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13 May 2020
The US Department of Transportation (DOT) issued an order finalising parameters for implementing authority granted to the secretary of transportation under the Coronavirus Aid, Recovery, and Economic Security Act (CARES Act). Under the CARES Act, the DOT may require that, "to the extent reasonable and practicable", an air carrier receiving financial assistance under the CARES Act maintains scheduled air transportation that the DOT deems necessary to ensure services to any US point served by that carrier before 1 March 2020 (service obligation). The order sets out the DOT's expectations regarding these required service levels. A summary of the key provisions is provided below.
While passenger air carriers and all-cargo carriers are eligible for financial assistance under the CARES Act, the DOT's service obligation applies to passenger and cargo air carriers, including large aircraft operators and commuter air carriers. However, the order does not apply to charter operators and air taxis.
The DOT's service obligation covers only US points. Covered carriers are not required to serve international points. In cases where carriers serve multiple airports in a given city, carriers do not need to maintain service to all such airports, but are permitted to consolidate operations at a single airport serving that point.
The service obligation pertains to any point served by covered carriers before 1 March 2020. To determine which points are covered, the DOT uses Official Airline Guide (OAG) schedule data combined with T100 traffic data as reported to the DOT for determining the points that covered carriers served prior to 1 March 2020. The DOT also uses OAG schedule data for the week ending 29 February 2020 as the primary source and T100 data for the year ending 31 December 2019 combined with OAG data from the same period as a supplementary source to determine the list of points served by covered carriers.
The DOT's order also accounts for seasonal service and allows covered carriers to choose whether to continue to provide seasonal services to the points it served in the winter schedule 2020 or the summer schedule 2019. To determine covered seasonal points, the DOT used OAG schedules for the week ending 29 February 2020 for winter seasonal services and the week ending 4 August 2019 for the summer season.
The DOT's order includes appendices outlining a list of points served by each covered carrier.
Covered carriers with a greater than 10% share of total industry domestic capacity in the calendar year 2019 that served a point more than 25 times per week will need to continue serving that point at least five times per week; for points served between five and 25 times per week, the carrier would need to provide at least three weekly flights; and for points served less than five times per week, it would need to provide only one weekly flight. Covered carriers with less than a 10% share of total industry domestic capacity in the calendar year 2019 that served a point five or more times per week would need to provide only three weekly flights and for points served less than five times per week, it would need to provide only one weekly flight.
The DOT recognised that even with reduced service levels it may not be practicable for covered carriers to serve all points previously served. As a result, covered carriers may request that points be exempted from their service obligation under an expedient process that includes filing with the department in advance, serving interested parties and providing them with a brief period of time to submit comments.
In the order, the DOT also provides for an industry-wide exemption for circumstances in which direct financial support arrangements between communities and airlines have ceased following the declaration of a public health emergency under Section 319 of the Public Health Services Act (Section 247d of Title 42 of the US Code) in response to COVID-19. The DOT defines such financial arrangements as "revenue guarantees or direct payments for flights that are funded, in part, by State, local, Tribal, Territorial, or private entities whether or not the Federal government is providing funding to the community with a grant", but notes that "direct support arrangements do not include agreements to provide marketing assistance, landing fee abatements, incentives offered by airports, or in-kind support". Covered carriers wishing to avail themselves of this exemption must secure a letter or agreement from the funding parties indicating that the direct financial support has ceased. The covered carrier should submit the letter and its revised service pattern as part of the monthly reporting obligation (as described below).
Regional operations operating as a franchise of a mainline carrier will be the responsibility of the mainline carrier, as the flights of regional carriers operating for mainline carriers are under the commercial control of the mainline affiliate that schedules, prices, sells and revenue manages the flight. The DOT will apply any service obligation to the marketing carrier. If a regional covered carrier holds out services under its own airline designator code, it will be the marketing carrier and be responsible for maintaining service at the above service levels. If a regional covered carrier receives assistance under the CARES Act, its service obligation will be considered met if it is operating all flights designated by its mainline affiliate, consistent with the mainline carrier's service obligation.
The DOT is not imposing service obligations on all-cargo carriers because:
The DOT may impose a service obligation on all-cargo carriers in the future if it determines that doing so is appropriate, including if it is necessary to maintain well-functioning healthcare and pharmaceutical supply chains, including for medical devices and supplies, as directed by the CARES Act.
Essential air service
Nothing in the DOT's order affects the obligations of carriers operating under an essential air service contract or the rights of communities eligible for essential air service.
Carriers which accept financial assistance under the CARES Act must certify to the DOT on a monthly basis that they operated in accordance with their service obligations. The DOT will not consider cancellations that cause a covered carrier to fall below its minimum service obligation resulting from operational issues (eg, weather, mechanical or lack of crew due to mandatory quarantine by state action), airport closures or lack of federal personnel as non-compliance.
Service obligations will extend until 30 September 2020 because carriers accepting financial assistance under the CARES Act must maintain employment levels until that date. The DOT will provide notice and an opportunity to comment should it decide to extend the initial term of the service obligation for all or portions of covered carriers and covered points.
For further information on this topic please contact David Heffernan or Rachel Welford at Cozen O'Connor by telephone (+1 202 912 4800) or email (email@example.com or firstname.lastname@example.org). The Cozen O'Connor website can be accessed at www.cozen.com.
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