Order 2010-5-25 

Served: May 24, 2010 

 

UNITED STATES OF AMERICA 

DEPARTMENT OF TRANSPORTATION 

OFFICE OF THE SECRETARY 

WASHINGTON, D.C. 

Issued by the Department of Transportation 

 on the 24th day of May, 2010 

Application of 

 KAISERAIR, INC. 

for a certificate of public convenience and necessity 

under 49 U.S.C. 41102 to engage in interstate charter 

air transportation of persons, property, and mail 

Docket DOT-OST-2009-0208 

ORDER TO SHOW CAUSE 

PROPOSING ISSUANCE OF CERTIFICATE 

Summary 

By this order, we tentatively conclude that KaiserAir, Inc. (“Kaiser”), is a citizen of the United 

States and is fit, willing, and able to provide interstate charter air transportation of persons, 

property, and mail using one large aircraft, and should be issued a certificate of public 

convenience and necessity authorizing such operations, subject to conditions. 

Background 

Section 41102 of Title 49 of the United States Code (“the Transportation Code”) directs us to 

determine that applicants for certificate authority to provide interstate charter air transportation 

of persons, property and mail are “fit, willing, and able” to perform such transportation and to 

ensure that all operations relating to this authority conform to the provisions of the 

Transportation Code and the regulations and requirements of the Department. In making fitness 

findings, the 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 order 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 find that the applicant is a 

U.S. citizen. 

On August 28, 2009, Kaiser, an on-demand air taxi operator holding a Part 135 Federal Aviation 

Regulation (“FAR”) operating certificate from the Federal Aviation Administration (“FAA”), 
2

filed an application in Docket DOT-OST-2009-0208 requesting a certificate issued under 49 

U.S.C. §41102 authorizing it to provide interstate charter air transportation of persons, property, 

and mail using large aircraft. Kaiser accompanied its application with fitness information 

required by section 204.3 of our regulations and supplemented its application with additional 

information on January 19 and February 4, 2010. 

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

applicant 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 

Kaiser is a U.S. citizen and is fit, willing, and able to provide interstate charter air transportation 

using one large aircraft. 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 Applicant 

Kaiser, based in Oakland, California, was formed as a corporation under the laws of the State of 

California on November 26, 1976, and is wholly-owned by Mr. Ronald J. Guerra. Kaiser 

currently holds a Part 135 Air Carrier Certificate issued from the FAA and is registered as an ondemand air taxi operator under Part 298 of our rules (14 CFR Part 298). The air carrier is also a 

licensed FAA Part 145 aircraft repair station, and a majority owner of a fixed base operator, the 

Santa Rosa Jet Center, LLC. Kaiser currently operates a fleet of eight (8) small aircraft and, if 

certificated, intends to add one large aircraft, a Boeing 737-700, to its operations.1

Managerial Competence 

Kaiser’s Board of Directors consists of the following five members: Messrs. Ronald J. Guerra, 

David L. Campbell, Alexander (Sandy) Waters, Roby J. Guerra, and Boyd C. Sleeth, Esq. 

Kaiser’s officers and other key management and technical personnel include: Ms. Beth A. 

Medlen, and Messrs. James G. (Jim) Strickland, Jr., David A. Mancebo, Wayne Smith, John L. 

Hancock, and David Street. Each has certified that he or she is a U.S. citizen. 

 

Director, President, and Chief Executive Officer Ronald J. Guerra 

Director, Vice President of Quality Assurance David L. Campbell 

Director, Vice President of Bus. Development/Admin. Officer Alexander (Sandy) Waters 

Director, Vice President of Asset Management/Client Relations Roby J. Guerra 

Director Boyd C. Sleeth, Esq. 

Vice President/Director of Maintenance Beth A. Medlen 

Chief Financial Officer James G. (Jim) Strickland, Jr. 

