DOT to Impose Minimum Air Service Obligations For U.S. Carriers Receiving CARES Act Financial Assistance 

March 31, 2020

The U.S. Department of Transportation (DOT) has issued an order proposing parameters for implementing authority granted to the Secretary of Transportation under the Coronavirus Aid, Recovery, and Economic Security Act (the CARES Act). Under the CARES Act, DOT may require that, “to the extent reasonable and practicable,” an air carrier receiving financial assistance under the CARES Act maintain scheduled air transportation that DOT deems necessary to ensure services to any U.S. point served by that carrier before March 1, 2020 (Service Obligation). The order sets forth DOT’s expectations regarding these required service levels. A summary of the key provisions follows.

Covered Carriers

While passenger air carriers and all-cargo carriers are eligible for financial assistance under the CARES Act, DOT is proposing that the Service Obligation apply to passenger and cargo air carriers, including large aircraft operators and commuter air carriers. The order does not apply to charter operators and air taxis.

Covered Points

DOT proposes to require that the Service Obligation cover only U.S. points. Covered carriers would not be required to serve international points. In cases where carriers serve multiple airports in a given city, carriers would not need to maintain service to all such airports, but would be able to consolidate operations at a single airport serving the point.

The Service Obligation pertains to any point served by covered carriers before March 1, 2020. To determine which points are covered, DOT proposes to use OAG schedule data combined with T100 traffic data as reported to DOT for determining the points that covered carriers served prior to March 1, 2020. DOT also proposes to use week-ended February 29, 2020, OAG schedule data as the primary source and year-ended December 31, 2019, T100 data combined with year-ended December 31, 2019, OAG data as a supplementary source to determine the list of points served by covered carriers.

DOT’s order includes an appendix outlining a tentative list of points served by each potentially covered carrier.

Service Levels

Generally

For points that a covered carrier served with at least one flight at least five days per week, the covered carrier would need to provide at least one flight per day, five days per week, for that point. For a point that received service from a covered carrier fewer than five days per week, the covered carrier would only need to serve that point with at least one flight on one day per week. If a covered carrier served a point with any degree of scheduled service from more than one other point, it would only need to provide service from that point to one of the previously served points as long as it meets the above frequency requirements. A covered carrier can meet its minimum Service Obligation for a given point by dividing its flights across multiple cities, if it so chooses.

If multiple covered carriers served a point, each covered carrier would be required to serve the point in accordance with the above minimum service levels, regardless of the service decisions made by the other covered carriers serving that point. These provisions do not authorize any coordination among air carriers that would violate the antitrust laws.

While DOT recognizes that even with reduced service levels it may not be practicable for covered carriers to serve all points previously served, DOT tentatively proposes to allow covered carriers, at any time for the duration of their Service Obligation, to request that points be exempted from their Service Obligation. Interested carriers should submit a list of points that they believe are not “reasonable or practicable” to serve and explain why service is not reasonable or practicable. DOT will inform covered carriers of its decision “in a timely manner.”

Regional Carriers

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. 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.

All-Cargo Carriers

DOT has tentatively determined that it will not impose any immediate Service Obligations on all-cargo carriers because all-cargo service is currently in greater demand; all-cargo operators need maximum operational flexibility to respond to changes in cargo flow; most all-cargo carriers do not publish schedules; and many operations occur on an ad-hoc basis. DOT may impose a Service Obligation on all-cargo carriers if it determines doing so is appropriate, including if it is necessary to maintain well-functioning health care and pharmaceutical supply chains, including for medical devices and supplies, as directed by the CARES Act.

Essential Air Service

Nothing in this order affects the obligations of carriers operating under an Essential Air Service contract or the rights of communities eligible for Essential Air Service.

Reporting

Carriers accepting financial assistance under the CARES Act must certify to DOT monthly that they operated in accordance with their Service Obligations.

Duration

Service Obligations will extend until September 3, 2020, because carriers accepting financial assistance under the CARES Act must maintain employment levels until that date. DOT will notify carriers no later than August 1, 2020, if it intends to extend the Service Obligation date. DOT will inform carriers with as much advance notice as possible if it intends to impose a new Service Obligation.

DOT invites comments on the proposal no later than April 2, 2020.

 


Authors

David Heffernan

Vice Chair, Transportation & Trade

dheffernan@cozen.com

(202) 463-2537

Rachel Welford

Associate

rwelford@cozen.com

(202) 912-4825

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