OST-97-3017 / Sky King Inc. (certificate of public convenience and necessity to engage in interstate/foreign [charter] air transportation) / October 15, 1997

Application of

for a certificate of public convenience and necessity under 49 U.S.C. 41102 to engage in interstate/foreign [charter] air transportation

Sky King Inc. submits this application for a certificate of public convenience and necessity authorizing interstate and foreign charter air transportation pursuant to section 41102 of Title 49 of the United States Code ("the Statute").

In support of its application Sky King Inc. states the following:

Applicant is a corporation organized on September 25, 1990 under the laws of the State of California. Its address and telephone number are:

Its address is: 3600 Power Inc. Road Sacramento, California 95826

and telephone # is: (916) 736-6821

and fax # is: (916) 737-8960

Applicant is a citizen of the United States as defined in section 40102(a)(15) of the Statute. The applicant is a California corporation and all of its officers are United States citizens.

Applicant is an existing corporation, currently engaged in air transportation under an FAR Part 125 Operating Certificate.

Applicant requests authority to engage in interstate and foreign charter air transportation of persons and property (passenger and cargo).

Applicant requests authority to engage in charter air transportation under an FAR Part 121 Operating Certificate. Currently, Sky King, Inc. operates under an FAR Part 125 Operating Certificate, which allows long-term lease arrangements with select clientele. Sky King, Inc. has provided air transportation for the Sacramento Kings Professional Basketball team for the past seven years, and has entered into lease contracts with entertainment tours during the summer season. The issuance of said Part 121 certificate is not expected to significantly alter current operations of Sky King, Inc., but would allow flexibility in procurement of additional business by means of marketing and solicitation of additional sports teams, both professional and amateur; additional entertainment tours, and corporations that may have a need for our specialized, custom interior aircraft.

Information in support of the applicant's fitness to conduct the proposed air transportation is contained in Exhibits 1 through 21.

Concurrently, applicant is seeking authority to engage in interstate air transportation. Information in support of the applicant's fitness to operate has been included with that application and is incorporated by reference here. Additional information in support of the applicant's proposed foreign air transportation operations is included as Exhibits 1 through 21.

Pursuant to Title 18 United States Code Section 1001, I, Gregg Lukenbill, in my individual capacity and as the authorized representative of the applicant, have not in any manner knowingly and willfully falsified, concealed or covered up any material fact or made any false, fictitious, or fraudulent statement or knowingly used any documents which contain such statements in connection with the preparation, filing or prosecution of this application. I understand that an applicant who violates the provisions of 18 U.S.C. 1001 shall be fined not more than $10,000 or imprisoned not more than five years, or both.

WHEREFORE, Gregg Lukenbill respectfully requests that the Department grant this application, and any such other relief as it may find to be in the public interest.

Respectfully submitted,

Gregg Lukenbill, President, Sky King Inc.

PART I

1. The name, address. telephone and fax numbers of the applicant.

Response:

SKY KING, INC.
3600 Power Inc. Road, Suite H
Sacramento, CA 95826

Telephone (916) 736-6821
Fax: (916) 737-8960

2. A narrative history of the applicant.

a. The narrative should include when the applicant was formed and by whom; any subsequent ownership changes, the nature of the business initially and how it has changed or grown, the applicant's service area and the primary markets currently being served.

Response:

Sky King, Inc. was formed in September, 1990 by Gregg Lukenbill as a flight operations company to service air transportation needs for the Sacramento Kings Professional Basketball team (Exhibits 1 and 1A).

Sky King, Inc. currently operates one BAC 1-11, tail number N401SK Our operation has provided air transportation for the Sacramento Kings for the past seven professional basketball seasons, and is currently in our eighth season of providing this service. In addition, air transportation has been provided to the San Antonio Spurs Professional Basketball team for the 1992-93 season. We have also contacted with various entertainment groups (Beach Boys, Bon Jovi) for long term summer tour air travel over the past seven years.

b. The narrative should also indicate the type of authority being requested in the application, the markets to be served, whether additional aircraft will be required in the proposed service, and whether other changes or additions in the applicant's management team, facilities, and operations will be made if the requested authority is received.

Response:

Applicant requests authority to engage in interstate and foreign charter air transportation of persons and property (passenger and cargo). Currently, Sky King, Inc. Operates under an FAR Part 125 Operating Certificate, which allows long-term lease arrangements with select clientele. Sky King, Inc. has provided air transportation for the Sacramento Kings Professional Basketball team for the past seven years, and has entered into lease contacts with entertainment tours during the summer season utilizing a BAC 1-11 aircraft. The issuance of said Part 121 certificate is not expected to significantly alter current operations of Sky King, Inc., but would allow flexibility in procurement of additional business by means of marketing and solicitation of additional sports teams, both professional and amateur; additional entertainment tours, and corporations that may have a need for our specialized, custom interior aircraft. Initially, one Boeing 737-200 aircraft will be leased or purchased to provide the proposed service. Changes from the existing Sky King, Inc. FAR Part 125 management team to the proposed FAR Part 121 management team are addressed herein.

