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JGR/DOT (Department of Transportation) International Aviation Decisions (9 of 10)
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JGR/DOT (Department of Transportation) International Aviation Decisions (9 of 10)
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John Roberts' Subject Files
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Ronald Reagan Presidential Library
Digital Library Collections
This is a PDF of a folder from our textual collections.
Collection: Roberts, John G.: Files
Folder Title: JGR/DOT (Department of Transportation)
International Aviation Decisions (9 of 10)
Box: 17
To see more digitized collections visit:
https://reaganlibrary.gov/archives/digital-library
To see all Ronald Reagan Presidential Library inventories visit:
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Contact a reference archivist at: [email protected]
Citation Guidelines: https://reaganlibrary.gov/citing
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THE WHITE HOUSE
WASHINCTON -
March 17, 1986
MEMORANDUM FOR DAVID L. CHEW
STAFF SECRETARY
FROM:
JOHN G. ROBERTS
ASSOCIATE COUNSEL TO THE PRESIDENT
SUBJECT:
DOT International Aviation Decision:
Marco Island Airways, Inc., and
Aeron International Airlines, Inc.
Our office has reviewed the above-referenced Department of
Transportation International Aviation decision, and has no legal
objection to the procedure that was followed with respect to
Presidential review of such decisions under 49 U.S.C. § 1461 (a) .
We also have no legal objection to OMB's recommendation that the
President not disapprove this order or to the substance of the
letter from the President to the Secretary of Transportation.
ID #.
CU
WHITE HOUSE
CORRESPONDENCE TRACKING WORKSHEET
o . OUTGOING
H INTERNAL
I . INCOMING
Date Correspondence
Received (YY/MM/DD)
/
/
Name of Correspondent:
David Chew
MI Mail Report
User Codes: (A)
(B)
(C)
Subject:
DOT International Aviation Decisions re:
Marco Island Airways, Inc. and Aeron
International Airlines, Inc.
ROUTE TO:
ACTION
DISPOSITION
Tracking
Type
Completion
Action
Date
of
Date
Office/Agency
(Staff Name)
Code
YY/MM/DD
Response
Code
YY/MM/DD
CUHOLL
ORIGINATOR 86,03,13
/
/
Referral Note:
CUAT 18
R
86,03,13
S 86,03,19
Referral Note:
/
/
/ /
I
Referral Note:
/
/
/
/
-
Referral Note:
/
/
/
/
-
Referral Note:
ACTION CODES:
DISPOSITION CODES:
A Appropriate Action
I Info Copy Only/No Action Necessary
A Answered
C Completed
C . Comment/Recommendation
R Direct Reply w/Copy
B - . Non-Special Referral
S Suspended
D - Draft Response
S For Signature
F Furnish Fact Sheet
X Interim Reply
to be used as Enclosure
FOR OUTGOING CORRESPONDENCE:
Type of Response = Initials of Signer
Code = "A"
Completion Date = Date of Outgoing
Comments:
Keep this worksheet attached to the original incoming letter.
Send all routing updates to Central Reference (Room 75, OEOB).
Always return completed correspondence record to Central Files.
Refer questions about the correspondence tracking system to Central Reference, ext. 2590.
5/81
Document No.
WHITE HOUSE STAFFING MEMORANDUM
DATE: 3/12/86
ACTION/CONCURRENCE/COMMENT DUE BY: Wed., 3/19/86
SUBJECT: DOT INTERNATIONAL AVIATION DECISIONS RE: Marco Island Airways, Inc
AND Aeron International Airlines, Inc.
ACTION FYI
ACTION FYI
VICE PRESIDENT
LACY
REGAN
POINDEXTER
MILLER
RYAN
BALL
SPEAKES
BUCHANAN
SPRINKEL
CHAVEZ
SVAHN
CHEW
P
SS THOMAS
DANIELS
TUTTLE
FIELDING
HENKEL
HICKS
KINGON
REMARKS:
Please provide any comments/recommendations by Wednesday, March 19.
Thank you.
RESPONSE:
David L. Chew
Staff Secretary
Ext. 2702
EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
ACTION
MAR / 2 1986
ISMORANDUM FOR THE PRESIDENT
SUBJECT:
Department of Transportation
International Aviation Decisions:
Marco Island Airways, Inc.
Aeron International Airlines, Inc.
Docket 43767
Docket 43582
Date due: April 24, 1986
Date due: May 5, 1986
The Department of Transportation (DOT) proposes to take the
following actions with regard to the above international aviation
cases:
- Revoke the authority of Marco Island Airways, Inc., to
engage in foreign scheduled air transportation between the
United States and points in the Bahama Islands, for failure
to maintain operations. The carrier has not objected to the
proposed order.
-- Authorize Aeron International Airlines, Inc., to engage in
worldwide foreign charter air transportation of property and
mail.
The National Security Council and the Departments of State,
Defense, and Justice have not identified any foreign policy or
national defense reasons for disapproving the orders in whole or
in part.
The Office of Management and Budget (OMB) recommends that you
approve DOT's decisions by signing the attached letter to the
Secretary which indicates that you do not intend to disapprove
DOT's orders within the 60 days allowed by statute for your
review. Also, OMB recommends that you state in your letter that
no national defense or foreign policy reason underlies your
actions. This will preserve whatever opportunity is available
under the statute for judicial review.
Signed
Carol T. Crawford
Associate Director for
Economics and Government
Attachments:
DOB letters of transmittal
DOT orders
Letter to the Secretary
Options and Implementation Actions:
( ) 1)
Approve DOT's orders and preserve whatever opportunity
is available for judicial review (DOS, DOD, DOJ, NSC,
OMB).
- Sign the attached letter to the Secretary
( ) 2)
Approve DOT's orders and do nothing to preserve
whatever opportunity is available for judicial review.
-- Implementation materials to be prepared.
( ) 3)
Disapprove DOT orders.
- Implementation materials to be prepared.
( ) 4)
See me.
THE WHITE HOUSE
WASHINGTON
Dear Madam Secretary:
I have reviewed the orders proposed by the Department of
Transportation in the following cases:
Marco Island Airways, Inc.
Aeron International Airlines, Inc.
Docket 43767
Docket 43582
I have decided not to disapprove the proposed orders. No foreign
relations or national defense reason underlies my actions.
Sincerely,
The Honorable Elizabeth Dole
Secretary of Transportation
Washington, D. C. 20590
OFFICIAL
U.S. Department of
Office of Assistant Secretary
400 Seventh St., S.W.
Transportation
Washington, D.C. 20590
Office of the Secretary
of Transportation
FEB 24 1986
The President
The White House
Washington, D.C. 20500-
Dear Mr. President:
I transmit the Department's proposed order in the matter of the revocation of
the foreign scheduled certificate of Marco Island Airways, Inc., for your
consideration under section 801(a) of the Federal Aviation Act of 1958, as
amended by the Airline Deregulation Act of 1978. The order will revoke the
certificate of public convenience and necessity issued to Marco Island Airways
authorizing the operation of foreign scheduled air transportation between the
U.S. and the Bahama Islands and adopt the Department's tentative decision in
its Order to Show Cause (copy enclosed), unless you disapprove it within 60
days of this transmittal. For your information, I am also enclosing the
Department's Order which finalized the tentative findings and conclusions set
forth in its Show-Cause Order and revoked the domestic certificates of this and
five other carriers.
If you should decide earlier that you will not disapprove, please advise me to
that effect; this will allow the earlier issuance of the order.
We are submitting the proposed decision to you before publication under the
provisions of section 801(a) of the Federal Aviation Act of 1958. In
accordance with Executive Order 11920, however, we plan to release all
unclassified portions of the decision on or after the sixth day following this
transmittal unless notified by your Assistant for National Security Affairs.
Respectfully Dours,
Mattinew V. Scocerza
Assistant Secretary for Policy
and International Affairs
Enclosures
UNITED STATES OF AMERICA
DEPARTMENT OF TRANSPORTATION
OFFICE OF THE SECRETARY
WASHINGTON, D.C.
Issued by the Department of Transportation
on the 24th day of February, 1986
In the matter of the revocation of
:
the air carrier certificates issued to: :
:
CHISUM FLYING SERVICE OF ALASKA, INC. :
COMBS AIRWAYS, INC.
:
Docket 43767
GELCO COUR IER SERVICES, INC.
:
THE HAWAII EXPRESS, INC.
:
HAWKINS & POWERS AVIATION, INC.
:
AND
:
MAR CO ISLAND AIRWAYS, INC.
:
:
under section 401 or section 418 of the
:
Federal Aviation Act
:
ORDER REVOKING CERTIFICATE
By Order 86-2-42 issued February 24, 1986, the Department finalized the
tentative findings and conclusions set forth in Order 86-1-73, and revoked the
domestic section 401 and 418 certificates of the carriers listed above, because
these carriers had ceased operations or were not operating under their
certificates. and apparently had no intentions to commence or recommence
certificated service.
By this order, we are revoking the foreign scheduled service certificate of
Marco Island Airways, Inc. Instead of repeating our findings and conclusions
in Order 86-1-73 we incorporate them here by reference.
ACCORDINGLY,
1. We revoke the certificate of public convenience and necessity issued to
Marco Island Airways. Inc., by Order 83-11-28 authorizing the operation of
foreign scheduled air transportation between the U.S. and points in the Bahama
Islands;
2. This order shall become effective on the 61st day after its submission to
the President of the United States, or upon the date of its receipt of advice
from the President that he does not intend to disapprove the Department's order
under section 801(a) of the Act, whichever occurs earlier, unless he disap-
proves it under that section; 1/ and
1/ This order was transmitted to the President on February 24, 1986 The
61st day is April 25, 1986.
-2-
3. We will serve a copy of this order on the persons listed in Attachment A.
By:
MATTHEW V. SCOCOZZA
Assistant Secretary
for Policy and International Affairs
(SEAL)
Attachment A
SERVICE LIST
Chisum Flying Service of Alaska, Inc.
The Hawaii Express, Inc.
Mr. D. Clark Dechant
Mr. Grant Murray
Chisum Flying Service of Alaska, Inc.
President
P.O. Box 1288
The Hawaii Express
Cordova, Alaska 99574
5757 W. Century Blvd.
Suite 210
Federal Aviation Administration
Los Angeles, California 90045
Alaska Regional Office
701 C Street
Federal Aviation Administration
P.O. Box 14
Flight Standards District
Anchorage, Alaska 99513
Office #62
5885 W. Imperial Highway
Mr. P. R. Steinman
Los Angeles, California 90045
Department of Transportation
701 C Street
Mr. Daniel H. Slate
P.O. Box 27
Gendel, Raskoff, Shapiro
Anchorage, Alaska 99513
and Quittner
1801 Century Park East-6th Floor
Judge J. Douglas Williams II
Los Angeles, California 90067
U.S. Bankruptcy Court
Re: Case No. 3X-85-00025
Hawkins & Powers Aviation, Inc.
701 C Street
P.O. Box 47
Mr. Randy Sullivan
Anchorage, Alaska 99513
Director
Hawkins & Powers Aviation, Inc.
Combs Airways, Inc.
P.O. Box 391
Greybull, Wyoming 82426
The Honorable Ronald J. Brumbaugh
Bankruptcy Court
Marco Island Airways, Inc.
1825 Sherman Street, Room 400
Denver, Colorado 80203
Mr. Peter Van Arsdale
President
Combs Airways, Inc.
Provincetown-Boston Airline
3980 Quebec Street
3201 Radio Road
Denver, Colorado 80207
Naples, Florida 33942
Mr. Allan H. Markham
Mr. V. Michael Straus
4801 Massachusetts Avenue, N.W.
1001 Connecticut Avenue, N.W.
Suite 400
Washington, D.C. 20036-5544
Washington, D.C. 20016
Gelco Courier Services, Inc.
Mr. Mark Katz
Tony Express Courier Corp. of America
P.O. Box 35206
Charlotte, North Carolina 28235
Gelco Courier Services. Inc.
P.O. Box 1975
St. Paul, Minnesota 55111
Attachment A
Page 2 of 2
Military Airlift Command
Attention: TR CC
Scott Air Force Base, Illinois 62225-5001
Military Traffic Management Command
Attention: PTS
5711 Columbia Pike
Falls Church, VA. 22041-5050
Mr. William T. Brennan
Manager, Air Transportation Division
Federal Aviation Administration
800 Independence Avenue. S.H.
Washington, D.C. 20591
Mrs. Patricia T. Szrom
Chief, Special Authorities Division, P-47
Office of Aviation Operations
400 7th Street, S.W.
Washington, D.C. 20590
UNITED STATES OF AMERICA
DEPARTMENT OF TRANSPORTATION
OFFICE OF THE SECRETARY
WASHINGTON, D.C.
Issued by the Department of Transportation
on the 5th day of March, 1986
Application of
:
:
AERON INTERNATIONAL AIRLINES, INC.
:
Docket 43582
:
for amendment of its certificate of
:
public convenience and necessity issued
:
pursuant to section 401 (d) (3) of the
:
Federal Aviation Act of 1958. as amended
:
ORDER ISSUING CERTIFICATE
On November 13, 1985, Aeron International Airlines, Inc. (Aeron) filed an
application. in Docket 43582, for amendment of its certificate of public
convenience and necessity to engage in foreign charter air transportation
to confer worldwide authority. 1/
In support of its application, Aeron states that: it is a Delaware
corporation and a citizen of the United States within the meaning of
section 101 (16) of the Act; and that it is fit, willing and able to
provide the proposed services and to conform to the Act and the
Department's rules, regulations and requirements. The applicant states
that it will provide the proposed transportation utilizing CL-44-D4
aircraft presently in its fleet, and that it foresees no difficulty in
obtaining fuel to operate under the expanded authority requested.
No answers to the application were filed.
We have decided that neither an oral evidentiary hearing nor a show-cause
proceeding is necessary for us to make a decision in this case because
1/ Aeron holds a certificate of public convenience and necessity (as
reissued by Order 85-8-86) authorizing it to engage in foreign charter air
transportation of property and mail between any point in any State of the
United States, or the District of Columbia, or any territory or possession
of the United States and any point in Europe and certain specified areas
and countries in the Western Hemisphere. It also holds a domestic
all-cargo air service certificate (reissued by Order 85-8-86).
