Order 2011

- 10

- 9 Served: October 18, 2011

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 18 th day of October

, 2011

Fitness Determination of

FRIENDSHIP AIRWAYS

, INC.

d/b/a YELLOW AIR TAXI

f or authority to resume scheduled passenger operations as a commuter air carrier under section 49 U.S.C. § 41738 Docket DOT

- OST

- 2005

- 21533

ORDER TO SHOW CAUSE

Summary

By this order, we propose to (1) revoke the Commuter Air Carrier Authorization issued to Friendship Airways, Inc. (“YAT”) d/b/a Yellow Air Taxi and (2) deny its application to resume commuter operations pursuant to 49 U.S.C. § 40109(f) and 14 CFR Part 298

, for its failure to remain fit, w illing, and able to provide scheduled passenger air transportation as a U.S.

commuter air carrier. Our review of the record in this case indicates that YAT has failed to establish that it possesses the managerial competence to oversee its proposed operati on, has proper regard for the laws and regulations governing its services to ensure that acceptable consumer relations practices will be followed, and that it has adequate financial resources.

Statutory Standar d

Section 41110(e) of Title 49 of the United States Code (the “Transportation Code”) provides that the requirement that air carriers be “fit” to perform air transportation services is a continuing one and that an air carrier’s authority shall be amended, modified, suspended, or revoked if it fails t o remain fit, willing, and able to provide the air transportation authorized by its economic authority, which includes failure to comply with the regulations governing its operations.

The Application

On April 10, 2010, YAT filed an application in Docket DOT

- OST

- 2005

- 21533 for authority to resume scheduled passenger operations as a commuter air carrier which authority, as described in detail below, was revoked by the Federal Aviation Administration ( “ FAA”) in October 2008. The air carrier accompanied its application with most of the fitness information required by section 204.3 of our regulations. 1

1 YAT supplemented its application with additional information, most recently on December 20, 2010.2

No a nswers opposing YAT ’s application were filed

. However, as discussed below, the information provided by the applicant does not demonstrate that it continu es to meet our fitness requirements. Therefore, we propose to deny YAT’s application to resume scheduled passenger

service and revoke its commuter authority. We will give interested persons an opportunity to

show cause why we should not adopt as final our tentative conclusion that YAT is not fit, willing, and able to resume operations as a commuter air carrier

.

Background

YAT , based in Ft. Lauderdale, Florida, was incorporated under the laws of the State of Florida i n 2003 and is solely owned by Mr. Christopher B. Behnam, a U.S. citizen. Mr. Behnam is also YAT’s President, Chief Executive Officer (“CEO”), and Director of Operations. The company

, until recently, held a n air carrier certificate issued by the F AA that authorize d it to engage in

o n

- demand operations pursuant to 14 CFR Part 135. 2

By Order 2006

- 5

- 5

, dated May 8, 2006, the Department found YAT fit to conduct scheduled passenger service as a commuter air carrier. In October 2008, after finding among other things,

that YAT’s then

- Chief Pilot was unqualified to conduct Operating Experience (“OE”) observations of its pilots, the FAA revoked YAT’s safety authority to engage in commuter operations, but allowed it to engage in on

- demand operations. As a result

, YAT began operating solely as an on

- demand air taxi. The Department, by letter dated October 1, 2009, notified YAT

of our intent to revoke its commuter air carrier authorization under section 204.7 of our rules for reason of dormancy

. 3 On October 9, 2009, YAT submitted a request for an extension of the Department’s dormancy provisions. In support of its request, the air carrier stated that additional time was needed to enable it to complete the necessary requirements to return to scheduled operations

.

By letter dated October 13, 2009, the Department granted YAT’s request for a 90

- day extension

, that is

, until January 10, 2010, to allow the air carrier to prepare documentation in support of its plan to resume commuter operations. On January 7, 2010, YAT filed a request for a second

90

- day extension, citing delays in gaining FAA approval of certain train ing manuals. By letter dated January 13, 2010, the Department granted YAT’s request for an extension until April 10, 2010, and reminded YAT of its need to provide updated fitness information pursuant to

section 204.7.