 

1

 As an air taxi operator, Kaiser’s operations are limited to the use of small aircraft (i.e., aircraft originally 

designed to have a maximum passenger capacity of 60 seats or less and a maximum payload capacity of 18,000 

pounds or less). Operations using large aircraft (i.e., aircraft originally designed to have a maximum passenger 

capacity of more than 60 seats or a maximum payload capacity of more than 18,000 pounds) requires certificate 

authority.
3

Director of Operations/Chief Pilot David A. Mancebo 

Chief Inspector Wayne Smith 

Director of Safety John L. Hancock 

Manager of Aircraft Maintenance David Street 

Mr. Ronald J. Guerra, the air carrier’s President, Chief Executive Officer, and Board member, 

holds an FAA Airline Transport Pilot certificate with multiple type-ratings in turbine/jet aircraft, 

and has logged over 21,000 total flight hours. He has held the position of President and CEO 

since 1979 after purchasing the organization, along with three other company executives, from 

its predecessor Kaiser Industries Corporation. In addition to his executive-level experience, 

Mr. Guerra previously served as a pilot for the various Kaiser family of corporations (1960-

1979), World Airways, Inc. (1960), Transocean Airlines, Inc. (1959), Overseas National 

Airlines, Inc. (1959), Resort Airlines, Inc. (1956-1960), Miami-Peninsula Air Transport, Inc. 

(1955), and Southeast Airlines, Inc. (1955). Mr. Guerra is an FAA-certified Flight Engineer and, 

in 2005, was awarded the National Business Aviation Association’s John P. (Jack) Doswell 

Award for Meritorious Service to Aviation. 

Mr. David L. Campbell, a Kaiser Board member and the company’s Vice President of Quality 

Assurance, holds an FAA Airline Transport Pilot certificate and has logged over 13,000 total 

flight hours. In addition to his executive duties, Mr. Campbell serves as Kaiser’s Gulfstream 

Check Airman (1996-present) and Gulfstream Captain (1989-present). He joined Kaiser in 1979 

and has served in several different capacities with the company, including Vice 

President/Director of Operations (2000-2008), Chief Pilot (1989-1999), and Captain/SIC Line 

Pilot (1979-1989). Prior to joining Kaiser, he held various pilot positions, including Flight 

Instructor for National Jets, Inc. (1978-1979), Eagle Aviation, Inc. (1977), Embry-Riddle 

Aeronautical University (1976-1978), and Pompano Aviation, Inc. (1976), and part-time Air 

Cargo Pilot for American Flyers, Inc. (1976-1979). He holds multiple aviation-related degrees 

from Embry-Riddle Aeronautical University. 

Mr. Alexander (Sandy) Waters, a Kaiser Board member and the company’s Vice President of 

Business Development and Administrative Officer, has over 28 years experience in 

executive-level and senior management positions. Prior to joining Kaiser in 1996, Mr. Waters 

served as General Manager for the Scottish Claymores Football Club (1994-1995), Sales 

Manager for Trefethen Vineyards and Winery (1991-1994), and Director of Administration for 

The Denver Broncos Football Club (1982-1991). 

Mr. Roby J. Guerra, a Kaiser Board member and the company’s Vice President of Asset 

Management and Client Relations, is an FAA Airline Transport Pilot with type-ratings in 

multiple turbine/jet aircraft and over 5,000 hours total flight time. In addition to his executive 

duties, Mr. Guerra serves concurrently as an FAA Part 121 qualified B-737 flight crewmember 

under an aircraft management agreement with Miami Air International, Inc. (2009-present). 

Prior to joining Kaiser in 1994, he held various aviation and non-aviation positions, including 

Sales/Business Development Associate for Ahart Aviation, Inc. (1993-1994), Ski/Bike Salesman 

for Niles Ski and Bike Works, Inc. (1993-1999), Ski Salesman/Boot Fitter for Swiss Ski Chalet, 

Inc. (1988-1993), Aircraft Re-fueler/Customer Service Representative for KaiserAir, Inc. 
4

(1984-1992), and Fitness Instructor for the Tri-Valley YMCA (1986-1988). Mr. Guerra attended 

Chabot College and California State University-Hayward. 

Mr. Boyd C. Sleeth, a member of Kaiser’s Board of Directors since 2008, is a Partner and 

Associate General Counsel with Reed Smith LLP in San Francisco, California, and specializes in 

insurance recovery and general litigation. Mr. Sleeth previously served as Director and private 

counsel for Crosby, Heafey, Roach & May Professional Corporation (1987-2002), and Health 

and Sciences Program Assistant for the University of California – Berkeley (1974-1978). He 

holds a Bachelor of Arts in History from Immaculate Heart College (1975). 

