The US Department of Transportation has tentatively confirmed the US nationality of Waltzing Matilda Aviation (WMA) but requires the carrier to obtain additional capital from US investors before granting it effective authority to fly.

This follows more than 12 months of regulatory two-and-fro between the DOT and WMA, the Boston-based FAA Part 135 charter specialist parent of nascent scheduled brand Connect Airlines (Bedford, MA), which had been to debut this quarter. The regulator had questioned WMA's US citizenship in light of the potential influence of a UK minority shareholder and investment funds affiliated with him.

In a notice on June 24, the DOT stated that WMA "is a citizen of the United States and is fit, willing, and able to conduct interstate and foreign scheduled air transportation of persons, property, and mail as a US certificated air carrier".

Still, "considering the existing capitalisation of WMA, which predominately derives from a sole foreign source, WMA must complete its planned Series B capital raise and obtain comparable additional capital contributions from US citizen investors as a condition of receiving effective authority," it stated. All interested parties have seven days (until June 29) to show cause why the DOT's findings should not be adopted as final conclusions.

In April and June 2021, WMA had filed applications with the DOT requesting authority for interstate and foreign scheduled air transport of persons, property, and mail and accompanied its applications with fitness information as required. The Allied Pilots Association (APA), the Air Line Pilots Association International (ALPA), and the Southwest Airlines Pilots Association (SWAPA) had opposed WMA's applications, questioning the "US certification of a Canadian-based and Canadian-crewed airline" and raising Federal Aviation Administration safety and oversight concerns given WMA's petition for an exemption filed with the FAA to allow it to use pilots who would not ordinarily be permitted to fly for commercial airlines in the United States.

On April 20, 2022, WMA and ALPA agreed the airline would use US citizens and US-based crews, resulting in the labour unions withdrawing their objections.

The DOT then raised concerns about WMA's ownership based on its initial proposed operating structure. In response, the company adjusted its operating structure.

If granted the certificate authority it seeks, WMA intends to operate seven DHC-8-Q400s as Connect Airlines on domestically between Philadelphia Int'l and Boston, and between Boston and Baltimore Thurgood Marshall.

In addition, it intends to operate international flights between Toronto City Centre and Philadelphia, Chicago O'Hare, New York JFK, and Baltimore. Flight crews will be based in Philadelphia, Pennsylvania, and its headquarters will remain in Needham, Massachusetts.

WMA's March 31, 2022 balance sheet showed current assets and liabilities of USD4.59 million and USD2.85 million, respectively, giving it a positive working capital of USD1.74 million.

WMA also raised more than USD8 million in initial investment capital through its Series A investment round, funded primarily by UK investor Richard McAlpine and his investment funds. The founders also loaned USD2 million to WMA and pledged to commit an additional USD9.13 million to launch Connect Airlines with third-party funds. WMA also raised USD1.4 million from US investors through so-called simple agreements for future equity.

WMA has also entered an agreement for a convertible promissory note with TransAir, a Delaware corporation, whose ultimate beneficiaries are members of the McAlpine Family Trust, a UK citizen. The convertible promissory note provides for funding of up to USD5 million in five tranches and is convertible into preferred equity of WMA. The first tranche of USD1 million was dispersed on April 29, 2022.

In addition, the company has also reached an agreement with US investment bank Raymond James to raise an additional USD35 million through a Series B capital equity offering with a planned close and receipt of funds in July 2022.