

as eligibility, deadlines for application, 

information and forms required of 

applicants, and audit requirements. The 

Department has received submissions 

from many carriers pursuant to this rule 

and is continuing to process requests for 

compensation. 

The Department received 18 

comments on the rule during the 

comment period; correspondence, 

memoranda of meetings, and late filed 

comments, have also been entered into 

the docket. The following portion of the 

preamble summarizes the comments 

that we received and describes the 

Department’s responses to those 

comments, including, where 

appropriate, amendments that the 

Department is making to the October 29 

final rule. 

Wet Lease Issues 

Several commenters disagreed with 

the rule’s provisions concerning how 

RTMs are counted in cargo ‘‘wet lease’’ 

situations. In a wet lease, one air carrier 

(the lessor) provides an aircraft, crew, 

maintenance, and insurance (ACMI) for 

another air carrier (the lessee). The rule, 

consistent with an existing regulatory 

definition of an RTM and Bureau of 

Transportation Statistics (BTS) guidance 

concerning it, provided that for 

purposes of the statutory formula for 

determining the proper amount of 

compensation for which an air carrier is 

eligible, RTMs would be attributed to 

the lessee who had reported the RTMs 

to the Department. This approach, the 

preamble to the rule said, was in 

keeping with the statutory direction to 

rely on RTMs ‘‘as reported to the 

Secretary.’’ 

Comments on this subject included 

letters from Atlas Air, Southern Air, 

Cargo Airline Association (CAA), 

Custom Air Transport (CAT), National 

Air Carrier Association (NACA), Air 

Transport Association (ATA), 

Congressman James P. McGovern, and a 

group of six members of the Florida 

Congressional delegation. They were in 

agreement that the Department’s 

approach to this issue should be 

changed. 

These commenters asserted that there 

would not be a ‘‘double-counting’’ 

situation to fear by granting wet lessors 

compensation. Atlas claims this is 

because ‘‘scope clauses in labor 

agreements typically prevent U.S. 

carriers from utilizing ACMI services’’; 

thus, ‘‘virtually all ACMI business is 

with foreign carriers, which by 

definition are not entitled to 

compensation under the Act.’’ 

Consequently, they said, the 

Department’s rule would unreasonably 

preclude any compensation for certain 

flights, since foreign carrier lessees are 

not eligible for compensation and the 

lessors could not count the RTMs 

involved for compensation purposes. 

These commenters also made the 

point that the Department’s rule 

elsewhere emphasizes (in denying 

compensation to indirect air carriers) 

the role of the direct air carrier in 

actually flying the aircraft and in fact 

specifies that RTMs must be flown by 

the air carrier submitting the claim. In 

this context, wet lessors better meet 

these standards than their lessees, they 

said, since the lessor is the party that 

actually flies the aircraft. 

A number of these comments said that 

it was unreasonable for the Department 

to rely on the way RTMs are reported to 

the Department on the BTS ‘‘Form 41,’’ 

since they viewed this report as being 

provided for unrelated purposes. In 

addition, some pointed out, the 

Department had previously proposed a 

rule that would change reporting 

requirements so that operating carriers 

(i.e., the lessor in a wet lease situation) 

would report the RTMs. 

Some of these comments referred to 

the ‘‘other auditable measure’’ language 

in the Act, saying that this language 

provided greater flexibility than the 

Department had provided in the rule. 

However, none of the commenters 

suggested any other auditable measures. 

Instead, several requested that they be 

able to count what they believed were 

their own RTMs for operating as wet 

lessors, even though these RTMs had 

previously been reported to the 

Department by the lessees. 

In a late-filed comment, CAT urged 

that the Department reverse its position 

Federal Register / Vol. 67, No. 1 / Wednesday, January 2, 2002 / Rules and Regulations 251

that wet lessees, rather than wet lessors, 

be credited with RTMs. CAT is a wet 

lessor that operates flights on behalf of 

other U.S. carriers. CAT asserted that it 

is irrelevant who reports RTMs to the 

Department; what should be dispositive 

in all cases, in CAT’s view, is who 

actually operated the flights. This is just 

as true in the case of situations in which 

U.S. carriers are the lessees as in which 

foreign carriers are the lessees. 

In the Conference Report on the 

Aviation Transportation Security Act 

(House Report 107–296 at p. 79), the 

managers made the following comment 

on this issue:

It is the Conferees’ position that the 

Stabilization Act’s section 103 compensation 

formula language, ‘‘revenue ton miles or 

other auditable measure’’ should be broadly 

construed and should not restrict 

compensation exclusively to revenue ton 

miles reported on previously filed DOT Form 

41s. If Air, Crew, Maintenance, Insurance 

lessors can provide accurate and auditable 

records of their revenue-ton-miles during the 

relevant time period, then they should be 

eligible for compensation based under the 

Stabilization Act.’’

