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OST-2004-18469 - New US-China Route Opportunities - Combination
Agreement Between the United States of America and the People's Republic of China
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New Route Opportunities (U.S.-China) OST-04-18468 - 2004 Cargo Designation and 2004/2005 All-Cargo Frequencies
Served June 21, 2004 Notice of New Route Opportunities | Word The United States and the People's Republic of China initialed, on June 18, 2004, a protocol amending the U.S.-PRC aviation agreement. The amended agreement will greatly expand the opportunities for the air carriers of both countries. These opportunities are increased progressively through 2010. Some of the new U.S. carrier rights can be implemented as early as August 1, 2004. To permit us to begin processing requests to take advantage of these new opportunities as soon as possible, we are by this Notice calling for applications for certain of the newly available rights, as set forth below. We intend to address other rights available under the new agreement by subsequent separate action. By: Paul Gretch
Served June 21, 2004 Notice of New Route Opportunities - Corrected Copy | Word *To reflect that applications are due 7 calendar days from the service date of this notice rather than 7 days as reflected in the original served notice. By: Paul Gretch OST-04-18469 - 2004 Combination Frequencies June 22, 2004 Objections of American Airlines to Notice Inviting Applications American urgently requests that the Department incorporate the frequency applications by Northwest and United into the upcoming carrier selection case for 2005/ 2006 designations, and allow new entrant applicants to vie for these 14 frequencies as well. In that way, the Department can consider proposals by new entrants to operate more than daily service, and can engage in a comparative route proceeding that takes into account the previous actions by United in failing to live up to its promise to serve the important Chicago‑Shanghai market. The Department should also immediately address the issue of the scope of authority to be awarded under the protocol. All carriers (incumbents Northwest/United and new entrants alike) should have the flexibility to use their authority to serve any U.S.-China markets as competitive conditions warrant. American raised this issue in the 2001 proceeding by applying for broad U.S. -China authority. (OST-99-6323) Counsel: American, Carl Nelson, 202-496-5647, carl.nelson@aa.com June 28, 2004 Reply of Hawaiian Airlines to Objections of American Airlines to Notice Inviting Applications Hawaiian believes that the Department must proceed in a manner that provides the greatest opportunity to the US aviation industry, maximizing opportunities to the United States and those carriers that are selected to provide this valuable service. To that end, Hawaiian believes that the Department should provide at least three separate proceedings to select designated carriers, one addressing the 2004 designation, one addressing the 2005 and 2006 opportunities and one addressing the 2008 and 2010 designations. American's Objection correctly points out that the frequencies available as of August 2004 are for carrier's designated as of that date. The United States may designate an additional carrier as of that date, so there is no reason why a carrier designated as of that date should not have an opportunity to utilize those frequencies becoming available as of that date. However, determinations as to carrier's to be designated as of 2004 should be distinct from designated carriers for 2005 and 2006 and those to be designated for 2008 and 2010. Each grouping should be addressed separately. To lump some or all together into one proceeding, addressing all opportunities, would not allow the Department and prospective designees to assess developments in China and the world that so directly effect airline industry and that will impact carriers' and the Department's decision making process. Counsel: Dow Lohnes, Jonathan Hill
June 28, 2004 Application of Northwest Airlines Submits this application for an allocation of seven of the 14 combination service frequencies made available to U.S. carriers as of August 1, 2004, pursuant to the U.S.-China Memorandum of Consultations of June 18, 2004. As i explained below, Northwest intends to use the seven requested frequencies to provide roundtrip service between Detroit and Guangzhou, via Tokyo. Northwest requests seven of these 14 frequencies in order to provide new daily roundtrip service between Detroit and Guangzhou, vi Tokyo. For this service, Northwest will use B-747-400 and B-757-200 aircraft currently in Northwest’s fleet. Northwest plans to operate this service as soon as possible, on a year-round basis, and, in any event, within 90 days after the frequencies become available. Counsel: Northwest, Megan Rae Rosia, 202-842-3193, megan.rosia@nwa.com
