OST-2004-19077 - 2005/2006 US-China Air Services Case and Designations

We invite all U.S. carriers interested in providing scheduled combination and/or all-cargo service between the U.S. and China to submit applications for certificate authority as well as for frequencies to perform such scheduled service. To the extent that carriers require new certificate authority to implement their proposed service, we will award the U.S.-China route authority at issue in the form of temporary, experimental certificates of public convenience and necessity under 49 U.S.C. section 41102(c). The duration of the authority will be five years for the primary carrier and one year for the backup carrier (should one be selected), unless the latter authority is activated during that time, in which case it will continue in effect for five years.

Footnote 3 on page 3 of the Appendix should read: The base year for traffic forecasting purposes should be the 12 months ended March 2004, instead of December 2004.

Further, we clarify that the due date for Carrier Information Responses is the same date as DOT Information Responses – September 10, 2004.

American requests that the Department, on reconsideration, specifically require combination applicants by September 22 to identify their proposed routings between the U.S. and China, as well as their proposed weekly frequencies, departure and arrival times, and equipment type and configuration. Moreover, the Department should require combination applicants by September 22 to state whether they are seeking entry in 2005 or 2006. If combination applicants are seeking entry in either year, they should state which year they would prefer, and whether they would accept an award for the other year in the event they do not receive their preference.

Such fundamental information should be required at the application stage, and should not be deferred to Direct Exhibits, in order to inform the public and all participating parties of the nature of each combination applicant's proposal at the outset of the proceeding, particularly given the highly expedited timetable the Department has established.

The designation and frequencies at issue do not become available for approximately one and one-half years. With nearly 18 months until the designation and frequencies become available, it is premature for the Department to select an additional carrier and allocate such frequencies. Specifically, the Department's own precedent holds that an evidentiary record remains relevant for a limited period of time and, for this reason, it has limited the issuance of even backup authority for a period of one year. In this regard, the Department has recently stated that one year is "the standard period in which [the Department has] determined the record remains relevant for another carrier to assume a route without further evidentiary procedures." The rationale for such a policy is clear. The Department has not relied on information that would likely become rendered invalid by the passage of time. It is a break with Department precedent to rely on evidentiary proceedings that took place more than one year prior to the issuance of the award. Order 2003-5-27, at 6; Order 2001-10-15, at 7. See also, Order 97-4-13.

In response to the Information Request, Federal Express Corporation submits the attached Exhibit FX‑1. The subject flights are not "seasonal" and are not operated under "code‑share arrangements."

Counsel: Federal Express, G. Bailey Leopard, 901-434-6664, gbleopard@fedex.com

Hereby submits the following incumbent carrier information responses pursuant to III.A.2. of the Appendix to the Department’s Order Instituting Proceeding and Inviting Applications, Order 2004-9-5, and Erratum. Northwest did not engage in code-sharing on any U.S.-China operations during the twelve months ending June 2004.

Page 1 of United's response reflects the number of flights and type of aircraft operated by United in the U.S.-China market for the twelve-month period ended June 2004. Page 2 reflects United's U.S.-China code-share services on flights operated by Air China for the period beginning October 31, 2003, through June 2004.

United has included this information regarding its code-share services on flights operated by Air China although it does not believe that this information is required. See, Information Response of Northwest, dated February 1, 2000, in Docket OST-99-6323.

The Department should first determine whether it will select a combination carrier or a cargo carrier in 2006. The Department can then select from the combination carriers or the cargo carriers that apply for the 2006 designation based upon that decision. The Department should not, for example, require cargo carriers interested in the 2006 designation to undergo the substantial effort to prepare complex responses to the Department's evidentiary requests, only to learn that the Department has decided to select a combination carrier, and vice versa.

Although Gemini does not object to Evergreen's suggestion that the Department wait until after the 2005 designation to decide whether the 2006 designee will be combination or cargo, Gemini believes that the Department could profitably address that decision at present ‑‑ concurrently with the process to select a combination carrier for 2005.

American Airlines, Inc., pursuant to Order 2004-9-5, September 3, 2004, hereby answers in opposition to the petition for reconsideration submitted on September 10, 2004 by Evergreen International Airlines, Inc.

The lead time for a new entrant to start service to China requires that awards be made on an expedited basis. The 2005 entrant will have only a few months to complete preparations. There is no sound reason to place the same burden on the 2006 entrant. A combined 2005/2006 proceeding is far more efficient than two separate proceedings, and will minimize administrative burdens on both the Department and the partici-pating parties.

Contrary to Evergreen's argument, the Department has solicited applications for route awards up to 20 months in advance of the effective date for entry, a longer period than the 18 months between applications (September 22, 2004) and 2006 entry (March 25, 2006) at issue here. See, e.g. Notice, U.S.-Colombia Scheduled Combination Service Opportunities February 16, 2001 (OST-2001-8910), inviting applications for new entry opportunities effective October 1, 2001 and October 1, 2002.

Continental supports American's request that applicants be required to provide in their certificate applications their proposed routings, weekly frequencies, departure and arrival times, equipment type and configuration, proposed years of service and acceptability of alternative awards if their primary applications are not granted. Although American requests such information only from applicants for combination-carrier authority, Continental believes this information should be required of all applicants, including those seeking all-cargo authority, if the award of all-cargo authority continues to be considered in this proceeding. Providing such information at the application date will provide all parties with information on the nature and scope of each applicants' proposal and facilitate expedition of the proceeding. American has presented no justification for imposing such requirements only on combination-carrier applicants, and all-cargo applicants, having just participated in an all-cargo proceeding on China, have already had an opportunity to develop specific proposals. Continental also supports American's request to adopt a single traffic forecast for the year ended March 31, 2006, regardless of the year or years in which the applicant proposes to institute service, for the reasons stated by American. Similarly, Continental agrees with American that carrier traffic forecasts in the proceeding should not require cumbersome confidentiality procedures and that carriers should be permitted to make public references to the various carrier forecasts throughout this proceeding to the extent the historic data shown are not carrier-specific.

The Department would be well justified in finding that the public interest clearly requires additional combination service in 2006 - and, accordingly, to entertain applications in this proceeding only for combination service. Evergreen argues that the Department should streamline selection for the 2006 designation by deciding first, what type of service is needed; then, secondly which specific carrier to authorize. Given the current and obvious imbalance in favor of all-cargo service, Delta believes that the Department can and should find upon reconsideration additional combination service is most needed in 2006, thereby alleviating the "free for all" of entertaining superfluous all-cargo applications.

Given Evergreen's status as an all-cargo carrier, there is no way for the Department to adopt Amerrican's suggeted solution that combination carriers rely on evidence for the 2005 designation without creating further confusion as to how to compare all-cargo projections with combination projections. As Evergreen pointed out in its Petition for Reconsideration, the 2005 combination carrier should be selected prior to the proceeding for the 2006 designation. Evergreen again encourages the Department to carefully reconsider its own precedent on the period of validity of an evidentiary record. Such a record would only support a decision on the type of service to be offered and the actual carrier to be selected to have validity for a period of one year.

FedEx Express agrees with American that the parties will be able to develop the strongest evidentiary record if they have as complete an understanding of the desires of each carrier as possible. In addition, given the expedited nature of the proceeding, the Department should encourage a full and early sharing of information. This would allow the Department, e.g., to alert applicants to any inconsistencies of their proposals with bilateral requirements. Moreover, it would preserve fairness among applicants by precluding applicants from changing their proposals after reviewing those of others.