-2-
there are no material determinative issues of fact requiring either
procedure for their resolution. Therefore, in accordance with our
regulations, 14 CFR 302.29(b) and 14 CFR 302.1750(a)(3), we will proceed
directly to final approval of Aeron's application. 2/
We find that Aeron is fit, willing and able to provide the foreign charter
air transportation covered by its application. 3/ A certificated carrier
applying for additional authority that would not substantially change its
operations ordinarily is presumed to he fit and need not file any
information relating to its fitness to provide the additional services.
We construe Aeron's request for an amendment of its certificate as a
non-substantial change in its operations. Section 204.3 of our
regulations provides that such carrier will be found fit on the basis of
officially noticeable materials unless the Department concludes from its
own analysis or from information submitted by third parties that such
carrier may not be fit to provide the service which it seeks to provide.
We have received no answers to the application and there is nothing that
would lead us to conclude that Aeron is not fit to provide the services it
proposes. 4/
PUBLIC CONVENIENCE AND NECESSITY
No finding of consistency with the public convenience and necessity is
required for the award of authority for interstate and overseas charter
air transportation under section 401(d)(3). See Orders 81-12-146,
83-11-5, 84-2-103 and 84-4-90. With regard to foreign charter air
transportation, section 401(d)(3) of the Act authorizes us to issue a
certificate if such transportation is consistent with the public
convenience and necessity. We find that the proposed foreign charter air
transportation is consistent with the public convenience and necessity.
By Order 78-7-106, which instituted the Former Large Irregular Air Service
Investigation, the Civil Aeronautics Board found that there was a
continuing demand and need for additional charter air carriers and that
noncomparative selection criteria should be utilized for new applicants
since the charter market is inherently capable of adjusting to new entry.
These findings remain valid and apply to the authority sought by Aeron.
We are taking this opportunity to reissue Aeron's certificate in a new
format which we will use in the issuance of future certificates. The
"new" certificates contain provisions which are not included in our
current "standard" certificates. These additional provisions impose no
21 We note that, while we are taking final action here, the certificate
cannot become effective until after we have been advised that the Presi-
dent does not intend to disapprove this order under section 801 (a) of the
Act.
3/ Aeron's fitness was last determined by Order 85-4-28. In the instant
application, the carrier states that there have been no changes in its
ownership or key personnel, and that its compliance disposition remains
unchanged since that last finding. In addition, our review of the
applicant's Form 41's indicates the carrier maintains a solid financial
posture.
4/ The FAA has also advised us that it knows of no reason why we should
find the applicant unfit for its proposed service.
-3-
obligations not imposed previously, but merely emphasize, for purposes of
clarity, certain requirements applicable to air carriers which are now
present in our regulations. Thus, the certificates now state specifically
that they are not transferable without Department approval; that the
certificate holder must maintain liability insurance coverage for its
operations; and that failure to maintain such insurance or to comply with
the Federal Aviation Act or the Department's rules shall be grounds to
revoke the certificate.
ACCORDINGLY,
1. We grant the application of Aeron International Airlines, Inc., in
Docket 43582, for amendment of its certificate of public convenience and
necessity to engage in foreign charter air transportation of property and
mail, and issue it a revised certificate in the form attached; 5/
2. The authority to serve the points listed in the foreign charter
certificate reissued by Order 85-8-86 became effective on August 29, 1985:
the expanded authority granted here shall become effective immediately,
with the exception of operations to Australasia, Indonesia, and Asia. The
latter authority will become effective 5 days after we receive from the
FAA a copy of the carrier's amended Operations Specifications authorizing
it to engage in such operations; Provided, however, that we may stay the
effectiveness of such authority prior to that date. 6/ 11
3. This order shall become effective on the 61st day after its submission
to the President of the United States, or upon the date of receipt of
advice from the President that he does not intend to disapprove this order
under section 801 (a) of the Act, whichever occurs earlier, unless he
disapproves it under that section; 8/ and
4. We will serve a copy of this order on the persons listed on
Attachment A.
By:
MATTHEW V. SCOCOZZA
Assistant Secretary
for Policy and International Affairs
(SEAL)
5/ The certificate issued by Order 85-8-86 shall be superseded by the one
issued pursuant to this order.
6/ The FAA documents should he sent to the Department of Transportation,
Attention: Director, Office of Aviation Operations, P-40, 400 7th Street,
S.W., Washington, D.C. 20590.
7/ When the remainder of the certificate has become effective, the
Department will issue a notice to that effect, with a copy of the
certificate, including its effective date, attached.
8/ This order was transmitted to the President on March 5, 1986.
The 61st day is May 5, 1986.
Attachment A
SERVICE LIST FOR AERON INTERNATIONAL AIRLINES. INC.
Mr. James B. Leonard
President, Aeron International Airlines, Inc.
Steward International Airport
Building 138
P.O. Box 6400
Newburgh, New York 12550
Mr. Benjamin R. Achenbach, Jr.
Dunnington, Bartholow and Miller
1700 K Street, N.W., Suite 1100
Washington, D.C. 20006
Mr. William T. Brennan
Chief. Air Transportation Division, AF0-200
Federal Aviation Administration
800 Independence Avenue, S.W.
Washington, D.C. 20591
Mr. Robert Schwartz
Chief, New York Air Carrier
District Office
Federal Aviation Administration
181 South Franklin Avenue
Fourth Floor
Valley Stream, New York 11582
American Association of Airport
Executives
2029 K Street, N.W.
Washington, D.C. 20006
Ms. Donna Kelly
Official Airline Guides
2000 Clearwater Drive
Oak Brook, Illinois 60521
DEPARTMENT OF TRANSPORTATION
UNITED STATES OF AMERICA
Certificate of Public Convenience and Necessity
for
Charter Air Transportation
(as reissued)
This certifies that
AERON INTERNATIONAL AIRLINES, INC.
is authorized, subject to the provisions of Title IV of the
Federal Aviation Act of 1958, as amended, the orders,
rules, and regulations issued thereunder, and the
attached terms, conditions, and limitations, to engage in
foreign air transportation of persons, property and mail.
This certificate is not transferable without the approval
of the Department of Transportation.
By Direction of the Secretary
Issued by Order
Matthew V. Scocozza
On March 5, 1986
Assistant Secretary for
Effective on See Attached
Policy and Interational
Affairs
OST F 6404 (9/85)
As reissued
by Order 86-
*
Terms, Conditions & Limitations
AERON INTERNATIONAL AIRLINES. INC.
is authorized to engage in foreign charter air transportation of property and
mail:
Between any point in any State of the United States or the
District of Columbia or any territory or possession of the
United States, and
Any point in Canada:
Any point in Mexico:
Any point in the Gulf of Mexico or the Caribbean Sea;
Any point in Central or South America;
Any point in Australasia. Indonesia and Asia, as far west as
longitude 70 degrees east, via a transpacific routing; and
Any point in Greenland. Iceland, the Azores. Europe, Africa
and Asia. as far east as. and including, India.
This authority is subject to the following provisions:
(1) The holder shall at all times conduct its operations in accordance
with the regulations prescribed by the Department of Transportation for
charter air transportation.
(2) The holder shall maintain in effect liability insurance coverage in
amounts not less than those required under Part 205 of the Department's
Regulations (14 CFR 205) for all operations under this certificate.
(3) The holder shall at all times conduct its operations in accordance
with all treaties and agreements between the United States and other
countries, and the exercise of the privileges granted by this certificate
is subject to compliance with such treaties and agreements and with any
orders of the Department of Transportation issued under them, or for the
purpose of requiring compliance with them.
(4) The exercise of the authority granted here is subject to the holder's
first obtaining from the appropriate foreign governments such operating
rights as may be necessary.
This certificate is being reissued to reflect the addition of authority to
serve the remainder of South America and the transatlantic, and the
transpacific.
-2-
(5) The exercise of the privileges granted by this certificate is subject
to any other reasonable terms, conditions, and limitations that the
Department of Transportation may prescribe in the public interest.
(6) Failure to maintain insurance coverage as required by Part 205
renders a certificate ineffective and this or other failure to comply with
the Federal Aviation Act or the Department's regulations shall be
sufficient grounds to revoke this certificate.
(7) The authority to engage in charter air transportation between the
United States and Canada: Mexico: and any point in the Gulf of Mexico or
the Caribbean Sea; Central America: Europe: Colombia; Venezuela; Guyana;
Surinam: and French Guiana is effective on August 29, 1985. The authority
to engage in charter air transportation between the United States and the
remainder of South America, Greenland, Iceland, the Azores, and Africa
is effective on
The remainder of Aeron's foreign
charter authority will become effective 5 days after the Department has
received from the Federal Aviation Administration a copy of the holder's
amended Operations Specifications authorizing it to engage in such
operations: Provided, however, that we may stay the effectiveness of such
authority prior to that date.
THE MINTE HOUSE
WASHINGTON
March 17, 1986
MEMORANDUM FOR DAVID L. CHEW
STAFF SECRETARY
FROM:
JOHN G. ROBERTS
ASSOCIATE COUNSEL TO THE PRESIDENT
SUBJECT:
DOT International Aviation Decision:
Dominion Intercontinental
Our office has reviewed the above-referenced Department of
Transportation International Aviation decision, and has no legal
objection to the procedure that was followed with respect to
Presidential review of such decisions under 49 U.S.C. § 1461 (a).
We also have no legal objection to OMB's recommendation that the
President not disapprove this order or to the substance of the
letter from the President to the Secretary of Transportation.
ID #
CU
WHITE HOUSE
CORRESPONDENCE TRACKING WORKSHEET
o - OUTGOING
H INTERNAL
I . INCOMING
Date Correspondence
Received (YY/MM/DD)
/
/
Name of Correspondent: Dave Chew
MI Mail Report
User Codes: (A)
(B)
(C)
Subject: DOT International amation Decesion
re Dominion Intercontinental
ROUTE TO:
ACTION
DISPOSITION
Tracking
Type
Completion
Action
Date
of
Date
Office/Agency
(Staff Name)
Code
YY/MM/DD
Response
Code
YY/MM/DD
WALL
ORIGINATOR 86,03,11
/ /
Referral Note:
cuat 18
R 86 103 111
5 86,03,17
Referral Note:
/ /
/ /
-
Referral Note:
/
/
/ /
-
Referral Note:
/
/
/
/
Referral Note:
ACTION CODES:
DISPOSITION CODES:
A Appropriate Action
I Info Copy Only/No Action Necessary
A Answered
C Completed
C Comment/Recommendation
R - Direct Reply w/Copy
B - . Non-Special Referral
S Suspended
D Draft Response
S - For Signature
F Furnish Fact Sheet
X Interim Reply
to be used as Enclosure
FOR OUTGOING CORRESPONDENCE:
Type of Response = Initials of Signer
Code = "A"
Completion Date = Date of Outgoing
Comments:
Keep this worksheet attached to the original incoming letter.
Send all routing updates to Central Reference (Room 75, OEOB).
Always return completed correspondence record to Central Files.
Refer questions about the correspondence tracking system to Central Reference, ext. 2590.
5/81
Document No.
WHITE HOUSE STAFFING MEMORANDUM
DATE: 3/11/86
ACTION/CONCURRENCE/COMMENT DUE BY:
3/17/86
SUBJECT: DOT INTERNATIONAL AVIATION DECISION RE: DOMINION INTERCONTINENTAL
ACTION FYI
ACTION FYI
VICE PRESIDENT
LACY
REGAN
POINDEXTER
MILLER
RYAN
BALL
SPEAKES
BUCHANAN
SPRINKEL
CHAVEZ
SVAHN
CHEW
P
SS THOMAS
DANIELS
TUTTLE
FIELDING
HENKEL
HICKS
KINGON
REMARKS:
Please provide any comments/recommendations by
Monday, March 17th. Thank you.
RESPONSE:
David L. Chew
Staff Secretary
Ext 2702
EXECUTIVE OFFICE OF THE PRESIDENT
STATE UP SECURITY UNITED THE OFFICE OF The
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
ACTION
MEMORANDUM FOR THE PRESIDENT
SUBJECT:
Department of Transportation International
Aviation Decision:
Dominion Intercontinental Airlines, Inc.
Fitness Investigation
Docket 41035
Date due: April 1, 1986
The Department of Transportation (DOT) proposes to take the
following action with regard to the above international aviation
case:
-- Deny the application of Dominion Intercontinental Airlines,
Inc., to engage in scheduled foreign air transportation.
DOT has based its decision on a finding that the airline is
not fit to provide the requested service.
The National Security Council and the Departments of State,
Defense, and Justice have not identified any foreign policy or
national defense reason for disapproving the order in whole or in
part.
The Office of Management and Budget (OMB) recommends that you
approve DOT's decision by signing the attached letter to the
Secretary which indicates that you do not intend to disapprove
DOT's order within the 60 days allowed by statute for your
review. Also, OMB recommends that you state in your letter that
no national defense or foreign policy reason underlies your
action. This will preserve whatever opportunity is available
under the statute for judicial review.
Carol T. Crawford
Associate Director for
Economics and Government
Attachments:
DOT letter of transmittal
DOT order
Letter to the Secretary
2
Options and Implementation Actions:
(
) 1) Approve DOT's order and preserve whatever opportunity is
available for judicial review (DOS, DOD, DOJ, NSC, OMB).
-- Sign the attached letter to the Secretary.
(
) 2) Approve DOT's order and do nothing to preserve whatever
opportunity is available for judicial review.
-- Implementation materials to be prepared.
( ) 3) Disapprove DOT's order.
-- Implementation materials to be prepared.
( ) 4) See me.
THE WHITE HOUSE
WASHINGTON
Dear Madam Secretary:
I have reviewed the order proposed by the Department of
Transportation in the following case:
Dominion Intercontinental Airlines, Inc.
Fitness Investigation
Docket 41035
I have decided not to disapprove the proposed order. No
foreign relations or national defense reason underlies my
action.
