Order 2011

- 8

- 15
Served: August 10, 2011

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

Issued by the Department of Transportation
on the 10 th day of August, 2011

Application s of

CARLSBAD

- PALOMAR AIRLINES, INC.
d/b/a CALIF ORNIA PACIFIC AIRLINES

for certificate s of public convenience and necessity under 49 U.S.C. 41102 to engage in interstate and foreign scheduled air transportation of persons, property, and
mail Dockets DOT

- OST

- 2010

- 012 5

an d
DOT

- OST

- 2010

- 0126

ORDER TO SHOW CAUSE
PROPOSING ISSUANCE OF INTERSTATE CERTIFICATE AUTHORITY
AND DISMISSING APPLICATION FOR FOREIGN CERTIFICATE AUTHORITY

Summary

By this order, we tentatively find that ( 1) Carlsbad

- Palomar Airlin es, Inc. d/b/a California Pacific
Airlines (“ CP Air ”)

, is a citizen of the United States, is fit, willing, and able to provide interstate air transportation of persons, property, and mail

, and should be issued a certificate of public

convenience and necess ity authorizing such operations, subject to conditions ; 1 and ( 2) its application for foreign scheduled authority should be dismissed

.

Background

Section 41102 of Title 49 of the United States Transpo rtation Code (“the Transportation Code”)
directs us to determine whether applicants for certificate authority to provide interstate scheduled air transportation are “fit, willing, and able” to perform such transportation, and to comply with
the Transportation Code and the regulations of the Department. In mak ing fitness findings, the Department 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 ord er to determine a company's fitness 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 comply with the Transportation Code and regulations imposed by Federal and State agencies. We must also determine that the applicant is a U.S.
citizen.

1 Specifically, we are proposing to limit CP Air’s authority to the use of three aircraft.2

On May 11, 201 0 , CP A ir filed an application in Docket DOT

- OST

- 2010

- 0125 reque sting a certificate to provide foreign scheduled air transportation of persons, property, and mail pursuant to § 41102 of the Transportation Code between Carlsbad, California, and Cabo San Lucas

, Mexico. On May 18 , 2010, CP Air filed an application in Doc ket DOT

- OST

- 2010

- 012 6 requesting a companion certificate to provide interstate scheduled air transportation of persons, property, and mail

. S ubsequently, the applicant stat ed that it no longer intended to provide foreign scheduled passenger operations dur ing its first year of operations. CP Air accompanied its application with the fitness information required by section 204.3 of our regulations (14 CFR 204.3). 2

No answers opposing CP Air ’s application s were filed and no special issues regarding the

app licant have come to our attention. Under these circumstances, we propose to decide the issue of the applicant’s fitness on the basis of the written record, and we tentatively conclude that CP
Air is a U.S. citizen and is fit, willing, and able to operate its proposed air service, subject to
conditions as set forth in this order

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

FITNESS

The Company

CP Air

, a n on

- operating company incorporated in the State of California on April 19, 2010, is wholly

- owned by Mr. Theodore L. Vallas , a U.S. citizen . CP Air’s corporate offices are located
in Carlsbad, California

, and its main base of operations will be based at McC lellan

- Palomar Airport in Carlsbad, California. If granted the interstate certificate it seeks, CP Air plans to provide scheduled passenger service between Carlsbad, California, and Phoenix, Arizona ; Las Vegas, Nevada; and Oakland, San Jose, and Sacrament o, California. The applicant plans to initially commence operations using one Embraer 170 aircraft and increase its fleet size to three Embraer 170 aircraft within its first year of revenue operations.

.

