Order 2013

- 8

- 5

Served: August 19

, 2013

Issued by the Department of Transportation

on the 19 th day of August

, 2013

Application of

SCOTT AIR, LLC

d/b/a ISLAND AIR EXPRESS

d/b/a DESERT SPLASH ADVENTURES

f or a certificate of public convenience and necessity under 49 U.S.C. § 41102 to engage in interstate scheduled air transportation of persons, property,

an d mail Docket DOT

- OST

- 201 2

- 0178

FINAL ORDER

SUMMARY

By this order, we find that Scott Air, LLC d/b/a Island Air Express (“Scott Air”) is fit, willing, and able to engage in interstate scheduled air transportation of persons, property, and mail using small aircraft, 1 and issue to it a certificate of public convenience and necessity subject to the Terms, Conditions, and Limitations attached.

BACKGROUND

By Order 201 3

- 1

- 12 , issued on January 18, 2013

, we tentatively found Scott Air fit to engage in interstate scheduled passenger air transportation using small aircraft. In that order, we also directed interested persons to file objections to the order within 14 days ( i.e., by February 1, 2013).

On Fe bruary 1, 2013, Pacific Airways, Inc.

, and PM Air, LLC ( collectively, the “ Ketchikan Carriers”)

, filed a Petition for Reconsideration and Answer in Docket DOT

- OST

- 2012

- 0178 opposing the Depa rtment’s tentative findings . The Ketchikan Carriers maintain that Scott Air

has continued to violate Federal law and Department regulations by engaging in illegal interstate scheduled air transportation since the company’s inception and after the Department issued a consent order finding that Scott Air was holding out interstate air transportation without

1 “Small aircraft” is defined as any aircraft originally designed to have a maximum passenger capacity of 60 seats

or less or a maximum payload capacity of 18,000 pounds or less. UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.2

Departmental economic authority

. In addition, the Ketchikan Carriers state that the Department’s tentative findings in Order 2013

- 1

- 12 were based “on unproven statements as well as misleading and fraudulent statem ents made in the applicatio n ” 2 that call into question Scott Air’s managerial competence, compliance disposition, and financial condition. Moreover , t he

Ketchikan Carriers assert that should the Department eventually determine that Scott Air is fit,

Scott Air should be issued a commuter authorization instead of a certificate of public convenience and necessity for persons, property, and mail since that Scott Air “neither requested authority to transport mail, nor did it include any mail traffic or review i n its proposed operations.” 3 The Ketchikan Carriers also note that Scott Air did not acknowledge a pending enforcement action in its application for certificate authority

, as required by Department rules. Further, the Ketchikan Carriers request that the Department refrain from any further action regarding the fitness of Scott Air until the ir formal complaint filed in Docket DOT

- OST

- 2013

- 0031 is adjudicated. 4

On February 12, 2013, Scott Air filed a Reply , stating that the Ketchikan Carriers’ objection

sho uld be dismissed . The applicant claims that the Ketchikan Carriers’ submission was filed
late, was procedurally deficient , and lacked material facts supporting the position that Scott Air is unfit to hold certificate authority. Scott Air also notes that the Ketchikan Carriers compete in the single city

- pair market operated by Scott Air (Klawock

- Ketchikan)

.

Further, Scott Air argues that the Ketchikan Carrier’s Answer was “replete with deliberate distortions of fact as well as outright misstatements of fa ct.” 5 For instance, the applicant rebuts

the Ketchikan Carriers’ assertion that the air carrier has no intention of operating interstate air

commerce or transporting mail , stating its “certificate application... indicates the nature of the

certificate authority applied for” 6 and that its “application is clearly one seeking authority to engage in scheduled air transportation of persons, property and mail .” 7 With respect to the allegation raised by the Ketchikan Carriers on the applicant’s failure to ack nowledge the enforcement action with the Department , Scott Air states that its application discusse s receiving

a letter of investigation in July 2012 from the Department and its response to the Department’s

letter in August 2012

, and notes that the Departm ent addresses the investigation, settlement, and

Consent Order 2012

- 12

- 16 in the Compliance Disposition section of its Show Cause Order

. Regarding the fina ncial issues that were raised by the Ketchikan Carriers

, Scott Air provided a detailed response by its Certified Public Accountant, Mr. Roy A. Dwaileebe

, disproving each of the allegations raised

.

