BEFORE THE

OFFICE OF THE SECRETARY

U.S. DEPARTMENT OF TRANSPORTATION

WASHINGTON, DC

________________________________________________

)

In the matter of the )

)

Application of HARRIS AIRCRAFT SERVICES, INC. ) Docket 2013-0089

For Authority to Conduct Scheduled Passenger )

Operations as a Commuter Air Carrier )

Under 49 USC 41738 )

________________________________________________)

PROTEST OF PACIFIC AIRWAYS, INC.,

AND PETITION TO DISMISS APPLICATION

FOR FAILURE TO COMPLY WITH

14 CFR 204 AND 14 CFR 302

Correspondence in reference to this document should be sent to:

Hank Myers Steve Montanus

MTC Pacific Airways, Inc.

P.O. Box 7142 P.O. Box 5158

Bellevue, WA 98008-1142 Ketchikan, AK 99901-0158

(425) 249-3454 (907) 225-3500

October 28, 2013
BEFORE THE

OFFICE OF THE SECRETARY

U.S. DEPARTMENT OF TRANSPORTATION

WASHINGTON, DC

________________________________________________

)

In the matter of the )

)

Application of HARRIS AIRCRAFT SERVICES, INC. ) Docket 2013-0089

For Authority to Conduct Scheduled Passenger )

Operations as a Commuter Air Carrier )

Under 49 USC 41738 )

________________________________________________)

PROTEST OF PACIFIC AIRWAYS, INC.,

AND PETITION TO DISMISS APPLICATION

FOR FAILURE TO COMPLY WITH

14 CFR 204 AND 14 CFR 302

Pacific Airways, Inc., a carrier certificated under 49 USC 41102 operating scheduled and 

on-demand air transportation in southeastern Alaska including Prince of Wales Island 

and Baranof Island, hereby protests the application of Harris Aircraft Services, Inc. 

(Harris) in docket OST 2013-0089, and moves for dismissal of the application. To the 

extent Pacific Airways did not become aware of the Harris Air application until last 

week, it requests that this protest be accepted although filed after the expiration of the 

28 day initial comment period.

The application should be dismissed because Harris lacks the required compliance 

disposition, is not financially fit, and its application is grossly deficient; not complying

with 14 CFR 302 and 14 CFR 204.
Appendix A is a detailed listing of the requirements of 14 CFR 204.3 with references to 

the application of Harris. Over half of the specific requirements are unmet, including 

whole sections relating to monetary claims and operating forecasts. As will be shown 

below, the information that is provided appears incomplete and conflicting. The 

application is so deficient that a finding of fitness cannot be made.

HISTORY OF APPLICATION

Harris Aircraft Services filed its application for commuter authority under 49 USC 41738 

on May 8, 2013. A request for addition information was sent to Harris on August 12, 

and a response was docketed on August 13, 2013. Typically, interested parties have a 

period of 28 days in which to file responses to the application. 14 CFR 302.202(b) 

requires, “Applications shall include a notice on the cover page stating that any person 

may support or oppose the application by filing an answer and serving a copy of the 

answer on all person served with the application. The notice shall also state the due 

date for the answers.” Harris Air did not provide the required notice. More important, 

Harris did not serve a copy of its application on “The airport authority of each airport 

that the applicant initially proposes to serve.” It can be argued that it is not known 

which points will be served because Harris made no specific service proposal in its 

application, but ironically Harris did not even serve the airport manager of its home 

base, Sitka, AK. Pacific Airways provides scheduled service to Craig and Klawock airport, 
and Harris not only publishes a schedule to Klawock, but names the point in its general 

service proposal. In any case, Harris failed to meet both the letter and spirit of the 

service requirements by providing service only to the Juneau Airport manager. As luck 

would have it, the then airport manager of Juneau had retired and no new manager has 

been announced.

Fitness staff requested clarification of some information in a letter dated August 12. In 

that request, clarification was sought about the purpose of Sitka Aircraft and Support 

Services, LLC, and explanation of several balance sheet issues including debt for aircraft. 

In its response, Harris did not completely address the issue of startup expenses, but did 

answer the direct inquiries about the balance sheet items. It was in the response that 

Harris revealed that Sitka Aircraft and Support Service is the alter ego of Harris Air, and 

its operations and finances must be considered as a single unit.

