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

Transcription

1 Order: Served: December 21, 2017 UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C. Issued by the Department of Transportation on the 21 st day of December, 2017 Essential Air Service at BURLINGTON, IOWA (FAIN 69A ) DECATUR, ILLINOIS (FAIN 69A ) 1 DOT-OST DOT-OST under 49 U.S.C et seq. ORDER SELECTING AIRLINES AND ESTABLISHING ANNUAL SUBSIDY RATES Summary By this Order, the United States Department of Transportation (the Department) is 1) re-selecting Multi-Aero, Inc. d/b/a Air Choice One (Air Choice One) to provide Essential Air Service (EAS) at Burlington, Iowa, for the four-year contract term from February 1, 2018, through January 31, 2022, and 2) selecting Hyannis Air Service, Inc. d/b/a Cape Air (Cape Air) to provide EAS at Decatur, Illinois, for the two-year contract term from February 1, 2018, through January 31, At Burlington, Air Choice One will provide 12 weekly nonstop round trips to Chicago O Hare International Airport (ORD) and 12 weekly nonstop round trips to St. Louis-Lambert International Airport (STL) (for a total of 24 weekly round trips) using 9-passenger Cessna 1 FAIN = Federal Award Identification Number.

2 - 2 - Grand Caravan aircraft for an annual subsidy of $2,439,963 for years 1 and 2, and $2,415,564 for years 3 and 4. 2 At Decatur, Cape Air will provide 24 weekly nonstop round trips to ORD and 12 weekly nonstop round trips (for a total of 36 weekly round trips) using 9-passenger Cessna 402 aircraft. The annual subsidy is summarized below: Cape Air at Decatur Year 1 $2,915,273 Year 2 $3,002,731 Background By Order , issued on December 22, 2015, the Department re-selected Air Choice One to provide EAS at Burlington and Decatur using Cessna Grand Caravan aircraft for the twoyear contract term from February 1, 2016, through January 31, At Burlington, the airline provides 12 weekly nonstop round trips to STL and 12 weekly round trips to ORD (for a total of 24 weekly round trips) for an annual subsidy of $2,316,502. At Decatur, the airline provides 18 weekly nonstop round trips to STL and 18 weekly nonstop round trips to ORD (for a total of 36 weekly round trips) for an annual subsidy of $2,915,638. As the expiration of the current contracts approached, the Department issued Order on July 25, 2017 requesting proposals from airlines interested in providing EAS at Burlington and/or Decatur for new contract terms. In response to that Order, Air Choice One and Cape Air submitted proposals to serve Burlington, and Air Choice One, Cape Air and SkyWest Airlines, Inc. (SkyWest) submitted proposals to serve Decatur. Each airline s complete proposal and the community comments may be accessed online at by entering each community s respective docket number in the search block. 2 Such subsidy is calculated and distributed on a fiscal year basis, subject to the availability of funds.

3 - 3 - Proposals of Air Choice One Air Choice One submitted proposals to serve both Burlington and Decatur, and they are summarized below: Burlington service option Option Aircraft Hubs 1 Cessna Caravan ORD/STL Round Trips per Week 24 (12 to ORD, 12 to STL) Annual Subsidy $2,439,963 (years 1 & 2) $2,415,564 (years 3 & 4) Decatur service options Option Aircraft Hubs 1 Cessna Caravan ORD/STL 2 Beechcraft 1900 ORD/STL 3 Beechcraft 1900 & Cessna Caravan ORD/STL Round Trips per Week 36 (18 to ORD, 18 to STL) 36 (18 to ORD, 18 to STL) 36 (18 to ORD, 18 to STL) Annual Subsidy $2,989,312 (years 1 & 2) $2,959,419 (years 3 & 4) $3,310,343 (years 1 & 2) $3,277,240 (years 3 & 4) $3,100,009 (years 1 & 2) $3,069,009 Proposal of Cape Air Cape Air submitted two-year and four-year options to serve Burlington and Decatur, all with Cessna 402 aircraft. With regard to its annual subsidy request, Cape Air states that, in order to align revenue with operating costs over time, the airline incorporated a three percent increase in annual subsidy for each year of the EAS contract, with a lower first- and second-year rate under its four-year option. At Burlington, Cape Air proposes 12 weekly nonstop round trips each to ORD and STL (for a total of 24 weekly round trips). The proposed annual subsidy rates are summarized below:

