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## ZUCKERT SCOUTT [y

## RASENBERGER, L.L.P.

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BY EMAIL AND BY HAND Ms. TorlandaArcher Chief, Special Authorities Division, X-46 Office ofInternational Aviation U.S. Department ofTransportation 1200NewJersey Avenue, S.E., 8th Floor Room W86-445 Washington, D.C. 20590 April 19,2011

Re: ABC Charters, Inc. Objection to Spirit Requestfor Waiver DearMs. Archer: Japera.<lzsrJaw.com

ABC Charters, Inc. ("ABC" orthe "Company")hereby responds to the March 29, 2011 request by SpiritAirlines for a waiverofthe Department ofTransportation's Part 212 and 380 financial security requirements (the "SpiritRequest"). As is discussed in more detail below, SpiritAirlines has made incorrect statements about the Cuba chartermarket in general and about the Company in particular. ABC respectfully urges the Departmentto 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 ("HAV") for travelers, who are licensed by the Office ofForeign Assets Control ("OFAC")to engage in travel related transactions with respect to Cuba (hereinafter "Licensed Travelers"). It appears that Spiritproposes to provide these services on its own and not as a direct air carrier for an OFAC licensed charteroperator (a "Carrier Service Provider"). To do so, Spiritmust (a) hold an effective CarrierService Provider ("CSP") license issued by OFAC, 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 charterprospectus. (c) maintainthe financial security arrangements required in Sections 212.7,212.8,380.34, and 380.35 ofthe 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 ofthis waiver. Many 0f its statements are incorrect.ZUCKERT SCOUTT [yRASENBERGER, LLP Ms. Torlanda Archer April 19,2011 Page 2



### I. SpiritAirlines Does Not Appearto 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 OFAC licensing requirements. OFAC requires that charter operators and air carriers obtain CSP licenses before they engage in any transactions relating to transportation services to Cuba. Charteroperators, therefore, must obtain CSP licenses before they enter into charter agreements with direct air carriers and apply for otherrequired authorizations and permits (including landing rights in Cuba and Part 380 authorization from the Department). Aircarriers, likewise, must obtain CSP licenses before they may apply for these same authorizations and permits. In fact, ifa 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 extentthat Spirit wishesto sell tickets on the flights, it must obtain a Travel Service Provider ("TSP") license as well. And ifit hopes that travel agencies will sell tickets onthe Spirit charter flights, it mustensure that each agency has an effective TSP license. Spirithas not indicated that it will comply with any ofthese rules. In fact, it has not stated in the Request that it evenholds an effective CSP license. OFAC'smostrecent list of Authorized Service Providers, moreover, does not confirm that Spirit holds eitherthe CSP or TSP license. See April 18, 2011 List ofAuthorized Service Providers at: http://www.treasury.gov/resource-center/sanctions/Programs/Documents/cuba tsp.pdf. How is it possible that Spiritcan submit a request for a waiver, let alone apply for landingrights in, and offercharter air transportation services to, Cuba? ABC respectfully objects to the grant ofany waiver to an air carrierthat does not hold required OFAC license.


### II. OFAC Regulations And Rules Do Not Replace The Department's Consumer Protection Requirements Spirit further states that OFAC requires air carriers "tocertify that their financial responsibility to operate the flights." See Spirit Request at 2 (citing Circular2006 at Appendix I, page 7). Spirit then suggests that it should not have to comply with DOT's financial security requirements because the certification offinancial ability somehowprotects passengerpayments. 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 Circular2006 Appendix I, applicants must certify that they are currently able "tobe responsible for all ofthe financial requirements inherent in the operation ofthe Flights." OFAC further requires that applicants provide "adetailed estimate of each relevant expense in the operation ofthe Flights." The estimate and the certification together are intended to demonstrate that applicants know the expenses they will incur inZUCKERT SCOUTT [y- RASENBERGER, L.L.P Ms. Torlanda Archer April 19.2011 Page 3 arranging/operating charterflights and can pay those expenses. Nothing in Circular 2006 states that the certification extends to financial security arrangements to protect passengerpayments. Nordoes 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 ofCircular2006 certainly does incorporate the DOT Operator-Participant Contractrequirement into OFAC's screeningprocedures. OFAC, however, does not "provide specific operator-participant contractrequirements" as Spirit states. To the contrary, OFAC establishes a rule as to the documentation Carrier Service Providers must receive when a Licensed Travelermakes a reservation orpurchases aticket. It is DOT

- not OFAC

- that requires all charterpassengers to receive, review and sign the Operator-Participant Contract. And it is DOT

