Baltia Air Lines Inc. (fka BLTA)

[speckulater]

DOT - Sufficient Financial Resources



An official Branch of the United States Government took 14 months of lengthy and arduous review before concluding that Baltia has sufficient financial resources. They looked at Baltia more carefully and stringently than you, I and the rest of this board combined, could ever possibly hope to do.




From the United States Of America Department Of Transportation, Office Of The Secretary Washington D.C.:


Operating Plan and Financial Position

If Baltia is granted the requested authority, the applicant initially intends to operate one roundtrip flight per week between New York, New York, and St. Petersburg, Russia, using one leased Boeing 747-300 aircraft configured for 320 passenger seats. Baltia does state that
if market conditions are favorable, it will increase the frequency of its operations to as many as five weekly roundtrip flights by the end of its first year of operations.12

In evaluating a new entrant applicant’s financial fitness, the Department generally asks that the company have available to it resources sufficient to cover all pre-operating costs plus a working capital reserve equal to the operating costs that would be incurred in three months of normal certificated operations.13 Baltia provided forecasts of its pre-operating costs, as well as projected first-year revenues and expenses associated with its proposed initial operations (i.e., one roundtrip flight per week using one aircraft). We have reviewed the applicant’s projected costs and believe them to be reasonable. Based on these forecasts, the applicant’s pre-operating expenses are expected to total approximately $2.1 million, with first-year expenses totaling approximately $17.2 million. Therefore, in order to meet our fitness requirements, Baltia will need access to approximately $6.4 million.

The Department generally requires an applicant to provide evidence of its ability to meet our financial fitness requirement prior to it receiving effective authority. However, in Baltia’s case, the Department, by Order 99-12-6, issued October 5, 1999, directed the company to provide third-party verification that it actually had available to it all of the resources needed to be found financially fit before the Department would accept another application from Baltia. Accordingly, Baltia provided third-party verification from Morgan Stanley, HSBC, Chase, Capital One, and Wachovia evidencing that it had $1.4 million on deposit in its accounts. The applicant also provided evidence that it had arranged for lines-of-credit totaling $5.1 million from Messrs. Igor Dmitrowsky, Brian Glynn, Walter Kaplinsky, Barry Clare, Russell Thal, Nicholas Oppegard, Vasko Gjelaj, and Joe Pampalone, and provided third-party verification confirming that each of these individuals had access to sufficient funds to extend the lines-of-credit proposed. 14

In light of the above, we tentatively conclude that Baltia has access to sufficient financial resources to commence one scheduled roundtrip flight per week between New York, New York, and St. Petersburg, Russia, using one large aircraft without posing an undue risk to consumers or their funds. 15





Footnotes

11. Before authorizing an air carrier to conduct air transportation operations, the FAA also evaluates certain of the applicant’s key personnel with respect to the minimum qualifications for those positions as prescribed in the Federal Aviation Regulations. The FAA’s evaluation of these key personnel provides an added practical and in-person test of the skills and technical ability of these individuals. The FAA has advised us that Baltia’s key technical personnel are acceptable to that agency in their respective positions.

12. Although Baltia did submit a first-year expense forecast for up to five roundtrip flights per week, we did not base its financial fitness on these operations since the company’s plans to operate these additional flights are not final and depend upon future market conditions. If Baltia does decide to engage in more than one roundtrip flight per week from New York to St. Petersburg, we will review the company’s expense forecast and financial condition at that time.

13. However, because projected operations during one or more of the first three months of anticipated actual air transportation services frequently do not include all costs of operations that will be incurred during a normal period of operations, it has been our practice to base our three-month standard on one quarter of the first-year operating cost forecast. In calculating available resources, projected revenues may not be used.

14. Baltia expects to raise an additional $3.0 million if warrant holders exercise their right to purchase Baltia stock at $0.10 per share.

15. As is our practice, prior to making any authority awarded to Baltia effective, we will require the company to demonstrate that it continues to have access to the financial resources needed to meet our financial test.


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