Order 2011

- 7

- 15

Served : July 29, 2011

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

Issued by the Department of Transportation

on the 29 th day of July, 2011

Applications of

NATIONAL AIR CARGO GROUP, INC.
d/b/a NAT IONAL AIRLINES

for amended certificates of public convenience and necessity under 49 U.S.C. § 41102 to engage in interstate and foreign charter air transportation of persons, property and mail Dockets DOT

- OST

- 20 10

- 0 181
and
DOT

- OST

- 20 10

- 0 215

ORDER CONFIRMING ORAL ACTION
AND ISSUING EFFECTIVE CERTIFICATE S

Summary

By this order we (1) confirm our oral action of June 6 , 2011, making the interstate and foreign

charter passenger authority issued to National Air Car go Group, Inc. d/b/a National Airlines (“National Airlines”) effective on that date, and (2) reissue the air carrier’s interstate and foreign certificate s to reflect the effectiveness of its charter passenger authority.

Background

By Order 2010

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- 05 , is sued November 5, 2010 , we directed all interested parties t o show cause why we should not m ake final our tentative findings and conclusions that National

Airlines is fit, willing, and able to provide interstate and foreign charter air transportation of

per sons, property, and mail. 1

1 National Airlines holds effective authority to engage in interstate and foreign charter air t ransportation of property and mail. See Order 2006

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- 20, issued December 21, 2006. Interested persons were given 14 days to file objections. Furthermore, we stated that if no objections were received to the show cause order we would proceed with an order making final our tentative findings. No objections wer e received

. Therefore, b y Order 2010

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- 25 , issued November 22, 2010 , the Department made final its tentative findings and issued National Airlines an amended certificate authorizing it to engage in interstate charter passenger operations. By Order 2011

- 1

- 26, served February 2, 2011, we2

issued to National Airlines an amended certificate authorizing it to engage in foreign charter passenger operations.

The authority to operate under these passenger certificates was to become effective on the sixth (busi ness) day after the Department had received (1) a copy of National Airlines’ Air Carrier Certificate and Operations Specifications issued by the Federal Aviation Administration ( “ FAA ” ) authorizing such operations, (2) a certificate of insurance evidencing passenger liability insurance coverage meeting the requirements of Part 205 of our rules, and (3) updated fitness information, including evidence that the air carrier continued to have funding sufficient

to meet our financial fitness criteria.

Subsequent to the issuance of our final order granting National Airlines ’ certificate authority to engage in charter passenger operations , on November 22 a nd November 23, 201 0

, respectively, Air Transport International, LLC (“ATI”) file d a m otion for le ave to file an o bjection a nd an

o bjection to the show c aus e o rder. We re viewed ATI’s pleading and found no new arguments
or evidence that ha ve not been considered or addressed in this proceeding or that would lead us

to conclude that National Airlines i s not fit to eng age in charter passenger operations. Therefore, we will dismiss ATI’s motion and objection.

FITNESS UPDATE

On May 26, 2011, National Airlines filed a copy of its updated FAA operating authority authorizing passenger operations

, financial and other upd ated fitness information , and a copy of its certificate of insurance evidencing that it had acquired appropriate insurance to conduct passenger operations

.

By letter dated May 31, 2011, we informed National Airlines that its filing was deficient. Specifi cally, National Airlines neglected to provided notes to the financial statements and other information required by section 204.3(k)(3) of our rules (14 CFR 204.3) , updated compliance information required by section 204.3(l), (m), (o), and (p) of our rules

, or the citizenship of key personnel that had joined the air carrier since the Department issued its show cause order in

this case. 2

On June 3, National Airlines filed updated information in support of its fitness, including updated financial informatio n demonstrating that it continued to have available resources sufficient to meet the Department’s financial fitness requirement

. In addition

, National

Airlines states that there have been several changes in its key management personnel since the

issuance of Order 2010

- 11

- 05 . The air carrier has appointed a new President, Mr. Steven B. Harrison, a new Vice President of Technical Services, Mr. Jack Fauth, and a new Director of

Maintena nc e, Mr. M ichael Martin. In addition

, Mr. Steven A. Rossum was elected t o serve on National Airlines’ B oard of D irectors and was also appointed to serve as the Chief Financial

Officer (“CFO”) , Executive Vice President, and General Counsel. All of the aforementioned

individuals are citizens of the United States.

