BEFORETHE DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASIDNGTON, D.C. 

### ) 

### Application of ) ) 

### HARRIS AIRCRAFT SERVICES, INC. ) Docket DOT-OST-2014-0145 ) 

### for a certificate ofpublic convenience and ) necessity pursuantto 49 U.S.C. §41102 ) to engage in interstate scheduled air ) transportation ofpersons, property and mail )

CONSOLIDATED REPLY OF HARRIS AIRCRAFT SERVICES,INC. TO ANSWERS TO APPLICATION FOR A CERTIFICATE OF PUBLIC CONVENIENCE & NECESSITY 

### Communications with respect to this document shouldbe sentto: R. Scott Harris President Harris Aircraft Services, Inc. 400 Airport Road Sitka, AK 99835

September29, 2014 

### Pierre Murphy Law Offices ofPierre Murphy 1200 New Hampshire Avenue, NW Suite 590 Washington, DC 20036 Telephone: (202) 776-3980 Facsimile: (202) 776-3975 Email: pmurphy@lopmurphy.com Attorney for Harris Aircraft Services, Inc.

### BEFORE THE DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C. ) Application of ) ) HARRIS AIRCRAFT SERVICES, INC. ) Docket DOT-OST-2014-0145 } for a certificate ofpublic convenience and ) necessity pursuant to 49 U.S.C. §41102 ) to engage ininterstate scheduled air ) transportation ofpersons, property and mail )



### CONSOLIDATED REPLY OF HARRIS AIRCRAFT SERVICES, INC. TO ANSWERS TO APPLICATION FOR A CERTIFICATE OF PUBLIC CONVENIENCE & 

### NECESSITY
Pursuant to Subpart B ofthe Department's ("DOT") procedural regulations, 14 C.F.R. §302.204(b), Harris Aircraft Services, Inc. ("Harris Air") hereby submits this consolidated reply to the answers filed herein. BACKGROUND Harris Air is a small,1family-owned, FAAPart 135 Alaskaintra-state commuter operating a fleet offour (4) small aircraft. Basedin Sitka, AK, Harris Airhas since 1999 been providing Alaska intra-state air
.services between a number ofcommunities inthe Southeast Alaskaregion, including long-standing Essential Air Service ("EAS") inone market. 

### Hams Air has applied for a DOT inter-state Certificate, providing all ofthe required information. 

# As is

16 full-time employees, plus 10 part-time employees, and 1 seasonal employee

### REPLY OF HARRIS AIRCRAFT SERVICES,INC
common with any number ofAlaska intra-state Part 135 operators which have overthe years applied for DOT inter-state Certificates but where the essential nature oftheir intra-state scheduled operations will actually remain unchanged after certification, there will similarly be no change in Harris Air's FAAPart-135-authorized intra-state scheduled operations. As set forth in its application, Harris Air's existing intra-state operations inthis Southeast region ofAlaska will continue as currently operated.

Over a dozen answers in strong support ofHarris Air's application were filed byvarious relevant constituents and interestedparties who all, for many years now, have relied onHarris Air's intra-state services, including: Rep. Kreiss-Tomkins, the local representative to the Alaska Legislature, plus the Cities ofPelican, Port Alexander and Klawock, and the City & Borough of Sitka. Other commenters in support include various local businesses and the local school district who for many years have all relied onHarris Air's intra-state commuter services and continueto do so.

Incomparison to the numerous constituents' filings stronglyin support, only one answer in oppositionwas filed. As has unfortunately become almost routine when any Alaska intra-state operator seeks DOT inter-state certificate authority, a carrier objection was filed. The lone objector was AirExcursions, LLC ("Air Excursions" or "Objector"), whose own 2008 equivalent DOT certificate application attracted a similar opposition filed by a local operator which already

2REPLY OF HARRIS AIRCRAFT SERVICES, INC held DOT certificate authority.2 That carrier objectorfor its own commercial reasons did not wantAir Excursions to hold any certificate authority and, unsuccessfully, raised arguments similar to those raised herein.

ARGUMENT That Air Excursions for some reason does notwant Harris Airto hold a certificate is patently clear from its September 15 answer. However, as was the case with its own successful certificate application strenuously objectedto by the certificated local operator, Objector's arguments herein are similarly baseless. Whereas Objector's answer is long onrhetoric and hyperbole, 3 it is short onrelevant facts.



