Order 20 10

- 4

- 7

UNITED STATES OF AMERICA
DEPARTMENT OF TRANSPORTATION
OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation
on the 14 th day of April , 20 10

Served: April 14, 2010

FINAL ORDER

Summary

By this Order

, we make final our tentative findings set forth in Order 20 10

- 3

- 21 (“show

- cause order”) and grant an exemption from 49 U.S.C. § 41101 and applicable Department regulations to air charter broker CSI Aviation Services, Inc. , (CSI) to the extent necessary for CSI to engage in domestic and foreign indirect air transportation of persons, property

, and mail pursuant to

contracts with Fed eral government agencies arranged under the General Services Administration (GSA) Schedule Special Item Number (SIN) 599

- 5, Air Ch arter Services

- Brokers. We also
finalize our tentative decision to exempt to the same extent all other a ir charter brokers cu rrently
listed on GSA Schedule SIN 599

- 5 , and all those that may be so listed during the term of this exemption authority

. 1

Background

On November 25, 2009, CSI filed an application for an exemption to continue perform ing under
GSA SIN 599

- 5 and act ing as a p rincipal in contracts for air transportation between Federal

1 Currently, the following air charter brokers are listed on GSA Schedule SIN 599

- 5: Air Charter Team; Air Partner, Inc.; Air Planning, LLC; Capital Aviation, Inc.; CSI Aviation Services, Inc.; Private Jet Services Group Inc.; Sundowner Oklahoma City, LLC; and Zeph yr Aviation, LLC. Application of

CSI Aviation Services, Inc.

for an emergency exemption pursuant to
49 U.S.C. § 40109 to continue to act as an
indirect air carrier charter broker under
contract to the General Services
Administration Docket DOT

- OST

- 2009

- 03112 government agencies , such as GSA, and direct air carriers

. 2 A number of parties , including GSA, filed either in support of or in opposition to CSI’s application. 3

The Department subsequently requested from GSA’s General Counsel a clear and definitive formal statement of GSA’s position on CSI’s application

. 4 By letter dated March 1, 2010, GSA
stated th at it would support action, via exemption or otherwise, that would permit air ch arter brokers to continue to perform their GSA Multiple Award Schedule (MAS) contracts

, as well as

any contracts the se brokers might have with other Federal agencies.

By Order 2010

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- 21, we tentatively granted CSI’s request for an exemption from 49 U.S.C. 41101 and applicable Department regulations to the extent necessary for CSI to engage in domestic and foreign indirect air transportation of persons, property and mail pursuant to

contracts with Federal government agencies arranged under GSA Schedu le SIN 599

- 5, Air
Charter Services

- Brokers. We also tentatively grant ed this authority to all other air charter
brokers listed on GSA Schedule SIN 599

- 5, and to all those that may be so listed in the future during the term of this exemption . We noted tha t this exemption authority would apply only to air charter brokers listed on GSA Schedule SIN 599

- 5 and would be limited to services pursuant
to contracts with the Federal government . We found that our tentative grant of exemption authority would be consi stent with the October 2004 Notice issued by the Department’s Office of Aviation Enforcement and Proceedings. We also found that our proposed action would provide GSA with the ability to continue using the air charter brokers listed on Schedule SIN 599

- 5 and would be in the public interest. Finally, we stated that authorized brokers could not enter into agreements with operators conducting services under 14 CFR Part 125 (“Part 125 operators”) , as those operators may not engage in common carriage operation s in air transportation, either directly or indirectly through third parties, such as air charter brokers.

Objections to the Department’s tentative decision were due on March 19 , 20 10. Capital Aviation, Inc. and Capital Airways, LLC (hereinafter collectiv ely referred to as “Capital”), Miami Air International, Inc. (Miami Air), and the National Air Carrier Association (NACA) each filed responsive pleadings

. 5

Summary of Responsive Pleadings

C apital objects to the Department’s tentative decision insofar as it would prohibit the affected
brokers from using the services of Part 125 operators

. C apital argues that U.S. government agencies have a demonstrated need for Part 125 air services to fulfill important missions of the types specifically recited in SIN 599

- 5, such as prisoner and detainee operations. C apital further argues that GSA’s March 1 letter made it clear that U.S. government agencies should not be restricted as to the types of air services that m ay be procured indirectly through air charter
brokers under SIN 599

- 5. C apital states that the Department has offered no reasoned justification for its decision to exclude Part 125 operators from among those entities with which

2 A direct air carrier is an entity that provides or offers to provide air transportation and who has control over the operational functions performed in providing that transportation.