Ms. Beth A. Medlen, Kaiser’s Vice President and Director of Maintenance, is an FAA Airframe 

and Powerplant Mechanic with more than 25 years of aircraft maintenance experience. Prior to 

joining Kaiser as Vice President of Maintenance and Ground Operations in 2007, she served as 

Vice President of Plans and Programs for AAR Aircraft Services, Inc. (2004-2006), and held 

several managerial positions with United Air Lines, Inc., including General Manager of the 

Oakland Maintenance Center, Manager of Engine Production and Test, Manager of Engine 

Inspection, Manager of Aircraft Maintenance, and Manager of Component Maintenance 

(1984-2004). Ms. Medlen is experienced in large aircraft maintenance, including B-737, B-747, 

B-757, B-767, B-777, and A-319/320 aircraft, and earned a Bachelor of Science in Aeronautical 

Operations from San Jose State University. 

Mr. James G. (Jim) Strickland, Jr., has served as Kaisers’s Chief Financial Officer (“CFO”) since 

2004 and has over 26 years of experience as Controller/CFO in the international transportation, 

import/export, commercial construction, and aircraft management/FBO industries. Prior to 

joining Kaiser, he served as Vice President/CFO for DBD Structures, Inc. (2000-2004), 

Controller for Scheidegger Trading Co. (1994-2000), Credit Controller for Tiphook Container 

Rental, Inc. (1993-1994), and Secretary-Treasurer/Controller for Star Shipping (U.S.H.C.) Inc. 

(1983-1993). Mr. Strickland earned a Bachelor of Science in Business Administration from 

California State University – Chico (1983). 

Mr. David A. Mancebo, Kaiser’s Director of Operations and Chief Pilot, is an FAA Airline 

Transport Pilot with over 10,800 flight hours logged. Mr. Mancebo joined Kaiser in 1984 and 

has served in several different pilot positions with the company, including Assistant Chief Pilot 

(1991-2000), Senior Captain (1991-present), Captain (1988-1991), and First Officer 

(1984-1988). Prior to joining Kaiser, he served as Pilot for Cascade Steel Rolling Mills, Inc. 

(1983-1984) and Air Nevada Airlines, Inc. (1982-1983); Flight Instructor for Sierra Academy of 

Aeronautics, Inc. (1980-1982); and Winemaker for Winemaster’s Guild Winery (1972-1979). 

Mr. Mancebo is type-rated in numerous turbine/jet aircraft, is an FAA Designated Check Airman 

(1994-present), and attended San Joaquin Delta College (1970-1972). 

Mr. Wayne Smith, Kaiser’s Chief Inspector since 2004, holds an FAA Airframe and Powerplant 

Mechanic certificate and has more than 40 years of experience performing aircraft maintenance. 

Prior to assuming his current position at Kaiser, he was employed by United Air Lines, Inc., as 

Aircraft Inspection Supervisor (1999-2004), Supervisor/Shift Manager for Heavy Maintenance 

(1988-1998), Line Maintenance Supervisor (1986-1987), Airframe Maintenance Supervisor 

(1981-1985), Airframe Overhaul/Avionics Technician (1973-1980), Electronic Component 
5

Repair/Overhaul Technician (1971-1972), and Hydraulic Components Shop Technician 

(1967-1969). Mr. Smith attended Santa Rosa Junior College (1995-2003), Canada College 

(1993), and the College of Notre Dame (1974-1976). He also served in the United States Navy 

(1967-1971). 

Mr. John L. Hancock, Kaiser’s Director of Safety, is an FAA Airline Transport Pilot and FAA 

Airframe and Powerplant Mechanic with over 40 years of aviation experience. Prior to joining 

Kaiser in 2009, Mr. Hancock served in a variety of executive and managerial positions, 

including Owner of John L. Hancock Aviation Safety Consultant, LLC (1996-2009), Aviation 

Safety Inspector for the FAA Flight Standards Division (1988-1996), President/Owner of Novus 

Technology, Corp. (1981-1987), and Owner of Eagle Aircraft of California (1982-1987). 

Additionally, Mr. Hancock has served as Pilot/Sales Manager for Welenco, Inc. (1979-1981), 

President/Owner of Aero Ag Service, Inc. (1974-1975), Chief Pilot for Del Monte Aviation 

(1973-1974), Chief Agricultural Pilot Instructor for Cal-Ag Aero, Inc. (1971-1973), and DC-3 

Co-pilot for World Weather, Inc. (1970-1971). He is type-rated in numerous turbine/jet aircraft, 

including the B-737, DC-3S, DC-4, and L-1049, and holds FAA Flight Engineer, rotorcraft, and 

glider certifications. Mr. Hancock has also held several non-aviation executive roles and served 

in the United States Air Force (1962-1966). 