FedEx Express has become increasingly concerned about regulatory burdens being imposed by other applicants to carrier‑selection cases. These extra burdens are being imposed at a time when the Department itself is cutting the burden it places on private parties, which FedEx Express applauds. Indeed, in this large, complex case, American's suggestion could impose such a burden on applicants that it could discourage their participation in such cases, rather than encourage new entry.

Gemini Air Cargo, Inc., agrees with Evergreen International Airlines, Inc., that "the selection of a new entrant to the U.S.-China market as of March 25, 2006, is a twostep analytical process." Evergreen Petition, page 3. The Department should first determine whether it will select a combination carrier or a cargo carrier in 2006. The Department can then select from the combination carriers or the cargo carriers that apply for the 2006 designation based upon that decision. The Department should not, for example, require cargo carriers interested in the 2006 designation to undergo the substantial effort to prepare complex responses to the Department’s evidentiary requests, only to learn that the Department has decided to select a combination carrier, and vice versa.

Although Gemini does not object to Evergreen’s suggestion that the Department wait until after the 2005 designation to decide whether the 2006 designee will be combination or cargo, Gemini believes that the Department could profitably address that decision at present -- concurrently with the process to select a combination carrier for 2005.

United objects to the Petition only to the extent its grant would prevent United or any other carrier from submitting passenger traffic forecasts for the 12 months ending March 31, 2006, for the 2005 selection and March 31, 2007, for the 2006 selection.

United has requested seven of the weekly U.S.-China combination service frequencies that will be available for allocation in either 2005 or 2006 to introduce daily roundtrip service between San Francisco and Guangzhou. If awarded frequencies for service in 2005, United would initially operate the route on a one-stop basis via Tokyo and after 12 months upgrade the service to nonstop. If awarded the frequencies for service commencing in 2006, United would immediately introduce daily nonstop service from the onset on March 25, 2006. In light of this proposal, by which United is proposing distinctly different services in each of the two forecast years, United must be allowed to submit traffic forecasts both for the 12 months ending March 31, 2006, and for the 12 months ending March 31, 2007, reflecting the results of these differing services and their impact on the marketplace. This information is necessary to allow the Department to evaluate fairly and fully the merits of United's proposal and would not prejudice other parties, such as American, who should be free to file one or two forecasts as they see fit (so long as they are prepared to take the risk that their single year forecast may not be fully comparable with those of other carriers which have separately forecast each year).

United Air Lines, Inc., for Frequency Allocation dated August 30, 2004, Docket OST-2004-19026

Federal Express Corporation, pursuant to 14 C.F.R. § 302.11, hereby moves the Department for an order compelling Northwest Airlines, Inc., United Airlines, Inc., and United Parcel Services, Inc. to fully and completely respond to the Information Request included in the Department's Order Instituting Proceeding and Inviting Applications at pages 2-3 of the Appendix. Considering the procedural schedule in this case, FedEx Express respectfully requests that the Department consider this motion on an expedited basis, shorten the ordinary time period for filing answers provided for in 14 C.F.R. § 302.6(d) from seven (7) days to one (1) business day, and require Northwest, United and UPS to fully and completely respond to the Information Request by no later than September 28, 2004.

On September 17, 2004, Federal Express Corporation filed a Motion to Compel with a request that answers to its motion be filed by no later than September 21, 2004. Northwest does not oppose FedEx’s request to shorten the response time, but fully disputes FedEx’s interpretation of the incumbent carrier data request set forth in ¶ III.A.2. of the Appendix to the Department’s Order Instituting Proceeding and Inviting Applications, Order 2004-9-5.

On September 17, 2004, Federal Express Corporation filed a motion in the captioned proceeding requesting that the Department (1) compel Northwest, United and UPS to "fully and completely" respond to the Information Request by providing the complete itinerary for the subject flights, including the flight number, each flight’s complete routing, each flight’s day(s) of operation, and each flight’s departure and arrival times; and (2) shorten the answer period for filing answers to this motion from seven to one business day. Under the Department’s regulations (14 CFR 302.6) answers to the motion would normally be due September 28, 2004.

Federal Express polled all parties served with the application and notified the Department that United and UPS have objected to Federal Express’ request for a shortened answer period.

As the resolution of this matter will have a bearing on the preparation of Direct Exhibits, due October 13, we have decided to grant, in part, Federal Express’ request to for a shortened answer period.

Therefore, acting under authority assigned in 14 CFR 385.3, we will shorten the answer period and require that answers be filed no later than noon on September 23, 2004, and replies to any answers be filed by noon on September 24, 2004. We believe this revision strikes a proper balance between the needs of all interested parties and will not prejudice any party to the proceeding.

In this Order we are addressing petitions filed by American Airlines, Inc. and Evergreen International Airlines, Inc., for reconsideration of Order 2004-9-5 in the above-captioned proceeding. We grant in part and deny in part the relief requested by American, and deny the relief requested by Evergreen.

American Airlines, Inc., pursuant to Order 2004-9-5, September 3, 2004 instituting the 2005/2006 U.S.-China Air Services Case and Designations hereby applies under 49 USC 41102 for a certificate of public convenience and necessity to engage in scheduled foreign air transportation of persons, property, and mail between points in the United States, on the one hand, and Shanghai, Guangzhou, Beijing, and two additional points in the People's Republic of China to be selected by the United States, on the other hand, either nonstop or via intermediate points. American also applies for the allocation of seven weekly U.S.-China combination frequencies. Finally, American requests route integration with its other certificates and exemptions to conduct scheduled foreign air transportation of persons, property, and mail.

American proposes to initiate daily nonstop service between Chicago and Shanghai effective May1, 2005 with B777-223 aircraft. We request that our application be processed through non-hearing, show-cause procedures under 14 CFR 302.207. American does not presently operate service to China.

American's application should be promptly granted in the public interest. United Air Lines, Inc. and Northwest Airlines, Inc. already have an enormous head‑start in U.S.-China combination service, with 28 weekly frequencies held by United, and 20 by Northwest. American's entry is essential and the most effective option to challenge the longstanding dominance of these two incumbent combination carriers in the U.S.‑China market

Applies for a certificate of public convenience and necessity authorizing Continental to provide scheduled foreign air transportation of persons, property and mail on daily New York/Newark-Beijing B--777 flights beginning on or about March 25, 2005, and on daily New York/Newark- Shanghai B-777 flights beginning on or about March 25, 2006, an allocation of seven weekly U.S.-China frequencies in 2005 and seven additional frequencies in 2006 and authority to integrate this authority with Continental's other certificate and exemption authority.

Continental proposes to institute daily nonstop service between its New York/Newark Liberty International Airport hub and Beijing in 2005 and Shanghai in 2006 with 283‑seat (48 BusinessFirst, 235 Economy) B‑777 aircraft to provide new competition between New York/Newark and Beijing/Shanghai, offering the first daily nonstop service between New York's Newark Liberty International Airport and both Beijing and Shanghai as well as offering online connecting service between Beijing and Shanghai and points throughout North America, Europe and Latin America served through Continental's New York/Newark hub.

Applies for a Certificate of Public Convenience and Necessity to provide scheduled foreign air transportation of persons, property and mail between the United States and the People's Republic of China., Delta also applies for an allocation of seven (7) U.S.-China combination frequencies to fund its Atlanta-Beijing service.

Despite the improvements in terms of nonstop gateway service to China, service options for network passengers East of the Mississippi remain very poor. With Northwest's cancellation of its nonstop Detroit-China service, network passengers have even fewer nonstop-to-nonstop service choices than before – and many have no online service options at all. Delta's proposal will dramatically improve the U.S.-China competitive service landscape, and is essential to maximizing the public benefits in this proceeding.