DOT Response 

Double counting—compensating more 

than one carrier for the same 

operation—is contrary to the statutory 

scheme of the Act. Under the Act, the 

amount of compensation available to a 

carrier is not simply a function of actual 

documented losses. Rather, 

compensation availability is limited by 

a formula based on the available seatmiles or revenue ton-miles (or other 

auditable measure) as reported by the 

carriers. The formula approach was 

clearly envisioned as a way to permit 

carriers to participate in a finite amount 

of compensation based on their 

proportionate market shares. Market 

shares are not ‘‘shared’’ due to multiple 

carriers participating in particular 

operations. Indeed, permitting two or 

more carriers to be compensated for the 

same operation would give greater 

weight to some operations than others, 

contrary to the broad and proportionate 

distribution principle evident from the 

language of both section 101 and 103. 

For example, suppose carrier A and 

carrier B both participated in operation 

X. Meanwhile, carrier C flew the same 

amount of cargo over the same route in 

operation Y, without the involvement of 

another carrier. Both operations result 

in 100,000 RTMs. If double counting 

were permitted, operation X would 

generate twice as much compensation as 

operation Y, reducing the total pool of 

funds available to all carriers, depriving 

other carriers of the proportionate 

amount of compensation that Congress 

intended them to receive. 

We would also point out that there are 

many forms of multiple participation in 

operations, such as wet leases, charters, 

code shares, and indirect/direct air 

carrier relationships. Attempting to find 

ways of accommodating all these 

situations, and the variety of types of 

double counting that would be 

involved, would not only be 

administratively impracticable but 

inevitably involve multiple inequities. 

Congress could not have intended such 

a result. 

We do not agree with commenters 

who would disregard the role of the 

Department’s reporting requirements 

(i.e., the Form 41 process) in 

determining the appropriate carriers to 

receive ‘‘credit’’ for ASMs or RTMs. 

Knowledge of this long-standing 

reporting scheme can clearly be 

attributed to Congress, and the Act’s 

explicit and repeated references to 

ASMs and RTMs ‘‘as reported to the 

Secretary’’ show that Congress 

implicitly adopted the Department’s 

reporting requirements. There is no 

evidence that Congress sought to revise 

these requirements or nullify them for 

purposes of the statutory compensation 

formula so that, for example, wet lessors 

would get credit for ASMs and RTMs 

while wet lessees would not. 

We recognize Congress did add the 

term ‘‘or other auditable measure’’ to the 

calculus with respect to RTMs. While 

neither the Department nor commenters 

have been able to suggest what such 

measures might be, this addition at least 

stands for the proposition that Congress 

intended some flexibility in the way 

that compensation was distributed 

among cargo carriers. That 

interpretation is fortified by the 

Conferees’ statement in House Report 

107–296 as cited above, which we note 

was directly in support of the 

compensation claims of wet lessors. 

Working with these principles, 

together with the mandates of the Act 

itself, we believe that the comments 

discussed above have some merit, and 

that wet lessors in some circumstances 

can participate in compensation 

payments. The primary condition to that 

participation is that an eligible carrier 

with a superior claim to RTMs under 

our rules has not applied for 

compensation. This requirement is 

necessary in order to avoid either 

double counting or the displacing of the 

claim of another carrier (e.g., the lessee 

in a wet lease situation) that Congress, 

through its ‘‘as reported to the 

Secretary’’ language, intended the 

Department to recognize. 

Therefore, we will accept applications 

from wet lessors if they (1) Otherwise 

qualify as an air carrier; (2) identify and 

document their status as wet lessor, 

explaining thereby why they have not 

previously reported ASMs or RTMs for 

the operations in question; (3) identify 

the wet lessees involved in these 

operations; (4) document that such 

lessees are either ineligible for 

compensation or voluntarily have not 

and will not claim such compensation 

with respect to the operations in 

question; and (5) provide accurate and 

auditable records of ASMs or RTMs 

actually flown during the relevant time 

period for these operations. 

We recognize that it is possible that 

some wet lessors either did not apply 

for compensation because of the way 

that the rule addressed this issue or 

would seek to amend their applications 

to claim additional RTMs or ASMs. We 

are amending the application 

procedures of the rule to allow carriers 

to do so within 14 days of the 

publication of this amendment. 

Claims to confidentiality of 

information provided under this 

provision will be carefully scrutinized. 

In any situation in which the 

Department determines that both wet 

lessors and wet lessees have claimed 

compensation for the same operations, 

the Department’s general rule that wet 

lessees report RTMs will be given effect 

and lessees given priority. 

Indirect Air Carrier Issues 

A number of commenters objected to 

the provision of the rule that only direct 

air carriers are eligible for 

compensation. These commenters 

(Emery Air Freight, CAA, BAX Global, 

and the Association of Air Medical 

Services (AAMS)) pointed out, first, that 

indirect air carriers are within the 

statutory definition of ‘‘air carrier,’’ and 

consequently should be eligible for 

compensation. These commenters 

disagreed with the Department’s 

contention, in the rule’s preamble, that 

the intent of Congress was to 

compensate carriers who actually 

operated flights. Emery added that, as 

an air freight forwarder, it has been 

recognized in DOT administrative 

decisions as responsible for the 

transportation of property, even though 

it did not actually operate flights. 

