[Federal Register Volume 66, Number 209 (Monday, October 29, 2001)]
[Rules and Regulations]
[Pages 54616-54640]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-27177]



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Part IV





Department of Transportation





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Office of the Secretary



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14 CFR Part 330



Procedures for Compensation of Air Carriers; Final Rule

  Federal Register / Vol. 66 , No. 209 / Monday, October 29, 2001 / 
Rules and Regulations  

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DEPARTMENT OF TRANSPORTATION

Office of the Secretary

14 CFR Part 330

[Docket OST-2001-10885]
RIN 2105-AD06


Procedures for Compensation of Air Carriers

AGENCY: Office of the Secretary, DOT.

ACTION: Final rule; request for comments.

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SUMMARY: On September 22, 2001, President Bush signed into law the Air 
Transportation Safety and System Stabilization Act (``the Act''). The 
Act makes available to the President funds to compensate air carriers, 
as defined in the Act, for direct losses suffered as a result of any 
Federal ground stop order and incremental losses beginning September 
11, 2001, and ending December 31, 2001, resulting from the September 11 
terrorist attacks on the United States. In order to fulfill Congress' 
intent to expeditiously provide compensation to eligible air carriers, 
the Department used procedures set out in Program Guidance Letters to 
make initial payments amounting to about 50 percent of the authorized 
funds. This rule establishes application procedures for air carriers 
interested in requesting compensation under this statute.

DATES: This rule is effective October 29, 2001. Comments should be 
received by November 13, 2001.

ADDRESSES: Interested persons should send comments to Docket Clerk, 
Docket OST-2001-10885, Department of Transportation, 400 7th Street, 
SW, Room PL-401, Washington, DC 20590. Applicants for compensation 
should NOT send their applications to the docket; the Department will 
accept only those complete applications sent to the address listed in 
the text of this rule. We request that, in order to minimize burdens on 
the dockets staff, commenters send three copies of their comments to 
the docket. Commenters wishing to have their submissions acknowledged 
should include a stamped, self-addressed postcard with their comments. 
The Docket Clerk will date stamp the postcard and return it to the 
commenter. Comments will be available for inspection at the above 
address from 10 a.m. to 5 p.m., Monday through Friday. Comments also 
may be sent electronically to the Dockets Management System (DMS) at 
the following Internet address: http://dms.dot.gov/. Commenters who 
wish to file comments electronically should follow the instructions on 
the DMS web site. Interested persons can also review comments through 
this same web site.

FOR FURTHER INFORMATION CONTACT: Steven Hatley, U.S. Department of 
Transportation, Office of International Aviation, 400 7th Street, SW., 
Room 6402, Washington DC, 20590. Telephone 202-366-1213.

SUPPLEMENTARY INFORMATION: As a consequence of the terrorist attacks on 
the United States on September 11, 2001, the U.S. commercial aviation 
industry suffered severe financial losses. These losses placed the 
financial survival of many air carriers at risk. Acting rapidly to 
preserve the continued viability of the U.S. air transportation system, 
President Bush and Congress enacted the Air Transportation Safety and 
System Stabilization Act (``the Act''), Public Law 107-42.
    The Act provided financial assistance to air carriers to address a 
short-term liquidity crisis in the wake of the September 11 attacks. 
This primary objective of the Act was clearly recognized by members of 
both the House and Senate. See, for example, statements of 
Representatives Frost, Lampson, Buyer, Green and Dicks (Daily 
Congressional Record, September 21, 2001, at H5884-5891) and Senators 
Bond, Hutchinson, Rockefeller, Boxer, McCain, Feingold, and Domenici 
(Daily Congressional Record, September 21, 2001, at S9589--9597). The 
Act provided financial assistance in two main ways. First, the Act 
authorized $5 billion in compensation to air carriers for direct and 
incremental losses incurred as a result of the September 11 attacks. 
Second, the Act authorized the issuance of up to $10 billion in loan 
guarantees to air carriers. This regulation concerns only the first 
type of financial assistance. The latter is covered by regulations 
issued on October 5, 2001 (66 FR 52270, October 12, 2001), by the 
Office of Management and Budget (14 CFR part 1300).
    Under section 101(a)(2)(A-B) of the Act, a total of $5 billion in 
compensation is provided for ``direct losses incurred beginning on 
September 11, 2001, by air carriers as a result of any Federal ground 
stop order issued by the Secretary of Transportation or any subsequent 
order which continues or renews such stoppage; and the incremental 
losses incurred beginning September 11, 2001 and ending December 31, 
2001, by air carriers as a direct result of such attacks.'' The 
Department of Transportation has already disbursed initial estimated 
payments of nearly $2.5 billion of the $5 billion amount that Congress 
authorized, using procedures set forth in the Department's Program 
Guidance Letters that were widely distributed and posted on the 
Department's web site. These payments represent about one-half of the 
sums estimated to be due to air carriers, and they are subject to 
adjustment and audit. Applicants can still receive the full amounts for 
which they are eligible, even if they did not apply previously. 
However, all applicants should note the strict 14-day (general) or 28-
day (air taxi) application deadlines, as explained below.

Section-by-Section Analysis

Section 330.1  What Is the Purpose of This Part?

    This section states the purpose of part 330, which is to carry out 
the statutory provisions of the Act with respect to compensating air 
carriers.

Section 330.3  What Do the Terms Used in This Part Mean?

