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OST-1995-764

Hong Kong Fifth Freedom All- Cargo Proceeding

UPS will serve the market with B-757 aircraft and use the frequencies in the Hong Kong - Manila market. UPS currently operates a Hong Kong-Manila flight but does not have the ability to place Asia origin/destination volume on flights to and from Hong Kong.  It would be in the public interest to award these valuable route rights to UPS because the fifth freedom traffic will strengthen UPS' Asian system. UPS was an applicant in the original Hong Kong Fifth Freedom All-Cargo Proceeding and was not awarded the frequencies. Five of the frequencies were awarded to Federal Express and three to Air Micronesia. Since that time, no new fifth freedom frequencies have been negotiated, and UPS, which has a significant operation at Hong Kong, has suffered from the inability to carry fifth freedom traffic to and from Hong Kong. Hong Kong is the largest Asia-Pacific express market outside Japan. Both of UPS' primary global competitors, Federal Express and DHL, have the ability to connect Hong Kong directly to their Asian networks. Federal Express uses its intra­Asia hub in Subic Bay to connect to and from  other Asian gateways. DHL uses its agreement with Cathay Pacific to link to Japan, Taiwan, Singapore and Europe sectors all denied to U.S. carriers.

It also would be in the public interest to award these frequencies to UPS because UPS is the only U.S. express/all-cargo carrier able to compete with the incumbent, Federal Express. Federal Express was awarded five of these frequencies in the original proceeding and is using them to operate between Hong Kong and Subic Bay in the Philippines. UPS has been hobbled in its ability to compete with Federal Express by the inability to carry local Hong Kong - Asia traffic on its flights.

Counsel:  Kelley Drye, David Vaughan, 202.955.9864

Hong Kong Fifth Freedom All- Cargo Proceeding

Evergreen International Airlines, Inc. hereby applies pursuant to Section 302.301 of the Department's Rules of Practice, 14 C.F.R. 302.301 for the allocation of three available weekly Hong Kong fifth freedom frequencies to enable it to provide scheduled all-cargo service between Hong Kong and Seoul. If it receives the fifth freedom frequency allocation it here requests, Evergreen will use this award to operate three weekly B-747 roundtrip freighter flights to Hong Kong and Seoul on the following routing: U.S.-Seoul-Hong Kong-Seoul-U.S. via a technical stop at Anchorage. The U.S. points served would include San Francisco, New York (JFK) and Columbus Ohio's Rickenbacker International Airport, the home of Evergreen's midwest terminal/distribution facility and a terminus for Evergreen's extensive Asian services.

Counsel:  Steptoe Johnson, David Coburn, 202.429.3000, dcoburn@steptoe.com 

Counsel:  Steptoe Johnson, David Coburn, 202.429.3000, dcoburn@steptoe.com

Federal Express Corporation hereby applies, pursuant to 49 U.S.C. § 40109 and Subpart C of the Procedural Regulations of the Department of Transportation, for an allocation of one (1) additional weekly Hong Kong fifth-freedom all-cargo scheduled service operating frequency for use on its U.S.-Hong Kong-Manila services. Federal Express currently holds and fully utilizes an allocation of five (5) Hong Kong fifth-freedom cargo frequencies.

Federal Express currently uses its allocated fifth-freedom frequencies to carry fifth-freedom traffic on flights between Hong Kong and Subic Bay, as it promised in the Hong Kong Fifth-Freedom All-Cargo Proceeding, Order 96-8-35. That service is operated utilizing the 170,000-pound payload MD-11 freighter aircraft. If awarded an additional fifth-freedom frequency, Federal Express plans to operate a roundtrip flight between Hong Kong and Manila. That service would be initiated within 30 days of an award and would be operated utilizing the 170,000-pound payload MD-11 freighter aircraft. All five of the current Hong Kong-Subic Bay flights, and the proposed Hong Kong-Manila flight, operated by Federal Express will connect to other Federal Express flights serving points throughout the Asia/Pacific region, points throughout Europe and the Middle East, and points throughout the United States.

Counsel:  Shaw Pittman, Nathaniel Breed, 202.663.8078

Counsel:  Shaw Pittman, Nathaniel Breed, 202.663.8078

By this application, Northwest seeks allocation of Air Micronesia’s three dormant Hong Kong fifth freedom frequencies. Northwest will use the frequencies to serve the Hong Kong-Seoul, Korea market with B-747 freighters, In granting: this application, Northwest further -asks that the Department select Seoul, Korea as one of the two authorized fifth freedom all-cargo traffic points available, under the MOU. Northwest already holds the requisite underlying economic authority for the proposed operations pursuant to its Route 129 certificate of public convenience and necessity.

Counsel:  Northwest, Megan Rae Rosia, 202.842.3193

Counsel:  Northwest, Megan Rae Rosia, 202.842.3193

Pursuant to Subpart C of the Department's Rules of Practice, Polar Air Cargo, Inc. requests that the Department allocate Polar the three (3) round-trip fifth-freedom all-cargo frequencies currently available under the September 29, 1995 United States-Hong Kong Memorandum of Understanding.

Counsel:  Wilmer Cutler, Jeffery Manley, 202.663.6670, jmanley@wilmer.com 

Upon grant of this application, Polar will immediately commence three weekly roundtrip flights on a New York (JFK)-Chicago-Anchorage-Seoul-Hong Kong v.v. routing. Polar will employ its maximum capacity widebody Boeing 747-200 and -400 freighters on the route, offering up to 125 tons of lift per flight over all segments of this route. Polar's freighter capacity and ability to serve a wide segment of the cargo market will offer the greatest range of new shipping alternatives to shippers, freight forwarders and consignees of all size. Polar has sufficient B747-200 and -400 aircraft in its fleet or on order to start its proposed service immediately upon receipt of authority.

Counsel:  Wilmer Cutler, Jeffery Manley, 202.663.6670, jmanley@wilmer.com

Hong Kong Fifth Freedom All- Cargo Proceeding

The prompt issuance of an instituting order following the same parameters to process the present applications will serve the ends of administrative efficiency and enable the Department to allocate the three dormant U.S.-Hong Kong fifth freedom all-cargo frequencies at the earliest possible date. Absent an instituting order, Polar and the other applicants will spend the next several weeks filing additional rounds of answers and replies to each other that will include largely duplicative information. Polar would submit that the public interest would be best served by avoiding unnecessary delay in reallocating these dormant frequencies, while at the same time providing for a complete record in this matter. Moreover, as a matter of fundamental fairness, all interested carriers should be required to file detailed information regarding their service proposals on the same date, allowing all parties equal responsive opportunities. The prompt issuance of an instituting order along the lines detailed above should accomplish all of these goals

Counsel:  Wilmer Cutler, Jeffery Manley, 202.663.6670, jmanley@wilmer.com

Hong Kong Fifth Freedom All- Cargo Proceeding

On December 20, 2000, we filed the Reply of Polar Air Cargo, Inc. ("Polar") to Answers of Evergreen, Federal Express and Northwest to Application of United Parcel Service Co. in the above-referenced docket. Due to a clerical error, the filed version of the pleading inadvertently omitted the final paragraph. Enclosed is a supplement to Polar's Reply containing the omitted paragraph, which has been faxed today to all parties on the service list.

