BEFORE the DEPARTMENT of TRANSPORTATION OFFICE of the SECRETARY WASHINGTON, D.C. ) Ap
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BEFORE THE DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C. __________________________________________ ) Application of ) ) Breeze Aviation Group, Inc. ) Docket DOT-OST-2020-0019 ) for a certificate of public convenience and ) Necessity under 49 U.S.C. 41102 to engage ) In interstate scheduled air transportation ) __________________________________________) SUPPLEMENT TO APPLICATION OF BREEZE AVIATION GROUP, INC. Communications with respect to this document should be sent to: Breeze Aviation Group, Inc. J. Parker Erkmann 23 Old Kings Highway South #202 Andrew Barr Darien, CT 06820 Breeze Aviation Group, Inc. Cooley LLP 1299 Pennsylvania Ave., NW #700 Washington, DC 20004 (202) 776-2036 [email protected] Counsel for Breeze Aviation Group, Inc. September 28, 2020 Notice: Any person who wishes to support to oppose this application must file an answer by October 19, 2020 and serve that answer on all persons served with this application. DOT-OST-2020-0019 Application of Breeze Aviation Group, Inc. Page 1 of 7 BEFORE THE DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C. __________________________________________ ) Application of ) ) Breeze Aviation Group, Inc. ) Docket DOT-OST-2020-0019 ) for a certificate of public convenience and ) Necessity under 49 U.S.C. 41102 to engage ) In interstate scheduled air transportation ) __________________________________________) SUPPLEMENT TOAPPLICATION OF BREEZE AVIATION GROUP, INC. Breeze Aviation Group, Inc. (“Breeze”) submits this supplement to its application for a Certificate of Public Convenience and Necessity authorizing Breeze to engage in interstate scheduled air transportation of persons, property and mail pursuant to § 41102 of Title 49 of the United States Code. The COVID-19 pandemic has challenged the aviation industry like no prior crisis. The dynamic circumstances have caused Breeze to make adjustments to its plans, including pushing out its anticipated commencement date, launching with scheduled service rather than charter services and postponing the delivery of A220 aircraft until August 2021. Despite these headwinds, Breeze’s experienced, capable team remains undeterred. As affirmed in this supplement, Breeze is fit, willing and able to hold and exercise the scheduled passenger authority. DOT-OST-2020-0019 Application of Breeze Aviation Group, Inc. Page 2 of 7 Breeze’s strategy remains bringing low-cost, nonstop services to mid-size markets abandoned by our current air transportation network.1 As major airlines retrench their networks in response to decreased travel demand, Breeze sees even more opportunities to serve smaller cities currently reachable, if at all, only through connections and the corresponding increased travel times. By flying a smaller aircraft with a lower trip cost, there are hundreds and hundreds of city pairs that can support a nonstop flight. Each city Breeze serves will realize significant public interest benefits from the introduction of its low-fare, high-quality service. This filing will update Breeze’s proposed network and schedule, update the Department concerning incremental changes to Breeze’s fleet plans and the corresponding impact on Breeze’s financial projections. Breeze enters the operational phase of its growth in a strong financial position. On August 28, 2020, Breeze raised approximately $83 million from equity investors through a Series A financing, providing it with more than adequate balance sheet strength to launch its new operations. This filing will describe and provide information about the new stockholders in Breeze and demonstrate that it remains a citizen of the United States. This pleading incorporates by reference the material submitted in support of Breeze’s application for authority and supplements the Application filed in February with additional, updated information.2 In support of this application for interstate scheduled authority to provide combination services, Breeze states as follows: 1 Breeze had proposed to commence its operations by flying charters and subsequently introducing scheduled service. With the disruption in college sports caused by COVID-19, Breeze intends to commence operations with its scheduled service. 2 On February 7, 2020, Breeze filed in this docket DOT-OST-2020-0019 an Application for a Certificate of Public Convenience and Necessity under 49 U.S.C § 41102 (hereinafter “Application”) to engage in interstate scheduled air transportation. DOT-OST-2020-0019 Application of Breeze Aviation Group, Inc. Page 3 of 7 1. Breeze is in the process of securing a Federal Aviation Administration (“FAA”) air carrier certificate and Part 121 operations specifications. As of September 11, 2020, the FAA’s Certification and Evaluation Program Office has accepted Breeze’s formal application package, concluding that “Breeze has met all Gate 2 requirements and will now enter Phase 3 of the certification process.”3 Breeze has since received approval to begin pilot and dispatcher training; this training began on September 21, 2020. 