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OST-1999-5286

New U.S.-Russia Opportunities

By this notice we request that all U.S. carriers interested in making use of new service opportunities in the U.S.-Russia aviation market file applications, including the information requested below, with the Department no later than March 29, 1999. The new service opportunities include the following: code sharing, scheduled combination service frequencies, scheduled all-cargo service frequencies, and overflight frequencies.

The Department has previously allocated 50.5 out of the 56 weekly frequencies, as follows:

• Alaska Airlines - 1
• Reeve Aleutian Airways - 2
• Delta Air Lines - 25
• Northwest Airlines - 8.5
• American Airlines - 7
• United Air Lines - 7

By:  Charles Hunnicutt

New US-Russia Opportunities

Alaska Airlines, Inc.

In its notice of March 18, 1999 in this docket, the Department appears to be taking the position that Alaska's single frequency should now be open to reallocation. Alaska submits that it should be permitted to retain that frequency not only because the same reasons that lead to the issuance of a waiver last year continue to apply fully, but also because Alaska has now reached an agreement with Reeve, and expects to begin codesharing operations with that carrier soon. These operations will fully utilize the single frequency that Alaska currently has. Alaska therefore submits that withdrawal of its only frequency and complete removal of its presence from the market in inappropriate. Alaska would also note that the demands for frequencies between the United States and the Russia of which it is aware could readily be accommodated without removing Alaska's only remaining foothold in this market.

Alaska and Reeve reached an understanding concerning codesharing services between Anchorage, on the one hand, and Petropavlosk-Kamchatski and Yuzhno-Sakhalinsk on the other hand within the past few days. The parties intend to implement this understanding as soon as possible after the necessary notifications are given to the various CRS's. The markets to be served on a codeshare basis are those between Anchorage, Alaska on the one hand, and Petropavlovsk-Kamchatski and Yuzhno-Sakhalinsk, Russia on the other hand. This will permit Alaska to resume service between the various points on its system and the Russian Far East. Alaska anticipates codesharing with Reeve on both of the two frequencies that it currently operates in these markets.

Counsel:  Alaska and Squire Sanders, Marshall Sinick, 202-626-6651

American Airlines, Inc.

American Airlines, Inc., pursuant to the Department's Notice of March 18, 1999 (New U.S.-Russia Opportunities), hereby applies for a third-country codesharing designation and an allocation of seven weekly combination service frequencies in order to serve between U.S. points, on the one hand, and St. Petersburg and Moscow, Russia, on the other, under a codesharing arrangement with Finnair Oyj. In addition, American seeks underlying route authority to serve St. Petersburg (OST-98-4522), and amendment of its Chicago-Moscow exemption granted by Notice of Action Taken, September 18, 1998 in OST-98-4328) so as to enable American to serve Moscow from U.S. points.  American and Finnair will operate daily service to each Russian point, thus requiring the allocation of seven weekly frequencies, since codesharing services count as one half of a frequency for a U.S. carrier placing its code on flights in the U.S.-Russian market operated by another airline. The American/Finnair service to Russia will operate on a year-round basis.

Counsel:  American, Carl Nelson, 202-496-5647, carl_nelson@amrcorp.com

Continental Airlines, Inc.

Continental will place its code on seven weekly Air France flights between Paris and Moscow and seven weekly Air France flights between Paris and St. Petersburg. Continental will offer Houston/Newark/Miami-Moscow/St. Petersburg on-line service using Air France's Paris-Moscow B-737-300 and A-320 service with seat configurations of 18 First/102 Coach and 21 First/144 Coach respectively and Paris-St. Petersburg B-737-300 and B-737-500 service with seat configurations of 18 First/102 Coach.  Continental will be operating Houston/Newark-Paris service using DC-10-30 and B-777-200 aircraft with a DC-10-30 seat configuration of 38 BusinessFirst/204 Coach and a B-777-200 seat configuration of 48 BusinessFirst/235 Coach. Continental will also be code-sharing on Houston/Newark/Miami-Paris flights operated by Air France using B-777-200, B-747-100 and A-340-300 aircraft with a B-777-200 seat configuration of 12 First/56 Business/202 Coach, a B-747-100 configuration of 6 First/41 Business/332 Coach and an A-340-300 configuration of 6 First/38 Business/212 Coach.

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

Delta Air Lines, Inc.

Delta hereby applies for a year-2000 designation to provide third-country codeshare service between the United States and Russia in conjunction with Air France via Paris, France. Delta also requests seven weekly combination frequencies to provide the proposed third-country codeshare service.  Delta proposes to offer seven weekly roundtrip codeshare flights to Moscow and seven weekly roundtrip codeshare flights to St. Petersburg on flights operated by Air France to and from Paris, beginning January 22, 2000. Air France operates Boeing 737 aircraft between Moscow and Paris and Boeing 737 and Airbus 320 aircraft between St. Petersburg and Paris. Air France’s Boeing 737 aircraft is configured with 24 business seats and 78 economy seats. Air France’s A-320 aircraft has 18 business seats and 132 economy seats.

Delta currently operates fourteen weekly codeshare flights to Moscow and three weekly codeshare flights to St. Petersburg with Swissair. Since the MOC limits the number of codeshare flights in any city-pair to no more than seven per week, Delta will be required to cut its current Moscow service in half, a result contrary to Delta’s longstanding objectives to increase U.S.-Russia codeshare service. The Department is well aware of Delta’s plans to increase third-country codeshare service to Russia. Indeed, the Department allocated to Delta additional frequencies to implement expanded service, but Delta’s plans were blocked by Russia’s refusal to allow Delta to conduct additional codeshare flights. In light of Delta’s inability to operate its planned service increases due to the actions of the Russian Federation, the Department granted Delta waivers of the dormancy requirements applicable to Delta’s frequencies. The new rights under the MOC now give the Department the important opportunity to allow Delta to achieve its long planned objective to expand its U.S.-Russia service. An award to Delta of a year-2000 designation would enable it to preserve existing Moscow service levels that Delta has provided in the marketplace for over two years. As the Department has stated, "it is in the public interest . . . to facilitate continuation of the existing incumbent carrier services in the market." Order 94-9-1 at 6. It would also allow Delta to increase service to St. Petersburg from three weekly flights to seven weekly flights.

Delta currently operates fourteen weekly flights between Frankfurt and Mumbai (seven in each direction). Delta has determined that it could operate to Mumbai over a more advantageous routing via Russia airspace, without overflying Afghanistan, and desires to do so immediately.  Delta submits that there are at least nineteen weekly overflights that should be subject to allocation in this proceeding, not five as suggested by the Department’s Notice. United terminated all direct services to India and is not using any of its fourteen weekly frequencies. United’s only service to India involves a codeshare operation in conjunction with flights operated by Lufthansa.

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

Federal Express Corporation

Federal Express Corporation hereby applies, in response to the Notice of the Department of Transportation (the Department), served March 18, 1999 in the captioned proceeding, for grant of twelve (12) one-way Russia overflight frequencies so as to authorize Federal Express to operate six (6) scheduled all-cargo flights a week in each direction between Paris, France, and Subic Bay, Philippines, over the Tashkent overflight routing. Federal Express requests that the foregoing frequency allocation be granted for a period of two years. Federal Express urges the Department to establish a further opportunity for competing applicants for any ``over-subscribed" opportunity to submit additional factual evidence and carrier-selection arguments in support of their applications.

Counsel:  Federal Express and Shaw Pittman, Nathaniel Breed, 202-663-8078

Kitty Hawk International, Inc.

Engage in scheduled foreign air transportation of property and mail between anile point or points in the United States vi a intermediate points to Moscow and St Petersburg, Russia. KHI seeks the right to conduct three weekly round trips scheduled all-cargo flights on the requested route KHI also requests authority integrate this exemption authority with all services KHI is otherwise authorized.