    This definitions section incorporates terms from the Act or other 
existing sources. The definition of ``air carrier'' in the Act refers 
to any U.S. air carrier, as defined in 49 U.S.C. 40102. This statutory 
definition is ``a citizen of the United States undertaking, by any 
means, directly or indirectly, to provide air transportation.'' This 
definition includes not only entities that operate aircraft (``direct'' 
air carriers) but also other entities that are involved in air 
transportation but do not operate aircraft (``indirect'' air carriers, 
such as freight forwarders and some public charter operators). As noted 
in section 330.11, not all ``air carriers'' are eligible for 
compensation, however.
    The definitions of available seat-miles (ASMs) and revenue ton-
miles (RTMs) are derived from the air carrier reporting requirements of 
14 CFR part 241. We note that, under the statutory formula of section 
103(b)(2) of the Act, combined cargo/passenger flights are eligible for 
compensation only on the basis of ASMs. Only RTMs flown on all-cargo 
freighter aircraft are eligible for compensation on the basis of RTMs.
    The definition of ``air taxi operator'' is an air carrier, other 
than a commuter air carrier, that holds authority under 14 CFR part 298 
and 14 CFR part 121 or 135. We believe that the Congress intended that 
air taxis be eligible for compensation, as long as they are able to 
accurately report the ASMs they have flown or the RTMs they have 
transported, as well as clearly document direct and incremental losses 
resulting from the attacks, to the Department. We are including 
provisions in the

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regulation to facilitate their participation in the program. At the 
same time, we understand that many air taxi companies are likely to 
have flown relatively few ASMs or RTMs, compared to the universe of 
ASMs or RTMs flown by the entire industry. For example, in CY 2000, the 
industry flew over 973 billion ASMs. Consequently, the statutory 
formula may result in very small amounts of compensation being payable 
to companies that fly relatively few ASMs.

Section 330.5  What Funds Will the Department Distribute Under This 
Part?

    The Department plans to disburse the remaining funds available 
under the Act in two additional installments. In the second 
installment, covered by the procedures of Part 330, we plan to disburse 
an amount that, cumulatively with the funds we have already disbursed, 
will not exceed 85 percent of the amount authorized for carriers. The 
Department is not establishing, in this regulation, a specific 
percentage of authorized funds that will be disbursed as part of this 
second installment. The Department anticipates having a clearer picture 
of the collective losses of air carriers after we review the 
submissions from carriers under this rule.
    We will subsequently establish a uniform across-the-board 
percentage figure that will determine the percentage of authorized 
funds that all eligible carriers will receive in this second 
installment. The Department wishes to avoid any situation in which a 
carrier is ``overpaid,'' resulting in our having to recoup payments 
from a carrier.
    The timing of the third installment must comport with the statutory 
directive that compensation relate to actual losses ``incurred'' 
through the end of December 2001. The Department will announce at a 
later date the procedures applicable to the third installment.

Section 330.7  How Much of An Eligible Air Carrier's Estimated 
Compensation Will Be Distributed Under This Part?

    Consistent with section 330.5, individual carriers will receive 
compensation not to exceed 85 percent of the estimated compensation for 
which they demonstrate that they are eligible, cumulatively with 
payments they have previously received. The amount will depend on the 
percentage amount of total available compensation the Department 
determines to make available through this second installment. As the 
example in the rule text points out, a carrier that had already 
received 50 percent of the estimated compensation for which it is 
eligible would receive an additional 35 percent as part of the second 
installment, if the Department had determined that all carriers would 
receive 85 percent of their estimated compensation through the second 
installment.
    We emphasize that carriers will only receive compensation for which 
they demonstrate they are eligible. To be eligible to receive any 
compensation at all, an air carrier must demonstrate to the 
satisfaction of the Department that it has actually incurred direct or 
incremental losses as defined in the Act. The burden of proof with 
respect to eligibility rests with carriers applying for compensation.
    The Department is retaining discretion to make a disbursement of 
funds before December 31, 2001, to individual carriers of the full 
amount of compensation for which they are eligible under the Act. If a 
carrier is able to demonstrate to the satisfaction of the Department, 
before December 31, 2001, that it has already suffered actual losses 
that exceed the formula amount of compensation for which it 
demonstrates and documents it is eligible in accordance with the 
requirements set forth in this rule, the Department could disburse the 
complete amount of compensation for which the carrier is eligible under 
the statutory formula without waiting for December 31.
    A carrier which requests disbursement of a final installment before 
December 31, 2001 must submit an independent auditor's review of the 
reasonableness and accuracy of its claim of actual losses for the 
period of the claim, a forecast for the same period which was prepared 
before September 11, 2001, and an independent auditor's review of the 
reasonableness and accuracy of its forecasts and data. The 
consideration of requests for final payment before December 31, 2001 is 
contingent upon the Department's ability to establish a fixed, 
comprehensive total of the ASMs and RTMs flown by all eligible air 
carriers during the relevant period to be used as the final basis for 
the total compensation formula for all eligible air carriers as 
established in the Act.

Section 330.9  What Are the Limits on Compensation to Air Carriers?

    This section restates the Act's provision that a carrier is 
eligible for the lesser of its direct and incremental losses, as 
defined in the Act, or the amount calculated through the following 
formula, set forth in section 103(b)(2) of the Act:

    (2) in the case of--
    (A) flights involving passenger-only or combined passenger and 
cargo transportation, the product of--
    (i) $4,500,000,000; and
    (ii) the ratio of--
    (I) the available seat miles of the carrier for the month of 
August 2001 as reported to the Secretary; to
    (II) the total available seat miles of all such carriers for 
such month as reported to the Secretary; and
    (B) flights involving cargo-only transportation, the product 
of--
    (i) $500,000,000; and
    (ii) the ratio of--
    (I) the revenue ton miles or other auditable measure of the air 
carrier for cargo for the latest quarter for which data is available 
as reported to the Secretary; to
    (II) the total revenue ton miles or other auditable measure for 
all such air carriers for cargo for such quarter as reported to the 
Secretary.

If any air carrier receives more compensation than it demonstrates to 
the satisfaction of the Department that it is eligible for under the 
Act, the carrier will be required to repay the excess amount to the 
Department.

Section 330.11  Which Carriers Are Eligible To Apply for Compensation 
Under This Part?

