OST-96-2012 | May 1, 1997

Mr. John E. Coleman, Director

Office of Aviation Analysis (X-50)

Department of Transportation

400 Seventh Street, N.W.

Washington, D.C. 20590

Dear Mr. Coleman:

This is a response to the letter of Suzette Matthews, the attorney for Millon Air, Inc., of April 25, 1997, responding to your letter of April 21, 1997.

Millon Air, Inc. ("Millon") states that its operations allow foreign airlines of Category III countries to operate who would not be otherwise able to operate without its assistance or the assistance of other FAR Part 121 carriers. However, in the Order Confirming Oral Action (the "Order") issued by the Department of Transportation ("DOT") on February 25, 1997, your analysis of this issue led you to the conclusion that:

While [the DOT] appreciate[s] the impact that Millon's inability to operate may have on some of its customers, other lift is available, and Millon has not persuaded [the DOT] that the public interest requires [the DOT] to alter [the DOT's] practices here.

The Order also cites Arrow, Inc. 's Answer objecting to Millon's Application which states:

Millon's aircraft is quite small. Arrow is informed and believes that at present Millon [sic] entire fleet consists of a maximum of three B-707 aircraft. That makes Millon the smallest cargo carrier operating in Miami, in terms of cargo capacity. The loss of its lift, even at this time of year, is relatively easy for the other cargo operators to absorb. Millon's concern is not so much for its customers is [sic] for its own financial welfare.

John E. Coleman Page 2 May 1, 1997

Further, Millon acknowledges that its Director of Operations, Johnny Millon experienced two FAR violations resulting in suspensions. Millon also acknowledges the "unfortunate accident" in Ecuador in October, 1996 which resulted in Millon voluntarily grounding its aircraft pursuant to an informal agreement with the Federal Aviation Administration (nFAA"), in order to undergo the Fitness Review currently being conducted by the DOT. Millon acknowledges that its review disclosed that its Quality Control Department "did exhibit deficiencies."

Although World Fuel International, S.A. ("WFI"), as joint venture partner in Petrosur -World Fuel International, S.A. ("PWFI") has no knowledge of the management history and the resumes detailed in Ms. Matthews' letter of April 25, 1997, Millon's dealings with PWFI as described in detail in its previous filings with the DOT, and supplemented herewith, support the fact that it is against the public interest to authorize an airline such as Millon, which is not economically viable, to continue to operate. Millon cannot pay its outstanding debts to its vendors and has insufficient capital to repay those outstanding obligations.

Millon has attempted to explain the distinction between Millon and Millon Air Cargo, Inc. ("Cargo"). Millon goes so far as to state that "ownership and management of the two companies are different. " However, Millon acknowledges that, currently, Ernesto Millon owns twenty-four (24%) percent of Millon and owns one hundred (100%) percent of Cargo.

Additional evidence of the fact that Millon is not the established entity it purports to be is the fact that the ownership percentages have drastically changed since December 10, 1996, the date Millon's Application for an Exemption and Notice of Intent to Resume Service was filed. Therein, the directors cited byMillon pursuant to 14C.F.R. 204.4(a)(5), were es follows:

Juan B. Millon, Chairman, 50% Owner

No other carrier ownership

Ernesto Millon (US Cit.), Director, 50% Owner

10 % ownership in Phoenix Airlines, Brazil

Thereafter, Exhibit "L", Page 2, Inquiry No. 7, submitted by Millon to the DOT on March 27, 1997, shows a change in ownership percentages as follows:

Juan B. Millon and Ernesto Millon each own 47.5 % of the company; 5% of the outstanding stock is owned by a passive investor. The company operates on the basis of consensus decisions by Juan B. and Ernesto Millon. (emphasis added).

Now, in Millon's letter of April 25, 1997, the ownership again has changed as follows:

John E. Coleman Page 3

Juan B. Millon [is] Millon Air, Inc.'s President, Chief Executive Of ricer, and 74 % owner of the company...

24% [is owned] by Ernesto Millon, and 2% by passive investors.

When Millon filed its Application, the DOT received information from Arrow Air, Inc. which led the DOT to state in the Order that:

If we were to receive probative evidence that either company [Millon and Cargo] is unlawfully holding out direct air service, it will be referred to the Department's Office of Aviation Enforcement and Proceedings for action.

Since then, Millon has been attempting to separate itself from Cargo. The above referenced changes in ownership evidence Millon's attempt to show that it is less involved with Cargo than in reality, it is.