Emery also asserted that, as a lessee 

for air freight transportation, it suffered 

losses because the direct air carriers 

whose aircraft it leased could not fly 

during the period of the Secretary’s 

September 11 ground stop order. This is 

exactly the sort of loss Congress 

intended to compensate, Emery said. 

Reporting ASMs or RTMs to the 

Department should not be an eligibility

requirement, these commenters said. All 

air carriers should be eligible for 

252 Federal Register / Vol. 67, No. 1 / Wednesday, January 2, 2002 / Rules and Regulations 

compensation regardless of whether the 

Department could calculate the 

‘‘formula cap’’ for compensation using 

RTMs, particularly since the statute 

allows for ‘‘other auditable measures’’ to 

be used in place of RTMs. 

In some cases, CAA said, indirect air 

carriers should get credit for the RTMs 

involved in cargo operations, since they 

‘‘generate’’ the freight carried, contract 

with direct air carriers for dedicated lift 

which requires payment regardless of 

how much freight is carried, and bear 

the entire financial risk for the 

operation. Emery also said that it, rather 

than the direct air carriers involved, 

should be regarded as generating RTMs, 

which the direct air carrier merely 

reports. 

BAX asserted that it is the 

Department’s obligation to find an 

appropriate ‘‘other auditable measure’’

for indirect air carrier operations for 

carriers that do not report RTMs, though 

BAX did not suggest what such 

measures might be. BAX did suggest, 

however, that the flexibility given to air 

taxis in the rule, for whom DOT could 

estimate RTMs based on other data, 

could be given to indirect air carriers as 

well. 

BAX dismissed the Department’s 

concern about ‘‘duplicating’’ ASMs or 

RTMs, saying that such overlap between 

direct and indirect air carriers is not 

‘‘inherently injurious.’’ BAX appears to 

mean that a carrier will not be able to 

get ‘‘double recovery,’’ though it 

concedes that some carriers might have 

their compensation reduced as a result. 

Emery agreed that allowing indirect air 

carriers to claim RTMs will not require 

DOT to pay more than once for a 

specific loss. Emery added that the 

parties to a contract (i.e., a direct and 

indirect air carrier) should be able to 

provide DOT the information needed to 

make appropriate allocations of relief. 

AAMS, representing air ambulance 

operators, also requested that the 

Department provide compensation to 

those air ambulance operators who are 

indirect air carriers. 

DOT Response 

Much of the discussion above 

concerning wet lease issues also 

pertains to the comments on indirect air 

carrier issues. In particular, the 

Department believes that double 

counting is impermissible. We find 

nothing in the text of the statute or its 

legislative history suggesting that 

Congress meant for carriers to be able to 

‘‘share’’ RTMs. Further, none of these 

commenters have offered a way to 

calculate ‘‘other auditable measures’’

that may be applicable to them in a way 

that is free of the problem of duplicating 

the claims of other carriers. (BAX’s 

analogy to air taxis is inapposite, since 

air taxis have been required to construct 

RTM data in a manner consistent with 

other carriers and no duplication of data 

is involved.) 

Nor are we persuaded by the 

suggestions that indirect air carrier/

freight forwarders have a superior claim 

to RTMs that are flown with their cargo 

aboard. As noted above, we believe that 

Congress implicitly adopted the 

reporting requirements of the 

Department in the Act, and we find no 

suggestion that it intended to displace, 

as eligible for compensation under the 

Act, the direct air carriers that report 

RTMs in accordance with our rules in 

favor of indirect air carriers that do not. 

As to comments analogizing the role 

of freight forwarders to that of wet 

lessees, there are clearly differences 

between the two. While both assume 

economic risks, a wet lessee assumes 

economic control and responsibility for 

the flight, which the freight forwarder 

does not. As to claims that freight 

forwarder operations are economically 

equivalent to a wet lease, if an air carrier 

has in fact reported RTMs to the 

Department as a wet lessee, then its 

application can be processed on that 

basis. We believe that the manner in 

which carriers have actually defined 

their relationships and reported the data 

to DOT—without regard to the 

economic incentive created by the 

availability of compensation—should be 

given credibility. 

That said, we are deleting the 

provision of the rule that made indirect 

air carriers ineligible to apply for 

compensation. In order to be consistent 

with the approach we have taken above 

for wet lessors, we will accept for 

processing applications from indirect air 

carriers if they (1) Otherwise qualify as 

an air carrier; (2) identify and document 

their status as an indirect air carrier, 

explaining thereby why they have not 

previously reported ASMs or RTMs on 

claimed operations; (3) identify the 

direct air carriers involved in their 

operations; (4) document that such 

direct air carriers are either ineligible for 

compensation or voluntarily have not 

and will not claim such compensation 

with respect to the operations in 

question; and (5) provide accurate and 

auditable records of ASMs or RTMs 

actually flown during the relevant time 

period for these operations. 

We recognize that it is possible that 

some indirect air carriers may not have 

applied for compensation in the past 

because the rule said that they were 

ineligible. We are amending the 

application procedures of the rule to 

allow indirect air carriers who did not 

apply previously to so do within 14 

days of the publication of this 

amendment. 