    Direct air carriers that engage in air transportation operations, 
including certificated air carriers, commuter air carriers, and air 
taxis, are eligible to apply for compensation. Entities that are 
outside the definition of ``air carrier,'' such as foreign air 
carriers, commercial operators, travel and ticket agents, and general 
aviation operators (including corporate air services and flight 
training schools), are not.
    As noted above, the general statutory definition of ``air carrier'' 
includes both direct and indirect air carriers. However, under the 
specific statutory language setting forth the ``Special Rules for 
Compensation,'' we believe that Congress intended compensation only for 
those entities that actually operate ``flights.'' Moreover, entities 
that actually fly aircraft were the overwhelming focus of the 
Congressional discussion of the purpose of compensation under the Act. 
A reading of the statute to extend compensation payments to other 
entities and individuals that do not actually fly aircraft would make 
it difficult, if not impossible, to distinguish among the many 
different kinds of contractual arrangements that exist for providing 
air transportation. We believe that, although a variety of air carriers 
and other entities suffered losses as a result of the terrorist 
attacks--public charter operators, travel agents, freight forwarders, 
employees, concessionaires,

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etc.--Congress limited the Act to provide financial assistance to help 
keep air carriers that actually operate flights flying.
    Congress designed the compensation system of Sec. 102(b)(2) 
consistent with its intent in this regard. The Act provides that air 
carriers would be eligible to receive the lesser of the amount of their 
direct and incremental losses or an amount calculated by using the 
statutory formula. Any air carrier, direct or indirect, may be able to 
demonstrate direct and incremental losses. However, unless the amount 
of compensation that would be payable to an air carrier under the 
statutory formula can be calculated, there is no way of implementing 
Congress' direction that the lesser of direct and incremental losses on 
one hand, or the formula-based payment on the other, be payable to the 
air carrier.
    The Act does not permit the Department to disburse compensation 
based solely on a showing of direct and incremental losses, absent the 
application of the formula. Doing so could permit a carrier to receive 
a greater amount of compensation than that to which the Act entitles it 
(i.e., because there would be no formula ``cap'' to limit the amount of 
compensation below the amount of direct and incremental damages). Such 
a result would be inconsistent with the Department's task of 
implementing the Act responsibly in accordance with the intent of 
Congress.
    With respect to carriers providing ``flights involving passenger-
only or combined passenger and cargo transportation'' (emphasis added), 
the formula is calculated based on a ratio involving an individual 
carrier's ASMs, as reported to the Secretary, to those for all such 
carriers. Indirect air carriers (e.g., public charter operators) do not 
report ASMs to the Department under 14 CFR parts 241 or 298. Since they 
do not operate aircraft, they cannot be said to have ASMs of their own 
at all. Indeed, the regulatory definition of ``available seat-miles'' 
refers in part to ``the aircraft miles flown on each flight stage'' 
(emphasis added), and indirect air carriers do not ``fly'' miles on 
flight stages. Any ASMs that these indirect air carriers might 
calculate would be duplicative of direct air carrier ASMs. For these 
reasons, we believe that the formula cannot be calculated for indirect 
air carriers, who are therefore ineligible to receive compensation. 
This is consistent with Congress' focus on providing compensation to 
carriers who actually operate aircraft.
    For carriers providing ``flights involving cargo-only 
transportation'' (emphasis added), the Act calculates the formula in a 
similar way, with the basic measure being RTMs reported to the 
Department under 14 CFR part 291. The same points made above with 
respect to passenger-only or combined passenger/cargo carriers apply to 
cargo carriers as well. An indirect air carrier in the cargo 
transportation field, such as an air freight forwarder, does not 
operate flights with aircraft and neither generates nor reports RTMs. 
Revenue ton-miles are defined as a ton of revenue traffic 
``transported'' one mile, not ``placed'' or ``contracted for.'' Any 
RTMs it would report would necessarily duplicate those of the direct 
air carrier that actually operated the flights involved. Indeed, an air 
freight forwarder could reasonably be viewed as a purchaser, rather 
than a provider, of air transportation services.
    This interpretation is also consistent with the general purposes of 
the Act. To the extent that the compensation program helps direct air 
carriers remain operating, indirect air carriers such as air freight 
forwarders clearly benefit. Paying compensation to indirect air 
carriers would reduce the funds available to direct air carriers, 
making it more likely that direct air carriers would not get all of the 
compensation that would otherwise be payable to them. This could 
contribute to failures of direct air carriers that, in turn, would harm 
the interests of indirect air carriers.

Section 330.13  If An Air Carrier Received Compensation Under the Act 
Previously, Does it Have To Apply Now?

Section 330.15  If An Air Carrier Did Not Apply for Compensation Under 
the Act Previously, May it Apply For the First Time Now?

Section 330.17  Must An Air Carrier Apply for Compensation Under This 
Part Now To Be Eligible for Funds That Will Be Distributed in the 
Future?

    These three related sections make a series of important points that 
air carriers should understand. All air carriers who want compensation 
under the Act must apply under this rule. This includes carriers who 
previously applied for and received funds from the first installment. A 
carrier who received funds under the first installment must submit an 
application under this rule even if it does not intend to seek further 
compensation. If a carrier did not apply for funds from the first 
distribution, it can apply now. Application under this part is 
mandatory, not only for carriers which wish to receive this second 
installment of compensation, but also from the third installment of 
funds to be distributed next year.

Section 330.21  When Must Air Carriers Apply for Compensation?

Section 330.23  To What Address Must Air Carriers Send Their 
Applications?

Section 330.25  What Are the Components of An Air Carrier's Application 
for Compensation?

    These sections give air carriers, other than air taxis, 14 days 
from the effective date of the rule to ensure that their complete 
applications reach the Department. In order to facilitate the 
participation of air taxis, the regulation provides them 28 days. These 
are firm deadlines. Unless a carrier can demonstrate to the 
satisfaction of the Department that extremely unusual extenuating 
circumstances, completely beyond its control, prevented it from making 
a timely submission, the Department will not accept a late submission.
    Likewise, the use of the address stated in the rule is mandatory. 
The Department will not accept applications sent elsewhere. In 
addition, applications must be in hard copy. Faxes and e-mails are not 
acceptable, because of the difficulties they create in handling large 
volumes of documents. In discussions with DOT staff, many carriers have 
indicated their intention to hand-carry applications to the Department. 
The Department will make arrangements to receive such packages in a way 
consistent with current Departmental office security procedures. 
Applications also must be complete, containing all the required 
information. The Department will not accept incomplete applications.

Section 330.27  What Information Must Certificated and Commuter Air 
Carriers Submit?

Section 330.29  What Information Must Air Taxi Operators Submit?

