BEFORE THE DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C.

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1 BEFORE THE DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C. Application of National Air Cargo Group, Inc. d/b/a National Airlines for an amended certificate of public convenience and necessity pursuant to 49 U.S.C (interstate and foreign charter air transportation of persons, property and mail) ) ) ) ) ) Docket OST ) ) ) ) ) ) APPLICATION OF NATIONAL AIR CARGO GROUP, INC. d/b/a NATIONAL AIRLINES Communications with respect to this document should be addressed to: Mark W. Atwood Elizabeth J. Wadsworth Sher & Blackwell LLP 1850 M St., NW, Suite 900 Washington, D.C (202) Attorneys for National Airlines July 9,2010 NOTE: Any person may respond to this application by filing an answer in the above-referenced docket and serving a copy on the persons named in the attached service list. Answers are due not later than July 29, 2010.

2 BEFORE THE DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C. Application of National Air Cargo Group, Inc. d/b/a National Airlines for an amended certificate of public convenience and necessity pursuant to 49 U.S.C (interstate and foreign charter air transportation of persons, property and mail) ) ) ) ) ) Docket OST ) ) ) ) ) ) APPLICATION OF NATIONAL AIR CARGO GROUP, INC. d/b/a NATIONAL AIRLINES National Air Cargo Group, Inc. d/b/a National Airlines ("National Airlines" or "the company"), an air carrier operating under 14 CFR Part 121, hereby applies, pursuant to 49 U.S.C. Section 41102, Subpart B of the Department of Transportation's Procedural Regulations (14 CFR Part 302, Subpart B) and Section of the Department's Economic Regulations (14 CFR 204.3), for an amended Certificate of Public Convenience and Necessity authorizing it to conduct interstate and foreign charter air transportation of persons, property and mail with large aircraft as described in this Application. Background National Airlines is a certificated air carrier that operates aircraft on a charter basis, and currently holds certificate authority to engage in the interstate

3 and foreign charter air transportation of property and mail. 1 Based in Ypsilanti, Michigan, it currently operates three DC-8 aircraft.2 National Airlines has been very successful in its current scope of operations and wishes to expand its business to include a Boeing ER for passenger charter operations. National Airlines intends to operate the aircraft for charter brokers, public charter operators, private corporations and sports team conducting various types of charters. Since the aircraft will allow for the transportation of passengers as well as cargo, National Airlines seeks to amend its DOT certificate to authorize transport of passengers, property and mail in interstate and foreign commerce. National Airlines' profitable existing cargo operation will primarily underwrite the aircraft lease and essentially all of the start-up and operating costs of the service. To the extent any additional infusion of capital is required, this will be provided by National Airlines' ultimate parent company, National Air Cargo Holdings, Inc., and its largest subsidiary, National Air Cargo, Inc., as attested to in the funds verification and provision letters respectively provided at Exhibits NA-12 and NA-13. Thus, National Airlines will have virtually no financial exposure in its amended certificated operations. National Airlines' addition of the Boeing ER to its fleet and the amendment of its certificate to include both passenger and cargo transport is the 1 See DOT Order (dated December 21, 2006). 2 National Airlines also previously operated two BAE Jetstream 31 and 32EP corporate aircraft for passenger air taxi purposes under a Part 298 exemption from the Department and FAA Part 135 operating authority. The company suspended those operations in

4 first step in the company's plan to substantially expand its aircraft fleet and operations over the next two years. In addition to the Boeing ER passenger aircraft, the company is currently in the process of acquiring four Boeing s that will be modified into "combi" aircraft for the transport of U.S. military personnel and cargo under future Civil Air Reserve Fleet ("CRAF") military contracts. 3 Should National Airlines be granted the amended certificate, the company intends to submit a fleet expansion request to the Department in the next year as those plans mature. National Airlines is part of the National Air Cargo family of companies and has several corporate affiliates worldwide. The ultimate sole shareholder of National Airlines, Mr. Christopher J. Alf, holds a substantial interest in these affiliates as outlined in this application. National Airlines is a citizen of the United States within the meaning of the Statute, and is fit, willing and able to operate the proposed air transportation services in a safe and compliant manner. The company's key management personnel are highly experienced in aviation management and operations. National Airlines has operated as a charter cargo carrier and also conducted passenger air taxi operations for nearly twenty-five years, both in its current corporate form and as its predecessor Murray Air, Inc. ("Murray Air"), with no safety incidents, which testifies to its ability to operate safely and successfully. 3 Like its corporate predecessor Murray Air, Inc., National Airlines is a CRAF member. The company currently conducts and has for several years conducted cargo transport for the U.S. military worldwide. 3

