November 29, 2012

Proposal of Hyannis Air Service, Inc. dba Cape Air to provide subsidized Essential Air Service for:

Massena, NYTo/From

Boston via AlbanyDocket DOT-OST-2012-0163

Hyannis Air Service, Inc., dba Cape AirAttn: Andrew Bonney, 660 Barnstable Road, Hyannis, MA 02601

(508) 862-9719

Cape Air is delighted to have served Massena for more than four years

• Cape Air started serving Massena on September 16, 2008

• Since then we have flown more than 32,000 passengers to or from Massena

– The Massena enplanement pace for 2012 is approaching 5,000

• Cape Air serves Massena three times daily to/from Boston, via Albany

• Fares are low, in 2012 averaging just $58

• Serving both Massena and Ogdensburg provides critical mass to recover from irregular operations

1

Overview

Massena ribbon cutting

Massena enplanements in 2012 will be the highestin the last decade

2

Source: US DOT T100 and Cape Air FLIFO Estimated

Massena enplanements

723

2,3272,056

3,2012,925

2,085

950

3,252 3,350

4,396

5,063

0

1,000

2,000

3,000

4,000

5,000

6,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Massena ridership swelled with the addition of Boston service

3

Massena passengersSum of both ways; year ending

5,84

9

6,14

6

6,14

7

6,22

1

6,22

3

6,21

3

6,14

5

6,13

6

6,17

8

6,22

5

6,28

6

6,33

0

6,39

4

6,41

1

6,46

8

6,43

4

6,48

0

6,50

0

6,46

8

6,53

9

6,67

7

6,84

2

7,04

8

7,29

8

7,53

8

7,82

7

8,01

0

8,31

5

8,59

6

8,75

8

9,03

5

9,27

0

9,35

4

9,48

4

9,56

2

9,61

4

9,62

0

9,65

7

9,62

5

0

2,000

4,000

6,000

8,000

10,000

12,000

Aug-09

Oct-09

Dec-09

Feb-10

Apr-10

Jun-10

Aug-10

Oct-10

Dec-10

Feb-11

Apr-11

Jun-11

Aug-11

Oct-11

Dec-11

Feb-12

Apr-12

Jun-12

Aug-12

Oct-12

Source: Cape Air FLIFO

Albany features flights to 20 non-stop destinations…

4

Albany route mapDecember 2012

Source: OAG

Albany destinations servedDecember 2012

Rank Destination Weekly Departures1 Philadelphia, PA 432 Newark, NJ 323 Baltimore, MD 324 Detroit, MI 305 Chicago-O'Hare, IL 276 Washington-Dulles, VA 237 Cleveland, OH 218 Boston, MA 219 Massena, NY 21

10 Ogdensburg, NY 2111 Charlotte-Douglas, NC 2012 Atlanta, GA 1913 Washington-National, DC 1914 Orlando, FL 1615 Chicago-Midway, IL 1416 Toronto, ON, CA 917 Fort Lauderdale, FL 718 Las Vegas, NV 719 Tampa, FL 720 Minneapolis/St. Paul, MN 7

Total 396

…And Boston has service to 100 non-stop destinations, including 30 international destinations and

comprehensive transcontinental service

Rank Destination Dpt/Wk Rank Destination Dpt/Wk Rank Destination Dpt/Wk Rank Destination Dpt/Wk1 Washington-National, DC 133 26 Presque Isle, ME 37 51 Hyannis, MA 13 76 Dublin, IE 72 New York-La Guardia, NY 127 27 Montreal-PET, QC, CA 33 52 Seattle/Tacoma, WA 13 77 Reykjavik, IS 63 Chicago-O'Hare, IL 107 28 Martha's Vineyard, MA 33 53 Halifax, NS, CA 12 78 Munich, DE 64 Philadelphia, PA 104 29 West Palm Beach, FL 33 54 Rochester, NY 12 79 Santo Domingo, DO 65 Baltimore, MD 100 30 Houston-Intercontinental, TX 31 55 Las Vegas, NV 11 80 Zurich, CH 66 New York-JFK, NY 100 31 Buffalo, NY 29 56 Ottawa, ON, CA 11 81 Harrisburg, PA 67 Atlanta, GA 95 32 Phoenix, AZ 29 57 Salt Lake City, UT 11 82 Sarasota/Bradenton, FL 68 Newark, NJ 91 33 Toronto-City, ON, CA 28 58 San Diego, CA 10 83 Santiago, DO 59 Charlotte-Douglas, NC 73 34 Lebanon, NH 28 59 Indianapolis, IN 9 84 St. Thomas, VI 5

