Mainline Airways
Encyclopedia
Mainline Airways LLC was tour operator in operation from 2002 to 2003 by an American college student, whom Massachusetts state authorities said didn't hold itself out to the public as a tour operator, instead pretending to be an airline offering cut-rate tickets between Honolulu
and Los Angeles
without the ability to actually provide the flights due to lack of an aircraft operating certificate ("AOC"). The student was Luke Thompson of Lower Makefield, Pennsylvania
, then a college sophomore at Babson College
in Massachusetts
.
The website was www.mainlineairways.com and its customer call center was 1-888-FLY-ML-AIR (1-888-359-6524).
During a short period prior to the lawsuit (during May and early-June 2003), the company sold what it called "pre-reservations" on flights that it claimed would be chartered between Los Angeles and Honolulu beginning in July 2003, for as low as $89 one-way. It was popular and publicized by the media as the first low-price "airline" to operate between LAX and Honolulu in a many years. The fact that the company was chartering the aircraft and not operating the flights themselves was hidden deep into the contract terms on the company's website, leading to rumors of illegitimacy that attracted the attention of the state attorney's office, who quickly filed suit against Mainline ex parte
.
According to court documents, the company received aircraft commitments from Omni Air International
and Ryan International Airlines
for Boeing DC-10 aircraft for the summer season and 757-200 aircraft (pending ETOPS certification) for the winter season, 757-200's (ETOPS) from North American Airlines
, ETOPS 737-800's from Miami Air International, MD-11 aircraft from World Airways
, and a 757-200 from Pace Airlines, all charter airlines, but Mainline formally rejected several of these prior to the lawsuit, claiming that the commitments came at an unacceptable cost. At the time, many of those airlines' Boeing 757-200 aircraft were not yet ETOPS certified, however most now are.
The company had also attempted to gain a cabotage
waver to allow Lufthansa
's Condor Airlines
to fly passengers on foreign registered 757-300 aircraft, that the at the time were sitting idle. Lufthansa withdrew its offer in April 2003. Lufthansa states that it deemed the project unprofitable .
The amount of sales in escrow at the time the lawsuit was filed, and returned to customers, was never publicly disclosed by either party, but is thought to be between $200,000 and $5 million.
. However this proved a daunting project, and in February 2003 (prior to the airline making any "pre-reservation" sales), the plan was axed to chartering the 6-times-weekly flight from a supplemental air carrier's aircraft. Leather seats were abandoned and "TV's at every seat" now meant portable DVD players for each passenger.
Unrelated to the change to chartered aircraft, the "free cocktails" promise was severely restricted and barely mentioned on the company's website.
Confusion and allegations of fraud against the company resulted largely from it not taking any steps towards the 6 month FAA safety certification process required for new airlines, while flights were to being in 3 weeks when the lawsuit was finally filed. Since the company didn't plan to operate its own flights, it did not need FAA safety certification, but did need to properly notify the airports of its change its intentions from starting airline service to only the chartering aircraft and selling seats. It failed to do so.
Before Thompson closed it in June 2003, the website had indicated that a handful of flights during the company's first week of proposed service in July 2003 had actually sold out and reservations could not be made. Thompson says word-of-mouth was bringing in droves of customers when they expected to not receive any or minimal bookings prior to advertising. Thompson stated the company was about to begin an expensive ad campaign focused on radio.
The route the company planned to serve (California to Hawaii) has high traffic volume but at the time few deeply discounted fares from competitors, and Thompson sustains that the market was overpriced at and potentially "a very profitable charter route with the opportunity to sell high-margin vacation packages in the future."
According to IRS
tax records, Mainline Airways posted a substantial loss in 2003 including $12,000 of call center expenses and forfeiture a $20,000 deposit on an aircraft charter contract.
Mainline Airways was incorporated as Mainline Airways LLC in Pennsylvania
on December 12, 2002. Thompson stated in 2005 that if he starts a similar operation in the future, it will likely be an international route from the eastern U.S.
, the regulatory agency overseeing tour operators opened an investigation against his company Mainline Airways in 2003 and took no action.
