Order 2010

- 8

- 4

Served: August 5, 2010

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 5 th day of August

, 2010

Fitness Determination of

GULF COAST AIRWAYS, INC.

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

- OST

- 2009

- 0249

ORDER TO SHOW CAUSE

PROPOSING ISSUANCE OF COMMUTER AIR CARRIER AUTHORITY

Summary

By this order, we tentatively find that Gulf Coast Airways, Inc. (“ GCA” )

, 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 “ Transportation Code”) and section 298.21(d) of the Department’s Aviation Economic Regulations (14 CFR 298.21(d)) direct us to determine whether companies proposing to provide scheduled passenger service as commuter air carriers are “fit, willing, and able to perform the service,” a nd to 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 Deregulatio n 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 managerial

sk ills 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 Transportation Code and regulat ions imposed by federal and state agencies. We must also determine that the applicant is a U.S. citizen.

On October 20, 2009, GCA , an on

- dema nd air taxi operator serving the State of Florida and holding a Part 135 Federal Aviation Regulation (“FAR”) op erating certificate from the FAA and operating under Part 298 of the Department’s regulations (14 CFR 29 8 )

, filed an application in

Docket DOT

- OST

- 200 9

- 0249 for authority to conduct scheduled passenger operations as a

commuter air carrier. The air carrier accompanied its application with fitness information2

required by section 204.3 of our regulations and supplemented its application with additional

info rmatio n on January 7, February 18, April 22, and April 27, 2010. 1

No a nswers opposing GCA ’s application were filed and no special 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 tentativel y conclude that GCA 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 concl usions.

FITNESS

The Company

GCA was incorporated under the laws of the State of Florida in August 1998 by Mr. Bahram

Owliaei

. Initially operate d as a flight school, GCA evolved its air charter busine ss and in September 2000, the FAA certifi cat ed the air carrier to provide on

- demand air transportation. The company was sold to eight partners in 2000, one of which was GCA’s current owner, Mr. Joel T. Johnson, Jr. , a U.S. citizen. Mr. Johnson bought out the other seven partners in 2002 and now wholly ow ns GCA. GCA now seeks to become a commuter air carrier and operate

scheduled service between Naples and Key West, Florida. The air carrier’s future destinations include Miami and Sarasota, Florida.

Managerial Competence

GCA management and key technical personnel consist of the following individual s. Each have certified they are U.S. citizens

.

Mr. Joel T . Johns on , Jr.

– President, Director of Operations

, and Manager

Mr. John E. Fuller

– Chief Pilot

Mr. David M. Montgomery

- Director of Maintenance

Mr. Joel T . Johns on , Jr. is President , Director of Operations, and Manager of GCA (199 8

- present) and is also the o wner and President of Gulf Co ast Aircraft, Inc., an aircraft

maintenance provider (1998

- present)

. He was previously the President and o wner of J&S

Aircraft Inc

. , (1985

- 2009) and President of Gulf Aircraft Leasing, I nc

. , an aircraft leasing firm ( 1988

- 1998). Mr. Johnston also worked as a Sales Manager for Connair, Inc. (1980

- 1984), and

as a Field Mana ger for A.C. Nielsen Company (1972

- 1980)

.

Mr. John E. Fuller

, an Airline Transport Pilot, has been GCA ’s Chief Pilot since 200 5 and has

over 25 years of flight experience and has logged over 18,500 hours of flight time

. He is also a

1 On April 27, 2010, GCA filed a motion requesting confidential treatment under 14 CFR 302.12 (Rule 12) of our Procedural Regulations for personal financial statements that the air carrier had provided with its fitness application. By letter dated May 20, 2010, the Department partially granted confidential treatment to GCA with instructions that certain information be redacted and filed in the publi c docket, which the applicant complied with on May 26, 2010

.3

certifi cat ed Ground Instructor and Flight Engineer

. Mr. Fuller previously was employed as a line pilot for Continental Airlines, Inc. (1985

- 2005) , and was also President of Fuller Seed Co., Inc

. (1975

- 1984), co

- owner of Lincoln Aviation, Inc. (1973

- 1978), and a Captain in t he Illinois
National Guard’s 170 th Tactical Fighter Squadron (1971

- 1977).