In the interest of establishing a complete record, Polar would suggest that the evidentiary requirements contained in the instituting order be supplemented to require the submission of information concerning (1) cooperative arrangements currently undertaken and anticipated by the applicants in each of the third/fourth and fifth freedom markets at issue; (2) if cooperative arrangements are involved, the percentage of total capacity presently sold in each such market by the applicant; and (3) the percentage of total capacity anticipated to be sold in each such market by the applicant upon receipt of the frequencies.

Counsel:  Wilmer Cutler, Jeffery Manley, 202.663.6670, jmanley@wilmer.com

Hong Kong Fifth Freedom All- Cargo Proceeding

Pursuant to Subpart C of the Department's Rules of Practice (14 C.F.R. PART 302), Gemini Air Cargo, Inc. hereby applies for allocation of the three round-trip fifth freedom all-cargo frequencies that are available under the Memorandum of Understanding between the United States and Hong Kong. Gemini also requests that the Department select Bangkok, Thailand as the beyond point in order for Gemini to provide fifth freedom service between Hong Kong and Bangkok as part of new round-the-world all-cargo service utilizing Gemini's DC- I 0-30F and MD- 11 F aircraft.

In the first quarter of 2001, and within 90 days of its receipt of the frequencies in question, Gemini will introduce service on an eastbound Los Angeles - New York -Brussels - Delhi - Penang - Bangkok - Hong Kong - Guam - Honolulu - Los Angeles route. Within four to six months thereafter Gemini will commence operations on the same route in the westbound direction, originating and terminating in Los Angeles.

Counsel:  Roller Bauer, Moffett Roller, 202.331.3300, mroller@rollerbauer.com 

For the past decade, UPS has been steadily building a worldwide distribution network to enhance the service options available to shippers in the global air express/cargo market in the United States and worldwide, and to compete on a global scale with Federal Express, DHL International and TNT. UPS is still in the process of building its own Asia network. Even now, with the Department's tentative decision to award UPS China authority, and with it the ability to provide direct service to the region's most populous nation, there still remain several critical elements that must be attained before UPS can complete its intra-Asia network and provide full-fledged competition to, from, and within Asia to the networks enjoyed by Federal Express, DHL International and TNT. The two most pressing issues preventing a level, global playing field from exisiting for UPS are competitive access to Tokyo and fifth-freedom beyond rights out of Hong Kong. An award to UPS of the authority it has requested herein will address the latter issue and increase UPS' ability to provide competition within Asia.

UPS finds ironic, however, Polar's claim that the public interest would best be served by "avoiding unnecessary delay" in reallocating these frequencies, and its request that the Department do so at "the earliest possible date." If these frequencies are as valuable to Polar as Polar claims, then why is it that Polar (and all Other Applicants for that matter) only applied for them after UPS filed its application despite the fact that Polar was free to file its application as early as June 2000-nearly six months before it (and the Other Applicants) did so by responding to UPS' request for authority. While UPS would begin to operate these frequencies tomorrow if authorized by the Department, fairness dictates that the Department permit UPS the opportunity to provide its Answers to the other Applications, as well as a chance to review the Replies to said Answers, before an Instituting Order is issued. The Replies are due January 10, 2001. UPS will submit a proposed procedural order in its Answer to the competing applications, just as Polar has done to UPS' Application, and requests that the Department not issue its Instituting Order prior to having the opportunity to review that filing.

Counsel:  Kelley Drye, Michael Francesconi, 202.955.9864

Hong Kong Fifth Freedom All- Cargo Proceeding

Counsel:  Roller Bauer, Moffett Roller, 202.331.3300, mroller@rollerbauer.com 

Northwest requests that the Department issue an order establishing an expedited procedural schedule using non-hearing show cause procedures as soon as possible. The prompt issuance of an instituting order is in the public interest in that it should enable the Department to allocate the three dormant Hong Kong fifth freedom all-cargo frequencies at the earliest possible date. Barring the immediate issuance of an instituting order, Northwest plans to file a consolidated answer to the applications of Evergreen, Polar, and Federal Express no later than December 29, 2000. That consolidated answer will demonstrate that a grant of the three fifth freedom frequencies to Northwest will best serve the public interest.

Counsel:  Northwest, Megan Rae Rosia, 202.842.3193

Hong Kong Fifth Freedom All- Cargo Proceeding

Contribution to Carrier's International Operations: The Other Applicants (including Federal Express) would use this authority to add only one additional market to their routings. Since UPS would use this authority to connect Hong Kong to the Philippines and then the other markets in its intra-Asia network, there is no question that these frequencies would provide a greater contribution to UPS' international operations than they would to the operations of any other carrier.

Improvement to Market Structure and Competition: UPS is the only new applicant that possesses the geographic network and scale of operations to compete with global air express/cargo carriers; consequently, only an award to UPS will improve the competitive environment. An award to any of the Other Applicants will not provide an improvement to the market structure or competition of this market segment. With this award, UPS can create a new intra-Asia hub, while the Other Applicants will be adding only a single linear route, a spoke, or another stop on an existing, multiple-stop flight.

Ability to Offer Air Express and Cargo Services: UPS is the only new applicant that offers all forms of cargo service: air express, time-definite freight, and general air freight services.

Established Presence in Asia: UPS has an established presence in Asia, with a trans-Pacific hub in Taipei, Taiwan, and 2,500 employees region-wide. UPS World Wide Logistics, an independent third-party logistics subsidiary, offers leading-edge services in its fully- integrated facilities in Singapore, and throughout the region. No other new applicant can match this presence.

Connection to Regional Hub Operations: None of the Other Applicants, including Federal Express, will use the fifth freedom frequencies to connect to a regional hub. UPS is the only applicant that will use this authority to connect Hong Kong to a regional hub. Federal Express would use this authority to improve its non-hub service to Manila, which it already serves via Subic Bay, while the remaining Applicants have no true air express/all-cargo hub in Asia.
It is evident then, that given the Department's clearly stated criteria for awarding the original fifth freedom frequency rights from Hong Kong, UPS' application is superior to those of the Other Applicants.

Counsel:  Kelley Drye, David Vaughan, 202.955.9864

Hong Kong Fifth Freedom All-Cargo Proceeding

As stated in the prior Answer of Federal Express to the Hong Kong frequency application filed by United Parcel Service Co. (UPS), Federal Express strongly supports the efforts of the U.S. government. to liberalize international air services. Federal Express welcomes competition and a free and open regime for trade in air services. However, U.S. air carriers serving Hong Kong are severely constrained in their ability to provide efficient fifth-freedom, or fill-up, services in the market. Therefore, Federal Express strongly urges the United States Government to seek prompt removal of these constraints, making competing applications unnecessary.

Until those constraints can be removed, however, the Department will have to continue to make choices among competing applications. An award to Federal Express of one additional fifth-freedom frequency would best serve the public interest. First, it would enable Federal Express to add a sixth Hong Kong-Philippines weekly frequency, thereby enhancing its ability to offer express U.S.-Hong Kong services to U.S. businesses, shippers, and exporters.' Second, an award of an additional frequency to Federal Express will promote the export competitiveness of the U.S. economy, since Federal Express has the best record of promoting U.S. exports by air and expanding westbound flows.