- not OFAC

- that requires charter operators and aircarriers to enter into financial security arrangements for protecting passengerpayments. Circular2006 does not change orreplace DOT'srequirements. ABC objects to any suggestionthat OFAC has responsibility for ensuring that passenger payments are protected. OFAC'sapplicationprocess does notreplace the need for DOT's financial security requirements, particularly in the U.S.-Cubamarket.
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 ofmaintaining 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, ifit did nothave to enterinto financial security arrangements. Spirit Request at 3 and 5. ABC respectfully objects to the notion that the costs ofmaintaining a $200,000 surety bond orletter ofcredit and a depository arrangement are burdensome transaction costs that have significantly impacted its fares. ABC certainly has costs ofarranging charter flights to Cuba. Not only must it pay the direct air carrier for operating the charter flights, but it also mustpay (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 otherexpenses. These otherexpenses include DOT'sprospectus filing fees, Florida Seller ofTravel application and renewal fees, operating bank account fees, depository bank account fees, letter ofcredit 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 0f these costs.ZUCKERT SCOUTT b RASENBERGER, L.L.P. Ms. TorlandaArcher April 19,2011 Page 4

While the Company does considerthe costs ofmaintaining a $200,000 letter ofcredit and a depository arrangement (the "financial security costs") in determining its fares, these financial security costs are nominal in comparison to the othercosts. Forthe year 2010, ABC paid less than $3.00 in financial security charges on behalfofeach Licensed Traveler booked on a charter flight it arranged to Cuba. Thisperpassengercost did not impact significantly the airfare ABC offered in 2010. Nor does ABC expectthe financial security costs to necessarily cause higher airfares in 2011. I Spirit claims that it is "anexperienced, financially stable, low-cost air carrier" that has "adequate financial reserves to assure reimbursement ofcharterparticipant funds in the eventof an improper nonperformance ofservice." 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 securityrequirements without facing any unduly burdensome costs.
IV. SpiritAirlines Has Made Inaccurate Statements About The Company ABC is quite surprised at some ofthe statements and suggestions Spirithas made about the Cubacharterbusiness in general andthe Company in particular. The Request demonstrates that either Spirit does nothave a full understanding ofthe Cubamarket, orit has a negative view ofABC (as well as otherCarrier Service Providers). To ensure that the Departmenthas accurate information about the Company, ABC corrects the inaccurate statements. A. Spirit is Wrong in Alleging That a CartellMonopoly Exists Spirit states that the chartercompanies "'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 itsproposed charter air transportation services are "necessaryto meet
...demand and prevent monopolistic pricing structures." ld. at 4.

While the annual financial securitycost attributable to each Licensed Traveleris nominal, the time involved in managing passengerpayments forwarded to the depositorybank is not insignificant. ABC estimates than an employee spends between 8 and 10 hours each week preparing (1) an accounting ofthe payments (including amountpaid and name ofLicensed 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. Ifthe Department grants a waiverto 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 ofa cartel, (b) controls the travel sector, (c) charges egregious fares and fees, or (d) is acting in collusion with Havanaturorwith any otherentity (U.S., foreign, or Cuban). ABC has been arranging charter airtransportationto Cuba since 2000. Ithas excellent business relationships with direct aircarriers, Travel and Carrier Service Providers, and Havanatur. These business relationships have beenestablished through arms-length negotiations. They are entirely consistent with OFAC's Circular 2006 and with otherapplicable u.S. laws rules and regulations. ABC is not part ofa cartel ormonopoly, 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 otherrequired charges that are directly related to the charterflights (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 ofthese costs. For Spiritto suggest that it is colluding with any entityto set fares is bordering on slander. And for Spiritto suggestthat ABC's fares are not appropriate giventhe various costs is completely inaccurate. 

### B. Spirit is not Correct in Stating That Only a Handful ofCarrierService Providers Arrange CharterFlights to Cuba Spirit expressly states that only "ahandful ofchartercompaniesregularly" arrange charter flights to Cubabefore the 2004 OF AC changes that restricted CubanAmericantravel. See Spirit Request at 3. Italso states that even after OFAC changed the travel restrictions in September2009, "only a small number ofcharteroperators" are servicing the Cubamarket. Id. at 3-4. These statements are not correct. Priorto the 2004 OFAC 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 Cubandestinations were Havana; Cienfuegos; Camaguey; Holguin; and Santiago. In 2009, before OFAC expanded the travel restrictions, an eighth charter operatorreturned to the Cuba charter market. Since 2009, eightcharteroperators have arranged charter flights betweenthe three airports (including for a period oftime 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 MexicanaAirlines, among other foreign air carriers.ZUCKERT SCOUTT [yRASENBERGER, L.L.P Ms. Torlanda Archer April 19.2011 Page 6

