Order 20 10

- 2

- 25

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 25 th day of February

, 20 10

Served: February 25 , 20 10

Application of

AVIATION MATTERS, INC. d/b/a PACIFICFLIER Docket DOT

- OST

- 200 9

- 031 9

for an exemption under 49 U.S.C. § 4 0109 and a foreign air carrier permit under 49 U.S.C. §41301

ORDER GRANTING EXEMPTION AND TO SHOW CAUSE

Summary

By this order we (1) grant the application of the referenced foreign air carrier for an exemption

under 49 U.S.C. § 40109, subject to conditions; 1 and (2) tentatively find that it is in the public

interest to grant the applicant the foreign air carrier permit attached as Appendix B to this order.

Background

On August 23 , 2005, the Department issued a Notice , in Docket DOT

- OST

- 2005

- 22228

, announcin g several steps designed to streamline our regulatory procedures for licensing U.S. and foreign air carriers. Among other things, the Notice stated that:

Assuming, based on the record and on the public interest/public convenience and necessity elements g ermane to our licensing decisions, that we were in a position to act

favorab ly, we would proceed to issue a single order (1) granting the exemption request for whatever duration we would normally have imposed, or until certificate/permit authority becomes effective, whichever is shorter, and (2) tentatively deciding ( i.e.

, show

- cause) to award a corresponding certificate (or permit), again for the standard duration we would normally have imposed (such as, in the case of certificates, five years for limited

- entry markets, indefinite for open

- entry markets, and in the case of permits, five years for comity and reciprocity regimes, indefinite for agreement regimes).

1 The conditions are attached as Appendix A.Our action in this Order serves to implement these streamlined regulatory procedures for the

ap plication involved in this proceeding.

Application

By application filed Dec ember 2, 2009, as supplemented on December 10, 2009, and clarified on January 28, 2010

, Aviation Matters, Inc. d/b/a PacificFlier ( PacificFlier ) , a foreign air carrier of the Republic of Palau

, requests an exemption under 49 U.S.C. § 40109

, and a f oreign air carrier permit under 49 U.S.C. § 41301, to engage in :

a. charter foreign air transportation of persons, property, and mail between the Republic of Palau and Guam;

b. charter foreign air transportation of persons, property, and mail betwee n Brisbane, Australia and Guam; and

c. other charter operations pursuant to Part 212 of the Department’s economic regulations. 2

PacificFlier proposes to conduct these operations using aircraft wet leased from Hi Fly

– Transportes Aereos, S.A. , a foreign air carrier of Portugal.

The applicant provided evidentiary materials required by 14 CFR Part 211 of our regulations to support its requests for authority. The applicant also requested a waiver of the Department ’ s ownership and control standard.

Responsive Pleadings

On December 17, 2009, Continental Micronesia, Inc. (Continental Micronesia) filed an answer to PacificFlier’s application. Continental Micronesia question ed the intent of PacificFlier’s initial request for non

- scheduled services and argue d that PacificFlier appear ed to be seeking open

ended seventh

- freedom authority for services between Guam and any point in the world via

Brisbane. Continental Micronesia further note d tha t PacificFlier’s ownership and management

structure

, completely comprised of citizens of Australia and New Zealand

, present ed extraordinary circumstances

, and Continental Micronesia urge d the Department to carefully consider PacificFlier’s request for a waiver of the Department’s ownership and control standard

.

On December 22, 2009, PacificFlier filed a reply. PacificFlier state d that its proposed flights

were to be operated to align with unscheduled cargo shipments between two foreign points.

2 We note that in its initial application, PacificFlier requested authority to provide non

- scheduled fore ign air transportation of persons, property, and mail from any point or points behind the Republic of Palau and Brisbane, Australia, via the Republic of Palau and Brisbane, Australia, via intermediate points to Guam and beyond, and to operate charters unde r 14 CFR Part 212. By letter dated January 28, 2010, we asked PacificFlier to supplement its application to clarify whether it sought scheduled or charter authority, as it is the Department’s policy to no longer grant “non

- scheduled” authority to foreign air carriers. On January 28, 2010, PacificFlier filed a response to our letter, clarifying that it requests authority to engage in charter services between the Republic of Palau and Guam,

and between Brisbane and Guam.P acificFlier also clarifie d at that time that the requested authority was limited to flights between : (1) the Republic of Palau and Guam; and (2) Brisbane, Australia and Guam. With respect to its ownership and control, PacificFlier cite d multiple instance s where the Department has granted exemption authority to carriers not substantially owned and effectively controlled by homeland nationals, and further stat e d that there is no evidence to suggest that the ownership of PacificFlier

would be inimical to U.S . aviation poli c y or interests.

