ost972586

OST-97-2586

1997 U.S. – Chile Combination Service Proceeding / Continental Airlines, Inc. and United Air Lines, Inc. / Delta Air Lines, Inc.

Order 97-6-4 | OST-97-2586 | OST-97-2373 and 97-2371 | OST-97-2372 | Issued and Served June 4, 1997

Order Instituting Proceeding

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By this order we institute the 1997 U.S.-Chile Combination Service Proceeding, Docket OST-97-2586, to select a carrier(s) to operate the seven frequencies available for additional U.S.Chile services effective December 15, 1997. We consolidate the frequency applications of Continental Airlines, Inc., and United Air Lines, Inc., and the certificate/frequency application of Delta Air Lines, Inc. into this proceeding.

Appendix A - Summary of Applications | Appendix B - Evidence Request

By: Charles Hunnicutt

U.S. – Chile Combination Service Proceeding

OST-97-2586 | June 10, 1997

Response of American Airlines to Order 97-6-4 (Incumbent Carrier Data)

American Airlines, Inc., in response to Order 97-6-4, June 4, 1997 (p. 6 q 5), hereby submits incumbent carrier data requested by Section III.A.2 of the evidence request. A diskette version is being provided to the Economic and Financial Analysis Division of the Office of Aviation Analysis, as directed by the order (Appendix B. p. 3 n. 3)

Attachment

Counsel: American, Carl Nelson, 202-496-5647

Information Responses of United Air Lines

UA-IR-1 United’s Schedule History in the US-Chile Market 6/1/96-5/31/97

Counsel: Ginsburg Feldman, Joel Burton, 202-637-9000

1997 U.S. – Chile Combination Service Proceeding

OST-97-2586 | June 20, 1997

Letter from DOT to Counsel for United Air Lines

United Airlines has continued to make incomplete and inaccurate Origin and Destination Survey submissions to the Department of Transportation for at least the last three and one half-years. With regard to one particular origin and destination airport, Santiago, Chile United's Origin and Destination Survey data has been critically deficient.

By: Timothy Carmody, Director, Office of Airline Information

U.S.-Chile Combination Service Proceeding

OST-97-2586 | July 7, 1997

Re: Letter from Office of Airline Information to Counsel for United Air Lines

The Office of Airline Information (OAI) is in receipt of the twelve quarterly supplemental file submissions containing the sample of Santiago, Chile itineraries. OAI also received your letter of July 1, in answer to this office's questions regarding the source of and processing of the supplemental Santiago, Chile itineraries.

Regarding your letter of explanation, a clarification is requested as well as the need to provide an answer to a question inadequately addressed by United.

First, United's response number 4, regarding the process utilized to break the thirty-six months of itineraries (PRIMS data) into the quarterly filings United states, "Data from the above process were split into twelve quarters."
A specific explanation of the method used to break the data into twelve quarters is required.
Second, United's response number 7, a statement concerning the content of the PRIMS records is not adequately responsive to the question.
Provide the content (item by item identification of each piece of data in the record), the record layout (sequence of data in the record) and the derivation (when and how the individual PRIMS files are prepared) of the PRIMS database.

By: Timothy Carmody, Director

1997 U.S.-Chile Combination Service Proceeding

OST-97-2586 | July 9, 1997

Request to Reprocess and Resubmit Information

By: Timothy Carmody, Office of Airline Information

Editor’s Note: Request available as soon as the Docket Section scans

U.S.-Chile Combination Service Proceeding

OST-97-2586 | July 9, 1997

Re: Letter from Office of Airline Information to Counsel for United

The Office of Airline Information (OAI) has reviewed the twelve quarterly supplemental Santiago itinerary tapes filed with our office under the request of June 20, 1997. Our analysis of the contents of the quarterly tapes indicates that the itineraries contained in the four quarters of 1996 are seriously deficient compared to the itinerary figures contained in the filings for the quarters of 1994 and 1995 and when compared to the quarterly 1996 T100 market passengers for Santiago city-pairs.