Counsel:  Federal Express and Shaw Pittman, Nathaniel Breed

Counsel:  Northwest, Megan Rae Rosia, 202-842-3193

In Polar's December 20, 2000 Reply and December 21, 2000 Supplement filed in this docket, Polar urged the Department to issue an order consolidating the competing applications and establishing an expedited carrier selection proceeding fashioned after the 1996 instituting order in this docket. The evidentiary record developed during such a proceeding will bear out Polar's belief that it would provide the highest and best use for the three available frequencies, offering shippers and consignees the capacity and service most needed in these markets.  Polar would again urge the Department to initiate such a proceeding as soon as practicable in the new year.

Counsel:  Polar and Wilmer Cutler, Jeffrey Manley

Hong Kong Fifth Freedom All-Cargo Proceeding

As stated in the prior Answer and Consolidated Answer of Federal Express filed previously in response to the Hong Kong frequency applications filed by UPS, Evergreen, Northwest and Polar, Federal Express objects to the grant of each of the other Hong Kong frequency applications, including that of Gemini, to the extent that grant of any of them would preclude the allocation of one (1) additional Hong Kong fifth-freedom frequency to Federal Express. Federal Express hereby incorporates by reference the facts and arguments contained in its prior Answer and Consolidated Answer for purposes of this Answer to the application of Gemini.

Counsel:  Shaw Pittman, Nathaniel Breed, 202.663.8078

Hong Kong Fifth Freedom All- Cargo Proceeding

In light of the legal necessity for further carrier-selection procedures in this case, Federal Express will limit this Consolidated Reply to three matters: (1) its views regarding the threshold procedural issues in this case, (2) a brief discussion of Federal Express' principal areas of disagreement with the various Answers filed in this proceeding, and the evidentiary and policy considerations that overwhelmingly support one additional Hong Kong fifth-freedom cargo frequency to Federal Express, and (3) the importance of attaching the highest priority to reaching an agreement in upcoming bilateral negotiations between the U.S. and Hong Kong to relax or eliminate the current severe and unjustified limitation on the ability of U.S. carriers to carry fifth-freedom cargo traffic to and from Hong Kong.

Federal Express will provide substantial evidence in the subsequent carrier--selection phase of this proceeding which will demonstrate that the award of an additional Hong Kong frequency to Federal Express is required by long-established carrier-selection -criteria, including the decisional criteria established by the Department to govern the 1996 Hong Kong Fifth-Freedom All-Cargo Proceeding in this docket. Award of an additional Hong Kong frequency to Federal Express will generate far broader public benefits than the award of a single Hong Kong frequency to any other applicant. In particular, Federal Express is prepared to demonstrate that the U.S.--Hong Kong-Subic Bay/Manila service operated, and proposed to be operated, by Federal Express provides a higher quality and broader array of air express and expedited air freight services benefiting a greater number of shippers and consignees, and generating greater benefits for the U.S. economy than the Hong Kong fifth--freedom cargo services proposed by any other applicant.

Evergreen International Airways, Inc. (Evergreen) has filed an application in this proceeding, but has not filed an Answer or Reply to any of the other applications and answers filed by the other applicants.

Counsel:  Shaw Pittman, Nathaniel Breed, 202.663.8078

Northwest Airlines, Inc. submits this consolidated reply solely to address the issue of the appropriate procedures the Department should invoke in making its frequency allocation in this proceeding.' Given the nature of the rights at issue and the fact that these rights already have been dormant for several months, Northwest urges the Department to adopt streamlined procedures and reach a decision in this matter promptly. Specifically, Northwest suggests that the Department promptly issue a notice directing the applicants to submit such additional information as the Department may require and setting dates for answers and replies thereto and then proceed to issue an order to show cause based upon those submissions.

Accordingly, Northwest suggests that the Department issue a notice directing the applicants to submit such additional information as the Department may require (as is discussed further below) and setting a schedule for answers and replies, and then proceed to issue an order to show cause on the basis of those submissions. If the Department believes that traffic data and forecasts are necessary to a determination in this case, it could direct the existing applicants to submit traffic forecasts and direct incumbent carriers to provide historical traffic data. In that regard, in the U.K. FFifth Freedom All-CAM Proceeding the Department directed the existing applicants to submit "supplemental information," including forecasts of beyond-U.K. traffic and of U. S. origin and destination traffic. Whichever procedures the Department adopts, the overriding purpose should be to allocate the three available frequencies as expeditiously as is reasonable.

Counsel:  Northwest, Megan Rae Rosia, 202.842.3193

Five carriers, including Polar, have filed applications in the captioned docket for the three available frequencies. Polar remains confident that its proposed widebody Boeing 747 freighter service on a New York (JFK)-Chicago-Anchorage-Seoul-Hong Kong v.v. routing would generate greater public interest benefits than any other proposed operation. To fully and fairly analyze these mutually excusive applications, however, the Department must institute a comparative selection proceeding.

In. order to develop an evidentiary record comprised of accurate and comparable data, while maintaining the applicants in an equal procedural posture, Polar would again urge the Department to issue an instituting order fashioned after the initial allocation order in this proceeding (Order 96-2-14, Feb. 13, 1996). At minimum, such an order should include a similar evidence request (a copy of which was appended to Polar's December 20, 2000 Reply), supplemented to require the submission of information needed to assess the implications of joint operations currently underway or anticipated in the markets at issue. See Polar's December 21, 2000 Supplement. The expedited issuance of such an order will facilitate the allocation of the three frequencies at the earliest possible date, while ensuring that the competing applicants' due process rights are fully protected.

Polar would also note that there are several critical factual errors in filings submitted by other parties. Those errors will be addressed once procedures for this case are established.

Counsel:  Wilmer Cutler, Jeffery Manley, 202.663.6670, jmanley@wilmer.com 

From a review of the prior filings in this proceeding, it is clear that UPS is the applicant which will best meet the Department's criteria for maximizing public benefits and make best commercial use of the available frequencies. The award to UPS would result in far greater benefits, both to UPS and its shippers, than would an award to any Other Applicant.

In providing the original fifth freedom authority to Federal Express and Continental Air Micronesia, the Department defined its decisional criteria as follows: the contribution of each proposal to the carrier's international operations; the improvement to the carrier's market structure and competition; the ability of the carrier to offer air express, time--definite freight and general air freight services; the carrier's established presence in Asia; and the carrier's utilization of the award to connect to regional hub operations. (Order 96-8-35, page 3) The network structure and global operations of UPS enable it to best satisfy these criteria.

UPS urges that the Department institute a non-oral, competitive carrier selection proceeding and move forward as quickly as the complexity of this case permits.

Counsel:  Kelley Drye, David Vaughan, 202.955.9864

Hong Kong Fifth Freedom All-Cargo Proceeding

Evergreen, a long-established all-cargo specialist with extensive Asian operations, stands by its U.S.-Seoul-Hong Kong--Seoul-U.S. proposal in all respects. It is prepared at the appropriate stage of this frequency reallocation proceeding to demonstrate that the public interest will best be served by selection of Seoul as a new point for Hong Kong fifth freedom all-cargo service and selection of Evergreen as the carrier to provide it.

Given the necessity, evident from the outset to Evergreen and the others for invoking competitive procedures, Evergreen decided not to burden the Department with unnecessary responsive filings before the Department had even decided on the specific procedures to be used. Evergreen has no doubt that the Department will assure that the applicants are accorded due process, including a full opportunity to present their direct cases and to rebut the direct cases of the other parties.