Sincerely,
The Honorable Elizabeth Dole
Secretary of Transportation
Washington, D.C. 20590
U.S. Department of
Office of Assistant Secretary
400 Seventh St., S.W.
Washington, D.C. 20590
Transportation
Office of the Secretary
of Transportation
JAN 3 1 1986
The President
The White House
Washington, D.C. 20500
Dear Mr President:
I transmit for your consideration under section 801(a) of the Federal Aviation
Act of 1958, as amended by the Airline Deregulation Act of 1978, a proposed
order adopted by the Department of Transportation which would deny an
application filed by Dominion Intercontinental Airlines, Inc. in Docket 41035.
That application requests authority to conduct scheduled foreign air
transportation operations.
The order will become effective unless you disapprove it within 60 days of this
transmittal. I am also enclosing an order denying Dominion overseas authority,
the Administrative Law Judge's Supplemental Recommended Decision of September
13, 1985, and our earlier Order 85-5-27, all of which discuss Dominion's
failure to demonstrate its fitness to engage in foreign air transportation.
If you should decide earlier that you will not disapprove our proposed order,
please advise the Department to that effect; this will allow the earlier
issuance of the order.
We are submitting the proposed decision to you before publication under the
provisions of section 801 (a) of the Federal Aviation Act of 1958. In
accordance with Executive Order 11920, however, we plan to release all
unclassified portions of the decision on or after the sixth day following this
transmittal unless notified by your Assistant for National Security Affairs.
Vance tork you
Assistant Secretary for Policy
and International Affairs
Enclosures
UNITED STATES OF AMERICA
DEPARTMENT OF TRANSPORTATION
OFFICE OF THE SECRETARY
WASHINGTON, D.C.
Issued by the Department of Transportation
on the 31st day of January, 1986
DOMINION INTERCONTINENTAL AIRLINES, INC.:
FITNESS INVESTIGATION
:
Docket 41035
ORDER
By Order 86-1-75 , we denied Dominion Intercontinental Airline's application
to engage in scheduled overseas air transportation of persons, property and
mail.
By this order, we are denying Dominion's application to engage in scheduled
foreign air transportation of persons, property and mail. Instead of repeating
our findings and conclusions in order 86-1-75 , we incorporate them here by
reference.
ACCORDINGLY,
1. We deny the application in Docket 41035 of Dominion Intercontinental
Airlines to engage in scheduled foreign air transportation.
2. This proceeding is terminated.
3. This order shall become effective on the 61st day after its submission to
the President of the United States, or upon the date of receipt of advice from
the President that he does not intend to disapprove the Department's order
under section 801 (a) of the Act, whichever occurs earlier, unless he
disapproves it under the section. 1/
By:
MATTHEW V. SCOCOZZA
Assistant Secretary
for Policy and International Affairs
(SEAL)
1/ This order was transmitted to the President on January 31, 1986.
The 61st day is April 2, 1986.
Order 85-5-27
UNITED STATES OF AMERICA
DEPARTMENT OF TRANSPORTATION
OFFICE OF THE SECRETARY
WASHINGTON, D.C.
Issued by the Department of Transportation
on the 3rd day of May, 1985
SERVED MAY 10 1985
:
DOMINION INTERCONTINENTAL AIRLINES, INC.
:
Docket 41035
FITNESS INVESTIGATION
:
ORDER
Dominion Intercontinental Airlines petitioned the Civil
Aeronautics Board to reconsider its decision in Order 84-11-130,
November 30, 1984, to remand this proceeding to the presiding
Administrative Law Judge ("ALJ") for further evidentiary hearings.
By that order, the CAB directed the ALJ to reopen the record on
all three fitness issues (managerial competence, financial/
operational plan and compliance disposition) and to issue a
supplemental decision in light of Dominion's newly offered
evidence of changes in its management team and new evidence by the
CAB's Bureau of International Aviation ("BIA") which might
adversely affect the ALJ's favorable finding on Dominion's
compliance disposition.
Dominion did not agree with the decision to remand and,
consequently, filed its petition for reconsideration on December
20, 1984. Dominion presents basically three arguments against
further evidentiary hearings: (1) Dominion has submitted new
evidence, after the issuance of the ALJ's Recommended Decision
("R.D."), reflecting a change in its senior management team which
should cure any defects found by the ALJ in his R.D. and also
answering any questions raised by the CAB in its order; (2) the
CAB had applied a more stringent standard in evaluating Dominion's
senior management team for competence than was applied in another
fitness proceeding, The Alfonso Airways Case; 1/ and (3) the
record need not be reopened on the compliance issue since the
1/
Alfonso Airways & Export, Inc. Fitness Investigation, Docket
42028, Recommended Decision of Administrative Law Judge William
A. Kane, Jr., served September 13, 1984; aff'd Order 84-11-39,
October 10, 1984.
2
CAB's own internal investigation had resolved any concerns
regarding the propriety of the preparation of Dominion's exhibits.
In addition, Dominion requested that the CAB grant it a
certificate to engage in overseas and foreign air transportation
on the existing record, since the CAB had all the necessary
information for granting Dominion's application and since further
hearings would only impose an unnecessary financial hardship on
it.
On January 14, 1985, Dominion filed with the Department a
motion requesting expedited action on its application without
further evidentiary hearings. That motion essentially reiterates
the three arguments presented in its petition for reconsideration
to the CAB. Dominion's motion and petition were answered by this
Department's Office of Aviation Enforcement and Proceedings and
Office of Aviation Operations ("OAEP/OAO"). 2/
After reviewing the record in this proceeding, we are not
convinced by Dominion's arguments that a remand is unnecessary. We
concur with the CAB's decision in Order 84-11-130 to remand this
proceeding for further evidentiary hearings. Furthermore, our
independent analysis of the record and of Dominion's arguments
requires that we not grant Dominion a certificate at this time and
remand this proceeding.
DISCUSSION
In processing an application for certificated authority to
engage in overseas and foreign air transportation, the CAB has
applied a three-part test for determining an applicant airline's
fitness: (1) the airline must demonstrate that it possesses the
necessary management skills and technical ability to operate
safely (i.e., have "managerial competence"); (2) if not
internally financed, the airline must have a plan for financing
which, if carried out, will generate sufficient resources to begin
the proposed operation without undue risk to the public (i.e.,
have a satisfactory "financial/operational plan") and (3) the
airline must demonstrate that it is disposed to comply with the
Federal Aviation Act and regulations imposed by federal and state
regulatory agencies (i.e., have a satisfactory "compliance
2/ The Office of Aviation Enforcement and Proceedings and the
Office of Aviation Operations, as joint successors to the CAB's
BIA, filed a Motion for Leave to File out of Time with their
consolidated answer. We hereby grant their motion to file late
since Dominion's petition was filed less than two weeks before the
CAB's demise and since the two offices had to contend with
administrative and logistical problems occasioned by their own
creation. Moreover, Dominion will not be projudiced by our
accepting their late filing.
3
disposition"). 3/
After Dominion's second hearing to determine its fitness in
February 1984, the ALJ found Dominion unfit on the issue of its
managerial competence and on the issue of its financial/opera-
tional plan. In his R.D., the ALJ noted that Dominion's three
founders (Mr. Wendell W. Levister, the President and Chairman of
the Board; Mr. D. Wendell Keene, Executive Vice-President and
Vice-Chairman of the Board; and Mr. John S. Wisniewski, Senior
Vice-President of Personnel and Administration) all lacked
experience in managing an airline. Furthermore, only Mr.
Wisniewski had any significant successful business experience
comparable to his position at Dominion. (R.D. at 9.)
Moreover, the ALJ found that Mr. Levister as chief executive
officer showed little ability to attract and select competent
senior managers for his airline. (R.D. at 8.) Also the ALJ found,
after observing many members of the senior management team
unsuccessfully attempting to sponsor exhibits at the hearing, that
no one at Dominion seemed to understand what the airline's start-
up plan was:
Inasmuch as none of the individuals who attempted
to sponsor the operating and financial exhibits
were able to explain them, no one in [Dominion's]
executive management appears to understand the
company's current financial status or the carrier's
start-up proposal, from either a financial or an
operational standpoint. This flawed presentation of
[Dominion's] case at the hearing calls into serious
question whether Mr. Levister, [Dominion's]
President, can be relied upon to select and retain
competent managerial personnel. R.D. at 15
(footnote omitted).
Although the ALJ and BIA understood the financial/operational
plans as presented in Dominion's exhibits and they considered
those plans to be basically sound, the ALJ concluded that Dominion
did not meet the sound financial/operational plan test because
apparently Dominion's senior management did not understand those
plans:
[W]e do not find that [Dominion's] operating
and financial plans can be assessed or approved
apart from competent witnesses and employees of the
applicant to sponsor those plans, demonstrate their
adequacy and accuracy, and assure some possibility
of their implementation. Where, as here, the
3/ See, e.g., Denham Aircraft Services Corp. II, Fitness
Investigation, Order 84-5-116, April 18, 1984, at 2; and New York
Air Fitness Investigation, Order 80-12-57, December 11, 1980, at
4.
4
applicant has failed to effectively sponsor or
explain financial and operating plans and has
failed to show the managerial competence to
implement them, we conclude that fitness could not
be demonstrated by the substitution or addition of
assertedly competent management personnel without
some further demonstration that such management
understands, supports, and would attempt to
implement the same or other adequate operating and
financing plans. R.D. at 22.
The ALJ found Dominion fit on the issue of compliance
disposition in light of the record before him.
A. Dominion's First Argument on Reconsideration.
Dominion's first argument in its petition for reconsideration
challenged the CAB's failure to find Dominion fit under the
managerial competence test. However, Dominion did not directly
dispute the ALJ's findings in his R.D., as based on the hearing
and the exhibits there introduced. Rather, Dominion argued that
whatever managerial defects were found by the ALJ and described in
his R.D. were cured by Dominion's having obtained a new president
and vice-president of finance. 41
1. CAB's Response to Dominion's First Argument.
This proposed change in Dominion's senior management team was
apparently first announced in Dominion's August 14, 1984 Brief to
the CAB which appealed the ALJ's adverse findings in the R.D. The
CAB considered this very argument by Dominion when Dominion
attempted to introduce new evidence, attached as exhibits to its
brief, in the form of resumes and form-letter affidavits of
commitment from the newly proposed president and vice-president of
finance.
Although the CAB considered the resumes. impressive in terms
of the listed experience, it concluded that the resumes alone were
an insufficient basis for finding Dominion to be managerially fit.
4/ Dominion has requested that the name and identity of its
newly proposed president and vice-president of finance be given
confidential treatment to prevent jeopardizing their current
employment. The CAB ordered a temporary grant of confidentiality
pending further developments in the proceeding. Order 84-11-130
at 4. We will continue that grant of confidentiality until we
have reason to act otherwise.
Although Dominion refers to these individuals as its new
president and vice-president, we will refer to them as the newly
proposed president and vice-president since their affidavits
indicate that they have not accepted the positions and will not do
so until Domin on is certificated.
5
This was especially so in light of the other senior managers'
apparent failure to comprehend the airline's start-up plan:
[I]t is insufficient for an applicant [airline] to
indicate that it has hired talented personnel. Its
managerial team must demonstrate that it is at least
conversant with the terms of the financial and
operational proposals. If they are not, the credibility
of the proposals and the competence of the management
team are undermined. Because Dominion has yet to show
that anyone in its management team understands the
company's financial and operational proposals, we cannot
find it fit on this record. Order 84-11-130 at 3.
Furthermore, the CAB noted that the attached resumes with
form-letter affidavits raised a number of questions without a
developed record to answer them:
While their resumes are impressive, a closer
examination of their experience would be useful in
determining the adequacy of the reformulated management
team. More important, the applicant has provided little
detail on the duties of the new executives in the
company, or the limits of their authority to make
decisions on behalf of the company. In this regard, it
is unclear to what extent Mr. Levister, the company's
founder, will have a voice in the company's
decisionmaking process. In short, the [CAB] has little
information on how Dominion will be run.
Moreover, further information is required on the
extent to which the new executives are committed to
employment with Dominion. Dominion's recent filings do
not disclose whether there are circumstances in which
the new executives may choose not to join the company or
the circumstances in which they may terminate their
employment. Order 84-11-130 at 3.
In summary, the CAB recognized that the new evidence of
Dominion's proposed new management needed to be developed on the
record. It would be a question of fact, requiring findings of
fact, as to whether the proposed additions to the management team
could cure the managerial competence defects described in the R.D.
5/ The CAB remanded the proceeding to the ALJ with directions to
5/
Furthermore, the CAB believed that the issue of the
financial/operational plan would have to be reopened since the ALJ
found Dominion unfit on that issue (because the senior managers
were not conversant with the plans) and there was no existing
record on whether the proposed new management understood those
start-up plans. We have concluded, however, that since the ALJ's
problems with Dominion's plans flowed solely from his findings on
the lack of understanding by the senior management team, the
(footnote continued on text page)
6
develop the record on these issues. 6/
2. Dominion's Response to the CAB's Rejection of its First
Argument.
In response to the CAB's decision to remand in Order 84-11-
130, Dominion attempted to use its petition for reconsideration to
introduce more evidence with which to answer the questions raised
by the CAB and thereby eliminate the need for a remand. The
petition contained further allegations of new facts and was
accompanied by another affidavit from the newly proposed president
of Dominion.
Dominion's petition also argued that there was no longer a
need for remand because: (1) The basis of the ALJ's finding of
managerial incompetence was Mr. Levister's lack of managerial
experience as president of Dominion and the lack of a full-time
director of finance, two problems now resolved through Dominion's
having obtained a new president and a new senior vice president -
finance; (2) the scope of the newly proposed president's
managerial authority was fully dealt with in Dominion's August 14,
1984 Brief; and (3) his commitment to Dominion was unambiguously
stated in his new affidavit.
soundness of those plans (assuming that they are basically
unchanged) need not, as such, be an issue on remand.
6/ Examples of other cases, where the CAB remanded for
developing and evaluating new evidence, include: Regent Air
Corporation Fitness Investigation, Order 84-8-130, August 31,
1984, and Order 83-7-22, July 8, 1983, (proceeding remanded and
record reopened on issues of compliance disposition and
ownership); Key Airlines Inc. Fitness Investigation, 84-4-83,
April 23, 1984 (reopening of the record to resolve issues of
ownership and control); Skystar Fitness Investigation, Remand,
Order 83-12-84, December 15, 1983 (proceeding remanded and record
reopened to accept new evidence of changes in management and
ownership after the issuance of the R.D.); Aero West Airlines
Fitness Procedure, Order 83-12-61, December 12, 1983; Lone Star
Airways Fitness Proceeding, Order 82-9-9, September 2, 1982, at 5;
Worldwide Airlines Fitness Investigation, Order 83-4-127, April
25, 1'83.
