[6] Cape Air was co-founded in 1988 by company pilots Craig Stewart and Dan Wolf, and investor Grant Wilson.

The startup team, led by Pacific Administrator, Captain Russell Price,[citation needed] launched scheduled service in July 2004 with the three ATR aircraft and two of the C402.

With the help of an intrastate minimum revenue guarantee, Cape Air expanded into Indiana on 13 November 2007, offering flights from Indianapolis to Evansville and South Bend.

Cape Air began flights between Florida Keys Marathon Airport and Fort Myers in 2008 but this service was discontinued a year later.

The airline continued its expansion into New York when they started to fly the EAS routes out of Albany to Watertown, Ogdensburg, and Massena, and Rutland Airport.

Cape Air commenced service from Rockland, Maine, and Lebanon, New Hampshire, to Boston on November 1, 2008.

Cape Air submitted bids to offer service between Newport and Portland in the state of Oregon.

The airline was hoping to be selected by the Newport city council to receive a financial grant to jump-start the service.

[15] However, in September 2013, the DOT selected Cape Air to provide EAS service between Billings and five communities in Eastern Montana, including, Sidney, Glendive, Glasgow, Havre and Wolf Point.

Cape Air carried 750,000 passengers in 2014 and offered up to 550 daily flights, achieving revenues of $120 million.

[1] Cape Air is the largest independent regional airline in the United States, with new routes driving steady increases over time.

Cape Air also recruits pilots over 65, the mandatory retirement age for FAR Part 121 airlines, so long as they maintain a first-class medical.

[23] Customers also get their baggage transferred and Cape Air and JetBlue Airways are located in the same terminal in Boston and San Juan which allows for an easy connection.

[24] Cape Air has been a longtime partner with United Airlines (UA) and offers a code sharing agreement for many destinations.

[25] Cape Air partners with the following airlines to provide interline flow-through ticketing and baggage transfers:[26] The airline operates Cape Air Boston Harbor Seaplane Base near Logan International Airport, (IATA: BNH, FAA LID: MA87).