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OST-98-4292

Aero Continente, S.A. (Exemption and Foreign Air Carrier Permit, Lima-Miami)

OST-98-4292 | August 7, 1998

Application for an Exemption

Aero Continente proposes to schedule daily round trip service between Lima and Miami. Charter service would be operated only in response to market demand and depending upon aircraft availability. Applicant projects that in the first full calendar year of scheduled service, assumed to be 1999, using B-727 aircraft, it will generate revenues totalling $12,909,463 and that operating expenses would amount to $11,784,430 during the period resulting in a gross operating income of $1.1 million U.S. dollars.

Aero Continente has estimated that it will generate traffic totalling 63,964 revenue passengers in the first full calendar year of service, which is assumed to be 1999.- It will offer a total of 94,170 seats which will result in an overall load fact of 68% between Lima and Miami.

Answers are due by August 24, 1998

Counsel:  Lawrence Wasko, 202-862-4370

Aero Continente, S.A. (Foreign Air Carrier Permit and Exemption, Peru-US)

OST-98-4291 | OST-98-4292 | August 24, 1998

Answer of Fine Air Services

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Fine Air urges the Department to defer all action on Aero Continente's application until the Peruvian Government has lifted the ban on Fine Air Services, and investigate published reports suggesting that control of Aero Continente may be exercised by Fernando Zevallos.

• Attachment:  Ecuador Faces More Turbulence, Miami Herald, 5/22/97
• Attachment:  Peruvuan Airline Whiz Faces New Drug Test, Miami Herald, 4/21/97
• Attachment:  Reported Drug Ties Embarrass US Firm, Miami Herald, 11/4/96

Counsel:  Wilmer Cutler, Jeffrey Shane, 202-663-6000

Aero Continente, S.A. - [Foreign Air Carrier Permit and Exemption (US-Peru)]

OST-98-4291 | OST-98-4292 | September 2, 1998

Reply of Aero Continente, S.A. to Answer of Fine Air Services

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The answer of Fine Air is wholly without merit and must be rejected by the Department of Transportation (the "Department"). Fine Air makes two arguments. First, it claims that because the Government of Peruhas placed a ban on Fine Air's service to/from Peru theDepartment should not take action on Aero Continente's applications until the ban is lifted. This argument is simply a rehash of the allegations Fine Air made in its earlier complaint against the Government of Peru. Second, that there are reports that the "Head" of Aero Continente is under investigation and facing charges for drug trafficking which must be investigated by the Department. The second argument is equally fallacious.

Fine Air argues that Fernando Zevallos is "an alleged drug trafficker" and that "if there is any possibility of Fernando Zevallos having any direct or indirect relationship with the carrier" then the Department must investigate the allegations. In reply to this contention Aero Continente reiterates and states unequivocally that Fernando Zevallos has no ownership interest, direct or indirect, with Aero Continente and is not an officer or director of the company. An independent investigation into the development of Aero Continente shows that the source of funds and their financial application has been consistent and reasonable and properly evidenced in the company's financial records.

• Attachment A - Re: Fernando Zevallos Gonzales
• Attachment B - Stockholders Emergency General Assembly
• Attachment C - Re: Fernando Zevallos
• Attachment D - DEA Comments Page

Counsel: Lawrence Wasko, 202.862.4370

Aero Continente, S.A.C. / Alas del Pacifico

Fine Air again respectfully urges theDepartment to defer all action on the applications of AeroContinente and Alas del Pacifico until such time as the Peruvian Government permits Fine Air to operate services in the U.S.-Peru market.

Counsel:  Wilmer Cutler, Jeffrey Shane, 202-663-6000

Aero Continente, S.A.

In summary, the self-serving assertions of Fine Air are wrong as a matter of fact and law. Fine Air asks the Department to act unlawfully to assist its reentry into Peru. The Department, as a matter of law and policy, must reject Fine Air's arguments.