### I. DOT Show Cause Order 2014-3-2 Does Have Some Bearing onFitness Herein The Objectorfirst accuses Harris Air ofa "failed attempt to avoid close scrutiny" (Answer, p. 1) and offalsely asserting that there has beenno significant changes in Harris Air's status or operations since the Show Cause Order issued approximately 6 months ago. Farfrom being "patently inaccurate" (Answer, p. 2), and apart from currently operating a slightly smaller fleet thanwas the case in 2013 (4 aircraft instead of5), there has in fact beenno significant

2 See: Air Excursions, LLC (Docket DOT-OST-2008-0318). 3 The sole Objector's 11-page answer is replete with inaccuracies as well as rhetoric and hyperbole ("patently inaccurate", "fundamental inconsistency'', "failed attempt to avoid close scrutiny ofthis Application", "seal'chhigh and low", "disingenuouslytailored", "floutingthe Department's regulations", "unrealistic and deceptive", "premeditated deceptive business practice", "Harris operates a' Cab' scheme" [inappropriate and insensitive language deleted and not repeated], "tortured and logistically impossible", "unrealistic or deceptive scheduling", "deafeningly silent", "playing fast and loose with the facts", "replacing claritywith doubt". 3

### REPLY OF HARRIS AIRCRAFT SERVICES, INC change at Harris Air.

DOT Show Cause Order 2014-3-2 speaks for itselfand was issued over the strenuous objection ofanother certificated operator (whichhas not objectedherein). As regards the current Objector herein, curiously it was only after the issuance ofthe March 2014 Show Cause Order that it also filed strenuous objections essentially similarto those filed herein. Infact, apart from the slightly smaller fleet-size today, the only other "change" ofwhich Harris Air is aware since Objector's March 18,2014 objectionto the March 2014 Show Cause Order is Objector's principals'4 unsuccessful attempt in late March/April to acquire the assets ofHarris Air. See: Infra.

Whereas there are very slight differences inthe operational and other status ofthe companytoday when comparedto when it was tentatively found fit earlierthis year, including a slightly smaller aircraft fleet being operated, Harris Air's application indicated those minor changes and its current intra-state Alaska operations remain substantially unchanged from 2013, including type ofF AA commuter authority held, routes served, service frequency, numbers of employees employed, etc.

II. Harris Air's Proposal Meets the Financial Fitness Test Contrary to Objector's assertions, Harris Air's application meets the Department's

4 Mr. Kent Craford & Mr. Mike Stedman 4

### REPLY OF HARRIS AIRCRAFT SERVICES, INC financial fitness test. (i) Pre-Operating 

### I Startup Expenses Objector states that Harris Airhas improperly failed to include anypreoperating or other start-up expenses in its service proposal. However Objector fails to acknowledge that Harris Air will in fact incur no startup expenses since it already holds all ofthe FAAPart 135 scheduled commuter authority required.

In comparisonto Harris Air, it is noteworthy that in each ofits 2001 and 2009 fitness certifications Objectorheld only intra-state, on-demand/airtaxi FAA authority at the time it applied for DOT interstate authority. Objector in its certification cases consequently didhave pre-certification costs whichhad to be incurred, and therefore were required to be taken into account inmeeting the Department's financial fitness test inthose certifications. By contrast, Harris Airis and for some time nowhas operated as a Part 135 intra-state commuter as stated in its application herein.5



### Inadditionto the lack ofany pre-operating certification costs, Objector also attempts to take issue with certain otherunspecified pre-operating/start-up expenses related to "certain outstations, training employees and operating aircraft." Since Harris Air will be continuing with its existing intra-state services, there are to be no changes inemployee numbers ortraining, all

5 Under its FAA FAR 135 intra-state commuter certificate there is a listing at C0701 & 0702 ofeach airport "authorizedfor scheduled operations" byHarris Air. These are the airports Harris Air currently serves p uantto its FAA commuter authority. 5REPLY OF HARRIS AIRCRAFT SERVICES,INC outstations have been long-established and approved by FAA, there are no additional aircraftto be acquired, no additional operating expenses to be incurred, no new additional advertising or marketing expenses and whatever DOTreporting systems requirements, Harris Air already owns the reporting systems software. So as was the case withthe lack ofF AA certification expenses, there will be no otherpre-operating/start-up expenses.