Evergreen hereby applies for a certificate of public convenience and necessity authorizing Evergreen to engage in scheduled foreign air transportation of property and mail between a point or points in the United States, via intermediate points, and the co-terminal points of Beijing and Shanghai, China. Evergreen also seeks authority to integrate this authority with its existing certificate and exemption authority and to commingle traffic consistent with applicable aviation agreements. Further, Evergreen seeks the new designation to China available March 25, 2006 along with an allocation of seven weekly round trip frequencies available beginning on March 25, 2006.

Evergreen's interest in and commitment to serving the AsiaPacific region is wellestablished. Evergreen has offices in Beijing, Hong Kong and Seoul. Evergreen's Beijing office is expected to nearly triple in size in the near term (from four employees to 11) and it is also seeking additional warehouse space in Beijing to supplement its capacity in China. Further, over the past two years, Evergreen CEO Delford M. Smith and other senior officers have met with Chinese government officials and companies in China in an effort to increase Evergreen's profile in China. Evergreen has operated in the U.S.-China and U.S.-Hong Kong markets for over 10 years. Between September and December 2003, Evergreen operated 21 multiple shipper charter flights from Shanghai and Hong Kong to the U.S. During calendar year 2004, Evergreen has operated consistently from Hong Kong and Shanghai with 100 multiple shipper charter flights to date, and an additional 22 planned in October.

If the Department grants FedEx Express' application, FedEx Express will be able to offer shippers a new daily, bi-directional transpacific flight as a part of its global network. An award of six frequencies to FedEx Express would also enable it to begin building its operations at Guangzhou's new Baiyun International Airport, where it is actively considering building a hub. FedEx Express' proposal would add new capacity to the Pearl River Delta and would offer U.S. shippers and exporters improved and competitive service in this critical region. Such an award would also increase capacity from the United States to Beijing and enhance connectivity within the region to and from China. Thus, by granting FedEx Express' application, the Department would maximize the public benefits resulting from an award of authority in this case and would enable FedEx Express to offer and maintain the best possible service for the shipping public.

FedEx Express seeks six frequencies from the twelve that will become available on March 25, 2006. FedEx Express would use these six frequencies to institute a new transpacific service to and from China, connecting the United States on a non-stop basis with Beijing and Guangzhou in both directions using wide-bodied MD-11 aircraft six times a week. (See Exhibit FX-1.) Additionally, the flight would connect to FedEx Express AsiaOne hub in Subic Bay with a change-of-gauge at Guangzhou to A-310 aircraft six times a week.

Gemini seeks designation as the next U.S. scheduled all‑cargo carrier to China and asks the Department to allocate to Gemini the twelve all‑cargo frequencies that will be available on March 25, 2006. Gemini will serve New York, Chicago, Los Angeles, San Francisco, and Anchorage in the United States, and Shanghai and Guangzhou in China.

Gemini proposes to operate all‑cargo service between the United States and China using its MD‑11F aircraft with a cargo capacity of 205,000 pounds. This service will be convenient, efficient, and economical for U.S. shippers to China as well as for U.S. importers shipping goods from China. Gemini plans to operate two routes to Shanghai (PVG) and two routes to Guangzhou (CAN), two major Chinese industrial centers that have established requirements for the air transportation of cargo to and from the United States.

For Shanghai the proposed routes are: New York (JFK) ‑ Anchorage (ANC) ‑ Shanghai (PVG) ‑ Anchorage ‑ Chicago (ORD) ‑ NewYork; and Los Angeles (LAX) ‑ San Francisco (SF0) ‑ Anchorage ‑ Shanghai ‑ Anchorage ‑ Los Angeles. For Guangzhou the proposed routes are New York ‑ Chicago ‑ Anchorage – Guangzhou (CAN) ‑ Anchorage ‑ Chicago ‑ NewYork; and Los Angeles ‑ San Francisco – Anchorage ‑ Guangzhou ‑ Anchorage ‑ Los Angeles ‑ Chicago. Gemini proposes to operate three weekly frequencies on each of the four routings effective March 25, 2006.

Operate combination service between Honolulu, Hawaii on the one hand and Shanghai, People's Republic of China on the other and points behind the gateway (Honolulu) in the United States, commencing service in 2006.

Hawaiian Airlines, with this application, offers to the United States and its citizens the first non-stop service from Hawaii to China. This developing and as yet untried market holds tremendous promise for the future to not only travelers who heretofore have not been able to reach China, except from the mainland of the United States, but to the State of Hawaii and its citizens. This new service will open markets that have never been served directly from Hawaii, offering significant economic growth to Hawaii and its tourism based economy. China is the largest, least developed consumer economy in the world. Tourism and its related benefits is a large and untapped source of economic stimulus to the State of Hawaii and its citizens.

Hawaiian proposes to operate four (4) frequencies a week using Boeing767-300 ER aircraft with a fleet average of 260 seats. This service will commence on or about May 15, 2006.

Requests a temporary, experimental certificate of public convenience and necessity under 49 U.S.C. § 41102(c) to provide scheduled foreign air transportation of persons, property and mail between the United States and the People's Republic of China and allocation of seven weekly U.S. carrier combination frequencies to become effective March 25, 2005, and an additional seven frequencies to become effective March 25, 2006. If awarded this authority, North American will initially operate daily high quality low-fare Oakland/Honolulu/Shanghai service. In March 2006, North American will expand its service to include Guangzhou. North American, with years of experience in international passenger service, will provide the kind of low-fare competitive service today's passengers demand. The proposed service from Oakland and Honolulu will meet the rapidly growing needs of leisure, business and ethnic passengers in these robust markets.

Commencing March 25, 2005, North American proposes to operate daily scheduled combination service from Oakland International Airport (OAK) to Shanghai (SHA) via Honolulu International Airport (HNL), using Boeing 767-300ER equipment. Starting in November 2005, North American would operate some or all of the flights with Boeing 777-200ER equipment. Upon award of the additional seven frequencies available for service commencing March 25, 2006, North American would add service to Guangzhou (CAN), operating as follows: five weekly frequencies serving OAK-HTNL-SHA route, five serving OAK-HNL-CAN, and four serving OAK-HNL-CAN-SHA.

Pursuant to the Department’s Order Instituting Proceeding and Inviting Applications, served September 3, 2004 (Order 2004-9-5), Northwest Airlines, Inc. hereby requests: (1) an allocation of eight of the twelve all-cargo frequencies available to designated U.S. carriers effective March 25, 2006 under the recently amended aviation agreement between the United States and People’s Republic of China (PRC); (2) a temporary, experimental certificate of public convenience and necessity under 49 U.S.C. § 41102 (c) authorizing Northwest to provide scheduled foreign air transportation of property and mail between a point or points in the United States, via any intermediate points, to a point or points in China open to scheduled international operations, and beyond to any points outside of China, with full traffic rights; and (3) authority to integrate Northwest’s existing exemption and certificate authority with the new certificate authority sought herein.

Polar proposes to offer B747 freighter services on three (3) additional weekly frequencies over the following routings:

In conjunction with the service Polar plans to introduce pursuant to its tentative selection under Order 2004‑9‑4, an award of these frequencies will permit Polar to offer a second daily service between the U.S. and Shanghai on six consecutive days each week and introduce service to Beijing on three (3) days each week. A detailed service proposal will be submitted in Polar's Direct Exhibits.

Requests: (1) issuance of certificate of public convenience and necessity authorizing it to provide scheduled foreign air transportation of property and mail from a point in the United States, via intermediate points, to a point or points in the People's Republic of China open to scheduled international operations, and beyond; and (2) allocation of twelve (12) weekly allcargo frequencies that become available March 25, 2006.

