OST-97-2763 / Baltia Air Lines / July 25, 1997
Request for Exemption
BALTIA AIR LINES, INC.
from requirements of section 204.7
REQUEST FOR EXEMPTION
Baltia Air Lines, Inc. ("Baltia") under the authority of Section 416(b)(1) of the Federal Aviation Act of 1958, and consistent with public interest, respectfully requests an exemption, to the extent necessary, from the provisions of its certificate of public convenience and necessity for Route 688, and from section 204.7 of the Department's regulations to delay inauguration of Baltia's service in the New York-St. Petersburg market.
By Docket OST-95-396, on February 7, 1996, issued February 26, 1996, Baltia was found fit, willing, and able to engage in foreign scheduled air transportation, and was issued a certificate of public convenience and necessity to engage in foreign scheduled air transportation of persons, property, and mail between New York, New York and St. Petersburg, Russia in the form and subject to the terms, conditions and limitations attached thereto. On February 6, 1997, the Department granted Baltia until August 7, 1997, in which to provide evidence of its FAA certification,
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operating capital and liability insurance coverage. Baltia herein provides evidence of its firm commitment financing, aircraft delivery times, insurance coverage, and FAA certification.
Baltia bar Obtained Firm Financing On March 4, 1996 Baltia filed a best efforts Initial Public Offering (IPO) Registration Statement with the U.S. Securities and Exchange Commission (SEC) which became effective on September 16, 1996. One week later, the president of the underwriting firm had a heart attack. Although the firm advised Baltia that it expected to complete the full offering Letter in OST-96-2032), by March 30, 1997, the offering remained incomplete and, along with most other IPO issuers, Baltia suspended its offering.
"The small-cap market started to heat up at the tail end of April." (Id.)
By June 3, 1997 Baltia engaged Global Equities Group, Inc (Global) to underwrite a firm commit offering in the amount of $6.5 million available to Baltia five days after SEC
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approval, 1/ (Attachment 3A) Assuming public warrants are fully exercised, Baltia will receive an additional $19.5 million. Global may sell to the public an additional 15% of the offering under the over-allotment option, and Global has underwriter's warrants entitling it to purchase an amount equal to 10% of the number of securities sold to the public. (Attachment 4,4A.)
Baltia has a letter of credit for $6.5 million from the Lateko Banka 2/ (Attachment 5.), a $6 million bond issuance by W.R. Lazard, Laidlaw & Luther, (Attachment 6.), and $420,000 in prepaid advertising with Corinthian/Kent Trading. Texicao is extending credit for approximately one months fuel and Paramount prepayment of one month's cargo transport is arranged , subject to approval by the Department. (Attachment 7.)
Aircraft Commitment Enable.
FAA Certification At a June, 1997 meeting Valley Stream FAA advised Baltia that, prior to formally commencing the certification process, Baltia must have in place the letter from United on aircraft, a Director of Safety, station arrangements at both
1/ The SEC approved Baltia's Registration Statement 9/15/96. A post effective amendment to the Statement will be filed to change the offering from best efforts to a firm commitment for $6.5 million. The underwriter has been changed from Patterson Travis to Global Equities Group, Inc. (Attachment 3.)
2/ This represents an extension of the original letter of credit to January 1989. An additional extension will be obtained prior to that date.
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JFK and Pulkovo Airport, arrangements for maintenance training, and a heavy maintenance facility.
As of July 22, 1997, Baltia and UAL Services have agreed upon the purchase and delivery times of two 747-lOO,s conditional upon definitive documentation and payment to United Airlines. (Attachments 8,8A.)
Training has been arranged. Crew training will be done at United, with back up at Natco. Engine and powerplant maintenance training will be done at Pratt & Whitney and Evergreen. A heavy maintenance facility has been engaged at Evergreen. (Attachments 7,13,14.)
Station Arrangements have been made at JFK Airport. Through agreement with IcelandAir, Baltia will have counter space with six passenger check-in positions and use of IcelandAir's first class passenger lounge for Baltia's first and business class services. Baltia will have space for line maintenance and service personnel as well as storage for ground equipment and use of the terminal's luggage handling system. Arrangements have been made for spare parts necessary for aircraft turnaround and line maintenance. (Attachment 7.) In St. Petersburg, at Pulkovo Airport, Baltia's VP Europe has arranged office space for station personnel, including space for technical staff, a location to store spare parts and ground equipment, and
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Good Cause Exists to Exempt Baltia
Pursuant to the Department's letter dated November 7, 1996, to obtain an exemption Baltia must show "good cause". In showing good cause, Baltia provides evidence that it still meets the Department's fitness criteria, i.e. all personnel remain in place, financial resources have increased, aircraft commitment is in place, and FAA certification awaits the Department's extension of route authority.
Good cause exists where delay is out of the control of the carrier. Baltia had no control over the six months required by the Department to issue its Final Order, the seven months the Securities and Exchange Commission (SEC) required to approve Baltia's registration statement, or the six months of underwriter's best efforts. Baltia had no control over the IPO market drying up in March 1997.
Good cause exists where the carrier moves the process as fast as possible. Only three days lapsed between the Department's Final Order and Baltia's filing its registration statement with the SEC. Baltia finalized its contract with the best efforts underwriter on the day the SEC approved Baltia's Registration Statement. Although Baltia suspended its offering on March 30, 1997 when the IPO market dried up, within 33 days, Baltia had negotiated and engaged a firm commitment underwriter. In approximately a month after obtaining the firm commitment underwriter, Baltia obtained a commitment on aircraft.
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space for passenger services, including check-in counter. (Attachment 9.)
All principal personnel named, whose resumes are filed in OST 96-2032, remain in their positions. Additionally Paul Asmus has been named Director of Safety. (Attachment 7,10.)
These arrangements in combination with the firm underwriting by Global enables Baltia to commence its FAA certification subject to extension of route authority by the Department. (FAA Certification Schedule of Events, Attachment 11.)
Insurance
Insurance is in place ready to be activated upon acquisition of the aircraft and commencement of operations. (Attachment 12.)
Baltia's Business Plan is Reasonable
Passenger (Attachment 21) and cargo traffic (Attachment 22,22A) support Baltia's business plan. Limited inflation results in consistent expenses. Baltia arbitrarily assumes no changes to its projected passenger flow, calculation of weighted average fare, and projected fares. All exhibits submitted in OST 95-396 and OST 96-2-51 are incorporated herein. (Attachments 15,16,17.)
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Good cause exists where the carrier has satisfied all apparent contingencies and is eager to provide needed service and is detained only by the necessity to obtain an exemption. Baltia vigorously continues to prepare its inauguration of service. Baltia is committed to serving the market to which it has authority. It is in the public interest to have an entry U.S. airline like Baltia that is committed to opening a developing market and is willing to make the investment with a long term objective. Ordinary U.S. citizens have invested capital and have committed years of their lives to realize this enterprise. Baltia respectfully requests that the Department grant the exemption so that the service can be initiated.
CONCLUSION
For the above reasons, Baltia requests an exemption for a period of six months.
Respectfully submitted,
BALTIA AIR LINES, INC.
By:
Steffanie J. Lewis
THE INTERNATIONAL BUSINESS LAW FIRM P.C.
3511 North Thirteenth Street Arlington, Virginia 22203
Telephone: 703 522 1198 Facsimile: 703 522 1197 July 24, 1997.
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