4 - 4 - Cape Air proposed annual subsidy for Burlington Two-Year Selection Annual Subsidy Year 1 $2,128,582 Year 2 $2,192,440 Four-Year Selection Annual Subsidy Year 1 $2,067,273 Year 2 $2,129,291 Year 3 $2,193,169 Year 4 $2,258,965 At Decatur, Cape Air proposes 24 weekly nonstop round trips to ORD and 12 weekly nonstop round trips to STL (for a total of 36 weekly round trips). The proposed annual subsidy rates are summarized below: Cape Air proposed annual subsidy for Decatur Two-Year Selection Annual Subsidy Year 1 $2,915,273 Year 2 $3,002,731 Four-Year Selection Annual Subsidy Year 1 $2,831,304 Year 2 $2,916,244 Year 3 $3,003,731 Year 4 $3,093,843 Proposal of SkyWest SkyWest submitted a proposal to serve only Decatur for a two-year contract term using 50- passenger Canadair Regional Jet CRJ200 aircraft with 14 weekly nonstop round trips to ORD for an annual subsidy of $3,308,945. SkyWest s proposal is contingent on the Department, as well as the community of Decatur, waiving the hold-in requirement at 49 U.S.C (c), 3 which would allow the airline to terminate its service at the community 120 days after giving notice to the Department and the community of its intent to end, suspend, or reduce EAS. SkyWest states in its proposal that it does not foresee this to be an issue and plans to serve Decatur for the full contract period. Nonetheless, in the event such action becomes necessary, SkyWest expressed concern that it 3 49 U.S.C (a) requires that EAS carriers provide the Department and the communities they serve 90 days notice prior to terminating, suspending, or reducing EAS service to that community. Upon receiving such a notice, the Department issues a request for proposals to identify replacement service. If the Department is unable to locate a replacement carrier during that 90-day period, the Department must require the existing EAS carrier to continue to serve that community for successive 30-day periods, until a replacement carrier is selected. 49 U.S.C (b) & (c).

5 - 5 - would be operationally constrained and kept in a community indefinitely, without the ability to adapt to the marketplace. Community Comments On September 13, 2017, the Department requested comments from both communities regarding this EAS air carrier-selection case. The Department received a letter from Mr. Charles E. Walsh, Board Chairman of the Southeast Iowa Regional Airport Authority, supporting Air Choice One s proposal for a new, four-year contract term. Mr. Walsh stated in his letter that public meetings were held with presentations from both airlines, and the Board compared the strengths of each proposal and weighed community feedback. Mr. Walsh mentions, Air Choice One has been a great partner with the Southeast Iowa Regional Airport..., adding, They continue to provide reliable service for [Burlington]. Mr. Bob Brilley II, President of the Decatur Park District, which owns and operates Decatur Airport, submitted a letter on November 3, 2017, supporting Cape Air s proposal for a four-year contract term. In that letter, Mr. Brilley states, After careful review of three airlines submitting proposals for air service beginning in 2018, the Decatur Park Board of Commissioners has selected Cape Air as the best option due to price, frequency, continuation of dual hub status, and interline agreements with Alaska, American, Delta, JetBlue, and United. However, on November 13, 2017, the Airport Director for Decatur Airport notified the Department via telephone that the community had reconsidered its support for Cape Air s proposal and stated that the community would submit a revised letter formally supporting the proposal put forth by SkyWest. By letter dated November 15, 2017, Mr. Brilley submitted an updated community comments, stating: After presentations by Archer Daniels Midland, Decatur Memorial Hospital, Economic Development Corporation, and the mayor of Decatur, as well as representation from additional local companies, the commissioners reconsidered their initial vote and now recommend SkyWest Airlines for EAS beginning February [Archer Daniels Midland] has committed $100,000 toward airport terminal upgrades and 5,000 enplanements per year for two years. The Department also received comments from Archer Daniels Midland Company (ADM), the largest employer in Decatur. ADM, which is headquartered in Chicago, supports SkyWest s proposal. Decision When selecting an airline to provide subsidized EAS for an eligible place not in Alaska, 49 U.S.C (c)(1) directs the Department to consider five factors: (a) service reliability; (b) contractual and marketing arrangements with a larger carrier at the hub; (c) interline arrangements with a larger carrier at the hub; (d) community views, giving substantial weight to the views of the elected officials representing the users; and (e) whether the carrier has included a plan in its proposal to market its service to the community. In addition, the Consolidated Appropriations Act, 2017, Pub. L as continued by the Further Continuing Appropriations Act, 2018 and Supplemental Appropriations for Disaster Relief Requirements Act, 2017, Pub. L , provides that when selecting a carrier to provide EAS, the Department

