Home | Search | Help
OST by Number | OST by Order | OST by Carrier | OST by Subject | OST by Day
OIA by Carrier/Subject | OIA by Day | FAA by Number | FAA by Subject | FAA by Day
Carrier Financials | Charter Office | Answer/Reply Calendar

Hong Kong Fifth-Freedom All-Cargo Frequencies

Order 2002-12-11 is instituting the 2002/2003 Hong Kong Fifth-All Cargo Frequency Proceeding to select carriers to operate the newly acquired fifth-freedom all-cargo weekly frequencies under the October 19, 2002 U.S.-Hong Kong Memorandum of Understanding. Procedural Timetable: Amended/Supplemented applications: 12/13/02; Petitions for Reconsideration: 12/17/02; Direct Exhibits: 1/24/03; Briefs: 2/7/03.

In allocating the available frequencies, our principal objective will be to maximize the public benefits that will result from award of the authority in this case. In this regard, we will consider which applicants will be most likely to offer and maintain the best service for the shipping public. We will also consider the effects of the applicants' service proposals on the overall competitive environment, including the market structure and the level of competition in the U.S.­-Asia market, and on any other market shown to be relevant, and, where relevant, the positive effect on each applicant's operations. In addition, we will consider other factors historically used for carrier selection where they are relevant.

By: Paul Gretch

2002/2003 Hong Kong All-Cargo Fifth Freedom All-Cargo Frequency Proceeding

Counsel:  Global Aviation Associates, Jon Ash, 202 457-0212

Counsel:  Polar and Wilmer Cutler, Jeffrey Manley, 202-663-6670, jeffrey.manley@wilmer.com

2002/2003 Hong Kong All-Cargo Fifth Freedom All-Cargo Frequency Proceeding

In light of the Department's counting approach, FedEx Express has reviewed its immediate needs, and believes that it will now need a total of 16 frequencies in Year One, and a total of 28 in Year Two. This supplement incorporates and replaces in toto the proposal submitted by FedEx Express on November 5, 2002.

Counsel:  Federal Express, Thomas Donaldson, 901-434-8580

Hereby amends its application to request an allocation of a total of four U.S.-Hong Kong fifth freedom all-cargo frequencies. In its original application, which was consolidated into this Docket by the Instituting Order, Northwest requested allocation of eight all-cargo fifth freedom frequencies, four to be used to serve Manila, and four to be used to serve Seoul. By this amended application, Northwest removes its request for the allocation of any frequencies to serve Seoul. In its amended application, Northwest will prosecute the allocation of four frequencies only, all to be used to serve Manila, the Philippines. Northwest further requests allocation of a single U.S.-Philippines Route 2 frequency under the terms of the U.S.-Philippines Air Transport Agreement.

Counsel:  Northwest, Megan Rae Rosia, 202-842-3193

Hereby submits the following Amendment No. 1 to its Application. Included in UPS' original Application was a request for six frequencies in year two between Hong Kong, on the one hand, and UPS' European hub in Cologne, Germany, on the other, with intermediate stops in Mumbai and Dubai in the westbound direction and non-stop service in the eastbound direction. UPS is amending its Application to indicate that, two days per week, the eastbound flights will stop at Mumbai enroute to Hong Kong. A revised schematic diagram reflecting this Amendment is attached hereto as Exhibit 1. This replaces the last page of Exhibit 2 to UPS' original Application in this proceeding. Thus, UPS' basic Application, i.e., double daily service between Hong Kong to its Asian hub at Clark and daily service between Hong Kong and UPS' European hub at Cologne, remains unchanged.

Counsel: Kelley Drye, David Vaughan, 202 955-9792

2002/2003 Hong Kong Fifth Freedom All-Cargo Frequency Proceeding

A key component of the evidence that applicants are required to submit is the traffic forecast. As currently written, the evidence request states that this and other forecast data are to be based on the 12-month period ended June 30, 2002. Use of such a base year period would create serious evidentiary problems, and Polar accordingly requests that the base year period be changed to the 12 months ended December 31, 2001.

More specifically, the Department's T-100 data, on which carrier applicants normally rely for determining market shares and load factors, are not presently available and will not become available in time to be used in this proceeding. Currently, we understand that T-100 data are available only through March 2002. Furthermore, because of delays in carrier reporting and subsequent data corrections, it often takes a substantial amount of time following the reporting of data to DOT for the database to be considered reasonably accurate and to be released to the public. With direct exhibits due in a mere three weeks (on January 7, 2003), there is virtually no chance that the applicants will have timely access to reliable data for first six months of 2002.

To remedy the situation, Polar requests that the Department change the base year period to calendar year 2001. The data for that period are already available. Moreover, that database will include a smaller amount of aberrational, post-9/11 data than the database for the year ended June 30, 2002, which includes more than nine months of post-9/11 data. Using calendar year 2001 as the base year period therefore will both expedite this proceeding and improve the reliability of the evidentiary foundation.

Counsel:  Polar and Wilmer Cutler, Jeffrey Manley, 202-663-6670, jeffrey.manley@wilmer.com

2002/2003 Hong Kong Fifth Freedom All-Cargo Frequency Proceeding

Federal Express Corporation hereby requests that the Department reconsider two aspects of the Evidence Request attached to Order 2002-12-11. First, the second paragraph, having to do with historic schedules, requires an applicant like FedEx Express, which operates a network of integrated services throughout the world, to produce large amounts of data, most of which is not material to this case.

