Order 2010

- 11

- 05

Served : November 5, 2010

UNITED STATES OF AMERICA
DEPARTMENT OF TRANSPORTATION
OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 5th day of November, 2010

Applications of

NATIONAL AIR CARGO GROUP, INC.
d/b/a NATIONAL AIRLINES

for amended certificates of public convenience and necessity pursuant to 49 U.S.C. § 41102 to engage in interstate and foreign charter air transportation of
persons, property

, and mail Dockets DOT

- OST

- 20 10

- 0 181
and
DOT

- OST

- 20 10

- 0 215

ORDER TO SHOW CAUSE
PROPOSING ISSUANCE OF CERTIFICATES

Summary

By this order, we tentatively conclude that National Air Cargo Group, Inc. d/b/a National

Airlines (“ National Airlines ”) is a citizen of the United S tates and is fit, willing, and able to provide interstate and foreign charter air transportation of persons, property, and mail, and should be issued certificates of public convenience and necessity authorizing such operations, subject to conditions.

Back ground

Section 41102 of Title 49 of the United States Code (“the Transportation Code”) directs us to determine that applicants for certificate authority to provide interstate and foreign charter air transportation of persons, property

, and mail are “fit, willing, and able” to perform such transportation and to ensure that all operations relating to this authority conform to the provisions of the Transportation Code and the regulations and requirements of the Department. In making fitness findings, the Dep artment 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 f

itness 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 compl y with the2

Transportation Code and regulations imposed by Federal and State agencies. We must also find that the applicant is a U.S. citizen.

On July 9, and August 13 , 2010

, National Airlines , a U.S. air carrier holding certificate authority authorizing interstate and foreign air transportation of property and mail, 1 filed applications in Dockets DOT

- OST

- 20 10

- 0 181 and DOT

- OST

- 20 10

- 0 215 requesting

amendments to its certificat es authorizing it to provide interstate and foreign charter air transportation of persons, property, and mail. National Airlines accompanied its applications with information required by section 204.3 of our regulations (14 CFR 204.3) for an examination of its fitness to hold such authority. 2

On August 18 , 2010, National Airlines file d a M otion requesting to shorten the public comment period for filing of answers to the Department’s tentative decision from 14 normally permitted in such cases to 5 days

. National Airlines states that the requested relief would permit it an opportunity t o initiate its passenger operations by October 1, 2010, and, importantly, meet the eligibility requirements for Fall 2011 participat ion in the Civil Air

Reserve Fleet ’s (“CRAF”) passenger charter program.

On August 19

, August 23 , and August 26 , 2010, re spectively, Air Transport International, LLC (“ATI”), Evergreen International Airlines, Inc. (“Evergreen” ), and North American Airlines, Inc. (“North American”) (together, the “Interested parties”) , each an operating U.S. certificated air carrier, filed an swer s opposing National Airlines’ M otion . The Interested parties argu e that National Airlines ’ request was untimely and lacked sufficient justification

. The Interested parties further state that in the interest of due process, they should be allowed

the full answer period normally permitted in certificate d proceedings.

A t this same time, North American filed an answer to National Airlines applications

, contend ing that the applicant’s financial projections are based on questionable assumptions

and that the financial information provided contain s discrepancies

. North American urges the Department to conduct a thorough review of National Airlines compliance disposition in light

of a recent settlement agreement National Air Cargo, Inc. (“NAC”), a company r elated to

Nat ional Airlines by common ownersh ip , entered into with the Department of Justice to resolve allegations that NAC defrauded the government.

1 See Order 2006

- 12

- 20, issued December 21, 2006. Currently, the air carrier’s authority is limited to three large aircraft.

2 National Airlines filed additional information supplementing its applications on September 2 and September 7

, 2010. The applicant requested that certain information in its initial application be withheld from public disclosure. By letter dated August 31, 2010, the Department no tified the applicant of our intended ruling on its confidentiality request, granting, in

- part the applicant’s requests and informing National Airlines that certain information for which it requested confidentiality did not warrant such treatment. The appl icant subsequently filed this information in the public docket on September 20, 2010.3

On September 1 , 2010, National Airlines filed a respon se to North American’s pleading, refuting the alle gations raised by North America n

. 3 National Airlines also reiterates its request to shorten the public comment period from 14 to 5 days. National Airlines believes its request would not prejudice any parties’ participation, especially since interested pa rties have already had an opportunity to comment on its application s

. Furthermore, the applicant states the Department has granted similar request s in the past where the petitioning air carrier sought to add foreign passenger charter service to its alread y existing foreign cargo service. 4

On October 4 , 2010, ATI filed an answer to National Airlines ’ applications and supplemental filing s

. 5 ATI claims the historical and current financial statements provided by National

Airlines for its parent company, Nati onal Air Cargo Holdings, Inc. (“NAC Holdings”)

, contain s discrepancies , and regardless of these discrepancies

, indicates that NAC Holdings , of whom National Airlines is relying on for financial support, is in poor financial health. Moreover, ATI contends that a letter from NAC Holdings’ Chief Executive Officer offering to provide funding to National Airlines is a non

- binding and unenforceable commitment of funding

.

On October 14, 2010, National Airlines filed a response to ATI’s pleading. Nati on al Airlin es contends that AIT’s assertions are without merit and intended to protract the regulatory process for ATI’s own competitive advantage.