FINANCIAL FITNESS

The financial forecasts included are inconsistent with Harris’ statement of proposed 

services. For example, Harris does not provide scheduled service to either Juneau or 

Petersburg, but it has obtained leases on property at each airport. This conflicts with 

the rationale for predicting revenues and costs which is based on slight expansions of 

existing service. Harris’ asserts “The company plans to add facilities in Hoonah, AK, 

Kake, AK as well as Wrangell, AK.” (top of second page of application) We have no idea 

when these services are proposed, or how they fit into the certification process.
In any case, the financial statements or Harris fall far short of the minimum liquidity 

requirements for commuter fitness. At first blush, the working capital of Harris is 

$530,133.84 ($694,346.93-$164,213.09). A closer look, however, shows that many of 

the balances are not adjusted according to general accepted accounting principles. Part

of the problem is due to the use of Quickbooks, which does not automatically adjust 

accounts for offsets. For example, the Accounts Receivable amount of $125,244.03 

does not list an offset for uncollectable debts. There is also no account aging note, as 

would normally be provided by an accountant. Similarly, many inventory items are 

subject to depreciation or obsolescence deductions. The vast majority of the inventory 

consists of aircraft parts, some of which are time limited. 

On the liabilities side, Harris does not include any amount for the current portion of long 

term debt. On the projected financial statements, which correspond to the balance 

sheet as at March 31, 2013, four long term debts are shown, one of which is expected to 

be paid off before certification (Ford Motor Credit). The three remaining loans are held 

by Alaska Pacific Bank. The loan for the deHavilland Beaver had a balance of $194,196 

on March 30, 2013, with 46 months remaining on the term. The current portion of this 

debt is 12/46ths of the debt, or $50,660. The second term loan, listed as “IRS Tax Audit 

Loan” had a balance of $250,263 with 113 monthly payments due until payoff. The 

current portion of this debt (12/113ths of the debt) is $26,576. On the Asset side, both 

the deHavilland Beaver and the Cessna 185 which is tied to the IRS Audit Loan are 
shown with $0 book value. (Forecast Revenue and Income Statement, Balance Sheet) 

The loan listed as a “Line of Credit To be paid off as soon as possible” has a balance of 

$35,132 (apparently taken out in the fourth quarter of 2012). Lines of credit, by 

definition, are current liabilities and should be listed as such. In total, the current 

portion of Harris’ long term debt was $112,368 as at March 31, 2013. What started off 

as a working capital balance of $530,133.84 is actually $417,765. 

As noted earlier, Harris does not provide any specific forecasts related to its proposed 

certificated service. At the same time, Harris shows that the majority of its existing 

operation consists of unauthorized scheduled service. When one adds service to all of 

the proposed points at the minimum level of three trips per week, it is safe to assume 

that the certificated service will be at least equal to the scope of the current total 

operation. According to the Income Statement for the 12 months ended December 31, 

2012 (the latest 12 month period available) shows total cash expenses of $2,298,335.19. 

As noted above, these expenses do not include non-cash (yet real) expenses related to 

write downs for uncollectable debt, inventory depreciation, and other depreciable 

assets. The minimum liquid assets required for certification at the current level of 

service is $574,583.80 (25% of $2,298,335.19). In summary, Harris is short at least 

$156,819 to reach the minimum level required to be found financially fit. Even if it were 

to draw down all of its remaining line of credit ($80,000 total), it would be over 

$100,000 short of its working capital requirement.
Another major concern about the financial fitness of Harris is the condition of its 

commonly owned sister company, Sitka Aircraft and Support Services. The balance 

sheet for Sitka Aircraft and Support Services shows that it is upside down on its aircraft 

loans, owing $210,335 more on its loans than the depreciated value of the aircraft. As a 

consequence, the company has a negative owners’ equity of $210,335. Sitka Aircraft 

and Support Services shows NO current assets at all, and does not list the current 

portion of its long term debt. Based on the 10 years remaining on the 23’ Packman and 

the less than nine year term on N38KC, we get current portion of debt at $5,284 

(12/113ths of $49,782) for the 23’ Packman and $27,083 (12/97ths of 218,919) for N 

38KC. This yields a negative working capital of $32,367. Deducting this amount from 

the working capital for Harris Air gives a combined working capital of only $385,398. 

