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OST-99-6210

OST-99-6108 - Delta Atlanta-Buenos Aires Application

New U.S.- Argentina Combination Service Opportunities

On August 12, 1999, representatives from the United States and Argentina initialed a Memorandum of Consultations and a set of amendments to the U.S.-Argentina Air Transport Services Agreement, providing for an open-skies accord between the countries after a three-year transition period for combination services. Under the terms of the transition, the number of U.S.-Argentina scheduled combination service frequencies that can be operated by U.S. carriers, beyond the 42 weekly flights that can be operated currently, can be increased in phases. Specifically, U.S. carriers may use seven additional frequencies per week beginning on September 1, 2000, and an additional seven each on June 1, 2001, and June 1, 2002. All frequency limitations between the U.S. and Argentina will be lifted by June of 2003, subject to certain conditions. There are no limitations on the number of U.S. carriers that may be designated to serve the market.

During the first phase of the transitional agreement (September 1, 2000 to May 31, 2001), U.S. carriers may serve from any points in the U.S. via intermediate points to Buenos Aires, Cordoba, and one additional point in Argentina to be selected by the U.S., and beyond to Santiago, Chile, and Montevideo, Uruguay. Under the second phase (June 1, 2001 to May 31, 2002), U.S. carriers may serve from any points in the U.S. via intermediate points to Buenos Aires, Cordoba, and two additional points in Argentina to be selected by the U.S., and beyond to Santiago, Chile, and Montevideo, Uruguay. In addition, under the second phase (June 1, 2001 to May 31, 2002), U.S. carriers may serve five additional points in Argentina to be selected by the U.S. on a code share basis only.

By this notice, we request that all U.S. carriers interested in making use of the frequencies available under the first two phases, i.e. seven frequencies beginning on September 1, 2000, and seven on June 1, 200 1, file applications as specified below with the Department no later than September 22, 1999. Answers to applications should be filed no later than September 29, 1999. Replies to answers should be filed no later than October 6, 1999.

By:  Bradley Mims

New U.S.- Argentina Combination Service Opportunities

In addition to its previous application for Newark-Buenos Aires authority, Continental requests authority to provide scheduled foreign air transportation of persons, property and mail between Houston, Texas and Buenos Aires, Argentina, and for an allocation of the seven U.S.-Argentina frequencies which become available June 1, 2001 to offer daily Houston-Buenos Aires flights. Continental plans to operate daily, year-round Newark-Buenos Aires service beginning September 1, 2000, or 120 days after receipt of all necessary government authority, whichever is later. Continental initially will offer daily, nonstop Newark-Buenos Aires service using Continental’s DC-10-30 aircraft with 38 BusinessFirst seats and 204 Coach seats, but it intends to substitute B-767 or B-777 aircraft in the future to tailor capacity to demand as the route develops, additional aircraft are delivered to Continental and DC-10-30 aircraft are phased out of Continental’s fleet. Continental currently does not plan to display the code of any Argentine carriers on its flights on this route.  Continental plans to operate daily, year-round Houston-Buenos Aires service beginning June 1, 2001, or 120 days after receipt of all necessary government authority, whichever is later. Continental initially will offer daily, nonstop Houston-Buenos Aires service using Continental’s DC-10-30 aircraft with 38 BusinessFirst seats and 204 Coach seats, but it intends to substitute B-767 or B-777 aircraft in the future to tailor capacity to demand as the route develops, additional aircraft are delivered to Continental and DC-10-30 aircraft are phased out of Continental’s fleet. Continental currently does not plan to display the code of any Argentine carriers on its flights on this route.

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

Delta had previously filed an application for the Year 1 frequencies immediately after the MOC seeking authority to operate nonstop service between Atlanta and Buenos Aires. Delta also stated that if the Department placed in issue the Year 2 frequencies, Delta would seek New York-Argentina authority. The Department consolidated Delta’s application in this docket, as well as the application of Continental for Houston/Newark-Argentina authority. The ability to operate daily nonstop service between Atlanta and Buenos Aires is Delta’s highest international route priority. While Delta also desires to initiate daily nonstop service between New York (JFK) and Buenos Aires and eventually double daily service between Atlanta and Buenos, Delta recognizes that it is highly unlikely the Department would award all available frequencies for Year 1 and Year 2 to one applicant. Therefore, Delta will focus its presentation in this case on why the award of the seven Year 1 frequencies to Delta for Atlanta-Buenos Aires nonstop service would provide greater public benefits than an award to Continental or any other applicant. To date, Delta and Continental have each applied for the seven Year 1 frequencies for their respective Atlanta and New York/Newark service proposals. In these circumstances, the Department’s focus should be to determine which carrier should be awarded the first opportunity, and which carrier’s proposal should be deferred by nine months to June 1, 2001.

Counsel:  Delta and Shaw Pittman, Robert Cohn, 202-663-8060, robert.cohn@shawpittman.com

United proposes to operate daily nonstop services between Los Angeles and Buenos Aires. United will start these services September 1, 2000, when seven additional frequencies become available. United needs all seven of the first phase frequencies it seeks in order to assure its ability to implement a daily nonstop service pattern. The services will be operated with state-of-the-art B777-200 aircraft configured with amenities specially designed to accommodate passengers over the long-haul, 6,114-mile flight between Los Angeles and Buenos Aires.  

