**BEFORE THE DEPARTMENT OF TRANSPORTATION**  **OFFICE OF THE SECRETARY WASHINGTON, DC** 

**________________________________** ) Complaint of ) ) **PACIFIC AIRWAYS, INC.** ) Docket DOT- OST - 2013 - 0031 **PM AIR, LLC** ) ) Against Scott Aviation, LLC ) d/b/a Island Air Express ) ________________________________)

REPLY OF THE KETCHIKAN CARRIERS TO THE ANSWER OF SCOTT AIR, LLC AND PETITION FOR LEAVE TO FILE AN OTHERWISE UNAUTHORIZED DOCUMENT

Communications with respect to this document should be addressed to: Hank Myers PO Box 7142 Bellevue, WA 98008 (425) 830
- 4265 February 25, 20131 **BEFORE THE DEPARTMENT OF TRANSPORTATION**  **OFFICE OF THE SECRETARY**  **WASHINGTON, DC**

**________________________________** ) Complaint of ) ) **PACIFIC AIRWAYS, INC.** ) Docket DOT- OST - 2013 - 0031 **PM AIR, LLC** ) ) Against Scott Aviation, LLC ) d/b/a Island Air Express )

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REPLY OF THE KETCHIKAN CARRIERS TO THE ANSWER OF SCOTT AIR, LLC AND PETITION FOR LEAVE TO FILE AN OTHERWISE UNAUTHORIZED DOCUMENT Pacific Airways, Inc. and PM Air, LLC (Ketchikan Carriers) hereby respond to the Answer of Scott Air, LL C (Scott) and request leave to file an otherwise unauthorized document. The pleading of Scott is filled with misstatements of law and fact, and is deceptive in its presentation. Scott’s Answer was received on Friday, February 22, and this Reply was filed before the beginning of the business day on Monday, February 25, the next work day. This filing will not delay handling of the Formal Complaint, and is needed to correct material misstatements of Scott.
Given the amount of contact between the Office of Aviation Enforcement and Scott, it is remarkable that Scott still does not accept the nature of its violations, the difference between safety and economic authority, the difference between interstate commerce2

and intrastate commerce, and its affirmative responsibility to reject requests fo r interstate transportation. We can no longer assume that Scott simply does not understand the nature of its violations , but r ather that Scott does not intend to understand the nature of its violations. Its willful behavior is clear evidence that it is unfit to hold a certificate of public convenience and necessity, and in this docket, has willfully abrogated the terms of its Consent Agreement.

**SAFETY vs ECONOMIC AUTHORTY**  Clearly Scott refuses to recognize that its FAA Air Carrier certificate is not the only authority it needs to oper ate. The Airline Deregulation Act of 1978 and subsequent legislation specifically preem pts State control over interstate air commerce, but also specifically exempts intrastate commerce from Federal regulation. None - the - less, even air carriers engaged in truly intrastate are still required to comply with State regulations on commercial servi ce. Within the State of Alaska a carrier is required to register with the office of the Alaska State Troopers, and provide proof of compliant liability insurance. This is a requirement separate from operating authority, but no Alaskan carrier can operate without meeting its terms. Even for intra - Alaskan operations, there is both safety and economic authority involved.
Even if Scott held FAA safety authority to engage in interstate air operations , it could not engage in interstate air commerce unless it had registered as an air taxi under3

14CFR298, been found fit as a commuter air carrier, or obtained a certificate of public convenience and necessity. At the time of the filing of the informal complaint, Scott had not registered under Part 298, been found fit as a commuter air carrier, or been issued a certificate of public convenience and necessity. Ev en today Scott has no economic authority to engage in scheduled interstate air commerce, or even to hold itself self out for such transportation.

**INTERST ATE vs INTRASTATE COMMERCE**  The Department and the Civil Aeronautics Board has established clear definitions bolstered by extensive case law defining the difference between interstate and intrastate transportation. Simply put, it is the true origin and de stination of the traffic, and not the online origin and destination of a particular carrier, which determines the nature of the commerce. For a passenger, the true origin and destination is the origin and destination of the continuous journey without an i ntermediate break. An intermediate break is defined as an intentional break in a journey to engage in a different activity other than travelling from the origin to the destination. For example, if a Klawock resident traveled from Seattle to Ketchikan and remained in Ketchikan to visit friends or relatives, or to engage in shopping, or to obtain medical or professional services, and then traveled to Klawock, then there would be a break in the journey. The travel between Ketc hikan and Klawock would be intr a state in nature.4

