Order 2016-12-22 Served: December 28, 2016 DEPARTMENT UNITED OF STATES TRANSPORTATION OF AMERICA UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C. Issued by the Department of Transportation on the 28 th day of December, 2016 Application of PAKLOOK AIR, INC. d/b/a AIRLIFT ALASKA Docket DOT-OST-2016-0126 for a certificate of public convenience and necessity pursuant to 49 U.S.C. 41102 to engage in interstate air transportation of persons, property, and mail Summary ORDER TO SHOW CAUSE PROPOSING ISSUANCE OF CERTIFICATE AUTHORITY By this order, we tentatively conclude that Paklook Air, Inc. d/b/a Airlift Alaska ( Airlift ), is a citizen of the United States, is fit, willing, and able to engage in interstate scheduled air transportation of persons, property, and mail, and should be issued a certificate of public convenience and necessity authorizing such operations, subject to conditions. Background Section 41102 of Title 49 of the United States Code ( the Transportation Code ) directs us to determine whether applicants for certificate authority to provide interstate scheduled air transportation of persons, property, and mail are fit, willing, and able to perform such transportation and to comply with the Transportation Code and the regulations of the Department. In making fitness findings, the Department uses a three-part test that reconciles the Airline Deregulation Act's liberal entry policy with Congress' concern for operational safety and consumer protection. The three areas of inquiry that must be addressed in order to determine a company's fitness are whether the applicant (1) will have the managerial skills and technical ability to conduct the proposed operations, (2) will have access to resources sufficient to commence operations without posing an undue risk to consumers, and (3) will comply with the Transportation Code and regulations imposed by Federal and State agencies. We must also find that the applicant is a U.S. citizen. On July 18, 2016, Airlift filed an application in Docket DOT-OST-2016-0126 requesting a certificate of public convenience and necessity authorizing it to engage in interstate scheduled air
2 transportation of persons, property, and mail. Airlift accompanied its application with the information required by 14 CFR 204.3 of our regulations for an examination of its fitness. 1 No answers opposing Airlift s application were filed and no special issues regarding the applicant have come to our attention. Under these circumstances, we propose to decide the issue of the applicant's fitness on the basis of the written record. After reviewing the application and other information available to us, as discussed below, we tentatively conclude that Airlift is a U.S. citizen and is fit, willing, and able to conduct interstate scheduled passenger air transportation as set forth in this order and subject to conditions. We will, however, give interested persons an opportunity to show cause why we should not adopt as final the tentative findings and conclusions stated herein. The Company FITNESS Airlift was incorporated under the laws of the State of Alaska on April 1, 2003. The company holds authority from the Federal Aviation Administration ( FAA ) authorizing it to engage in operations under Part 135 of the Federal Aviation Regulations ( FARs ). Airlift, an intrastate Alaskan operator, conducts its operations from its base in Kodiak, Alaska, using a fleet of five small aircraft, with seating capacity ranging of 5 or 9 seats. Mr. Wes Osowski, the company s President and Chief Pilot, is the sole-owner of Airlift. He is a U.S. citizen. Managerial Competence Airlift s management and key technical personnel consist of the following individuals: Wes Osowski President and Chief Pilot Eoghan P. Joyce Director of Operations Louis Morris Director of Maintenance Mr. Wes Osowski, an AirFrame and Powerplant Mechanic and Airline Transport Pilot, has owned Airlift since its inception in 2003. Mr. Osowski also previously owned Servant Air, Inc. ( Servant Air ), a U.S. certificated air carrier, until he sold the company in July 2016. Mr. Osowski held numerous positions while owner of Servant Air, including Pilot, Director of Operations, and Chief Pilot (2004-2016). Prior to joining Servant Air, Mr. Osowski served as the Director of Maintenance at Andrew Airways (2001-2004). He was previously employed as Branch Manager and Loan Officer at National Bank of Alaska (1996-2001), as a Pilot at Airlift Alaska (1990-1996), and as a Ramp Hand and Pilot at Trail Ridge Air (1987-1990). Mr. Eoghan P. Joyce, an Airline Transport Pilot, joined Airlift in October 2016 as its Director of Operations. Prior to joining Airlift, he was employed as a Pilot at Servant Air (2015-2016). Before this, he owned and operated Valley Aviation, LLC, a flight training company (2011-2015). Mr. Joyce was also previously employed as a Pilot at Ameriflight (2011), at Northern Aviation (2010-2011), and at Arctics Aviation (2008-2010). 1 Airlift filed additional information supplementing its application on October 6 and November 16, 2016.
