Order 2012-5-7

 

 

 

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION 

OFFICE OF THE SECRETARY 

WASHINGTON, D.C.

Issued by the Department of Transportation

On the Ninth day of May, 2012

People Express Airlines, Inc. Docket OST 2012-0002

Violations of 49 U.S.C. § 41101 and 

14 CFR 201.5(a) Served May 9, 2012

CONSENT ORDER

This order concerns the offer and sale of memberships by People Express Airlines, Inc., 

(People Express) in its “Club Travelati” in violation of 49 U.S.C. § 41101 and 14 CFR 

201.5(a). It directs People Express to cease and desist from future violations of these 

provisions and assesses People Express a compromise civil penalty of $10,000. 

Applicable Law

In order to engage directly or indirectly in air transportation, citizens of the United States1

are required to hold economic authority from the Department pursuant to 49 U.S.C. 

§ 41101, either in the form of a “certificate of public convenience and necessity” or in the 

form of an exemption from the certificate requirement. An entity that does not have 

economic authority may not hold out air transportation. Such conduct would constitute 

“engaging” in air transportation and would violate 49 U.S.C. § 41101.2

 In addition, 14 

 

1 A “citizen of the United States” includes a corporation or association organized in the United 

States that 1) meets certain specified standards regarding the citizenship of its president, officers and 

directors, and holders of its voting interest and 2) is under the actual control of citizens of the United States. 

49 U.S.C. § 40102(a)(15). 

2 From the standpoint of the requirements of section 41101, the holding out of air service, as well as 

the actual operation of air service, constitutes “engaging” in air transportation. Prior to 1994, when Title 49 

of the United States Code was recodified and simplified, 49 U.S.C. § 41101 stated that no carrier could 

“engage” in air transportation without appropriate authority. Although the wording of section 41101 now 

states that what is prohibited is “providing” air transportation without authority, Congress made clear when 

it recodified Title 49 that in doing so it did not intend any substantive change to the statute. Act of July 5, 

1994, Pub. L. 103-272, § 6(a), 108 Stat. 745, 1378.

 
2

 

 

CFR 201.5(a) prohibits an applicant for new or amended authority from advertising the 

air transportation covered by its application until the application has been approved by 

the Department. Operating, advertising, or otherwise holding out or selling air 

transportation to the public as a certificated carrier without having such authority violates 

section 41101 and Part 201. 

Background

People Express is a Virginia-based corporation. It does not hold economic authority from 

the Department to engage in air transportation. On March 19, 2012, People Express 

applied for authority to engage in interstate scheduled passenger air transportation. Its 

application is currently pending with the Department. Between February 13 and March 

27, 2012, People Express advertised on its Internet website memberships in its “Club 

Travelati” by offering prospective members, among other things, the opportunity to 

receive after scheduled service began “ULTRA-LOW discount offers” and discount 

certificates to be used towards their first “PEOPLExpressTM ticket for any scheduled 

flight or fare.” As a result, People Express sold more than 130 memberships through its 

website. By advertising and selling club memberships offering future discounts before it 

received effective economic authority for that service, People Express violated 49 U.S.C. 

§ 41101 and 14 CFR 201.5. 

Mitigation

In mitigation, People Express states that it takes full compliance with the Department’s 

consumer protection regulations very seriously. People Express emphasizes that it 

moved immediately and decisively to address the Department’s issues about its Club 

Travelati (“Club”), changing its website to eliminate all substantive web content related 

to the Club within one hour of being informed by the Department of its concerns. People 

Express believes that this response demonstrates its favorable compliance disposition.

People Express maintains that it was not its intent to advertise, hold out, or sell air 

transportation. Rather, People Express asserts that the Club membership offered non-air 

fare and non-air service related benefits, including “first to know” information about the 

company for Charter Club members, as well as a charter member souvenir pin. People 

Express states that it intended the Club to promote interest in the company, not to sell 

airline services. 

People Express states that it did not believe that its offerings constituted advertising, sale 

or holding out of air transportation and that it established safeguards to avoid running 

afoul of the “pre-sales” prohibition in the Department’s regulations by making clear on 

its website and in the Club’s Terms and Conditions that Club membership would not 

become effective (and Club benefits would not arise) until after People Express operated 

its first scheduled departure (which necessarily means that People Express had received 

all of its regulatory approvals and certificates to operate air transportation). People 

Express asserts that its intent was to ensure that no fare or air transportation related 

benefits would accrue or have validity prior to the receipt of regulatory approvals and the 
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commencement of service. Quoting from its website, People Express states that the 

Charter member benefits were limited only to “our pre-launch plans, including all of our 

exciting announcements and events” and that other benefits would not begin until after 

the company began scheduled service. With respect to “ULTRA Low-Fare offers” and 

discount certificates, People Express asserts that only “after we begin our scheduled 

service” would Club members be entitled to later receive fare “offers” or pay $15 for a 

discount certificate.

Finally, People Express states that it has agreed to settle this matter without admitting

violations in order to avoid the burden and expense of litigation and to put this issue 

behind it to avoid any delay to the consideration of its pending application for certificate 

authority before the Department.

DECISION

The Office of Aviation Enforcement and Proceedings (Enforcement Office) has carefully 

considered the information provided by People Express, but continues to believe that 

enforcement action is warranted. The Enforcement Office and People Express have 

reached a settlement of this matter in order to avoid litigation. Without admitting the 

violations described above, People Express consents to the issuance of this order to cease 

and desist from future violations of 49 U.S.C. § 41101 and 14 CFR Part 201 and to the 

assessment of $10,000 in compromise of potential civil penalties otherwise due and 

payable pursuant to 49 U.S.C. § 46301. This assessment is appropriate considering the 

nature and extent of the violations described herein and serves the public interest. It 

establishes a strong deterrent against future noncompliance with the Department’s 

requirements governing the conduct of applicants for certificate authority.

This order is issued under the authority contained in 49 CFR 1.57a and 14 CFR 385.15.

ACCORDINGLY, 

1. Based on the above discussion, we approve this settlement and the provisions of 

this order as being in the public interest;

2. We find that People Express Airlines, Inc., violated 49 U.S.C. § 41101 and 14 

CFR 201.5 by advertising and selling club memberships offering future discounts 

on air travel without having first been granted the authority to engage in 

passenger air services; 

3. We order People Express Airlines, Inc., and all other entities owned or controlled 

by or under common ownership with People Express Airlines, Inc., and its 

successors and assignees to cease and desist from further violations of 49 U.S.C. 

§ 41101 and 14 CFR Part 201; 

4. We assess People Express Airlines, Inc., a compromise civil penalty of $10,000 in 

lieu of civil penalties that might otherwise be assessed for the violation found in 
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ordering paragraph 2, above, which amount shall be due and payable within thirty 

(30) days of the date of the issuance of this order. Failure to pay the penalty as 

ordered shall also subject People Express Airlines, Inc., to the assessment of 

interest, penalty, and collection charges under the Debt Collection Act and to 

possible enforcement action for failure to comply with this order; and

5. Payment shall be made by wire transfer through the Federal Reserve 

Communication System, commonly known as “Fed Wire,” to the account of the 

U.S. Treasury in accordance with the attached instructions.

This order will become a final order of the Department 10 days after its service date 

unless a timely petition for review is filed or the Department takes review on its own 

motion.

BY:

ROSALIND A. KNAPP

Deputy General Counsel

(SEAL)

An electronic version of this document is available at

www.regulations.gov