5 Information Required by 14 CFR Name and address: ( 204.3(a)) 835 Willow Run Airport Ypsilanti, MI Tel. (734) Form and State of Organization: ( 204.3(b)-(d)) National Airlines is incorporated as a domestic profit corporation in the State of Michigan. It was originally incorporated on April 6, 1992, as Murray Air, Inc., which was subsequently purchased in November 2006 by National Air Cargo, Inc. In December 2006, the name of Murray Air, Inc. was formally changed to National Air Cargo Group, Inc. ("National Air Cargo Group"), which is in turn authorized by the State of Michigan and the U.S. Department of Transportation to conduct business as National Airlines and Murray Air. A Certificate of Good Standing from the State of Michigan evidencing National Air Cargo Group's current valid corporate status is attached as Exhibit NA Citizenship and SUbstantial Interest: ( 204.3(e) and (9)) Substantial Interest As shown in the organizational chart attached as Exhibit NA-2, National Airlines is a wholly owned subsidiary of National Air Cargo Acquisitions, LLC ("NAC Acquisitions"), a Delaware limited liability company. NAC Acquisitions is in turn wholly owned by National Air Cargo Holdings, Inc. ("NAC Holdings"), a New York domestic profit corporation. Mr. Christopher J. Alf, the Chairman of the Board of Directors of NAC Holdings and its numerous subsidiaries, is the sole shareholder of NAC Holdings. 4

6 Mr. Alf is thus the ultimate holder of all 60,000 shares of National Airlines' common stock, which is comprised of 6,000 shares of voting and 54,000 shares of non-voting stock. Mr. Alf is a citizen of the United States and resides in California. As the ultimate holder of National Airlines' voting stock, Mr. Alf is the only person holding a substantial interest in the company as defined in 14 CFR Section 204.2(m). As the sole shareholder of NAC Holdings, Mr. Alf, in addition to National Airlines, is also the sole or primary shareholder of NAC Holding's numerous other worldwide subsidiaries. 4 These subsidiaries are primarily freight forwarders, although a few are air carriers. As the Chairman of the Board of Directors that oversees NAC Holdings and its subsidiaries, Mr. Alf serves in a director role for these companies. NAC Holdings was founded in 1991 by Mr. Alf and is based in Orchard Park, New York. NAC Holdings is the parent of seven wholly owned subsidiaries: a) National Air Cargo, Inc. ("NAC Inc."), a New York corporation; b) National Air Cargo (Luxembourg) S.a.r.1. ("NAC Lux"), a Luxembourg corporation, which is the ultimate parent company of National Air Cargo Middle East FZE ("NAC Dubai"), a United Arab Emirates corporation, and National Air Cargo (Madeira)-SGPS, Unipessoal Lda. ("NAC Madeira"), a single-owner Portuguese limited liability holding company; 4 Mr. Alf is a partial rather than the sole owner of National Air Cargo (Deutschland), GmbH, a German corporation. 5

7 c) NAC Acquisitions, which as already mentioned is the parent company of National Airlines; d) NACM OHQ, Sdn Bhd ("NAC Malaysia OHQ"), a Malaysian private limited liability company; e) NACM Holdings, Sdn Bhd ("NAC Malaysia Ops"), also a Malaysian private limited liability company; f) National Air Cargo (Thailand) Limited ("NAC Thailand"), a Thailand private limited company; and g) NAC AC Ventures LLC, a Delaware limited liability company. NAC Inc. is a freight forwarder and a major supplier of transportation logistics to the U.S. Department of Defense. It provides airfreight broker services to the U.S. military, and to customers located in the United States and abroad, to domestic and international destinations. NAC Dubai is located in Dubai, United Arab Emirates and provides airfreight and aircraft charter services to military and commercial customers throughout the Middle East. National Airlines, as further described in the narrative attached to this application as Exhibit NA-3, is a CRAF carrier operating large U.S. military and commercial aircraft cargo charters worldwide from its base in Ypsilanti, Michigan. NAC Malaysia OHQ, located in Kuala Lumpur, Malaysia, provides air cargo and charter services worldwide. NAC AC Ventures is a holding company for two entities, NAC 300 LLC, a Delaware limited liability company, which owns a Bombardier Challenger 300 aircraft available for charters and corporate use, and NAC 2000 LX LLC, which holds a position on an aircraft to be constructed in 6

