OST-95-676 & 95-677 / Falcon Air Express / June 6, 1997

NOTICE: ANY PERSON WHO WISHES TO SUPPORT OR OPPOSE THIS APPLICATION FOR AMENDMENT MUST BY JULY 4, 1997 FILE AN ANSWER WITH THE DEPARTMENT OF TRANSPORTATION AND SERVE A COPY ON ALL PERSONS SERVED WITH THIS APPLICATION.

IT IS REQUESTED THAT THIS APPLICATION BE PROCESSED UNDER SUBPART Q OF THE DEPARTMENT'S REGULATIONS.

Application of:

to Amend Certificate of Public Convenience and Necessity

Falcon Air Express, Inc. ("Falcon Air" or "Falcon") hereby applies pursuant to 14 C.F.R. §302.4 and Subpart Q of the Department's Regulations for an amendment to its Certificate of Public Convenience and Necessity to extent necessary to lift the "one aircraft" limitation currently in place on Falcon's Air Certificate. /1 By this Amendment Falcon Air is further supplementing and amending its November 4, 1996 original Application, and its November 15, 1996 and December 3, 1996 Supplements and Amendments and advises the Department of Falcon Air's plans for the operation of additional aircraft. As Falcon Air will demonstrate herein, it possesses the necessary managerial and financial disposition to expand its operations as described herein to meet the immediate need for additional domestic and international charter air service and sub-service at the present time.

In support of this application, Falcon Air states as follows:

1. By Order 96-3-8 issued and served March 5, 1996, the Department found Falcon Air to be fit, willing, and able to engage in interstate and foreign air transportation and issued Falcon Air a Certificate of Public Convenience and Necessity for interstate air transportation. On March 26, 1996, the Department issued Falcon Air a foreign charter passenger certificate. See Order 96-3-56. The carrier then promptly commenced charter operations at the end of March 1996. In issuing these certificates, however, the Department included a provision limiting Falcon Air to the operation of a single aircraft. In November 1996 Falcon Air applied for an amendment to its Certificate of Public Convenience and Necessity to lift this "one aircraft" restriction. See Applications dated November 4, 1996, November 15, 1996 and December 3, 1996. Falcon also filed a pendente lite exemption application requesting authority to add another B-727-200 to its Operations Specifications, pending a decision by the Department on its Application to Amend its Certificate of Public Convenience and Necessity. See Exemption Application dated November 4, 1996. This exemption authority was orally granted in early December to allow Falcon to operate two (2) aircraft. See Order 97-2-5. The Department deferred action on Falcon's Application to Amend its Certificate of Public Convenience and Necessity until Falcon Air obtained some operating experience with the additional aircraft. See Order 97-2-5 at 2. Since March of 1997, Falcon Air has successfully conducted its operations with two (2) B-727-200 aircraft, both configured for one-hundred and seventy (170) passengers, providing sub-service for a number of other air carriers (e.g., Miami Air, Nations Air) and foreign air carriers (e.g., Aerolineas Argentinas, Air Atlantic Dominicana, etc.), as well as conducting its own charter operations on behalf of a number of Public Charter Operators as well as foreign-originating tour operators.

2. Since it commenced operations in March of 1996, Miami-based Falcon Air has received strong marketplace acceptance due to its high quality service and experienced management team (Mr. Dirube has been in the Miami aviation business in a variety of capacities for approximately 30 years). Falcon has been operating both aircraft on a profitable basis, performing well over 200 block hours per month for each aircraft in sub-service and charter air service for a number of air carriers and indirect air operators. See Exhibit FAE- 1, profit and loss statement, showing an overall net profit for the period January 1996-February 1997.

3. Due to its service and strong marketplace acceptance, Falcon Air has received, and continues to receive, frequent requests from air carriers to provide sub-service in both domestic and international operations. Because Falcon Air is limited to only two (2) aircraft, it has reluctantly been forced to turn down these often urgent requests from carriers in desperate need of alternative lift arrangements due to lack of aircraft availability. Falcon Air has also received a number of similar requests from charter operators seeking a direct air carrier to operate a variety of charter programs and has similarly been unable to accept these additional commercial opportunities.

4. Further, since Falcon Air's existing B-727-200's are low gross weight "- 9" powered aircraft, /2 Falcon has been required to turn down substantial amounts of commercially attractive business since using the existing aircraft would require an en route stop which is commercially not viable to the charterer. The additional B-727-200 Falcon Air proposes to operate are high gross weight, longer range aircraft with "- 15" or "- 17" power allowing for maximum flexibility in Falcon's operations.

5. Most recently, Falcon Air has been approached by foreign carrier from an FAA determined "Category II" country, which is unable to operate aircraft to the U.S. in its own right, and is therefore required by the FAA to wet lease aircraft from operators such as Falcon Air. This foreign air carrier, Aeropostal, /3 operates a substantial fleet of DC-9 and MD-80 passenger aircraft in domestic operations within Venezuela and in international operations from Venezuela to other countries. Because of the FAA's Category II determination for Venezuela, Aeropostal cannot recommence its authorized U.S.-Venezuela scheduled operations with its own aircraft and it therefore requires a U.S. direct air carrier to operate its scheduled operations between Venezuela and the United States, with two (2) aircraft, each for over 200 hours per month for a term of one (1) year, renewable each year. See Letter of Intent, Exhibit FAE-2. This is the same type of service Falcon Air has been operating with its B-727-200 aircraft for over a year for other foreign air carriers, however, the high gross weight "-15" or "-17" powered aircraft is the optimum aircraft for this particular operation and this route.