Counsel:  Federal Express, Thomas Donaldson, 901-434-8580

FedEx Express would have objected to the conclusion of the MOU in the strongest possible terms had this interpretation of the agreement been made clear at the time of its negotiation. As discussed below, FedEx Express is at a loss to see how the Department can realistically allocate the MOU's limited opportunities in a way that will satisfy the needs of the many U.S. carriers clamoring for these opportunities. In addition, since FedEx Express carries more U.S. exports than any other airline, the agreement's deficiencies could well have a significant adverse effect on broader U.S. economic opportunities and the public interest as a whole.

Counsel:  Federal Express, Thomas Donaldson, 901-434-8580

The Joint Movants listed below respectfully request the Department for a three­week extension of the procedural timetable established in Order 2002-12-11, pursuant to 14 C.F.R. § 302.9. The Joint Movants request that the procedural timetable be amended as follows:  Direct Exhibits: January 28, 2003 Rebuttal Exhibits: February 14, 2003 Briefs: February 28, 2003. The Joint Movants state that this brief extension is necessary to enable them to prepare their exhibits and to develop an adequate evidentiary record, especially given the holiday season. This short extension should not affect the Department’s ability to make a timely decision awarding the frequencies. The Joint Movants are authorized to state that UPS does not oppose this motion.

Counsel:  Wilmer Cutler, Jeffrey Manley for Polar / Federal Express, Melissa Paul / Evergreen, Thomas Lydon / Northwest, Megan Rae Rosia / Atlas, Russell Pommer / Sher Blackwell, Mark Atwood for Kalitta

2002/2003 Hong Kong Fifth Freedom All-Cargo Frequency Proceeding

On December 10, 2002, the Department issued Order 2002-12-11, instituting the 2002/2003 Hong Kong Fifth-Freedom All-Cargo Frequency Proceeding, Docket OST-2002-14049, establishing a procedural schedule for the proceeding and attaching an evidence request for the use of the parties in the case. Under the established procedures, petitions for reconsideration of Order 2002-12-11 were to be filed December 17, 2002, and Direct Exhibits are to be filed January 7, 2003. 

The Department received three petitions for reconsideration of its instituting order on December 17, 2002. Polar Air Cargo, Inc. requests reconsideration of certain portions of the evidence request attached as Appendix A to Order 2002-12-11, and also requests that December 19, 2002, be established as an answer date for its petition. Federal Express filed two separate petitions, one seeking reconsideration of technical issues in the instituting order and another requesting that the Secretary of Transportation reconsider the Department's interpretation of the U.S.-Hong Kong Memorandum of Understanding. 

Under the Department's regulations, 14 CFR 302.14, answers to each of the petitions filed December 17, 2002, would be due on December 27, 2002. In order to establish more expeditiously a record to resolve the issues raised, we have decided to establish Monday, December 23, 2002, as the due date for answers to the petitions, and Friday, December 27, 2002, as the due date for replies. 

By:  Read C. Van de Water

2002/2003 Hong Kong Fifth Freedom All-Cargo Frequency Proceeding

Notice, the Department grants the motion and extends the procedural dates: Direct Exhibits shall be due January 28 2003 Rebuttal Exhibits due February 14, 2003; and Briefs due February 28, 2003.

By: Susan McDermott

Northwest supports Polar's petition regarding the base data to be utilized in the traffic forecasts. The latest T-100 data are available only through March 2002. Northwest urges the Department to change the base year to calendar 2001, as petitionedby Polar. Northwest concurs in Polar’s observation that Calendar 2001 data will be less skewed by aberrational post-9/11 data. For these reasons, Northwest also supports Polar’s request that the requirement to submit historic schedule data be modified to require schedules for the two-year period ending December 31, 2001, although as discussed below, Northwest recommends that the DOT approve FedEx’s request that schedule “snapshots” be submitted in lieu of all historic schedules. FedEx FedEx has filed two Petitions for Reconsideration, raising a number of technical and policy issues. Northwest answers these issues as follows

Counsel: Northwest, Andrea Newman, 202 842-3193

The reality is that FedEx has vastly overreached in its efforts to claim all of the new fifth freedom frequencies available in this proceeding. In its initial application for frequencies, FedEx applied for half of the available first-year frequencies and two-thirds of the available second year frequencies. Having seen the applications requested by other carriers, and being fully aware that the frequency requests already outnumbered those available, FedEx nonetheless amended its application to request more frequencies than are available during the first two years to all carriers in total under the MOU. Recognizing the dilemma in which it has placed itself, FedEx now seeks to remedy the situation by seeking an interpretation for which there is no support, intimating that U.S. exports as a whole will be threatened if it does not get its way. Based on prior precedent, FedEx's own publicly stated position, and the public interest, the Department should summarily deny FedEx's petition.

Counsel: Global Aviation, Jon Ash, 202 457-0212

Polar has requested that the Department modify the base year period for traffic forecasts to calendar year 2001, and likewise modify the requirement for the submission of historic schedules. Evergreen fully supports this request, which is in the public interest. As noted by Polar, the T-100 data that would be necessary to prepare a traffic forecast for the 12-month period ended June 30, 2002 is not readily available, and a requirement to rely upon it would unnecessarily complicate the proceeding.

Counsel: Global Aviation, Jon Ash, 202 457-0212

Counsel:  UPS and Kelley Drye, David Vaughan, 202-955-9864

2002/2003 Hong Kong Fifth Freedom All-Cargo Frequency Proceeding

Respectfully requests that the Department grant limited intervention to its Office of the Assistant General Counsel for Aviation Enforcement and Proceedings in this proceeding. The purpose of the Enforcement Office's limited intervention is to assist the parties in developing a proposed allocation of the frequencies at issue in this proceeding.