(source: Balance Sheet of Sitka Aircraft and Support Services, LLC as at 12/31/3013)

If we combine the shareholder equity amounts for Sitka Air and Aircraft and Support 

Services, the total owner equity is only $34,044. The combination is highly leveraged, 

and its financial statements shown it has taken out over $490,000 in term loans in the 

last few months, as well as drawing on its current line of credit. The rental fees Sitka 

Aircraft and Support Services have charged have not even kept up with depreciation 

rates of the aircraft leased. Essentially Sitka Aircraft and Support Services has subsidized 

the operations of Harris by at least $210,335 over the years, and that assumes zero 

profits for the leasing company. The two companies are inseparable. Harris cannot 
operate without aircraft from Sitka Aircraft and Support Services, and the leasing 

company depends on Harris to lease its assets, albeit at unprofitable rates.

There is concern about the future of Harris’ business with the Southeast Alaska Regional 

Health Cooperative. The Cooperative operates hospitals in both Juneau and Sitka. 

Recently the Cooperative announced it was reviewing its policies for transporting 

passengers to its two hospitals. Rather than contracting with carriers, as it does now, it 

will depend on the open market for transportation services. The details are unclear, and 

it is not known if SEARHC has implemented a new policy. What is known is that carriers

such as Wings of Alaska and Alaska Seaplane Service are currently transporting SEARHC 

clients to the Juneau hospital from Angoon, Tenakee, Hoonah and Kake (current Harris 

points) as well as from Haines, a point proposed for service by Harris. Harris’ proposed 

scheduled service between Sitka and Wrangell and Petersburg is not cost or service 

effective. There are existing turbo-prop medevac services based at Juneau which 

provide pressurized, nurse assisted service to Juneau, and Alaska Airlines provides 

regular, pressurized jet service for passengers who do not require a litter. Both services 

are less expensive and more comfortable and effective than Harris’ unpressurized Piper 

Navajo. Other than vague press coverage, there is nothing substantial to challenge the 

assumptions of Harris, but the Department should at least inquire about the situation.

As noted, Harris has failed to comply with Department regulations asking for specific 

documentation of its traffic and operating forecasts. It claims that its less than daily 
service will be a substantial boost in service to those villages. Each of the villages listed 

for proposed service already has multiple daily flights by one or more certificated air 

carriers using turboprop and multi-engine aircraft. To the extent Harris assumes a 

portion of the existing traffic now being carried on other services, its forecasts are 

doubtful at best. Further analysis will have to wait for specific documentation from 

Harris.

COMPLIANCE DISPOSITION

For the second time in less than a year, an “on-demand” air carrier in southeastern 

Alaska has applied to legitimize scheduled service it has operated entirely without 

authority for some time. Rather than admitting to past violations, Harris Air relies on its 

openly admitted scheduled air service to support its application, and the profits made 

from non-compliant activities. Its own application shows that it did not have FAA 

authority to operate scheduled service until at least three months after it published 

printed schedules. It also appears that Harris did not collect appropriate Federal Excise 

Tax on its scheduled service because it lists a debt of over $250,000 on its balance sheet 

as being related to an “IRS Tax Audit Loan”.

In addition to its inability to comply with basic FAA and DOT scheduled service 

requirements, Harris seems unable or unwilling to comply with 14 CFR 204.3 and 14 CFR 

302.202. By ignoring these regulations Harris has omitted required information that is 
dispositive to its applications, and it failed to provide notice as required so that 

adequate public notice was provided. As was the case with Island Air Express, the lack 

of formal protest is not due to lack of opposition but lack of knowledge of the 

application.

As a technical matter, Harris proposes to transport US Mail on its services. As a 

commuter Air Carrier it would not be authorized to transport U.S. Mail unless the Postal 

Service determined that existing service is inadequate. In each of the markets there are 

already multiple daily flights by certificated carriers. Mail volume is very low in these 

markets, and current certificated service is more than adequate.