On April 10, 2010, YAT filed the af orementioned application to resume scheduled passenger operations as a commuter air carrier. In its application, YAT filed a motion requesting confidential treatment of certain financial data under 14 CFR 302.12 ( " Rule 12 ” ) of our Procedural Regulations. Specifically, YAT requested that the Department withhold from public

2 The Department was informed by the FAA that YAT ceased its on

- demand air taxi operations as of May 16, 2011. Subsequently, YAT’s Chief Pilot and Director of Maintenance resigned from the air carrier on May 17, and June 1, 2011, respectively. YAT surrende red its Air Carrier Certificate to the FAA on August 15, 2011. The Department canceled YAT’s air taxi registration on October 18, 2011

. 3 Section 204.7 of our rules (14 CFR 204.7) states that if an air carriers ceases conducting operations for which it was found fit, it may not resume air transportation operations until its fitness to do so has been redetermined by the Department. Any such redetermination of fitness must be accomplished within one year of the date of cessation;

otherwise the air carrier ’s economic authority would be subject to the revocation for dormancy provisions, which in

YAT’s case was October 10 , 2009

.3

disclosure proof that YAT had the required funding to meet the Department’s financial fitness

test. However, the air carrier did not provide the confidenti al financial fitness data , an omission which was brought to YAT’s attention via email on April 15 and again on July 6, 2010.

By letter dated April 23, 2010, the Department requested additional information from YAT

. Specifically, we requested a current balance sheet and income statem ent, aircraft lease documentation, updated resumes for several of YAT’s key personnel, and clarification of YAT’s planned schedule and cost forecast.

O n June 10, 2010, the Department sent a reminder letter to YAT . On June 14, 2010, YAT

submitted its response to the Department’s request for additional information

.

On July 29, 2010, YAT filed the confidential information it had referenced in its application to

resume commuter operations

. Specifically, YAT requested that we withhold from public

disclo sure the details of a letter from a third

- party institution providing a line

- of

- credit to the air carrier on the grounds it was sensitive commercial information. By letter dated August 16, 2010,

t he Department grant ed confidential treatment to the interest rate for the line

- of

- credit but required all other information in the letter to be filed in the public docket. In the same letter, we

also sta ted that, because the line

- of

- credit was being supplied by an organization other than a recognized financial institution

, YAT must provide the corporate financial statements for the

line

- of

- credit provider, Charter America, Inc. We also requested further documentation of the

line

- of

- credit’s particular terms and conditions of repayment.

O n September 14 , 2010, YAT provided the corporate financial statement s for Charter America,

Inc.

, along with detailed information about the terms and conditions of the line

- of

- credit, and concurrently filed a motion requesting confidential treatment of this information u nder Rule 12

. By letter dated November 5, 2010, the Department den ied confidential treatment to Charter America’s corporate financial statement, and partially grant ed confidential treatment to the terms

and conditions of the line

- of

- credit. The Departmen t granted confidentiality to the interest rate while all other information was required to be filed in the public docket. 4

AREAS OF CONCERN

As previously mentioned, in October 2008, YAT’s authority to perform commuter operations

was rescinded by the FAA as a result of its then

- Chief Pilot not being qualified to conduct OE observations of its pilots and not having the required OE training program in place. According
to YAT, its Director of Operations “has complete authority and responsibility f or the safe conduct and compliance to the FAA regulations of all flight personnel and for flight operations

which shall include... certify and maintain as required, all flight department personnel training and qualification records; schedule ad ditional train ing when required ” 5 and the Chief Pilot holds

4 YAT submitted the information for which confidential treatment was denied in the public docket on

November 12, 2010

. 5 See Docke t DOT

- OST

- 2005

- 21533, Application of Friendship Airways, Inc. d/b/a Yellow Air Taxi, Exhibit

YAT

- 2 02 , p. 3.4

responsibility to “assist in maintaining the training program for Flight Department personnel that complies with FAA regulations and Manual Requirements.” 6

On October 5, 2010, the FAA was notified that YAT’s liability insurance coverage was canceled because of nonpayment of premiums . S ubsequent to cance l lation, the air carrier had continued to operate without the requisite liability insurance coverage , a violation of 14 CFR 205.3 and

14 CFR 298.37. U pon being notified of the lapse, the FAA advised YAT that its FAA safety authority was invalid during the time its insurance coverage was canceled and directed that YAT restore and certify coverage within fifteen days from October 5, 2010. YAT timely comp lied.

The cancellation of YAT’s liability insurance rendered ineffective its Departmental economic authority. Accordingly, on November 15, 2010, t he Department took enforcement action against

YAT for violating 49 U.S.C. §§ 41101 and 41712 by engaging in air transportation without effective economic authority during the period in which its liability insuranc e had lapsed

. 7 The resulting consent order assessed YAT a $30,000 civil penalty

, a portion of which was payable in three separate installments

. The a ir carrier was late in paying all three installments.

On December 21, 2010, the Department initiated an investigation of YAT’s website advertising practices, concerning alleged violations of 14 CFR 399.84, the Department’s full fare advertising

rules

, and the related statutory requirement, 49 U.S.C. § 41712, which prohibits unfair and deceptive practices and unfair methods of competition. This case is currently pending.