In addition, the comparison of the Santiago city-pair coupon counts contained in the submission for the fourth quarter of 1996 with those contained in United's regular O&D Survey filing for that quarter indicate that the supplemental tape prepared from the PRIMS database produces a serious shortfall in itinerary coupons.

By: Timothy Carmody, Office of Airline Information

1997 U.S.-Chile Combination Service Proceeding

OST-97-2586 | June 23, 1997

Acknowledge Receipt from United Air Lines

By: United and Ginsburg Feldman

Editor’s Note: Filing available as soon as the Docket Section scans the document

1997 U.S.-Chile Combination Service Proceeding

OST-97-2586 | June 23, 1997

Acknowledgement Receipt from United Air Lines

This will acknowledge receipt of your letter to Joel S. Burton dated June 20, 1997, relating to United Airlines' resubmission of O&D statistics in the referenced proceeding. This will also confirm our understanding reached in telephone conversations with yourself and Regis Milan late Friday afternoon regarding United's compliance with certain items of that letter.

Counsel: Ginsburg Feldman, Joel Burton, 202-637-9000, jburton@gfblaw.com

1997 US-Chile Combination Service Proceeding

OST-97-2586 | August 19, 1997

Direct Exhibits of Continental Airlines

Table of Contents

Counsel: Continental and Crowell Moring, Bruce Keiner, 202-624-2500

Direct Exhibits of Delta Air Lines

Table of Contents

Service List

Counsel: Delta and Shaw Pittman, Robert Cohn

Direct Exhibits of the Georgia and Atlanta Parties

Table of Contents

Direct Exhibits of the New Jersey Parties

Table of Contents

Direct Exhibits of United Air Lines

Table of Contents

Service List

Counsel: Ginsburg Feldman, Joel Burton, 202 637 9000

1997 U.S.–Chile Combination Service Proceeding / Rebuttal of United Air Lines

OST-97-2586 | September 9, 1997

Rebuttal

United is the only applicant that proposes to use the new U.S.-Chile service opportunity at issue in this case to challenge American's dominance of the U.S.-Latin America market from that carrier's Miami hub. American continues to be the largest carrier between the U.S. and Latin America by any measure: profits, revenues, or passengers. American also operates more services to South America than any other U.S. carrier. American's services to South America are concentrated at the Miami gateway where American alone controls 74 percent of the U.S. carrier nonstop seats. American serves all of South America from Miami and in most markets is protected from competition by anticompetitive bilateral agreements.

Service List | Exhibit Index (Index For All "UAR - R - # " Exhibits Below)

Exhibits:

Counsel: Ginsburg Feldman, Joel Burton, 202 637 9000

1997 U.S.–Chile Combination Service Proceeding / Rebuttal Exhibits of Georgia and Atlanta Parties

OST-97-2586 | September 9, 1997

Re: 1997 U.S.-Chile Combination Service Proceeding

Neither Continental nor Delta is currently authorized to serve Chile. United has such authority, and currently provides service from Miami, both non-stop and one-stop. In the 100 Series of rebuttal exhibits, the Georgia and Atlanta Parties focus on the Continental proposal for Newark-Santiago contrasted with the Delta proposal for Atlanta-Sao Paulo-Santiago service. Absent other factors, one would assume that a non-stop service to Chile would be preferable to a service with an intermediate stop. However, if that non-stop service is not viable and would lose money, and will not provide good connecting service for much of the country, then perhaps further review is essential. We will show in the 100 Series that the Continental proposal will NOT work.

Exhibits:

ATL-RT-200 | ATL-RT-201 | ATL-RT-202 | ATL-RT-203

Counsel: Ball Janik, Bill Alberger, 202 638 3307

1997 U.S.–Chile Combination Service Proceeding / Rebuttal Exhibits of Delta Air Lines, Inc.

OST-97-2586 | September 9, 1997

Rebuttal Exhibits

Delta's direct and rebuttal exhibits demonstrate the overwhelming superiority of Delta's service proposal and the substantial reasons which compel an award to Delta. Delta is the only applicant that will inject effective network competition against American, United and LAN Chile to Chile and against Continental, American and United in Latin America.