6 - 6 - may consider the relative subsidy requirements, thus codifying a factor that has been considered since the inception of the program. At Burlington, Air Choice One has provided the community reliable EAS for several years and the community overwhelmingly supports the airline s re-selection for a new contract term. The Department finds the airline s proposed service and subsidy to be reasonable. Since the community expressed a preference for a four-year contract, the Department will re-select Air Choice One to provide EAS at Burlington from February 1, 2018, through January 31, With respect to Decatur, the decision proved to be not so straightforward. All three airlines have earned solid reputations for providing reliable EAS and all three submitted competitive proposals. Relying on the five-selection criteria to guide its decision, the Department has decided to select Cape Air to provide EAS at Decatur for a two-year contract term. The incumbent airline at Decatur, Air Choice One, met only two out of the five selection criteria: proven reliability for providing EAS, and a marketing plan in its proposal. Notably, the carrier did not have community support. Therefore, Air Choice One was eliminated from further consideration. As between Cape Air and SkyWest, both airlines met four out of five of the selection criteria. Cape Air did not meet the community support criterion; SkyWest did not meet the criterion of including a marketing plan in its proposal. While the Department gives serious consideration to the comments of the community, it is not its only consideration. It is also important that the Department be mindful of its fiduciary responsibilities. Therefore, the Department looked at the annual subsidy requested by each airline. For a two-year contract term, Cape Air s proposal would cost a total of $5,918,004 compared to SkyWest s proposal costing $6,617,890. Cape Air s proposal would save the federal government $699,886 over a two-year period. Cape Air s proposal will connect Decatur to ORD (of noted importance to ADM, as stated in their letter), a large hub airport as well as to STL, a medium-hub airport. Cape Air s service would also be provided with twin-engine aircraft (also of noted importance to ADM, since their letter stated that corporate travel policy prevents employees from traveling on single-engine aircraft.) In addition, Cape Air s interline and marketing agreements with Alaska Airlines, American Airlines, Delta Air Lines, JetBlue Airways, and United Airlines will provide Decatur passengers connections to the national air transportation. Since the Department cannot reasonably justify such an increase in annual subsidy and Cape Air s service will sufficiently meet Decatur s EAS, the Department will select Cape Air for the two-year contract term from February 1, 2018, through January 31, Finally, the Department notes that Cape Air s proposal does not require an exemption from any of the EAS statutory requirements. The Department shall make these selections contingent upon its receiving properly executed certifications from Air Choice One and Cape Air that they are in compliance with the Department s regulations regarding drug-free workplaces and nondiscrimination, as well as the regulations concerning lobbying activities. 4 4 The certifications are available online under Reports and Publications at