However, in June 2003 Massachusetts Attorney General Thomas Reilly filed the well-publicized state lawsuit against Mainline and Luke Thompson alleging that the company would not perform the travel services paid for by customers that were to be executed beginning only 3 weeks after the suit was filed, and Reilly expressed a general concern that the company was nothing more than a fraud and Thompson was laundering large amounts of cash from the company. It was later revealed that the funds were actually protected in a company escrow bank account containing all monies received from customers to hold their reservations. The dollar amount held was never released to the public, but thought to be between $200,000 and $5 million.
Reilly's lawsuit had sought to shut down the company, obtain refunds for all customers, and $605,000 in punitive damages from both Mainline and Thompson, but it was partially withdrawn in September 2004 and Thompson was not forced to pay a fine or damages.
, with whom the company had matching schedules and rebooking agreements in the event that the planned charter flights were cancelled or deferred. However most customers had already put stop-payment orders on their credit card transactions after hearing the press and the company did not have sufficient capital to pay for both refunding and re-booking customers, leading to the decision to purely refund customers.
Delta Air Lines
had modified its schedules in April 2003 and added Delta flight 1852 and 1579 to presumably copy Mainline's proposed charter, with Delta flight 1852 matching Mainline's planned 8:55PM Honolulu departure exactly to the minute. Delta even made the departure time change by an hour during daylight saving changes to match Mainline's daylight saving departure time adjustment, rather than allowing the hour to affect its arrival time like all other Delta flights. Approximately a year after Mainline cancelled its plans, Delta replaced the flight with one at another time and no departure time adjustment and recycled the flight number.
Over a year after the suit and Mainline discontinued operations, on September 2, 2004, a settlement was reached and approved between Luke Thompson and the state, providing that no party admitted wrongdoing or liability, and for no fines or other penalties would be paid Thompson or Mainline; the state had originally sought $605,000 in fines. While Thompson was not fined anything, he agreed that he would be fined $5,000 in the event that other terms of the settlement are violated, including if refunds provided over a year earlier were somehow not completed or the company engages in the of pre-reservation charter sales in the future where the name of the airline operating the service is not revealed at the time of purchase. The settlement formally ordered Mainline to refund all customers, but refunds had actually been provided in June 2003, only the company was not under court order to issue refunds until their settlement was approved (just over a year later).
Prior to the settlement, Thompson and Mainline filed an answer indicating over 30 defences and over 10 counterclaims alleging improprieties and perjury in documents filed with the court to obtain a restraining order restricting sales as well as misrepresenting the terms of the order in the plaintiff Thomas Reilly
's press releases, which incorrectly stated that Reilly had froze the company's assets and obtained an order to refund customers. The actual restraining order issued by the court did not order either of those actions and Thompson and Mainline demanded restitution for those errors. The settlement released all parties from liability and neither Mainline, Thompson, nor Reilly admitted wrongdoing of any kind.
The program was canceled in June 2003 shortly after Massachusetts Attorney General
Thomas Reilly
obtained a restraining order to temporarily halt ticket sales for charter flights that were to begin in July 2003 and filed a lawsuit
. A settlement was reached in 2004, providing refunds to those who had paid money through the web site. The settlement also provides that no party admits wrongdoing or liability.
According to IRS
tax records, Mainline Airways posted a substantial loss in 2003 including forfeiting a $20,000 deposit on an aircraft charter contract.
Honolulu, Hawaii
Honolulu is the capital and the most populous city of the U.S. state of Hawaii. Honolulu is the southernmost major U.S. city. Although the name "Honolulu" refers to the urban area on the southeastern shore of the island of Oahu, the city and county government are consolidated as the City and...
and Los Angeles
Los Angeles, California
Los Angeles , with a population at the 2010 United States Census of 3,792,621, is the most populous city in California, USA and the second most populous in the United States, after New York City. It has an area of , and is located in Southern California...
without the ability to actually provide the flights due to lack of an aircraft operating certificate ("AOC"). The student was Luke Thompson of Lower Makefield, Pennsylvania
Pennsylvania
The Commonwealth of Pennsylvania is a U.S. state that is located in the Northeastern and Mid-Atlantic regions of the United States. The state borders Delaware and Maryland to the south, West Virginia to the southwest, Ohio to the west, New York and Ontario, Canada, to the north, and New Jersey to...
