Proposal of Hyannis Air Service, Inc. dba Cape Air to provide subsidized Essential Air Service for Massena, Ogdensburg and Watertown, NY To/From Albany and/or Boston Docket DOT-OST-1997-2842 Hyannis Air Service, Inc., dba Cape Air Attn: Andrew Bonney, 660 Barnstable Road, Hyannis, MA 02601 (508) 862-9719 Media inquiries to Charles Ferrara, VP Corporate Affairs: 617-567-3597 July 14, 2010
Cape Air is delighted to have served Massena, Ogdensburg and Watertown for almost two years Overview Cape Air started serving Massena, Ogdensburg and Watertown on September 16, 2008 Since then we have flown thousands of passengers (through May 2010): Massena: 10,572 Ogdensburg: 6,738 Watertown: 7,997 Cape Air s North Country route map Massena Ogdensburg Watertown Cape Air serves each community non-stop to Albany, three times daily As promised, Cape Air has kept fares low: Massena: $58 Ogdensburg: $57 Watertown: $64 Albany 1
Cape Air is carrying more than 6,000 passengers annually at Massena; Watertown and Ogdensburg traffic is growing Passengers served in the year ending Sum of both directions 7,000 6,000 5,000 4,000 3,000 MSS ART OGS 2,000 1,000 0 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 2
Cape Air is a small but robust commuter airline, operating and growing since 1989 Key facts First route was Boston Provincetown, begun in October 1989 with three aircraft Cape Air: Leading the pack nine at a time Presently flying 59 Cessna 402s in five regions, and two ATR-42s in Micronesia Operating up to 570 flights daily In 2009 flew more than 610,000 passengers Stable, mature and growing company Photo courtesy Mark Garfinkel (August 7, 2000, Boston) 3
For smaller communities and niche markets, Cape Air s nine-seat planes have proven to be a good fit Cape Air highlights Key West Express High-frequency, non-stop service Interline eticketing and baggage agreements Complete GDS sales channels Reliability Subsidies used to lower fares MOCHA HAGoTDI culture and community investment Make Our Customers Happy And Have A Good Time Doing It 4
Cape Air has been an interline carrier since 1993 enabling connectivity with most major airlines, now including Interline highlights Twenty-five interline agreements are in place, with almost all legacy airlines Cape Air has completed migration to interline e-ticketing, the updated industry norm Cape Air operates flights in Micronesia as Flights in the Caribbean have a Five Boston routes have a code code, and Cape Air can interline with JetBlue Flights in the Midwest operate with the code of 5
Cape Air is embedded in the global distribution systems (GDS) Cape Air is sold through: 6
Cape Air has had its own reservations center, using the industry-standard, system, for more than 15 years Cape Air s Telephone Reservations Center Toll free reservations: 866-CAPE-AIR Never a booking fee! 7
Cape Air s independence offers numerous benefits Benefits of independence Complete control of: Fares Marketing and advertising Community sponsorships Schedule Direct relationships with the decision makers at Cape Air Financially strong airline Aircraft isolated on routes to provide reliability Good availability of spare aircraft Same connectivity as a network affiliate, since Cape Air has e-ticket and baggage agreements with most major airlines Independent reservations center: 866-Cape-Air Capeair.com No fees to book tickets with a live Cape Air reservations agent or at the counter No first checked bag fee; no change fees 8