Managerial Competence

CP Air ’s B oard of D irectors, officers, and other key management personnel , all of whom are U.S. citizens, consist of the following individuals:

Theodore L. (“Ted”) Vallas

– President , C hief Executive Officer (“CEO”) , and Chairman Theodore G. (“T.G.”) Vallas

– Corporate Secretary a nd Board Member

2 CP Air filed additional information supplementing its application on Augus t 26, September 22, October 12, and October 29, 2010; January 20, March 10, and May 18, 2011. The applicant accompanied its application and its August 26, 2010, supplemental filings with a request that certain information be withheld from public disclosur e

. By letters dated July 12 and October 26, 2010, the Department notified the applicant of our intended ruling on its confidentiality request s , granting, in

- part

, the applicant’s requests and informing CP Air that certain information for which it requeste d confidentiality did not warrant such treatment. The applicant subsequently filed this information in the public docket on July 13 and October 28, 2010.3

Victor Ramirez

– General Counsel and Board Member
John Pennant

- Jones

– Board Member
John Polchin

– Board Member
Andrew Smith

– Board Member
Chuck Hansen

- Board Member
Fernando Woodside

- Board Member
Jim Buntz

– Vice Presiden t of Fin ance and Business Development and Board Member

Tom Morrow

– Director of Communications and Board Member
John G. Ross

– Director of Operations
Dean Sinerius

– Director of Maintenance
Patrick Randall

– Chief Inspector Bret Ebaugh

– Chief Pilot

Dave L ove , Jr.

– Director of Safety

The Department reviewed Mr. Theodore L. Vallas’ employment background in connection with

the certification of Flight T rails d/b/a/ Air R esorts A irlines (“Air Resorts”)

. 3 At that time he was the majority owner of Air Resort and its Chief Executive Officer. Mr. Vallas has been the owner/president of numerous companies during his 40 year career as an entrepreneur, including El Camino Country Club (1958

- 2008), Olympic Resort Hotel and Spa (1982

- 2007), Instruments at Palomar, In c. (1983

- 1997), Golf Course Inns of America (1965

- 1997), Olympic Golf Resorts (1983

- 1995), Super 580 Aircraft Company (1979

- 1994), Whispering Palms Country Club (1970

- 1997) Barbara Worth Country Club (1971

- 1975), El Camino Playhouse (1967

- 1970), and
Genera l Design Instruments Company (1953

- 1960).

Mr. Theodore G. Vallas has more than 36 years of management experience

, having served as General Manager of Olympic Resort Hotel and Spa for more than 11 years (1996

- 2007), El
Camino Country Club for more than 23 years ( 1973

- 1976 ) , and Whisper Palms Country Club for approximately 2 years ( 1971

- 1973). Mr. Vallas is also a Partner at U.S. International
Consultants , a business consulting firm specializing in corporate restructuring (2007

- p resent)

, and he previously served in the U.S. Air Force as an F

- 4 Captain (1966

- 1971).

Mr. Victor Ramirez is a retired Judge from the Superior Court of San Diego (1979

- 2002) and he is currently s elf

– employed as an attorney in private practice focusing on civil and business law (200 2

- present). Mr. Ramirez has also served on the B oard at Hidden Valley National Bank as its Chairman (1982

- 1983) and as an attorney in civil and business law (1973

- 1979).

Mr. John Pennant

- Jones has more than 34 years of executive management experience. S ince 1990, he has been an investor and owner/manger of several enterprises in the food service industry, including Donovan’s Steak and Chop House (1990

- Present), a TGIF Franchise (1999

- p resent), and Amaregal, Inc. (1996

- p resent). Prior to this, Mr. Pennan t

- Jones held executive sales positions with T RW LSI Product (1989

- 1993) and Semtech Corp (1986

- 1989)

.

Mr. John Polchin has more than 30 years of executive management experience. Prior to joining CP Air, he served as Vice President and Chief Financial Off icer of several companies, including

3 See Order 89

- 2

- 19, issued February 7, 1989.4

The Aes Corporation (2007

- 2008), Goldleaf Financial Solutions , Inc. (2007), Convera Corporation (2004

- 2006), Intelidata Technologies (2002

- 2004), Orblynk Incorporated (2000

- 2002), E.Spire Communications (1996

- 2000), an d UNC Incorporated (1988

- 1994) . Mr. Polchin
has also previously been employed by Appworx C orporation as Vice President and Corporate Controller (1994

- 1996) and by NCNB Corporation as an Associate (1986

- 1988).

