BALTIA'S BUSINESS MODEL

BALTIA®

New U.S. Airlineto Soar to Major World Markets


The continued prosperity of Southwest and the recent success of Jet Blue exemplify the lucrative and expanding market for niche U.S. air carriers. Baltia’s goal is to become the leading U.S. airline in the trans-Atlantic market between the major U.S. cities and the capital cities of Eastern Europe, including Russia, Latvia, Ukraine, and Belarus. With experienced management and a lucrative and growing travel market to the Baltic region Baltia intends to soar to success.


Market Niche and Potential

Baltia’s objective is to provide high quality three-class passenger service, and cargo and mail transportation. Baltia plans to start its flight operations in the late spring of 2008, as the only U.S. airline connecting directly two of the world’s most prominent cities – New York and St. Petersburg.

Baltia’s non-stop service from New York’s JFK to St. Petersburg will be approximately 8 hours, as compared to European connecting flights by foreign airlines taking 11 to 18 hours. Only a U.S. airline (as well as a reciprocal Russian airline) is entitled to fly non-stop. “Third nation” airlines, which are currently serving the market, can only operate connecting flights via their national airports.

Management believes that the shortened flight time, elimination of a layover, elimination of the possibility of missing a connecting flight, and a high quality passenger service provided by a U.S. airline will attract the business traveler and high-end tourism. During year one, Baltia plans to add additional airplanes and nonstop routes from JFK to Riga, Moscow, Kiev and Minsk. On the JFK-St. Petersburg route alone, management is projecting revenues for year one of operations at $60 million.

Company Info

Baltia is a New York corporation. Listings: OTC Bulletin Board- BLTA, Frankfurt Exchange- B3A.

The Company’s senior management meets regulatory requirements to operate a Part 121 airline.

Baltia has arranged a three year lease of a Boeing 747 aircraft. Baltia has leased space at JFK, Terminal 4, for its base of operations.

For information about Baltia please call Barry Clare, Director of Investor Relations at (212) 464-8201.


Please visit us at: www.baltia.com


BUSINESS STRATEGY

Baltia Air Lines, Inc. was founded by a team of U.S. airline professionals. Baltia plans to start weekly non-stop flights between JFK and St. Petersburg and to expand the schedule to daily flights within a four-month period. During year one of operations, Baltia plans to build its initial route network by adding non-stop routes from JFK to Riga, Moscow, Minsk, and Kiev.

Favorable Market Conditions and Superior Baltia Service

The New York - St. Petersburg route is a huge market directly connecting two cities with populations of 10 million and 6 million, respectively. The market is currently served by over 150 OAG (Official Airline Guide) listed flights per week, operated by a number of European airlines. These foreign airlines may not fly directly between the US and Russia; they have to operate with connecting flights through their countries. As a result, the market is presently served by foreign airlines requiring one or two stops and entailing an 11 to18 hour journey. Cargo transport on connecting flights is very inefficient. From the trans-Atlantic leg cargo is offloaded mechanically from wide body jets. It is then manually loaded onto connecting narrow body jets. Non-stop service offered by Baltia will provide convenient 8 hour travel, and reliable and efficient palletized/ containerized cargo transport.

In addition to being the only direct flight, Baltia intends to operate exceptional quality passenger service in a tree-class cabin layout. Typically, in the market served only by connecting flights, as much as 60% of the traffic migrates over to non-stop service when such service becomes available. Starting with one Boeing 747 in the JFK-St. Petersburg market, Baltia’s business model calls for approximately 85,000 passengers during year one on that route, representing less than 10% of the market size. Thus Baltia can be expected have initial operations with a high passenger load factor. Baltia will also offer “Baltia Courier” service for letters and packages. The company has strong interest from major overnight shippers for virtually all of its cargo capacity.

Despite the large number of stop-over flights currently offered by foreign airlines, passenger fares between JFK and St. Petersburg have steadily risen in the past years due to and even greater increase in traffic. Baltia has conservatively structured its non-stop fares consistent with those of the foreign airlines providing connecting services.

Revenues Anticipated From The Start

Because Baltia will offer the only non-stop flights, Baltia anticipates a high demand for its service from passengers switching from the current connecting services. It is expected that traffic volume will exceed the Company's conservative assumptions. Pursuant to the DOT policy that controls advance sales of a startup airline, the Company will be authorized to sell its tickets in advance of its inaugural flight. Management estimates at least $3mm from the advance sales. Those revenues will become available to the Company upon the completion of its air carrier certification. Based on a conservative 68% load factor for passengers and fares competitive with stop-over flights, the Company anticipates a cash positive first year with revenues of over $60 million and about $10 million in profits.

