- Mainline Airways
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.
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 Airways. 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 United States Department of Transportation, 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 Lines, 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.
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