L\f' I to!,. I ~0~_ ~f(.'~J 

ZUCKERT SCOUTT [y RASENBERGER, L.L.P. 

ilflil Sewnteenth Street, ~~w, Vi:lshinhton, DC 2ll(X16-3 ,r)9 

felephone 12(l2129R-HM,J Fu 1202J o-}2·Ci)R3 

\-VVlvV.Zsrld\VCOrn 

LO;\lNIE ANNE PERA DIRECT DIAL (202) 973-7913 

BY EMAIL AND BY HAND 

Ms. Torlanda Archer 

Chief, Special Authorities Division, X-46 

Office of International Aviation 

U.S. Department of Transportation 

1200 New Jersey Avenue, S.E., 8th Floor 

Room W86-445 

Washington, D.C. 20590 

April 19,2011 

Re: ABC Charters, Inc. 

Objection to Spirit Request for Waiver 

Dear Ms. Archer: 

Japera.<lzsrJaw.com 

ABC Charters, Inc. ("ABC" or the "Company") hereby responds to the March 29, 2011 

request by Spirit Airlines for a waiver of the Department of Transportation's Part 212 and 380 

financial security requirements (the "Spirit Request"). As is discussed in more detail below, 

Spirit Airlines has made incorrect statements about the Cuba charter market in general and about 

the Company in particular. ABC respectfully urges the Department to not grant a blanket waiver 

to Spirit Airlines based upon these statements. 

According to the Request, Spirit will provide charter air transportation services between 

Hollywood Fort Lauderdale International Airport ("FLL") and Havana, Cuba ("HA V") for 

travelers, who are licensed by the Office of Foreign Assets Control ("OF AC") to engage in travel 

related transactions with respect to Cuba (hereinafter "Licensed Travelers"). It appears that 

Spirit proposes to provide these services on its own and not as a direct air carrier for an OF AC 

licensed charter operator (a "Carrier Service Provider"). To do so, Spirit must (a) hold an 

effective Carrier Service Provider ("CSP") license issued by OF AC, so that it can apply for 

landing rights in Cuba, enter into ground arrangements in Cuba, and operate to/from Cuba, (b) 

obtain Part 380 authorization from the Department upon filing a public charter prospectus. (c) 

maintain the financial security arrangements required in Sections 212.7,212.8,380.34, and 

380.35 of the Department's Regulations, and (d) comply with all other applicable rules and 

regulations relating to the Cuba charter flights. Spirit seeks a waiver of (c) and makes statements 

in support of this waiver. Many 0 f its statements are incorrect. 
ZUCKERT SCOUTT [y RASENBERGER, LLP 

Ms. Torlanda Archer 

April 19,2011 

Page 2 

I. Spirit Airlines Does Not Appear to Hold a CSP License 

Spirit acknowledges that "air service to Cuba remains restricted to licensed charter 

flights." Spirit Request at 2. Yet, Spirit does not seem to comply with the OF AC licensing 

requirements. 

OF AC requires that charter operators and air carriers obtain CSP licenses before they 

engage in any transactions relating to transportation services to Cuba. Charter operators, 

therefore, must obtain CSP licenses before they enter into charter agreements with direct air 

carriers and apply for other required authorizations and permits (including landing rights in Cuba 

and Part 380 authorization from the Department). Air carriers, likewise, must obtain CSP 

licenses before they may apply for these same authorizations and permits. In fact, if a carrier 

such as Spirit Airlines wants to market and sell charter air transportation services to Cuba on its 

own, it must hold an effective CSP license. To the extent that Spirit wishes to sell tickets on the 

flights, it must obtain a Travel Service Provider ("TSP") license as well. And if it hopes that 

travel agencies will sell tickets on the Spirit charter flights, it must ensure that each agency has 

an effective TSP license. 