As noted above, claims to 

confidentiality of information provided 

under this provision will be carefully 

scrutinized. In any situation in which 

the Department determines that both 

indirect and direct air carriers have 

claimed compensation for the same 

operations, the Department’s general 

rule that direct air carriers report RTMs 

will be given effect and they will be 

given priority. 

Air Ambulance Issues 

AAMS expressed concern about the 

provisions of the Act and the rule that 

based calculations of compensation for 

which air carriers are eligible on 

available seat-miles (ASMs). AAMS said 

that ASMs are not a good measure of the 

capacity of air ambulance services, 

because air ambulances must be staffed 

and ready to go on a 24-hour basis, yet 

fly relatively few ASMs. Given the way 

the statutory formula works, this would 

result in very little compensation being 

made available to air ambulance 

services. 

In place of the ASM calculations that 

are used for other kinds of air carriers, 

AAMS recommended that the 

Department calculate lost volume by 

comparing the flight volume of August 

and September 2001, multiplying the 

difference by the average revenue per 

flight, and extrapolating the result to the 

industry as a whole. AAMS suggested 

that the functional equivalent of ASMs 

(i.e., as a measurement of capacity) 

could be calculated by multiplying the 

average number of seats in air 

ambulances aircraft (six) times the 

average speed of the aircraft (150 m.p.h.) 

times the hours per day it is staffed and 

ready (24). This, AAMS suggested, 

would create a reasonable 

approximation of the capacity of an air 

ambulance aircraft per day. 

In the Aviation and Transportation 

Security Act (Pub. L. 107–71), Congress 

also addressed the situations of air 

ambulances. Section 124(d) of this 

statute amended section 103 of the Air 

Transportation Safety and System 

Stabilization Act. The purpose of this 

amendment, according to the 

Conference Report (House Report 107–

296 at p. 79), is to ‘‘to allow for a 

modified system of providing 

compensation to air tour operators and 

air ambulances to better address their 

needs after industry wide losses.’’ The 

following is the text of this amendment:

(d) Compensation for Certain Air 

Carriers.—

(1) Set-Aside.—The President may set 

aside a portion of the amount of 

Federal Register / Vol. 67, No. 1 / Wednesday, January 2, 2002 / Rules and Regulations 253

compensation payable to air carriers under 

section 101(a)(2) to provide compensation to 

classes of air carriers, such as air tour 

operators and air ambulances (including 

hospitals operating air ambulances) for 

whom application of a distribution formula 

containing available seat miles as a factor 

would inadequately reflect their share of 

direct and incremental losses. The President 

shall reduce the $4,500,00,000 specified in 

section (b)(2)(A)(i) by the amount set aside 

under this subsection. 

(2) Distribution of Amounts.—The 

President shall distribute the amount set 

aside under this subsection proportionally 

among such air carriers based on an 

appropriate auditable measure, as 

determined by the President.

Under the statutory language, use of this 

set-aside authority is discretionary 

(‘‘The President may set aside***’’). 

Neither the statute nor the Conference 

Report provides any guidance 

concerning the appropriate size of such 

a set-aside or the identity of any other 

‘‘classes’’ of air carriers that could be 

included in it, if the President chooses 

to use the authority. 

DOT Response 

The Department will consider using 

the discretion provided by section 

124(d) of the Transportation Security 

Act to set aside a portion of the $4.5 

billion compensation available for 

passenger carriers for air ambulances 

and other classes of air carriers for 

whom application of an ASM-based 

compensation formula would 

inadequately reflect their share of direct 

and incremental losses. The Department 

is issuing a separate document in 

today’s Federal Register requesting 

comment on the issue of whether we 

should establish a set-aside, which 

classes of carriers a set-aside should 

cover, and what method or methods 

should be used to allocate funds from a 

set-aside. 

Charter Carrier Issues 

NACA, representing charter air 

carriers, asked for changes in the data 

the Department collects. NACA said that 

Parts 2 and 4 of Form 330–A request a 

variety of types of information (e.g., 

forecast ASMs and RTMs; volume, 

revenue and cost information related to 

individual passengers; break even load 

factor, average length of passenger haul, 

departures planned, average passenger 

fares, and passenger yield per RPM) that 

are not relevant to charter air carriers’

operation. Charter air carriers, NACA 

said, typically sell full planeload charter 

flights to tour operators, who in turn 

pay for the whole airplane by ‘‘block 

hour.’’ Charter revenue forecasts are 

based on aircraft utilization, which is 

the predicted monthly number of block 

hours the carrier expects to operate. The 

forecast units then become revenue and 

cost per block hour, rather than ASMs 

and RTMs. 

DOT Response 

The Department understands that 

some charter carriers may not have 

some of the data elements in the form 

the Department has asked for them. The 

Department has received applications 

from a number of such carriers, and we 

are working with the carriers in 

question to clarify information 

necessary to permit determinations on 

compensation to be made. 

Consequently, the Department does not 

believe that it is necessary to make any 

changes in the current rule or forms to 

accommodate NACA’s concern. 

However, we will consider whether, in 

connection with the third increment of 

compensation we intend to distribute in 

2002, we should change any of the data 

elements for charter carriers. 