    Forms 330-A, 330-B, and 330-C on which carriers must submit data to 
support their applications, are found in the Appendices to part 330. 
Carriers should note that forms for certificated and commuter passenger 
and combination passenger/cargo carriers are found in Appendix A, forms 
for certificated cargo carriers are found in Appendix B, and forms for 
air taxis are found in Appendix C. Certificated and commuter carriers 
which operate both passenger/combination aircraft and all-cargo 
aircraft and routinely report to the Department ASMs and RTMs 
separately for both types of flights and which are seeking compensation 
on both an ASM and an RTM basis must submit both sets of forms in 
Appendices A and B to seek compensation on both an ASM and

[[Page 54619]]

RTM basis. Financial and operational data (both actual and forecasted) 
must be disaggregated and correlate exclusively to one or the other 
type of operation.
    In submitting the information on these forms, carriers must report 
total net income after taxes, based on application of standard 
corporate income tax rates, as well as other financial information. The 
Department has, however, tentatively determined to accept applications 
for compensation of losses calculated on the basis of pre-tax data. The 
rationale for this tentative determination is that the Act is intended 
to compensate air carriers for losses related to their actual 
operations, realized prior to taxation. Under the Act, compensation 
received is taxable income. The Act subjects this income to taxation at 
the end of the fiscal year when air carriers compute their corporate 
taxes, as they would had the carrier earned that income from the 
marketplace if the terrorist attacks had not occurred. In addition, we 
believe that this approach avoids prejudice to eligible air carriers 
based on their varied tax positions. Actual losses must be net of 
savings on a number of items, however (e.g., fuel consumption, 
reductions in staff).

Section 330.31  What Data Must Air Carriers Submit Concerning ASMs or 
RTMs?

    There are three points in this section that the Department wishes 
to emphasize. First, since the statute relies on ASMs and RTMs 
``reported to the Secretary'' (Sec. 103(b)(2) of the Act), we must rely 
on the reports of these statistics already made to the Department. 
Carriers are not at liberty to modify their reports, except as directed 
by the Department (e.g., to correct over-reported data) and to avoid 
double counting or the reporting of activity by code-sharing or 
alliance partners.
    Second, we recognize that, unlike certificated and commuter air 
carriers that file Form 41 or part 298-C reports, air taxis do not 
routinely file with the Department ASM or RTM reports or traffic, 
financial, and other operational data. The Department is therefore 
requiring additional information from air taxis that is necessary to 
verify their claims for compensation. We are asking such carriers to 
provide information about their operations with their applications for 
compensation which will allow for a calculation of ASMs or RTMs, 
consistent with Bureau of Transportation Statistics (BTS) requirements 
and guidance (see 14 CFR part 298). If there are any direct air 
carriers, other than air taxis, that legitimately have not submitted 
ASMs or RTMs to the Department, they would also have to provide such 
information.
    Any air carrier that calculates its ASMs or RTMs in connection with 
its applications must certify under penalty of law that the calculation 
is accurate and must fully ``show its work'' (i.e., submit the data and 
assumptions on which the calculation is based and describe how the 
result was reached). The Department provides more detailed guidance on 
the form in Appendix C. The Department, after reviewing such 
submissions, has the discretion to modify or reject the carrier's 
calculation.
    Third, we have been asked how the Department views the situation of 
carriers that operate under ``wet-lease'' arrangements. In a wet lease, 
a carrier (the ``lessor'') leases its aircraft and crew to another 
carrier (the ``lessee'') for an operation. The question arises as to 
whether the lessor or the lessee can claim the ASMs or RTMs resulting 
from the operation for purposes of an application for compensation.
    The statute bases the compensation formula on ASMs or RTMs ``as 
reported to the Secretary.'' Consequently, the Department believes that 
the lessor can appropriately claim the ASMs or RTMs resulting from an 
operation only when that is how the ASMs or RTMs were reported to the 
Department, in accordance with BTS regulations and guidance. Under 14 
CFR 241.25, Appendix, (m)(2)(ii), ``Wet-lease arrangements shall be 
reported by the lessee as though the leased aircraft and crew were part 
of the lessee's own fleet.'' BTS discussed this requirement in Office 
of Airline Information Accounting and Reporting Directive No. 217, 
issued July 28, 1997. This BTS guidance document stated the following:

    Under the Form 41 and T-100 traffic reporting systems, wet-lease 
operations are reported by a lessee as though the leased aircraft 
and crew were a part of the lessee's own fleet and crew. [citation 
to Sec. 241.25 omitted] This principle removes the uncertainty of 
which carrier, the lessee or the lessor, reports the detailed 
traffic and financial information from a wet-lease arrangement, and 
precludes two carriers reporting the same traffic movement while 
assuring that the traffic is reported by one carrier. This principle 
also applies for wet-lease operations involving commuter air 
carriers.

    This approach is consistent with the Act and other provisions of 
this regulation.
    We are aware that section 102(b)(2)(B)(ii) of the Act provides that 
the formula calculation is to be based on ``revenue ton-miles or other 
auditable measure of the air carrier for the latest quarter for which 
data is available as reported to the Secretary'' (emphasis added). 
Neither the language of the statute nor its legislative history 
provides any information on what such an ``other auditable measure'' 
would be. To fulfill the purpose of the statutory formula, such a 
measure would have to be readily verifiable, could not be duplicative 
of RTMs reportable by direct air carriers, and would have to be 
comparable to RTMs so that it could be part of the basis for the 
formula ``cap'' on the compensation payable to a carrier for its direct 
and incremental losses. The Department also believes that any ``other 
auditable measure'' would have to be a measure applicable to air 
carriers for cargo generally. It would not be feasible to attempt to 
make the comparison referred to above on the basis of individual, 
carrier-specific measures.
    The language of the statute requires the Department to apply such 
an ``other auditable measure'' in the same way that it applies RTMs 
that are ``reported to the Secretary.'' It may be possible, for 
example, that a calculation of RTMs, based on auditable information 
regarding flights actually flown by the air carrier and prepared in 
accordance with Bureau of Transportation Statistics regulations and 
guidance, but that were not required to be reported to the Secretary, 
could meet these criteria. On the other hand, for example, financial 
data evidencing losses, without regard to RTMs actually flown by the 
air carrier, are clearly not such a measure. The Department will review 
comments that propose ``other auditable measures'' and could, if 
warranted, add language to this rule permitting submissions by cargo 
carriers who actually operate aircraft based on such measures, if they 
meet the criteria discussed above. Because the Department does not now 
know of specific ``other auditable measures'' that meet the criteria 
for such a measure, however, we are not including any provisions to 
this effect in today's rule.