We have reviewed thoroughly the application, the answers provided by North American and

ATI , and the responsive plea dings in this case and no special issues regarding the applicant have come to our attention requiring a hearing. Based on this review, our tentative findings, as more fully discussed in the FITNESS section below, are that National Airlines is a U.S.

citiz en and has established its fitness to provide, subject to conditions, interstate and foreign

charter air transportation of persons, property, and mail, and that National Airlines should be

issued certificate s authorizing it to engage in interstate and fore ign charter air transportation of persons, property, and mail, subject to conditions

. 6 However, we will give interested persons an opportunity to show cause why we should not adopt as final these tentative findings and

conclusions. We note that the appli cant had requested a shortened public comment period for filing of answers to the Department’s tentative decision in order to facilitate an October 1 start

up. Because that date has already passed, there is no longer a basis to grant that request, particu larly in the circumstance where the request has been opposed. Therefore, we dismiss
NAC’s Motion. I nterested persons will be given 1 4 days following the service date of this order to show cause why the tentative findings and conclusions set forth here sh ould not be

made final with answers to objections due within 7 days thereafter.

3 The substance of the interested parties’ answers and the applicant’s response are more fully discussed in the

FITNESS section.

4 See Order 2010

- 4

- 8, issued April 15, 2010, in Dockets DOT

- OST

- 2009

- 0267 and DOT

- OST

- 2009

- 0268.

5 ATI accompanied its answer with a motion to file for leave.

6 Specifically, we are proposing to limit the air carrier’s operations to four total aircraft: three cargo and one passenger aircra ft.4

FITNESS

The Company

National Airlines

, a U.S. certificated air carrier authorized to provide interstate and foreign charter cargo air transportation, is based in Ypsilanti, Michigan

, and was formed as a corporation under the laws of the State of Michigan on April 6, 1992

. The air carrier was initially formed under the name Murray Air, Inc. (“Murray Air”), and operated under the Murray Air name until 200 6

, when the company un derwent a change in ownership. T he air

carrier holds a Part 121 Air Carrier Certificate issued from the Federal Aviation Administration ( “ FAA ” )

. National Airlines is ultimately wholly owned by Mr. Christopher Alf through his sole ownership of NAC Holding s , a corporation organized under the laws of the State of New York in 1991 and headquartered in Orchard Park, New York. NAC Holdings wholly or partially owns eight subsidiaries, which together provide worldwide freight forwarding and air transportation of cargo. 7

C urrently

, National Airlines operates a fleet of three DC

- 8 cargo aircraft and provides air
transport ation of freight for a number of customers, including the U.S. Department of Defense.

I f granted the cer t if

i cates it seeks

, National Airlines in tends to a dd one Boeing 757

- 200ER

passe nger aircraft to its fleet for use in interstate and foreign passenger charter operations

. 8
The air carrier intends to operate its passenger charter service for charter brokers, public charter operators, private corp orations, and sports teams.

Managerial Competence

National Airlines ’ Board of Directors, officers, and other key management personnel , all of whom are U.S. citizens, consist of the following individuals:

Christopher Alf

– Board Member

Loretta Alf

– Board Member

John R. Baker

– Board Member Glen Joerger

– Board Member

William Mortensen

- Board Member

7 Specifically, NAC Holdings wholly own s National Air Cargo, Inc., a New York corporation; National Air Cargo S.a.r.l, a Luxembourg corporation, which is the ultimate parent company of National Air Cargo Middle East FZE, a United Arab Emirates corpora tion; National Air Cargo SGPS, Unipessoal Lda., a single

- owner Portuguese limited liability company; NAC Acquisitions, a Michigan corporation; NACM OHQ, Sdn Bhd, a Malaysian private limited liability company; NACM Holdings, Sdn Bhd, a Malaysian private lim ited liability company; National Air Cargo Limited, a Thai private limited liability company; and NAC AC Ventures, LLC, a Delaware corporation. NAC Holdings has partial ownership in National Air Cargo GmbH, a German corporation.

8 In its application, Nat ional Airlines also references its plans to acquire four additional Boeing 757

- 200 aircraft, which it intends to configure as “combi” aircraft for the transport of U.S. military personnel and cargo

under the CRAF program . However, the applicant states tha t at this time, those plans have yet to mature, and should they mature, it will provide the required fleet expansion request to the Department ( See Docket DOT

- OST

2010

- 0181, Application of National Air Cargo Group, Inc., at 3.)5

Preston G. Murray

– Chief Executive Officer (“CEO”) /Board Member Thomas J. Quehl

– President Joseph A Stroud

– Chief Financial Officer

Steven F. Cl ements

– Director of Operations

Carlos Veliz

– Director of Safety

Emmett M. Dotson

– Director of Maintenance Abraham V. Williams, Jr.

– Director of Quality Control Jonathan W. Wiesinger

– Chief Pilot

Mr. Christopher Alf has more than 20 years of exp erience in the air cargo and freight forwarding industry. In 1991, he founded National Holdings in Orchard Park, New York, with a desire to provide global freight forwarding services. The company now operates offices in New York, Germany, United Arab Em i r a tes, Malaysia, South Korea, Thailand, and Japan. As the sole shareholder of NAC Holdings, the ultimate owner of National Airlines, Mr. Alf is also the sole or primary shareholder of NAC Holdings’ numerous other worldwide subsidiaries. In

addition to se rving as chairman of NAC Holdings, Mr. Alf also serves as a board member at each of NAC Holdings ’ subsidiaries. Prior to founding National Holdings , Mr. Alf was employed by Weste rn New York Air Freight, Inc., as an Independent Sales Contractor (1986

- 1991)

.

Mrs. Loretta Alf has more than 20 years of experience in sales, marketing, and executive leadership positions. In 2008, Mrs. Alf founded and serves as CEO of Palm Beach Ice Works, an ice skating park in Palm Beach, Florida, and Tacking Innovations, LLC , a supply chain management company. Prior to this, she was employed by National Air Cargo as a Strategic Consultant (2005

- 2008) and as Vice President of Sales (1991

- 2005), and by Tower Group

International as a Custom Broker (1988

- 1991).

