OST-97-2477, 97-2481, Undocketed / American and Aero California / June 19, 1997

 

Applications of

AMERICAN AIRLINES, INC. and AERO CALIFORNIA S.A. DE C.V.

for exemptions under 49 U.S.C. §40109 and statements of authorization under 14 CFR Parts 207 and 212 (U.S.-Mexico Code Sharing)

 

DATED: June 19, 1997

 

RESPONSE OF UNITED AIR LINES, INC.

AND MOTION FOR LEAVE TO FILE

 

United Air Lines, Inc. ("United") submits the following response to the "Consolidated Surreply" of Continental Airlines, Inc. ("Continental") dated June 12, 1997, in the above-referenced proceeding: /1

 

1. Continental's Surreply is directed primarily at the issues raised by the code-share arrangement of American and Aero California. Continental concurs in United/Mexicana's characterization of the American/Aero California code share as being far broader in scope than that of United/Mexicana. While United/Mexicana did not object to the American/Aero California

 

1/ Continental's "Consolidated Surreply" is unauthorized under the Department's rules. United requests leave to file in the event that the Department allows Continental to submit its surreply. Continental's "Consolidated Surreply" improperly raises issues relating to the code share between United and Compania Mexicana de Aviacion, S.A. de C.V. ("Mexicana") which is beyond the scope of the proceeding in which Continental's pleading is filed.

 

 

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code-share applications, they did indicate their intent to seek similarly broad authority in the future and urged the Department not to delay action on the long pending United/Mexicana joint application while the issues raised by that of American/Aero California were being resolved.

 

2. In response to answers of United/Mexicana and others relating to the issues raised by the scope of their code share, American/Aero California responded that they would accept a condition on approval of their code share that would permit a U.S. carrier wishing to operate its own equipment on a U.S.-Mexico city pair to replace the code-share service and receive the limited designation for that route. United is prepared to accept the same condition on its more limited code-share service so long as it is also imposed as a condition on all U.S.-Mexico code-share arrangements, including but not limited to those of Delta and Aeromexico . 2/

 

3. Continental suggests, with respect to the American/Aero California code share, that rather than imposing such a condition, the Department should not approve "any further U.S. Mexico code-shares" until it has (1) negotiated "appropriate code-share provisions with Mexico" and (2) obtained additional U.S. carrier designations for the Los Angeles-Mexico City route.

 

2/ United is authorized by Mexicana to state that carrier's concurrence in acceptance of such a condition.

 

 

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Continental's proposed "solution" to the code-share designation issue is directed to the American/Aero California code share in the above-captioned proceeding. Even in the American/Aero California proceeding, however, Continental's pleading has been filed outside of the Department's normal procedural requirements. To the extent that Continental's proposal would also affect timely approval of the United/Mexicana code share, it is both unconscionably late and irrelevant.

 

Continental was well aware of the United/Mexicana code share when it was filed over six months ago and made no effort to answer it. United and Mexicana have striven to avoid the controversy over designations that is raised by the broader American/Aero California proposal. United/Mexicana have limited their code shares to those city pairs where demand is apparent and designations are available. It would be wholly unfair to United and Mexicana to require them to await resolution of the bilateral designation issues raised by the much more extensive and later-filed American/Aero California application. Those carriers have requested authority to code share between every pair of points they serve in the U.S. and Mexico via their U.S.-Mexico gateways.

 

Any delay of the United/Mexicana code share while the Department resolves issues raised by the American/Aero California application would be particularly unfair in circumstances where Delta and Aeromexico have already been allowed to implement their

 

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own code share pursuant to a scope of operations comparable to that proposed by United and Mexicana. United takes no position with respect to whether the American/Aero California issues must be resolved through bilateral negotiations. However, the much narrower United/Mexicana code share raises no issues that have not already been addressed and resolved by the Department in the case of the comparable Delta/Aeromexico code share. No bilateral consultations were required there and none are required here. The Department approved the Delta/Aeromexico code share under principles of comity and reciprocity which have equal applicability to the proposal of United and Mexicana:

 

... While there are no specific provisions in the U.S.-Mexico agreement governing codeshare operations, Mexico has previously approved codeshare operations proposed by Delta and Aeromexico as well as between other U.S. and Mexican carriers. In these circumstances, we believe that sufficient reciprocity exists to warrant approval of the proposed Delta/ Aeromexico services.

 

Order 97-1-15 at 6. The same considerations of reciprocity require approval of the United/Mexicana code share to allow these alliances to compete with each other. Continental appears to be venting its frustration at not having found a Mexican code-share partner. Continental is not itself seeking to implement code-share service to Mexico nor is it claiming to be barred from serving any city pair where a designation has been used' to support code-share service.

 

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Continental, therefore, has everything to gain and nothing to lose through the moratorium it proposes because such a moratorium would protect Continental's own U.S.-Mexico market position from the additional competition United will be able to provide under its code share with Mexicana . 3/

 

4. United and Mexicana urge the Department to approve their long-pending code-share application in Docket OST-96-1988. There is no cause, nor has Continental even offered one, for considering the remedy offered by Continental in this docket which involves the American/Aero California applications, as having any applicability to the joint application of United and Mexicana in Docket OST-96-1988.

 

Respectfully submitted,

 

JOEL STEPHEN BURTON

GINSBURG, FELDMAN and BRESS, CHARTERED

1250 Connecticut Avenue, N.W.

Suite 800

Washington, D.C. 20036

(202) 637-9130

Counsel for UNITED AIR LINES, INC.

DATED: June 19, 1997

 

3/ On the basis of total seats scheduled in July 1997 OAG schedules, Continental is the number 2 U.S. carrier between the U.S. and Mexico while United ranks only number 6.