Pan Am Closes Ahead of DOT Revocation

After the Department of Transportation proposed to revoke the certificate of Boston-Maine Airways, dba Pan Am, the Portsmouth, N.H.-based airline shut its airline operations February 29, in favor of operating charter services with the seven BAe Jetstream 31s that it still has flying. It owns a total of 15...

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After the Department of Transportation proposed to revoke the certificate of Boston-Maine Airways, dba Pan Am, the Portsmouth, N.H.-based airline shut its airline operations February 29, in favor of operating charter services with the seven BAe Jetstream 31s that it still has flying. It owns a total of 15 Jetstreams. It is now working on building its charter business, according to Spokesperson Stacy Beck, who otherwise declined comment.
An investigation found that BMAC did not possess the financial wherewithal to continue or expand it operations without posing a risk to consumers. It also questioned the managerial competence necessary to oversee its current and proposed operations as well as its regard for the federal aviation regulations to ensure that its aircraft and personnel conform to applicable safety standards and to ensure that acceptable consumer relations practices will be followed. In its order, DOT said it is particularly troubling that the FAA has been extremely concerned about the ability of BMAC’s management to oversee the air carrier’s existing operations, much less expanded operations and informed the department that the air carrier’s staffing levels have decreased so much that BMAC’s maintenance manuals had to be rewritten because the positions responsible for specific tasks remained vacant.
In 2006, an Office of Aviation Enforcement and Proceedings investigation found BMAC violated 14 CFR Part 374, which requires airlines to make prompt credit refunds. That order further found that BMAC engaged in an unfair and deceptive practice and unfair method of competition in violation of 49 U.S.C. 41712. It directed the air carrier to cease and desist from further violations and assessed the air carrier $50,000 in civil penalties.
In its Show-Cause Order on revoking its certificate, the department recounted BMAC submissions dating back to 2002 which included falsification of its financial documents on its request for certification to operate a 727. In also recounted a labor fight with the Air Line Pilots Association, which was active in having BMAC’s certificate revoked. ALPA alleged that the defendants formed BMAC to divert work from Pan Am, a unionized corporation, to BMAC, a non-unionized corporation, with the intent of eventually dissolving Pan Am. ALPA argued that the defendants were trying to circumvent its labor agreements.
“Over the past five years, BMAC’s actual financial condition has been extremely poor, and the air carrier has continued to sustain losses,” said the department in its order. “The severity of BMAC’s financial situation has inhibited the air carrier’s ability to maintain an adequate number of necessary personnel, has likely had a negative impact on consumer refunds, and has caused the air carrier to significantly scale back its operations.”
The airline said it was unaware that falsified documents had been submitted by its then senior vice president and general counsel but DOT countered the company should have known and the fact that did not was proof that it could not maintain adequate oversight of its operations.
BMAC was organized as a New Hampshire corporation in March 1999 as a wholly-owned subsidiary of Pan Am Systems, Inc. owned by Timothy Mellon (94.2 percent) and David Fink (5.2 percent), who is also president. It received its scheduled certificate in 2000 and, in 2004, DOT amended its authority to permit operation of large aircraft in interstate scheduled operations. Operating under the trade name Pan Am Clipper Connection, BMAC used its Jetstreams in scheduled passenger operations, serving Portsmouth, Bedford, Mass. and Trenton, N.J., while the 727s were for private charter flights. Destinations recently included Baltimore/Washington International; Tunica, Miss.; Gary, Ind., and Elmira, N.Y. as well as New Haven. Many of these routes closed almost as quickly as they started up, according to ALPA.
The company conducted interstate scheduled and charter operations using a fleet of seven 19-seat Jetstream 3100 aircraft and three 141-seat B-727-200 aircraft. It tried to expand its large aircraft fleet to seven aircraft but DOT restricted the airline’s authority to a single large aircraft. It later deferred its ruling pending FAA authority to operate the 727.
The ALPA allegations date back to 2002 charging that other companies that share common ownership with BMAC and its sister air carrier, Pan American Airways Corp. (“Pan Am”), previously had been found to have engaged in violations of the Railway Labor Act (“RLA”).
ALPA provided evidence of the falsifications made by BMAC Senior Vice President and General Counsel John Nadolny. Nadolny ultimately pleaded guilty in U.S. District Court in Concord, New Hampshire, to a charge of falsifying documents to the Department's Office of Aviation and International Affairs in support of the airline's application for amended certification in May 2005.