\\DC - 042333/000001 - 6510733 v4 BEFORE THE DEPARTMENT OF TRANSPORTATION

WASHINGTON, D.C.

Application of HARRIS AIRCRAFT SERVICES, INC. For a certificate of public convenience and necessity pursuant to 49 U.S.C. § 41102 to engage in interstate scheduled air transportation of persons, property, and mail ) ) ) ) ) ) ) ) ) Docket DOT-OST-2014-0145

COMMENTS OF AIR EXCURSIONS LLC
Communications with respect to this document should be addressed to: Kent Craford AIR EXCURSIONS LLC 1873 Shell Simmons Dr. Suite 110 Juneau, AK 99801 Robert E. Cohn Patrick R. Rizzi HOGAN LOVELLS US LLP Columbia Square 555 Thirteenth Street, NW Washington, DC 20004 +1 202 637 4999/5659 robert.cohn@hoganlovells.com patrick.rizzi@hoganlovells.com Counsel for Air Excursions LLC

March 27, 2015\\DC - 042333/000001 - 6510733 v4 BEFORE THE DEPARTMENT OF TRANSPORTATION

WASHINGTON, D.C.
Application of HARRIS AIRCRAFT SERVICES, INC. For a certificate of public convenience and necessity pursuant to 49 U.S.C. § 41102 to engage in interstate scheduled air transportation of persons, property, and mail ) ) ) ) ) ) ) ) ) Docket DOT-OST-2014-0145

March 27, 2015

COMMENTS OF AIR EXCURSIONS LLC With the Department of Transportation’s most recent information request, dated March 11, 2015 (“DOT IR”), and, more importantly, the response of Harris Aircraft Services, Inc. (“Harris Air”), dated March 20, 2015, it is clear that two critically important issues with significant implications for Harris Air’s fitness for the requested certificate authority are being hidden by Harris Air and overlooked by the Department. First, there is no current substantive information about an important “relevant corporation” of Harris Air, Sitka Aircraft and Support Services, LLC (“Sitka LLC”), the submission of which is a key fitness requirement under Part 204 of the Department’s regulations. Sitka LLC is owned by the same two individuals that own Harris Air. In addition, Sitka LLC owns Harris Air’s entire wheel-plane fleet of two Piper Chieftains. Second, there has been no reconciliation of the contradictory stories that Harris Air has presented to the DOT Air Carrier Fitness Division in this proceeding and the DOT Essential Air Service Division in bidding on EAS. Air Excursions respectfully submits that, untilComments of Air Excursions Page 2

\\DC - 042333/000001 - 6510733 v4 sufficiently addressed, these two voids preclude any positive conclusion about Harris Air’s fitness for such certificate authority. 1

I. Sitka LLC is a Relevant Corporation Inextricably Linked to Harris Air and its Operations. Scott Harris and Laura Kronsperger, the two owners of Harris Air, also own Sitka LLC. See Application of Harris Air, at 6-7 n.6 (August 25, 2014). Sitka LLC owns the two Piper Chieftains (the entire wheel-aircraft fleet) operated by Harris Air. Sitka LLC apparently has at least one loan secured by the two Piper Chieftain aircraft. 2 Although Harris Air’s most recent (just submitted) income statement shows lease payments on the two Piper Chieftains as an expense, there is no further updated information about the inter-company relationships between the two commonly owned and closely-held companies, as there should be for a relevant corporation. 14 C.F.R. § 204.2 defines a “relevant corporation” for purposes of certificate authority applications as: “(k) Relevant corporations are the applicant or air carrier, any subsidiary thereof, any predecessor thereof ( i.e. , any air carrier in which any directors, principal officers or persons having a substantial interest have or once had a substantial interest), and any company (including a sole proprietorship or partnership) which has a significant financial or managerial influence on the applicant or air carrier

. The latter includes: (1) Any company (including a sole proprietorship or partnership) holding more than 50 percent of the outstanding voting stock of the applicant or air carrier; and (2) Any company (including a sole proprietorship or partnership) holding between 20 percent and 50 percent of the outstanding voting stock of the applicant or air carrier and which has significant influence over the applicant or

1 To the extent necessary, Air Excursions requests leave to file these comments. Good cause for accepting these comments is warranted to provide the Department with a more complete record on the relevant factual and fitness issues pertaining to this certificate application proceeding. 2 http://dnr.alaska.gov/ssd/recoff/sag/DocDisplayUCC.cfm?SelectedDoc=20137537332&District=500.Comments of Air Excursions Page 3

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air carrier as indicated, for example, by 25 percent representation on the boardof directors, participation in policy-making processes, substantial intercompany transactions, or managerial personnel with common responsibilities in both companies.” (Emphasis added) The DOT’s Information Packet also explains that a relevant corporation includes “any company in which the directors, principal officers or owners have or once had a substantial interest, or any organization which has a significant financial or managerial influence on the applicant.” See Information Packet on How to Become a Certificated Air Carrier , at 17 n.15 (September 2012). Moreover, in another fitness proceeding, the Department recently requested more information from Menagerie Enterprises, including explanatory footnotes to financial statements about items such as “any liens or encumbrances against any of the applicant’s or any relevant corporation’s assets . . . [and] any liabilities of the applicant or relevant corporation that are more than 60 days past due . . . .”Letter of DOT to R. MacPherson, dated March 19, 2015 (Docket DOT-OST2014-0192). Indeed, the Department previously understood that Sitka LLC was a relevant corporation. In July 2013, almost two years ago, the Department asked follow-up questions about Sitka LLC and the purchase of new aircraft in the context of Harris Air’s subsequently dismissed application for scheduled commuter authority, see Letter from DOT to S. Harris, July 16, 2013 (Docket DOT-OST-2013-0089) (for example, “What is the main purpose of Sitka Aircraft & Support Services, LLC”), application dismissed by DOT Order 2014-5-2, and Harris Air even included a balance sheet and income statement for Sitka in its response at that time. And, more recently, implicitly recognizing the importanceComments of Air Excursions Page 4

