OST-97-2646 / OST-97-2648 / FWIA / July 21, 1997

In the matter of the Application of

for renewal of certificate and exemption authority

In the matter of the Application of

for renewal of exemption authority and frequency allocation

Fine Airlines, Inc. (refine Air") files the instant answer to the applications of Florida West International Airways ("FWIA") for renewal of its certificate and exemption authorities filed in the above-captioned dockets. /1 Fine Air urges the Department to:

1/ The issues raised by the instant pleading are relevant to both closely related proceedings. With respect to the "major" application, filed in Docket OST-97-2646, for "renewal of certificate and exemption authorities," the instant pleading is timely filed. With respect to the "subsidiary," application filed in Docket OST-97-2648, for renewal of certain exemption authorities, Fine Air seeks leave, to the extent necessary, to file the instant pleading out of time. Since there can be no resolution of the exemption renewal application without first resolving the certificate renewal application, Fine Air submits that no party is adversely affected by affording consideration to Fine Air's pleading in both dockets.

As the Department is aware, foreign ownership and control of FWIA was a significant issue in the FWIA certificate transfer proceeding conducted a year ago (Docket OST-95-418). Twenty-five percent of FWIA's voting stock is controlled by Fast Air, a Chilean carrier; FWIA owes a significant amount of debt to Fast Air; a representative of Fast Air sits on the FWIA board of directors; and FWIA is dependent upon Fast Air for its aircraft fleet.

In view of this extensive foreign citizen involvement in FWIA, the Department imposed upon FWIA certain basic reporting requirements to permit it to monitor FWIA's compliance with the Department's policy requiring it to be "effectively controlled" by U.S. citizens. Specifically, the Department required that FWIA inform it in advance of any change in its U.S. or foreign voting or non-voting stock ownership interests or any changes in the Board of Directors or its corporate governing documents, and provide it, prior to execution, with copies of any proposed aircraft lease agreements between itself and Fast Air, Lan Chile or Ladeco (or companies owned or related to Fast Air, Lan Chile or Ladeco or their principals). /2

Over the past year, Fast Air's involvement in and relationship with FWIA appears, if anything, to have grown. Fast Air retains its ownership interest in the carrier and is, now, the largest shareholder able to vote its own equity interest. It also retains its large debt participation in FWIA and its presence on the FWIA board of directors. And, according to its own application, FWIA has entered into agreements with Fast Air, pursuant to which FWIA leases its aircraft from Fast Air, obtains other aircraft from Fast Air under an interchange agreement, subleases on-airport facilities from Fast Air, and receives and provides cargo from and to Fast Air.

Fine Air assumes that, as required by these conditions, FWIA notified the Department of and received its prior approval for (1 ) what appear to be at least two changes in the stock ownership of FWIA, and (2) the aircraft sublease agreement entered into between FWIA and Fast Air.

With respect to stock ownership, FWIA formerly represented to the Department that 70 percent of the company was held by Mansour Rasnavad, an individual, and 25 percent held by Fast Air Carrier, S.A. The Department found accordingly in Order 96-6-19. However, FWIA's application for renewal of certificate and exemption authority dated June 23, 1997, filed in Docket OST-97-2646, states that the shares are now owned by Equipment Power, Inc. and International Aviation Services, Inc. Even if FWIA's unsupported allegations that these companies are controlled by Mansour Rasnavad and the principals of Fast Air, respectively, are true, clearly the assumption of ownership by these two new companies (proof of whose ownership and citizenship have never been furnished in a public docket) constitutes a change in ownership of which FWIA was obligated to notify the Department in advance.

Similarly, the FWIA-Fast Air aircraft sublease agreement described by FWIA clearly constitutes an aircraft lease agreement a copy of which FWIA was obligated to provide the Department in advance.

Should it turn out that FWIA did not comply with its requirement to obtain prior approval of the change in share ownership or the aircraft sublease agreement, the Department would, of course, not only have to subject FWIA to immediate enforcement action, but would also have to reexamine closely its compliance disposition.

In light of Fast Air's continued equity participation in FWIA and the enhanced relationship between the carriers, the Department should continue to subject the carrier to the reporting requirements set forth in Ordering paragraph #10. FWIA continues to test the limits of the Department's policy prohibiting foreign "effective control" of a U.S. carrier; continuation of reporting requirements that can hardly be described as onerous is clearly essential to the Department's ability to monitor this unique and troubling relationship.

FWIA has applied in Docket OST-97-2548 for permission to sell to Federal Express Corporation its one frequency to operate scheduled service to Argentina. The Department has not yet issued a ruling in that docket.

Fine Air has opposed the application and moved to compel the production of certain information key to an evaluation of its merits. Fine Air continues to believe that any transfer of U.S.-Argentina frequencies to Federal Express would be profoundly contrary to the public interest and Departmental policy.

If, however, the Department were to grant the application in that docket, FWIA's exemption authority to conduct scheduled authority to Argentina should clearly be stripped, as FWIA would no longer possess the frequency required to conduct such service. It is patently contrary to Departmental policy to permit a carrier to retain scheduled authority which the relevant bilateral agreement does not permit it to exercise. Consequently, pending Departmental action in Docket OST-97-2548, the Department should, at a minimum, defer action on that portion of FWIA's application to the extent that it seeks renewal of U.S.-Argentina authority.

WHEREFORE, Fine Air urges the Department to (i) retain all conditions on FWIA's authority set forth in ordering paragraph #10 of Order 96-8-6; and (ii) defer all action on that portion of FWIA's application seeking renewal of its authority to conduct scheduled service to Argentina.

Respectfully submitted

Jeffrey N. Shane

Karan K. Bhatia

WILMER, CUTLER PICKERING

2445 M Street, N.W.

Washington, D.C. 20037-1420

Counsel for Fine Airlines, Inc.