Counsel:  Kirkland Ellis, Jeffery Manley, 202.879.5161, jeffrey_manley@kirkland.com

New U.S.- Argentina Combination Service Opportunities

Counsel:  Continental and Crowell Moring, Bruce Keiner

Counsel:  Delta and Shaw Pittman, Robert Cohn, 202-663-8060, robert.cohn@shawpittman.com

Counsel:  Atlanta, Ronny Just, 404-586-8467

Counsel:  Zuckert Scoutt, David Heffernan, 202.298.8660

Counsel:  Kirkland Ellis, Jeffery Manley, 202.879.5161

U.S.-Argentina Combination Service Opportunities

Counsel:  Kirkland Ellis, Jeffrey Manley

New U.S.- Argentina Combination Service Opportunities

Counsel:  Zuckert Scoutt, David Heffernan, 202.298.8660

New U.S.- Argentina Combination Service Oppotunities

Counsel:  Crowell Moring, Bruce Keiner, 202.624.2615

Counsel:  Shaw Pittman, Robert Cohn, 202.663.8060

Counsel:  Metro Atlanta Chamber of Commerce, Ronny Just, 404.586.8467

By:  L.A. World Airports, Lydia Kennerd

Counsel:  Regional Business Partnership (Newark, NJ), Samuel Crane

Counsel:  Kirkland Ellis, Jeffery Manley, 202.879.5161, jeffery_manley@kirkland.com

New U.S.- Argentina Combination Service Opportunities

Counsel:  Zuckert Scoutt, David Heffernan, 202.298.8660

New U.S. - Argentina Combination Service Opportunities

By:  Bradley Mims

1999 U.S.- Argentina Combination Service Case

United's application requests seven combination service frequencies to operate daily Los Angeles-Buenos Aires nonstop services. United would begin that service either in September 2000 or June 2001, depending on when the frequencies are available. In describing the various applications, the Department correctly notes that "United already holds certificate authority to serve the Los Angeles-Buenos Aires market and seeks only a frequency allocation for the proposed services." The Department in the same order, however, incorrectly states that "United does not seek any backup award in this case." Order 99-11-14 at 3. While it is true that backup authority in a limited-entry market is usually awarded in the form of a specially-conditioned certificate of public convenience and necessity, such conditions can equally well be imposed on a frequency allocation such as United has requested.' In these circumstances, United requests to clarify to the Department that it would willingly accept the award of seven U.S. -Argentina frequencies to be used for Los Angeles-Buenos Aires nonstop services subject to the standard conditions applicable to backup authority. United would accept such a backup allocation for frequencies available on either September 1, 2000 or June 1, 2001.

Counsel:  Kirkland Ellis, Jeffery Manley, 202.879.5161, jeffery_manley@kirkland.com

1999 U.S.- Argentina Combination Service Case

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

Counsel:  Kirkland Ellis, Jeffery Manley, 202.879.5000

1999 U.S.-Argentina Combination Service Case

Hereby supplements its application for Atlanta-Buenos Aires certificate authority and allocation of seven U.S.-Argentina frequencies.' Delta proposes to operate its Atlanta-Buenos Aires service using MD 11 aircraft in lieu of B-767-300 aircraft as originally proposed. Delta's MD 11 aircraft are configured with 218 coach seats and 50 BusinessElite seats, for a total of 268 seats.

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

1999 U.S- Argentina Combination Service Case

Counsel:  Zuckert Scoutt,  David Heffernan, 202.298.8660

Counsel: Crowell Moring, Bruce Keiner, 202.624.2615

Counsel:  Shaw Pittman, Robert Cohn, 202.663.8060

Counsel:  Atlanta Chamber of Commerce, HollyBeth Anderson

By:  New Jersey Parties

Counsel:  Kirkland Ellis, Jeffery Manley, 202.879.5161

1999 U.S.- Argentina Combination Service Case

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

1999 U.S.- Argentina Combination Service Case

Enclosed please find six (6) copies of two revised direct exhibits of United Air Lines, page 1 of Exhibit UA-301 and Page 4 of Exhibit UA-N-1. These revisions were made to correct an error in the forecast, and we took the opportunity to clarify the headings of the last two columns of the forecast.

Counsel:  Kirkland Ellis, Jeffery Manley, 202.879.5000

1999 U.S.- Argentina Combination Service Case

This revision corrects an erroneous statement in the narrative of the growth rate used in United's traffic forecast. A correction is also made in the forecast for the second year. There is no change in the first year forecast itself.

Counsel:  Kirkland Ellis, Jeffery Manley, 202.879.5161, jeffery_manley@kirkland.com

1999 U.S.-Argentina Combination Service Case

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

U.S.- Argentina Combination Service Opportunities

Continental urges the Department to strike United's exhibits and dismiss its application since United has repeatedly failed to comply with the Department's order instituting this proceeding by submitting revised exhibits of its passenger traffic forecasts three times in less than two weeks. United's outrageous and persistent disregard for the clearly articulated procedures of the Department disqualifies United for an award in this case.  Continental believes this proceeding should be concluded as promptly as possible, and dismissal of United's application will allow the Department to focus expeditiously on the choice between Continentals comprehensive New York/Newark and Houston-Argentina proposal to complete Continental's South American network and Delta's Atlanta-Buenos Aires proposal to add another isolated segment to Delta's network before it institutes service in other South American markets already available to it. Nonetheless, if the Department decides to accept United's exhibits and consider its application despite United's patent attempts to bypass the Department's procedures intended to ensure timely and accurate submission of information to the Department and an even playing field for all applicants, the Department should, at the very least, suspend the due date for submission of rebuttal exhibits now scheduled for February 7 while the Department considers the merits of Continental's instant motion and establish a new date for submission of rebuttal exhibits so all parties will have adequate time - at least two weeks - to rebut United's final forecast exhibit, which was not submitted until January 27.