\\DC - 042333/000001 - 6510733 v4 of Sitka LLC as a relevant corporation, Harris Air even provided Sitka LLC’s certificate and articles of incorporation, as well as a certificate of compliance, with its original application here. Exhibit HAS-9. The Department, however, still has only one-half of the picture and cannot make a determination on the financial fitness of Harris Air without evaluating the financial details of Sitka LLC, including outstanding loans, inter-company accounting/transactions, and aircraft leases/liens.

II. Harris Air Has Never Reconciled The Significant Disparities Between Its EAS Submissions About Future Service and Its Representations In Support Of Its Certificate Application. Harris Air has not sufficiently explained the inconsistencies between its operational plans in this proceeding and its most recent EAS proposals. Since the scope of operations being contemplated has a significant impact on the cost/expense forecast for Harris Air, and thus the financial fitness threshold amount it must demonstrate, Harris Air’s true operational plans must be clear to the Department. But those plans cannot be clear when one DOT division is told one story and another DOT division is told another story with respect to the scope and magnitude of planned operations. To this point, Harris Air has repeatedly claimed in this proceeding that it will “continu[e] its existing intra-state services”, that its “existing intra-state operations in this Southeast region of Alaska will continue as currently operated” and that its intra-state Alaska operations will “ remain substantially unchanged from 2013 , including type of FAA commuter authority held, routesComments of Air Excursions Page 5

\\DC - 042333/000001 - 6510733 v4 served, service frequency, numbers of employees employed, etc.”3 Yet, last fall, Harris Air told the Department that if certificated, it will offer substantially more service than it currently operates in the context of the EAS proceeding for Angoon, Tenakee, and Pelican. See Proposal of Harris Air to Provide Essential Air Service, at 4 (October 22, 2014) (Dockets DOT-OST-2002-11586 and 2006- 25542). That EAS proposal was in sharp contrast to the Illustrative Schedule provided with its certificate application in this docket, reflecting a 169% (peak) and 61% (off-peak) increase from the service levels contained in Harris Air’s certificate application for these three markets alone. Similarly, in April 2014, a few months before its certificate application was filed, Harris Air bid to operate EAS for Kake, Alaska, proposing to serve the community from Juneau with 14 weekly roundtrips (peak season) and 7 weekly roundtrips (off-peak). See Proposal of Harris Air to Provide Essential Air Service at Kake, at 4 (April 28, 2014) (Docket DOT-OST-2008-0217). But, its Illustrative Schedule attached to its certificate application showed only 7 weekly Kake– Juneau frequencies and 5 weekly Juneau–Kake frequencies (Exhibit HAS-13) – far less than the 14 weekly peak season roundtrips proposed to the EAS division. Moreover, Harris Air does not appear to operate the Juneau–Kake route currently with any regularity or sustained level of frequency. Yet, Air Excursions expects that Harris Air will bid on the Kake EAS again with 14 weekly frequencies when the Department’s EAS Solicitation Order comes out this spring. This would constitute a dramatic increase in operations for Harris Air, operations which are

3 See Application of Harris Air, at 9 (August 25, 2014); Consolidated Reply of Harris Air, at 1, 4 and 5 (September 29, 2014) (underlined emphasis in original).Comments of Air Excursions Page 6

\\DC - 042333/000001 - 6510733 v4 not encompassed by its certificate application and for which the Department has not accounted in the working capital requirements placed on Harris Air to determine its fitness. Harris Air cannot have it both ways. Air Excursions recognizes that Harris Air was not chosen to operate the EAS at these communities last time the Department made its awards. However, the point remains. What other EAS or other services constituting a substantial increase to the scope and magnitude of its operations is Harris Air planning in the near future (as it clearly was for Angoon, Tenakee, and Pelican, as well as Kake) that are not properly accounted for in the financial fitness calculus underlying its application? To the extent there are such plans, these increased operations must be properly accounted for in connection with this certificate application (which they are not now), and the fundamental financial fitness bases for Harris Air’s certificate application collapse.

III. Conclusion. The Department should not issue any determination on Harris Air’s pending certificate application unless and until these critical information deficiencies are sufficiently addressed and evaluated.Comments of Air Excursions Page 7

\\DC - 042333/000001 - 6510733 v4 Respectfully submitted,

______________________________________ Robert E. Cohn Patrick R. Rizzi HOGAN LOVELLS US LLP 555 Thirteenth Street, NW Washington, DC 20004 +1 202 637 4999/5659 Counsel for Air Excursions LLC\\DC - 042333/000001 - 6510733 v4 CERTIFICATE OF SERVICE I hereby certify that a copy of the foregoing Comments of Air Excursions, LLC, has been served this March 27, 2015, upon each of the following:
pmurphy@lopmurphy.com scott@harrisair.com hank@MTCWorld.com info@flypacificairways.com

/s/ Patrick Rizzi