CHAPTER 417 -- OPERATIONS OF CARRIERS                       
                                                                               
                        SUBCHAPTER I -- REQUIREMENTS                           
      Sec.                                                                     
      41701.  Classification of air carriers.                                  
      41702.  Interstate air transportation.                                   
      41703.  Navigation of foreign civil aircraft.                            
      41704.  Transporting property not to be transported in aircraft          
              cabins.                                                          
      41705.  Discrimination against handicapped individuals.                  
      41706.  Prohibitions against smoking on scheduled flights.               
      41707.  Incorporating contract terms into written instrument.            
      41708.  Reports.                                                         
      41709.  Records of air carriers.                                         
      41710.  Time requirements.                                               
      41711.  Air carrier management inquiry and cooperation with other        
              authorities.                                                     
      41712.  Unfair and deceptive practices and unfair methods of             
              competition.                                                     
      41713.  Preemption of authority over prices, routes, and service.        
                                                                               
                                                                               
                       SUBCHAPTER II -- SMALL COMMUNITY AIR SERVICE            
      41731.  Definitions.                                                     
      41732.  Basic essential air service.                                     
      41733.  Level of basic essential air service.                            
      41734.  Ending, suspending, and reducing basic essential air             
              service.                                                         
      41735.  Enhanced essential air service.                                  
      41736.  Air transportation to noneligible places.                        
      41737.  Compensation guidelines, limitations, and claims.                
      41738.  Fitness of air carriers.                                         
      41739.  Air carrier obligations.                                         
      41740.  Joint proposals.                                                 
      41741.  Insurance.                                                       
      41742.  Ending effective date.                                           
                                                                               
                        SUBCHAPTER I -- REQUIREMENTS                           
                                                                               
      Sec. 41701. Classification of air carriers                               
            The Secretary of Transportation may establish --                   
                (1) reasonable classifications for air carriers when           
            required because of the nature of the transportation               
            provided by them; and                                              
                (2) reasonable requirements for each class when the            
            Secretary decides those requirements are necessary in the          
            public interest.                                                   
                                                                               
      Sec. 41702. Interstate air transportation                                
            An air carrier shall provide safe and adequate interstate          
      air transportation.                                                      
                                                                               
      Sec. 41703. Navigation of foreign civil aircraft                         
            (a) Permitted Navigation. -- A foreign aircraft, not part          
      of the armed forces of a foreign country, may be navigated in the        
      United States only --                                                    
                (1) if the country of registry grants a similar                
            privilege to aircraft of the United States;                        
                (2) by an airman holding a certificate or license              
            issued or made valid by the United States Government or the        
            country of registry;                                               
                (3) if the Secretary of Transportation authorizes the          
            navigation; and                                                    
                (4) if the navigation is consistent with terms the             
            Secretary may prescribe.                                           
            (b) Requirements for Authorizing Navigation. -- The                
      Secretary may authorize navigation under this section only if the        
      Secretary decides the authorization is --                                
                (1) in the public interest; and                                
                (2) consistent with any agreement between the                  
            Government and the government of a foreign country.                
            (c) Providing Air Commerce. -- The Secretary may authorize         
      an aircraft permitted to navigate in the United States under this        
      section to provide air commerce in the United States.  However,          
      the aircraft may take on for compensation, at a place in the             
      United States, passengers or cargo destined for another place in         
      the United States only if --                                             
                (1) specifically authorized under section 40109(g) of          
            this title; or                                                     
                (2) under regulations the Secretary prescribes                 
            authorizing air carriers to provide otherwise authorized           
            air transportation with foreign registered aircraft under          
            lease or charter to them without crew.                             
            (d) Permit Requirements Not Affected. -- This section does         
      not affect section 41301 or 41302 of this title.  However, a             
      foreign air carrier holding a permit under section 41302 does not        
      need to obtain additional authorization under this section for an        
      operation authorized by the permit.                                      
                                                                               
      Sec. 41704. Transporting property not to be transported in               
      aircraft cabins Under regulations or orders of the Secretary of          
      Transportation, an air carrier shall transport as baggage the            
      property of a passenger traveling in air transportation that may         
      not be carried in an aircraft cabin because of a law or                  
      regulation of the United States.  The carrier is liable to pay an        
      amount not more than the amount declared to the carrier by that          
      passenger for actual loss of, or damage to, the property caused          
      by the carrier.  The carrier may impose reasonable charges and           
      conditions for its liability.                                            
                                                                               