Counsel: Federal Express, Melissa Paul, 901 434-8580

2002/2003 Hong Kong Fifth-Freedom All-Cargo Frequencies

The confusion in the parties' answers confirms that the Department must reconsider its interpretation of the MOU's frequency limitation. In so doing, the Department should grant the interpretation for which the plain language of the MOU calls. That interpretation is also consistent with its policy of interpreting U.S. bilateral agreements in a way that maximizes the benefits derived there-from. Under the text of the MOU, a frequency means one round-trip flight, regardless of whether that flight turns around at, or exercises the bilateral right to continue beyond, the territory of the other party.

Counsel: Thomas Donaldson, 901 434-8580

Like Federal Express, UPS believes that it may be possible for the parties in the above-captioned proceeding to agree to a Hong Kong fifth freedom frequency distribution solution that would eliminate the need for the comparative carrier selection proceeding now underway. A settlement among the parties to this proceeding, supervised and ultimately approved by the Department, would save the carrier applicants and the U.S. Government a great deal of time and valuable resources.  In order to facilitate settlement discussions to this end, UPS believes that the intervention requested by Federal Express is necessary to address and alleviate antitrust concerns. Although this involvement is not required under the antitrust laws, UPS believes that such involvement will be very helpful and could foster a rapid settlement by the parties.

Counsel: Kelley Drye, David Vaughan, 202 955-9864

2002/2003 Hong Kong Fifth-Freedom All-Cargo Frequency Proceeding

FedEx requests the intervention of the Enforcement Office for the purpose of assisting the parties in developing for the Department's consideration a proposed allocation of the frequencies at issue in this proceeding. Evergreen supports the concept proposed by FedEx, and asks that the Department issue an appropriate order that would enable the parties to discuss a proposal for allocation of fifth-freedom frequencies and route rights, under the Department's guidance. Evergreen notes, however, that in the Department's Order cited by FedEx in support of its request, and in order to provide all parties with an appropriate comfort level on antitrust issues, the Department granted the parties antitrust immunity while nonetheless finding that the meeting contemplated would not give rise to antitrust liability. Such an approach also would be in the public interest here.

Counsel:  Evergreen and Global Aviation Associates, Jon Ash, 202-457-0212, jfa@ga2online.com

2002/2003 Hong Kong Fifth-Freedom All-Cargo Frequencies

The applicants in this proceeding believe that discussions may enable them to present a joint position to the Department that would permit the Department to allocate the frequencies at issue without the necessity of a fully litigated route proceeding. While Kalitta Air agrees that such a discussion, confined specifically to the allocation of Hong Kong Fifth Freedom frequencies, would not put the participants in jeopardy of antitrust liability, out of an abundance of caution we believe that the presence of a representative of the General Counsel's office would relieve any possible concerns. 

The process proposed by the applicants is little different than discussions authorized by the Department or the Civil Aeronautics Board in the past. The example cited by FedEx is very closely on point. In Order 88-12-12, the Department authorized discussions concerning scheduling adjustments to relieve congestion at O'Hare. It stated "The product of the discussions will not be a private agreement among the carriers but an FAA decision exercising its statutory authority to regulate use of the nation's airspace. Since any restrictions imposed on the carriers' operations will result from FAA action, the carriers' participation in the discussions cannot create a risk of antitrust liability."

The purpose of the proposed discussion is essentially the same: not a private agreement, but a joint proposal to assist the Department in exercising its statutory authority to allocate the frequencies at issue. The Department may decide to allocate the frequencies in accordance with the proposal, or it may decide that the matter should be fully litigated. In any event, the action is the government's, and there should not be any risk of liability. Nonetheless, the ensure full disclose and transparency, Kalitta Air urges the Department to act promptly to authorize the intervention of the Assistant General Counsel for Aviation Enforcement and Proceedings in the proposed discussions amongst the applicant carriers.

Counsel: Sher Blackwell, Mark Atwood, 202 463-2513

2002/2003 Hong Kong Fifth-Freedom All-Cargo Frequency Proceeding

By motion dated December 24, 2002, Federal Express Corporation has asked to have the Department's Office of Aviation Enforcement and Proceedings facilitate discussions by the parties in an effort to develop a proposed allocation of Hong Kong 5th freedom frequencies. Atlas Air, Inc. hereby submits its answer to the FedEx motion. 

Counsel: Atlas, Russell Pommer, 202 354-3843

2002/2003 Hong Kong Fifth-Freedom All-Cargo Frequency Proceeding

Polar joins with the other applicants in seeking to reach a settlement of the issues in this proceeding without recourse to a carrier selection case. Such a result would benefit the applicants as well as DOT staff by avoiding the expanse and delay of such a proceeding. Moreover, any settlement proposed by the applicants would be subject to DOT approval, assuring that the settlement will be consistent with the public interest.

Counsel:  Polar and Wilmer Cutler, Jeffrey Manley, 202-663-6670

2002 Hong Kong Fifth Freedom All-Cargo Proceeding

By Order 2002-12-11, the Department instituted the 2002/2003 Hong Kong Fifth-Freedom All-Cargo Frequency Proceeding, Docket OST-2002-14049, and established a procedural schedule for the proceeding. In response to a request from a number of the applicants for additional time, the Department extended the original procedural schedule by a Notice, served on December 23, 2002. Under the revised procedural schedule Direct Exhibits are due January 28, 2003; Rebuttal Exhibits, February 14, 2003; and Briefs, February 28, 2003. 

By: Susan McDermott

2002-2003 Hong Kong Fifth-Freedom All-Cargo Frequency Proceeding

Russ, I noted that in acknowledging receipt of our Notice staying procedural dates in Docket OST-2002-14049, you added a thought that might be viewed as a substantive request. In this regard, I feel I should point out that if you indeed are requesting a modification of the instituting order, you will need to comply with 14 CFR 302.14. I am placing a copy of your email to me and my reply in the correspondence section of the docket.

