Order 2010

- 2

- 7

Served: February 12 , 2010

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 12 th day of February, 2010

Fitness Determination of

RUGBY AVIATION, LLC

d/b/a NORTHWEST SKY FERRY

as a commuter air carrier under section 49 U.S.C. § 41738 Docket DOT

- OST

- 2009

- 0188

ORDER TO SHOW CAUSE

P ROPOSING ISSUANCE OF COMMUTER AIR CARRIER AUTHORITY

Summary

By this order, we tentatively find that Rugby Aviation, LLC d/b/a Northwest Sky Ferry (“Rugby ”)

, is a citizen of the United States and is fit, willing, and able to conduct scheduled passenger operations as a commuter air carrier, subject to conditions.

Background

Section 41738 of Title 49 of the United States Code (“the Transpo rtation Code”) and section 298.21(d) of the Department’s Aviation Economic Regulations (14 CFR 298.21(d)) direct us to determine whether companies proposing to provide scheduled passenger service as commuter air carriers are “fit, willing, and able to perf orm the service,” and to ensure that all operations relating to this service conform to the safety standards established by the Federal Aviation Administration ( “ FAA ” ). 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 n air carrier’s fitness are whether the applicant: (1) will hav e the managerial skills and technical ability to conduct the proposed operations, (2) has sufficient financial resources to commence the operations proposed without posing an undue risk to consumers or their funds, and (3) will comply with the Transportati on Code and regulations imposed by federal and state agencies. We must also determine that the applicant is a U.S. citizen.

O n August 12, 2009, Rugby

, an on

- demand air taxi operator holding a Part 135 Federal Aviation Regulation (“FAR”) operating certi ficate from the FAA and serving the Pacific Northwest, filed an application in Docket DOT

- OST

- 2009

- 0188 for authority to conduct scheduled passenger operations as a commuter air carrier. The air carrier accompanied its application with fitness

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

additional info rmation on November 25 and December 9, 2009 and January 14, 2010

.2

No a nswers opposing Rugby ’s application were filed and no special issues regarding the appl icant 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 tentativel y conclude that Rugby is a U.S. citizen and is fit, willing, and able to provide sc heduled passenger operations as

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

FITNESS

The Company

Rugby was formed as a limited l iability company under the laws of the State of Washington in January 1999. Initially based on Orcas Island, Washington, the company provided air carrier transportation on a n on

- demand basis to communities in the San Juan Islands. It was purchased

in 200 7 f

rom its origin al owner and the air carrier’s base of operations was moved to Bellingham, Washington. In April 2009, Rugby was purchased by SAS Aviation LLC (“SAS”), a Washington limited l iability company . Ownership of SAS is held equally by Mr. Louis A.

Jansen and Mrs. Kathryn J. Ja nsen, 1 both of whom are U.S. citizens. The applicant now seeks to

become a commuter air carrier and operate scheduled service to points in Washington State.

Managerial Competence

Rugby management and key technical perso nnel consist of the following individuals. Each have certified they hold U.S. citizenship.

Mr. Louis A. Jansen

- General Manager Mrs. Kathryn J. Jansen

- Manager Mr. Mark W. Schoening

- Director of Operations

Mr. Hidenori Sunahara

- Chief Pilot

Mr. John A. Ring

- Director of Maintenance

Mr. Louis A. Jansen, Rugby’s General Manager since acquiring the applicant in 2009 , is also the

O wner and Managing Member of SAS (2009

- present) and Baycrest Investme nts LLC, a property development company in Washington state (2002

- present). Mr. Jansen currently spends

seventy

- five percent of his time handling Rugby ’s operations. Additionally, M r. Jansen owns JIJ Corporation, a construction company (1990

- present). Prior positions at JIJ Corporation include President (1 985

- 1990) and On

- Site Construction Manager (1978

- 1984).

