Order 2013-4-12

Served: April 15, 2013 

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

Issued by the Department of Transportation

on the 15th day of April, 2013

Applications of

 NATIONAL AIR CARGO GROUP, INC.

 d/b/a NATIONAL AIRLINES

for amended certificates of public convenience and 

necessity pursuant to 49 U.S.C. § 41102 to engage in 

interstate and foreign scheduled air transportation of 

persons, property, and mail

Dockets DOT-OST-2012-0204

 and

 DOT-OST-2012-0205

ORDER TO SHOW CAUSE

PROPOSING TO AMEND AND REISSUE CERTIFICATE AUTHORITY

Summary

By this order, we tentatively (1) conclude that National Air Cargo Group, Inc. d/b/a National 

Airlines (“National Airlines”) is a citizen of the United States and is fit, willing, and able to 

provide foreign scheduled air transportation of persons, property, and mail, and should be 

issued an amended certificate of public convenience and necessity authorizing such operations, 

subject to conditions; (2) dismiss the application of National Airlines requesting interstate 

scheduled passenger authority; and (3) deny the air carrier’s request for an exemption from the 

provisions of 49 U.S.C. 41102 to permit it to engage in foreign scheduled air transportation

while its application for foreign scheduled passenger authority remains pending.

Background

Section 41102 of Title 49 of the United States Code (“the Transportation Code”) directs us to 

determine that applicants for certificate authority to provide interstate and foreign scheduled

air transportation of persons, property, and mail are “fit, willing, and able” to perform such 

transportation, and to ensure that all operations relating to this authority conform to the 

provisions of the Transportation Code and the regulations and requirements of the Department. 

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 

company’s fitness are whether the applicant (1) will have the managerial skills and technical 

ability to conduct the proposed operations, (2) will have access to resources sufficient to 
2

commence operations without posing an undue risk to consumers, and (3) will comply with the 

Transportation Code and regulations imposed by Federal and State agencies. We must also 

find that the applicant is a U.S. citizen.

On December 11, 2012 National Airlines, a U.S. air carrier holding certificate authority 

permitting it to engage in interstate and foreign charter air transportation of persons, property 

and mail,1 filed applications in Dockets DOT-OST-2012-0204 and DOT-OST-2012-0205

requesting amendments to its certificate authority to permit it to engage in interstate 

scheduled air transportation of persons, property, and mail and foreign scheduled air 

transportation of persons, property, and mail between a point or points in the United States and 

a point of points in the United Arab Emirates and beyond to a point or points in Afghanistan 

and/or Iraq. National Airlines accompanied its applications with information required by 

section 204.3 of our regulations (14 CFR 204.3) for an examination of its fitness to hold such 

authority2 and at the same time the air carrier filed a request for an exemption to operate 

scheduled flights while its application was pending. 

National stated that while it intends to operate scheduled passenger service between the United 

Arab Emirates and Afghanistan, it has yet to develop plans to provided scheduled domestic air 

transportation or foreign air transportation to Iraq. Therefore we notified the air carrier that we 

would defer action on its interstate application and its request for foreign scheduled authority 

to serve Iraq until it had developed proposals to provided air transportation in these respective 

markets. Subsequently, on March 18, 2013, National Airlines informed the Department that it 

would refile its application for interstate scheduled air transportation and its request to provide 

foreign scheduled air transportation to Iraq once it had solidified its service proposal. 

No answers were received in response to its application and no special issues regarding the 

applicant 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 tentatively conclude that 

National Airlines is a U.S. citizen and is fit, willing, and able to operate its proposed foreign 

scheduled passenger service. We will give interested persons an opportunity to show cause 

why we should not adopt as final the tentative findings and conclusions stated herein.

FITNESS

The Company

As previously mentioned, National Airlines holds certificates of public convenience and 

necessity authorizing it to engage in interstate and foreign charter air transportation of persons, 

property, and mail. The air carrier also holds a Part 121 Air Carrier Certificate issued by the 

Federal Aviation Administration (“FAA”). National Airlines was formed as a corporation

under the laws of the State of Michigan on April 6, 1992, and is currently based in Ypsilanti, 

Michigan. The air carrier is ultimately wholly owned by Mr. Christopher Alf through his sole 

 1 See Order 2011-7-15, issued July 29, 2011. 2 National Airlines also filed additional information supplementing its applications on March 11, 2013, and March 

20, 2013.
3

ownership of National Air Cargo Holdings (“NAC Holdings”), a corporation organized under 

the laws of the State of New York in 1991 and headquartered in Orchard Park, New York. 