Counsel:  Crowell Moring, Bruce Keiner, 202.624.2500, rbkeiner@cromor.com

1999 U.S.- Argentina Combination Service Case

In its motion Continental urges the Department to strike United's exhibits and dismiss United's application in this proceeding. By so requesting, Continental hopes to turn United's unintentional forecasting errors to its advantage. Recognizing that it cannot prevail on the merits against United's superior application for service at Los Angeles, Continental resorts to procedural objections in an attempt to win by default. While the actions it urges would enable Continental to become the fourth nonstop carrier at New York, they would come at the expense of the far greater benefits United proposes to offer at Los Angeles, the largest U.S. market without nonstop service to Buenos Aires. United, therefore, urges the Department to deny Continental's motion for the reasons discussed below.

Counsel:  Kirkland Ellis, Jeffery Manley, 202.879.5161, jeffery_manley@kirkland.com

1999 U.S.- Argentina Combination Service Case

It is obvious that United’s forecast has no basis in reality. Indeed, if United seriously thought that it could achieve a 93% load factor at Los Angeles, it would be hard pressed to explain why it has been wasting its current allocation of Argentina frequencies at New York and Chicago, which have, respectively, been operating only 54 and 55 percent load factors – nearly 40 points lower than United Delta is anxious to begin marketing its Atlanta-Buenos Aires services proposed to begin on September 1, 2000. The present procedural schedule will likely permit a final decision by May 2000, just four months in advance of the September 1 start date. This is barely adequate time to market and implement an important new international long-haul service, and, under no circumstances should this proceeding be delayed by Continental. The strength of Delta’s proposal makes Delta the most likely applicant to receive the year one award. Consequently, Delta would be most adversely impacted by the procedural delay proposed by Continental. Indeed, Delta’s Atlanta proposal will benefit over 55,000 more annual passengers than Continental, and Delta will provide by far the greatest expansion of network service benefits (not to mention the fact that New York/Newark is already one of the best served U.S.-Argentina gateways). Since Delta fully expects to begin service on September 1, 2000, it is critical to Delta’s marketing efforts that the issuance of a final decision not be delayed. On the other hand, since Continental’s markedly inferior Newark service proposal is unlikely to be authorized until at least year 2, Continental has nothing to lose by delaying the proceeding.  Rebuttal exhibits provide ample opportunity for the other applicants to probe the obvious deficiencies of United’s erroneous and highly exaggerated forecast. Delta has already completed the necessary evaluation of United’s forecast and prepared rebuttal exhibits for timely submission in accordance with the Department’s procedural schedule. Continental should do the same. Indeed, even without the aid of rebuttal exhibits by the other applicants the Department staff would be fully capable of recognizing and rejecting United’s exaggerated claims for its Los Angeles service.

Counsel: Shaw Pittman, Alexander Van der Bellen, 202.663.8060

1999 U.S.- Argentina Combination Service Case

On November 22, 1999, by Order 99-11-14, the Department instituted the captioned proceeding to select a carrier or carriers to use the 14 new frequencies that become available for U.S.-Argentina combination services beginning September i, 2000. Delta Air Lines, Continental Airlines and United Air Lines are applicants for the available frequencies. The instituting order also established procedural dates for the filing of the evidentiary material necessary for the Department to make its decision, calling for Direct Exhibits on January 10, 2000, Rebuttal Exhibits on February 7, 2000, and Briefs on March 6, 2000.

On January 14, 24, and 27, 2000, United filed revisions to the traffic forecast included in its Direct Exhibits. On February 2, Continental filed a motion requesting that the Department strike United's exhibits and dismiss its application based on the repeated revisions to its exhibits. Should the Department nonetheless accept United's exhibits and consider its application, Continental requests that the Department extend the date for filing Rebuttal Exhibits until February 10 to provide interested parties adequate time to rebut United's final forecast exhibit. United opposed Continental's request to strike its exhibits and dismiss its application, but did not object to Continental's request for additional time to file rebuttal exhibits. Delta took no position on Continental's request for dismissal, but opposed Continental's request to extend the procedural dates in this case, arguing that the delay would adversely affect the selected carriers' ability to promote the services properly before the new frequencies become available.

After careful consideration of Continental's motion, we decided to extend the date for filing Rebuttal Exhibits as Continental has requested, thereby affording all parties two full weeks to adjust their rebuttal exhibits to incorporate the latest revision filed by United on January 27. The extension requested was for a very short period and given the revisions by United to its exhibits, we found that the additional time was not unreasonable and that the. slight revision to the procedural schedule in this case properly balanced the interests of all parties to the proceeding. Given that the extension involves a period of only three additional days, we further decided that no other changes to the procedural schedule are necessary, and, thus, that the date that Briefs are due will remain March 6, 2000. We orally notified all parties to the proceeding of our decision on February 4, 2000, and we confirm that decision here.