Decision

We have decided, under assigned authority and consistent with our August 23 , 2005 Notice referenced above, to grant in part the applicant’s request for exemption authority, subject to conditions, and tentatively to grant in part , subject to show

- cause procedures, its request for a foreign air carrier permit, also subject to conditions.

Specifically, we grant PacificFlier exemption authority to permit it to engage in charter foreign air transportation of persons, property, and mail between the Republic of Palau and Guam. We

also grant the applicant authority to engage in other charter op erations in accordance with the prior approval requirements set forth in 14 CFR Part 212. 3 We will tentatively grant PacificFlier a foreign air carrier permit for these services. 4

With respect to the applicant’s request for exemption authority, we find t hat grant of this authority is consistent with the public interest . In particular, while the U.S.

- Palau Compact of Free Association, which formerly governed aviation relations between the United States and Palau, has expired, we find that reciprocity and the overall state of our aviation relationship with Palau warrant grant of the specified exemption authority, for a two

- year term, or until the requested permit authority becomes effective, whichever occurs earlier.

We also find that the applicant has demonstrated, based on the record , that it is financially and operationally qualified to perform the services authorized . With respect to the ownership and control of PacificFlier, the applicant states that it is owned in equal shares by two citizens of

A ustralia and one citizen of New Zealand. In addition, PacificFlier states that its directors, officers, and key management personnel consist of four citizens of Australia and one citizen of New Zealand. In the circumstances presented, and in l ight of the fact that we have open

- skies aviation agreements with Australia and New Zealand, we find that a waiver of our ownership and control polity is warranted, as there is nothing in the ownership of the carrier which would be inimical to U.S. aviation policy or interests.

We also note that the applicant is properly licensed by its homeland to p erform the proposed

services. We have verified the applicant’s compliance with 14 CFR Parts 203 (Warsaw liability waiver), and 205 (insurance requirements).

3 This latter charter authority wil l mean, among other things, that any PacificFlier Brisbane

- Guam charter services will be subject to the prior approval requirements of 14 CFR §212.9. We are not granting PacificFlier’s specific request here for Brisbane

- Guam exemption authority.

4 Consis tent with PacificFlier’s application, i n the conduct of the operations authorized the applicant may only use aircraft wet leased from a duly authorized and properly supervised U.S. or foreign air carrier

.With respect to the concerns raised by Continental Micronesia, we note that PacificFlier ’s subsequent clarifications indicate a narrower request than that set forth in its original application. Moreover, in light of the authority we are actually granting, all operations by PacificFlier in seventh freedom markets would be subject to prior Department approval under 14 CFR Part 212, giving other interested parties the opportunity for comment and giving us the opportunity to evaluate the public interest merits of such operations on a case

- by

- case basis. Finally, as discussed above, we have carefully examined the ownership and control of PacificFlier, and, as noted, have determined that a waiver of our ownership and control policy is warranted.

Tentative Findi ngs and Conclusions

-- Foreign Air Carrier Permit Application

We tentatively find and conclude that the public interest warrants granting the applicant a foreign air carrier permit, in the form attached as Appendix B and subject to the conditions attached. 5 In particular, w e tentatively find and conclude that the factors which support our grant in part of exemption authority to the applicant also warrant granting in part the foreign air carrier permit that the applicant has requested

.