Thanks, Linda. Now that procedural dates have been suspended, one thing The Department might consider addressing in its upcoming order is whether the forecast year for first-year proposals still should be CY 2003.

By: Linda Senese

Federal Express

By: Sally Coffin

By: Peter Sachse

Hong Kong Fifth-Freedom

By this order, we address various issues raised in three separate petitions for reconsideration to the instituting order, as well as a motion and related requests in the above-referenced proceeding. We deny the relief requested by Federal Express in its petition for reconsideration and request for decision by the Secretary of Order 2002-12-11 which instituted the proceeding. We deny the motion of Federal Express requesting the limited intervention of the Office of Aviation Enforcement and Proceedings, and also deny the requests for antitrust immunity in relation to the Federal Express motion. We grant the petitions of Federal Express and Polar Air Cargo concerning the evidence request, and, upon reconsideration, modify, in part, the evidentiary material to be filed by the applicants. We also establish revised procedural dates for processing this case.

In view of our decisions above, we are revising the remaining procedural schedule for this proceeding as follows: Direct Exhibits: March 21, 2003 Rebuttal Exhibits: April 4, 2003 Briefs: April 14, 2003

By: Read C. Van De Water

2002/2003 Hong Kong Fifth-Freedom All-Cargo Frequency Proceeding

Atlas Air, Inc. wishes to advise the Department and the parties that it is withdrawing its request for two Hong Kong fifth‑freedom all‑cargo frequencies in the captioned proceeding. Accordingly, Atlas will not be submitting direct exhibits, which are due today. The decision to withdraw was not an easy one. Because the overall demand for Hong Kong frequencies is quite high, Atlas has decided against making the expenditure of resources associated with its further participation in this proceeding and instead will focus on other commercial opportunities.

In its application for Hong Kong fifth-freedom rights in Docket OST-2002­13761, which has been consolidated into the above-referenced proceeding, Atlas also is seeking expanded U.S.-Hong Kong route authority to reflect the rights made available to all U.S. carriers under last Fall's U.S.-Hong Kong aviation agreement. Atlas is not withdrawing that portion of its request in Docket OST-2002-13761.

Counsel:  Atlas, Russell Pommer, 202-354-3843, rpommer@atlasair.com

Counsel:  Evergreen

Counsel:  Federal Express, Nancy Sparks

Counsel:  Sher & Blackwell, Mark Atwood

Counsel:  Megan Rae Rosia, 202-842-3193

Counsel:  Wilmer Cutler, Jeffery Manley, 202-663-6670, jeffrey.manley@wilmer.com 

By: Axel Frings

Counsel:  UPS and Kelley Drye, David Vaughan

The attached service list was inadvertently omitted from the letter transmitting Federal Express Corporation's direct exhibits in the 2002/2003 Hong Kong Fifth-Freedom All-Cargo Frequency Proceeding.

Counsel:  Federal Express, Melissa Paul, 901-434-8580

2002/2003 Hong Kong Fifth-Freedom All-Cargo Frequency Proceeding

On March 21, 2003, Federal Express Corporation submitted Direct Exhibits in the captioned proceeding. Upon review of those exhibits, we discovered that Exhibit FX-105 inadvertently contained schedules unrelated to this proceeding, and failed to include other schedules to accurately reflect our proposal. With this letter, we enclose revised pages for the entirety of Exhibit FX-105. The Department and parties should discard the whole of Exhibit FX-105 and replace it with Exhibit FX-1 05 (revised), enclosed with this letter.

Counsel: Federal Express, Bailey Leopard, 901-434-6664

2002 Hong Kong Fifth-Freedom All-Cargo Frequency Proceeding

Attached hereto please find corrected versions of the following Polar Air Cargo, Inc. ("Polar") direct exhibits:

PO-302 PO-303, pp. 1,2 PO-304

The corrections relate primarily to Polar's forecast market shares "without award." The "without award" market shares in the direct exhibits were erroneously based on Polar's current schedule, including services operated with the temporary award of fifth-freedom frequencies, rather than on Polar's proposed schedules without any of the requested fifth-freedom frequencies. Consequently, the direct exhibits showed Polar market shares "without award" in markets such as Manila and Penang that would not be served but for the anticipated award of the requested fifth-freedom frequencies. The primary effect of the corrections is to reduce Polar's "without award" market shares to zero in the affected markets.

The primary impact of these corrections has been on the market shares for Polar's services as they would have been without the award of Hong Kong fifth-freedom authority.

Counsel:  Wilmer Cutler, Jeffrey Manley, 202-663-6670, jmanley@wilmer.com

2002 Hong Kong Fifth-Freedom All-Cargo Frequency Proceeding

Enclosed herewith is a corrected Exhibit KA-301, to substitute for the Exhibit KA-301 that was filed in this Docket on March 21, 2003.

Upon reviewing its direct exhibits Kalitta Air noticed that it had incorrectly stated the amount of traffic that it forecast carrying in year two from Hong Kong to Europe via a connection to another aircraft in Dubai. The correct number should be 148,352 pounds per flight rather than the slightly higher number shown in the original page 2 of Exhibit KA-301; critical segment load factors west of Hong Kong drop slightly to reflect that reduction in forecast on-board loads. 