Mr. David Street, Kaiser’s Manager of Aircraft Maintenance, is an FAA Airframe and 

Powerplant Mechanic with over 15 years of experience performing aircraft maintenance. Prior 

to joining Kaiser in 2001, Mr. Street served as an Airframe and Powerplant Mechanic for United 

Air Lines, Inc. (1997-2001), and Flying “S” Aviation, Inc. (1995-1996). He also performed 

aircraft overhaul duties for Joliff Aircraft, Inc. (1994-1995), and avionics repair for Modesto 

Avionics, Inc. (1989-1994). Mr. Street is experienced in B-747 large aircraft maintenance and 

earned a Bachelor of Science in Aviation Maintenance from San Jose State University (1996). 

The FAA has advised us that Kaiser’s key technical personnel have been approved by that 

agency to hold their positions, the air carrier has conducted its operations satisfactorily, and it 

has no objection to the Department’s approval of Kaiser’s application for certificate authority.2

 

In light of the experience and background of the applicant’s key personnel, we tentatively 

conclude that Kaiser’s management team possesses the skills and technical ability to conduct its 

proposed interstate charter air transportation operations using one large aircraft. 

 

2

 Before authorizing an air carrier to conduct air transportation operations, the FAA evaluates the qualifications 

of persons holding certain positions with respect to the minimum qualifications for those positions as prescribed in 

the FARs. The FAA’s evaluation of these key personnel provides an added practical and in-person test of their 

skills and technical ability. 
6

Operating Plan and Financial Position 

As previously noted, Kaiser currently provides on-demand charter air transportation with a fleet 

of eight (8) small aircraft operated under FAR Part 135 and Part 298 of our regulations. If 

granted the certificate authority it seeks, Kaiser intends to provide interstate charter operations 

using one large aircraft in executive configuration for members of Kona Associates, LLC (“Kona 

Associates”), a non-profit organization incorporated under the laws of the State of Hawaii.3 The 

applicant has entered into an Aircraft Management Agreement (“AMA I”), wherein Kaiser has 

agreed to operate one 60-seat Boeing 737-700 on behalf of Kona Associates between Oakland 

International Airport and Keahole-Kona International Airport, providing two weekly round-trip 

flights, for a total of 104 round-trip flights annually.4

According to the terms of the AMA I, passengers will be limited to members of Kona 

Associates, their families, invited guests, and household employees; the flights will not be held 

out to the public.5 In addition, the pre-certification start-up costs of Kaiser’s proposed 

operations, as well as the post-certification fixed and variable costs, are to be paid, in entirety, by 

Kona Associates upon invoice or account debit. Kona Associates will also pay into an escrow 

account sufficient funds to cover aircraft leasing costs and Kaiser’s monthly fixed costs, in 

advance, for services performed, including terminal services, communications, flight crew, 

training, reservations, administrative/management services. Kona Associates will pay monthly 

invoiced maintenance, labor, overtime, parts, and material costs, as well as monthly invoiced 

variable costs, including fuel, crew travel expenses, aircraft parking fees, airport taxes, landing 

fees, and catering. 

Historical financial statements submitted in support of Kaiser’s application show that for the 

calendar years ending 2007 and 2008, Kaiser earned net income of $2.1 million on 

approximately $41.3 million, and $311,197 on approximately $45.0 million in operating 

revenues, respectively. For the seven months ending July 31, 2009, Kaiser earned net income of 

 

3

 Kona Associates has 90 members, which are comprised of the residents of three exclusive resort communities 

on the Kona coast of Hawaii – Kukio, Hualalai, and Mauna Lani. The members formed the association to provide 

private air transportation between the San Francisco Bay area, where the majority of the members have their 

primary residences, and the three Kona communities where they maintain vacation homes. 

 By Order 2004-8-8, issued August 11, 2004, Kona Associates was granted an exemption from the Department’s 

regulations to the extent required to enable it to make this service available to its members. Accordingly, Kona 

Associates was limited to the use of certificated air carriers to perform the flights. The Kona operations initially 

began in February 2008 under an aircraft management agreement with a company other than Kaiser. 

4

 Since Kaiser cannot provide the charter service on behalf of Kona Associates until it has received the 

appropriate operating and certificate authority from the Department and the FAA, it has opted to begin providing 

the shuttle service by entering into an Aircraft Management Agreement (“AMA II”) with Miami Air International, 

Inc. (“Miami Air”), effective March 18, 2009, for a period of time sufficient for Kaiser to complete the Part 121 

certification process. Subsequently, Kaiser and Miami Air entered into an Aircraft Sublease Agreement on May 11, 

2009, to effect the operation of a Boeing 737-700 aircraft, whereby the aircraft would be placed on Miami Air’s 

FAA Air Carrier Certificate, and operated and maintained by Miami Air under Kaiser’s supervision. On May 15, 

2009, Kaiser took delivery of a Boeing 737-700 aircraft. Accordingly, Kona shuttle flights began service in June 

2009 under management by Kaiser, with operations conducted by Miami Air.