3 Mr. Louis Morris, an Airframe and Powerplant Mechanic with more than 30 years of experience performing aviation maintenance, became Airlift s Director of Maintenance in 2015. Prior to this, he was employed as Director of Maintenance and as a Line Mechanic at Servant Air (2014-2015); as Director of Maintenance and part-time Line Mechanic at Island Air Service (2002-2014); and as Line Mechanic, Lead Mechanic, and Maintenance Supervisor at Peninsula Airways (1986-2001). In view of the experience and background of the applicant s key personnel, combined with the fact that the FAA also reviewed and approved the qualifications of all of these individuals with respect to Parts 119 and 135 of the FARs, 2 we tentatively conclude that Airlift has demonstrated that it has the management skills and technical ability to conduct its proposed services. Operating Plan and Financial Position If issued the certificate authority requested, Airlift intends to offer roundtrip once daily scheduled service between Kodiak, Alaska, on the one hand, and Old Harbor and Ouzinkie, Alaska, on the other hand, using its existing fleet of Cessna 207 aircraft configured for five passenger seats. Airlift offers this service on an intrastate basis now, and intends to add traffic from the U.S. Postal Service, as well as interstate passengers connecting from other air carriers at Kodiak. Airlift states that it does not expect to incur any pre-operating costs for its proposed operations since it already operates between Kodiak, Old Harbor, and Ouzinkie, Alaska, as an intrastate operator. Airlift s grant of interstate scheduled authority would permit the company to carry U.S. mail and allow it to partner with other interstate air carriers. Airlift expects to incur $243,000 in first-year operating expenses related to its interstate scheduled operations. We find Airlift s forecast to be reasonable and estimate that the company will need approximately $60,750 to meet our financial fitness test. 3 In support of its ability to finance its proposed interstate operations, Airlift provided current and historical income statements, as well as its current balance sheet. The current and historical income statements Airlift provided indicate that its most recent financial results from operations have been profitable. For calendar year 2015, Airlift reported net income of $70,036 on revenues of $941,204. As of June 15, 2016, the air carrier reported net income of $208,682 on revenues of $854,724. Airlift s June 15, 2016, balance sheet shows current assets and current liabilities of $181,942 and $117,897, respectively, giving the air carrier a positive working 2 Before authorizing an air carrier to conduct air transportation operations, the FAA also evaluates certain of the applicant s key personnel with respect to the minimum qualifications for those positions as prescribed in the FARs. The FAA s evaluation of these key personnel provides an added practical and in-person test of the skills and technical ability of these individuals. All of Airlift s key technical personnel have been approved by the FAA to hold their positions. 3 We have generally asked that new entrant applicants have resources sufficient to cover all pre-operating costs, plus a working capital reserve equal to the operating costs that would be incurred in three months of normal certificated operations. However, because projected operations during one or more of the first three months of anticipated actual air transportation services frequently do not include all costs of operations that will be incurred during a normal period of operations, it has been our practice to base our three-month standard on one quarter of the first year s operating cost forecast. In calculating available resources, projected revenues may not be used.