There will be no change in the facilities currently being utilized, and operations will remain essentially the same, excepting for the FAR Part 121 Operating Certificate and the Boeing 737-200 aircraft type to be utilized.

c. If the applicant has or proposes to establish maintenance or operations bases separate from its corporate offices, the locations of those bases should be indicated. Response: Principal Maintenance Base: Southwest Aero Technology (Exhibit 10) Sky King, Inc. has contracted with Southwest Aero Technology to serve as the Main Maintenance Base for Sky King, Inc. The location of this Main Maintenance Base is:

Southwest Aero Technology
74 Earl Cummings Loop East
Roswell, New Mexico 88201

It is the responsibility of the Sky King, Inc. Director of Maintenance and Chief Inspector respectively to exercise direct operational quality control over all maintenance functions administered at the Main Maintenance Base.

d. If the applicant intends to contract out any maintenance, training or other operational functions, the percentage and type of such contracts should be indicated. Major maintenance contracted and performed by Southwest Aero Technology will constitute approximately 50% of annual maintenance, with the balance of aircraft maintenance to be performed by Sky King, Inc. maintenance personnel.

100% of pilot and simulator training will be contracted with the Simulator Training Center of U.S. Air, Pittsburgh, Pennsylvania.

3. A list of the applicant's current and/or proposed fleet of aircraft, including the number and seating/cargo capacity of each type and model of aircraft and whether they are or will be owned or leased.

Response:

Sky King, Inc. currently operates one BAC 1-11, series 401AK, tail number N401SK, with a first-class executive configuration interior, seating thirty passengers.

(Please refer to interior layout; Exhibit 5.) This BAC 1-11 aircraft is leased from Lukenbill Enterprises on an annual basis. The applicant proposes to operate a Boeing 737-200 aircraft to be leased, or more likely purchased. The proposed interior layout for the 737-200 aircraft, with a first-class executive configuration interior, will seat thirty-six passengers. (Please refer to interior layout; Exhibit 5A).

a. If the aircraft are leased, identify the lessor.

Response: If the 737-200 aircraft is leased, Sky King Inc. will identify the lessor, and provide the lease to the DOT prior to receipt of the Part 121 Operating Certificate, and final DOT authority.

b. A sworn affidavit stating that each of these aircraft has been certified by the FAA and complies with all applicable FAA safety standards should also be provided by applicants that already operate aircraft. For non-operating applicants, this affidavit should be submitted at the time the company's FAA documents are submitted to the Department to make its authority effective.

Response:

The Affidavit of Safety Compliance for the BAC 1-11 aircraft is attached as Exhibit 6. The 737-200 aircraft will be leased or purchased within the next four months. For FAR Part 121 Authority, the Affidavit of Safety Compliance for the 737-200 aircraft will be submitted at the time the company's FAA documents are submitted to the Department to make its authority effective.

4. A description of all authority the applicant holds or has held to conduct air transportation operations from state, federal, and foreign governments. This would include, for example, a certificate from the FAA or a Canadian Transport Commission license.

Response:

Sky King, Inc. currently holds FAR Part 125 Operating Certificate, issued on May 10,1991 (Please refer to Exhibit 4.)

a. If additional authority is needed from the FAA in order to conduct the proposed operations, the status of any application for that authority, and the name, telephone number, and address of the PAA personnel responsible for processing that application should be provided. If no additional authority is needed, the name, address, and telephone number of the applicant's FAA principal operations inspector should be included.

Response:

Application for FAR Part 121 Operating Certificate was filed, and the Pre-Application meeting was held on October 7,1997 with the following authority:

5. The form of the applicant's organization (for example, sole proprietorship, partnership, or corporation), and the state law(s) under which the applicant is organized and the date of incorporation or organization.

Response:

Sky King, Inc. is a Corporation. Sky King, Inc. was incorporated under the laws of the State of California on September 25,1990; please refer to attached Exhibit 1 and Exhibit 1-A.

6. If the applicant is a corporation, a statement provided by the Office of the Secretary of State, or other agency of the state in which the applicant is incorporated, certifying that the applicant corporation is in good standing. This statement should reflect the applicant's corporate standing not more than one month prior to the date the application is filed.

Response:

The certification statement is provided. Please refer to attached Exhibit 2.

7. A sworn affidavit stating that the applicant is a citizen of the United States. 11/ If any officers, directors, owners, or other persons who have the power to influence the applicant, whether through ownership, debt, or other interest, are not U.S. citizens, state the name and citizenship of each, and describe each such person's relationship to and interest in the applicant.

Response:

Sky King, Inc., a corporation, is a citizen of the United States. There are no officers, directors, owners, or other persons who have the power to influence the applicant who are not citizens of the United States. Please refer to attached Exhibit 3.

11/ Section 40102(a)(15) of the statute defines a "citizen of the United States" as: (I) an individual who is a citizen of the United States; (2) a partnership each of whose partners is an individual who is a citizen of the United States, or (3) a corporation or association organized under the laws of the United States or a state, the District of Columbia, or a territory or possession of the United States, of which the president and two-thirds of the Board of Directors and other managing officers are citizens of the United States, and in which at least 75 percent of the voting interest is owned or controlled by persons that are citizens of the United States. In addition to meeting these specific numerical standards, we have interpreted the statute to require that a U.S. air carrier, in fact, be under the actual control of U.S. citizens.

8. A description of the classes or types of the applicant's stock that are authorized and the number of shares of each class or type that are issued and outstanding.

Response:

Ten thousand shares of common stock have been authorized and issued in Sky King, Inc.

9. A list of all persons (individuals or organizations) that own or control at least 10 percent of the stock of the applicant, indicating the number of voting shares and the corresponding percentage of the total shares outstanding that are held by each, along with their address, citizenship, and principal business.