By:  Bradley Mims

New U.S.- Argentina Combination Service Opportunities/United Air Lines

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

Counsel:  Shaw Pittman, Alexander Van der Bellen, 202.663.8382, sascha.vanderbellen@shawpittman.com

Counsel:  Atlanta Chamber of Commerce, HollyBeth Anderson

Counsel:  Zuckert Scoutt, Rachel Trinder, 202.298.8660

Counsel:  GKMG Consulting, Barney Parrella, 202.342.2501

Counsel:  Newark, Chip Hallock

Counsel: Kirkland Ellis, Jeffery Manley, 202.879.5161, jeffrey_manley@kirkland.com 

New U.S.- Argentina Combination Service Opportunities

Counsel: Crowell Moring, Bruce Keiner, 202.624.2615

Counsel:  Delta and Shaw Pittman, Robert Cohn, 202-663-8060, robert.cohn@shawpittman.com

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

Counsel:  Zuckert Scoutt, David Heffernan, 202.298.8660

Counsel:  GKMG, Steven Quan, 202.342.5201

Counsel:  Newark, Chip Hallock, 973.242.4209

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

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

1999 U.S.- Argentina Combination Service Case

Continental submits the enclosed copy of a letter to Secretary Slater from Governor Cayetano of Hawaii supporting Continental's application for New York/Newark-Buenos Aires authority in the above referenced docket. To the extent necessary, Continental asks the Department for leave to file this document out of time. Acceptance will provide the Department with a more complete record on which to base its decision in this case and will not prejudice any party.

Counsel:  Crowell Morning, Thomas Bolling, 202.624.2500

U.S.- Argentina Combination Service Case

Counsel: Crowell Moring, Thomas Newton Bolling, 202-624-2683, tbolling@cromor.com 

1999 U.S.- Argentina Combination Service Case

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

U.S.- Argentina Combination Service Case and 1999 U. S.-Brazil Combination Service

By:  Congress of the United States, The Honorable Maxine Waters

1999 U.S.-Argentina Combination Service Case

Delta applauds the success of the U.S. Government in reaching an agreement with Argentina to permit the introduction of two new daily U.S. carrier services in 2001. Delta understands that the United States has received confirmation from Argentina that it is prepared to authorize seven additional weekly U.S. carrier frequencies effective April 1, 2001, and a further seven weekly frequencies effective December 1, 2001. Delta is eager to begin service, and is ready, willing and able to commence service on April 1, 2001. 

The U.S.-Argentina marketplace is currently highly restrictive, and is characterized by a lack of effective competition and consumer choice. The traveling public urgently requires the beneficial relief that will be provided by the new service opportunities. Accordingly, Delta urges the Department to immediately decide this case, so that the selected carriers can make plans and begin marketing efforts to take full advantage of the new frequency opportunities immediately upon their effective date. 

In order to enable carriers to allocate the aircraft resources necessary to implement a major new longhaul service such as this, the Department should act to provide carriers with a final decision by no later than December 31, 2000, so that carriers can plan accordingly for their Summer Season 2001 schedules. 

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

1999 U.S.-Argentina Combination Service Case

In November 1999, the Department instituted the captioned proceeding to award 14 weekly frequencies that would be available for new service to Argentina. The first seven frequencies were to become available on September 1, 2000, and the remaining seven were to have been available on June 1, 2001. Continental Airlines, Delta Air Lines, and United Airlines filed applications. Continental sought all of the available frequencies for service from both Newark and Houston; Delta sought seven weekly frequencies for service from Atlanta; and United sought seven weekly frequencies for service from Los Angeles. Civic parties from each of the proposed cities also participated in the proceeding. In accordance with the procedural schedule set forth in the Department's instituting order, all of the parties filed Direct Exhibits, Rebuttal Exhibits and Briefs. 

We have recently agreed with Argentina on a modification of the dates for implementing the new service rights. Seven of the fourteen weekly frequencies Will now become available on April 1, 2001, and the remaining seven will become available on December 1, 2001. While the timing for implementation of the service rights has changed, we believe that the record developed in the 1999 U.S.-Argentina Combination Service Case, except for some limited updating as set forth below, will be adequate for us to reach a decision in this case, and we intend to proceed to select among the applications filed based on that record. 

We also note that on November 29, 2000, Delta filed a motion for immediate action in the case and calling for an expedited final Department decision in order to facilitate prompt implementation of services by the selected carriers. As Delta's November 29 motion is relevant to the issues encompassed by this notice, we will also require that any responsive pleadings to. Delta's motion be filed in accordance with the procedural dates established above for comments and answers.

By:  Susan McDermott

U.S.- Argentina Combination Service Opportunities

Continental is fully prepared to institute daily, nonstop New York/Newark-Buenos Aires service April 1, 2001 with new B-767-200 ER aircraft being delivered to Continental in the first quarter of 2001. Continental has been waiting for at least seven years to add service at Buenos Aires, a critical South American point, and its time has come. Continental is also fully prepared to add daily, nonstop Houston-Buenos Aires B-767-200 ER service December 1, 2001, to complete Continental’s ability to provide a truly nationwide network for Argentina service and nonstop Argentina service at its two primary international hubs. Neither Delta nor United is prepared to make such a substantial commitment to Argentina in this case.

Counsel:  Crowell Moring, Bruce Keiner, 202.624.2500, rbkeiner@cromor.com

Delta supports the Department’s proposed approach. The record is complete and ripe for a decision, and the respective merits of the competing carrier proposals are clear. There is no need for the submission of further evidence, and the Department should proceed immediately with the issuance of a Show Cause Order. Delta reiterates the request made in its November 29, 2000 motion that the Department decide this case by not later than December 31, 2000. A decision by that date is critical for the selected applicants to have sufficient time to plan their services, and allocate aircraft and other resources.

