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Air India Limited

Perform scheduled foreign air transportation of persons, property and mail between Mumbai (Bombay) and other points in India, on the one hand, and Los Angeles, CA, on the other hand, via Kuala Lumpur, Malaysia, pursuant to a codeshare agreement with Malaysia Airlines ("MAS"). Air-India also intends, as permitted under the U.S. India Memorandum of Consultations, to exercise fifth freedom traffic rights between Los Angeles, CA and Kuala Lumpur, Malaysia. Air-India plans to begin advertising and selling Los Angeles-India codeshare service via Kuala Lumpur as soon as all necessary approvals are received so that service may be initiated on March 25, 2001. Air-India requests that this authority be granted for at least a two (2)-year period. All flights will be performed with modem A-330. B-777 or B-747 aircraft meeting all applicable noise requirements.

Two (2) U.S. combination carriers - Delta and Northwest - operate their own services with fifth freedom traffic rights to India, while United markets its services to India pursuant to a codeshare agreement. Two (2) U.S. all-cargo carriers - Federal Express and UPS - also operate their own scheduled services to India from the U.S. Grant of the exemption authority sought herein will permit Air-India to continue to Incrementally Increase its U.S. marketing presence and competitive posture.

Counsel:  Squire Sanders, Elizabeth Collins, 202.626.6600, msinick@ssd.com

Air-India Limited

Air-India seeks exemption authority to enable it to display its "Al" airline designator code on flights operated by MAS between Los Angeles, California and Kuala Lumpur, Malaysia, on the one hand, and between Kuala Lumpur and Mumbai, Bangalore, and Hyderabad, India, on the other hand. Air-India also intends to exercise fifth freedom traffic rights between Los Angeles, California and Kuala Lumpur, Malaysia.

Air-India asserts in its application that the exemption authority it seeks is "an essential element to the enhancement of codesharing operations authorized by the [U.S.-India] MOC", and that "approval of Air-India's request, therefore, would be consistent with the Department's statutory obligation to act consistently with the obligations of the United States Government under an international agreement." What Air-India fails to acknowledge is that the Government of India is in violation of the very same provision of the MOC upon which Air-India's application is predicated. Northwest presently operates flights between the United States and India, via Amsterdam. Northwest has a longstanding interest in displaying the airline designator code of its alliance partner, KLM, on these Northwest operated flights. Unfortunately, the Government of India has refused to authorize these Northwest/KLM codeshare services. Northwest's proposed codeshare services with KLM are absolutely consistent with the codesharing provision contained in the December 2, 1995 Memorandum of Consultations between the United States and India.

During the November 1999 U.S.-India bilateral talks, U.S. negotiators communicated clearly to the Government of India that the U.S. views India's refusal to permit Northwest to display KLM's code on Northwest's Amsterdam-India flights to be inconsistent with the codesharing provision of the MOC. It is important that the U.S. hold its ground on this point as the implications go beyond the U.S.-India relationship. The codeshare language in the U.S.-India MOC is modeled after what has become standard codeshare language in U.S. open skies agreements. Were the U.S. to concede to India's position in this case, it would risk denigrating the liberalized codeshare rights the U.S. has successfully negotiated with, at last count, 52 U.S. open skies trading partners.

Counsel:  Northwest, Megan Rae Rosia, 202-842-3193, megan.rosia@nwa.com

Air India Limited

Northwest's objection is focused on just one issue. The argument advanced by Northwest is that the third country carrier codesharing language set forth in the 1995 MOC must be read to permit Northwest not only to place its designator code on third-country carriers, in this instance KLM flights, but also to embrace the economic right for KLM to put its designator code on the unlimited number of Northwest flights which Northwest operates and may later operate to India.

Significantly, Northwest's argument directly implicates the capacity provisions of the pre-MOC bilateral and inter-carrier commercial agreements, respectively, between India and the Netherlands and between Air-India and KLM. Since KLM is currently offering the maximum capacity permitted under those arrangements-seven weekly flights-to allow KLM to place its designator code on Northwest's own flights would vitiate the capacity provisions in these other preexisting agreements. The MOC itself provides, insofar as third country codeshare relationships are concerned, that " . . . all airlines in such arrangements ... hold the appropriate authority." The fact is that even though KLM is permitted to offer codeshare services in the Netherlands-India market and could do so in this instance if it were willing to reduce the number of direct flights it operates, KLM does not have authority to do so in violation of the capacity restrictions in the relevant intergovernmental and commercial agreements. Therefore, KLM does not have the requisite "appropriate authority" which, without more, should be sufficient to dispose of Northwest's objection.

The recently added provisions of the U.S.-Israel bilateral further confirm and clarify the requirement that third country carriers have "appropriate authority" to engage in codeshare operations is subject to and limited by the capacity provisions of the relevant bilateral agreements. Specifically, the U.S. -Israel bilateral was amended just two months ago to add a provision concerning cooperative marketing arrangements and third country codesharing.

Northwest apparently takes the erroneous position that, as long KLM has the underlying authority from the Indian and Netherlands Governments to offer codeshare services, that "authority" is independent of any limitations imposed by the capacity provisions of the relevant intergovernmental and commercial agreements. Suffice it to say that Air-India disagrees that any such artificial distinction can properly be made. The United States was almost certainly the first country to recognize the significant economic value of codeshare rights and to require that such rights be subject to prior governmental approval. The long history of the United States' intergovernmental disputes with numerous countries over codesharing further confirms the value of such rights. The undeniable value of these codeshare rights makes it unreasonable to argue, as Northwest does, that a carrier's "authority" to exercise such rights should not be subject to limitations on that same authority set forth in the same intergovernmental and commercial agreements from which the carrier's authority derives.

Counsel:  Squire Sanders, Elizabeth Collins, 202.626.6600, msinick@ssd.com

Air India Limited

By:  Paul Gretch

Air India Limited

Air-India Limited hereby requests renewal of its exemption, to the extent necessary, to permit Air-India to continue to engage in the scheduled foreign air transportation of persons, property and mail between India and Los Angeles, California via Kuala Lumpur, Malaysia on a codeshare basis only, with fifth freedom Los Angeles - Kuala Lumpur traffic rights. Air-India conducts these operations pursuant to a codeshare agreement with Malaysia Airlines.  Air-India’s current exemption expires on March 28, 2002, and Air-India requests that this exemption be renewed for at least one year under its existing terms and conditions.

Two U.S. carriers, Delta Air Lines and Northwest Airlines, currently provide combination service to India. Air-India currently serves the United States directly through the New York and Chicago gateways, and indirectly through the Los Angeles gateway pursuant to a codeshare with Singapore Airlines. Renewal of Air-India's exemption authority, therefore, will permit Air-India to continue to maintain its U.S. presence and competitive posture while offering travelers and shippers additional service options and carrier choices.

Counsel:  Squire Sanders, Elizabeth Collins, 202.626.6600, msinick@ssd.com

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