In addition to its scheduled flights, Baltia also plans to operate other revenue services in the form of international charter flights, cargo shipment services, and contract flights. Management is also considering qualifying the company for U.S. military contracts.

SERVICE Inauguration and Development

Baltia plans to complete its FAA Air Carrier Certification in the spring of 2008 to inaugurate non-stop service with one round trip flight per week. A transition to daily roundtrip flights is planned gradually in a four-month period.

Baltia has arranged aircraft leasing, contract maintenance, ground servicing and spare parts support at JFK and St. Petersburg. Baltia has made the necessary training arrangement for its personnel.

In the first year of operations, Baltia plans implement its initial route network by commencing scheduled non-stop service to the other capital cities, i.e. Riga, Minsk, Kiev and Moscow. Expansion of the route network is planed from operating revenues. The Company has additional Boeing 747 sister ships available from the lessor for the expansion of service.

The Company will carry airline liability insurance as required by DOT regulation.

Baltia has a staff of twenty professionals who have extensive major U.S. airline experience in aircraft maintenance, airline operations, airline regulatory compliance and administration. The team includes Lawrence Hecker as Director of Flight Operations and Hans Wolf as Director of Cargo Handling. Mr. Hecker has spent more than 40 years in the aviation industry. He was Deputy FAA Administrator under President Reagan and in 1993 was TWA as Vice President of Operations responsible for its turnaround at the time. Mr. Wolf was formerly Vice President in charge of TWA world wide cargo division.

Baltia will Connect Two Prominent Economic Regions of the World

The non-stop flight by Baltia will connect two of the largest economic regions of the world, centered around the cities of New York and St. Petersburg, with metropolitan city populations alone of 10 million and 6 million, respectively. New York is a prime destination for international air transportation due to the size of its population, the magnitude of its port-of-entry position within the U.S., and its cultural, industrial and commercial role in the nation. These same fundamental factors apply to St. Petersburg as a prominent gateway into Russia and, indeed, to all of Northern Europe. St. Petersburg is the leading maritime and surface cargo center, and it is well positioned to become Russia’s air cargo center. St. Petersburg is the second largest city in Russia after Moscow and the fourth largest City in all of Europe, following Paris, London and Moscow. St. Petersburg was the imperial capital of Russia and it is now its cultural capital.

St. Petersburg is also a major industrial, scientific, and commercial center with over 400 research institutes, 40 colleges, 780 libraries, 5 shipyards, and thousands of factories. St. Petersburg is Northwest Russia’s center of transportation with two airports, five major rail terminals, and a hub of interstate roadways. The city is Russia’s only year-round, deep sea commercial port. There are several hundred large American companies with operations in the St. Petersburg region. Remarkably, St. Petersburg has become the major software development center with hundreds of companies working on contracts from the West.

Route Traffic is Rapidly Growing but is Underserved

The OAG lists over 150 connecting flights from the United States to St. Petersburg on European airlines. Department of Commerce estimated this flight volume to equate to an annual passenger traffic of over one million. A survey of passenger traffic indicates that the traffic grew at a compounded rate of 10% during the 1992-2004 period. Recent growth rates have been reported by some airlines to be as high as 30%.

It is estimated that 60-70% of the passengers move from connecting flights to a non-stop flight when non-stop flight is available. Also, as required by the Fly America Act, all U.S. tax-supported passenger and cargo transport is required to be flown on a U.S. carrier when service is available.

The traffic levels projected for Baltia's revenue projections are at less than 10% of the above estimates.

The cargo traffic between the U.S. and St Petersburg was at twelve million kilograms per year and has experienced a growth rate of 20% per year. Cargo is currently being shipped on foreign connecting flights, which necessitates off-loading (mechanized) from trans Atlantic vide-body jets and reloading by hand into narrow body aircraft (not mechanized) at foreign hub airports. Such reloading is operationally very inefficient and subjects cargo shipments to certain risks and extra costs.

Because of the reliability of a non-stop light, Baltia is projected to capture a large portion of the existing cargo traffic. Further, government cargo, such as that of the U.S. Postal Service and diplomatic cargo, is required by law to be carried on a U.S. flag carrier when service is available. Baltia has had discussions with over a dozen major freight shippers that have a strong interest in utilizing most of the available cargo capacity on Baltia's direct flights on a pre-committed basis. Expected cargo traffic from these shipping companies significantly exceeds the level used in Baltia's revenue projections.

Baltia has a marketing program to ensure steady passenger and cargo traffic levels.

