Order 2011-1-2

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION 

OFFICE OF THE SECRETARY 

WASHINGTON, D.C.

Issued by the Department of Transportation

On the Fifth day of January, 2011

Capital Airways, LLC

Docket OST 2011-0003

Violations of 49 U.S.C. §§ 41101 and 41712 Served January 5, 2011

CONSENT ORDER

This consent order concerns unauthorized air transportation by Capital Airways, LLC,

(Capital Airways). Since at least April 2010, Capital Airways has engaged in air 

transportation without holding the requisite economic authority from the Department. 

This order directs Capital Airways to cease and desist from such future violations and 

assesses Capital Airways a compromise civil penalty of $175,000. 

In addition to complying with applicable Federal Aviation Administration (FAA) safetyrelated requirements, in order to engage directly or indirectly in air transportation, a 

citizen of the United States1 is required to hold economic authority from the Department 

pursuant to 49 U.S.C. § 41101, or an exemption from that provision.2

 1 A “citizen of the United States” includes a corporation organized in the United States that 1) meets 

certain specified numerical standards regarding the citizenship of its president, officers and directors, and 

holders of its voting interest and 2) is under the actual control of citizens of the United States. 49 U.S.C. 

§ 40102(a)(15). 

 “Air 

2

 Economic authority is granted to large aircraft operators, e.g., operators of MD-83 aircraft like that 

of Capital Airways, in the form of a certificate of public convenience and necessity. Before granting an 

applicant economic authority in this form, the Department must find it to be “fit,” which entails a 

determination that the carrier is owned and controlled by U.S. citizens and has adequate financial resources, 

a competent management team, and a positive compliance disposition. This fitness requirement is a 

continuing one, and the Department monitors “certificated” carriers to ensure their compliance. 

Certificated carriers must also meet certain Departmental economic rules, such as liability insurance 

requirements (14 CFR Part 205) and, where applicable, financial security requirements designated to 

protect charterers’ funds and expectations (14 CFR 212.8 and 380.34). In addition, carriers operating large 

aircraft in air transportation must also receive safety certification from the FAA under 14 CFR Part 121, the 

most stringent requirements related to safety, and comply with the appropriate set of associated operating 

rules prescribed by that agency. Large aircraft operators that engage in common carriage without the 

appropriate DOT and FAA authorizations harm consumers by denying them the level of protection 
2

transportation” includes the transportation of passengers or property by aircraft as a 

common carrier for compensation between two places in the United States or between a 

place in the United States and a place outside of the United States.3

 Common carriage, in 

the context of air service, consists of the provision or holding out of transportation by air 

to the public for compensation or hire.4

 From the standpoint of the requirements of 

section 41101, the holding out of air service, as well as the actual operation of that

service, constitutes “engaging” in air transportation.5

 Under Department enforcement 

case precedent, violations of section 41101 also constitute unfair and deceptive practices 

and unfair methods of competition in violation of 49 U.S.C. § 41712.6

Capital Airways is a citizen of the United States organized under the laws of the 

Commonwealth of Virginia and an operator of aircraft pursuant to 14 CFR Part 125. 

Authority under this FAA regulation is limited to private carriage operations.7

 

Notwithstanding this proscription, since at least April 2010, Capital Airways has held out 

and performed significant common carriage service using an MD-83 aircraft (N982CA)

in contravention of 49 U.S.C. §§ 41101 and 41712. Specifically, in April 2010, Capital 

Airways entered into contracts with Aviation Advantage, Inc., (AAI) a brokerage firm 

through which Capital Airways operated several weekly roundtrip charter flights 

transporting passengers who purchased the air transportation as part of hotel-air packages 

sold by two casinos. 8

 By contracting for and transporting the common carriage traffic 

obtained by the casinos and AAI, Capital Airways indirectly held out and operated air 

transportation. 

 afforded by duly licensed carriers that have been found fit by the Department and are complying with the 

proper FAA safety regulations. In addition, such operators, whose regulatory compliance costs are lower, 

place duly licensed common carriers at a competitive disadvantage.

3 49 U.S.C. §§ 40102(a)(5), (a)(23), and (a)(25).

4 See, e.g., Woolsey v. National Trans. Safety Bd., 993 F.2d 516 (5th Cir. 1993).

5 Prior to 1994, when Title 49 of the United States Code was recodified and simplified, 49 U.S.C. 

§ 41101 stated that no carrier could “engage” in air transportation without appropriate authority. Although 

the wording of section 41101 now states that what is prohibited is “providing” air transportation without 

authority, Congress made clear when it recodified Title 49 that in doing so it did not intend any substantive 

change to the statute. Act of July 5, 1994, Pub. L. 103-272, § 6(a), 108 Stat. 745, 1378.

6 See, e.g., Principal Air Services, LLC, and David C. Bernstein, Violations of 49 U.S.C. §§ 41101 

and 41712, Order 2006-7-13 (Jul. 11, 2006).

7 14 CFR 125.11(b) provides that “[n]o certificate holder may conduct any operation which results 

directly or indirectly from any person’s holding out to the public to furnish transportation.”

8

 A non-common carrier may not perform common carriage operations that result from the 

marketing efforts of a third-party, such as another air carrier, or a public charter operator, charter broker, 

freight forwarder, agent, or affiliated company. See, e.g., Contract Air Cargo, Inc., Violations of 49 U.S.C. 

§§ 41101 and 41712, Order 2005-3-39 (Mar. 30, 2005).
3

In addition, between September and December 2010, Capital Airways provided single 

entity9 charter air service to a significant number of college sports teams through 

contracts with Global Airline Services, Inc., an air charter broker. By doing so, it 

engaged in a course of conduct that evinced a willingness to provide passenger air 

transportation to the public, thereby constituting an unlawful holding out and operation of 

common carriage via reputation. 10 The number of customers that Capital Airways served 

far exceeds any reasonable interpretation of the boundaries of private carriage for hire

under relevant Department precedent.

