Order 2011

- 3

- 21

Served: March 17, 2011

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 17th day of March , 20 1 1

Fitness Determination of

AIR CHARTER, INC.

d/b/a AIR FLAMENCO

as a commu ter air carrier under section 49 U.S.C. § 41738 Docket DOT

- OST

- 20 10

- 0260

ORDER TO SHOW CAUSE

PROPOSING ISSUANCE OF COMMUTER AIR CARRIER AUTHORIZATION

Summary

By this order, we tentatively find that Air Charter, Inc. d/b/a Air Flamenco (“Air Flamen co”) is a citizen of the United States and is fit, willing, and able to conduct scheduled passenger operations as a commuter air carrier, subject to conditions.

Background

Section 41738 of Title 49 of the United States Code (“the Statute ”) and section 29 8. 32 of the Department’s Aviation Economic Regulations (14 CFR 298. 32 ) direct us to determine whether companies proposing to provide scheduled passenger service as commuter air carriers are “fit, willing, and able to operate the proposed commuter service. ” We must also ensure that all operations relating to this service conform to the safety standards established by the Federal Aviation Administration ( “ FAA ” ). In making fitness findings, the Department uses a three

- part
test that reconciles the Airline De regulation 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 n air carrier’s fitness are whether the applicant: (1) will have the mana gerial skills and technical ability to conduct the proposed operations, (2) has sufficient financial resources to commence the operations proposed without posing an undue risk to consumers or their funds, and (3) will comply with the Statute and regulation s imposed by federal and state agencies. We must also determine that the applicant is a U.S. citizen.

On October 15, 2010

, Air Flamenco filed an application in Docket DOT

- OST

- 20 10

- 0260 for authority to provide scheduled passenger operations as a commuter air carrier pursuant to section2

41738 of the Statute. Air Flamenco accompanied its application with the fitness information required by section 204.3 of our regulations (14 CFR 204.3)

. 1

No answers opposing Air Flamenco ’s application were filed and no s pecial 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 we tentatively conclude that Air

Flamenco is a U.S. citizen and is fit, willing, and able to provide scheduled passenger operations as a commuter air carrier. However, we will give interested persons an opportunity to show cause why we should not adopt as final these tentative findings and conclusions.

FITNESS

The C ompany

Air Flamenco is a corporation that was organized under the laws of the commonwealth of Puerto

Rico on June 1, 1987

, by Mr. Edwin Tabales and Ms. Noemi Gonzalez. On August 25, 1993,

Air Flamenco was certified as an air carrier under Part 135 of the Federal Aviation Regulations

to conduct on

- demand passenger and cargo operations using six small aircraft. 2 On May 19, 1998, Ms. Gonzalez acquired the sum of Mr. Tabales’ shares of the company and simultaneously donated the total outstanding shares of th e company to her two sons, Messrs.

Ruben and Francisco Torres. The shares were split equally between the two brothers. Francisco assumed the positions of President, Treasure r
, Pilot in Command, and Director of Operations ; and Ruben assumed the positions of Vice President and Chief Pilot

. Currently, the applicant holds a 14 CFR Part 298 exemption and operates 10 small aircraft.

Managerial Competence

The following table identifies Air Flamenco’s officers and other key management and technical personnel

, each of whom is a U.S. citizen

.

Name Position

Mr. Fransico Torres President , Treasure r
, Pilot in Command, and Director of Operations

Mr. Ruben Torres Vice President, Chief Pilot Mr. Cayetano Rodriguez Director of Maintenance

Mr. Francisco Torre s, an Airline Transport Pilot with over 2

, 500 total flight hours logged, assumed his current position s in 1998. Before that, he served as a Loader Super visor for

Flamenc o Airways, Inc. (1996

– 1998) and a Station Manage r for West Atlantic Air (1995

- 1996 ). He holds a Bachelor’s degree in Business Administration from Universidad Metropolitan.

1 Air Flamenco filed additional information supplementing its application on December 2, 2010

. 2 A small aircraft is defined as aircraft originally designed to have a maximum passenger capacity of 60 seats o r less and a maximum payload capacity of 18,000 pound or less.3

Mr. Ruben Torres, an Airline Transport Pilot with over 4,500 total flight hours logged, assumed the position of Air Flamenco’s Chief Pilot in 2004 and has served as its Vice President since

1998. Before that, he served as a Pilot for the applicant (1998

- 2004) . From September 1994 to February 1997, Ruben took a leave of absence for medical reasons . He br iefly served as a Pilot for Aerial Imagine ( October 1997) an d Aerial Architectural Photography, Inc. ( February 1997). Before that, he served as a Loader for Flamenco Airways, Inc. (1994).