3 See Order 2010

- 3

- 21 at 2 for the list of s upporting and opposing parties.

4 See letter dated February 12, 2010 in the instant docket.

5 NACA’s pleading, filed March 23, was accompanied by a motion file an otherwise unauthorized document. In the interest of ensuring a complete record, we will gra nt the motion.3 air charter b ro kers may con tract to provide services pursuant to SIN 599

- 5

. C apital asserts that there is no legal or rational basis for regarding the U.S. government or any agency thereof as the “general public” to support the determination barring brokers from contracting with Part 125
operators

. C apital states that the U.S. government is not the general public, and that the offer or provision of air transportation to the U.S. government should not be considered holding out to the general public. C apital maintains that the Dep artment, whose authority is limited to entities engaged in the provision of air transportation, i.e ., common carriage, has no jurisdiction to assert
restrictions on either broker activities o r Part 125 commercial operators serving the U.S.
government

.

In their objections, Miami Air and NACA renew their previous opposition to the CSI application

. However, both concentrate on challenging Capital’s position. They both support the Department’s tentative decision that would prohibit authorized air charter bro kers from contracting with Part 125 operators. They assert that the law is very clear with respect to Part 125 operators, and that 14 CFR Part 125 is only applicable to operations when common carriage is
not involved

. Specifically, NACA notes that Part 125 operators are restricted to “non

- common carriage”, which is defined as an aircraft operation for compensation that does not involve a holding out to others. NACA notes that Part 125 operators may not advertise or solicit from anyone, public or private , and that providing air operations through a broker is “holding out” as the broker is clearly soliciting a government contract in this case

. Miami Air states that, as is the
case with civilian

- operated flights conducted on behalf of the Department of Def ense, only certificated air carriers should be allowed to operate flights carrying government personnel.

Decision

For the reasons cited in the show

- cause order , we have decided to make final our tentative
decision to grant CSI an exemption , subject to co nditions, from 49 U.S.C. § 41101 to the extent necessary for CSI to engage in domestic and foreign indirect air transportation of persons, property, and mail pursuant to contracts with Federal government agencies arranged under GSA
Schedule SIN 599

- 5, Air Charter Services

- Brokers. We also make final our tentative decision to grant this exemption , subject to the same conditions, to all other air charter brokers listed on
GSA Schedule SIN 599

- 5, and to all those that may be so listed during the term of this exemption authority

.

W e have reviewed each of the submissions filed in response to our show

- cause order. In again opposing CSI’s exemption request, Miami Air and NACA relied essentially on arg uments previously submitted. We fully considered those arguments in rendering our tentative decision and find no persuasive basis to reach a different result here.

With respect to the concerns raised by Capital , the authority we are granting to CSI and other similarly

- situated ai r charter brokers is to act as indirect air carriers of persons and property in their dealings with GSA and other U.S. Government agencies. These entities thus are authorized by this order to engage in air transportation as common carriers. While C apital believes that the services arranged by CSI do not constitute common carriage (and therefore air transportation) because of the limited scope of holding out done by the broker (i.e., soliciting only from U.S. Government agencies), we disagree.4 I n Order 2010

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- 21 we stated:

A broker does not need economic authority from the Department of Transportation as long as it properly limits its role to that of a strict go

- between between direct air carriers and the U.S. government, serving as no more than an age nt for one of the parties. However, if the broker acts in a manner that gives it the attributes of an actual provider of air transportation, that is as a principal rather than an agent, the broker must hold appropriate DOT authority to act as an
indirect air carrier. 6

We remain of the view that, given the factual circumstances here , and in particular the contracting arrangements set up by GSA, the provision of air services for U.S. Government agencies through the GSA contracting system constitutes an enga gement in air transportation, necessitating that brokers conducting such business hold economic authority from the Department to act as indirect air carriers.