TradeWinds proposes to operate scheduled all-cargo service between the United States and China using TradeWinds' B-747-200F aircraft. The proposed routes to be operated by TradeWinds are: Fort Wayne (FWA)-Anchorage (ANC)-Shanghai (PVG)-FWA (daily); FWA-ANC-Guangzhou (CAN)-ANC-FWA (3 times weekly).

Hereby applies for an award of three (3) of the twelve (12) round-trip weekly all-cargo frequencies available in 2006. UPS' request is modest but appropriate given the limited number of frequencies. There are twelve (12) frequencies available for four cargo carriers (UPS, Federal Express, Northwest and Polar). UPS is requesting three so that it can improve its full array of air cargo services-especially express which has grown over three hundred percent (300%) since UPS initiated direct air service to China in 2001. This is particularly important because express traffic comprises high value products and items of significant importance to the shippers and consignees of these packages. Aside from the immediate tangible value of the contents of these packages, it is important to recognize the high yield of such express traffic and the economic stimulus that such services bring to a growing economy and its supporting industries. Also, these high yields mean a more profitable operation for the U.S. carrier which, in turn, means that the carrier will be more likely to maintain the service.

World hereby applies for a certificate of public convenience and necessity to engage in scheduled foreign air transportation of property and mail from a point or points in the United States, via intermediate points to a point or points in the People's Republic of China and beyond. World seeks the designation available for all‑cargo services under the US‑China Air Transport Services Agreement as of March 25, 2006.

The services proposed herein will complement World's existing all‑cargo operations in the China market. World already provides all‑cargo services to China on a wet lease basis, in addition to charter flights which it provides to a major U.S. freight forwarder. The designation sought by World will facilitate the expansion of its current services to China to include scheduled all‑cargo operations.

Counsel: World and Zuckert Scoutt, Malcolm Benge, 202-298-8660, mlbenge@zsrlaw.com

Pursuant to the Department's Order on Reconsideration, Order 2004-9-20 (September 22, 2004), North American is filing this Supplement to its Application to advise that the configuration for the B76730 ER aircraft it proposes to operate in the Oakland/Honolulu/Shanghai market, commencing March 25, 2005, would have 24 Business Class and 213 Coach seats. As stated in the Application, commencing in November 2005, North American would provide some or all of the service using B777-200ER aircraft with a configuration of 44 Business Class and 242 Coach seats. If North American is awarded additional frequencies for 2006 to initiate service to Guangzhou, as described in the Application it would operate the same equipment with the same configuration.

United Parcel Service Co. opposes the Motion to Compel filed by Federal Express Corporation on September 17, 2004, and files this Opposition in accordance with the Department of Transportation’s September 21, 2004 Notice Shortening Answer Period. UPS disagrees with FedEx’s interpretation of the information requested in the Order Instituting Proceeding and Inviting Applications, Order 2004-9-5, and states that it has fully provided the information requested by the DOT. It is instructive that all of the other incumbent carriers interpreted the Department’s information request differently from FedEx.

Federal Express Corporation hereby files this consolidated reply to Northwest Airlines, Inc. and United Parcel Service, Co.'s Oppositions to FedEx Express's Motion to Compel dated September 17, 2004, pursuant to the Department's Notice Shortening the Answer Period.

Additionally, FedEx Express's Motion asserted that United Airlines, Inc. had failed to fully and completely respond to the Information Request included in the Department's Order Instituting Proceeding and Inviting Applications at pages 2-3 of the Appendix. As of this filing, United has failed to oppose FedEx Express's Motion. As FedEx Express's Motion with respect to United is unopposed, it is well within the Department's discretion to grant FedEx Express's Motion with respect to United without further deliberation.

Supplements its Application for Certificate of Public Convenience and Necessity and Allocation of Frequencies filed September 22,2004 to provide a "description of proposed routing" as set forth at page 5 of Order 2004-9-20. Hawaiian's routing behind the gateway, Honolulu, will be a single flight number originating in San Diego.

Additionally, Hawaiian seeks only the 2006 opportunity, and would not be in a position to accept the 2005 designation.

Counsel: Hawaiian and Dow Lohnes, Jonathan Hill, 202-776-2000, jhill@dowlohnes.com

Hereby respectfully supplements its Application in response to the Department’s Order on Reconsideration issued September 22, 2004 (Order 2004-9-20), instructing carriers to provide the following information by September 24, 2004:

Exhibit A, attached hereto, contains the details relating to Northwest’s service proposal
requested by the referenced Order.

OST-04-19077
OST-97-3020 - Renewal and Amendment of a Certificate of Public Convenience and Necessity for Route 246 - US-People's Republic of China

United already has pending in Docket OST‑97‑3020 an application to amend its certificate for Route 246 to expand its U.S.‑China certificate authority in a manner similar to what Northwest is now seeking in Docket OST‑2004‑19077. As noted, United has no objection to the Department granting Northwest broad certificate authority to serve China, so long as the Department simultaneously grants United's long‑pending application for expanded U.S. China authority. Both United and Northwest are "incumbents" under the U.S.‑China bilateral, and there is no reason to grant Northwest any broader authority than United.

United does not believe that the current 2005/2006 frequency allocation proceeding is the appropriate docket in which to address the issue of the scope of the certificate authority that should be issued to the incumbent U.S.‑China carriers. This case involves wholly unrelated issues of carrier selection and frequency allocation, and involves numerous parties, including both incumbents and potential new entrants. Moreover, because of the complexity of the issues involved, a final decision in this proceeding is months away.

UPS has applied for three (3) additional weekly all-cargo frequencies to China so that it may provide a full array of all-cargo air transportation services between the U.S. and China and between China and the world. If awarded the frequencies, UPS would operate them as follows:

World requests designation as an all-cargo carrier under the U.S.-China Air Transport Agreement and the issuance of a certificate of public convenience and necessity effective March 25, 2006 in order to engage in all-cargo services as follows: (i) four times weekly on the routing Houston(IAH)-San Jose-Anchorage-Shanghai-Anchorage-San Jose-Houston and (ii) two times weekly on the routing Houston-San Jose-Anchorage-GuangzhouAnchorage-San Jose-Houston. Anchorage will be a tech stop only.

To support its proposed all-cargo services, World requests an allocation of six (6) weekly frequencies. World will operate the proposed services using MD-1 I freighter aircraft with a maximum payload capacity of 205,000 lbs.

Counsel: World and Zuckert Scoutt, Malcolm Benge, 202-298-8660, mlbenge@zsrlaw.com

Hawaiian requires that it be promptly notified as to whether the DB1 B database may be used in this proceeding. To clarify Hawaiian's request, no identification of particular or specific carriers will be made and data from this table will be shown in aggregate form only. The purpose and need for
use of the data is to identify (historical) stopover traffic on flights to and from Asia. Therefore, Hawaiian respectfully requests that the Decision Maker immediately grant Hawaiian's motion of September 22,2004 and authorize the use of the DB1B data in this proceeding.

By Order 2004-9-5, the Department instituted the 2005/2006 U.S.-China Air Services Case and invited interested U.S. carriers to file applications for authority to serve the U.S.-China market and for allocations of frequencies effective March 25, 2005, and March 25, 2006. The Order established a procedural schedule and specified September 10, 2004, as the date DOT Information Responses would be available. It also specified October 13, 2004, as the due date for direct exhibits.