Counsels:  Laurence Wasko and Jacquelyn Gluck, 202.862.4370

Aero Continente, S.A.C. / Alas del Pacifico

In their most recent pleadings, Aero Continente and Alas argue that the Department is precluded from delaying action on Aero Continente's applications by federal law. Aero Continente also argues that, notwithstanding that it and its former chairman have been indicted in connection with drug trafficking charges, no further investigation of its fitness to hold a U.S. Government license is merited. Both arguments are unavailing.

Wilmer Cutler, Jeffrey Shane

Aero Continente, S.A.

Aero Continente, S.A. respectfully requests that the Department of Transportation, without further delay, grant its Application for an Exemption, Docket OST-98-4292, authorizing it to engage in the scheduled foreign air transportation, as described, pending action of its Application for a Foreign Air Carrier Permit in Docket OST-98-4291, and that it take such other or further action, consistent with the premises herein, as may be in the public interest.

Counsels:  Lawrence Wasko and Jacquelyn Gluck, 202.862.4370

Aero Continente, S.A.

The Government of peru by document officially published March 20, 1999 has lifted the prohibition dated March 17, 1995 imposed upon Fine Airlines, INc.  This action reinstates the authority of Fine Air to serve between Peru and the United States and to implement service for which it has been designated under the bilateral Air Transport Agreements between Peru and the United States.  Please note that this action has been taken by the Government of Peru although there is legal action involving Fine Air pending in Peru arising out of the circumstances on which the original suspension was based.

Counsel:  Lawrence Wasko for Aero Continente, 202.862.4370

Aero Continente, S.A.

Additional Information of Aero Continente, S.A. submitting an English translation of Resolution No. 097-99-MTC/15, 16 of the Government of Peru lifting the ban on operations by Fine Air Servics, Inc. to Peru.

Counsel:  Lawrence Wasko for Aero Continente, 202.862.4370

Aero Continente, S.A.

Aero Continente, S.A. hereby clarifies the relief requested in its above-referenced application exemption from the provisions of 49 U.S.C. section 41301 for authority to engage in scheduled foreign air transportation of passengers, property and mail between Lima, Peru and Miami, Florida and in on-route charters and off-route charters between a point in Peru and a point or points in the United States and between points in the United States and points outside Peru subject to the Department's regulations to include authority limited to wet-lease operations with a duly authorized and properly qualified U.S. or foreign air carrier, pending action on its application for a foreign air carrier permit filed in Docket 4291 and/or the full relief requested in Docket 4292. There are no changes in the information concerning the qualifications of Aero Continente as filed with the Department and Applicant respectfully requests that the Department take immediate action to grant the requested exemption.

Counsel:  Lawrence Wasko, 202-862-4370

Aero Continente, S.A.

Due to the Government of Peru's consistent and continuing failure to act positively on Fine Air's pending application for U.S.-Peru authority over the past several months, Fine Air maintains its objection to the authority sought herein and urges that the Department continue to defer action on Aero Continente's pending applications. Despite the issuance of a March 19, 1999 Ministry Resolution (copy filed herein on March 22, 1999) vacating an earlier March 1995 Ministry Resolution, Fine Air still cannot serve Peru due to the continuing de facto ban on Fine Air operations to Peru. Aero Continente's change in its proposed U.S. operations from operating its own aircraft to using the wet-lease services of another (unspecified) carrier does not change the essential nature of the economic authority sought herein, namely U.S.-Peru authority, the same authority Fine Air has been denied by the Peruvian aviation authorities for many months now. Until Fine Air is awarded a license by the Peruvian authorities and permitted to conduct its bilaterally authorized operations to Peru, a continued deferral of action on Aero Continente's application, even as amended, is required by its public interest.

Counsel:  Pierre Murphy, 202-872-1679, pmuprhy@lopmurphy.com

Aero Continente, S.A.

Letters of Aero Continente, S.A. providing additional information re: evidence that the Government of Peru by Ministerial Resolution repealed the prohibition of the import and operation of Fine Airlines aircraft in Peru.

Counsel:  Lawrence Wasko

Aero Continente, S.A.

