Air Ecuador Airecu, S.A.

OST-2007-0081 - Foreign Air Carrier Permit and Exemption - Ecuador-US

November 21, 2007

Application for a Foreign Air Carrier Permit and Exemption Authority - Bookmarked

Motion to Withhold Information from Public Disclosure

Air Ecuador is a new airline. As such, it has no operating history, and its activities to date have consisted of selecting and hiring personnel, applying for and obtaining necessary governmental authority, and other tasks customarily applicable to start-up carders. In March 2008, Air Ecuador expects to launch scheduled flights between Quito and/or Guayaquil, on one hand, and New York (JFK), on the other hand, using aircraft wet-leased from Gadair. Subsequently, after six months of operation, Air Ecuador will transition out of wet-lease operations into the provision of service under its own operational control.

Air Ecuador will provide its initial service between Ecuador and the United States using a Boeing 757 and/or Boeing 767 aircraft wet-leased from Gadair. Air Ecuador's traffic forecast contemplates five weekly flights to the United States during the first year of operation.

Air Ecuador does not have any code-share agreements or other cooperative agreements with any U.S. carriers, non-U.S. carriers, or air freight forwarders or consolidators that would affect the proposed service to the United States, except that Air Ecuador's initial service will be provided via wet lease as described above.

Counsel: Garofalo Goerlich, Aaron Goerlich, 202-776-3970, agoerlich@ggh-airlaw.com

January 4, 2008

Motion of Aerolineas Galapagos Aerogal to File Out of Time and Answer to Application of Air Ecuador

To begin with, fully 42% of the voting equity in Air Ecuador is held by citizens of Spain. Moreover, Air Ecuador vaguely states that it is "affiliated" with Gadair, a citizen of Spain, without any additional explanation of this business arrangement. Indeed, a review of Gadair' s web site suggests that Air Ecuador may be a business component of the "Gadair Aviation Group. Moreover, it appears two of the five directors of Air Ecuador's board are citizens of Spain, including the president of Gadair, a Spanish air carrier. Such arrangements raise serious questions as to whether Air Ecuador is actually a citizen of Ecuador, or an air carrier substantially owned and effectively controlled by third country entities.

Air Ecuador appears to be no more than a "paper airline" at this time. With no Air Operator Certificate, designation, or aircraft of its own, Air Ecuador appears to be relying entirely on Gadair for the proposed services. Such an arrangement points to further "control" issues that relegate Air Ecuador to a mere flag of convenience for a carrier of another country.

Under the wet lease arrangement Air Ecuador contemplates, Gadair, an air carrier of Spain, would provide the necessary aircraft and crew. However, to the best of AeroGal's knowledge, Gadair does not possess any authority from the Department, the FAA or the TSA to engage in scheduled or charter foreign air transportation as proposed by Air Ecuador. Finally, such wet leasing would be extra bilateral under the U.S.-Ecuador bilateral.

Counsel: Pillsbury Winthrop, Josh Romanow, 202-663-8000, romanow@pillsburylaw.com

January 15, 2008

Answer and Reply of Air Ecuador Airecu to Answer of AeroGal

AeroGal asserts that Air Ecuador's application is incomplete because it does not contain a copy of Air Ecuador's designation by the Ecuadorian government and for other reasons. As stated in Air Ecuador's application, the carrier's designation has been transmitted by the Ecuadorian government to the U.S. government through diplomatic channels. The Department's regulations do not require applicants to submit copies of designations. As to AeroGal's other points, Air Ecuador believes its application is thorough, but will be pleased to respond to any questions the Department may have.

AeroGal's answer should be disregarded, as its assertions are uniformly inaccurate or irrelevant. Here, it is apparent one Ecuadorian carrier, AeroGal, is attempting to frustrate or delay market entry of another Ecuadorian carrier, Air Ecuador, through misuse of US government processes. Such a pleading should be recognized for what it is and ignored.

Counsel: Garofalo Goerlich, Aaron Goerlich, 202-776-3970, agoerlich@ggh-airlaw.com

Air Ecuador Airecu, S.A.

OST-2007-0081 - Foreign Air Carrier Permit and Exemption - Ecuador-US

Filed November 21, 2007 | Issued July 29, 2008

Notice of Action Taken

Exemption under 49 USC §40109 and a foreign air carrier permit under 49 USC §41301 to engage in: 1) scheduled foreign air transportation of persons, property, and mail between a point or points in Ecuador and New York, NY; and 2) charter foreign air transportation of persons, property, and mail pursuant to the U.S.-Ecuador Air Transport Agreement and Part 212 of the Department’s regulations. Air Ecuador proposes to operate these services using aircraft wet leased from Gadair European Airlines, S.L.

The applicant has requested confidential treatment of its financial submissions, under the provisions of 14 CFR §302.12. Good cause having been shown, we will grant this request.

After reviewing the record, we have decided to grant Air Ecuador the exemption authority it requests. We find that our action is consistent with the terms of the Agreement and is in the public interest. We further find that the applicant is operationally and financially qualified to conduct its proposed operations. With regard to the ownership and control of the applicant, Air Ecuador states, as noted above, that 58% of its voting stock is owned by citizens of Ecuador, with the remaining 42% owned by Gadair, which in turn is owned by citizens of Spain. It further states that three of the five members of its Board of Directors are citizens of Ecuador and the remaining two are members are citizens of Spain. In addition, all but one of its key management personnel is a citizen of Ecuador. Noting the non-homeland involvement in Air Ecuador’s ownership and control and its relationship with Gadair, we find that a waiver of our ownership and control standard is warranted, as there is nothing in the ownership and control of the carrier which would be inimical to U.S. aviation policy or interests. With respect to Aerogal’s citation of the Department’s denial of the Lan Ecuador application, we note that the Department subsequently granted exemption authority to Lan Ecuador and waived our ownership and control standard after the applicant restructured its ownership and management, resulting in significantly increased presence by Ecuadorian citizens in both the ownership and control of the carrier. In the instant case, the level of involvement of Ecuadorian citizens in the ownership and control of Air Ecuador exceeds that which was present in our grant of authority to Lan Ecuador. Thus, we see nothing in the concerns raised by Aerogal that would cause us to reach a different result in this case.

By: Paul Gretch