Mr. Cayetano Rodriguez Diaz , an Airframe and Powerplant Mechanic, joined the applicant in

2001 and served as a Mechanic. He a ssumed his current position as Director of Maintenance in 2002. Before that, he served as a Mechanic for Isla Nena Air Service, Inc. (1998

– 2002), Tol

Air Services

, Inc. (1992

- 1998), and Flamenco Air w ays , Inc. (1987

– 1992).

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

conclude that Air Flamenco ’s management team possesses the managerial skills and technical ability to conduct the proposed operations. 3

Operating Proposal and Financial Plan

If granted the commuter authorization it seeks, Air Flamenco intends to operate scheduled

service four times daily between Isla Grande and Culebra and between Ceiba and Culebra,

Puerto Rico

, using its fleet of 10 Britten

- Norman Islander aircra ft configured for 9 pass enger

seats.

In support of its application, Air Flamenco submitted current and h istorical financial statements demonstrating the company’s results from operation s . The historical profit and loss statements provided by the applicant show that f or calend ar year 2007, the company reported net income of $33,665 on approximately $3.00 million in operating revenues. For calendar year 2008

, the company reported net income of $32,550 on approximately $ 2.59 million in operating

revenues
, and for calendar year 2 009

, the company reported a net loss of $ 95,159 on approximately $ 2.72 million in operating revenues . F or the eight months ending August 31, 2010, the company reported a net loss of $ 15,349 on approximately $ 2.30 million in operating revenues . In additio n, the company’s August 31 , 2010, balance sheet shows that it has

c urrent assets of $ 229,276 and current liabilities of $ 195,275

, giving the company a positive working capital balance of $ 34,001

.

Air Flamenco also provided the Department with a financia l forecast for its first year of scheduled operations. The applicant states that it expects to incur no significant pre

- operating

expenses since it already provides on

- demand air service in the markets it proposes to operate

scheduled service. Air Flamen co provided first

- year expense forecasts of approximately $1.97 million. We have reviewed the applicant’s forecast and find it to be reasonable.

3 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 thos e positions as prescribed in the Federal Aviation Regulations. The FAA’s evaluation of these key personnel provides an added practical and in

- person test of the skills and technical ability of these individuals. The FAA has advised us that Air Flamenco’s key technical personnel are acceptable to that agency in their respective positions.4

Therefore, to meet our fitness test

, 4 we estimate that the company will need access to approximately $ 458,821

. 5 By letter dated December 1, 2010, Banco Santander o f Puerto Rico provided third

- party verification of funds on deposit in the applicant’s name which totals $464,534.28.

In light of the above , we tentatively conclude that Air Flamenco will have acces s to sufficient financial resources to enable it to commence its proposed operations without posing an undue

risk to consumers or their funds. 6

Compliance Disposition

The applicant states that there are no actions or outstanding judgments against it, its owners, or its key personnel nor have there been any charges of unfair, deceptive or anti

- competitive business practice, or of fraud, felony or antitrust violations brought against any of these parties in the past ten years.

In its application, Air Flamenco stated that the FAA issued a lette r of investigation dated August 23, 2010, alleging that t he applicant may have conducted scheduled operations that extended beyond the scope of its air carrier certificate and therefore potentially violated 14 CF R 135.3 (a) ( 1 ) , 135.243 (a), 119.3, 119.5 (g), (i), (k), and (l). This investigation remains under review by that Agency.

Additonally, the Department’s Office of Aviation Enforcement and Proceedings (“Enforcement Office”) is investigating allegations t hat Air Flemenco engaged in unauthorized commuter air carrier operations. That matter is pending and the Enforcement Office has advised us that it has no objections to the approval of Air Flamenco’s application.

Air Flamenco states that , except for the above on

- going enforcement actions

, there are no other pending investigations, enforcement actions, or formal complaints filed by the Department against it, its key personnel, or persons having a substantial interest in it with respect to compliance wi th the Statute or the Department’s regulations. Moreover, o ur review of the applicant ’s compliance disposition has produced no evidence of any compliance issues other

than the matter s stated above

. While we note that there are pending investigation s of t he applicant for alleged violations of federal regulations, it does not appear at this time that any adverse finding in th ese case s would warrant a negative fitness f inding

. We will, however, reconsider our decision in this regard at the conclusion of tho se matters, if necessary.

4 We have generally asked that new entrant applicants have resources sufficient to cover all pre

- operating costs, plus a working capital reserve equal to the operating costs that would be incurred in three months of normal commuter operations. However, because projected operations during one or more of the first three months of anticipated actual air transportation services frequently do not include all costs of operati ons that will be incurred during a normal period of operations, it has been our practice to base our three

- month standard on one quarter of the first year’s operating cost forecast. In calculating available resources, projected revenues may not be used.