Evergreen believes that the Department should adopt procedures that. allow for the submission of applications that include whatever specific information the Department deems appropriate for applications of this nature, as well as for the submission of appropriate answers and replies. These procedures would permit each applicant an opportunity to present complete direct and rebuttal cases and exhibits. While Evergreen is not adverse to a final round of briefing, neither is it persuaded that such additional briefing is necessary as some have advocated. A schedule that contemplates filing of further, supplemented applications within twenty days of an Instituting Order, the filing of answers thirty days after the submission of these applications and the filing of replies thirty days thereafter would allow adequate time for a complete record to be developed.

Counsel:  Evergreen and Steptoe Johnson, Richard Taylor, 202.429.3000

Hong Kong Fifth Freedom All-Cargo Proceeding

Gemini Air Cargo, Inc. submits this Reply to the foregoing Answers filed in this docket by Evergreen International Airlines, Inc., Northwest Airlines, Inc., Polar Air Cargo, Inc., and Federal Express Corporation in which asserts the merits of its own application and argues that it should be selected to receive the three Hong Kong fifth-freedom all-cargo frequencies at issue in this proceeding. Gemini concurs with those carriers that have requested the Department to institute a proceeding to select the carrier to receive the frequencies. Gemini is confident of the superiority of its proposal under which it would operate fifth-freedom all-cargo service between Hong Kong and Bangkok. Gemini is prepared to provide whatever additional information the Department may require in order to make its decision regarding these contested rights. Gemini regards a carrier selection proceeding as the best way for Gemini and the other applicants to present their proposals in more detail.

Counsel:  Roller Bauer, Moffett Roller, 202.331.3300

Hong Kong Fifth Freedom All-Cargo Proceeding

Virtually all of the carriers competing for the three U.S.-Hong Kong roundtrip fifth freedom all-cargo frequencies agree that the Department must institute a comparative selection proceeding in order to fairly allocate the frequencies. The scope and procedures governing the proceeding remain to be determined. With the exception of Northwest, which alone believes that the record stands largely complete -- an assertion which Polar and others strongly contest -- the remaining applicants generally agree that evidence requests, exhibits, rebuttal exhibits, and possibly briefs are in order.

Under the UPS proposal, the Hong Kong frequencies would remain unused for nearly three additional months, a delay that is both unnecessary and harmful to U.S. interests. Indeed, Polar believes that Evergreen's proposed 80-day proceeding is twice as long as is necessary under the circumstances. Polar would urge the Department to reject any unnecessary delay.

UPS has also proposed two Information Requests that would paper the record with reams of unnecessary information. The Department should similarly decline to entertain this delaying tactic. The Information Request previously used in this docket was sufficient then, and it remains so today. Polar would urge the Department to move forward with a focused, straightforward and expeditious proceeding that will produce a record demonstrating the highest and best use of the available frequencies.

Counsel:  Polar and Wilmer Cutler, Jeffrey Manley, 202-663-6670, jmanley@wilmer.com

U.S.- Hong Kong Fifth Freedom All- Cargo Proceeding

Before we decide how to proceed to award the available opportunities, and to ensure that we have applications from all interested carriers, we hereby afford by this notice a final opportunity for any additional U.S. carriers interested in making use of the available frequencies to file applications with the Department no later than January 31, 2001. Answers to such applications should be filed February 5, 2001. Replies to such answers should be filed February 8, 2001.

Carriers without the requisite operating authority should file exemption/frequency allocation applications. Carriers with the requisite underlying authority need only file requests for an allocation of frequencies. All applications should include, at a minimum, the following information: (a) the proposed startup date; (b) the markets to be served, including the last point of departure from the U.S. served as a traffic stop for the applicant's service to Hong Kong;, (c) the number of fifth-freedom frequencies to be provided to and from Hong Kong and the duration of service if not provided on a year-round basis for each leg of the flights; (d) type of aircraft, including payload capacity, to be used for each leg of the flights, and whether or not those aircraft are currently in the applicant's fleet or must be obtained; and (e) existing authority held to conduct the operations, if applicable. Applicants are free to submit any additional information that they believe will help us in making our decision.

We note that several of the carriers that have already filed applications have urged the Department to initiate a comparative proceeding to award the available frequencies expeditiously, and have presented recommendations regarding the filing of additional evidentiary material and the carrier selection procedures that should be used to allocate the frequencies. The sole purpose of this notice is to ensure that all carriers interested in using the available rights have an opportunity to file applications. We will address the issue of additional evidentiary material and of procedures to be adopted in this case by separate notice/order in the near future.

We will authorize service of documents by facsimile and by electronic mail. Carriers that are interested in such service, however, should state if they want service by email and should provide interested parties with their fax number and/or email address.

By:  Paul Gretch

U.S.- Hong Kong Fifth Freedom All- Cargo Proceeding

In the UPS consolidated reply submitted January 10, 2001, in this proceeding, you suggested that the Department issue Information Responses requiring that Continental Air Micronesia provide by month for the most recent 24 months operated, fifth freedom traffic by direction between Hong Kong and any points served, including non-stop; single plane; connecting or change of gauge, via any intermediate points, all segments by
segment. Identify traffic by category, i.e., - express, time-definite air freight, and general air freight.

Neither Air Micronesia nor Continental Micronesia has this information available, and they would be unable to provide such information if it were
requested.

Counsel:  Crowell Moring, Bruce Keiner

In its Consolidated Reply, UPS urges the Department to impose an extremely burdensome Information Response requirement on Federal Express in this proceeding. UPS has asked Federal Express to provide, inter alia, some of its most competitively sensitive data—traffic carried by category— without providing any justification. Further, Federal Express either cannot provide some of the data requested, or would find it unreasonably burdensome to do so. Federal Express believes that the requested data would produce no information relevant to a sound decision on the carrier-selection issue in this case. For these reasons, Federal Express strongly opposes the Information Response requirement proposed by UPS, and urges the Department to reject it.

Specifically, UPS urges the Department to require Federal Express to prepare and submit a report of all Hong Kong fifth-freedom traffic carried by Federal Express on five flights a week between Hong Kong and Subic Bay during the past two years ending December 31, 2000. UPS urges that the requested traffic data be broken down by direction to every third country to and from which Federal Express has transported Hong Kong fifth-freedom traffic on “non-stop, single-plane, connecting or change of gauge” flights, “via any intermediate points [and] all segments by segment.” UPS further requests that the reported traffic be identified “by category, i.e., express, time-definite air freight, and general air freight”

Counsel:  Shaw Pittman, Nathaniel Breed, 202.663.8078

U.S.- Hong Kong Fifth Freedom All- Cargo Proceeding

Polar accuses UPS of attempting to delay this proceeding. If UPS had not applied for these dormant rights, there would not now be a proceeding. Polar was sitting on its hands, apparently oblivious to the existence of these dormant rights, until UPS filed its application. Then - presumably as a result of UPS' filing - Polar filed a "me too" application after realizing that these valuable rights were available. In that UPS was the first, and for a period of time the only, carrier to apply for these rights, UPS obviously is interested in their prompt award. UPS initially applied for these rights over five (5) years ago. UPS further believes that a deliberate consideration of the issues and all available facts in this proceeding will clearly demonstrate that the selection of UPS will produce the greatest benefits.