June 28, 2004 Application of United Air Lines United requests that the Department allocate these seven weekly frequencies for an indefinite period, subject to the usual conditions. United also urges the Department to allocate the frequencies as soon as possible in circumstances where current load factors on its daily nonstop San Francisco‑Shanghai flight for the last three months (March‑May 2004) averaged 91%. Load factors at these levels demonstrate that demand far exceeds supply. United needs to start making operational preparations for its new services immediately. Nonstop Shanghai service from Chicago, United's largest hub, would provide online service to points throughout United's network and maximize the public benefit of these valuable frequencies. Counsel: Wilmer Cutler, Jeffrey Manley, 202-663-6670, jeffrey.manley@wilmerhale.com July 1, 2004 Northwest Airlines, Inc. hereby answers the Objection of American Airlines, Inc. to the Department’s Notice dated June 21, 2004, inviting applications for 14 U.S.-China combination frequencies available for service by designated U.S. airlines effective August 1, 2004. As is described more fully below, the Department’s allocation of these 14 combination frequencies does not require a comparative selection proceeding under Ashbacker. American’s Objection lacks merit and should be rejected. American contends that all carriers whether currently designated or not should be invited to submit applications for the 14 frequencies available August 1, 2004 and, assuming the frequencies are oversubscribed, the Department should institute a comparative selection proceeding where, presumably, the ultimate outcome could be that none of the immediately available frequencies would be operated before March 25, 2005, perhaps later. American's request is legally unfounded and bad policy. Counsel: Northwest, Megan Rae Rosia, 202-842-3193, megan.rosia@nwa.com
July 1, 2004 American is not designated to operate U.S.‑China combination services and it is unclear when it may be designated. American is not, therefore, in a position to use currently any of the 14 frequencies at issue in this case and consequently has not been invited to apply for an allocation of those frequencies. Indeed, the Department could not make a lawfully exercisable award of any frequencies to American at present because American lacks the designation that is a legal prerequisite for using those frequencies. By contrast, United and Northwest are eligible to use these frequencies and, consistent with the terms of the Department's Notice, have each filed a timely application for seven of the 14 available frequencies. United proposes to use the seven frequencies for which it has applied to introduce daily nonstop roundtrip service between Chicago and Shanghai, effective with the start of the next scheduling season, which is the earliest date United can obtain the slots it needs to start additional service at Shanghai. Counsel: United and Wilmer Cutler, Jeffrey Manley July 6, 2004 American opposes the applications submitted by Northwest and United. American urges the Department to incorporate the Northwest/United frequency applications into the upcoming carrier selection proceeding for the 2005 designation, and allow new entrant applicants to vie for these 14 frequencies as well. In that way, the Department can consider proposals by new entrants to operate more than daily service, and engage in a comparative evaluation that, among other things, takes into account United's failure to live up to its promise to serve the Chicago‑Shanghai market in 2001, as well as the fact that Northwest would continue to operate all of its U.S.‑China combination service via Tokyo. Counsel: American, Carl Nelson, 202-496-5647, carl.nelson@aa.com
July 6, 2004 Based on the applications submitted by Northwest and United, the frequencies available August 1, 2004 are not oversubscribed. Thus, a comparative selection proceeding is unnecessary for the allocation of these frequencies. Moreover, the expedited allocation of these frequencies would be in the public interest as it would permit maximum advance time to market and prepare for the introduction of the service. Northwest proposes to begin daily roundtrip service between Detroit and Guangzhou, via Tokyo, as soon as possible and, in any event, within 90 days after the frequencies become available. United proposes to begin daily roundtrip service between Chicago and Shanghai on October 31, 2004. Counsel: Northwest, Megan Rae Rosia, 202-842-3193, megan.rosia@nwa.com
July 6, 2004 United and Northwest were the only carriers to file applications by the Department's June 28, 2004 deadline. Because the combined total number of frequencies requested by United and Northwest is exactly 14, there is no mutual exclusivity between their respective frequency requests and the Department may grant each application without prejudice to the other. Therefore, United strongly urges the Department to grant its application on an expedited basis and has no objection to the Department's approval of Northwest's application as long as such approval would not delay prompt approval of United's application. United also reaffirms its request that the Department grant its application on an indefinite basis, subject to the usual conditions. Prompt approval of United's application is important because United would like to commence making operational preparations for its new Chicago-Shanghai service as soon as possible. Counsel: United and Wilmer Cutler, Jeffrey Manley, 202-663-6670, jeffrey.manley@wilmerhale.com July 8, 2004 Reply of American Airlines to Answers of Northwest and United Northwest and United assert that since 14 U.S. –China combination frequencies are at issue, and each has applied for only seven, the matter is uncontested, and the Department should issue the authority they have requested without further procedures. That would certainly be a cozy outcome ‑ cozy, that is, for the continued dominance of the two entrenched U.S. passenger carriers serving China. But such an outcome would not be beneficial for the public interest in increased competition and improved market structure, or for the traveling public, or for potential U.S. gateways and the behind cities they serve, or for new entrant aspirants. The reason that Northwest and United were the only two applicants is because the Department's notice stated that only Northwest and United could apply. But as American said in its objections submitted on June 22, 2004, the Department has prejudged whether the public interest would be better served by awarding some or all of these 14 frequencies to a new entrant rather than reserving them exclusively for Northwest (which already operates 16 U.S.-China frequencies) and United (which already operates 21). Contrary to the Northwest/United answers, this matter is very much contested. Counsel: American, Carl Nelson, 202-496-5647, carl.nelson@aa.com