, then a college sophomore at Babson College
Babson College
Babson College is a private business school located in Wellesley, Massachusetts near Boston.- History :Babson College was founded by Roger Babson on September 3, 1919, as the Babson Institute. It was renamed "Babson College" in 1969...
in Massachusetts
Massachusetts
The Commonwealth of Massachusetts is a state in the New England region of the northeastern United States of America. It is bordered by Rhode Island and Connecticut to the south, New York to the west, and Vermont and New Hampshire to the north; at its east lies the Atlantic Ocean. As of the 2010...
.
The website was www.mainlineairways.com and its customer call center was 1-888-FLY-ML-AIR (1-888-359-6524).
During a short period prior to the lawsuit (during May and early-June 2003), the company sold what it called "pre-reservations" on flights that it claimed would be chartered between Los Angeles and Honolulu beginning in July 2003, for as low as $89 one-way. It was popular and publicized by the media as the first low-price "airline" to operate between LAX and Honolulu in a many years. The fact that the company was chartering the aircraft and not operating the flights themselves was hidden deep into the contract terms on the company's website, leading to rumors of illegitimacy that attracted the attention of the state attorney's office, who quickly filed suit against Mainline ex parte
Ex parte
Ex parte is a Latin legal term meaning "from one party" .An ex parte decision is one decided by a judge without requiring all of the parties to the controversy to be present. In Australian, Canadian, U.K., Indian and U.S...
.
According to court documents, the company received aircraft commitments from Omni Air International
Omni Air International
Omni Air International, Inc. is a United States charter airline with its headquarters in Hangar 19 on the grounds of Tulsa International Airport in Tulsa, Oklahoma, USA. It operates international and domestic passenger charters, as well as wet leasing....
and Ryan International Airlines
Ryan International Airlines
Ryan International Airlines, Inc. is an American FAR 121 airline with domestic, flag, and supplemental authority.Based in Rockford, Illinois, the US Postal Service was once the airline's main customer, flying Boeing 727 aircraft on scheduled cargo flights...
for Boeing DC-10 aircraft for the summer season and 757-200 aircraft (pending ETOPS certification) for the winter season, 757-200's (ETOPS) from North American Airlines
North American Airlines
North American Airlines, Inc. is an American airline with its headquarters in Building 141 on the grounds of John F. Kennedy International Airport in Jamaica, Queens, New York City, USA. Prior to May 2008, it operated scheduled international services from the USA to Africa and Guyana. Today, it...
, ETOPS 737-800's from Miami Air International, MD-11 aircraft from World Airways
World Airways
World Airways, Inc. is an American airline headquartered at the HLH Building in Peachtree City, Georgia. For the most part, the company operates non-scheduled services. Its main aircraft and maintenance base is Tampa International Airport.-History:...
, and a 757-200 from Pace Airlines, all charter airlines, but Mainline formally rejected several of these prior to the lawsuit, claiming that the commitments came at an unacceptable cost. At the time, many of those airlines' Boeing 757-200 aircraft were not yet ETOPS certified, however most now are.
The company had also attempted to gain a cabotage
Cabotage
Cabotage is the transport of goods or passengers between two points in the same country by a vessel or an aircraft registered in another country. Originally starting with shipping, cabotage now also covers aviation, railways and road transport...
waver to allow Lufthansa
Lufthansa
Deutsche Lufthansa AG is the flag carrier of Germany and the largest airline in Europe in terms of overall passengers carried. The name of the company is derived from Luft , and Hansa .The airline is the world's fourth-largest airline in terms of overall passengers carried, operating...
's Condor Airlines
Condor Airlines
Condor Flugdienst GmbH, usually shortened to Condor, is an airline based in Germany, operating scheduled leisure flights to the Mediterranean, Asia, Africa, North America and the Caribbean as part of Thomas Cook Group...
to fly passengers on foreign registered 757-300 aircraft, that the at the time were sitting idle. Lufthansa withdrew its offer in April 2003. Lufthansa states that it deemed the project unprofitable .
The amount of sales in escrow at the time the lawsuit was filed, and returned to customers, was never publicly disclosed by either party, but is thought to be between $200,000 and $5 million.