On the other hand, if the Klawock bound passenger traveled from Seattle to Ketchikan and then took the next convenient flight on Scott Air, even if the passenger remained in Ketchikan overnight, the nature of the journey would be interstate. For example, the El Capitan lodge offers a fishing package which assumes an evening arrival on Alaska Airlines into Ketchikan that is after the last Scott departure to Klawock. The passenger spends the night in Ketchikan as part of the packag e , and then takes the next convenient flight from Ketchikan International Airport to Klawock on Scott Air. Because the overnight stay was part of a continuous journey, the travel between Ketchikan and Klawock in interstate in nature.
As noted in Order 20 12 - 12 - 16, it is not only a violation of law to transport passengers in interstate commerce without necessary economic authority, it is a violation to hold out an offer to transport passengers in interstate transportation. While Scott neither admitted nor denied its violations in its Consent Order, the Department clearly stated: **ACCORDINGLY,** 1. Based on the above information, we approve this settlement and the provisions of this order as being in the public interest; 2. We find that Scott Air LLC d/b/a I sland Air Express violated 49 U.S.C. § 41101 by offering for sale and operating interstate air service between the Ketchikan International and the Klawock Airports in Alaska without certificate authority under 49 U.S.C. § 41101 or registration as an air taxi under 14 CFR Part 298;5

3. We find that Scott Air LLC d/b/a Island Air Express violated 49 U.S.C. § 41712 by holding out and providing air service between Ketchikan International Airport and the Klawock Airport, as described above; 4. We order Scott Air LLC d/b/a I sland Air Express and all other entities owned and controlled by, or under common ownership and control with Scott Air LLC d/b/a I sland Air Express, and their successors and assignees, to cease and desist from future violations of 49 U.S.C. §§ 41101 and 41712. Failure to comply with this cease and desist provision shall subject the company to further enforcement action; By offering for sale and holding out interstate air service via its website and interstate toll free telephone numbers, Scott violated Federal law. Scott is clearly incorrect when it asserts that in order for transportation to involve interline, interstate service that a single ticket or at least an interline ticketing and baggage agreement must be used. As was found specifica lly in the Simmons case, there did not need to be a single ticket or even interline ticketing and baggage agreement. Indeed, the fact that Simmons operated only from Baltimore - Washington International Airport was proof enough to show that it was engaged i n interstate commerce. The same logic applies to Ketchikan International Airport. There are no residents on Gravina Island where Ketchikan International Airport is located, or at lea s t none who have convenient road acc ess to the airport. The City of Ket chikan is located on Revillagigedo Island, and can only be reached from the airport by ferry, private boat, or air service.6

Half a dozen federally licensed air carriers, scheduled and on - demand, operate bases along the City of Ketchikan waterfront, only S cott does not. Scott argues that Ketchikan International Airport is the only place where its wheeled Cessna Caravans can land. First of all, as with Simmons, the choice of the aircraft and airport is Scott’s alone. Second, it does operate and advertis e amphibious Cessna Caravan aircraft fully capable of operating to the City of Ketchikan waterfront if it chooses. The Caravan on wheels could also be converted to amphibious floats and be able to operate between the Klawock airport runway and the Ketchik an waterfront, but Scott chooses to keep it on wheels. Scott could operate in true intrastate commerce, but chooses not to. Nobody is forcing Scott to violate Federal law. In the Simmons case, the Department found that by merely serving Baltimore Washington International Airport instead of other airports in the area, Simmons was engaged in interstate air transportation. The same principle applies at Ketchikan. There are numerous landing facilities on the Ketchikan waterfront which could be used by aircraft in Scott’s fleet. By choosing to serve only Ketchikan International Airport instead of the City of Ketchikan waterfront, Scott chooses to engage in interstate commerce. Service to Ketchikan International Airport is prima facie eviden ce of engaging in interstate air transportation.7

**SCOTT HAS AN AFFIRMATIVE RESPONSIBILITY TO AVOID INTERSTATE COMMERCE**
Scott’ s argument that it is not now n or never has been engaged in interstate commerce is fatuous. Order 2012 - 12 - 16 is clear in its finding. Claiming that interline, interstate transportation requires a single ticket and bag check is equally fatuous. The Department has consistently ruled that a carrier has an affirmative responsibility to abide by all applicable regulations, and cann ot claim ignorance as a defense. The remarkable thing is that Scott does know that passengers are interstate in nature because it openly solicits information about connections at Ketchikan International Airport. Scott argues that its disclaimer concernin g its FAA safety authority meets the requirements of its mitigation statement. Again, it ignores that it has no economic authority, and it is the Department of Transportation and not the F.A.A. that has found it in violation. Scott now argues that to lis t all of the authority is does not have would encompass hundreds of pages, thus being unwieldy and burdensome. A simple statement such as, “Scott Air, LLC is not authorized to transport passengers or freight whose entire journey begins or ends outside the State of Alaska, but is only authorized to transport passengers and freight whose entire journey is between two points in the State of8

Alaska” seems concise, clear and unambiguous. When it agreed to make the required changes in its website, was it acting it good faith?

