UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C.

NOTICE OF ACTION TAKEN -- DOCKET DOT-OST-2007-0081

This serves as notice to the public of the action described below, taken by the Department official indicated (no additional confirming order will be issued in this matter).

Applicant: AIR ECUADOR AIRECU S.A. d/b/a AIR ECUADOR (Air Ecuador)

Date Filed: November 21, 2007

Relief requested: Exemption under 49 USC §40109 and a foreign air carrier permit under 49 USC §41301 to engage in: 1) scheduled foreign air transportation of persons, property, and mail between a point or points in Ecuador and New York, NY; and 2) charter foreign air transportation of persons, property, and mail pursuant to the U.S.-Ecuador Air Transport Agreement and Part 212 of the Department’s regulations. Air Ecuador proposes to operate these services using aircraft wet leased from Gadair European Airlines, S.L. (Gadair).

Applicant representative: Aaron A. Goerlich, 202-776-3970 DOT analyst: Robert J. Finamore, 202-366-2405

Responsive pleadings: On January 4, 2008, Aerolineas Galapagos Aerogal, S.A. (Aerogal) filed a motion for leave to file an answer in response to Air Ecuador’s application. In support of its motion, Aerogal states that Air Ecuador’s application is incomplete and therefore maintains that no party will be prejudiced by grant of Aerogal’s motion. With regard to the merits of Air Ecuador’s application, Aerogal points out the involvement of non-Ecuadorian citizens in the ownership and control of Air Ecuador, and argues that rights granted under the restrictive U.S.-Ecuador bilateral should be limited to citizens of the homeland governments.¹ Specifically, Aerogal notes that 42% of the voting equity of Air Ecuador is held by citizens of Spain and that two of Air Ecuador’s five directors are citizens of Spain, one of whom is Gadair’s president. Aerogal states that it is unclear whether Air Ecuador has been designated by Ecuadorian officials and raises various other issues regarding the completeness of Air Ecuador’s application. Finally, Aerogal maintains that Air Ecuador’s website suggests that the carrier already seems to be promoting its service to New York prior to grant of the necessary DOT economic authority. With respect to Gadair, Aerogal asserts that Gadair does not have requisite DOT and FAA operating authorities.

On January 15, 2008, Air Ecuador filed an answer to Aerogal’s motion and a contingent reply to Aerogal’s answer. Air Ecuador states that Aerogal has not established good cause for its late-filed motion and therefore its motion should be denied. In its reply to Aerogal’s assertions, Air Ecuador points out that 58% of its stock is owned by citizens of Ecuador and cites examples where the Department granted ownership and control waivers to TACA Ecuador, S.A. and LAN Ecuador, under similar circumstances. Air Ecuador notes that the remaining 42% of its stock is held by citizens of Spain, and that as of March 30, 2008, an open-skies regime will govern U.S.-Spain aviation relations. Air Ecuador contends that affiliations between carriers of different nationalities are commonplace, such as its relationship with Gadair. It asserts that Gadair will be filing an application with the Department for economic authority. Air Ecuador states that it has been designated by the Ecuadorian Government and that the designation has been submitted through diplomatic channels. With regard to its website, Air Ecuador states that no transportation may be reserved or purchased on the website, and that no schedules or fares are contained on the website.

DISPOSITION

Action: Approved, subject to conditions (exemption authority only)² (See remarks below)

¹In taking this position, Aerogal calls attention to the Department’s denial of the application of Aerolane Lineas Aereas Nacionales del Ecuador S.A. d/b/a Lan Ecuador (Lan Ecuador), where the Department found that the applicant was not substantially owned and effectively controlled by Ecuadorian citizens. See Order 2002-12-15. ² Air Ecuador also requested in this Docket a foreign air carrier permit to engage in its proposed services. We will act on that portion of its request separately.

Action date: July 29, 2008

Effective dates of authority granted: July 29, 2008, through July 29, 2009.

Basis for approval: United States-Ecuador Air Transport Agreement (the Agreement).

Except to the extent exempted/waived, this authority is subject to the terms, conditions, and limitations of our standard exemption conditions (attached).

Special conditions/Remarks: In the interest of obtaining a complete record in this proceeding, we have decided to grant Aerogal’s motion and accept its late-filed answer to Air Ecuador’s application.

After reviewing the record, we have decided to grant Air Ecuador the exemption authority it requests. We find that our action is consistent with the terms of the Agreement and is in the public interest. We further find that the applicant is operationally and financially qualified to conduct its proposed operations.³ With regard to the ownership and control of the applicant, Air Ecuador states, as noted above, that 58% of its voting stock is owned by citizens of Ecuador, with the remaining 42% owned by Gadair, which in turn is owned by citizens of Spain. It further states that three of the five members of its Board of Directors are citizens of Ecuador and the remaining two are members are citizens of Spain. In addition, all but one of its key management personnel is a citizen of Ecuador. Noting the non-homeland involvement in Air Ecuador’s ownership and control and its relationship with Gadair, we find that a waiver of our ownership and control standard is warranted, as there is nothing in the ownership and control of the carrier which would be inimical to

U.S. aviation policy or interests. With respect to Aerogal’s citation of the Department’s denial of the Lan Ecuador application, we note that the Department subsequently granted exemption authority to Lan Ecuador and waived our ownership and control standard after the applicant restructured its ownership and management, resulting in significantly increased presence by Ecuadorian citizens in both the ownership and control of the carrier.⁴ In the instant case, the level of involvement of Ecuadorian citizens in the ownership and control of Air Ecuador exceeds that which was present in our grant of authority to Lan Ecuador. Thus, we see nothing in the concerns raised by Aerogal that would cause us to reach a different result in this case.

