Order 2013

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UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation on the Tenth day of April , 2013

Third Party Complaint of Docket OST 2013

- 0031 Pacific Airways, Inc.

, and PM Air, LLC

Against Scott Air, LLC d/b/a Island Air Express Served April 10 , 2013

ORDER OF DISMISSAL

On February 1, 2013, Pacific Airways, Inc.

, and PM Air, LLC (Petitioners) filed a third

party complaint against Scott Air, LLC, d/b/a Island Air Express (Scott Air) alleging that

Scott Air is continuing to engage in scheduled interstate air transportation without proper economic authority from the Department despite the issuance of a consent order on December 28, 2012, against Scott Air for such conduct

. 1 Petitioners request that the Department find that Scott Air is continuing to engage in unauthorized air transportation

in violation of Order 2012

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- 16 , compel payment of the entire penalty asses sed by the order, and institute a formal enforcement proceeding in front of a Departmental

administrative l aw j udge. Alt hough not specifically requested in Petitioners’ pleading,

we are treating Petitioners’ filing as a formal complaint under 14 CFR 302.4 04

.

Background and Applicable Law

Section 41101 of Title 49 of the U.S. Code prohibits the holding out or the provision of interstate air transportation unless a carrier has economic authority from the Department in the form of a certificate of public convenience and necessity or an exemption from the certificate requirement. In addition to being a violation of 49 U.S.C. § 41101, holding out or providing air service without economic authority is in violation of 49 U.S.C. § 41712, which prohibits unfair and deceptive trade practices and unfair methods of competition.

On December 28, 2012, the Department issued Or der 2012

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- 16 against Scott Air. The order found that Scott Air was holding out interstate air transportation without Departmental economic a uthority

. Specifically the Department found that Sco tt Air

1 See Scott Air LLC d/b/a Island Air Express, Violations of 49 U.S.C. §§ 41101 and 41712

, Order 2012

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- 16 ( Dec

. 28, 2012 )

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advertised scheduled serv ice between Ketchickan International Airport in Alaska and the Klawock Airport which serves Craig and Klawock, Alaska , and Scott Air’s website allowed reservations from pa ssengers outside the State of Alaska . These passengers could also book flights using a toll

- free number. Scott Air’s website also allowed passenger to enter information regarding Alaska Airlines flight s carrying passengers from

outside Alaska connecting at Ketchikan International Airport. As a result , Scott carried

more than a de minimis number of passengers moving as part of a continuous journey

from outside the State of Alaska to and from Craig and Klawock

.

O rder 2012

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- 16 directs Scott Air to cease and desist from future violations of 49 U.S.C. §§ 41101 and 41712 and assesses a civil penalty of $20,000

. If Scott Air fails to

cease and desist from further violations

, it may be subject to additional penalties and

further enforcement action.

Prior t o the issuance of Order 2012

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- 16, Scott Air amended its website to note that it only operates intrastate air transportation

. O n October 22, 2013, Scott Air also filed an application for a certificate of public convenience and necessity which would allow it to engage in interstate scheduled air transportation . In Order 2012

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- 16, the Department stated that “in light of the steps taken by Scott and the mitigation factors mentioned above, the [Aviation] Enforcement Office [of the Department] will no t oppose Scott being found fit and as a matter of prosecutorial discretion will not take enforcement action against Scott while it conducts its present operations until its certificate has been granted. ” On January 18, 2013, t he Assistant Secretary for Av iation and International Affairs made a tentative finding that Scott Air is fit for interstate air transportation in an

Order to Show Cause which was issued. The order directs all interested persons to show cause why the office should not finalize its fin dings. That matter is pending before the Department. 2

Complaint filed by Petitioners

On February 1, 2013, t he Petitioners filed a “complaint against Scott Aviation, LLC, for

anti

- competitive, deceptive, and unfair business practices while engaging in in terstate air

commerce without authority.” In that complaint

, the Petitioners allege that Scott Air’s

website is still “ universally available ” and that its disclaimer is not sufficient to notify consumers that it lacks interstate authority from the Department. Additionally the Petitioners claim that Scott Air continues to accept reservations from passengers who indicate that they (the passengers ) are engaged in interstate transportation. Petitioners attach “reservation confirmations” to their complaint

, which they claim show that Scott Air is accepting reservations from persons that also have Alaska Airlines connections in Ketchikan, Alaska. Ad ditionally, Petitioners seem to indicate that Scott Air’s utilization

of a toll

- free reservations number also violates the consent order’s cease and desist provision.