This is an important case. These frequencies will be of enormous benefit to UPS as building blocks for its intra-Asian system. UPS believes the procedural schedule it has suggested will meet the dual goals of awarding these valuable, dormant rights expeditiously - rights which would perhaps have been dormant indefinitely had UPS not applied for them - while simultaneously providing the Department with an adequate record necessary to determine which application best serves the public interest.

Counsel:  Kelley Drye, Michael Francesconi, 202.955.9864

Hong Kong Fifth Freedom All- Cargo Proceeding

Evergreen applied for these frequencies on December 14, 2000. Evergreen stated in its application that it would use them to provide three weekly flights between Hong Kong and Seoul, two major Asian traffic-generating points in Asia that Evergreen currently serves, albeit without fifth freedom Hong Kong traffic rights.

Evergreen's initial service pattern would operate on the following routings: SFO-ANC-SEL-HKG-SEL-ANC-SFO (twice weekly) and JFK- LCK (Columbus, OH)-ANC-SEL-HKG-SEL-ANC-LCK-JFK (once weekly)

Anchorage would be a technical stop only on both routings. These flights would be operated in addition to (i.e., would not replace) the three weekly flights Evergreen currently operates between the United States and Seoul. Evergreen might adjust the number of flights on one routing versus the other on a seasonal basis, but will maintain a total of three flights throughout the year.

Evergreen will utilize B-747-200 and B-747-100 (heavy model) aircraft currently in its fleet for each leg of its service.

Evergreen already serves both Hong Kong and Seoul, the former with daily B-747 freighter service, on an annualized basis, and the latter with three weekly B-747 freighter flights. (The three flights proposed here would be in addition to the three existing Evergreen U.S./Seoul flights, which are operated in conjunction with Asiana.) Thus, Evergreen has an established presence in these markets and a familiarity with them. Hong Kong is in fact Evergreen's Asian hub. Evergreen flows traffic to Hong Kong from Taipei, Jakarta, Singapore, and Bangkok for onward carriage to its terminal/distribution facilities at San Francisco, Columbus, and JFK. While Evergreen thus has solid experience competing against the Asian cargo specialists and has succeeded in establishing a strong market presence in the Asian market, an award of these Hong Kong frequencies would dramatically enhance the utility of its Hong Kong hub operation and strengthen its competitive posture against the Asian carriers.

Counsel:  Steptoe Johnson, David Coburn, 202.429.3000, dcoburn@steptoe.com 

Federal Express Corporation hereby submits this Supplement No. 1 to its December 14, 2000 application for an allocation of one (1) additional weekly Hong Kong Fifth Freedom all-cargo frequency for use on its U.S.-Hong Kong-Manila services.

Federal Express will utilize the requested frequency to operate all-cargo service carrying Hong Kong fifth-freedom traffic between Hong Kong and Manila, Philippines, and beyond. That new service will be operated in addition to the existing five-day-a-week service operated by Federal Express between Hong Kong and Federal Express' major Asia/Pacific hub at Subic Bay in the Philippines. Federal Express serves Anchorage as the last point of departure and the first point of arrival (served as a traffic stop) on virtually every flight operated by Federal Express between the U.S. and Hong Kong.

Federal Express requests one (1) additional Hong Kong frequency, for a total allocation of six (6) weekly frequencies. Federal Express will utilize all six frequencies to provide round trip flights to and from Hong Kong on a year-round basis, with no seasonal variation.

Federal Express will utilize the 170,000-pound payload MD-11 freighter aircraft in its operations between Anchorage and Hong Kong, and between Hong Kong and points in the Philippines. As of November 30, 2000, Federal Express owned and leased a total of 31 MD-11 aircraft, as a part of its total fleet of 358 transport category freighter aircraft. Beyond the Philippines, Federal Express will utilize the MD-11 and various other aircraft types from its existing aircraft fleet to transport fifth-freedom cargo traffic between Hong Kong and points throughout the worldwide system served by Federal Express.

Counsel:  Shaw Pittman, Nathaniel Breed, 202.663.8078 

Gemini Air Cargo, Inc. hereby applies for allocation of the three round-trip fifth freedom all-cargo frequencies that are available under the Memorandum of Understanding between the United States and Hong Kong. Gemini also requests that the Department select Bangkok, Thailand as the beyond point in order for Gemini to provide fifth freedom service between Hong Kong and Bangkok as part of new round-the-world all-cargo service utilizing Gemini’s DC-10-30F and MD-11F aircraft.

Gemini also applies for an exemption from 49 U.S.C. § 41101 in order to operate scheduled all-cargo service between points in the United States and points in Thailand via intermediate points. Gemini requests that this exemption authority be integrated with its authority to operate to destinations specified under its existing certificate and exemptions. Gemini also requests that the department allocate to Gemini three fifth freedom frequencies per week pursuant to Article II of the Memorandum of Understanding of May 8, 1996, between the United States and Thailand.

Within 90 days of its receipt of the authority requested herein, Gemini will introduce service three times per week, year-round, on an eastbound Los Angeles - New York - Brussels - Abu Dhabi - Delhi - Bangkok - Hong Kong - Guam - Honolulu - Los Angeles route.1 Within four to six months thereafter Gemini will commence operations on the same route three times per week, year-round, in the westbound direction, originating and terminating in Los Angeles. The last point of departure from the U.S. to be served as a traffic stop on the eastbound routing is New York. The last point of departure from the U.S. to be served as a traffic stop on the westbound routing is Guam. Gemini will use its current fleet of 11 DC-10-30F and three MD-11F aircraft to operate the service. Gemini plans to take delivery of its fourth MD-11F aircraft very shortly, as soon as it completes its conversion program. The payload capacity is 165,000 pounds for the DC-10-30F and 205,000 pounds for the MD-11F.

Counsel:  Roller Bauer, Moffet Roller, 202.331.3300, mroller@rollerbauer.com 

Hereby files this supplement to its application filed on December 14, 2000 for three weekly Hong Kong fifth freedom all-cargo frequencies. Northwest will operate the three weekly roundtrip frequencies on a year-round basis on the following route: Anchorage - Seoul Korea - Hong Kong - Seoul Korea – Anchorage. Anchorage will be the last point of departure from the United States served as a traffic point. Northwest service to and from Anchorage will connect with Northwest cargo service to and from New York (JFK), Chicago, Los Angeles and San Francisco.

Northwest will utilize the three fifth freedom frequencies operating B747-200 nose-loading freighters with a maximum payload capacity of 120 tons. The freighters are currently a part of Northwest's cargo fleet.

Counsel:  Northwest, Megan Rae Rosia, 202.842.3193 

UPS will commence the proposed service immediately upon receipt of the award herein. Because UPS is already operating aircraft between Hong Kong and Manila, the market for which the new service is proposed herein, and because UPS has employees, facilities and a mature distribution network in-place, there will be no "start-up" in the traditional sense of that term.

UPS proposes to utilize the fifth freedom rights in the Hong Kong-Manila market. The last U.S. point to be served will be Anchorage, Alaska. UPS is applying for all three available frequencies, and, because of the nature of its operation, UPS will be able to convert the three frequencies into four in accordance with the terms of the Memorandum of Understanding between the United States and Hong Kong.