10 Dallas/Fort Worth, TX 71 35 Cleveland, OH 27 60 Columbus, OH 9 85 Frankfurt, DE 511 San Francisco, CA 70 36 Chicago-Midway, IL 27 61 Norfolk, VA 9 86 New Orleans, LA 512 Orlando, FL 67 37 Tampa, FL 26 62 Syracuse, NY 9 87 Rome-Da Vinci, IT 513 Los Angeles, CA 63 38 San Juan, PR 25 63 Aruba, AW 8 88 Long Beach, CA 514 Toronto, ON, CA 61 39 Plattsburgh, NY 23 64 Akron/Canton, OH 8 89 San Jose, CA 415 Raleigh/Durham, NC 51 40 Provincetown, MA 22 65 Memphis, TN 7 90 Nassau, BS 416 Fort Lauderdale, FL 49 41 Bar Harbor, ME 22 66 Amsterdam, NL 7 91 Punta Cana, DO 317 Miami, FL 49 42 Albany, NY 21 67 Austin, TX 7 92 Madrid, ES 318 Fort Myers, FL 49 43 Augusta, ME 21 68 Nashville, TN 7 93 Kansas City, MO 319 Washington-Dulles, VA 48 44 Richmond, VA 21 69 Cancun, MX 7 94 Shannon, IE 320 Nantucket, MA 46 45 Rockland, ME 21 70 Jacksonville, FL 7 95 Praia, CV 221 Denver, CO 43 46 Rutland, VT 21 71 Myrtle Beach, SC 7 96 Montego Bay, JM 222 Pittsburgh, PA 43 47 Saranac Lake, NY 21 72 Tokyo-Narita, JP 7 97 Ponta Delgada, PT 223 Detroit, MI 39 48 Cincinnati, OH/Covington, KY 21 73 Portland, OR 7 98 Providenciales, TC 224 London-Heathrow, EN, GB 39 49 St. Louis, MO 16 74 Bermuda, BM 7 99 St. Maarten, SX 225 Minneapolis/St. Paul, MN 37 50 Milwaukee, WI 14 75 Paris-De Gaulle, FR 7 100 Grand Cayman Island, KY 1

Total 2,716

5

Boston destinations servedDecember 2012

Source: OAGNote: Shading denotes international service

The empirical success in ridership growth at Massena is due to a service solution that fits

Low fares

Service to Albany and

Boston

Convenient schedule at

3x daily

Interlines with all legacy airlines

Connection to

Fully-functioning global distribution

plus local outreach

Safe and conservative

operating philosophy

6

Popular service

Constellation of success

7

A great fit for Massena:Cape Air is a small but robust commuter airline,

operating and growing since 1989

First route was Boston –Provincetown, begun in October 1989 with one aircraft

67 Cessna 402s in four regions, and two ATR-42s in Micronesia

Operating up to 600 flights daily

In 2011 flew almost 700,000 passengers

Stable, mature and growing company

Key facts Cape Air: Leading the pack nine at a time

Photo courtesy Mark Garfinkel (August 7, 2000, Boston)

Cape Air 2012

• Annual revenue over $100M

• Financially stable

• Cape Air has purchased three more Cessnas, which will bring the fleet total to 70

• 37 airports served, 15 in EAS

8Captain Krista Poppe

Boston based

9

For smaller communities and niche markets, Cape Air’s nine-seat planes have proven to be a good fit

High-frequency, non-stop service

Interline e-ticketing and baggage agreements

Complete GDS sales channels: 800-Cape-Air In-house reservations call center

Reliability thanks to spare aircraft availability

MOCHA HAGoTDI† culture and community investment

Cape Air highlights “Key West Express”

† Make Our Customers Happy And Have A Good Time Doing It

10

Cape Air began service in 1989 with a few aircraft…

11

…And one route: Boston – Provincetown

Provincetown

Boston

Original Cape Air route map

November 1989 schedule

12

Today, Cape Air serves 17 communities in the Northeast…Northeast route map

NantucketMartha’s Vineyard

Provincetown

Boston

HyannisNew Bedford

Rockland

Lebanon

Saranac Lake

Rutland

Albany

OgdensburgMassena

December 2012 route map (including summer-seasonal service)