Response:

Ten thousand shares of stock in Sky King, Inc. have been issued to Gregg Lukenbill and Janet Lukenbill, Husband and Wife, as community property. Their address is: 1341 37th Street, Sacramento, California 95816. They are both United States citizens. Their principal business is Sky King, Inc.

a. if any stockholder is an organization, provide the name, address, citizenship, and principal business of the individuals who own or control at least 10 percent of the stock of the organization.

Response:

No stockholder is an organization.

b. If the applicant's stock is held by someone for the benefit or account of a third party, give the name, citizenship, and principal business of that person or organization.

Response:

None of the applicant's shock is held by someone for the benefit or account of a third party.

c. If any of these persons are related by blood or marriage or have had any financial interest in, or serve or have served as an officer or director of any other air carrier, common carrier, or person substantially engaged in the business of aeronautics or persons whose principal business (in purpose or fact) is the holding of stock in or control of any aviation-related entity, that relationship should be described.

Response:

Ten thousand shares of stock in Sky King, Inc. have been issued to Gregg Lukenbill and Janet Lukenbill, Husband and Wife, as community property. Their address is: 1341 37th Street, Sacramento, California 95816. They are both United States citizens. Their principal business is Sky King, Inc. They have not been affiliated in any way with any other aviation-related entity.

d. If any person or organization holds options to convert debt to equity or one type of stock to another type, identify the person or organization and discuss the circumstances under which such conversion may occur.

Response:

There are no persons or organizations holding options to convert debt to equity or one type of stock to another type.

10. A list of the applicant's operating divisions and subsidiaries, if any, or of any other company (including any air carrier, common carrier, or person substantially engaged in the business of aeronautics) in which the applicant has a financial interest. The principal business of each of these companies, and their relationship to the applicant should be discussed.

Response:

There are no operating divisions or subsidiaries of Sky King, Inc.

The purpose of this information is to demonstrate that the applicant has a sufficient number of qualified, competent personnel directing its operations who have the background and experience necessary for the kind of operations being undertaken.

The following information concerning the existing and/or prospective key management personnel 12/ should be submitted:

1. A chart showing positions and operating divisions within the organization that depicts which positions and functions report to whom.


Response:

Key management personnel of Sky King, Inc. are outlined in a company organizational chart included herewith as Exhibit 7.

2. Each key person's position and responsibilities with the applicant and the date employed or to be employed. 13/

a. If an individual has been employed with the applicant for a number of years, indicate all positions held during that time, with dates.

Response:

Each key management person's position, responsibilities, tenure, and positions with Sky King, Inc. are outlined as follows:

1. Board of Directors {for 7 years}: Green Lukenbill and Janet Lukenbill. husband and wife. The home address of Gregg Lukenbill and Janet Lukenbill is 1341 37th Street, Sacramento, California, 95816. The citizenship of Gregg and Janet Lukenbill is United States of America. The principal business of Gregg and Janet Lukenbill is Sly King, Inc.

2. Director of Safety/President {as employed for 7 years}: Grew Lukenbill (Exhibit 8) The Director of Safety will be responsible for the implementation and oversight of all operational safety programs and audits, and the interface with all FAA

12/ "Key personnel" refers to the President, Chief Executive Officer, Chief Operating Officer, General Manager, Chief Financial Officer, and Vice President(s), if any, the Director of Operations, the Director of Maintenance, the Chief Pilot, the Director of Safety, and the Chief Inspector, as well as the Chairman and members of the Board or other key officials who may not be involved with the day-to-day operation of the company but who are primary stockholders and/or whose influence on the policy of the applicant is, or potentially could be, substantial.

13/ In addition to the key personnel noted above, if the applicant proposes to contract out any maintenance or training functions, the corporate position that will be responsible for overseeing those contracts should be identified along with the name, background, and credentials of the individual selected for this position to oversee contracts of this type. The applicant should also indicate to whom in the corporate structure this position will report, how the oversight will be accomplished, and whether the position is part-time or full-time.

personnel as to the satisfactory compliance therewith. The Director of Safety will be responsible for all flight operations, and for management of Sky King, Inc. including the coordination of all departments, selection of department heads; carrying out company policies and for the compliance with all laws, rules and regulations governing Air Carrier operations as applicable to Sky King, Inc. The President of Sky King, Inc. will direct all policies and planning of Sky King, Inc. He/She shall direct all departments within the organization, insuring that all Sky King, Inc. procedures are adhered to. The President is authorized to:

A) Exercise administrative supervision of all aircraft operations and maintenance.

B) Develop and administer contracts for the performance of aircraft operations and maintenance.