Hereby further clarifies the relief requested in its above-referenced application exemption and states that is not an applicant for authority to engage in restricted foreign air transportation of passengers, property and mail between Lima, Peru and Miami, Florida and in on-route charters and off-route  charters limited to wet-lease operations, at this time. This Further Clarification reverses and sets aside the statement of Relief Requested filed in this Docket on May 12, 1999. This action is being taken in view of the extended period of time that its applications in this Docket and in Docket 4291 have been pending as well as the economic and operational considerations involved in a limited wet-lease service. Aero Continente continues to vigorously prosecute its application for a foreign air carrier permit filed in Docket 4291 and the full relief requested in Docket 4292.

Counsel:  Lawrence Wasko, 202.862.4370

Aero Continente, S.A. / Ceilos del Peru, S.A. / Alas del Pacifico, S.A.C.

Counsel:  Pierre Murphy, 202.872.1679, pmurphy@lopmurphy.com

Aero Continente, S.A.

Fine Air has moved to withdraw its pleadings in opposition to the grant to Aero Continente of authority to serve the United States. Fine Air had based its opposition on two arguments, the first that because the Government of Peru has placed a ban on Fine Air's service to/from Peru the Department should not take action on Aero Continente's applications until the ban is lifted and, second, that there were reports that the "head" of Aero Continente and Aero Continente itself are under investigation and facing charges for drug trafficking which must be investigated by the Department. The Government of Peru has lifted the ban on Fine Air and the motion to withdraw has been filed. But having hurled the charge, based on unsubstantiated hearsay, Fine Air's withdrawal of its pleadings does not clear the record of the evil aura created by its allegations of drug trafficking. Accordingly, Aero Continente wishes to take the opportunity of this answer to provide a summary rebuttal to Fine Air's second line of attack.

Counsel:  Lawrence Waskon, 202-862-4370

Aero Continente, S.A.

Letter of Aero Continente, S.A. requesting the Office of International Aviation provide it with such written advice, including information regarding the FAA's position on the Aero Continente applications, to enable Aero Continente to take steps within its own organization as may be required, and to solicit the cooperation of Peru's Ministry of transport so as to obtain full, satisfactory clearance from the FAA and from the Department of Transportation.

Counsel:  Lawrence Waskon, 202-862-4370

Aero Continente S.A.

This is in response to your telephone request of August 10, 1999 that Aero Continente provide certain supplementary information to its July 30, 1999 Answer to the Motion of Fine Air Services, Inc. Dr. Erick Bellido has prepared written answers to the questions I provided to him, based upon our conversation, which answers have been translated into English, copies attached hereto.

Counsel:  Lawrence Wasko, 202.862.4370

Aero Continente, S.A.

Aero Continente respectfully requests that the Department of Transportation clearly state in any order or notice granting Aero Continente authority to engage in foreign air transportation of passengers, property and mail between Lima, Peru and Miami, Florida nonstop and via intermediate points and in on-route charters and off-route charters limited to wet-lease operations, that such action is not intended to dispose of all of the requests for authority in this Docket and that it deferring action on the full relief for which Aero Continente has applied. As it has previously noted, Aero Continente continues to vigorously prosecute its application for a foreign air carrier permit filed in Docket 4291 and the full relief requested in Docket 4292. Respectfully submitted, Aero Continente, S.A.

Counsel:  Aero Continente, Lawrence Wasko, 202.862.4370

Aero Continente, S.A.

By:  Paul Gretch

Aero Continente, S.A.

Counsel:  Lawrence Wasko, 202.862.4370

Aero Continente, S.A.

By:  Paul Gretch

Aero Continente, S.A.

As you are aware Aero Continente is currently using wet leased Boeing 757-200 aircraft between Lima and Miami consistent with the limitations contained in the authority granted to it by the Department of Transportation, see Notice of Action Taken-Docket OST-98-4292, dated November 12, 1999. The Department of Transportation has deferred action on that portion of Aero Continente's application in Docket OST-98-4292 for authority to conduct its operations to the United States using its own aircraft and crews, see Notice of Action Taken dated October 6, 1999.