July 8, 2004 Motion for Leave to File and Reply of Northwest Airlines Other than Northwest and United, only one carrier has filed pleadings in this docket, American. Of course, American did not file an application, nor could it have done so. Rather, American’s filings have been solely gauged at delaying the only action possible by the Department under the terms of the U.S.-China Protocol. Having attended all of the negotiations leading up to the Protocol, surely American understands that only currently designated carriers were intended to be eligible for the 14 frequencies available August 1, 2004, and additional frequencies and designations are available beginning March 25, 2005 through 2010. Indeed, the basic terms of the Protocol involving new designations and frequencies were agreed to in principle by U.S. and Chinese negotiators many weeks before the Protocol was even initialed. At bottom, American apparently is dissatisfied with the landmark agreement that U.S. and Chinese government officials successfully negotiated. American’s criticisms are unfounded, and in any event untimely. There is no Ashbacker issue, and American knows it. Counsel: Northwest, Megan Rae Rosia, 202-842-3193, megan.rosia@nwa.com
July 8, 2004 American's token attempt at rebuttal on the Ashbacker issue was an unsuccessful effort to distinguish a DOT order interpreting Ashbacker cited by Northwest. In fact, that order is apposite, despite American's attempts at obfuscation by selective quotation. In that case, the Department approved the application of Northwest, which held the requisite designation under the applicable bilateral agreement, for new authority to operate Los Angeles-Sydney service over the Ashbacker-based objections of Delta, which was not designated at that time. At the time of the award, the U.S./Australia bilateral agreement precluded designation of additional carriers such as Delta, and the Department reasoned that Delta's Ashbacker arguments were therefore without merit. In the same way here, because American cannot be designated under the U.S.-China agreement and cannot use the 2004 frequencies for which United and Northwest have applied, American has no Ashbacker rights for a simultaneous consideration of its application. The language quoted by American out of context merely refers to the fact that an amendment to the U.S./Australia agreement would eliminate the designation restrictions that precluded Delta's application and that such an application would not be barred in the future once that amendment took effect. In the same way here, once the additional designation becomes available under the U.S.-China agreement, an application from American may be heard. But until then, just as in the 1991 case cited by Northwest, the provisions of the applicable bilateral agreement preclude the grant of American's application and that, in turn, renders invalid American's Ashbacker claim. Counsel: United and Wilmer Cutler, Jeffrey Manley, 202-663-6670, jeffrey.manley@wilmerhale.com New Route Opportunities (U.S.-China) Order 04-07-23 Issued and Served July 23, 2004 By this Order we allocate seven weekly frequencies to Northwest Airlines, Inc. and seven weekly frequencies to United Air Lines, Inc. for combination services in the U.S.-China market. We have examined American's Ashbacker argument and concluded that the Ashbacker doctrine does not apply to the facts of this proceeding. There is no "mutual exclusivity" because Northwest and United are the only designated carriers who have filed applications for the 14 frequencies available in this proceeding. Under the Protocol, only designated airlines are entitled to operate the weekly frequencies for combination services effective August 1, 2004. American is not "similarly situated" since it is not a designated carrier and is, therefore, not eligible for the 14 frequencies available August 1, 2004. Indeed, United correctly points out that American has not indicated any interest in using more than the seven frequencies available March 25, 2005, and no other carrier has applied for the combination service frequencies for use in 2005. The immediate award of the 2004 frequencies will not preclude American from applying for the additional seven frequencies available in the 2005 proceeding. Beyond the Ashbacker issue, as a policy matter we give great weight to the fact that the new U.S.-China agreement, with its carefully phased structure for the introduction of new frequencies and designations, expressly provides for 14 new U.S. combination frequencies effective August 1, 2004. These are valuable rights, and it is longstanding Department policy to maximize the timely use of bargained‑for rights in limited entry markets. American has presented no persuasive reason for us not to follow that policy here. By: Karan Bhatia |
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