98-10 / United and Lufthansa / Blanket Statements of Authorization and Renewal / January 26, 1998
Mr. Paul L. Gretch, Director
Office of International Aviation
Department of Transportation
400 Seventh Street, S.W.
Room 6402
Washington, D.C. 20590
SUBJECT: Joint Application of United Air Lines, Inc. ("United") and Lufthansa German Airlines ("Lufthansa") for (1) Blanket Statements of Authorization Under 14 C.F.R. Parts 207 and 212 and (2) Renewal of Existing Statements of Authorization (Open Skies Code-Share Operations)
Dear Sir:
United and Lufthansa ("Joint Applicants") hereby apply for blanket Statements of Authorization to engage in certain code-share operations consistent with the Open Skies Agreement between the U.S. and Germany, as follows:
(1) A Statement of Authorization under Part 207 of the Department's regulations to enable United to display Lufthansa's "LH" designator code on any flight operated by United between (a) any points within the United States, in conjunction with services held out by Lufthansa between Germany and the United States, (b) any point or points in the United States, on the one hand, and any point or points in Germany, on the other hand (either nonstop or over any intermediate point or points in any country), (c) any point or points in the United States, on the one hand, and any point or points in any third country, on the other hand, and (d) any point or points in Germany, on the one hand, and any point or points in any third country, on the other hand; and
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(2) A Statement of Authorization under Part 212 of the Department's regulations to enable Lufthansa to display United's "UA" designator code on any flight operated by Lufthansa between (a) any points within Germany, in conjunction with services held out by United between the United States and Germany, (b) any point or points in Germany, on the one hand, and any point or points in the United States, on the other hand (either nonstop or over any intermediate point or points in any country), (c) any point or points in Germany, on the one hand, and any point or points in any third country, on the other hand, and (d) any point or points in the United States, on the one hand, and any point or points in any third country, on the other hand.
As the Joint Applicants demonstrate below, grant of this application would enable United and Lufthansa to expand code-share services consistent with the Open Skies Agreement between the U.S. and Germany and the Alliance Agreements between United and Lufthansa approved by the Department by Orders 96-5-27 and 96-11-1. Approval of this application will also enable United and Lufthansa to respond quickly to service demands and changes in the marketplace, as it will provide the carriers with the flexibility to adjust their code-share services without the need to obtain Department approval to amend their code-share authority every time they seek to add another third-country beyond point.
United and Lufthansa also hereby request renewal of their existing Statements of Authorization. These are listed in Attachments 1 and 2. United and Lufthansa invoke the procedures of 14 CFR Part 377 to continue these Statements of Authorization in effect under 5 U.S.C. §552(c) pending final action on this application to renew and amend those authorizations. United and Lufthansa request that their Statements of Authorization as renewed and amended be effective for a period of two years.
In further support of this Joint Application, United and Lufthansa state the following:
1. The Department's decision granting approval of and antitrust immunity for the Alliance Agreements between United and Lufthansa found that the Alliance will "enhance competition overall and allow the airlines to provide better service and enable them to operate more efficiently." Order 96-5-12 at 15. That decision has enabled the Joint Applicants to coordinate their respective route networks and
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to offer enhanced code-share services on each other's flights. Since the Department's approval of the Alliance Agreements, the Joint Applicants have continued to apply for, and gain approval of, authority under Parts 207 and 212 to expand their alliance services.
2. Approval of this application meets the standards applicable to grants of Statements of Authorization under Parts 207 and 212, and is in the public interest for the following reasons:
(a) Approval of this application is fully consistent with the terms of the U.S.-Germany open skies bilateral air services agreement, is supported by principles of reciprocity and comity, and is consistent with the Department's previous approvals of similar blanket Statements of. Authorization for American/Canadian, United/SAS, Delta/Swissair, Delta/Austrian Airways and Delta/SABENA.
(b) Grant of this application will give the Joint Applicants broad flexibility to revise and expand code-share services without the need to seek additional Department approval. The approval of blanket code-share authority would also allow United and Lufthansa jointly to institute new international services, including new code-share service to any third-country beyond point, offering convenient new on-line connections, that would enhance international competition and service options for travelers who are seeking service between the United States and Germany, and beyond.
(c) In particular, approval of the blanket Statement of Authorization under Part 207 would enable United to list Lufthansa's "LH" designator code on any flight operated by United to third-country points beyond the U.S. and Germany, in accordance with applicable bilateral agreements. This blanket authority would enable Lufthansa to expand its code-share operations on United's flights, and would enable the carriers jointly to institute new international services.
(d) Similarly, approval of the Statement of Authorization under Part 212 would enable Lufthansa to list United's "UA" designator code on any flight operated by Lufthansa to third-country points beyond Germany and the U.S., in accordance with applicable bilateral agreements. This blanket authority would enable United to expand its code-share operations on Lufthansa's flights, and, as noted above, would enable the carriers jointly to institute new international
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services. Approval of the blanket Statement of Authorization under Part 212 would also allow United to benefit from third-country code-share access to the fullest extent contemplated by current bilateral agreements, and would allow United quickly to enter new markets. The addition of United's on-line connections to international destinations would provide travelers with new service alternatives and would inject new competition between the U.S. and various foreign points.