In order to position itself to comply with the expressed views of the Peru Ministry of Transportation, Communication, Housing and Construction as stated by the Director General of civil Aviation and to be prepared to begin service with its own aircraft and crews, Aero Continente has entered into an aircraft lease agreement with International Lease Finance Corporation for one Boeing 767-200ER aircraft which aircraft it believes is well suited for use between Peru and the United States to be operated by Aero Continente crews properly trained and qualified. A copy of the lease document accompanies the original of this letter. Aero Continente is prepared to use the Boeing 767-200ER aircraft on its route to the United States upon approval by the Department of Transportation of the deferred portion of Docket OST-98-4292.

Aero Continente respectfully requests that your office again review the basis on which Aero Continente and other Peruvian Flag air carriers continue to be denied the right to use their own aircraft and crews in service to the United States despite the fact that Peru is classified as a Category I country regarding safety oversight, and has been for the entire time the Aero Continente applications have been pending before the Department.

Counsel:  Lawrence Wasko, 202.862.4370

Aero Continente, S.A.

Aero Continente, S.A. has issued a public announcement that it will stop operating between Peru and the U.S. effective June 5, 2000 because the Department of Transportation will not allow it to use its own aircraft to serve the U.S. and to compete fairly on even terms with U.S. flag air carriers. A copy of the announcement and a translation is attached hereto.

The actions of the U.S. Department of Transportation, through the. office of the Secretary and,the Federal Aviation Administration, which limit Aero Continente to a "wet lease" service, i.e., flights operated with aircraft and crews that are under the control of some other, non-Peruvian air carrier, are contrary to the provisions of the Air Transport Agreement between the U.S. and Peru. There is no equality of competitive opportunity and the result has been to harm privately owned and operated Peruvian businesses such as Aero Continente.

Instead of implementing the first truly Open Skies transport agreement between a Latin American nation and the U.S., an agreement that has been the model for other Central and South American countries, the Department has erected barriers to the entry of Peruvian carriers to the U.S., barriers which a commercial enterprise such as Aero Continente cannot overcome. For nearly two years, from the date of signing of the agreement, June 10, 1998 to the present, no Peru flag carrier has been authorized by the Department to operate its own aircraft to the U.S. and there is currently no Peruvian flag carrier operating its own aircraft to the U.S.  In contrast, the Department has made certain that U.S. flag carriers have obtained full and open rights to serve to and through Peru, even using the licensing process as a weapon against Aero Continente and other Peruvian carriers to obtain even more benefits for the U.S.  It is clear that this "Open Skies" agreement in reality only benefits the U.S. flag carriers.

Aero Continente does not believe that this situation is an international safety compliance issue. Aero Continente does not believe that the Department is taking action restricting Aero Continente's service to protect United States citizens travelling to Peru. In support of this view Aero Continente notes that Secretary of Transportation Rodney E. Slater stated publicly that Peru has never lost its Category I compliance status with ICAO safety standards. Peru has been audited by ICAO. The U.S. Department of Transportation has reviewed the ICAO report including references to certain aeronautic legislation matters which the Secretary, in his public statements, described as "minor" and not effecting Category I status. Nevertheless, your office and the office of International Flights Standards in Miami have refused to allow Aero Continente, or any other Peruvian air carrier, to fly to the United States.

The economic impact of these circumstances falls squarely on Aero Continente and it has been devastating. The cost of implementing and providing "wet-lease" service has been significantly greater than when service is performed with Aero Continente's own aircraft and crews, because many functions, airport and ground service needs, passenger servicing as well as overseeing and coordinating aircraft operations, must be duplicated and added to the lease rental expense. A Peruvian carrier limited to a wet-lease operation cannot compete economically in the same market with an American carrier operating its own aircraft.

Counsel:  Lawrence Wasko, 202.862.4370

Aero Continente, S.A.

Aero Continente now wishes to operate aircraft in its own night on its authorized Lima-Miami scheduled services, and hereby seeks a lifting of the wet-lease condition currently imposed on its exemption authority herein. To that end, Aero Continente hereby advises the Department that it has met with the Federal Aviation Administration staff in the Miami International Field Office and Aero Continente has filed its FAA Form 8400-6 Pre-Application Statement of Intent.