Subsequent to September 10, 2004, Counsel for United Parcel Service advised the Department that it needed to make revisions to the data it had provided on which the Department based, in part, its information responses. UPS has submitted the revised data to the Department. The Department has now revised its information responses to take account of the UPS submission and has placed these information responses on computer diskettes. Parties wishing to receive the reissued information responses on these diskettes or by email should contact Michael Lane or Kevin Bryan in the Competition and Policy Analysis Division at (202) 366-2352 and (202) 493-0183, respectively.

Tradewinds Airlines, Inc. respectfully withdraws its pending application dated September 22, 2004 for a certificate of public convenience and necessity to operate scheduled foreign air transportation of property and mail from a point in the United States, via intermediate points, to a point or points in the People’s Republic of China open to scheduled intermediate operations, and beyond. Thus, Tradewinds will not be submitting Direct Exhibits pursuant to the timetable established by Order 2004-9-5.

Served October 13, 2004

Notice Suspending Procedural Schedule

By Order 2004‑9‑5, the Department issued an order instituting the 2005/2006 U.S. –China Air Services Case and invited interested U.S. carriers to file applications for authority to serve the U.S.‑China market and for allocations of frequencies effective March 25, 2005, and March 25, 2006. The Order established a procedural schedule for submissions in this case, including calling for direct exhibits on October 13, 2004.

By this Notice we are suspending all procedural dates in this proceeding until further order of the Department. We will establish a revised procedural schedule as soon as possible.

By: Paul Gretch

October 13, 2004

The Port Authority of New York and New Jersey Support of Continental Airlines | Word

Continental Airlines is strongly qualified to operate nonstop air service to China and sustain this service with a high level of commitment. This is evidenced in the fact that, over the past two years, Continental has added seven new nonstop international markets to its Newark-Liberty operation and has sustained service in over 140 nonstop markets. We are confident that the addition of nonstop air service to China will further enhance what is not only the strongest local traffic base in the United States but also provide a substantial number of connections to a broad part of this country. Such an operation will benefit our communities, our economy and our region.

From the 2006 frequency pool, several all-cargo carriers have proposed services originating at JFK. We strongly support the continued growth of New York/New Jersey's vitally important air cargo industry. Due to the limited number of frequencies available in 2006, we are unable to support any one carrier, however, we strongly support granting the maximum allocation to NY/NJ connected routes. Clearly, the strength of the market warrants such a decision.

By: Port Authority of NY/NJ, William DeCota and Bradley Rubinstein, 212-435-3741, brubinst@panynj.gov

2005/2006 US-China Air Services Case and Designations

Order 04-10-07
OST-04-19077

Issued and Served October 15, 2004

Order | Word

By this Order (1) we grant, in part, and deny, in part, the motion filed by Federal Express Corporation to compel other applicants to comply with the Information Request included in the Department’s Order instituting this proceeding; (2) we deny the motion filed by Hawaiian Airlines, Inc. requesting the Department to release, in this proceeding, additional O & D Survey Data under 14 CFR §241.19-7(d)(2); and, (3) we amend the procedural schedule in this proceeding to reflect our decision to require United Parcel Service Co. to file additional information.

Revised UPS Information Response: October 18, 2004
Direct Exhibits: October 20, 2004
Rebuttal Exhibits: November 10, 2004
Briefs: November 22, 2004

By: Karan Bhatia

October 14, 2004

Re: Complaint of North American Airlines about Extension of Time

As you are aware, North American filed its China exhibits on time yesterday, only to discover one hour later that the deadline had been indefinitely extended.

In accordance with DOT rules we also notified the entire list of other airlines interested in the subject. Since North American filed its application in a timely manner and was the only airline to submit it's exhibits, the result of your extending the deadline let all North American's information become available to all the other interested parties. I believe the result was to compromise and prejudice our application for the route rights.

By: Dan McKinnon

October 18, 2004

Revised Information Response of United Parcel Service

United Parcel Service Co. respectfully submits its Revised Information Response as required by Department of Transportation Order 2004-9-5 and clarified in Order 2004-10-7. Concurrent with this filing, UPS is submitting a copy of its Revised Information Response in electronic form to the Competition and Policy Analysis Division and is serving a copy on all parties to this proceeding.

Counsel: Kelley Drye, David Vaughan, 202-9955-9792, dvaughan@kelleydrye.com

October 20, 2004

Direct Exhibits of American Airlines:

Counsel: American, Carl Nelson, 202-496-5647, carl.nelson@aa.com

October 20, 2004

Direct Exhibits of Continental Airlines:

Counsel: Continental and Crowell & Moring, Bruce Keiner

October 20, 2004

Re: Certificate of Service for Continental Airlines

Enclosed is a CD‑Rom containing the complete Direct Exhibits of Continental Airlines in this proceeding. This CD‑Rom has also been served upon all parties on the attached service list by overnight delivery.

Counsel: Crowell & Moring, Bruce Keiner, Jr., 202-624-2615, rbkeiner@crowell.com

October 20, 2004

Direct Exhibits of Delta Air Lines

Counsel: Delta and Shaw Pittman, Robert Cohn

October 20, 2004

Direct Exhibits of Evergreen International

Re: Errata of Evergreen International Airlines

Counsel: Glenn Wicks and Lisa Harig, 202-457-7790, gpwicks@wicks-group.com and lharig@wicks-group.com

October 20, 2004

Direct Exhibits of Federal Express:

Counsel: FedEx, Nancy Sparks, 202-756-2461, nsparks@fedex.com

October 20, 2004

Direct Exhibits of Gemini Air Cargo

Counsel: Morton Beyer, Michele Dixey and Roller & Bauer, Moffett Roller

October 20, 2004

Direct Exhibits of Georgia and Atlanta Parties

By: Georgia and Atlanta Parties

October 20, 2004

Counsel: Dow Lohnes, Jonathan Hill, 202-776-2728, jhill@dhlaw.com

October 20, 2004

Re: City of Houston and the Greater Houston Partnership Direct Exhibits

Counsel: Zuckert Scoutt, Rachel Trinder, 202-298-8660

October 20, 2004

Direct Exhibits of the New Jersey Parties

Re: Certificate of Service for The New Jersey Parties

By: The New Jersey Parties

October 20, 2004

Direct Exhibits of North American Airlines

Counsel: Baker & Hostetler, David Kirstein

October 20, 2004

Direct Exhibits of Northwest Airlines

Counsel: Northwest, Megan Rae Rosia, 202-842-3950

October 20, 2004

Direct Testimony and Exhibits of Polar Air Cargo

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

October 20, 2004

Re: Direct Exhibit of The City of San Jose

Counsel: Zuckert Scoutt, Richard Mathias

October 20, 2004

Direct Exhibits of United Air Lines

Counsel: United and Wilmer Cutler, Jonathan Moss, 202-663-6655

October 20, 2004

Direct Exhibits of United Parcel Service

Counsel: UPS and Kelley Drye, David Vaughan

October 20, 2004

Direct Exhibits of World Airways

By: World Airways

October 26, 2004

Motion of City of Chicago for Leave to File in Support of Application of American Airlnes for a Certificate of Public Convenience and Necessity and Frequency Allocation

Currently, United is the only U.S. combination carrier operating nonstop service between Chicago and China, with existing service between Chicago and Beijing and new service between Chicago and Shanghai scheduled to begin October 31, 2004. American's application presents the first and only opportunity for competitive service, which stimulates the market and offers further price discipline. Granting American's application will enhance inter‑airline competition for service to China, benefiting business and leisure travelers and enhancing Chicago's status as the nation's only dual international hub city.