Counsel:  Bagileo Silverberg, Robert Silverberg, 202-944-3300

American Airlines, Inc.

Counsel:  American, Carl Nelson, 202-496-5647, carl_nelson@amrcorp.com

Delta Air Lines, Inc.

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

Kitty Hawk International, Inc.

Counsel:  Bagileo Silverberg, Robert Silverberg, 202-944-3300

New U.S.-Russia Opportunities

American presently has no on-line access to the Russian market. By conducting codesharing operations via Helsinki, American and Finnair will offer a highly convenient service, and with virtually no geographic circuity, between New York (JFK) and the two principal cities of Russia, Moscow and St. Petersburg. The American/Finnair arrangement will also serve a number of major U.S. cities which have nonstop service on American or American Eagle to New York (JFK), as shown in American's application of March 29, 1999. Continental and Delta are in the untenable position of seeking parallel codesharing designations with the same foreign partner, Air France. It is unthinkable that the Department would allow Air France to take up both of the two remaining U.S.-Russia third-country codeshare opportunities, particularly given the absence of an open skies agreement between the U.S. and France. The Department should not permit double-dipping by Air France, and thereby deprive American and Finnair of their only access to the U.S.-Russia codeshare market.

Counsel:  American, Carl Nelson, 202-496-5647, carl_nelson@amrcorp.com

Delta will continue to hold more U.S.-Russia frequencies than any other carrier, even if its application for frequencies to code-share with Air France is denied. Delta holds fourteen U.S.-Russia frequencies which it uses to operate its own nonstop JFK-Moscow flights and code-share service with Swissair between the U.S. and Moscow/St. Petersburg at JFK, Boston, Cincinnati, Chicago, Atlanta, Los Angeles and San Francisco. Delta also provides its own on-line JFK connecting service between Moscow and Boston, Cincinnati, Chicago, Atlanta, Los Angeles and San Francisco. Since Delta's service with Air France would simply duplicate the service it already offers on its own Delta flights and with Swissair at each and every one of the gateways where Delta plans to code-share with Air France for U.S.-Russia service, Delta's Air France proposal would add neither a single new gateway nor an additional domestic network for service between the U.S. and Russia. Although Delta claims its objective is restoration of additional frequencies lost under the new U.S.-Russia agreement because of limits on Delta’s code-sharing via Zurich, the practical effect of awarding any authority to Delta would be entirely anticompetitive.

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

American's proposed service is less than meets the eye. Although American claims that Finnair operates daily service to Moscow and St. Petersburg, the connections to/from the New York flights are erratic and on some days non-existent. Thus, westbound connections from St. Petersburg to Finnair's Helsinki-New York departure are available only five days a week.  As Delta's application noted, Delta has been operating 14 weekly codeshare flights to Moscow in conjunction with its codeshare arrangement with Swissair. However, the MOC limits the number of codeshare flights that each codeshare arrangement can provide in any city pair to no more than seven weekly. Thus, in the absence of an award in this case, Delta will be required to reduce by one-half its current Moscow service. The Department's longstanding policy has been to permit carriers to continue existing services. Delta currently operates 14 weekly flights between Frankfurt and Mumbai and seeks 14 weekly overflight frequencies, which Delta proposes to use immediately upon the issuance of the authority. No other carrier has requested Russia overflights to be operated to the Indian subcontinent. Since Delta desires to implement the overflights immediately, Delta's application should be granted promptly, and not be deferred pending resolution of other contested issues.

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

In view of the fact that the cargo submissions do not exceed the allowable number of operations permitted under the U.S.-Russia bilateral agreement, KHI urges the Department to issue a final order awarding the cargo authority sought by KHI and Federal Express. A decision well in advance of the July 1, 2090 startup date will permit KHI to better market its services to prospective shippers and, as well, necessary to proceed to process an application for any Russian-issued license. Further, whatever additional procedures the DOT must employ to complete the passenger phase of this matter, they should proceed on a separate track

Counsel:  Bagileo Silverberg, Robert Silverberg, 202-944-3300

Contrary to Delta's suggestions, these fourteen Europe-India overflight frequencies are neither dormant nor are they subject to 90-day dormancy condition following yesterday's suspension of United's New York-London-Delhi service. The Department has amended the 90-day dormancy condition with respect to these Europe-India frequencies so that it does not begin to run until the reopening of Afghanistan airspace to U.S. carriers. Notice dated September 17, 1998 in Docket OST-97-2610. United's new nonstop Chicago-Delhi service can be operated, as noted above, without overflying Afghanistan. If the Department were to ignore these precedents and reallocate United's Europe-India overflight frequencies, it would reduce competition in the U. S.-India market contrary to the public interest. While this might suit Delta's goals, as an incumbent U.S.-India competitor, it would seriously disserve the public. This is all the more the case given the fact that United's relatively short suspension of service is necessary to accommodate the advance planning and equipment modification needed to implement an important service improvement in the U. S.-India market. If the Department were to grant Delta's application for reallocation of these Russia overflight frequencies, the new Chicago-Delhi nonstop services could not be operated as planned.

Counsel:  United and Kirkland Ellis, Jeffrey Manley, 202-879-5161, jeffrey_manley@kirkland.com

US - Russia Opportunities

In accordance with the requirements of the Notice issued by the Department in this proceeding on March 18, 1999, Alaska Airlines, Inc. hereby supplements its Response filed in this proceeding on March 29, 1999 by submitting for the record the attached redacted copies of the AIRLINE SERVICES AGREEMENT and the FIRST AMENDMENT TO AIRLINE SERVICES AGREEMENT that Alaska entered into with Reeve Aleutian Airways, Inc.

Counsel:  Squire Sanders, Marshall Sinick, 202.526.6651

New U.S.-Russia Opportunities

In view of the compelling public interest factors cited in Alaska's application, and the lack of opposition from, or adverse effect on, other carriers, Alaska hereby requests that the Department promptly reaffirm the allocation to it of a single frequency in the United States-Russia markets.

Counsel:  Alaska and Squire Sanders, Marshall Sinick, 202-626-6651

Counsel:  American, Carl Nelson, 202-496-5647, carl_nelson@amrcorp.com

Continental will add a new carrier network between the U.S. and Russia and expand intergateway competition lay adding two new hub gateways (at Houston and Newark) and one non-hub gateway (at Miami). Houston will be the first hub gateway for Russia service in the southwestern United States, and Newark will be the first hub gateway for Russia service in the New York/Newark area. Since Delta already offers one-stop U.S.-Russia service at each and every Delta/Air France gateway. Delta's proposal would neither introduce a new airline network between the U.S. and Russia nor add its first on-line service at a single point. Since JFK is already served by Delta and multiple code-share arrangements between U.S. and foreign carriers, American's proposal would not add a single new U.S.-flag gateway, and Finnair would operate all of the code-share flights between JFK and Russia. On the other hand, American would at least add a new U.S.-flag carrier offering U.S.-Russia services and provide additional on-line connecting opportunities at JFK.

Counsel:  Continental and Crowell Moring, Bruce Keiner, 202-624-2500, rbkeiner@cromor.com

There are three applicants for the two available third-country codeshare designations. Delta's application ranks at the top in terms of all the significant carrier-selection factors and should be one of the two choices for an award in this case. As all but one carrier will receive an award, the Department need only determine which proposal is the weakest. American's proposal offers the fewest service and competitive benefits of any applicant. Continental's proposal is substantially inferior to Delta's more comprehensive U.S.-Russia service proposal.