Section 330.33  Must Carriers Certify the Truth and Accuracy of Data 
They Submit?

    This section provides the form of a certification that the Chief 
Executive Officer, Chief Financial Officer, or Chief Operating Officer, 
or equivalent official, of a carrier must make with respect to 
applications for compensation and participation in the compensation 
program.

[[Page 54620]]

Section 330.35  What Records Must Carriers Retain?

Section 330.37  Are Air Carriers That Participate in This Program 
Subject To Audit?

    In order to maintain the Department's ability to audit the 
compensation program, we must require air carriers to retain a 
significant amount of information for review by the Department 
(including the Office of Inspector General), the Comptroller General, 
or other Federal agencies.
    Carriers will have to provide an independent auditor's review of 
their forecasts before becoming eligible for the final installment of 
compensation. We also want air carriers to be aware that, before 
becoming eligible to receive payment from the final installment of 
compensation under the Act, they must report to the Department actual 
losses for the period September 11, 2001--December 31, 2001 that are 
the result of the terrorist attacks.
    Carriers that can demonstrate and document to the Department's 
satisfaction that they suffered actual losses before December 31, 2001 
that exceed the formula amount of compensation may request a final 
installment in CY 2001 subject to the terms and conditions discussed in 
connection with Sec. 330.7 above. Carriers will have to support these 
reports of losses with audited financial statements or, for carriers 
who do not normally prepare audited financial statements, relevant tax 
records and supporting documents. In addition, the Department may 
require the carrier to provide whatever documents or other supporting 
data are necessary to verify the carriers' reported losses. All claims 
by carriers are subject to audit both by the Department (including the 
Office of Inspector General), the Comptroller General, or other Federal 
agencies.

Regulatory Analyses and Notices

    This rule is an economically significant rule under Executive Order 
12886, since it will facilitate the distribution of more than a billion 
dollars into the economy during the 12-month period following its 
issuance. Because of the need to move quickly to provide compensation 
to air carriers for the purpose of maintaining a safe, efficient, and 
viable commercial aviation system in the wake of the events of 
September 11, 2001, we are not required to provide an assessment of the 
potential cost and benefits of this regulatory action. The Department 
has determined that this rule is being issued in an emergency 
situation, within the meaning of Section 6(a)(3)(D) of Executive Order 
12866. However, this impact is expected to be a favorable one: making 
these funds available to air carriers to compensate them for losses 
resulting from the terrorist attacks of September 11. In accordance 
with Section 6(a)(3)(D), this rule was submitted to the Office of 
Management and Budget for a brief review.
    Because a notice of proposed rulemaking is not required for this 
rulemaking under 5 U.S.C. 553, we are not required to prepare a 
regulatory flexibility analysis under 5 U.S.C. 604. However, we do note 
that this rule may have a significant economic effect on a substantial 
number of small entities. Among the entities in question are air taxis, 
as well as some commuters and small certificated air carriers. In 
analyzing small entity impact for purposes of the Regulatory 
Flexibility Act, we believe that, to the extent that the rule impacts 
small air carriers, the impact will be a favorable one, since it will 
consist of receiving compensation. We have facilitated the 
participation of small entities in the program by allowing a longer 
application period for air taxis, which are generally the smallest 
carriers covered by this rule and which do not otherwise report traffic 
or financial data to the Department. The Department has also concluded 
that this rule does not have sufficient Federalism implications to 
warrant the consultation requirements of Executive Order 13132.
    We are making this rule effective immediately, without prior 
opportunity for public notice and comment. Because of the need to move 
quickly to provide compensation to air carriers for the purpose of 
maintaining a safe, efficient, and viable commercial aviation system in 
the wake of the events of September 11, 2001, prior notice and comment 
would be impractical, unnecessary, and contrary to the public interest. 
Consequently, prior notice and comment under 5 U.S.C. 553 and delay of 
the effective date under 5 U.S.C. 801, et. seq, are not being provided. 
On the same basis, we have determined that there is good cause to make 
the rule effective immediately, rather than in 30 days. We are 
providing for a 14-day comment period following publication of the 
rule, however. The Department will subsequently respond to comments we 
receive.
    This rule contains information collection requirements subject to 
the Paperwork Reduction Act (PRA), specifically the application 
documents that air carriers must submit to the Department to obtain 
compensation. The title, description, and respondent description of the 
information collections are shown below as well as an estimate of the 
annual recordkeeping and periodic reporting burden. Included in the 
estimate is the time for reviewing instructions, searching existing 
data sources, gathering and maintaining the data needed, and completing 
and reviewing the collection of information.
    Title: Procedures (and Forms) for Compensation of Air Carriers.
    Need for Information: The information is required to administer the 
requirements of the Act.
    Use of Information: The Department of Transportation would use the 
data submitted by the air carriers to determine each carrier's 
compensation for direct losses suffered as a result of any Federal 
ground stop order and incremental losses beginning September 11, 2001, 
and ending December 31, 2001, resulting from the September 11, 2001, 
terrorist attacks on the United States as defined in the Act.
    Frequency: For this final rule, the Department will collect the 
information once, with air carriers reporting on Forms 330-A, 330-B, 
and 330-C.
    Respondents: The respondents include an estimated 430 air carrier 
applicants. This number is based on an estimate of 300 air taxis (about 
twice as many as have contacted the Department to date in connection 
with this program) and 130 other carriers choosing to submit 
applications.
    Burden Estimate: Total air carrier burden of $146,000 based on 
total burden hours of 5,320 for 430 applicants and a weighted average 
cost per hour of $27.44.
    Form(s): The data would be collected on Forms 330-A, 330-B, and 
330-C as shown in the Appendices to this rule.
    Average Burden Hours per Respondent: A weighted average of 12.4 
hours per application.
    The Office of Management and Budget has approved this information 
collection on an emergency basis, with Control Number 2105-0546.

List of Subjects in 14 CFR Part 330

    Air carriers, Grant programs--transportation, Reporting and 
recordkeeping requirements.

    Issued this 24th day of October, 2001, at Washington, DC.
Read C. Van De Water,
Assistant Secretary for Aviation and International Affairs.