Company
From communication between Mainline and airport officials during the planning stage in 2002, the company intended to operate leased aircraft, older wide-body L1011's refitted with new interiors featuring leather seats and TV's at each seat, a copy of JetBlue AirwaysJetBlue Airways
JetBlue Airways Corporation is an American low-cost airline. The company is headquartered in the Forest Hills neighborhood of the New York City borough of Queens. Its main base is John F. Kennedy International Airport, also in Queens....
. However this proved a daunting project, and in February 2003 (prior to the airline making any "pre-reservation" sales), the plan was axed to chartering the 6-times-weekly flight from a supplemental air carrier's aircraft. Leather seats were abandoned and "TV's at every seat" now meant portable DVD players for each passenger.
Unrelated to the change to chartered aircraft, the "free cocktails" promise was severely restricted and barely mentioned on the company's website.
Confusion and allegations of fraud against the company resulted largely from it not taking any steps towards the 6 month FAA safety certification process required for new airlines, while flights were to being in 3 weeks when the lawsuit was finally filed. Since the company didn't plan to operate its own flights, it did not need FAA safety certification, but did need to properly notify the airports of its change its intentions from starting airline service to only the chartering aircraft and selling seats. It failed to do so.
Before Thompson closed it in June 2003, the website had indicated that a handful of flights during the company's first week of proposed service in July 2003 had actually sold out and reservations could not be made. Thompson says word-of-mouth was bringing in droves of customers when they expected to not receive any or minimal bookings prior to advertising. Thompson stated the company was about to begin an expensive ad campaign focused on radio.
The route the company planned to serve (California to Hawaii) has high traffic volume but at the time few deeply discounted fares from competitors, and Thompson sustains that the market was overpriced at and potentially "a very profitable charter route with the opportunity to sell high-margin vacation packages in the future."
According to IRS
Internal Revenue Service
The Internal Revenue Service is the revenue service of the United States federal government. The agency is a bureau of the Department of the Treasury, and is under the immediate direction of the Commissioner of Internal Revenue...
tax records, Mainline Airways posted a substantial loss in 2003 including $12,000 of call center expenses and forfeiture a $20,000 deposit on an aircraft charter contract.
Mainline Airways was incorporated as Mainline Airways LLC in Pennsylvania
Pennsylvania
The Commonwealth of Pennsylvania is a U.S. state that is located in the Northeastern and Mid-Atlantic regions of the United States. The state borders Delaware and Maryland to the south, West Virginia to the southwest, Ohio to the west, New York and Ontario, Canada, to the north, and New Jersey to...
on December 12, 2002. Thompson stated in 2005 that if he starts a similar operation in the future, it will likely be an international route from the eastern U.S.
Investigations
The United States Department of TransportationUnited States Department of Transportation
The United States Department of Transportation is a federal Cabinet department of the United States government concerned with transportation. It was established by an act of Congress on October 15, 1966, and began operation on April 1, 1967...
, the regulatory agency overseeing tour operators opened an investigation against his company Mainline Airways in 2003 and took no action.
However, in June 2003 Massachusetts Attorney General Thomas Reilly filed the well-publicized state lawsuit against Mainline and Luke Thompson alleging that the company would not perform the travel services paid for by customers that were to be executed beginning only 3 weeks after the suit was filed, and Reilly expressed a general concern that the company was nothing more than a fraud and Thompson was laundering large amounts of cash from the company. It was later revealed that the funds were actually protected in a company escrow bank account containing all monies received from customers to hold their reservations. The dollar amount held was never released to the public, but thought to be between $200,000 and $5 million.
Reilly's lawsuit had sought to shut down the company, obtain refunds for all customers, and $605,000 in punitive damages from both Mainline and Thompson, but it was partially withdrawn in September 2004 and Thompson was not forced to pay a fine or damages.
Fallout after state lawsuit
Shortly after the suit was filed, Thompson declared that his company was suspending its plans to begin chartering flights due to "bad press created by the lawsuit" and cancelled all "pre-reservations" and issued refunds. The company had maintained the funds collected from customers so it was able to issue refunds quickly. Mainline Airways says it had planned to re-book passengers on Delta Air LinesDelta Air Lines
Delta Air Lines, Inc. is a major airline based in the United States and headquartered in Atlanta, Georgia. The airline operates an extensive domestic and international network serving all continents except Antarctica. Delta and its subsidiaries operate over 4,000 flights every day...