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

The Government of Finland was among the first countries to accept the United States Government's open skies initiative and enter into the model agreement sponsored and supported by the United States. That agreement promised expanded opportunities for carriers of the two countries and guaranteed the virtual elimination of unnecessary regulatory delay and interference. Among the most noteworthy provisions was Article 10 liberalizing, to the maximum extent possible, the commercial opportunities for those carriers. Of particular note here, is Paragraph 7 of Article 10, which, as amended, gives express recognition to the authority of designated carriers of the two countries to "enter into cooperative marketing arrangements such as blocked-space, code-sharing or leasing agreements ..." On September 30, 1998, American and Finnair filed a joint application for a statement of authorization authorizing them to institute code-share services, including service to and from the Russian Federation. It is the United States- Russia portion of that application which is presently pending before the Department for consideration in these proceedings.

Counsel:  Seeger Potter, John Richardson, 202-496-1234

Houston, as the key hub gateway for an underserved geographical region -- the southwestern and midwestern states -- also is uniquely positioned to enhance the overall structure of U.S. carrier service to Russia. As is so often the case, most carriers (both those already authorized and the other applicants) have focused on establishing Russia third-country codeshare service from the east, west and northern midwest regions. This skewing of international air service away from the southwest and midwest regions is an historical anomaly that does not reflect the nationwide distribution of passenger and shipper demand. As Houston is the only city in this proceeding that would deliver third-country Russia codeshare service to the southwest and midwest U.S. regions, the selection of Continental and Houston would give the Department an opportunity to provide service to a major geographical constituency that otherwise will go without such service from any carrier or city.

Counsel:  Houston and Zuckert Scoutt, Rachel Trinder, 202-298-8660

As United has explained in its April 5, 1999 Answer, it has plans to use its Europe-India overflight frequencies beginning on October 3 l, 1999, when it inaugurates new nonstop service between Chicago and Delhi. These new services will be directly competitive with Delta's US-Bombay services but, unlike Delta's services, which can be operated over a more southerly routing, United's Chicago-Delhi services can be consistently operated on a nonstop basis only by navigating through Russian airspace via Europe. Indeed, Delta is currently operating services between Frankfurt and Bombay without navigating through Russian airspace and seeks United's frequencies in order to improve its existing services. If frequencies to overfly Russian airspace were not available to United, United's service between Chicago and Delhi could not be operated on a nonstop basis and would be uneconomic. Moreover, and at least equally important, if the new Chicago-Delhi services were not operated on a nonstop basis, consumers would lose an important benefit. Nonstop services will reduce average travel times between Chicago and Delhi by 3 hours or more. In addition, nonstop flights between Chicago and Delhi will be competitive with services to India from U. S. East Coast points such as New York and Washington, D.C. which presently operate via stops or connections in Europe. By operating via a stop in Chicago, East Coast passengers will have a new competitive choice of service to India with elapsed times generally equivalent to those experienced on existing service via Europe.

Counsel:  United and Kirkland Ellis, Jeffrey Manley, 202-879-5161, jeffrey_manely@kirkland.com

New U.S.-Russia Opportunities / American Airlines, Inc. and Finnair Oyj

On April 14, 1999, Bloomberg News Service reported that "AOA Aeroflot, Russia's national airline, and Delta Air Lines, Inc., the third-largest U.S. carrier, said they plan to sign a codesharing agreement, a move that would for the first time give the U.S. and Russian air carriers access to hundreds of destinations to each other's home countries, the Moscow Times reported. The agreement, which may be implemented as early as his fall, would allow passengers to take advantage of the routes and frequent flyer programs of both airlines."  If Delta and Aeroflot now enter into a codesharing agreement, Delta will have three opportunities to access the U.S.-Russia market. The Department should not award Delta a fourth opportunity -- to codeshare with Air France via Paris -- to the exclusion of American's request to codeshare with Finnair via Helsinki, which will represent American's only on-line access to Russia. In these circumstances, to grant Delta's application would be contrary to the public interest in maximizing competitive options for passengers and shippers in the U.S.-Russia market.

Counsel:  American, Carl Nelson, 202-496-5647, carl_nelson@amrcorp.com

New U.S.-Russia Opportunities

American's Supplement contains a news article that alleges that Delta has completed a codeshare arrangement with Aeroflot. American argues that this provides a basis for rejecting Delta's application. Delta disagrees with American that Delta's application should be rejected. While Delta is negotiating a codeshare arrangement with Aeroflot, an agreement has not been concluded. Such negotiations provide no basis for rejecting Delta's application. Moreover, American's submission does not blunt the fact that in every significant respect, as demonstrated in Delta's Answer and Reply, Delta's multi-gateway proposal is superior to American's. Delta will serve eight gateways and offer scores of same-day roundtrip daily connections to Moscow and St. Petersburg. By contrast, American's single-gateway proposal would not even offer a single daily roundtrip same-day connection to either Moscow or St. Petersburg.

Counsel:  Delta and Shaw Pittman, Robert Cohn, 202-216-0700

New U.S.-Russia Opportunities

United opposes any interim allocation of these frequencies to Delta for an open ended period such as Delta has proposed. Based on its previous dealings with the Russian authorities, it is United’s experience that a precise expiration of any interim allocation is necessary in order to avoid delays in gaining the necessary Russian approvals to start the proposed Chicago-Delhi nonstop flights on schedule. United needs a clear and unambiguous right to the frequencies as of October 31, 1999 in order to assure expeditious approvals of these schedules.  Moreover, United’s willingness to accept an interim allocation of these frequencies should not be interpreted as any concession on United’s part that Delta can use these frequencies to improve its services between Frankfurt and Bombay on a consistent basis. As United has noted in its Reply, flights operating between Frankfurt and Bombay, according United’s analysis, would only rarely benefit from navigating through Russian airspace but avoiding Afghanistan. United, on the other hand, stands to benefit from these frequencies on a consistent basis. United will, therefore, maximize the utilization of this valuable resource.

Counsel:  United and Kirkland Ellis, Jeffrey Manley, 202-879-5161, jeffrey_manley@kirkland.com

U.S.-Russia Overflight Opportunities

Counsel:  Shaw Pittman, Rovert Cohn for Delta, 202.663.8060, robert_cohn@shawpittman.com

Delta Air Lines, Inc.

Allocation of five weekly Russian overflight frequencies on a continuing basis; and Interim allocation of nine weekly Russian overflight frequencies, currently allocated to United Air Lines.

By:  Paul Gretch

Federal Express Corporation

Six (6) scheduled all-cargo flights a week in each direction between Paris, France, and Subic Bay, Philippines, over Tashkent. Based on the volume and destination of traffic moving between Paris and Subic Bay, Federal Express may also operate some flights via an intermediate stop in Bangkok, Thailand.

By:  Paul Gretch

Alaska Airlines, Inc. / New U.S.-Russia Opportunities

Scheduled foreign air transportation of persons, property, and mail between Anchorage, Alaska, on the one hand, and Yuzhno-Sakhalinsk, Russia, on the other hand.  Scheduled foreign air transportation of persons, property, and mail between Anchorage, Alaska, on the one hand, and Petropavieksk-Kamchadski and Yuzhno-Sakhalinsk, Russia, on the other hand. Alaska intends to operate this service under a code-share arrangement with Reeve Aleutian Airways.

The 1999 U.S.-Russia agreement provides that code-share services count as one half of a frequency for a U.S. carrier placing its code on flights in the U.S.-Russia market operated by another airline. Based on this frequency equivalency provision of the agreement, the frequency sought by Alaska will enable it to put its code on the two weekly flights operated by Reeve Aleutian in the Anchorage-Russia Far East markets. As a result of our action here, a total of 25 frequencies remain available for allocation to U.S. carriers.

By:  Paul Gretch

Delta Air Lines, Inc.