In view of the forego ing and all facts of record, we tentatively find and conclude that:

1. It is in the public interest to issue the applicant a foreign air carrier permit in the form attached;

2. The applicant is fit, willing and able properly to perform the foreign air transportation described in the attached permit and to conform to the provisions of Title 49 of the U.S. Code

, and to our rules, regulations, and requirements;

3. A waiver of our ownership and control policy is warranted in the circumstances presented;

4 . The public interest requires that the exercise of the privileges granted by the permit should be subject to the terms, conditions, and limitations contained in the attached permit, and to such other reasonable terms, conditions, and limitations requir ed by the public interest as we may prescribe;

5 . The issuance of this f oreign air carrier permit will not constitute a major regulatory action under the Energy Policy and Conservati on Act of 1975, as defined in 14 CFR §313.4(a)(1) of our

r egulations; 6

6 . The public interest does not require an oral evidentiary hearing on the application ; and

5 The applicant’s request for a foreign air carrier permit was summarized in the Department’s published weekly list of applications filed. This notice described the authority sought and gave interested persons an opportunity to submit evidence and objections to the award of this foreign air carrier permit authority.

6 This finding is based on the fact that the grant of this permit will not result in a near

- term net annual change in aircraft fuel consumption of 10 million gallons or more.7 . Our action with respect to this foreign air carrier permit should, unless disapproved by the President of the United States under §41307 of Title 49 of the U. S. Code, become effective on the 61st day after its submission for §41307 review, or upon the date of receipt of advice from the President or his designee under Executive Order 12597 and implementing regulations that he or she does not intend to disapprove this portion of the Department’s decision under that section,

whichever occurs earlier.

In view of the above, an d acting under authority assigned by the Department in its regulations,

14 CFR Part 385, we find that (1) our actions are consistent with Depa rtment policy; and (2) with respect to the exemption authority we are conferring on the applicant, the applicant is qualified to perform those operation s; and that grant of the exemption authority is consistent with the public

interest and would not consti tute a major regulatory action under the Energy Policy and

Conservation Act of 1975.

ACCORDINGLY,

1. We grant the request of Aviation Matters, Inc. d/b/a PacificFlier for an exemption under 49 U.S.C. §40109 to permit it to engage in : 1) charter foreign air transportation of persons, property,

and mail between the Republic of Palau and Guam; and 2 ) other charter s pursuant to the prior approval requirements set forth in the Department’s regulations governing charters ;

2

. The exercise of the privi leges granted above is subject to compliance by Aviation Matters,

Inc. d/b/a PacificFlier with the conditions listed in Appendix A;

3. In the conduct of the operations authorized, Aviation Matters, Inc. d/b/a PacificFlier may only

use aircraft wet leased from a duly authorized and properly supervised U.S. or foreign air carrier;

4

. Our action granting the exemption authority described herein is effective immediately, for a period of two year s from the issue date of this order , or until the attached permit becomes effective, whichever is earlier ;

5

. We may amend, modify, or revoke the exemption authority set forth herein at our discretion at any time and without hearing;

6

. To the extent not acted upon above, we dismiss the applicant’s request for exemption authority in this Docket (DOT

- OST

- 200 9

- 031 9 ) ;

7

. With respect to the applicant’s request for a foreign air carrier permit in this proceeding, w e direct all interested persons to show cause why our tentative decision on that application, set
forth above

, should not be made final;

8

. Any interested person objecting to the issuance of an order making final our tentative findings

and conclusions with respect to the applicant’s request for a foreign air carrier permit shall, no later than twenty

- one (21) calendar days after the date of service of this order, file with the Department and serve on the parties to this proceeding , a statement of objections specifying the part or parts of the tentative findings and conclusions objected to, together wi th a summary oftestimony, statistical data, and concrete evidence to be relied upon in support of the objections; if objections are filed, answers to objections are due no later than seven (7) calendar days thereafter;

9

. If timely and properly supporte d objections are filed, we will give further consideration to the matters and issues raised by the objections before we take further action;

1 0

. In the event no objections are filed, all further procedural steps shall be deemed waived, and the Department will enter an order which will (subject to Presidential review under §41307 of Title 49 of the U.S. Code) make final our tentative findings and conc lusions set forth in this order; and

1 1

. We will serve a copy of this order on Aviation Matters, Inc. d/b/a PacificFlier, Continental Micronesia, Inc.

, the Ambassador of the Republic of Palau in Washington, D.C., the Federal Aviation Administration, and the U.S. Department of State

.