The Fly America Act

The Fly America Act (41CFR301.3-6) requires all government travelers (travel supported by taxpayer funds) to use a U.S. carrier when a direct flight is available. Similarly, all government cargo shipments are to be carried on a U.S. carrier. Such a policy, of flying on a U.S. carrier, has been adopted no only by the Federal Government and its agencies, but by most state governments, as well as many non-government associations and public institutions including many universities. This represents a valuable committed source of passenger and cargo traffic.

Market Segments

Baltia has identified the following market segments in the U.S.-Russia market: (i) Business Travelers, (ii) General Tourism, (iii) Ethnic Travelers, (iv) Special Interest Groups, (v) Professional Exchanges, and (vi) Government and Diplomatic Travel.

Business and First Class

American business travelers generally choose reliable, high quality, non-stop service and typically choose First, Business, and full fare Coach (Voyager Class) tickets. Business travelers originate primarily from New York, Washington, Boston, Chicago and Atlanta. (US DOC, USTTA)

General Tourism and Ethnic Travel

Americans traveling on leisure typically choose excursion fares, individually or as part of wholesale air and ground tour packages. Americans with ethnic ties, originating largely in New York, Chicago and Los Angeles, generally book in advance and choose excursion fares. This category also includes US-bound emigrants and family visitors originating in Russia with tickets pre-paid in the U.S. (US Census Data on Distribution of Ethnic Populations)

Special Interest Groups

Special interest groups represent a relatively new and substantial category of travelers which is generated by the US government, sister cities programs, educational institutions, and cultural exchange programs. Passengers typically originate in the US, but many also originate in Russia using tickets pre-paid in the US. These exchange programs choose coach and business fares. (US DOC, BISNIS, Government Programs to Russia)

Professional Exchanges

American-Russian professional exchanges are sponsored by trade associations, the US government, cities, hospitals, colleges, corporations, and performing arts institutions. Example: A consortium consisting of 82 US and Russian universities, perhaps the largest in the world. (Columbia University, DOC, BISNIS, Internships and Professional Exchanges)

Government and Diplomatic Travel

As discussed before, the Fly America Act requires U.S. government and diplomatic travelers to fly on a U.S. carrier where one is available. Traffic generally originates in Washington, DC and New York. The State Department and the U.S. Counsel General in St. Petersburg had contacted the Company about using its flights from JFK to St. Petersburg. As reported by the DOC BISNIS online information service, among the agencies sending the most employees to Russia are: the Department of State, the Department of Commerce, the Department of Agriculture, the Department of Energy, and the Department of Defense. The DOC programs alone aimed at Russia transported over 16,000 passengers.

Non-stop FLIGHT vs. conneCting Service

The direct non-stop flight to be offered by Baltia is significantly superior to the connecting service currently offered by foreign airlines, such as FinnAir, SAS, Lufthansa, British Airways. A comparison between the two services with respect to passenger convenience and cargo transport efficiency is given below.

BALTIA – a U.S. airline, non-stop service

A JFK to St. Petersburg flight in less than 8 hours.
Boeing 747 wide-body comfort all the way.
Cargo arrives containerized and palletized, and most importantly - reliably and secure.

Foreign airlines, stop-over journeys

11 to 18 hours through Helsinki, Copenhagen, Moscow, or Frankfurt on a foreign carrier.
Passengers must change to narrow-body aircraft at layover airport, can miss connection.
Cargo is “broken up” and manually loaded onto narrow-body aircraft, or even trucked.

Baltia’s management does not take for granted the Company’s advantage based on non-stop superiority alone. Baltia plans to operate efficiently and provide consistent high quality service to passengers and cargo shippers alike in order to establish the Company as the preferred airline in the market in comparison to its competitors. The Company plans to use targeted marketing of its service to maintain and grow its market share.

BALTIA’S Competition

The following is a brief survey of connecting services in the U.S. - St. Petersburg market.

FinnAir

FinnAir flies between Helsinki and St. Petersburg daily. Five days a week, to connect with its flights from U.S. to Helsinki, a layover time of 1:15 hours is required East-bound, and 1:40 hours of layover was required West-bound. Total en route time East-bound is 10 ½ hours, and total en route time West-bound is 11:30 hours. The other two days require a layover of 5 hours East-bound, and an overnight stay in Helsinki West-bound. Total en route time East-bound is 19 hours, and West-bound 31 hours. The JFK - Helsinki flight is on a wide-body MD11 aircraft. The connecting flight from Helsinki to St. Petersburg is on a narrow-body DC9 aircraft. Finnair does not have First Class service, and does not have palletized and containerized cargo service into St. Petersburg. From the MD11, cargo is unpacked and manually loaded into the narrow-body DC9, or shipped over land by trucks.