3. Director of Operations {as employed for 7 years}: Ford Dickson (Exhibit 9) The Director of Operations reports directly to the President. The Director of Operations is responsible for canceling, diverting, or delaying a flight if, in his/her opinion or that of the Pilot-In-Command, the flight cannot operate or continue to operate safely as planned or released. The Director of Operations is responsible for assuring that each flight is monitored with respect to at least the following:

1. Direct supervision of all flight operations functions.
2. Coordination with the FAA and DOT in all matters concerning the operation of Sky King, Inc. aircraft and the performance of flight crew personnel.
3. He/She is responsible for all contractual operations requirements relating to ground and flight training, surveillance of flight New records; maintaining master copies of aircraft manuals, preparing and submitting for approval all necessary revisions; and is responsible for all reports required by the FAA and DOT.
4. The coordination, planning and initiation of management procedures to insure efficient flight operations and operations support.
5. Responsible for insuring that no aircraft is utilized in Sky King, Inc. FAR 121 Operations unless said aircraft is properly certificated in accordance with the airworthiness requirements set forth in FAR 121 and that said aircraft is listed on the Operations Specifications.
6. He/She and the Pilot-In Command are jointly responsible for the initiation, continuation, termination, and diversion of a flight in compliance with FAR 121 and the Operations Specifications The Director of Operations may delegate the authority for the initiation, continuation, diversion, and termination of a flight, but he/she may not delegate the responsibility for these functions.
7. Departure of the flight from the place of origin and arrival at the destination, including intermediate stops and any diversions.
8. Monitoring of maintenance and mechanical delays encountered at places of origination, termination, and intermediate stops.
9. The Director of Operations may designate responsible persons to act for him/her. However, this does not relieve him/her of the overall responsibility.

4. Director of Maintenance: Michael Houlihan (Exhibit 11) {Employment as Director of Maintenance commences November 1,1997} The Director of Maintenance is responsible to the President of Sky King, Inc. He/She is responsible for the administration and functioning of the Maintenance Planning, and coordinating the Maintenance Department to ensure a smoothly functioning operation. His/Her duties include:

1. Direction and evaluation of the performance of Maintenance Foremen, Stores Manager, Shops, and direction of all maintenance labor at both line and hangar.
2. Direct coordination with the Chief Inspector and Quality Control in all phases of scheduled and non-scheduled maintenance.
3. Responsibility for all out station maintenance activity.
4. Assure that Sky King Inc.'s maintenance policies and procedures are adhered to away from the Main Maintenance Base.

5. Chief Pilot Daniel Stanzione Employed for 1 year as pilot} (Exhibit 13) The Chief Pilot is responsible to the Director of Operations for the administration and supervision of the aircraft flight crewmembers. He/She is responsible for:

1. The selection of all flight deck/cabin personnel.
2. Discipline of all flight deck cabin/personnel, should it be required, to insure compliance with regulations and with Sky King, Inc. policies and procedures.
3. Direct supervision and utilization of flight deck/cabin News.
4. The determination of the usability of landing and takeoff areas, and disseminating that information.
5. Line qualification, initial operating expedience, and proficiency of flight deck/cabin crew.
6. The development and monitoring of standard procedures and the supervision of the flight crew training program. The Chief Pilot will have qualified check and instructor personnel, designated as check pilot or instructors, assist him/her in maintaining the standards set forth by Sky King, Inc. policy and FAR's.

6. Chief Inspector Lane Eason (Exhibit 10) {Employment as Chief Inspector to commence concurrent with certification of FAR Part 121 Operations} The Chief Inspector is directly responsible to the President of Sky King, Inc. He/She is responsible for the overall administration of the Maintenance and Inspection Program ensuing aircraft, engines, and appliances are maintained in accordance with Federal Aviation Regulations and Sky King, Inc. policies and procedures and functions as the Chief Inspector in accordance with the requirements of FAR 119.67. His/Her duties include:

1. Performance of a functions of the Chief Inspector.
2. Control of all Maintenance Inspection Programs, weight and balance control, log book accuracy, filing and storage of records, monitoring deferred maintenance, CASP Program, Reliability Program and other duties as assigned.
3. Direction of Aircraft Inspectors and designee in technical related work.
4. Supervision of the inspection of office records and office personnel in performance of their duties.
5. He/She is responsible for the air worthiness of all aircraft engines, components, and emergency equipment operated by the Company.
6. He/She is also responsible for the condition of the inspection branch functions and other quality control functions to promote an effective relationship, keeping the Company's general welfare and safety of equipment operated by the Company foremost in mind at all times.

b. If any key person is employed or to be employed by the applicant on less than a full-time basis, state what percentage of the employee's time will be spent on the applicant's business, and provide details of his or her concurrent occupation(s).

Response:

All personnel will serve on a full time basis. We await the determination of the FAA to define the capacity of Chief Inspector Lane Eason and/or Southwest Aero Technologies Inc. for the Sky King, Inc. Chief Inspector position. Lane Eason is serving concurrently as President of Southwest Aero Technologies Inc., the contracted Main Maintenance Base of Sky King, Inc.

3. A resume for each of the key personnel stating:

 a. Full name, current address, and telephone numbers.

 b. All previous employment (both aviation and non-aviation) including: name of employer, location (city, state), type of business, position held, description of responsibilities, and dates employed. If the previous employer held any aviation authority, state the type (e.g., air taxi, commuter, FE3O, section 401 certificate). Any periods of unemployment should be accounted for.

c. Education and training, including names of institutions, dates attended, and any certificates or degrees received. If the person holds a certificate or license from the FAA (such as an Airline Transport Pilot or Airframe & Powerplant Mechanic license), these, including their numbers, should be listed, as well as the number of recorded hours of flying time for the Chief Pilot.

Response:

Please refer to Exhibits 8 through 13 included herewith.

4. The citizenship of each such person.

Response:

All key personnel of Sky King, Inc. designated herein are citizens of the United States.

