OST-97-3092 / Undocketed / Continental and Aeroflot / Joint Reply of Aeroflot and Continental / December 3, 1997

Application of :

AEROFLOT RUSSIAN INTERNATIONAL AIRLINES

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

Application of :

CONTINENTAL AIRLINES, INC.

for an exemption pursuant to § 40109 (Miami-Moscow)

Joint Application of:

AEROFLOT RUSSIAN INTERNATIONAL AIRLINES, CONTINENTAL AIRLINES, INC. AND CONTINENTAL EXPRESS, INC.

for statements of authorization under Parts 207 and Part 212 of the Department's Regulations to engage in code-sharing

 

JOINT CONSOLIDATED REPLY OF

CONTINENTAL AIRLINES, INC., CONTINENTAL EXPRESS, INC.

AND AEROFLOT RUSSIAN INTERNATIONAL AIRLINES

 

Delta /1 asks the Department to defer action on the code-share requests of Continental and Aeroflot until a new bilateral agreement is negotiated, and United says the requests should be deferred or dismissed until Russia renews United/Lufthansa third-country code-share authority. Instead, the Department

1/ Common names of parties are used.

 

Joint Consolidated Reply of Continental,

Continental Express and Aeroflot

Page 2

 

should approve proposed Continental/Continental Express/Aeroflot code-sharing immediately, as Houston and the Regional Business Partnership (Newark) urge, so passengers, shippers and U.S. cities can begin enjoying the service and competition benefits the code share will bring. Alternatively, the Department could defer -- not dismiss -- the applications while negotiations aimed at resolving bilateral issues continue.

Continental, Continental Express and Aeroflot state as follows in support of their position:

1. No party disputes the public benefits of Continental/Continental Express/Aeroflot code sharing, and the answers of Houston and the Regional Business Partnership (Newark) demonstrate that the benefits for U.S. cities, travellers and shippers are substantial. The code share will greatly benefit Houston, which "has long-standing economic ties with Moscow and the former Soviet Bloc countries." (Houston Answer at 2) Approval "will promote competition by providing alternate transportation options to Moscow travelers," and "enhance Continental's existing international network, which allows Houston to better compete with other international gateways." (Id. at 2-3) "Travelers and shippers who rely on Newark International Airport will benefit greatly from Continental and Aeroflot nonstop Newark-Moscow service, and approving the code-share will advance the U.S. objectives of '[i]ncreas[ing] the variety of price and service options available to consumers' and '[e]hancing access of the U.S cities to the

 

Joint Consolidated Reply of Continental,

Continental Express and Aeroflot

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international air transportation system."' (Regional Business Partnership Answer at 2, quoting U.S. International Air Transportation Policy Statement at 7, April 1995)

2. Aeroflot, Continental and Continental Express believe Russia's approval of Delta/Swissair, Northwest/KLM and Northwest/Alaska code-sharing provide ample reciprocity for approval of the proposed Continental/Continental Express/Aeroflot code-share. Delta errs in suggesting that Russia's refusal to permit third-country code shares by United/Lufthansa or Delta/Austrian and Russia's position during the November round of talks preclude immediate approval of the U.S.-Russia code-sharing proposed by the Joint Applicants. If the Department agrees with Delta (and United) that Russian comity and reciprocity do not support immediate approval of the code share, however, the Department should defer consideration of the Joint Application while U.S. and Russian negotiators pursue a new bilateral agreement and resolution of outstanding issues.

3. United first advocates deferral until Russia permits United/Lufthansa third-country code-sharing, and suggests dismissal as an alternative. Dismissing the Joint Application would serve no useful purpose, however, and should not be considered. If the Department is not prepared to grant the application now, it should defer action pending further negotiations with Russia. Deferral will encourage further negotiation of outstanding bilateral issues. As United recommended in connection with the American/Transaero code-share application,

 

Joint Consolidated Reply of Continental,

Continental Express and Aeroflot

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the U.S. "should use the leverage created by this application to negotiate a settlement of the dispute raised by the Russian Federation's denial of United's code-share." (Consolidated Answer of United in Docket OST-96-1485 at 9 /2 Deferral rather than dismissal will also permit the Department to resume consideration of the Joint Application as soon as bilateral issues are resolved with a minimum of administrative expense and effort.

For the foregoing reasons, the Department should grant the Continental/Continental Express/Aeroflot code-share requests immediately.

2/ See Joint Application of American and TransAero, filed July 22, 1996, and related American exemption application in Docket OST-96-1485. The Department has deferred that application for over a year.

 

Joint Consolidated Reply of Continental,

Continental Express and Aeroflot

Page 5

 

Alternatively, the Department should defer consideration of the requests until further negotiations are completed and outstanding issues are resolved.

Respectfully submitted,

Gary Garofalo of BOROS& GAROFALO, P.C. for Aeroflot

Lorraine Halloway of Crowell Moring for Continental

 

December 3, 1997