Further

, t he Petitioner s allege that Scott Air intentionally times its flights to connect “conveniently” to or from Alaska Airlines’ flights to Ketchikan. In support of this

2 See Docket DOT

- OST

- 2012

- 0178 and DOT

- OST

- 2012

- 0179.– 3

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assertion , Petitioner s provide a timetable , which they generated, of Alaska flights from

Seattle to Ketch ikan and Scott Air flights from Ketchikan to Klawock. Petitioner s also attach several newspaper advertisements from the Ketchikan Daily News that purport to

advertise Scott Air’s connecti ng service to Alaska Airlines. P etitioner s claim that the

Ketchikan Daily News is a “regional newspaper” and then lists the localities within the State of Alaska where the newspaper can be purchased. The advertisement in question appeared in December 2012. Petitioner s also attached two advertisements from the

Southeast I sland News , one from November 21, 2011

, and one from November 21, 2012, both before the Department issued the consent order. In those newspaper advertisements, Scott Air highlight s that it schedules its flights to coincide with Alaska Airlines flights.

P etitioners then list a series of seemingly rhetorical questions as to why a carrier would choose to fly into and out of Ketchikan International Airport and why a passenger would choose to fly into the airport. Petitioners argue that the only way to get be tween the airport and the City of Ketchikan is via a ferry, which Petitioners argue operates in

accordance with Alaska Airlines schedule. Petitioners state that the a irport is “strictly [a] connecting market” because of its location, and passengers would only choose to use that airport to connect to an Alaska Airlines flight.

Finally, Petitioners attach as appendices various third

- party websites for fishing lodges

and the Prince of Wales I sland’s chamber of commerce which list Scott Air as providing service between Ketchikan and the fishing lodges. Petitioners maintain that Scott Air has made no attempt to correct the third party websites with a disclaimer of its intrastate authority. Pet itioners argue that there is a relationship between Scott Air, Desert Splash Adventures (Scott Air’s winter season Arizona operation), and El Capitan Lodge , located in Craig, Alaska . Petitioner s state that Desert Splash’s website lists El Capitan as a “pa rtner.” Petitioner s claim that if a person calls Scott Air’s toll

- free number and inquires about reservations for El Capitan, callers are directed to a Bremerton, Washington, phone number to make reservations directly with El Capitan . Petitioners

also cl aim that their representative called several local hotels and inquired as to how to

reach the hotels. According to the Petitioners’ complaint, e ach hotel stated that the visitors should use Scott Air. Petitioners argue that this is evidence that Scott Ai r has attempted to generate interstate traffic.

Answer of Scott Air

On February 20, 2013, t hrough counsel, Scott Air replied to the complaint filed by Petitioners stating that the complaint should be dismissed on factual and procedural grounds. Scott A ir states that Petitioners ’ complaint does not comply with the Department’s requirements for filings under 14 CFR 302.4 , and Petitioners ’ representative failed to provide an 18 U.S.C. § 1001 certification. Scott Air states that the complaint should be dism issed due to these procedural deficiencies

.

Scott Air replies that the complaint should be dismissed on substantive grounds as well. Specifically, Scott Air argues that the fact that it operates out of an “International Airport” does not mean it conducts interstate transportation. Scott Air notes that its– 4

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wheeled Cessna Caravan aircraft can only land in the area at the Ketchikan International Airport. Regarding its website, Scott Air a s serts that its disclaimer is adequate 3 , and that its maintenance of a website is common practice for all other intrastate and interstate

carriers. Scott Air also argues that it is not required under Department regulations to list

the types of economic authority it does not have. Scott Air s tates t hat it does not accept

interstate reservations on its website.

