Order 2010

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UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

O n the 15 th day of November , 2010

Friendship Airways, Inc. Docket OST 2010

- 0005

d/b/a Yellow Air Taxi

Served November 15 , 2010

Violations of 49 U.S.C. § § 41101, 41712 an d

14 CFR Parts 205 and 298

CONSENT ORDER

This consent order concerns violations by Friendship Airways, Inc., d/b/a Yellow Air Taxi (Yellow Air Taxi), of the Department’s liability insurance coverage rules, as stated in 14 CFR Parts 205 and 298 and related statutory requirements, 49 U.S.C. §§ 41101 and

41712. It directs Yellow Air Taxi to cease and desist from future violations of 14 CFR

Parts 205 and 298 and 49 U.S.C. §§ 41101 and 41712, and assesses the carrier a compromise civil penalty of $30,000.

Applicable Law

Pursuant to 49 U.S.C. § 41101, no citizen of the United States may engage in air transportation without first having been awarded economic authority in the form of a certificate of public convenience and necessity (CPCN) from the Department of Transportati on (Department). Part 298 creates an exemption from the certificate requirement of section 41101 for a class of carriers called commuter air carriers, which as defined by section 298.2 are carriers that carry passengers on at least five round trips per

we ek on at least one route between two or more points according to its published flight schedules with small aircraft. Any person desiring to provide air transportation as a

commuter air carrier must obtain a commuter air carrier authorization from the Depa rtment pursuant to Part 298. Engaging in air transportation without an effective CPCN or a valid exemption, such as that available under Part 298, violates section 411012

and is also considered by the Department to constitute an unfair and deceptive practi ce and unfair method of competition in violation of 49 U.S.C. § 41712.

Section 298.3(b) establishes the prerequisites for commuter air carriers to conduct operations, and specifically section 298.3(b)(4) requires that commuter air carriers have

and ma intain in effect accident liability insurance coverage in accordance with 14 CFR Part 205, and maintain a current certificate of insurance evidencing such coverage on file with the Department. Pursuant to section 298.3(c), the operations of holders of com muter air carrier authorizations who no longer meet the requirements enumerated in section 298.3(b), including that pertaining to liability insurance, are not covered by the Part 298 exemption and are therefore illegal. 1

Further, as stated above, Part 2 05 enumerates the requirements for accident liability insurance coverage needed by direct air carriers. Specifically, section 205.3 prohibits a direct air carrier from engaging in air transportation unless it has in effect aircraft accident liability insu rance. Likewise, section 298.37 prohibits commuter air carriers from engaging in air transportation unless they hold effective liability insurance in

accordance with Part 205.

Facts and Conclusions

Yellow Air Taxi holds a commuter air carrier authoriz ation from the Departmen t pursuant to 14 CFR Part 298. For a period of time in 2010, Yellow Air Taxi’s liability insurance policy or coverage was canceled because of nonpayment of the premium and subsequent to cancellation it continued to operate flights in air transportation for a short period without the requisite liability insurance coverage. Yellow Air Taxi’s commuter

air carrier a uthorization became invalid at the time its insurance coverage was canceled and the flights Yellow Air Taxi operated durin g the time period that it did not hold liability insurance coverage were performed in violation of 49 U.S.C. §§ 41101 and

41712 and 14 CFR 205.3 and 298.37.

Mitigation

In mitigation, Yellow Air Taxi states that its insurance cancellation was not int entional, but rather resulted from a clerical oversight. Yellow Air Taxi states that its management did not know that its insurance was canceled until after it had operated a number of flights, and once management became aware of the cancellation, Yellow Air Taxi immediately ceased operations. Yellow Air Taxi further points out that it has cooperated with the Department throughout this matter, and that it has no prior history of violating

the above

- cited statutes and regulations.

1 T he effectiveness of a CPCN is also conditioned upon maintaining in effect at all times liability insurance coverage in accordance with Part 205. 49 U.S.C. § 41112

.3

Decision

The Enforcement Office has carefully considered the information provided by Yellow Air Taxi and continues to believe that enforcement action is warranted. The Department views compliance with the Federal aviation statutes and regulations very seriously. The

Enforcement Office and Yellow Air Taxi have reached a settlement of this matter in order to avoid litigation. Without admitting or denying the violations described above,

Yellow Air Taxi consents to the issuance of this order to cease and desist from future violations of 14 CFR Parts 205 and 298 and 49 U.S.C. §§ 41101 and 41712, and to the assessment of $30,000 in compromise of potential civil penalties otherwise due and payable pursuant to 49 U.S.C. § 46301.

This compromise assessment is appropriat e considering the nature and extent of the violations described herein and serves the public interest. It represents a strong deterrent against future noncompliance with the Department’s liability insurance coverage rule by

all air carriers.

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

1. Based on the above information, we approve this settlement and the provisions of this order as being in the public interest;

2. We find that Friendship Airways, Inc., d /b/a Yellow Air Taxi, violated 14 CFR 205.3 and 298.37 by engaging in air transportation without effective liability insurance

coverage;

3. We find that by engaging in the conduct described in paragraph 2 above, Friendship Airways, Inc., d/b/a Yellow Air Taxi, failed to meet the requirements for the holders of commuter air carrier authorizations under the Part 298 exemption to 49 U.S.C. § 41101, and as a result operated in violation of 49 U.S.C. § 41101;

4. We find that by engaging in the conduct descri bed in paragraphs 2 and 3 above, Friendship Airways, Inc., d/b/a Yellow Air Taxi, engaged in unfair and deceptive trade practices and unfair methods of competition in violation of 49 U.S.C. § 41712;

5. We order Friendship Airways, Inc., d/b/a Yellow Air Taxi, and all other entities owned or controlled by, or under common ownership and control with Friendship Airways, Inc., d/b/a Yellow Air Taxi, their successors, affiliates, and assigns, to cease

and des ist from further similar violations of 49 U.S.C. §§ 41101 and 41712 and

14 CFR 205.3 and 298.37. Failure to comply with this cease and desist provision

sha ll subject Friendship Airways, Inc., d/b/a Yellow Air Taxi and all other entities

owned or controlle d by, or under common ownership and control with Friendship Airways, Inc., d/b/a Yellow Air Taxi, their successors, affiliates, and assigns to further enforcement action;4

6. We assess Friendship Airways, Inc., d/b/a Yellow Air Taxi, a compromise civil penalt y of $30,000 in lieu of civil penalties that might otherwise be assessed for the

violations describ ed in ordering paragraphs 2, 3 , and 4 above. O f this total penalty amount, $15 ,000 shall be due in three

- equal instal lments. The first payment of $5 ,000 sh all be due and payable within 45 days of the date of issuance of this consent

orde r. The second payment of $5,000 is due and payable on January 17, 2011. The third payment of $5,000 is due and payable on March 17, 2011 . The remainin g $15 ,000 shall becom e due and payable immediately if Friendship Airways, Inc., d/b/a

Yellow Air Taxi , violates this order’s cease and desist or payment provisions during the 12 months following the service date of this order, and Friendship Airways, Inc.,

d/b/a Yellow Air Tax i

, also may be subject to further enforcement action for failure to comply with this order; and

7. Payments shall be made by wire transfer through the Federal Reserve Communications System, commonly known as "Fed Wire," to the account of the U.S. Treasury. The wire transfer shall be executed in accordance with the instructions contained in the Attachment to this order. Failure to pay the compromise penalty assessment as ordered will subject Friendship Airways, Inc., d/b/a Yellow Air Taxi,

to an assessment of interest, penalty, and collection charges under the Debt Collection Act, and to possible enforcement action for failure to comply with this order.

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