Spirit has not indicated that it will comply with any of these rules. In fact, it has not 

stated in the Request that it even holds an effective CSP license. OFAC's most recent list of 

Authorized Service Providers, moreover, does not confirm that Spirit holds either the CSP or 

TSP license. See April 18, 2011 List of Authorized Service Providers at: 

http://www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba tsp.pdf. How is 

it possible that Spirit can submit a request for a waiver, let alone apply for landing rights in, and 

offer charter air transportation services to, Cuba? ABC respectfully objects to the grant of any 

waiver to an air carrier that does not hold required OF AC license. 

II. OFAC Regulations And Rules Do Not Replace The Department's Consumer 

Protection Requirements 

Spirit further states that OF AC requires air carriers "to certify that their financial 

responsibility to operate the flights." See Spirit Request at 2 (citing Circular 2006 at Appendix I, 

page 7). Spirit then suggests that it should not have to comply with DOT's financial security 

requirements because the certification of financial ability somehow protects passenger payments. 

There is nothing in Circular 2006 to suggest or state this. 

The certification to which Spirit refers is a statement that applicants must make in their 

CSP license applications. According to Circular 2006 Appendix I, applicants must certify that 

they are currently able "to be responsible for all of the financial requirements inherent in the 

operation of the Flights." OFAC further requires that applicants provide "a detailed estimate of 

each relevant expense in the operation of the Flights." The estimate and the certification together 

are intended to demonstrate that applicants know the expenses they will incur in 
ZUCKERT SCOUTT [y- RASENBERGER, L.L.P 

Ms. Torlanda Archer 

April 19.2011 

Page 3 

arranging/operating charter flights and can pay those expenses. Nothing in Circular 2006 states 

that the certification extends to financial security arrangements to protect passenger payments. 

Nor does Circular 2006 state that the certification in any way replaces DOT's consumer 

protection requirements. 

The fact that Circular 2006 references the Operator-Participant Contract but not DOT's 

financial security requirements, moreover, does not mean that the financial security requirements 

are not necessary or do not apply. Appendix II of Circular 2006 certainly does incorporate the 

DOT Operator-Participant Contract requirement into OFAC's screening procedures. OFAC, 

however, does not "provide specific operator-participant contract requirements" as Spirit states. 

To the contrary, OFAC establishes a rule as to the documentation Carrier Service Providers must 

receive when a Licensed Traveler makes a reservation or purchases a ticket. It is DOT - not 

OF AC - that requires all charter passengers to receive, review and sign the Operator-Participant 

Contract. And it is DOT - not OF AC - that requires charter operators and air carriers to enter 

into financial security arrangements for protecting passenger payments. Circular 2006 does not 

change or replace DOT's requirements. 

ABC objects to any suggestion that OF AC has responsibility for ensuring that passenger 

payments are protected. OFAC's application process does not replace the need for DOT's 

financial security requirements, particularly in the U.S.-Cuba market. 

III. DOT's Financial Security Requirements Do Not Impose Burdensome Transaction 

Costs That Result In Fare Increases 

As its main argument, Spirit contends that the costs of maintaining DOT-required 

financial security arrangements have resulted in high fares to Licensed Travelers. It further 

argues that Spirit would be able to offer lower fares to Licensed Travelers, if it did not have to 

enter into financial security arrangements. Spirit Request at 3 and 5. ABC respectfully objects 

to the notion that the costs of maintaining a $200,000 surety bond or letter of credit and a 

depository arrangement are burdensome transaction costs that have significantly impacted its 

fares. 

ABC certainly has costs of arranging charter flights to Cuba. Not only must it pay the 

direct air carrier for operating the charter flights, but it also must pay (a) fuel surcharges to the 

direct air carrier, (b) landing fees, ground handling charges, and related service fees to 

Havanatur, S.A., the Cuban entity responsible for flight clearances and services in Cuba, (c) 

advertising costs to U.S. companies, and (d) various other expenses. These other expenses 

include DOT's prospectus filing fees, Florida Seller of Travel application and renewal fees, 

operating bank account fees, depository bank account fees, letter of credit fees, business 

insurance premiums, legal fees and costs, office supply costs, etc. ABC establishes its fares for 

the DOT -approved charter flights based upon all 0 f these costs. 
ZUCKERT SCOUTT b RASENBERGER, L.L.P. 