Counsel:  Sher & Blackwell, Mark Atwood, 202-463-2513

2002 Hong Kong Fifth-Freedom All-Cargo Frequency Proceeding

Counsel:  Evergreen

Counsel:  Federal Express, G. Bailey Leopard

Counsel:  Sher & Blackwell, Mark Atwood, 202-463-2513

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

Counsel: Northwest

Counsel: UPS and Kelley Drye, David Vaughan

2002 Hong Kong Fifth-Freedom All-Cargo Frequency Proceeding

Enclosed on behalf of Northwest Airlines, Inc. please find an original and five copies of Revised Rebuttal Exhibits NW-R-101 (Rev.), NW-R-104 (Rev.) and NW-RT-1 (Rev.) in the above­referenced proceeding. Copies of these Revised Rebuttal Exhibits have been served today by hand delivery or overnight mail on all parties to this proceeding. These revisions are necessary to take into account the expanded city cap applicable to Seoul, Korea in Year 2 of the MOU. The Rebuttal Exhibits distributed on April 4 relied on the Year One cap only. These corrections do not change any material conclusions contained in Northwest’s Rebuttal Exhibits or Testimony.

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

2002 Hong Kong Fifth-Freedom All-Cargo Frequency Proceeding

Hereby submits its brief in this proceeding, in which it has applied for a modest four (4) of the forty (40) Hong Kong fifth-freedom frequencies that are available, which Evergreen would use to inaugurate viable, effective, competitive new fifth-freedom services in the Cologne-Hong Kong, Singapore-Hong Kong, and Seoul-Hong Kong markets, as well as new service in the New York-Hong Kong market and in other en-route markets. As Evergreen has demonstrated in its exhibits and will amplify here, there are multiple pro-competitive reasons that justify an award to Evergreen of the four frequencies it seeks, which, among other benefits, will introduce important new competition in the U.S.-Hong Kong and third-country-Hong Kong markets; provide critical new service options for the shipping public; and further strengthen Evergreen as a viable competitive force to balance the dominance of the existing U.S.-Hong Kong fifth-freedom incumbents and other major U.S.-Asia and Europe-Asia carriers.

Counsel: Global Aviation, Jon Ash, 202-457-0212, jfa@ga2online.com 

Despite their protestations of being "all things to all shippers," it is apparent that neither of the express carriers is particularly interested in stimulating the low cost heavy freight market in Hong Kong or anywhere else. Indeed, if you asked someone to read their testimony and exhibits in this case without disclosing the name of the proceeding, they would assume that the Department is conducting The Intra-Asia Express Service Case. FedEx boasts that the entire amount of new U.S.-Hong Kong freight that it projects generating from a full 18 frequency award will be express (FX-RT-2, p.9) and even criticizes UPS for forecasting carrying some "general freight" with the new authority that it seeks.

Counsel:  Sher & Blackwell, Mark Atwood, 202-463-2513

It should be kept firmly in mind, however, that if no government interference in market entry and capacity decision-making is the ideal, then it necessarily follows that when governmental decision-making is unavoidable, less interference is always better than more. The closer the DOT can come to letting the invisible hand of the market make decisions, the better and more sound those decisions will be, and the closer the DOT will have come to achieving its fundamental policy objective, which is to let markets work. The approach Northwest has taken in its Direct and Rebuttal Exhibits is premised on advancing this core DOT objective. We believe that the unique attributes of this case - the number of opportunities available, the number of opportunities sought, and the statements of the applicants regarding their highest priorities - allows the DOT largely to replicate a market-based outcome and thus achieve its most important policy objective, at least insofar as the allocation of thirty-one of the forty frequencies is concerned.

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

The full value of fifth-freedom rights does not exist in isolation, confined solely to the two foreign points between which the carriage of traffic is permitted. Rather, the full value of fifth-freedom traffic rights is realized through the economic and competitive leverage the sound use of these rights provides to a carrier seeking to mount, sustain and increase underlying third- and fourth-freedom operations. Used in this manner, broad benefits flow both to the carrier and to the transportation consumers of the country conferring the rights, rather than accruing exclusively to the carrier exercising the rights. Applicants for Hong Kong fifth-freedom frequencies in this proceeding fall into two distinct categories. One is comprised of those applicants intent on enhancing already-significant fifth-freedom market participation and advantage, while proposing no new or meaningful increase in capacity between the U.S. and Asia. FedEx, UPS and Northwest fall into this category. The other category is comprised of carriers seeking to build new service to and from the U.S. through the economic and competitive benefits that flow from a grant of fifth-freedom traffic rights. Polar falls into this category.

Counsel: Wilmer Cutler, Jeffrey Manley, 202-663-6670, jmanley@wilmer.com 

As a longstanding proponent of a more open Hong Kong agreement, UPS respectfully submits that it can best utilize the fifth freedom opportunities offered by the new agreement. The grant of UPS' Application would do most to enhance competition and improve service by forging robust links between this critical Asian cargo market and the UPS all-points European and Asian hubs which form the backbone of UPS' worldwide network. While its competitors have enjoyed unique access to such large markets as Japan and China, UPS is eager to achieve meaningful access to Asia's largest cargo market, and market access equal to its global network rivals. The very nature of the new agreement-explicitly recognizing that once Hong Kong traffic transits its first "beyond point," a U.S. airline may carry that traffic anywhere in the world-underscores that this allocation proceeding must focus on building networks. Only through efficient global networks can these new "beyond" rights be most effectively used. The newly-available frequencies should accordingly be awarded to those carriers that can best use them for global distribution network operations, not merely point-to-point, stub-end transport. Aside from Federal Express, which is already the dominant U.S. incumbent carrier, UPS is the only applicant in this case with a true global cargo network. As such, UPS also presents the greatest competitive spur to the major market incumbents-including DHL, whose market share today dwarfs that of UPS.

Counsel: Kelley Drye, David Vaughan, 202-955-9864, dvaughan@kelleydrye.com

2002 Hong Kong Fifth-Freedom All-Cargo Frequency Proceeding

Supplemental Exhibits of Kalitta Air, which contain letters from Members of Congress in support of the application of Kalitta Air.