**USE OF ISLAND ’**  **S SERVICES BY KETCHIKAN CARRIERS** As noted in the original complaint. Scott has been operating under a business name that is nearly identical to that of a properly certificated air carrier in Kodiak, Redemption, Inc. d/b/a Is land Air (Redemption). Until June, 2012, the Ketchikan Carriers were under the impression that Scott was an extension of the legally operated services of Redemption. It was not until BTS T - 100 data for the KTN - KLW data were analyzed that it was discovere d there were no entries for Redemption in the records. Further investigation uncovered that Scott and Redemption are not related in any way, and Scott was illegally engaged in interstate commerce. The Ketchikan Carriers used Scott assuming it was properl y certificated. The fact that Scott accepted the business is further proof of its engagement in interstate commerce.

**RESERVATIONS RECORDS** The reservations records appended to the February 1, 2013 Formal Complaint were reproduced exactly as received from the passengers. In the case of the two Lucas reservations, there is a notation within the body of the Scott reservation Comments section that there was a connection to Flight 60. The Alaska reservation record clearly9

shows a reservation to Flight 60. W e will determine if the Alaska Airlines record was part of the original Scott record or simply additional proof of the interstate commerce. In the Erickson record, there is a clear notation that the passenger is connecting from Flight 65. Both Flight 60 and Flight 65 are operated by Alaska Airlines directly to or from Seattle, WA, and are the closest connecting flight to the Scott service for which the reservation was accepted. Travel on these Alaska Airlines flights is clearly interstate in nature. The important issue, which cannot be avoided, is that Scott knows full well that some of its passengers are engaged in interstate transportation because it solicits information about passengers’ connecting itineraries. By accepting reservations from passenge rs it knows are engaged in interstate transportation, they are continuing to offer and hold out interstate air transportation.

**EL CAPITAN RESERVATIONS OPERATION** The point of the interstate relationship between Scott, Desert Splash and El Capitan is that there is a common ownership relationship between operations that span three states and are carefully interrelated. Desert Splash advertises its link to El Capitan, its Alaska fishing lod ge, to its clients in Arizona. Appendix A is the “Contact Us” page f or El Capitan (the home page of El Capitan was include d in the Formal Complaint). Lik e Scott, El Capitan advertises an interstate toll free telephone reservations line, but it also clearly lists a phone number in area code 360 (western Washington state). A reverse lookup search was performed on Whitepages.com, and the result is a VOIP account in10

Bremerton, WA. We contacted the City of Bremerton to see if there was a business license for the 360 - 850 - 0036 number, and that explains the mixup on the number. It is one thing for Scott to point out a clerical error on the phone number, it is entirely different to deny the existence of a Bremerton, WA phone line linked to a Bremerton, WA location. Again, this is more proof that Scott and El Capitan are engaged in a deceptive and willful attempt to engage in interstate commerce under the guise of separate, intrastate services. The Ketchikan Carriers have met their burden of showing probable cause that violations are continuing. If Scott is unwilling to admit th e actual operation, then a formal investigation must be undertaken.

**THE ACTIONS OF THE COMPLAINANTS ARE ABOVE REPROACH** Scott continuously refers to “... repeated use of the regulatory process to engage in a veritable campaign of harassment directed at Applicant, involving substantial and repeated misrepresentations of fact which Applicant has at each stage been obliged to address and rebut.” (Answer, page 2) As far as Enforcement matters are concerned, the Ketchikan Carriers filed one informal complaint against Scott alleging violations of Federal law and regulation. That filing was addressed in Docket 2012 - 0002, and was the only filing by the Ketchikan Carriers in that docket. As a complainant, the Ketchikan Carriers had a burden of pro of to show probable cause to believe a violation of law and regulation had occurred. Complainants clearly met this burden by demonstrating that Scott was holding out and offering to transport passengers in interstate commerce. The11

Department found that e ach of the Complainants’ allegations was true and found that Scott was in violation.
Three weeks after Order 2012 - 12 - 16 was issued, Complainants sought to confirm whether or not Scott was in compliance with its mitigation statement that it would only carry local traffic. The first test was to see if Scott would accept a reservation from the very same person who had previously made a reservation that became the basis of the informal complaint, and who was the known agent of the Ketchikan carriers. It woul d have been an egregious violation if in fact the rese rvation had been accepted. Actually, the reservation was accepted, only to be cancelled two hours later when the passenger’ s name was recognized. Scott calls this harassment.
The next test was to see if Sco tt would accept online reservations from passengers clearly engaged in interstate transportation but who were not named Hank Myers. Three attempts were made, and all three succeeded. Scott made two statements to the Department as mitigation of its offenses. First, it said it had altered its website to state that it was only authorized to engage in intrastate commerce. Its statement only addressed safety authority and did not mention economic authority. Second, it pledged to carry only local traffic until its certificate of public convenience and necessity had been awarded and activated. Once again Scott has been shown to be holding out and offering service in interstate commerce.12

The Complainants have met their burden of proof to show probable cause of continued violations, and have done so in a very open and transparent manner.