Lieutenant Gener al John R. Baker served in the U

. S

. Air Force (“USAF”) for more than 33 years before retiring in 2002. During his career with the USAF, General Baker served as a pilot and staff officer, and held multiple positions as commander, includ ing staff positions in

the Pent a gon and positions as Squadron Commander, Wing Commander , and V ice

Commander

.

Colonel Glen Joerger served in the USAF for more than 24 years before retiring in 2007. During his career with the USAF, Colonel Joerger held various senior execut ive positions primarily in areas where he was responsible for strategic and operational supply chains and transportation networks. Currently, Colonel Joerger serves as the Managing Member of Innovative Concepts Consulting, LLC

. I n addition to serving as a B oard member at National Airlines, he is also a B oard member at Trident United Way, Charleston Chamber of Commerce, and Federal Executive Association.

Lieutenant General William Mortensen retired from the U.S. Army in 2008 after 35 years of

service. His last assignment was as Deputy Commanding General, U.S. Army, Material Command, where he was responsibilities for areas of acquisition, logistics, and research and development . General Mortensen has also held various command positions throughout his6

lo ng military career and he has completed numerous Army and Joint assignments throughout the Department of Defense.

The Department reviewed Mr. Preston G. Murray’s employment background in connection with the certification of Murray Air. 9 Since then, he ha s been employed by National Air Cargo as its President and CEO (2006

- present) and as CEO of National Airlines ( 200 6

- present ). Mr. Murray is also a member of the United States Air Force Lift Committee, a member of the Eastern Michigan University Aviation A dvisory Board, and a partner in Murray Air

Certifications , an FAA approved consulting and certification firm.

The Department reviewed Mr. Thomas J. Quehl ’s employment background in connection with the certification of Murray Air. 10 At that time, Mr. Quehl was serving as the Director of Operations of Murray Air. In November 2008, he became the President of National Airlines.

Mr. Joseph A Stroud joined National Airlines in January 2009 as its Chief Financial Officer. Prior to joining the company , he serve d as a Consultant and Partner of General Management Partners, LLC (2005

- 2009) and J.F. Lehman Equity Investors I, LP (1997

- 2005)

. Mr. Stroud also was employed by Sperry Marine, Inc., as Executive Vice President and Chief Financial Officer (1993

- 1996) ; by Astra Holdings Corp.

, as Vice President of Finance and Administration (1989

- 1993) ; by General Defense Corporation as Vice President and Business Operations (1985

- 1989) ; and by Western Union Telegraph Company in various positions of increasing responsibly, including Director of Financial Planning, Manager of Finance and Cost Analyst (1978

- 1985). In addition to his duties and responsibilities as Chief Financial Officer of National Airlines, Mr. Stroud is also a B oard member of OSI Geospatial and Burke

Indus tries, Inc.

Mr. Steven F. Clements , an Airline Transport Pilot with over 14,500 total flight hours, has

served as National Airlines ’ Director of Operations since June 2009. Prior to joining National Airlines, he was employed by Cayman Airways as Vice Pre sident of Flight Operations (2009),

as an FAA Certification Consultant (2008

- 2009), by Virgin America as Director of Training (2004

- 2008), by Airtran Airways as a Boeing 737 Fleet Manager (2004) and as Manager of Training (2000

- 2004), by Arrow Air as Vice President and Director of Operations (1999

- 2000) and as a pilot (1992

- 1993), by American International Airways as Director of Training (1993

- 1999), and by United Parcel Service as a Flight Standard Supervisor (1989

- 1992).

Mr. Carlos Veliz joined Nationa l Airlines in January 2010 as the air carrier’s Director of Safety. Prior to this, he was employed at Cayman Airways as Director of Safety (2009).

Mr. Veliz has al so previously been employed by Arrow Panama, SA, as President and General Manager (2005

- 200 8), at Planet Airways as V ice President of Compliance (2002

- 2004), at Arrow Air as Director of Safety (1989

- 1999), and at Batch Air, a Part 145 repair station, as

9 See Order 2003

- 5

- 36, Dock et DOT

- OST

- 2003

- 14320.

10 See Order 2004

- 11

- 6, Docket DOT

- OST

- 2003

- 14320.7

Lead Mechanic and Shift Supervisor (1986

- 1989). Mr. Veliz holds FAA certificates as a

Commer cial Pilot, Flight Engineer, and Airframe and Powerplant Mechanic.

Mr. Emmett M. Dotson

, an Airframe and Powerplant Mechanic with more than 3 4 years of experience in aircraft maintenance , joined National Airlines in 2007 as the air carrier’s

Director of Maintenance. Prior to this, he was employed by Murray Air as D irector of

Maintenance (2006

- 2007) ; by Air Transport International as Senior Coordinator of Aircraft

an d System Modifications (2006), Manager of Heavy Maintenance (2004

- 2005), Manager of Quali ty Control (2000

- 2004), and Quality Control Representative (1994

- 2000) ; by Page Avjet Corp. as Lead Mechanic (1992

- 1994) ; by Crown Airways as Director of Maintenance (1990

- 1992) ; by Metro Express II, Inc., as Director of Maintenance (1988

- 1990) ; by SMB

Sta ge Line as Aircraft Inspector (1985

- 1988) ; by GTE Directories Services Corp. as a mechanic (1985

- 1988) ; and by Wright Airlines as a mechanic (1982

- 1984). Mr. Dotson also served in the U.S. Army for four years as an aircraft mechanic (1976

- 1980).

The Depa rtment reviewed the employment background of Mr. Abraham V. Williams, Jr., in connection with the certification of Murray Air. 11 At that time, Mr. Williams was serving as

the Vice President of Operations and Maintenance of Murray Air. In 2007, he became t he Director of Quality Control of National Airlines.