      Sec. 41705. Discrimination against handicapped individuals               
      In providing air transportation, an air carrier may not                  
      discriminate against an otherwise qualified individual on the            
      following grounds:                                                       
                (1) the individual has a physical or mental impairment         
            that substantially limits one or more major life                   
            activities.                                                        
                (2) the individual has a record of such an impairment.         
                (3) the individual is regarded as having such an               
            impairment.                                                        
                                                                               
      Sec. 41706. Prohibitions against smoking on scheduled flights            
            (a) General. -- An individual may not smoke in the                 
      passenger cabin or lavatory of an aircraft on a scheduled airline        
      flight segment in air transportation or intrastate air                   
      transportation that is --                                                
                (1) between places in a State of the United States, the        
            District of Columbia, Puerto Rico, or the Virgin Islands;          
                (2) between a place in any jurisdiction referred to in         
            clause (1) of this subsection (except Alaska and Hawaii)           
            and a place in any other of those jurisdictions; or                
                (3)(A) scheduled for not more than 6 hours' duration;          
            and                                                                
                (B)(i) between a place referred to in clause (1) of            
            this subsection (except Alaska and Hawaii) and Alaska or           
            Hawaii; or                                                         
                (ii) between Alaska and Hawaii.                                
            (b) Regulations. -- The Secretary of Transportation shall          
      prescribe regulations necessary to carry out this section.               
                                                                               
      Sec. 41707. Incorporating contract terms into written instrument         
            To the extent the Secretary of Transportation prescribes by        
      regulation, an air carrier may incorporate by reference in a             
      ticket or written instrument any term of the contract for                
      providing interstate air transportation.                                 
                                                                               
      Sec. 41708. Reports                                                      
            (a) Application. -- To the extent the Secretary of                 
      Transportation finds necessary to carry out this subpart, this           
      section and section 41709 of this title apply to a person                
      controlling an air carrier or affiliated (within the meaning of          
      section 11343(c) of this title) with a carrier.                          
            (b) Requirements. -- The Secretary may require an air              
      carrier or foreign air carrier --                                        
                (1)(A) to file annual, monthly, periodical, and special        
            reports with the Secretary in the form and way prescribed          
            by the Secretary; and                                              
                (B) to file the reports under oath;                            
                (2) to provide specific answers to questions on which          
            the Secretary considers information to be necessary; and           
                (3) to file with the Secretary a copy of each                  
            agreement, arrangement, contract, or understanding between         
            the carrier and another carrier or person related to               
            transportation affected by this subpart.                           
                                                                               
      Sec. 41709. Records of air carriers                                      
            (a) Requirements. -- The Secretary of Transportation shall         
      prescribe the form of records to be kept by an air carrier,              
      including records on the movement of traffic, receipts and               
      expenditures of money, and the time period during which the              
      records shall be kept.  A carrier may keep only records                  
      prescribed or approved by the Secretary.  However, a carrier may         
      keep additional records if the additional records do not impair          
      the integrity of the records prescribed or approved by the               
      Secretary and are not an unreasonable financial burden on the            
      carrier.                                                                 
            (b) Inspection. -- (1) The Secretary at any time may --            
                (A) inspect the land, buildings, and equipment of an           
            air carrier or foreign air carrier when necessary to decide        
            under subchapter II of this chapter or section 41102,              
            41103, or 41302 of this title whether a carrier is fit,            
            willing, and able; and                                             
                (B) inspect records kept or required to be kept by an          
            air carrier, foreign air carrier, or ticket agent.                 
            (2) The Secretary may employ special agents or auditors to         
      carry out this subsection.                                               
                                                                               
      Sec. 41710. Time requirements                                            
            When a matter requiring action of the Secretary of                 
      Transportation is submitted under section 40109(a) or (c)-(h),           
      41309, or 42111 of this title and an evidentiary hearing --              
                (1) is ordered, the Secretary shall make a final               
            decision on the matter not later than the last day of the          
            12th month that begins after the date the matter is                
            submitted; or                                                      
                (2) is not ordered, the Secretary shall make a final           
            decision on the matter not later than the last day of the          
            6th month that begins after the date the matter is                 
            submitted.                                                         
                                                                               
      Sec. 41711. Air carrier management inquiry and cooperation with          
      other authorities                                                        
            In carrying out this subpart, the Secretary of                     
      Transportation may --                                                    
                (1) inquire into the management of the business of an          
            air carrier and obtain from the air carrier, and a person          
            controlling, controlled by, or under common control with           
            the carrier, information the Secretary decides                     
            reasonably is necessary to carry out the inquiry;                  
                (2) confer and hold a joint hearing with a State               
            authority; and                                                     
                (3) exchange information related to aeronautics with a         
            government of a foreign country through appropriate                
            departments, agencies, and instrumentalities of the United         
            States Government.                                                 
                                                                               