NAC Holdings wholly or partially owns eight subsidiaries, which together provide worldwide 

freight forwarding and air transportation of cargo.

Currently, National Airlines operates a fleet of three B747-400 cargo aircraft and one B757-

200 passenger aircraft. It is authorized by the Department to operate up to six cargo aircraft 

and one passenger aircraft.3 If granted the authority it seeks, National Airlines intends to add

one B757-200 passenger aircraft to its fleet for use in its foreign scheduled operations. 

Managerial Competence

National Airlines’ Board of Directors and key management personnel, all of whom are U.S. 

citizens, consist of the following individuals:

Mr. Christopher Alf Chairman

Colonel Glen Joerger Board Member/President

Mrs. Lori Alf Board Member

Lt. General John R. Baker Board Member

Lt. General William Mortensen Board Member

Lt. General Robert D. Bishop, Jr. Board Member

Mr. Brian Conaway Acting Chief Financial Officer

Mr. Steven E. Santangelo Director of Maintenance

Mr. Jeffrey A. Miller Director of Operations

Mr. Charles H. Davis Acting Chief Inspector

Mr.William E. Phillips Director of Quality Control

Mr. James VanZino Chief Pilot

With the exception of Lt. General Robert D. Bishop, Jr., we previously reviewed the 

employment background of National Airlines’ board of directors in connection in the air 

carrier’s application for interstate and foreign charter passenger operations.4

Lt. General Robert D. Bishop, Jr. joined the Board of Directors of National Air Cargo in May, 

2011. He served in the United States Air Force since 1974, retiring in 2008 as Commander, 

3rd Air Force, Ramstein Air Base, Germany. Prior to that assignment, he served as Vice 

Commander, U.S. Air Forces in Europe. A graduate of the U.S. Air Force Academy, Lt. 

General Bishop has flown over 5,400 flight hours as a licensed command pilot. 

Mr. Brian Conaway is the Vice President of Finance for National Airlines’ parent company, 

NAC Holdings (2011-present), and is the Acting Chief Financial Officer for National Airlines. 

Mr. Conaway previously served as NAC Holdings’ Controller (2001-2011). Before this, he 

was employed by Computer Task Group, Inc., as Accounting Director (2001), Accounting 

 3 See Department letter to National Airlines dated October 12, 2011, approving increase in fleet to 7 total 

aircraft; 6 cargo and 1 passenger aircraft.

4 See Order 2010-11-5, issued November 5, 2010.
4

Manager (1995-2001), and Accounting Supervisor (1989-1993); by Robert Half International, 

Inc., as Placement Manager (1993-1995); and by Price Waterhouse as a Staff Auditor (1987-

1989). Mr. Conaway is a Certified Public Accountant.

Mr. Steven E. Santangelo, an Airframe and Powerplant Mechanic, was named Director of 

Maintenance at National Airlines in February, 2013. He was previously employed at Capital 

Cargo International Airlines as Director of Quality/Chief Inspector (February 2012-February 

2013) and Regional Line Maintenance Manager (November 2010-February 2012). Prior to 

this, he was employed by Seaborne Airlines as a Designated Maintenance Inspector (April 

2010-August 2010); Director of Maintenance (September 2007-April 2010); Assistant Director 

of Maintenance (December 2006-September 2007); Aircraft Maintenance Supervisor (October 

2005-December 2006); and Aircraft Mechanic (January 2005-October 2005). Mr. Santangelo 

has also served as an Aircraft Mechanic at American Airlines (May 1999-October 2003); 

Corporate Air, Inc. (July 1984-August 1985); and New Air Flight Inc. (July 1982-July 1984).

Mr. Jeffrey A. Miller, an Airline Transport Pilot, joined National Airlines as its Director of 

Operations in February 2012. Mr. Miller was previously employed with AirTran Airways 

(May 1996-February 2012) in various roles of increasing responsibility, having most recently 

served as Vice President of Operations. While at AirTran he also held the position of Director 

of Flight Standards and was a B717 Captain, and a DC-9 and B727 First Officer. Mr. Miller

also served in the United States Air Force for approximately 20 years (June 1976-June 1996). 