2. Breeze is a citizen of the United States as defined in 49 U.S.C. § 40102(a)(15). It is a Delaware corporation initially formed on August 25, 2017. Since submitting the Application, Breeze has conducted two rounds of financing resulting in the capital structure depicted in the table below. Breeze Aviation Group Capitalization Table % Shareholder Shares Ownership Citizenship David Neeleman 644,542 35.8% United States Trey Urbahn 46,078 2.6% United States Robert A. & Elizabeth A. Milton 11,163 0.6% United States Robert A. Milton 2012 Irrevocable Gift Trust 17,266 1.0% United States Michael F. Cronin 18,531 1.0% United States Michael P. Lazarus 33,775 1.9% United States Boerseuns LLC 13,187 0.7% United States T4S Solutions, LLC 22,490 1.3% United States Lukas Johnson 46,711 2.6% United States Thomas E. Anderson 24,904 1.4% United States Peterson Partners VIII, LP 95,409 5.3% United States Peterson Partners VIII Parallel, LP 18,746 1.0% United States Peterson Partners IX, LP 114,156 6.3% United States Peterson Breeze Coinvest, LLC 202,413 11.3% United States Everwind, LLC 5,180 0.3% United States BNM Ventures Fund I, LP 2,170 0.1% United States Blue Star Private Equity LLC 25,900 1.4% United States Amir Nasruddin 8,479 0.5% United States Jim Smith 4,240 0.2% United States Kyle Smith 4,240 0.2% United States 3 Letter of Mr. David Lusk to Mr. Amir Nasruddin (Sep. 11, 2020), attached hereto as Exhibit S- 1. Breeze’s Pre-application Statement of Intent was submitted as Exhibit S of the Application. DOT-OST-2020-0019 Application of Breeze Aviation Group, Inc. Page 4 of 7 Danny Cox 4,240 0.2% United States Texas Family Office4 101,206 5.6% United States Sandlot Opportunity Fund I, LLC 253,017 14.1% United States Deferred Compensation Subscribers 7,867 0.4% United States Friends and Family 45,684 2.5% United States Employee Stock Purchase Plan 5,242 0.3% United States RSUs Granted at Closing 21,466 1.2% United States Unallocated Shares under 2020 Equity Incentive Plan 27,334* Total Issued and Outstanding 1,798,302 * Unallocated shares are not reflected in the total share count. All of its equity is owned by U.S. citizens. Additional information about the citizenship of the investors is provided in Exhibit 1 and referenced confidential Exhibits. Breeze’s Second Amended & Restated Articles of Incorporation (“Articles”) are attached as Exhibit 2, and information supporting the citizenship of Breeze’s managing officers and board of directors is provided in Exhibit F. Breeze President and Chief Executive Officer David Neeleman is a U.S. citizen. All of Breeze’s officers are U.S. citizens. Breeze has six members of its Board of Directors, and all of them are U.S. citizens.5 Board of Directors of Breeze Aviation Group, Inc. Member Citizenship David Neeleman United States Trey Urbahn United States 4 This Series A investor is a Delaware limited partnership that makes investments on behalf of a family based in Texas (“Texas Family Office”) that is owned by family members, trusts for their benefit and employees of the Texas Family Office. See Exhibit 7. 5 Section 3.2 of the Articles provides for the election of seven (7) directors, but the Amended & Restated Stockholders Agreement Section 4.1(a)(ii) (submitted confidentially as Exhibit 4) provides that David Neeleman shall have the right to cast the vote of each vacant seat on the board for matters coming before the Board. DOT-OST-2020-0019 Application of Breeze Aviation Group, Inc. Page 5 of 7 Robert Milton United States Henri Courpron United States Michael Lazarus United States Clint Peterson United States An affidavit of citizenship is attached as Exhibit E. In addition, the Articles provide for a foreign stock registry that will further ensure that Breeze remains a citizen of the United States. Any non- U.S. citizen that acquires shares of stock of Breeze must register its stock on the foreign stock registry in order to vote those shares. Any such stock is registered on a first-come, first-served basis. If the ownership by non-U.S. citizens ever exceeds 25%, the shares held by foreign citizens above that amount automatically lose the right to vote.6 3. Breeze has agreed to acquire sixty (60) Airbus 220-300 aircraft produced in Mobile, Alabama with deliveries now beginning in August 2021 that are ideally suited for introducing nonstop flights to the mid-size markets that Breeze intends to serve. Prior to the A220 deliveries, Breeze intends to initiate service with Embraer E190/E195 aircraft equipped with 108 or 118 seats respectively. Details of Breeze’s fleet plan can be found in Exhibit N. Although adjustments have been made to its plans, Breeze’s mission of providing nonstop service to underserved markets across the country remains unchanged. 4. For FAA certification, Breeze will conduct line maintenance at its facility in Islip, New York (“ISP”) and has contracted with Embraer in Nashville, Tennessee for heavy maintenance.