8 the future. National Air Cargo (Deutschland), GmbH ("NAC Germany"), an affiliate through common ownership, is located in Frankfurt, Germany. It brokers general cargo and charter services for customers worldwide. NAC Germany is 85% owned by Mr. Alf and 15% owned by NAC Lux. In 2008, three additional companies were established. National Air Cargo FZE, a United Arab Emirates ("UAE") free zone company, was established in the UAE as a wholly owned subsidiary of NAC Dubai, with the intent of expanding NAC operations in the Middle East and possibly acquiring an A6 airline operating certificate in the region. National Air Cargo (Japan) KK ("NAC Japan"), a Japanese corporation, was formed as a wholly owned subsidiary of NAC Malaysia OHQ. Finally, NAC Thailand was established as a wholly owned subsidiary of NAC Holdings. Both NAC Japan and NAC Thailand were established to provide worldwide air cargo and charter services. Most recently, on June 1, 2010, NAC Holdings registered a "Yuhan Hoesa" company in Seoul, South Korea in order to continue the company's Asia expansion. Similar to a limited liability company, the new entity, National Air Cargo LLC (Korea), which is a subsidiary of NAC Malaysia OHQ, is part of an overall strategic plan to enhance growth and develop new business opportunities in developing marketplaces. Citizenship National Airlines is a citizen of the United States within the meaning of 14 CFR Section 204.2(c)(3). As previously noted, Mr. Alf, the ultimate sole shareholder of National Airlines, is a citizen of the United States and resides in 7

9 California and Florida. Mr. Preston Murray, the company's Chief Executive Officer, and Mr. Thomas Quehl, the company's President, are both U.S. citizens. As an ultimate wholly owned subsidiary of NAC Holdings, National Airlines is overseen by the same Board of Directors that oversees NAC Holdings and its other wholly owned subsidiaries. In addition to Mr. Alf and Mr. Murray, the Board of Directors has five other members, all of whom are U.S. citizens: Mrs. Loretta "Lori" Alf, the wife of Mr. Alf; Lieutenant General John Baker, USAF (retired); Colonel Glen Joerger, USAF (retired); Mr. Jacob Mathew; and Lieutenant General William Mortensen, USA (retired). Resumes for each board member are included in Exhibit NA-4. Finally, National Airlines is under the actual control of U.S. citizens. An affidavit verifying these criteria and the company's U.S. citizenship is attached as Exhibit NA Key Personnel: ( 204.3(f)) The management of National Airlines has extensive experience in aviation and operating large aircraft. The current key personnel, who will continue to serve in these capacities after the company's certification is amended to also include passenger operations, are as follows: CEO President Chief Financial Officer Director of Operations Director of Safety Preston G. Murray* Thomas J. Quehl Joseph A. Stroud Steven F. Clements Carlos Veliz 8

10 Director of Maintenance Director of Quality Control Manager Quality Assurance/ Chief Inspector Director of Training Chief Pilot Maintenance Supervisor Emmett M. Dotson Abraham V. Williams, Jr. Richard A. Polas Jahaziaha Webb Jonathan W. Wiesinger Charles H. Davis, Jr. (* Member of the Board of Directors) The business address of each person named above is 835 Willow Run Airport, Ypsilanti, Michigan, All individuals named above are citizens of the United States. Copies of their resumes are included with Exhibit NA-4. None of these individuals own any shares of National Airlines. Interests in relevant corporations are described in Section 5 below. Positions and interests previously held in any other carrier or person substantially engaged in the business of aeronautics are reflected in the resumes. 5 Each of the technical personnel listed above-specifically, the Directors of Operations and Maintenance and the Chief Pilot-meet all required qualifications as mandated in 14 CFR Sections and An organizational chart, showing the relationship of the various personnel and operating departments within National Airlines, is attached as Exhibit NA-6. 5 It should be noted that in addition to serving as the CEO of National Airlines, Preston Murray serves as the CEO and President of NAC Holdings and also for NAC AC Ventures. 9

