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OST-99-6437

Cyprus Airways and Northwest Airlines, Inc.

Counsel:  Northwest, Megan Rae Poldy, 202.842.3193 and Squire Sanders Dempsey, Charles Donley, 202.626.6601

Counsel:  Northwest, Megan Rae Poldy, 202.842.3193 and Squire Sanders Dempsey, Charles Donley, 202.626.6601

Cyprus Airways and Northwest Airlines, Inc.

Counsel:  Northwest, Megan Rae Poldy, 202.842.3193 and Squire Sanders Dempsey, Charles Donley, 202.626.6601

Cyprus Airways and Northwest Airlines, Inc.

By their application Cyprus Airways and Northwest request authority to engage in reciprocal code sharing. Under this arrangement, Northwest would hold out services on Cyprus Airways' flights between Amsterdam and points in Cyprus and Cyprus Airways would hold out service on Northwest's flights between Amsterdam and points in the U. S. In each case, the code share would be for the purpose of carrying traffic ticketed for services between Cyprus and the U. S. There is no code-share provision in the bilateral agreement between the governments of Cyprus and the U. S. In their joint application, Cyprus Airways states its belief "that the Government of Cyprus would approve [code-share] requests [of U. S. carriers], consistent with reciprocal treatment by the United States of similar requests from Cypriot carriers." Joint Application at 9. At least one of United's alliance partners, Lufthansa, serves Cyprus. At present, United is not code sharing on Lufthansa's flights between Germany and Cyprus, but United is interested in implementing such code-share service.

Because the Northwest/Cyprus Airways code share does not involve a third country carrier, it is not clear that the "reciprocal treatment" expected to be granted by the Cypriot government would apply to a code share between United and Lufthansa. United urges the U.S. to seek a written confirmation from the Cypriot authorities that they are prepared to approve code shares between U. S. and third-country carriers, including Lufthansa. Assuming such confirmation is obtained, United would urge that the code share between Northwest and Cyprus Airways be approved on the basis of comity and reciprocity. Absent such confirmation, United would urge the U. S. to defer action on this joint application pending conclusion of a bilateral agreement guaranteeing the rights of U. S. carriers to code share to points in Cyprus with the partners of their choice.

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

Cyprus Airways and Northwest Airlines, Inc.

United stated in its answer that it "would urge that the code share between Northwest and Cyprus Airways be approved on the basis of comity and reciprocity" provided the Government of Cyprus is prepared to approve codeshare arrangements between U.S. and third-country carriers. United noted specifically its interest in establishing codeshare service to Cyprus in conjunction with its alliance partner Lufthansa, which serves Cyprus from Germany.

Based on its discussions with the Cypriot Government, Cyprus Airways believes that the Government of Cyprus would approve on the basis of comity and reciprocity codeshare arrangements between U.S. and third-country carriers. Thus, provided that the United States is prepared to grant reciprocal treatment to codeshare arrangements involving Cypriot and third-country carriers, Cyprus Airways believes the Government of Cyprus would respond positively to requests from U.S. carriers to engage in codesharing services with third-country carriers, such as those described in United's answer. In view of the foregoing, Cyprus Airways requests prompt approval of its pending application to engage in codeshare services with Northwest Airlines.

Counsel:  Squire Sanders Dempsey, Charles Donley, 202.626.6601

Cyprus Airways and Northwest Airlines, Inc.

The delay in approval of the Joint Applicants' request has resulted in significant unrealized income to both carriers. Unless the Department promptly approves at least the transatlantic portion of their codeshare application, Cyprus Airways and Northwest will lose the opportunity to offer even limited codeshare services across the Atlantic during the peak summer travel season.

Counsel:  Northwest, Megan Rae Poldy, 202.842.3193 and Squire Sanders Dempsey, Charles Donley, 202.626.6601

Northwest Airlines, Inc.

Since June 1, 1999, when Sun Country switched its domestic operations from charter to scheduled service, Northwest has engaged in numerous and varied anticompetitive acts against Sun Country in every important city-pair market served by the two carriers. Northwest has added great quantities of seats in those markets at fare levels matching Sun Country's low fares but well below Northwest's average fares in markets not served by Sun Country. Northwest has scheduled additional flights and used larger aircraft to divert maximum revenue from Sun Country.

Sun Country, in the Appendix hereto, has shown that Northwest has been, and is now, engaging in specific types of unfair and anticompetitive behavior intended to drive Sun Country out of city pair markets in which it provides low-fare competition to Northwest. The foregoing statement of Background Facts cites numerous instances of Northwest's abuse of its market power to repel Sun Country: massive capacity increases and deeply discounted fares meant to divert traffic and revenue from a new entrant competitor at fares plainly noncompensatory to Northwest. The Appendix also demonstrates that Northwest consistently and successfully has used the same tactics and practices against every other new entrant carrier which has offered to compete against Northwest at any of the major carrier's three hub airports.

Counsel:  Sun Country, Dennis Barnes, 202.332.8216

Cyprus Airways and Northwest Airlines, Inc.

Counsel:  Northwest, Megan Rae Poldy, 202.842.3193 and Squire Sanders Dempsey, Charles Donley, 202.626.6601

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