2 See Order 2010

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- 5, issued November 5, 2010.3

Mr. Steven B . Harrison joined National Airli nes in September 2010 as its President

. Prior to joining National Airlines, he served in the United St ates Air Force (“U.S. Air Force ”) for more than 22 years retiring with the rank of Colonel in 2010. During his career w ith the

U.S. Air Force

, Mr. Harris on held a numbe r of senior positions including , among others, Deputy Direc tor for Operational Logistics, J oint Staff J

- 4 (2010) and Commander of the 89 th
Airlift Wing at Andrews Air Force Base Maryland (2009

- 2010).

Mr. Jack Fauth

, an Airframe and Powerplant Mechanic with more than 30 years of aircraft

maintenance experience, joined National Airlines in November 2010. Prior to this, he held various positions of increasing responsibility, the last of which being Director of Line Maintenance at Northwest Airlines where he was responsible for overseeing line maintenance

of Northwest Airlines’ Detroit operations.

Mr. Michael Martin joined National Airlines in January 2011. Prior to joining National

Airl i nes, Mr. Martin serv ed in the U.S. Air Force where he held a number of management positions in logistics and aviation maintenance during his career. He retired from the U.S. Air Force in February 2011, where he last served as Chief of Maintenance for Air For ce One with

the P resid en tial Airlift Group.

Mr. Steven Rossum was elected to National Airlines’ B oard of D irectors in February 2011. In addition to serving as Executive Vice President, Chief Financial Officer, and General Counsel of National Airlines, Mr. Rossum also s erve s in this capacity with National Airlines’ affili ated companies. Mr. Rossum is also Managing Director of Volusia, LLC, an aviation consulting

company and he has previously held executive positions with AirTran Airways

, Astar Air Cargo , and US Airways. Prior to joining National Airlines, Mr. Rosssum served as Executive Vice President, General Counsel, and Secretary at Air Tran Airways, Inc. (2008

- 2011).

National Airlines provided updated financial information, indicating that the air carrier

continues to have access to sufficient funds to meet the Department’s financial fitness test. F or the twelve months ending March 31, 2011, the air carrier reported a net loss of $24.1 million

on revenues of $ 45.6 million . National Airlines attributes it s los s es t o one

- time expenses

associated with purchasing and readying additional cargo aircraft for use in its operations.

National Airlines March 31, 2011, balance sheet shows that the air carrier has current assets of $43.3 million an d current liabilities of $10. 9 million , giving it positive working capital of $32.4 million and a current ratio of 3.97:1

. In addition, this same bal a nce sheet show s a retained deficit of $29.3 million and negative total shareholder equity of $19.9 million

.

We have previously determ ined that in order to meet our financial fitness test, the applicant would need access to approximately $ 4.25 million

. 3

3 See Order 2010

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- 05 at 9. This amo u nt consisted of one

- quarter of

the air carrier ’s proposed first

– year operating expenses associated with its passenger operatio ns

or $3.4 million and $ 845,000 in remaining unpaid pre

- operating expenses. The air carrier now4

indicates that all but $ 350,000 in pre

- operating expenses remain s to be paid. Therefore,

National Airlines would need access to $3.75 million to meet our fina ncial fitness requirements for receipt of effective charter passenger authority.

