OST-99-5035 / Expanded Air Services at Alaska Intl Airports / Reply Hawaiian Airlines to State of Hawaii / February 16, 1999

In the Matter of

First, should Order 99-1-11 be made final, the Department intends "as a matter of general policy in appropriate bilateral aviation negotiations" to seek, on a reciprocal basis with other countries, to waive any designation and/or frequency limitations in the bilateral agreement between those two countries for services by carriers of both countries on flights that operate via a point or points in Alaska. This would allow each side to add carriers beyond the number allowed in any such agreement so long as those new carriers operated via Alaska and to add frequencies beyond the number allowed in any such agreement, so long as those additional frequencies were operated via Alaska.

Second, the Order indicates that the Department, on its own initiative, proposes to grant exemption authority to all foreign carriers holding scheduled permit or exemption authority (except foreign air carriers of the United Kingdom) to allow them to serve any point or points in Alaska and to coterminalize points in Alaska with other U.S. points for which they hold authority. This would allow foreign air carriers to offer their passengers stopover privileges at Alaskan points, and those passengers may also stopover at other U.S. points so long as all stopover passengers are ticketed and carried by the foreign carrier in question in a through movement into and out of the United States.

Third, the Department is proposing to invite foreign air carriers to apply for exemption authority to serve additional U.S. points on an extrabilateral basis where those additional points would be served only on flights also serving Alaska (i.e., "beyond gateway" authority). Under this proposal, according to the proposed Show Cause Order as it applies to Alaska, the home countries of the foreign applicants would have to respect all aspects of their bilateral aviation agreements with the United States in order for a carrier to be eligible for this expanded authority.

As the Department is aware, the State of Hawaii and the State of Alaska have similar transportation needs and comparable economic dependence on foreign commerce. Hawaii's biggest single industry is its hospitality industry which has in recent years been substantially hurt by the downturn in the Asian economies. Any steps that would facilitate the growth in the traffic to Hawaii from foreign countries would be beneficial to both the State of Hawaii and to Hawaiian Airlines, not only as an interisland carrier, but as a potential competitor in those newly opened reciprocal markets that would be authorized under Order 99-1- I I (should it apply to Hawaii). New tourism from points in the South Pacific, Mexico and South America provide significant economic opportunities for both Hawaii and Hawaiian.

The first two elements of the Department's proposed Order would undoubtedly have beneficial market effects for the State of Hawaii, the traveling public and competitive carriers. However, the third element of the Department's proposal extending "beyond gateway" authority to foreign carriers—is inappropriate for the Hawaii market. Foreign carriers should not be allowed to use any point in the State of Hawaii as a potential hub for operations to cities in the mainland U.S. Hawaiian opposes the grant of any "beyond gateway" authority as described, unless such rights can be made available reciprocally to U.S. carriers in the original carrier's home country.

Because of the importance of increased access to the State of Hawaii and increased access from Hawaii to foreign countries, Hawaiian files this Reply in support of the State of Hawaii's Answer. Hawaiian urges the Department to expand Order 99-1-11 to include the State of Hawaii as set forth above or, in the alternative, to institute a similar Show Cause proceeding to address issues particular to the State of Hawaii.

Respectfully submitted,

Jonathan B. Hill

Heather A. Purcell

Dow, Lohnes & Albertson PLl.C

1200 New Hampshire Ave., N.W. #800

Washington, DC 20036

202/776-2000

Attorneys for Hawaiian Airlines, Inc.

February 16, 1999