4 capital balance of $64,045 and a current ratio of 1.54:1. For this same period, the air carrier reported shareholder equity of $113,469. In light of the above, we tentatively conclude that Airlift has sufficient financial resources to commence its proposed operations without posing an undue risk to consumers or their funds. 4 Compliance Disposition Airlift states that there are no actions or outstanding judgments against it, its owners, its key personnel, or any relevant corporation, nor have there been any charges of unfair, deceptive, or anti-competitive business practices, or of fraud, felonys or antitrust violations brought against any of these parties in the past ten years. Additionally, Airlift states that it has not been involved in any accidents or incidents in the preceding year or at any time in the past, which remains under investigation by the FAA, the National Transportation Safety Board ( NTSB ), or the company itself. Moreover, none of its key personnel have been involved in an accident or incident in the year preceding its application or at any time in the past which remains under investigation by the FAA or the NTSB. Furthermore, there are no pending investigations, enforcement actions, or formal complaints filed by the Department against it, its key personnel, or persons having a substantial interest in it with respect to compliance with the Transportation Code or the Department s regulations. Our review has uncovered no other information which would reflect negatively on Airlift, its owners, or its key personnel. In addition, according to the FAA, Airlift is making satisfactory progress in working toward obtaining the required FAA authority for the operations it proposes and the agency knows of no reason why the air carrier should not be granted the authority it is seeking. In light of these circumstances, we tentatively find that Airlift has the proper regard for the laws and regulations governing its services to ensure that its aircraft and personnel conform to applicable safety standards and that acceptable consumer relations practices will be followed. CITIZENSHIP Section 41102 of the Transportation Code requires that certificates to engage in air transportation be held only by citizens of the United States as defined in 49 U.S.C. 40102(a)(15). That section requires that the President and two-thirds of the Board of Directors and other managing officers be U.S. citizens, that at least 75 percent of the outstanding voting stock be owned by U.S. citizens, and that the applicant must be under the actual control of U.S. citizens. Airlift is organized as an Alaskan corporation. All of the company s issued and outstanding stock is held by Mr. Wes Osowski, a U.S. citizen and the applicant s sole board member. In addition, all of Airlift s key personnel are citizens of the United States. Moreover, the company 4 As is our practice, prior to making any authority awarded to Airlift effective, we will require the company to provide updated information on its operating plans, as well as third-party verification that it has actually obtained the financial resources needed to meet our financial test.
5 has provided an affidavit attesting that it is a citizen of the United States within the meaning of the Transportation Code. Finally, our review of the applicant's citizenship has uncovered no other reason to suggest that control of Airlift rests with non-u.s. citizens. Based on the above, we tentatively conclude that Airlift is a citizen of the United States and is fit, willing, and able to conduct the operations it proposes. OBJECTIONS We will give interested persons 14 days following the service date of this order to show cause why the tentative findings and conclusions set forth here should not be made final; answers to objections will be due within 7 days thereafter. We expect such persons to direct their objections, if any, to the application and points at issue and to support such objections with detailed economic analyses. If an oral evidentiary hearing or discovery procedures are requested, the objector should state in detail why such a hearing or discovery is considered necessary, and what material issues of decisional fact the objector would expect to establish through a hearing or discovery that cannot be established in written pleadings. The objector should consider whether discovery procedures alone would be sufficient to resolve material issues of decisional fact. If so, the type of procedure should be specified (See Part 302, Rules 19 and 20); if not, the reasons why not should be explained. We will not entertain general, vague, or unsupported objections. If no substantive objections are filed, we will issue an order that will make final our tentative findings and conclusions with respect to Airlift s fitness and certification. CERTIFICATE CONDITIONS AND LIMITATIONS If Airlift is found fit and issued the certificate it seeks, its authority will not become effective until the company has fulfilled all requirements for effectiveness as set forth in the terms and conditions attached to its certificate. Among other things, this includes our receipt of evidence that Airlift has been certificated by the FAA to engage in the subject operations, a fully executed OST Form 6410 evidencing liability insurance coverage that meets the requirements of section 205.5(b) of our rules (14 CFR 205.5(b)), and a statement of any changes it may have undergone since its fitness was examined. In addition, consistent with the applicant s proposed operations, we propose to limit any authority issued to Airlift to operations conducted under Part 135. Should Airlift subsequently desire to acquire and operate larger aircraft that would require certification from the FAA under Part 121, it must first be determined fit for such operations. 5 Further, we remind Airlift of the requirements of 49 U.S.C. 41110(e). Specifically, that section requires that, once an air carrier is found fit initially, it must remain fit in order to hold its authority. To be assured that air carriers continue to be fit after effective authority has been issued to them, we require that they supply information describing any subsequent substantial changes they may undergo in areas affecting fitness. In this regard, should Airlift propose any 5 We note that the operation of larger aircraft could require the air carrier to have access to additional funds and hire additional management personnel.