Scandinavian Airlines System (SAS)

SAS serves St. Petersburg from Stockholm and Copenhagen daily. To connect with its flights from the U.S. at Stockholm or Copenhagen, East-bound layover time is 1:30 hours, and West-bound requires an overnight stay in either Copenhagen or Stockholm. Total en route time East-bound is 10:30 hours, and total en route time West-bound is 30 hours through Stockholm and 31:30 hours through Copenhagen. The Newark – Stockholm or Newark - Copenhagen flight is on a wide body B767 aircraft. From Stockholm or Copenhagen the connecting flight to St. Petersburg is on a narrow-body MD80 aircraft. SAS does not have First class service, and does not have palletized and containerized cargo service into St. Petersburg. From the B767 cargo is unpacked and manually loaded into the narrow-body MD80.

Lufthansa

Lufthansa serves St. Petersburg from Frankfurt daily. To connect with its flights from the U.S. at Frankfurt, East-bound layover time is 1:40 hours, and an overnight stay in Frankfurt is required on West-bound flights. Total en route time East-bound is 13:10 hours, and total en route time West-bound is 25:20 hours. The New York to Frankfurt flight is on a wide body A340 aircraft. From Frankfurt the connecting flight to St. Petersburg is on a narrow-body A320 aircraft. Lufthansa has First, Business and Coach seating, but does not have palletized and containerized cargo service into St. Petersburg. From the A340, cargo is unpacked and manually loaded into a narrow-body A320.

KLM Royal Dutch Airlines

KLM serves St. Petersburg from Amsterdam daily. To connect with its flights from the U.S. at Amsterdam, East-bound layover time is 1 hour, and West-bound layover time is 1 hour. Total en route time East-bound is 12:30 hours, and total enroute time West-bound is 15 hours. The New York to Amsterdam flight is on a wide-body B747 aircraft. From Amsterdam the connecting flight to St. Petersburg is on a narrow-body B737 aircraft. KLM does not have First class seating, and does not have palletized and containerized cargo service into St. Petersburg. From the B747, cargo is unpacked and manually loaded into the narrow-body B737.

British Airways, Air France, Austrian Airlines, and Swissair

British Airways serves St. Petersburg through London daily. The return requires overnight stay in London. Air France flies to St. Petersburg through Paris daily and requires overnight stay in Paris on return. Austrian Airlines flies to St. Petersburg through Vienna daily. Swissair flies to St. Petersburg through Zurich daily.

Delta Air Lines (U.S. carrier)

Delta Air Lines provides non-stop service to Moscow. Delta does not serve St. Petersburg.

Aeroflot (Russian carrier)

Aeroflot service from New York to St. Petersburg via Moscow is available four times a week (Monday-Thursday). Aeroflot operates a B767 on its non-stop flights between New York and Moscow. On connecting flights from Moscow to St. Petersburg, Aeroflot operates the Russian-built Tupolev.

Summary of Competition

FinnAir, Lufthansa and SAS presently are the leading foreign airlines in the U.S.-Russia market. These carriers offer mediocre service quality and have intermediate stops in Helsinki, Frankfurt, Stockholm and Copenhagen (change-of-gauge points - hubs). Other foreign airlines have to fly even more circuitous routes through their hubs. A total of 36 world airlines provide some form of connecting flights (one or two stops) at varying levels of service from New York City to St. Petersburg, while a number of other airlines offer tickets through code share arrangements.

Baltia will be offering the only non-stop, true wide-body, U.S. carrier service in the market. Baltia’s average JFK - St. Petersburg non-stop block time is approximately 8 hours (includes taxi times and estimated air traffic delays). The normal JFK - St. Petersburg flying time is approximately 7 hours and 30 minutes. A major U.S. airline has expressed interest to code share on Baltia’s flights.

INITIAL SCHEDULE

Starting schedule with one round trip per week during the first four weeks:

Depart JFK at 17:00 Fri
Arrive LED at 9:34+1 Sat
Depart LED at 12:00 Sun
Arrive JFK at 13:31 Sun

Frequency increase to five round trips per week in month three:

Depart JFK at 17:00 Sun, Mon, Wed, Thu, Fri
Arrive LED at 9:34+1 Mon, Tue, Thu, Fri, Sat
Depart LED at 12:00 Mon, Tue, Thu, Fri, Sat
Arrive JFK at 13:31 Mon, Tue, Thu, Fri, Sat

The Company plans to operate daily service to St. Petersburg by the end or year one.