    For the reasons set forth in the preamble, the Department adds a 
new part 330 to Title 14, Code of Federal Regulations, to read as 
follows:

[[Page 54621]]

PART 330--PROCEDURES FOR COMPENSATION OF AIR CARRIERS

Sec.
Subpart A--General Provisions
330.1   What is the purpose of this part?
330.3   What do the terms used in this part mean?
330.5   What funds will the Department distribute under this part?
330.7   How much of an eligible air carrier's estimated compensation 
will be distributed under this part?
330.9   What are the limits on compensation to air carriers?
330.11   Which air carriers are eligible to apply for compensation 
under this part?
330.13   If an air carrier received compensation under the Act 
previously, does it have to apply now?
330.15   If an air carrier did not apply for compensation under the 
Act previously, may it apply for the first time now?
330.17   Must an air carrier apply for compensation under this part 
now to be eligible for funds that will be distributed in the future?
Subpart B--Application Procedures
330.21   When must air carriers apply for compensation?
330.23   To what address must air carriers send their applications?
330.25   What are the components of an air carrier's application for 
compensation?
330.27   What information must certificated and commuter air 
carriers submit?
330.29   What information must air taxi operators submit on Form 
330-C?
330.31   What data must air carriers submit concerning ASMs or RTMs?
330.33   Must carriers certify the truth and accuracy of data they 
submit?
330.35   What records must carriers retain?
330.37   Are carriers which participate in this program subject to 
audit?
Appendix A to Part 330--Forms for Certificated and Commuter Air 
Carriers
Appendix B to Part 330--Forms for Certificated Cargo Carriers
Appendix C to Part 330--Forms for Air Taxi Operators

    Authority: Pub. L. 107-42, 115 Stat. 230 (49 U.S.C. 40101 note).

Subpart A--General Provisions


Sec. 330.1  What is the purpose of this part?

    The purpose of this part is to establish procedures to implement 
section 101(a)(2) of the Air Transportation Safety and System 
Stabilization Act (``the Act''), Public Law 107-42, 115 Stat. 230 (49 
U.S.C. 40101 note). This statutory provision is intended to compensate 
air carriers for direct losses incurred as a result of the Federal 
ground stop order issued by the Secretary of Transportation, and any 
subsequent orders, following the terrorist attacks of September 11, 
2001, and incremental losses incurred from September 11 through 
December 31, 2001, as the result of those attacks.


Sec. 330.3  What do the terms used in this part mean?

    The following terms apply to this part:
    Air carrier means any U.S. air carrier, as defined in 49 U.S.C. 
40102.
    Air taxi operator means an air carrier, other than a commuter air 
carrier, that holds authority issued under 14 CFR part 298 and 14 CFR 
part 121 or part 135.
    Available seat-miles (ASMs) means the aircraft miles flown on each 
flight stage by an air carrier multiplied by the number of seats 
available for revenue use on that stage.
    Certificated air carrier means an air carrier holding a certificate 
issued under 49 U.S.C. 41102 or 41103.
    Commuter air carrier means an air carrier as defined in 14 CFR 
298.2(e) that holds a commuter air carrier authorization issued under 
49 U.S.C. 41738.
    Incremental loss means a loss incurred by an air carrier in the 
period of September 11, 2001--December 31, 2001, as a result of the 
terrorist attacks on the United States of September 11, 2001. It does 
not include any loss that would have been incurred if the terrorist 
attacks on the United States of September 11, 2001, had not occurred.
    Revenue ton-miles (RTMs) means the aircraft miles flown on each 
flight stage by the air carrier multiplied by the number of tons of 
revenue cargo transported on that stage. For purposes of this part, 
RTMs include only those resulting from all-cargo flights flown by the 
air carrier submitting the claim for compensation.


Sec. 330.5  What funds will the Department distribute under this part?

    Through the regulations in this part, the Department is 
distributing compensation not to exceed 85 percent of the total funds 
available, cumulatively with funds distributed previously.


Sec. 330.7  How much of an eligible air carrier's estimated 
compensation will be distributed under this part?

    (a) If you are an eligible air carrier that has not previously 
received compensation under the Act, you will receive compensation not 
to exceed 85 percent of the compensation for which you demonstrate you 
are eligible under the Act.
    (b) If you are an eligible air carrier that has previously received 
compensation under the Act, you will receive compensation not to exceed 
85 percent of the estimated compensation for which you demonstrate you 
are eligible under the Act, less the amount of estimated compensation 
you received previously. For example, suppose you have already received 
50 percent of the estimated compensation for which you are eligible. 
If, under this part, the Department determined that all carriers would 
receive 85 percent of the compensation for which they are eligible as 
part of the second installment of compensation, your payment for the 
second installment would be an additional 35 percent of the estimated 
compensation for which you are eligible under the Act.
    (c) If, as an air carrier, you are able to submit data, subsequent 
to your application under this part but before December 31, 2001, 
demonstrating and documenting conclusively that you have incurred 
actual losses as defined in section 101(a)(2) of the Act that exceed 
the amount of compensation for which you demonstrate you are eligible 
under the formula of section 103(b)(2) of the Act, the Department may 
disburse to you, without waiting for a submission in Calendar Year (CY) 
2002, the remainder of the formula amount of compensation for which you 
are eligible. A carrier that requests a final installment before 
December 31, 2001 must submit an independent auditor's review of the 
reasonableness and accuracy of its claim of actual losses for the 
period of the claim, a forecast for the same period which was prepared 
before September 11, 2001, and an independent auditor's review of the 
reasonableness and accuracy of its forecasts and data. The 
consideration of requests for final payment before December 31, 2001 is 
contingent upon the establishment by the Department of a fixed 
comprehensive universe of ASMs and RTMs for all eligible air carriers 
to be used as the basis of the final compensation formula for all 
eligible air carriers as established in the Act.


Sec. 330.9  What are the limits on compensation to air carriers?

    (a) You are eligible to receive compensation equaling the lesser of 
your direct and incremental losses or the amount calculated by the 
formula set forth in section 103(b)(2) of the Act.
    (b) In the event that the compensation for which we determine you 
are finally eligible as provided in paragraph (a) of this section is 
less than the amount the Department has disbursed to you, you are 
required to repay the excess amount to the Department.


