Docket OST-97-2551 / Nations Air / Answer of European American / June 6, 1997

Application of

for an exemption pursuant to 49 U.S.C. 40109 (Miami, Florida- Maracaibo, Venezuela)

Dated: June 6, 1997

Pursuant to § 302.406 of the Department's Procedural Regulations, European-American Travel, Inc. ("EURAM") and Student Travel Services, Inc. ("STS") (collectively referred to herein as "EURAM/STS") submit the following Answer to the Application of Nations Air Express, Inc. ("Nations Air") for an exemption that would enable it to provide scheduled passenger service between Miami, Florida and Maracalbo, Venezuela. EURAM/STS oppose Nations Air's application. As explained below, in performing separate charter contracts it had entered into with EURAM and STS, Nations Air failed to comply with key consumer protection requirements of the Department's charter rules. Because of these serious violations, the Department cannot find Nations Air "fit, willing and able" to perform the transportation at issue and to conform to the provisions of the

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Transportation Code and the Department's regulations, as required by the statute and the Department's rules before Nations Air's application can be granted.

Under the terms of 49 U. S. C. § 41110(e), air carriers have a continuing obligation to be "fit, willing and able" to provide the air transportation services for which they have been certificated, and the Department may not grant new authority to a carrier, consistent with 49 U.S.C. § § 41102 and 41 108, unless the carrier can affirmatively demonstrate its fitness to provide the transportation services for which it is seeking authority. Because Nations Air has committed serious violations of key consumer protection provisions of the Department's charter rules, the carrier cannot establish its fitness. Therefore, it would not be consistent with the public interest to grant Nations Air's exemption request.

In further support of their position, EURAM/STS state as follows:

1. EURAM and STS are charter operators that provide Public Charter services in accordance with Part 380 of the Department's Regulations.

2. In December 1996, STS entered into a charter contract with Nations Air, acting through its general sales agent, World Pacific Airways ("WPA"), providing for Nations Air to operate a series of charters from U.S. points to Cancun, Mexico during the period from February 28, 1997, through April 5. A charter prospectus covering these flights was filed with the Department on February 21, 1997. In accordance with the terms of the charter contract between STS and Nations Air, and in compliance with applicable DOT regulations, STS made

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payments for the charter flights Nations Air had contracted to operate into the depository account designated by Nations Air with the First American Bank-Michigan.

3. STS understands that the aircraft Nations Air intended to use to operate the charter flights it had contracted to perform for STS was unavailable to Nations Air as of February 28, so that it was necessary for Nations Air and its general sales agent, WPA, to arrange substitute transportation. However, on or about March 2, 1997, Nations Air abruptly repudiated its responsibility to provide these charter services, forcing STS, on its own, to arrange substitute transportation for its passengers. Nations Air's refusal to operate these flights, or to arrange substitute transportation, is a clear violation of § 380.43 of the Department's Regulations, which prohibits a direct air carrier from cancelling a charter less than 10 days before the scheduled departure, except in circumstances not applicable here. As a direct result of Nations Air's actions, STS incurred in excess of $600,000 in expenses to arrange substitute transportation for its customers. Despite repeated requests from STS, Nations Air has refused to reimburse STS for these expenses.

4. EURAM entered into a charter contract with Nations Air, acting through its general sales agent, WPA, on January 24, 1997, for a series of U.S.-London charter flights that were scheduled to commence this month. During February and March 1997, Nations Air, through its general sales agent, WPA,

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informed EURAM that it needed additional funds to get the airplane it intended to use for the charter flights it had contracted to perform for EURAM certificated and included on its FAA-approved Part 121 Operations Specifications. In an effort to assist Nations Air and WPA, EURAM advanced $250,000 to Nations Air's general sales agent, WPA, to assist them in completing the required certification work. The parties agreed to credit this sum against money EURAM was obligated to pay Nations Air under the terms of the parties' charter agreement. Despite such financial assistance from EURAM, in late March, Nations Air, through WPA, informed EURAM that it would be unable to operate the flights covered by the parties' charter contract. Despite its inability to perform its obligations under the charter contract, Nations Air refused to refund to EURAM the $250,000 that EURAM had paid WPA, even though Nations Air clearly was deemed to have received those payments under § 207.4 of the Department's Regulations. /1

5. Under Section 41102 of Title 49 of the United States Code, the Department may not grant an application for certificate authority unless it finds that the applicant is "fit, willing, and able" to perform the transportation proposed and to comply with the statute and the regulations of the Department. The Department must be able to make the same findings before it can grant an

1/ Section 207.4 provides, in pertinent part, that "payments for a U.S. Originating charter flight made to any person to whom ...[a] carrier, directly or indirectly, ... has agreed to pay a commission for that flight shall be considered payments to the carrier."

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applicant an exemption from the statute's certification requirements. In making fitness determinations, the Department uses a three-part test. The three areas of inquiry are whether the applicant has demonstrated that (1 ) it will have the managerial skills and technical ability to conduct the proposed operations, (2) will have access to resources sufficient to commence operations without posing an undue risk to consumers, and {3) will comply with the statute and regulations imposed by Federal and State agencies. See, e.g. Application of CityLink Airlines, Inc. d/b/a CityLink, Order 97-4-17.

Patently, Nations Air's utter disregard for its obligations to STS, EURAM and their customers under Parts 380 and 207 of the Department's Regulations demonstrate that Nations Air lacks a satisfactory compliance disposition. Further, its willingness to enter into charter commitments for which it lacked suitable aircraft, or the capital resources essential to obtain the equipment to be operated, calls into question both the competence of the carrier's management and whether the carrier has sufficient resources to continue operating without exposing the public to undue financial risk.

Sections 380.43 and 207.4 of the Department's Regulations are key elements of the panoply of consumer protection rules the Department imposes on charter services. A carrier's failure to comply with these key consumer protection rules is no mere technical violation of an obscure regulatory requirement, but a serious violation of core statutory obligations. If Nations Air cannot be relied upon

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by the Department to comply fully with such core consumer protection requirements, it clearly is unfit to be awarded the exemption authority at issue.

WHEREFORE, for the reasons set forth, Nations Air's exemption application must be denied.

Respectfully submitted,

Bruce H. Rabinovitz

Lisa A. Harig

GINSBURG, FELDMAN AND BRESS, CHARTERED

1250 Connecticut Avenue, N.W.

Suite 700

Washington, D.C. 20036

(202) 637-9036

Attorneys for EUROPEAN-AMERICAN TRAVEL, INC. and STUDENT TRAVEL SERVICES, INC.