“LED” is the three letter identifier for St. Petersburg’s Pulkovo Airport. All times are local times, “+1”represents next day. Flight schedule is subject to changes.

Sales and marketing

Marketing Objective

Baltia’s objective is to establish itself as the leading carrier in its market niche over the North Atlantic with operations that are profitable from the outset and growing over time. In order to accomplish this objective, Management intends to establish and maintaining high quality service standards which will assure Baltia’s lead compared to the European airlines currently providing connecting flights to St. Petersburg. Although 30% dilution of the average weighted fare is conservatively allocated for discounts and promotions, Baltia does not expect to be in direct competition with deep discount airlines, including several East European airlines and the offspring of the former Soviet airline Aeroflot, which also provide connecting flights to St. Petersburg.

Overall Market Strategy

Baltia will operate between the two of the world’s largest industrialized nations, in one of the world’s fastest-growing markets providing nonstop, U.S. carrier wide-body passenger service with First, Business, and Voyager Class (coach) accommodations. This is a niche-market. Baltia’s passenger market strategy is tailored to particular preferences of the various segments of its customer base, with marketing attention particularly focused on American business travelers with interests in Russia who require high quality, non-stop service from the U.S. to Russia.

Baltia’s initial marketing strategy is based on existing travel agencies that specialize in the market, select travel and business publications, supplemented by direct mailings to corporate travel planners, as well as American businesses that are currently involved in Russia.

To further enhance is marketing, Baltia plans to sponsor select industry and trade events in the U.S. and in St. Petersburg, and to implement the frequent flyer program. Baltia also intends to advertise to the general public throughout the U.S. In addition to fisting Baltia’s schedules and tariffs in the Official Airline Guide, and world-wide reservations access of Baltia’s flights through a major Computer Reservations and Ticketing System (“CRS”), Baltia intends to operate its customer service and reservations centers in New York and in St. Petersburg. Tickets will also be available through www.baltia.com and other internet based outlets.

The Company will activate its reservations services for public access when the DOT issues its order authorizing Baltia to sell tickets (approximately 30 days before the inaugural flight).

The marketing strategy relating to capacity and overall quality of service is reflected in the Company’s choice of its aircraft. Five aircraft types are capable of flying non-stop on the JFK-St. Petersburg route, B747, MD11, B767, A340 and B777. From among these aircraft, Baltia’s management has concluded that the cabin size of a Boeing 747 offers the greatest degree of comfort and capacity in a three-class cabin layout for the JFK-St. Petersburg market. The B747 dispatch reliability lies within the 97% range contributing to passenger confidence in Baltia’s dependability (Boeing Report ID:RM 23004). Baltia’s on-time dependability is further enhanced because B747, a four-engine aircraft, is not subject to the ETOPS regulations which could cancel or divert flights during certain weather conditions. “ETOPS” is an acronym for Extended Range Twin Engine Operations, which generally requires that during year one of operations by a new airline a twin engine aircraft be operated within 75 minutes from a suitable airport. If one of the airports on the Great Circle route is unusable, a twin engine aircraft could not receive dispatch clearance for a flight to St. Petersburg, or worse, could be diverted to an alternate while en route.

With the B747, a true wide-body aircraft, Baltia intends to provide unsurpassed cargo service from JFK to St. Petersburg, offering containers, pallets, and block space arrangements. Baltia expects to carry contract cargo for express shippers, and Baltia plans to market its own high quality “Baltia Courier”, “Baltia Express”, and “Baltia Priority” services for letters and packages between the metropolitan areas of New York and St. Petersburg. Under the Fly America Act provisions, Baltia also expects revenues from shipments by government agencies, and diplomatic mail and cargo.

Promotion

In addition to the above overall strategy and having its sales specialists directly contact travel agencies and shippers, Baltia has specialized marketing programs directed at specific market segments.

For the general tourism market, Baltia plans to conduct promotion through tour operators and wholesalers who specialize in tourism to Russia, with attention to upscale tour packages.

To promote the convenience of its non-stop flights into St. Petersburg, Baltia plans to organize periodic travel agent familiarization trips, and to sponsor select cultural and performing arts events in order to associate Baltia’s name with high quality service. As part of the marketing strategy to associate Baltia with culture and quality and to develop name recognition, Baltia sponsored the St. Petersburg Festival at the Metropolitan Opera in New York. In addition, Baltia established promotional contacts with the St. Petersburg’s performing arts community, including the management of the Kirov Opera & Ballet, Hotel Astoria, Grand Hotel Europa, and the Pribaltiyskaya Hotel.