Specifically, the Memorandum of Understanding, dated November 29, 1995 provides, on U.S. Route 2, that one of the frequencies may be converted into two if "operated by aircraft with a capacity of less than 50 tonnes operated to and from [U.S. gateway points] not in the continental United States." UPS will be able to take advantage of this expansion provision, and convert the three available frequencies into four, by operating four days per week between Anchorage and Hong Kong with a B-767 (which has a capacity of less than 50 tonnes over that leg) which will be extended to Manila two days per week, and two days per week on the Hong Kong-Manila leg with a B-757, the latter aircraft having a capacity of less than 50 tonnes. Because the B-767 meets the capacity restriction and serves a point, Anchorage, "not in the continental United States," this four frequency proposal is fully consistent with the requirements of the MOU and should be considered as such by the Department.

While UPS is confident that its proposal properly meets the bilateral requirements for converting the three available frequencies into four, UPS, in the alternative would be willing to utilize three weekly frequencies, operating B-767 aircraft over a Manila-Hong Kong-Anchorage and return routing, if required. The evidence will demonstrate that the UPS three frequency alternative proposal is also superior to any put forth by the other applicants.

Counsel:  Kelley Drye, David Vaughan, 202.955.9864, dvaughan@kelleydrye.com 

Hong Kong Fifth Freedom All- Cargo Proceeding

Counsel:  Roller Bauer, Moffett Roller, 202.331.3300, mroller@rollerbauer.com 

Counsel:  Northwest, Megan Rosia, 202-842-3193, megan.rosia@nwa.com 

Counsel:  Wilmer Cutler, Jeffery Manley, 202.663.6670, jmanley@wilmer.com 

Hong Kong Fifth Freedom All- Cargo Proceeding

The possibility of obtaining fifth freedom nights at Hong Kong in this proceeding presents a unique occasion for Evergreen to build upon the inherent advantages of its existing hub there and to provide important new opportunities for shippers while greatly strengthening Evergreen's competitive posture with respect to Asian cargo operators. In its supplemental application, Evergreen observed that four of the other five applicants -- UPS, Federal Express, Polar and Northwest -- hold fifth freedom rights at Asian points they have chosen to use as traffic centers, while Evergeen does not have such rights at Hong Kong, its major Asian traffic center. An award of fifth freedom rights to Evergreen, a relatively smaller carrier with a strong Asian presence, would thus allow it a considerable competitive benefit that certain other U.S. carriers competing in Asia already enjoy. Consideration of this factor is consistent with the Department's goal in cases of this nature to address "the effects of the applicants' service proposals on the competitive environment, including the overall market structure and level of competition in the U.S.--Far East market and in any other market shown to be relevant, and also including, where relevant, the positive effect on applicants' operations in the Far East."

Counsel:  Evergreen and Steptoe Johnson, Richard Taylor, 202-429-3000

After analyzing the relevant factors, the Department should award Federal Express an additional fifth-freedom frequency. Such an award would enable Federal Express to continue its leadership in promoting U.S. exports. With the additional traffic generated by these rights, Federal Express could upgrade its current U.S.-Hong Kong-Philippines service to daily service. In light of the Department's recent finding that daily air express/cargo services require at least six weekly frequencies, Federal Express' proposal to round out its service pattern to one of Asia's largest air express/cargo markets should be a high Department priority. In contrast, the other carriers can use the rights to support at most an incomplete service pattern.

Counsel:  FedEx, Thomas Donaldson, 901.434.8586

Gemini Air Cargo, Inc. hereby replies to the Consolidated Answers that Polar Air Cargo and Northwest Airlines filed in this proceeding on February 5, 2001. Gemini's proposal to operate 5th Freedom all-cargo service between Hong Kong and Bangkok as an integral part of new U.S. carrier round-the-world cargo service represents the best utilization of the valuable rights at issue in comparison to the proposals outlined by Evergreen, Federal Express, Northwest, Polar, and United Parcel Service. Gemini concurs with the Consolidated Answer of Polar, however, to the extent that Polar urges the Department to move expeditiously into the next phase of this proceeding in order to award the three unutilized frequencies as promptly as possible.

Counsel:  Roller Bauer, Moffett Roller, 202-331-3300, mroller@rollerbauer.com 

Northwest Airlines, Inc., in accordance with the Department's Notice in this docket dated January 19, 2001, hereby submits this Reply in order to supplement Northwest's Consolidated Answer filed on February 5, 2001 in one limited respect. Specifically, Northwest seeks to clarify the record on the issue of aircraft payload capacity, which was included among the information requests in the Department's January 19, 2001 Notice.

Attached to Northwest's Consolidated Answer filed on February 5, 2001 was an Exhibit labeled NW-CA-1, prepared based upon the various carriers' applications. That exhibit indicated that Northwest would operate B-747-200 equipment having a capacity of 120 tons, whereas Polar would operate B-747-200's having a capacity of 125 tons and Evergreen would operate B-747-200's having a capacity of 126 tons. Northwest has examined the differences in the capacity figures of Northwest, Polar and Evergreen and has concluded that, while Northwest's 120 ton figure is net of tare weight (container weight), the figures supplied by Polar and Evergreen reflect gross capacity. In order that the record contain a direct comparison, Northwest has prepared the attached Exhibit NW-CA-l Rev. This exhibit states a gross capacity amount of 127 tons for Northwest's 747-200 equipment. As demonstrated in Exhibit NW-CA-l Rev, no applicant has proposed more capacity than Northwest.

Counsel:  Northwest, Megan Rosia, 202-842-3193, megan.rosia@nwa.com 

Northwest notes that Polar did not choose to supplement its December 14, 2000 Application for the three U.S.-Hong Kong roundtrip fifth freedom all-cargo frequencies available for allocation in this proceeding. Northwest's subsequent contention -- that Polar's application "fails to comply with the Department's January 19 Notice" because it does not identify Polar's last U.S. traffic stop and proposed start-up date -- is incorrect.

Polar's December 14 Application provides the entire traffic routing for its proposed use of the three fifth freedom frequencies: New York (JFK)-Chicago-Anchorage-Seoul-Hong Kong and vice versa. Absent any indication to the contrary, it should have been apparent to Northwest that Polar's last traffic stop before departing the U.S. was Anchorage. In any event, if Northwest remained confused when it filed its February 5 Answer, Polar explicitly confirmed that Anchorage was its final traffic stop in its February 5, 2001 Answer at n. 1.

Northwest also alleges that Polar's application "does not state a proposed start-up date." Northwest Answer at 1, n. 1. This assertion is also incorrect. Polar's Application underscores twice that it would begin utilizing the frequencies immediately upon grant. See Polar Application at I and 2. Polar can only conclude that Northwest does not like Polar's proposed start-up date, which is understandable given that Northwest's proposed start-up is the slowest of any of the six applicants -- 90 days after receipt of all requisite governmental approvals.

Fortunately, the time for repetitive pleadings in this matter has drawn to a close. Polar now welcomes the opportunity to demonstrate in the upcoming evidentiary and argument phases that its proposed use of the frequencies will provide the greatest possible benefits to shippers and consumers in the U.S.-Korea-Hong Kong markets.

Counsel:  Wilmer Cutler, Jeffery Manley, 202.663.6670, jmanley@wilmer.com

Hong Kong Fifth Freedom All-Cargo Proceeding

On February 8, 200 1, Northwest Airlines filed a Reply in the above-referenced docket. It has come to Northwest's attention that Exhibit NW-CA-1 Rev., which is referred to in the Reply and was intended to be attached, was inadvertently omitted from some copies of the filing. Accordingly, enclosed herewith is the referenced Exhibit NW-CA-1 Rev.