11 5. Subsidiaries and Related Companies: ( 204.3(h) and (i)) National Airlines' only subsidiary is NACG Leasing LLC ("NACG Leasing"), a Michigan limited liability company, which is 100% owned by National Airlines. NACG Leasing is an aircraft holding company which currently owns and leases a DC-8-71F (N872SJ) to National Airlines. NACG Leasing is based at the same address as National Airlines. Other than NACG Leasing, National Airlines does not hold a substantial interest in any other air carrier, foreign air carrier, or person substantially engaged in the business of aeronautics. Related companies that are affiliated with National Airlines through its holding companies are described above. 6. Financial Statements of National Airlines: ( 204.3(k)) Exhibit NA-7 contains financial statements for National Airlines for 2007, 2008, 2009, and the first five months of Pages 3 through 31 of Exhibit NA-7 contain "Combined Financial Statements and Other Financial Information" prepared by PriceWaterhouseCoopers ("PWC") for NAC Holdings and its affiliates, including National Airlines' parent company, NAC Acquisitions, for the years ended December 31, 2008 and 2007 ("the PWC 2007/2008 Combined Statement,,).6 The PWC 2007/2008 Combined Statement was prepared retroactively according to Generally Accepted Accounting Principles on an accrual basis. It does not separately address National Airlines, but instead 6 Since only the financial condition of National Airlines is of relevance in this application, we have provided a redacted version of the PWC 2007/2008 Combined Statement which deletes the pertinent financial information and notes for NAC Holdings and all of its subsidiaries other than NAC Acquisitions, National Airlines' parent company. A nonredacted version of the PWC 2007/2008 Combined Statement will be submitted separately to the Department under seal in conjunction with National Airlines' Motion for Confidential Treatment regarding this exhibit. 10

12 provides financial information for its parent, NAC Acquisitions, which is a holding company for National Airlines. All income and expenses for National Airlines are passed through to and reported by NAC Acquisitions. Additionally, NAC Acquisitions has no income or expenses from any other source, such that those figures stated for NAC Acquisitions are those of National Airlines. Specific results for NAC Acquisitions can be found on pages 28 through 31 of Exhibit NA-7, under the "Other Financial Information" section of the PWC 2007/2008 Combined Statement, in column 5 each of the "Combining Balance Sheet December 31, 2008;" "Combining Statement of Operations and Stockholder's Equity for the Year Ended December 31, 2008;" Combining Balance Sheet December 31, 2007;" and "Combining Statement of Operations and Stockholder's Equity for the Year Ended December 31,2007." Unaudited balance sheets and statements of income and retained earnings for National Airlines for 2009, and for the first five months of 2010, are also included with this application as pages 1 and 2 of Exhibit NA We would note that the "Accounts payable-affiliate" entries appearing under "Current liabilities" for NAC Acquisitions in Exhibit NA-7 pages 28 and 30 of the PWC 2007/2008 Combined Statement, have been moved to the "Long-term debt-intercompany-nac Parent" category in the National Airlines 2009 and 2010 Unaudited Balance Sheets appearing at page 2 of Exhibit NA-7. This change was made because the amounts stated in these entries are not currently nor were ever liabilities of NAC Acquisitions or National Airlines. Rather, the accounts reflected in the "Accounts payable-affiliate" entries of the PWC 2007/2008 Combined Statement were simply accounts used by NAC Holdings to move cash as needed to and from National Airlines, primarily in order to purchase the DC-8 aircraft owned by NACG Leasing and to provide National Airlines with working capital from time to time. There is no requirement that either NAC Acquisitions or National Airlines payoff these amounts within the next twelve months, so that these amounts can be properly reclassified as long-term debt in National Airlines' 2009 and 2010 Unaudited Balance Sheets. With this reclassification, National Airlines' 11