Mr. Charles H. Davis, an Airframe and Powerplant Mechanic, was named National Airlines’ 

Acting Chief Inspector in February 2013. Prior to this, he held several positions at National 

Airlines, including Quality Control Inspector (2011-2013), Fleet Maintenance Manager (2008-

2011), Maintenance Supervisor (2005-2008), and Director of Maintenance (1998-2005). 

Before joining National Airlines, he was employed by Midwest Turbine, Inc., as General 

Manager of Research and Development (1998-2003) and by Murray Aviation as Assistant 

Director of Maintenance (1993-1998). 

Mr. William E. Phillips, National Airlines’ Director of Quality Control since February 2013, 

was previously employed by Southern Air, Inc., as Regulatory Compliance Engineer 

(September 2009-October 2012), Vice President of Quality Control/Chief Inspector (January 

2000-September 2009), and Manager of Quality Control (March 1999-January 2000). 

Mr. Phillips was also previously employed by Southern Air Transport, Inc., in similar 

positions (March 1989-August 1998) and he was previously employed as a Lead Aircraft 

Mechanic at Aero Corporation (June 1984-March 1989). Mr. Phillips also served as Inspector 

of Avionics for more than 6 years while serving in the United States Air Force (January 1978-

May 1984).

Mr. James VanZino, an Airline Transport Pilot, has served as National Airlines’ Chief Pilot

since April 2011. Prior to joining National Airlines, he was employed by the FAA as an 

Aviation Safety Inspector (September 2010-April 2011). Before this, he was employed as a 

B767 Captain at Amerijet International, Inc. (2010), and ABX Air, Inc. (December 1998-

August 2009), and as a First Officer at Air Wisconsin Airlines (October 1997-December 1998) 

and Air 21 (January 1996-January 1997).
5

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

conclude that National Airlines’ management team possesses the managerial skills and 

technical ability to conduct its proposed service.5 

Operating Plan and Financial Position

National Airlines currently operates charter flights from Dubai to Afghanistan on behalf of a 

U.S. government contractor. The air carrier now intends to broaden the scope of its service in 

the region by conducting these flights on a scheduled basis.

Although National Airlines notes that it will add an additional B757-200 passenger aircraft to 

its fleet for use in its proposed foreign scheduled passenger operation, it states that, initially, it 

will offer air transportation between the U.S. and United Arab Emirates only pursuant to a 

code share arrangement with an authorized U.S. or foreign air carrier, with the code share 

partner carrying National Airlines’ code and operating the flight. 6

To meet the Department’s financial fitness criteria, an applicant should have access to 

financial resources sufficient to cover its pre-operating expenses and the expenses that are 

reasonably projected to be incurred during three months of “normal” operations.7 National 

Airlines provided the Department with a financial forecast for its first year of foreign 

scheduled passenger operations using one B757 aircraft and a list of all pre-operating expenses 

associated with adding the aircraft to its FAA Operation Specifications. The applicant projects 

that its total operating expense for its first year of scheduled operations with this aircraft will 

be approximately $21.06 million and that it will incur $705,000 in pre-operating expenses. 

Based on these forecasts, we estimate that National Airlines will require approximately $5.97 

million to meet our financial fitness requirements. 

For the year ending December 31, 2012, National Airlines recorded a net loss of $33.4 million 

on approximately $101 million in operating revenues. The air carrier’s most recent balance 

sheet indicates that, as of December 31, 2012, it had current assets of $68.66 million and 

current liabilities of $48.28 million, giving the company a positive working capital balance of 

$20.37 million. The same balance sheet shows the company as having negative retained 

earnings of $93.2 million and total shareholders’ equity of $309.4 million. 

 5 Before authorizing an air carrier to conduct air transportation operations, the FAA also evaluates certain of 

the applicant’s key personnel with respect to the minimum qualifications for those positions as prescribed in the 

Federal Aviation Regulations. The FAA’s evaluation of these key personnel provides an added practical and inperson test of the skills and technical ability of these individuals. All of National Airlines’ key technical 

personnel have been approved by the FAA to hold their positions.

6 We remind National Airlines that prior to commencing a code share operation with a foreign air carrier, that 

carrier will need a code share statement of authorization, and that a code share safety assessment compliance 

statement will be required pursuant to the FAA’s IASA program. 7 Because projected expenses during the first several months of air transportation services frequently do not 

include all costs that will be incurred during a “normal” period of operations, it is our practice to base our threemonth test on an average of one-quarter of the first year’s operating cost forecast. 
6

In support of its ability to meet our financial fitness requirements, National Airlines provided a 

letter from its parent company, NAC Holdings, confirming that it would make funds available 

to National Airlines to support its proposed passenger operations and NAC Holdings provided 

third-party verification from Wells Fargo Capital Finance evidencing that it had extended

National Airlines a $60 million revolving credit facility with $31.3 million currently remaining 

for disbursement.