Delta Air Lines, Inc. hereby requests that its interim allocation of nine Russian overflight frequencies previously held by United Air Lines, Inc. be granted for an indefinite period. United recently announced that it has canceled plans to launch daily nonstop Chicago-Delhi service. In light of the fact that United no longer requires Russian overflight frequencies for this service, there is no longer any reason to limit the duration of Delta’s frequency allocation.

Counsel:  ShawPittman, Robert Cohn, 202.663.8060, robert.cohn@shawpittman.com

Delta Air Lines, Inc.

Earlier this year, United consented to an interim allocation to Delta of nine of United’s Russian overflight frequencies for services to India. United was prepared to allow Delta to receive this allocation on an interim basis because such an allocation in no way prejudiced United so long as the frequencies were returned to United on October 30, 1999, when United planned to begin Chicago-Delhi nonstop services.  United has now cancelled plans to begin Chicago-Delhi nonstop services. United opposes any indefinite reallocation of its nine Russia overflight frequencies, however, in circumstances where it is unlikely that Delta will be able to use them. .Delta claims that it needs the frequencies to overfly Russia on its services between Frankfurt and Bombay. Services between Europe and Bombay, however, operate over a more southerly routing than do services between Europe and Delhi. According to United’s calculations, it would be very unusual for a carrier to benefit from overflying Russia on a Frankfurt-Bombay routing. This is particularly the case with Afghanistan closed to U.S. carrier operations. Indeed, in its June 14, 1999, letter, Delta does not even claim to have used a single Russia overflight frequency in the period since May 3, 1999 when the frequencies were allocated to Delta on an interim basis.  In these circumstances, the Department should not make an indefinite allocation of these overflight frequencies to Delta unless Delta can demonstrate during the period of its interim allocation that it can actually use the frequencies. If, as United believes to be the case, a Frankfurt-Bombay flight cannot be operated efficiently through Russian airspace, particularly with Afghanistan closed, it would be prejudicial to other carriers to award the frequencies to Delta for an indefinite period. It would be preferable for DOT to reclaim these interim frequencies, as well as the other five allocated to Delta on an indefinite basis, so that they are available for allocation to carriers that can use them on a consistent basis. Based on the .foregoing, United urges the Department to deny Delta’s request dated June 14, 1999, and to direct Delta to report on a monthly basis its utilization of the Russian over-flight frequencies allocated to Delta on an interim basis by Notice, dated May 3, 1999, in Docket OST-99-5286.

Counsel:  United and Kirkland Ellis, Jeffrey Manley, 202-879-5161

New U.S.-Russia Oppurtunities

During the pendency of this proceeding, Air France has announced that it will enter into a long-term strategic alliance with Delta,2 Swissair has applied for blanket codeshare authority with American and Continental now seeks U.S.-Russia codeshare authority with Czech Airlines. Because of these new circumstances, Continental urges the Department to reopen the record in this proceeding to permit Continental to amend its application to seek authority to codeshare between the U.S. and Russia with CSA via Prague and to allow American and Delta to revise their proposals in keeping with their future alliance plans if they choose to do so. Only by reopening the record and considering the allocation of U.S.-Russia codesharing opportunities to the broadest possible number of U.S. carriers and their codeshare partners in accordance with their current alliance plans can the Department maximize the public benefits which will flow from new U.S.-Russia codesharing opportunities. Continental therefore moves to reopen the record in this proceeding for amended applications or, at the very least, allow Continental to file a second amendment to its application so it can substitute CSA and Prague for Air France and Paris.

Counsel:  Continental, Crowell Moring, Bruce Keiner, 202.624.2500

New U.S.- Russia Opportunities / Continental Airlines

American Airlines, Inc. and Finnair Oyj hereby jointly answer in opposition to the motion submitted on August 19, 1999 by Continental Airlines, Inc. to reopen the record in this proceeding to receive an "amendment" to its application to engage in codesharing services to Russia. By its belated amendment, Continental is seeking exemption authority and frequencies to serve Moscow and St. Petersburg via Prague, Czech Republic under a codesharing arrangement with Czech Airlines. The Department should deny Continental's motion, reject its tendered amendment, and proceed immediately to a final decision granting the long-pending American/Finnair request for codesharing frequencies to serve Moscow and St. Petersburg via Helsinki, Finland.

Counsel:  Finnair OYJ, John Richardson, 202.828.0152 and American Airlines, Carl Nelson, 202.496.5647, carl_nelson@amrcorp.com

With two applicants for three awards, the Department need only eliminate the weakest applicant. Regardless of whether Continental or American is selected for the remaining opportunity, an award to Delta to provide daily Russia codeshare service with Air France from eight nonstop U.S. gateways will maximize the public benefits from an award in this case.

Counsel:  Shaw Pittman, Robert Cohn, 202.663.8060, robert.cohn@shawpittman.com

New U.S.- Russia Opportunities

As both American/Finnair and Continental have explained, granting Delta's proposal would harm airline competition between the U.S. and Russia by foreclosing a new entrant, further consolidating Delta's dominant position on U.S.-Russia routes and duplicating service Delta already provides.  Delta's third daily Moscow service and second daily St. Petersburg service would not produce any new public benefits since those services would merely duplicate its JFK-Moscow flights and existing codeshare service with Swissair without opening a single new U.S. gateway to U.S.-Russia service. Similarly, American's proposal would not produce public benefits comparable to Continental's service with CSA. American would add U.S.-flag Russia service only at JFK, the U.S. gateway with the most Russia service already, and American could not offer much online connecting service since JFK is not an American hub.

Counsel:  Crowell Moring, Bruce Keiner, 202.624.2500

New U.S.-Russia Opportunities

CSA does not take issue with the argument that Delta's code share proposal may well be more expansive or serve more gateway points than the proposal advanced by Continental for its code share service with CSA. But Continental properly replies that the Delta proposal simply duplicates current Delta code share services, while Continental's proposal would add a totally new and burgeoning gateway point, namely, Newark. Moreover, if the number of gateway points were to be the sole or even the main test used by the Department for reaching its determination in this proceeding, then it could fairly be said that only the biggest airlines and combinations of airlines will survive and thrive, while the smaller ones will wither and more than likely ultimately disappear. This is not a prescription for how best to encourage competition in any marketplace, much less the one involved in this proceeding.. It is true that CSA's connections to Moscow and St. Petersburg, much like those of Finnair, are not currently as desirable as those of the major European carriers that are involved here as code share partners of other major U.S. carriers. But CSA is convinced that, if authorized by the Department to conduct these code share services, the two partners will in time be in a position to offer fully competitive connections between the United States and Russia via Prague. Moreover, there could be no more preferable point than Prague as a gateway to Russia and other points in eastern Europe. Indeed, so far as CSA is able to determine, every other European code share intermediate point involved in this proceeding is in western Europe. Prague would be the first and only exception, which would clearly benefit the growing numbers of American travelers who are seeking to vary their travel plans and to visit the emerging countries in central and eastern Europe. CSA is right now trying its best to improve its connections to Russia and believes that, because of the new network brought about by the proposed code share arrangement with Continental, CSA's efforts will surely and shortly be successful.

Counsel:  Alan Mendelsohn

I certify that on this date I have served a copy of the September 14, 1999, Consolidated Reply of Continental and Motion for Leave to File on the additional parties identified by an asterisk on the attached service list who, due to a clerical error, were inadvertently omitted from the original list.