Mr. Andrew Smith has more than 23 years of e xperience in insurance and risk management. In 2006, he founded AvPac Insurance , an insurance b rokerage that he continues to own and manage. Prior to this, he was employed by William A. Tassio Insurance Service as a M anager (2002

- 2006), and by Arnel and Affiliates as a Risk Manager (1987

- 1999 ). Mr. Smith is also currently employed by Stargazer Aviation as a Risk Manager (1999

- present).

Mr. Chuck Hansen has more than 23 years of execut ive experience and he is an active member of the San Diego comm unity having served on the board of directors of numerous local non

profit organizations. Currently, Mr. Hansen serves as Vice President of Community Relations at Viejas Enterprises, Executive Director at America’s Cup Services, and Vice President of Marketing at Atlas Hotels, positions he has held since 1993. Mr. Hansen has also previously served as Vice President of Marketing at Pacific Southwest Airlines (1976

- 1983).

Mr. Fernando Woodside has more than 27 years of executive experience and he is also a
heli copter and fixed wing pilot. In addition to serving as a B oard member for CP Air,

Mr. Woodside also serves as the CEO of SUI Generis Entertainment Group (1983

- present) and AS Plus, Inc. (2009

- present). Mr. Woodside is also a B oard member at Grupo Formula (1990

- present).

Mr. Jim Buntz joined CP Air in August 2009 as its Vice President of Finance and Busin ess Development. Prior to this , he was employed for over 40 years in the Telecommunications industry where he held executive positions in operations, sa les, and marketing with various
telecommunications companies, including Northwest Bell, Pacific Bell, Telcos, Time Warner telcom, XO Communications , ISG, and Telepacific. Mr. Buntz has a B.A. degree from the University of Nebraska in Economics and a n MBA degree from Creighton University

.

Mr. Tom Morrow joined CP Air in July 2009 as its Director of Communications and as a B oard

m ember . In addition to his duties and responsibilities at CP Air, Mr. Morrow is al so employed by KOCT

- TV as a B oard member and as Host

- Producer (1994

- present), by the San Diego County Cable TV Commission as Chairman (2005

- present)

, and as a self

- employed Author, Biographer, and Publicist (2007

- present). Prior to this, he was employed by MiraCosta College

as a Faculty Instructor (19 97

- 2002); by North County Times as a Columnist , Feature Writer, and Business Editor (1991

- 2007) ; by Daily Vista Press as a Feature and Entertainment Editor (1988

- 1991) ; by Cotton

- Morrow Communications as Partner (1985

- 19 88) ; and by Hotel del Coronado

R acqu et Club of Palm Springs as Director of Communications (1983

- 1985).

M r. John Ross, an Airline Transport Pilot with more than 12,000 total flight hours , joined CP Air in August 2010 as the applicant’s Director of Operations. Prior to joining CP Air, he was the founder and CEO of OK3 Group, a corporation that developed risk management processes and integrated training systems to enhance safety (February 2010

- August 2010). B efore this,5

Mr. Ross was employed by Twin Star Airways as Vice President of Flight Operations and Director of Operations (2009

- 2010) ; by Volant Systems, LLC, as Vice President and Chief Networking Officer ( January 2009

– November 2009) ; by JetBlue Ai rways in various capacities during his tenure with the company

, the last of which being D irector of Operations (2005

- 2009); by DJ Air Group as Vice Presiden t of Flight Operations (2002

- 2005) ; by U.S. Airways in various positions of increasing responsibility, including 737

- 300/400 Fleet Captain ; F100 Fleet Captain ; Manager of Flight Training ; C heck Airma n ; and Captain (1982

- 2005); and by C ontinental
Airlines as a B

- 727 C aptain and F light E ngineer (1978

- 1982).