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

United has demonstrated why its new daily nonstop service at Los Angeles will produce far more benefits than Continental's duplicative service at New York/New York. This is not a situation such as that in the recent 1999 U.S.-Brazil case where the Department favored New York/Newark over Los Angeles because there was a need to preserve daily nonstop service in a much larger market. Here, the New York/Newark market to Buenos Aires already has daily nonstop service to Buenos Aires operated by three carriers, including two U.S. carriers. The Department should assure that the much greater need of Los Angeles for its first daily nonstop service is met before New York/Newark is given a fourth nonstop carrier.

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

U.S.- Argentina Combination Service Opportunities

Counsel:  Shaw Pittman, Alexander Van der Bellen

U.S.- Argentina Combination Service Opportunities

Continental, Delta and United are agreed that the Department should act promptly to award the 14 Argentina frequencies which have now become available for April and December 2001 service. In awarding the seven frequencies available April 1, 2001, the Department must choose between Continental’s new-entrant service at a hub (Newark International Airport) which today receives no single-plane Argentina service at a gateway (New York/Newark) serving large volumes of U.S.-Argentina traffic, new-entrant service by Delta at a hub which already has nonstop Argentina service but very little U.S.-Argentina traffic, and service by United, an incumbent which already holds more frequencies than all the frequencies at issue in this proceeding, at a developing hub which now receives even more Argentina service than it received when the record in this case was first developed. Once the initial frequencies are allocated, the Department must choose between one of the remaining selections from April and Continental’s proposal to institute daily, nonstop Houston-Buenos Aires service at a hub which today receives no single-plane Argentina service, provide enhanced Argentina access for passengers throughout the western United States and offer comprehensive, nationwide Argentina service through two hubs.

Counsel:  Crowell Moring, Bruce Keiner, 202.624.2500

Continental's excessive request for all fourteen frequencies is unrealistic and undeserved, particularly in light of Continental's poor track record in South America and demonstrated inability to promptly and fully utilize valuable limited-entry awards. So long as Delta is granted the first available opportunity on April 1, 2001, Delta has no objection to Continental receiving the second opportunity for either its Newark or Houston proposal.

Delta will accomplish with a single frequency award what Continental cannot manage even with two. Delta's Atlanta hub will provide highly effective coverage for the entire United States. Continental admits that its Newark flight will benefit primarily "New York/Newark, with its large local market" (n. 1), and that it needs Houston "to compete nationwide with American." (page 4). Even if Continental were to receive two awards, which would be an absurd result, there would still be a huge competitive service gap in the southeastern of. Forgetting, for example, that the Department previously awarded United authority for Los Angeles-Sao Paulo service, which United abandoned after only six months, as well as additional Miami-Sao Palo authority, which the Department reallocated to American after United advised the Department it would allow the frequencies to remain dormant for an extended period of time.

United devotes several pages of argument to explaining why "the introduction of nonstop Los Angeles-Buenos Aires service by a foreign carrier makes it all the more imperative that the Department select United . . ." UA at 3. To the extent the Department finds enhanced competition with foreign-flag carriers important, those considerations would apply equally to Delta's ability to compete with LAPA at Atlanta. And, unlike United, Delta does not have the option of matching the competition on its own accord, since United has 21 Argentina frequencies, and Delta has none.

Counsel:  Shaw Pittman, Robert Cohn 202.663.8060

The Houston Parties urge the Department to award the seven U.S.-Argentina frequencies that will become available on December 1, 2001 to Continental for its proposed service between Houston and Buenos Aires. By awarding these frequencies to Continental, the Department would ensure that a strong third competitor - a carrier with a proven commitment to, and track record in, Latin America - will enter the U.S.--Argentina market. Moreover, Continental's proposed Houston-Buenos Aires service would maximize the public benefits of a U.S.-Argentina frequencies award, by providing passengers and shippers from across the southwest and west regions of the U.S. with low-circuity connections to Argentina.

Counsel:  Zuckert Scoutt, Rachel Trinder, 202.298.8660

Awarding Newark International Airport its first nonstop Argentina access effective April 1, 2001, will bring far more public benefits for consumers and competition than selecting proposals to provide additional nonstop Argentina service at Atlanta or Los Angeles. The Newark/New York region itself generates far more Argentina traffic than either the Atlanta region or the Los Angeles region, and introducing service at the only true airline hub in the Newark/New York region will also provide enhanced service throughout the area served by at Continental's Newark International Airport hub, particularly the northeastern United States.

Counsel:  Chip Hallock, 973.242.4209

In their filings neither Continental nor Delta provides any basis for their applications being given priority over United's request for seven U.S.-Argentina frequencies to operate daily nonstop service between Los Angeles and Buenos Aires. The Los Angeles-Buenos Aires city pair is the U.S.-Argentina market where these seven frequencies will have the greatest positive economic and public benefits. The introduction of new daily nonstop service in a market is extremely valuable, and Buenos Aires-Los Angeles is by far the largest market in the proceeding without such service.

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

For the foregoing reasons, as well as those articulated in our brief and exhibits, the Los Angeles Parties urge the Department to award, on an expedited basis, seven frequencies to United to serve Buenos Aires-Los Angeles, based on the record already developed in the above-captioned proceeding, as supplemented by pleadings filed in accordance with the Notice Reactivating Proceeding.