7
3. Analysis of Dominion's First Argument.
We do not believe Dominion's argument accurately or
completely portrays the relevant facts or law. First, the ALJ
based his finding of lack of managerial competence on numerous
factors, including but not limited to the absence of managerial
experience by Mr. Levister and the other two founders, as
described briefly supra at p.3. The record in this proceeding
shows Dominion's managerial competence problems extending beyond
Mr. Levister's lack of a successful business history to the
collective inability of its entire management team to demonstrate
that someone understood the airline's start-up plans. 71 Whether
the newly proposed president can overcome these problems is an
issue of fact to be determined on a complete record.
Second, Dominion has not adequately dealt with the issue of
the scope of the newly proposed president's authority in its
August 14, 1984 brief. The only reference in its brief to the
scope of his authority is a single sentence: "As President and
Chief Operating Officer, [the newly proposed president] will have
overall managerial responsibility for [Dominion's] operations."
(Dominion's August 14 Brief at 11, para. 2.)
In view of the ALJ's findings concerning Mr. Levister,
fundamental questions on the scope of authority are still
unanswered on this present record. For example, (a) Can the newly
proposed president discharge any or all of the current management
team? If so, is cause needed for doing so? (b) Can he hire his own
senior managers? If so, does he first need the approval of
someone else? (c) When there is a disagreement between himself and
the chairman of the board (Mr. Levister) on the operation of the
airline, how will that disagreement be resolved? By the full board
of directors? By his deferring to the chairman? By a committee of
directors? and (d) Does there exist a description of the
president's duties and responsibilities? If such a description
does exist, has the newly proposed president seen it and agreed to
it?
Third, the newly proposed president's affidavit does not
answer all questions related to his commitment to Dominion. In
fact, the new affidavit does not direct itself to the two specific
questions raised by the CAB in its order to remand: "whether there
are any circumstances in which the new executives may choose not
to join the company or the circumstances in which they may
terminate their employment." Order 84-11-130 at 3.
Furthermore, Dominion only supplied an affidavit from the
newly proposed president; no new affidavit was offered from the
71 See PP. 11-13 and n. 17, infra, for a more complete
discussion of the deficiencies noted by the ALJ in Dominion's
senior management team.
8
newly proposed senior vice president - finance. This continuing
lack of definitive answers further reinforces the need for a
remand with evidentiary hearings, where questions can be asked and
answers returned for a complete record.
B. Dominion's Second Argument on Reconsideration.
1. Synopsis of Dominion's Second Argument.
Dominion's second argument against the CAB's decision to
remand alleges the use of a double standard against Dominion.
According to Dominion, the CAB used a more lenient standard for
evaluating the managerial competence of Alfonso Airways 8/ than it
used in evaluating Dominion's managerial competence.
In support of this argument, Dominion provides three
instances of apparently different treatment: (1) the founder and
president of Alfonso Airways, Mr. Alfonso Diaz del Castillo,
allegedly had "absolutely no business managerial experience
whatsoever" 9/ and yet his airline was certificated; whereas the
proposed new president of Dominion has a wealth of experience and
success in managing complex air transportation enterprises;
(2) Alfonso Airways' Director of Finance, the same Mr. Diaz del
Castillo, allegedly lacks any financial experience; whereas
Dominion's Director of the Finance Committee, Mr. Thomas McMahon,
was formerly the executive vice-president of a major bank; and (3)
Alfonso Airways had only one witness testify at its hearing, Mr.
Diaz del Castillo; whereas many of Dominion's senior managers were
required to respond to close questioning at Dominion's hearing.
Although Dominion's second argument claims that the CAB erred
in failing to find Dominion's executive management fit, Dominion
fails to state how the CAB erred by either violating or
disregarding any applicable law, procedures or legal principles.
Dominion presents a few selected facts from Dominion's case, finds
similarities between them and a few facts in The Alfonso Case,
implies that the similarities in facts mandate a similar result
(i.e., the granting of a certificate), and then concludes that,
because dissimilar results were reached from similar facts, such
different results could only be caused by the application of a
different standard. Yet nowhere in Dominion's argument does
Dominion state how or where the CAB erred. Rather Dominion at most
implies that the CAB erred because it reached, in Dominion's view,
the wrong result.
8/ Alfonso Airways & Export, Inc. Fitness Investigation, Docket
42028, Recommended Decision of Administrative Law Judge William
A. Kane, Jr., served September 13, 1984; aff'd Order 84-11-39,
October 10, 1984.
9/
Dominion's Petition for Reconsideration at 3.
9
Theoretically, we could dispose of Dominion's argument by
merely stating that it fails to specify an error, committed by
either the ALJ in his R.D. or the CAB in its Order 84-11-130, in
making findings of fact or in applying the relevant law and
procedure to those facts. However, we will meet Dominion's
argument fully and in its best possible light. We will: (a) state
the principal indicators used by the CAB as criteria for
determining managerial fitness, (b) review the application of
those indicators to Dominion and to Alfonso for the purpose of
determining whether the CAB treated Dominion unfairly either by
incorrectly applying those indicators to Dominion or by
disregarding those indicators in The Alfonso Case, and (c) review
the three instances cited by Dominion which allegedly prove the
application of a double standard. 10/
2. Review of The Dominion Case and The Alfonso Case.
a. CAB Criteria for Determining Managerial Fitness.
The CAB traditionally used four principal indicators of
managerial competence in its fitness proceedings: (1) a history of
business success by its founders and senior executive officers as
managers in aviation or nonaviation related enterprises; 11/ (2)
in the absence of such a history, the manager's demonstration --
during the course of the proceeding -- of good business judgment,
management skills and a desire to succeed; 12/ (3) the ability of
10/ It is important to note that we do not consider ourselves
bound by the CAB's cases as precedent or mandatory authority in
our independent review of Dominion's application. However, we do
consider CAB cases as precedent in determining whether the CAB
acted evenhandedly in its decisionmaking in this proceeding,
within the context. of a petition for reconsideration.
11/ See, e.g, Sea Coast Airways Fitness Investigation, Order 83-
6-27, June 9, 1983, at 4; Air Atlanta Fitness Investigation,
Recommended Decision of Administrative Law Judge John M. Vittone,
served May 27, 1982, at 3 and 6-9; aff'd, Order 82-6-90, June 15,
1982; Northeast Sunrise Airlines, Inc. Fitness Investigation,
Order 83-5-90, May 19, 1983, at 2 and 4; Spanish Main
International Airlines Fitness Investigation, Order 81-11-86,
October 1, 1981, at 4; Universal Airlines Inc. Fitness
Investigation, Recommended Decision of Administrative Law Judge
William A. Pope, II, served March 12, 1981, at 14; aff'd, Order
81-10-28, October 2, 1981; and Eugene Horbach Acquisition of
Modern Air Transport, Inc., 73 CAB 147 (1977).
12/ See e.g., Northeast Sunrise Airlines, Inc. Fitness
Investigation, Order 83-5-90, May 19, 1983 ("Of course, in the
absence of a history of business success, [the airline founder's]
conduct in establishing [the airline] is the best evidence of his
(footnote continued on next page)
10
the president or chairman of the board (i.e., the primary moving
force of the senior management team) to attract, select and retain
competent senior managers in general, but especially when many
senior management slots are not yet filled; 13/ and (4) the
presentation of the applicant airline's case at hearing. 14/
managerial competence." Id. at 5). See also, Spanish Main
International Airlines Fitnes Investigation, Order 81-11-86,
October 1, 1981 ("[the airline founder's] conduct in this
proceeding demonstrates a lack of business acumen and skill." Id.
at 5.).
13/ See Sea Coast Airways Fitness Investigation, Order 83-6-27,
June 9, 1983 ("[The CAB] has found carriers fit with an incomplete
management roster where we could rely on existing management to
select and attract qualified personnel." Id. at 5. "Appointment of
personnel to responsible positions on the basis of a family
relationship does not reflect the type of business judgment we
require of individuals with overall managerial responsibilities."
Id. at 4.); Northeast Sunrise Airlines, Inc. Fitness
Investigation, Order 83-5-90, May 19, 1984 ("... [T]he ALJ acted
properly in examining the method by which [the airline's founder]
selected key personnel.' Id. at 5.); Worldwide Airlines Fitness
Investigation, Recommended Decision of Administrative Law Judge
John M. Vittone, served August 9, 1982; aff'd Order 83-4-127,
April 25, 1983; Air Atlanta Fitness Investigation, Recommended
Decision of Administrative Law Judge John M. Vittone, served May
27, 1982; aff'd, Order 82-6-90, June 15, 1982; Muse Air Fitness
Investigation, Initial Decision of Administrative Law Judge William
A. Kane, Jr., served January 8, 1981; aff'd, Order 81-1-99,
January 21, 1981.
14/ See, Silvas Air Lines Fitness Investigation, Order 84-11-126,
November 30, 1984 at 3-5 (airline found unfit where Chief
Executive Officer's testimony displayed inattention to detail and
uncertainty about airline's assets and preoperating costs, an
unwillingness to respond to questions about expenses and potential
lenders, and a general failure to demonstrate that he comprehended
the various complexities associated with the proposed airline);
Aero West Fitness Investigation, Order 84-10-105, October 24, 1984
(where the Chief Executive Officer's managerial competence was
evaluated on his inaccurate and incomplete representations in his
evidentiary submissions and testimony); Northeast Imperial
Airlines Fitness Investigation, Recommended Decision of
Administrative Law Judge Ronnie A. Yoder, served January ,1984;
aff'd, Order 84-2-84, February 17, 1984 (where senior management
was unwilling to answer relevant and material questions) Sea
Coast Airways Fitness Investigation, Order 83-6-27, June 9, 1983
(where the airline's founder and president admitted his own lack
of financial expertise but did not search for another senior
manager to fill that gap); Worldwide Airlines Fitness
Investigation, Recommended Decision of Administrative Law Judge
(footnote continued on next page)
11
b. Application of the CAB Managerial Fitness Criteria to
Dominion.
These indicators were properly applied to Dominion by the ALJ
during the course of the proceeding. First, when this case was
before the ALJ, Dominion's chairman of the board, president and
primary moving force at that time, Mr. Levister, did not have a
history of significant business success as a manager. Neither did
the other two founders, Messrs. Keene and Wisniewski.
Consequently, the other three indicators became of greater
importance.
As to the second principal indicator of managerial compe-
tence, Mr. Levister's demonstration of managerial qualities and
skills during the course of the proceeding up to the close of the
record after hearing was very poor: (a) Dominion responded to
requests for evidence from BIA in a tardy manner, sometimes months
after the first due date; (b) Dominion failed to assemble its
exhibits properly and had to submit revised exhibits on at least
two occasions; (c) Dominion admitted to not meeting the fitness
requirements at its first hearing in August 1983; and (d) Dominion
called to the witness stand several of its chief officers as
sponsors of its exhibits at the February 1984 hearing, yet these
senior managers could not demonstrate that they understood those
exhibits and, inferentially, Dominion's start-up plan.
As to the third and fourth principal indicators of managerial
competence, Dominion's founder, chairman of the board and, up to
the close of the hearing, president --Mr. Levister-- had attracted
and selected several senior managers of questionable abilities for
their positions. 15/ Mr. Levister selected Mr. D. Wendell Keene
to be Dominion's executive vice-president and vice-chairman. Mr.
Keene has had some success in real estate, but no aviation
experience. He also had little role in forming the company, and
thus gained little experience in aviation matters in the time
between the formation of the company and the hearing. At the
hearing, he apparently still did not know much about aviation
John M. Vittone, served August 9, 1982, at 11-13; aff'd Order 83-
4-127, April 25, 1983 (where airline's president and founder
refused to supply information about persons being considered for
employment); and Spanish Main International Airlines Fitness
Investigation, Order 81-11-86, October 1, 1981 (where airline
founder and president's testimony demonstrated & "lack of business
acumen and skill").
15/ Their abilities are of greater importance to the airline in
light of Mr. Levister's not having experience in managing an
airline
12
matters. 16/ Mr. Levister also selected Mr. John S. Wisniewski
to be Dominion's senior vice-president of personnel and
administration. Mr. Wisniewski apparently had no significant
responsibility for personnel supervision (R.D. at 9). Although Mr.
Wisniewski has had some experience in supervising, the ALJ
questioned whether he would be a suitable choice for that
position. (R.D. at 9.)
The selection of Messrs. Keene and Wisniewski called into
question Mr. Levister's ability to select competent senior
executive managers. Mr. Levister's selection of other senior
managers confirmed that doubt. At the time of the first hearing in
August 1983, Mr. Levister had selected Mr. George A. Vadasan as
Dominion's vice-president for finance and financial planning. Mr.
Vadasan sponsored Dominion's exhibits at that first hearing and
his presentation led the ALJ to conclude: "[H]e was obviously
deficient in his understanding of those exhibits, financial
matters generally, and the aviation industry." (R.D. at 10.)
Furthermore, at the second hearing in February 1984, the ALJ found
that Mr. Levister's selections for vice-president of marketing and
route development (Mr. Tackling), senior vice-president and chief
operating officer (Mr. Sykes), and vice-president for finance (Mr.
Carter) could not adequately explain, justify or demonstrate they
understood the exhibits they were sponsoring. 17/ Consequently,
16/ it is unclear what [Mr. Keene's] future management
responsibilities would be." R.D. at 8. "Keene admitted that he is
'not well versed in airline management. Id.
17/ At the hearing Mr. Lloyd J: Tackling, Dominion's Vice
President of Marketing and Route Development, did not understand
the exhibits which he was sponsoring or how they were calculated.