White Plains

Providence

AugustaBar Harbor

13

…And has developed niches in Florida, the Caribbean, Midwest and Micronesia

Florida KeysFt. Myers

Key West

Florida

Kirksville

Micronesia

Guam

Rota

Saipan

Anguilla

Nevis

St. Croix

Vieques

Mayaguez

Tortola

St. Thomas

San Juan

Caribbean

Quincy

Ft. Leonard Wood

Cape Girardeau

Marion Owensboro

Kentucky

Missouri

Illinois

St. Louis

Midwest

December 2012 route maps; not to scale

San Juan

Map inset not to scale

Guam

Rota

Saipan

Micronesia

Caribbean

Florida

Midwest

NortheastProvincetownHyannisNantucket

Providence

New Bedford

Martha’s Vineyard

Boston

Augusta

LebanonRutland

Saranac LakeOgdensburgMassena

White Plains

Albany

Ft. Leonard Wood

Cape GirardeauMarion

QuincyKirksville

St. Louis

Key West

Ft. Myers

Mayaguez

St. CroixVieques

Tortola

St. Thomas

Anguilla

Nevis

Cape Air RoutesDecember 2012

Including seasonal service

Owensboro

Manhattan

Rockland

Bar Harbor

15

Over more than 20 years in business Cape Air has invested in the airline features smaller communities need

Feature Established

Reliability

Tickets sold through Expedia, Orbitz, Travelocity

Interline e-ticketing with all legacy airlines

Checked luggage transferwith all legacy airlines

TSA security program

Cape Air is delighted to operate a full-time city ticket office in Massena

16

Cape Air aggressively markets Massena’s air service, and actively participates in community life

17

18

Cape Air codeshares with American and United…

• Cape Air operates flights in Micronesia as

• Flights in the Caribbean have code

• Flights in the Midwest operate with the code of

Codeshare highlights

…And interlines with all of the legacy airlines plus JetBlue and Frontier

19

20

Participation in the global distribution system gives Massena access to the world and the world access to Massena

Cape Air is sold through:

Cape Air puts Massena on jetblue.com…

21

…And United.com

22

23

Cape Air’s Reservations Call Center

Cape Air has its own reservations call center: 800-CAPE-AIR

CORPORATE UPDATE

24

Cape Air continues to work on development of the next generation twin-engine nine-seat airliner

25

Tecnam’s P2012 Traveler

On February 25, 2012 Cape Air became the launch customer for ’s new passenger service system

26

Cape Air takes environmental sustainability seriously by investing in fuel-saving aircraft technologies and

powering its offices with solar panels

27

MASSENA PROPOSALCape Air’s November 2012 Essential Air Service

28

Cape Air proposes a continuation of Massena’s 3x daily “through” service to Boston via Albany

• Each flight operates non-stop to Albany, then continues on to Boston

• In distribution systems the service is displayed as an exquisitely timed Cape Air connection

• Dual hub service retains the intra-state link with Albany while providing access to Boston’s world-class hub and major metropolitan area

29

Highlights

Massena

Ogdensburg

Albany

Boston

Through service to Boston map

Massena Proposal Economics

30

Drivers

ExpensesTwo-year selection, with discounted four-year option

4-Year Discount

Daily RTs 3Pax/Dpt 4.95Load Factor 55%Fare (net) $57.75 Pax Rev/Dpt $285.87

Fuel $849,145 Maintenance $912,148 Pilots $249,971 Ownership $263,909 Stations $452,773 Operating Fees $118,605 Marketing $56,154 General & Admin./Other $249,128 Operating Expense $3,151,832

Return of 5% $165,886 Economic Expense $3,317,718 Passenger Revenue $1,226,769 Profit ($2,090,949)

Subsidy Required $2,090,949 Per Departure $984 Per Passenger $195

4-Year Contract Discount $2,039,094 Per Departure $960

Cape Air offers (and prefers) a four-year discounted contract to improve stability and planning

31

Cape Air is proud to be Massena’s airline!

3x daily non-stop service to Boston via Albany

Ample fleet of back-up aircraft, and Ogdensburg service for operational flexibility

Full interline connectivity with all the major airlines, including JetBlue, allowing same-ticket connections with the world

Global distribution

Cape Air offers the airline amenities Massena needs:

Cape Air would be honored to be reselected to serve Massena

32

Thank you!