Mr. Dean Sinerius , an Airframe and Powerplant Mechanic, joined CP Air in January 2011 , as its
Director of M aintenance. Before joining CP Air, he was employed by Mesa Air Group as Director of Programs, Planning, Engineering, Powerplant Management, and MRO Services (2006

- 2011). Prior to this, he was employed by Frontier Airlines as Senior Manager of
Maintenance Contro l and Technical Service s (2006); by America West Airlines as Manager of Maintenance Control (2003

- 2006); by GE Inspection Technologies as Director o f Aircraft Programs (2001

- 2002); by Champion Airlines as Director of Technical Pr ograms and Planning (1999

- 2001); by Northwest Airl ines in various positions of increasing responsibility the last of which being Maintenance Program Manager for the Boeing 727 (1982

- 1999); and by the Garret Corporation as Development Engineering Test Technician (1980

- 1982). Mr. Sinerius has also
served i n the U.S. Navy as a P

- 3 Flight Engineer (1976

- 1980).

Mr. Patrick Randall , and Airframe and Powerplant M echanic, with over 34 years of aviation
maintenance experience, joined CP Air in May 2011 as its Chief Inspector

. Prior to joining CP Air, he was empl oyed by US Airways where he held various positions during his tenure there

, including Line Maintenance Supervisor ( 1993

- 1997 and 2008

- 2010), Maintenance Control Supervisor (1997

- 2008), Aircraft Mechanic (1988

- 1989), and Aircraft Electrician (1986

- 1988).

B efore this, he was employed with Continental Air l ines as an Avionics Technician (1985

- 1986) and at Imperial Airlines as Lead Mechanic (1982

- 1985). In addition to his aviation maintenance experience in the commercial sector, Mr. Randall also served in the United States Air Force as an Aircraft Technician (1976

- 1980).

Mr. Bret Ebaugh, and Airline Transport Pilot with more than 12,000 total flight hours, joined CP
Air as its Chief Pilot in November 2009. Before this , he was employed by Pluna Airlines as a
C ertified Training Instructor and Training Examin er (2008

- 2009), by EOS Airlines as a B

- 757 First Officer and by PSA Airlines, Inc., where he held various positions, including as a CRJ

- 200
and CRJ

- 700 Captain, as a Designated Examiner, and as a Manager of F light Standards.

Mr. David Love , an Airline Transport Pilot with more than 1 3 ,000 total flight hours, joined CP
Air in January 2011 as the applicant ’s Director of Safety . Before joining CP Air, Mr. Love was employed by ConAm Management as a C

- 550 pilot ( 2007

- 2011) and by US Airways in various positions, including B

- 737 and A

- 320 Simulator and Line Check Airman (1980

- 2007). Mr. Love
has also served in the U.S. Air Force and U.S. Air Force Reserve as an F

- 4 and KC

- 10 pilot (1970

- 1984).6

In view of the expe rience and background of the applicant’s key personnel, we tentatively
conclude that CP Air’s management team possesses the managerial skills and technical ability to conduct its proposed service. 4

Operating Proposal and Financial Plan

I f granted the i nterstate certificate it seeks, CP Air plans to provide scheduled passenger service
between Carlsbad, California, and Phoenix, Arizona , Las Vegas, Nevada, and Oakland, San Jose, and Sacramento, California

. CP Air intends to initiate its operations using o ne Embraer 170
aircraft with a second and third Embraer 170 aircraft added to the company’s operations in the second and third quarters following commencement of operations

. CP Air is currently seeking
certification from the Federal Aviation Administratio n (“FAA”) under Part 1 21 to conduct the proposed operations.

CP Air expects to incur $ 7 .4 million in pre

- operating expenses prior to the commencement of revenue operations, of which approximately $4. 9 million remains to be paid, and that operating

expen ses during its first year of operations will total approximately $ 28.0 million. 5 We find CP Air’s expense projections to be reasonable and estimate that CP Air will need approximately $ 11. 9 million t o meet our financial fitness test. 6