**SUMMARY** For several years now, Scott Air, LLC has engaged in scheduled interstate air commerce. It adopted a business name of an existing certificated air carrier in Kodiak. It hired key personnel from other certificated carriers who should have been aware of DOT requirements having gone through the vetting process themselves. It assisted passengers in physically transferring themselves and their belongings to and f rom interstate fights of Alaska Airlines. It holds out scheduled service using an interstate toll free reservations number. It maintains an unrestricted web site offering scheduled services without listing any restriction on its economic authority, and a ccepting reservations from outside the State of Alaska and even encouraging passengers to list their interline connecting flights on the interstate services of Alaska Airlines. It schedules its flights to connect to the interstate flights of Alaska Airlin es, varying its service to coordinate with Alaska Airlines schedule changes, and not to the needs of the local Ketchikan to Klawock passenger market. It operates only to Ketchikan International Airport and not the City of Ketchikan located on a separate i sland, even though it has aircraft capable of landing at the Ketchikan waterfront, and has other aircraft which could be converted to serve Ketchikan itself. It now admits it has even13

accepted charters from properly certificated air carriers and transport ed interstate passengers on their behalf. The Department has treated Scott in a very trusting and lenient manner. The Department accepted Scott at its word that it was unaware that its operations required interstate authority. It then waited three month s for Scott to apply for certificate of public convenience and necessity, thereby allowing them to operate unfettered during the entire lucrative summer season. It accepted Scott’s promise in a mitigation statement that it had altered its web site to clea rly state the limits on its economic authority, and would only transport local passengers between Klawock and Ketchikan until its certificate had been awarded. Scott has repaid this lenience and trust by changing none of its operations, and abrogating the terms of its mitigation statement. As shown in the February 1 Formal Complaint, Scott has not changed its web site to notify passengers of the limitations of its economic authority. It publishes several schedules on its website, each timed to connect co nveniently to and from interstate flights of Alaska Airlines. It continues to solicit interstate connecting flight information, and accepted three separate reservations from passengers who listed connections to interstate flights on their reservations req uests. Indeed, Scott has made it clear in its certificate application that it does not accept that it has engaged in interstate commerce, and the nature of its operation would not change even if certificated.14

In its defense , Scott asserts that the Compla inants have engaged in a continuous effort of harassment obliging Scott to respond at every step, or, on the other hand, not filing objections at a time when Scott asserts Complainants should have. To date, Scott has simply engaged in a pattern of denying actions and blaming others. Scott has the affirmative requirement to abide by Federal regulation, and it continues to play the ignorance card long after the credibility has worn off. Scott has not only abrogated the terms of its Consent Agreement, but i t continues to engage in new violations. It has played a game of catch me if you can, and been caught.

**CERTIFICATION** The contents of this application and the attached exhibits are true and correct to the best of my knowledge and belief. Pursuant to tit le 18, United States Code section 1001, I, in my individual capacity and as the authorized representative of the applicant, have not in any manner knowingly and willfully falsified, concealed or failed to disclose any material fact or made any false, ficti tious, or fraudulent statement or knowingly used any documents which contain such statements in connection with the preparation, filing or prosecution of the application. I understand that an individual who is found to have violated the provisions of 18 U .S.C. section 1001 shall be fined not more than $10,000 or imprisoned not more than five years, or both.15

**WHEREFORE** ; the Ketchikan Carriers respectfully renew the request to find that Scott Air, LLC has abrogated its mitigation statement and reinstate the full fine specified in Order 2012 - 12 - 16. Furthermore, the Department should investigate Scott not only for its vio lations subsequent to abrogating its mitigation statement, but prior to the Consent Order to assure the veracity of its statements. If nothing else, Scott has clearly covered up the its true operation through misleading statements in its several filings.
Respectfully submitted, Pacific Airways, Inc. PM Air, LLC

_____________________________ By Hank Myers, its authorized agent February 25, 2013 **CERTIFICATE OF SERVICE** I hereby certify that I have this day served a copy of the foregoing Reply of the Ketchikan Carriers upon Scott Air, LLC and its attorney of record, Pierre Murphy by Certified Priority US Mail, return receipt requested. Respectfully submitted,

_____________________________ Hank Myers February 25, 201316 Appendix A Page 1 of 2

“ CONTACT US ” PAGE FOR EL CAPITAN LODGE17 **Appendix A Page 2 of 2** 
**REVERSE PHONE LISTING FOR 360 -**  **850 -**  **0036**