Counsel:  Northwest, Megan Rae Rosia, 202-842-3193

Hong Kong Fifth Freedom All- Cargo Proceeding

We have decided to institute the 2001 Hong Kong Fifth-Freedom All-Cargo Frequencies case to select a carrier or carriers to operate the three weekly Hong Kong fifth-freedom frequencies that are currently available. The subject fifth-freedom all-cargo traffic rights constitute valuable service opportunities in conjunction with service in the U.S.-Hong Kong market. Six U.S. carriers have applied to use these limited opportunities, seeking a greater number of frequencies than are available. In these circumstances, we believe that the public interest is best served by instituting a comparative proceeding to determine how these frequencies should be allocated.

As we have already solicited applications from U.S. carriers interested in allocation of these frequencies, we will not solicit further applications to use the available frequencies. In allocating the available frequencies, our principal objective will be to maximize the public benefits that will result from award of the authority in this case. In this regard, we will consider which applicants will be most likely to offer and maintain the best service for the shipping public. We will also consider the effects of the applicants' service proposals on the overall competitive environment, including the market structure and the level of competition in the U.S.-Asia market, and on any other market shown to be relevant, and also including, where relevant, the positive effect on each applicant's operations in Asia. In addition, we will consider other factors historically used for carrier selection where they are relevant.

We will not place at issue the selection of backup carriers for these frequencies. We caution carriers, however, that frequencies may not be held indefinitely if not used. Consistent with our current practice, the frequencies allocated in this proceeding will be for an indefinite term, provided that the carrier continues to hold the underlying economic authority for the specific markets authorized. The frequencies to be awarded will also be subject to our standard 90-day dormancy condition, whereby the frequencies will be deemed dormant if they are not operated for 90 days in the market authorized, except where service in the market is seasonal. In all such instances of seasonal service, however, a carrier must notify the Department that its operations are of a seasonal nature; otherwise, the dormancy condition will apply. Under the dormancy condition if flights allocated are not used for 90 days, the frequencies expire automatically, and the frequencies revert to the Department for reallocation so that they can be available for other carriers immediately.

• Petitions for Reconsideration: March 19, 2001
• Direct Exhibits: April 2, 2001
• Rebuttal Exhibits: April 16,2001
• Briefs: April 30, 2001

By:  Susan McDermott

2001 Hong Kong Fifth Freedom All- Cargo Proceeding

Federal Express Corporation respectfully requests the Department to extend, by ten calendar days, the time for filing direct exhibits in this proceeding. If the Department grants the requested extension, then Federal Express asks that the dates for filing rebuttal exhibits and briefs also be extended by ten calendar days. Counsel for FedEx is authorized to state that no party opposes this brief extension.

Under the schedule fixed by DOT Order 2001-3-10, direct exhibits would be due on Monday, April 2, 2001. FedEx is requesting this extension because its counsel will be attending U.S.-Hong Kong bilateral air service negotiations that are scheduled to begin Wednesday, March 28, 2001 and end Friday, March 30, 2001 (Hong Kong time). FedEx has consulted with other parties to this proceeding, and most have stated that either their counsel or key advisors on Hong Kong matters will also be attending those negotiations. Since these negotiations will take place in Hong Kong, travel time and time/date differences make it impossible for the parties to meet the current schedule. Thus, the brief requested extension would promote the public interest by enabling the affected parties to focus on the air service talks next week and to provide effective assistance to U.S. negotiators during the talks. It would also enable those carriers that participate in the talks to compete effectively for the U.S.-Hong Kong frequencies presently available. Otherwise, carriers participating in the talks would be forced to compete against other carriers that are able to devote all of their energy toward producing direct exhibits.

Federal Express is authorized to state that no party to this proceeding objects to the requested extension. Federal Express proposes the following revised procedural timetable:

• Direct Exhibits: April 12, 2001
• Rebuttal Exhibits: April 26, 2001
• Briefs: May 10, 2001

Counsel:  FedEx, Thomas Donaldson, 901.434.8586

Hong Kong Fifth Freedom All-Cargo Frequencies

Order 2001-3-10 set the procedural schedule for U.S. air carriers interested in using fifth-freedom traffic rights for all-cargo services to and from Hong Kong. On March 21, 2001, Federal Express filed a motion requesting that the Department extend the dates for filing Direct Exhibits, Rebuttal Exhibits, and Briefs. The new procedural schedule is as follows: Direct Exhibits due April 12, 2001 Rebuttal Exhibits due April 26, 2001 Briefs due May 10, 2001.

On March 21, 200 1, Federal Express filed a motion requesting that the Department extend for ten calendar days the dates for filing Direct Exhibits, Rebuttal Exhibits, and Briefs. Federal Express stated that its counsel would be attending U.S.-Hong Kong bilateral air service negotiations until March 30, 2001, in Hong Kong and that the travel time and date differences between the U.S. and Hong Kong would make it impossible to meet the current schedule. Counsel for Federal Express stated that all of the other parties to this case had no objection to this extension.

The new procedural schedule requested by Federal Express would be as follows:

• Direct Exhibits: April 12, 2001
• Rebuttal Exhibits: April 26, 2001
• Briefs: May 10, 2001

After the filing of Federal Express' motion, bilateral negotiations between the United States and Hong Kong were postponed. We have decided, nonetheless, to extend the procedural schedule as described above. No party had opposed Federal Express' revised schedule and the requested extension is for only a short period of time that would not prejudice any party's interests in this case. Moreover, we note that many parties may have already adjusted their exhibit preparations based on Federal Express' initial uncontested request. In these circumstances, we find that it is in the public interest to extend the procedural dates in this proceeding.

By:  Paul Gretch

2001 Hong Kong Fifth-Freedom All-Cargo Frequencies

Counsel:  Evergreen, Tom Lydon

Counsel:  Federal Express

Counsel:  Rollerbauer, Moffett Rollerbauer, 202.331.3300

Counsel:  Northwest, Megan Rae Rosia, 202-842-3193

Counsel:  Wilmer Cutler, Jeffrey Manley

Counsel:  Kelley Drye, David Vaughan

2001 Hong Kong Fifth-Freedom All-Cargo Frequencies

On behalf of Evergreen International Airlines, Inc., we enclose a revised Exhibit EZ-300 (Evergreen's traffic forecast). The purpose of the revision is to correct errors that appear only in the "Summary" portion of the original exhibit. These errors were caused by a computer programming error which did not, however, affect Evergreen's forecast for its proposed Routes I and 2 which appears in the initial portion of the exhibit (and which therefore remains unchanged from the original).

Counsel:  Steptoe Johnson, Benjamin Achenbach, 202.429.6289, bachenba@steptoe.com 

Hong Kong Fifth Freedom All- Cargo Proceeding

On behalf of Polar Air Cargo, Inc., enclosed for filing in the above-referenced docket are the original and five (5) copies of revised Exhibit PO-601, which summarizes Polar's Asia services for the years 2000 and 1999. The revised exhibit reflects a correction, marked in bold, to the routing of Polar's Singapore charter flights. No other changes have been made to the exhibit.

