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 Kais erAir, 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, a nd should be issued a certificate of public convenience and necessity authorizing such operations, subject to conditions.

Background

Section 41102 of Title 49 of the Un ited 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 requi rements 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 manage rial skills and technical ability to conduct the proposed operations, (2) will have access to resour ces sufficient to commence operations without posing an undue risk to consumers, and (3) w ill 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 th e 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 accompan ied its application with fitness information required by section 204.3 of our re gulations 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 th ese circumstances, we propose to decide the issue of the applicant’s fitness on the basis of the wr itten 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-o wned by Mr. Ronald J. Guerra. Kaiser currently holds a Part 135 Air Carrier Certificate i ssued 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 repa ir station, and a majority owner of a fixed base operator, the Santa Rosa Jet Center, LLC. Kaiser currently opera tes 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 follo wing five members: Messr s. Ronald J. Guerra, David L. Campbell, Alexander (Sandy) Wate rs, Roby J. Guerra, and Boyd C. Sleeth, Esq. Kaiser’s officers and other key management a nd technical personnel include: Ms. Beth A. Medlen, and Messrs. James G. (Jim) Strickla nd, 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. Developmen t/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 s eats 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 Presid ent, Chief Executive Officer, and Board member, holds an FAA Airline Transport Pilot certificate w ith 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 th e 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. Gu erra is an FAA-certified Flight Engineer and, in 2005, was awarded the National Business Avia tion 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 hi s executive duties, Mr. Campbell serves as Kaiser’s Gulfstream Check Airman (1996-present) and Gulfstream Capt ain (1989-present). He joined Kaiser in 1979 and has served in several different cap acities 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 Pomp ano 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 O fficer, 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 tota l 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 Mi ami Air International, Inc. (2009-present). Prior to joining Kaiser in 1994, he held va rious aviation and non-aviation positions, including Sales/Business Development Associate for Ahar t 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-fue ler/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 Bo ard 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. Sleet h previously served as Director and private counsel for Crosby, Heafey, Roach & May Prof essional Corporation (1987-2002), and Health and Sciences Program Assistant for the Univer sity 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 Maintena nce 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 Li nes, Inc., including General Manager of the Oakland Maintenance Center, Manager of Engi ne Production and Test, Manager of Engine Inspection, Manager of Aircraft Maintenance, and Manager of Component Maintenance (1984-2004). Ms. Medlen is experienced in la rge 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 Contro ller/CFO in the international transportation, import/export, commercial construction, and aircraft management/FBO industries. Prior to joining Kaiser, he served as Vice Presid ent/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/C ontroller 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 logge d. 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/je t aircraft, is an FAA Designated Check Airman (1994-present), and attended San Joaquin Delta College (1970-1972).

Mr. Wayne Smith, Kaiser’s Chief Inspector sin ce 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), Supe rvisor/Shift Manager for Heavy Maintenance (1988-1998), Line Maintenance Supervisor ( 1986-1987), Airframe Maintenance Supervisor (1981-1985), Airframe Overhaul/Avionics T echnician (1973-1980), Electronic Component5

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 Di rector of Safety, is an FAA Airline Transport Pilot and FAA Airframe and Powerplant Mechanic with over 40 y ears of aviation experience. Prior to joining Kaiser in 2009, Mr. Hancock served in a va riety of executive and managerial positions, including Owner of John L. Hancock Aviation Safety Consultant, LLC (1996-2009), Aviation Safety Inspector for the FAA Flight Standard s Division (1988-1996), President/Owner of Novus Technology, Corp. (1981-1987), and Owner of Ea gle Aircraft of California (1982-1987). Additionally, Mr. Hancock has served as Pilo t/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 hol ds FAA Flight Engineer, rotorcraft, and glider certifications. Mr. Hancock has also he ld several non-aviation executive roles and served in the United States Air Force (1962-1966).

Mr. David Street, Kaiser’s Manager of Aircra ft Maintenance, is an FAA Airframe and Powerplant Mechanic with over 15 years of expe rience 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), a nd Flying “S” Aviation, Inc. (1995-1996). He also performed aircraft overhaul duties for Joliff Aircraft, In c. (1994-1995), and avionics repair for Modesto Avionics, Inc. (1989-1994). Mr. Street is experi enced in B-747 large aircraft maintenance and

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

The FAA has advised us that Kaiser’s key t echnical 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 th e applicant’s key personnel, we tentatively conclude that Kaiser’s management team posse sses 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 tran sportation operations, the FAA evaluates the qualifications of persons holding certain positions with respect to the mi nimum qualifications for those positions as prescribed in the FARs. The FAA’s evaluation of these key personnel pr ovides 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 configurati on for members of Kona Associates, LLC (“Kona Associates”), a non-profit organization incorpor ated under the laws of the State of Hawaii. 3 The applicant has entered into an Aircraft Manage ment Agreement (“AMA I”), wherein Kaiser has agreed to operate one 60-seat Boeing 737-700 on be half of Kona Associates between Oakland International Airport and Keahole-Kona Interna tional 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. K ona Associates will also pay into an escrow

account sufficient funds to cover aircraft leasi ng costs and Kaiser’s monthly fixed costs, in advance, for services performed, including term inal services, communications, flight crew, training, reservations, administrative/management services. Kona Associates will pay monthly invoiced maintenance, labor, overtime, parts, a nd material costs, as well as monthly invoiced variable costs, including fuel, crew travel expens es, aircraft parking fees, airport taxes, landing fees, and catering.