The ALJ noted the following problems with Mr. Tackling's testimony
at hearing: a) he did not understand the Quality Service Index
(QSI) methodology used; b) he admitted the exhibits were wrong; c)
he twice pleaded a mental block in response to questions
concerning exhibits; d) he failed to demonstrate an understanding
of Dominion's marketing strategy and operating forecasts; e) he
could not explain the reason why Dominion had a common fare in the
Chicago-Port-au-Prince market and the Chicago-Santo Domingo
market, but had different fares from Boston to the same two
destinations; f) he could not explain why his comparison of
existing discount fares with Dominion's proposed fares showed some
discount fares to be higher than regular coach fares, although he
claimed to have checked the Official Airline Guide in all markets;
8) he could not explain the source of his fare elasticity estimate
of 1.3; h) he could not explain his generalization that 25% of the
traffic in Caribbean markets was carried on discount fares; i) he
was confused by the term "OLC" which appeared on Exhibit DIA-502
under the heading "Equipment," and did not realize that it
signified "on-line connections." (R.D. at 10-11.)
Although we acknowledge his statement after hearing that he
(footnote continued on next page)
&
13
the ALJ found that Mr. Levister, as the primary moving force of
Dominion's senior management team, could not be relied upon to
select and retain competent senior managers (R.D. at 15) nor
effectively present Dominion's case at hearing (R.D. at 16).
c. Application of CAB Managerial Fitness Criteria to
Alfonso.
Alfonso Airways was scrutinized under the same four principal
indicators of managerial competence. The difference between the
was under great stress from other matters before and during the
hearing (See Letter of Mr. Lloyd J. Tackling, undated, Exhibit C
attached to Dominion's August 14, 1984 Brief), nonetheless he
failed to demonstrate his managerial abilities at a critical point
in the proceeding. Furthermore, no CAB regulation or procedural
guideline required Mr. Tackling specifically to appear to sponsor
those exhibits on which he testified. Dominion could have used
another witness to sponsor those exhibits.
Mr. Don C. Sykes, Dominion's Senior-Vice President and Chief
Operating Officer, also had problems sponsoring exhibits at
hearing. The ALJ noted the following problems with Mr. Sykes
testimony in sponsoring Dominion's costing exhibits, the average
fare calculation, the computation of units for Subpart K
Methodology and the 500 and 600 series exhibits: a) he could not
explain the derivation of the QSI factors applied in each market;
b) he acknowledged that he had checked only two of the QSI
figures; c) he could not explain Dominion's average fare
calculation, and in particular could not, after repeated questions
from the ALJ and BIA counsel, state why excursion fares are
mentioned in Dominion's revenue projections when Dominion only
proposed to use coach and first class fares; and d) he was unable
to explain the traffic forecasts developed by Mr. Vadasan. (R.D.
at 12.)
Mr. Albert G. Carter, Dominion's Vice-President of Finance,
also had problems during his testimony. Even though he had been
associated with Dominion for only three weeks prior to hearing,
Dominion called him to the witness stand to sponsor exhibits. The
ALJ noted the following problems with his testimony: a) he had not
audited Dominion's current balance sheet, even though he is a CPA
licensed in Illinois; b) he attempted to sponsor the private
placement memorandum, which involves obtaining sufficient
financing for start-up operations, but he could not demonstrate a
competent understanding of that document; c) he could not verify
the intentions or capability of the founders to produce the
additional capital to which they had committed themselves; d) he
could give only a partial explanation of Dominion's financial
condition or its future plans; and e) he could not explain the
$20,000 debt under current liabilities on the balance sheet which
had been the subject of inquiry at the August 8, 1983 hearing.
(R.D. at 12-13.) On the basis of the above problems, the ALJ
concluded that he did not have the financial expertise to qualify
as the financial manager of Dominion. (R.D. at 13.)
14
respective ALJs' findings on managerial competence was based on
differences of fact. The first indicator of managerial competence,
a history of business success as a manager, was not strictly
applied to Alfonso's president and founder, Mr. Diaz del Castillo,
just as it had not been applied strictly to Mr. Levister of
Dominion. He, like Mr. Levister, had no history of previous
business success. Nonetheless, the ALJ in The Alfonso Case noted
that "[Mr. Diaz del Castillo] has obtained a good deal of
experience since [forming the airline]." (R.D. at 6-7.)
Alfonso's president amply demonstrated he had the managerial
qualities and skills and the firm desire to succeed necessary to
satisfy the second indicator of managerial competence as president
of a new airline. After starting a career in aviation, he went
back to school to study aviation management and transportation
management at Barry University in Miami. To expand his knowledge
of aircraft availability, he directly contacted various aircraft
manufacturers on the availability of various types of aircraft.
(R.D. at 5-6.)
When confronted with the problem of finding and selecting
qualified senior management for his new airline, he arranged a
meeting and sent letters with invitations to approximately 500
people with various aviation-related backgrounds, inviting them to
meet with him to discuss the establishment of an airline. The
majority of the people now with Alfonso were among those who
attended that formative meeting. (R.D. at 6.)
When he discovered that Alfonso's director of finance did not
have the qualifications shown on his resume and was unfit for the
position, Mr. Diaz del Castillo took it upon himself to testify on
Alfonso's financial plan at the fitness hearing and then
discharged the director of finance. Although he successfully
presented his airline's financial plan at hearing, he recognized
his limited experience in financial matters and was planning to
find a replacement director of finance. 18/
Furthermore, Mr. Diaz del Castillo's desire to succeed and
managerial skills were shown by his aggressive prosecution of
Alfonso's application through the certification process to a
favorable R.D. He accomplished this despite encountering
obstacles such as attempts to delay his application by prospective
competitors on one of Alfonso's proposed routes, requests for
further evidence from the CAB, denial of his motion for processing
his application without hearing, and a reopening of the record
after hearing when Alfonso's former director of finance made
allegations reflecting on Mr. Diaz del Castillo's and Alfonso's
integrity and the truthfulness of Alfonso's exhibits.
18/ R.D. at 2; and Order Deferring Briefs and Reopening the
Record, July 6, 1984.
15
As to the third and fourth indicators of managerial
competence, Alfonso's management team was satisfactory. Mr. Diaz
del Castillo demonstrated his ability as president and chairman of
the board to attract competent senior managers through his
creative and effective method of mass mailing. The ALJ found no
problems with Mr. Diaz del Castillo's selection of Alfonso's
senior managers. Nor does the record of Alfonso Airways indicate
any problem in the retention of competent managers.
In addition, Alfonso's management successfully presented its
case before the ALJ at hearing. The exhibits were prepared almost
solely by Alfonso's president. He was the sole witness for the
presentation of Alfonso's case. He sponsored all the exhibits and
responded to close questioning by Alfonso's attorney, the ALJ and
BIA counsel. Although the ALJ noted in his R.D. that the exhibits
were poorly organized, they were understandable to the ALJ and
opposing counsel and did not require further revisions at hearing
as did Dominion's during the August 1983 hearing. Finally, the ALJ
was so impressed with Mr. Diaz del Castillo's presentation of
Alfonso's case at hearing that he stated: "His solo efforts
manifest a persistence and strong determination to make Alfonso
Airways succeed and a general knowledge and understanding of what
is needed to start an airline." (R.D. at 7.)
3. Review of Dominion's Three Instances of Allegedly Unfair
Treatment.
In light of the above discussion of the principal CAB
indicators of managerial competence and their application to
Dominion and to Alfonso, we now have a context of material facts
and relevant cases within which to review Dominion's three alleged
instances of the CAB's applying a more stringent standard to
Dominion.
a. Dominion's First Alleged Instance.
Dominion claims, as its first instance of allegedly unfair
treatment, that its management team must have been unfairly
evaluated by the CAB because Dominion's "president and chief
officer possesses extensive managerial experience in the managing
of complex air transportation enterprises" 19/ whereas Alfonso's
"president and chief operating officer had absolutely no business
managerial experience whatsoever." 20/
In responding to Dominion's allegation, we first note that
Dominion's characterization of Mr. Diaz del Castillo is not the
same as that of the ALJ who decided The Alfonso Case: "Although he
19/ Dominion Petition for Reconsideration at 4.
20/ Dominion Petition for Reconsideration at 3 (emphasis in the
original).
16
had no prior business management experience before forming Alfonso
Airways he has obtained a good deal of experience since that
time." (R.D. at 6-7.) Second, we have already discussed above that
the president or chief executive officer need not have a prior
history of business success, provided that he could assemble a
staff of senior managers who demonstrate proficiency in those
areas were he was deficient. This standard was applied to Dominion
by the ALJ in his R.D. and resulted in Dominion's being found
unfit on the basis of managerial competence. 21/
Third, Dominion's comparison-of-presidents argument tacitly
assumes that the fundamental issue of managerial fitness centers
upon the qualifications of an airline's president. That assumption
is not always true. Rather, the managerial fitness test revolves
around the central issue of whether the collective abilities of
the senior management team are sufficient to successfully operate
an airline. While Dominion's newly proposed president's
qualifications are relevant to this central issue, they are by no
means dispositive or conclusive.
In some cases, the CAB gave great weight to the president's
qualifications when he was well qualified and deemed to be the
primary moving force of the senior management team. 22/ However,
in a case like this where the other senior managers have shown
deficiencies, the Board could not mechanically evaluate only the
president, disregarding the abilities of the other managers, and
then reach a sound conclusion on the collective abilities of the
management team.
We cannot find on this record that the newly proposed
president here will be the primary moving force within the
airline. His ability to select and attract other senior managers
has been basically preempted by Mr. Levister's already having
filled most of the more important senior management positions. 23/
Moreover, we cannot assume that the newly proposed president
will be the ultimate authority within the airline's management
structure. Factors indicating that he will not be the ultimate
authority include: (1) Mr. Levister's dominant position in forming
the airline; (2) Mr. Levister's retaining his current position of
Chairman of the Board, the position to which the newly proposed
21/ See our discussion at PP. 11-13 and n. 17, supra, for a more
detailed enumeration of the defects found by the ALJ in Dominion's
senior management team.
22/ See cases cited at P. 10, n. 13, supra.
23/ See PP. 11-13 and n. 17, supra, for the positions already
filled and the problems noted by the ALJ regarding the managers in
those positions.
17
president will report; and (3) the absence in the record of a
realistic delineation of the responsibilities and duties between
the president and chairman. 24/
Thus, we do not perceive that the CAB erred in remanding this
proceeding to the ALJ despite the submission of the newly proposed
president's resume and affidavit. The proper weight to be given
the resume and the affidavit in evaluating the collective ability
of the reconstituted senior management team is simply unclear. The
CAB properly denied Dominion a certificate because Dominion had
not met its burden of proof in demonstrating that its
reconstituted senior management team was collectively fit, even
with its newly proposed president.
Finally, we cannot find under our own review that the mere
submission of the newly proposed president's resume and affidavit
merits finding by us of managerial competence in light of this
factually unusual situation. Too many uncertainties prevent us
from finding that Dominion has met its burden of proof in
demonstrating managerial competence.
Accordingly, we believe that the record should be developed
through evidentiary hearings so that findings of fact can be made
by the ALJ on remand. We, like the CAB earlier, cannot make such
findings of fact on the current record.
b. Dominion's Second Alleged Instance.
Dominion alleges, as its second instance, that its Director
of the Finance Committee, Thomas McMahon, was eminently more
qualified for that position in Dominion than Mr. Diaz del Castillo
was for the position of Director of Finance in Alfonso. Mr.
McMahon was formerly the executive vice-president of a major bank.
Mr. Diaz del Castillo, on the other hand, had no previous
experience in financial matters; yet Dominion's management team
was found unfit whereas Alfonso's was found fit. Supposedly this
demonstrates that whatever standard was applied to Dominion was
not applied to Alfonso during its application process.
We can see two potential arguments arising from Dominion's
contrast: (1) that the CAB found Mr. McMahon unfit for his
position, despite the fact that Mr. McMahon's qualifications were
better than those of Mr. Diaz del Castillo for the position of
Director of Finance, and that such a finding shows Dominion must
have been subjected to a more stringent test of managerial
competence than Alfonso; or (2) that the CAB found Mr. McMahon fit
for his position and such finding should be sufficient for finding
Dominion's management team fit.
24/ See also the questions on the newly proposed president's
scope of authority posed on P. 7, supra.
18
Turning to the first potential argument, we can discover no
finding by the ALJ in his R.D. or by the CAB in Order 84-11-130
indicating that Mr. McMahon was found unfit for his position. To
the contrary, the ALJ seems to be laudatory of Mr. McMahon as to
his professional experience and abilities, and as to his sharing
of those abilities in helping numerous minority-owned enterprises
initiate operations. (R.D. at 14.) However, any problem which the
ALJ found regarding Mr. McMahon did not involve any lack of
ability on his part; rather the problems arose from his role at
Dominion being essentially part-time and advisory, and his
inability to rectify the deficiencies of other senior managers in
areas of expertise and day-to-day responsibilities beyond Mr.
McMahon's position. (R.D. at 14.)
Furthermore, as to Mr. Diaz del Castillo's holding the
position of Director of Finance at Alfonso, Dominion's argument
gives the impression that Mr. Diaz del Castillo considered himself
adequately qualified for that position and that the ALJ in that
proceeding agreed. That is a false impression. The record in the
Alfonso proceeding shows that Alfonso originally had a Director of
Finance who appeared to be qualified for his position on the basis
of his resume, who apparently was not truthful on his resume and
who was subsequently discharged about the time of the hearing. Mr.
Diaz del Castillo stepped into the breach caused by the removal of
the former Director of Finance and presented all the financial
testimiony at Alfonso's hearing as the most knowledgeable person,
given the emergency circumstances. 25/
Mr. Diaz del Castillo recognized his limitations in the area
of finance and intended to find another Director of Finance. 26/
Under CAB case law, an applicant airline need not have filled the
position of Director of Finance as a prerequisite for
certification provided that the primary moving force of the senior
management team (i.e., chairman of the board, president or chief
executive officer) demonstrates that he has the ability to
attract, select and retain competent senior managers for the
unfilled positions on the senior management team. 27/ Mr. Diaz
del Castillo demonstrated that ability and it was so found by the
ALJ in that proceeding. (R.D. at 7.)
25/ See Alfonso Airways & Export, Inc. Fitness Investigation,
Docket 42028, Order Deferring Briefs and Reopening the Record,
July 6, 1984, at 2; and R.D. at 2.
26/ Id.