Counsel:  Wilmer Cutler, Jeffery Manley, 202.663.6000, jmanley@wilmer.com

2001 Hong Kong Fifth Freedom All-Cargo Frequencies

Counsel:  Evergreen and Steptoe Johnson, Richard Taylor, 202.429.8063

Counsel:  FedEx, Thomas Donaldson, 901.434.8586

Counsel:  Northwest, Megan Rosia, 202-842-3193, megan.rosia@nwa.com 

Counsel:  Wilmer Cutler, Jeffrey Manley, 202-663-6670, jmanley@wilmer.com 

Counsel:  Kelley Drye, David Vaughan, 202.955.9864

2001 Hong Kong Fifth Freedom All-Cargo Frequencies

Counsel:  Evergreen and Steptoe Johnson, Richard Taylor, 202.429.8063

Hong Kong Fifth Freedom All-Cargo Proceeding

Counsel:  Evergreen and Steptoe Johnson, David Coburn, 202.429.3000

Hong Kong Fifth Freedom All- Cargo Proceeding

Counsel:  Steptoe Johnson, David Coburn, 202.429.8063, dcoburn@steptoe.com 

Counsel:  FedEx, Thomas Donaldson

Counsel:  Northwest, Megan Rae Rosia, 202.842.3193, megan.rosia@nwa.com

Counsel:  Wilmer Cutler, Jeffery Manley, 202.663.6670, jmanley@wilmer.com 

Counsel:  Kelley Drye, David Vaughan, 202.955.9792, dvaughan@kelleydrye.com

Hong Kong Fifth Freedom All- Cargo Proceeding

Counsel:  Emery Worldwide, Richard J. Zablocki

2001 Hong Kong Fifth Freedom All Cargo Frequencies and Northwest Airlines, Inc.

Counsel:  Northwest, Megan Rae Rosia, 202.842.3193, megan.rosia@nwa.com 

Hong Kong Fifth Freedom All- Cargo Proceeding

By:  Republic of the Philippines, Pantaleon Alverez

2001 Hong Kong Fifth Freedom All Cargo Frequencies

We have tentatively decided to select Polar for allocation of the three weekly fifth-freedom frequencies for services in the Hong Kong-South Korea market. We also have tentatively decided to make a backup award of the frequencies to Northwest.  

We have reached this tentative conclusion after careful consideration of the affirmative public interest arguments offered by UPS and FedEx. Regarding UPS' proposal, we particularly noted the potential benefits in its arguments in support of the global service benefits, and the competitive/structural improvements that would derive from its proposed services, if those services could be realized. FedEx's proposal of daily fifth-freedom cargo service also would bring a degree of benefit to the market. While we recognized that certain aspects of both proposals might indeed prove beneficial, we tentatively determined that, in the circumstances before us now and taking into consideration the limited opportunities available, those benefits did not outweigh the service and competitive/structural benefits that would result from introducing competition in a second Hong Kong fifth-freedom market and. for the reasons discussed below, the particular benefits associated with the introduction of Polar's service.

Three of the applicants in this case--Polar, Northwest, and Evergreen--would serve the Hong Kong-South Korea market. After reviewing all three proposals, we tentatively find that Polar's proposal ,, would provide the greatest public benefits. In addition to providing shippers a first U.S.-flag service option in the fifth-freedom Hong Kong-South Korea market, Polar's new transpacific all-cargo service would provide shippers with a new choice of service in the third/fourth freedom U.S.-South Korea market. Also. Polar's proposed use of B747-200 freighter equipment should effectively serve the needs of shippers in these markets.

The selection of Polar would furthermore provide significant structural benefits. Polar is the only applicant in this proceeding proposing to institute a totally new transpacific service. Selecting Polar thus would promote the increase of U.S. carrier competition in the U.S.-South Korea all-cargo market. Currently, foreign carriers provide the majority of service in the U.S.-Seoul all-cargo market, operating approximately 60 percent of the total all-cargo frequencies." Service by an additional U.S. carrier would enhance competition among U.S. carriers in the market as well as build on the competitive position of U.S. carriers vis-a-vis foreign carriers. Finally, Polar's new services in the Asia-Pacific region together with its services in the U.S.-Japan, Hong Kong, Taipei, Kuala Lumpur, and Manila markets would increase competition among U.S. carriers in the region (UPS, FedEx, and Northwest) as well as the U.S.-flag position vis-a-vis foreign carriers in the region.

By:  Susan McDemott

Hong Kong Fifth Freedom All- Cargo Proceeding

Polar is not the carrier most likely to "offer and maintain" the best service. The undisputed record in the proceeding (including Polar's own submissions) made quite clear that Polar has a history of abandoning markets when the going gets tough. While Evergreen has expanded its Asia operations in recent years, Polar has exited five important Asia markets over the course of recent years - Thailand, Taiwan, the Philippines, India and Malaysia. Although it has reentered certain markets it had left, Polar's ability to "maintain" operations for the benefit of the shipping public is belied by this record. Indeed, Polar is proposing in this proceeding to re-enter the U.S.-Korea market that it apparently once served, but later exited.

Counsel:  Steptoe Johnson, David Coburn, 202.429.3000, dcoburn@steptoe.com 

Unlike Northwest, Polar will not pose a significant competitive threat to foreign-flag carriers. Nor will Polar produce the public benefits that the Department expects. Polar proposes to provide single plane service from New York-Chicago-Anchorage-Seoul-Hong Kong. Lacking a developed network and a Pacific cargo hub, Polar will not cross-load traffic among flights in order to support its service and will provide little behind-gateway feed traffic for its proposed service.

If the Department decides to finalize the award to Polar and the back-up award to Northwest, Northwest requests that the Department's final order clarify the circumstances that would trigger the back-up authority. In particular, the Department should make clear (a) that, should Polar fail to satisfy the 90-day dormancy condition at any time, i.e.. whether due to a delay in start-up or a suspension of service after start-up, then the three frequencies will automatically revert to the Department and will immediately be re-allocated to Northwest and (b) that the dormancy condition is not satisfied unless Polar operates all three of the frequencies, i.e. the dormancy condition is not satisfied if Polar operates one or two frequencies.

Counsel:  Northwest, Megan Rae Rosia, 202.842.3193

Some 75% of the total commercial value of Hong Kong's air cargo traffic is in high-value commodity categories that most often require express services. (Exhibit UPS-300, p. 8; UPS-311-314). Express yields are 6 to 7 times greater than general air freight. (Exhibit UPS-R-201 and R-405; UPS-328, 330 and 334). This explains why Polar, a general air freight carrier, may not be able to sustain the service. This being the case, it is important that the Department not "lock in" another general air freight carrier, Northwest, to receive these frequencies should Polar not be able to maintain the service. Northwest will operate under the same economics as Polar. Accordingly, the Department should, instead, not select a backup carrier at this time and preserve its flexibility to select whatever carrier makes sense for the market at the time of Polar's failure.

Recent events indicate that there is a very realistic possibility that Polar may not be able to maintain the service. This year, Polar has reduced it service to Hong Kong by half, and Polar's weak financial position is well-known. (Appendix A). Additionally, Polar has recently been acquired by Atlas, an ACMI carrier which has had numerous problems of its own. (Id.). Notably, from August 31, 2000 to August 31, 2001, Atlas' stock dropped 68%, from $43.25 to $13.84.

Counsel:  Kelley Drye, David Vaughan, 202.955.9864, dvaughan@kelleydrye.com 

Hong Kong Fifth Freedom All- Cargo Proceeding