Millon's statement that "Millon Air Cargo, Inc. has no ownership interest in the airline Millon Air, Inc., nor vice-versa" is, at best, misleading. The statement by Ernesto Millon in his affidavit attached to Ms. Matthews' letter that "Millon Air, Inc. and Millon Air Cargo, Inc. do not have any common directors or any common officers" is likewise misleading. Ernesto Millon himself owns a large percentage of Millon Air, Inc. and all of Cargo. Further, Millon has admitted that "[t]he company operates on the basis of consensus decisions by Juan B. and Ernesto Millon."

With regard to Millon's statement that "the airline Millon Air, Inc. has no access to balance sheets and/or profit and loss statements of the company Millon Air Cargo, Inc.," since Ernesto Millon is a common owner, Millon not only has constructive, but it also has actual knowledge of the information in, and access to, the balance sheets and/or profit and loss statements of Millon. The above statement is, at best, disingenuous.

The Affidavit of Cristoforo Roditti, V, which will be submitted to the DOT on or about May 7, 1997 and which is not attached hereto due to holidays in Ecuador which made it impossible to obtain the executed affidavit at the time of this filing, presumably will state that Millon received all of the invoices and all of the fuel tickets, and it never complained or notified PWFI that they were addressed to the wrong party. The Affidavit of Carlos Abaunza attached hereto and incorporated by reference herein states that he requested copies of any document showing that WFI and/or PWFI were notified of the alleged lack of relationship between Millon and Cargo from Juan B. Millon. No such documentation has ever been produced. Mr. Abaunza's Affidavit also clarifies Paragraph 5 of the Affidavit of Juan B. Millon, where he states that "Millon Air, Inc. does not owe World Fuel the amount alleged." (emphasis added). Mr. Abaunza's Affidavit makes it clear that Juan B. Millon, in referring to "World Fuel," was not referring to PWFI or WFI since the evidence submitted to date before the DOT clearly shows that Millon has an outstanding and unpaid debt to PWFI of $329,646.52.

John E. Coleman Page 4

The Affidavit of Phillip Bradley, Chairman of Advance Petroleum, Inc. d/b/a World Fuel Services of FL ("API"), which also will be submitted on or about May 7, 1997 (due to his absence from the country at this time), should clarify the statements made in the Affidavit of Juan B. Millon, Attachment "C" to the Ms. Matthews' letter, regarding a meeting between Juan B. Millon and Captain Bradley. At Paragraphs 3 and 4, Juan B. Millon states that he notified Captain Bradley of the alleged difference between Millon and Cargo. Captain Bradley's Affidavit presumably will state that he never received notice that: (1) Millon and Cargo were completely separate entities; (2) that "Millon Air" was Millon Air Cargo, Inc., and not Millon Air, Inc.; and (3) that Millon Air, Inc. would not pay bills sent to "Millon Air."

The affidavit of Juan B. Millon is quite telling. The DOT should note that although Millon obtained an affidavit from Ernesto Millon, Ernesto Millon does not deny any of the statements made in Carlos Abaunza's affidavit.. Rather, Millon has chosen to use the affidavit of Juan B. Millon to counter the statements made by Carlos Abaunza and stating that, as to each one of these statements: "neither do I recall Ernesto Millon acknowledging or confirming this." The fact that Juan B. Millon does not recall whether he or Ernesto Millon acknowledged or confirmed all of the statements made in the affidavit of Carlos Abaunza, fail to conclusively rebut the following statements in the affidavit of Carlos Abaunza:

1. Ernesto Millon acknowledged and confirmed to Carlos Abaunza that a significant portion of amounts of the notes and accounts receivable of Millon Air, Inc. arise from debts owned from Millon Air Cargo to Millon Air, Inc.

2. Ernesto Millon acknowledged and confirmed that these accounts and/or notes receivable due from Millon Air Cargo to Millon Air, Inc. are probably uncollectible because Millon Air Cargo, Inc. is in dire financial trouble.

3. Ernesto Millon stated that Millon Air Cargo, Inc. and Millon Air, Inc. conducted business as "Millon Air".

4. Ernesto Millon acknowledged and confirmed that upon further review of the documentary evidence, at a minimum, third parties such as WFI and PWFI would be confused and/or were led to believe that "Millon Air" was Millon Air, Inc.

5. Ernesto Millon acknowledged that PWFI had a justifiable basis in believing that Millon Air, Inc. was a party to all transactions with PWFI.

Although Millon submitted an affidavit of Ernesto Millon, the affidavit of Ernesto Millon does not deny or oppose any of the above-stated facts as set forth in Carlos Abaunza's Affidavit. PWFI reiterates the statements in Carlos Abaunza's previously-filed Affidavit wherein the above statements were made by Ernesto Millon and also were acknowledged and confirmed by Juan B. Millon. Juan B. Millon's "lack of recall" is, at best, self-serving-and should be considered in that light by the DOT.