Mr. David M. Montgomery

, Director of Maintenance for GCA, has over 29 years of e xperience

in airline maintenance as a certified Airframe and Po werplant Mechanic. He is also employed by

R exAir Sales and Leasing ( 2007

- present) as its Director of Maintenance. Mr. Montgomery most recently was a self

- employed maintenance inspec t or (2005

- 2007), and has also held Aircraft Mechanic and Inspector positions at various Part 135 /121 ai rcraft maintenance service providers including Prime Planes Inc. ( 2004

- 2005), GCA (2003

- 2004 )

, Na ples Air Center (2001

- 2003 ), Aerojet Service Center ( 1998

- 2001 ), Doug Bagley Co. ( 1997

- 1998 and 1994

- 1996), Commodor

Aviation Inc. (1996

- 1997) , Peninsu la Avionics (1991

- 1994), T amiami Je t Center Flight School (1989

- 1991), Amerifligh t (1988

- 1989), and Barken International ( 1988

- 1988). Mr. Montgomery also served in the United States Air Force as a Turboprop Propulsion Mechanic (1981

- 1987)

.

In view of the ex perience and background of the applicant’s key personnel, we tentatively

conclude that GCA has demo nstrated that it has both key management and technical personnel who have the managerial skills and technical ability to support its proposed operations

. Mo reover
, the FAA has advised us that all of the applicant’s key personnel have been found qualified to hold their respective positions. 2

Opera ting Proposal and Financial Condition

GCA is currently operating as an on

- demand air taxi and has now requested commuter authority

to conduct scheduled passenger operation s between Key West and Naples, Florida. The air

carrier submitted a plan for its first year of scheduled operat ions that stated it would initiate one additional flight pe r week to suppl ement the 4 weekly flights currently being operated. GCA intends to perform its schedule with its existing aircraft

– a five

- seat Piper Aztec

, wit h no plans

to add a second aircraft to its fleet.

In establishing financial fitness, the Department typically asks an applicant to demonstrate that it has access to financial resources sufficient to cover its pre

- operating expenses and any negative working capital balance, plus a working capital reserve e qual to the operating costs that are reasonably projected to be incurred during three months of “normal” operations. Because projected expenses during the first several months of air service frequently do not include all costs that will be incurred during a “normal” period of operations, it is our practice to base our

three

- month test on one

- quarter of the first year’s operating costs. Further, in calculating available resources, projected revenues may not be used.

F inancial statements submitted in supp ort of GCA’s fitness show that for calendar year 2009,

GCA lost $10,727 on approximately $143,819 in operating revenues. The applicant’s balance

2 Before authorizing a n 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 those 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 all of the indi viduals holding key technical positions with CSA are qualified and have been approved for those positions.4

sheet at December 31, 2009

, shows that the company has current assets and current liabilities of $1,147 and $1 62,697

, respectively, indicating negative working capital of $161,550

. The company’s historic financial statements show a $ 7, 970 profit and a $41,632 loss for calendar years 2007 and 2008, respectively.

The air carrier also provided forecasts of expenses associated with its proposed scheduled operations. GCA states that it has no pre

- operating costs or startup costs as the company initially began operations i n 2000 and has the existing infrastructure required to operate as a scheduled

commuter airline . It projects its first year expenses will total approximately $154,600

. Based on

this forecast , we estimate that GCA will require about $ 200,200 to meet our financial fitness

criteria. 3

To support any funding requirements, GCA’s owner, Mr. Joel T. Johnson, provided a statement indicating that he would provide any funding for the airline on as “as needed” basis from a stock

account. In support of this statemen t, the air carrier submitted verification from its accounting firm on February 18, 2010, stating that $70,000 in liquid assets and approximately $6.5 million in unrestricted stocks and bonds were in Mr. Johnson’s personal accounts. GCA also provided a

letter dated April 26 , 2010

, fr om Mr. Johnson’s stockbroker verifying the avail ability of funds.

We have reviewed the forecasts provided by GCA and find them to be reasonable. Moreover,
we have reviewed GCA’s financial statements. Because the applicant provided additional

evidence t hat other assets will be available to support the proposed operations, we tentatively

conclude that GCA will have access to sufficient financial r esources to enable it to commence its proposed operations without posing an undue risk to consumers or their funds

. 4

Compliance Disposition

The applicant states that there are no actions or outstanding judgments against it, persons holding a substantial interest in it, or its key personnel, and that none of these parties have been the subject of any charges of unfair, deceptive or anti

- competitive business practices, or of fraud, felony or antitrust violations, or other legal action during the past ten years. The air carrier al so states tha t there are no pending investigations, enforcement actions, or formal complaints involving the applicant, persons holding a substantial interest in it, or its key personnel with respect to compliance with the Statute or the Department’s regulations.