      Sec. 41712. Unfair and deceptive practices and unfair methods of         
      competition On the initiative of the Secretary of Transportation         
      or the complaint of an air carrier, foreign air carrier, or              
      ticket agent, and if the Secretary considers it is in the public         
      interest, the Secretary may investigate and decide whether an air        
      carrier, foreign air carrier, or ticket agent has been or is             
      engaged in an unfair or deceptive practice or an unfair method of        
      competition in air transportation or the sale of air                     
      transportation.  If the Secretary, after notice and an                   
      opportunity for a hearing, finds that an air  carrier, foreign           
      air carrier, or ticket agent is engaged in an unfair or deceptive        
      practice or unfair method of competition, the Secretary shall            
      order the air carrier, foreign air carrier, or ticket agent to           
      stop the practice or method.                                             
                                                                               
      Sec. 41713. Preemption of authority over prices, routes, and             
      service                                                                  
            (a) Definition. -- In this section, "State" means a State,         
      the District of Columbia, and a territory or possession of the           
      United States.                                                           
            (b) Preemption. -- (1) Except as provided in this                  
      subsection, a State, political subdivision of a State, or                
      political authority of at least 2 States may not enact or enforce        
      a law, regulation, or other provision having the force and effect        
      of law related to a price, route, or service of an air carrier           
      that may provide air transportation under this subpart.                  
            (2) Paragraph (1) of this subsection does not apply to air         
      transportation provided entirely in Alaska unless the                    
      transportation is air transportation (except charter air                 
      transportation) provided under a certificate issued under section        
      41102 of this title.                                                     
            (3) This subsection does not limit a State, political              
      subdivision of a State, or political authority of at least 2             
      States that owns or operates an airport served by an air carrier         
      holding a certificate issued by the Secretary of Transportation          
      from carrying out its proprietary powers and rights.                     
                                                                               
                SUBCHAPTER II -- SMALL COMMUNITY AIR SERVICE                   
                                                                               
      Sec. 41731. Definitions                                                  
            (a) General. -- In this subchapter --                              
                (1) "eligible place" means a place in the United States        
            that --                                                            
                    (A) was an eligible point under section 419 of the         
                Federal Aviation Act of 1958 before October 1, 1988;           
                    (B) received scheduled air transportation at any           
                time after January 1, 1990; and                                
                    (C) is not listed in Department of Transportation          
                Orders 89-9-37 and 89-12-52 as a place ineligible for          
                compensation under this subchapter.                            
                (2) "enhanced essential air service" means scheduled           
            air transportation to an eligible place of a higher level          
            or quality than basic essential air service described in           
            section 41732 of this title.                                       
                (3) "hub airport" means an airport that each year has          
            at least .25 percent of the total annual boardings in the          
            United States.                                                     
                (4) "nonhub airport" means an airport that each year           
            has less than .05 percent of the total annual boardings in         
            the United States.                                                 
                (5) "small hub airport" means an airport that each year        
            has at least .05 percent, but less than .25 percent, of the        
            total annual boardings in the United States.                       
            (b) Limitation on Authority To Decide a Place Not an               
      Eligible Place. -- The Secretary of Transportation may not decide        
      that a place described in subsection (a)(1) of this section is           
      not an eligible place on the basis of a passenger subsidy at that        
      place or on another basis that is not specifically stated in this        
      subchapter.                                                              
                                                                               