Service List | Exhibit Index

Exhibits:

Note: Not all numbers between #101-183 are presented by Delta Air Lines as exhibits. For instance, Delta listed exhibits #101-106, but sequentially the next exhibit is #110. In other words, every exhibit included in the Delta OST-97-2586 filing is accessible via the above exhibits. In the interest of more expeditious posting of this information, the Delta exhibits were grouped 5-10 per site. All individual exhibit numbers are fully listed in the Exhibit Index.

Counsel: Shaw Pittman, Robert Cohn, 202 663 8060

1997 U.S.–Chile Combination Service Proceeding / Rebuttal Exhibits of New Jersey Parties

OST-97-2586 | September 9, 1997

Rebuttal Exhibits (Contains Index For All "NJP - R - # " Exhibits Below)

Selection of Continental's nonstop Newark/New York-Santiago proposal over the one-stop proposals of Delta and United is compelled by the large numbers of Chile travelers in the Newark/New York-Santiago market, the many Hispanic residents in the area served by Newark International Airport, the strength of Continental's hub at Newark, the importance of Chile to New Jersey's international trade objectives, and the absence of nonstop Newark/New YorkSantiago service today. Passengers and shippers in the large Newark/New York gateway have an immediate need for the nonstop Chile service proposed by Continental. Delta's proposal to offer only one-stop Atlanta-Santiago service concedes that Atlanta cannot support nonstop services, and Miami already has ample nonstop service.

Service List

Exhibits:

Counsel: Unsigned

1997 U.S.–Chile Combination Service Proceeding / Rebuttal Exhibits of Continental Airlines

OST-97-2586 | September 9, 1997

Rebuttal Exhibits (Contains Index For All "CO - R - # " Exhibits Below)

Continental is the only applicant intrepid enough to propose truly competitive U.S.-Chile service and offer genuine benefits to substantial numbers of passengers and shippers. Only Continental has proposed new nonstop service between the U.S. and Chile, both Delta and United would add tag service to existing Sao Paula flights. Only Continental will offer better service than the incumbent airlines offer today in the largest U.S.-Chile market without nonstop service (Newark/New York -Santiago)

Service List

Exhibits:

CO-RT-1 | CO-R-1100 | CO-R-1101 | CO-R-1102 | CO-R-1103 | CO-R-1104 | CO-R-1105 | CO-R-1106
CO-R-1107 | CO-R-1108 | CO-R-1109 | CO-R-1110 | CO-R-1111 | CO-R-1112 | CO-R-1113 | CO-R-1114
CO-R-1115 | CO-R-1116 | CO-R-1117 | CO-R-1118 | CO-R-1119 | CO-R-1120 | CO-R-1121 | CO-R-1122
CO-R-1123 | CO-R-1124 | CO-R-1125 | CO-R-1126 | CO-R-1127 | CO-R-1128 | CO-R-1129 | CO-R-1130
CO-R-1131 | CO-R-1132 | CO-R-1133

Counsel: Unsigned

Continental Airlines, Inc.

OST-97-2586 | September 10, 1997

Re: 1997 U.S.-Chile Combination Service Proceeding

Enclosed for submission in the above-referenced docket are copies of letters filed by the following civic parties urging the Department to select Continental's proposal for Newark-Santiago services:

John O. Bennett (New Jersey Senate Majority Leader)
Jack Collins (Speaker of the New Jersey General Assembly)
Donald T. DiFrancesco (President of the New Jersey Senate)
Jacqueline A. Kaiko (Sr. Vice President, Chase Manhattan Bank)
Joan Verplanck (President of the New Jersey Chamber of Commerce)

Letters of Support | Service List

Counsel: Crowell Moring, Steven Mirmina, 202 624 2500

U.S.-Chile Combination Service Proceeding

OST-97-2586 | September 16, 1997

Re: Letters in Support of Continental's Application from the New Jersey Congressional Delegation