Counsel: Sher & Blackwell, Mark Atwood, 202-463-2513

April 30, 2003

OST-02-14049

Re: Letter from Federal Express Correcting the Record

FedEx Express has reviewed the briefs filed in this docket and wishes to correct the record in one respect: In its brief, Evergreen takes issue' with the portrayal of its financial condition in Exhibit FX-R-116. In regard to the stockholders' equity portion of the exhibit, FedEx Express should have removed the brackets (signifying negative numbers) from its source data. Evergreen's Form 41 reported stockholders' equity has been positive since 1995, as shown in its brief.

Exhibit FX-R-1 16 was intended to support the statement that during the nine years from 1993 through 2001, Evergreen reported net losses in seven of those years. This statement is, in fact, correct. The column title in the exhibit used the term "net operating profit/(loss)". Insertion of the word "operating" was in error.

Counsel: Federal Express, Nancy sparks, 202-756-2461

2002/2003 U.S.-Hong Kong Fifth-Freedom All-Cargo Frequency Proceeding

Issued and Served July 14, 2003

Order 03-7-17
OST-02-14049 - 2002 U.S.-Hong Kong Fifth-Freedom All-Cargo Frequency Proceeding

Order to Show Cause | Charts | Word

We tentatively believe that one of the most important uses of the new opportunities achieved by the MOU is the ability for U.S. carriers to link services to their regional hubs, thus enabling U.S. carriers to provide effective global operations and strengthening their networks and consequently providing greater shipping and competitive options for U.S. shippers worldwide. In these circumstances, we have tentatively decided to allocate frequencies to FedEx and UPS that will permit them to link their Asian and European hubs with Hong Kong. We tentatively conclude that allocating FedEx and UPS frequencies to provide effective daily service to both their hubs in Europe and in Asia is critical to our goal of improving service and competitive choices for U.S. shippers and strengthening the market structure for U.S. carrier services in fifth-freedom markets.

By: Susan McDermott

July 16, 2003

OST-02-14049

Correspondence of Stephen Roach

UPS fails on all criteria set forth by the U.S. Department of Transportation to distribute the fifth-frequencies to maximize their benefits to the U.S. public. UPS has unrelentlingly focused its energy on domestic ground and air carrier services while neglecting international opportunities. While domestic ground and air carrier services have subdued, UPS has applied for fifth-freedom rights as an afterthought and not a well planned attack on international air carrier service. UPS will only add excess capacity to alreadly well-served general air freight markets.

By: Stephen Roach

OST-02-14049 - Hong Kong Fifth Freedom All-Cargo Frequencies

July 28, 2003

Comments and Objections of Evergreen International Airlines

Evergreen is extremely disappointed by the Department's tentative decision to award to UPS all of the frequencies for Cologne - Hong Kong services that are available under the MOU, and respectfully objects to the proposed award. There is ample room in this proceeding to achieve a balanced award for Cologne rights through a split award to Evergreen and UPS, and a solid basis in the record for making such a choice, which offers by far the most pro-competitive benefits. The tentative decision, if finalized, would effectively preclude any competition in the Cologne - Hong Kong market for the foreseeable future. It would create a monopoly in the Cologne - Hong Kong fifth-freedom market and, combined with the Paris frequencies award to FedEx, an integrated/express carrier duopoly in the Europe - Hong Kong market.

By: Evergreen, Thomas Lydon, 202-466-2929, tom.lydon@evergreenaviation.com

July 28, 2003

Response of Federal Express to Order to Show Cause

FedEx Express agrees with the Department's tentative allocation of seven weekly frequencies (six in the First Year and one in the Second Year, as defined in the Order) to FedEx Express for its proposed Subic Bay services and of six weekly second-year frequencies for FedEx Express's proposed Paris services. As indicated by the Department in the Order, one of the most important uses of the opportunities provided by the 2002 Memorandum of Understanding between Hong Kong and the United States is "the ability for U.S. carriers to link services to their regional hubs, thus enabling U.S. carriers to provide effective global operations and strengthening their networks and consequently providing greater shipping and competitive options for U.S. shippers worldwide." Order at 7. The Department found that the ability to link hubs to beyond points with effective, daily express services is "critical to [the Department's] goal of improving service and competitive choices for U.S. shippers and strengthening the market structure for U.S. carrier services in fifth-freedom markets." Id. The Department's proposed allocation to FedEx Express is an essential and necessary product of the opportunities and goals identified by the Department.

Counsel: Fed Ex, G. Bailey Leopard, 901-434-6664, gbleopard@fedex.com

July 28, 2003

Objection of Kalitta Air to Order to Show Cause

White Kalitta Air received only four of the nine frequencies it requested in this Proceeding, the pattern of those awards will allow it to implement and sustain services of value to U.S. importers and exporters. Kalitta Air also believes that its performance with these new rights will provide compelling support for a future decision by the Department to allocate a portion of the remaining 16 frequencies to the carrier. As a consequence, Kalitta Air's objection here is very narrow in scope; it is designed only to preserve the Department's ability deploy those final 16 allocations in a manner that the Government determines best suits the public interest at that time.

Counsel: Sher Blackwell, Mark Atwood, 202-463-2513

July 28, 2003

Comments of Northwest to Order to Show Cause

Removing the blind sector restriction, and allowing Northwest, at long last, to carry local cargo on its existing flights not only will dramatically improve the efficiency of Northwest's operation, but also improve the operational efficiency of its overall Pacific cargo network. Finally, the Department seeks to promote new entry in the Hong Kong fifth freedom market. As the Department correctly recognizes, Northwest is a new entrant in the Hong Kong-Manila market, and should be selected for that additional reason as well. Order 2003-7-17 at 10 & n.46. In sum, the selection of Northwest to provide four fifth freedom all-cargo services between Manila and Hong Kong clearly advances all of the Department's public interest criteria.