Counsel:  Continental Airlines, Thomas Newton Bolling

New U.S.- Russia Opportunities

United Air Lines, Inc., pursuant to the Department's direction in the Notice of Action Taken dated May 3, 1999, in this docket, hereby provides notice of its plans for use of the Russian overflight frequencies allocated to it. United has reluctantly decided that it cannot now implement its plans to launch Chicago-Delhi nonstop service on October 31, 1999. By letter dated June 14, 1999, Delta requested that the Department convert to indefinite the interim allocation to Delta of the nine weekly Russian overflight frequencies officially allocated to United. United opposed that request by Answer dated June 23, 1999 and urged the Department to deny Delta's request. United continues to oppose any allocation of these frequencies to Delta for an open-ended, indefinite period. Delta has never demonstrated that it can use the allocation to improve its Frankfurt-Bombay service on a consistent basis, notwithstanding the unsupported assertion in its application of March 29, 1999, in this docket that it had "determined that it could operate [from Frankfurt] to Mumbai over a more advantageous routing via Russia airspace, without overflying Afghanistan, and desires to do so immediately." United continues to believe that there is likely to be little, if any, benefit to Delta from operating its Frankfurt-Bombay service over Russian airspace and that the most efficient operations on that route are via a more southerly routing that avoids both Russia and Afghanistan.  United has no objection to renewal of Delta's overflight frequency allocation for an additional interim period of 179 day if Delta is actually using the frequencies. However, United believes that before the Department makes any further decisions on even interim allocations of these overflight frequencies, it should require Delta to file in this docket a report on the number of Frankfurt-Bombay Delta flights that have actually used Russia overflight frequencies since May 3, 1999 . Such a report would provide the Department with the information required to determine appropriate allocation of these frequencies.

Counsel:  Kirkland Ellis, Jeffery Manley, 202.879.5161

Federal Express Corporation

For the reason noted below, Federal Express has not yet begun to utilize its Russia overflight frequencies, and does not anticipate that it will begin Russia overflights prior to December 31, 1999, which is the currently effective deadline by which Federal Express must begin utilizing its Russia overflight frequency allocation in order to avoid forfeiture of that allocation for non-use, absent the grant of an exemption or waiver to delay the applicability of the dormancy condition. At the present time, Federal Express anticipates that it will not begin operating line-haul connecting flights between its major European hub in Paris and its major Asia/Pacific hub at Subic Bay in the Philippines, which is the operation which requires utilization of Russia overflight authority, until September 1, 2000. Federal Express has delayed the inauguration of its planned new inter-hub line-haul flights pending the completion of an ongoing internal evaluation of various interrelated system-wide changes in line-haul operations, of which the Paris-Subic Bay flights are an integral part. Based on that ongoing review of its system operations, and the need of Federal Express to retain its Russia overflight frequencies to insure the future operation of inter-hub flights via the most efficient non-circuitous routing, Federal Express hereby applies for grant of an exemption from, or waiver of, the dormancy condition applicable to its Russia overflight frequency allocation so as to enable Federal Express to delay its initial utilization of that allocation until September 1, 2000.

Counsel:  Shaw Pittman, Nathaniel Breed, 202.663.8078

New U.S.- Russia Opportunities

Continental  moves the Department to reopen the record to consider the termination of the Delta/Swissair codeshare arrangement and allow Delta to use its seven U.S.-Russia scheduled combination service codeshare frequencies with either Swissair or Air France, but not both, since Delta is terminating its alliance with Swissair in favor of Delta’s alliance with Air France. The Department can now allow Continental/CSA, American/Finnair and Delta/Air France to begin daily codeshare service between the U.S. and Moscow and St. Petersburg with Delta using the seven frequencies it already holds and Continental and American each using seven new frequencies.

Counsel:  Crowell Moring, Bruce Keiner, 202.624.2500

New U.S.-Russia Opportunities

On October 26, 1999, Continental Airlines, Inc. filed a motion to reopen the record in this case. Delta has notified the Department that it will replace its existing Swissair codeshare flights with services operated by Air France. In these circumstances, Delta has no objection to Continental's motion. As Continental points out, there are sufficient frequencies to authorize all of the proposed services of Delta, Continental, and American.

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

Federal Express Corporation

Counsel: Shaw Pittman, Nathaniel Breed, 202.663.8078

New U.S.-Russia Opportunities/Czech Airlines

Respectfully applies, under 14 C. F. R. Part 212, for a Statement of Authorization on an expedited basis to allow CSA to display the designator code of Continental Airlines (hereafter Continental) on flights operated by CSA between Prague, on the one hand, and Moscow and St. Petersburg, Russia on the other. On October 27, 1999, Delta Airlines notified the Department of Transportation (hereafter DOT or the Department) that it will use its seven Russia frequencies for code share service with Air France instead of Swissair and that, as a consequence, no party objects to Continental's motion of October 26, 1999, requesting immediate approval of Continental's amended application to code share with CSA.

Counsel:  Mendelsohn & Szymkowicz, Allan I. Mendelsohn

American Airlines, Inc. and Finnair Oyj hereby jointly answer in support of the motion submitted by Continental Airlines, Inc. on October 26, 1999 to reopen the record to take account of the fact that Delta Air Lines, Inc. is terminating its alliance with Swissair, thereby releasing one additional third-country codesharing opportunity for reallocation. When the Department initiated this proceeding by Notice served March 18, 1999, it determined that two authorizations are available, effective January 22, 2000. With the Delta/Swissair termination, there are now three available opportunities, or a sufficient number to satisfy the three pending applications -- one by American/Finnair, one by Continental/Czech Airlines, and one by Delta/Air France. American and Finnair are eager to finalize preparations for engaging in codeshare services between the U.S. and Moscow/St. Petersburg, via Helsinki, at the earliest possible date. The Department should promptly conclude this proceeding by granting authority to all three applicants, since no carrier-selection issues are presented.

Counsel:  Crispin Brenner, John Richardson, 202.371.2258, jrichardson@crispinandbrenner.com and American, Carl Nelson, 202.496.5647,  carl_nelson@amrcorp.com

Federal Express Corporation 

By:  Paul Gretch

New U.S.- Russia Opportunities

Order 2000-1-9 authorizes Continental Airlines and American Airlines to operate third country code-share services in the U.S.-Russia market, effective January 22, 2000, with their code-share partners, Czech Airlines (CSA), and Finnair Oyj, respectively. Allocates each carrier seven weekly frequencies for these services. Also authorizes Delta Air Lines to operate its existing third country code-share authorization with either Swissair or Air France. 

By:  Bradley Mims

U.S.- Russia Third-Country Code-Sharing Opportunities

American sought the subject frequencies in order to engage in codesharing services between the U.S., on the one hand, and Moscow and St. Petersburg, on the other, under an arrangement with Finnair. Regrettably, the Russian aeronautical authorities have not yet granted necessary authorizations for American and Finnair to begin such services. Although American's efforts to secure Russian approval are continuing, it does not appear that approval will be in hand in time to commence services by the end of the dormancy period on April 22, 2000.

Counsel:  American, Carl Nelson, 202.496.5647, carl_nelson@amrcorp.com

New U.S.-Russia Opportunities

Continental and CSA have been working with Russian aviation officials to obtain approval for their U.S.-Prague-Russia codeshare, but, as of this date, Russian aviation authorities have not granted the authorizations necessary for initiation of the proposed services. Despite Continental's efforts to obtain Russian approval for its codeshare with CSA, it is unlikely that foreign authorization will be granted on or before April 22, 2000, when Continental's U.S.-Russia frequency allocation will terminate.  On March 3, 2000, the other recipient of U.S. -Russia frequencies in this proceeding, American, filed a request for waiver of the dormancy provision applicable to its frequencies since it has been unable to obtain Russian approval for its proposed codeshare services with Finnair.

Counsel:  Continental, Crowell Moring, Bruce Keiner, 202.624.2500

New U.S.- Russia Opportunities

Counsel: Crowell Moring, Bruce Keiner, 202.624.2500

American Airlines, Inc. / Continental Airlines, Inc.