27/ See Air Atlanta Fitness Investigation, Recommended Decision
of Administrative Law Judge John M. Vittone, served May 27, 1982;
aff'd, Order 82-6-90, June 15, 1982; Muse Air Fitness
Investigation, Initial Decision of Administrative Law Judge
William A. Kane, Jr. served January 8, 1981; aff'd, Order 81-1-
99, January 21, 1981
19
C. Dominion's Third Alleged Instance.
For its third instance of allegedly unfair treatment,
Dominion argues that numerous members of its senior management
team were subjected to close questioning by the ALJ and BIA
counsel at hearing; whereas in the Alfonso proceeding, only one
witness testified for Alfonso, Mr. Diaz del Castillo. At
Dominion's second hearing, many of the senior managers who
sponsored various exhibits were unable to explain, to justify, or
even to agree with their respective exhibits. Consequently, the
ALJ found such poor sponsorship of exhibits to be a major basis
for finding Dominion's senior management unfit:
The revised exhibits submitted at the
reconvened hearing were again incompetently
sponsored. Such persistent deficiencies reflect
serious shortcomings in Mr. Levister's ability to
conduct the affairs of the company in compliance
with the Act and applicable rules and requlations
and without undue risk to the public. R.D. at 16.
Dominion apparently believes that, since its management team
was subjected to such close questioning and since the result of
the close questioning was an adverse finding by the ALJ on its
managerial competence, Alfonso must have been subjected to a less
strict standard of not being required to call its senior
management team to sponsor exhibits.
Dominion's argument rests upon the false premise that
Dominion was required to call numerous members of its senior
management team to sponsor exhibits during the hearing. There is
no such requirement in the CAB's regulations, in the Act, in the
case law or in the rules of evidence. Rather, an airline is
required to have someone sponsor its exhibits so that they can be
entered into the record as the testimony of a person under oath
and in accordance with the rules of evidence.
Dominion's argument fails to perceive the nature of exhibits
and their relation to the burden of proof in the application
process. First, there is no presumption that every applicant
airline is fit for certification. Thus, each applicant must prove
that it is fit to operate. To successfully carry that burden of
proof, the airline prepares exhibits as a way of summarizing a
great deal of oral testimony for the purpose of showing that it
meets all requirements under applicable law and regulations. Those
exhibits are not self-authenticating; that is, an exhibit's truth
and accuracy is not immediately accepted by the ALJ on the basis
of the exhibit's mere existence. Rather, the statements in an
exhibit are adopted by the person sponsoring the exhibit as his
own statements. 28/ And as such, the sponsoring witness must be
28/ See Silvas Air Lines Fitness Investigation, Order 84-11-126,
(footnote continued on next page)
20
prepared to explain, justify and agree with those statements in
the exhibit which he is sponsoring, just as he would have to do
with any statement he himself uttered on the witness stand.
At its hearing, Dominion had the burden of proof to show that
it was fit to operate. Dominion chose various senior managers to
sponsor Dominion's exhibits in order to enter the exhibits into
the record as the statements of a person who was testifying under
oath. The choice of who sponsored a particular exhibit, or all the
exhibits, was solely Dominion's. Dominion could have entered its
exhibits through one witness if it so desired because no
applicable rule or law prevents it from doing so. Since it chose
to use its various managers to sponsor exhibits, it cannot now
claim that it was forced to do so by the CAB. And since many of
its senior managers could not explain, justify or even agree with
those exhibits, Dominion cannot fault the ALJ for inferring that
those senior managers have not demonstrated their ability to meet
the requirements of their positions nor fault the ALJ for
concluding that Dominion's senior management as a whole was unfit
at the time of the hearing to operate an airline. We therefore
find Dominion's third instance of allegedly unfair treatment to be
without merit.
In summary, our analysis of the Dominion record indicates no
error by the CAB, either in the R.D. or in Order 84-11-130, in
applying the relevant regulations, case law and rules of evidence
and procedure to the material facts in the record. Furthermore,
our comparison of the CAB's processing of Dominion's application
with Alfonso's application likewise revealed no errors through the
use of any stricter standards applied to Dominion. Finally, our
review of the three specific instances cited by Dominion failed to
show any application of a double standard to Dominion; rather, the
divergent outcomes on managerial fitness resulted from differing
factual, legal and procedural circumstances.
C. Dominion's Third Argument on Reconsideration.
Dominion's third argument challenges the CAB's decision to
remand the compliance disposition issue in light of BIA's new
evidence and allegations regarding the circumstances under which
Dominion's exhibits were prepared.
The remand on the compliance disposition issue arose from
BIA's motion, filed the day after the R.D. was issued, to reopen
the record and to stay the effectiveness of the R.D. According to
the motion, BIA had recently discovered new evidence (embodied in
a memorandum concerning the internal investigation of a CAB
employee) which could affect the ALJ's finding of a satisfactory
November 30, 1984, at 5 ("We expect [an applicant airline] to
provide a sponsor for all information ... contained in,its
"exhibits." Id. at 5.)
21
compliance disposition. 29/
BIA's motion raised the question whether Dominion may have
violated relevant law or guidelines, or alternatively, may have
demonstrated a predisposition for not complying with applicable
law if granted a certificate. However, BIA did not develop an
argument going to the merits of the compliance issue; rather, it
merely moved for an opportunity to present such an argument in its
rebuttal case. In support of its motion and to show that its
motion was not frivolous, BIA proffered the memorandum on the
internal investigation. The CAB granted BIA's motion to reopen the
record on the compliance issue and noted that the new evidence
also involved the preparation of Dominion's exhibits. Order 84-11-
130 at 3-4. 30/
In support of its argument against the remand, Dominion
basically alleges three points: (a) that the members of Dominion's
senior management team are all honorable men, some of whom hold
advanced academic degrees; and therefore to subject them and
Dominion to further proceedings on the compliance issue would be
unnecessary and a drain on Dominion's limited finances; (b) that
the ALJ has already made a favorable finding of compliance
disposition and there is no need to disturb it; and (c) that the
CAB has already completed its own internal investigation under
Part 370 of the CAB's regulations and the investigation has
resulted in no findings adverse to Dominion; therefore such
investigation cannot be the basis for additional inquiry into
Dominion's compliance disposition within the context of its
fitness proceeding.
As to Dominion's first point, it is immaterial to the
compliance issue being remanded. The purpose of the remand is not
for a determination of who is or who is not an honorable man.
Whether or not all of Dominion's senior management team are
honorable men is not a material issue in this proceeding. Rather,
the basic issues on remand, as to compliance disposition, are:
29/ BIA stated in its motion that it was informed of an internal
CAB investigation which convinced BIA that "inextricably
interwoven with the questions on [Dominion's] compliance
disposition are questions on a serious and sensitive matter of
Board employee conduct." BIA Motion to Reopen the Record and Stay
the Effectiveness of the Recommended Decision, April 24, 1984,
at 2.
30/ In ruling on BIA's motion, the CAB further revealed that "the
concern about the applicant's compliance disposition arises from
the circumstances under which the applicant's exhibits were
prepared." Order 84-11-130 at 4.
Because of the sensitive nature of the investigation, the CAB
granted temporary confidentiality on the more sensitive issues
involved until the ALJ could make further rulings on
confidentiality during the course of the remanded proceeding.
22
whether BIA's newly discovered evidence should be admitted into
the record, and whether OAEP/OAO will be permitted to develop that
evidence through discovery and at hearing. The purpose of the
remand is to develop the record on the issue of compliance
disposition under the applicable law and the rules of evidence.
The issue must be remanded because we do not have a fully
developed record, with findings of fact based on evidence properly
introduced into the record.
As to Dominion's second point, that the ALJ has already made
a favorable finding on Dominion's compliance disposition,
Dominion's argument begs the very question that it is supposed to
answer. The issue is not whether the ALJ found Dominion fit under
the compliance disposition test in his R.D. after hearing. No one
is contesting that he did so; but the ALJ did not have before him,
did not rule on and did not reopen the record to accept BIA's
newly discovered evidence. Thus, and more specifically, the issue
is whether the ALJ would still have found Dominion fit under the
compliance disposition test if the ALJ had reopened the record,
had ruled on and had accepted BIA's proferred evidence, and had
permitted BIA to develop the record on the subsidiary issues
raised by the new evidence.
As to Dominion's third point, that the CAB's internal
investigation has resolved the questions raised by the new
evidence on compliance disposition, we find Dominion's argument
unconvincing. The internal investigation, according to Dominion,
was conducted under Part 370 of the CAB's regulations. Those
regulations govern employee conduct and not airline fitness under
the compliance disposition test. Although Dominion argues that the
Part 370 internal investigation failed to make any findings
adverse to Dominion and that Dominion's managers and directors
were not called to testify there, we fail to perceive how such
alleged facts can be deemed conclusive or dispositive of the
compliance disposition issue in this fitness proceeding. The
parties, the issues, the substantive law and the procedures in the
Part 370 investigation are different from those in this fitness
proceeding.
Furthermore, Dominion's argument implies that BIA and OAEP
have already presented their arguments based on the new evidence
for their rebuttal case on the compliance issue. They have not.
Rather, BIA merely moved to reopen the record without presenting
full arguments or complete evidence of its rebuttal case. 31/
31/ The record of this proceeding does not contain the full Part
370 investigation to which Dominion refers. BIA moved to reopen
the record and to have the memorandum -- related to the
investigation -- entered into the record on the day after the
ALJ's R.D. was issued, when the record was already closed. The ALJ
declined to rule on BIA's motion since he had already issued his
R.D. and, consequently, jurisdiction passed from the ALJ to the
(footnote continued on next page)
23
Although Dominion's argument speculates that OAEP/OAO are
limited in this proceeding to evidence introduced in the Part 370
employee investigation, we do not preclude the possibility of
their going beyond that to evidence which may have been developed
but not introduced in that investigation or which may yet be
uncovered in this proceeding by discovery. In any event, we will
not decide the merits of BIA's or OAEP/OAO's rebuttal arguments
and evidence before they are presented to us.
Thus, we are not convinced by Dominion's third point that the
CAB's internal investigation under Part 370 either disposes of the
compliance disposition issue in this fitness proceeding or
determines the sufficiency of BIA's or OAEP/OAO's rebuttal case.
The proper forum to determine the issue of Dominion's compliance
disposition is this fitness proceeding, where we have the proper
parties, issues, procedures and substantive law.
We concur with the CAB's decision to reopen the record and
remand the compliance disposition issue on the basis of BIA's
motion with supporting evidence. We find that the motion raises
important questions involving compliance disposition which should
be answered but cannot be resolved until OAEP/OAO make their
arguments and present their supporting evidence. 32/ We therefore
direct the ALJ to make findings of fact and to issue a
supplemental decision on the compliance disposition issue also.
CAB. The CAB, in turn, could not decide the compliance issue on
the record before it and ordered the record reopened on the
compliance issue. See Administrative Law Judge's Order, April 27,
1984; Order 84-7-11, July 3, 1984; and Order 84-11-130, November
30, 1984.
32/ The CAB, like this Department, felt constricted in making any
findings without a developed record upon which to base them:
Dominion's counsel has reviewed the allegations and
responds that he does not believe the allegations
[contained in BIA's proffered evidence] reflect
adversely on Dominion's compliance disposition. While
certainly not dispositive, the allegations, at a
minimum, call into question the applicant's willingness
to be candid with regulatory authorities. The applicant
avoided disclosure of the circumstances in which its
exhibits were prepared, even after the presiding judge
raised questions about them. The facts might also
disclose actual misrepresentation or violations of laws
or regulations. Order 84-11-130 at 4.
24
ACCORDINGLY,
1. We remand this proceeding to the Chief Administrative Law
Judge for assignment. We direct the Designated Administrative Law
Judge to reopen the record, to make findings of fact and to issue
a Supplementary Decision, in accordance with this order:
a. on the issue of whether Dominion's newly reconsti-
tuted senior management team meets the managerial fitness
requirements;
b. on the issue of whether Dominion's current financial
and operational plans have changed from the plans presented in its
exhibits at hearing; if those plans have materially changed, then
the ALJ should reopen the record and make findings of fact on the
new plans; if those plans have not so changed, then this issue
need not be reopened; and
C. on the issue of whether Dominion's compliance
disposition meets the fitness requirements in light of evidence
discovered by BIA and to be developed by OAEP/OAO.
2. We grant the motion of the Office of Aviation Enforcement
and Proceedings and the Office of Aviation Operations for Leave to
File Out of Time.
3. We grant Dominion's motion to withdraw a document from the
public docket of this proceeding, and direct the Chief of the
Docket Section to return Mr. Levister's affidavit dated February
7, 1985, to Dominion's attorney. 33/
4. We deny, to the extent not otherwise granted or denied,
all other pending motions, petitions and other requests in this
docket.
By:
Matthew V. Scocozza
Assistant Secretary for Policy
and International Affairs
(SEAL)
33/ Mr. Levister filed with the Department an affidavit regarding
his qualifications. A week later, Dominion filed a motion to
withdraw that document because it was untimely filed. OAEF/OAO
have not contested Dominion's motion. We therefore grant
Dominion's motion for the return of the affidavit.
Order 86-1-75
UNITED STATES OF AMERICA
DEPARTMENT OF TRANSPORTATION
OFFICE OF THE SECRETARY
WASHINGTON, D.C.
Issued by the Department of Transportation
on the 31th day of January 1986
DOMINION INTERCONTINENTAL AIRLINES, INC.
FITNESS INVESTIGATION
:
Docket 41035
ORDER DENYING APPLICATION
This proceeding was transferred to the Department from the Civil Aeronautics
Board. At the CAB, Administrative Law Judge Ronnie A. Yoder issued a
Recommended Decision ("R.D.") on April 24, 1984, in which he found that
Dominion satisfied the operational/financial plan and the compliance
disposition elements of the fitness test, but not the managerial competence
element. On the day after the R.D. was served, the CAB's Bureau of
International Aviation moved to reopen the record for the admission of newly
discovered evidence relating to Dominion's compliance disposition. Dominion
appealed the Judge's decision and offered evidence of a reconstituted
management team which would allegedly cure the defects found by the Judge. The
CAB remanded the proceeding on all three elements of the fitness test by its
Order 84-11-130; and Dominion petitioned the CAB to reconsider its decision to
remand. The proceeding was transferred to this Department without a decision
on Dominion's petition for reconsideration.