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

July 28, 2003

Objections of Polar Air Cargo to Order 2003-7-17

Regrettably, the tentative decision in this proceeding does not accommodate Polar's pressing need for the fifth freedom Hong Kong rights in the India and Malaysia markets which are required to establish and sustain Polar's new round-the-world routings. Offering service on round-the-world routings are particularly important to U.S. shippers and consignees because such operations open up competing services to a variety of new on-line markets consistent with the rationale underlying the Department's other awards in this proceeding ("to promote greater competition, to improve U.S. carriers' overall route systems, and, most important, to provide more service options to shippers.") Order 2003-7-17 at 8. For instance, Polar's new round-the-world service via Hong Kong will offer U.S. shippers direct access to points in Asia via both transpacific and transatlantic routings. In addition, the round-the-world services will enable Polar to add Delhi to the points it already serves in India, creating on-line service to three of that country's top four cargo markets. Operation of these services via Hong Kong with the support of fifthfreedom traffic to/from that point also will help to assure the availability to U.S. shippers and consignees of more frequent services to, from and between a greater variety of points along the route in both directions.

Counsel: Jeffrey Manley, 202-663-6670, jmanley@wilmer.com

July 28, 2003

Response of United Parcel Service to Order to Show Cause

Significant benefits will flow from awarding UPS six weekly frequencies between Hong Kong and the DMIA Hub. Through its DMTA Hub, UPS provides its full array of cargo, express and logistics services to the spoke cities of Tokyo, Osaka, Taipei, Seoul, Beijing, Shanghai, Bangkok, Penang, Singapore, Mumbai, and Sydney. The importance of this network establishment is illustrated by the fact that, upon the opening of the DMIA Hub establishing UPS' intra-Asia network, UPS' traffic in the region more than doubled. The Department's decision to award these frequencies to UPS was clearly correct.

Counsel: Kelley Drye, David Vaughan, 202-955-9864, dvaughan@kelleydrye.com

July 29, 2003

OST-02-14049 - Hong Kong Fifth Freedom All-Cargo Frequencies

Certificate of Service submitted by Federal Express Corporation

Counsel: Thompson Coburn, Patricia Snyder, 202-585-6900

OST-02-14049

August 4, 2003

Answer of Evergreen International Airlines

Should the Department wish to reconsider its prior decision not to award backup authority in this proceeding, it would be left with the complex task of awarding such authority for all of the frequencies awarded, and not just those covered by FedEx's request, action that would cause further delay. The record in this proceeding lacks any information specifically designed to assist the Department in making such awards. In any event, any frequencies that become dormant should be made available to all applicants. See Order 96-10-2, U.S-Peru All-Cargo Service Proceeding, at 5, where the Department also had proposed not making backup awards ('No party opposed our proposal... and the public interest is best served by retaining flexibility in the event services are not operated. Should any of the carriers not implement service, we will determine appropriate procedures at that time to make full use of the frequencies").

Counsel: Evergreen, Thomas Lydon, 202-466-2929, tom.lydon@evergreenaviation.com

August 4, 2003

Reply of Federal Express Corporation

Files this response to the comments and objections filed by the parties relating to the Department's Order to Show Cause in this Hong Kong Fifth Freedom All-Cargo Frequency Proceeding. FedEx Express is not seeking any additional allocation or amendment to the proposed allocation in this proceeding. Instead, FedEx Express is requesting that it be awarded a back-up designation for frequencies to Seoul, Korea.' Additionally, FedEx Express is seeking clarification of the notice provisions relating to the cessation of operation of the pendente lite frequencies. Those two requests, as set forth in the Response of Federal Express Corporation to Order to Show Cause, are incorporated herein by reference.

Counel: Fed Ex, Nancy Sparks, 901-434-6664

August 4, 2003

Consolidated Answer of Kalitta Air to Comments and Objections to Order to Show Cause

Kalitta Air asks that the final order, at least with respect to the allocations it has tentatively received, not be delayed while the Department attempts to parse out the latest iteration of what it is that Polar/Atlas wants from this Proceeding. The carrier now wishes to shift the markets in which its tentative allocations can be used. Providing that the requested changes do not affect the tentative award to Kalitta Air or any other party, as the applicant contends, Kalitta Air does not oppose the relief requested. However, so as not to further delay a final order on Year One awards, Kalitta Air requests that the Polar/Atlas request be dealt with in a separate order.

Counsel: Sher Blackwell, Mark Atwood, 202-463-2513

August 4, 2003

Consolidated Answer of Polar Air Cargo

Collectively, the six responses to the show-cause order demonstrate the continuing strong demand for Hong Kong fifth freedom frequencies. Polar, for its part, will continue to use the Seoul-Hong Kong frequencies already assigned pendente lite and is eager to start the Delhi/Penang-Hong Kong service that the final order hopefully will allow. In this regard, Polar again notes the relative importance of the Deihi/Penang frequencies to which Polar assigned the highest priority of any service in Year Two of the allocation process.

Counsel: Wilmer Cutler, Jeffrey Manley, 202-663-6670, jmanley@wilmer.com

August 4, 2003

Answer of United Parcel Service

Evergreen's objections, if heeded, would block UPS from establishing a critical link between Hong Kong and its European hub at Cologne. Only six total frequencies are available, and Evergreen is requesting two. Additionally, Kalitta has asked that the Department grant UPS only three permanent and two pendent lite allocations to Dubai. The objections of Evergreen and Kalitta should be denied because both are proposing point-to-point, stub-end services for general air freight only, as opposed to the full network pattern of UPS' operations serving both the general air freight and the important door-to-door fully-integrated express market.