Persons entitled to petition the Department for review of this order under the Department’s regulations, 14 CFR §385.30, may file their petitions within seven (7) days after the date of

issuance of this order . Our action with respect to the applicant’s request for exemption authority

under 49 U.S.C. § 40109 is effective immediately

, and the filing of a petition for review will not

alter such effectiveness.

By:

PAUL L. GRETCH

Director

Office of International A viation

(SEAL)

Appendices

An electronic version of this document is available on the World Wide Web at: http://www.regulations.govAppendix A

F oreign Carrier Exemption Conditions

In the conduct of the operations authorized, the foreign carrier applicant(s) shall:

(1) Not conduct any operations unless it holds a currently effective authorization from its homeland for such operations, and it has filed a copy of such authorization with the Department;

(2) Comply with all applicable requirements of the Federal Aviation Administration, the Transportation Security Administration, and with all applicable U.S. Government requirements concerning security, including, but not limited to, 1 4 CFR Parts 129, 91, and 36 and 49 CFR Part 1546 or 1550, as applicable. To assure compliance with all applicable U.S. Government requirements concerning security, the holder shall, before commencing any new service (including charter flights) from a fore ign airport that would be the holder’s last point of departure for the United States, contact its International Industry Representative (IIR) (formerly referred to as International Principal Security Inspector) to advise the I IR of its plans and to find ou t whether the Transportation Security Administration has determined that security is adequate to allow such airport(s) to be served;

(3) Comply with the requirements for minimum insurance coverage contained in 14 CFR Part 205, and, prior to

the commenceme nt of any operations under this authority, file evidence of such coverage, in the form of a completed OST Form 6411, with the Federal Aviation Administration’s Program Management Branch (AFS

260), Flight Standards Service (any changes to, or termination of , insurance also shall be filed with that office);

(4) Not operate aircraft under this authority unless it complies with operational safety requirements at least equivalent to Annex 6 of the Chicago Convention;

(5) Conform to the airworthiness and airman competency requirements of its Government for international air services;

(6) Except as specifically exempted or otherwise provided for in a Department Order, comply with the requirements of 14 CFR Part 203, concerning waiver of Warsaw Convention liabili ty limits and defenses;

(7) Agree that operations under this authority constitute a waiver of sovereign immunity, for the purposes of 28 U.S.C. 1605(a), but only with respect to those actions or proceedings instituted against it in any court or other

trib unal in the United States that are: (a) based on its operations in international air transportation that, according to the contract of carriage, include a point in the United States as a point of origin, point of destination, or agreed stopping place, or f or which the contract of carriage was purchased in the United States; or (b) based on a claim under any international agreement or treaty cognizable in any court or other tribunal of the United States. In this condition, the term "international air transp ortation" means "international transportation" as defined by the Warsaw Convention, except that all States shall be considered to be High Contracting Parties for the purpose of this definition;

(8) Except as specifically authorized by the Department, orig inate or terminate all flights to/from the United States in its homeland;

(9) Comply with the requirements of 14 CFR Part 217, concerning the reporting of scheduled, nonscheduled, and charter data;

(10) If charter operations are authorized, except as otherwise provided in the applicable aviation agreement, comply with the Department's rules governing charters (including 14 CFR Parts 212 and 380); and

(11) Comply with such other reasonable terms, conditions, and limitations required by the public inter est as may be prescribed by the Department, with all applicable orders or regulations of other U.S. agencies and courts, and with all applicable laws of the United States.

This authority shall not be effective during any period when the holder is not in c ompliance with the conditions imposed above. Moreover, this authority cannot be sold or otherwise transferred without explicit Department approval under Title 49 of the U.S. Code.

1 2/2007Appendix B

Issued by

Order 20 10

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__

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.



### -------------------------------------------------------- PERMIT TO FOREIGN AIR CARRIER



### ---------------------------------------------------------



### Aviation Matters, Inc. d/b/a PacificFlier

A F oreign Air Carrier of the Republic of Palau

is authorized, subject to the following provisions, the provisions of Title 49 of the U.S. Code, and the orders, rules, and regulations of the Department of Transportation, to engage in :

Charte r foreign air transportation of persons, property, and mail between the Republic

of Palau and Guam; and

The holder shall also be authorized to engage in other charter trips in foreign air transportation, subject to the terms, conditions, and limitations of the Department’s regulations governing

charters.