7 - 7 - Service Transition At Decatur, the Department expects Air Choice One and Cape Air to work together to make a smooth transition with no service hiatus. Before Air Choice One suspends service, the Department expects it to notify all passengers holding reservations for travel after the suspension date, to assist those passengers in making alternate air transportation arrangements, or to provide a refund of the ticket price, without penalty, if requested. If Cape Air is unable to start service on February 1, 2018, Air Choice One is required to serve Decatur with the current service pattern until Cape Air begins full EAS at the community. In that case, Air Choice One will be compensated at the annual subsidy rate for status-quo service in its EAS bid as described in Appendix D. Reminder About EAS Eligibility To remain eligible for EAS, communities must comply with all applicable EAS eligibility requirements. 49 U.S.C (a)(1)(C) states that to be eligible for EAS, a community must have an average subsidy per passenger of less than $1,000 during the most recent fiscal year, as determined by the Secretary of Transportation, or face termination of subsidy eligibility, regardless of distance to the nearest hub airport. The $1,000 subsidy per passenger limit applies to all EAS communities outside of Alaska and Hawaii. In addition, the Department is prohibited from subsidizing air service at a community where the subsidy per passenger exceeds $200, unless the community is more than 210 highway miles from the nearest large- or medium-hub airport. Burlington and Decatur are located fewer than 210 miles from STL, a large-hub airport, and are subject to this eligibility requirement. Lastly, a community must maintain an average of 10 enplanements per service day, as determined by the Secretary of Transportation, during the most recent fiscal year ended September 30, The legislation exempts locations in Alaska and Hawaii, and communities that are more than 175 driving miles from the nearest large- or medium-hub airport. Decatur is located fewer than 175 miles of STL and, therefore, is subject to this eligibility requirement. Burlington is located more than 175 miles from STL and, therefore, is not subject to this eligibility requirement. Carrier Fitness 49 U.S.C (b) and require that the Department find an air carrier fit, willing, and able to provide reliable service before the Department may subsidize it to provide EAS. Air Choice One and Cape Air are subject to the Department s continuing fitness requirements, and no information has come to the Department s attention that would cause the Department to question either air carrier s fitness at this time. The Department has contacted the Federal Aviation Administration, and it has raised no concerns that would negatively affect our fitness findings. The Department therefore concludes that Air Choice One is reliable and fit to conduct the operations proposed at Burlington and Cape Air is reliable and fit to conduct operations proposed at Decatur. This Order is issued under authority delegated in 49 CFR Part 1.25a(b).

8 - 8 - ACCORDINGLY, 1. The Department re-selects Multi-Aero, Inc. d/b/a Air Choice One to provide Essential Air Service at Burlington, Iowa, and establishes the annual subsidy rate as described in Appendix C; 2. The Department selects Hyannis Air Service, Inc. d/b/a Cape Air to provide Essential Air Service at Decatur, Illinois, and establishes the annual subsidy rate as described in Appendix C; 3. The Department sets a temporary rate, as described in Appendix D, for Multi-Aero, Inc. d/b/a Air Choice to provide Essential Air Service at Decatur, Illinois, from February 1, 2018, through March 31, 2018, in the event Cape Air does not inaugurate service at Decatur on February 1, 2018, to allow time for a seamless transition between air carriers; 4. The Department directs Multi-Aero, Inc. d/b/a Air Choice One and Hyannis Air Service, Inc. d/b/a Cape Air to retain all books, records, and other source and summary documentation to support claims for payment, and to preserve and maintain such documentation in a manner that readily permits its audit and examination by representatives of the Department. Such documentation shall be retained for seven years from the service date of this Order or until the Department indicates that the records may be destroyed, whichever comes first. Copies of flight logs for aircraft sold or disposed of must be retained. The carrier may forfeit its compensation for any claim that is not supported under the terms of this Order; 5. The Department finds that Multi-Aero, Inc. d/b/a Air Choice One is fit, willing and able to operate as a commuter air carrier, and capable of providing reliable Essential Air Service at Burlington, Iowa; 6. The Department finds that Hyannis Air Service, Inc. d/b/a Cape Air is fit, willing and able to operate as a commuter air carrier, and capable of providing reliable Essential Air Service at Decatur, Illinois; 7. These dockets will remain open pending further Department action; and