Mrs. Kathryn J. Jansen, Rugby’s M anager, is co

- owner of SAS ( April 2009

- present) and Baycrest Investments LLC (2002

- present), and Vice President of JIJ Corporation (1990

- present). Prior to her cu rrent positions, she was a School Teacher (1978

- 1989), and a Bank Teller for Northwestern Commercial Bank (1968

- 1978). Mrs. Jansen is a graduate of Western Washington University.

Mr. Mark W. Schoening, Director of Operations for Rugby , has over 25 year s of e xperience in airline operations. He co

- founded, planned, and produced all aspects of Great Arctic Air

1 Mrs. Kathryn Jansen is the wife of Mr. Louis Jansen.3

Adventure Inc. (March 2008

- present), a documentary film about flying two vintage float planes to the Magnetic North Pole

, which was filmed in 2008 and is currently being edited

. He is also Managing Member of Park 144 LLC

, a real estate development and holding company (January

2002

- present), and was the Founder and President of Sound Flight, Inc.

, a Part 135 air carrier specializing in seaplane opera tio ns
, where he also served as its Director of Operations and Chief

Pilot (1987

- 2004)

. Mr. Schoening holds a Commercial Pilot’s License and a Certified Flight

Instructor certificate.

Rugby’s Chief Pilot, Mr. Hidenori Sunahara, has held this position sinc e March 2009. Previously

, he was a Pilot for Alaska Airlines

, Inc. (2007

- 2009), SkyWest Airlines , Inc. (1999

- 2007), Ameriflight LLC (1998

- 1999), and Aviation Northwest ( 1994

- 1997). He also was employed as a Flight and Ground Instructor for Chuckanut A vi atio n Cent er , a flight school and small aircraft maintenance facility (1997

- 1998). Mr. Sunahara holds an Air Transport License and has flown over 9,200 flight hours

.

Mr. John A. Ring, is the Director of Maintenance for Rugby (2002

- present) and is a licen sed

Air frame and Powerplant Mechanic. Additionally, he is the owner/operator of Whatcom Territory Aero Services, Inc

. (2002

- present). Prior to joining Rugby, he was Director of

Ma intenance for West Isle Air Inc. (1996

- 2002)

, and Lead Mechanic for Chuckan ut Aviation

Center (1989

- 1996).

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

conclude that Rugby has dem onstrated that its key management and technical personnel have the managerial skills and technical abilit y to support its proposed operations . Moreover

, the FAA has advised us that all of the applicant’s key personnel have been found qualified to hold their respective positions.

Operating Proposal and Financial Plan

Rugby is currently operating as an on

- demand air taxi 2 and has now requested commuter authority to conduct scheduled operation s between Bellingham, Washington

, to other points

, including Friday Harbor, Lopez Island, and Orcas Island , Washington

. The air carrier submitted a plan for its first year of scheduled oper ations, forecasting on average 18 flights per day to the

aforementioned points

. Future destinations include Seattle’s Boeing Field Airport, Skagit Regional Airport, and Anacortes Airport. If granted the commuter authority it seeks, Rugby intends to perform its schedule with its existing fleet of three aircraft

– two 3

- seat Cessna 172 s and one 5

- seat Cessna 206. The aircraft are dry

- leased from Aircraft Adventures, LLC, a wholly

- owned subsidiary of Rugby’s parent company, SAS.

In e stablishing financial fitness, the Department typically asks an applicant to demonstrate that it has access to financial resources sufficient to cover its pre

- operating expenses and any negative working capital balance, plus a working capital reserve equal to the operating costs that are reasonably projected to be incurred during three months of “normal” operations. Because projected expenses during the first several months of air service frequently do not include all costs that will be incurred during a “ normal” period of operations, it is our practice to base our

2 Rugby also holds Canada Transport License 050058, dated July 29, 2008, granting the ai r carrier authority to

conduct non

- scheduled international c harter flights into Canada.4

three

- month test on one

- quarter of the first year’s operating costs. Further, in calculating available resources, projected revenues may not be used.