13 The attached financial statements demonstrate that National Airlines has a healthy balance sheet, and is financially well-positioned to undertake charter passenger operations. 7. Actions and Outstanding Judgments: ( 204.3(1) & (m)) There are no pending legal actions or outstanding judgments against National Airlines, its key personnel or its shareholders, or against any relevant corporations (including NAC Acquisitions, National Airlines' parent company; NAC Holdings, the parent company of NACG Acquisitions; or Mr. Alf, the ultimate sole shareholder of all three companies). 8. Current Aircraft Fleet: ( 204.3(n)) National Airlines currently operates three DC-S aircraft in its interstate and cargo charter transportation. One of these is owned by National Airlines, as follows: DC-S-63F NS65F, and two are leased, as follows: DC-S-71 F NS72SJ Leased from NACG Leasing, LLC DC-S-73F N155CA Leased from Aersale, Inc. A sworn affidavit of the FAA certification and compliance of these aircraft is contained in Exhibit NA-S. The Boeing ER that will be used for Part 121 certificated passenger and cargo operations will be leased from CIT Leasing, the owner of the aircraft, for a period of eighteen months at a rate of $40,000 per month. current assets clearly exceed its current liabilities for both 2009 and the first five months of

14 9. Investigations, Enforcement Actions and Complaints: ( 204.3(0)) There are no DOT investigations, enforcement actions or complaints currently pending against National Airlines or any relevant corporations or their personnel. Additionally, no person employed by, or holding a substantial interest in, National Airlines or any related company have any FAA or DOT proceedings or investigations pending against them. 10. Charges of Fraud, Deception, etc.: ( 204.3(p)) Neither National Airlines nor its predecessor Murray Air has ever been subject to charges of unfair, deceptive or anticompetitive business practices or of fraud, felony or antitrust violations. In 2005, prior to Murray Air's acquisition by NAC Holdings, a NAC Inc. employee filed a qui tam action in U.S. District Court alleging that NAC Inc. had violated the Federal Claims Act by submitting false invoices to the Department of Defense ("DOD"). NAC Inc. was subsequently investigated by DOD for allegedly fraudulent practices in transporting DOD freight within the United States. In October 2007, NAC Inc. and DOD entered into a negotiated settlement that resolved all of these charges except for a single count of submitting a false invoice. NAC Inc. pleaded guilty to this charge and paid a fine to the United States Government. Subsequent to this plea, NAC Inc. entered into an Administrative Agreement with the United States Air Force ("the Air Force") under which Mr. Alf and five employees left the company and Mr. Alf's stock was placed in a voting trust, with the company operating under the management of the voting trustee. 13

15 In addition, Mr. Alf was debarred from government contracts for a period of three years. As a result of this agreement, DOT's Air Carrier Fitness Division in February 2009 imposed certain conditions on National Airlines in order for the carrier to retain its certificate fitness, including managing the company under a voting trust agreement and an independent board; removing certain individuals including Mr. Alf from any influence or control over the company; and regular reporting by the company to the Department. In May 2009, Mr. Alf filed a complaint in the U.S. District Court for the District of Columbia contesting his debarment from government contracts and challenging flaws in the Air Force's investigation. On October 29, 2009, the U.S. District Court found the government's prior case to be "logically flawed" and issued a preliminary injunction enjoining Mr. Alf's debarment from government contracts. The next day the Air Force permanently terminated Mr. Alf's debarment, and in December 2009 entered into an Amended Administrative Agreement with NAC Inc. and Mr. Alf that permitted him to dissolve the stock voting trust and immediately resume control of NAC Inc. Some elements of the Amended Administrative Agreement remain in effect, as do certain reporting requirements imposed by the Department of Transportation. This oversight continues through the date of this application, and requires National Airlines to submit periodic reports to the Department. National Airlines has an exemplary compliance record with these requirements, and neither National Airlines nor NAC Inc., NAC Holdings, nor any other NAC Holdings 14

16 subsidiary, have been the subject of any further government enforcement proceedings. Indeed, both NAC Inc. and National Airlines continue to perform numerous CRAF and other contracts for the U.S. military. 11. Aircraft Accidents or Incidents: ( 204.3(q)) Neither National Airlines nor any relevant corporation nor any of their personnel have been involved in any aircraft accidents or incidents during the past year, nor are any prior accidents or incidents still under investigation. 12. Narrative History of Operations: ( 204.3(r)) The history of National Airlines and its predecessor company Murray Air, Inc. is included as Exhibit NA Description of Federal, State and Local Authority: ( 204.3(s)) National Airlines operates under an Air Carrier Certificate issued by the FAA under FAR Part 121 (Certificate No. U2RA944L), which currently authorizes charter air carrier cargo operations in common carriage. As discussed in Section 19 below, National Airlines is currently working with the FAA Detroit Flight Standards District Office ("Detroit FSDO") to obtain the necessary amended certification and operations specifications for Part 121 passenger charter operations. 14. Description of Proposed Operations: ( 204.3(t)) As noted above, National Airlines wishes to conduct passenger charter operations with its newly acquired Boeing ER, and consequently requires amended DOT certificate authority to conduct both passenger and cargo charter operations. Under the passenger authority, National Airlines intends to market 15

