OST-98-3571 / Mexicana / Zacatecas-Oakland / March 2, 1998

NOTICE: Interested persons must submit to the Department of Transportation answers to this application on or before March 17, 1998.

In the matter of the application of

COMPANIA MEXICANA DE AVIACION, S.A. DE C.V.

Docket OST-98-3571

for an exemption to provide scheduled service between Zacatecas, Mexico and Oakland, California

Compania Mexicana de Aviacion, S.A. de C.V. ("Mexicana"), pursuant to the provisions of Title 49 of the United States Code and Subpart D of the Procedural Regulations of the Department of Transportation (the "Department"), hereby requests an exemption from 49 U.S.C. 41301 and from any other provisions of Title 49 and the Economic Regulations of the Department to the extent necessary to permit Mexicana to engage in the scheduled foreign air transportation of persons, property and mail between Zacatecas, Mexico and Oakland, California. Mexicana requests that this exemption be granted for at least a one-year period. Mexicana plans to commence service on this route shortly after the Department's approval of this application.

Application of Compania Mexicana de Aviacion, S.A. de C.V.

Docket OST-98

March 2, 1998

Mexicana submits that it is fit, willing and able to perform this service and that the service is clearly consistent with the public interest.

1. Mexicana is well-known to the Department of Transportation as one of the world's major international airlines. It is one of the oldest air carriers in the world, having begun operations in Mexico in 1921 and offering continuous service since that time. Mexicana has operated between the United States and Mexico for more than fifty consecutive years pursuant to a number of foreign air carrier permits issued by the Department or its predecessor, the Civil Aeronautics Board.

2. Under authority of its current foreign air carrier permit (Order 78-6-127), or additional exemption grants in various dockets, Mexicana currently provides service between numerous points in the United States and Mexico.

3. Mexicana is a citizen of Mexico. As part of a restructuring of Mexicana in June 1996, the carrier's ownership was transferred to the Mexican company Corporacion Internacional de Aviacion ("CINTRA"). CINTRA is seventy percent-owned by a consortium of Mexican banks and twenty-one percent-owned by the Government of Mexico.

4. The Director General, principal management officials and all of the members of the Board of Directors of Mexicana are citizens of Mexico. Both the Department of Transportation and the Civil Aeronautics Board have recognized

Application of Compania Mexicana de Aviacion, S.A. de C.V.

Docket OST-98

March 2, 1998

Mexicana's Mexican citizenship on numerous past occasions. Nothing in the 1996 restructuring of Mexicana did anything to affect the Mexican citizenship of the carrier.

5. Mexicana requests authority from the Department to provide scheduled combination service between Zacatecas, Mexico and Oakland, California. Mexicana expects to commence operations on this route shortly after receiving authority from the Department of Transportation, and plans to conduct its services with B727-200 or A320 aircraft configured to seat 156 passengers.

6. On November 21, 1991, the United States and Mexico signed an amendment to the Air Transport Agreement of August 15, 1960 broadening air transport services between the two countries and permitting designated Mexican carriers to operate from "a point or points in Mexico to a point or points in the United States." The Zacatecas-Oakland route is clearly within the scope of the amendments to the Air Transport Agreement between the United States and Mexico. Mexicana has been authorized by the Mexican Government to provide service on this route and expects to be designated shortly for this service. Attached is a copy of a letter from the Mexican DGAC to the Ministry of Foreign Relations requesting that the Ministry notify the United States of Mexicana's designation to serve Zacatecas-Oakland. The Department has consistently recognized that the inclusion of a point in

Application of Compania Mexicana de Aviacion, S.A. de C.V.

Docket OST-98

March 2, 1998

a bilateral agreement to which the United States is a party and the designation of a foreign carrier by its home country government for service to that point satisfy all public interest requirements for the grant of exemption authority.

7. Mexicana is subject to the safety and operational rules of the Government of Mexico. Mexico is a contracting party to the Convention on International Civil Aviation and observes all applicable ICAO standards.

8. This exemption application raises no environmental or energy issues. Mexicana will perform these services entirely with modern, noise-compliant aircraft. Similarly, approval of this request will not result in a near term increase in fuel consumption of ten million gallons or more.

WHEREFORE, Compania Mexicana de Aviacion, S.A. de C.V. ("Mexicana") respectfully requests that it be exempted from 49 U.S.C. 41301 and the Department's Regulations to the extent necessary to permit Mexicana to provide

Application of Compania Mexicana de Aviacion, S.A. de C.V.

Docket OST-98

March 2, 1998

scheduled combination service in foreign air transportation between Zacatecas, Mexico and Oakland, California.

Respectfully submitted,

Robert D. Papkin

Charles F. Donley II

SQUIRE, SANDERS & DEMPSEY L.L.P.

1201 Pennsylvania Avenue, N.W.

P. O. Box 407

Washington, D.C. 20044

(202) 626-6601

Counsel to Compania Mexicana de Aviacion, S.A. de C.V.

DATE: March 2, 1997