In the conduct of the operations authorized, the holder may only use aircraft wet leased from a duly authorized and properly supervi sed U.S. or foreign air carrier.

This permit and the exercise of the p rivileges granted in it shall be subject to the terms, conditions and limitations in both the order issuing this permit and the attachment to this order, and to all applicable provisions of any treaty, convention or agreement affecting international air

tr ansportation now in effect, or that may become effective during the period this permit remains in effect, to which the United States and the holder’s homeland are or shall become parties.

This permit shall be effective on

, 20 10 , an d shall terminate five years thereafter; provided, that if during said period the operation of the foreign air transportation authorized becomes the subject of any treaty, convention or agreement to which the United States and the applicant’s homeland are or shall become parties, then this permit is continued in effect during the period provided in such treaty, convention, or agreement.The Department of Transportation has executed this permit and affixed its seal on
, 20 10

.

By:

PAUL L. GRETCH

Director

Office of International Aviation 

### (SEAL)Foreign Air Carrier Permit Conditions

In the conduct of the operations authorized, the foreign carrier applicant(s) shall:

(1) Not conduct any operations unless it holds a currently effective authorization from its homeland for such operations, and it has filed a copy of such authorization with the Department;

(2) Comply with all applicable requirements of the Federal Aviation Administration, the Transportation Security

Adm inistration, and with all applicable U.S. Government requirements concerning security, including, but not limited to, 14 CFR Parts 129, 91, and 36 and 49 CFR Part 1546 or 1550, as applicable. To assure compliance with all applicable U.S. Government requir ements concerning security, the holder shall, before commencing any new service (including charter flights) from a foreign airport that would be the holder’s last point of departure for the United States, contact its International Industry Representative ( IIR) (formerly referred to as International Principal Security Inspector) to advise the I IR 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;

(3) Comply with the requirements for minimum insurance coverage contained in 14 CFR Part 205, and, prior to the commencement of any operations under this authority, file evidence of such coverage, in the form of a completed OST Form 6411, with the Federal Avi ation Administration’s Program Management Branch (AFS

- 260), Flight Standards Service (any changes to, or termination of, insurance also shall be filed with that office);

(4) Not operate aircraft under this authority unless it complies with operational saf ety requirements at least equivalent to Annex 6 of the Chicago Convention;

(5) Conform to the airworthiness and airman competency requirements of its Government for international air services;

(6) Except as specifically exempted or otherwise provided for in a Department Order, comply with the requirements of 14 CFR Part 203, concerning waiver of Warsaw Convention liability limits and defenses;

(7) Agree that operations under this authority constitute a waiver of sovereign immunity, for the purposes of 28 U.S.C. 1605(a), but only with respect to those actions or proceedings instituted against it in any court or other tribunal in the United States that are: (a) based on its operations in international air transportation that, according to

the contract of ca rriage, include a point in the United States as a point of origin, point of destination, or agreed stopping place, or for which the contract of carriage was purchased in the United States; or (b) based on a claim under any international agreement or treaty cognizable in any court or other tribunal of the United States. In this condition, the term "international air transportation" means "international transportation" as defined by the Warsaw Convention, except that all States shall be considered to be High Contracting Parties for the purpose of this definition;

(8) Except as specifically authorized by the Department, originate or terminate all flights to/from the United States in its homeland;

(9) Comply with the requirements of 14 CFR Part 217, concernin g the reporting of scheduled, nonscheduled, and charter data;

(10) If charter operations are authorized, except as otherwise provided in the applicable aviation agreement, comply with the Department's rules governing charters (including 14 CFR Parts 212 a nd 380); and

(11) Comply with such other reasonable terms, conditions, and limitations required by the public interest as may be prescribed by the Department, with all applicable orders or regulations of other U.S. agencies and courts, and with all applic able laws of the United States.

This authority shall not be effective during any period when the holder is not in compliance with the conditions imposed above. Moreover, this authority cannot be sold or otherwise transferred without explicit Department

a pproval under Title 49 of the U.S. Code.

1 2 /200 7