In light of the foregoing, we tentatively conclude that National Airlines will have access to 

sufficient financial resources to commence the operations it proposes without posing an undue 

risk to consumers or their funds. Moreover, we note that, as is our practice, prior to making

any authority awarded to National Airlines effective, we will require the company to 

demonstrate that it continues to have access to the financial resources needed to meet our 

financial test. 

This tentative finding of fitness is based on the operations proposed in this application. Were 

National Airlines to propose a substantial expansion of its plans, including among other things, 

the addition of more than the one passenger aircraft discussed here, this finding may not 

continue to apply. Therefore, if our tentative finding regarding National Airlines’ fitness is 

made final, and National Airlines is issued the authority it seeks, we will require that should 

the company want to operate more than eight total aircraft and/or more than two passenger 

aircraft, it must first provide the Department with at least 45-days advance notice of such plans 

and provide updated information establishing its fitness for such expansion.

Compliance Disposition

Our review of FAA records shows that National Airlines has not been involved in an accident 

in the past 5 years and it has been involved in one incident during this same period.8 In its 

application, the air carrier notes that there are no pending investigations by the DOT and 

although the air carrier identified three pending investigations by the FAA, these investigations

have since been closed with no adverse action taken against the air carrier.

9

We note that in 2005, an employee of National Air Cargo, Inc., (“NAC”), an affiliate of 

National Airlines related by common ownership, filed a qui tam action in the U.S. District 

Court alleging that NAC had violated the Federal False Claims Act by submitting false 

invoices to the Department of Defense (“DOD”). In October 2007, NAC and the DOD entered 

into a negotiated settlement that resolved all of these charges except for a single count of 

 8 FAA report 2011072702309 indicates that, on July 27, 2011, a DC-8 aircraft operated by National Airlines 

experienced a tail strike incident upon takeoff from Luxembourg causing minor damage to the aircraft. Further 

investigation determined that the aircraft weight and balance had been computed in pounds while the load sheet 

was meant to be computed in kilograms. 

9 FAA report 2012GL230093 regarding a complaint that the air carrier instructed its flight attendants to falsify 

a written exam in preparation for an evacuation demonstration resulted in a letter of correction. FAA report 

2012GL230092 regarding a complaint that the air carrier operated an aircraft with an unserviceable Halon fire 

extinguisher also resulted in a letter of correction. The 3rd investigation, FAA report 2012GL230091 concerning a 

complaint of the air carrier holding scheduled practice rehearsals for an evacuation demonstration was closed 

with no further action.
7

submitting a false invoice. According to the settlement agreement, NAC agreed to plead 

guilty to one count of knowingly making a material misstatement to the United States, a felony 

charge and violation of Title 18 of the United States Code, Section 1001(a)(2), and it agreed to 

pay certain penalties and restitution. Subsequent to this, NAC entered into an Administrative 

Agreement with the United States Air Force (“USAF”) under which, among other things, Mr.

Christopher Alf and five employees were required to leave the company. In addition, Mr. 

Alf’s stock was placed in a voting trust with the company operating under the management of 

the voting trust and the USAF debarred Mr. Alf from government contracting for a period of 

three years. 

Similarly, because of the nature and degree of the allegations made against NAC and its 

owner, Mr. Alf, and the common ownership between National Airlines and NAC, the 

Department found it appropriate to impose certain fitness conditions on National Airlines to 

ensure its independence from NAC, including requiring that management of National Airlines 

be placed under a voting trust and an independent board of directors; removing certain 

individuals, including Mr. Alf, from any influence or control over the company; regular 

reporting requirements; and a requirement that Mr. Alf dispose of his interest in National 

Airlines within a reasonable period of time. 

In May 2009, the U.S. District Court for the District of Columbia issued an Order and Opinion 

granting Mr. Alf a preliminary injunction against enforcement of the debarment decision of the 

USAF. The District Court found that the USAF had erred in its findings that a single false 

statement was grounds to impute the alleged misconduct associated with that false statement to 

Mr. Alf. Shortly thereafter, the USAF permanently terminated Mr. Alf’s debarment and on 

December 12, 2009, the USAF and NAC amended the Administrative Agreement to permit 

Mr. Alf to dissolve the voting trust and resume control of NAC. 