The FAA advises us that it is working with GCA in connection with the applicant's efforts to

obtain commuter operating authority from that agency, and it knows of no reason why we should

not find GCA fit. Additionally, our review of FAA records indicates that GCA has not been involved in any accidents or incidents since it initially commenced operations.

3 The $200,200 noted here is one

- quarter of the applicant’s forecast of approximately $154,600 in first year expenses equaling $38,650, plus $161,55 0 in negative working capital.

4 As is our practice, prior to making any authority awarded to GCA effective, we will require the company to

demonstrate that it continues to have the financial resources needed to meet our financial fitness criteria.5

In light of these circumstances, we tent atively conclude that GCA has the proper regard for the laws and regulations governing its services to ensure that its aircraft and personnel conform to applicable safety standards

, and that acceptable consumer relations practices will be followed.

CITIZENSHIP

Section 41102 of the Transportation Code requires that authority to engage in air transportation

be held onl y by citizens of the United States as defined in 49 U.S.C. § 40102(a)(15). That section also requires that the president and two

- thirds of the Board of Directors and other managing officers be U.S. citizens and that at least 75 percent of the voting stock be owned by

U.S. citizens. The air carrier must actually be controlled by U.S. citizens.

As noted earlier, GCA was incorporated under the laws of the State of Florida in August 1998 by

Mr. Bahram Owliaei

, and was then sold to eight partne rs in 2000, one of which was GCA’s

current owner, Mr. Joel T. Johnson, Jr. Mr. Johnson bought out the other seven partners in 2002.

The record shows that as GCA’s sole owner and president, Mr. Joel T. Johnson, Jr., and all othe r key personnel of GCA are U.S. citizens. The applicant has also provided an affidavit attesting

that it is a citizen of the United States within t he meaning of the Statute. Ad ditionally , our review of the applicant’s citizenship has uncovered no reason to suggest that c ontrol of GCA

rests with non

- U.S. citizens.

I n light of the foregoing, we tentatively find that GCA is owned and actually controlled by U.S. citizens, consistent with 49 U.S.C. § 40102(a)(15) and is fit, willing, and able to provide the proposed interstate 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 b e 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 or discovery procedures are

r equested, 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 p leadings. 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 sho uld 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 GCA ’s fitness and certification.

EFFECTIVE COMMUTER AUTHORIZATION & LIMITATIONS

If GCA is foun d fit and issued the commuter authority it seeks, its authority will not become effective until the company has fulfilled all requirements for effectiveness as set forth in the

terms and condit ions attached to its commuter authorization . Among other things, this includes our receipt of evidenc e that GCA has been cert ifi cat ed by the FAA to engage in the proposed6

operations, a fully executed OST Form 6410 evidencing liability insurance coverage that meets the requirements of section 205.5(b) of our rules for all of its aircraft, third

- party verif ication of available funding necessary to meet the Department’s fitness requirements, and a statement of changes it may have undergone since its fitness was examined. In addition, consistent with the applicant’s proposed operations, we propose to limit an y authority issued to GCA to operations using aircraft that can be operated under FAR Part 135 (that is, aircraft with no more than 9 seats in scheduled passenger operations). Should GCA desire to acquire and operate larger aircraft that would require cer tification from the FAA under 14 CFR Part 121, our fitness findings might no longer apply. Therefore, should GCA 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 advance notice of such plans and provide updated information establishing its fitness for such expansion.

Furthermore, we remind GCA of the requirements of 49 U.S.C. § 41110(e). Specifically, that section requires that, once a n air carrier is found fit initially, it must remain fit in order to hold its authority. To be assured that c ommuter air carriers continue to be fit after effective authority has been issued to them, we require that they supply information describing any subse quent substantial changes they may undergo in areas affecting fitness. Therefore, if GCA is issued an effective commuter authorization and should it subsequently propose substantial changes in its ownership, management, or operations, it must first comply with the requirements of section

204.5 of our rules. 5 The compliance of the company with this requirement is essential if we are to carry out our responsibilities under section 41110(e)