Ms. Torlanda Archer 

April 19,2011 

Page 4 

While the Company does consider the costs of maintaining a $200,000 letter of credit and 

a depository arrangement (the "financial security costs") in determining its fares, these financial 

security costs are nominal in comparison to the other costs. For the year 2010, ABC paid less 

than $3.00 in financial security charges on behalf of each Licensed Traveler booked on a charter 

flight it arranged to Cuba. This per passenger cost did not impact significantly the airfare ABC 

offered in 2010. Nor does ABC expect the financial security costs to necessarily cause higher 

airfares in 2011. I 

Spirit claims that it is "an experienced, financially stable, low-cost air carrier" that has 

"adequate financial reserves to assure reimbursement of charter participant funds in the event of 

an improper nonperformance of service." Spirit Request at 3-4. With this experience, Spirit 

should be able to negotiate similar financial security arrangements as ABC. In this case, it can 

comply with DOT's financial security requirements without facing any unduly burdensome 

costs. 

IV. Spirit Airlines Has Made Inaccurate Statements About The Company 

ABC is quite surprised at some of the statements and suggestions Spirit has made about 

the Cuba charter business in general and the Company in particular. The Request demonstrates 

that either Spirit does not have a full understanding of the Cuba market, or it has a negative view 

of ABC (as well as other Carrier Service Providers). To ensure that the Department has accurate 

information about the Company, ABC corrects the inaccurate statements. 

A. Spirit is Wrong in Alleging That a CartellMonopoly Exists 

Spirit states that the charter companies "'are a virtual cartel that control the travel sector 

from the U.S. to Cuba, charging egregious fees in collusion with the Cuban authorities. '" Spirit 

Request at 3. While Spirit quotes another source to make this point, it clearly believes this is the 

case. After all, Spirit states that its proposed charter air transportation services are "necessary to 

meet ... demand and prevent monopolistic pricing structures." ld. at 4. 

While the annual financial security cost attributable to each Licensed Traveler is nominal, 

the time involved in managing passenger payments forwarded to the depository bank is not 

insignificant. ABC estimates than an employee spends between 8 and 10 hours each week 

preparing (1) an accounting of the payments (including amount paid and name of Licensed 

Traveler), (2) the flight payment certificate(s) for the amount to be paid to the direct air carrier 

for each flight, and (3) the flight completion certificate( s) stating the date on which each flight 

was completed. If the Department grants a waiver to Spirit, the Company will seek a similar 

waiver, so that it can minimize employee time and expenses in performing these functions. 
ZUCKERT SCOUTT 6- RASENBERGER, LLP. 

Ms. Torlanda Archer 

April 19,2011 

Page 5 

ABC vehemently opposes these statements and any suggestion that it (a) is part of a 

cartel, (b) controls the travel sector, (c) charges egregious fares and fees, or (d) is acting in 

collusion with Havanatur or with any other entity (U.S., foreign, or Cuban). ABC has been 

arranging charter air transportation to Cuba since 2000. It has excellent business relationships 

with direct air carriers, Travel and Carrier Service Providers, and Havanatur. These business 

relationships have been established through arms-length negotiations. They are entirely 

consistent with OF AC's Circular 2006 and with other applicable u.S. laws rules and regulations. 

ABC is not part of a cartel or monopoly, and it is not in collusion with any entity to set prices or 

to engage in any prohibited practices. 

Importantly, ABC has had a mission to provide charter air transportation services to/from 

Cuba, using reliable and safe airlines,2 at the best possible fare it can offer, given the high cost of 

chartering the aircraft, the rising fuel prices, and other required charges that are directly related 

to the charter flights (including landing fees, ground handling charges, insurance premiums for 

business liability insurance, etc.). ABC's fares are solely within its discretion and are directly 

related to all of these costs. 

For Spirit to suggest that it is colluding with any entity to set fares is bordering on 

slander. And for Spirit to suggest that ABC's fares are not appropriate given the various costs is 

completely inaccurate. 