Rugby provided a foreca st of first year re venues and expenses associated with its proposed

commuter operations. The air carrier states that because it plans to operate the same aircraft to the same locations as it does in its current air taxi operations, any pre

- operating costs have been minimal, and absorbed in its normal operating budget

. Rugby projects its first year expenses will total approximately $446,142

. Based on this forecast , we estimate that it will require about $111,535 to meet our financial fitness criteria

. 3

In support of its ability to fund its proposed operations, Rugby submitted a balance sheet for September 30, 2009

, that shows that the company has current assets and current lia bilities of $140,386 and $22,182 respectively , indicating po sitive working capital of $118,204

. Additionally, the air carrier provided third

- party verifica tion that as of November 25, 2009, it has $120,000 on deposit in its name.

We have reviewed the forecast and financial statements provided by Rugby and find them to be

reasonable. In light of t he above

, we tentatively conclude that Rugby will have access to
sufficient financial resources to enable it to commence the proposed operations without posing

an undue risk to consumers or their funds

.

Compliance Disposition

The applicant states that th ere are no actions or outstanding judgments against it, persons holding a substantial interest in it, or its key personnel, and that none of these parties have been the subject of any charges of unfair, deceptive or anti

- competitive business practices, or of fraud, felony or antitrust violations, or other legal action during the past ten years. The air carrier also stated that there are not any pending investigations, enforcement actions, or formal complaints involving the applicant, persons holding a subs tantial interest in it, or its key personnel with respect to compliance with the Statute or the Department’s regulations.

The FAA advises us that it is working with Rugby in connection with the applicant's efforts to

obtain commuter operating authority f rom that agency, and it knows of no reason why we should act unfavorably on the company’s commuter application.

Rugby disclosed that the air carrier was involved in a non

- fatal accident in January 2009 and noted that the accident occurred under previous ownership

. 4 The air carrier also noted that the aircraft was repaired and placed back into service, and the pilot of the accident aircraft was subsequently dismissed

. Other than this accident, our review of FAA records indicates that Rugby has not been i nvolved in any accidents or incidents since it initially commenced operations.

3 The $111,535 noted here is one

- quarter of the applicant’s forecast of approximately $4 46,142 in first year

expenses. 4 National Transportation Safety Board (“NTSB”) Report WPR09CA084 indicates that on January 14, 2009, a Rugby Cessna 206 slid on a grass runway upon landing at Crane Island, Wash ington. To avoid a drop off at the end of the runway, the pilot turned the plane and in doing so, the aircraft was substa ntially damaged but no one was injured. According to the NTSB, p robable cause of the accident is attributed to pilot’s failure to mai ntain directional control during landing5

In light of these circumstances, we tent atively conclude that Rugby 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 authority to engage in air transportation be held only by citizens of the United States as defined in 49 U.S.C. § 40102(a)(15). That section requires 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 voting sto ck be owned by U.S. citizen s, and that t he air carrier must be under the actual control of U.S. citizens.

As noted earlier, Rugby was formed as a limited liability company under the laws of the State of Washington in January 1999 and was p urchased in April 2009, by SAS, a Washing ton limited liability company. SAS is owned equally by Mr. Louis Hansen and Mrs. Kathryn Hansen , both

of whom are U.S. citizens

. Additionally

, Rugby’s key personnel are U.S. citizens and the company has provided an affidavit attesting that it is a citize n of the United States within the meaning of the Statute. O ur review of the applicant’s citizenship has uncovered no reason to suggest that c ontrol of Rugby rests with non

- U.S. citizens.

I n light of the foregoing, we tentatively find that Rugby is owned and actually controlled by U.S. citizens, consistent with 49 U.S.C. § 40102(a)(15) and is fit, willing, and able to provide the proposed interstate scheduled operations, subject to conditions

.