6 substantial changes in its ownership, management, or operations, it must first comply with the requirements of section 204.5 of our rules. 6 The compliance of the company with this requirement is essential if we are to carry out our responsibilities under section 41110(e). 7 Finally, to aid the Department in monitoring the fitness of new air carriers, we have adopted a requirement that all newly certificated air carriers must submit a detailed progress report, within 45 days following the end of the first year of certificated operations to the Air Carrier Fitness Division. The report should include a description of the air carrier s current operations (number and type of aircraft, principal markets served, total number of full-time and part-time employees), a summary of how these operations have changed during the year, a discussion of any changes it anticipates from its current operations during its second year, current financial statements, 8 and a listing of current senior management and key technical personnel. The air carrier should also be prepared to meet with staff members of the Fitness Division to discuss its current and future operations. ACCORDINGLY: 1. We direct all interested persons to show cause why we should not issue an order making final the tentative findings and conclusions stated above and award a certificate to Paklook Air, Inc. d/b/a Airlift Alaska authorizing it to engage in interstate scheduled air transportation of persons, property, and mail, subject to the attached specimen Terms, Conditions, and Limitations. 2. We direct any interested persons having objections to the issuance of an order making final any of the proposed findings, conclusions, or the certificate award set forth here to file them with Department of Transportation Dockets, 1200 New Jersey Ave. SE, Room W12-140, Washington, D.C. 20590, in Docket DOT-OST-2016-0126, and serve them upon all persons listed in Attachment A no later than 14 days after the service date of this order. Answers to objections shall be filed no later than 7 days thereafter. 3. If timely and properly supported objections are filed, we will accord full consideration to the matters or issues raised by the objections before we take further action. 9 6 The air carrier may contact our Air Carrier Fitness Division to report proposed substantial changes in its operations, ownership, or management, and to determine what additional information, if any, will be required under section 204.5. Moreover, by notice dated July 21, 1998, the Department requested air carriers to provide a 30-day advance notification of any proposed change in ownership, restructuring, or recapitalization. If the air carrier fails to file the information or if the information fails to demonstrate that the air carrier will continue to be fit upon implementation of the substantial change, the Department may take such action as is appropriate, including enforcement action or steps to modify, suspend, or revoke the air carrier's economic authority. 7 We also remind Airlift about the requirements of section 204.7 of our rules. This section provides, among other things, that (1) the certificate authority granted to a company shall be revoked if the company does not commence actual flying operations under that authority within one year of the date of the Department s determination of its fitness; (2) if the company commences operations for which it was found fit and subsequently ceases such operations, it may not resume certificated operations unless its fitness has been redetermined; and (3) if the company does not resume such operations within one year of its cessation, its authority shall be revoked for dormancy. 8 These financial statements should include a balance sheet as of the end of the company s first full year of actual flight operations and a twelve-month income statement ending that same date. 9 Since we have provided for the filing of objections to this order, we will not entertain petitions for reconsideration.