5. The amount of stock (or other interest) held in the applicant, if any, by each.

Response:

As previously stated, stock in Sky King, Inc. is held only by Gregg Lukenbill, President, and Janet Lukenbill. They have been issued ten thousand shares of common stock, jointly owned as community property. Other key personnel do not hold stock or any other interest in Sky King, Inc.

6. A description of the officerships, directorships, stock (if 10 percent or more), or other interests each holds m any other air carrier, common carrier, or person substantially engaged in the business of aeronautics.

Response:

No personnel of Sky King, Inc. holds any interest, stock, or position in any other air carrier, common carrier, or aeronautic business.

7. For the key technical personnel (Director of Operations, Director of Maintenance, Director of Safety, Chief Pilot, and Chief Inspector), a statement that these individuals meet the qualifications for their respective positions as set forth in sections 119.65 and 119.67 of the Federal Aviation Regulations (14 CFR 119.65 and 119.67).

Response:

Sky King, Inc. hereby states that the individuals submitted for the key technical personnel positions of Director of Operations, Director of Maintenance, Director of Safety, Chief Pilot, and Chief Inspector meet the qualifications for their respective positions as set forth in sections 119.65 and 119.67 of the Federal Aviation Regulations (14 CFR 119.65 and 119.67).

The following financial information about the applicant should be provided:

1. Balance sheets and income statements of the applicant and all relevant corporations together with their accompanying explanatory footnotes (including a description of the company's significant accounting policies, such as for depreciation, amortization of intangibles, overhauls, unearned revenues, and cost capitalization), for the three most recent calendar or fiscal years, and for a period ending no more than three months prior to the date of filing.

This requirement may be met by the submission of financial statements, preferably audited, or 10K and/or 10Q reports filed with the Securities and Exchange Commission.

a. The financial documents should include a statement as to who prepared them, his or her qualifications and relationship, if any, to the applicant, and whether they were prepared in accordance with Generally Accepted Accounting Principles.

b. If an annual audit, review, or compilation by an independent CPA is performed, the name and address of the firm, and type of services provided should be listed.

Response:

Balance sheets and income statements are included herewith as Exhibits 14 through 18. Current financial information is included herewith as Exhibit 14.

2. Statements which include a description of the following:

a. Any liens or encumbrances against any of the applicant's assets, including those pledged as collateral for any outstanding obligations.

Response:

Property 3600 Power Inc. Road, securing a loan in the amount of $888,219.00 from Sierra West Bank in Sacramento. 3600 Power Inc. Road serves as the headquarters and operating base for Sky King, Inc. The interest rate on this loan is prime plus 35. The term is 36 months. Monthly payments and expenses are covered by rent from me building. Property 7521 Power Inc. Road, securing a loan in the amount of S41200. The interest rate on this loan is 11.5% and me remaining term is one year due, October 1,1998.

b. Any major commitments into which the applicant or any relevant corporation has entered during the past 6 months, or proposes to enter into during the next 6 months, including bank or other institutional financing, private financing, issuance of bonds or stock in the applicant, or major contracts to perform services.

Response:

During the past six months the following major contract has been entered into obligating the services of Sky King, Inc.:

1. Sacramento Kings Basketball Team - Contract for air travel for the NBA season to commence flight operations October 1,1998 and continuing through April 30, 2003 with a 737-200 aircraft (enclosed as Exhibit 19)

2. Sky King, Inc. proposes to enter into a contract for the lease or purchase of a 737-200 aircraft. In relation to the lease or purchase of the 737-200 aircraft, Sky King, Inc. proposes to contract to bring all maintenance current on the aircraft, provide Stage III hushkits on the aircraft engines if necessary, and to convert the interior of the aircraft into a luxury class 36 seat configuration, as depicted in Exhibit 5A enclosed herein. The budget allocated for the contractual purchase of the aircraft, and accomplishment of the foregoing 737-200 aircraft improvements is S4.0 million. The alternative monthly lease or mortgage expense for the leasing or purchase of a 737-200 aircraft improved pursuant to the foregoing is S40,000 monthly, or S480,000 annually.

c. Any transactions in which the applicant or any relevant corporation sold or exchanged any major assets (aircraft, land, buildings, etc.) during the past 6 months, or plans to sell or exchange within the next 6 months, including how any funds realized from those transactions were used.

Response:

There were no transactions in which the applicant sold or exchanged any major assets during the past six months, nor are there any plans to sell or exchange any major assets in the next six months.

d. Any liabilities of the applicant or any relevant corporation that are more than 60 days past due at the time of the application, including the amount and the circumstances under which they are past due and will be paid.

Response:

There are no Sky King, Inc. liabilities more than 60 days past due at the time of the application.

e. Any contingent liabilities that may have an effect on the applicant's or any relevant corporation's financial posture (i.e., lawsuits, pending judgments), including plans to meet those obligations.

Response:

From the date of the most recent financial statement through the date of this statement, there are no pending or existing lawsuits or judgments, or any other contingent liability outstanding that would have an effect on the applicant's financial posture.

f. Any events which occurred after the preparation of the most recent financial statements which may have a significant impact on the financial position or on the operations of the applicant or any relevant corporation. If no such events have occurred, provide a statement to that effect.

Response:

As of the date of this statement, there have been no events occurring which would have a significant impact on the financial position of Sky King, Inc.