Regarding the local newspaper advertisements, Scott Air points out that the advertisement from December 2012 does not make any reference to connections with any

other air carrier. Scott Air also notes that the advertisements are in local newspapers directed to the local community.

Regarding the third party websites, Scott Air states that the websites speak for themselves. Scott Air points out that nowhere on the websites mentioned by Peti tioner s is it stated that there is any connection with Scott Air and Alaska Airlines. Scott Air addresses the allegations regarding the relationship between S cott Air and El Capitan Lodge by stating that the Bremerton, Washington, phone number that Petit ioner s list as El Capitan’s phone number is not a phone number for El Capitan. Scott Air notes that neither it nor El Capitan has an office in Washington state.

Petitioner’s Reply to Scott Air’s Answer

On February 25, 2013, P etitioners filed an unauth orized reply to Scott Air’s Answer. Under 14 CFR §302.6(b) a reply to an answe r is not authorized. The Department will only accept otherwise unauthorized documents for filing only if leave has been obtained from the DOT decision maker on written motion and on good cause shown. Such

motions must contain a concise statement of the ma tters relied upon as good cause and shall be attached to the pleading or other document for which leave to file is sought. In this case, Petitioners incorporated the written motion into the otherwise unauthorized

document. We ha ve reviewed the motion and have not found good cause to accept the

motion to file the unauthorized document. Therefore

, we are not considering subsequent pleadings in this matter. Disposition and Analysis

We have carefully considered the complaint in Docket 201 3

- 0031 , and have decided to

dismiss the complaint. T he Petitioners have not demonstrate d that Scott Air has failed to comply with the terms of Order 2012

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. T he Petitioners do not take into account the steps taken by Scott Air to operate within its intrasta te authority during the pendency of their application for authorit y. Additionally, none of the assertions provided by the

Petitioners show evidence that to the extent that Scott Air may still be carrying more than

de minimis interstate traffic.

3 “ Island Air Express operates its scheduled services within the State of Alaska. We have been granted full

FAA authorization as an intra

- state FAA certificate holder t o operate our Caravans IFR (in or above the clouds), day or night using the advanced Synthetic Flight Vision navigation system making our modern aircraft the safest, most reliable fleet in Alaska.”– 5

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As an initial matter, a carrier having a website, which by definition is accessible world

wide via the Internet, and a toll

- free number, is not evidence per se that a carrier is operating interstate air transportation. In today’s modern market place , having a web site is important for small businesses , and it is not feasible for a com pany to limit its Internet

advertisements only to people within a state. There must be other evidence of h olding out interstate transportation in addition to having a website

. A toll

- free number is a convenient way to allow passengers to contact a carrier, and, in and of itself, it also is not evidence of holding out interstate transportation.

Scott Air amended its website to indicate that its authority is limited to operating

sched uled service within the State of Alaska. This disclaimer is on Scott Air’s homepage. There is no Departmental requirement that Scott Air put such a disclaimer on

its website at all, or , if it chooses to put a disclaimer on its website, li st the authority that

it does not have. We believe the disclaimer is adequate to inform consumers booking transportation on Scott Air’s website that its authority is currently limited to intrastate operations. Similarly, in the absence of collusion, the Department canno t hold Scott responsible for third

- party websites that it cannot control or third

- party recommendations to use Scott’s services between Ketchikan and Klawock. The Department review ed Desert Splash Adventure’s website (www.desertsplashadventures.com)

. The website mentions that Desert Splash Adventures are “operated by Island Air Express,” but there is no indication that Scott Air is operating interstate air transportation through Desert Splash Adventures. Desert Splash Adventures does list a partner as El Capitan Lodge, but the link takes you to El Capitan’s website, not Scott Air’s. We are not convinced that the link on Desert Splash Adventure’s website to El Capitan Lodge is evidence of Scott Air holding out interstate air transportation.