      Sec. 41732. Basic essential air service                                  
            (a) General. -- Basic essential air service provided under         
      section 41733 of this title is scheduled air transportation of           
      passengers and cargo --                                                  
                (1) to a hub airport that has convenient connecting or         
            single-plane air service to a substantial number of                
            destinations beyond that airport; or                               
                (2) to a small hub or nonhub airport, when in Alaska or        
            when the nearest hub airport is more than 400 miles from an        
            eligible place.                                                    
            (b) Minimum Requirements. -- Basic essential air service           
      shall include at least the following:                                    
                (1)(A) for a place not in Alaska, 2 daily round trips 6        
            days a week, with not more than one intermediate stop on           
            each flight; or                                                    
                (B) for a place in Alaska, a level of service at least         
            equal to that provided in 1976 or 2 round trips a week,            
            whichever is greater, except that the Secretary of                 
            Transportation and the appropriate State authority of              
            Alaska may agree to a different level of service after             
            consulting with the affected community.                            
                (2) flights at reasonable times considering the needs          
            of passengers with connecting flights at the airport and at        
            prices that are not excessive compared to the generally            
            prevailing prices of other air carriers for like service           
            between similar places.                                            
                (3) for a place not in Alaska, service provided in an          
            aircraft with an effective capacity of at least 15                 
            passengers if the average daily boardings at the place in          
            any calendar year from 1976-1986 were more than 11                 
            passengers unless --                                               
                    (A) that level-of-service requirement would require        
                paying compensation in a fiscal year under section             
                41733(d) or 41734(d) or (e) of this title for the place        
                when compensation otherwise would not have been paid           
                for that place in that year; or                                
                    (B) the affected community agrees with the                 
            Secretary in writing to the use of smaller aircraft to             
            provide service to the place.                                      
                (4) service accommodating the estimated passenger and          
            property traffic at an average load factor, for each class         
            of traffic considering seasonal demands for the service, of        
            not more than --                                                   
                    (A) 50 percent; or                                         
                    (B) 60 percent when service is provided by aircraft        
                with more than 14 passenger seats.                             
                (5) service provided in aircraft with at least 2               
            engines and using 2 pilots, unless scheduled air                   
            transportation has not been provided to the place in               
            aircraft with at least 2 engines and using 2 pilots for at         
            least 60 consecutive operating days at any time since              
            October 31, 1978.                                                  
                (6) service provided by pressurized aircraft when the          
            service is provided by aircraft that regularly fly above           
            8,000 feet in altitude.                                            
                                                                               
      Sec. 41733. Level of basic essential air service                         
            (a) Decisions Made Before October 1, 1988. -- For each             
      eligible place for which a decision was made before October 1,           
      1988, under section 419 of the Federal Aviation Act of 1958,             
      establishing the level of essential air transportation, the level        
      of basic essential air service for that place shall be the level         
      established by the Secretary of Transportation for that place by         
      not later than December 29, 1988.                                        
            (b) Decisions Not Made Before October 1, 1988. -- (1) The          
      Secretary shall decide on the level of basic essential air               
      service for each eligible place for which a decision was not made        
      before October 1, 1988, establishing the level of essential air          
      transportation, when the Secretary receives notice that service          
      to that place will be provided by only one air carrier.  The             
      Secretary shall make the decision by the last day of the 6-month         
      period beginning on the date the Secretary receives the notice.          
      The Secretary may impose notice requirements necessary to carry          
      out this subsection.  Before making a decision, the Secretary            
      shall consider the views of any interested community and the             
      appropriate State authority of the State in which the community          
      is located.                                                              
            (2) Until the Secretary has made a decision on a level of          
      basic essential air service for an eligible place under this             
      subsection, the Secretary, on petition by an appropriate                 
      representative of the place, shall prohibit an air carrier from          
      ending, suspending, or reducing air transportation to that place         
      that appears to deprive the place of basic essential air service.        
            (c) Availability of Compensation. -- (1) If the Secretary          
      decides that basic essential air service will not be provided to         
      an eligible place without compensation, the Secretary shall              
      provide notice that an air carrier may apply to provide basic            
      essential air service to the place for compensation under this           
      section. In selecting an applicant, the Secretary shall consider,        
      among other factors --                                                   
                (A) the demonstrated reliability of the applicant in           
            providing scheduled air service;                                   
                (B) the contractual and marketing arrangements the             
            applicant has made with a larger carrier to ensure service         
            beyond the hub airport;                                            
                (C) the interline arrangements that the applicant has          
            made with a larger carrier to allow passengers and cargo of        
            the applicant at the hub airport to be transported by the          
            larger carrier through one reservation, ticket, and baggage        
            check-in;                                                          
                (D) the preferences of the actual and potential users          
            of air transportation at the eligible place, giving                
            substantial weight to the views of the elected officials           
            representing the users; and                                        
                (E) for an eligible place in Alaska, the experience of         
            the applicant in providing, in Alaska, scheduled air               
            service, or significant patterns of non-scheduled air              
            service under an exemption granted under section 40109(a)          
            and (c)-(h) of this title.                                         
            (2) Under guidelines prescribed under section 41737(a) of          
      this title, the Secretary shall pay the rate of compensation for         
      providing basic essential air service under this section and             
      section 41734 of this title.                                             
            (d) Compensation Payments. -- The Secretary shall pay              
      compensation under this section at times and in the way the              
      Secretary decides is appropriate.  The Secretary shall end               
      payment of compensation to an air carrier for providing basic            
      essential air service to an eligible place when the Secretary            
      decides the compensation is no longer necessary to maintain basic        
      essential air service to the place.                                      
            (e) Review. -- The Secretary shall review periodically the         
      level of basic essential air service for each eligible place.            
      Based on the review and consultations with an interested                 
      community and the appropriate State authority of the State in            
      which the community is located, the Secretary may make                   
      appropriate adjustments in the level of service.                         
                                                                               