Department regulations allow for the refunding of filing fees to an applicant that 

withdraws prior to a decision on the application. Given the overall deficiency in the 

application and lack of financial fitness and compliance disposition, it is suggested that 

Harris withdraw its application until it can comply with all applicable regulations. This 

must include the cessation of all illegally operated scheduled service.

SUMMARY

The application of Harris Aircraft Service is deficient on its face, and does not support a 

finding that the carrier is fit willing and able to engage in interstate transportation of 

passengers, freight and mail. Harris has omitted over half of the required information. 
What information that is provided shows that Harris is out of compliance with economic 

regulations governing holding out a published schedule more than four times a week, 

operation of interstate transportation without DOT authority, and very probably failure 

to collect and remit Federal Excise Tax on the transportation of passengers and freight 

over a regular route. The submissions also show that the financial position of Harris is 

bolstered by the essentially bankrupt operations of Sitka Aircraft and Support Services. 

These two companies are joined at the hip, and have a combined net worth of only 

$34,000.

WHEREFORE, Pacific Airways, Inc. hereby protests the application of Harris Aircraft 

Services in this docket, and asks that the application be dismissed pursuant to 

§302.3(d)(2) which states “If any document initiating, or filed in, a proceeding that is not 

in substantial conformity with the applicable rules or regulations of the Department as 

to the contents thereof, or is otherwise insufficient, the Department, on its own 

initiative, or on motion of any party, may reject, strike or dismiss such document, or 

require its amendment.”

Respectfully submitted,

Pacific Airways, Inc.

_____________________________________

By Hank Myers, its authorized representative

October 28, 2013
CERTIFICATE OF SERVICE

I hereby certify that I have this day served a copy of the foregoing Protest and Motion to 

Dismiss the Application of Harris Aircraft Services, Inc. by first class mail, upon the 

following persons:

_____________________

Hank Myers

October 28, 2013

FAA Flight Standards District Office

Suite 106

3032 Vintage Park Blvd.

Juneau, AK 99801

Airport Manager

Juneau International Airport

Suite 200

1873 Shell Simmons Drive

Juneau, AK 99801

Alaska Department of Transportation and Public Facilities

P.O. Box 112506

Juneau, AK 99811-2506

Robert S. Harris

President

Harris Aircraft Services, Inc.

400 Airport Road

Sitka, AK 99835
Appendix A

Page 1 of 1

REGULATORY REQUIREMENTS FOR COMMUTER AUTHORITY

UNADDRESSED BY HARRIS AIR

The listing below includes all specific content or form requirements for an application 

for commuter authority. General or duplicative requirements are excluded. While the 

application does not conform to the specific format requirements of §302.3, this list 

details the substance and process requirements.

§302.202(b) Notice Requirement on Front Page Did Not Comply

§302.203(b)(1)(A)(1) Requires service on all Airport Managers Did Not Comply

§302.205 Requires complete economic data and other facts Did Not Comply

§204.3(g)(4) Requires current/past involvement in air operationsDid Not Comply

§204.3(h) Requires list of all subsidiaries and description Did Not Comply

§204.3(k)(3)(i) Requires statement of GAAP compliance Did Not Comply

§204.3(k)(5) Identification of person preparing statements Did Not Comply

§204.3(l) List of actions and judgments more than $5,000 Did Not Comply

§204.3(m) List of actions and judgments less than $5,000 Did Not Comply

§204.3(t)(1) Projected Balance Sheet with assumptions Did Not Comply

$204.3(t)(2) Estimated aircraft revenue block hours Did Not Comply

§204.3(t)(2) Requires Revenue miles by aircraft type Did Not Comply

§204.3(t)(2) Requires Number of Passengers Transported Did Not Comply

§204.3(t)(2) Requires Number of Tons of Cargo and Mail Did Not Comply

§204.3(t)(2) Requires Estimate of Newly Generated Traffic Did Not Comply

§204.3(t)(2) Requires Statement of Accrual or Cash Accounting Did Not Comply

§204.3(t)(2) Requires Explanation of Basis of Costs & Revenues Did Not Comply

§204.3(t)(2) Requires Description of Manner of Allocation Did Not Comply

§204.3(t)(2) Requires Estimate of Peak & Average Load Factors Did Not Comply

§204.3(u) Requires Signed Counterpart of Agreement 18900 Did Not Comply