3. The applicant's service proposal and a forecast balance sheet and profit and loss statement (broken down by month or by quarter) for the first normal year of certificated operations. These documents should include ample notes explaining the basis for the amounts shown and whether the statements were prepared on a cash or accrual basis. The description should be in sufficient detail to allow the Department's staff to replicate the mathematics involved and to determine the reasonableness of the forecast.

Response:

See next two pages for the revenue and expense information.

The revenue forecast should indicate:

a. For applicants for scheduled authority, the proposed markets and number of daily flights in each market; for applicants for charter authority, the types of charters to be operated (e.g., public, single-entity, Department of Defense) and the proposed geographic areas to be served.

Response:

Sky King, Inc. is an applicant for public and single entity charter. Geographical areas to be served include: United States, including Alaska, Canada, Mexico, Central America, South America, and the Caribbean.

b. The type, model, seating/cargo capacity, and number of the aircraft to be used.


Response:

Thirty-six passenger, executive seating configuration; one 737-200 aircraft initially, multiple 737-200 aircraft eventually.

c. The number of passengers or amount of cargo to be carried and expected load factors.

Response:

Thirty-six passengers; 75 to 100 percent load factors.

d. The fares or rates to be charged, and the resulting gross revenues.

Response:

Projected gross revenues of S2 million. This projection is based on 234 annual revenue block flight hours (from October, 1998 through September 1999), which is an average of the last five fiscal years of operation, at a rate of S8,550 per flight hour. This includes estimated air travel with the Sacramento Kings Basketball team at approximately 140 flight hours @ $8,571 per flight hour for $1,200,000 in contract revenue (see Kings contract enclosed as Exhibit 19) and other basketball or hockey team, ad hoc charter, and summer tour travel contracts resulting in approximately 94 additional flight hours at S8,500 for an additional $800,000 in gross revenue.

e. The total number of revenue block hours and revenue miles expected to be flown, and the extent of any seasonal traffic peaks.

Response:

Projecting 234 revenue block hours; 80,000 revenue miles. There are no seasonal peaks in proposed operations.

The expense data should show:

a. Detail by expense category (direct and indirect) and indicate how the amounts were computed

Response:

Notes:

(1) Lease or purchase arrangement for aircraft is 1% of $4 mil. or $40,000 monthly.

(2) Payroll figures include payroll tax and associated payroll burden.

(3) Per diem is calculated @ $120 per day, multiplied by the estimated number of days of travel in each quarter.

(4) Hotel expense is calculated @ $240 per day, multiplied by the estimated number of days of travel in each quarter.

(5) Repairs and maintenance is based on estimates developed with Maintenance Base. 

(6) Fuel expense is calculated by estimating an average price per gallon @ $.80; with a fuel burn of approximately 1000 gallons per flight hour.

(7) Airport fees are estimated at actual costs per city for NBA season; multiplied by 1.67 stops for the estimated number of cities visited annually. These costs include lav service, parking fees, landing fees, and other miscellaneous expenses.

(8) Insurance is based on King's contract insurance expense stop of $175,000 annually for $300 mil. in liability insurance with King's paying excess expense for 5 year period. (See Kings contract, Exhibit 19, Page 9, Paragraph 13)

(9) Excise tax is based on 107 of gross revenues per quarter.

(10) Miscellaneous expenses include any supplies, office expenses, or miscellaneous expenses of operation.

b. For indirect expenses, if the applicant is engaged in other aviation-related (e.g. fixed base operation) operations, expenses should be allocated on a rational basis between the proposed certificated operations and the other operations, with appropriate explanations. The applicant should prepare a consolidated forecast income statement for the entire business as well as separate forecast statements for each operating segment, including the proposed certificated operation.

Response:

Sky King, Inc. has chosen to present only revenues and expenses for certificated operations for the twelve month projection of 10/1/98 to 9/30/99.

c. If aircraft or other facilities are to be acquired to conduct the proposed services, a description of the plans for obtaining and financing those items should be provided.

Response:

737-200 aircraft acquisition and related improvements, or turn key lease of the specified completed 737-200 aircraft is budgeted at $4 million as follows:

Aircraft Acquisition $1,500,000

Stage III Hushkit Installation 1,500,000

D-Check Maintenance Currency 500,000

TOTAL $4,000,000

Significant discussions with lenders and leasing companies have been held toward effectuating a 10 year capitalization structure resulting in monthly lease or mortgage payments approximating S40,000 per month or S480,000 annually. Aircraft acquisition or lease will be completed prior to receipt of the FAR Part 121 Operating Certificate, and final DOT Authority.

4. An estimate of the amount of capital the applicant will need to commence operations which shows (1) the basis of the estimate (e.g., the amounts for pre-operating costs, including aircraft deposits or leases, office and hangar space, insurance, salaries, training, preparation of FAA manuals, working capital, etc.), and (2) the proposed form and source of capital.

Response:

The amount of capital necessary to commence operations is estimated at S4,300,000. 737-200 aircraft acquisition and related improvements, or turn key lease of the specified completed 737-200 aircraft will be capitalized at $4 million, through a long term lease or financing.

Office space, insurance, 737-200 manual production, and salaries for all key personnel are all encompassed by the current Sky King, Inc. FAR Part 125 Operation.