Mr. Jonathan W. Wiesinger has served as Chief Pilot of National Airlines since June 2010. Prior to this, he w a s employed with the air carrier as its Director of Operations and as a DC

- 8 Check Airman (2 008

- 2010). Mr. Wiesinger has also been employed by United Airlines as an

A

- 320 First Officer (2007

- 2008) and as a B

- 737 and B

- 727 First Officer (2000

- 2003) , by

National Airlines as a DC

- 8 Check Airman (2005

- 2007), by A

- 1 Mechanical as General Manger (2003

- 2005) , and by Atlantic Coast Airlines as a J

- 32 First Officer (1999

- 2000) . I n addition to his civilian aviation experience, Mr. Wiesinger was also employed in various

aviation

- related positions while serving in the U.S. Air Force (1989

- 1998) and he is cu rrently a C

- 130H Instructor Pilot in the Ohio National Guard ( since 2007 )

.

In view of the experience and background of the applicant’s key personnel, 12 we tentatively conclude that National Airlines’ management team possesses the managerial skills and

tech nical ability to conduct its proposed service. 13

11 See Order 2003

- 5

- 36, Docket DOT

- OST

- 2003

- 14321.

12 National Airlines also provided the resumes for three other individuals holding senior staff positions. These

individuals are R ichard A. Polas (Manager of Quality Assurance), Jahaziaha Webb (Director of Training), and Charles H. Davis, Jr (Maintenance Supervisor) . We have reviewed the background and experiences of these individuals and each appears qualified for their position.

13 Before authorizing a n 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 Federal Aviation Regulations. 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 National Airlines’ key technical personnel have been approved by the FAA to hold their positions.8

Operating Plan and Financial Position

As previously stated, i f granted the certificates it seeks, National Airlines intends to add one Boeing 757

- 200ER passenger aircraft to its fleet for use in interstat e and foreign passenger charter operations. To meet the Department’s financial fitness criteria, an applicant should have access to financial resources sufficient to cover its pre

- operating expenses and the expenses that are reasonably projected to be inc urred during three months of “normal” operations. 14 National Airlines provided the Department with a financial forecast for its first year of passenger operations using one Boeing 757 aircraft and a list of all pre

- operating

expen ses associated with adding the aircraft to its FAA Operation Specifications. The applicant projects that its total operating expense for its first year of charter operations with

this aircraft will be about $13

. 6 million and that it will incur $845,000 in pre

- operating

expenses. 15

In its August 26 answer objecting to National Airlines’ applications for certificate authority, North American declares that National Airlines has grossly underestimated the projected cost of its proposed service, thereby reducing the amount of working capital reserve the applicant needs to meet the Department’s financial fitness requirements. For example, North American states the applicant’s forecasted monthly lease expense of $40,000 does not reflect market

realities . In support of its position, Nor th American provided a survey of current lease rates for

the B757

- 200 aircraft published by the International Society of Transport Aircraft Trading (“ISTAT”). North American also claims that National Airlines’ presented the Department with

an overly optim istic first

- year operating forecast and questions whether the applicant can consistently achieve the 100 block hours of utilization forecasted per month or the $13,000 block hour rate it proposes. North American claims that because National Airlines ’ oper ating expenses are likely to be higher than forecasted and its revenues are likely to be lower than forecasted, the projected financials filed by National Airlines have very little resemblance to

market realities.

In its response to North American’s alleg ations, National Airlines argues that $40,000 monthly aircraft lease amount in its expense forecast does not purport to be the full lease cost. National Airlines states that it also included an estimated aircraft maintenance reserve of $120,000 per

month in its expense forecast. This combined figure amounts to $160,000 in monthly lease

cost s , which National Airlines notes is well within the average monthly B757

- 200 lease range cited in the ISTAT survey provided by North American. In addition, National Ai rlines claims that its forecasted 100 hours of monthly utilization is based on years of experience and is consistent with reported averages for other large aircraft passenger charterers.

14 Because projected expenses during the first several months of air transportation services frequently do not include all costs that will be incurred during a “normal” period of operations, it is our practice to base our three

month test on an average of o ne

- quarter of the first year’s operating cost forecast.

15 National Airlines forecast of first

- year operating expenses includes approximately $12.3 million in direct operating expense s and $1.35 million in indirect operating expenses. Indirect operating expenses were calculated by allocating indirect expenses evenly among the number of aircraft in National Airlines’ fleet.9

We have carefully reviewed North American’s and National Airlines’ c omments. While we evaluate the overall reasonableness of an applicant’s service proposal it is not our practice to judge the validity of utilization or revenue forecast s . O ur primary focus is on evidence that the applicant fully understands and has reaso nably estimated the cost s involved in providing the proposed operations, and that it has available to it resources sufficient to meet our financial fitness requirements to cover those expenses. 16 In this regard, we have reviewed the applicant’s projected d irect costs on a block hour basis against the costs reported by other air carriers operating similar aircraft and find the applicant’s forecast to be reasonable . Based on

this review we estimate that National Airlines will need access to $4.25 million in funding to

meet our financial fitness test. 17

Historical financial statements submitted in support of National Airlines ’ fitness show that for

the calendar year ending 2008

, National Airlines experienced a net loss of $ 98,799 on approximately $ 25.21 mill ion in operating revenues

, and for the calendar year ending 2009

, National Airlines experienced a net loss of $ 6.11 million on approximately $ 23.52 million in operating revenues. For the five months ending May 31, 2010, National Airlines lost $917,392

on approximately $ 12.93 million in operating revenues. The air carrier ’s most recent balance sheet indicates that, as of May 31, 2010 , it had current assets of $ 3.52 million and current liabilities of $ 2.08 million , giving the company a positive working capi tal balance of $ 1.44

million

. The same balance sheet shows the company as having negative retained earnings of $ 6.83 million and total shareholders’ equity of $ 620,605

.