Unlike the proposals by Continental and Delta to provide more service to Beijing (in 2005 and 2006, respectively), American's proposal links China's leading financial and commercial center and gateway to China with economic centers in the midwestern, southern and eastern United States. Continental's proposed service between Newark and Beijing and Delta's proposed service between Atlanta and Beijing in 2006 merely envision more single‑hub, single U.S. carrier service. American's proposal, on the other hand, provides real head‑on competition with United's U.S.‑China operations.

Counsel: Pillsbury Winthrop,Kenneth Quinn, 202-775-9800

November 5, 2004

Motion of the City and County of San Francisco for Leave to File Statement of Position in Support of the Application of United Air Lines to Serve the San Francisco-Guangzhou Market

No participant in this case appears to take issue with SFO's long role as a focus for China service. Yet our neighbor, the San Jose airport, has submitted in this docket a lengthy set of exhibits - nominally in support of World Airways' desire for all-cargo service, but including considerable material apparently aimed at comparing San Jose to SFO as an international gateway. The overall purport of the San Jose submission appears to be that it, rather than SFO, lies at the "heart" of Silicon Valley and prosperous Santa Clara County, and so is some minutes' shorter "drive time" from the airport for some high tech travelers and businesses.

Counsel: City Attorneys Office, Robert Maerz, 640-794-5065

November 10, 2004

Rebuttal Exhibits of American Airlines

Revised List and Letters of Civic Support

Counsel: American, Carl Nelson, 202-496-5647, carl.nelson@aa.com

November 12, 2004

Re: American Airlines Revised Exhibit

American Airlines, Inc. hereby submits revised Exhibit AA‑R‑114 (page 1) in order to correct an inadvertent error on lines 6, 7, 15, and 17 of column 1.

Counsel: American, Carl Nelson, 202-496-5647, carl.nelson@aa.com

November 10, 2004

Rebuttal Exhibits of Continental Airlines

Counsel: Continental and Crowell & Moring, Bruce Keiner

November 10, 2004

Rebuttal Exhibits of Delta Air Lines

Counsel: Delta and Shaw Pittman, Robert Cohn

November 10, 2004

Rebuttal Exhibits of Evergreen Airlines

Counsel: Glenn Wicks and Lisa Harig, 202-457-7790, gpwicks@wicks-group.com and lharig@wicks-group.com

November 10, 2004

Rebuttal Exhibits of Federal Express

Counsel: FedEx, Nancy Sparks, 202-756-2461, nsparks@fedex.com

November 10, 2004

Rebuttal Exhibits of Gemini Air Cargo

Counsel: Morton Beyer, Michele Dixey and Roller & Bauer, Moffett Roller

November 10, 2004

Rebuttal Exhibits of Hawaiian Airlines

Counsel: Dow Lohnes, Jonathan Hill, 202-776-2728, jhill@dhlaw.com

November 10, 2004

Rebuttal Exhibits of the City of Houston and the Greater Houston Partnership

Counsel: Zuckert Scoutt, Rachel Trinder, 202-298-8660

November 10, 2004

Rebuttal of Exhibits of The New Jersey Parties

By: The NJP, Chip Hallock

November 10, 2004

Rebuttal Exhibits of North American Airlines

Counsel: Baker & Hostetler, David Kirstein, 202-861-1756, dkirstein@bakerlaw.com

November 10, 2004

Rebuttal Exhibits of Northwest Airlines

Counsel: Northwest, Megan Rae Rosia, 202-842-3950

November 10, 2004

Rebuttal Testimony and Exhibits of Polar Air Cargo

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

November 10, 2004

Re: Summary of Rebuttal Comments of the San Diego County Regional Airport Authority

By: Thella Bowens

November 10, 2004

Rebuttal Exhibits of United Air Lines

Counsel: Wilmer Cutler, Jonathan Moss, 202-663-6655, jonathan.moss@wilmerhale.com

November 10, 2004

Rebuttal Testimony and Exhibits of United Parcel Service

Counsel: UPS and Kelley Drye, David Vaughan

November 10, 2004

Rebuttal Exhibits of World Airways

Counsel: Zuckert Scoutt, Malcolm Benge

November 18, 2004

Re: Letter from American Airlines Containing a Chicago Sun-Times Editorial

Counsel: American Airlines, Carl Nelson, 202-496-5647, carl.nelson@aa.com

November 22, 2004

Brief of American Airlines

Counsel: American, Carl Nelson, 202-496-5647, carl.nelson@aa.com

November 22, 2004

Brief of the City of Chicago - American Airlines

Counsel: Pillsbury Winthrop, Kenneth Quinn, 202-775-9800

November 22, 2004

Brief of Continental Airlines

Re: Additional Letters in Support from Employees an Others

Counsel: Continental and Crowell & Moring, R. Bruce Keiner, 202-624-2615

November 22, 2004

Brief of Delta Air Lines

Counsel: Delta and Shaw Pittman, Robert Cohn and Alexander Van der Bellen, 202-663-8060, robert.cohn@shawpittman.com and sascha.vanderbellen@shawpittman.com

November 22, 2004

Brief of Evergreen International Airlines

Counsel: Glenn Wicks and Lisa Harig, 202-457-7790, gpwicks@wicks-group.com and lharig@wicks-group.com

November 22, 2004

Brief of Federal Express Corporation

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

November 22, 2004

Brief of Gemini Air Cargo

Counsel: Roller & Bauer, Moffett Roller, 202-331-3300

November 22, 2004

Brief of The Georgia and Atlanta Parties - Delta Air Lines

By: Metro Atlanta Chamber of Commerce, HollyBeth Anderson

November 22, 2004

Brief of Hawaiian Airlines

Counsel: Dow Lohnes, Jonathan Hill, 202-776-2725, jhill@dlalaw.com

November 22, 2004

Brief of the New Jersey Parties - Continental Airlines

By: Regional Business Partnership, Chip Hallock, 973-242-4209

November 22, 2004

Brief of North American Airlines

Counsel: Baker & Hostetler, David Kirstein, 202-861-1756, dkirstein@bakerlaw.com

November 22, 2004

Brief of Northwest Airlines

Counsel: Northwest, Megan Rae Rosia, 202-842-3950, megan.rosia@nwa.com

November 22, 2004

Brief of Polar Air Cargo

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

November 22, 2004

Brief of San Diego County Regional Airport Authority | Word - Hawaiian

Counsel: Stephen Gelband, 202-337-8970, slg@gelbandlaw.com

November 22, 2004

Brief of the City of San Jose - World Airways

Counsel: Zuckert Scoutt, Richard Mathias, 202-298-8660, rdmathias@zsrlaw.com

November 22, 2004

Brief of United Air Lines

Counsel: Wilmer Cutler, Jonathan Moss, 202-663-6655, jonathan.moss@wilmerhale.com

November 22, 2004

Brief of United Parcel Service

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

November 22, 2004

Brief of World Airways

Counsel: World and Zuckert Scoutt, Malcolm Benge, 202-298-8660, mlbenge@zsrlaw.com

2005/2006 US-China Air Services Case and Designations

Order 2005-02-14
OST-04-19077

Issued and Served February 22, 2005

Order to Show Cause - Bookmarked

By this Order, we tentatively decide to award Continental Airlines, Inc. and American Airlines, Inc. certificate authority to provide combination services in the U.S.-China market and to allocate Continental and American seven weekly combination frequencies, respectively, for their proposed services. The rights would become available to Continental on March 25, 2005, and to American on March 25, 2006. We also tentatively decide to select American as a backup to Continental’s primary award for 2005 and Delta Air Lines, Inc. as a backup to American’s primary award for 2006. Further, we tentatively decide to allocate the 12 weekly all-cargo frequencies available on March 25, 2006, as follows: three weekly frequencies each to Federal Express Corporation, Northwest Airlines, Inc., Polar Air Cargo, Inc., and United Parcel Service, Co.