For the ethnic passenger market, Baltia plans to advertise in selected ethnic publications and on ethnic radio and TV stations in the U.S. Baltia plans to send direct mailings to ethnic organizations and travel agencies to announce the start of service. Baltia has plans to offer limited introductory fares, group travel packages, and “Pre-Paid Tickets” (see Freeloaders in www.baltia.com).

In the U.S. and in Russia Baltia plans to sponsor select cultural and ethnic events to promote interaction of people with like ethnic backgrounds between the two countries. For educational associations and colleges offering Russian studies and language programs, mailings, introductory fares, group travel packages, as well as pre-paid ticket arrangements for Russian travelers will be available. Existing U.S.-Russia academic and scientific exchange programs are perhaps the world’s largest, featuring Moscow and St. Petersburg universities as well as universities throughout the U.S. For promotions within special group markets, Baltia plans direct mailings to trade associations, foundations, educational institutions, and government agencies.

Cabin Configuration and Pricing

Baltia's strategy for the configuration of seating and for the pricing of its three classes of cabin service is consistent with its policy of initially focusing on existing passenger segments that expect quality and comfort in travel. The number of seats allocated in each of the three classes of service is aimed at maximizing revenue potential and meeting the market needs.

Recently, the JFK - St. Petersburg passenger market experienced significant growth in business travel. Average industry distribution among First, Business and Economy classes is about 6%, 14%, and 80%, respectively. The ratio of First, Business, and Tourist fares significantly affects the total revenue from any given number of passengers. In general, the more First, Business, and full fare coach tickets sold, the more revenue earned from a given number of passengers. For conservative reasons, Baltia calculates its projected revenues based on a 3.3%, 9.5%, and 87.2% class distribution ratios among passengers. However, recognizing the fact that in the market the requirement for First and Business class service appears strong, Baltia seating is planned to have extra capacity for its First and Business classes (16 First, 32 Business, and 268 Economy and Economy Discount seats.

Baltia surveyed the price structures of FinnAir, SAS, Lufthansa, Delta and Swissair to compare the published market fares of connecting services involving a change of aircraft, for comparison with Baltia’s non-stop service from JFK to St. Petersburg.

For marketing reasons, to reflect Baltia’s exclusive non-stop, wide-body U.S. air carrier service, certain of Baltia’s published fares are planned incrementally higher than those of foreign connecting flights. Fares are subject to adjustment. Baltia marketing focus is on First, Business and upscale tourism market, requiring non-stop, high quality service. Business and First class travelers are currently paying between $1,707 to $2,660 more than a restricted coach fare. It is reasonable to expect that travelers will prefer Baltia’s non-stop service. According to the DOC statistics, 77% of all passengers visit one country. Baltia assumes a 30% dilution factor at the start of service, a dilution of the weighted average fare used in forecasting revenues which results when passengers purchase a discounted ticket. This percent of dilution is expected to allow the Company to compete periodically with discount programs without compromising its revenue forecasts.

operations Strategy

Facilities and Aircraft

Baltia has leased facilities at JFK Terminal 4. As a U.S. air carrier providing international service, the Company is eligible for required gate space and other facilities, both at JFK and at Pulkovo Airport in St. Petersburg. Baltia has also arranged for a 3 year lease of B747aircraft.

Air Carrier Certification

In order to launch revenue service, Baltia has two main tasks. One, the FAA Air Carrier Certification, which encompasses all necessary operational elements. Second, initial marketing. During the first two months of certification, Baltia will focus almost entirely on its FAA Air Carrier Certification process. For a startup airline at an advanced level of preparation like Baltia the certification is expected in about four to five months. During this process the Company, according to its Compliance Statement, demonstrates to the FAA how the airline will comply with the federal aviation regulations. But it isn’t merely a formal compliance with regulations. It is the FAA staff’s confidence in the company’s management, and the organizational control mechanisms and their sub-elements.

The company’s staff has experience with the certification and has worked closely with the New York Flight Standards District Office (NY FSDO) and CSET. The FAA certification is a well-defined process, it is structured in phases with test gates, and requires advance preparation on the part of the carrier. The FAA assembles a certification team and the airline assembles its certification team, acceptable to the FAA. The two teams interact at a counterpart level. Each team has its team leaders and managers of different functions, for example, maintenance, flight operations, cabin safety, etc. The following table shows the outline of the FAA certification process.