Accounting Issues 

The American Institute of Certified 

Public Accountants (AICPA) 

recommended a number of changes in 

the way that the rule describes the 

independent audit requirements of the 

final rule. Rather than requiring a 

‘‘review’’ of a carrier’s ‘‘forecasts,’’ or an 

‘‘audited financial statement,’’ AICPA 

suggested that DOT require carriers to 

perform an ‘‘agreed-upon procedures 

engagement.’’ This change would make 

the rule more consistent with 

accounting terms of art, AICPA said. 

AICPA provided a suggested draft of 

such agreed-upon procedures as well as 

technical amendments to the rule’s 

language that would accommodate the 

group’s concerns. 

AICPA also commented concerning 

the rule’s requirement that carriers 

report and support reports of losses for 

the period beginning September 11, 

2001. Generally, AICPA said, carriers 

prepare financial data on a monthly, 

rather than a daily basis, so it would 

make more sense to report losses 

beginning September 1 rather than 

September 11. Also, carriers and the 

DOT should have access to the 

independent auditors’ working papers 

on request, but the carrier should not 

routinely obtain and retain them. Doing 

the latter would be inconsistent with 

AICPA auditing standards, the 

organization asserted. 

The Air Transport Association noted 

in its comments that it supported the 

AICPA’s views. 

DOT Response 

In the interest of facilitating auditing 

of carriers’ records, the Department will 

make the regulatory text changes 

suggested by AICPA, with minor edits. 

These changes in the Department’s rule 

include adoption of the ‘‘agreed-upon 

procedures engagement’’ approach that 

AICPA suggested. However, the 

Department does not adopt or otherwise 

approve the specific agreed-upon 

procedures document enclosed with 

AICPA’s comment. 

In implementing the agreed-upon 

procedures approach, DOT will require 

that airlines and their accountants use 

procedures that are acceptable to 

applicants and the Department. The 

Department intends to issue, in the near 

future, guidance that will provide the 

essential elements of procedures that 

the Department will accept. As part of 

this process, the Department is 

considering guidance relating to 

abbreviated procedures for smaller air 

carriers. 

Before- and After-Tax Reporting 

TEM Enterprises noted that the rule 

requires that carriers report both ‘‘net 

losses, before taxes’’ and ‘‘total net 

income after taxes, based on application 

of standard corporate income tax rates.’’

TEM recommended that the Department 

use before-tax information in 

determining compensation, particularly 

where a carrier projected losses even 

before the September 11 attacks, since 

no tax would have been paid in that 

case. It would not make sense to use 

after-tax data except, perhaps, in the 

case of carriers who project having 

taxable income at the end of their tax 

years. TEM also objected to the 

possibility that the reference to 

‘‘standard corporate tax rates’’ would 

mean that the Department would 

uniformly apply a 34 percent tax rate 

against a carrier’s projected net income. 

AICPA also asked for clarification on 

whether compensation will be based on 

pre-tax or net income after taxes, and on 

what is meant by the rule’s reference to 

‘‘standard corporate income tax rates.’’

DOT Response 

The Department has determined, as 

the result of reviewing both 

compensation applications and 

comments to the docket for this rule, 

that the Department will rely on pre-tax 

data for purposes of determining 

carriers’ losses. Consequently, issues 

concerning use of after-tax data, 

including the appropriate corporate tax 

rate to apply, are moot. We have deleted 

the after-tax income lines from the 

reporting forms in Appendices A–C of 

the regulation. 

254 Federal Register / Vol. 67, No. 1 / Wednesday, January 2, 2002 / Rules and Regulations 

Documentation of pre-September 11 

Forecasts 

TEM Enterprises and Custom Air 

Transport made similar comments 

concerning the rule’s requirement that 

carriers submit documentation that preSeptember 11 forecasts were, in fact, 

completed before September 11. The 

problem, they said, was that carriers 

such as themselves do not routinely 

prepare forecasts of the kind 

contemplated by the rule. They could 

produce, for purposes of their 

applications, they said, detailed 

forecasts based on information existing 

before September 11, but these forecasts 

were prepared after September 11. It 

would be unreasonable, they said, to 

exclude carriers from compensation 

because their normal business practices 

before September 11 did not involve 

preparing detailed forecasts. Like air 

taxis, some other air carriers should be 

given flexibility to make a good faith 

effort to categorize their revenues and 

expenses according to the rule’s forms. 

DOT Response 

The Department believes that it is fair 

to accommodate the situation of carriers 

that did not prepare actual forecasts 

before September 11. In reviewing 

applications that have been submitted, 

the Department has accepted some 

carriers’ estimates of pre-September 11 

expectations for their performance, 

based on historical data, in lieu of a 

forecast actually made before that date. 

As a matter of interpretation, the 

Department will continue this practice. 

While the Department will scrutinize 

the carrier’s data to make sure the 

estimates of expectations are reasonable, 

the Department will not exclude carriers 

in this category from eligibility for 

compensation. 