By our Order 85-5-27, we remanded this proceeding for further development of
the record. The proceeding on remand was reassigned to Judge Yoder and a
prehearing conference was held on June 25, 1985. Shortly thereafter,
Dominion's board of directors unanimously voted to dissolve the corporation.
Dominion filed a Notice of Withdrawal of Application on July 10, 1985, and its
attorney filed a Notice of Withdrawal of Counsel on the same day.
Judge Yoder issued a supplemental recommended decision (S.R.D.) on
September 13, 1985 (copy attached as appendix). He denied Dominion's motion to
withdraw and proceeded instead to make findings on the merits. He concluded
that Dominion had not met the fitness standards and that its application should
be denied. Although no petition for discretionary review has been filed, we
have decided to take review on our own initiative and to affirm his decision in
part.
- 2 -
As to procedure, we affirm Judge Yoder's decision to deny Dominion's request to
withdraw. He rightly characterized the disposition of withdrawal requests as
discretionary with the Department. He accurately described how such requests
were typically disfavored by the C.A.B. when received only after a case had
been extensively litigated. 1/ That is clearly the situation here and we will
continue the C.A.B.'s approach. Furthermore, we endorse the Judge's emphasis
on the importance of finalizing this particular proceeding. (S.R.D. at 9).
As to the merits, our remand Order 85-5-27 requested the Judge to reopen the
record for the admission of new evidence and arguments on two issues: (a) the
managerial competence of Dominion's new management team and (b) Dominion's
compliance disposition in light of OAEP's newly discovered evidence. However,
the withdrawal of Dominion and its counsel before hearing precluded the proper
admission of Dominion's and OAEP's evidence into the record and the necessary
opportunity for rebuttal evidence and arguments.
Notwithstanding the undeveloped state of the evidence on remand, we affirm the
Judge's finding on remand that Dominion failed to demonstrate that its new
management team could remedy the managerial deficiencies enumerated in the
Judge's April 24, 1984 recommended decision, which was based on a complete and
litigated record. (S.R.D. at 9.) We further affirm on review that this finding
is legally sufficient to support his conclusion that Dominion remains
managerially unfit and therefore should be denied a certificate to engage in
foreign and overseas air transportation. In light of our affirming the Judge
on managerial competence as discussed, we need not and do not reach the Judge's
other findings on the fitness test elements. 2/
ACCORDINGLY,
1. To the extent set forth in this order, we affirm the Supplemental
Recommended Decision in Docket 41035, served September 13, 1985;
1/ When the parties have developed the record and fully argued the issues, an
applicant cannot avoid the res judicata effect of an adverse decision by
attempting to withdraw. See, e.g., Southern Transcontinental Service Case, 33
CAB 701, 739 (1961); Tourist Enterprises Corporation "ORBIS," d/b/a Orbis
Polish Travel Bureau, Inc., and d/b/a Pargiello Services, Inc., Foreign
Indirect Air Carrier Permit, 76 CAB 594, 617 (1978); and Unicorn Air, Ltd.,
Fitness Investigation (On Remand), Docket 41306, Supplemental Recommended
Decision of Chief Administrative Law Judge Elias C. Rodriguez, served May 24,
1985; aff'd Order 85-9-24, July 31, 1985.
2/ Notwithstanding our decision not to review the Judge's discussion and
findings on Dominion's compliance disposition, the Office of Aviation
Enforcement and Proceedings has full discretion to determine whether any
enforcement action is warranted concerning the events described by the Judge.
- 3 -
2. We find on review that Dominion Intercontinental Airlines has failed to
demonstrate that it is fit, willing and able to engage in overseas and foreign
air transportation;
3. We deny the application in Docket 41035 of Dominion Intercontinental
Airlines to engage in overseas air transportation; 3 /
4. The Docket Section shall preserve and maintain the confidential section of
this docket until further order of the Department; and
5. Except to the extent granted, we deny all other pending motions, petitions,
applications and requests in this docket.
By:
MATTHWWW SCOCOZZA
Assistant Secretary
for Policy and International Affairs
(SEAL)
3/ By this order, we deny Dominion's application for authority to conduct
overseas air transportation. Denial of Dominion's request for foreign
authority is subject to Presidential review under section 801 of the Act and
will be handled in a forthcoming companion order.
SERVICE LIST FOR DOMINION INTERCONTINENTAL AIRLINES
John S. Wisniewski
325 Box Elder Drive
West Chester, PA 19380
Thomas F. Mahoney
Office of Aviation Enforcement
and Proceedings/C-70
Department of Transportation
Washington, D.C. 20590
UNITED STATES OF AMERICA
CIVIL AERONAUTICS BOARD
WASHINGTON, D.C.
DOMINION INTERCONTINENTAL AIRLINES, INC.
FITNESS INVESTIGATION
DOCKET 41035
RECOMMENDED DECISION OF
ADMINISTRATIVE LAW JUDGE RONNIE A. YODER
Served: April 24, 1984
Upon:
Edwin O. Bailey, Wiley, Johnson & Rein, 1776 K Street, NW.,
Washington, D.C. 20006, for Dominion Intercontinental Airlines, Inc.
Nicholas R. Lowry, Civil Aeronautics Board, 1825 Connecticut
Avenue, N.W., Washington, D.C. 20428 for the Bureau of International
Aviation.
Found:
Dominion Intercontinental Airlines, Inc., has failed to
demonstrate that it is fit, willing and able to engage in overseas and
foreign scheduled air transportation of persons, property and mail as
defined in the Federal Aviation Act, and to comply with the Act and
the Board's rules, regulations and requirements thereunder.
This recommended decision is rendered pursuant to authority delegated
to Administrative Law Judges under Rule 27 of the Rules of Practice in
Economic Proceedings (14 CFR 302.27). Review by the Board of this
decision is automatic if exceptions are filed within 14 days after
service of this decision in accordance with Rules 1754 and 1755 of the
Rules of Practice in Economic Proceedings (14 CFR 302.1754, 302.1755).
- 3 -
On May 12, 1983, DIA filed an amendment to its application for
overseas and foreign scheduled authority to strike all foreign points
in its application except the Dominican Republic and Haiti.
Accordingly, DIA's application is limited to transportation between
any point in any state of the United States or the District of
Columbia, or any territory or possession of the United States, and a
point or points in the Dominican Republic and Haiti.
A hearing was held on August 2 and 8, 1983, and at its conclusion
the applicant admitted that it had not demonstrated compliance with
the Board's fitness requirements (2 Tr. 31-35). It, therefore,
requested an opportunity to submit revised exhibit, and to reconvene
the hearing at a later date. The only other party, the Bureau of
International Aviation, agreed to that request, and the hearing was
reconvened on February 2, 1984. Both parties have submitted
posthearing exhibits 3/ and briefs. 4/ While DIA supports a finding
of fitness, the Bureau opposes such a finding because of DIA
managerial deficiencies.
SUMMARY OF FINDINGS AND CONCLUSIONS
We conclude that Dominion Intercontinental Airlines, Inc., has
failed to demonstrate that it is fit, willing and able to provide
3/ The following posthearing exhibits were submitted pursuant to
rulings at the hearing and are hereby marked and admitted in evidence:
DIA Post Hearing IR-1 through 4; BIA PH-1 through 3.
4/ The Bureau's brief was filed on March 1, 1984, with a contingent
motion to late file. The Bureau's time was extended to February 29,
1984, by order dated February 28, 1984. On February 29, 1984, the
Bureau moved for a further one-day extension because of a breakdown in
its word processing equipment. The applicant consented to that
motion, which we will grant, thereby mooting the Bureau's motion to
late file.
- 5 -
The founder of both companies, Wendell W. Levister, has been
attempting to start an airline for over twenty years. While working
in Honduras in 1960 he attempted to start an Honduran airline, La Cosa
Airlines, but was unable to finance it (1 Tr. 22-24). After returning
to the United States Mr. Levister was commissioned in 1974 by the
President of Haiti, Jean Claude Duvalier, to start a Haitian airline,
Haiti International Airlines, S.A., but after seven years of effort
Levister was again unable to finance it (DIA 201, p. 12; 1 Tr. 25).
Mr. Levister was then invited by Dominican Ministry of Tourism
officials to start a Dominican airline (DIA 201, pp. 12-13; 1 Tr.
26). Dominion Internacional de Aviacion, S.A., was incorporated in
Santo Domingo for that purpose in May 1981 (DIA 201, p. 14), with the
understanding that it would be 51% owned by Dominican nationals, would
not compete with the national flag carrier, and would serve Puerto
Plata (DIA 201, p. 13). 6/
The applicant's positions concerning plans for activation of the
Dominican "subsidiary" have not been uniformly consistent or clear.7/
6/ Under Dominican law 51% of the stock of S.A. must be owned by
Dominican nationals. DIA 1001.24 Rev., p. 7; 1 Tr. 71. Stock was
initially issued to three Dominicans -- DIA's attorney Aquiles 0.
Farias Monge (2%) and Juan Rafael Pacheco and Dr. Angel Enrique
Pacheco (49%). 1 Tr. 48-50. Levister testified that the Pacheco's
have turned in their stock to the company (S.A.) and that Monge had
assigned his proxy to the officers of S.A. (Messrs. Levister and
Keene). 1 Tr. 49-50, 69, 73-74. Levister also testified that Monge
held 2% and each of the other Dominicans held only 1% (1 Tr. 69)
and that the applicant owns 39% of S.A.'s stock, Mr. Keene 5% and Mr.
Levister 5%. (1 Tr. 51). Compare DIA 201, P. 17, which states that
four percent of S.A. stock is owned by Dominican nationals: that 47%
is set aside for purchase by them; and that Keene and Levister each
own 4.5% and Wisniewski 1%.
7/ Although DIA holds less than 50% of S.A.'s stock, the applicant
has repeatedly referred to S.A. as a subsidiary of DIA, and Mr.
Levister stated that he expected to be able to control S.A.
DIA 1001.24 Rev., pp. 20-22; PHC Tr. 10-11.
- 7 -
for a number of Honduran-based airlines. 10/ His most recent
aviation-related employment was from 1965 to 1967 with George B. Adler
& Company In Honduras where he flew crop-spraying and air freight
assignments; from April to September 1971 as chief pilot and director
of the charter department for Midwest Aircraft Sales Corporation, a
fixed-base operation where he supervised 20 employees; and from 1971
to 1973 with Muhammed Speaks, flying a Super Connie L-104-H and
developing a program (which was not implemented) for the purchase of a
Boeing 720(B) and the creation of an aviation department (DIA 1001.4,
1 Tr. 19-21). Mr. Levister has also held a variety of other jobs,
none of which involved managerial or supervisory responsibility in
running a business enterprise. He has not had stable, salaried
employment since 1973, when he began work on Haiti Intercontinental.
Mr. Levister's business experience has been limited to his
attempt to start this airline, Haiti Intercontinental Airlines, and La
Cosa Airlines: and his managerial experience is limited to six months
with Midwest Aircraft Sales Corporation. Mr. Levister has candidly
acknowledged that he lacks experience as a chief executive or
operating officer or in running an airline and plans to operate DIA by
relying on other personnel (DIA-100, PP. 4-9). He cites President
Truman and Henry Ford as precedential examples of inexperienced but
10/ Mr. Levister has been a pilot for 39 years and has accumulated
over 8,000 hours of flight time. After the Second World War, Mr.
Levister served as a captain for ANHSA Airlines, as a captain for a
private freight carriers, and as pilot to the Vice President of the
Republic of Honduras and various cabinet members. He also served as a
pilot for the Honduran Departments of Geodetics and Civil Aeronautics
and for the Honduran Security Police. He has completed high school
and two years at the University of Washington and holds licenses as a
U.S. airlines transport pilot (SEL) with commercial privileges (SMEL)
and as a Honduran airline transport pilot with C-82, C-45 and C-47
ratings. DIA 1001.4.
- 9 -
and loss and supervises 80 employees and product manufacture (1 Tr.
122). Between 1976 and 1981, Mr. Wisniewski worked as a supervisor in
the processing and die shop at the Franklin Mint. Prior LO 1976 he
worked with a number of manufacturing firms in positions including
production engineer, assistant manager, manager and vice president,
but apparently without significant responsibility for personnel
supervision (DIA 1001.6, p. 2). The Bureau asserts that given the
scope of DIA's proposed operations, and the need for a considerable
workforce, the V.P. Personnel will be a position of considerable
importance, and questions whether Mr. Wisniewski is an appropriate
choice for that position in view of his limited experience with
administrative responsibility for personnel matters. While we
conclude that Mr. Wisniewski might be qualified for his proposed
position, it is clear that neither Levister nor Keene possesses the
kind of successful business experience which has been relied upon by
the Board in finding that prospective airline management need not have
aviation-related experience, if it has demonstrated successful
business experience and may be relied upon to select competent staff
to handle technical responsibilities. 12/ Moreover, Mr. Levister's
other selections of management personnel and sponsoring witnesses do
not reflect an ability to select competent personnel.
The exhibits relating to the applicant's proposed operations were
largely prepared by George A. Vadasan, who was initially designated as
DIA's Vice-President for Finance and Financial Planning, then later as
12/ See Eugene Horbach and Aeroamerica, Acquisition of Modern Air
Transport, Inc., 73 C.A.B. 147, 154-55 (1977).
- 11 -
(QSI) methodology used, admitted the exhibits were wrong, and twice
pleaded a mental block in response to questions concerning exhibits (3
Tr. 88, 98, 103, 109-110). Despite Mr. Tackling's allegedly extensive
experience in marketing, 16/ he also failed to demonstrate an
understanding of DIA's marketing strategy and operating forecasts.