While National Airlines initially intended to meet our financial fitness requirements using

financial support provided by its ultimate parent company , National Air Cargo Ho ldings, Inc., or its affiliate National Air Cargo, Inc. , i t appears that the air carrier now has sufficient working capital on its own to meet our financial fitness requirements for receipt of effective charter passenger authority. However, as discussed i n Order 2010

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- 5, we note that our finding of fitness may no longer apply should the air carrier propose to operate additional aircraft in either cargo or passenger operations. Therefore, in that order we proposed to limit National Airlines operations to no more than four total large 4 aircraft and/or more than one passenger aircraft without the air carrier first providing the Department with at least 45 days prior notice and demonstrating its fitness prior to conducting operations with any additional

airc raft. 5 This condition was made final by Order 2010

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- 25. We continue to find this

restriction is appropriate and that it will permit us the ability to closely monitor the air carrier ’s

fitness and its safe and prudent induction of additional air service

. Ther e fore, should National Airlines seek to operate any additional aircraft, it must first comply with this condition and

have its fitness redetermined. 6

National Airlines also stated that that other than the above noted there have been no material

cha nges in its management personnel, compliance disposition

, or financial pos ture and t hat its operating plans remain as described in its application.

We note that by Order 2010

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- 22, issued December 12, 2010 , the Depart ment’s issued a consent order again st National Airlines for violations of 49 U.S.C. §§ 41101 and 41712 and 14

CFR Part 201.5(a). The Department’s Office of Aviation Enforcement and Proceedings (the “Enforcement Office”) found that during the pendency of National Airlines’ application for

c harter passenger authority, the air carrier advertised its ability to provide passenger air transportation. By advertising passenger air transportation before it received effective economic authority for that service, National Airlines violated 49 U.S.C. § 41101 and section

201.5

. Violations of section 41101 and section 201.5 also constitute “unfair or deceptive practices” in violation of 49 U.S.C. § 41712. The Enforcement Office and National Airlines

reached a settlement of this matter in order to avoid litigation. Without admitting or denying the violations described above, National Airlines agreed to the issuance of the consent order directing it to cease and desi st from future violations of 49 U.S.C. §§ 41101 and 41712 and

4 A “large” aircraft is any aircraft originally designed to have a maximum passenger capaci ty of more than 60 seats or a payload of more than 18,000 pounds.

5 The Department adopted its policy of imposing fleet restrictions pursuant to the recommendations of the FAA

90

- day safety review , issued September 16, 1996, to facilitate appropriate mo nitoring of individual air carriers’ growth. See , e.g. , Orders 98

- 1

- 3, 97

- 10

- 22, 97

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- 34, and 97

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- 18.

6 We note that by letter dated January 18, 2011, National Airlines notified us of its intent to operate three additional aircraft, all Boeing 747 air craft, in cargo operations. By letter dated February 22, 2011, the Department requested additional information concerning National Airlines ’ fitness to operate additional cargo aircraft. This review remains ongoing.5

Part 201, and to the assessm ent of $20,000 in compromise of potential civil penalties otherwise

due an d payable pursuant to 49 U.S.C. § 46301.

We do not believe the alleged violations discussed above warrant unfavorable action on

National Airlines’ application to engage in charter p assenger operations or that such allegation

, when considered in conjunction with National Airlines ’ compliance history, is indicative of a poor disposition to comply with the laws and regulations gover n ing its services. As discussed

in Order 2010

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- 5, th e Department previously imposed a number of reporting requirements on National Airlines that would permit us to closely monitor the air carrier’s compliance disposition

. 7 We believe these reporting requirements are adequate and that they will permit

us th e ability to take timely action against the air carrier’s certificate should we find any future

action would warrant such treatment.

In light of the above, we determined that National Airlines continued to be fit to provide interstate and foreign charter air transportation of persons, property

, and mail. Therefore, on

June 6

, 2011, we orally advised the air carrier that we were making its certificate authority for passenger operations effective on that date. By this order, we confirm our oral action of

J une 6 , 2011, and reissue the air carrier’s certificates to reflect their effective date.

ACCORDINGLY: Acting under the authority assigned by the Department in its Regulations,

14 CFR 385.12:

1. We confirm our oral action of June 6, 2011 , making the secti on 41102 interstate and foreign charter passenger certificate authority issued to National Air Cargo Group , Inc.