The amount of additional pre-operating capital necessary to commence operations is estimated to be approximately $300,000, as outlined below:

(a) Training costs $18,000 (1)

(b) Proving runs 30,000 (2)

(c) Working capital 252,000 (3)

Total: $300,000

Notes:

1. Training costs for flight training including ground school for two pilots @ S8,000 each, at U.S. Air in Pittsburgh, inclusive of hotel and per diem @ $1,000 each
2. Proving runs are calculated at a cost of S1,200 per hour for 25 hours.
3. Sky King, Inc. is currently operating under FAR Part 125 certification, thus significantly reducing the anticipated start up costs, such as pre-operating costs, insurance, and start-up salaries of the proposed Part 121 operation. All FAA documentation and manuals are currently being produced or reviewed by existing Sky King, Inc. personnel employed in existing FAR Part 125 operations.

The proposed form and source of estimated capital expenditures is the financing or leasing of the 737-200 aircraft at S40,000 per month, and existing cash available from fiscal year 1997 Part 125 operations.

This entire process is being implemented with the dose interaction and oversight of local FAA Flight Standards District Office personnel. The Sky King, Inc. FAR Part 121 Pre-Application Meeting was held on October 7,1997. The sequence of scheduled integrated implementation that has been tentatively agreed to with the FAA FSDO is submittal of the DOT 401 application and submittal and acceptance of the Formal FAA Application, followed by aircraft acquisition, improvement, conformity, and proving runs, concurrent with the timely processing of the DOT 401 and FAA 121 Applications, respectively.

a. If the resources of an individual or other organization would be made available to the applicant in order to sustain operations, provide a statement from the individual or organization of the amount of such available resources and the terms or conditions under which such funds will be provided. Copies of the personal or corporate financial statements of the individual or organization should also be provided. The liquidity of any assets, other than cash, should be made clear through appropriate footnotes, e.g., the current market value of stocks and bonds that can be readily converted to cash should be noted. Wherever possible, third party verification of the assets and values should be provided (e.g., letters from banks or stockbrokers holding liquid assets, or recent appraisals of real assets).

Response:

Financial and income statements for Sky King, Inc. as of September 30, 1997 are submitted herewith as Exhibit 14. Financial and income statements are also provided for Gregg and Janet Lukenbill as Exhibit 18. Gregg and Janet Lukenbill are willing to provide Sky King, Inc. with additional capital, loans, loan guarantees and equity contributions of an additional S1 million, if needed to support the certificated DOT 401, and FAA 121 operations of Sky King, Inc.

b. If borrowed capital or a line-of-credit is to be employed, the total amount, current balance, source, security, provisions to convert the debt to equity, and terms of repayment to the lender should be stated. Verification of this information from the lender should be provided.

Response:

It is anticipated that a 737-200 aircraft may be purchased, improved with necessary maintenance, Stage m engines, and a luxury class interior, and subsequently or concurrently financed by Sky King, Inc. with secured debt financing of the purchased and improved aircraft. The financing is anticipated to approximate $4 million, amortized over ten years, at 10% interest, with monthly mortgage payments approximating $40,000, or $480,000 annually. If this method of aircraft procurement is undertaken by Sky King Inc. the financing information will be forwarded to the DOT with third party verification from the lender, prior to the issuance of final operating authority from the DOT and FAA respectively.

c. A letter from the applicant's bank confirming the amount on deposit and bank loans and lines-of-credit, if any, should be provided.

Response:

A letter from the applicant's bank confirming the amount currently on deposit in form of certificates of deposit, and checking accounts is enclosed as Exhibit 20.

5. A description of all outstanding judgments against the applicant, relevant corporations, key personnel employed by each, or any person having a substantial interest in the applicant. a. For judgments of more than $5,000, include a brief summary of the circumstances leading to each judgment, the amount of each judgment, the party to whom it is payable, how long it has been outstanding, and its current status.

b. For judgments of less than $5,000, the list need only identify the company or person involved and the total amount of the judgment still owed.

Response:

There are no outstanding judgments against Sky King, Inc. Gregg Lukenbill, Janet Lukenbill, or any relevant corporations or key personnel.

PART 4

The purpose of evaluating compliance disposition is to assure that the company and the personnel running the company do and will abide by the laws, rules, and regulations governing the applicant's operations and that management will be diligent in maintaining safe operations.

The following information about compliance by the applicant, its owners, related companies, and their key personnel should be filed:

1. A description of the current status of all pending investigations, enforcement actions, and formal complaints filed with or instituted by the Department, including the FAA, involving the applicant, relevant corporations, their key personnel (employed or to be employed) or persons having a substantial (i.e., 10 percent or more) interest in any of these companies, involving the Statute, and the rules and regulations of the Department, including the FAA.

There are no pending investigations, enforcement actions, or formal complaints filed by the Department or the FAA or DOT involving Sky King, Inc. or key personnel.

a. If any of these persons were affiliated (as a partner, officer, director, or stockholder) with any air carrier which, at the time of such affiliation, was found to have committed knowing, willful violations of the Statute or any order, rule or regulation issued pursuant to that Act, such actions should be described.

Response:

No persons were affiliated with any air carrier found to have committed knowing, willful violations of the Federal Aviation Act or any order, rule or regulation issued pursuant to that Act.

b. The complaint or action should be identified, together with a brief summary of the circumstances and the current status. 18/ By "actions" or "complaints," we mean those that have actually been filed with or taken by some official agency such as the Department, including the FAA, or a state, irrespective of whether the company or person believes it was or is guilty. For example, if the FAA proposed a civil penalty

18/ Special attention should be paid to the Directors of Maintenance and Operations and Safety and the Chief Pilot and Chief Inspector, as persons holding these positions are more likely than others to be cited for FAA violations.

in an enforcement action against a company and the company made a compromise payment in settlement, that FAA action must be considered, even though the payment may not have been an admission of guilt.