Regarding the scheduling issue Petitioners raise, stating that Scott Air’s flights are “conveniently” timed to Alaska Airlines flights, this matter was raised and considered by the Department before the issuance of Order 2012

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- 16. There is no interline agreement

b etween Alaska Airlines and Scott Air. Scott Air has amended its advertisement to

remove its highlight ing of the “convenient” connection. Scott Air is allowed to make a

business decision abo ut when to schedule its flights as long as it does not hold out

int erstate air transportation or carry more than de minimis interstate air transportation

. Scott Air amended its website and its print advertiseme nts to correct the information that could be perceived as holding out interstate service. Scott Air’s decision to fly into and out of Ketchikan International Airport is likewise not a determining factor.

The newspaper advertisements cited by Petitioner as evidence are not compelling, and, in fact, support the fact that Scott Air amended its advertisements to sto p holding out

interstate service. First, both the Ketchikan Daily News and the Southeast Island News are regional newspapers located within the State of Alaska, and do not reach a broad out

of

- state audience. Secondly, the advertisement from the Ketchika n Daily News , from “December 2012” does not mention connecting service to Alaska Airlines, unlike the two

advertisements in the Southeast Island News , both of which predate the consent order. To the extent that any advertisements printed before the issuan ce of the consent order advertised “convenient” connecting service to Alaska Airlines flights, those– 6

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advertisements are covered under Order 2012

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- 16. Moreover, the advertisements show that Scott Air change d its advertising practices to comport with Departmental regulations.

Regarding the reservations made on Scott Air, all the reservations proffered by

Petitioners as evidence that Scott Air is flying passengers that connected from an Alaska Airlines flight we re all made by residents with mailing addresses within Alaska. Also

, in one of the reservations submitted, the Alaska Airlines confirmation pages are merged

with the Scott Air confirmation pages to make it appear to the reader that Scott Air is providin g confirmation for Alaska Airlines flights, which is not the case. Finally, if a passenger voluntarily decides to schedule his or he r intrastate trip to coincide with

interstate air transportation, as Scott Air stated in its Reply, Scott Air is not respon sib le

for that connection

.

Scott Air does not accept reservations made by out

- of

- state residents, as Petitioners discovered when they attempted to make purchases out

- of

- state . While Scott Air

request s “Alaska Airlines Connecting Flight Info

, ” it does s o in order to know if a passenger will make its flight on Scott if the Alaska flight is delayed or cancelled. While the Department understands why Scott Air asks for this information, requesting the connecting flight information can be construed to be hol ding out interstate service. Scott

Air points out that it is not operating “connecting” service with Alaska Airlines. Scot t
Air does not have an interline agreement with Alaska. Passengers on Scott Air must check in for their Scott and Alaska flight s sep arately and must check their bags separately. This issue was addressed in the consent order issued by the Department

. B ecause Scott Air made changes to its website and reservations process, and it changed its advertisements to eliminate the references to connecting service, we find that any interstate traffic Scott Air may have carried as a result of asking for a customer’s connecting flight information subsequent to the issuance of Order 2012

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- 16 was de

minimis in nature.

After a thorough review of the information presented by Petitioners, we find that there is

insufficient evidence that S cott Air violated the te rms of consent order 2012

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that the intent of the order is being fulfilled.

ACCORDINGLY, pursuant to the authority delegated under 14 CFR 302.406 , I dismiss the complaint of Pacific Airways, Inc. and PM Air, LLC, against Scott Air, LLC, d/b/a Island Air Express in Docket OST 2013

- 0031

. This order s hall become effective as a final order of the Department 30 days after its service date.

By:

SAMUEL PODBERESKY

Assistant General Counsel for Aviation Enforcement and Proceedings

An electronic version of this document is available at www.regulations.gov