B. Spirit is not Correct in Stating That Only a Handful of Carrier Service 

Providers Arrange Charter Flights to Cuba 

Spirit expressly states that only "a handful of charter companies regularly" arrange 

charter flights to Cuba before the 2004 OF AC changes that restricted Cuban American travel. 

See Spirit Request at 3. It also states that even after OF AC changed the travel restrictions in 

September 2009, "only a small number of charter operators" are servicing the Cuba market. Id. 

at 3-4. 

These statements are not correct. Prior to the 2004 OF AC changes, at least seven charter 

operators holding CSP licenses arranged charter flights, on a weekly basis, between three U.S. 

airports and five Cuban destinations. The three U.S. airports were Miami International Airport 

(MIA); JFK International Airport (JFK); and Los Angeles International Airport ("LAX"). The 

five Cuban destinations were Havana; Cienfuegos; Camaguey; Holguin; and Santiago. In 2009, 

before OF AC expanded the travel restrictions, an eighth charter operator returned to the Cuba 

charter market. Since 2009, eight charter operators have arranged charter flights between the 

three airports (including for a period of time LAX) and the five Cuban airports. This is not a 

2 Since its founding in 2000, ABC has chartered aircraft from reputable U.S. airlines, 

including American Airlines, Continental Airlines, Miami Air International, and United Airlines. 

It also has had charter agreements with Mexicana Airlines, among other foreign air carriers. 
ZUCKERT SCOUTT [y RASENBERGER, L.L.P 

Ms. T orlanda Archer 

April 19.2011 

Page 6 

small number of service providers, but rather a significant number given the existing travel 

restrictions to Cuba. 

C. Spirit is not Correct in Suggesting that the Carrier Service Providers are not 

Meeting Demand 

Spirit further maintains that its services are necessary to meet current demand. Spirit 

Request at 4. Spirit appears to suggest that the existing eight Carrier Service Providers are not 

meeting demand. 

Any such suggestion is not correct. The number of charter nights ABC arranges depends 

upon several factors. Obviously, one of these factors is demand. 3 If more Licensed Travelers 

demand transportation than is currently offered, ABC will consider adding flights. But it cannot 

do so without also considering whether Havanatur will grant landing rights for those additional 

flights. This is not a market whereby any Carrier Service Provider can simply add flights. A 

Carrier Service Provider should never ignore Cuba's requirements, just to flood the market with 

flights. The bottom line is that the Company (as well as other Carrier Service Providers) will add 

charter flights, if there is demand by Licensed Travelers and if all required authorizations and 

clearances will be granted. 

D. Spirit is not Correct in Suggesting that Carrier Service Providers are 

Motivated to Cancel Flights When Demand is low 

Spirit, lastly, maintains that it (a) will "prevent stranding passengers" when mechanical 

problems occur and (b) avoid cancelling flights when demand is low. Spirit Request at 4. As 

support, the airline states that "charter operators ... may be motivated to cancel flights when 

demand is low." Id. Spirit, by contrast, "does not foresee cancellations" because - as it suggests 

- its services are reliable and those of charter operators are not. Id. at 4-5. 

Nothing could be further from the truth in the Cuba market. While ABC is not an air 

carrier, it is a DOT -authorized indirect air carrier. And it charters aircraft from safe and reliable 

direct air carriers. If those carriers cannot operate a particular night during Customs business 

hours, ABC immediately arranges alternate charter air transportation. Licensed Travelers will 

not be stranded as a result of a direct air carrier's mechanical problems; ABC sees to it that 

Licensed Travelers are transported to their ultimate destination. 

3 The Company questions how Spirit can make any statements about demand in the Cuba 

market. Spirit has not sold a single ticket for travel to Cuba. Nor should it have done so. As 

OFAC's April 2011 List of Authorized Service Providers shows, Spirit does not have a TSP 

license. 
ZUCKERT SCOUTT (7 RASENBERGER, LLP. 