9 The Department will serve a copy of this Order on the civic officials of Burlington, Iowa, and Decatur, Illinois, the Airport Director of Southeast Iowa Regional Airport, the Airport Director of Decatur Airport, Multi-Aero, Inc. d/b/a Air Choice One, Hyannis Air Service, Inc. d/b/a Cape Air, and SkyWest Airlines, Inc. By: SUSAN MCDERMOTT Deputy Assistant Secretary for Aviation and International Affairs (SEAL) An electronic version of this document is available at

10 Appendix A AREA MAP Maps generated by the Great Circle Mapper - copyright Karl L. Swartz.

11 Air Choice One Proposal to Provide EAS at Burlington Appendix B Page 1 of 3

12 Cape Air Proposal at Decatur Appendix B Page 2 of 3

13 Cape Air Proposal at Decatur Appendix B Page 3 of 3

14 Appendix C Page 1 of 4 Multi-Aero, Inc. d/b/a Air Choice One Essential Air Service to be provided at Burlington, Iowa DOT-OST Annual Subsidy: $2,439,963 Contract Term: February 1, 2018, through January 31, 2020 Hubs: Chicago O Hare International Airport (ORD) St. Louis Lambert International Airport Scheduled Service: 12 weekly nonstop round trips to ORD 12 weekly nonstop round trips to STL Aircraft: 9-seat Cessna Grand Caravan Rate per Flight: 1 $998 Weekly Ceiling: 2 $47,904 Note: The carrier understands that it may forfeit its compensation for any flights that it does not operate in conformance with the terms and stipulations of the rate Order, including the service plans outlined in the Order and any other significant elements of the required service, without prior approval. The carrier understands that an aircraft take-off and landing at its scheduled destination constitutes a completed flight; absent an explanation supporting subsidy eligibility for a flight that has not been completed, such as certain weather cancellations, only completed flights are considered eligible for subsidy. In addition, if the carrier does not schedule or operate its flights in full conformance with the Order for a significant period, it may jeopardize its entire subsidy claim for the period in question. If the carrier contemplates any such changes beyond the scope of the Order during the applicable period of this rate, it must first notify the Office of Aviation Analysis in writing and receive written approval from the Department to be ensured of full compensation. Should circumstances warrant, the Department may locate and select a replacement carrier to provide service on these routes. The carrier must complete all flights that can be safely operated; flights that overfly points for lack of traffic will not be compensated. In determining whether subsidy payment for a deviating flight should be adjusted or disallowed, the Department will consider the extent to which the goals of the program are met and the extent of access to the national air transportation system provided to the community. If the Department unilaterally, either partially or completely, terminates or reduces payments for service or changes service requirements at a specific location provided for under this Order, then, at the end of the period for which the Department does make payments in the stipulated service levels, the carrier may cease to provide service to that specific location without regards to any requirement for notice of such cessation. Those adjustments in the levels of subsidy and/or service that are mutually agreed to in writing by the Department and carrier do not constitute a total or partial reduction or cessation of payment. Subsidy contract 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 may not be available for performance under this Order beyond December 22, The Government s obligation for performance under this Order beyond December 22, 2017, is subject to the availability of funds from which payment for services can be made. No legal liability on the part of the Government for any payment may arise for performance under this order beyond December 22, 2017, until funds are made available to the Department for performance. If sufficient funds are not made available for performance beyond December 22, 2017, the Department will provide notice in writing to the carrier. All claims for payment, including any amended claims, must be submitted within 90 days of the last day of the month for which compensation is being claimed. For example, claims for service provided in July must be filed by October 31; August claims must be submitted by November 30, and so on. 1 Annual compensation of $2,439,963 divided by 2,446 annual departures (48 weekly departures x 52 weeks x 98 percent completion) arrivals and departures per week multiplied by $998.