      Sec. 41734. Ending, suspending, and reducing basic essential air         
      service                                                                  
            (a) Notice Required. -- An air carrier may end, suspend, or        
      reduce air transportation to an eligible place below the level of        
      basic essential air service established for that place under             
      section 41733 of this title only after giving the Secretary of           
      Transportation, the appropriate State authority, and the affected        
      communities at least 90 days' notice before ending, suspending,          
      or reducing that transportation.                                         
            (b) Continuation of Service for 30 Days After Notice               
      Period. -- If at the end of the notice period under subsection           
      (a) of this section the Secretary has not found another air              
      carrier to provide basic essential air service to the eligible           
      place, the Secretary shall require the carrier providing notice          
      to continue to provide basic essential air service to the place          
      for an additional 30-day period or until another carrier begins          
      to provide basic essential air service to the place, whichever           
      occurs first.                                                            
            (c) Continuation of Service for Additional 30-Day                  
      Periods. -- If at the end of the 30-day period under subsection          
      (b) of this section the Secretary decides another air carrier            
      will not provide basic essential air service to the place on a           
      continuing basis, the Secretary shall require the carrier                
      providing service to continue to provide service for additional          
      30-day periods until another carrier begins providing service on         
      a continuing basis.  At the end of each 30-day period, the               
      Secretary shall decide if another carrier will provide service on        
      a continuing basis.                                                      
            (d) Continuation of Compensation After Notice Period. -- If        
      an air carrier receiving compensation under section 41733 of this        
      title for providing basic essential air service to an eligible           
      place is required to continue to provide service to the place            
      under this section after the 90-day notice period under                  
      subsection (a) of this section, the Secretary shall continue to          
      pay that compensation after the last day of that period.  The            
      Secretary shall pay the compensation until the Secretary finds           
      another carrier to provide the service to the place or the 90th          
      day after the end of that notice period, whichever is earlier.           
      If, after the 90th day after the end of the 90-day notice period,        
      the Secretary has not found another carrier to provide the               
      service, the  carrier required to continue to provide that               
      service shall receive compensation sufficient --                         
                (1) to pay for the fully allocated actual cost to the          
            carrier of performing the basic essential air service that         
            was being provided when the 90-day notice was given under          
            subsection (a) of this section plus a reasonable return on         
            investment that is at least 5 percent of operating                 
            costs; and                                                         
                (2) to provide the carrier an additional return that           
            recognizes the demonstrated additional lost profits from           
            opportunities foregone and the likelihood that those lost          
            profits increase as the period during which the carrier is         
            required to provide the service continues.                         
            (e) Compensation to Air Carriers Originally Providing              
      Service Without Compensation. -- If the Secretary requires an air        
      carrier providing basic essential air service to an eligible             
      place without compensation under section 41733 of this title to          
      continue providing that service after the 90-day notice period           
      required by subsection (a) of this section, the Secretary shall          
      provide the carrier with compensation after the end of the 90-day        
      notice period that is sufficient --                                      
                (1) to pay for the fully allocated actual cost to the          
            carrier of performing the basic essential air service that         
            was being provided when the 90-day notice was given under          
            subsection (a) of this section plus a reasonable return on         
            investment that is at least 5 percent of operating                 
            costs; and                                                         
                (2) to provide the carrier an additional return that           
            recognizes the demonstrated additional lost profits from           
            opportunities foregone and the likelihood that those lost          
            profits increase as the period during which the carrier is         
            required to provide the service continues.                         
            (f) Finding Replacement Carriers. -- When the Secretary            
      requires an air carrier to continue to provide basic essential           
      air service to an eligible place, the Secretary shall continue to        
      make every effort to find another carrier to provide at least            
      that basic essential air service to the place on a continuing            
      basis.                                                                   
            (g) Transfer of Authority. -- If an air carrier, providing         
      basic essential air service under section 41733 of this title            
      between an eligible place and an airport at which the                    
      Administrator of the Federal Aviation Administration                     
      limits the number of instrument flight rule takeoffs and landings        
      of aircraft, provides notice under subsection (a) of this section        
      of an intention to end, suspend, or reduce that service and              
      another carrier is found to provide the service, the Secretary           
      shall require the carrier providing notice to transfer any               
      operational authority the carrier has to land or take off at that        
      airport related to the service to the eligible place to the              
      carrier that will provide the service, if --                             
                (1) the carrier that will provide the service needs the        
            authority; and                                                     
                (2) the authority to be transferred is being used only         
            to provide air service to the eligible place.                      
                                                                               