Counsel: Crowell Moring, Lorraine Halloway

U.S.-Chile Combination Service Opportunities

OST-97-2586 | September 30, 1997

Brief of Continental Airlines

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Continental will introduce nonstop service in the largest U.S.Chile market without nonstop service. Newark-Santiago service will close a gap in Continental's coverage of the U.S.-South America market and enhance its ability to compete with American throughout South America. Continental's nonstop Newark-Santiago service will carry more passengers than Delta and United combined have forecast for their one-stop services. Continental forecast traffic on nonstop-to-nonstop connecting services for over 60 cities, while Delta and United would offer no nonstop-to-nonstop connecting services and no effective competition for American or Lan Chile. Delta would abandon its newly-won Atlanta-Rio de Janeiro service to offer circuitous one-stop Santiago service in the tiny Atlanta-Santiago market, which already has more expeditious service today. United's proposed one-stop Miami-Sao Paulo-Santiago service would be substantially inferior to service United offers today on other flights and wingtip two of United's own Miami-Santiago departures.

Counsel: Continental and Crowell Moring, Bruce Keiner, 202-624-2500

Brief of Delta Air Lines

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This proceeding was instituted by Order 97-6-4 to examine the long-term air service needs of the U.S.-Chile market and to determine which applicant carrier can best meet those needs. At issue are seven weekly round-trip frequencies available for additional U.S. carrier service to Chile beginning on December lS, 1997. Delta, Continental and United each submitted applications for the seven frequencies, and the Department is therefore required to evaluate the comparative merits of the respective service proposals. The evidence of record shows that the public interest and market structure benefits central to the Department's carrier-selection determination would be best served by awarding Delta the seven newly available frequencies. Delta has submitted a comprehensive yet conservative proposal that would create unmatched levels of new network competition by bringing Delta's large Atlanta and Cincinnati hubs to bear on the U.S.-Chile market, both with direct single-plane service to Chile. The Department should not be distracted by Continental's illusory nonstop proposal, which the record demonstrates is uneconomic and not a viable operation. The U.S.-Chile market needs significant and sustainable new network competition, which Delta is uniquely qualified to provide.

Counsel: Delta and Shaw Pittman, Robert Cohn, 202-663-8060

Brief of the Georgia and Atlanta Parties

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Traditionally, where competing proposals differ such that one carrier offers nonstop service and the other offers one stop service, the preference is for nonstop service. Continental has proposed nonstop service, while Delta has not. Should that be the end of the decision-making process? No, it should not be. Continental must show that its nonstop proposal is viable and will actually be operated for the foreseeable future. It is our contention that the Continental proposal for a Newark-Santiago service just is not viable, and that if Continental were selected, the service would only operate one-stop if at all. There is no way Continental would actually allocate two airplanes to this route. We do not find the forecast to be at all credible. We believe the methodology Continental employed to calculate foreign flag traffic is inconsistent with D.O.T. practice. We believe clear mistakes were made in forecasting extensive backhaul services, one-way connections, and connections in small commuter aircraft. If the comparison is more fairly between a non-stop proposal that will not carry even 40 percent load factors, and a one-stop proposal via Brazil linking the largest airline hub in the World (Atlanta) with Chile, then we believe that the Delta proposal for Atlanta-Chile service is the clear winner.

Exhibit 1 - CO-R-1102 | Exhibit 2 - DL-101

Counsel: Ball Janik, Bill Alberger, 202-638-3307

Brief of The New Jersey Parties

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The Department should use its one available U.S. route opportunity to open a new nonstop Chile gateway in a U.S. region without existing nonstop service, provide substantial public benefits for the large numbers of Chile travellers and shippers in the Newark/New York-Santiago market and introduce a new competitor (Continental) into the restricted U.S.-Chile market. Newark is the only proposed U.S. gateway in the Northeast region of the U.S., which currently has no nonstop Chile access, and Newark is the only proposed gateway with an immediate need for nonstop Chile service. United's proposed Miami gateway is already well-served by American, United and LanChile, and Delta's Atlanta one-stop proposal concedes that Atlanta is too small a Chile gateway to support nonstop service. Continental's proposal to bring the first nonstop Chile service to the huge Newark/New York gateway offers far more public benefits September 30, 1997 than either United's proposal to duplicate its existing service or Delta's proposal to bring one-stop Chile service to the minuscule Atlanta gateway.