(e) Approval of these blanket Statements of Authorization would reduce the administrative burden both on the Joint Applicants and on the Department, in that the Joint Applicants would not need to seek new or amended Statements of Authorization every time new or modified code-share services are to be implemented to third-country points beyond the U.S. or Germany consistent with applicable bilateral agreements. In addition, if granted such blanket authority, the Joint Applicants' ability to implement new code-share arrangements would not be delayed by the regulatory process, and the traveling public would be able to benefit from such new services more quickly. In any event, the Department has fully evaluated and approved the Alliance, and the code-share services contemplated herein are consistent with the Department's approval, and with the terms of the U.S.-Germany Open Skies agreement. As such, grant of blanket authority is non-controversial and fully warranted.
3. Both United and Lufthansa hold the underlying route authority to implement new services between any third-country point beyond either the U.S. or Germany. See, e.g., United's Certificates of Public Convenience and Necessity for Routes 57, 603, 669 and 747 and its route integration exemption issued by
Order 97-6-16. /1 Similarly, Lufthansa's open-skies exemption authorizes Lufthansa to provide service from behind Germany via intermediates to the U.S. and beyond. Notice dated October 17, 1997, in Docket OST-97-2963. Implementation of new code-share service to third-country points beyond the U.S. and Germany would be implemented only to the extent permitted by the carriers' respective international route authorities and the applicable bilateral agreements.4. Grant of the Statements of Authorization would be consistent with Department policy and precedent. See U.S. International Air Transportation Policy Statement, April 1995, pp. 4-5. In the policy statement, the Department
1/ See also United's exemption authority issue by Orders 96-11 -5 and 96-9-28.
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specifically recognizes that code-share arrangements "can provide a cost-efficient way for carriers to enter new markets, expand their systems and obtain additional flow traffic to support their operations..." Id. at 4. Based on its policy, the Department has previously approved several code-share arrangements between United and Lufthansa under Parts 207 and 212. In addition, the Department has previously granted blanket Statements of Authorization in situations where the applicable bilateral agreements specifically allow for such broad-based code-share services. See American/Canadian International, Notice of Action Taken, dated April 18, 1996 (Docket OST-95-792 and Undocketed);
United/SAS, Statement of Authorization, dated May 20, 1997; Delta/Swissair, Statement of Authorization, dated April 30, 1997; Delta/Austrian Airways, Statement of Authorization, dated April 30, 1997; and Delta/SABENA, Statement of Authorization, dated April 30, 1997.5. The Joint Applicants have previously submitted copies of the relevant Alliance agreements for the Department's review and approval.
6. United and Lufthansa will comply with all applicable Department rules relating to code-share service and with each of the other conditions normally imposed by the Department on code-share arrangements. United and Lufthansa will also comply with a condition requiring the carriers to notify the Department 30 days before they begin any code-share service in a new market not previously authorized. /2 The blanket Statements of Authorization should be effective for a period of two years.
7. United and Lufthansa also request renewal of their outstanding Statements of Authorization. The markets in which statements of authorization have already been issued are listed in Attachments 1 and 2, together with their expiry dates. United and Lufthansa invoke the procedures of 14 CFR Part 377 to
2/ Those markets which have been previously authorized are described in Attachments 1 and 2. To the extent the Department has already authorized services in the markets listed in those attachments, no 30 day notice is required.
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continue the effectiveness of their Statements of Authorizations under 5 U.S.C. §552(c) pending action on this application to renew and amend their Statements of Authorization.
The Statements of Authorization listed in Attachments 1 and 2 should also be renewed for a two-year period. This two-year renewal period should be the same as that for which the blanket Statements of Authorization are issued. A common expiry date for all Statements of Authorization relating to the United/Lufthansa code shares will reduce the administrative burden on both the Department's staff and the Joint Applicants by reducing the number of renewal applications that would otherwise be necessary. /3
8. Pursuant to the Department's letter to CRAF participants dated June 1, 1995, United hereby states that this application will have no impact on United's CRAF commitments.
9. In conclusion, by granting this application, the Department will provide United and Lufthansa with the flexibility to implement new code-share services that would result in more efficient operations by the carriers and improved international service options for the traveling public, while reducing the administrative burden on the Joint Applicants and the Department.
WHEREFORE, United and Lufthansa respectfully request that the Department grant this application for (1) blanket Statements of Authorization and (2) renewal of existing Statements of Authorization to permit United and Lufthansa to provide the
3/ There are also several outstanding applications for Statements of Authorization which have been pending for an extended period. These include, for example, Lufthansa's applications to display United's code on Lufthansa's flights to Accra, Ghana, and Lagos, Nigeria; to Belgrade, Yugoslavia; and to Odessa, Ukraine. At such time as these applications may be granted, they should be issued subject to the same expiry date applicable to the Statements of Authorization requested herein.
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code-share services discussed above for a two-year period, and grant such other and further relief as the Department deems to be in the public interest.
Respectfully submitted.
JOEL STEPHEN BURTON
GINSBURG, FELDMAN and BRESS, CHARTERED
Counsel for UNITED AIR LINES, INC.
JAMES S. CAMPBELL
WILMER, CUTLER & PICKERING
Counsel for LUFTHANSA GERMAN AIRLINES