In support of its ability to meet our fitness requirement s for its proposed operations, CP Air
states that its initial shareholder, Ted Vallas, has assigned title and interest in property valued at $400,000 to the company, as well as rights and title to a Fixed Payment Agr eement which provides for payments to the company of $25,000 per month for a duration of 30 years. It has
also retained the services of the law f irm of Procopio, Cory, Hargreaves and Savitch, LLP, to prepare and file a Private Placement Memorandum with th e Securities and Exchange
Commission . CP Air expects to issue between 10,000 and 3,200,000 shares through its private offering to raise the capital necessary to meet our financial fitness requirements

. CP Air ’s
balance sheet at December 11, 2010 , shows t hat the company had current assets of $ 400,000 and current liabilities of $ 48,947

, giving the company positive working capital of $ 351,053 and a

current assets to current liabilities ratio of 8.17:1

. In addition, the company’s balance sheet
showed positiv e shar eholder equity of $15.3 million as of December 11 , 2010.

4 Before authorizing an air carrier to conduct air tr ansportation 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. The FAA has advised us that CP Air’s key technical personnel are acceptable to that agency in their respective positions.
5 CP Air no longer intends to pursu e its foreign certificate authority at this time. Thus, the first

- year expenses noted above omit the cost associated with its proposed foreign operations.

6 We have generally asked that new entrant applicants have resources sufficient to cover all pre

- op erating costs, plus a working capital reserve equal to the operating costs that would be incurred in three months of normal certificated operations. However, because projected operations during one or more of the first three months of anticipated actual a ir transportation services frequently do not include all costs of operations that will be incurred during a normal period of operations, it has been our practice to base our three

- month standard on one quarter of the first year’s operating cost forecast. In calculating available resources, projected revenues may not be used.7

In light of the above, we tentatively conclude that CP Air has developed a funding plan which, if successful, will provide the applicant with sufficient financial resources to commence its

pro posed operations without posing an undue risk to consumers or their funds. As is our practice, prior to making any authority awarded to CP Air effective, we will require the company to provide updated information on its operating plans

, as well as third

- p arty verification demonstrating that the proceeds raised from it s private offering are sufficient to meet our financial fitness test or that it otherwise has obtained the financial resources ne cessary to meet our financial test. However, if CP Air is unsu ccessful in raising the capital required to meet our financial fitness test for the operations it proposes, the applicant will have to submit an amended service proposal with supporting evidence of its fitness.

Compliance Disposition

CP Air states that t here are no actions or outstanding judgments against it, its owners, or its key personnel, nor have there been any charges of unfair, deceptive or anti

- competitive business practices, or of fraud, felony or antitrust violations brought against any of these parties in the past ten years. The applicant also states that there are no 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 respec t to compliance with the Transportation Code or the Department’s regulations.

A review of our records and other information available to us has uncovered no information which would reflect negatively on the applicant or any of its key personnel

. In add ition, according to the FAA, CP Air is continuing to work with the agency in obtaining its

FAA certification under Part 121 and the agency knows of no reason why the applicant should not be granted the authority it is seeking.

In light of these circumstan ces, we tent atively conclude that CP Air 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 acceptable consumer relations practices will be fol lowed.

C ITIZENSHIP

The Transportation Code requires that authority to engage in air transportation be held only by
citizens of the United States as defined in 49 U.S.C. § 40102(a)(15). The Transportation Code
also requires that the president and two

- thi rds 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 t he air carrier must be under the actual control of U.S. citizens.

As noted earli er, Mr. Ted Vallas, the President and sole shareholder of CP Air , is a U.S. citizen. Moreover, all of CP Air’s board members and key personnel are U.S. citizens and the applicant has provided an affidavit attesting that it is a citizen of the United State s within the meaning of
the Transportation Code and that it is owned and controlled by U.S. citizens. Our review of the applicant has uncovered no reason to suggest that control of CP Air rests with non

- U.S. citizens. In light of the foregoing, we tentati vely find that CP Air is owned and actually controlled by U.S. citizens, consistent with 49 U.S.C. § 40102(a)(15)

.8

O BJECTIONS

We will give interested persons 14 days following the service date of this order to show cause why the tentative findings and co nclusions 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 and points at issue and to support such objections with
detailed e conomic analyses. If an oral evidentiary hearing or discovery procedures are requested, the objector should state in detail why such a hearing or discovery is considered necessary, and what material issues of decisional fact the objector would expect to e stablish 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 shoul d be specified ( See Part 302, Rules 19 and 20); if not, the reasons why not should be explained. We will not entertain general, vague, or unsupported objections. If no substantive objections are filed, we will issue an order that will
make final our tent ative findings and conclusions with respect to CP Air ’s fitness and
certification.