      Sec. 41735.  Enhanced essential air service                              
            (a) Proposals. -- (1) A State or local government may              
      submit a proposal to the Secretary of Transportation for enhanced        
      essential air service to an eligible place for which basic               
      essential air service is being provided under section 41733 of           
      this title.  The proposal shall --                                       
                (A) specify the level and type of enhanced essential           
            air service the State or local government considers                
            appropriate; and                                                   
                (B) include an agreement related to compensation               
            required for the proposed service.                                 
            (2) The agreement submitted under paragraph (1)(B) of this         
      subsection shall provide that --                                         
                (A) the State or local government or a person pay 50           
            percent of the compensation required for the proposed              
            service and the United States Government pay the remaining         
            50 percent; or                                                     
                (B)(i) the Government pay 100 percent of the                   
            compensation; and                                                  
            (ii) if the proposed service is not successful for at              
            least a 2-year period under the criteria prescribed by             
            the Secretary under paragraph (3) of this subsection,              
            the eligible place is not eligible for air service or              
            air transportation for which compensation is paid by               
                the Secretary under this subchapter.                           
            (3) The Secretary shall prescribe by regulation objective          
      criteria for deciding whether enhanced essential air service to          
      an eligible place under this section is successful in terms of --        
                (A) increasing passenger usage of the airport                  
            facilities at the place; and                                       
                (B) reducing the amount of compensation provided by the        
            Secretary under this subchapter for that service.                  
            (b) Decisions. -- Not later than 90 days after receiving a         
      proposal under subsection (a) of this section, the Secretary             
      shall --                                                                 
                (1) approve the proposal if the Secretary decides the          
            proposal is reasonable; or                                         
                (2) if the Secretary decides the proposal is not               
            reasonable, disapprove the proposal and notify the State or        
            local government of the disapproval and the reasons for the        
            disapproval.                                                       
            (c) Compensation Payments. -- (1) The Secretary shall pay          
      compensation under this section when and in the way the Secretary        
      decides is appropriate.  Compensation for enhanced essential air         
      service under this section may be paid only for the costs                
      incurred in providing air service to an eligible place that are          
      in addition to the costs incurred in providing basic essential           
      air service to the place under section 41733 of this title.  The         
      Secretary shall continue to pay compensation under this section          
      only as long as --                                                       
                (A) the air carrier maintains the level of enhanced            
            essential air service;                                             
                (B) the State or local government or person agreeing to        
            pay compensation under this section continues to pay the           
            compensation; and                                                  
                (C) the Secretary decides the compensation is necessary        
            to maintain the service to the place.                              
            (2) The Secretary may require the State or local government        
      or person agreeing to pay compensation under this section to make        
      advance payments or provide other security to ensure that timely         
      payments are made.                                                       
            (d) Review. -- (1) The Secretary shall review periodically         
      the enhanced essential air service provided to each eligible             
      place under this section.                                                
            (2) For service for which the Government pays 50 percent of        
      the compensation, based on the review and consultation with the          
      affected community and the State or local government or person           
      paying the remaining 50 percent of the compensation, the                 
      Secretary shall make appropriate adjustments in the type and             
      level of service to the place.                                           
            (3) For service for which the Government pays 100 percent          
      of the compensation, based on the review and consultation with           
      the State or local government submitting the proposal, the               
      Secretary shall decide whether the service has succeeded for at          
      least a 2-year period under the criteria prescribed under                
      subsection (a)(3) of this section.  If unsuccessful, the                 
      place is not eligible for air service or air transportation for          
      which compensation is paid by the Secretary under this                   
      subchapter.                                                              
            (e) Ending, Suspending, and Reducing Air Transportation. --        
      An air carrier may end, suspend, or reduce air transportation to         
      an eligible place below the level of enhanced essential air              
      service established for that place by the Secretary under this           
      section only after giving the Secretary, the affected                    
      community, and the State or local government or person paying            
      compensation for that service at least 30 days' notice before            
      ending, suspending, or reducing the service.  This subsection            
      does not relieve the carrier of an obligation under section 41734        
      of this title.                                                           
                                                                               