On December 3, 2009, National Airlines requested that, in light of the District Court’s findings 

and the Amended Administrative Agreement with the USAF, the Department remove the 

fitness conditions previously imposed on the air carrier. Upon review of the matter, the 

Department found National Airlines fit under the ownership, control, and management of Mr. 

Alf, and removed the fitness conditions. However, at the same time, we imposed various 

reporting requirements so that we may more closely monitor the air carrier’s fitness, including 

requiring the air carrier to report, within 7 days of occurrence, (1) any charge of unfair or 

deceptive or anticompetitive business practices, or of fraud, felony or antitrust violation, 

brought against any relevant corporation, or member of the key personnel employed (or to be 

employed) by any relevant corporation; (2) investigations, enforcement actions, or formal 

complaints filed by the Department or other government agency, involving any relevant 

corporations, personnel employed (or to be employed) by any relevant corporations or person 

having a substantial interest in any relevant corporation; (3) any complaint or other action by 

the USAF alleging that NAC had failed to comply with any aspect of the December 2009 

Amended Settlement Agreement; and (4) any aircraft accidents or incidents (as defined by the 

National Transportation Safety Board Regulations, 49 CFR 830.2) experienced by National 

Airlines, its personnel, or any relevant corporation. 

Since we imposed these reporting restrictions, National Airlines has reported no additional 

incidents of fraud or felony charges against it, its owners, its key personnel, or any relevant 
8

corporation, nor any charges of unfair, deceptive or anti-competitive business practices, or of 

antitrust violations brought against National Airlines, its owners, its key personnel, or any 

relevant corporation. Moreover, a review of our records and other information available to us 

has uncovered no additional information which would lead us to conclude that the applicant or 

any of its key personnel lacks the proper compliance disposition to be found fit. In addition, 

according to the FAA, the air carrier has conducted its operations satisfactorily and the agency 

knows of no reason why the air carrier should not be granted the authority it is seeking.

In light of these circumstances, we tentatively find that National Airlines 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 certificates 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 specifies 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 

outstanding voting interest be owned by U.S. citizens, and that the air carrier must be under the 

actual control of U.S. citizens.

As noted earlier, National Airlines is a corporation organized under the laws of the State of 

Michigan. The company is wholly-owned by National Air Cargo Acquisitions, LLC (“NAC 

Acquisitions”), a Delaware limited liability company. NAC Acquisitions in turn, is whollyowned by NAC Holdings, a New York corporation. Mr. Christopher J. Alf, a U.S. citizen, is 

the sole owner of NAC Holdings.

10 In addition, National Airlines’ president, its board of 

directors, and all of its key personnel are U.S. citizens. Furthermore, National Airlines

provided an affidavit attesting that it is a U.S. citizen. Finally, there is no other information 

before us that would lead us to conclude that National Airlines is not controlled by U.S. 

citizens.

In view of the foregoing, we tentatively conclude that National Airlines is a U.S. citizen and 

that it is fit, willing, and able to provide scheduled foreign air transportation services as a U.S.

certificated air carrier, subject to conditions. 

 10 NAC Holdings wholly owns National Air Cargo, Inc., a New York corporation; National Air Cargo S.a.r.l, a 

Luxembourg corporation, which is the ultimate parent company of National Air Cargo Middle East FZE, a United 

Arab Emirates corporation; National Air Cargo SGPS, Unipessoal Lda., a single-owner Portuguese limited 

liability company; NAC Acquisitions, a Michigan corporation; NACM OHQ, Sdn Bhd, a Malaysian private 

limited liability company; NACM Holdings, Sdn Bhd, a Malaysian private limited liability company; National 

Air Cargo Limited, a Thai private limited liability company; and NAC AC Ventures, LLC, a Delaware 

corporation. NAC Holdings has partial ownership in National Air Cargo GmbH, a German corporation.
9

PUBLIC CONVENIENCE AND NECESSITY

The award of authority to engage in foreign air transportation requires a finding under 

section 41102 of the Transportation Code that grant of the authority is consistent with the 

public convenience and necessity. The applicant states that the authority it is requesting is 

consistent with the public interest, since it will expand flight options for United States 

Department of Defense-approved passengers, and it is also consistent with the Open Skies air 

transport agreement between the United States and the United Arab Emirates. National 

Airlines also notes that while there is no bilateral air service agreement between the U.S. and 

Afghanistan, the Afghanistan government has been supportive of U.S. air carriers, granting 

operating rights as a matter of comity and reciprocity. We tentatively find that the foreign 

scheduled air transportation proposed by National Airlines is consistent with the public interest 

and if it meets the fitness requirements of the Transportation Code, it will receive an amended

certificate authorizing it to engage in foreign scheduled air transportation of persons, property, 

and mail under section 41102.