5

 Kona Associates’ members pay annual dues to fund air transportation operations and, in return, members are 

guaranteed seats on a certain number of flights per year.
7

$594,708 on approximately $16.4 million in operating revenues. The air carrier’s balance sheet 

indicates that, as of July 31, 2009, it had current assets of $11.4 million and current liabilities of 

$2.5 million, giving the company a positive working capital balance of $8.9 million. The same 

balance sheet shows the company as having retained earnings of $17.9 million and total 

shareholders’ equity of $18.0 million. 

Kaiser anticipates that its pre-operating start-up costs for the Kona operation to be approximately 

$385,200. These figures are drawn from the Part 121 portion of the Kaiser consolidated 

financial forecast, which projects costs of $60,200 for aircraft proving runs, $25,000 for 

maintenance bridging and conformity, and $300,000 for legal and regulatory certification costs.6

Kaiser’s forecast first full-year of operations financial results are based on the Boeing 737-700 

aircraft being operated twice weekly (for an annual total of 104 round trips), with an estimated 

flight time of 10.5 hours per round trip (1,092 hours per year). As such, Kaiser projects that the 

operating costs for the first full-year of the Kona operation, from July 2010 through June 2011, 

will total approximately $8.8 million. 

To meet the Department’s financial fitness criteria, an applicant should have access to financial 

resources sufficient to cover its pre-operating expenses and the expenses that are reasonably 

projected to be incurred during three months of “normal” operations.7

 Kaiser provided the 

Department with a consolidated financial forecast for its first year of operations with its Boeing 

737-700, and further stated that it considers the FAA Part 121 certification process to be 

progressing satisfactorily and within cost projections. Given the nature of the air carrier’s 

proposed operations, we find the applicant’s forecast to be reasonable and estimate that Kaiser 

will need access to $2.6 million in funding to meet our financial fitness test.8 In support of its 

ability to meet our financial fitness requirements, Kaiser provided third-party verification from 

Wells Fargo Bank and BancWest Investments, confirming that it has maintained account 

deposits in excess of the amount required by the Department. 

We note that Kaiser’s operation of the Kona operation is dependent upon Kona Associate’s 

collection of sufficient membership revenues to pay for the service. In addition to a substantial 

initial payment and annual membership dues, out of which the entire costs for the proposed 

operations are paid, club members are also subject to additional charges to make up for any 

unmet costs in order to keep the service running. Additionally, all of Kaiser’s fixed and variable 

operating costs are reimbursed, plus a profit element, by Kona Associates, and the remainder of 

its overhead and administrative costs are met by its existing aircraft management, FBO, and 

charter operations. As such, Kaiser’s exposure to default risk is minimal. Further, we note that 

 

6

 Kaiser notes that the $25,000 it has allocated for maintenance bridging and conformity is for related 

contingencies that, for unforeseen reasons, may not be paid by Miami Air. 7

 Because projected expenses during the first several months of air transportation services frequently do not 

include all costs that will be incurred during a “normal” period of operations, it is our practice to base our threemonth test on an average of one-quarter of the first year’s operating cost forecast. In calculating resources, 

projected revenues may not be used.

8

 The $2.6 million consists of the applicant’s pre-operating expense forecast of $385,200, plus $2.2 million, which 

is one quarter of Kaiser’s estimated first-year expense of $8.8 million.
8

Kaiser holds a funding surplus of $1.3 million relative to its available cash and short-term 

securities without considering the obligation of Kona Associates to fully cover the pre-operating 

and operating costs incurred by Kaiser. 

Based on our review of the financial documents submitted in support of Kaiser’s financial 

fitness, we tentatively conclude that Kaiser has access to sufficient financial resources to 

commence the operations it proposes without posing an undue risk to consumers or their funds.

9

Compliance Disposition 

The applicant states that there are no pending legal 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. Kaiser 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 respect 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 addition, 

according to the FAA, Kaiser has conducted its operations in a satisfactory manner and the 

agency knows of no reason why the air carrier should not be granted the authority it is seeking. 