      Sec. 41736.  Air transportation to noneligible places                    
            (a) Proposals and Decisions. -- (1) A State or local               
      government may propose to the Secretary of Transportation that           
      the Secretary provide compensation to an air carrier to provide          
      air transportation to a place that is not an eligible place under        
      this subchapter.  Not later than 90 days after receiving a               
      proposal under this section, the Secretary shall --                      
                (A) decide whether to designate the place as eligible          
            to receive compensation under this section; and                    
                (B)(i) approve the proposal if the State or local              
            government or a person is willing and able to pay 50               
            percent of the compensation for providing the                      
            transportation, and notify the State or local government of        
            the approval; or                                                   
                (ii) disapprove the proposal if the Secretary decides          
            the proposal is not reasonable under paragraph (2) of              
            this subsection, and notify the State or local                     
            government of the disapproval and the reasons for the              
                disapproval.                                                   
            (2) In deciding whether a proposal is reasonable, the              
      Secretary shall consider, among other factors --                         
                (A) the traffic-generating potential of the place;             
                (B) the cost to the United States Government of                
            providing the  proposed transportation; and                        
                (C) the distance of the place from the closest hub             
            airport.                                                           
            (b) Approval for Certain Air Transportation. --                    
      Notwithstanding subsection (a)(1)(B) of this section, the                
      Secretary shall approve a proposal under this                            
      section to compensate an air carrier for providing air                   
      transportation to a place in the 48 contiguous States or the             
      District of Columbia and designate the place as eligible for             
      compensation under this section if --                                    
                (1) at any time before October 23, 1978, the place was         
            served by a carrier holding a certificate under section 401        
            of the Federal Aviation Act of 1958;                               
                (2) the place is more than 50 miles from the nearest           
            small hub airport or an eligible place;                            
                (3) the place is more than 150 miles from the nearest          
            hub airport; and                                                   
                (4) the State or local government submitting the               
            proposal or a person is willing and able to pay 25 percent         
            of the cost of providing the compensated transportation.           
            (c) Level of Air Transportation. -- (1) If the Secretary           
      designates a place under subsection (a)(1) of this section as            
      eligible for compensation under this section, the Secretary shall        
      decide, not later than 6 months after the date of the                    
      designation, on the level of air transportation to be provided           
      under this section.  Before making a decision, the Secretary             
      shall consider the views of any interested community, the                
      appropriate State authority of the State in which the place is           
      located, and the State or local government or person agreeing to         
      pay compensation for the transportation under subsection (b)(4)          
      of this section.                                                         
            (2) After making the decision under paragraph (1) of this          
      subsection, the Secretary shall provide notice that any air              
      carrier that is willing to provide the level of air                      
      transportation established under paragraph (1) for a place               
      may submit an application to provide the transportation.  In             
      selecting an applicant, the Secretary shall consider, among other        
      factors --                                                               
                (A) the factors listed in section 41733(c)(1) of this          
            title; and                                                         
                (B) the views of the State or local government or              
            person agreeing to pay compensation for the transportation.        
            (d) Compensation Payments. -- (1) The Secretary shall pay          
      compensation under this section when and in the way the Secretary        
      decides is appropriate.  The Secretary shall continue to pay             
      compensation under this section only as long as --                       
                (A) the air carrier maintains the level of air                 
            transportation established by the Secretary under                  
            subsection (c)(1) of this section;                                 
                (B) the State or local government or person agreeing to        
            pay compensation for transportation under this section             
            continues to pay that compensation; and                            
                (C) the Secretary decides the compensation is necessary        
            to maintain the transportation to the place.                       
            (2) The Secretary may require the State or local government        
      or person agreeing to pay compensation under this section                
      to make advance payments or provide other security to                    
      ensure that timely payments are made.                                    
            (e) Review. -- The Secretary shall review periodically the         
      level of air transportation provided under this section.  Based          
      on the review and consultation with any interested community, the        
      appropriate State authority of the State in which the community          
      is located, and the State or local government or person paying           
      compensation under this section, the Secretary may make                  
      appropriate adjustments in the level of transportation.                  
            (f) Withdrawal of Eligibility Designations. -- After               
      providing notice and an opportunity for interested persons to            
      comment, the Secretary may withdraw the designation of a place           
      under subsection (a)(1) of this section as eligible to receive           
      compensation under this section if the place has received                
      air transportation under this section for at least 2 years and           
      the Secretary decides the withdrawal would be in the public              
      interest.  The Secretary by regulation shall prescribe standards         
      for deciding whether the withdrawal of a designation under this          
      subsection is in the public interest.  The standards shall               
      include the factors listed in subsection (a)(2) of this section.         
            (g) Ending, Suspending, and Reducing Air Transportation. --        
      An air carrier providing air transportation for compensation             
      under this section may end, suspend, or reduce that                      
      transportation below the level of transportation established by          
      the Secretary under this section only after giving the Secretary,        
      the affected community, and the State or local government or             
      person paying compensation under this section at least 30 days'          
      notice before ending, suspending, or reducing the transportation.        
                                                                               