15 Appendix C Page 2 of 4 Multi-Aero, Inc. d/b/a Air Choice One Essential Air Service to be provided at Burlington, Iowa DOT-OST Annual Subsidy: $2,415,564 Contract Term: February 1, 2020, through January 31, 2022 Hubs: Chicago O Hare International Airport (ORD) St. Louis Lambert International Airport Scheduled Service: 12 weekly nonstop round trips to ORD 12 weekly nonstop round trips to STL Aircraft: 9-seat Cessna Grand Caravan Rate per Flight: 1 $988 Weekly Ceiling: 2 $47,424 Note: The carrier understands that it may forfeit its compensation for any flights that it does not operate in conformance with the terms and stipulations of the rate Order, including the service plans outlined in the Order and any other significant elements of the required service, without prior approval. The carrier understands that an aircraft take-off and landing at its scheduled destination constitutes a completed flight; absent an explanation supporting subsidy eligibility for a flight that has not been completed, such as certain weather cancellations, only completed flights are considered eligible for subsidy. In addition, if the carrier does not schedule or operate its flights in full conformance with the Order for a significant period, it may jeopardize its entire subsidy claim for the period in question. If the carrier contemplates any such changes beyond the scope of the Order during the applicable period of this rate, it must first notify the Office of Aviation Analysis in writing and receive written approval from the Department to be ensured of full compensation. Should circumstances warrant, the Department may locate and select a replacement carrier to provide service on these routes. The carrier must complete all flights that can be safely operated; flights that overfly points for lack of traffic will not be compensated. In determining whether subsidy payment for a deviating flight should be adjusted or disallowed, the Department will consider the extent to which the goals of the program are met and the extent of access to the national air transportation system provided to the community. If the Department unilaterally, either partially or completely, terminates or reduces payments for service or changes service requirements at a specific location provided for under this Order, then, at the end of the period for which the Department does make payments in the stipulated service levels, the carrier may cease to provide service to that specific location without regards to any requirement for notice of such cessation. Those adjustments in the levels of subsidy and/or service that are mutually agreed to in writing by the Department and carrier do not constitute a total or partial reduction or cessation of payment. Subsidy contract 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 may not be available for performance under this Order beyond December 22, The Government s obligation for performance under this Order beyond December 22, 2017, is subject to the availability of funds from which payment for services can be made. No legal liability on the part of the Government for any payment may arise for performance under this order beyond December 22, 2017, until funds are made available to the Department for performance. If sufficient funds are not made available for performance beyond December 22, 2017, the Department will provide notice in writing to the carrier. All claims for payment, including any amended claims, must be submitted within 90 days of the last day of the month for which compensation is being claimed. For example, claims for service provided in July must be filed by October 31; August claims must be submitted by November 30, and so on. 1 Annual compensation of $2,415,564 divided by 2,446 annual departures (48 weekly departures x 52 weeks x 98 percent completion) arrivals and departures per week multiplied by $988.