John E. Coleman Page 5

With regard to Millon's statement that Millon has "no judgments outstanding," the letter of John A. Margolis attached to Ms. Matthews' letter specifies four (4) separate lawsuits against Millon in addition to "numerous lawsuits for damages, wrongful death, and personal injury arising from the crash of October, 1996, giving rise to the instant Fitness Review. In addition thereto, PWFI will submit, on or about May 7, 1997, the Complaint of PWFI, which Mr. Margolis states Millon had no knowledge of, and the Affidavit of the attorney for PWFI in that law suit presumably certifying that Millon was served with that law suit. Again, counsel for PWFI is unable to obtain these documents at this time due to Ecuadorian holidays.

Millon acknowledges in its letter that it "made fuel payments in Ecuador on a reimbursable basis on Millon Air Cargo's behalf . . ." Further, Ernesto Millon's Affidavit states:

... Millon Air Cargo, Inc. purchased fuel using the Millon Air, Inc. bank account in Ecuador in order to comply with regulations of the Ecuadorian Government as to the purchase of aviation fuel.

Thus, Millon admits that it paid for the fuel purchased from PWFI. The statement in Ernesto Millon's Affidavit that Cargo was ultimately responsible for payment for fuel charges and that this arrangement was clearly understood by PWFI is directly contradicted by the Affidavit of Cristoforo Roditti, V previously submitted to the DOT which states:

At all times during which PWFI did business with Millon Air, Inc., any and all invoices were sent to Millon Air, Inc. at 5300 N.W. 36th Street, Miami, Florida, where Millon Air, Inc. conducts business... During all times that PWFI did business with Millon Air, Inc., the fuel sold was uplifted into planes owned, controlled and/or operated by Millon Air, Inc.... Further, Millon Air, Inc. made payments for the fuel to PWFI.... The principal balance due and outstanding from Millon Air, Inc. to PWFI is ... $329,646.52 ...

Furthermore, Ernesto Millon's Affidavit alleges that Millon Air Cargo, Inc. used Millon Air's bank account in Ecuador to purchase fuel and that Millon Air Cargo is an agent for Millon Air, Inc. See Ernesto Millon's Affidavit at paragraphs 2 and 5. At a minimum, based upon the agency relationship between the two companies, the common shareholders, the alleged common use of the name "Millon Air" and the payment of checks to PWFI from bank accounts of Millon Air, Inc., in payment of invoices to "Millon Air" at the address of Millon Air, Inc., which invoices were never disputed nor was there any objection to the fact that they were addressed to Millon Air at Millon Air, Inc.'s address, show that Millon Air, Inc. is liable for the fuel debts to PWFI. These facts and circumstances confirm, at a minimum, that either: (1) Millon Air, Inc. owes PWFI the monies for all of the fuel because it was in fact purchased by Millon Air, Inc.; or (2) there is such a level of interaction and entanglement (financially and/or legally)

John E. Coleman Page 6

between Millon Air Cargo, Inc. and Millon Air, Inc. that third parties, such as PWFI, are entitled to rely upon Millon Air, Inc. to pay debts for all fuel for flights of "Millon Air," billed to "Millon Air" at Millon Air, Inc.'s address (with no objection by Millon Air, Inc.) and paid for by Millon Air, Inc.'s checks on Millon Air, Inc.'s bank account in Ecuador.

Millon's statement that it "considers the debt owing from Millon Air Cargo to be entirely collectable" is, as stated above, contradicted by Millon's own Ernesto Millon, as evidenced by Carlos Abaunza's affidavit. Again, to date, Millon has failed to explain or to deny the unpaid debt of $329,646.52 to PWFI that is owed by Millon. Further, Millon's statement that it "has made arrangements with creditors to defer payments until a later date," is further evidence that Millon lacks financial viability at this time.

Further, MILLON has attached to its April 25 letter, a letter from Pan Airlines Cargo stating that it intends "to enter into a wet lease agreement between Pan Airlines Cargo and Millon Air, Inc.... Pan Airlines will guarantee 250 block hours per month ... equivalent to $825,000…" Upon information and belief, Pan Airlines Cargo has not been approved as an airline in Colombia and, if so, it is misrepresenting itself as an operational airline. Upon

information and belief, Pan Airlines Cargo simply applied, within the last four or five months, before the Departamento Administrative de Aeronautica Civil (DAAC) -- Colombia, for authority to become an airline. Upon information and belief at this time, Pan Airlines Cargo has no authority to operate, has no airplanes, and is itself undergoing the lengthy preliminary regulatory

process to become an airline.

Should the Department require any further information, please do not hesitate to contact the undersigned.

Very truly yours,

HATER, LEWIS & PATHMAN,

DAVID B. HABER

MARTA LEDERMAN RUB