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Boston-Maine Airways Corp. d/b/a Pan Am Clipper Connection

We have carefully considered the points raised by ALPA in its objection. However, like the applicant, we disagree with ALPA's premise that the Department incorrectly determined the level of funds required for Boston-Maine to meet our financial fitness standard. It is the Department's practice to determine an applicant's financial fitness based on the level of funds required to cover the applicant's pre-operating costs for the proposed operations, and to provide the company with a working capital reserve equal to one-quarter of its operating expenses for the first year of the proposed operations. Further, when an applicant already has established operations, we include in our funding requirement the level of funds needed to cover any current working capital deficit (i.e., the difference between the applicant's current assets and current liabilities). This policy is applied to applicants seeking expanded authority (whether through the addition of larger aircraft, or through the addition of aircraft beyond the numerical limits set in the applicant's current authority) regardless of whether its past operations have been profitable. Indeed, companies may not have positive working capital despite profitable operations, just as those companies experiencing operating losses may not be in a negative working capital position. This policy effectively protects the public while implementing Congress's intent, through the Airline Deregulation Act, to enhance competition through a liberal entry policy.

By: Read C. Van De Water

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