By: Regional Business Partnership Newark, Samuel Crane, 201-242-6237

Brief of United Air Lines to the Decisionmaker

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Competition in the U.S.-Latin America passenger air transportation market is the aviation equivalent of an endangered species. Immediate, drastic actions are necessary to allow it to survive. American Airlines, Inc. ("American") has over the past few years single-mindedly undertaken to secure a stranglehold not just on air transportation between a few city pairs but between two entire continents. It now operates two of every three U.S. carrier seats in the U.S.-South America market and three out of four U.S. carrier non-stop seats to South America from Miami. In no other region of the world is the market so overwhelmingly dominated by one carrier, and in no other region are the prospects that other carriers will mount a competitive challenge so bleak.

Counsel: United and Ginsburg Feldman, Joel Burton, 202-637-9130

U.S.-Chile Combination Service Proceeding

OST-97-2586

Re: Ex Parte Letter from Rodney Slater to Christine Todd Whitman, Governor of New Jersey

1997 U.S.-Chile Combination Service Proceeding

Order 97-11-27 | OST-97-2586 | Issued and Served November 14, 1997

Order to Show Cause

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By this order, we tentatively select Continental Airlines, Inc., to serve the U. S.-Chile market and allocate it seven weekly frequencies for its nonstop services in the Newark/New York-Santiago market. We also tentatively select Delta Air Lines, Inc., for backup authority in the U.S.-Chile market. We will afford interested parties 10 calendar days to file objections to our tentative findings and conclusions and 5 calendar days thereafter for any answers.

Appendix A: US-Chile Applications
Appendix B: Major Arguments Made by Parties | HTML

By: Patrick Murphy

1997 U.S.-Chile Combination Service Proceeding

OST-97-2586 | November 24, 1997

Objections of Delta Air Lines

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Delta hereby files these objections to the Show Cause Order. First, Delta believes that the evidence of record establishes that Continental's two-aircraft Newark-Santiago nonstop service proposal would be uneconomic and, as a result, there is serious question as to whether Continental will default on its route case proposal just as it defaulted on the two-aircraft Newark-Rio de Janeiro proposal it recently presented in the 1997 Brazil case. Delta submits that the Department failed adequately to consider the substantial evidence that demonstrates Continental's proposal to be unviable. Second, in light of the doubt cast on the viability of Continental's service proposal, if the Department finalizes its tentative selection of Continental to operate Newark-Santiago nonstop service, it is critically important to the public interest and to the integrity of the carrier-selection process for the Department to include appropriate certificate conditions in the event of a default by Continental of its service proposal which would trigger a termination of Continental's authority and the implementation of Delta's back-up certificate authority.

Counsel: Delta and Shaw Pittman, Robert Cohn, 202-663-8060

1997 U.S.-Chile Combination Service Proceeding

OST-97-2586 | December 1, 1997

Answer of Continental Airlines

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Given Delta's proposal to abandon all single-plane Brazil service at Cincinnati and all single-plane service between Atlanta and Rio de Janeiro, it is particularly ironic that Delta faults Continental for offering the nonstop Newark-Rio de Janeiro service it proposed at a different time of day in the southbound direction only. As Delta is well aware, Continental's innovative daytime Newark-Rio de Janeiro flight offered an experimental alternative not otherwise available in the Newark/New York-Brazil market. Effective January 8, 1998, Continental will be offering night-time departures in both directions between Newark and Rio de Janeiro and comparing the results of that service with the results of its current service pattern to determine its future Newark-Rio de Janeiro service pattern. In the meantime, Delta has never offered or proposed its own nonstop Rio de Janeiro service, and it would abandon all single-plane service in the Atlanta and Cincinnati-Rio de Janeiro markets if its backup authority in this proceeding became effective.