Historical financial statements submitted in suppor t 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 e nding 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 ma jority of the members have their primary residences, and the three Kona comm unities 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 carri ers to perform the flights. The Kona operations initially began in February 2008 under an airc raft management agreement with a company other than Kaiser.

4 Since Kaiser cannot provide the charter service on be half of Kona Associates until it has received the appropriate operating and certificate authority from the De partment and the FAA, it has opted to begin providing the shuttle service by entering into an Aircraft Manage ment 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 Ai r entered into an Aircraft Sublease Agreement on May 11, 2009, to effect the operation of a Bo eing 737-700 aircraft, whereby the aircra ft 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 tr ansportation 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 reve nues. 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 a nnual 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 th e Kona operation, from July 2010 through June 2011, will total approximately $8.8 million.

To meet the Department’s financial fitness crite ria, an applicant should have access to financial resources sufficient to cover its pre-operating e xpenses and the expenses that are reasonably projected to be incurred during thr ee 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 th e FAA Part 121 certification process to be progressing satisfactorily and within cost projec tions. Given the nature of the air carrier’s proposed operations, we find the applicant’s forecas t 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 subj ect 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 elemen t, 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 de fault 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 m onths of air transportation services frequently do notinclude 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 y ear’s operating cost forecast. In calculating resources, projected revenues may not be used.

8 The $2.6 million consists of the applicant’s pre-operati ng 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 re lative to its available cash and short-term securities without considering the obligation of K ona 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 le gal actions or outstanding judgments against it, its owners, or its key personnel nor have ther e been any charges of unfair, deceptive or anti-competitive business practices, or of fraud, fe lony 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 w ith respect to compliance with the Transportation Code or the Department’s regulations.

A review of our records and other informati on 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 fi nd 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-thir ds of the board of directors and other managing officers be U.S. citizens, that at least 75 per cent 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 corpor ation under the laws of th e 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) pe rcent of the total equity and 100 percent of the voting shares of

Kaiser’s common stock. The remainder of the co mpany’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 awar ded to Kaiser effective, we will require the company to

demonstrate that it continues to have access to the fina ncial 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. citizen s and neither individual holds, or have held, a substantial interest in any other aeronautical bus iness. Additionally, Kaiser’s key personnel are U.S. citizens and the company has submitted an a ffidavit 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 th at Kaiser is a U.S. citiz en and that it is fit, willing, and able to provide air transportation servi ces as a U.S. certificated air carrier, subject to

conditions.

REQUEST FOR CONFIDENTIAL TREATMENT

On January 19, 2010, Kaiser filed a motion fo r confidential treatment under 14 CFR § 302.12 (“Rule 12”) of our rules to withhold from public di sclosure 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 co mprise 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 wa s obtained from a person outside the government. The remaining question is whether the informa tion 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 informa tion; 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 Depa rtment, by letter dated January 29, 2010, denied Kaiser’s request for confidential treatment of co mpany financial documents. In that letter, the Department informed Kaiser that it is not th e 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 di sclosure 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 fo rth 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 decisiona l 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 al one 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 e xplained. We will not entertain general, vague, or unsupported objections. If no substantive objecti ons are filed, we will i ssue an order that will make final our tentative findings and conclusi ons 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 requireme nts 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 requi rements of section 205.5(b) of our rules, (3) a statement of changes it may have undergone sin ce 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 require ments of 49 U.S.C. § 41110( e). Specifically, that section requires that, once an air carrier is found f it initially, it must remain fit in order to hold its authority. To be assured that certificated air carri ers continue to be fit after effective authority has been issued to them, we require that th ey supply information describing any subsequent substantial changes they may undergo in areas affec ting 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 mana gement, and to determine what additional in formation, if any, will be required under section 204.5. In addition, by notice dated July 21, 1998, the De partment requested air ca rriers to provide a 30-day advance notification of any proposed change in ownership, restructuring, or r ecapitalization. If the air carrier fails to file this updated information or if th e information fails to demonstrate that the air carrier will continue to be fit upon implementation of the substantial change, the Departme nt 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 fi nding 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 a dditional large aircraft or wish to conduct independent large aircraft charter operations, our fitness findings, particularly involving the adequacy of Kaiser’s management and financia l 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 agreemen t 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 comp any with this requirement is essential if we are to carry out our responsibilities under section 41110(e). 12

Finally, if Kaiser is granted effective authorit y, it would be required to submit a detailed progress report, within 45 days following th e 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 adopt ed as policy by the Department to aid in monitoring the fitness of new air carriers. Th e 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 prepar ed 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 stat ed 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 obj ections 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 sec tion 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 commen ces 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 Transportati on Dockets, 1200 New Jersey Avenue, S.E., West Building Ground Floor, Rm. W12-140, Washi ngton, 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 ar e 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 w ill 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 char ter 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 cer tificate will not become effective until six (business) days after the Department has received the following documents; provided

, however , that the Department may stay the eff ectiveness 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 Fo rm 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 holde r 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 expen ses 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 remaini ng 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), i ssue 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 se rvice 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 th e Federal Aviation Administration (FAA), and2

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 Asso ciates, 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 substantia l 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 fo r dormancy, unless the holder is conducting operations under another type of certificate author ity. 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. Governm ent requirements concerning security, the holder shall, before commencing any new service (incl uding 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