OST Docket Filings for June 2, 1997

Illustrative Service Proposal | Service List

American has continuously provided nonstop service between Los Angeles and Guadalajara since August 1995, and (effective June 15, 1997) operates nine roundtrip flights per week, using 139-seat MD80 aircraft.

Answers are due by June 17, 1997

Counsel: American, Carl Nelson, 202-496-5647, carl_nelson@amrcorp.com

American Airlines, Inc. (Renew – Notice of Action Taken)

OST-97-2302 | Posted May 30, 1997

Scheduled foreign air transportation between Miami and SantaCruz/La Paz

By: Paul Gretch

American Airlines, Inc. et. Al. And the TACA Group Reciprocal Code-Share Services Proceeding

OST-96-1700 | June 2, 1997

Motion of Continental Airlines for Confidential Treatment

Consolidated Answer of Continental Airlines

Answer of the Dallas/Fort Worth Parties

The key issue before the Department is whether the American/TACA codeshare arrangement enhances or inhibits competition in affected markets. In the airline industry, like other network industries, this means that code-sharing agreements and other cooperative arrangements must be evaluated for their effect on competition between competing networks. As a Deputy Assistant Secretary for Aviation and International Affairs has said: "For us in government, the question is -- how do we get more competition, and how can we see that it produces the greatest benefit for the traveling public, as well as for the airlines' shareholders." The answer to that question is: "The airline industry is a network industry, and . . . network competition produces better service and lower fares for the great majority of passengers."

Counsel: Continental and Crowell Moring, Bruce Keiner, 202-624-2500

Motion of Delta Air Lines for Confidential Treatment

Largely overlooked is that despite Miami's dominant position each of the TACA Group carriers has applied for authority to serve Dallas/Fort Worth and certain other U.S. cities on a nonstop basis. Approval of the American/TACA Group Applications would also spur inter-gateway competition and allow DFW to compete with Houston as alternative U.S. gateways to Central America. While overshadowed by Miami, Houston has developed as a major U.S. gateway to Central America. Between Continental and the Central American carriers, Houston has nonstop service to eleven Central American cities and service from two different foreign carriers. As noted, DFW has nonstop service to one Central American city and no foreign-flag service. Thus, a significant benefit of the American/TACA Group Agreement is that it will spur competition between the two Texas gateways -- DFW and Houston -- as American and the TACA Group carriers add services at DFW. DFW will provide another competitive one-stop routing to Central America besides Houston for travelers from U.S. cities west of the Mississippi.

Counsel: Bagileo Silverberg, Michael Goldman, 202-944-3305

Answer of Delta Air Lines

Answer of United Air Lines

The proposed Alliance has none of the beneficial characteristics of code-share arrangements recognized by the Department in its international Air Transportation Policy Statement. American will not gain the ability to enter new markets or to expand its system, because American itself already serves all the TACA Group nonstop destinations from Miami. American's principal motive in pursuing this Alliance is to eliminate competition between American and its main competitors on nonstop routes between Central America and the United States.

Counsel: Delta and Shaw Pittman, Robert Cohn, 202-663-8060

Exhibit 1 - US-Central America Weekly Frequency Share | Exhibit 2 - Miami is by Far the Predominant US Gateway for Central America Traffic | Exhibit 3 - American and The TACA Group have an Overwhelming Majority of Miami-Central America Nonstop Seats | Exhibit 4 - The AA/TACA Group Code-Share Proposal Results in Highly Concentrated US-Central America Markets

If American is successful in foreclosing entry by United (or another U.S. competitor) into Central America through a codesharing arrangement with one or more of the TACA carriers, American will have insulated its U.S.-Central America route network from competition and increased the barriers to entry into these markets.9 American is the only carrier with an established online route network that links its hubs in the United States with virtually all of the countries in Central and South America. Code sharing, however, can provide United and other U.S. carriers a cost-efficient means to extend their route networks into Central and South American markets, and thereby to initiate much broader network-to-network competition with American than would otherwise be possible. It is to forestall that competition, and to retain its dominant position in the market, that American is seeking to establish an exclusive codesharing alliance with the TACA Combine.

