Air Canada and Lufthansa / Response of Canadian Airlines / March 12, 1998
Mr. Paul L. Gretch
Director
Office of International Aviation
Department of Transportation
400 Seventh Street, S.W.
Room 6402D
Washington, D. C. 20590
Re: - Application of Air Canada for Statement of Authorization
Dear Mr. Gretch:
Canadian Airlines International, Ltd. (Canadian Airlines) hereby responds to the Application of Air Canada for Statement of Authorization to display the Lufthansa airline designator code on Air Canada-operated flights between points in Canada and points in the United States which was filed with the Department on
March 6, 1998, with a request for approval within five days.On
February 3, 1998 Canadian Airlines and Linea Area Nacional Chile, S.A. (Lan Chile) filed an analogous application with respect to the Canada - Chile market via the United States and requested Department approval in time to permit a March 11, 1998 start-up. United Airlines, Air Canada's U.S. alliance partner, objected to the application, Inter alia, on the grounds that approval would result in inappropriate market dominance by American Airlines (which is not even a party to the Canadian Airlines - Lan Chile application).Canadian Airlines disputed United's claims and, in particular, its attempt to enmesh American Airlines in the Application. Nonetheless, Canadian Airlines and Lan Chile continue to await a response on the application, now over five weeks old, and have had to defer marketing activities and the start up of the joint operation pending the completion of a still on-going U.S. Department of Transportation/Department of Justice review.
Mr. Paul L. Gretch
March 12, 1998
Page 2
Canadian Airlines is of the view that the objections of Air Canada's U. S. partner are without merit and has so stated in response to the United Airlines' intervention. Nonetheless, in the absence of a response from U. S. DOT/DOJ on the Canadian Airlines - Lan Chile application, Canadian Airlines is bound to observe that the same issues appear to arise in the current Air Canada application and that the latter application warrants similar review and consideration.
Swift approval of the Air Canada application under these circumstances when the Canadian Airlines - Lan Chile application remains unresolved would be unfair and prejudicial to Canadian Airlines.
To elaborate: In the Air Canada - Lufthansa case, we note that those two carriers combined enjoy a 95% market share in the Canada - Germany market compared to Canadian Airlines, the other designated carrier in that market. To permit the Air Canada - Lufthansa codeshare would exacerbate the market dominance of United's partner unless Canadian Airlines receives assurances that it will be permitted to codeshare into points in Germany with its alliance partner(s) as well.
As it so happens, Canadian Airlines applied to the German authorities to codeshare into Germany with its European partner, British Airways, on March 6, 1998. (Coincidentally the same day the Air Canada application was filed with the U.S. DOT). Canadian Airlines is awaiting a reply from the German Government with no indication as to whether that application will be approved or when.
We note that under the Canada - Germany bilateral, approval is entirely discretionary with the German authorities since the bilateral does not provide underlying rights at intermediate points in the U. S. for carriers of either side or for third country carrier codesharing. Similarly, as a condition for approval of the Air Canada/Lufthansa Application, Canadian Airlines wishes to seek assurances that a future application by Canadian Airlines to the DOT to codeshare into Germany on American Airlines' U. S. - Germany services would also be approved.
Mr. Paul L Gretch
Larch 12, 1998
Page 3
In conclusion, Canadian Airlines suggests that Air Canada's application to codeshare with Lufthansa should receive no less careful scrutiny than United Airlines has asked be given to Canadian Airlines' application to codeshare with Lan Chile.
Respectfully submitted,
Thomas J Whalen
Evelyn D Sahr
CONDON & FORSYTH
1016 16th Street, N. W.
Washington, D C. 20036-5307
(202) 289-0500
Attorneys for Canadian Airlines International, Ltd.