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

necessa ry, 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 r esolve 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 substant ive objections are filed, we will issue an order that will make final our tentative findings and conclusions with respect to Rugby’s fitness and

certification.6

EFFECTIVE COMMUTER CONDITIONS & LIMITATIONS

If Rugby is found fit and issue d the commute r authority it seeks, its authority will not become effective until the company has fulfilled all requirements for effectiveness as set forth in the

terms and condit ions attached to its commuter authorization . Among other things, this includes our receipt of evidence that Rugby has been cert ified by the FAA to engage in the subject operations, a fully executed OST Form 6410 evidencing liability insurance coverage that meets the requirements of section 205.5(b) of our rules for all of its aircraft, third

- pa rty verification of available funding necessary to meet the Department’s fitness requirements, and a statement of changes it may have undergone since its fitness was examined. In addition, consistent with the applicant’s proposed operations, we propose to limit any authority issued to Rugby to operations using aircraft that can be operated under FAR Part 135 (that is, aircraft with no more than 9 seats in scheduled passenger operations). Should Rugby desire to acquire and operate larger aircraft

that woul d require certification from the FAA under 14 CFR Part 121, our fitness findings might no longer apply. Therefore, should Rugby desire to operate aircraft that would require certification from the FAA under Part 121, it must first provide the Department w ith at least 45 days advance notice of such plans and provide updated information establishing its fitness for such expansion.

Furthermore, we remind Rugby of the requirements of 49 U.S.C. § 41110(e). Specifically, that section requires that, once a n ai r carrier is found fit initially, it must remain fit in order to hold its authority. To be assured that commuter air carriers continue to be fit after effective authority has been issued to them, we require that they supply information describing any subs equent substantial changes they may undergo in areas affecting fitness. Therefore, if Rugby is issued an effective commuter authorization and should it subsequently propose substantial changes in its ownership, management, or operations, it must first com ply with the requirements of section

204.5 of our rules. 5 The compliance of the company with this requirement is essential if we are to carry out our responsibilities under section 41110(e)

. 6

Additionally, if the air carrier is granted effective authorit y, it would be required to submit a

detailed progress report, within 45 days foll owing the end of its first year o f commuter flight operations, to the Air Carrier Fitness Division. The submission of a first year progress report is conditioned upon all new ly authorized 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 Rugby ’s current operations (number and type of aircraft, principle markets served, tota l number

of full

- time employees), a summary of how its operations have changed during the year, a

5 Rugby 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, restructurin g, or recapitalization. If Rugby fails to file this updated informa tion 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 certificate authority.

6 We also remind Rugby about the requirements of section 204.7 of our rules. This section provides, among other things, that (1) the commuter authority granted to a company shall be revoked if the company d oes 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 commuter 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.7

discussion of any changes it anticipates from its current operations during its second year,
current financial statements, 7 and a listing of current senior ma nagement 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 n ot issue an order finding that Rugby Aviation

, LLC d/b/a Northwest Sky Ferry is fit, willing, and able under

49 U.S.C. § 41738 to provide scheduled passenger service as a commuter air carrier.

2. We direct any interested persons having objections to the issuance of an order making final any of the proposed findings, conclusions, or award of authority set forth here to file them with Department of Transportation Dockets, 1200 New Jersey Avenue, SE, Washington, D.C. 20590, in Docket DOT

- OST

- 2009

- 0188 and s erve 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 fu ll consideration to the matters or issues raised by the objections before we take further action. 8

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

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

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

By:

SUSAN L. KURLAND Assistant Secretary

for Aviation and International Affa irs

An electronic version of this document is available on the World Wide Web at: http:www. regulations .gov

7 These financial statements should include a balance sheet as of the end of the company’s first full year of

commuter flight operations and a 12

- month income statement ending that same date.

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

reconsidera tion.

### Attachment

SPECIMEN 

### Terms, Conditions, and Limitations

RUGBY AVIATION, LLC d/b/a Northwest Sky Ferry

is authorized to engage in scheduled passenger air transportation operations as a commuter air

carrier.

This authority is subject to the following provisions:

(1) The authority to conduct scheduled passenger operations 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 op erations 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 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 expenses already paid and those remaining to be paid, as w ell as independent verification that the holder has available to it funds sufficient to cover any remaining pre

- operating expenses and to provide a working capital reserve equal to the operating costs that would be incurred in three months of operations.

