OST-96-1250 / OST-96-1146 / OST-95-110 / Undocketed / Air Aruba and Continental Airlines / Reply of Hillsborough Aviation / March 8, 1999

Application of

for reissuance of an exemption from 49 U.S.C. § 41301

Joint Application of

for statements of authorization (U.S.-Aruba code sharing)

On February 24, 1999, Aeropostal alas de Venezuela, C.A. ("Aeropostal")answered conditionally in opposition to: (1) the Application of Air Aruba, N.V. ("Air Aruba") for reissuance of exemption authority and, to the extent necessary, for waiver of the Department's requirement that Air Aruba be substantially owned and effectively controlled by nationals of Aruba; and (2) the joint application of Air Aruba and Hillsborough County Aviation Authority

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Continental Airlines, Inc. ("Continental") for reciprocal code-share authority. /1 Because of the importance of Air Aruba's service to the Tampa Bay area, the Hillsborough County Aviation Authority, operator of Tampa International Airport, requests leave to file the instant reply.

Last month, Air Aruba and Continental submitted two applications that by all reasonable measure should be deemed non-controversial. Aviation relations between the United States and Aruba are governed by an open skies agreement under which airlines of both countries have virtually unrestricted operating and code-share rights in third, fourth and fifth freedom markets. In that procompetitive environment, the U.S. interest lies in assisting Air Aruba regain financial strength through privatization; indirect Venezuelan investment in Air Aruba /2 should not be of U.S. concern. Moreover, a code-share arrangement between Air Aruba and a U.S. airline is expressly authorized by the U.S.-Aruba bilateral.

The Tampa Bay community therefore was surprised by Aeropostal's answer, which opposes a grant of the Air Aruba exemption application and the Continental/Air Aruba code-share application until such time as the Department authorizes code sharing

1/ In its answer at 5, Aeropostal notes that it would further discuss its conditional objection to the Continental/Air Aruba code-share arrangement in a separately filed document. We are unaware that such a document has yet been filed.

2/ The application states (at 2) that direct ownership of 90% of Air Aruba's equity will continue to be held by Aruban entities.

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by American Airlines, Inc. and Venezuelan airline Aeropostal in the U.S.-Venezuela market. the community is filing this reply to forestall an adverse impact on Air Aruba's services.

For a number of years, the Tampa Bay community has been working energetically to obtain additional international air service. In January 1996, Air Aruba responded to the community's needs by commencing Tampa Bay-Aruba operations. Not only has this provided Tampa Bay area residents with direct access to Aruba, but it also has afforded connections to and from Venezuela, thus assisting the Tampa Bay community's efforts to develop its Latin American business links.

Currently, Air Aruba offers four flights per week between the Tampa Bay area and Aruba. Under the contemplated code-share arrangement, Continental will place its code on those flights, injecting a new carrier and, hence, competition into the market and generating more traffic to support Air Aruba's operations. It is of utmost importance to the Tampa Bay community that Air Aruba service continues and, indeed, expands as market conditions warrant. Grant of Air Aruba's exemption application and the Continental/Air Aruba code-share application will have a positive financial impact on Air Aruba and, hence, will advance the above objectives.

Aeropostal makes several invalid arguments in an attempt to raise U.S. policy concerns. The first involves timing -- specifically, that the Department should not grant the applications until such time as it also grants a pending Aeropostal/American

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application for code-share authority in the U.S.-Venezuela market. We respectfully submit that this 'me too' approach should not guide U.S. policy, at least in situations where, as here, the applications deal essentially with different country-pair markets. /3 Here, two airlines have proposed a code-share arrangement that is contemplated by the applicable aviation bilateral and is in the public interest. The arrangement should be evaluated and authorized on its own merits.

Aeropostal also argues against grant of the referenced applications by alleging a three-way linkage of Continental, Air Aruba and Venezuelan airline Aserca. Once again, Aeropostal is unpersuasive. Although Aserca plans to take a substantial ownership interest in Air Aruba and Continental apparently is planning code-share arrangements with both Aserca and Air Aruba, these distinct facts do not provide evidence of a three-airline alliance or, more significantly, of an attempt to circumvent U.S.-Venezuela bilateral require meets.

The Tampa Bay community understands Aeropostal's desire to be lifted from the onerous operating restrictions resulting from Venezuela's placement in FAA Category II and hopes that Venezuela soon will be upgraded. The fact that that has not yet occurred, however, is no reason to penalize a U.S. community such as the Tampa Bay area or an airline from a Category I country.

3/ A minor aspect of the Continental/Air Aruba code-share arrangement involves the placement of the "CO" code on Air Aruba's flights between Aruba and Caracas. All other aspects involve U.S.-Aruba code sharing.

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WHEREFORE the Hillsborough County Aviation Authority respectfully suggests that the Department reissue the referenced Air Aruba exemption and grant the Continental/Air Aruba code-share application.

March 8, 1999

Respectfully submitted,

Michael J. Roberts

Russell E. Pommer

VERNER, LIIPFERT, BERNHARD,

MCPHERSON AND HAND, CHARTERED

901 15th St.,N.W.

Suite 700

Washington, D.C. 20005

(202) 371-6000

Counsel for the Hillsborough County Aviation Authority