Counsel: United and Ginsburg Feldman, Joel Burton, 202-637-9130

Continental Airlines, Inc. (New – Notice of Action Taken)

OST-97-2488 | Posted May 30, 1997

Scheduled foreign air transportation between Newark and Caracas

By: Paul Gretch

EL AL Israel Airlines, Ltd. (Exemption Renewal)

OST-95-472 (47986) & 97-2547 (48826) | June 2, 1997

Answer of Tower Air to Objections to Order to Show Cause 97-5-18 - Corrected, Page 4 was Missing

The U.S.-Israel bilateral agreement nowhere mentions the Israel-Greece agreement nor, for that matter, any other agreement. There is absolutely no hint in the U.S.-Israel agreement that some other agreement will, or even might, limit the rights of U.S. carriers under that agreement. Israel and El Al may wish that they had thought to include such a limitation, but, to the best of our knowledge, the subject was never even raised -- and certainly was never agreed to by both parties

Counsel: Hewes Gelband, Stephen Gelband, 202-337-6200

Preliminary Answer of Fine Airlines

Federal Express Corporation and Arrow Air, Inc. and Florida West International Airways, Inc. (Approval of a Transfer of Frequency Allocations)

OST-97-2548 | June 2, 1997

Answer of Polar Air Cargo

Fine Air is prepared to participate actively in this proceeding. Absent a procedural order from the Department to the contrary, Fine Air, complying with the clear provisions of the Department's Procedural Rules, will file its answer in opposition 28 days after the completion of the Joint Application.

Counsel: Wilmer Cutler, Jeffrey Shane, 202-663-6000

Federal Express does not intend to use the three new frequencies to add any flights. Rather, it would convert existing narrow-body operations to wide-body. No doubt this would be helpful to the Fed Ex operation, but the load factor data it supplied does not demonstrate that the situation is critical or that it justifies the Department taking action that would place competition at risk. Polar Air has no interest in frustrating the business development plans of Federal Express but it cannot acquiesce in them if it means foregoing the expansion Polar Air Cargo needs to remain in Argentina. That is the position in which Polar Air finds itself today. As Polar Air stated, it would not object to the proposed Fed Ex purchase so long as it had an opportunity to add the second weekly flight it needs to be competitive.

Counsel: Ginsburg Feldman, Alfred Eichenlaub, 202-637-9034

Motion to File an Otherwise Unauthorized Document and Objection of Air Transport Internaitonal

Millon Air, Inc. (Fitness Review)

OST-96-2012 | June 2, 1997

In an attempt to establish its financial fitness, Millon seeks to ignore debts incurred by its affiliated company, Millon Air Cargo, Inc., by claiming that Millon Air Cargo is a separate corporation. Notwithstanding this attempt, the totality of the circumstances reflects that Millon's own dealings with third parties and Millon Air Cargo do not support Millon's contention. The pleadings are replete with assertions by Millon that as a separate corporation with separate ownership and management, Millon is not responsible for debts incurred by Millon Air Cargo.

Millon's refusal to accept full responsibility for its actions should not be countenanced by the Department. Millon cannot disavow its responsibilities by attempting to distance itself from the obligations of its closely affiliated company, especially when that company has contracted with others (such as ATI) for the benefit of Millon. If the Department were to accept such behavior, what would prevent other carriers from relying upon affiliates to incur the debts necessary to enable the carrier to operate, then disavow such obligations since they allegedly were not obligations of the carrier?

Counsel: Boros Garofalo, Eileen Gleimer, 202-822-9070

Northern Air Cargo, Inc.

OST-97-2323 | June 2, 1997

Re: Application of Northern Air Cargo

Attachment – Supplemental Response to Item 4

The Attachment hereto sets forth Northern Air Cargo's general objective and proposal, looking to the institution of small aircraft service. The Attachment indicates generally the nature and purpose of such service and the manner in which it will fit into the operations of the parent company, NAC. That Attachment also sets forth estimated annual costs and states that same will be underwritten In all respects by the parent; in the same manner as though the small aircraft operation were to be conducted by the parent directly rather than technically through the wholly owned subsidiary.