Counsel:  L.A. Visitors Bureau, Patti Macjennet

U.S.- Argentina Combination Service Opportunities

United’s calculations of seats-per-passenger conveniently ignores all of the through-flight-number service offered at Los Angeles. Adding even a fraction of the seats on each of those flights to the calculation shows that Los Angeles has more Argentina seats per passenger than New York/Newark, using a reasonable forecast for Los Angeles-Buenos Aires passengers rather than United’s inflated forecast.

United had access to the Los Angeles-San Jose del Cabo route only through codesharing. United itself has access to the Los Angeles-Buenos Aires route today, offering one daily single-flight-number service and three daily one-stop connecting services as well as having the ability to bmove frequencies to Los Angeles. Ironically, although United claims that Los Angeles, San Francisco and Seattle "are poorly served over the Newark gateway" (United Answer at 4), United itself offers connecting Buenos Aires service via JFK for Los Angeles and San Francisco. Continental stands ready to compete with United for this traffic as soon as Continental is awarded Argentina frequencies. 4 Delta claims that the New York/Newark gateway "is already served by four competing nonstop carriers." (Delta Answer at 3) Continental agrees the New York/Newark gateway should be served by four competing nonstop carriers, but at present only American, United and Aerolineas Argentinas offer nonstop Buenos Aires service at any New York/Newark airport.

Counsel:  Crowell Moring, Bruce Keiner, 202.624.2615 

No applicant can match the benefits of Delta’s Atlanta service proposal, which will provide new and highly competitive network benefits for the entire United States. In limited-entry South American markets such as Argentina, the Department has recognized that the benefits of new service from a large hub gateway like Atlanta are "particularly significant and compelling in a market that has been artificially restricted for so many years."

Continental’s Newark proposal amounts to little more than installing a fourth carrier on the abundantly served New York/Newark-Buenos Aires route. Continental’s Newark proposal will provide minimal network benefits, since Continental’s own forecast shows that Continental expects New York local passengers account for two-thirds of its total traffic. Unfortunately, Continental’s actual experience on Newark-South America routes provides irrefutable evidence that Continental cannot meet its exaggerated claims of capturing large shares of New York local passengers. And, Continental’s disappointing performance in this respect has lead to a string of service defaults on Newark-South America routes. Thus, on the Newark-Rio de Janeiro, Newark-Sao Paulo, and Newark-Santiago routes, Continental fell short of its local market predictions by 66 percent on average. DL-R-112. Continental’s Newark-Buenos Air service proposal is characterized by exactly the same defects that have lead to disappointment in each of those prior cases.

Counsel:  Shaw Pittman, Robert Cohn, 202.663.8060

The Georgia and Atlanta Parties are extremely pleased that the Department will now be able to select two proposals for U.S.-Argentina service commencing in 2001. The many important public interest factors favoring the selection of Delta’s Atlanta proposal for the first available opportunity have already been detailed by the Georgia and Atlanta Parties in their previously submitted Brief and Exhibits. Nothing has changed in the interim period that would change those conclusions.

Counsel:  Atlanta Chamber of Commerce, HollyBeth Anderson

In conclusion, the Department has the opportunity in this proceeding to make the first meaningful improvement in air service between the United States and Argentina in several years. Unfortunately, not all U.S. carrier service aspirations can be met. With 14 frequencies available, however, the Department can authorize one new entrant service proposal which will offer passengers in the Eastern U.S. an additional competitive choice. Both Delta and Continental propose services from Eastern hubs and either could offer this service. However, only United offers service at Los Angeles which is the largest gateway that still lacks daily nonstop service. Moreover, only United offers services from a hub with a network that serves the Western U.S. Unlike the East, which already has daily nonstop services by three carriers at three U.S. gateways, Los Angeles and the Western U.S. have no daily nonstop service to Argentina. The Department should allocate initial seven of the frequencies available to meet these critical service needs and not squander all 14 frequencies by concentrating still more services in the East.

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

1999 U.S.-Argentina Combination Service Case

By this order, we tentatively select Delta Air Lines, Inc. and Continental Airlines, Inc. to serve the U.S.-Argentina market and tentatively allocate each carrier seven weekly frequencies for its proposed services. Delta's award would be for services commencing April 1, 2001 in the Atlanta-Buenos Aires market and Continental's award is for services commencing December 1, 2001 in the Newark-Buenos Aires market. We also tentatively select Continental as the backup carrier to Delta's Atlanta award for service from Houston and United Air Lines, Inc. as the backup carrier for Continental's primary award for services from Los Angeles. We will afford interested persons 7 calendar days to file objections to our tentative decision and 3 calendar days to file answers to objections.

Our primary objective in this proceeding is to select a carrier or carriers that would provide the greatest public benefits. This goal is particularly important in a market such as Argentina, which historically has been one of the most restrictive in South America and is considered by the applicants as a critical component for an effective South America route network. While the U.S.-Argentina market is one of our most important South America markets, it historically has been limited to combination services by only two U.S. airlines. Indeed, there has been no increase in the number of U.S. scheduled combination airlines in the market for over 50 years. 13 Argentina is now the only major South America market served by fewer than three U.S. combination carriers. Because of this long history of restrictive service, one of our major objectives in liberalizing our aviation regime with Argentina was to create new opportunities for additional carriers to serve this important market. We seek such expanded opportunities with our aviation partners because we believe that new entry is the most effective means of improving service, price, and competition, which in turn, provides the widest and most responsive range of competitive services to consumers.