Ms. T orlanda Archer 

April 19,2011 

Page 7 

In addition, since 2000, ABC has never cancelled a charter flight "when demand was 

low." It is not motivated to do so for a number of reasons. First, since day one, it has been 

committed to offering charter air transportation in accordance with DOT Regulations. It would 

never deviate from DOT rules by cancelling a flight for low demand. Second, ABC values its 

customers. It has contracted with reputable U.S. direct air carriers - even when the charter price 

was higher than that of low cost or charter carriers - to ensure that the charter flights would 

operate as scheduled (and as approved by the Department). It also chooses reputable carriers 

because cancelling flights would irreparably impair the Company's reputation in a highly 

regulated and competitive market. Third, under most if not all charter agreements, the direct air 

carriers impose high fees when a charter operator cancels a flight. These contractual 

requirements tend to remove any motivation (which ABC does not have) to cancel flights. 

ABC does not wish to suggest that it has never cancelled flights. Since 2000, it has had 

to do so as a result of circumstances beyond its control. For example, ABC has had to cancel 

flights when: 

• On September 11, 2001, the Federal Aviation Administration ("FAA") closed 

U.S. airspace as a result of the terrorist attacks. ABC had no choice but to cancel 

some flights and delay others as a result of this government action. When U.S. 

airspace was again open, ABC arranged for the same or other direct air carriers to 

operate between Miami and Cuba to (a) ensure that all Licensed Travelers in 

Cuba were returned to Miami and (b) provide transportation to Licensed Travelers 

who had tickets on charter flights bound for Cuba. 

• After OF AC amended the Regulations on June 16, 2004 to significantly restrict 

travel to Cuba, ABC again had to cancel some flights and to substitute other 

flights with smaller aircraft. The Company did so, not because of low demand, 

but rather because of "no demand". There simply were fewer Licensed Travelers 

as a result ofOFAC's regulatory change. 

• Over the years, hurricanes and tropical storms temporarily closed the airports in 

Cuba. ABC had no choice but to delay the charter flights for weather related 

reasons. 

No Carrier Service Provider can guarantee that a flight will not be cancelled. Some 

circumstances (such as those relating to severe weather or regulatory changes) are simply beyond 

the Carrier Service Provider's control. Even Spirit understands this. After all, it was forced to 

cancel scheduled flights in June 2010 as a result oflabor disputes. Given Spirit's own history of 

canceling flights, it is remarkable that Spirit would suggest that charter operators are more likely 

to cancel flights than air carriers. 
ZUCKERT SCOUTT fy RASENBERGER, LLP 

Ms. T orlanda Archer 

April 19,2011 

Page 8 

ABC certainly has never cancelled charter flights because some seats were not filled. 

And while some flights had to be cancelled or delayed as a result of unforeseen circumstances, 

ABC has made alternate arrangements - including contracting with different carriers - to 

accommodate Licensed Travelers. Any suggestion that it would strand passengers is not only 

wrong but also is offensive. 

* * * * 

ABC does not object to a Carrier Service Provider offering public charter air 

transportation to Cuba, in accordance with OF AC and DOT requirements. It, however, does take 

issue with the Department granting a waiver of the financial security requirements based upon 

inaccurate and (in some cases) inflammatory statements. For this reason, ABC objects to Spirit's 

waiver request. 

cc: Ms. Joanne M. Young (by email) 

Mr. David W. Kirstein 

Counsel for Spirit Airlines, Inc. 

Ms. Susan Jollie (by email) 

Counsel for C&T Charters 

Mr. Pierre Murphy (by email) 

Respectfully submitted, 

ZUCKERT, SCOUTT & RASENBERGER, 

L.L.P. 

Attorneys for ABC Charters, Inc. 

Counsel for Wilson International Services, Inc. 

Mr. Josh Romanow (by email) 

Counsel for Xael Charters, Inc. 

Mr. Charles Bishop (by email) 

Office of Foreign Assets Control 

U.S. Department of the Treasury 
Zt.,lCKERT SCOUTT 6- RASENBERGER, L.L.p. 

Ms. T orlanda Archer 

April 19,2011 

Page 9 

Mr. Gilberto Torres Vela (by email) 

Office of Cuban Affairs 

U.S. Department of State