BTS-2004-19380 - Confidential Treatment of Form 41, Schedules B7 and B43

September 14, 2004

Re: Position Statement of United Parcel Service Regarding the Confidential Treatment of Form 41, Schedules B7 and B43 Pertaining to Aircraft and Engine Cost Data

UPS objects to the release of these data and requests that the Department extend confidentiality period indefinitely or, at a minimum, for another ten (10) years. At the time the Department initially granted confidential treatment for a period of ten (10) years, UPS was uncertain whether that length of time would be adequate; however, upon reviewing the situation as it currently exists, UPS is convinced that the release of these data, even though ten years old, would cause UPS substantial injury because the data remain commercially sensitive. Withholding the data from public disclosure is also consistent with the Freedom of Information Act (5 U.S.C. 552) and the precedent thereunder.

The information for which UPS seeks further protections consists of cost and cost-related data pertaining to airframe and aircraft engine acquisitions, inventory and retirement. Data regarding these costs are a major portion of an air carriers' business expenses and, as such, the data is treated by a carrier in the most restrictive and sensitive manner.

Counsel: Kelley Drye, David Vaughan, 202-855-9600

OST-95-675 - Confidential Treatment Under Section 302.39 (Form 41)
BTS-2004-19380 - Confidential Treatment of Form 41, Schedules B7 and B43

September 23, 2004

Motion for an Extension of Confidentiality Period

Hereby requests the Department grant United an extension, until December 31, 2006, of the confidentiality period granted (or previously requested) with respect to certain airframe and aircraft engine cost data reported in (a) our annual Form 41 Schedules B-43 for the years 1992 through 1996, and (b) our quarterly Form 41 Schedules B-7 for the quarters ended December 31, 1992 through December 31, 1996.

The information for which this confidentiality extension is sought detail United's acquisition cost and sales realization amounts with respect to new and used aircraft and aircraft engines, each broken down by model, individual serial number, and individual purchase or sale prices for the period 1992-96. This information is substantially similar to and consistent with other aircraft/engine price information for which United continued to consistently seek confidentiality after 1996 up to the present. Most of the confidential price information relates to acquisitions made under Boeing and Airbus aircraft acquisition agreements whose delivery dates began in the early 1990's and extended up to the present. As a result, our 747s delivered in 1994, for example, have aircraft/engine prices which are the same as the prices of the later delivered 747s, except for some minor changes due to price escalation provisions and any minor configuration changes. Therefore, the disclosure of the aircraft/engine price information for 1992-96 would result in the effective disclosure of the similar price information relating to the later filed years.

Counsel: United, David Olaussen, 847-700-6169

BTS-2004-19380 - Confidential Treatment of Form 41, Schedules B7 and B43

October 25, 2004

Request for Public Comments on 14 CFR Part 241 Reporting Requirements

Pursuant to the Department’s regulations, certain air carriers are required to file BTS Form 41 Schedule B–7 (Airframe and Aircraft Engine Acquisitions and Retirements) and Form 41 Schedule B–43 (Inventory of Airframes and Aircraft Engines). Under the Department’s regulations, the Department can withhold confidential business information if release of the confidential information is likely to cause substantial competitive harm to the entity that submitted the information. Based on the sensitive nature of this cost data, carriers have filed motions for confidential treatment and BTS has routinely granted confidential treatment for a ten-year period. After receiving notification that, upon the expiration of the ten-year confidentiality period, the BTS intended to release the cost data, the United Parcel Service Co. (UPS) and United Air Lines, Inc. (United) filed objections to the pending release. Both UPS and United claimed that the cost data, although ten years old, are still so sensitive that their release would result in competitive harm.

By: Don Bright

BTS-2004-19380 - Confidential Treatment of Form 41, Schedules B7 and B43

November 19, 2004

Comments of Morten Beyer & Agnew

The value of current airline fleets in the USA today is some $100.0 billion and tranches of public securities covering these fleets is a major part of this sum. Aircraft values have declined sharply due to the current problems of the industry and it is of vital importance to have accurate appraisals in order to protect airlines and investors. Experience indicates that current professional appraisers valuations of new aircraft vary by 10% to 20 %, or tens of millions of dollars for a modern jet transport. Valuation variance for older used aircraft varies by up to 50% between appraisers for the same aircraft.

By: Morten Beyer

BTS-2004-19380 - Confidential Treatment of Form 41, Schedules B7 and B43

December 3, 2004

Comments of Jack B. Feir & Associates

You have asked for public comments on the merits of the UPS and United Airlines objections to the release often‑year‑old aircraft and engine cost data submitted on Form 41, Schedules B‑7 and B‑43. In brief, I believe that their objections are without merit. Their objections, including those referring to confidentiality provisions of the SEC, were already examined at length by the DOT and rejected several years ago (Federal Register of 01/04/1993). I also believe that withholding access to the information contained in those schedules is contrary to the best interests of the airline industry. Further, I believe it would be in the best interests of the industry if the ten‑year confidentiality period were greatly shortened or eliminated altogether, returning us to the relatively transparent reporting process that the industry had previously observed for several decades prior to the early 1990s.