16 Appendix C Page 3 of 4 Hyannis Air Service, Inc. d/b/a Cape Air Essential Air Service to be provided at Decatur, Illinois DOT-OST Annual Subsidy: $2,915,273 Contract Term: February 1, 2018, through January 31, 2019 Hubs: Chicago O Hare International (ORD) St. Louis Lambert International Airport (STL Scheduled Service: 24 weekly round trips to ORD 12 weekly round trips to STL Aircraft: 9-passenger Cessna 402 Rate per Flight: 1 $803 Weekly Ceiling: 2 $57,816 Note: The carrier understands that it may forfeit its compensation for any flights that it does not operate in conformance with the terms and stipulations of the rate Order, including the service plans outlined in the Order and any other significant elements of the required service, without prior approval. The carrier understands that an aircraft take-off and landing at its scheduled destination constitutes a completed flight; absent an explanation supporting subsidy eligibility for a flight that has not been completed, such as certain weather cancellations, only completed flights are considered eligible for subsidy. In addition, if the carrier does not schedule or operate its flights in full conformance with the Order for a significant period, it may jeopardize its entire subsidy claim for the period in question. If the carrier contemplates any such changes beyond the scope of the Order during the applicable period of this rate, it must first notify the Office of Aviation Analysis in writing and receive written approval from the Department to be ensured of full compensation. Should circumstances warrant, the Department may locate and select a replacement carrier to provide service on these routes. The carrier must complete all flights that can be safely operated; flights that overfly points for lack of traffic will not be compensated. In determining whether subsidy payment for a deviating flight should be adjusted or disallowed, the Department will consider the extent to which the goals of the program are met and the extent of access to the national air transportation system provided to the community. If the Department unilaterally, either partially or completely, terminates or reduces payments for service or changes service requirements at a specific location provided for under this Order, then, at the end of the period for which the Department does make payments in the stipulated service levels, the carrier may cease to provide service to that specific location without regards to any requirement for notice of such cessation. Those adjustments in the levels of subsidy and/or service that are mutually agreed to in writing by the Department and carrier do not constitute a total or partial reduction or cessation of payment. Subsidy contract 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 may not be available for performance under this Order beyond December 22, The Government s obligation for performance under this Order beyond December 22, 2017, is subject to the availability of funds from which payment for services can be made. No legal liability on the part of the Government for any payment may arise for performance under this order beyond December 22, 2017, until funds are made available to the Department for performance. If sufficient funds are not made available for performance beyond December 22, 2017, the Department will provide notice in writing to the carrier. All claims for payment, including any amended claims, must be submitted within 90 days of the last day of the month for which compensation is being claimed. For example, claims for service provided in July must be filed by October 31; August claims must be submitted by November 30, and so on. 1 Annual compensation of $2,915,273 divided by 3,632 annual departures (72 weekly departures x 52 weeks x 97 percent completion) arrivals and departures per week multiplied by $803.

17 Appendix C Page 4 of 4 Hyannis Air Service, Inc. d/b/a Cape Air Essential Air Service to be provided at Decatur, Illinois DOT-OST Annual Subsidy: $3,002,731 Contract Term: February 1, 2019, through January 31, 2020 Hubs: Chicago O Hare International (ORD) St. Louis Lambert International Airport (STL Scheduled Service: 24 weekly round trips to ORD 12 weekly round trips to STL Aircraft: 9-passenger Cessna 402 Rate per Flight: 1 $827 Weekly Ceiling: 2 $59,544 Note: The carrier understands that it may forfeit its compensation for any flights that it does not operate in conformance with the terms and stipulations of the rate Order, including the service plans outlined in the Order and any other significant elements of the required service, without prior approval. The carrier understands that an aircraft take-off and landing at its scheduled destination constitutes a completed flight; absent an explanation supporting subsidy eligibility for a flight that has not been completed, such as certain weather cancellations, only completed flights are considered eligible for subsidy. In addition, if the carrier does not schedule or operate its flights in full conformance with the Order for a significant period, it may jeopardize its entire subsidy claim for the period in question. If the carrier contemplates any such changes beyond the scope of the Order during the applicable period of this rate, it must first notify the Office of Aviation Analysis in writing and receive written approval from the Department to be ensured of full compensation. Should circumstances warrant, the Department may locate and select a replacement carrier to provide service on these routes. The carrier must complete all flights that can be safely operated; flights that overfly points for lack of traffic will not be compensated. In determining whether subsidy payment for a deviating flight should be adjusted or disallowed, the Department will consider the extent to which the goals of the program are met and the extent of access to the national air transportation system provided to the community. If the Department unilaterally, either partially or completely, terminates or reduces payments for service or changes service requirements at a specific location provided for under this Order, then, at the end of the period for which the Department does make payments in the stipulated service levels, the carrier may cease to provide service to that specific location without regards to any requirement for notice of such cessation. Those adjustments in the levels of subsidy and/or service that are mutually agreed to in writing by the Department and carrier do not constitute a total or partial reduction or cessation of payment. Subsidy contract 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 may not be available for performance under this Order beyond December 22, The Government s obligation for performance under this Order beyond December 22, 2017, is subject to the availability of funds from which payment for services can be made. No legal liability on the part of the Government for any payment may arise for performance under this order beyond December 22, 2017, until funds are made available to the Department for performance. If sufficient funds are not made available for performance beyond December 22, 2017, the Department will provide notice in writing to the carrier. All claims for payment, including any amended claims, must be submitted within 90 days of the last day of the month for which compensation is being claimed. For example, claims for service provided in July must be filed by October 31; August claims must be submitted by November 30, and so on. 1 Annual compensation of $3,002,731 divided by 3,632 annual departures (72 weekly departures x 52 weeks x 97 percent completion) arrivals and departures per week multiplied by $827.