In support of its ability to meet our financial fitness requirements, National Airl ines states that its parent company

, NAC

, or its parent company, NAC Holdings, will provide any additional infusion of capital required to meet the Department’s financial fitness requirements. In addition, the applicant provided a letter from NAC confirmi ng it would make funds available to National Airlines to support its proposed passenger operations

, and third

- party verification from JPMorgan Chase Bank (“JP Morgan”) confirming that NAC maintained account deposits in excess of the amount required by Nati onal Airlines to meet the Department’s financial fitness requirements. Furthermore, National Airlines provided a balance sheet for NAC Holdings shows that a s of July 31 , 2010

, NAC Holdings had cash accounts of $ 8.76 million

, total stockholders’ equity of $ 133.73 million , current assets of $55.19 million , and current

liabilities of $22.87 m illion, for a current ratio of 2.41:1 (meaning that for every dollar that NAC Holdings owed on July 31 , 2010 , payable within 12 months, it has $ 2.41 with which to pay it)

.

In its August 26 answer, North American questions whether National Airlines has access to
sufficient capital to meet the Department’s fitness requirements. North American claims the

third

- party verification of cash accounts that National Airlines provi ded from JP Morgan is not reflected in the applicant’s balance sheet, although the date of the JP Morgan letter predates the

date of the balance sheet.

16 See Order 99

- 8

- 12, at 8.

17 This figure is comprised of the applicant’s forecasted pre

- operating expenses ($845,000) and an averag e of

one

- quarter of the first year’s operating cost forecast ($3.41 million).10

In its September 1 reply, National Airlines maintains that contrary to North American’s assertion, it h as working capital reserves sufficient to satisfy the Department’s financial fitness requirements. National Airlines states that the letter from JP Morgan clearly identifies the cash accounts held by NAC. Therefore, there is no corresponding accounting e ntry on National Airlines balance sheet to reflect these funds. However, National Airlines contends, as stated in its application, that NAC and NAC Holdings have pledged to provide these funds to support National Airlines proposed passenger operations and the JP Morgan letter was provided as verification of their ability to extend their financial commitment to National Airlines.

In its October 4 answer , ATI claims the historical and current financial statements of NAC Holding s contain irregularities in th e accounting of retained earnings

. Specifically, ATI states that it is unable to reconcile NAC Holdings’ ending retained earnings by adding the net income for the year to NAC Holdings’ beginning retained earnings. Moreover, ATI contends that the

financia l statements of NAC Holdings ’ show a dramatic decline in the company’s liquid assets over the past few years and that the dwindling of NAC Holdings’ short

- term liquidity is

indicative of poor financial health. Furthermore

, ATI claims that a letter from NA C Holdings’ expressing a commitment to make funding available to support National Airlines ’ proposed operations is non

- binding and unenforceable

.

In its response to ATI answer, National Airlines explains that the “anomalies” ATI asserts in

the accountin g of NAC Holdings retained earnings is primarily attributable to distributions that have been made. In addition, National Airlines states

, the financial statements that it provided to the Department for 2007 and 2008 are from audited financial statements while the 2009 and January

- July 31, 2010, financial statements are preliminary unaudited results which are subject to change. National Airlines notes that the decline in NAC Holdings’ short

- term liquidity is

attributed to several factors

, including a deva luing of the company’s investments following th e fall of the stock market from late 2008 through the first part o f 2009, customary distributions to the shareholder, and the liquidation of cash and investment accounts to purchase aircraft for

use in Nationa l Airlines’ operations. As a final point, National Airlines states that the letter from NAC Holdings agreeing to commit funds to support National Airlines proposed operations is identical to commitments found in numerous other applications before the Depa rtment. In addition, National Airlines contends that a formal contract between affiliated companies would be no more meaningful than the commitment letter it provided since it would be absurd for one affiliate to sue another affiliate to force performance under a contract.

The opposing parties have provided no convincing evidence to support their contention that the applicant does not have access to sufficient financial resources or that its financial projections

are unreasonable or erroneous

. T he record shows that NAC Holdings and its subsidiaries have extended an offer to provide National Airlines with the capital necessary to meet the capital requirements for it s proposed passenger charter operations. In addition, the applicant provided

evidence demon strating the availability of the funds necessary to honor this commitment

, as well as third

- party verification of these funds. In light of the foregoing, we tentatively

conclude that National Airlines will have access to sufficient financial resources to commence the operations it proposes without posing an undue risk to consumers or their funds.11

Moreover

, we note that, as is our practice, prior to making any authority awarded to National Airlines effective, we will require the company to demonstrate tha t it continues to have access

to the financial resources needed to meet our financial test.

T his tentative finding of fitness is based on the operations proposed in this application. Were

National Airlines to propose a substantial expansion in its plan s, including the operation of

more than the one passenger aircraft discussed here, this finding may not continue to apply. Therefore, if our tentative finding regarding National Airlines’ fitness is made final, and

National Airlines is issued the authorit y it seeks , we will require that, should the company want to operate more than four total aircraft and/or more than one passenger aircraft, it must first provide the Department with at least 45

- days advance notice of such plans and provide updated

informat ion establishing its fitness for such expansion.

Compliance Disposition

In 2005

, a NAC employee filed a qui tam action in the U.S. District Court alleging that NAC had violated the Federal False Claims Act by submitting false invoices to the Department o f Defense. In October 2007, NAC and the DOD entered into a negotiated settlement that resolved all of these charges except for a single count of submitting a false invoice. According to the settlement agreement, NAC agreed to p lead guilty to one count of knowingly making a material misstatement to the United States, a felony charge and violation of Title 18 of the United States Code, Section 1001(a)(2)

, and it agreed to pay certain penalties and restitution

. Subsequent to this, NAC entered into an Admini strative Agreement with the USAF under

which , among other things, Mr. Alf and five employees were required to leave the company

. Mr. Alf’s sto ck was placed in a voting trust with the company operating under the management of the voting trust. Furthermore , the USAF debarred Mr. Alf from government contracting for a period of three years.