On February 22, 2013, the Ketchikan Carriers filed a Response reiterating their position that Scott Air has not proven its fitness to operate interstate air transportation of persons, property, and mail, and providing new information concerning Scott Air ’s lack of compliance with the

2 See Answer of the Ketchikan Carriers, dated February 1, 2013, at 3.

3 Id., at 8.

4 On April 10, 2013, the Department’s Office of Aviation Enforcement and Proceedings dismissed the complaint filed by the Ketchikan Carriers, citing insufficient evidence that Scott Air violated the terms of Consent

Order 2012

- 12

- 16. ( See Order 2013

- 4

- 4)

5 See Reply of Scott Air, at 5.

6 Id

. , at 6.

7 Id., at 7.3

State of Alaska

. 8 The Ketchikan Carriers now reque st the Department to either assign the application to an Administrative Law Judge, deny the application on the grounds of continued lack of compliance and uncertainty about the company’s financial position, or dismiss the application without prejudice unti l the current complaint of continuing transportation of interstate traffic is resolved and Scott Air files a complete application with all the necessary information as required by Department regulations

.

On June 4, 2013, the Ketchikan Carriers filed a Mot ion to Dismiss the application of Scott Air for lack of prosecution and material deficiencies in the information provided

. On June 17, 2013, Scott Air filed an Answer to the Ketchikan Carriers’ Motion, arguing that no new information was presented and thu s, the Department should reject the Ketchikan Carriers’ latest filing and finalize its tentative findings. On June 24, 2013, the Ketchikan Carriers filed a response to Scott’s Answer, requesting that the Department dismiss Scott Air’s application

. On July 26 2013, Scott Air submitted a Notice of Filing requesting that the latest Ketchikan filing not be accepted by the Department.

DECISION

We have reviewed the pleadings in this case and find that Scott Air is fit, willing, and able to engage in interstate scheduled air transportation of persons, property, and mail. Despite the allegations raised by the Ketchikan Carriers regarding Scott Air’s lack of fitness, we find that the material provided by Scott Air in its application was sufficient for u s to make a determination o f the company’s managerial competency, compliance disposition, and financial condition. T he Department reviewed the information submitted by Scott Air in its application and find s that the

information was sufficient for us to de termine the company’s fitness.

Furthermore, in reviewing an applicant’s financial fitness , our primary focus is on evidence that the applicant fully understands and has reasonably estimated the costs involved in providing the proposed operations, and th at it has available to it resources sufficient to meet our financial fitness requirements to cover those expenses. Scott Air’s forecast that it includ ed in its application is for operations it currently provides . The forecast include d revenue assumptions and more importantly, cost assumptions that indicate to the Department that the air carrier had taken into account the major financial cost drivers required to operate as a certificated air carrier

. Additionally, as is our practice, p rior to making any authority awarded to Scott Air effective, we will require the company to demonstrate that it continues to have access to the financial

resources needed to meet our financial fitness test.

Other than the arguments mentioned above, w e fin d no found no new arguments or evidence that have not been considered or addressed in this proceeding that would require a hearing by an Administrative Law Judge or lead us to conclude that Scott Air is not fit to engage in interstate scheduled air transpo rtation of persons, property, and mail. Therefore, by this order, we confirm

8 See Response of the Ketchikan Carriers, dated February 22, 2013, at 13. The Ketchikan Carriers submitted as Appendix A, a copy of Scott Air’s current corporate status report filed with the Alaska Department of Commerce, Community, and Economic Development which shows Scott Air’s corporate status as “non

- compliant.” I n this particular instance, “non

- compliance” means that Scott Air did not file a biennial report with the Alaska Department

of Commerce.4

out tentative findings in Order 2013

- 1

- 12, and find Scott Air fit to engage in interstate scheduled passenger air transportation.

ACCORDINGLY,

1. We find that Scott Air, LLC is fit, willing, and able under 49 U.S.C. § 41102 to provide

interstate schedule d air transportation of persons, property, and mail using small aircraft pursuant

to Part 135 of the Federal Aviation Regulations

.

2. We issue a Certificate of Public Conveni ence and Necessity to Scott Air, LLC, subject to the Terms, Conditions, and Limitations attached.

3. W e dir ec t Scott Air, LLC, to submit to the Air C a rr ier F i t n e ss Division a fi r st y ea r
p r o g r e ss r e port 9 w i th i n 45 d a y s following the e nd of i t s fi r st y e a r of a c tual certificated flight

op e r a t i ons using small a ir c r a ft.