5 T he $458,821 noted here is one

- quarter of the applicant’s first

- year expense forecast of approximately $492,000, less the company’s positive working capital balance of $34,001.

6 As is our practice, prior to making any authority awarded to Air Flame nco effective, we will require the company to demonstrate that it continues to have access to the financial resources needed to meet our financial test.5

In light of these circumstances, we tentatively conclude that Air Flamenco has the proper regard for the laws and regulations governing its services to ensure that its aircraft and personnel conform to applicable safety stand ards and that acceptable consumer relations practices will be

followed.

CITIZENSHIP

The Statute requires that authority to engage in air transportation be held only by citizens of the

United States as defined in 49 U.S.C. § 40102(a)(15). The Statute als o requires 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 t he air

carrier must be under the actual co ntrol of U.S. citizens.

As noted earlier, Messrs. Ruben and Francisco Torres

, both of whom are U.S. citizens, are the

sole shareholder s of Air Flamenco

, and Francisco serves as the air carrier’s President

. Moreover,

all of Air Flamenco ’s other key pers onnel are U.S. citizens and t he applicant has provided an affidavit attesting that it is a citizen of the United States within the meaning of the Statute and that it is owned and controlled by U.S. citizens. O ur review of the applicant has uncovered no

re ason to suggest that control of Air Flamenco rests with non

- U.S. citizens.

I n light of the foregoing, we tentatively find that Air Flamenco is owned and actually controlled by U.S. citizens, consistent with 49 U.S.C. § 40102(a)(15) and is fit, willing, an d able to provide

commuter operations, subject to conditions

.

OBJECTIONS

We will give interested persons 14 days following the service date of this order to show cause why the tentative findings and conclusions set forth here should not be made final; answers to objections will be due within 7 days thereafter. We expect such persons to direct their objections, if any, to the application and points at issue and to support such objections with detailed economic analyses. If an oral evidentiary hearing o r 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 Air Flamenco ’s fitness and

C ommuter A ir C arrier A uthorization

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EFFECTIVE COMMUTER AUTHORIZATION

CONDITIONS AND LIMITATIONS

In the event that we find Air Flamenco fit, willing, and able to conduct the proposed scheduled service, we will issue to it a Commuter Air Carrier Authorization. However, that authorization will not become effective until the company has fulfilled all of the requirements for effectiveness as set forth in the Terms, Conditions, and Limitations attached to it. Among other things, this

in cludes (1) our receipt of evidence of Air Flamenco ’s authority from the FAA authorizing such 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 under gone since its fitness was examined, and (4) evidence that Air Flamenco has adequate financial resources available to it.

Moreover, given the limited scope of Air Flamenco ’s proposed operations, we will impose certain limitations on its authorization to p rovide scheduled air transportation as a commuter air carrier. Our finding of fitness for Air Flamenco is based on the operating plans described in its application, namely, utilizing aircraft that can be operated under Part 135. Should Air Flamenco

desi r e to acquire and operate aircraft that would require certif ication from the FAA under

Part 121, our fitness findings, particularly involving the adequacy of Air Flamenco ’s management and financial resources, might no longer apply. Therefore, we propose to limit any authority issued to Air Flamenco to operations conducted under Part 135. Should Air Flamenco desire to operate aircraft that would require certification from the FAA under Part 121, it must first provide the Department with at least 45

- days adv ance notice of such plans and provide updated information establishing its fitness for such expansion.

Furthermore, we remind Air Flamenco 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 commuter 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. Therefore, if Air

Flamenco is issued an effective Commuter Air Carrier Authorization and should it subsequently propose substantial changes in its ownership, management, or operations, it must first co mply with the requirements of section 204.5 of our rules. 7 The compliance of the company with this requirement is essential if we are to carry out our responsibilities under section 41110(e). 8

7 The air carrier may contact our Air Carrier Fitness Division to report proposed substantial change s 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 notifi cation 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 su bstantial 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.

8 We also remind Air Flamenco about the requirements of section 204.7 of our rules. This section provides, among other things, that (1) the commuter 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

dete rmination of its fitness; (2) if the company commences operations for which it was found fit and subsequently ceases such operations, it may not resume commuter operations unless its fitness has been redetermined; and (3) if the company does not resume ope rations within one year of its cessation, its authority shall be revoked for dormancy.7

Additionally, if Air Flamenco 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 commuter flight operations, to the Air Carrier Fitness Division. The submission of a first year progress report 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, principal 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, 9 and a listing of current senior management and key technical personnel. The air car rier should also be prepared to meet with staff members of the Fitness Division to discuss its current and future operations.

ACCORDINGLY,

1. We direct all interested persons to show cause why we should not issue an order finding that Air Charter, Inc. d /b/a Air Flamenco is fit, wi lling, and able under 49 U.S.C. § 41738 to provide scheduled passenger service as a commuter air carrier using small aircraft pursuant to Part 135 of the Federal Aviation Regulations.