Similarly, because of the nature and degree of the allegations made against NAC and its owner, Mr. Alf, and the common ownership between National Airlines and NAC, the Department found it appropriate to impose certain fitness conditions on National Airlines to ensure its independence from NAC, including requiring that management of National Airlines be placed under a voting trust and an independent board of directors ; re moving certain individuals, including Mr. Alf, from any influence or control over the company ; regular reporting requirements ; and a requirement that Mr. Alf dispose of his interest in National Airlines within a reasonable period of time.

In May 2009, M r. Alf filed a complaint in the U.S. District Court for the District of Columbia contesting his debarm ent from government contracting and o n October 29, 2009, the District

Court issued an Order and Opinion granting Mr. Alf a preliminary injunction against

enforcement of the debarment decision of the USAF . The Dist rict Court found that the USAF had erred in its findings that any fraud beyond the single false statement had occurred, and that it was improper to impute the alleged misconduct associated w ith th at false statement to

Mr. Alf. Shortly thereafter, the USAF permanently terminated Mr. Alf’s debarment and in12

December 2009 , the USAF and NAC amended the Administrative Agreement to permit

Mr. Alf to dissolve the voting trust and resume control of NAC.

O n December 3, 2009, National Airlines requested that, in light of the District Courts findings and the Amended Administrative Agreement with the USAF, the Department remove the fitness conditions previously imposed. Upon review of the matter, the Departme nt found National Airlines fit under the ownership, control, and management of Mr. Alf , and removed

the fitness conditions

. By letter dated August 12, 2010, we informed National Airlines of our

conclusion. At the same time, we imposed various reporting r equirements

, including requiring the air carrier report, within 7 days of occurrence , ( 1) any charge of unfair or deceptive or anticompetitive business practices, or of fraud, felony or antitrust violation, brought against any relevant corporation, 18 or mem ber of the key personnel 19 employed (or to be employed) by any relevant corporation ; ( 2) investigations, enforcement actions, or formal complaints filed by the Department or other government agency, involving any relevant corporations, personnel employed (o r to be employed) by any relevant corporations or person having a substantial

interest 20 in any relevant corporation ; ( 3) any complaint or other action by the USAF alleging that NAC had failed to comply with any aspect of the December 2009 Amended Settlemen t Agreement ; and ( 4) any aircraft accidents or incidents (as defined by the National Transportation Safety Board Regulations, 49 CFR 830.2) experienced by National Airlines, its personnel, or any relevant corporation. With these reporting requirements in place, the Department may more closely monitor the air carrier’s compliance posture

.

In its application, the applicant stated that other than noted above, there have been no charges

of fraud or felony against it, its owners, or its key personnel nor have there been any charges of unfair, deceptive or anti

- competitive business practices, or of or antitrust violations brought against National Airlines, its owners, or its key personnel in the past ten years . Moreover, the applicant stated that there are no pending legal actions or outstanding judgments or 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

Tr ansportation Code or the Department’s regulations.

O n October 8 , 2010, the Department received a complaint from an interested party alleging

that National Airlines had violated section 201.5 of our rule s , by advertising its proposed

18 Section 204.2(k) of our rules (14 CFR 204. 2(k) ) defines a r elevant corporations as the air carrier, any subsidiary thereof, any predecessor thereof (i.e., any air carrier in w hich any directors, principal officers or persons having a substantial interest have or once had a substantial interest), and any company (including a sole proprietorship or partnership) which has a significant financial or managerial influence on the appl icant or air

carrier. The latter includes a ny company (including a sole proprietorship or partnership) holding more than 50 percent of the outstanding voting stock of the air carrier; and a ny company (including a sole proprietorship or partnership) holding between 20 percent and 50 percent of the outstanding voting stock of the air carrier and which has significant influence over the air carrier as indicated, for example, by 25 percent representation on the board of directors, participation in policy

- making processes, substantial inter

- company transactions, or managerial personnel with common res ponsibilities in both companies ( See 14 CFR § 204.2(k)).

19 See 14 CFR § 204.2(i).

20 See 14 CFR § 204.2(m).13

passenger air transp ortation prior to receiving effective authority from the Department. 21
These allegations are currently being investigat ed b y the Department’s Assistant General Counsel for Aviation Enforcement and Proceedings (“Enforcement Office”)

.

While National Airl i nes ’ compliance disposition is a concern to us in light of the Enfo r cement
Office ’s investig ation, we do not believe that th is action alone would warrant a negative finding of fitness for National Air lines

. 22 A review of our records and other information

a vailable to us has uncovered no additional information which would lead us to conclude that

the applicant or any of its key personnel lacks the proper compliance disposition to be found

fit

. In addition, according to the FAA, the air carrier has conducted its operations satisfactorily

and the agency knows of no reason why the air carrier should not be granted the authority it is seeking. 23 Moreover, the En forcement Office has informed us that it has no objections to the approval of National Airlines’ appli cation.

In light of these circumstances, we tentatively find that National Airlines 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 accepta ble 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). Th at section specifies 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 interest be owned by U.S. citizens , and that the air carrier must be under the

actual control of U.S. citizens.