Moreover, the applicant notes that neither it nor any of its key personnel have been involved in 

an accident or incident in the year preceding its application or at any time in the past which 

remains under investigation by the FAA, the NTSB, or the company itself. 

In light of these circumstances, we tentatively find that Kaiser 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 followed. 

CITIZENSHIP 

Section 41102 of the Transportation Code requires that certificates to engage in air transportation 

be held only by citizens of the United States as defined in 49 U.S.C. § 40102(a)(15). That 

section specifies that the president and two-thirds of the board of directors and other managing 

officers be U.S. citizens, that at least 75 percent of the outstanding voting interest be owned by 

U.S. citizens, and that the air carrier must be under the actual control of U.S. citizens. 

As noted earlier, Kaiser is organized as a corporation under the laws of the State of California. 

Mr. Ronald J. Guerra, the applicant’s President, Chief Executive Officer, and Board member is a 

U.S. citizen and owns one (1) percent of the total equity and 100 percent of the voting shares of 

Kaiser’s common stock. The remainder of the company’s stock – all of which is non-voting – is 

held equally in four irrevocable trusts for Roby James Guerra and Katherine Anne Guerra 

 

9

 As is our practice, prior to making any authority awarded to Kaiser effective, we will require the company to 

demonstrate that it continues to have access to the financial resources needed to meet our financial test. 
9

Campbell, the son and daughter, respectively, of Mr. Ronald J. Guerra. Mr. Roby Guerra and 

Mrs. Katherine Guerra Campbell are U.S. citizens and neither individual holds, or have held, a 

substantial interest in any other aeronautical business. Additionally, Kaiser’s key personnel are 

U.S. citizens and the company has submitted an affidavit attesting that it is a citizen of the 

United States within the meaning of the Statute. Finally, there is no other information before us 

that would lead us to conclude that Kaiser is not controlled by U.S. citizens. 

In view of the foregoing, we tentatively conclude that Kaiser is a U.S. citizen and that it is fit, 

willing, and able to provide air transportation services as a U.S. certificated air carrier, subject to 

conditions. 

REQUEST FOR CONFIDENTIAL TREATMENT

On January 19, 2010, Kaiser filed a motion for confidential treatment under 14 CFR § 302.12 

(“Rule 12”) of our rules to withhold from public disclosure its aircraft lease agreements, aircraft 

management agreements, and company financial documents. In support of its request, Kaiser 

stated that public disclosure of these documents would cause substantial harm to Kaiser’s 

competitive position on the grounds that they comprise of competitively sensitive commercial 

information. 

Rule 12 instructs us to evaluate requests for confidential treatment in accordance with standards 

of disclosure found in the Freedom of Information Act (5 U.S.C. § 552). Information may be 

withheld from disclosure under 5 U.S.C. 552(b)(4) if it is (1) commercial or financial, 

(2) obtained from a person outside the government, and (3) privileged or confidential (Gulf and 

Western Industries, Inc. v. United States, 615 F.2d 527, 529 (D.C. Cir. 1979)). 

There is no question that the information for which Kaiser seeks confidential treatment is 

financial or commercial in nature and that it was obtained from a person outside the government. 

The remaining question is whether the information is privileged or confidential – whether 

“disclosure of the information is likely to have either of the following effects: (1) impair the 

Government’s ability to obtain necessary information; or (2) cause substantial harm to the 

competitive position of the person from whom the information was obtained” (National Parks 

and Conservation Association v. Morton, 498 F.2d 765, 770 (D.C. Cir. 1974)). Further, to be 

privileged or confidential, the information must not be of the type that is usually released to the 

public (Gulf and Western Industries, Inc. v. United States, 615 F.2d 527, 530 (D.C. Cir. 1979)). 

After reviewing Kaiser’s motion, the Department, by letter dated January 29, 2010, denied

Kaiser’s request for confidential treatment of company financial documents. In that letter, the 

Department informed Kaiser that it is not the Department’s practice to withhold from public 

disclosure information regarding an applicant’s current or historical financial information, or 

forecasted revenues and expenses, except when the applicant has shown that substantial harm to 

its competitive position would result from public disclosure of the given information and such 

information is not the type that is normally released to the public. No such showing was made. 

In that letter, the Department also granted Kaiser’s motion to withhold aircraft lease agreements 

and aircraft management agreements from public disclosure. The Department has, in the past, 
10

afforded confidential treatment to an applicant’s management and aircraft lease agreements and, 

therefore, we deemed it reasonable to do so here. 

