\\DC - 042333/000001 - 5802239 v6 BEFORE THE DEPARTMENT OF TRANSPORTATION

WASHINGTON, D.C.

Application of HARRIS AIRCRAFT SERVICES, INC. For a certificate of public convenience and necessity pursuant to 49 U.S.C. § 41102 to engage in interstate scheduled air transportation of persons, property, and mail ) ) ) ) ) ) ) ) ) Docket DOT-OST-2014-0145

MOTION FOR LEAVE TO FILE AND RESPONSE OF AIR EXCURSIONS LLC

Communications with respect to this document should be addressed to: Kent Craford AIR EXCURSIONS LLC 1873 Shell Simmons Dr. Suite 110 Juneau, AK 99801 Robert E. Cohn Patrick R. Rizzi HOGAN LOVELLS US LLP Columbia Square 555 Thirteenth Street, NW Washington, DC 20004 +1 202 637 4999/5659 robert.cohn@hoganlovells.com patrick.rizzi@hoganlovells.com Counsel for Air Excursions LLC

October 6, 2014\\DC - 042333/000001 - 5802239 v6 BEFORE THE DEPARTMENT OF TRANSPORTATION

WASHINGTON, D.C.
Application of HARRIS AIRCRAFT SERVICES, INC. For a certificate of public convenience and necessity pursuant to 49 U.S.C. § 41102 to engage in interstate scheduled air transportation of persons, property, and mail ) ) ) ) ) ) ) ) ) Docket DOT-OST-2014-0145

October 6, 2014

MOTION FOR LEAVE TO FILE AND RESPONSE OF AIR EXCURSIONS LLC
Air Excursions LLC seeks leave to file this brief Response to the Consolidated Reply of Harris Aircraft Services, Inc. (“Harris Air”), dated September 29, 2014.

I. Motion for Leave to File. Air Excursions requests leave to file this response to Harris Air’s Reply.Good cause exists for the Department to accept and consider this brief, narrowlytailored Response to address obfuscations and inaccuracies in Harris Air’s Reply, and to ensure that the Department has a more accurate and complete record on which to reach a decision.

II. Harris Air’s Reply Has Failed to Address, Much Less Resolve, Its Financial Fitness Deficiencies. Air Excursions’ Answer to Harris Air’s application discussed several reasons why Harris Air failed to demonstrate that it possessed sufficient financial fitness for the issuance of certificate authority. Harris Air’s Reply makes a failedMotion and Response of Air Excursions Page 2

\\DC - 042333/000001 - 5802239 v6 attempt to rebut those points by highlighting irrelevant data from its financial statements and overlooking its own DOT application history. (HAS Reply at 4-8.) First, Harris Air attempts to explain the substantial 44% reduction in the financial fitness threshold from its 2013 application ($999,000 to $558,000) by reiterating the claim that it has no pre-operating or start-up expenses because it is merely continuing its current operations. (HAS Reply at 5-6.) That assertion is not credible and is contrary to the position Harris Air took in 2013 when it filed for commuter authority, based on merely continuing its existing service. In its previous application, Harris Air itself included over $350,000 in start-up costs and DOT agreed in its Show Cause Order issued this year that such costs needed to be accounted for in calculating the financial fitness threshold. See DOT Order 2014-3-2, at 6. Although Harris Air now claims no expenses related to “certain outstations, training employees and operating aircraft” (HAS Reply at 5), those were among the express categories Harris Air itself factored into the financial fitness threshold calculation in its earlier application. See Harris Air Information Response, August 2013 (Docket DOT-OST-2013-0089). Moreover, there is no showing that such expenses have already been incurred and paid for in the current financial statements. Ironically, Harris Air quotes a Scott Air decision to support its newfound “no pre-operating/start-up expenses” position, but conveniently overlooks its very own Show Cause Order from earlier this year where the Department clearly included start-up and pre-operating expenses in calculating Harris Air’s financial fitness threshold. DOT Order 2014-3-2, at 6. Second, it is clear that Harris Air artificially reduced its projected first-year expenses in order to conform to its limited line of credit. Its 2013 presentationMotion and Response of Air Excursions Page 3

\\DC - 042333/000001 - 5802239 v6 showed total expenses of $2.584 million, but here, total expenses are only $2.231 million – a nearly 14% reduction. (Compare Harris Air Application, Exhibit HAS-7 with Exhibit HAS-14.) It claims that this difference relates to having one fewer aircraft in its fleet. (HAS Reply at 6-7.) But, that doesn’t hold water for two reasons. First, that aircraft had been used for the Southeast Alaska Regional Health Consortium, which arrangement was terminated before the Department issued its Show Cause Order on Harris Air’s request for commuter authority. Second, the 14% reduction in projected expenses cannot be reconciled with Harris Air’s other claim that it will simply be “continuing with its existing intra-state services” under its certificate (if granted). (HAS Reply at 5 (emphasis in the original).) Third, Harris Air contends that its Balance Sheet and other financial statements are “sound”. It asserts that “Harris Air’s August 14, 2014 Balance Sheet shows total current assets of $997,276 and total current liabilities of $213,096 giving the air carrier positive working capital of $784,180.” (HAS Reply at 7-8.) That response is both wrong and misses the point. Assets minus liabilities does not translate into having enough liquidity to cover the cost of operations. Assets, especially those which comprise most of Harris Air’s balance sheet assets, are not liquid. Harris Air cannot pay its employees or fuel bills with aircraft assets. Thus, Harris Air’s claim of having positive working capital does not address having sufficient funds available to meet its expense requirements, which is the Department’s financial fitness requirement. As for its discussion about historic revenues and net income, those data are simply irrelevant because the Department’s financial fitness determination isMotion and Response of Air Excursions Page 4