As noted earlier, National Airlines is a corporation o rganized under the laws of the S tate of Michigan

. The company is wholly

- owned by National Air Cargo Acquisitions , LLC (“NAC Acquisitions”), a Delaware limited liabili ty company. NAC Acquisitions in turn, is wholly

owned by NAC Holdings, a New York corporation. Mr. Christopher J. Alf, a U.S. citizen, is the sole owner of NAC Holding s . In addition, National Airlines’ president, its board of directors, and all of its k ey personnel are U.S. citizens. Furthermore, National Airlines provided a n affidavit attesting that it is a U.S. citizen. Finally, there is no other information

before us that would lead us to conclude that National Airlines is not controlled by U.S.

cit izens.

21 See 14 CFR § 20 1

. 5.

22 We will monitor the course of this enforcement action as part of our continuing fitness responsibilities.

23 National Airlines notes that neither it nor any of its key personnel have been involved in an accident or incident in the year preceding its application or at any time in the p ast which remains under investigation by the FAA, the NTSB, or the company itself.14

In view of the foregoing, we tentatively conclude that National Airlines is a U.S. citizen and that it is fit, willing, and able to provide air transportation services as a U.S. certificated air carrier, subject to conditions.

PUBLIC CONVENIENC E AND NECESSITY

No finding of consistency with the public convenience and necessity is required for the award of authority for interstate charter air transportation of persons, property, and mail under section 41102, although such a finding is required fo r authority to engage in foreign charter air transportation.

We tentatively find that the foreign charter air transportation proposed by National Airlines is consistent with the public convenience and necessity. By Order 78

- 7

- 106, which instituted the

Fo rmer Large Irregular Air Service Investigation , the Civil Aeronautics Board found that there was a continuing demand and need for additional charter air carriers. These findings remain valid and apply to the authority sought by National Airlines . Therefo re, if National

Airlines meets the fitness requirements of the Transportation Code, it will receive certificates authorizing it to engage in interstate and foreign charter air transportation of persons, property,

and mail under section 41102. 24

OBJECTIONS

We will give interested persons 1 4 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 s 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 w hy 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 genera l, 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 National Airlines ’

fitness and certification.

24 Pursuant to 49 U.S.C. § 41307, issuance of foreign authority to the applicant is subject to Presidential review.15

EFFECTIVE CERTIFICATE CONDI TIONS AND LIMITATIONS

If National Airlines is found fit and issued the certificates it seeks, its authority will not

become effective until the air carrier has fulfilled all of the requirements for effectiveness as

set forth in the terms and conditions at tached to its certificates. Among other things, this

includes (1) our receipt of evidence that National Airlines has been certificated by the FAA to engage in passenger operations , (2) evidence of liability insurance coverage that meets the requirements o f section 205.5(b) of our rules

, (3) a statement of changes it may have undergone since its fitness was examined, and (4) evidence that National Airlines continues to have adequate financial resources available to it.

We also wish to remind National Airli nes 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 certificated air carriers continue to be fit

afte r 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. Therefore, if National Airlines is issued effective certificate authority and subsequently

propose s substantial changes in its ownership, management, or operations, it must first comply with the requirements of section 204.5 of our rules. 25

Moreover, t his tentative finding of fitness is based on the operations proposed in this

ap plication. Were National Airlines to propose a substantial expansion in its plans, including the operation of more than the one passenger aircraft discussed here, this finding may not continue to apply. Therefore, if our tentative finding regarding Natio nal Airlines’ fitness is made final, and National Airlines is issued the authority it seeks , we will require that, should the company want to operate more than three cargo aircraft and/or more than one passenger aircraft, it must first provide the Departme nt with at least 45

- days advance notice of such plans and provide updated information establishing its fitness for such expansion. The compliance of the company with this requirement is essential if we are to carry out our responsibilities

under section 4 1110(e). 26

25 The air carrier may contact our Air Carrier Fitness D ivision 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. In addition, by notice dated July 21, 1998, the Department requested ai r carriers to provide a

30

- day advance notification of any proposed change in ownership, restructuring, or recapitalization. If the air carrier fails to file this updated information or if the information fails to demonstrate that the air carrier will

con tinue 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 certificate authority.

26 We also remind National Ai rlines 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 commuter operations unless its fitness has been red etermined; and (3) if the company does not resume operations within one year of its cessation, its authority shall be revoked for dormancy.16

Finally, if National Airlines is granted effective authority, it would be required to submit a detailed progress report, within 45 days following the end of the first year of certificated flight operations, to the Air Carrier Fitness Division. The submission of a first year progress report is conditioned upon all newly certificated air carriers and was adopted as policy by the Department to aid in monitoring the fitness of new air carriers. The report should include a description of the air car rier’s current operations (number and type of aircraft, principle markets served, total number of full

- time employees), a summary of how its operations have changed during the year, a discussion of any changes it anticipates from its current operations

dur ing its second year, current financial statements, 27 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 operat ions.

ACCORDINGLY,

1. We direct all interested persons to show cause why we should not issue orders making final our tentative findings and conclusions stated above and award certificates to National Air Cargo Group, Inc. d/b/a National Airlines authorizing it to engage in interstate and foreign charter air transportation of persons, property and mail, subject to the attached specimen Terms, Conditions, and Limitations.

2. We deny the M otion of National Air Cargo Group, Inc, in Docket DOT

- OST

- 2010

- 0181,

reques ting to shorten the comment period.

3

. We direct any interested persons having objections to the issuance of orders making final any of the proposed findings, conclusions, or the certificate awards set forth here to file such objections with the Departmen t of Transportation Dockets, 1200 New Jersey Avenue, S.E., West Building Ground Floor, Rm. W12

- 140, Washington, D.C. 20590, in Dockets DOT

- OST

20 10

- 0 181 and DOT

- OST

- 20 10

- 0 215 and serve them upon all persons listed in Attachment A

no later than 1 4 days afte r the service date of this order; answers to objections shall be filed no

later than 7 days thereafter.

4

. 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.