By: Jack Feir

BTS-2004-19380 - Confidential Treatment of Form 41, Schedules B7 and B43

December 14, 2004

Comments of AVMARK

The lack of valid data on aircraft and engine values is actually damaging the aviation industry. Two factors affect aircraft values: first, its ability to generate revenue for the operator, second, is market conditions. In the first case, the "inherent earnings power" will determine the "value" of the aircraft while market conditions will determine the "price" it sells for. Market conditions are highly cyclical so market prices can change dramatically in a short period of time. This was clearly seen after 9/11.

AVMARK understands that some airlines feel that what they pay for aircraft is a competitive issue. However, it is common knowledge that large carriers who purchase large number of aircraft will pay less per plane than small, one‑off deals. Further, there is more to competition than just the price of aircraft. Other sensitive competitive issues include fuel prices, wages, financial arrangements, fares and yields‑‑‑all of which are publicly available.

By: Barbara Beyer

December 16, 2004

Re: Comments of Boeing

The intricacies of transactions between manufacturers of large aircraft and their customers are among the most sensitive in the business world of product sales, given their sheer size and the competitiveness of the business. The large airplane market is a global one, and total public disclosure of all the intricacies of purchases in one part of that market (the large U.S. airlines) would very much distort the overall global marketplace and harm U.S. manufacturing interests. Global airline competition (a policy cornerstone for U.S. aircraft manufacturing success) would also be harmed, because U.S. airlines would be directly harmed without their foreign competitors being required to make similar data submissions.

Purchasers of aircraft are perfectly capable of determining what is in their best interests without public disclosure of confidential data submitted by the airlines to the U.S. Government. Our experience is that aircraft purchasers operate with an extraordinarily high degree of information about other transactions and what is going on in the market at any given moment, without the data that is submitted to DOT for economic policy analysis being made public.

If the detailed aircraft transaction data, submitted in conjunction with Form 41, were publicly disclosed, there would certainly be those who would misuse, misinterpret, or misconstrue the data, or even deliberately distort it to gain advantage. The public would not be served by this. The public is already very well served in this area by an aggressive global press which routinely reports the elements of transactions that are of interest to the public based on sources of information other than that submitted to the government for the purpose of detailed policy analysis.

By: John Judy

December 22, 2004

Comments of Pratt & Whitney

Pratt & Whitney concurs with the claims made by both UPS and United in their letters to the DOT. In addition, contracts for the acquisition and support of Pratt & Whitney Engines by either a US or foreign airline are specific to the transacting airline, its unique operation and the type of transaction. In many cases, the contract may be an extension of a contract already in existence between Pratt & Whitney and the airline for more than ten years and may be extended for many more years.

The submission of confidential data to the DOT is primarily to allow DOT to make policy decisions. The rationale for the confidentiality of this data for the past 10 years has not changed. Making such data public serves no overriding public interest but could result in misinterpretation and possible misuse of such data.

By: Pratt & Whitney, Richard Fair

December 23, 2004

Re: Comments of Ariel Aviation

The denial to the marketplace of the Forms 41 aircraft and engine transaction data has, in particular, placed the providers of debt in an unnecessarily vulnerable position. The principal players in, for example, a new an aircraft financing include: the manufacturer, the airline, the financing arranger, the tax attorneys, the aircraft appraiser and the debt provider.

During the past ten years investors in commercial aircraft and engine debt have all too frequently become the equity in deals as airlines have failed financially and equity positions wiped out. Debt has lost enormous amounts on investments that were considered relative secure. Ten years ago there were many commercial aircraft and engine debt participants. Today it is a brave banker who will take a proposed aircraft debt transaction to his or her investment committee. The exodus of many debt participants from the commercial aircraft and engine financing market is completely understandable.

By: Neil Whitehouse

December 26, 2004

Re: Comments of Aircraft Information Services | Word

The ten year blackout of the Form 41 Schedule B‑7 and Schedule B‑43 data for most major airlines has done a disservice to the entire industry, even to the misguided airlines originally requesting the blackout. The blackout has deprived us of a major portion of real transaction data upon which the accuracy of our opinions depend.

While we have expanded efforts to develop alternative data sources, we as a group have not really found a satisfactory replacement for the Form 41 data, which once provided an estimated 4 times the data we can now reliably access. A further problem is the fact that the lost Form 41 data was reported with a known and consistent methodology that gave a level of comfort in its accuracy. No other source provides such a level of comfort.