It is a well

- established Department standard that indirect air carriers may only use the services of
authorized direct air carriers in conducting their operations. See 14 CFR §2 96.3, § 297.12(a), and § 380.10(d). As we stated in Order 2010

- 3

- 21, CSI and the other brokers, acting as principals in arranging air services for GSA, are acting as indirect air carriers, and we are licensing them in this order to do business in that manner. Under these circumstances, we see no persuasive public interest reason to treat CSI and the other brokers differently from the way we treat other indirect air carriers in contracting for air services, i.e. , that they may only contract with direct air carriers holding appropriate OST and FAA authority. Indeed, we note that GSA’s
Schedule SIN 599

- 5 statement of work specifies that flight operations conducted under that Schedule must be performed by an air carrier holding authority under 14 CFR Parts 121 or 135 ( i.e ., authority to act as a direct air carri er), and does not provide for operations by Part 125
operators.

In view of the above, w e find that our tentative decision in Order 2010

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- 21 barring authorized brokers from entering into agreements with Part 125 operators is consistent with GSA ’s

procur ement process and is otherwise warranted in the public interest , and should be finalized.

ACCORDINGLY,

1. We grant an exemption from 49 U.S.C. § 41101 to CSI Aviation Services, Inc., to the extent necessary for it to engage in domestic and foreign indire ct air transportation of persons, property, and mail pursuant to contracts with Federal government agencies arranged under the
General Services Administration (GSA) Schedule Special Item Number (SIN) 599

- 5, Air Charter
Services

- Brokers ;

2. We grant an exemption from 49 U.S.C. § 41101 to all other air charter brokers listed on
GSA Schedule SIN 599

- 5, and all those that are so listed in the future to the extent necessary for them to engage in domestic and foreign indirect air transportation of persons, property, and mail pursuant to contracts with Federal government agencies arranged under the GSA Schedule
SIN 599

- 5, Air Charter Services

- Brokers ;

6 Order 2010

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- 21 at 1

- 2.5 3. The authority granted in ordering paragraphs 1 and 2 is subject to the following
conditions:

**•** A ir ch arter brokers shall contract only with direct air carriers that hold the requisite Departmental authority to engage in air transportation; 7

**•** All air services arranged by the air charter broker s shall be authorized in accordance with the Fly America Act (49 U.S.C. § 40118) by the contracting agency ;

**•** Before engaging in indirect air transportation to the extent permitted by this exemption

,
an air charter broker not currently listed on GSA Schedule SIN 599

- 5, Air Charter
Services

- Brokers shall file a notice in this docket of its listing on GSA Schedule SIN
599

- 5 ; and

**•** An air cha rter broker currently listed on GSA Schedule SIN 599

- 5, Air Charter Services

Brokers, or that is listed subsequent to the issuance of this order

, shall file a notice in this
docket within 30 days after its removal from the GSA Schedule SIN 599

- 5 Air Charter
Services

- Brokers ;

4. The exemption authority granted in ordering paragraphs 1 and 2 shall be effective immediately and will terminate one year from the issue date of this order, or upon the issuance of a final rule encompassing this authority , whichever is sooner ; 8

5

. We grant the motion of the National Air Carrier Association for leave to file an otherwise unauthorized document;

6

. To the extent not granted above, we deny all requests for relief in this d ocket ;

7

. We shall not entertain petitions for reconsideration of this o rder; and

7 Brokers shall not, for example, enter into agreements with companies operating pursuant to 14 CFR Part 125, as these entities are prohibited from engaging in common carriage operations in air transportation, ei ther directly or indirectly through air charter brokers.

8 Sixty days before the expira tion of the exemption authority granted in ordering paragraphs 1 and 2, we will favorably consider a n extension of this exemption authority if a rulemaking on this subj ect is underway

, but not yet final, and GSA advises the Department that such a n extension of the exemption authority is necessary for the acquisition of airlift for the Federal g overnment agencies

.6 8

. We shall serve this order on the parties to the captioned docket of this order , the U.S. Department of State (Office of Aviation Negotiations), the Federal Aviation Administration (AFS

- 200), and the General Services Administration

.

By:

Susan L. Kurland Assistant Secretary for Aviation

and International Affairs

(SEAL)

A n electronic versio n of this document is available at www.regulations.gov