Upon the issuance and approval of its FAA Part 129 Operation Specifications and the lifting of the wet lease condition herein, it is Aero Continente's intention to continue with the existing wet-lease arrangement, however Aero Continente intends to supplement its existing Lima-Miami wet-lease operations with other operations using its own aircraft on its authorized routes.

Counsel:  Pierre Murphy, 202.872.1679, pmurphy@lopmurphy.com

Aero Continente, S.A.

Respectfully submits this Amendment #3 to Aero Continente's Exemption authority issued herein requesting authority to operate to the additional U.S. points: Ft. Lauderdale, FL; New York, NY; Los Angeles, CA; and San Juan, PR, via intermediate points, consistent with the broadened authority recently issued to Aero Continente by the Peruvian Direccion General de Aeronautica Civil pursuant to the U.S.-Peru "Open Skies" agreement.

Counsel:  Pierre Murphy, 202-872-1679, pmurphy@lopmurphy.com

Aero Continente, S.A.

By:  Paul Gretch

Aero Continente, S.A.

Hereby respectfully applies for an amendment to its current exemption from 49 U.S.C. §41301 to the extent necessary to enable Aero Continente to engage in: the scheduled foreign air transportation of persons, property and mail from points behind Peru via Peru and intermediate points to a point or points in the United States and beyond.

On June 10, 1998 (entered into force on February 8, 1999), the governments of the United States and Peru signed the "Open Skies" Air Transport Agreement. Under Annex I of this Agreement, the airlines of Peru are entitled to operate scheduled services "from points behind Peru via Peru and intermediate points to a point or points in the United States and beyond. 112 Aero Continente requests herein amended exemption authority that is co-extensive with this grant of rights.

Aero Continente is fit, willing and able to perform the services encompassed by this application. Aero Continente currently holds exemption authority authorizing it to conduct scheduled combination services between Lima, Peru, and Miami, FL; Ft. Lauderdale, FL; New York, NY; Los Angeles, CA; and San Juan, PR via intermediate points, using wet leased aircraft.

Counsel:  Pierre Murphy, 202.822.8050, pmurphy@lopmurphy.com

Aero Continente, S.A.

Amend exemption, last granted September 4, 2001, in this docket, to permit it to conduct scheduled foreign air transportation of persons, property and mail from points behind Peru, via Peru and intermediate points, to a point or points in the United States and beyond, limited to wet-lease operations conducted by a duly authorized and properly supervised U.S. or foreign air carrier.

By:  Paul Gretch

Aero Continente, S.A.

OST-98-4292

Filed March 20, 2002 Issued June 17, 2002

Notice of Action Taken

U.S.- Peru

Amend exemption authority awarded in Docket OST-98-4292 to eliminate the condition requiring Aero Continente to conduct its authorized operations using wet leased aircraft.

Background: Aero Continente currently holds exemption authority to conduct scheduled foreign air transportation of persons, property and mail from points behind Peru, via Peru and intermediate points, to a point or points in the United States and beyond (effective through March 12, 2004); and charters pursuant to 14 CFR 212 of the Department's regulations (effective through September 4, 2003). In the conduct of these authorized services, we limited Aero Continente's operations to the use of aircraft wet leased from a duly authorized and properly supervised U.S. or foreign air carrier that receives requisite authority under the provisions of 14 CFR 212 of the Department's regulations. (See Notices of Action Taken dated March 12, 2002, and September 4, 2001, in this docket.)

The effect of our action in this Notice is to remove the wet-lease condition effective immediately. Based on the advice of the FAA, we found that Aero Continente was qualified to conduct operations using its own aircraft and crews.

By:  Paul Gretch

OST-98-4292 - Exemption and Foreign Air Carrier Permit, Lima-Miami

March 1, 2004

Application for Renewal of Exemption Authority

AeroContinente has been successfully operating U.S. ‑ Peru scheduled combination services on a variety of routes using Boeing B‑767‑200 equipment. AeroContinente continues to be fit, willing and able to operate the scheduled services referred to herein.

Counsel: Pierre Murphy, 202-776-3980, pmurphy@lopmurphy.com

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