The primary benefit of United's proposal derives from the service improvements that it would bring to Los Angeles, specifically the first U.S.-flag nonstop service in the largest U.S.-Argentina gateway without U.S.-flag service. Delta and Continental, however, would also provide the first U.S.-flag nonstop service. to their proposed gateways of Atlanta and Newark. Moreover, Los Angeles enjoys considerably more service than either Atlanta or Newark. In addition to the three weekly nonstop flights provided by Aerolineas Argentinas, United provides single flight number service in the market over Chicago, and COPA, a Panamanian carrier, and LAN Chile, a Chilean carrier, provide one-and two-stop services, respectively, for a total of 24 weekly services. Thus, while we would hardly dispute that United's introduction of nonstop service at Los Angeles is a benefit, in the context of this proceeding, given the restrictive history of the market and the new entrant applicant proposals before us, which themselves would provide substantial public benefits, we tentatively find that the public benefits that Delta and Continental are likely to provide as a result of an award in this case outweigh the benefits that United would provide.

By:  Susan McDermott

New U.S.- Argentina Combination Service Opportunities

Atlanta, unlike Continental's hub at Newark International Airport, already enjoys nonstop Buenos Aires flights, and Atlanta already has more nonstop Buenos Aires seats available per passenger than New York/Newark does. This excess capacity already available for Atlanta passengers and shippers should preclude the Department's award of the first available Argentina frequencies for Delta's redundant Atlanta-Buenos Aires flights, which are not urgently needed. Continental's New York/Newark-Buenos Aires flights are urgently needed, however, to institute the first and only nonstop or single-plane flights at Continental's hub at Newark International Airport, promote intragateway competition in the New York/Newark area and end JFK's monopoly on New York./Newark-Buenos Aires nonstop and single-plane service by longstanding incumbents American, United and Aerolineas Argentinas. attract these passengers for its proposed service at Atlanta, the geographic center of the region. South Florida accounts for the vast majority of Argentina traffic in the region, but Delta will not attract south Florida passengers because of the backhaul between south Florida and Atlanta. Since virtually all of these passengers will continue to prefer nonstop service offered at Miami, Delta will be unable to support its Atlanta-Buenos Aires service with the passengers that account for most Argentina traffic in the region where Delta's proposed nonstop service will operate. Without these passengers in Delta's column, the northeast United States has the largest number of U.S. -Argentina passengers that can be served by an applicant in this proceeding. The Department should allow Continental to operate its New York/Newark- Buenos Aires flights first to serve those passengers immediately.

Counsel:  Crowell Moring, Bruce Keiner, 202.624.2500, rbkeiner@cromor.com 

Delta is extremely pleased the Department has selected Delta to receive one of the two available service opportunities to Argentina, and that the Department recognized the importance of selecting Delta for the first service opportunity on April 1, 2001, so that travelers and shippers in broad regions of the United States can enjoy new service and competitive options as quickly as possible. The Department has demonstrated its strong commitment to ensuring that these valuable frequencies are fully utilized by issuing its tentative decision less than a month after the Government of Argentina agreed to authorize the two tranches of frequencies.  Delta urges the Department to finalize the tentative awards as quickly as possible, so that Delta can proceed with implementation plans for its new Atlanta-Buenos Aires service.

Counsel:  Delta and Shaw Pittman, Robert Cohn, 202.663.8060

The Georgia and Atlanta Parties applaud the Department’s decision to make Atlanta the first new nonstop gateway for Argentina service on April 1, 2001.  The Georgia and Atlanta Parties strongly support the Department’s reasoning in the Show Cause Order, and urge the Department to promptly issue a Final Order confirming its tentative findings. Atlanta is located in the heart of the burgeoning southeast region of the country.  Over the past several years, Atlanta Hartsfield Airport has experienced a surge in new nonstop service to the Latin American region by Delta, from its major Atlanta hub, as well as foreign-flag carriers that have recognized the important commercial opportunities Atlanta has to offer.

Counsel:  HollyBeth Anderson, 404.586.8462

United and American, the two incumbent U.S.-flag carriers in Argentina - as well the historically dominant carriers across Latin America - already hold 21 U.S.-Argentina frequencies each . Only Continental has invested in the long-term development of a comprehensive network of services to challenge them elsewhere in Latin America, and would compete with them effectively in Argentina. Only Continental has made efforts to take advantage of the new service opportunities generated by Open Skies agreements in the region. In contrast, Delta has shied away from markets that were less than certain, and with rare exception has introduced new services only in limited-entry markets. Moreover, in this proceeding Continental has proposed to create a new network of services, competing with United and American from two hubs. Delta, in contrast, proposed to operate service from only one gateway. The U.S. public would benefit most from service on a carrier willing to invest in a network of transportation options across the United States to challenge the over 50-year old duopoly over service to Argentina

Counsel:  Zuckert Scoutt, Jol Silversmith, 202.298.8660, jasilversmith@zsrlaw.com 

With the possibility of selecting two carriers and two gateways, it is astonishing that the Department does not make United and Los Angeles one of its choices, given the unchallenged public benefits United's service would offer to consumers in Los Angeles and the Western U.S. region. The Department manages this feat by concluding that both Delta and Continental are new entrants and stating its belief "that new entry is the most effective means of improving service, price and competition, which in turn, provides the widest and most responsive range of competitive services to consumers." Whatever the merits of this assertion in the abstract, it does not support the selection of Continental on the record in this proceeding. Based on the record as summarized by the Department itself, United's proposed Los Angeles-Buenos Aires service provides "the widest and most responsive range of competitive services to consumers." The Department's decision to select Continental at Newark over United at Los Angeles in the face of these overwhelmingly superior public benefits can only be explained by an irrational bias favoring new entrant carriers at the expense of consumers.