OBJECTIONS 

We will give interested persons 14 days following the service date of this order to show cause 

why the tentative findings and conclusions set forth here should not be made final; answers to 

objections will be due within 7 days thereafter. We expect such persons to direct their 

objections, if any, to the application and points at issue and to support such objections with 

detailed economic analyses. If an oral evidentiary hearing or discovery procedures are 

requested, the objector should state in detail why such a hearing or discovery is considered 

necessary, and what material issues of decisional fact the objector would expect to establish 

through a hearing or discovery that cannot be established in written pleadings. The objector 

should consider whether discovery procedures alone would be sufficient to resolve material 

issues of decisional fact. If so, the type of procedure should be specified (See Part 302, Rules 19 

and 20); if not, the reasons why not should be explained. We will not entertain general, vague, 

or unsupported objections. If no substantive objections are filed, we will issue an order that will 

make final our tentative findings and conclusions with respect to Kaiser’s fitness and 

certification. 

EFFECTIVE CERTIFICATE CONDITIONS AND LIMITATIONS 

If Kaiser is found fit and issued the certificate it seeks, its authority will not become effective 

until the air carrier has fulfilled all of the requirements for effectiveness as set forth in the terms 

and conditions attached to its certificate. Among other things, this includes (1) our receipt of 

evidence of Kaiser’s authority from the FAA authorizing such operations, (2) evidence of 

liability insurance coverage that meets the requirements of section 205.5(b) of our rules, (3) a 

statement of changes it may have undergone since its fitness was examined, and (4) evidence 

that Kaiser continues to have adequate financial resources available to it. 

We also wish to remind Kaiser of the requirements of 49 U.S.C. § 41110(e). Specifically, that 

section requires that, once an air carrier is found fit initially, it must remain fit in order to hold its 

authority. To be assured that certificated air carriers continue to be fit 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 fitness. Therefore, if Kaiser is issued 

effective certificate authority and subsequently proposes substantial changes in its ownership, 

management, or operations, it must first comply with the requirements of section 204.5 of our 

rules.10 

 

10 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 information, 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, including 

enforcement action or steps to modify, suspend, or revoke the air carrier's commuter authority.
11

Moreover, as discussed in the FITNESS section of this order, our finding of fitness for Kaiser is 

based on the operating plans described in its application, namely, performing passenger charter 

air transportation with one large aircraft on behalf of Kona Associates.11 Were the applicant to 

propose to expand its operations to include additional large aircraft or wish to conduct 

independent large aircraft charter operations, our fitness findings, particularly involving the 

adequacy of Kaiser’s management and financial resources, might no longer apply. Therefore, we 

propose to restrict Kaiser’s operations to one large aircraft in charter passenger operations 

pursuant to an aircraft management agreement with Kona Associates or another company 

similarly structured. Should Kaiser desire to operate additional large aircraft or independent 

large aircraft charter passenger operations, it must first provide the Department with at least 

45-days advance notice of such plans and provide updated information establishing it fitness for 

such. The compliance of the company with this requirement is essential if we are to carry out 

our responsibilities under section 41110(e).12

Finally, if Kaiser 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,13 and a listing of current senior management and key technical 

personnel. The air carrier should also be prepared to meet with staff members of the Fitness 

Division to discuss its current and future operations. 

ACCORDINGLY, 

1. We direct all interested persons to show cause why we should not issue an order making 

final our tentative findings and conclusions stated above and award a certificate to KaiserAir, 

Inc., authorizing it to engage in interstate charter air transportation of persons, property and mail 

using one large aircraft, subject to the attached specimen Terms, Conditions, and Limitations. 

2. 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 such 

 

11 This limitation does not apply to the air carrier’s small aircraft operations and, as a result, Kaiser remains free to 

conduct operations with as many small aircraft as it desires.

12 We also remind Kaiser about the requirements of section 204.7 of our rules. This section provides, among other 

things, that (1) the certificate authority granted to a company shall be revoked if the company does not commence 

actual flying operations under that authority within one year of the date of the Department's determination of its 

fitness; (2) if the company commences operations for which it was found fit and subsequently ceases such 

operations, it may not resume 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 dormancy. 13 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.
12

objections with the Department of Transportation Dockets, 1200 New Jersey Avenue, S.E., West 

Building Ground Floor, Rm. W12-140, Washington, D.C. 20590, in Docket DOT-OST-2009-

0208 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. 

3. 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. 

