OST-97-2232 / Pacific International / Renew All-Cargo Panama City-San Juan via Kingston & Curacao / March 20, 1998

In the matter of the application of

for an exemption from 49 U.S.C. 41301 to conduct scheduled all-cargo service between Panama City and San Juan via Kingston and Curacao

On March 25, 1997, the Department of Transportation (the "Department") granted Pacific International Airlines, S.A. ("Pacific") an exemption from 49 U.S.C. 41301 to perform scheduled foreign air transportation of property and mail between Panama City, Panama and San Juan, Puerto Rico via the intermediate points Curacao, Netherlands Antilles and Kingston, Jamaica. This authority was granted for a one-year period which, by its terms, will expire on March 25, 1998. Pacific hereby requests renewal of this authorization for an additional one-year period. Pacific relies upon the provisions of the Administrative Procedure Act and Part 377 of the Department's Procedural Regulations to continue its existing authorization in force pending a anal decision on this renewal application.

Application for Renewal of Exemption / Docket OST-97-2232 / March 20, 1998

As indicated below, all of the factors that originally led the Department to grant the requested exemption to Pacific have been confirmed and continue in existence at the present time. Pacific has operated successfully between San Juan and Panama during the past year, with excellent acceptance from shippers. Pacific's services are consistent with the terms of the May 1997 U.S.-Panama bilateral agreement and are supported further by comity and reciprocity between the United States and Panama. Accordingly, Pacific submits that renewal of its exemption authority is clearly mandated under established policies of the Department. In further support of its request for renewal, Pacific states as follows:

1. Pacific commenced weekly service between Panama City and San Juan via Kingston and Curacao in March 1997 utilizing B727-100 freighter aircraft. These operations have been performed without accident or incident. Pacific submits that its fitness to continue to provide these services is thus clearly established.

2. Pacific's stock is owned entirely by Panamanian citizens. Each member of Pacific's Board of Directors is a citizen of Panama. All officers and key management personnel of Pacific are also citizens of Panama. Pacific submits that the foregoing demonstrates that it remains substantially owned and effectively controlled by citizens of Panama.

3. Pacific's operations are regulated by the Government of the Republic of Panama. Panama is a contracting State to the Convention on International Civil Aviation ("Chicago Convention") and observes all applicable

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ICAO standards. All maintenance on Pacific's aircraft is and will continue to be performed in accordance with programs that comply with the provisions of ICAO Pilots and Airmen Annexes 1, 6 (Part 1 ) and 7.

4. On March 12, 1997 the United States and Panama initialed an important new air transportation services agreement, representing the very first open skies agreement for the United States in Latin America. As such, the agreement constitutes an significant step forward for Panama as well as the United States. Pacific's services are clearly within the scope of the March 12 agreement. The agreement permits unrestricted services by both countries' carriers between the United States and Panama via intermediate points, and is similar in breadth to open-skies agreements concluded by the United States with various European and Asian nations.

Even in the absence of an open skies agreement, however, renewal of Pacific's exemption is justified on the basis of comity and reciprocity between the United States and Panama. The Government of Panama has been extremely liberal in authorizing U.S. carrier service to Panama. Currently, scheduled cargo service in the Panama City-Miami market is provided by several U.S. carriers and the Department has recognized Panama's willingness to authorize additional U.S. carrier services. 1/ The Department has also noted previously the excellent state of aviation relations

1/ See, e.g., Application of Millon Air, Inc., Order 91-3-60, April 5, 1991. The Panamanian DAC has in the past authorized fifth freedom operations by Arrow Air, Challenge Air Cargo, Florida West Airlines, Continental Airlines, American Airlines and Fine Airlines.

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between the United States and Panama. 2/ In view of the Panamanian Government's liberal attitude toward U.S. carrier service and willingness to approve U.S. carrier fifth freedom operations, renewal of Pacific's exemption would be fully consistent with the public interest.

5. Pacific submits that this renewal application raises no environmental or energy issues. Pacific will continue to perform its services entirely with modern, noise-compliant aircraft. Indeed, since Pacific is seeking renewal of authorization for services which are currently being performed, the incremental environmental impact of such renewal can truly be said to be de minimis. Similarly, there is no reason to believe that approval of this exemption renewal will result in a near term increase in fuel consumption of ten million gallons or more.

WHEREFORE, Pacific International Airlines, S.A. respectfully requests that the exemption granted to it to provide scheduled foreign air transportation of property and mail between Panama City, Panama and San

2/ Application of Trans Latin Air, Inc., Order 93-2-12, February 4, 1993 ("The current status of our aviation relationship with Panama supports grant of the [scheduled all-cargo] authority at issue hereby.

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Juan, Puerto Rico via Kingston, Jamaica and Curacao, Netherlands Antilles be renewed for an additional one-year period on its existing terms and conditions.

Respectfully submitted,

SQUIRE SANDERS, Robert D Papkin, Charles Donley II

Counsel to Pacific International Airlines, S.A.

DATED: March 20, 1998