Documentation Period
Formal application documents
Manual system, checklists, aircraft airworthiness records, airport/enroute analyses
Compliance statement, draft operation specifications
Training curricula
Mini-evacuation test plan
Proving flight plan
Requests for deviations and exemptions

Inspection and Demonstration Period
Training of pilots, instructors, check airmen
Training of mechanics, instructors
Training of dispatchers
Training of flight attendants
Aircraft conformity check
Inspection of base of operations and stations JFK and St. Petersburg
Mini evacuation test
Proving flights

During the documentation period the FAA satisfies itself that the air carrier has properly documented its operating procedures, that aircraft and its documentation meet airworthiness requirements, that training facilities are qualified and their curricula meet requirements. During this period the company prepares draft Operation Specifications, which are refined and issued in a final form upon certification.

During the inspection and demonstration stage the FAA confirms that the company conducts its training in accordance with its approved procedures, under FAA supervision. The FAA satisfies itself that the base, station facilities at JFK and St. Petersburg are appropriate for the proposed operations with adequate equipment, spares and arrangements in place. Aircraft conformity check assures that the aircraft meets all airworthiness requirements, typically fresh out of check-C. The mini evacuation test is conducted to demonstrate that the crew is capable of evacuating the aircraft in emergency. Finally, proving flights demonstrate that the company actually conducts its flights in accordance with its specifications and procedures, and the test involves simulated emergencies.

About 45 days before the end of certification, Baltia will increase its focus on passenger and cargo marketing and related services. From that point on, pre-operating marketing efforts will be intensified so that at the time of the inaugural flight an effective marketing campaign will be in full progress. About 30 days prior to the inaugural flight, the Company’s passenger and cargo reservations will be fully functional and accepting reservations, as will the internet based outlets and www.baltlia.com. At the time of the inaugural flight all service arrangements for catering, passenger services, check-in, cargo handling, etc. will be operational.

Commencement of JFK – St. Petersburg Flights

Baltia plans to start the JFK-St. Petersburg service with one round-trip flight per week, and increase the frequency to five round trips within a four-month period. By starting with one roundtrip flight per week for the first four weeks, Baltia not only accelerates and simplifies its FAA certification, but the Company also saves itself the grief from being too busy during those initial days to make large scale necessary corrections. With a gradual increase in schedule, any inefficiencies of a given flight can be corrected for the next flight. Baltia management expects that in the initial four weeks, the company will attain high operating efficiencies and service standards, at which point schedule will be increased to three round-trips per week. Following that first frequency increase, service frequency will be increased to five round-trips per week and then subsequently to daily round-trip flights, at which point additional aircraft is planned to be brought into service. It is important that this transitional schedule allows Baltia to train additional pilots, flight attendants, and support staff at a continuous pace. It also allows Baltia marketing program to take effect through its various segments.

The care taken in establishing high standards has implications beyond the immediate launching of the JFK-St. Petersburg flight. Baltia plans to implement service modules refined on the JFK-St. Petersburg route throughout the initial route network.

Initial Route Network

Baltia plans to build operating modules and apply those standards as it enters new markets. By the end of year one Baltia plans to introduce in service three additional aircraft.

Additional Revenues from Charter Flying

In conjunction with its Part 121 certification for scheduled service, Baltia will also seek certification for world-wide charter authority. Following certification, Baltia plans to utilize its aircraft (when they are not on scheduled service) to earn additional revenues from charters, sub-service to other carriers, and Baltia is considering qualifying its aircraft for military contracts.

BALTIA MANAGEMENT TEAM

Organized by the Company’s founder, Baltia’s management meets regulatory requirements and has been previously found qualified by the DOT and the FAA to operate a U.S. airline.

Igor Dmitrowsky, President. Mr. Dmitrowsky, born in Riga, Latvia, has developed and promoted new businesses for more than 25 years. He founded American Kefir Corporation, a dairy distribution company, which completed a public offering in 1986. During his long and successful business career, he has financed aircraft and automotive projects. Mr. Dmitrowsky is fluent in Latvian, Russian, and English.

Lawrence M. Hecker, Director of Flight Operations. Mr. Hecker has spent more than 40 years in aviation, including airline, military, general aviation and government service. He has served as President and CEO of a junior company at the forefront of space commercialization and as Chief Operating Officer of an air ambulance carrier. Mr. Hecker was recalled to TWA as Senior Vice President of Flight operations to help the company emerge from bankruptcy. Mr. Hecker has served as Deputy Administrator of the Federal Aviation Administration.