CERTIFICATE CONDITIONS & LIMITATIONS

Under our rules (14 CFR 204.3(t)), an applicant for interstate and/or foreign certificate authority is expected to include with its ap plication an expense forecast based on the services it proposes to conduct during its initial year of actual flight operations. The Department bases the capital requirement necessary to demonstrate a new entrant air carrier’s fitness upon these expense

pr ojections. Since CP Air has not presented a foreign service proposal including, among other things, an expense projection for foreign operations, we are unable to determine CP Air’s capital requirements to conduct foreign operations. Therefore, we will d ismiss CP Air’s application for foreign certificate authority. However, this action is taken without prejudice to the company refiling an application for foreign certificate authority at any time in the future.

Moreover, our tentative finding of fitnes s is based on the operations proposed in this application. Were CP Air to propose a substantial expansion in its plans, including the operation of more than
the three aircraft discussed here, this finding may not continue to apply. Therefore, if our

tent ative finding regarding CP Air’s fitness is made final, and CP Air is issued certificate authority, we will require that, should the company want to expand its fleet beyond three aircraft, it must first provide the Department with at least 45

- days’ notice of such plans and provide updated information demonstrating its fitness to operate additional aircraft.

If CP Air is found fit and issued the certificate it seeks, its authority will not become effective until the company has fulfilled all requirements for effectiveness as set forth in the terms and conditions attached to its certificate. Among other things, this includes our receipt of evidence
that CP Air has been certificated by the FAA to engage in the subject operations, a fully executed
OST Form 6 410 evidencing liability insurance coverage that meets the requirements of 14 CFR 205.5(b) of our rules for all of its aircraft, third

- party verification of available funding necessary to meet the Department’s fitness requirements, and a statement of chang es it may have undergone since its fitness was examined.9

We also wish to remind CP Air 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 it s authority. To be assured that certificated air carriers continue to be fit after effective authority has been issued to them, we require that they supply information describing any subsequent substantial changes they may undergo in areas affecting fitne ss. Therefore, if CP Air 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. 7 The compliance of the company with this requirement is essential if we are to carry out our responsibilities under the Transportation Code. 8

Finally, if CP Air 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 carrier’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 during its second year, current financial statements, 9 and a listing of current senior management and key technical personnel. The air carrier should also be p repared to meet with staff members of the Fitness Division to discuss its current and future operations.

ACCORDINGLY,

1. We dismiss, without prejudice, the application filed by Carlsbad

- Palomar Airlines, Inc. d/b/a
California Pacific Airlines

, in Docket DOT

- OST

- 20 10

- 0125 for a certificate of public convenience and necessity to engage in foreign scheduled air transportation of persons, property,
and mail

.

2. We direct all interested persons to show cause why we should not issue an order making final
the tentati ve findings and conclusions stated above and award a certificate to Carlsbad

- Palomar

7 The air carrier may contact our Air Carrier Fitness Division to report proposed substantial changes in its operations, ownership, or management, and to determine what additional i nformation, if any, will be required under section 204.5. In addition, by notice dated July 21, 1998, the Department requested air 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 continue to be fit upon implementation of the substantial change, the Department may take such action as is appropriate, includin g enforcement action or steps to modify, suspend, or revoke the air carrier's certificate authority.
8 We also remind CP Air about the requirements of section 204.7 of our rules. This section provides, among other things, that (1) the certificate authori ty 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 f ound fit and subsequently ceases such operations, it may not resume certificated operations unless its fitness has been redetermined; and (3) if the company does not resume operations within one year of its cessation, its authority shall be revoked for
dor mancy. 9 These financial statements should include a balance sheet as of the end of the company’s first full year of certificated flight operations and a 12

- month income statement ending that same date.10

Airlines, Inc. d/b/a California Pacific Airlines authorizing it to engage in interstate scheduled air transportation of persons, property, and mail, subject to the attache d specimen Terms, Conditions, and Limitations.