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

New U.S.-Argentina Combination Service Opportunities

For proof that Continental will institute vigorous new competition for U.S.-Argentina passengers and shippers at New York/Newark and throughout the United States, the Department need look no further than United’s vehement objection to awarding seven frequencies to Continental for service at New York/Newark. United is the only party objecting to Continental’s award at New York/Newark, reflecting United’s fear of effective new competition for Argentina traffic in the New York/Newark region and throughout the northeastern United States, given United’s weak position at JFK. If, as United argues, New York/Newark cannot support an additional airline serving Argentina and United truly believes its own inflated forecast for Los Angeles-Argentina traffic, United can move seven frequencies to Los Angeles and offer every single benefit it claims for nonstop Los Angeles-Buenos Aires service. Thus, Continental opposes United’s objection to Continental’s award of seven frequencies at New York/Newark and urges the Department to issue promptly a final decision confirming an award of route authority and seven frequencies to Continental for New York/Newark-Buenos Aires service.

Counsel:  Continental and Crowell Moring, Bruce Keiner

Continental's Objections consist almost entirely of re-arguing the relative merits of adding an alternate airport in the New York/Newark metropolitan area (which already receives three daily nonstop Argentina flights), and to renewing Continental's unrealistic request for the entire allocation of Argentina frequencies, so that Continental could occupy both new entry opportunities by adding service at its second-choice Houston gateway. For the sound reasons explained in the Show Cause Order, the Department properly prioritized Delta's Atlanta-Buenos Aires service over both of Continental's proposals.

In these circumstances, the Department should immediately finalize its tentative award to Delta, so that Delta can proceed as quickly as possible with implementation plans for its April 1, 2001 service. The need for an expeditious final decision cannot be over-emphasized. Delta appreciates the Department's efforts in issuing a tentative decision only a month after the Government of Argentina agreed to authorize the new services. However, because Delta is the carrier that has tentatively been selected to start service on April I - just three months away - any delay in the issuance of a Final Order is likely to cause serious and disproportionate harm to Delta. Indeed, even if the Department were to issue a Final Order in the first week of January - an admittedly ambitious schedule - Delta would have less than 90 days to implement its services, as planned, on April 1, 2001.

Since United has determined not to object to Delta's award, there is no need for Delta to respond further to United's extended objections, other than to say the Department should deal with United's concerns expeditiously, so as not to delay the issuance of a Final Order.

Counsel:  Delta and Shaw Pittman, Robert Cohn

The Georgia and Atlanta Parties urge the Department to make final its tentative award to Delta, so that Georgia, Atlanta and the Southeast region can begin to enjoy the benefits of new daily nonstop Argentina service on April 1, 2001. United has stated that it will not object to Delta's award for Atlanta service, and the Objections of Continental and the Houston Parties fail to raise any arguments that would call into question the Department's findings in the Show Cause Order.

By:  The Georgia and Atlanta Parties

The few cases in which the Department has declined to award backup authority have involved highly atypical circumstances, such as the recent U.S.-China Air Services proceeding. See Order 2000-11-24, at 18-19. This proceeding, although significant, is not of such rare caliber. The Department already has recognized that Continental's proposed service between Houston and Buenos Aires would "bring the benefit of opening a new gateway to Argentina." Order 2000-12-13, at 11. Moreover, absent a compelling justification, frequencies in limited-entry markets should not be left unused: the benefits of international air services should not be withheld from the U.S. public until another lengthy route case can be completed. As the Department has explained, "it is not our policy to permit valuable route rights to be wasted." Order 95-8-18, at 5.

Indeed, as the Department observed in the Order to Show Cause, Delta could have in this proceeding submitted a proposal to operate services to Argentina from a gateway other than Atlanta, but choose not to do so. See Order 2000-12-13, at 12. Delta should not be allowed at this late date to redefine the rules of the Department's

frequency allocation process in order to offset its lack of commitment to, and vision in, developing new services between the United States and Latin America. In contrast, Continental in this proceeding proposed to create a new network of Argentina services which would compete with the incumbents, United Airlines and American Airlines, from two hubs. Moreover, the Houston Parties continue to be fully prepared to support new service between George Bush Intercontinental Airport and Buenos Aires.

Counsel:  Houston and Zuckert Scoutt, Rachel Trinder, 202-298-8660, rbtrinder@zsrlaw.com

By:  Los Angeles Convention and Visitors Bureau

Assuming for the sake of argument that the Department were to grant Continental the relief it has requested, Continental would replace Delta as the carrier receiving April 2001 frequencies and would use them at New York/Newark. In that event, both Continental and United would be incumbents when the December 2001 frequencies were available. Even under the Department's own erroneous reasoning granting a pre-emptive preference to new entrants, Continental would be entitled to no such preference for the December 2001 frequencies. As set forth in the text, on the basis of consumer benefits,
United should, under these assumptions, be selected at Los Angeles where its services clearly offer superior consumer benefits compared to Continental at Houston.

United has urged that the Department rely consistently on benefits to consumers, not to carriers that happen to be new entrants. New entry is obviously a factor that should be considered, but it should not be allowed to trump all other benefits. Where, for example, two carriers offer roughly equivalent benefits to consumers but one is a new entrant and the other an incumbent, it may be appropriate to make the selection based on the structura