, effective on that date.

2. We reissue to National Air Cargo Group , Inc., the section 41102 interstate and foreign charter passenger certifica tes issued to it by Orders 2010

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- 25 and 2011

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- 26 , respectively, in

the attached form to reflect their effective date.

3. We direct National Air Cargo Group , Inc. , to submit to the Air Carrier Fitness Division a

first

- year progress report within 45 days following the end of its first year of passenger operations. 8

4. We direct that should the National Air Cargo Group , Inc.

, want to operate more than four

total large 9

7 See Order 2010

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- 5 at 12. aircraft and/or more than one passenger aircraft, it must first notify the Department

8 The r eport should include a description of the air carrier’s current operations (number and type of aircraft, principal markets served, total number of full

- time and part

- time employees), a summary of how these operations have changed during the year, a discuss ion of any changes it anticipates from its current operations during its second year, current financial statements (including a balance sheet at the end of its first year of flight operations

and a 12

- month income statement ending that same date), and a li sting of current senior management and key technical personnel.

9 There are no restrictions on the number of small aircraft National Airlines may operate.6

i n writing at least 45 days prior to the proposed change in operations and demonstrate its fitness to conduct such operations before their commencement.

5. We dismiss as moot the motion for leave filed by Air Transport International, Inc.

6

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

Persons entitled to petition the Department for review of this order, under 14 CFR 385.30, may file their petitions within 10 days of the service date of this order.

The action co nfirmed in this Order was effective when taken and the filing of a petition for

review shall not alter its effectiveness.

By:

TODD M. HOMAN

Director Office of Aviation Analysis

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

# Certificate of Public Convenience and Necessity for Interstate Charter Air Transportation

(as reissued)

This Certifies That



## NATI O NAL AIR CARGO GROUP, INC.

d/b/a NATIONAL AIRL INES

is authorized, subject to the provisions of Subtitle VII of Title 49 of United States Code, the orders, rules, and regulations issued thereunder, and the attached Terms, Conditions, and Limitations, to engage in interstate charter air transportation of persons, property, and mail.

This Certificate is not transferable without the approval of the Department of Transportation.

By Direction of the Secretary

Issued by Order 2011

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- 15 Todd M. Homan

On July 29, 2011 Director Effective on June 6, 20 11 Office of Aviation Analysi s

### Attachment

* As reissued by Order 2011

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### Terms, Conditions, and Limitations

NATIONAL AIR CARGO GROUP, INC.

d/b/a NATIONAL AIRLINES

is authorized to engage in interstate charter air transportation of persons, property and mail between any point in any State, territory, or possession of the United States or the District of Columbia, and any other point in any of those entities.

This authority is subject to the following provisions:

(1) The holder shall at all times con duct 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) 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 c oncerning security , including, but not limited to 49 CFR Part

1544

. **∗ ∗** 

(3) The holder shall at all times remain a "Citizen of the United States" as required by 49 U.S.C. 40102(a)(15).

(4) The holder shall maintain in effect liability insurance coverag e a s 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 regulati ons shall be sufficient grounds to revoke this certificate.

(5) The holder is not authorized to engage in air transportation operations between points within the State of Alaska.

**∗** This certificate is being reissued to reflect its effective date.

**∗ ∗**  To assure compliance with a ll 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.2

(6) Should the holder propose any substantial change in its ownership, mana gement, or operations (as defined in 14 CFR 204.2(l)), it must first comply with the requirements of 14 CFR

204.5.

(7) In the event that the holder commences operations for which it was found "fit, willing, and able" and subsequently ceases all such opera tions, 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 h older does not resume operations within one year of its cessation, its authority shall be revoked for dormancy.