This case is no different from other Alaska intra-state commuters applying for DOTinterstate certificate authority. As was recognized bythe Department in another Alaska intra-state Part 135 commuter applying for DOTinter-state authority: "[applicant] is not expanding its current operations and is instead requesting an inter-state certificate to continue its scheduled and charter operations
. . . in Alaska. Therefore we agree withthe companythat no pre-operating costs will be incurred and that its first-year operating expenses are sound based on [applicant's] past experience." Scott Air, LLC, DOT Show Cause Order 2013-1-12 atp. 4 & DOT Final Order 2013-8-5 (Docket DOT-OST-2012-0178).
Harris Air is inthe same situation as regards the lack ofany pre-certification or other start-up expenses. 

### (ii) Operating Expenses Next, Objector attempts to make much ofa "significantreduction in Year 1 operating expenses forecast (2.58 millionv. 2.23 million)" relying onHarris Air's 2013 application (Answer, p. 4).
However, as is indicated inthe application and as Objector well knows, the difference in 6REPLY OF HARRIS AIRCRAFT SERVICES,INC projected operating expenses Objectortries to make is hardly significant or in any way nefarious, such difference being accounted for bya simple difference inthe number ofaircraft currently being operated and to be operated. Atthe time ofHarris Air's April 2013 application 18 months ago, Harris was operating, and was projectedto continue operating in 2013/2014, a fleet offive (5) aircraft as reflected in its FAAPart 135 Ops Specs in effect at thattime. In its recentAugust 25, 2014 application, Harris Air is operating, and isprojected to continue operating in 2014/2015, a fleet offour (4) aircraft as is reflected in its FAA Part 135 commuter Ops Specs currently in effect. This approximately 13.5% difference in overall projected operating costs, which projected operating costs are based onHarris Air's actual operating costs inprioryears,6 is accounted for bythe difference in number ofaircraft actually operated. (iii) Harris Air's Balance Sheet Next, Objector attempts to make an issue regarding Harris Air's current Balance Sheet. Howeverthe current Balance Sheet is sound, meets the financial fitness test, and is fairly typical for this type ofestablished, operating carrier.

Harris Airhas provided detailed financial results for theperiods 2011, 2012, 2013 and for the period ending May 30, 2014.7 These included P&L statements and Balance Sheets. Also provided was a current Balance Sheet dated as ofAugust 14, 2014. 8 

### In support ofits fitness,

6 See: DOT Order 2013

-1-12 at page 4, supra. 7 See: Exhibit HAS-7. 8 See: Exhibit HAS-8. 

### 7REPLY OF HARRIS AIRCRAFT SERVICES, INC Harris Air's August 14,2014Balance Sheet shows total current assets of$997,276 andtotal current liabilities of$213,096 giving the air carrierpositive working capital of$784,180. Id. 9 In addition, Harris Airreported net income for the 5-month period ending May 31, 3014 of$58,692
onrevenues of$958,567. 10 These Balance Sheet and net income figures are in line with both Harris Air's actual financial results for prior years (2011, 2012 and 2013) as well as withthe financial results ofsimilarly-sized Alaska operators found financially fit bythe Department. 11 There is no problem with Harris Air's Balance Sheet or its financial results.

III. Harris Air Continues to Demonstratethe Appropriate Compliance Disposition Objector next argues that Harris Air lacks compliance disposition. Objector's argument is, again, baseless.

Harris Air is an FAAPart 135 intra-state commuter operating wholly within this isolated Southeast comerofAlaska. It is not a Part 298 inter-state commuter. For decades now, any number ofAlaska intra-state commuters in various regions ofAlaskahave operated and continue to operate inthis manner. Indeed, this presumably was how Objector itselfoperatedpriorto

9 Harris Air has also provided evidence ofa $500,000 bank line ofcredit submitted as part ofthe fmancial fitness demonstration. 10 See: Exhibit HAS-7. Also, for 2013,2012 & 2011 Harris Air had net incomes of$158,909, $142,798 and $91,937. ld. 11 See: DOT Order2013-1-12 at p. 4 where that intra-state applicanthadtotal current assets of$820,078, current liabilities of$39,540 giving that carrier a positive working capital of$780,538. That applicant also reported net income of$106,371 on revenues of$1.19M. 