17 the aircraft for full charter flights to public charter operators and organizations for single entity charters. Potential clients include USAJet, InterFlight Global Corporation, and several NCAA sports teams. The proposed passenger operations also include flights on behalf of heavy industrial corporations from the United States to Germany, and then on to points in Europe and back to the United States. This route would be traveled approximately five days each week. The company is also considering leisure market charters from the United States to South America, also on a five-day per week basis, for the purpose of transporting ocean cruise line passengers to and from various points along the cruise line route. Additionally, after a full year of large-aircraft passenger experience has been completed, National will be in a position to operate passenger/combination charters for the DOD. The company understands the Department's standard requirement that a carrier demonstrate its fitness to operate additional aircraft, and it will provide such information at a later time with respect to the combi aircraft and any fleet expansion request. 15. Maintenance and Training: Line maintenance on the Boeing ER will be performed by National Airlines. Heavy maintenance work will be performed by PEMCO World Air Services, and engine work by TES Aviation Group. Contracted work is the responsibility of the Director of Maintenance, and the Director of Quality Control is responsible for the quality and control of the maintenance training program. 16

18 16. Forecast Financial Results of Operations and Financial Fitness Test: ( 204.3(t)) Exhibit NA-9 contains National Airlines' projected financial statements for the first full year of amended certificate operations. This information is provided on an accrual basis. Exhibit NA-1 0 lays out a summary of National Airline's startup expenses for the proposed passenger operations. How the company will meet the three-month financial fitness test is examined in the "Financial Fitness Analysis" included as Exhibit NA-11. As previously noted, National Air Cargo Holdings in its letter included as Exhibit NA-13 has pledged that National Air Cargo will provide any capital required by National Airlines in meeting its start-up costs and expenses in conducting the proposed passenger operations. As shown in the Financial Fitness Analysis included as Exhibit 11 and the third-party verification of funds letter provided in Exhibit NA-12, National Air Cargo possesses more than sufficient funds to meet these obligations. These exhibits demonstrate that National Airlines is fit, willing and able to provide the proposed passenger services without risk to the public. 17. Warsaw Waiver Agreement: ( 204.3(u)) An executed counterpart of Agreement (OST Form 4523) was filed by National Airlines in 2007 in Docket OST

19 18. Family Assistance Plan (49 U.S.C ) and Passenger Manifest Plan (Part 243) National Airlines is aware of its responsibilities under 49 U.S.C. Section to submit a plan to implement the Aviation Disaster Family Assistance Act of 1996 (Pub. L ), as amended, and under Part 243 of the Department's rules to submit a plan for collecting passenger manifest information from covered passengers. It is in the process of preparing those plans and will file them as required as soon as possible, and will incorporate procedures implementing those plans into the company's manual system. 19. Amendment of FAA Part 121 Certificate National Airlines has had extensive discussions and meetings with the FAA Detroit FSDO regarding the addition of the Boeing ER to the company's Part 121 certificate, and the amendment of its certificate and operation specifications to include passenger operations. National Airlines is currently completing preparation of its required manuals for the aircraft and passenger operations for review by the FAA. 20. Certification: ( 204.3(v)) The required certification, signed by National Airline's President, Mr. Thomas Quehl, is included as Exhibit NA Qualifications for Passenger Operations The addition of interstate and foreign passenger authority to National Airlines' certificate authority is a natural extension of its Part 135 air taxi operations and the experience of its key personnel. As noted in the company 18