Counsel: Hewes Gelband, Stephen Gelband, 202-337-6200

Notice of Proposed Rulemaking: Domestic Passenger Manifest

Comment Period has been reopened – closes June 20, 1997

OST-97-2198

Comments of Aspen Aviation – May 20, 1997

By: Kim Bracher, Manager

Pan American World Airways, Inc. (Notice of Action Taken)

OST-97-2467 | Posted June 2, 1997

Scheduled transportation between Ft. Lauderdale and New York, on the one hand, and Nassau, on the other. Intends to operate this service pursuant to a code-share arrangement with Carnival

By: Paul Gretch

Application for All-Cargo Frequency Allocation

Polar Air Cargo, Inc. (All-Cargo Frequency Allocation, US-Argentina)

OST-97-2578 | June 2, 1997

Polar Air has a pressing need to increase the frequency of its Argentina scheduled service, if it is to succeed in establishing a viable competitive presence in the market. Polar Air has already incurred $3 million in losses in developing a foothold in Argentina. Despite southbound load factors that averaged 89 percent in the months of March and April, Polar Air's single weekly service is not profitable, primarily because higher yielding freight gravitates toward the much more frequent services of Federal Express. A second weekly frequency would help to offset that disadvantage as well as permit the carrier's fixed costs in Argentina to be supported by a much larger revenue base.

Service List

Counsel: Ginsburg Feldman, Alfred Eichenlaub, 202-637-9034

Polar Air Cargo, Inc. (New – Notice of Action Taken)

OST-97-2265 | Posted May 30, 1997

By Order 97-1-17 the Department granted Polar Air Cargo exemption authority to provide scheduled all-cargo service in the U.S.-Philippine market. That authority was subject to the condition that Polar Air inaugurate service within 90 days from the issue date of the order (January 24, 1997) or the authority would expire. On March 25, 1997, Polar applied for an exemption to extend its April 24, 1997, startup date to June 8, 1997. By Notice of Action Taken dated April 21, 1997, the Department granted the extension. Polar seeks extension of the June 8 startup date to July 23, 1997. Polar states that it has not received the necessary authorizations from the foreign government but believes that such authorizations will be obtained by July 23, 1997.

By: Paul Gretch

1997/1998 U.S. – Brazil All-Cargo Charter Proceeding

Order 97-6-1 | OST-97-2243 | Issued and Served June 2, 1997

Order Tentatively Allocating Charters

By this order we tentatively allocate the 750 US-Brazil all-cargo charters available for the 1997/1998 charter year as follows: Southern Air Transport – 180; FWIA – 145; Air Transport Intl – 83; Arrow – 29; Atlas – 35. In addition, we propose to place 278 charters into a pool for ad hoc distribution and use under conditions discussed below

By: Patrick Murphy

Consolidated Answer of Continental Airlines

U.S. – South Africa Third Country Code Share Opportunities | Continental Airlines, Inc. / Delta Air Lines, Inc. / Northwest Airlines, Inc. / United Air Lines

OST-97-2554 | 97-2553 | 97-2552 | 95-498 | June 2, 1997

Answer of Delta Air Lines

Unlike the other applicants, Continental has no transatlantic thirdcountry code-sharing authority, and Continental's proposed partner, Air France, participates in no U.S.-Europe or U.S.-South Africa code-share operations today. The three other U.S. applicants (Delta, Northwest and United) participate in huge antitrust-immune alliances that have global coverage. In sharp contrast, the proposed Continental/Air France partnership is a new-entrant alliance which would add an entirely new network to South Africa and to U.S.-Europe routes but not require immunity. A U.S.-South Africa third-country code-share designation will enhance Continental's ability to compete with the antitrust-immunized mega-alliances.

Counsel: Continental and Crowell Moring, Bruce Keiner, 202-624-2500

DL-1 – Proposed South Africa-Zurich Code Share Service | DL-19 – Delta Offers More Domestic Online Jet Service | DL-20 – Route System | DL-21 – Delta Operates More Transatlantic Service at JFK

An award to Delta would best achieve geographic diversity among hub gateways authorized for service to South Africa. Both United's and Northwest's proposals are predicated upon service from those carriers' primary hubs, which are all located in the northern Midwestern region of the country. United's largest hub is located at Chicago, which is flanked by Northwest's hubs on either side at Detroit and Minneapolis/St. Paul. The primary catchment areas for these hubs overlay each other. As a result of this overlapping coverage, fewer service benefits would result if Northwest and United were both selected than if one of those two carriers and Delta receives an award.