2. We direct any interested persons having objections to the issuance of an order making final any of the proposed findings, conclusions, or award of authority set forth here to file them with Department of Transportation Dockets, 12 00 New Jersey Avenue, S E

, Room W12

- 140

, Washington, D.C. 20590, i n Docket DOT

- OST

- 20 10

- 0260 and serve them upon all persons listed in Attachment A no later than 14 days after the service date of this order; answers to objections shall be filed no later than 7 business days thereafter.

3. If timely and properly suppor ted objections are filed, we will accord full consideration to the matters or issues raised by the objections before we take further action. 10

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

waived and we will enter an order making final our tentative findings and conclusions.

5

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

9 These financial statements should include a balance sheet as of the end of the company’s first full year of commuter flight operations and a 12

- month income statement ending that same date.

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

reconsideration.8

6

. We will publish a summary of this order in the Federal Register.

By:

SUSAN L . KURLAND

Assistan t 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 Limit ations

AIR CHARTER, INC

. D/B/A AIR FLAMENCO

is authorized to engage in scheduled passenger air transportation operations as a commuter air

carrier.

This authority is subject to the following provisions:

(1) The authority to conduct scheduled passenge r operations 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 t he 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 rev ised 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 scheduled passenger oper ations, and any advertisement or listing of flights 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 requirements of 14 CFR Part 298 and any other regulations prescribed by the Department of Transportation for the services authorized here, and with such other reasonable terms, conditions, and limitations as the Department of Transportation may prescribe in the public interest.2

(4) The holder’s authority is limited to operations conducted pursuant to Part 135 of the Federal Aviation Regulations. In the event that the holder wishes to institute operations that would require Part 121 certification from the FAA, it mus t first be determined fit for such operations.

( 5 ) The holder may not operate aircraft designed to have a maximum passenger capacity of more than 60 seats or a maximum payload capacity of more than 18,000 pounds.

( 6 ) The holder's authority under this cer tificate is effective only to the extent that such operati ons are also authorized by the 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 insuran ce coverage as required under

14 CFR Part 205. Failure to maintain such insurance coverage will render this authority ineffe ctive, 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 authority.

( 9 ) In the event that the holder receives effective scheduled passenger authority, the following additional conditions will apply:

(a) The holder may reduce or terminate service at any point or between any two points, subject to compliance with the provisions of 49 U.S.C. § 41734 and all orders and regulat ions issued by the Department of Transportation under that

section.

(b) The holder may not provide scheduled passenger air transportation to or from Dallas (Love Field), Texas, except within the limits set forth in section 29 of

the International Air Tran sportation Compet ition Act of 1979, as amended or as modified by any future legislation addressing access restrictions to or from Love

Field.

.

( 10 ) Should the holder propose any substantial changes in its ownership, management, or operations (as that ter m is defined in 14 CFR 204.2(l)), it must first comply with the requirements of 14 CFR 204.5.

(1 1 ) In the event that the holder does not commence actual flying operations as a commuter air carrier under this authority within one year of the date of the De partment's determination of its fitness, its commuter authority shall be revoked for dormancy. Further, in the event that the

 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 th at security is adequate to allow such airport(s) to be served.3

holder commences but subsequently ceases all scheduled passenger operations, the authority granted here 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 such operations within one year of its
cessation, it s commuter authority shall be revoked for dormancy.Attachment A

SERVICE LIST FOR

AIR CH A RTER
, INC

. D/B/A AIR FLAMENCO

FRANCISCO TORRES

PRESIDENT

AIR CHARTER INC

PO BOX 810352

CAROLINA PR 00981 PETER LYNCH AGC

- 300

ASST CHIEF COUNSEL FOR ENFORCE MENT

FEDERAL AVIATION ADMINISTRATION

800 INDEPENDENCE AVE SW

WASHINGTON DC 20591

WILLIAM J WEBER

CERTIFICATION SECTION MANAGER

FAA AFS

- 900

45005 AVIATION DRIVE SUITE 131

DULLES VA 20166 JOAQUIN PUNTONET

PRINCIPLE OPERATIONS INSPECTOR

FEDERAL AVIATION AD MINISTRATION

SAN JUAN FSDO

525 FD ROOSEVELT AVE NUE

SAN JUAN PR 00918

ANNE SUISSA RTS

- 42

OFFICE OF AIRLINE INFORMATION

DOT/RITA/BTS E

- 34

1200 NEW JERSEY AVE SE

WASHINGTON DC 20590 BERNARD STANKUS

OFFICE OF AIRLINE INFORMATION

DOT/RITA/BTS RTS

- 42

1200 N EW JERSEY AVE SE

WASHINGTON DC 20590