Russell K. Thal, Director of Operations Control. Prior to joining the Company, Mr. Thal was Chairman of Compuflight, Inc. Previously he worked as Director of Stations for New York Air, and before then as Director System Operations for Seaboard World Airlines.

John Chanda, Director of Technical Services. Prior to joining the Company, Mr. Chanda was Director of Maintenance for Tower Air. Prior to it he was the Head of Maintenance Department for TWA.

Joseph Verner, Chief Technical Inspector. Prior to joining the Company, Mr. Werner was Vice President, Maintenance and Engineering for TWA.

Robert S. Volpe, Inspector of Operational Safety. Prior to joining the Company, Mr. Volpe was Aircraft Maintenance Planner for Tower B747 aircraft. Previously he worked as Inspector and Consultant for the CIT Group/Capital Equipment Financing.

Hans G. Wolf, Director of Cargo Handling. Mr. Wolf, with technical and management skills acquired during 23 years of service with Trans World Airlines, specializes in air cargo marketing, sales, and service. At TWA, Mr. Wolf served as Vice President of Cargo Sales and Marketing, Director of Cargo Pricing, and Manager of International Cargo Pricing. After leaving TWA, he served as Vice President of Air Cargo, Inc.

Victoria Charlton, Vice President of International Relations. Ms. Charlton has a background in international promotions. She organized the Company’s promotional sponsorship of the St. Petersburg Festival at the Met. During various she served as executive director of Gateway Projects representing merchandising rights for Paramount Studios, LCA (Warner), MCA (Universal Studios and DeLaurentis Studios). Ms. Charlton has presented exhibitions from the Hermitage Museum in St. Petersburg and organized performances for Russian artists and the leading companies in the United States. In 1993, she organized a lecture tour for Mikhail Gorbachev in England.

Captain Glen Johnmeyer will serve as the Company's Chief Pilot during completion of the Company's certification. Presently, he maintains his professional qualifications with United Parcel Service. Mr. Johnmeyer has more than 10,000 hours as pilot in command of jets which includes more than 1,350 hours as pilot in command of the B747 aircraft. Between 1968 and 1972, Mr. Johnmeyer was an Honor Graduate of the Fixed Wing Aviator Course, Aircraft Commander, Instructor Pilot, and Standards Pilot for the U.S. Army. Since then he has been employed as Captain, First Officer, Instructor, and Director of Operations in U.S. commercial aviation.

In addition to the individuals listed above, Baltia staff includes a number of other management professionals who have extensive major U.S. airline experience in aircraft maintenance, flight operations, regulatory compliance, passenger and cargo sales, service, and administration.

BALTIA AIR LINES -- ACCOMPLISHMENTS SINCE D.O.T. FILING

Baltia Air Lines Current Accomplishments

In November 2007 Baltia field with the Port Authority of NY&NJ for PA security clearance at JFK. In December the Company was approved for card issuance. The company’s staff completed the required training and as of January 2008 Baltia staff has been approved for and have been issued the PA security cards.

In November Baltia contracted two professional airline certification consultants, Aviation Content Management and PAS Group, to assist Baltia staff with Air Carrier Certification. Aviation Content Management participated with JetBlue certification. PAS Group is an FAA approved air carrier certification consultant.

In November Baltia entered into agreement with PanAm International Flight Academy in Miami, for the training of Baltia’s pilots, flight attendants, and dispatchers.

In November Baltia entered into agreement with Evergreen Maintenance for heavy maintenance support.

In December 2007 a new team member joined Baltia’s management as Chief of Flight Operations – Joseph Smoltz. Mr. Smoltz’s previous experience was serving as the Chief Pilot for FedEx.

In December Baltia staff completed a special certification training course conducted by PAS Group, at JFK for compliance with the Air Transportation Oversight System (ATOS) standards. The purpose of the training was to assure that Baltia’s preparation of Air Carrier Manuals is in compliance with the latest Federal Aviation Regulations (FARs) requirements and the latest Safety Attribute Inspection (SAI) requirements.

In January Baltia entered into contract with Navtech for chart, weather, flight planning, airport and in route data, and weight and balance services.

Baltia’s Certification Team is currently preparing Baltia’s Air Carrier Manual System. The manual system is an extensive collection of required Air Carrier Manuals that are subject to review by the FAA during the Air Carrier Certification Process.

STOCKS TO WATCH! BALTIA AIR LINES OTCBB "BLTA"

Baltia Air Lines is a must stock play for 2008. Independant analysts project a $2.00 - $3.00 share price upon the start of flight revenue operations. It's just a matter of time before
Baltia receives all of the necessary approvals and begins to fly!!