OST-97-2961 / Aero California / Exemption, Codesharing with American / October 1, 1997

Notice: Pursuant to 14 C.F.R. § 302.406, any person may support or oppose this application by filing an answer and serving a copy of the answer on all persons served with this application. The due date for answers is October 16, 1997.

Application of

for an exemption from 49 U.S.C. § 41301

(code-sharing)

Aero California requests that this authority be issued for an initial period of one year or immediately following the Department's grant of its permit application, whichever occurs first. /1 In support of this application, Aero California submits the following:

1. Aero California is a corporation organized and existing under the laws of Mexico. It has continuously and successfully engaged in transporting persons, property and mail within Mexico since 1967. Aero California is headquartered at La Paz, Baja California Sur International Airport. With its fleet of DC-9 aircraft, Aero California currently provides service between points throughout the Baja California Peninsula and numerous other points within Mexico, on the one hand, and points in California and Arizona, on the other.

1/ Aero California's application for issuance of a foreign air carrier permit, Docket 42012, was originally filed on February 21, 1984. That application, as amended, is still pending before the Department.

2. Aero California currently holds exemption authority from the Department to provide scheduled combination service between (1) the coterminal points Loreto, San Jose del Cabo, Culiacan, Hermosillo, La Paz and Manzanillo, Mexico, and the terminal point Los Angeles, California; (2) San Jose del Cabo, Mexico and Phoenix, Arizona; (3) Hermosillo, Mexico and Tucson, Arizona; (4) the coterminal points Mazatlan, Guaymas and Tijuana, Mexico, and the terminal point Los Angeles, California; and (5) Durango, Mexico and Los Angeles, California; (6) Loreto, Mexico and Albuquerque, New Mexico; (7) Mazatlan, Mexico and Phoenix, Arizona; (8) Puerto Vallarta, Mexico and Dallas-Ft. Worth, Texas; (9) Puerto Vallarta, Mexico and Phoenix, Arizona; (10) San Jose del Cabo, Mexico and San Francisco, California; (11) Torreon, Mexico and Los Angeles, California; (12) Mazatlan, Mexico and San Francisco, California; (13) Puerto Vallarta, Mexico and San Francisco, California; (14) Chihuahua, Mexico and Dallas-Fort Worth, Texas; (15) Aquascalientes, Mexico and Dallas-Ft. Worth, Texas, (16) Mazatlan, Mexico and Dallas-Fort Worth, Texas and (17) Zacatecas and Dallas-Ft. Worth, Texas. These exemption authorities were granted or renewed in Docket Nos. OST 96-1836 (issued on October 18, 1996); OST-97-2446 (issued May 28, 1997); OST-97-2481 (issued June 27, 1997 and July 10, 1997); and OST-97-2791 (issued August 26, 1997).

3. DOT has previously-found Aero California to be "operationally and financially qualified" to conduct operations between specified points in Mexico and the United States in a series of dockets. See, e.q., Docket Nos. OST-95-696 and OST-95-701. The factors which supported those earlier findings have not changed.

4. Aero California and American have entered into amendments to their code-share agreement, which amendments have been filed with the Office of International Aviation as attachments to the above-noted request for statements of authorization, under which they will offer code-share services in the three additional markets that are the subject of this application, as well as other U.S./Mexico markets. Aero California will place its "JR" designator code on the American flights to be operated in those markets.

5. Although the U.S./Mexico bilateral air services agreement does not contain a code-share provision, the proposed services are supported by principles of comity and reciprocity and are consistent with the public interest in enhanced and competitive international flight services. Both the United States and Mexico have previously authorized each other's carriers to code share in numerous markets similar to those involved in this ''proceeding. E.q., Order 97-1-15, Joint Application of Delta Air Lines, Inc. and Aerovias de Mexico, S.A. (Jan. 8, 1997). The Department has also approved numerous similar code-sharing arrangements involving other carriers and other markets, and encourages such services in the interest of consumers and competition.

6. Aero California understands that U.S. and Mexican aviation authorities may be discussing the question of whether designations are required for a non-operating carrier in connection with code-sharing services. The Department has expressed the view that "bilateral restrictions on the number of carriers that may operate services from the same city-pair gateways should not apply to code-share services from those gateways, especially in the majority of cases in which the code-sharing carrier does not hold out service from that gateway." See Notice of Action Taken in Dockets OST-96-1896 and OST-96-1332 (Nov. 27, 1996). While the designation question may not yet be resolved, Aero California will request of the Mexican government that it be designated to serve the markets that are the subject of this application should a determination be made that such designation is required for code-share services.

WHEREFORE, for the reasons stated above, Aero California respectfully requests the Department of Transportation to grant its exemption authority for the above-described routes for a period of at least one year or until it approves Aero California's application for a foreign air carrier permit in Docket 42012, whichever occurs first.

Respectfully submitted,

David H. Coburn

STEPTOE & JOHNSON ALP

1330 Connecticut Avenue, N.W.

Washington, D.C. 20036

(202) 429-8063

(202) 429-3902 (fax)

Attorney for Aero California

October 1, 1997