11

CONFIDENTIAL TREATMENT

On December 11, 2012, National Airlines filed a motion under 14 CFR 302.12 (Rule 12) 

requesting that the Department withhold from public disclosure the revenue and profit 

amounts from a consolidated financial forecast of National Airlines’ first year of scheduled 

operations.

The air carrier states in its motion that “competitors will be able to determine National 

Airlines’ pricing for the proposed scheduled service” and cited instances where the 

Department has granted confidential treatment to forecast revenues and related statistics, 

especially in instances where the proposed route had just one service provider.

Rule 12 instructs us to evaluate requests for confidential treatment by the standards of 

disclosure found in the Freedom of Information Act (5 U.S.C. section 552). Information may 

be withheld from disclosure under 5 U.S.C. 552(b)(4) if it is (1) commercial or financial, 

(2) obtained from a person outside of government, and (3) privileged or confidential (Gulf and 

Western Industries, Inc. v. United States, 615 F.2d 527, 529 (D.C. Cir. 1979)).

There is no question that the information for which National Airlines seeks confidential 

treatment is financial or commercial in nature and that it was obtained from a person outside 

the government. The remaining question is whether the information is privileged or 

confidential, that is, whether “disclosure of the information is likely to have either of the 

following effects: (1) impair the Government’s ability to obtain necessary information; or (2) 

cause substantial harm to the competitive position of the person from whom the information 

was obtained” (National Parks and Conservation Association v. Morton, 498 F.2d 765, 770 

(D.C. Cir. 1974)). Further, to be privileged or confidential, the information must not be of the 

type that is usually released to the public (Gulf and Western Industries, Inc. v. United States, 

615 F.2d 527, 530 (D.C. Cir. 1979)).

 11 Pursuant to 49 U.S.C. § 41307, issuance of foreign authority to the applicant is subject to Presidential review.
10

With respect to Exhibit NA-3, the Department typically grants confidential treatment to an 

applicant’s projected revenues. We find that the release of this information could cause 

substantial harm to the competitive position of the applicant. Thus, we will grant confidential 

treatment to National Airlines’ projected revenue and profit statement. 

OBJECTIONS

On March 22, 2013, National Airlines filed a Motion requesting us to shorten the public 

comment period for filing of answers to the Department’s tentative decision, from 14 days for 

objections and 7 days for answers normally permitted in such cases, to 3 days for objections 

and 2 days for answers. We will give interested persons 3 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 2 days thereafter.12 We expect such 

persons to direct their objections, if any, to the applications 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 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 resolve 

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 substantive objections are filed, we will issue 

an order that will make final our tentative findings and conclusions with respect to National 

Airlines’ fitness and certification.

CERTIFICATE CONDITIONS AND LIMITATIONS

If National Airlines is found fit and issued the amended certificate that it seeks, its authority 

will not become effective until the air carrier has fulfilled all of the requirements for 

effectiveness set forth in the terms and conditions attached to its certificate. Among other 

things, this includes (1) our receipt of evidence that National Airlines has been certificated by 

the FAA to engage in foreign scheduled passenger operations, (2) evidence of liability 

insurance coverage that meets the requirements of section 205.5(b) of our rules, (3) a statement 

of changes it may have undergone since its fitness was examined, and (4) evidence that 

National Airlines continues to have adequate financial resources available to it.

We also wish to remind National Airlines of the requirements of 49 U.S.C. § 41110(e). 

Specifically, that section requires that, once an air carrier is found fit initially, it must remain 

fit in order to hold its authority. To be assured that certificated air carriers continue to be fit 

after effective authority has been issued to them, we require that they supply information 

describing any subsequent substantial changes they may undergo in areas affecting fitness. 