T he Department also received 13 complaints from passengers arising from numerous flight

cancellations between August 2010 and June 2011, in which YAT fail ed to provide refund s in a timely manner to ticket purchasers who used credit cards as required by 14 CFR Part 374

, and to those who paid with cash , as required by Departmental enfor cement policy. 8 A fter the Department intervened, YAT ultimately processed many of the refunds that were due.

Previously, YAT was the subject of Consent Order 2005

- 5

- 4, in which the air carrier was found to have conducted scheduled air transportation with out appropriate economic authority. YAT was also assessed a $30,000 civil penalty in that case.

TENTATIVE DECISION

After careful review of the record and based on the totality of the circumstances, it is the Department’s tentative conclusion that YAT’s commuter air carrier authorization should be revoked and its application to resume commuter operations should be denied. YAT has failed to establish that it possesses the managerial competenc e to oversee its proposed operations, has the

6 See Docket DOT

- OST

- 2005

- 21533, Application of Friendship Airways, Inc. d/b/a Yellow Air Taxi, Exhibit

YAT

- 2 02 , p. 4.

7 See Order 2010

- 11

- 14, issued November 15, 2010. Our rules require that air carriers must maintain accident liability insurance. An air carrier’s economic authority becomes invalid once an air carrier’s insurance coverage is canceled. Additionally, operatin g without insurance is also considered by the Department to be an unfair and deceptive practice and an unfair method of competition.

8 Failure to provide timely refunds to customers is considered by the Department to be an unfair and deceptive practice an d an unfair method of competition5

proper regar d for the laws and regulations governing its services to ensure that acceptable consumer relations practices will be followed , and that it has adequate financial resources.

Regarding an air carrier’s management and compliance disposition, the Department h as long held that violations that have occurred under an executive’s leadership can support a finding that

the air carrier lacks an adequate compliance disposition under his or her control

. 9 Moreover, “a carrier’s key personnel are responsible for conduc ting its operations in a way so as to ensure that reasonably expected compliance problems do not occur.” 10 In this case, as YAT’s President and
CEO, Mr. Christopher Behnam is ultimately responsible for ensuring the air carrier has the managerial competency to conduct its current and proposed operations and the proper regard for the laws and regulations governing its services.

Un der Mr. Behnam’s direction

, however, a pattern of non

- compliance has emerged at the air

carrier. For example, YAT’s commuter operations were rescin ded by the FAA in October 2008

because its then

- Chief Pilot was not qualified to conduct OE observations of its pilots

, and YAT

did not have a required OE training program in place. In this case, b oth the Chief Pilot and the

Director of Operations failed to uphold their responsibilities regarding both stated company objectives and FAA regulations. However, oversight of the qualifications of YAT’s chief pilot is clearly in the purview of Mr. Behnam in his capacity as Director of Opera tions. The Chief Pilot was replaced

, but Mr. Behnam remain s as Director of Operations.

Furthermore, under Mr. Behnam’s direction as President and CEO, YAT’s liability insurance lapsed in August 2010 and the air carrier continued to transport passengers in spite of this lapse

, violating the Department’s liability insurance coverage rules as stated in 14 CFR Parts 205 and 298, and the related statutory requirements of the Transportation Code , 49 U.S.C §§ 41101 and

41712. Additionally, under his supervisio n, the air carrier has repeatedly failed to provide timely refunds as prescribed by regulations and Departmental policy.

We also note that Mr. Behnam, while serving as President and CEO and Director of Operations for YAT, is also a pilot for United Airli nes. YAT states in an amendment to its application that “as a senior pilot for United Airlines, Mr. Behnam is able to work at a reduced schedule. As Director of Operations for YAT, Mr. Behnam is in constant communications with the YAT management team via cell phone and email, when out of town.” 11 However, the FAA inspectors assigned to YAT report that Mr. Behnam is only available on a part

- time basis. While YAT states that Mr. Behnam provides his expertise via phone or email, given the many variables that can affect an airline’s daily operation, long distance management of an airline’s operation i s sub

optimal. Additionally, the FAA inspectors have noted that, due to Mr. Behnam’s absence s
, operational decisions have, by default, been made by YAT’s General Manager, Ms. Elizabeth Behnam, who does not hold any FAA authority as a Director of Operation s. We view th ese practice s as contribut ing to YAT’s poor managerial competence and compliance disposition

.

Moreover, the high number of consumer complaints in less than a year against YAT for failing to provide timely refunds after numerous flight cancel lations is of great concern, especially when

9 ATX, Inc., Fitness Investigation , Docket 48780, Opinion and Order on Review, issued April 5, 1994, at 7.

10 Id. , citing Yute Air Alaska , Order 89

- 11

- 48.