Thus he could not explain the reason for DIA's common fare in the
Chicago-Port-au-Prince and Chicago-Santo Domingo markets, while fares
from Boston to the two destinations were different (3 Tr. 78-79); he
could not explain why his comparison of existing discount fares with
DIA's proposed fares showed some discount fares to be higher than
regular coach fares, although he claimed to have checked the Official
Airline Guide in all markets (3 Tr. 85-86); he could not explain the
source of his fare elasticity estimate of 1.3 (3 Tr. 88); nor could he
explain his generalization that 25 percent of the traffic in Caribbean
markets was carried on discount fares (3 Tr. 94). Mr Tackling was
confused by the term "OLC" which appeared on DIA-502 under the heading
"Equipment," and did not realize that it signified "on-line
connections." 17/
The applicant also sought to rehabilitate certain of its exhibits
through Don C. Sykes, Senior Vice President and Chief Operating
Officer. Mr. Sykes held a number of positions with United Airlines
16/ Mr. Tackling worked as regional sales and marketing director for
Capitol Air, Inc. from March 1980 to October 1982, as Director of
Route Development for Evergreen International Airlines from February
1978 to November 1980, and as North American Corporate Marketing and
Sales Manager for Iran Air, Inc. from March 1969 to November 1978. He
holds a B.S. in Business Administration from Ecole Militaire Saint
Cyr, Paris. DIA 1001.16.C.
17/ 3 Tr. 95-96, 99, 103. Compare 3 Tr. 105-106.
- 13 -
Miller, 19/ Carter and Levister; but none of those individuals
demonstrated a competent understanding of that document or DIA's
financial plans; and none had the financial expertise necessary to
qualify as a financial manager of DIA. Mr. Albert G. Carter, DIA's
Vice President, Finance, could only give a partial explanation of
DIA's financial condition or its future plans. Although Mr. Levister
deferred certain financial questions to Mr. Carter (3 Tr. 30, 33-35),
he could only confirm the appropriateness of the general accounting
procedures used in the private placement memorandum (DIA 1001.24 and
1001.24 Rev.). Mr. Carter, a CPA licensed in Illinois, 20/ had only
been associated with DIA for three weeks and had not audited the
current balance sheet; nor could he verify the intentions or
capability of the founders to produce the additional capital for
which they have committed themselves. 21/ No one could explain the
$20,000 debt under current liabilities on the balance sheet, which had
been the subject of inquiry at the August 8 hearing. There, Mr.
Vadasan had been unable to explain the debt (2 Tr. 115-121); at the
February 2 hearing neither Mr. Keene (3 Tr. 152) nor Mr. Carter (3
Tr. 169) could explain the item.
19/ Peter J. Miller is outside counsel to DIA, not a permanent member
of DIA's executive staff, and could only express a legal opinion
as to the adequacy of the memorandum from his prospective as a
corporate attorney. 3 Tr. 173-78.
20/ Mr. Carter holds a B.S. in Business Administration from
Northwestern University and served as Assistant Controller for
Maremount Corporation from 1965-1972 and as Corporate Controller of TV
Time Foods, Inc. from 1972 to 1980. Thereafter he operated a small
CPA practice until 1982 when he became a senior consultant for FPC
Associates; but neither of these activities appears to have been
successful. DIA 1000.16E.
21/ 3 Tr. 170; DIA 1001.24 Rev., pp. 17-18.
- 15 -
when qualified personnel have been found to fill technical positions,
the carrier must have qualified managers in positions with overall
responsibility for the airline." 24/ Inasmuch as none of the
individuals who attempted to sponsor the operating and financial
exhibits were able to explain them, no one in DIA's executive
management appears to understand the company's current financial
status or the carrier's start-up proposal, from either a financial or
an operational standpoint. 25/ This flawed presentation of DIA's case
at the hearing calls into serious question whether Mr. Levister, DIA's
President, can be relied upon to select and retain competent
managerial personnel.
The initial exhibits presented by the applicant were in such a
state of disarray that the judge reviewed the entire submission at the
prehearing conference and directed the submission of a revised set of
(footnote 23 continued from page 14)
first as a maintenance representative in the Pacific, and later as
Maintenance Controller where he had responsibility for monitoring the
maintenance of the carrier's fleet. DIA 1001.15. Robert P. Bell,
Assistant Vice President, Flight Operations and Flight Control
Manager, is also a former Braniff employee, where he was a flight
dispatcher between 1963 and 1980 and Systems Operations Manager with
supervisory responsibility over managers of customer service,
maintenance, routing, and crew control. DIA 1001.16. Finally,
William W. Hefton, DIA's chief pilot, flew for Braniff from 1951 until
1982, and has accumulated some 15,000 flight hours including service
across the Pacific and Atlantic and into South America, and is a rated
captain on B-747, B-727, and DC-8 equipment. DIA 1001.24, p. 40;
1001.36.
24/ Northeast Sunrise Airlines, Inc. Fitness Investigation, Order
83-5-90, p. 7.
25/ Mr. John B. Wimbicus, Assistant Vice President Finance, has no
in-depth experience in financial matters. He is currently an account
executive at Namisco, Inc., a rare coin and precious metals brokerage
firm located in Chicago. He graduated from Northern Illinios Graduate
School of Business with an MBA in 1981. DIA 1001.10.
- 17 -
for service from eight mainland U.S. points (Baltimore, Boston,
Chicago, Cleveland, Houston, Los Angeles, Minneapolis and San
Francisco) to San Juan, Port-au-Prince and Santo Domingo, tn be phased
in over the first seven months of operations. 28/ Two L-1011 aircraft
would be purchased initially, one of which would be held in reserve
for three months as a back-up aircraft until additional routes were
inaugurated. The first routes served would be Boston and Baltimore
(BWI) to San Juan and Santo Domingo six days a week, including a stop
at Port-au-Prince once a week (DIA 300, P. 2). In its seventh month
of operation, DIA would purchase a DC-10 to provide non-stop service
in the long-haul markets of Los Angeles and San Francisco to San Juan
and Santo Domingo (DIA-300, P. 2).
DIA's exhibits give a detailed breakdown of revenues, traffic,
costs and load factors by route segment. 29/ DIA proposes to operate
largely coach service with some first-class seats, but no discount
service apart from bulk sales to hotel or casino operators. 30/
Exhibit DIA-501 attempts to compare DIA's proposed coach fares in its
markets with existing coach fares, showing that DIA will offer low
fares in all markets.
The Bureau does not dispute DIA's cost projections, stating that
they appear reasonable in view of industry experience with regard to
DC-10 and L-1011 aircraft. 31/ The Bureau does dispute, however, the
applicant's traffic and revenue estimates, asserting that DIA
28/ DIA 300, P. 2; DIA 502.
29/ See DIA 500, 600 and 700 series exhibits.
30/ Mr. Tackling, DIA's proposed Vice President, Marketing and Route
Development, testified that as much as 50% of DIA's seats would be
blocked for casino traffic. 3 Tr. 94-95.
31/ See CAB, Local Service Air Carrier's Unit Costs, Vol. 1.,
year ending September 30, 1981, pp. 5, 7.
- 19 -
service. DIA argues that its use of a .15 factor for connecting
flights is more conservative than the basic QSI methodology which has
no value for connecting flights; but the Bureau witness testified that
QSI must be applied with discretion, that it would be inappropriate to
give no weight to connecting service, that .15 was too small a factor,
that .4 had been used by the Bureau in British American Air, Inc.
Fitness Investigation, Docket 41231, BIA-R-304, p. 1, n. 2, and that
its use would be appropriate here. 33/ Although no definite value has
been established for such service in Board precedent, an arbitrary
value does not take into account the varying quality of such service,
and DIA's exhibits offer no explanation of why it selected its
particular value. None of DIA's witnesses could explain its selection
except to point to its use by AVMARK in its report (3 Tr. 129). That
report was, however, not sponsored or explained by any of DIA's
witnesses and consequently is entitled to little weight. After making
all the Bureau's adjustments -- i.e., no fare stimulation, a 15%
participation factor for markets now experiencing no single-plane
service, and a .4 factor for on-line connecting traffic -- DIA would
still have a small profit ($204,400) after return and taxes in the
first normalized year of operations, if the historical growth rate is
applied to the full year 1985 traffic, instead of only 1/4 of that
year as was done by DIA in its exhibits. 34/ Accordingly, we find no
basis for concluding that DIA's operating proposal is ipso facto
unreasonable.
33/ 3 Tr. 192-94, 202-204. See BIA-PH-2.
34/ DIA 500, col. 7. See DIA Br., Appendix B.
- 21 -
DIA projects that the bulk of the funds from all three stages
would be applied to aircraft purchases. Over the first six months DIA
would spend approximately $20,000,000 of these funds on two L-1011 and
one DC-10 aircraft. 37/ Ground equipment, initial advertising
expenses, preinauguration payroll and operating expenses (such as crew
training, terminal rental and contract services) would require
approximately $2.4 million. 38/
While the financial plan meets this projected need for funds, it
lacks firm commitments from proposed sources of equity, other than the
incorporators, who have signed notes affirming their commitment to
purchase additional stock. Discussions concerning the two subsequent
stock offerings have been preliminary and inconclusive. However, the
Board does not require firm commitments from potential investors but
merely a plan which if implemented will produce sufficient funds to
allow the carrier to begin operations without undue risk to
consumers; 39/ and DIA's exhibits contain a plan which if successfully
implemented would appear to meet its start-up needs for capital.
The Bureau contends that DIA's managerial and sponsorship
deficiencies do not infect DIA's operating and financial plans and
concludes that they meet the Board's fitness test (Br., p. 14, n. 10%
Nevertheless, the Bureau notes that problems of DIA's management and
37/ DIA 1001.24 Rev., pp. 14-18. DIA 704, pp. 1-2, shows that DIA
would spend $20.6 million from stock receipts and borrow approximately
$9.3 million to meet the total estimated cost of $30 million for the
aircraft. At the hearing Mr. Levister acknowledged that the aircraft
might each cost up to $3 million more than estimated in its exhibits.
3 Tr. 48. While that additional $9 million cost might be funded by
the stock offering, the additional depreciation expense is not
included in DIA's profit forecasts. DIA 701; DIA 704, p. 1.
38/ DIA 1001.24 Rev., pp. 14, 15.
39/ See Transcontinental Low-Fare Route Proceeding, 80 C.A.B. 11,
29-30 (1979), Order 79-1-75, p. 26; Sea Coast Airway Fitness
Investigation, 102 C.A.B. 1, 5 (1983), Order 83-6-27, p. 5.
- 23 -
Compliance Disposition
The record indicates that neither the applicant nor any of the
applicant's key personnel has been the subject of consumer
complaints; 42/ compliance actions on the part of the FAA or CAB;
charges of unfair, deceptive, or anticompetitive business practices;
or charges of fraud, felony or antitrust violations. 43/ In response
to the Bureau's inquiry, the FAA stated it had no objection to grant
of DIA's application (BIA-R-102). Moreover, a review of Board files
conducted by the Bureau of Carrier Accounts and Audits revealed no
compliance actions taken against any of the key personnel or relevant
corporations (BIA-R-100). Mr. Levister was cited by the FAA in 1971
and 1973 for operating an aircraft within 500 feet of people and/or
structures, and those complaints were settled upon payment of $100 and
$200, respectively (BIA-R-101). Those violations were both over ten
years ago and do not by themselves warrant a finding of unsatisfactory
compliance disposition. DIA has also demonstrated substantial and
persistent deficiencies in complying with evidentiary requirements in
this proceeding; but those deficiencies do not show a lack of disposi-
tion to comply with the Act or the Board's rules and regulations.
Accordingly, we conclude that DIA satisfies the Board's requirements
with respect to compliance disposition. 44/
42/ See, e.g., statements from the Pennsylvania State Real Estate
Commission (DIA-1001.18) and the Indiana State Consumer Complaint
Commission (DIA-1001.19).
43/ DIA 201, pp. 1-2; DIA 1001.16(b).
44/ See, e.g., Aeromar, Foreign Permit, 57 CAB 492, 500-501 (1971);
Transportes Aereos Nacionales, Foreign Permit, 31 CAB 246, 248 (1960);
Foreign Charter Carriers, Permit Renewals, 72 CAB 97, 198-99 (1976);
Silvas Airlines, Charter Authority Denial, 87 CAB 160, 167 (1980),
Order 80-10-103, p. 8; IASCO Fitness Investigation, 99 CAB 447, 463
(1983), Order 83-1-31, Initial Decision, p. 12; Key Airlines, Inc.
Fitness Investigation, Initial Decision, pp. 11-13, review declined
except as to citizenship issues, Order 84-2-60.
- 25 -
citizens. 46/ Although the applicant intends to add new members to
its .Board of Directors, it has certified that they will all be U.S.
citizens and that further issuance of its stock will be monitored by
its transfer agent to ensure continued compliance with the citizenship
requirements of the Act (3 Tr. 53). Accordingly, we conclude that the
applicant is a U.S. citizen within the meaning of Section (16) of
the Act.
Section 408 and 409 Questions
Order 82-10-34 instituting this investigation placed at issue
whether the Board should "approve, exempt, or disclaim jurisdiction
over any control or interlocking relationships under Section 408 and
409 which may exist."
Section 408(a)(6) of the Act makes it unlawful, without Board
approval, "for any air carrier or person controlling a certificated
air carrier to acquire control, in any manner whatsoever, of any
person substantially engaged in the business of aeronautics other than
as an air carrier." Section 409 prohibits relationships, without
Board approval, in which an officer or director of an air carrier
concurrently serves as an officer or director of a person
substantially engaged in the business of aeronautics.
46/ The company has 12 million shares of authorized common stock,
11,000,000 voting and 1 million to be offered privately as non-voting
stock at $1.50 each. At present there are 1.5 million shares of stock
outstanding, all of which is held by Levister (700,000 shares); Keene
(600,000); and Wisniewski (200,000) under restrictions imposed by
governmental authorities. DIA 1001.24, pp. 42-43. In order to repay
loans in connection with the attempted start-up of DIA and Haiti
Intercontinental Airlines the shareholders have agreed to issue 21, 104
shares of their own or company-owned stock to relatives and friends of
Levister and Keene, all but one of whom are U.S. citizens. DIA-H-8;
DIA-H-9, P. 2; 2 Tr. 145. See, supra, D. 20.
- 27 -
demonstrated that it is fit, willing, and able to engage in interstate
and overseas charter air transportation of persons, property and mail,
as proposed in its application; and to comply with the provisions of
the Act and rules, regulations and requirements of the Board
thereunder. We also conclude that there are no control or
interlocking relationships which require approval, exemption or
disclaimer of jurisdiction under sections 408 and 409 of the Act.
Dated: April 19, 1984