To enhance connectivity, Cape Air proposes an option for through service to Boston, via Albany Through service to Boston highlights Each flight would operate non-stop to Albany, then continue on to Boston on a combined funnel flight Retains the intra-state link with Albany Through service to Boston map Ogdensburg Massena In distribution systems the service will show as a one-stop direct flight with a single through flight number As a practical matter, the service is an exquisitely timed Cape Air connection Watertown Albany Provides access to Boston s world-class hub and major metropolitan area Boston The incremental subsidy to add Boston is modest compared with the benefit to the communities, and the per-passenger subsidy markedly decreases 9
Albany has service to 25 non-stop destinations, but Albany destinations served Destination Wkly Dpts 1 Chicago-O'Hare, IL 41 2 Baltimore, MD 40 3 Philadelphia, PA 35 4 Detroit, MI 31 5 Newark, NJ 28 6 Washington-Dulles, VA 27 7 Cleveland, OH 23 8 Watertown, NY 21 9 Charlotte-Douglas, NC 21 10 Massena, NY 21 11 Ogdensburg, NY 21 12 Atlanta, GA 20 13 Washington-National, DC 20 14 New York-La Guardia, NY 18 15 Toronto, ON, CA 18 16 Orlando, FL 14 17 Chicago-Midway, IL 14 18 Boston, MA 12 19 Cincinnati, OH 7 20 Fort Lauderdale, FL 7 21 New York-JFK, NY 7 22 Las Vegas, NV 7 23 Minneapolis/St. Paul, MN 7 24 Tampa, FL 7 25 Buffalo, NY 6 Total 473 Albany route map Source: OAG June 2010 10
Boston has service to 95 non-stop destinations, including 25 international destinations and comprehensive transcon service Boston destinations served Rank Destination Wkly Dpts Rank Destination Wkly Dpts Rank Destination Wkly Dpts Rank Destination Wkly Dpts 1 New York-La Guardia, NY 228 25 Buffalo, NY 42 49 Memphis, TN 20 73 Santo Domingo, DO 8 2 Washington-National, DC 176 26 Miami, FL 42 50 Augusta, ME 19 74 Austin, TX 7 3 Chicago-O'Hare, IL 147 27 Minneapolis/St. Paul, MN 39 51 Paris-De Gaulle, FR 19 75 Dublin, IE 7 4 New York-JFK, NY 142 28 Montrea l -PET, QC, CA 39 52 Presque Isle, ME 19 76 Rome-Da Vinci, IT 7 5 Baltimore, MD 137 29 Lebanon, NH 38 53 Syra cus e, NY 19 77 Jacksonville, FL 7 6 Atlanta, GA 113 30 Houston-Intercontinental, TX 36 54 Columbus, OH 18 78 New Orleans, LA 7 7 Philadelphia, PA 103 31 Fort Lauderdale, FL 34 55 Rochester, NY 17 79 Munich, DE 7 8 Washington-Dulles, VA 96 32 Chicago-Midway, IL 34 56 Ottawa, ON, CA 17 80 Portland, OR 7 9 Nantucket, MA 94 33 Toronto-City, ON, CA 31 57 Bermuda, BM 14 81 Sa n Jos e, CA 7 10 Charlotte-Douglas, NC 83 34 Richmond, VA 29 58 Las Vegas, NV 14 82 Zurich, CH 7 11 Martha's Vineyard, MA 75 35 Rockland, ME 28 59 Newport News, VA 14 83 Kansas City, MO 6 12 San Francisco, CA 73 36 Cleveland, OH 26 60 Fort Myers, FL 14 84 Myrtle Beach, SC 6 13 Raleigh/Durham, NC 72 37 Cincinnati, OH 25 61 St. Louis, MO 14 85 Aruba, AW 4 14 Toronto, ON, CA 71 38 Indianapolis, IN 25 62 Atlantic City, NJ 13 86 Cancun, MX 4 15 Newark, NJ 70 39 West Palm Beach, FL 24 63 Bar Harbor, ME 13 87 Madrid, ES 4 16 Los Angeles, CA 69 40 San Juan, PR 24 64 Akron/Canton, OH 13 88 Shannon, IE 4 17 Provincetown, MA 61 41 Hyannis, MA 21 65 Frankfurt, DE 13 89 Oakland, CA 3 18 Dallas/Fort Worth, TX 58 42 Plattsburgh, NY 21 66 San Diego, CA 13 90 Ponta Delgada, PT 3 19 Denver, CO 56 43 Phoenix, AZ 21 67 Salt Lake City, UT 13 91 Montego Bay, JM 2 20 Orlando, FL 52 44 Rutland, VT 21 68 Albany, NY 12 92 Praia, CV 2 21 London-Heathrow, EN, GB 49 45 Seattle/Tacoma, WA 21 69 Long Beach, CA 12 93 Lisbon, PT 1 22 Detroit, MI 48 46 Saranac Lake, NY 21 70 Harris burg, PA 11 94 Punta Cana, DO 1 23 Milwaukee, WI 45 47 Tampa, FL 21 71 Amsterdam, NL 10 95 Terceira, PT 1 24 Pittsburgh, PA 45 48 Halifax, NS, CA 21 72 Reykjavik, IS 10 Total 3,310 Shading denotes international Source: OAG June 2010 11