Counsel: Kelley Drye, David Vaughan, 202-955-9864, dvaughan@kelleydrye.com

OST-02-14049

August 6, 2003

Motion for Leave to File an Otherwise Unauthorized Document and Rejoinder of Polar Air Cargo

Evergreen has failed to express even a remote desire for Delhi and/or Penang frequencies. Its presentation in this proceeding was confined to supporting its request for two Seoul frequencies in Year One and two Cologne frequencies via Singapore in Year Two. Evergreen never indicated an interest in Hong Kong fifth freedom rights in either the India or Malaysia markets despite applications of Polar as well as three other carriers for authority to serve one or both of those countries. Indeed, Evergreen's Cologne-Singapore-Hong Kong service proposal contemplated a Mumbai, India stop without Hong Kong fifth freedom rights.

Counsel: Wilmer Cutler, Jeffrey Manley, 202-663-6670, jmanley@wilmer.com

August 6, 2003

Response of Kalitta Air to Answer of United Parcel Service and Motion to File an Otherwise Unauthorized Document

Kalitta Airis very reluctant to take action which might delay a final decision in this Proceeding. However, in its Answer to Kalitta Air's request that two of the five permanent Dubai city allocations to UPS be made temporary in nature pending the final round of frequency allocations, UPS mischaracterized both the evidence and its own service proposal with respect to Dubai. Because of the potential importance of Dubai to Kalitta Air's long-term expansion, the carrier hereby requests that the Department grant it leave to clarify the record by filing this otherwise unauthorized Response to Answer of United Parcel Service Co.

Counsel: Sher Blackwell, Mark Atwood, 202-463-2513

August 12, 2003

OST-02-14049

Motion to Strike of Evergreen

Polar Air Cargo, Inc. filed a "motion for leave to file and rejoinder" in this docket on August 6, 2003, responding to the August 4, 2003 answer of Evergreen International Airlines, Inc.. Polar's pleading was not authorized by the Order to Show Cause (Order 2003-7-17), and Polar has failed either to allege or to show good cause for the filing of an unauthorized document pursuant to 14 C.F.R. § 302.6(c). Based on Polar's violation of the Department's procedural rules, Evergreen respectfully moves pursuant to 14 C.F.R. § 302.3(d)(2) and 14 C.F.R.302.11 (a) that the Department strike Polar's pleading from the docket.

As the Department knows all too well, in every proceeding there must be an endpoint to responsive pleadings. To that end, when the Department issued an order to show cause in this proceeding, it specifically provided for objections and answers thereto, and for no further pleadings. By its Rejoinder, Polar has in effect requested that the Department now override its procedural plan and allow Polar to have the last bite at the apple. Polar's actions are wholly inappropriate in several respects: first, Polar waits until the eleventh hour, after the filing of exhibits and briefs, to modify its service proposal, a proposal that has been on record in this case for nearly five months. Then, in its unauthorized Rejoinder, Polar presents no new factual or legal arguments in response to Evergreen's objections to that change. Finally, Polar uses an unauthorized filing to make allegations concerning Evergreen that are new and have absolutely no foundation, and to which Evergreen has no opportunity to respond under the procedural rules established for this proceeding. Polar argues, for example, that Evergreen has no interest in India or Malaysia frequencies, when there is no basis for making such a claim. Contrary to the approach taken by several of the applicants, Evergreen submitted a frequency request tailored specifically to, and based on a realistic assessment of, its current needs and goals, rather than greedily requesting more frequencies than it believed it could implement at this time. This approach in no way delineates Evergreen's long term goals and interests in the Hong Kong fifth-freedom markets, which are both serious and extensive, and will be addressed in the next frequency allocation proceeding.

By: Evergreen, Thomas Lydon, 202-466-2929, tom.lydon@evergreenaviation.com

August 13, 2003

Motion for Leave to File an Otherwise Unauthorized Document and Surreply of Northwest Airlines | Word

Hereby responds to the request by Federal Express Corporation that it be allocated backup authority in the Department’s Final Order in this proceeding, and requests leave to file this otherwise unauthorized document pursuant to 14 C.F.R. § 302.6(c). The Department explicitly stated in the Order instituting this proceeding that “we will not place at issue the selection of backup carriers for these frequencies” (Order 2002-12-11 at 4). To the extent the Department is inclined to entertain the request by Federal Express for backup authority at this late stage of the proceeding, the Department should reopen the record and permit all carriers to submit proposals for backup authority.

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

OST-02-14049

August 15, 2003

Answer of Polar Air Cargo to Evergreen's Motion to Strike

Evergreen wrongly asserts that Polar has failed to make the good-cause showing required by 14 C.F.R. §302.6(c). As Polar explained in its Motion and Rejoinder, Evergreen's answer of August 4, 2003, had misconstrued Polar's show-cause objection and claimed prejudicial impact where none exists. Polar moved for leave to file a responsive pleading in order to clarify its position in light of Evergreen's answer. The Department characteristically grants motions for leave to file otherwise unauthorized documents submitted for that purpose and Polar respectfully requested the Department provide the same relief in that instance.

Evergreen uses its motion primarily to reinforce its own previously expressed opposition to Polar's request for three Delhi/Penang frequencies in lieu of the three Manila frequencies tentatively allocated to Polar by the Department. Yet, Evergreen offers arguments with little relevance to its request to strike Polar's Motion and Rejoinder. No constructive purpose would be served by granting Evergreen's motion to strike. On the contrary, if Evergreen's view prevailed, an assessment of Polar's objection and standing request for reconsideration of its tentative award in this proceeding would be, without the benefit of clarification, prejudiced.

Counsel: Wilmer Cutler, Jeffrey Manley, 202-663-6670, jmanley@wilmer.com