\\DC - 042333/000001 - 5802239 v6 a zero revenue/income standard. DOT Order 2014-3-2, at 5 (“Further, in calculating available resources, projected revenues may not be used.”) In any event, Harris Air failed to even acknowledge, much less address, the specific points Air Excursions actually made about the Balance Sheet – e.g., sizeable negative retained earnings, and high leverage in terms of high ratio of loans to total equity. (Air Excursions Answer at 5-6.) In sum, Harris Air has not demonstrated the requisite financial fitness for certificate authority, and nothing in its Consolidated Reply changes that conclusion.

III. Harris Air Has Not Demonstrated A Proper Compliance Disposition. Harris Air reiterates that it has an appropriate compliance disposition. (HAS Reply at 8-10.) For example, it argues that it is a Part 135 intra-state commuter, and not a Part 298 carrier. But, DOT Order 2014-3-2 (page 1) described Harris Air as “an on-demand air taxi serving the Southeastern Alaska area operating under 14 CFR Part 298 . . .,” and, moreover, Harris Air’s current operations surely involve at least a de minimis amount of interstate passenger traffic. As regards to connecting passengers to the national air transportation (interstate) system, here is what Harris Air recently told the Department: “With regard to getting passengers into the major airline system, Harris Air is unique with its base in Sitka. With aircraft departing from Sitka we are able to offer a secondary access point to the major airlines, . . . .” Harris Air Proposal to Provide Essential Air Service, Docket DOT-OST-2008-0217 (April 28, 2014). To the extent that it operates more than four scheduled flights per weekMotion and Response of Air Excursions Page 5

\\DC - 042333/000001 - 5802239 v6 on routes carrying more than a de minimis amount of interstate traffic (as its Winter Schedule showed, see Air Excursions Answer, Attachment), Harris Air is required to hold either a DOT certificate or commuter authority. In addition, Harris Air did not even attempt to confront the apparent impossibility of operating its Illustrative Schedule, which Air Excursions detailed in its Answer (pages 8-9), choosing instead to simply parrot that it will be continuing its current operations. (HAS Reply at 9.) But merely avoiding the issue raised altogether does not resolve it, particularly when it goes to the core of the air carrier–passenger relationship and the applicant’s compliance disposition. As proposed, Harris Air’s schedule for its wheel-plane markets appears logistically impossible to execute with only two wheel-aircraft operating on an IFR platform. For example, it schedules four flights in wheel-plane markets operated with the Navajo aircraft departing Sitka at the same time, 7:30 a.m. (SitkaKlawock; Sitka-Hoonah; Sitka-Gustavus; Sitka-Juneau), but Harris Air only has
two such aircraft. As another example of the scheduling impossibility being proposed here (detailed in Air Excursions’ Answer, but which Harris Air did not address),
First Wheel-Aircraft SIT – KLA: 0730 – 0815 KLA – SIT: 0830 – 0930

Second Wheel-Aircraft SIT – JUN: 0730 – 0800 JNU – SIT: 0810 – 0915 GST – JNU: 0825 – 0840 HNH – JNU: 0835 – 0850 HNH – GUS: 0835 – 0850 GUS – HNH: 0900 – 0915Motion and Response of Air Excursions Page 6

\\DC - 042333/000001 - 5802239 v6 There has been no showing of how Harris Air could actually operate all of the near-simultaneous wheel-plane flights with only two wheel-aircraft in its fleet. These examples of unrealistic scheduling demonstrate a fundamental lack of compliance fitness here. Holding out a schedule to the traveling public that is not logistically feasible and thus cannot be relied upon to any reasonable degree is a disservice to the traveling public, violates the Department’s regulations, 14 C.F.R. § 399.81, and is tantamount to a deceptive business practice in that Harris Air knows, with a high degree of certainty, that it cannot operate its published and marketed schedule. Unrealistic scheduling harms not only local passengers, but also interstate travelers relying on the dependability of the scheduled service in order to make connections at Juneau to the national air transportation network beyond. The Department should not condone and approve this unrealistic scheduling by granting Harris Air’s application for certificate authority.

IV. Conclusion. For the reasons detailed above and explained in Air Excursions’ Answer, Harris Air has not demonstrated financial fitness or proper compliance disposition for certificate authority. Its Consolidated Reply did not resolve any of the dispositive flaws with its Application. Its Application should be denied.Motion and Response of Air Excursions Page 7

\\DC - 042333/000001 - 5802239 v6 Respectfully submitted,

______________________________________ Robert E. Cohn Patrick R. Rizzi HOGAN LOVELLS US LLP 555 Thirteenth Street, NW Washington, DC 20004 +1 202 637 4999/5659 Counsel for Air Excursions LLC\\DC - 042333/000001 - 5802239 v6 CERTIFICATE OF SERVICE I hereby certify that a copy of the foregoing Motion for Leave and Response of Air Excursions has been served this 6th day of October 2014 , upon each of the following:
pmurphy@lopmurphy.com scott@harrisair.com hank@MTCWorld.com info@flypacificairways.com

Patrick R. Rizzi