With respect to the concerns raised by Aerogal regarding the lack of designation of Air Ecuador by the Ecuadorian government, we note that Air Ecuador has been properly designated and licensed by its homeland to perform its proposed services. Furthermore, by memorandum dated March 7, 2008, the FAA advised us that it knows of no reason to withhold this authority.

We have also determined that, based upon the scope of its proposed operations by wet lease-only from Gadair, Air Ecuador has provided sufficient information in its application to warrant grant of this limited authority in the circumstances presented. We also note that Gadair has received the economic authority necessary to conduct its proposed wet lease operations with Air Ecuador.⁵ We have reviewed the Air Ecuador website and determined that the carrier is not holding out or selling services for which it has not received the requisite economic authority.

As a final matter, Air Ecuador may conduct the operations at issue here only using aircraft wet-leased from Gadair. Air Ecuador may not conduct U.S. operations with its own aircraft and crews without further action by the Department. In addition, in accordance with 14 CFR §212.9(d), Air Ecuador shall not perform any charter flights to or from the United States unless the Department has granted a statement of authorization for such operation (see Order 84-6-90).

Action taken by: Paul L. Gretch, Director, Office of International Aviation

Under authority assigned by the Department in its regulations, 14 CFR Part 385, we found that (1) our action was consistent with Department policy; (2) the applicant was qualified to perform its proposed operations; (3) grant of the authority was consistent

³ The applicant has requested confidential treatment of its financial submissions, under the provisions of 14 CFR §302.12. Good cause having been shown, we will grant this request. ⁴See Order 2003-3-9. ⁵See Order 2008-6-16. Gadair stated in its application for economic authority that it will also apply for the necessary statement of authorization to wet lease aircraft to Air Ecuador.

with the public interest; and (4) grant of the authority would not constitute a major regulatory action under the Energy Policy and Conservation Act of 1975. To the extent not granted/deferred/dismissed, we denied all requests in the referenced Docket. We may amend, modify, or revoke the authority granted in this Notice at any time without hearing at our discretion.

Persons entitled to petition the Department for review of the action set forth in this Notice under the Department’s regulations, 14 CFR §385.30, may file their petitions within seven (7) days after the date of issuance of this Notice. This action was effective when taken, and the filing of a petition for review will not alter such effectiveness.

An electronic version of this document is available on the World Wide Web at:

http://www.regulations.gov

Foreign Carrier Exemption Conditions

In the conduct of the operations authorized, the foreign carrier applicant(s) shall:

(1): Not conduct any operations unless it holds a currently effective authorization from its homeland for such operations, and it has filed a copy of such authorization with the Department;
(2): Comply with all applicable requirements of the Federal Aviation Administration, the Transportation Security Administration, and with all applicable U.S. Government requirements concerning security, including, but not limited to, 14 CFR Parts 129, 91, and 36 and 49 CFR Part 1546 or 1550, as applicable. To assure compliance with all applicable U.S. Government requirements concerning security, the holder shall, before commencing any new service (including charter flights) from a foreign airport that would be the holder’s last point of departure for the United States, contact its International Industry Representative (IIR) (formerly referred to as International Principal Security Inspector) to advise the IIR of its plans and to find out whether the Transportation Security Administration has determined that security is adequate to allow such airport(s) to be served;
(3): Comply with the requirements for minimum insurance coverage contained in 14 CFR Part 205, and, prior to the commencement of any operations under this authority, file evidence of such coverage, in the form of a completed OST Form 6411, with the Federal Aviation Administration’s Program Management Branch (AFS-260), Flight Standards Service (any changes to, or termination of, insurance also shall be filed with that office);
(4): Not operate aircraft under this authority unless it complies with operational safety requirements at least equivalent to Annex 6 of the Chicago Convention;
(5): Conform to the airworthiness and airman competency requirements of its Government for international air services;
(6): Except as specifically exempted or otherwise provided for in a Department Order, comply with the requirements of 14 CFR Part 203, concerning waiver of Warsaw Convention liability limits and defenses;
(7): Agree that operations under this authority constitute a waiver of sovereign immunity, for the purposes of 28 U.S.C. 1605(a), but only with respect to those actions or proceedings instituted against it in any court or other tribunal in the United States that are: (a) based on its operations in international air transportation that, according to the contract of carriage, include a point in the United States as a point of origin, point of destination, or agreed stopping place, or for which the contract of carriage was purchased in the United States; or (b) based on a claim under any international agreement or treaty cognizable in any court or other tribunal of the United States. In this condition, the term "international air transportation" means "international transportation" as defined by the Warsaw Convention, except that all States shall be considered to be High Contracting Parties for the purpose of this definition;
(8): Except as specifically authorized by the Department, originate or terminate all flights to/from the United States in its homeland;
(9): Comply with the requirements of 14 CFR Part 217, concerning the reporting of scheduled, nonscheduled, and charter data;
(10): If charter operations are authorized, except as otherwise provided in the applicable aviation agreement, comply with the Department's rules governing charters (including 14 CFR Parts 212 and 380); and
(11): Comply with such other reasonable terms, conditions, and limitations required by the public interest as may be prescribed by the Department, with all applicable orders or regulations of other U.S. agencies and courts, and with all applicable laws of the United States.

This authority shall not be effective during any period when the holder is not in compliance with the conditions imposed above. Moreover, this authority cannot be sold or otherwise transferred without explicit Department approval under Title 49 of the U.S. Code.

12/2007