 12 Since National Airlines already holds Part 121 authority from the FAA, and since no answers were filed 

opposing National Airlines’ application, we have determined that good cause exists for not delaying action on its 

application with the standard 14-day answer period.
11

Therefore, if National Airlines is issued effective certificate authority and subsequently 

proposes substantial changes in its ownership, management, or operations, it must first comply 

with the requirements of section 204.5 of our rules.13 

Moreover, this tentative finding of fitness is based on the operations proposed in this 

application. Were National Airlines to propose a substantial expansion in its plans, including 

the operation of more than the two passenger aircraft discussed here, or operating using its 

own aircraft on the U.S.-United Arab Emirates leg of the proposed operations, this finding 

may not continue to apply. Therefore, if our tentative finding regarding National Airlines’

fitness is made final, and National Airlines is issued the authority it seeks, we will require that, 

should the company want to operate more than six cargo aircraft and/or more than two

passenger aircraft, or should it wish to conduct operations using its own aircraft on the U.S.-

United Arab Emirates leg of the proposed operations, it must first provide the Department with 

at least 45 days advance notice of such plans and provide updated information establishing its 

fitness for such expansion. The compliance of the company with this requirement is essential 

if we are to carry out our responsibilities under section 41110(e).14

Finally, if National Airlines is granted effective authority, it would be required to submit a 

detailed progress report, within 45 days following the end of the first year of certificated flight 

operations, to the Air Carrier Fitness Division. The submission of a first year progress report 

is a condition imposed on all newly certificated 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 the air carrier’s current operations (number and type of aircraft, principle 

markets served, total number of full-time employees), a summary of how its operations have 

changed during the year, a discussion of any changes it anticipates from its current operations 

during its second year, current financial statements,15 and a listing of current senior 

management 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.

 13 The air carrier 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, restructuring, or recapitalization. If the air 

carrier fails to file this updated information 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.

14 We also remind National Airlines about the requirements of section 204.7 of our rules. This section 

provides, among other things, that (1) the certificate authority granted to a company shall be revoked if the 

company does 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 operations unless its fitness has been redetermined; and 

(3) if the company does not resume operations within one year of its cessation, its authority will be revoked for 

dormancy.

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

certificated flight operations and a 12-month income statement ending that same date.
12

Lastly, it is not the Department’s policy to grant exemption authority if an air carrier does not 

have underlying economic authority, therefore we will deny National Airlines’ request for an 

exemption pursuant to 49 U.S.C § 40109.

ACCORDINGLY,

1. We direct all interested persons to show cause why we should not issue an order making 

final our tentative findings and conclusions stated above and reissue an amended certificate to 

National Air Cargo Group, Inc. d/b/a National Airlines authorizing it to engage in foreign 

scheduled air transportation of persons, property and mail, subject to the attached specimen 

Terms, Conditions, and Limitations.

2. We direct any interested persons having objections to the issuance of orders making final 

any of the proposed findings, conclusions, or the certificate award set forth here to file such 

objections with the Department of Transportation Dockets, 1200 New Jersey Avenue, S.E., 

West Building Ground Floor, Rm. W12-140, Washington, D.C. 20590, in Dockets DOT-OST2012-0204 and DOT-OST-2012-0205 and serve them upon all persons listed in Attachment A 

no later than 3 days after the service date of this order; answers to objections shall be filed no 

later than 2 days thereafter.

3. We deny National Air Cargo Group, Inc. d/b/a/ National Airlines’ application for 

exemption from the provisions of 49 U.S.C. 41102 to engage in foreign scheduled air 

transportation in Docket DOT-OST- 2012-0204.

4. We dismiss the application of National Air Cargo Group, Inc., in Docket DOT-OST-2012-

0205 for interstate scheduled passenger authority and its request to provide foreign scheduled 

air transportation to Iraq in Docket DOT-OST-2012-0204.

5. We grant the motion of National Air Cargo Group, Inc. d/b/a/ National Airlines in Dockets 

DOT-OST-2012-0204 and DOT-OST-2012-0205 to shorten the public comment period to 

5 days.

6. We grant the motion of National Air Cargo Group, Inc. d/b/a/ National Airlines in 

Dockets DOT-OST-2012-0204 and DOT-OST-2012-0205 requesting to withhold information 

from public disclosure.

7. If timely and properly supported objections are filed, we will accord full consideration to 

the matters or issues raised by the objections before we take further action.