2/ Pratt & Whitney JT-7D-9 or "- 9."

3 Aeropostal has DOT exemption authority to conduct scheduled combination service on a number of U.S.-Venezuela scheduled routes. See Dockets 49288, 44068, and 46979.

6. Further, Falcon Air also requires the general operational flexibility that an additional two (2) aircraft would provide. One of Falcon Air's existing B-727's will be entering a comprehensive maintenance "D" check in June of 1997, which process is expected to last approximately 60 days. Leasing in an aircraft for a couple of months to replace this aircraft is not a commercially realistic option. Falcon Air has existing charter and sub-service contracts which must be fulfilled during this time. Further, Falcon has additional charter flying which it wishes to operate on behalf of Pelican, a Venezuelan charterer, which it currently cannot commit to or operate due to its present two (2) aircraft limitation. See Letter of Intent, Exhibit FAE-5. The addition of the proposed high gross weight aircraft would therefore not only help enable Falcon Air to perform its existing contractual obligations during June and July while one of its existing aircraft is in "D" check, but it would also enable Falcon to commence wet lease operations for the Venezuelan scheduled carrier Aeropostal in July, and at the same time operate additional charters for charterers such as Pelican, while the "D" check aircraft is still in maintenance.

Therefore, all four (4) aircraft will be fully utilized at all times, with only three (3) aircraft operated initially in June and July while the other aircraft is in "D" check.

6. Operation of the additional B-727's will be crewed by Falcon Air's existing complement of flight and cabin crew, /4 together with an additional four (4) flight crews and eight (8) cabin crews. /5 These new employees will be trained during June and July in order that they

4/ The higher gross weight "- 15" and "- 17" powered B-727-200 aircraft do not require any additional training for Falcon Air's existing crews.

5/ Falcon Air currently employs a total of twenty-six (26) pilots and thirty-two (32) flight attendants. Each flight crew is composed of three (3) people: the chief pilot, the first officer and the engineer. Each cabin crew is composed of four (4) flight attendants.

may start working in August when the B-727-200 comes out of its "D" check. This crew complement is sufficient to operate four (4) B-727-200 aircraft. Falcon Air herewith submits as Exhibit FAE-3its projected Profit & Loss Statements for the operation of a third and fourth B-727-200 at 200 hours per month. Falcon Air will have no extraordinary expenses in adding the B-727-200's to its fleet and to its Operations Specifications. /6

7. Falcon Air plans to lease the third aircraft from Residual Based Finance Corporation ("RESIDCO") under the following proposed terms:

Equipment: One (1) B-727-225A Aircraft

Estimated Delivery Date: June 15, 1997

Term of Lease: June 15, 1997-December31, 1999

Security Deposit: $270,000

Monthly Lease Payments: $90,000

Falcon Air plans to lease the fourth aircraft from The CIT Group ("CIT") under the following proposed terms:

Equipment: One (1) B-727-200A Aircraft

Estimated Delivery Date: June 27, 1997

Term of Lease: June 27, 1997 - June 27, 2002

Security Deposit: $290,000

Monthly Lease Payments: $145,000

8. Falcon Air's proposed operations will benefit U.S. air carriers and charter operators, and will provide reliable, efficient, and much-needed charter air transportation

6/ Falcon Air's POI at the MIA-FSDO is aware of Falcon Air's plan to add an additional two (2) aircraft.

opportunities for the traveling public. /7 Grant of this authority, will, therefore, serve the public interest.

9. Falcon Air is fit, willing, and able to perform the service requested in this application, and will conform to the provisions of 49 U.S.C. §40101, 1. beg,., as well as the rules. regulations, and requirements promulgated by the Department pursuant thereto. Given the present needs of the charter and sub-service marketplace, the significant lack of U.S.-flag B-727200 wet lease lift available to FAA-determined Category II countries, Falcon Air's proven ability to operate on a profitable basis (See Exhibit FAE-1), its present financial position (See Exhibit FAE-4), and its projected annual financial summary for the operation of additional aircraft (See Exhibit FAE-3), Falcon Air now respectfully requests that the Department grants this application to Amend its Certificate of Public Convenience and Necessity to lift the current one (l) aircraft limitation in order to meet the needs of air carriers and charter operators alike.

WHEREFORE, for the foregoing reasons, Falcon Air Express, Inc. respectfully requests that the Department grant its application to Amend its Certificate of Public Convenience and Necessity, originally issued by Orders 96-3-8 and 96-3-56 to the extent necessary to lift the current one ( 1 ) aircraft limitation for domestic and international charter and sub-service

7/ As the Department is aware, the Venezuelan government recently suspended the authority of one of its international flag-carriers, VIASA, in early 1997, leaving the market to be served by American Airlines, United Airlines, and Servivensa. As a Category II country carrier, Servivensa's level of operations to the U.S. is frozen. By granting Falcon Air authority to add another aircraft, the traveling public will therefore be afforded more carrier and schedule options between the U.S. and Venezuela.

transportation. In the alternative, Falcon Air Express, Inc. requests such other, further, or different relief as the Department may deem appropriate.

June 6, 1997

Respectfully submitted,

Pierre Murphy

Elizabeth C. Collins

One Westin Center

2445 M Street, N.W.

Suite 260

Washington, DC 20037

(202) 872-1679

Attorneys for Falcon Air Express, Inc.