OST-97-2965 / OST-98-3626 / Undocketed / OST-98-3640 / American and Iberia / Air Nostrum and Aviaco / Answer of Northwest to Petition of United / June 1, 1998
Applications of:
AMERICAN AIRLINES, INC. ("American") :
Dockets OST-97-2965IBERIA LINEAS AEREAS DE ESPANA, S.A.
: OST-98-3626 and Undocketedfor an exemption under 49 U.S.C. S40109 and statements of authorization under Parts 207 and 212 (reciprocal codeshare services)
Joint Application of:
AIR NOSTRUM, LINEAS AEREAS DEL MEDITERRANEO, S.A. ("Air Nostrum")
AVIACION Y COMERCIO, S.A. ("Aviaco")
for an exemption pursuant to 49 U.S.C. 40109
ANSWER OF NORTHWEST AIRLINES INC.
IN SUPPORT OF PETITION OF UNITED AIR LINES INC.
FOR REVIEW OF STAFF ACTION
Northwest Airlines, Inc. ("Northwest") hereby files the following Answer in support of the
Petition of United Air Lines, Inc. ("United") for review of staff action. In its Petition, United seeks the Department's review of the staff's oral approval, by Notice of Action Taken dated April 30, 1998, of certain statements of authorization issued to Iberia, Air Nostrum and Aviaco permitting these carriers to display the code of American on flights operated by the Spanish carriers between Madrid and Rome, Italy. For the reasons set forth below, Northwest supports United's Petition and urges the Department to review the staff's grant of code-share authority to Iberia, Air Nostrum and Aviaco and, upon review, to dismiss these carriers' applications, just as the Department previously dismissed the application of Northwest/KLM to provide third-country code-share service between the U.S. and Italy.1. By
Notice of Action Taken dated April 30, 1998, the Department's staff orally approved statements of authorization for Iberia, Aviaco and Air Nostrum to display the designator code of American on flights operated by these Spanish carriers between, inter alia, Madrid and Rome. This action by the staff was based on a finding that such service was consistent with the U.S.-Spain bilateral air services agreement. That agreement authorizes a U.S. carrier to serve Rome as a point beyond Madrid.2. In issuing the aforementioned statements of authorization, however, the staff apparently overlooked the fact that the code-share service proposed by American and its Spanish carrier partners between the U.S. and Rome, via Madrid, is inconsistent with the U.S.-Italy bilateral air services agreement. Indeed, in dismissing a substantially identical third-country code-share application by Northwest/KLM, the Department stated that:
"[t]he requested rights are not available under the U.S.-Italy Aviation Agreement. In these circumstances, we will dismiss this application without prejudice." Order 96-7-44.
3. The U.S.-Netherlands bilateral authorizes the proposed Northwest/KLM third-country code-share services, as the Department found to be the case with respect to the U.S.-Spain bilateral. The Department nevertheless dismissed Northwest's application to code-share on KLM's flights between Amsterdam and Italy due to the lack of requisite authority under the U.S.-Italy bilateral. There has been no modification to the U.S.-Italy air transport agreement since the date the Department dismissed the applications of Northwest/KLM. Under the circumstances, there can be no justification for the staff's accordance of more favorable treatment to the applications of American and its Spanish partners to provide third-country code-share service in the U.S.-Italy market.
4. Moreover, unlike American and United, Northwest presently is foreclosed entirely from serving the U.S.-Italy market. As the Department knows, Northwest long has sought authority to operate to Italy, particularly from its Detroit hub. In granting Northwest back-up authority in the 1996 U.S.-Italy Route Proceeding, the Department recognized the substantial consumer and competitive benefits that will be realized if Northwest is permitted to enter the U.S.-Italy market. Unfortunately, there are no additional U.S. carrier designations available under the bilateral and the Italian Government to date has been unwilling to authorize Northwest to enter the U.S.-Italy market on an extrabilateral basis, either directly or via codesharing.
5. When it comes to Italy, it should be the Department's first priority to obtain authority for Northwest to enter and compete in the U.S.-Italy market by operating direct service between Detroit and Italy, as well as code-share service in conjunction with KLM. Unless and until the Department is successful in gaining access into the U.S.-Italy market for Northwest, the Department should not grant the incumbent carriers American and United any extrabilateral authority to serve Italy.
Conclusion
For the foregoing reasons, Northwest asks the Department to review the staff's oral action in approving the statements of authorization for Iberia, Aviaco and Air Nostrum to display the designator code of American in the Madrid-Rome market and, on review, to reverse that action and dismiss the relevant portions of these applications.
Respectfully submitted,
Megan Rae Poldy
Associate General Counsel
NORTHWEST AIRLINES, INC.
901 15th Street, N.W.
Suite 310
Washington, D.C. 20005
(202) 842-3193
June 1, 1998