By Order 2000-1-9, the Department authorized American Airlines and Continental Airlines to conduct third-country code-share services in the U.S.-Russia market, effective January 22, 2000, with Finnair Oyj and Czech Airlines, respectively. In addition, the Department allocated American and Continental seven weekly frequencies to operate their code-share services. Those frequency awards are subject to the condition that the awards will expire automatically and the frequencies will revert to the Department for reallocation if they are not used for a period of 90 days. Under the terms of the awards, the frequencies would revert automatically to the Department on April 22, 2000, unless American and/or Continental began service by that date. The carriers state that they have been unable to secure the necessary authorizations from the Russian Federation to begin service. Accordingly, each seeks a waiver of the 90-day dormancy condition. Furthermore, each carrier, citing Department precedent,' asks that the waiver be granted on an open-ended basis.

By:  Paul Gretch

U.S.- Russia Overflight Rights

On June 1, 2001, Delta will resume nonstop service between Frankfurt, Germany and Delhi, India. Delta plans to operate a pattern of daily service, and therefore requires a total of fourteen (14) Russian overflight frequencies to operate on most efficient routing via Russian airspace.

Counsel:  Shaw Pittman, Alexander Van der Bellen, 202.63.8060

On July 27, 2000, Northwest Airlines, Inc. ("Northwest") filed an application seeking a temporary allocation of six (6) Russian overflight frequencies held by United Air Lines, Inc. ("United"). In its answer of August 11, 2000, United does not dispute that its Russia overflight frequencies are unused and dormant. However, rather than acceding to Northwest's temporary request, United asks the Department instead to reallocate the five Russia overflight frequencies awarded to Delta Air Lines, Inc. ("Delta") in docket OST-99-5286

Counsel:  Shaw Pittman, Alexander Van der Bellen, 202.63.8060

Application of Federal Express Corporation, for renewal of an existing waiver of the 90-day dormancy condition applicable to its allocation of twelve (12) Russia all-cargo Overflight Frequencies so as to authorize Federal Express to delay the inauguration of its utilization of seven (7) of those Overflight frequencies for up to one year until September 1, 2001

Counsel:  Shaw Pittman, Nathaniel Breed, 202.63.8060

U.S.- Russia Overflight Rights

Delta recognizes that there are insufficient frequencies available under the U.S./Russia bilateral air services agreement to meet its needs. It, therefore, urges the Department to seek additional overflight frequencies in the negotiations with the Russian Federation that are scheduled to take place next month. Delta urges, specifically, that the U.S. seek an increase from 28 to 42 of the number of such overflight frequencies in order to accommodate daily operations between Europe and India by three U.S. carriers.  United supports this portion of Delta's application. If the U.S. government succeeds in obtaining additional frequencies, as Delta urges, then there would be no carrier selection issues raised by Delta's request for 14 such frequencies, assuming no other carrier applies.

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

Counsel:  Shaw Pittman, Alexander Van der Bellen, 202.663.8060

U.S.- Russia Overflight Rights

Counsel:  Shaw Pittman, Alexander Van der Bellen, 202.663.8060

U.S.- Russia Overflight Rights

United is, however, constrained to respond to Delta's latest pleading to the extent that carrier persists in suggesting that Northwest should receive a temporary allocation of six of United's frequencies to enable Northwest to increase its Amsterdam-Delhi services this winter. Northwest has itself recognized that its allocation should come from the six dormant frequencies that have reverted to the Department and not from United's allocation. Consolidated Reply and Surreply of Northwest, dated August 25, 2000, in Docket OST-97-2610. Delta, nevertheless, continues to urge that any temporary allocation to Northwest come from United's frequency base rather than from the frequencies that have reverted to the Department.

Delta has offered no basis as to why it is prepared to be more generous with respect to a temporary reallocation of United's frequencies than it is with respect to those which Delta allowed to become dormant. In fact, if a temporary allocation to Northwest is necessary in the circumstances presented, it would be far more straightforward to make a pendente lite allocation to Northwest of the six reverted frequencies pending the Department's disposition of the carrier selection issues raised by the competing applications of Delta and Northwest. Indeed, even if Delta's frequencies had not reverted for dormancy,, it has no plan to use them until next June whereas United will begin using its frequencies in April. The six reverted frequencies could, therefore, be allocated for a longer temporary period than could those held by United, even if Delta still retained any vestigial interest in them. In conclusion, United urges that any temporary allocation that may be necessary to allow Northwest to proceed with its expansion plans effective October 29 be made on a pendente lite basis using the six dormant frequencies that reverted to the Department and not frequencies that have already been allocated to United.

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

Federal Express Corporation

Federal Express now seeks an extension of the waiver of the 90-day dormancy condition for seven (7) of its twelve (12) overflight frequencies until September 1, 2001, stating that it currently plans to begin using a total of only five frequencies before November 30, 2000. Federal Express states that it does not now anticipate using the remaining seven (7) frequencies until September 1, 2001.

The Department has granted Federal Express waivers of the dormancy condition since November 24, 1999. The Department's dormancy condition is grounded on the policy that carriers seeking limited-availability authority in Department proceedings exercise that authority, or else that such authority will revert to the Department so that the rights will then be readily available for award to other interested carriers with firm plans to use the rights. While the Department has by its present action further extended until September 1, 2001, the dormancy waiver of Federal Express with respect to the unused overflight frequencies at issue here, we believe that the grant of dormancy waivers on an ongoing basis could, in the absence of countervailing circumstances, undermine the policy on which our dormancy condition rests. We thus advise Federal Express that, in future circumstances, we may no longer find that the public interest warrants a further extension of this dormancy waiver in the event that Federal Express continues to have no immediate plans to use its seven unused overflight frequencies.

By:  Paul Grecth

Continental Airlines, Inc., Continental Express, Inc. and Czech Airlines

Counsel:  Crowell Moring, Bruce Kiener, 202.624.2500 and Constance O'Keefe, 202.775.0680

New U.S.- Russia Opportunities

Under the U.S./Russia agreement, the U.S. has five third-country carrier code-share opportunities. Each opportunity allows a U.S. carrier to code share to Russia via a single intermediate point. No more than 14 weekly operations may be performed under each opportunity, requiring the allocation of 1/2 of a weekly frequency for each operation, and no more than daily service may be operated in the same city pair under each opportunity. U.S./Russia air services agreement, as amended, Annex V.

One of these five third-country code-share opportunities is now available for reallocation. This opportunity was previously allocated to Continental Airlines, Inc. to code share to Russia via Prague with Czech Airlines. On March 2, 2001, Continental and Czech gave notice of the termination of their code share.

United requests designation for the available third-country code-share opportunity. United will use the opportunity to code share with Austrian between Vienna and both Moscow and St. Petersburg. Effective June 6, 2001, Austrian will be operating twice daily Vienna-Moscow services and daily Vienna-St. Petersburg servicesY Under the frequency provisions of the U.S./Russia agreement, United's services with Austrian would require allocation of seven weekly frequencies.

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

New U.S.-Russia Opportunities

American Airlines, Inc. hereby applies for a third-country codesharing designation and allocation of associated frequencies in order to provide services between points in the United States, on the one hand, and Moscow and St. Petersburg, on the other, via Zurich under a codesharing arrangement with Swissair. American/Swissair will provide daily service to Moscow, and service four days a week to St. Petersburg.

Counsel:  American, Carl Nelson, 202.496.5647, carl_nelson@aa.com

American Airlines, Inc. hereby answers in opposition to the application filed by United Air Lines, Inc. on April 2, 2001, for a third-country codesharing designation and frequency allocation to serve between the United States and Russia, via Vienna, under an arrangement with Austrian Airlines. American is this day filing a competing application for third-country codesharing designation and frequency allocation to serve between the United States and Russia, via Zurich, under an arrangement with Swissair.