Counsel: Continental and Crowell Moring, Bruce Keiner, 202-624-2500

Answer of The New Jersey Parties to Delta's Objections

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The New Jersey Parties are disappointed that problems securing full and accurate O&D traffic data from United (and American) caused the Department to "delay substantially the timetable" for deciding this case.) That delay will cause Continental to miss its originally-planned December start-up, and Continental will now be forced to start up during a weak traffic period. Continental will clearly need a significant period of time to obtain its Chilean authority and to conduct advance marketing of its new Newark-Santiago service.

By: Newark, Samuel Crane, 201-242-6237

1997 U.S.-Chile Combination Service Proceeding

OST-97-2586 | December 4, 1997

Motion for Leave to File and Reply of Delta Air Lines

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Delta submits that adoption of Continental's start-up condition could lead to significant mischief and undermine the integrity of the carrier-selection process and the credibility of route case submissions. It essentially places the start-up clock in the hands of the individual airline, which could delay the foreign government process to suit its own purposes by simply dragging its feet on filing necessary documents. Continental's proposal would, in effect, nullify the Department's start-up condition, rendering it useless. Continental should have raised this issue early on in the proceeding, certainly no later than its direct exhibits so that all parties to this case would have had an opportunity to address the legal and policy ramifications of the proposal. Moreover, a change of policy should not be determined in the context of a single carrier selection proceeding, especially when the issue was not fully aired in the pleadings and was raised for the first time in an answer to show cause objections. Issues of broad policy affecting international air service should be examined in the context of a rulemaking-type proceeding after all affected parties, including airlines and communities, have had an opportunity to file comments.

Counsel: Delta and Shaw Pittman, Robert Cohn, 202-663-8060

1997 U.S.-Chile Combination Service Proceeding

OST-97-2586 | December 15, 1997

Surreply of Continental and Motion for Leave to File

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No matter what circuitous single-plane service Delta proposes between Atlanta and Santiago, however, it could not provide anything like the public benefits Continental's nonstop Newark-Santiago service would provide.

Counsel: Continental and Crowell Moring, Bruce Keiner, 202-624-2500

1997 US-Chile Combination Proceeding

Order 98-1-22 | OST-97-2586 | Issued January 24, 1998 | Served January 29, 1998

Final Order

By this order, we make final our tentative decision in Order 97-11-27 to select Continental Airlines, Inc. to serve the U.S.-Chile market and to allocate it seven weekly frequencies for its nonstop services in the Newark/New York-Santiago market. We also make final our tentative decision to select Delta Air Lines, Inc., for backup authority in the U.S.-Chile market.

By: Patrick Murphy

1997 U.S.-Chile Combination Service Proceeding / Continental Airlines, Inc.

OST-97-2586	November 30, 1998	Application of Continental Airlines for Renewal of a Frequency Allocation	US-Chile Combination Service, Newark-Santiago
		Service List

Continental will continue to use its Newark-Santiago frequencies to provide significant competition for New York (JFK) flights and inter-gateway competition for Miami and Dallas/Ft. Worth flights. Continental continues to provide the only nonstop service between Newark/New York and Chile; absent Continental, passengers travelling between Newark/New York and Chile would have to use one-stop or connecting service via Miami, Dallas/Ft. Worth or foreign points.

Counsel: Continental and Crowell Moring, Bruce Keiner, 202-624-2615

Continental Airlines, Inc.

OST-97-2586

Filed November 30, 1998
Issued December 21, 1998

Notice of Action Taken

Newark-Santiago, Chile

Scheduled foreign air transportation of persons, property, and mail between Newark, New Jersey, and Santiago, Chile.

By: Paul Gretch