### 8

### REPLY OF HARRIS AIRCRAFT SERVICES, INC becoming a DOTcertificated air carrier in 2001 (and again in 2008); i.e. priorto those DOT certifications Objectorwas neither a Part 298 on-demand air taxi nor a Part 298 commuter. 12
Objectornext attempts to argue that Harris Air's existing intra-state schedule offlights is impossible and that Harris Air is guilty of"unrealistic and deceptive scheduling" (Answer, p. 9). Contrary to Objector's statements, Harris Air's schedule is what it historically has operated without any problems. Further and most importantly, as the numerous answers in support of Harris Airindicate, the local travelling public has had no problems with Harris Air's schedule or its service ingeneral. As these constituents clearly indicate, quite the opposite is infact the case.

IV. SEARHC Contract Lastly, Objector appears to make much ofa contract Harris Air held with the SoutheastAlaska Regional Health Consortium ("SEARHC"). Objectorrefers to a "deafening silence aboutthat situation" (Answer, p. 1 0) and asserts this contractto be a "key element" of Harris Air's service proposal. 

### It is not. Objector's allusions are again baseless.

Until the recent early termination by SEARHC due to SEARHC's internal funding and budget difficulties, Harris Airdid indeed hold and operated a med-evac and passenger airlift contract with SEARHC for employee/patienttransportationto SEARHC'shospital in Sitka, AK.

12 Once certificatedbythe Department, the necessityfor any Part 298 inter-state authority for Objector's intrastate operations was ofcourserendered moot since the DOT Certificate issued to ObjectorbyDOT Order 2009-11-5 was for scheduled inter-state authority. 9REPLY OF HARRIS AIRCRAFT 

### SERVICES, INC Harris Air initiated litigation overthis breach ofcontractby SEARHC, however, as anAlaska Native organization, SEARHC used a sovereign immunity13 defense and the litigation was settled. Consequently, any revenues which may have internally beenprojected in 2013 and early 2014 pursuant to this SEARHC med-evac contract, were ofcourse not included 

### in the projections herein since that SEARHC contact is no longer in effect. 14

V. The Reason for Air Excursions' Objection Whereas, unfortunately, it now seems almost automatic for any intra-state Alaska operator's application for DOT certificate authority to receive strenuous objections from other Alaska certificated operators (E.g.: see: Harris AirLLC (Docket DOT-OST-2013-0089); Objector herein Air Excursions. LLC itself(Docket DOT-OST-2008-0318); Scott Air, LLC (DOT-OST-2012-0178), etc.), it is not clear from the record in eitherthis docket or inthe 2013 Harris Air docket why Juneau-based Air Excursions is objecting herein.

However, shortly after Air Excursions filed its March 18, 2014 objectionto the March 2014 Show Cause Order 2014-3-2 (Docket DOT-OST-2013-0089),15 in late March/early April

13 SEARHC is the region's largest employer, and as an Alaskan Native tribal organization, SEARHC has the status ofa "sovereign" entity, and as such is immune from civil liability. 14 However, notwithstanding the termination ofthat SEARHC med-evac contract, Harris Air does continue to hold and operate a transportation contract with SEARHC which is ingood standing. 15 NOTE: Objector did not file any objection to Harris Air's 2013 applicationbut only after the Show Cause Order was issued. 10REPLY OF HARRIS AIRCRAFT SERVICES, INC 2014 

### Mr. Kent Craford and Mr. Mike Stedman arrived unannounced in Sitka at Harris Air's facility asking to meet with Harris Air's owner, ScottHarris. 

### Mr. Harris understood that Messrs. Craford and Stedman were business partners and the principals of2 AlaskaDOT certificated carriers: Objectorherein, AirExcursions, and Alaska Seaplane, Service, LLC ("Alaska Seaplanes". See: DOT Order 2013-4-1. 16

Messrs. Craford and Stedman advised Mr. Harris that Alaska Seaplanes would be initiating serviceto Sitka and were interested in a purchase ofcertain ofthe assets ofHarris Air, principally Harris Air'smaintenance facilities in Sitka, butnot including its FAR 135 commuter certificate. Apart from a follow-up call from 

### Mr. Stedman approximately a week later, 

### Mr. Harris did notpursue this expression ofinterest by Messrs. Craford and Stedman and there have beenno further discussions regarding the acquisition by Messrs. Craford/Stedman orAir Excursions/ Alaska Seaplanes ofHarris Air's infrastructure, ormaintenance and other facilities. Harris Air submits that the March 18 objection to the Show Cause Order and Objector's answer in opposition filed herein are not unconnected withthis attempt to acquire Harris Air's assets and facilities.
Secondly, another reason for Air Excursions' objectionto Harris Air's certification is perhaps indicated by the recently-issued DOT Order 2014-9-13, anEAS Order requesting

