OST-99-4994 / Undocketed / American and JAL / Answer of United / January 26, 1999

OST-99-4994 / Undocketed / American and JAL / Answer of American / January 26, 1999

Application of

AMERICAN AIRLINES, INC. / Docket OST-99-4994

under 49 U.S.C. 40109 for an exemption (U.S.-Japan and beyond; code sharing with Japan Airlines Co., Ltd.)

Joint Application of

AMERICAN AIRLINES, INC. and JAPAN AIRLINES CO., LTD. / Undocketed

for statements of authorization under 14 C.F.R. Part 212 (reciprocal code sharing services)

ANSWER OF UNITED AIR LINES, INC.

United Air Lines, Inc. ("United"), pursuant to 14 C.F.R. Part 212(e)(1) and Rule 406 of the Department's Rules of Practice ( 14 C.F.R. § 302.406), hereby answers the applications of American Airlines, Inc. (and its regional affiliates American Eagle Airlines, Inc. and Executive Airlines, Inc. d/b/a American Eagle) ("American") and Japan Airlines Co., Ltd. ("JAL") for an exemption and statements of authorization to engage in reciprocal code-share services.

1. The recent expansion of code-share service in the U.S.-Japan market is generating valuable benefits for U.S. carriers and consumers, including new seamless on-line connecting service for many U.S. communities. United recently began code sharing with All Nippon Airways Co., Ltd. ("ANA") under the terms of the 1998 U.S.-Japan Memorandum of

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Understanding ("MOU"), which forms the basis for these new code-share alliances. The proposed American/JAL code share will offer similar benefits, and United supports a grant of code-share authority to American/JAL provided it is issued subject to the same conditions and limitations as those imposed on the United/ANA authority. See United/ANA statement of authorization granted August 7, 1998

2. The American/JAL request for statements of authorization generally mirrors the scope of authority issued to United/ANA. As such, it should be granted subject to the same conditions imposed on United/ANA, including the condition that American/JAL notify the Department no later than 30 days before they begin any new code-share service under their statements of authorization. American and JAL already have provided notice of their intention to implement Phases 1 and 2 of the code sharing under their agreement. In later phases, American and JAL plan to code share to hundreds of additional points. Because the Department has determined that, effective February 22, 1999, code-share applications will be filed in the public docket /1 the Department also should require that all carriers' 30-day code-share notifications be filed in the public docket to provide interested parties actual notice of new code share implementation. /2

The American/JAL statements of authorization also should be explicitly conditioned on the fifth freedom limitations contained in condition (f) of the United/ANA

1/ 64 Fed. Reg. 3212-13 (Jan. 21, 1999).

2/ To the extent this may require the opening of dockets for previously approved blanket statements of authorization subject to 30-day notification requirements, United would support that action.

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statement of authorization, which generally requires that service be consistent with all applicable U.S. bilateral agreements. Further, the blanket statement of authorization should not be construed as conferring upon American any rights (including code share, fifth freedom intermediate and/or beyond rights) to serve markets where U.S. carrier rights are limited unless American first notifies the Department of its intent to serve such a market, allowing the opportunity for a carrier selection proceeding. Finally, American's blanket statement of authorization should not be construed as providing it any preference in a carrier selection proceeding to determine allocation of dormant limited-entry route authority. /3 All of these conditions are particularly important here because the later phases of the American/JAL code-share agreement contemplate service to limited-entry points or countries with no bilateral code-share or third-country code-share provision, such as Argentina, China, Colombia and Hong Kong

4. With respect to American's request for underlying exemption authority, American's exemption request is overly broad to the extent that American seeks authority to engage in foreign air transportation of persons, property, and mail "between a point or points in the United States and a point or points beyond the United States." American Application for Exemption at 1. American's intermediate and beyond authority should be limited in the same manner as United's Japan certificate, which provides that "[t]he authority granted to serve

3/ United's position underscoring the need for equal treatment is prompted by the Department's apparent inconsistency in applying conditions to code shares involving U.S. and Japanese carriers. See, e.g., Northwest/NCA statement of authorization, approved December 18, 1998. In that statement of authorization, the Department omitted the condition requiring advance notice of any new service in limited-entry markets operated by virtue of the blanket statement of authorization. See condition (f) to the United/ANA code share statement of authorization, approved August 7, 1998.

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intermediate and beyond points in conjunction with Japan service on segment 10 of this certificate is limited to countries with which the United States has signed open-skies agreements and/or countries for which the carrier holds authority to serve under certificates or exemptions issued by the Department. and for which it holds route integration authority." Order 98-6-22. See also United's Japan exemption issued by Order 98-7-21. In the alternative, if the Department is prepared to grant American broader third country authority than that granted to United, the Department should expand United's third country authority consistent with that issued to American.

5. Finally, the American/JAL agreement does not presently contain an exclusivity provision. United has urged that such provisions be allowed, but the Department has undertaken a review of that position as well as of United's exclusivity provision in its code-share agreement with ANA. Depending on the outcome of the Department's review, American and JAL may later adopt such a provision. The Department should, therefore, require that they submit any such provision to the Department for review. See, e.g., Notice of Action Taken, Joint Application of Delta Air Lines., Inc. and China Southern Airlines Limited, January 21, 1999 at 2, n. 2.

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Respectfully submitted,

JEFFREY A MANLEY

CAREEN P. PETERSON

KIRKLAND & ELLIS

655 Fifteenth Sweet, NW

Washington, DC 20005

(202) 879-5161

Counsel for UNITED AIR LINES, INC.

DATED: January 26, 1999