Application of

BEFORE THE DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

National Air Cargo Group, Inc. d/b/a National Airlines

) ) ) ) ) Docket OST-201 0-)

for an amended certificate of public convenience and necessity pursuant to 49 U.S.C. § 41102 (interstate and foreign charter air transportation of persons, property and mail)

) ) ) ) )

APPLICATION OF NATIONAL AIR CARGO GROUP, INC. d/b/a NATIONAL AIRLINES

Communications with respect to this document should be addressed to:

July 9,2010

Mark W. Atwood Elizabeth J. Wadsworth Sher & Blackwell LLP 1850 M St., NW, Suite 900 Washington, D.C. 20036 (202) 463-2513

Attorneys for National Airlines

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.

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. § 41102 (interstate and foreign charter air transportation of persons, property and mail)

APPLICATION OF

) ) ) ) ) Docket OST-201 0-) ) ) ) ) )

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 204.3 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

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 757 -200ER 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 757 -200ER to its fleet and the

amendment of its certificate to include both passenger and cargo transport is the

1 See DOT Order 2006-12-20 (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 2009.

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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 757-200ER

passenger aircraft, the company is currently in the process of acquiring four

Boeing 757-200s 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

Information Required by 14 CFR § 204.3

1. Name and address: (§ 204.3(a))

835 Willow Run Airport Ypsilanti, MI 48198

Tel. (734) 484-4800

2. 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-1.

3. 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

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

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

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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

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-5.

4. 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

8

Preston G. Murray*

Thomas J. Quehl

Joseph A. Stroud

Steven F. Clements

Carlos Veliz

Director of Maintenance

Director of Quality Control

Manager Quality Assurance/ Chief Inspector

Director of Training

Chief Pilot

Maintenance Supervisor

(* Member of the Board of Directors)

Emmett M. Dotson

Abraham V. Williams, Jr.

Richard A. Polas

Jahaziaha Webb

Jonathan W. Wiesinger

Charles H. Davis, Jr.

The business address of each person named above is 835 Willow Run Airport,

Ypsilanti, Michigan, 48198. 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 119.65 and 119.67.

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

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 1 00% 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 2010. 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

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-7.7

7 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

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 757 -200ER 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 2010.

12

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

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

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-3.

13. 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 757 -200ER, 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

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 757 -200ER 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

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 start­

up 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 18900 (OST Form 4523) was filed

by National Airlines in 2007 in Docket OST 95-236.

17

18. Family Assistance Plan (49 U.S.C. § 41113) and Passenger

Manifest Plan (Part 243)

National Airlines is aware of its responsibilities under 49 U.S.C. Section

41113 to submit a plan to implement the Aviation Disaster Family Assistance Act

of 1996 (Pub. L. 101-264), 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 757-200ER 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-14.

21. 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

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history set forth in Exhibit NA-3, National Airlines conducted Part 135 charter

flight operations for nearly 25 years before suspending those operations in 2009.

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 2005. 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

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

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.

Dated: July 9, 2010

21

Mark . Atwood Elizabeth J. Wadsworth Sher & Blackwell LLP 1850 M St., NW, Suite 900 Washington, D.C. 20036 (202) 463-2513

Attorneys for National Airlines

CERTIFICATE OF SERVICE

I, Elizabeth J. Wadsworth, hereby certify that on this 9th day of July, 2010, I served via

email 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 48111

Email: RaymondJpaul@faa.gov

Elizabeth J. Wadsworth

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

NATIONAL AIRLINES

TABLE OF EXHIBITS

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