4. We dismiss the Motion filed by Pacific Airways, Inc. , and PM Air, LLC , on June 4, 2013, requesting the Department to dismiss Scott Air, LLC’s application.

4

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

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

9 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 and part

- time employees), a summar y of how these operations have changed d uring the year, a discussion of any changes it anticipates from its current operations during its second year, current financial statement, 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

.

# Certificate of Public Convenience and Necessity for

Interstate Air Transportation

This Certifies That



## SCOTT AIR, LLC

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 air transportation of persons, prop erty, and mail.

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

By Direction of the Secretary

Issued by Order 2013

- 8

- 5 Susan L. Kurland

On August 19, 201 3 Assistant Secretary for Effective (See Attached) Aviation and International AffairsAttachment 

### Terms, Conditions, and Limitations

SCOTT AIR, LLC

is authorized to engage in interstate 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 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 com pliance 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 cov er 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), issue tickets for the operations proposed under this certificate, or enter into contracts with charter operators, and any advertisement by the holder must prominently state: "This service is subject to receipt of governm ent operating authority."

(3) The holde r ’ s authority is limited to operations pursuant to Part 135 of the Federal Aviation Regulation. In the event that the holder wishes to institute operations that would require Part 121 certification from the FAA , it must first be determined fit for such operations.

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

(5 ) 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 Trans portation may prescribe in the public interest.2

(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 re quirements concerning security. *

(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. Fai lure 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 rev oke 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 changes in its ownership, manag ement, or operations (as that term is 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 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 fitn ess to do so has been redetermined by the Department. Moreover, if the holder does not resume operations within one year of its cessation, its authorit y shal l be revoked for dormancy.

* To assure compliance with all applicable U.S. Government requirements concerning security, the holder shall, before

comm encing 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 i s adequate to allow such airport(s) to be served.Appendix A

SERVICE LIST FOR SCOTT AIR, LL C.

MR PIERRE MURPHY

ATTORNEY FOR SCOTT A IR LLC

1200 NEW HAMPSHIRE A VE NW

SUITE 800

WASHINGTON DC 20003 6 MARK MAZOR

FEDERAL AVIATION ADMINISTRATION

45005 AVIATION DRIVE AFS

- 900

SUITE 131

DULLES VA 20166

MR SCOTT VAN VALIN

SCOTT AIR LLC

PO BOX 1174

CRAIG ALASKA 99921 MR PETER J LYNCH

ASSISTANT CHIEF COUN SELFOR

ENFORCEMENT AGC

- 300

FEDERAL AVIATION ADM INISTRATION

800 INDEPENDENCE AVENUE SW

WASHINGTON DC 20591

MR TROY MCCLANAHAN

PRINCIPAL OPERATIONS INSPECTOR

FEDERAL AVIATION ADMINISTRATION

3032 VINTAGE PARK BOULEVA RD

SUITE 106

JUNEAU ALASKA 99801

MARK ATWOOD

HAWAII ISLAND AIR IN C

THE ARMY AND NAVY BU ILDING

1627 I STREET NW

SUITE 1100

WASHINGTON DC 20006

GARY GAROFALO

ISLAND AIRLINES LLC

GAROFALO GOERLICH & HAINBACH

1200 NEW HAMPSHIRE A VE NW

SUITE 800

WASHINGTON DC 20036

MICHAEL CARNEY

KETCHIKAN INTL AIRPORT

1000 AIRPORT TERMINAL WAY

KETCHIKAN AK 99901 REGIONAL COUNSEL, AA L

- 7

FEDERAL AVIATION ADM INISTRATION ALASKAN REGION HEADQ UARTERS

222 WEST 7 TH AVENUE SUITE 14

ANCHORAGE ALASKA 9 9513

OFFICE OF AIRLINE INFO

DOT/RITA/BTS E

- 36

- RTS

- 42

1200 NEW JERSEY AVENUE SE

WASHINGTON DC 20590

ROBERT SANFORD

PRESIDENT

REDEMPTION INC

D/B/A ISLAND AIR SERVICE

PO BOX 125

KODIAK AK 99615

TIM LACOUR

AIRPORT MANAGER

KLAWOCK AIRPORT

PO BOX 91

CRAIG AK 9 9921