Cape Air proposes three service options for two-year selection periods, but also offers DOT savings if the selection is for four years Preferred Option Description 1 Each community served 3x daily to Albany (status quo) 2 MSS and OGS only to Albany only, 3x daily 3 Two or three of the communities served 3x daily to Boston via Albany Cape Air prefers a four-year selection, which provides a slight savings to DOT and a better return on marketing and community investment, making both more attractive 12
Option 1 3x daily each to Albany Expenses Two-year selection Drivers To/From Albany Only ART MSS OGS Daily RTs 3 3 3 Pax/Dpt 2.8 3.0 2.6 LF 31% 33% 29% Fare (net) $59.00 $58.00 $57.00 Rev/Dpt $165 $172 $149 ART MSS OGS Fuel $422,205 $471,993 $485,934 Maintenance $411,583 $459,380 $475,312 Pilots $156,436 $156,436 $156,436 Ownership $87,690 $87,690 $87,690 Stations $460,757 $438,832 $410,243 Operating fees $39,661 $18,309 $18,309 Marketing $32,850 $32,850 $32,850 General & Admin./Other $123,889 $125,891 $121,327 Operating expense $1,735,071 $1,791,381 $1,788,100 Return of 5% $91,320 $94,283 $94,111 Economic Expense $1,826,390 $1,885,664 $1,882,210 Revenue $349,681 $365,932 $316,032 Profit ($1,476,709) ($1,519,732) ($1,566,178) Subsidy Required $1,476,709 $1,519,732 $1,566,178 Per Departure $695 $715 $737 4-year Discount Subsidy Required $1,432,408 $1,474,140 $1,519,193 Per Departure $674 $694 $715 13
Option 2 Massena and Ogdensburg only 3x daily to Albany Expenses Two-year selection Drivers To/From Albany MSS OGS Daily RTs 3 3 Pax/Dpt 3.0 2.6 LF 33% 29% Fare (net) $58.00 $57.00 Rev/Dpt $172 $149 MSS OGS Fuel $471,993 $485,934 Maintenance $482,257 $498,983 Pilots $156,436 $156,436 Ownership $87,690 $87,690 Stations $438,832 $410,243 Operating fees $18,309 $18,309 Marketing $32,850 $32,850 General & Admin./Other $125,891 $121,327 Operating expense $1,814,258 $1,811,770 Return of 5% $95,487 $95,356 Economic Expense $1,909,745 $1,907,127 Revenue $365,932 $316,032 Profit ($1,543,813) ($1,591,094) Subsidy Required $1,543,813 $1,591,094 Per Departure $727 $749 4-year Discount Subsidy Required $1,497,499 $1,543,362 Per Departure $705 $727 14
Option 3 Two or three of the communities served 3x daily to Boston via Albany Note: Cape Air requires at least two communities for Option 3 to be viable Expenses Two-year selection Drivers To/From Boston ART MSS OGS Daily RTs 3 3 3 Pax/Dpt 4.5 4.7 4.3 LF 50% 52% 48% Fare (net) $71.12 $70.01 $70.41 Rev/Dpt $319 $327 $303 Local ALB-BOS rev $120 $120 $120 ART MSS OGS Fuel $673,747 $723,535 $737,476 Maintenance $656,253 $704,049 $719,982 Pilots $230,052 $230,052 $230,052 Ownership $128,956 $128,956 $128,956 Stations $460,757 $438,832 $410,243 Operating fees $73,269 $51,916 $51,916 Marketing $32,850 $32,850 $32,850 General & Admin./Other $134,072 $136,074 $131,510 Operating expense $2,389,955 $2,446,265 $2,442,984 Return of 5% $125,787 $128,751 $128,578 Economic Expense $2,515,742 $2,575,016 $2,571,562 Revenue $933,226 $949,477 $899,577 Profit ($1,582,516) ($1,625,539) ($1,671,985) Subsidy Required $1,582,516 $1,625,539 $1,671,985 Per Departure $745 $765 $787 4-year Discount Subsidy Required $1,535,041 $1,576,773 $1,621,825 Per Departure $723 $742 $763 15
Cape Air is proud to be a partner in air service for Massena, Ogdensburg and Watertown Summary Three daily flights to Albany and/or Boston Subsidy used to lower fares Interline connections, ticketing and bag transfer with most major airlines; global distribution A healthy, strong, independent airline that cares passionately about serving communities Cape Air is a great choice for Massena, Ogdensburg and Watertown Hyannis Air Service, Inc., dba Cape Air Attn: Andrew Bonney, 660 Barnstable Road, Hyannis, MA 02601 (508) 862-9719 Media inquiries to Charles Ferrara, VP Corporate Affairs: 617-567-3597 16