Other Issues 

Worldwide Flight Services, an 

aviation services firm that provides 

ramp, passenger, cargo, maintenance, 

container leasing, and fueling services, 

commented that it has suffered 

significant losses as the result of the 

September 11 attacks. The company is 

not receiving its expected revenue 

because carrier customers operating 

fewer flights are using their services 

less. Worldwide asserted it is not an 

indirect air carrier and that its unique 

position and the services it provides to 

carriers should result in its becoming 

eligible for compensation. Generally, 

Worldwide believes its services are vital 

to the flights of aircraft. 

If its operations stopped tomorrow, 

Worldwide said, many flights could not 

operate because essential services 

would not be provided, especially in 

smaller communities. According to 

Worldwide, in view of the Act’s 

mandate that the Secretary take 

appropriate action to ensure the 

continuation of scheduled air service to 

small communities, the Department 

should compensate the company. In 

addition, acccording to worldwide, if 

Worldwide stopped providing its 

service, there would be interruptions of 

mail deliveries. 

ATA expressed concern about the 

provision that carriers must provide all 

requested information with their 

applications or face rejections of their 

applications by the Department. This 

requirement is too stringent, in ATA’s 

view, particularly since carriers may be 

unable to meet precisely some of the 

rule’s information requirements. For 

example, carriers may well be unable to 

provide an auditable forecast and actual 

losses for the September 11–30 period, 

since they do not keep records in a daily 

or weekly, as opposed to monthly, 

fashion. Like AICPA, ATA 

recommended that the rule’s 

information collection requirements 

relate to the entire month of September. 

Finally, ATA disagreed with the rule’s 

requirement that independent auditors 

review carriers’ forecasts for accuracy. 

This, ATA said, would be difficult given 

the variation among carriers’ forecasting 

methods. Instead, the auditors should 

certify that the forecast submitted to 

DOT was the carrier’s most recently 

available forecast prior to September 11. 

DOT Response 

The events of September 11 had 

serious economic effects on a wide 

variety of businesses. For example, 

airport concessionaires, hotels and 

resorts, and other tourism-related 

businesses appear to have lost 

substantial amounts of money. We do 

not doubt that an aviation services 

company like Worldwide may have 

suffered significant financial losses as 

the result of the September 11 attacks, 

and we recognize that firms like 

Worldwide can play an important role 

in the aviation industry. 

Nevertheless, Congress provided 

compensation in the Act only to air 

carriers. Worldwide is not only not an 

indirect air carrier; it is not an air carrier 

at all, as defined in the Act. We do not 

have the legal discretion to provide 

compensation to parties that are not air 

carriers, even though doing so could 

help to achieve other purposes of the 

Act, such as maintaining service to 

small communities. 

The Act requires losses to be 

calculated from September 11, not 

September 1. The Department cannot 

assume that a forecast pertaining to all 

of September will permit an accurate 

calculation of losses pertaining to 

September 11–30. Certainly, merely prorating data for the entire month as a 

means of estimating losses for 

September 11–30 would not be an 

accurate method for doing so. It is 

appropriate and possible, in the 

Department’s view, for carriers—even 

those who did not originally structure 

their forecasts in this fashion—to break 

out data pertaining to September 1–10 

and September 11–30, respectively. 

As noted in the response to the 

AICPA comment, DOT is modifying 

audit requirements and will rely on 

‘‘agreed-upon procedures’’ as distinct 

from a formal ‘‘review’’ or ‘‘audit’’ of 

carrier information. This change 

adequately responds to ATA’s 

comments on this point. We do not 

believe it would be adequate to have an 

auditor merely attest to the recency of 

a carrier’s documents. To ensure that 

the Department distributes funds in 

accordance with Congress’ direction, 

auditors need to consider the accuracy 

of the substance of this information. 

Regulatory Analyses and Notices 

This rule is an economically 

significant rule under Executive Order 

12886, since it will facilitate the 

distribution of more than a billion 

dollars into the economy during the 12-

month period following its issuance. 

Because of the need to move quickly to 

provide compensation to air carriers for 

the purpose of maintaining a safe, 

efficient, and viable commercial 

aviation system in the wake of the 

events of September 11, 2001, we are 

not required to provide an assessment of 

the potential cost and benefits of this 

regulatory action. The Department has 

determined that this rule is being issued 

in an emergency situation, within the 

meaning of Section 6(a)(3)(D) of 

Executive Order 12866. However, this 

impact is expected to be a favorable one: 

making these funds available to air 

carriers to compensate them for losses 

resulting from the terrorist attacks of 

September 11. In accordance with 

Section 6(a)(3)(D), this rule was 

submitted to the Office of Management 

and Budget for a brief review. 

Because a notice of proposed 

rulemaking is not required for this 

rulemaking under 5 U.S.C. 553, we are 

not required to prepare a regulatory 

flexibility analysis under 5 U.S.C. 604. 

However, we do note that this rule may 

have a significant economic effect on a 

substantial number of small entities. 

Among the entities in question are air 

taxis, as well as some commuters and 

small certificated air carriers. In 

Federal Register / Vol. 67, No. 1 / Wednesday, January 2, 2002 / Rules and Regulations 255

analyzing small entity impact for 

purposes of the Regulatory Flexibility 

Act, we believe that, to the extent that 

the rule impacts small air carriers, the 

impact will be a favorable one, since it 

will consist of receiving compensation. 