. 6

Additionally, if the air carrier is granted effective authority, it would be required to submit a

detailed progress report, within 45 days following the end of its firs t year o f commuter flight operations, to the Air Carrier Fitness Divis ion. The submission of a first

- year progress repor t is conditioned upon all new ly authorized commuter air carriers and was adopted as policy by the Department to aid in monitoring the fitness of new air carriers. The report should include a description of GCA ’s current operations (number and type of airc raft, principle 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, 7 and a listing of current senior management and key technical

5 GCA may contact our Air Carrier Fitness Division to report proposed substantial changes 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 notification of any proposed change in ownership, restructurin g, or recapitalization. If GCA fails to file this updated

information or if the information fails to demonstrat e that the air carrier will continue to be fit upon implementation of the substantial change, the Department may take such action as is appropriate, including enforcement action or steps to modify, suspend, or revoke the air carrier's commuter authority.

6 We also remind GCA 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 determination 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 operations within one year of its cessation, its authority shall be revoked for dormancy.

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

- month income statement ending that same date.7

personnel. The air carrier 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 Gulf Coast Airways, Inc.

, is fit, willing, and able under 49 U.S.C. § 41738 to provide scheduled passenger service as a commuter air carrier.

2. We direct any interested persons having o bjections 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, 1200 New Jersey Avenue, SE, Washington, D.C. 20590, in Docket DOT

- OST

- 2009

- 0249 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 days thereafter.

3. If timely and properly supported objections are filed, w e will accord full consideration to the matters or issues raised by the objections before we take further action. 8

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 f inal our tentative findings and conclusions.

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

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

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:

h ttp: // www. regulations .gov

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

reconsideration.

### Attachment 

### SPECIMEN

Terms, Conditions, and Limitations

Gulf Coast Airways, Inc.

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 passenger 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 the holder's Air Carrier Certificate and Operations Specifications authorizing such operations from the Federal Aviation Administration (FAA).

(b) A certificate of insuran ce 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, o r compliance 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 t o 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 k ind (i.e., cash, check, or credit card) or issue tickets for scheduled passenger operations, 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, condit ions, and limitations as the Department of Transportation may prescribe in the public interest.2

(4) 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 p ounds.

(5) 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 Par t 121 certifcatio n from the FAA, it must first be determined fit for such operations.

(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

al l 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 insurance coverage as required under 14 CFR Part 205. Failure to maintain such insurance coverage will render this authority 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 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 regulations issued by the Department of Transportation under that

section.

(b) The hol der 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 Transportation Competition Act of 1979, as amended by section 337 of the Department of Transportation and Related Agencies Appropriations Act, 1998.

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

f 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 Department's determination of its fitness, its commuter authority shall be revok ed for dormancy. Further, in the event that the 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

 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 f oreign 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 is adequate to allow such airport(s) to be served.3

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, its commuter authority shall be revoked for dormancy.Attachment A

SERVICE LIST FOR GULF COAST AIRWAYS, INC.

MR JOEL T JOHNS ON

CEO

GULF COAST AIRWAYS INC

526 TERMINAL.DRIVE

NAPLES MUNICIPAL AIRPORT

NAPLES FL 34104 MS MARIANNE SEGUIN RTS

- 42

OFFICE OF AIRLINE

INFORMATION

DOT/RSPA/BTS E

- 36

1200 NEW JERSEY AVENUE SE

WASHINGTON DC 20590 MR WILLIAM WEBER

CERTIFICATION SECTION

MANAGER

FAA AFS

- 900

45005 AVIATION DRIVE

SUITE 131

DULLES VA 20166

MR FELIX MOLINA

SOUTH FLORIDA FSDO

- 19

FAA

2895 SW 145 TH AVENUE

MI RAMAR FL 33027 MR CLAY MORITZ RTS

- 42

OFFICE OF AIRLINE

INFORMATION

DOT/RSPA/BTS E

- 36

1200 NEW JERSEY AVENUE SE

WASHINGTON DC 20590

MR PETER LYNCH

AGC

- 300

FAA ASST CHIEF COUNSEL FOR

ENFORCEMENT

800 INDEPENDENCE AVE SW

WASHINGTON DC 20591 MR BERNARD STANKUS

OFFICE OF AIRLINE

INFORMATION

DOT/RSPA/BTS E

- 36

1200 NEW JERSEY AVENUE SE

WASHINGTON DC 20590