18 Appendix D Multi-Aero, Inc. d/b/a Air Choice One Essential Air Service to be provided at Decatur, Illinois DOT-OST Annual Subsidy: $2,989,312 Contract Term: February 1, 2018, through March 31, Hub: Chicago O Hare International Airport (ORD) St. Louis International Airport (STL) Scheduled Service: 18 weekly nonstop round trip to ORD 18 weekly nonstop round trips to STL Aircraft: 9-passenger Cessna Caravan Rate per Flight: 2 $795 Weekly Ceiling: 3 $57,240 Note: The carrier understands that it may forfeit its compensation for any flights that it does not operate in conformance with the terms and stipulations of the rate Order, including the service plans outlined in the Order and any other significant elements of the required service, without prior approval. The carrier understands that an aircraft take-off and landing at its scheduled destination constitutes a completed flight; absent an explanation supporting subsidy eligibility for a flight that has not been completed, such as certain weather cancellations, only completed flights are considered eligible for subsidy. In addition, if the carrier does not schedule or operate its flights in full conformance with the Order for a significant period, it may jeopardize its entire subsidy claim for the period in question. If the carrier contemplates any such changes beyond the scope of the Order during the applicable period of this rate, it must first notify the Office of Aviation Analysis in writing and receive written approval from the Department to be ensured of full compensation. Should circumstances warrant, the Department may locate and select a replacement carrier to provide service on these routes. The carrier must complete all flights that can be safely operated; flights that overfly points for lack of traffic will not be compensated. In determining whether subsidy payment for a deviating flight should be adjusted or disallowed, the Department will consider the extent to which the goals of the program are met and the extent of access to the national air transportation system provided to the community. If the Department unilaterally, either partially or completely, terminates or reduces payments for service or changes service requirements at a specific location provided for under this Order, then, at the end of the period for which the Department does make payments in the stipulated service levels, the carrier may cease to provide service to that specific location without regards to any requirement for notice of such cessation. Those adjustments in the levels of subsidy and/or service that are mutually agreed to in writing by the Department and carrier do not constitute a total or partial reduction or cessation of payment. Subsidy contract 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 may not be available for performance under this Order beyond December 22, The Government s obligation for performance under this Order beyond December 22, 2017, is subject to the availability of funds from which payment for services can be made. No legal liability on the part of the Government for any payment may arise for performance under this order beyond December 22, 2017, until funds are made available to the Department for performance. If sufficient funds are not made available for performance beyond December 22, 2017, the Department will provide notice in writing to the carrier. All claims for payment, including any amended claims, must be submitted within 90 days of the last day of the month for which compensation is being claimed. For example, claims for service provided in July must be filed by October 31; August claims must be submitted by November 30, and so on. 1 This is only an interim rate in case Cape Air is unable to start service on February 1, Annual compensation of $2,915,638 divided by 3,669 annual departures (72 weekly departures x 52 weeks x 98 percent completion) arrivals and departures per week multiplied by $795.