Counsel:  American, Carl Nelson, 202.496.5647, carl_nelson@aa.com

Delta Air Lines, Inc. ("Delta") hereby applies for a codeshare designation and seven U.S.-Russia combination frequencies, pursuant to the 1999 U.S.-Russia MOC, so that Delta may offer third-country codeshare service to Moscow and St. Petersburg, via Prague, in conjunction with Delta's SkyTeam alliance partner, Czech Airlines ("CSA"). The Department has already found U.S. carrier services with CSA to be procompetitive and in the public interest. However, as a result of a change in CSA's U.S. carrier alliance affiliation, the Department must reallocate a codeshare designation and seven frequencies to Delta in order to facilitate the introduction of these beneficial services. In further support of this application, Delta states as follows:

Delta proposes to use the requested codeshare authority to offer daily third-country codeshare service with CSA between Prague, on the one hand, and Moscow and St. Petersburg, on the other hand. Under the terms of the 1999 U.S.-Russia MOC, seven frequencies are required for the proposed operation, since one codeshare frequency counts for one half of one combination frequency.

On March 21, 2001, CSA joined Delta as the newest SkyTeam alliance partner. CSA is Delta's only alliance partner in Eastern Europe with a competitive connecting hub located squarely within the Star alliance's primary Eastern European catchment area. The introduction of daily competitive codeshare service to Moscow and St. Petersburg, the two most important cities in the Russian Federation, is an important step in the development of CSA's Prague hub as a connecting point for Delta online service to Eastern Europe.

In contrast to the United/Lufthansa/Austrian "Star" alliance, which is joined together under the umbrella of antitrust immunity, the Delta/CSA partnership under SkyTeam is a relatively small, new competitive force, comprised entirely of independent competitors. The Department should encourage the development of SkyTeam against its larger established rivals by awarding Delta the authority it needs to commence Russia codeshare service with CSA.

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

If the Department wants to foster and promote alliance competition for service to Eastern Europe, the choice is an easy one -- the Delta/CSA service should be selected. United, Lufthansa, and Austrian Airlines are all antitrust immunized members of the powerful Star alliance. Moreover, Lufthansa's large Frankfurt hub and established service patterns make Star the competitive force other carriers must contend with in developing service to Eastern Europe. Strengthening Star, by adding a second hub for service to Russia should not be the Department's preferred result.

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

New U.S.-Russia Opportunities

With Delta's request, three applications for U.S.-Russia codesharing have recently been submitted. On April 17, 2001, American filed an application in this docket to codeshare between the United States and Russia, via Zurich, under an arrangement with Swissair. On April 2, 2001, United Air Lines, Inc. filed an application in this docket to codeshare between the United States and Russia, via Vienna, under an arrangement with Austrian Airlines.

Five third-country codesharing opportunities are available to U.S. carriers under the United States-Russia Protocol of April 5, 1999. These opportunities have been assigned to Northwest/KLM, Delta/Air France, United/Lufthansa, American/Finnair, and Continental/Czech Airlines. See order 2000-1-9, January 7, 2000, p. 2. However, on March 2, 2001, Continental and Czech filed notification of termination of their codeshare (OST-99-5286), thereby making that opportunity available for reassignment.

Accordingly, with three applications for one available opportunity, the Department is required to conduct a carrier-selection proceeding under Ashbacker Radio Co. v. FCC, 326 U.S. 327 (1945). In that proceeding American will show why its application should be favored. American and Swissair serve 14 U.S. gateways to Zurich, while Czech Airlines serves just two U.S. gateways to Prague (New York (JFK) and Newark). Moreover, Delta already provides its own operations to Russia, with daily nonstop service between New York (JFK) and Moscow. Delta is also reported to be developing a cooperative relationship with Aeroflot.

Counsel:  American, Carl Nelson, 202.496.5647, carl_nelson@aa.com

New U.S.-Russia Opportunities

On April 17, 2001, Delta and America each filed a "me too" application for the single available third-country code-share designation as well as for a frequency allocation. Delta proposes to code share to Moscow and St. Petersburg with Czech Airlines via Prague and American to do so with Swissair via Zurich. As the only carrier proposing to offer daily service to both Moscow and St. Petersburg, United is confident that its code share with Austrian will receive the necessary designation and frequency allocation.

Both Delta and American urge that the Department set down a carrier selection proceeding to determine the disposition of the single available third-country code-share designation and related frequencies. With only one designation available and three mutually exclusive applications for that designation, United agrees that carrier selection will be required under the present terms of the U.S./Russia agreement.

Each of the applicants already holds a third-country code-share designation to serve Russia. United is authorized to offer such service with Lufthansa, American, with Finnair and Delta, with Air France. At present, none of these code-share services is being offered.

Representatives of the governments of the U.S. and the Russian Federation met last month to discuss various aviation issues, including the status of the agreement under which third-country code sharing may be offered between the U.S. and Russia. At that meeting, the two sides agreed to extend the present annexes through September 30, 2001 (including Annex V which governs code shares). The governments also agreed to meet again in September prior to that expiry.

In these circumstances, United urges that carrier selection proceedings on these applications' be deferred until the results of the September negotiations are known, at least as they relate to the further extension or amendment of Annex V. Such deferral will not prejudice any party in the present circumstances and will assure that the carrier selection proceeding, when it is conducted, will be based on a bilateral agreement relating to the longer term extension of the third-country code-sharing provision. Indeed, depending on the terms to be agreed, the agreement, as extended, may be amended to avoid the need for carrier selection.

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

New U.S.-Russia Opportunities

American, along with Finnair and British Airways, is part of the large oneworld alliance. In order to promote global alliance competition, Delta and its newly formed SkyTeam alliance should be favored in this proceeding over American or United. The Department has already determined that U.S. carrier services in conjunction with CSA "would use valuable opportunities available under the new agreement with Russia and would promote competition in the market."

Redesignating Delta with CSA, Delta’s newest SkyTeam alliance partner, for service to Russia would improve market structure and alliance competition to a greater degree than giving either American or United its second codeshare opportunity.

Difficulties with the Russian Government have prevented U.S. carriers from offering third-country codeshare service at the present time. Those impediments must eventually be resolved, so that U.S. carriers can exercise their bilateral codeshare rights.

In these circumstances, Delta urges the Department to make its determination on the basis of the applications and responsive pleading that have been submitted, and proceed directly with the issuance of a Show Cause Order. The Department has used abbreviated Show Cause Procedures in numerous similar cases, and employing them here “would be consistent with [the Department’s] commitment to achieving sound regulatory results with a maximum of efficiency and a minimum of procedural burden.”

Counsel:  Shaw Pittman, Nathaniel Breed, 202.663.8078

New U.S.-Russia Opportunities

Each of the three applicant carriers has cited reasons favoring its own proposal for an award.

However, as noted by Delta and United in their answers, difficulties with the Russian Government have prevented duly authorized U.S. carriers from offering any third-country codeshare services to Russia at the present time. Those impediments must be resolved before U.S. carriers can exercise the bilateral codeshare opportunities at issue in this proceeding.

In these circumstances, Delta concurs with United's suggestion that the Department should defer any further carrier selection proceedings, until the results of the scheduled government-to-government talks in September are known. Deferral will not prejudice any party, and Delta is also hopeful that the U.S. Government may be able to negotiate additional service opportunities, which would obviate the need for carrier selection.

Counsel:  Shaw Pittman, Nathaniel Breed, 202.663.8078

New U.S.-Russia Opportunities

United, which has filed for codesharing authority via Vienna with Austrian Airlines, urges that the carrier-selection proceeding the Department is required to conduct should be deferred until at least September 30, 2001. United states that Annex V to the U.S.-Russia Air Transport Agreement, which governs codesharing, presently expires on September 30, 2001, and that the two Governments recently agreed to meet in September to discuss this and other issues.