4. In the event that no objections are filed, we will consider all further procedural steps to be 

waived and we will execute an order making final our tentative findings and conclusions.14

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

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

By: 

SUSAN L. KURLAND 

Assistant Secretary 

for Aviation and International Affairs 

An electronic version of this document is available on the World Wide Web at: 

http://www.regulations.gov 

 

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

reconsideration. 
Attachment 

Specimen 

Terms, Conditions, and Limitations 

KAISERAIR, INC. 

is authorized to engage in interstate charter air transportation of persons, property and 

mail between any point in any State, territory, or possession of the United States or the 

District of Columbia, and any other point in any of those entities. 

This authority is subject to the following provisions: 

(1) The authority to operate under this certificate will not become effective until six 

(business) days after the Department has received the following documents; provided, 

however, that the Department may stay the effectiveness of this authority at any time 

prior to that date: 

(a) A copy of the holder's Air Carrier Certificate and Operations Specifications 

authorizing such operations from the Federal Aviation Administration (FAA). 

(b) A certificate of insurance on OST Form 6410 evidencing liability insurance 

coverage meeting the requirements of 14 CFR 205.5(b) for all of its aircraft. 

(c) A statement of any changes the holder has undergone in its ownership, key 

personnel, operating plans, financial posture, or compliance history, since the 

date of the Show Cause Order in this case. 

(d) A revised list of pre-operating expenses already paid and those remaining to 

be 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), issue tickets for the operations proposed under 

this certificate, or enter into contracts with charter operators, and any advertisement by 

the holder must prominently state: "This service is subject to receipt of government 

operating authority." 

(3) The holder shall at all times conduct its operations in accordance with the 

regulations prescribed by the Department of 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 interest. 

(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 
2

comply with all U.S. Government requirements concerning security, including, but not 

limited to 49 CFR Part 1544. 

(5) When the authority contained in this certificate becomes effective, the charter 

passenger authority contained herein will be limited to operations performed under an 

aircraft management agreement with Kona Associates, LLC or with another similarly 

structured company. 

(6) The holder shall at all times remain a "Citizen of the United States" as required 

by 49 U.S.C. 40102(a)(15). 

(7) 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. 

(8) Should the holder propose any substantial change in its ownership, management, 

or operations (as defined in 14 CFR 204.2(l)), it must first comply with the requirements 

of 14 CFR 204.5. 

(9) In the event that the holder does not commence actual flying operations under 

this certificate within one year of the date of the Department's determination of its 

fitness, its authority shall be revoked for dormancy, unless the holder is conducting 

operations under another type of certificate authority. Further, in the event that the 

holder commences operations for which it was found "fit, willing, and able" and 

subsequently ceases all such operations, its authority under all 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 holder does not resume operations within one year of its 

cessation, its authority shall be revoked for dormancy. 

 

 To assure compliance with all applicable U.S. Government requirements concerning security, the holder shall, 

before commencing any new service (including charter flights) to or from a foreign airport, contact its Principal 

Security Inspector (PSI) to advise the PSI of its plans and to find out whether the Transportation Security 

Administration has determined that security is adequate to allow such airport(s) to be served.
SERVICE LIST FOR KAISERAIR, INC. 

MICHAEL BLASCO 

AVIATION SAFETY INSPECTOR 

FAA OAKLAND FSDO 

SUITE 280 

1420 HARBOR BAY PARKWAY 

ALAMEDA, CA 94502 

MARK W ATWOOD 

ELIZABETH J WADSWORTH 

SHER & BLACKWELL LLP 

1800 M STREET NW 

SUITE 900 

WASHINGTON DC 20036 

PETER LYNCH AGC-300 

ASST CHIEF COUNSEL FOR ENFORCEMENT 

FEDERAL AVIATION ADMINISTRATION 

800 INDEPENDENCE AVE SW 

WASHINGTON DC 20591 

BERNARD STANKUS RTS-42 

OFFICE OF AIRLINE INFORMATION 

DOT/RSPA/BTS E-36 

1200 NEW JERSEY AVE SE 

WASHINGTON DC 20590 

WILLIAM J WEBER 

CERTIFICATION SECTION MANAGER 

FAA AFS-900 

45005 AVIATION DRIVE, SUITE 131 

DULLES VA 20166 

CLAY MORITZ, RTS-42 

OFFICE OF AIRLINE INFORMATION 

DOT/RSPA/BTS E-36 

1200 NEW JERSEY AVE SE 

WASHINGTON DC 20590