3

. We direct any interested persons having objections to the issuance of an order making final any of the proposed findings, conclusions, or the certificate award set forth here to file them with Department o f Transportation Dockets, 1200 New Jersey Avenue, S.E., West Building Ground Floor, Rm. W12

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

- OST

- 2010

- 0126 and serve them upon all persons listed in Attachment A no later than 14 days after 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. 10

5

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

6

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

7

. We will publish a summary 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

10 Since we have provided for the filing of objectio ns to this order, we will not entertain petitions for
reconsideration.Attachment
SPECIMEN 

### Terms, Conditions, and Limitations

CARLSBAD

- PALOMAR AIRLINES, INC.
d/b/a CALIFORNIA PACIFIC AIRLINES

is authorized to engage in interstate air transportation of persons, prop erty, 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 operate un der 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 c opy of the holder's Air Carrier Certificate and Operations Specifications authorizing such operations from the Federal Aviation Administration (FAA).

(b) A certificate of insurance on OST Form 6410 evidencing liability insurance coverage meeting the requi rements 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 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 accept payment of any kind (i.e., cash, check, or credit card) or issue tickets for the operations p roposed under this certificate, and any advertisement or listing of flights 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 accordan ce with the regulations prescribed by the Department of Transportation 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 intere st.

(4) The holder's authority under this certificate is effective only to the extent that such operations are also authorized by the Federal Aviation Administration (FAA), and comply with2

all U.S. Government requirements concerning security, including, b ut 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 authorized to conduct charter flights in interstate and/or foreign air transportation in accordance with the provisions of 14 CFR 212

.

(8) In the event that the holder receives effective scheduled passenger au thority, the following additional conditions will apply:

(a) The holder may reduce or terminate service at any point or between any two points, subject to compliance with the provisions of 49 U.S.C. 41734 and all orders and regulations issued by the Depar tment of Transportation under that section.

(b) The holder may not provide scheduled passenger air transportation to or from Dallas (Love Field), Texas, except within the limits set forth in section 29 of the International Air Transportation Competition A ct of 1979, as amended or as modified by any future legislation addressing access restrictions to or from Love Field.

(9) Should the holder propose any substantial change in its ownership, management, or operations (as defined in 14 CFR 204.2(l)), it mus t 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 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 opera tions, 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 operations unless its fitness to do so has been redetermined by the Department. Moreover, if the h older 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
CARLSBAD

- PALOMAR AIRLINES, INC.

TED VALLAS
PRESIDENT AND CEO
CALIFORNIA

- PALOMAR AIRLINES INC
D/B/A C ALIFORNIA PACIFIC AIRLINES
5670 EL CAMINO REAL
SUITE D
CARLSBAD CA 92008 PETER LYNCH AGC

- 300
FAA ASST CHIEF COUNSEL
FOR ENFORCEMENT
800 INDEPENDENCE AVE SW
WASHINGTON DC 20591 WILLIAM J WEBER
CERTIFICATION SECTION MANAGER
FAA AFS

- 900
45005 AVIATION DRI VE SUITE 131
DULLES VA 20166

BERNARD STANKUS
OFFICE OF AIRLINE INFORMATION
DOT/RITA/BTS RTS

- 42
1200 NEW JERSEY AVE SE
WASHINGTON DC 20590 ANNE SUISSA RTS

- 42
OFFICE OF AIRLINE INFORMATION
DOT/RITA/BTS E

- 34
1200 NEW JERSEY AVE SE
WASHINGTON DC 20590 JE ROME PENDZICK
FAA FSDO MANAGER
8524 GIBBS DRIVE
SUITE 120
SAN DEIGO CA 92123