By: Karan Bhatia

Issued and Served February 22, 2005

Erratum

The third sentence on page 2 of the Order should read:

Further, the restrictions on entry and competition ill-serve the economies, consumers, carriers, and communities of both China and the United States.

By: Paul Gretch

March 4, 2005

Comments of American Airlines on Show-Cause Order 2005-2-14

The show‑cause order proposes that American be re quired to start service no later than March 25, 2006 American would like to start service on April 2, 2006, which coincides with one of the year's major schedule change dates, when the changeover to Daylight Savings Time occurs.

We therefore request that the final order either specify April 2, 2006 as American's required start date, or in the alternative allow a 14‑day cushion beyond March 25, consistent with recent Department practice.' However, in the event the Department does not do so, American is fully prepared to start Chicago‑Shanghai service on March 25, 2006.

Counsel: American, Carl Nelson, 202-496-5647, carl.nelson@aa.com

March 4, 2005

Comments of Delta Air Lines

Delta does not intend to submit detailed Objections. Rather, Delta submits these comments to reaffirm its keen interest in commencing service to China at the earliest possible date, to emphasize once again the important public interest benefits that would be gained by authorizing the service that Delta has proposed, and to encourage the Department to immediately begin discussions with the Government of China to secure the right to authorize Delta to serve China in 2007. Under the current bilateral air services agreement, a new combination service designation will not become available until 2008. Delta urges the Department to promptly explore on government‑to government basis the possibility of advancing that opportunity to 2007. Delta further urges the Department to institute a new carrier selection case by no later than January 1, 2006, so that the successful applicant can begin advance preparation for implementation, marketing, and allocation of fleet resources.

Counsel: Hogan & Hartson, Alexander Van der Bellen, 202-637-8382, sascha.vanderbellen@hhlaw.com

March 4, 2005

Reply of Federal Express to Order to Show Cause

Until we can successfully negotiate an Open Skies agreement with China, FedEx Express, other U.S. carriers, and the Department must operate within the restricted environment of the U. S.-China bilateral. The Department must continue to "choose among competing U.S. carrier applicants in carrier selection cases ... that are difficult and resource-consuming for applicants and communities, as well as for the Department." Indeed, FedEx Express (and, admittedly, the other cargo applicants) committed extensive resources to this case. However, the Department's tentative allocation of the available all-cargo frequencies and its rationale for its allocation imply that this case was over before it started and that the commitment of resources by FedEx Express and the other cargo carriers was unnecessary.

Counsel: Federal Express, G. Bailey Leopard, 901-434-6644, gbleopard@fedex.com

March 4, 2005

Objections of Gemini Air Cargo to Order to Show Cause 2005-2-14

The Department should issue not adopt the tentative findings and conclusions as set forth in Order 2005-2-14. It should instead issue Gemini Air Cargo, Inc., a certificate of public convenience and necessity to operate scheduled foreign air transportation of property and mail from a point or points in the United States; via intermediate points; to a point or points in the People's Republic of China open to scheduled international operations; and beyond, effective March 25, 2006. The Department should also designate Gemini to provide scheduled all-cargo service to China and allocate Gemini twelve all-cargo frequencies.

Counsel: Roller & Bauer, Moffett Roller, 202-331-3300, mroller@rollerbauer.com

March 4, 2005

Objections of Hawaiian Airlines to Order to Show Cause

Hawaiian, like five other applicants, requested the Department to designate it for the 2006 combination service to China. Hawaiian believes that the Department's decision, as reflected in the Show Cause Order, is wrong as it does not discuss or even acknowledge the distinct and unique benefits available to the public from selecting Hawaiian, as opposed to American. The Department chose to ignore the greater, yet more subtle, benefits that Hawaiian's proposal provides to the U.S.-China market. Hawaiian presented unrefuted evidence that its service between San Diego-Honolulu and Shanghai would represent a much more significant benefit to the underserved traveling public than would any other carrier's proposal -the creation of completely new on-line service to China or the creation of a competitive option for such service. Hawaiian's proposal would serve more passengers in markets gaining their first or second on-line option to China than both American and Delta, the two carriers awarded primary and backup authority to serve this route in 2006.

Counsel: Dow Lohnes, Jonathan Hill, 202-776-2000, jhill@dowlohnes.com

March 4, 2005

Objections and Comments of the City of Houston and the Greater Houston Partnership

The Houston Parties fully endorse the Department's decision to award the 2005 designation and accompanying Beijing frequencies to Continental. As was emphasized in Houston's Brief, Continental - Houston's home town carrier - is the only major combination carrier in this proceeding that does not have the ability to offer service to China, either on its own or through code-sharing and as the Department rightfully concludes, Continental's selection will enhance competition in the overall U.S.-China market. The tentative decision should promptly be finalized with respect to this award. Houston notes that Continental's future plans include services to China from Houston.

The Houston Parties strongly object to the Department's decision to allocate the 2006 designation and related frequencies to American. Houston does not dispute the fact that there have been no new combination entrants in the U.S.-China market since 1986.

Counsel: Houston and Zuckert Scoutt, Rachel Trinder, 202-298-8660

March 4, 2005

Comments of Northwest Airlines to Order to Show Cause

Whatever the Department's final allocation in this proceeding, Northwest will fully utilize the frequencies it is allocated and Northwest intends to seek additional all‑cargo frequencies from the pool of fifteen available effective March 25, 2007. Northwest urges the Department to move forward expeditiously with a final order, and upon completion of this proceeding invite applications for 2007 all‑cargo frequencies in sufficient time to ensure interested carriers will have ample opportunity to engage in advance sales and marketing activities for institution of services on the earliest dates authorized under the U.S. –China Protocol.

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

March 4, 2005

Response of Polar Air Cargo to Order to Show Cause

The confidence the Department's tentative decision expresses in the commitment Polar has made to the development of service in the U.S.-China market is deeply appreciated. Yet, it is also well-founded. On October 21, 2004, Polar was designated as a new U.S. all-cargo carrier in the China market under the air services agreement. Five days later it was provided a copy of the diplomatic note and submitted its application to the Civil Aviation Administration of China. By the first week of December, only six weeks after its designation, Polar commenced the operation of all six of the 2004 all-cargo frequencies it was awarded. Polar has already completed preparations for increasing its service on March 25, 2005, using the three additional frequencies it was awarded last year. It is fully prepared to as promptly put to use the additional three frequencies it has just been tentatively awarded once they become available.

Counsel: Polar, Kevin Montgomery, 202-828-1002, kevin.montgomery@polaraircargo.com

March 4, 2005

Objections of San Diego Regional Airport Authority to Order to Show Cause | Word

By emphasizing network "legacy" carriers and traditional gateways in the decision, the DOT eliminates the only real viable competitive carriers offering service from the western USA. The only legacy hubs west of the Rocky Mountains operated by airlines with equipment capable of reaching China are United's at SF0, DEN and LAX, and Delta's at SLC. However, Delta has not shown any interest in building Salt Lake City as a viable international hub. Instead it focused its application on the furthest hub from Beijing in the proceeding, and arguably the hub with the least of the USA behind it. Delta, nevertheless, secured the backup authority in 2006 should American choose to waive their rights. Regrettably, the two carriers who proposed service from western gateways did not even secure backup authorities.