Sec. 330.11  Which carriers are eligible to apply for compensation 
under this part?

    (a) If you are a certificated air carrier, a commuter air carrier, 
or an air taxi, you are eligible to apply for

[[Page 54622]]

compensation under Subpart B of this part.
    (b) If you are an air freight forwarder (as described in 14 CFR 
part 296), public charter operator (as described in 14 CFR part 380), 
or other indirect air carrier (such as a contract bulk fare operator), 
you are eligible to apply for compensation under this part.
    (c) If you are a foreign air carrier, commercial operator, flying 
club, fractional owner, general aviation operator, fixed base operator, 
flight school, or ticket agent, you are not eligible to apply for 
compensation under this part.


Sec. 330.13  If an air carrier received compensation under the Act 
previously, does it have to apply now?

    Yes, if, as an air carrier, you previously received compensation 
under section 101(a)(2) of the Act, you must, in all cases, submit an 
application under this part. You must do so even if you are not seeking 
additional compensation.


Sec. 330.15  If an air carrier did not apply for compensation under the 
Act previously, may it apply for the first time now?

    Yes, if you are an air carrier that did not apply for compensation 
previously under the Act, you may apply for the first time under this 
part.


Sec. 330.17  Must an air carrier apply for compensation under this part 
now to be eligible for funds that will be distributed in the future?

    Yes, as an air carrier, you must apply under this part to be 
eligible to receive funds from the second and third installments of 
compensation. If you do not apply under this part, you will not be 
eligible to receive funds distributed in this or subsequent 
installments including those distributed in CY 2002.

Subpart B--Application Procedures


Sec. 330.21  When must air carriers apply for compensation?

    (a) If you are an eligible air carrier other than an air taxi, you 
must ensure that your application for compensation reaches the 
Department by no later than close of business November 13, 2001.
    (b) If you are an eligible air taxi, you must ensure that your 
application for compensation reaches the Department by no later than 
close of business November 26, 2001.
    (c) If you do not meet the applicable deadline for submitting your 
application for compensation, the Department will not accept it, unless 
you document extremely unusual extenuating circumstances, completely 
beyond your control, that prevented you from submitting your 
application in a timely manner.


Sec. 330.23  To what address must air carriers send their applications?

    (a) You must submit your application, and all required supporting 
information, in hard copy (not by fax or electronic means) to the 
following address:

U.S. Department of Transportation
Aviation Relief Desk (X-50)
400 7th Street, SW
Room 6401
Washington, DC 20590

    (b) If your complete application is not sent to the address in 
paragraph (a) of this section as required in this section, the 
Department will not accept it.


Sec. 330.25  What are the components of an air carrier's application 
for compensation?

    As an air carrier applying for compensation under this part, you 
must provide to the Department all materials described in Secs. 330.27-
330.33. The Department will not accept your application if it does not 
comply fully with the requirements of this subpart.


Sec. 330. 27  What information must certificated and commuter air 
carriers submit?

    (a) If you are a certificated or commuter air carrier that provides 
passenger and/or combination passenger/cargo service and are applying 
for compensation under this part, you must submit Form 330-A, found in 
Appendix A to this part.
    (b) If you are a certificated carrier operating all-cargo service 
and are applying for compensation under this part, you must submit Form 
330-B, found in Appendix B to this part. Data for all-cargo carriers 
supplied on the forms in Appendix B to this part must be tied only to 
the airline portion of their businesses and must exclude activities 
usually associated with indirect air carriers or with ground services.
    (c) Certificated and commuter carriers which operate both 
passenger/combination aircraft and all-cargo aircraft and routinely 
report to the Department ASMs and RTMs separately for both types of 
flights must submit both sets of forms in Appendices A and B to this 
part (Forms 330-A and 330-B) to seek compensation on both an ASM and 
RTM basis. Financial and operational data (both actual and forecasted) 
must be disaggregated and correlate exclusively to one or the other 
type of operation.
    (d) You must include the following financial information in Part 1 
of Forms 330-A and 330-B and the Operational Data as required by Part 2 
of that form for the period September 11 through September 30, 2001:
    (1) Your pre-September 11, 2001, profit/loss forecast for the 
period beginning on that date and ending September 30, 2001. This 
forecast must reflect seasonal reductions in capacity and the cost 
savings associated with such reductions. Documentation verifying that 
the pre-September 11, 2001, forecast was, in fact, completed before 
that date must also be submitted with your application.
    (2) Your actual results for that same period reflecting any losses 
that were a direct result of the terrorist attacks of September 11, 
2001.
    (3) The difference between your forecast profits/losses and actual 
results for that period (i.e., the difference between the figures in 
paragraphs (d) (1) and (2) of this section).
    (4) The actual losses you report must be net losses, before taxes, 
taking into account savings from such items as reductions in passenger 
and cargo handling costs, fuel consumption, landing fees, revenue/
traffic-related expenses (e.g., commissions, food and beverage, booking 
fees, credit card fees), and savings of other costs due to the ground 
stop and subsequent schedule/capacity/staff reductions (including 
savings from layoffs of employees, adjusted for severance payments), as 
well as proceeds from business recovery insurance or other insurance 
payments. You must not report as losses insurance premium increases 
that have been or will be compensated by the Government under the Act, 
or other losses that have been or will be compensated by other 
subsidies or assistance provided by Federal, state, or local 
governments. You must also report after tax profit/losses as required 
on the forms in the Appendices to this part.
    (e) You must include the following financial information in Part 3 
of Form 330-A and 330-B and the Operational Data as required by Part 4 
of those forms for the period October 1 through December 31, 2001:
    (1) Your pre-September 11, 2001, profit/loss forecast for the 
period beginning October 1, 2001, and ending December 31, 2001. This 
forecast must reflect seasonal reductions in capacity and the cost 
savings associated with such reductions. Documentation verifying that 
the pre-September 11, 2001 forecast was, in fact, completed before that 
date must also be submitted with your application.
    (2) Your post-September 11, 2001, forecast of incremental losses 
estimated to be incurred for the period beginning October 1, 2001, and 
ending December 31, 2001 as a result of the September 11,