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

waived and we will enter orders making final our tentative findings and conclusions and will 

issue National Air Cargo Group, Inc. d/b/a National Airlines a certificate that will contain 

exact copies of the attached specimen Terms, Conditions, and Limitations.

16

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

reconsideration.
13

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

10. We will publish a notice 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
Attachment

SPECIMEN 

Terms, Conditions, and Limitations

National Air Cargo Group, Inc. d/b/a National Airlines

is authorized to engage in foreign air transportation of persons, property, and mail: 

Between a point or points in the United States and between a point or points in the

United Arab Emirates and beyond to a point or points in Afghanistan 

This authority is subject to the following provisions:

(1) The authority to operate under this certificate 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 operations 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 holder 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 well 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 the operations proposed under this 

certificate, and any advertisement by the holder must prominently state: "This service is subject 

to receipt of government operating authority." 

(3) The holder shall at all times conduct its operations in accordance with the regulations 

prescribed by the Department of Transportation for the services authorized by this certificate, 

and with such other reasonable terms, conditions, and limitations as the Department of 

Transportation may prescribe in the public interest.
2

(4) The holder shall at all times conduct its operations in accordance with all treaties and 

agreements between the United States and other countries, and the exercise of the privileges 

granted by this certificate is subject to compliance with such treaties and agreements and with 

any order of the Department of Transportation issued under them. To the extent that the holder 

has authority to serve more than one country or points in more than one country on the same 

route segment, that authority does not confer upon the holder any additional rights (including 

fifth-freedom intermediate and/or beyond rights) in limited-entry markets unless the Department 

has completed any necessary carrier selection procedures to determine which carrier(s) should 

be authorized to exercise such rights and has notified the foreign country(ies) involved that any 

such selected carrier(s) has the required authority. In such cases, the fact that the carrier may 

hold authority to serve the countries (points) at issue on the same segment will not be considered 

as providing any preference to the holder in a carrier selection proceeding.

(5) The exercise of the authority granted here is subject to the holder's first obtaining from 

the appropriate foreign governments such operating rights as may be necessary.

(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 a certificate ineffective, 

and this or other failure to comply with the provisions of Subtitle VII of Title 49 of the United 

States Code or the Department's regulations shall be sufficient grounds to revoke this certificate.

(9) The holder is authorized to conduct charter flights in interstate and/or foreign air 

transportation in accordance with the provisions of 14 CFR 212. 

(10) Should the holder propose any substantial change in its ownership, management, or 

operations (as defined in 14 CFR 204.2(l)), it must first comply with the requirements of 14 CFR 

204.5.

(11) In the event that the holder does not commence actual flying operations under this 

certificate within one year of the date of the Department's determination of its fitness, its 

authority shall be revoked for dormancy, unless the holder is conducting operations under 

another type of certificate authority. Further, in the event that the holder commences operations 

 ∗ 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

for which it was found "fit, willing, and able" and subsequently ceases all such operations, its 

authority under all certificates held 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 the Department. Moreover, if the holder does not resume operations 

within one year of its cessation, its authority shall be revoked for dormancy.
Attachment A

NATIONAL AIR CARGO GROUP INC. d/b/a NATIONAL AIRLINES

MARK W ATWOOD

ELIZABETH J WADSWORTH

COZEN O’ CONNER

1627 EYE STREET NW SUITE 1100

WASHINGTON DC 20006

PAUL GRANDAHL 

RAYMOND PAUL

DARYL BENTLEY

EAST MICHIGAN FSDO 

FEDERAL AVIATION ADMINISTRATION

MARK MAZOR 

CERTIFICATION SECTION MANAGER

FAA AFS-900

45005 AVIATION DRIVE, SUITE 131

DULLES VA 20166

WILLIAM CHADWICK

OFFICE OF AIRLINE INFORMATION

DOT/RSPA/BTS E-36

1200 NEW JERSEY AVE SE

WASHINGTON DC 20590

PETER LYNCH AGC-300

ASST CHIEF COUNSEL FOR ENFORCEMENT FEDERAL 

AVIATION ADMINISTRATION

800 INDEPENDENCE AVE SW

WASHINGTON DC 20591

LUTHER HIPPS

CHARLEY BEERS

ORLANDO FSDO

FEDERAL AVIATION ADMINISTRATION

OFFICE OF AIRLINE INFORMATION

DOT/RSPA/BTS E-36

1200 NEW JERSEY AVE SE

WASHINGTON DC 20590