We have facilitated the participation of 

small entities in the program by 

allowing a longer application period for 

air taxis, which are generally the 

smallest carriers covered by this rule 

and which do not otherwise report 

traffic or financial data to the 

Department. The Department has also 

concluded that this rule does not have 

sufficient Federalism implications to 

warrant the consultation requirements 

of Executive Order 13132. 

We are making this rule effective 

immediately, without prior opportunity 

for public notice and comment. Because 

of the need to move quickly to provide 

compensation to air carriers for the 

purpose of maintaining a safe, efficient, 

and viable commercial aviation system 

in the wake of the events of September 

11, 2001, prior notice and comment 

would be impractical, unnecessary, and 

contrary to the public interest. 

Consequently, prior notice and 

comment under 5 U.S.C. 553 and delay 

of the effective date under 5 U.S.C. 801, 

et seq., are not being provided. On the 

same basis, we have determined that 

there is good cause to make the rule 

effective immediately, rather than in 30 

days. We are providing for a 14-day 

comment period following publication 

of the rule, however. The Department 

will subsequently respond to comments 

we receive. 

The Office of Management and Budget 

has approved the information collection 

requirements of this rule, with Control 

Number 2105–0546.

List of Subjects in 14 CFR Part 330 

Air carriers, Grant programs—

transportation, Reporting and 

recordkeeping requirements.

Issued this 26th day of December, 2001, at 

Washington, DC. 

Read C. Van de Water, 

Assistant Secretary for Aviation and 

International Affairs.

■ For the reasons set forth in the 

preamble, the Department amends 14 

CFR Part 330 as follows:

PART 330—PROCEDURES FOR 

COMPENSATION OF AIR CARRIERS

■ 1. The authority citation for Part 330 is 

revised to read as follows:

Authority: Pub. L. 107–42, 115 Stat. 230 

(49 U.S.C. 40101 note); sec. 124(d), Pub. L. 

107–71, 115 Stat. 631 (49 U.S.C. 40101 note).

■ 2. Amend § 330.7 by revising 

paragraph (c) to read as follows:

§ 330.7 How much of an eligible air 

carrier’s estimated compensation will be 

distributed under this part?

* * * * *

(c) If, as an air carrier, you are able to 

submit data, subsequent to your 

application under this part but before 

December 31, 2001, demonstrating and 

documenting conclusively that you have 

incurred actual losses as defined in 

section 101(a)(2) of the Act that exceed 

the amount of compensation for which 

you demonstrate you are eligible under 

the formula of section 103(b)(2) of the 

Act, the Department may disburse to 

you, without waiting for a submission in 

Calendar Year (CY) 2002, the remainder 

of the formula amount of compensation 

for which you are eligible. 

(1) A carrier that requests a final 

installment before December 31, 2001 

must submit its claim of actual losses 

for the period of the claim, a forecast for 

the same period that was prepared 

before September 11, 2001, and an 

independent public accountant’s report 

based on the performance of agreedupon procedures approved by the 

Department of Transportation with 

respect to the carrier’s forecasts and 

actual results. The independent public 

accountant’s engagement must be 

performed in accordance with generally 

accepted professional standards 

applicable to agreed-upon procedures 

engagements. 

(2) The consideration of requests for 

final payment before December 31, 2001 

is contingent upon the establishment by 

the Department of a fixed 

comprehensive universe of ASMs and 

RTMs for all eligible air carriers to be 

used as the basis of the final 

compensation formula for all eligible air 

carriers as established in the Act.

§ 330.11 [Amended]

■ 3. Amend § 330.11 by removing and 

reserving paragraph (b).

■ 4. Amend § 330.21 by adding new 

paragraphs (d) and (e), to read as follows:

§ 330.21 When must air carriers apply for 

compensation?

* * * * *

(d) Notwithstanding any other 

provision of this section, if you are an 

eligible air carrier that did not submit an 

application or wishes to amend its 

application, you may do so by January 

16, 2002 if you are one of the following: 

(1) An indirect air carrier which did 

not file an application because indirect 

air carriers were formerly ineligible to 

apply for compensation; or 

(2) A wet lessor that either did not file 

an application, or submitted fewer 

ASMs or RTMs with its application than 

it now believes can be counted for 

compensation purposes, because this 

rule formerly limited the ASMs or RTMs 

that you could submit. 

(e) If you are submitting a new or 

amended application under paragraph 

(d) of this section, you must include a 

signed statement, under penalty of 

perjury, that you are submitting the new 

or amended application for the reason 

stated in paragraph (d)(1) or (d)(2) of 

this section.

■ 5. Revise § 330.31 to read as follows:

§ 330.31 What data must air carriers 

submit concerning ASMs or RTMs? 

(a) Except as provided in paragraph 

(d) of this section, if you are applying 

for compensation as a passenger or 

combination passenger/cargo carrier, 

you must have submitted your August 

2001 total completed ASM report to the 

Department for your system-wide air 

service (e.g., scheduled, non-scheduled, 

foreign, and domestic). 