By: Fred Bearden

December 17, 2004

Re: Comments of BK Associates

We used the B‑7 and B‑43 schedules from 1971 until the loss of access to data in early 1993 We looked forward to the quarterly release of the data and relied upon it as an essential ingredient of our methodology. In appraising the current market value of an aircraft the most reliable methodology is based on recent sales of comparable aircraft. Financial institutions, lenders and investors rely on accurate, credible appraisals to insure they are making an informed decision. In other industries, such as in real estate, recent sales of neighboring properties are usually public information. The mortgage holder has confidence that the property has sufficient value to cover his investment.

By: John Keitz

December 23, 2004

Re: Comments of Gueric J. Dechavanne

For those who are willing to provide capital, they often refer to appraisers, such as BACK Aviation Solutions, to provide them with accurate and comprehensive data on aircraft values and market conditions. In order for appraisers to compile this information, there is a need to have as much cost data as possible. Releasing the cost data will reinforce the opinions that appraisers have given over the past ten years, making investors feel more confident about the accuracy of the data they were given. This, in turn, will allow investors to continue to provide capital to the Airlines and potentially bring new investors to the market.

The release of the cost data by the BTS is something that must be done to insure the continued growth of the airline industry. It will make investors feel more confident about the information they are given about the marketplace which in turn will give the Airlines the much needed capital to continue with their plans to provide lift for the ever growing flying public.

By: Gueric J. Dechavanne

December 27, 2004

Re: Comments of ACI Aviation Consulting

The information contained in the old schedules should be immediately released as it is in the best interest of the airline industry. Any assertion by UPS, United Airlines or any other airline that ten year old cost data would cause them harm is not accurate and not consistent with the dynamics of market change over one year not to mention a ten year period. ACI believes that the ten year confidentially period should be eliminated and the reports should be made immediately available once filed.

By: Quentin Brasie

December 27, 2004

Re: Comments of the Air Transport Association

ATA respectfully requests that the Bureau amend the filing requirements of 14 C.F.R. § 241.23 to exclude the cost elements contained in Schedules B‑7 and B‑43. We believe, in today's deregulated environment, that the requirement to submit this data has outlived its utility. Unless the Department uses the data to support departmental programs (and we ask that the Department identify any such programs if it does), we request that the Department release air carriers from the obligation to provide such information. Even if the Department uses the information to support a departmental program, we believe we could provide the data in an alternative form without diminishing its usefulness to the Department.

By: Sophy Chen

BTS-2004-19380 - Confidential Treatment of Form 41, Schedules B7 and B43

December 28, 2004

Re: Comments of Vx Capital Partners Letter in Support of the Release of Aircraft Price Information

I am writing in support of the proposal to release aircraft price information. As an investor in commercial aircraft over the past 16 years, I and my colleagues have suffered from the lack of transparency regarding the aircraft prices. I believe much of the volatility in the aircraft leasing industry over the business cycle can be attributed to this lack of transparency. It is a well established fact that investors pay too much and backers lend too much due to inaccurate estimates of market prices. Please help to damper the volatility in our industry by publishing the data.

By: Robert Brown

BTS-2004-19380 - Confidential Treatment of Form 41, Schedules B7 and B43

January 10, 2005

Re: Further Comments of Jack B. Feir & Associates

When this issue was previously open for public comment in the early 1990s, the Department observed that none of the respondents then had produced evidence of previous harm. That is still the case. None of the current responses favoring confidentiality pointed to examples of any previous harm during the decades when such data had been routinely released. Nor did they cite cases of competitive imbalance since then when certain carriers continued to allow release of their data while others requested theirs to be withheld. UPS, for example, did not say how they enjoyed any competitive advantage over Federal Express during the early 1990s when UPS's data was withheld while FedEx's was publicly available. Equally, FedEx did not respond to the current request for comments with examples of how they were harmed during that period. The truth is that we have had a real-world experiment of several preceding decades when data was released and the most recent decade when some of it was withheld, but no‑one claims to have been a loser on that account (or a winner, for that matter) during either period.

By: Jack Feir

BTS-2004-19380 - Confidential Treatment of Form 41, Schedules B7 and B43

January 25, 2005

Re: Comments of The Air Transport Association

These supplemental comments respond to the letter from Jack B. Feir & Associates, which attempts to rebut arguments ATA and other respondents have made in support of the Department's either relieving carriers from the obligation to file Form 41 Schedules B‑7 and B‑43 or extending indefinitely the period during which the data are withheld from public disclosure.

Nothing in the JFA Letter provides a cognizable or persuasive reason for DOT to release to the public data from Schedules B-7 and B-43. Rather, unless the Department can identify a legitimate public interest in continuing to collect such data and explain why the public should have access to such data, the Department should relieve carriers from the obligation to file these schedules or, alternatively, withhold the schedules from public disclosure indefinitely.

By: Sophy Chen, 202-626-4177, schen@airlines.org