American opposes United's bid for delay, which appears to be based on speculation that Annex V may not be extended. American does not share United's apparent lack of confidence on the extension of Annex V, and believes that the United States and Russia will agree to continue that provision. American is eager to enter the U.S.-Russia market under its codesharing arrangement with Swissair, and urges that delaying the Department's decision, as United would do, is not in the public interest. American urges the Department to conduct a carrier-selection proceeding on an expedited basis, and to enter a final order at the earliest possible date, since "[i]t is not the Department's policy to permit valuable limited-entry rights to go unused." See Notice (undocketed), U.S.-India Third-Country Codeshare Services, July 22, 1998, p. 1. 

Delta, which has filed for codesharing authority via Prague with Czech Airlines, asks the Department to proceed immediately with a show-cause order granting an award to Delta, based solely on the applications and pleadings already submitted. American opposes Delta's request for such a procedural shortcut. In recent codesharing cases, the Department has developed a standard evidence request which requires the applicants to submit data on U.S. gateways served, elapsed travel times, number of frequencies, number of seats, and the like. See, e.q., Notice re U.S.-Turkey Combination Service Third-Country Codeshare Opportunities, OST-2001-8781, January 31, 2001; Notice; U.S.-Israel Third-Country Codeshare Opportunities (2001), OST-2001-8726, January 22, 2001. The Department should follow similar procedures here.

It is not surprising that Delta, having partnered with a foreign carrier serving only two U. S. gateways, would want to avoid submitting any detailed evidence of its proposal. American and Swissair serve 10 U.S. gateways to Zurich, and clearly will provide far greater public benefits with codesharing service to Russia than Delta and Czech Airlines. American will detail those benefits in response to the evidentiary notice that the Department should issue forthwith.

Counsel:  American, Carl Nelson, 202.496.5647, carl_nelson@aa.com

Federal Express Corporation

Counsel:  Shaw Pittman, Nathaniel Breed, 202.663.8078

Federal Express Corporation

UPS opposes the renewal of Federal Express' waiver of the 90-day dormancy condition applicable to 7 of its 12 Russia all-cargo overflight frequencies. Federal Express has applied twice earlier for waivers of the dormancy condition, and indicates that it has no plans to utilize these frequencies "in the near term foreseeable future." To date, Federal Express has maintained a waiver of dormancy for these frequencies for nearly two years-the instant Application requests waiver of the dormancy condition for a third year.

The public would be better served by the Department of Transportation holding these frequencies for future allocation to carriers upon a showing that the frequencies will actually be used. Having these frequencies available for allocation to such carriers is far preferable to allowing a particular carrier to keep these frequencies "in the bank" and therefore unavailable to any other carrier.

Counsel:  Kelley Drye, David Vaughan, 202.955.9864

Federal Express Corporation

Federal Express submits, however, that reclaiming these frequencies would, in fact, run counter to the interests of the United States itself. During the upcoming round of U.S.-Russia bilateral aviation negotiations, the U.S. plans to push for an increase in the number of Tashkent overflight frequencies available to U.S. carriers. If Federal Express' dormancy waiver is not renewed, the U.S. will enter those negotiations having allocated only 5 of 28 available frequencies, and having recently rendered the 7 frequencies at issue in this proceeding unallocated. It is highly unlikely that Russia will agree to an increase in overflight frequencies when so many of those available remain unallocated. By renewing this waiver, the Department actually supports the U.S. efforts to liberalize the bilateral agreement.

While UPS opposes a renewal of Federal Express' waiver, UPS does not argue that it desires to apply for and utilize the Russia overflight frequencies at issue. UPS also fails to mention the fact that, in addition to the 12 frequencies allocated to Federal Express, a total of 16 other Russia overflight frequencies remain unassigned and available to any other U.S. carrier which desires to utilize them.

In those circumstances, Federal Express submits that there is no public interest rationale for taking the seven frequencies at issue away, solely because Federal Express does not yet have a definitive timetable for utilizing those frequencies in the immediate future. Federal Express has stated that it desires and fully intends to utilize all 12 of its currently allocated Russia overflight frequencies in connection with its existing inter-hub line-haul flights between Europe and Asia transitting Russian airspace over the Tashkent routing. As stated in Federal Express' application, the ability of Federal Express to operate its inter-hub flights over the Tashkent routing, rather than the far more circuitous routing which avoids Russian airspace, materially improves the cost efficiency and transit times oi' those flights for the benefit of tens of thousands of shippers and consignees whose shipments are transported on those inter-hub flights.

While the retention of all seven frequencies at issue is highly important to Federal Express and its customers, retention of the sixth eastbound Tashkent frequency is critically and immediately important to Federal Express as that frequency is currently utilized by Federal Express in its Europe-Asia line-haul flights, although not yet with sufficient frequency and regularity to satisfy the full-utilization requirements of the 90-day dormancy condition. Since the need of Federal Express to operate a sixth weekly frequency over Russia regularly arises on very short notice, withdrawal of that sixth frequency would prevent Federal Express from operating a periodically necessary sixth weekly Russia overflight in excess of its current five-frequency regular weekly schedule.

Counsel:  Shaw Pittman, Nathaniel Breed, 202.663.8078

U.S.- Russia Overflight Rights

On June 29, 2001, Federal Express Corporation (FedEx) applied for renewal of an existing waiver of the ninety day dormancy condition applicable to seven of its Russia all-cargo overflight frequencies. Docket OST 99-5286-92 (June 29, 2001). FedEx seeks the waiver because it is not currently using all of the frequencies it was awarded by the Department, although it plans to use the frequencies to generate cost savings and to increase the efficiency of Europe-Asia flights, particularly flights between Fedex's European hub in Paris and its Asia/Pacific hub in Subic Bay, Philippines.

This letter updates and clarifies some of the information in the June 29, 2001 application. FedEx began using the overflight frequencies in August, 2000 using MD-11 aircraft to operate its flight FX 5081 four times a week from Paris to Subic Bay via the Tashkent routing. In November, 2000 FedEx began operating FX 5080, using an MD-11 aircraft once a week from Frankfurt to Subic Bay also via the Tashkent routing. In March, 2001, operational necessities required FedEx to re-route its flight FX 5080. At that time, FX 5080 began operating directly between Frankfurt and Bangkok and no longer used the Tashkent routing.

Counsel:  Shaw Pittman, Nathaniel Breed, 202.63.8060

U.S.- Russia Third Country Codesharing Opportunities, American Airlines, Inc.

Renew for two years exemption under U.S.C. 40109 to provide the following service:  Scheduled foreign air transportation of persons, property, and mail between points in the United States, on the one hand, and Moscow and St. Petersburg, Russia, on the other, via Helsinki, Finland. American intends to use this authority to serve the market on a third-country code-share basis under its code-share arrangement with Finnair.

American states that the Government of the Russian Federation has not yet approved these services, and that by Notice of Action Taken dated April 5, 2000, in this docket, the Department granted American a dormancy waiver relevant to this authority.

By:  Paul Gretch

Notice of Action Taken Dismissing Applications - Various Dockets

Issued May 1, 2003

OST-95-928 - American Airlines, Inc.
OST-96-1109 - American Airlines, Inc.
OST-96-1039 - Arrow Air, Inc.
OST-00-7525 - Emery Worldwide Airlines, Inc.
OST-99-5286 - Federal Express Corporation
OST-00-8551 - Southern Air, Inc.
OST-97-3178 - United Parcel Service Co.

Notice of Action Taken | Word

By: DOT

OST-99-5286

October 31, 2003

Application of American Airlines for Renewal of Exemption (US-Moscow/St. Petersburg)

Hereby applies for renewal of its exemption, initially granted by Order 2000-1-9, January 7, 2000, p. 4 &