[Federal Register Volume 67, Number 1 (Wednesday, January 2, 2002)]
[Proposed Rules]
[Pages 263-264]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-32177]



  Federal Register / Vol. 67, No. 1 / Wednesday, January 2, 2002 / 
Proposed Rules  

[[Page 263]]


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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: 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 a final rule being published 
in today's Federal Register, the Department is amending its application 
procedures for this compensation program. This document requests 
further comments on the issue of whether the Department should 
establish a set-aside of compensation funds for classes of air 
carriers, such as air ambulances and air tour operators, for whom the 
final rule's compensation formula may not adequately reflect their 
share of direct and incremental losses.

DATES: Comments should be received by January 16, 2002; late-filed 
comments will be considered to the extent practicable.

ADDRESSES: Interested persons should sent comments to Docket Clerk, 
Docket OST-2001-10885, Department of Transportation, 400 7th Street, 
SW., Room PL-401, Washington, DC 20590. 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 noted in the preamble to the final rule 
on airline compensation procedures that the Department is publishing in 
today's Federal Register, commenters expressed a concern about the 
provisions of the Act that based calculations of compensation for which 
air carriers are eligible on available seat-miles (ASMs). The concern 
was basically that this ASM-based formula would not adequately 
compensate air ambulances and air tour operators for the losses they 
suffered as the result of the September 11 attacks.
    In the Aviation and Transportation Security Act (Public Law 107-
71), Congress addressed the situations of air ambulances, air tour 
operators and other similarly situated classes of air carriers. Section 
124(d) of this statute amended section 103 of the Air Transportation 
Safety and System Stabilization Act. The purpose of this amendment, 
according to the Conference Report (House Report 107-296 at p. 79), is 
to ``to allow for a modified system of providing compensation to air 
tour operators and air ambulances to better address their needs after 
industry wide losses.'' The following is the text of this amendment:

    (d) Compensation for Certain Air Carriers.--
    (1) Set-aside.--The President may set aside a portion of the 
amount of compensation payable to air carriers under section 
101(a)(2) to provide compensation to classes of air carriers, such 
as air tour operators and air ambulances (including hospitals 
operating air ambulances) for whom application of a distribution 
formula containing available seat miles as a factor would 
inadequately reflect their share of direct and incremental losses. 
The President shall reduce the $4,500,00,000 specified in subsection 
(b)(2)(A)(i) by the amount set aside under this subsection.
    (2) Distribution of Amounts.--The President shall distribute the 
amount set aside under this subsection proportionally among such air 
carriers based on an appropriate auditable measure, as determined by 
the President.

Under the statutory language, use of this set-aside authority is 
discretionary (``The President may set aside * * *''). Neither the 
statute nor the Conference Report provides any guidance concerning the 
appropriate size of such a set-aside, the methodology for 
proportionally allocating any funds set aside, or the identity of any 
other ``classes'' of air carriers that could be included in it, if the 
President chooses to use the authority.
    The Department is considering using the discretion provided by 
section 124(d) of the Transportation Security Act to set aside a 
portion of the $4.5 billion compensation available for passenger 
carriers for air tour operators, air ambulances and other classes of 
air carriers for whom application of an ASM-based compensation formula 
would inadequately reflect their share of direct and incremental 
losses. The Department does not have sufficient information to 
determine whether to create such a set-aside at this time, which 
classes of carriers a set-aside would cover, what the appropriate size 
of such a set-aside would be, or how any funds set aside should be 
allocated. While we have some information about the situation of air 
ambulances, we have little information about the situation of other 
classes of air carriers to which such a set-aside could apply.
    Both because of this lack of information and our desire to avoid 
delays in distributing the second increment of compensation funds to 
carriers, the Department did not make a determination, for purposes of 
today's final rule, about whether to create a set-aside. After this 
second increment of funds is distributed, approximately 15 percent of 
the authorized $4.5 billion will remain. This should be more than 
enough to use for the purpose of compensating carriers who would be 
subject to such a set-aside. If the Department decides to implement a 
set-aside, we would do so in connection with the third increment of 
compensation funds. To help the Department decide whether to implement 
a set-aside, the Department requests information concerning whether 
there are classes of air carriers for whom application of an ASM-based 
compensation formula would inadequately reflect their share of direct 
and incremental losses for which use of this set-aside authority would 
be appropriate. This information should pertain to classes of carriers, 
not just to individual carriers, and concern such subjects as the type 
of operations conducted by a class of carriers and the reasons why use 
of the statute's general approach to compensation is inadequate for the 
class. Commenters should note that the statute's general approach does 
not assure that all losses attributable to the terrorist events will be 
compensated; because of the statute's default provision to the ASM 
formula, the vast majority of passenger carriers are scheduled to 
receive compensation well below their claimed losses.
    If the Department were to establish a set-aside, there are a number 
of possible ways that funds from the set-aside could