20 history set forth in Exhibit NA-3, National Airlines conducted Part 135 charter flight operations for nearly 25 years before suspending those operations in The company's fleet at various points has included MU-11 s, Learjets, Casa 212/200s, a Beechcraft King Air, a SAAB 340 and a BAE Jetstream 31 and 32EP. At one point the company operated up to eight aircraft at one time, although the fleet in 2009 consisted of three aircraft. The company's primary passenger clients were Fortune 500 companies, including auto manufacturers like DaimlerChrysler, needing employees flown between company locations throughout the United States, Mexico and Canada. National Airlines enjoyed considerable success in this area, shuttling over 10,000 passengers in Between 2002 and 2006, the company transported over 21,740 DaimlerChrysler passengers alone to a variety of U.S. destinations. At the time National Airlines suspended its Part 135 operations in 2009, it employed an In-Flight Manager and five flight attendants. All flight attendants underwent rigorous initial and annual recurrent FAA-compliant training, where they learned about company policies and procedures, security, the Federal Aviation Regulations, emergency drills, hazardous materials and also passenger service requirements. In 2005, National Airlines was presented with the National Business Aviation Association's "Commercial Business Flying Safety Award" for operating business aircraft for over 21 years and 72,607 consecutive hours without an accident. The award specifically recognized the company's commitment to operational safety. Active Aero, North America's leading air charter management 19

21 company, awarded National Airlines a "Carrier Appreciation Award" for the company's dedication to on-time performance, communication and outstanding customer service. The whole organization's commitment to quality has earned its cargo operation a 100 percent on-time and 100 percent reliability rating from the Air Mobility Command for the past five years. National Airlines thus has substantial experience conducting passenger charter operations and is well-versed with FAA safety requirements for those operations. The company has hired Ms. Kim Farrington to serve as the Director of In-flight Services and to oversee the training and supervision of its flight attendants for the passenger operations. The Director of Security will ensure that all applicable aircraft, baggage and passenger security requirements are met. The company is in the process of hiring a Director of Security with both passenger and DOD experience. Any charter contracts undertaken will be primarily through charter brokers, and those contracts will be negotiated and handled by National Airlines' charter sales staff. The sales staff will be under the supervision of the Director of the Charter Management Group, Mr. Glen Gates, who will have responsibility for ensuring that any charter requirements under 14 CFR Part 212 are satisfied. Any consumer complaints emanating from National Airlines' passenger operations will be addressed by the company's Manager of Customer Service, Mr. Bernie Walsh, who has substantial management experience in customer interaction. Scheduling of the passenger charters will be handled by Ms. Regina 20

22 Eikland, National Airlines' Manager of Operations Control, who has significant experience overseeing the scheduling of the company's numerous cargo flights. 22. Conclusion As the above information and attached exhibit materials demonstrate, National Airlines is legally and operationally well qualified to receive amended certification by the Department to operate as a passenger charter carrier with large aircraft, enabling it to broaden the scope of its services and clientele. WHEREFORE, National Air Cargo Group, Inc. d/b/a National Airlines requests that the Department issue it a Certificate of Public Convenience and Necessity to operate interstate and foreign charter air transportation of persons, property and mail, and any such other relief as the Department may deem necessary. Mark. Atwood Elizabeth J. Wadsworth Sher & Blackwell LLP 1850 M St., NW, Suite 900 Washington, D.C (202) Attorneys for National Airlines Dated: July 9,

23 CERTIFICATE OF SERVICE I, Elizabeth J. Wadsworth, hereby certify that on this 9 th day of July, 2010, I served via the foregoing "Application of National Air Cargo Group, Inc. d/b/a National Airlines for an Amended Certificate of Public Convenience and Necessity" on the following person: Federal Aviation Administration Detroit Flight Standards District Office POI John Paul 8800 Beck Road-Eastside Belleville, MI RaymondJpaul@faa.gov Elizabeth J. Wadsworth

24 NATIONAL AIRLINES TABLE OF EXHIBITS Exhibit NA-1 NA-2 NA-3 NA-4 NA-5 NA-6 NA-7 NA-8 NA-9 NA-10 NA-11 NA-12 NA-13 NA-14 Certificate of Good Standing National Air Cargo Holdings Organization Chart Narrative History of Operations Key Personnel Resumes Affidavit of United States Citizenship National Airlines Organization Chart Financial Statements Affidavit of FAA Compliance Consolidated Forecast Financial Statements and Narrative (first year of amended certificate operations) Start-Up Costs Financial Fitness Analysis Third-Party Verification of Available Funds National Air Cargo Holdings Funds Letter President's Certification

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