Response:

There are no complaints or actions to be disclosed.

2. A description of any charges (civil or criminal) within the past 10 years brought against any of the persons or companies listed above, of fraud, felony, or antitrust violations, or of unfair, anticompetitive or deceptive business practices, including their final disposition or current status.

Response:

During the term of Sky King, Inc.'s existence there have been no criminal or civil charges of any kind brought against the company. Gregg Lukenbill, President of Sky King, Inc. had the civil charge of fraud, along with several other civil charges, declaratory relief, restraining orders and similar lawful actions filed against him and other individual partners and partnerships unrelated to Sky King, Inc. in March of 1992. The charges and restraining order actions were summarily denied in late March 1992. A comprehensive final settlement release and severance agreement was executed in October of 1992 with the same former partner who filed these charges. The remaining civil charges were all dismissed in November of 1992. Again, in May of 1993, the same individual filed the charge of fraud, seeking declaratory relief and restraining orders against Gregg Lukenbill in the same partnership, unrelated to Sky King, Inc. In late May of 1993, the court again summarily dismissed the declaratory relief and restraining order legal actions. In the judge's decision, as he stated in the ruling on the dismissals, there was no basis for the charges to be filed. The remaining civil charges were ruled in the judicial favor of the defendant (Gregg Lukenbill) and dismissed against him in December of 1994. The court's decision was appealed by the plaintiff. The appellate court dismissed the appeal in March of 1996. The court awarded the recovery of attorney's fees against the plaintiff in the amount of $275,000. Of that amount S130,000 has been recovered, and a judgment against the plaintiff for S145,000 awarded, with collection of that amount still being sought by Gregg Lukenbill at this time.

For the preceding ten years there are no other charges (civil or criminal) brought against any other persons related to Sky King, Inc. excepting the matter brought against Gregg Lukenbill, as outlined above.

3. A description of any aviation-related accidents or incidents which the applicant, its personnel, or any relevant corporation has had either during the year preceding the date of the application, or at any time in the past if the matter remains under investigation by the FAA, the NTSB, or by the company itself. This includes:

a. The date of the occurrence, the type of flight (Part 135, Part 121, etc.), the number of passengers on board, the extent of injuries to persons and damage to the aircraft, the name of the pilot, and any other pertinent information available. Copies of the pilot's reports, if available, should be filed.

Response:

There are no aviation-related accidents or incidents which the applicant, its personnel, or any relevant corporation has had either during the year preceding the date of the application, or at any time in the past if the matter remains under investigation by the FAA, the NTSB, or by the company itself.

b. The FAA and the NTSB file numbers, if known, for each accident and incident, and the findings of the NTSB and/or the FAA, including any violations cited against the company or any of its personnel, and any positive actions taken by the company as a result of the occurrence, if any were appropriate.

Response:

There are no aviation-related accidents, incidents, or violations as described above to disclose.

4. The Aviation Disaster Family Assistance Act of 1996 (Title VII of the Federal Aviation Reauthorization Act of 1996 (P.L.101-264) adds a new section 41113 to the Statute requiring certificated air carriers to develop and submit to the Department and the National Transportation Safety Board a plan ("accident plan") to address the needs of families of passengers and other victims involved in any aircraft accident involving an aircraft of the air carrier and resulting in a major loss of life. The requirement to file an accident plan, which becomes effective April 9,1997, applies not only to passenger carriers but also to all-cargo carriers, which must file a plan to cover any employee or third-party accident victims, such as cargo attendants, non-revenue passengers, or persons on the ground. New section 41113(b) of the Statute describes the specific contents of the accident plans. The copy of the plan to be submitted to the Department should be included in the application for certificate authority. The copy to be submitted to the National Transportation Safety Board should be sent to the following address:

Office of Public Affairs
National Transportation Safety Board
490 L'Enfant Plaza East, S.W.
Washington, DC 20594

Sky King Inc. has developed and hereby submits to the Department and the National Transportation Safety Board a plan ("Sky King, Inc. Family Assistance Plan") to address the needs of families of passengers and other victims involved in any aircraft accident involving an aircraft of the air carrier and resulting in a major loss of life pursuant to "The Aviation Disaster Family Assistance Act of 1996 (Title VII of the Federal Aviation Reauthorization Act of 1996 (P.L.101-264) Section 41113(b). The copy of the plan to be submitted to the Department is included herein as Exhibit 21. Concurrent with the date of this document, a copy of the "Sky King, Inc. Family Assistance Plan" has been submitted to the National Transportation Safety Board via U.S. mail.

5. The certification "Pursuant to Title 18 United States Code Section 1001."

Response:

This certification is contained on page 3 of this document.

Prior to conducting any operations, an air carrier must also meet the insurance requirements set forth in Part 205 of the Department's rules, and become a signatory to the Interim Agreement of carriers, which relates to higher limits of liability for international passengers. This latter requirement applies whether or not the applicant is seeking a certificate to provide foreign air transportation.

Sky King, Inc. agrees to meet the insurance requirements set forth in Part 205 of the Department's rules, and become a signatory to the Interim Agreement of carriers prior to conducting any operations.