16 NOTE: Air Excursions and Alaska Seaplanes share a commonality ofcommercial interest since both share common ownership and the common DOT-approvedtrade name of"Alaska Seaplanes". See: DOT §215 Notice datedApril 2, 20 13. 11

### REPLY OFHARRIS AIRCRAFT SERVICES, INC subsidyproposals for 4 Alaska communities17 where Alaska Seaplanes is the subsidized incumbent at each ofthose four EAS points, receiving a total annual subsidy of$542,412. Id. However in that Order soliciting new EAS subsidyproposals for the relevant up-coming subsidy period, the Department noted that Harris Air currently provides non-EAS air service at levels meeting the Department's EAS frequency minima in 3 ofthe 4 communities at issue. See: DOT Order 2014-9-13, p. 2, n. 1. The Department specifically noted Harris Air's certificate applicationpendingherein, noting that:
"IfHarris Air's application is approved, we may revisit the need for requesting proposals at those three locations
... IfHarris Air, as a certificated carrier, is providing subsidy-free EAS, the need for subsidized EAS is moot." Id.
The loss ofEAS subsidy to Alaska Seaplanes at the three locations referred to in DOT Order 2014-9-13 appears to total $467,031. Id. Therefore, as indicated in Order 2014-9-13, the loss to Objector's sister airline ofthis substantial amount ifHarris Airis certificated is clearly yet another significant, but improper, reason for Air Excursions' objections to Harris Airbeing awarded a DOT certificate. 18

Air Excursions/ Alaska Seaplanes may therefore have a number ofsignificant, but

17 E1fm Cove, Pelican, Angoon & Tenakee, AK 18 NOTE: Alaska Seaplanes is also objecting to Harris Air's EAS service proposal for Kake, AK. See: DOT Order 2014-3-15 (Docket DOT-OST-2008-0217) requesting proposals and Alaska Seaplanes' filing in opposition dated June 3, 2014. 12

### REPLY OF HARRIS AIRCRAFT SERVICES, INC non-relevant, commercial reasons for wishing Harris Air not to become a certificated carrier, but those reasons have nothing to do with Harris Air's fitness.

CONCLUSION Forthe reasons stated, Harris Air submits Objector is improperly seeking to preventthe issuance ofthe inter-state certificate authority applied for herein. Objector's arguments should be rejected since Applicant is financially and otherwise fit.

September 29, 2014 Res



### ectfully submitted, 

# l'

**~** 

# l rre hy
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# / I:w Offices ofPierre Murphy

13 1200 NewHampshire Avenue, NW Suite 590 Washington, DC 20036 Telephone: (202) 776-3980 Facsimile: (202) 776-3975 Email: pmurphy@lopmurphy.com Attorney for Harris Aircraft Services, Inc.Certificate ofService I hereby certify that on September 29, 2014, a copy ofthe foregoing Reply ofHarris Aircraft Services, Inc. was served viaUS Mail (and by electronic transmission where indicated) to the following persons: Attn: Terry L. Gordon Manager Attn: Troy McClanahan POI Juneau Flight Standards District Office (FSDO AL05) Federal Aviation Administration 3032 Vintage ParkBoulevard Suite 106 Juneau,AK 99801 Peter J. Lynch Assistant ChiefCounsel for EnforcementAGC-300 Federal Aviation Administration 800 Independence Avenue, SW Washington, DC 20591 Regional Counsel, AAL-7 Federal AviationAdministration Alaskan Region Headquarters 222 West

## Jili Avenue, Suite 14 Anchorage,AK 99513 Office ofAirline Info DOT /RITA/BTS E-36-RTS-42 1200 NewJersey Avenue, SE Washington, DC 20590 Robert E. Cohn, Esq. (via email) PatrickR. Rizzi, Esq. Counsel for AIREXURSIONS, LLC/ ALASKA SEAPLANES, LLC Hogan Lovells US, LLP Columbus Square 555 13th Street, NW Washington, DC 20004 robert.cohn@hoganlovells.com patrick.rizzi@hoganlovells.com