OST-00-7194 / US-Vietnam Third-Country Codesharing Opportunities / Reply of Northwest / April 18, 2000

 

U.S.-VIETNAM THIRD-COUNTRY CODE-SHARING OPPORTUNITIES / Docket OST-2000-7194

 

CONSOLIDATED REPLY OF NORTHWEST AIRLINES, INC.

 

Northwest Airlines, Inc. (Northwest"), pursuant to the Department's Notice entitled "U.S.-Vietnam Third-Country Code-Share Opportunity" served on April 5, 2000, hereby submits this Consolidated Reply to the answers of Delta Air Lines, Inc. ("Delta"), United Air Lines, Inc. ("United") and American Airlines, Inc. ("American").

American's application should be denied because American's proposed codeshare flights on Swissair overfly Afghanistan.

American states in its answer that Swissair's flights between Zurich and Vietnam, via Singapore, operate over U.S. restricted Afghanistan airspace. U.S. carriers are clearly prohibited from code-sharing on flights overflying Afghanistan. See 14 C.F.R. Part 91 (SFAR No. 67). In August 1998, Delta and Swissair entered into a Consent Order with the Department finding that the carriers engaged in prohibited codeshare flights over Afghanistan on flights between Zurich, on the one hand, and Singapore, Delhi and Bangkok, on the other. The Department assessed Swissair a $50,000 civil penalty. Order No. 98-8-10.

American acknowledges in its answer that codesharing by U.S. carriers on such flights is prohibited, Consolidated Answer of American Airlines, Inc., at 2-3, but states that it will request

 

Consolidated Reply of Northwest Airlines, Inc.

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that Swissair reroute its flights if American is awarded the designation. However, American offers no assurances that Swissair can or will do so. American also proposes no alternative routes or intermediate gateways that would avoid overflying Afghanistan. Thus, American's service proposal is speculative and impossible to evaluate on a basis that is fair and reasonable. Under these circumstances, the Department should deny American's application.

Delta should be required to give the Department further information before the Department considers its application.

It appears that Delta's codeshare operation on flights operated by Air France between Paris, on the one hand, and both Singapore and Bangkok, on the other, may also overfly Afghanistan. Northwest urges the Department to request that Delta report whether its proposed codeshare flights overfly Afghanistan. If the answer is in the affirmative, Delta's application should also be denied.

It has been reported that Delta has been in discussions with Vietnam Airlines regarding a proposed cooperative marketing agreement. Codesharing between U.S. carriers and Vietnamese carriers is authorized by the U.S.-Vietnam MOD without limitations as to the number of codeshare frequencies allowed. If Delta plans to gain access to the limited U.S.-Vietnam market via a codeshare arrangement with Vietnam Airlines, it would not be in the public interest to also award Delta one of the three valuable third-country opportunities. Accordingly, the Department should also require Delta to report on the status of its potential codeshare relationship with Vietnam Airlines.

 

Consolidated Reply of Northwest Airlines, Inc.

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United concedes that it may not be in the public interest to allocate to United all 14 of the frequencies it has proposed.

United has requested an allotment of 14 of the available 21 frequencies. United's first priority is to provide daily service to Ho Chi Minh City; United will use any remaining frequencies it is allocated to serve Hanoi and Da Nang. Consolidated Answer of United Air Lines, Inc. at 11. United acknowledges in its answer, however, that the Department should award United frequencies in excess of seven only "as is feasible after other carriers' services, which are found to produce consumer benefits, have been accommodated." Id.

United takes a similar position in the pending proceeding entitled "U.S.-Turkey Combination Third-Country Codeshare Opportunities" (Docket OST-2000-7148). As is the case here, the Department in the Turkey proceeding is considering how to allocate three designations and 21 weekly frequencies for third-country codeshare service. In United's application for one of the U.S.-Turkey designations and seven frequencies, United argues that the Department should award an equal number of frequencies (seven) to each of three U.S. carriers, rather than awarding a disproportionate number of frequencies to one carrier. Application of United Air Lines, Inc., Docket OST-2000-7148, at 3. The same rationale applies here.

Northwest should be one of the three U.S. carriers selected, as Northwest's proposal is clearly superior to American's

There are only three viable applicants in this proceeding in light of American's admission that its proposed codeshare service would involve flights which Swissair currently operates over Afghanistan airspace. Even ignoring this fatal defect, Northwest's proposal is clearly superior to American's. Northwest proposes to serve twice as many points in Vietnam, with twice as many weekly frequencies as American, and will provide a more efficient and convenient service. Northwest will offer six roundtrip flights a week, whereas American proposes only three.

 

Consolidated Reply of Northwest Airlines, Inc.

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Northwest proposes to serve both Hanoi and Ho Chi Minh City, whereas American proposes to serve only Ho Chi Minh City. /1

Northwest's gateways to Vietnam provide better service to a much larger portion of the U.S.-Vietnam travelling public than American's. As shown by United, Northwest's two-stop gateways account for 37% of the U.S.-Vietnam traffic whereas American's gateways account for only 2% of the market's traffic. United Answer at 7.

Northwest's service in the important Los-Angeles-Ho Chi Minh City is superior to American's. Los-Angeles-Ho Chi Minh City is the largest U.S.-Vietnam city pair with 29.2 percent of the U.S.-Vietnam traffic. Id. at 3. Northwest will provide better service from Los Angeles to Ho Chi-Minh City than American. Northwest will provide one more weekly roundtrip flight to Ho Chi Minh City than American (four weekly flights as opposed to three). The average elapsed time on Northwest's service with MAS between Ho Chi Minh City and Los Angeles will be approximately three hours less than the average elapsed time on American's service with Swissair. See Exhibit NW-1.

In conclusion, the Department should take full advantage of all three U.S. carrier designations it successfully bargained for under the U.S.-Vietnam MOD. American should be disqualified from consideration due to Swissair's overflying of restricted Afghanistan space, leaving only three applicants eligible for the three available designations: Northwest, United and Delta. In any event Northwest's application is superior to American's and therefore Northwest should be one of the three designated carriers. Allocating Northwest all six of the frequencies it

1/ American states in its answer that MAS' flights to and from Ho Chi Minh City are shown in the OAG as being operated by "MH/VN". All of the flights on which Northwest has proposed codeshare service in this proceeding are operated by MAS.

 

Consolidated Reply of Northwest Airlines, Inc.

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has requested will leave 15 frequencies available for allocation among the remaining two selected designees, only one of which (United) has proposed more than 7 frequencies.

WHEREFORE, the Department should award Northwest one of the three third-country codeshare opportunities and an allocation of six of the 21 available frequencies.

 

Respectfully submitted,

Megan Rae Rosia

Managing Director, Government Affairs &

Associate General Counsel

NORTHWEST AIRLINES, INC.

901 15th Street, N.W.

Suite 3 10

Washington, D.C. 20005

(202) 842-3193