(2) Pending receipt of effective authority, the holder may not accept payment of any kind (i.e., cash, check, or credit card) or issue tickets for scheduled passenger operations, and any advertisement or listing of flights by the holder must prominently st ate: "This service is subject to receipt of government operating authority."

(3) The holder shall at all times conduct its operations in accordance with the requirements of 14 CFR Part 298 and any other regulations prescribed by the Department of Transpo rtation for the services authorized here, 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 is limited to operations conducted pursuant t o Part 135 of the Federal Aviation Regulations. In the event that the holder wishes to institute operations that2

would require Part 121 certification from the FAA, it must first be determined fit for such operations.

(5 ) The holder may not operate aircra ft designed to have a maximum passenger capacity of more than 60 seats or a maximum payload capacity of more than 18,000 pounds.

(6 ) The holder's authority under this certificate is effective only to the extent that such operations are also authorized by the Federal Aviation Administration (FAA), and comply with all U.S. Government requirements concerning security , including, but not limited to 49 CFR Part

1544

. 

(7 ) The holder shall at all times remain a "Citizen of the United States" as required by 49

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

(8 ) The holder shall maintain in effect liability insurance coverage as required under 14 CFR Part 205. Failure to maintain such insurance coverage will render this authority ineffective, and this or other failure to comply with the p rovisions of Subtitle VII of Title 49 of the United States Code or the Department's regulations shall be sufficient grounds to revoke this authority.

( 9 ) In the event that the holder receives effective scheduled passenger authority, the following

addition al conditions will apply:

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

section.

(b) The holder may not provide scheduled passenger air transportation to or from Dallas (Love Field), Texas, except within the limits set forth in section 29 of the International Air Transportation Competition Act of 1979, as amended by

secti on 337 of the Department of Transportation and Related Agencies Appropriations Act, 1998.

( 10 ) Should the holder propose any substantial changes in its ownership, management, or operations (as that term is defined in 14 CFR 204.2(l)), it must first compl y with the requirements of 14 CFR 204.5.

(1 1 ) In the event that the holder does not commence actual flying operations as a commuter air carrier under this authority within one year of the date of the Department's determination of its fitness, its commuter authority shall be revoked for dormancy. Further, in the event that the holder commences but subsequently ceases all scheduled passenger operations, the authority granted here 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

 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.3

the Department. Moreover, if the holder does not resume such operations within one year of its cessation, its commuter authority shall be revoked for dormancy.Attachment A

SERVICE LIST FOR RUGBY AVIATION LLC

d/b/a NORTHWEST SKY FERRY

MR MARK W. SCHOENING

RUGBY AVIATION LLC

4165 MITCHELL WAY

BELLINGHAM WA 98226 MR BERNARD STANKUS, RTS

- 42

OFFICE OF AIRLINE INFORMATION

DOT/RSPA/BTS E

- 36

1200 NEW JERSEY AVE SE

WASHINGTON DC 20590 MR CLIFF PETERSON

POI FOR RUGBY AVIATION LLC

1601 LIND AVENUE SW

SUITE 260

RENTON WA 98057

MR LOUIS A. JANSEN

RUGBY AVIATION LLC

4165 MITCHELL WAY

BELLINGHAM WA 98226 MR CLAY MORITZ, RTS

- 42

OFFICE OF AIRLINE INFORMATION

DOT/RSPA/BTS E

- 36

1200 NEW JERSEY AVE SE

WASHINGTON DC 20590 MR WILLIAM J WEBER

CERTIFICATION SECTION

MANAGER

FAA AFS

- 900

45005 AVIATION DRIVE SUITE 131

DULLES VA 20166

MR PETER LYNCH AGC

- 300

FAA ASST CHIEF COUNSEL

FOR ENFORCEMENT

800 INDEPENDENCE AVE SW

WASHINGTON DC 20591 REGIONAL COUNSEL

FAA

NORTHWEST MOUNTAIN R EGION

1601 LIND AVENUE SOU THWEST RENTON, WA 98057