Order 2002-2-5 - Sunrise Airlines

Order 2002-2-5 - Sunrise Airlines - Show Cause

Sunrise Airlines, Inc.

Order 2002-2-5
OST-2001-8695

Issued February 8, 2002
Served February 8, 2002

Order To Show Cause

Commuter Air Carrier Fitness - Notice of Intent to Resume Service

Order 2002-2-5 tentatively finds Sunrise Airlines, Inc. d/b/a Flair Airlines fit, willing, and able to resume scheduled passenger air transportation operations as a commuter air carrier, subject to conditions. When it ceased operations in November 2000, Sunrise was the essential air service provider at Page, Arizona, Ely, Nevada, and Vernal and Moab, Utah. It performed these services with leased 19-seat Jetstream-31 aircraft. If authorized to resume operations, the carrier will not be reinstituting its previous services. Rather, as noted earlier, it intends to conduct scheduled passenger flights between its main base of operations in Sarasota to various other points in Florida. The company plans to begin with two daily round trips between Sarasota and Miami. When at full service, the carrier anticipates conducting as many as five daily round trips in this market, with additional flights in other markets. 14 Mr. Hilliard has purchased six 19-seat Jetstream-31 aircraft for the carrier's initial services.

Sunrise's October 31, 2001, balance sheet indicates that, at that date, the carrier had $12,725 in cash, negative working capital of $177,564 (for a current assets to current liabilities ratio of 0.48 to 1), negative retained earnings of approximately $1 million, and positive stockholders' equity of $458,341. To support its resumption of operations, Sunrise has been relying on funds provided by Mr. Hilliard and other investors in FAH. Thus far, FAH has received a total of $6.73 million in funds and funding commitments. This includes approximately $880,000 in loans," $2.65 million in equity contributions received from Mr. Hilliard and other shareholders, as well as a further pledge of $3.2 million from Mr. Hilliard.¹⁶ The company is continuing to solicit investors in the company" and has identified seven additional individuals who have stated their intention to provide the company with a total of approximately $2.4 million in additional equity. Coupled with the $6.73 million already raised, these funds will provide the company with approximately $9.1 million.

Notwithstanding the above, we have been troubled by the manner in which the carrier prosecuted its application, particularly in its initial submissions filed with the Department. For instance, we understood early on that Dekkers Aviation Group, a company owned by a non-U.S. citizen, Rudi Dekkers, would be its aircraft lessor, but would have no other role with

Sunrise. We soon learned, however, that Mr. Dekkers, a partner with Mr. Hilliard in other businesses, was, in fact, at that time a principal player in Sunrise's proposed reinstitution of service and he desired to continue playing a key role with the carrier once it had resumed its commuter flights. This would have included a substantial ownership interest and senior management role with the carrier. Since Mr. Dekkers is not a U.S. citizen, his involvement with the carrier caused concerns as to whether Sunrise would meet the requirement in the Statute that U.S. air carriers be substantially owned and controlled by U.S. citizens.

Sunrise also initially stated that it intended to resume operations by providing services to its prior points--Page, Vernal, Ely, and Moab--and that it would "research additional EAS and nonEAS routes." It soon became apparent, however, that Sunrise's primary operating plans included services to and from points within Florida." This lack of information initially hindered the Department's ability to make a fully informed assessment of the carrier's proposed operations and the level of financial support needed to support those plans.

By: Read Van D Water