(b) Except as provided in paragraph 

(d) of this section, if you are applying 

for compensation as an all-cargo carrier, 

you must have submitted your RTM 

reports to the Department for the second 

calendar quarter of 2001. 

(c) In calculating and submitting 

ASMs and RTMs under paragraphs (a) 

and (b) of this section, there are certain 

things you must not do: 

(1) Except at the direction of the 

Department, or to correct an error that 

you document to the Department, you 

must not alter the ASM or RTM reports 

you earlier submitted to the Department. 

Your ASMs or RTMs for purposes of 

this part are as you have reported them 

to the Department according to existing 

standards, requirements, and 

methodologies established by the Office 

of Airline Information (Bureau of 

Transportation Statistics). 

(2) You must not include ASMs or 

RTMs resulting from operations by your 

code-sharing or alliance partners. 

(3) You must not include ASMs or 

RTMs that are reported by or 

attributable to flights by another carrier. 

(d) If you have not previously 

reported ASMs or RTMs as provided in 

paragraphs (a) and (b) of this section for 

a given operation or operations, you 

may submit your calculation of ASMs or 

RTMs to the Department with your 

application. You must certify the 

accuracy of this calculation and submit 

with your application the data and 

assumptions on which the calculation is 

based. After reviewing your submission, 

the Department may modify or reject 

your calculation. 

(1) If you are a direct air carrier that 

has operated your aircraft for a lessee 

(i.e., a wet lease, or aircraft, crew, 

maintenance, and insurance (ACMI) 

256 Federal Register / Vol. 67, No. 1 / Wednesday, January 2, 2002 / Rules and Regulations 

operation), you may submit your 

calculation of ASMs or RTMs for these 

flights. Your submission must include 

the following elements: 

(i) Documentation that you otherwise 

qualify as an air carrier; 

(ii) Documentation that you are a wet 

lessor, and an explanation of why you 

did not previously report ASMs or 

RTMs for the operations in question; 

(iii) Documentation of the identify of 

the wet lessees involved in these 

operations; 

(iv) Documentation that such lessees 

are either ineligible for compensation or 

voluntarily have not and will not claim 

such compensation with respect to the 

operations in question; and 

(v) Accurate and auditable records of 

ASMs or RTMs actually flown during 

the relevant time period for these 

operations. 

(2) If you are an indirect air carrier, 

you may submit your calculation of 

ASMs or RTMs for flights that direct air 

carriers have operated for you under 

contract or other arrangement. Your 

submission must include the following 

elements: 

(i) Documentation that you otherwise 

qualify as an air carrier; 

(ii) Documentation that you are an 

indirect air carrier, and an explanation 

of why you did not previously report 

ASMs or RTMs for the operations in 

question; 

(iii) Documentation of the identify of 

the direct air carriers involved in these 

operations; 

(iv) Documentation that such direct 

air carriers are either ineligible for 

compensation or voluntarily have not 

and will not claim such compensation 

with respect to the operations in 

question; and 

(v) Accurate and auditable records of 

ASMs or RTMs actually flown during 

the relevant time period for these 

operations.

■ 6. Amend § 330.35 by revising 

paragraph (a)(4) to read as follows:

§ 330.35 What records must carriers 

retain?

* * * * *

(a) * * * 

(4) You must agree to have your 

independent public accountant retain 

all reports, working papers, and 

supporting documentation pertaining to 

the agreed-upon procedures engagement 

conducted by your independent public 

accountant under the requirements of 

this part for a period of five years. The 

accountant must make this information 

available for audit and examination by 

representatives of the Department of 

Transportation (including the Office of 

the Inspector General), the Comptroller 

General of the United States, or other 

Federal agencies.

* * * * *

■ 7. Amend § 330.37 by revising 

paragraph (b) to read as follows:

§ 330.37 Are carriers which participate in 

this program subject to audit?

* * * * *

(b) Before you are eligible to receive 

payment from the final installment of 

compensation under the Act, there must 

be an independent public accountant’s 

report based on the performance of 

procedures agreed upon by the 

Department of Transportation with 

respect to the carrier’s forecasts and 

actual results. The independent public 

accountant’s engagement must be 

performed in accordance with generally 

accepted professional standards 

applicable to agreed-upon procedures 

engagements. You must submit the 

results of the agreed-upon procedures 

engagement to the Department with 

your application for payment of the 

final installment.

■ 8. Amend Appendix A to Part 330 by 

revising Page 1 of 5 and Page 3 of 5 of 

Form 330–A to read as follows: 

Appendix A to Part 330—Forms for 

Certificated and Commuter Air Carriers

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■ 9. Amend Appendix B to Part 330 by 

revising Page 1 of 5 and Page 3 of 5 of 

Form 330–B to read as follows: 

Appendix B to Part 330—Forms for 

Certificated Cargo Carriers


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■ 10. Amend Appendix C to Part 330 by 

revising Page 1 of 7 and Page 3 of 7 of 

Form 330–C to read as follows: 

Appendix C to Part 330—Forms for Air 

Taxi Operators


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[FR Doc. 01–32176 Filed 12–27–01; 4:28 pm] 

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