[[Page 264]]

be allocated. In its comment, the Association of Air Medical Services 
(AAMS) recommended that the Department calculate lost volume by 
comparing the flight volume of August and September 2001, multiplying 
the difference by the average revenue per flight, and extrapolating the 
result to the industry as a whole. AAMS suggested that the functional 
equivalent of ASMs (i.e., as a measurement of capacity) could be 
calculated by multiplying the average number of seats in air ambulances 
aircraft (six) times the average speed of the aircraft (150 m.p.h.) 
times the hours per day it is staffed and ready (24). This, AAMS 
suggested, would create a reasonable approximation of the capacity of 
an air ambulance aircraft per day. This suggestion, a variation of it, 
or some other surrogate for ASMs could be one possible approach to 
distribution of compensation under a set-aside.
    Subsequent to the enactment of the Transportation and Aviation 
Security Act, AAMS and the air carrier MEDjet approached the Department 
separately with alternative approaches for compensating air ambulances, 
that do not rely on ASM's as a factor. These proposed alternative 
approaches are derived from the Medicare Fee Schedule, which both AAMS 
and MEDjet propose could be used as a benchmark for determining lost 
revenue based on lost volume. Both AAMS and MEDjet propose that the 
lost revenues for an air ambulance could be determined by taking a base 
rate for each lost trip and adding that amount to the product of the 
lost miles for that trip and a fixed mileage rate. The base rate and 
the mileage rate would be derived from the Medicare Fee Schedule. Both 
AAMS and MEDjet proposed a different, limited period of time to be used 
for calculating lost trips as well as different base rate and mileage 
rate figures. One disadvantage to these approaches is that they may not 
be readily adaptable to use for air tour operators or other classes of 
carriers.
    Another approach could be to calculate the average percentage of 
documented direct and incremental losses that applicant carriers have 
received in compensation. We could then apply that percentage to the 
direct and incremental losses that carriers in the class or classes 
subject to the set-aside could document. For example, if on average all 
carriers were eligible, under the statutory formula, for compensation 
equivalent to 60 percent of their documented losses, the Department 
could compensate carriers participating in the set-aside for 60 percent 
of their documented losses.
    The Department seeks comments on these or other approaches that the 
Department could use to allocate funds from a set-aside, as well as on 
the underlying question of whether the Department should use its 
discretionary authority to establish a set-aside in the first place.
    The Department will keep the docket open for 14 days to receive 
comments on this set of issues. If the Department decides to establish 
a set-aside, we would amend Part 330 in the future to provide 
application instructions for carriers who sought compensation under the 
set-aside.

Regulatory Analyses and Notices

    This request for comments pertains to an underlying rule (49 CFR 
Part 330) that is significant for purposes of Executive Order 12886 and 
the Department of Transportation's rulemaking policies and procedures. 
If the Department decides to undertake further rulemaking after 
reviewing comments, the Department will follow applicable provisions of 
these requirements.
    If the Department proceeds with further rulemaking on the subject 
of this notice, the rulemaking may have a significant economic effect 
on a substantial number of small entities. Among the entities in 
question are air ambulances and other classes of air carriers that 
include small entities. In analyzing small entity impact for purposes 
of the Regulatory Flexibility Act, we believe that, to the extent that 
the use of the Department's set-aside authority impacts small air 
carriers, the impact will be a favorable one, since it will consist of 
receiving additional compensation. The Department has also concluded 
that this rule does not have sufficient Federalism implications to 
warrant the consultation requirements of Executive Order 13132.

List of Subjects in 14 CFR Part 330

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

    Issued this 26th day of December, 2001, at Washington, DC.
Read C. Van de Water,
Assistant Secretary for Aviation and International Affairs.
[FR Doc. 01-32177 Filed 12-27-01; 4:28 pm]
BILLING CODE 4910-62-P