US’s Waltzing Matilda hits regulatory snags over ownership

Plans by US charter operator Waltzing Matilda Aviation (MW, New Bedford) to launch scheduled operations under the Connect Airlines brand have snagged with the US Department of Transportation having identified “major issues that must be resolved before any further processing of WMA’s application continues”.

In a letter dated September 17, 2021, to WMA’s legal representative, the DOT has given the company 30 days to address “citizenship, fitness, and procedural concerns” identified in MWA application to conduct interstate and foreign scheduled air transportation of persons, property, and mail.

The DOT said it would defer further processing of WMA’s application pending resolution of the identified issues. “If WMA does not resolve the issues identified or correct the procedural issues identified within this time, we will recommend that the department dismiss the applications of WMA without prejudice to the applicant refiling.”

WMA founder John Thomas, in an email to ch-aviation, said: “It is not at all unusual for the DOT to ask for additional information/clarification when an application for operating authority is filed with them. We are currently in the process of putting that information together and working with DOT to answer their questions. We are confident that our application will be approved.”

The company is said to have already signed an interline agreement with American Airlines to codeshare on flights from Philadelphia Int’l and Chicago O’Hare into Toronto City Centre. It is hoping to start operating the schedules in early 4Q21 using two DHC-8-Q400s leased from Chorus Aviation.

The most salient issues identified are the DOT’s concerns about the US citizenship of WMA and its relationship with its subsidiary, WM Airlines LP (WM LP), a non-US Citizen. As reported previously, WM LP will lease and own all aircraft and sublease to another subsidiary, WM Aviation LLC, which will have operational control over the aircraft. WM LP will also raise equity and debt financing to fund the airline’s operations.

“It appears that WM LP is in a position to exercise actual control over WMA, thus rendering WMA a non-US citizen. For example, WMA states that WM LP will provide the necessary capital and aircraft to support its proposed Part 121 operations in exchange for the applicant operating under the Connect Airlines brand name created by WM LP,” the DOT states.

It is also concerned that the management and services agreement between WMA and WM LP would entitle WM LP to all revenue for the services WMA provides using the Connect Airlines brand. WM LP would also have access to WMA’s operations and repair station manuals and records pertaining to the aircraft and flight support personnel, including performance reviews, to request the replacement of flight support personnel, and to access and use WMA’s scheduling software. “The dependence of WMA on WM LP’s support and WM LP’s ability to access WMA’s day-to-day operational data, including its personnel records and scheduling software, are important factors that we considered as part of our US citizenship review of WMA,” the DOT says.

The DOT also found WMA’s funding plan to be problematic. “Not only is WMA relying solely upon WM LP, a foreign limited partnership, to support its proposed operations, but also, according to the record, WM LP intends to obtain the capital needed by WMA through capital raises. However, adequate details concerning the funding plan, such as the timing of proposed capital raises, and information related to how the applicant will proceed with its proposed operations if sufficient capital is not raised, leads us to believe that WMA does not have a viable funding plan in place that will provide it with sufficient access to capital necessary to meet the department’s financial fitness criteria,” the DOT states.

A further issue identified was that WMA’s key technical personnel appeared to “lack sufficient experience managing scheduled Part 121 or large aircraft operations as proposed by WMA”. “Without this information, which should be documented and described in detail in the resumés provided for this personnel, we are unable to determine that WMA has the managerial competency to manage and oversee its proposed operations”.

On a technical issue, it also noted that WMA’s applications and supplemental filings were not submitted in accordance with application procedures and rules of practice in proceedings.