Title 49 — TransportationRelease 119-73
§41737 Compensation guidelines, limitations, and claims
Title 49 › Subtitle SUBTITLE VII— - AVIATION PROGRAMS › Part PART A— - AIR COMMERCE AND SAFETY › Subpart subpart ii— - economic regulation › Chapter CHAPTER 417— - OPERATIONS OF CARRIERS › Subchapter SUBCHAPTER II— - SMALL COMMUNITY AIR SERVICE › § 41737
Summary
The Secretary of Transportation must make rules for how much the government will pay airlines to keep air service going. The rules must set reasonable pay based on typical costs for the kind of planes used and must treat promotional money as a separate part of payment. Pay can be reduced if an airline fails to provide agreed service. The rules may include bonuses to encourage better service, such as improving on-time performance, cutting cancellations, keeping fares reasonable (including joint fares beyond the hub), making good connections beyond hubs, and boosting marketing. The Secretary may also offer long-term contracts to help keep service to eligible places. The Secretary may only pay carriers that can provide reliable service. When an airline files a written claim, the Secretary must pay or deny the government’s share within 15 days and explain any denial. The Secretary may use the Airport and Airway Trust Fund to pay, and such agreements are government payment contracts. The Secretary may raise compensation right away if carriers face significantly increased costs and may later reverse that raise if costs fall back. Significantly increased costs — a total unit cost increase of 10 percent or more versus the compensation rate, shown by the carrier’s internal audit and lasting at least 2 consecutive months.
Full Legal Text
Title 49, §41737
Transportation — Source: USLM XML via OLRC
(a)(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;
(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;
(D)include provisions under which the Secretary may encourage an air carrier to improve air service for which compensation is being paid under this subchapter by incorporating financial incentives in an essential air service contract based on specified performance goals, including goals related to improving on-time performance, reducing the number of flight cancellations, establishing reasonable fares (including joint fares beyond the hub airport), establishing convenient connections to flights providing service beyond hub airports, and increasing marketing efforts; and
(E)include provisions under which the Secretary may execute a long-term essential air service contract to encourage an air carrier to provide air service to an eligible place if it would be in the public interest to do so.
(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)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)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)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.
(e)(1)If the Secretary determines that air carriers are experiencing significantly increased costs in providing air service or air transportation for which compensation is being paid under this subchapter, the Secretary may increase the rates of compensation payable under this subchapter without regard to any agreement or requirement relating to the renegotiation of contracts or any notice requirement under section 41734.
(2)If an adjustment is made under paragraph (1), and total unit costs subsequently decrease to at least the total unit cost reflected in the compensation rate, then the Secretary may reverse the adjustment previously made under paragraph (1) without regard to any agreement or requirement relating to the renegotiation of contracts or any notice requirement under section 41734.
(3)In this subsection, the term “significantly increased costs” means a total unit cost increase (but not increases in individual unit costs) of 10 percent or more in relation to the total unit cost reflected in the compensation rate, based on the carrier’s internal audit of its financial statements if such cost increase is incurred for a period of at least 2 consecutive months.
Legislative History
Notes & Related Subsidiaries
Historical and Revision Notes
Revised SectionSource (U.S. Code)Source (Statutes at Large) 41737(a)49 App.:1389(f).Aug. 23, 1958, Pub. L. 85–726, 72 Stat. 731, § 419(e)(2)–(g); added Oct. 24, 1978, Pub. L. 95–504, § 33(a), 92 Stat. 1732; Dec. 8, 1983, Pub. L. 98–213, § 10, 97 Stat. 1461; Oct. 4, 1984, Pub. L. 98–443, § 9(r), 98 Stat. 1708; restated Dec. 30, 1987, Pub. L. 100–223, § 202(a)(1), (2), (b)(1), 101 Stat. 1507, 1515. 41737(b)49 App.:1389(e)(2). 41737(c)49 App.:1389(g). 41737(d)49 App.:1389(l).Aug. 23, 1958, Pub. L. 85–726, 72 Stat. 731, § 419(l); added Nov. 5, 1990, Pub. L. 101–508, § 9113(b)(1), 104 Stat. 1388–363. In subsection (a)(1), before clause (A), the word “prescribe” is substituted for “establish” to eliminate an executed word. The words “air service or air transportation under this subchapter” are substituted for “air service under this section” for consistency with the source provisions restated in section 41733, 41735, and 41736 of the revised title. In clause (C), the words “the service or transportation for which compensation is being provided” are substituted for “such service” for clarity. In subsection (a)(2), the words “compensation provided to a carrier under this subchapter” are substituted for “required compensation” for clarity. In subsection (b), the words “air service or air transportation” are substituted for “air service” for consistency with the source provisions restated in section 41733, 41735, and 41736 of the revised title. In subsection (d)(2), the reference to fiscal year 1992 is omitted as obsolete.
Editorial Notes
Amendments
2024—Subsec. (d). Pub. L. 118–63 struck out par. (1) designation before “The Secretary” and par. (2) which read as follows: “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.” 2012—Subsec. (a)(1)(D), (E). Pub. L. 112–95 added subpars. (D) and (E). 2003—Subsec. (e). Pub. L. 108–176 added subsec. (e).
Statutory Notes and Related Subsidiaries
Effective Date
of 2003 Amendment Pub. L. 108–176, title IV, § 402(b), Dec. 12, 2003, 117 Stat. 2543, provided that: “The amendment made by subsection (a) [amending this section] shall take effect 30 days after the date of enactment of this Act [Dec. 12, 2003].” Emergency Across-the-Board Adjustment to Compensation for Significantly Increased Costs Pub. L. 112–95, title IV, § 426(a), Feb. 14, 2012, 126 Stat. 98; Pub. L. 115–254, div. B, title V, § 539(s)(1), Oct. 5, 2018, 132 Stat. 3371, provided that: “Subject to the availability of funds, the Secretary of Transportation may increase the rates of compensation payable to air carriers under subchapter II of chapter 417 of title 49, United States Code, to compensate such carriers for increased aviation fuel costs without regard to any agreement or requirement relating to the renegotiation of contracts or any notice requirement under section 41734 of such title.” Deadline for Issuance of Revised Guidance Pub. L. 112–95, title IV, § 427(b), Feb. 14, 2012, 126 Stat. 99, provided that: “Not later than 1 year after the date of enactment of this Act [Feb. 14, 2012], the Secretary of Transportation shall issue revised guidelines governing the rate of compensation payable under subchapter II of chapter 417 that incorporate the
Amendments
made by this section [amending this section].”
Reference
Citations & Metadata
Citation
49 U.S.C. § 41737
Title 49 — Transportation
Last Updated
Apr 6, 2026
Release point: 119-73