# Certificate of Public Convenience and Necessity f or Foreign Charter Air Transportation

(as reissued)

This Certifies That



## NATIONAL AIR CARG O GROUP, INC.

d/b/a NATIONAL AIRLINES

is authorized, subject to the provisions of Subtitle VII of Title 49 of the United States Code, the orders, rules, and regulations issued thereunder, and the attached Terms, Conditions, and Limitations, to engage in foreign charter air transportation of persons, property, and mail.

This Certificate is not transferable without the approval of the Department of Transportation.

By Direction of the Secretary

Issued by Order 2011

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- 15 Todd M. Homan

On July 29, 2011 Director Effective on June 6, 2011 Office of Aviation Analysis

### Attachment

**∗** 

### As reissued by Order 2011

- 7

- 15



### Terms, Conditions, and Limitations

NATIONAL AIR CARGO GROUP, INC.

d/b/a NATIONAL AIRLINES

is authorized to engage in foreign charter air trans portation of persons, property, and mail:

Between any place in the United States and any place outside thereof.

This authority is subject to the following provisions:

(1) The holder shall at all times conduct its operations in accordance with the regul ations 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) The hold er 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 agreem ents and with any orders of the Department of Transportation issued under them or for the purpose of requiring compliance with them.

(3) The exercise of the authority granted here is subject to the holder's first obtaining from the appropriate foreign gov ernments such operating rights as may be necessary.

(4) 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. Governmen t requirements concerning security , including, but not limited to 49 CFR Part

1544

. **∗ ∗** 

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

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

**∗** This certificate is being reissued to reflect its effective date

**∗ ∗**  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 whet her the Transportation Security Administration has determined that security is adequate to allow such airport(s)

to be served.2

(6) The holder shall maintain in effect liability insur anc e 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 Depart ment's regulations shall be sufficient grounds to revoke this certificate.

(7) 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 C FR 204.5.

(8) In the event that the holder commences but subsequently ceases all operations for which it was found "fit, willing, and able," its authority under this certificate 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.Att achment A

SERVICE LIST FOR NATIONAL AIR CARGO GROUP, INC.

JAMES L HOBSON JR

PRESIDENT AND CEO

AIR TRANSPORT INTERNATIONAL LLC

2800 CANTRELL ROAD

LITTLE ROCK ARKANSAS 72202 GEORGE A GOLDER ESQ

GENERAL COUNSEL

AIR TRANSPORT INTERNATIONAL LLC

7100 TPC DRIVE SUITE 100

ORLANDO FLORIDA 32822

MARK W ATWOOD

ELIZEBETH J WADSWORTH

COZEN O’ CONNER

1627 EYE STREET NW SUITE 1100

WASHINGTON DC 20006 BERNARD STANKUS RTS

- 42

OFFICE OF AIRLINE INFORMATION

DOT/RSPA/BTS E

- 36

1200 NEW JERSEY AVE SE

WASHINGTON DC 20590

WILL IAM J WEBER

CERTIFICATION SECTION MANAGER

FAA AFS

- 900 45005 AVIATION DRIVE, SUITE 131

DULLES VA 20166 CLAY MORITZ, RTS

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OFFICE OF AIRLINE INFORMATION

DOT/RSPA/BTS E

- 36

1200 NEW JERSEY AVE SE

WASHINGTON DC 20590

PETER LYNCH AGC

- 300

ASST CHIEF COUNSEL FO R

ENFORCEMENT

FEDERAL AVIATION ADMINISTRATION

800 INDEPENDENCE AVE SW

WASHINGTON DC 20591 MALCOLM L BENGE ZUCKERT, SCOUTT & RASENBERGER LLP

888 7 TH STREET NW SUITE 700

WASHINGTON DC 20006

- 3939

TIM WAHLBERG

PRESIDENT

EVERGREEN INTERNA T I ONAL AIRLINES IN C

3850 THREE MILE LANE

MCMINNVILLE OREGO N 97128 EDWARD W SAUER SQUIRE SANDERS & DEMPSEY LLP

1201 PENNSYLVANIA AVE NW

SUITE 500

WASHINGTO N DC 20004