Counsel: Delta and Shaw Pittman, Robert Cohn, 202-663-8060

Consolidated Answer of Northwest Airlines, Inc.

NW-CA 1 - Comparison of Carriers' US-Johannesburg/Capetown Codesahre Proposals | NW-CA 2 - Seat Capacity of Carriers' US-Johnannesburg Codeshare Proposals (Europe-JNB Route)

Northwest urges the Department to authorize expeditiously Northwest's proposed U.S.-South Africa code-share services so that Northwest may begin preparations for operations on November 1, 1997, the earliest date services may be offered under the terms of the U.S.-South Africa Air Transport Agreement.

Counsel: Northwest, Megan Rae Poldy, 202-842-3193

Consolidated Answer of United Air Lines

UA-101 – United will Offer More Same Day Connections | UA-102 | UA-103 – United will Serve US Gateways that Generate More US-South Africa Traffic

In conclusion, the Department should select United as one of the two carriers to offer third-country carrier code-share services between the U.S. and South Africa. United and Lufthansa have been seeking authority to serve South Africa since 1994 and were instrumental in urging the U.S. to negotiate an agreement with South Africa that includes multiple third-country carrier code-share opportunities. United and Lufthansa have submitted applications that conform to the Department's May 5, 1997, Notice.3 United's proposed services can be offered effective November 1, 1997, when the bilateral opportunity becomes available

Counsel: Ginsburg Feldman, Joel Burton, 202-637-9130

Motion for Leave to File an Otherwise Unauthorized Document and Surreply of Delta Air Lines

ValuJet Airlines, Inc. (Exemption, High Density Rule, LaGuardia-Atlanta)

OST-97-2442 | June 2, 1997

ValuJet's principal argument appears to be that where there is only a single nonstop operator in a LaGuardia airport-pair, that circumstance constitutes a "monopoly" which, standing alone, would justify a finding of "exceptional circumstances." That position wholly ignores the presence of a highly competitive array of alternative services between New York and Atlanta. . ValuJet's Application and Reply also fail to establish its inability to obtain slots under the buy-sell rule. The Department established a market-based buy-sell rule which permits slots to be freely traded, leased, sold, or otherwise transferred. The buy-sell mechanism is available to all carriers seeking to obtain slots to offer services in any LaGuardia airport-pair. ValuJet admits that it has had several opportunities to buy or lease existing slots, but for its own commercial reasons has chosen not to do so. ValuJet's previous ability to obtain slots (which it voluntarily gave back) and its current continued ability to obtain slots through the buy-sell mechanism, conclusively negate any claim of "exceptional circumstances."

Counsel: Delta and Shaw Pittman, Robert Cohn, 202-663-8060

Agreement Adopted by the Tariff Coordinating Conferences of the International Air Transport Association Relating to US-Japan Passenger Fares

Order 97-6-2 | OST-97-2138 | Issued June 2, 1997 | Served June 6, 1997

Order

The agreement introduces normal and promotional fares and governing fare rules between Hiroshima and Guam/Saipan equal to those currently applicable between Tokyo and Guam/Saipan in anticipation of the inauguration of direct services by All Nippon Airlines On June 5, 1997

By: Charles Hunnicutt

Notice of Approval of IATA Agreement(s)

Weekly Period Ending May 30, 1997

Notice

OST-97-2556 | Date Filed: 5/23/97 | Date Approved: 5/28/97

By: Paul Gretch

Agreements Adopted by the Traffic Conferences of the International Air Transport Association

OST-97-2579 | June 2, 1997

Application for Approval of Agreements

AT THE REQUEST OF VARIG, THE DIRECTOR GENERAL HAS AUTHORISED ISSUANCE OF CABLE MAIL VOTE BELOW. IN REQUESTING THIS MAIL VOTE, VARIG STATED THAT THEY WISH TO INCREASE FIRST AND INTERMEDIATE CLASS FARES FOR TRAVEL BETWEEN BRAZIL AND VENEZUELA BY 5 PCT DUE TO COMMERCIAL REASONS AND ALSO TO COMPENSATE FOR INCREASES IN COSTS.

Counsel: IATA, David O’Connor, 202-624-2977