      Sec. 41737. Compensation guidelines, limitations, and claims             
            (a) Compensation Guidelines. -- (1) The Secretary of               
      Transportation shall prescribe guidelines governing the rate of          
      compensation payable under this subchapter.  The guidelines shall        
      be used to determine the reasonable amount of compensation               
      required to ensure the continuation of air service or air                
      transportation under this subchapter.  The guidelines shall --           
                (A) provide for a reduction in compensation when an air        
            carrier does not provide service or transportation agreed          
            to be provided;                                                    
                (B) consider amounts needed by an air carrier to               
            promote public use of the service or transportation for            
            which compensation is being paid; and                              
                (C) include expense elements based on representative           
            costs of air carriers providing scheduled air                      
            transportation of passengers, property, and mail on                
            aircraft of the type the Secretary decides is appropriate          
            for providing the service or transportation for which              
            compensation is being provided.                                    
            (2) Promotional amounts described in paragraph (1)(B) of           
      this subsection shall be a special, segregated element of                
      the compensation provided to a carrier under this                        
      subchapter.                                                              
            (b) Required Finding. -- The Secretary may pay compensation        
      to an air carrier for providing air service or air transportation        
      under this subchapter only if the Secretary finds the carrier is         
      able to provide the service or transportation in a reliable way.         
            (c) Claims. -- Not later than 15 days after receiving a            
      written claim from an air carrier for compensation under this            
      subchapter, the Secretary shall --                                       
                (1) pay or deny the United States Government's share of        
            a claim; and                                                       
                (2) if denying the claim, notify the carrier of the            
            denial and the reasons for the denial.                             
            (d) Authority To Make Agreements and Incur Obligations. --         
                (1) The Secretary may make agreements and incur                
            obligations from the Airport and Airway Trust Fund                 
            established under section 9502 of the Internal Revenue             
            Code of 1986 (26 U.S.C. 9502) to pay compensation under            
            this subchapter.  An agreement by the Secretary under              
            this subsection is a contractual obligation of the                 
            Government to pay the Government's share of the                    
            compensation.                                                      
                (2) Not more than $38,600,000 is available to the              
            Secretary out of the Fund for each of the fiscal years             
            ending September 30, 1993-1998, to incur obligations under         
            this section.  Amounts made available under this section           
            remain available until expended.                                   
                                                                               
      Sec. 41738. Fitness of air carriers                                      
            Notwithstanding section 40109(a) and (c)-(h) of this title,        
      an air carrier may provide air service to an eligible place or           
      air transportation to a place designated under section 41736 of          
      this title only when the Secretary of Transportation decides             
      that --                                                                  
                (1) the carrier is fit, willing, and able to perform           
            the service or transportation; and                                 
                (2) aircraft used to provide the service or                    
            transportation, and operations related to the service or           
            transportation, conform to the safety standards prescribed         
            by the Administrator of the Federal Aviation                       
            Administration.                                                    
                                                                               
      Sec. 41739. Air carrier obligations                                      
            If at least 2 air carriers make an agreement to operate            
      under or use a single carrier designator code to provide air             
      transportation, the carrier whose code is being used shares              
      responsibility with the other carriers for the quality of                
      transportation provided the public under the code by the other           
      carriers.                                                                
                                                                               
      Sec. 41740. Joint proposals                                              
            The Secretary of Transportation shall encourage the                
      submission of joint proposals by 2 or more air carriers for              
      providing air service or air transportation under this subchapter        
      through arrangements that maximize the service or transportation         
      to and from major destinations beyond the hub.                           
                                                                               
        Sec. 41741. Insurance                                                  
            The Secretary of Transportation may pay an air carrier             
      compensation under this subchapter only when the carrier files           
      with the Secretary an insurance policy or self-insurance plan            
      approved by the Secretary.  The policy or plan must be sufficient        
      to pay for bodily injury to, or death of, an individual, or for          
      loss of or damage to property of others, resulting from the              
      operation of aircraft, but not more than the amount of the policy        
      or plan limits.                                                          
                                                                               
        Sec. 41742. Ending effective date                                      
            This subchapter is not effective after September 30, 1998.