, with whom the company had matching schedules and rebooking agreements in the event that the planned charter flights were cancelled or deferred. However most customers had already put stop-payment orders on their credit card transactions after hearing the press and the company did not have sufficient capital to pay for both refunding and re-booking customers, leading to the decision to purely refund customers.
Delta Air Lines
Delta Air Lines
Delta Air Lines, Inc. is a major airline based in the United States and headquartered in Atlanta, Georgia. The airline operates an extensive domestic and international network serving all continents except Antarctica. Delta and its subsidiaries operate over 4,000 flights every day...
had modified its schedules in April 2003 and added Delta flight 1852 and 1579 to presumably copy Mainline's proposed charter, with Delta flight 1852 matching Mainline's planned 8:55PM Honolulu departure exactly to the minute. Delta even made the departure time change by an hour during daylight saving changes to match Mainline's daylight saving departure time adjustment, rather than allowing the hour to affect its arrival time like all other Delta flights. Approximately a year after Mainline cancelled its plans, Delta replaced the flight with one at another time and no departure time adjustment and recycled the flight number.
Over a year after the suit and Mainline discontinued operations, on September 2, 2004, a settlement was reached and approved between Luke Thompson and the state, providing that no party admitted wrongdoing or liability, and for no fines or other penalties would be paid Thompson or Mainline; the state had originally sought $605,000 in fines. While Thompson was not fined anything, he agreed that he would be fined $5,000 in the event that other terms of the settlement are violated, including if refunds provided over a year earlier were somehow not completed or the company engages in the of pre-reservation charter sales in the future where the name of the airline operating the service is not revealed at the time of purchase. The settlement formally ordered Mainline to refund all customers, but refunds had actually been provided in June 2003, only the company was not under court order to issue refunds until their settlement was approved (just over a year later).
Prior to the settlement, Thompson and Mainline filed an answer indicating over 30 defences and over 10 counterclaims alleging improprieties and perjury in documents filed with the court to obtain a restraining order restricting sales as well as misrepresenting the terms of the order in the plaintiff Thomas Reilly
Thomas Reilly
Thomas F. Reilly is an American attorney and politician who served as the 45th Massachusetts Attorney General. He was born in Springfield, Massachusetts to Irish immigrant parents....
's press releases, which incorrectly stated that Reilly had froze the company's assets and obtained an order to refund customers. The actual restraining order issued by the court did not order either of those actions and Thompson and Mainline demanded restitution for those errors. The settlement released all parties from liability and neither Mainline, Thompson, nor Reilly admitted wrongdoing of any kind.
The program was canceled in June 2003 shortly after Massachusetts Attorney General
Attorney General
In most common law jurisdictions, the attorney general, or attorney-general, is the main legal advisor to the government, and in some jurisdictions he or she may also have executive responsibility for law enforcement or responsibility for public prosecutions.The term is used to refer to any person...
Thomas Reilly
Thomas Reilly
Thomas F. Reilly is an American attorney and politician who served as the 45th Massachusetts Attorney General. He was born in Springfield, Massachusetts to Irish immigrant parents....
obtained a restraining order to temporarily halt ticket sales for charter flights that were to begin in July 2003 and filed a lawsuit
Lawsuit
A lawsuit or "suit in law" is a civil action brought in a court of law in which a plaintiff, a party who claims to have incurred loss as a result of a defendant's actions, demands a legal or equitable remedy. The defendant is required to respond to the plaintiff's complaint...
. A settlement was reached in 2004, providing refunds to those who had paid money through the web site. The settlement also provides that no party admits wrongdoing or liability.
According to IRS
Internal Revenue Service
The Internal Revenue Service is the revenue service of the United States federal government. The agency is a bureau of the Department of the Treasury, and is under the immediate direction of the Commissioner of Internal Revenue...
tax records, Mainline Airways posted a substantial loss in 2003 including forfeiting a $20,000 deposit on an aircraft charter contract.