11 

In mitigation, Capital Airways asserts that with respect to the casino transportation 

contracts, Capital Airways entered into agreements that created single-entity charters, and 

to the extent the operations were noncompliant it was due to a counterparty’s failure to 

conform to the contract, and Capital Airways’ failure to timely identify such 

nonconformity. Capital Airways further asserts that as to the de facto holding out of air 

transportation services as evidenced by multiple end users, Capital Airways did not 

actually engage in any solicitation of air transportation services and instead responded to 

unsolicited requests for service from a charter broker claiming to be the agent to each of 

the end users. Capital Airways states that the services covered here were provided for a 

short time period. Lastly, Capital Airways notes that it is currently pursuing certification 

by the Department under 49 U.S.C. § 41102 and the FAA under 14 CFR Part 121.

The Enforcement Office views seriously the violations of the Department’s licensing 

requirements by Capital Airways. After a careful examination of all of the available 

information, including that provided by the firm, the Enforcement Office continues to 

believe that enforcement action is warranted. In this connection and in order to avoid 

litigation, the Enforcement Office and Capital Airways have reached a settlement of this 

matter. Without admitting or denying the violations described herein, Capital Airways

agrees to the issuance of this order to cease and desist from future violations of 49 U.S.C. 

§§ 41101 and 41712, and to an assessment of $175,000 in compromise of potential civil 

 9 A single-entity charter is a charter for the entire capacity of the aircraft, the cost of which is borne 

by the charterer and not directly or indirectly by the individual passengers.

10 A holding out of common carriage occurs when a carrier engages in a course of conduct such that 

it gains a reputation for having a willingness to serve the public. See, e.g., Woolsey, 993 F.2d at 524 n.24; 

SportsJet, LLC, Violations of 49 U.S.C. §§ 41101 and 41712, Order 2003-12-23 (Dec. 29, 2003)

Intercontinental, U.S., Inc., Enforcement Proceeding, 41 C.A.B. 583, 601 (1965).

11 In what it termed “a close one,” the CAB, which held jurisdiction over aviation licensing matters 

prior to the Department, deemed as private certain air service operations by Part 125 operators Zantop 

International Airlines (Zantop) and Air Traffic Service Corporation (ATSC) that involved transporting 

cargo pursuant to contracts with the three major American automobile manufacturers, plus a de minimus

level of non-automotive related traffic. Automotive Cargo Investigation, 70 C.A.B. 1540, 1554 (1976). 

Aside from the limited number of customers served by Zantop and ATSC, the CAB’s decision in this case 

appeared predicated substantially on the fact that, at the time, duly licensed common carriers had “no 

meaningful capability” to provide service equivalent to that needed by the “Big Three.” Id. at 1553. 

Today, by contrast, in the markets at issue here served by Capital Airways―public charters and the 

transportation of sports teams―there are numerous duly licensed common carriers capable of providing air 

transportation service equivalent to that which Capital Airways provides.
4

penalties otherwise assessable against it. This compromise is appropriate in view of the 

nature and extent of the violations in question and serves the public interest. Moreover, it 

creates a deterrent against future similar unlawful practices by Capital Airways and other 

entities that lack economic authority from the Department to engage in air transportation.

This order is issued under the authority contained in 49 CFR 1.57a and 14 CFR 385.15. 

ACCORDINGLY, 

1. Based on the above discussion, we approve this settlement and the provisions of the 

order as being in the public interest.

2. We find that Capital Airways, LLC, violated 49 U.S.C. § 41101, as described above, 

by engaging in air transportation without appropriate economic authority.

3. We find that by engaging in the conduct described in paragraph 2, above, Capital 

Airways, LLC, engaged in an unfair and deceptive practice and an unfair method of 

competition in violation of 49 U.S.C. § 41712.

4. We order Capital Airways, LLC, and all other entities owned or controlled by, or 

under common ownership with Capital Airways, LLC, and their successors and assignees

to cease and desist from further similar violations of 49 U.S.C. §§ 41101 and 41712.

5. We assess Capital Airways, LLC, a compromise civil penalty of $175,000 in lieu of 

civil penalties that might otherwise be assessed for the violations described in ordering 

paragraphs 2 and 3, above. Of this total penalty amount, $87,500 shall be due and 

payable in ten equal monthly installments of $8,750 each, with the first installment due 

and payable on or before March 1, 2011, and the remaining nine installments due and 

payable no later than the first day of each month between April 2011 and December

2011. The remaining $87,500 shall be due and payable if, within one year following the 

date the first payment is due under this order, Capital Airways, LLC, violates the cease 

and desist provisions or the payment provisions of this order, in which case, the entire 

unpaid portion of the civil penalty shall become due and payable immediately. Failure to 

pay the penalty as prescribed shall subject Capital Airways, LLC, to the assessment of 

interest, penalties, and collection charges under the Debt Collection Act and to possible 

enforcement action for failure to comply with this order; and

6. Payments shall be made by wire transfer through the Federal Reserve 

Communications System, commonly known as “Fed Wire,” to the account of the U.S. 

Treasury. The wire transfers shall be executed in accordance with the instructions 

contained in the Attachment to this order.
5

This order will become a final order of the Department ten days after its service date 

unless a timely petition for review is filed or the Department takes review on its own

initiative.

BY:

ROSALIND A. KNAPP

Deputy General Counsel

(SEAL) 

An electronic version of this document is available on the at

www.regulations.gov