11 See Docket DOT

- OST

- 2005

- 21533; Information Request Response of Friendship Airways, Inc. d/b/a Yellow Air Taxi, June 14, 2010

.6

Departmental intervention appeared to have been the impetus for YAT finally taking action. T he recurrence of the complaints leads us to conclude that YAT ’s leadership has failed to fix what appears to be a syst emic problem and also points to a disregard for the Transportation Code and consumer protection laws

.

Concerning YAT’s financial fitness, the air carrier’s application indicated that as September 30, 2010, it had negative working capital of approximately $203,546, while in the 9 months ended September 30, 2010, it had earned net income of $46,892 on approximately $1.29 million in operating r evenues. While YAT submitted a letter from a third

- party institution willing to provide a line

- of

- credit to the air carrier in the amount of $400,000, we note that this letter was a tentative commitment, subject to the completion of standard loan document ation. Additionally,

YAT’s delinquency in paying the civil penalty assessed against it for operating flights while its liability insurance had lapsed and the numerous delays in providing timely customer refunds indicate the presence of serious financial p roblems

.

La ck of oversight of pilot records, a la pse in payment of insurance premiums

, and operating flights without insurance

, together with a high level of consumer complaints suggest a failure of YAT’s management to maintain an adequate compliance di sposition at the air carrier. YAT’s delay in paying its civil penalty is a further indication of an ongoing pattern of faulty managerial oversight. It also calls into question the air carrier’s financial fitness. Furthermore, regarding YAT’s managerial competency and compliance disposition, the FAA inspectors assigned to the air carrier have also expressed serious concerns with YAT’s maintenance posture, further calling into question the company’s ability to perfor m compliant on

- demand and scheduled operations.

While YAT’s application to resume its commuter air carrier authorization is pending and therefore its commuter authorization expiration period due to dormancy has been stayed, we note

that YAT ha d operated as a n air taxi since October 2008

, and it is under this authority that it allowed its insurance to lapse and subsequently violated the Transportation Code and several consumer protection laws of the Department.

Under these circumstances, we tentatively conclude that YAT does not possess the managerial competence necessary to oversee its current and proposed operations, and does not have the proper regard for the laws and regulations governing its services to ensure that acceptable consumer relations prac tices will be followed. Therefore, we propose to revoke YAT’s commuter authority and dismiss its application to resume scheduled passenger operations.

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 necessary, and what material issues of decisio nal 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 resolve material

issues of decisional fa ct. If so, the type of procedure should be specified ( See Part 302, Rules 197

and 20); if not, the reasons why not should be explained. We will not entertain general, vague, or unsupported objections. If no substantive objections are filed, we will issue an order that will make final our tentative findings and conclusions with respect to YAT ’s fitness and certification.

ACCORDINGLY,

1. We direct all interested persons to show cause why we should not issue an order making final the tentative findings a nd conclusions stated above and revoke the commuter authorization of Friendship Airways, Inc. d/b/a Yellow Air Taxi and deny its application for resumption of commuter authority

, pursuant to 49 U.S.C. § 40109(f) and 14 CFR Part 298

.

2. We direct any interested persons having objections to the issuance of an order making final any of the proposed findings and conclusions set forth here to file them with Department of Transportation Dockets, 1200 New Jersey Avenue, SE, Washington, D.C. 205 90, in Docket

DOT

- OST

- 2005

- 21533 and serve them upon all persons listed in Attachment A no later than 14 days after the service date of this order; answers to objection s shall be filed no later than 7 days

thereafter.

3. If timely and properly supported o bjections are filed, we will accord full consideration to the matters or issues raised by the objections before we take further action. 12

4. In the event that no objections are filed, we will consider all further procedural steps to be

waived and we will e nter an order making final our tentative 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 Affairs

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

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

reconsideration.Attachment A

SERVICE LIST FOR

FRIENDSHIP AIRWAYS INC.

d/b/a YELLOW AIR TAXI

MR CHRISTOPHER BEHNAM

FRIENDSHIP AIRWAYS INC

2680 NE 24 ST

POMPANO BEACH FL 33064 MS ANNE SUISSA

OFFICE OF AIRLINE INFORMATION

DOT/RSPA/BTS E

- 36

1200 NEW JERSEY AVE SE

WASHINGTON DC 20590 REGIONAL COUNSEL

FAA

SOUTHERN REGION

POST OFFICE BOX 20636

ATLANTA GA 30320

MR JERRY PROENZA

POI FOR FRIENDSHIP AIRWAYS INC

2895 SW 145 TH AVENUE

SUITE 120

MIRAMAR FL 33027 MR PETE SNEAD

PMI FOR FRIENDSHIP AIRWAYS INC

2895 SW 145 TH AVENUE

SUITE 120

MIRAMAR FL 33027 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