7 4. In the event that no objections are filed, we will consider all further procedural steps to be waived and we will enter an order making final our tentative findings and conclusions. 5. We will serve a copy of this order on the persons listed in Attachment A. 6. We will publish a summary of this order in the Federal Register. By: JENNY T. ROSENBERG Acting Assistant Secretary for Aviation and International Affairs An electronic version of this document is available on the World Wide Web at: http://www.regulations.gov
Attachment SPECIMEN Terms, Conditions, and Limitations PAKLOOK AIR, INC. d/b/a AIRLIFT ALASKA is authorized to engage in interstate air transportation of persons, property, and mail between any point in any State, territory, or possession of the United States or the District of Columbia, and any other point in any of those entities. This authority is subject to the following provisions: (1) The authority to operate under this certificate will not become effective until six (business) days after the Department has received the following documents; provided, however, that the Department may stay the effectiveness of this authority at any time prior to that date: (a) A copy of the holder's Air Carrier Certificate and Operations Specifications authorizing such operations from the Federal Aviation Administration (FAA). (b) A certificate of insurance on OST Form 6410 evidencing liability insurance coverage meeting the requirements of 14 CFR 205.5(b) for all of its aircraft. (c) A statement of any changes the holder has undergone in its ownership, key personnel, operating plans, financial posture, or compliance history, since the date of the Show Cause Order in this case. (d) A revised list of pre-operating expenses already paid and those remaining to be paid, as well as independent verification that the holder has available to it funds sufficient to cover any remaining pre-operating expenses and to provide a working capital reserve equal to the operating costs that would be incurred in three months of operations. (2) Pending receipt of effective authority, the holder may not accept payment of any kind (i.e., cash, check, or credit card) or issue tickets for the operations proposed under this certificate, and any advertisement or listing of flights by the holder must prominently state: "This service is subject to receipt of government operating authority." (3) The holder shall at all times conduct its operations in accordance with the regulations prescribed by the Department of Transportation for the services authorized by this certificate, and with such other reasonable terms, conditions, and limitations as the Department of Transportation may prescribe in the public interest. (4) The holder's authority under this certificate is effective only to the extent that such operations are also authorized by the Federal Aviation Administration (FAA), and comply with
2 all U.S. Government requirements concerning security, including, but not limited to 49 CFR Part 1544. (5) The holder s authority is limited to operations conducted pursuant to Part 135 of the Federal Aviation Regulations. In the event that the holder wishes to institute operations that would require Part 121 certification from the FAA, it must first be determined fit for such operations. (6) The holder shall at all times remain a "Citizen of the United States" as required by 49 U.S.C. 40102(a)(15). (7) The holder shall maintain in effect liability insurance coverage as required under 14 CFR Part 205. Failure to maintain such insurance coverage will render a certificate ineffective, and this or other failure to comply with the provisions of Subtitle VII of Title 49 of the United States Code or the Department's regulations shall be sufficient grounds to revoke this certificate. (8) The holder is authorized to conduct charter flights in interstate and/or foreign air transportation in accordance with the provisions of 14 CFR Part 212. (9) Should the holder propose any substantial change in its ownership, management, or operations (as defined in 14 CFR 204.2(l)), it must first comply with the requirements of 14 CFR 204.5. (10) In the event that the holder does not commence actual flying operations under this certificate within one year of the date of the Department's determination of its fitness, its authority shall be revoked for dormancy, unless the holder is conducting operations under another type of certificate authority. Further, in the event that the holder commences operations for which it was found "fit, willing, and able" and subsequently ceases all such operations, its authority under all certificates held shall be suspended under the terms of 14 CFR 204.7 and the holder may neither recommence nor advertise such operations unless its fitness to do so has been redetermined by the Department. Moreover, if the holder does not resume operations within one year of its cessation, its authority shall be revoked for dormancy. To assure compliance with all applicable U.S. Government requirements concerning security, the holder shall, before commencing any new service (including charter flights) to or from a foreign airport, contact its Principal Security Inspector (PSI) to advise the PSI of its plans and to find out whether the Transportation Security Administration has determined that security is adequate to allow such airport(s) to be served.
Attachment A SERVICE LIST FOR PAKLOOK AIR, INC. NAOMI TSUDA ASST CHIEF COUNSEL FOR ENFORCEMENT FEDERAL AVIATION ADMINISTRATION AGC-300 800 INDEPENDENCE AVE SW WASHINGTON DC 20591 BRIAN FREDERICK PRINCIPAL OPERATIONS INSPECTOR FEDERAL AVIATION ADMINISTRATION JUNEAU FSD-05 3032 VINTAGE PARK BLVD JUNEAU AK 99801 OFFICE OF AIRLINE INFO DEPT OF TRANSPORTATION 1200 NEW JERSEY AVE SE WASHINGTON DC 20590 MARK MAZOR AFS-900 MANAGER CSET FAA SUITE 203B 45005 AVIATION DRIVE DULLES VA 20166-7537 WES OSOWSKI PRESIDENT PAKLOOK AIR INC 1619 AIRPORT WAY KODIAK AK 99615-6977 KATHRINE TATUM TECHNICAL PROGRAMS BRANCH AFS-260 FEDERAL AVIATION ADMINISTRATION 800 INDEPENDENCE AVE SW WASHINGTON DC 20591