5

. In the event that no objections are filed, we will consider all further procedural steps to be waived and we will enter orders making final our tentative findings and conclusions and will

issue National Air Cargo Group, Inc. d/b/a National Airlines certificates that will contain exact copies of the attached specimen Terms, Conditions, and Limitations. 28

6

. We will grant all motions for leave to file in Docket DOT

- OST

- 2010

- 0181.

27 These financial statements should include a balance sheet as of the end of the company’s first full year of

certi ficated flight operations and a 12

- month income statement ending that same date.

28 Since we have provided for the filing of objections to this order, we will not entertain petitions for

reconsideration.17

7

. We will serve a copy of this order on the persons listed in Attachment A.

8

. We will publish a notice of this order in the Federal Register.

By:

SUSAN L. KURLAND 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

NATIONAL AIR CARGO GROUP, INC.

d/b/a NATIONAL AIRLINES

is authorized to engage in interstate charter air tra nsportation 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 conduct cargo charter air transportation under this certificate became effective on December 21, 2006 . The authority to conduct passenger charter air transportation under this certificate will not become effective until six (business) days after the D epartment 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
authorizin g 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

p aid, 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

oper ations.

(2) Pending receipt of effective authority, the holder may not accept payment of any kind (i.e., cash, check, or credit card), issue tickets for the operations proposed under this certificate, or enter into contracts with charter operators, and an y advertisement 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 Tran sportation 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.2

(4) The holder's authority under this certificate is ef fective only to the extent that such operations are also authorized by the Federal Aviation Administration (FAA), and comply with all U.S. Government requirements concerning security , including, but not limited to 49 CFR Part

1544

. 

(5) The holder shall at all times remain a "Citizen of the United States" as required by 49 U.S.C. 40102(a)(15).

(6) 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.

(7) The holder is not authorized to engage in air transportation operations between points within the State of Alaska.

(8) Should the holder propose any substantial chang e in its ownership, management, or operations (as defined in 14 CFR 204.2(l)), it must first comply with the requirem ents of 14 CFR

204.5.

(9) 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 ce rtificates 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. Gove rnment 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
Specimen 

### Terms, Conditions, and Limitations

NATIONAL AIR CARGO GROUP, INC.

d/b/a NATIONAL AIRLINES

is authorized to engage in foreign charter air transportatio n of persons, property, and mail:

Between any place in the United States and any place outside thereof.

This authority is subject to the following provisions:

(1) The authority to conduct cargo charter air transportation under this certificate became

e ffective on December 21, 2006 . The authority to conduct passenger charter air transportation 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 cer tificate 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, f inancial 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 acce pt payment of any kind (i.e., cash, check, or credit card), issue tickets for the operations proposed under this certificate, or enter into contracts with charter operators, and any advertisement by the holder must prominently state: "This service is subje ct 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 ot her reasonable terms, conditions, and limitations as the Department of Transportation may prescribe in the public interest.2

(4) The holder shall at all times conduct its operations in accordance with all treaties and agreements between the United States a nd other countries, and the exercise of the privileges granted by this certificate is subject to compliance with such treaties and agreements and with any orders of the Department of Transportation issued under them or for the purpose of requiring complian ce with them.

(5) The exercise of the authority granted here is subject to the holder's first obtaining from the appropriate foreign governments such operating rights as may be necessary.

(6) The holder's authority under this certificate is effective onl y to the extent that such operations are also authorized by the Federal Aviation Administration (FAA), and comply with all U.S. Government requirements concerning security, including, but not limited to 49 CFR Part

1544. 

(7) The holder shall at all times remain a "Citizen of the United States" as required by 49 U.S.C. 40102(a)(15).

(8) 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.

(9) Should the holder propose any substantia l 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 on e 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 opera tions 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 operati ons 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 NATIONA L AIRLINES

JAMES L HOBSON JR

PRESIDENT AND CEO

AIR TRANSPORT INTERNATIONAL LLC

2800 CANTRELL ROAD

LITTLE ROCK ARKANSAS 72202 GEORGE A GOLDER ESQ

GENERAL COUNSEL

AIR TRANSPORT INTERNATIONAL LLC

7100 TPC DRIVE SUITE 100

ORLANDO FLORIDA 32822

MARK W ATWOOD

ELIZEBETH J WADSWORTH

COZEN O’ CONNER

1627 EYE STREET NW SUITE 1100

WASHINGTON DC 20006 BERNARD STANKUS RTS

- 42

OFFICE OF AIRLINE INFORMATION

DOT/RSPA/BTS E

- 36

1200 NEW JERSEY AVE SE

WASHINGTON DC 20590

WILLIAM J WEBER

CERTIFICATION SECTION MANAGER

FAA AFS

- 900 45005 AVIATION DRIVE, SUITE 131

DULLES VA 20166 CLAY MORITZ, RTS

- 42

OFFICE OF AIRLINE INFORMATION

DOT/RSPA/BTS E

- 36

1200 NEW JERSEY AVE SE

WASHINGTON DC 20590

PETER LYNCH AGC

- 300

ASST CHIEF COUNSEL FOR

ENFORCEMENT

FEDERAL AVIATION ADMINISTRATION

800 INDEPENDENCE AVE SW

WASHINGTON DC 20591 MALCOLM L BENGE ZUCKERT, SCOUTT & RASENBERGER LLP

888 7 TH STREET NW SUITE 700

WASHINGTON DC

TIM WAHLBERG

PRESIDENT

EVERGREEN INTERNAITONAL AIRLINES INC

3850 THREE MILE LANE

MCMINNVILLE OREGAN 97128 EDWARD W SAUER SQUIRE SANDERS & DEMPSEY LLP

1201 PENNSYLVANIA AVE NW

SUITE 500

WASHINGTO DC 20004