small number ofservice providers, but rather a significant number given the existing travel restrictions to Cuba. C. Spirit is not Correct in Suggesting that the CarrierService Providers are not Meeting Demand Spirit further maintains that its services are necessary to meetcurrent demand. Spirit Request at 4. Spirit appears to suggest that the existingeight Carrier Service Providers are not meeting demand. Any such suggestion is not correct. The number ofcharternights ABC arranges depends upon several factors. Obviously, one ofthese factors is demand. 3 Ifmore Licensed Travelers demand transportation than is currently offered, ABC will consider adding flights. But it cannot do so without also considering whether Havanaturwill grant landing rights for those additional flights. This is not a market whereby any Carrier Service Providercan simply add flights. A Carrier Service Provider should never ignore Cuba'srequirements,justto flood the market with flights. The bottom line is that the Company (as well as other Carrier Service Providers) will add charter flights, ifthere is demand by Licensed Travelers and ifall required authorizations and clearances will be granted. D. Spirit is not Correct in Suggesting that CarrierService Providers are Motivated to Cancel Flights When Demand is low Spirit, lastly, maintains that it (a) will "prevent strandingpassengers" when mechanical problems occur and (b) avoid cancelling flights when demand is low. Spirit Request at 4. As support, the airline states that "charteroperators
... 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 ofcharter operators are not. Id. at 4-5. Nothing could be further from the truth in the Cubamarket. 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. Ifthose carriers cannot operate aparticular night during Customs business hours, ABC immediately arranges alternate charter air transportation. Licensed Travelers will not be stranded as a result ofa direct aircarrier'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 ofAuthorized Service Providers shows, Spirit does not have a TSP license.ZUCKERT SCOUTT (7RASENBERGER, LLP. Ms. TorlandaArcher April 19,2011 Page 7

In addition, since 2000, ABC has nevercancelled a charter flight "whendemand was low." It is not motivated to do so for a number ofreasons. First, since day one, it has been committed to offering charter airtransportation in accordance with DOT Regulations. Itwould never deviate from DOTrules by cancelling a flight for low demand. Second, ABC values its customers. 

### It has contracted withreputable U.S. direct air carriers

- even when the charter price was higher than that oflowcost orchartercarriers

- 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 impairthe Company's reputation in a highly regulated and competitive market. Third, under most ifnot all charter agreements, the direct air carriers impose high fees when a charteroperator cancels a flight. These contractual requirements tend to remove any motivation (whichABC 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 ofcircumstancesbeyond its control. For example, ABC has had to cancel flights when:

• On September 11, 2001, the Federal AviationAdministration ("FAA") closed U.S. airspace as a result ofthe terrorist attacks. ABC had no choice but to cancel some flights and delay others as a result ofthis government action. When U.S. airspace was again open, ABC arranged for the same orotherdirect air carriers to operate between Miami and Cubato (a) ensurethat all Licensed Travelers in Cubawere returned to Miami and (b) provide transportation to Licensed Travelers who had tickets on charterflights bound for Cuba.

• After OFAC 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 oflow demand, but rather because of"no demand". There simply were fewer Licensed Travelers as a result ofOFAC'sregulatory change.

• Overthe years, hurricanes and tropical storms temporarily closed the airports in Cuba. ABC had no choice but to delay the charter flights for weatherrelated reasons. No Carrier Service Providercan guarantee that a flight will not be cancelled. Some circumstances (such as those relating to severe weather orregulatory 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 oflabordisputes. Given Spirit'sown history of canceling flights, it is remarkable that Spirit would suggest that charteroperators are more likely to cancel flights than aircarriers.ZUCKERT SCOUTT fyRASENBERGER, LLP Ms. TorlandaArcher April 19,2011 Page 8

ABC certainly has never cancelled charter flights because some seats were not filled. And while someflights had to be cancelled ordelayed as a result ofunforeseen 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 offeringpublic charter air transportation to Cuba, in accordance with OFAC and DOTrequirements. It, however, does take issue with the Department granting a waiver ofthe financial security requirements based upon inaccurate and (in some cases) inflammatory statements. Forthis reason, ABC objects to Spirit's waiverrequest.

cc: Ms. Joanne M. Young (by email) Mr. David W. Kirstein Counsel for Spirit Airlines, Inc. Ms. Susan Jollie (by email) Counsel for C&TCharters 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 ofForeignAssets Control U.S. Department ofthe TreasuryZt.,lCKERT SCOUTT 6- RASENBERGER, L.L.p. Ms. TorlandaArcher April 19,2011 Page 9

Mr. Gilberto Torres Vela (by email) Office ofCuban Affairs U.S. Department ofState