[[Page 54623]]

2001, terrorist attacks. This forecast must incorporate all cost 
reductions associated with capacity reductions and furloughs you made 
due to the reduced demand for air service after the September 11th 
attacks (e.g., employee pay adjustments and furloughs, changes in 
aircraft fleet in service, schedule and capacity changes, etc.).
    (3) The difference between your pre-September 11 forecast profit-
loss forecast for the October 1--December 31, 2001, period and your 
post-September 11 forecast for incremental losses for that period 
(i.e., the difference between the figures in paragraphs (e) (1) and (2) 
of this section).
    (f) Estimated losses you report for the October 1--December 31 
period must be net losses, before taxes, taking into account savings 
from such items as reductions in passenger and cargo handling costs, 
fuel consumption, landing fees, revenue/traffic-related expenses (e.g., 
commissions, food and beverage, booking fees, credit card fees), and 
savings of other costs due to the ground stop and subsequent schedule/
capacity/staff reductions (including savings from layoffs of employees, 
adjusted for severance payments), as well as proceeds from business 
recovery insurance or other insurance payments. You must not report as 
losses insurance premium increases that have been or will be 
compensated by the Government under the Act, or other losses that have 
been or will be compensated by other subsidies or assistance provided 
by Federal, state, or local governments. You must also report after tax 
profit/losses as required on the forms in the Appendices to this part.


Sec. 330.29  What information must air taxi operators submit on Form 
330-C?

    Air taxi operators are required to complete Form 330-C as shown in 
Appendix C to this part. Explanatory notes are included on that Form.


Sec. 330.31  What data must air carriers submit concerning ASMs or 
RTMs?

    (a) Except as provided in paragraph (c) of this section, if you are 
applying for compensation as a passenger or combination passenger/cargo 
carrier, you must have submitted your August 2001 total completed ASM 
report to the Department for your systemwide air service (e.g., 
scheduled, non-scheduled, foreign, and domestic).
    (b) Except as provided in paragraph (c) of this section, if you are 
applying for compensation as an all-cargo carrier, you must have 
submitted your RTM reports to the Department for the second calendar 
quarter of 2001.
    (c) If you have not reported ASMs or RTMs as provided in paragraphs 
(a) and (b) of this section, you may submit your calculation of ASMs or 
RTMs to the Department with your application. Your calculation must 
include only your own completed flights, and not flights flown for you 
by other air carriers. You must certify the accuracy of this 
calculation and submit with your application the data and assumptions 
on which the calculation is based. After reviewing your submission, the 
Department may modify or reject your calculation.
    (d) In calculating and submitting ASMs and RTMs for purposes of 
this section, there are certain things you must not do:
    (1) Except as necessary to comply with paragraphs (d)(2) and (d)(3) 
of this section or at the direction of the Department, you must not 
alter the ASM or RTM reports you earlier submitted to the Department or 
add previously unreported ASMs or RTMs to your total. Your ASMs or RTMs 
for purposes of this part are as you have reported them to the 
Department according to existing standards, requirements, and 
methodologies established by the Office of Airline Information (Bureau 
of Transportation Statistics).
    (2) You must not include ASMs or RTMs resulting from operations by 
your code-sharing or alliance partners.
    (3) You must not include ASMs or RTMs that are reported by or 
attributable to flights by another carrier.
    (4) If you are an air carrier that ``wet leases'' aircraft and 
crews to other carriers, your calculations and submissions of ASMs and 
RTMs must be based on ASMs or RTMs as reported to the Secretary in 
accordance with previously established reporting requirements of the 
Bureau of Transportation Statistics (see paragraphs (a) and (b) of this 
section). Like other carriers, you must demonstrate your losses through 
the data submitted in order to be eligible for compensation.


Sec. 330.33  Must carriers certify the truth and accuracy of data they 
submit?

    Yes, with respect to all information submitted or retained under 
Secs. 330.27-330.31 and 330.35, your Chief Executive Officer (CEO), 
Chief Financial Officer (CFO), or Chief Operating Officer (COO) or, if 
those titles are not used, the equivalent officer, must certify that 
the submitted information was prepared under his or her supervision and 
is true and accurate, under penalty of law.


Sec. 330.35  What records must carriers retain?

    As an air carrier that applies for compensation under this part, 
you must retain records as follows:
    (a) You must retain all books, records, and other source and 
summary documentation supporting your claims for compensation of direct 
and incremental losses pursuant to Sections 101, 103, and 106 of the 
Act. This requirement includes, but is not limited to, the following:
    (1) You must retain supporting evidence and documentation 
demonstrating the validity of the data you provide under Secs. 330.27-
330.31.
    (2) You must retain documentation verifying that your pre-September 
11, 2001, forecast was the most recent forecast available to that date.
    (3) You must also retain documentation outlining the assumptions 
made for all forecasts and the source of the data and other inputs used 
in making the forecasts.
    (4) You must obtain and retain all reports, working papers, and 
supporting documentation pertaining to audits or review conducted by 
independent auditors under the requirements of this part.
    (b) You must preserve and maintain this documentation in a manner 
that readily permits its audit and examination by representatives of 
the Department of Transportation (including the Office of the Inspector 
General), the Comptroller General of the United States, or other 
Federal agencies.
    (c) You must retain this documentation for five years.
    (d) You must make all requested data available within one week from 
a request by the Department of Transportation (including the Office of 
the Inspector General), the Comptroller General of the United States, 
or other Federal agencies.


Sec. 330.37  Are carriers which participate in this program subject to 
audit?

    (a) All payments you receive from the Department of Transportation 
under this program are subject to audit. All information you submit 
with your applications and all records and documentation that you 
retain are also subject to audit.
    (b) Before you are eligible to receive payment from the final 
installment of compensation under the Act, there must be an independent 
auditor's review of the reasonableness and accuracy of your forecasts 
and data. You must submit the results of this audit to the Department 
with your application for payment of the final installment.
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Appendix A to Part 330--Forms for Certificated and Commuter Air 
Carriers
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Appendix B to Part 330--Forms for Certificated Cargo Carriers
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Appendix C to Part 330--Forms for Air Taxi Operators
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[FR Doc. 01-27177 Filed 10-25-01; 9:37 am]
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