Counsel: Stephen Gelband, 202-337-8970, slg@gelbandlaw.com

March 5, 2005

Objection of United Air Lines

United objects to the Department's failure to select United's proposals for San FranciscoGuangzhou service beginning in either 2005 or 2006. United would provide the first daily service between the U.S. and Guangzhou from its ideally located San Francisco hub. The economic significance of Guangzhou, and the Guangdong province, to the U.S. are undeniable. The public benefits of United's proposal to this burgeoning commercial and manufacturing center clearly outweigh those from all of the other proposals, but especially the proposal from American to do nothing more than duplicate the service United already is offering between Chicago and Shanghai.

Counsel: United and Wilmer Cutler, Bruce Rabinovitz, 202-663-6960, bruce.rabinovitz@wilmerhale.com

March 4, 2005

Response of United Parcel Service to Order to Show Cause

With this tentative award, UPS will now have fourteen China frequencies to be operated at Shanghai. Coupled with its change of gauge operations, these will enable UPS to meet the Agreement's cargo hub definition criterion of 72 weekly aircraft movements. In addition to meeting this criterion, UPS has been working diligently to meet the other qualifying prerequisites needed for cargo hub operations. No other U.S. carrier has yet to affirmatively decide to develop a hub in China.

The commitment of UPS to China goes far beyond building a cargo hub. For example, in February UPS became the first wholly‑owned foreign air express carrier in China with the establishment of its headquarters in Guangzhou. By the end of this year, UPS will have offices in 23 cities serving more than 200 locations. These offices will provide UPS the unique opportunity to provide air express services in China of the same level that are provided by UPS throughout the world.

Counsel: Kelley Drye, David Vaughan, 202-955-9792, dvaughan@kelleydrye.com

March 5, 2005

Comments of World Airways on Order to Show Cause

Given the importance of the China air cargo market to its business plan, World would be tempted to file an objection to the Order to Show Cause were it not for the additional U.S.‑China designation available in 2008. World fully expects to apply for the 2008 designation and to compete aggressively for an award of all‑cargo operating authority. If present trends hold, the factors supporting the use of that designation for all‑cargo service, and the award of all‑cargo rights to World, will be even stronger in the future than they are today.

Counsel: World and Zuckert Scoutt, Malcolm Benge, 202-298-8660, mlbenge@zsrlaw.com

OST-04-19077

March 7, 2005

Motion of Continental Airlines for Expeditious Action

Absent a final award to Continental by mid-March, Continental's ability to institute service during early June to meet the requirements of peak- period U.S.-China travelers would be at serious risk. Although the right to designate an additional U.S. airline and begin utilizing seven additional weekly combination frequencies will become available March 25, 2005, it is now clear that no airline could institute service by that date, given the requirement to secure authority in China, make appropriate arrangements for handling and terminal facilities in Beijing and conduct advance marketing and sales for a new U.S.-China route. Continental is grateful to have been selected to provide the first U.S. –flag nonstop service between New York/Newark and Beijing and the first daily nonstop service on that route by any airline to remedy what the Department has called "the most serious service deficiency" on U.S.-China routes in what is "by far the largest U.S. -China origin and destination market in this proceeding".

Counsel: Crowell & Moring, Bruce Keiner, Jr., 202-624-2615

Served March 8, 2005

Notice Shortening Answer Period

In the circumstances presented, including the existing procedural schedule established for the show-cause order, we have determined to shorten the answer period for the Continental motion in Docket OST 2004-19077 to close of business March 9, 2005.

Therefore, acting under authority assigned in 14 CFR 385.3, we will shorten the answer period to the Continental motion and will require that answers to the Continental motion be filed no later than March 9, 2005.

By: Paul Gretch

March 9, 2005

Answer of American Airlines to Motion of Continental Airlines for Expeditious Action

American shares Continental's interest in having a final order at the earliest possible date. However, American opposes Continental's suggestion that the Department could finalize Continental's award first, and enter a separate order dealing with American's award later.

Having already found that the public interest would be best served by authorizing American as the back-up selection - to fly to China in 2005 if Continental defaults, there should be no question that the Department would find the case favoring American to be even more compelling for 2006. Accordingly, it would make little sense for the Department to wait any longer to finalize American's 2006 award.

Counsel: American, Carl Nelson, 202-496-5647, carl.nelson@aa.com

March 9, 2005

Answer of American Airlines to Objections to Show-Cause Order 2005-2-14

American Airlines, Inc. hereby answers objections submitted on March 4, 2005 to show‑cause Order 2005‑2‑14, February 22, 2005, in which the Department tentatively granted American's application for Chicago‑Shanghai authority beginning in 2006. None of the objectors have offered any compelling reason for the Department to change its tentative award to American, which should be promptly confirmed by a final order.

Counsel: American, Carl Nelson, 202-496-5647, carl.nelson@aa.com

March 9, 2005

Answer of Continental Airlines

Alone among the 18 parties which submitted briefs in this proceeding, United has objected to the award of New York/Newark-Beijing authority to Continental in 2005. Since United's arguments have already been made to, and rejected by, the Department, the Department should issue a final decision immediately awarding Continental a certificate authorizing New York/Newark- Beijing service and seven 2005 U.s. -China frequencies so Continental can secure the necessary foreign authority and handling arrangements in China and begin marketing and selling its new service well in advance of its June 2005 commencement of service.

Counsel: Crowell & Moring, Bruce Keiner, Jr., 202-624-2615

March 9, 2005

Answer of Polar Air Cargo to Objections to Order to Show Cause | Word

The Objections filed do not focus on the allocation of all-cargo frequencies in 2006 but are raised primarily in connection with the underlying 2006 choice by the Department of a combination versus all-cargo carrier and the allocation of combination service frequencies. This Answer is offered in response only to those comments raised in connection with the Department's tentative award to Polar of three additional all-cargo frequencies in 2006. Continental Airlines, Inc. filed a motion for expeditious action in this case. Polar is fully sympathetic, from its own recent experience, with the urgency of Continental's request to commence service in time for peak seasonal demand. Polar does not object to the request for expedition but does not agree with Continental that the proceeding can or should at this juncture be split and decisions separately finalized for 2005 and 2006 route and frequency awards. One decision could not be rendered without impacting the other. Polar would instead urge the Department to use all means at its disposal to render a final decision in this proceeding as quickly as possible.

Counsel: Polar, Kevin Montgomery, 202-828-1002, kevin.montgomery@polaraircargo.com

March 9, 2005

Answer of United Air Lines

The record is clear that United's proposal for daily San Francisco Guangzhou service provides greater public benefits than any other combination carrier proposal, including American's proposal to become the second U.S.‑flag carrier operating nonstop Chicago‑Shanghai service and third U.S.‑flag carrier offering online service on the route. As United detailed in its Objection, United's proposal to offer the first daily nonstop service to Guangzhou would provide vastly superior public benefits by having a greater competitive impact in the U.S.‑China market, providing more balance of trade benefits and generating better passenger service options than any other proposal.

By: Wilmer Cutler, Jonathan Moss, 202-663-6960, jonathan.moss@wilmerhale.com

2005/2006 US-China Air Services Case and Designations

Order 2005-03-24
OST-04-19077

Issued March 15, 2005 | Served March 17, 2005

Final Order

We have decided to grant Continental's motion and to make final our tentative decision to award Continental Newark-Beijing certificate authority as proposed in Order 2005-2-14. We find that it is in the public interest in the circumstances presented to issue this separate order to facilitate Continental's efforts to inaugurate service by early June. It is important that we utilize these valuable new access rights as soon as possible. Granting Continental's motion will expedite entry of new U.S-flag service and enable it to meet the peak summer season. We will address all other remaining issues in this proceeding, including the selection of an airline to serve the U.S.-China market effective March 2006 and the award of 2006 frequencies, in a subsequent order.

By: Karan Bhatia

2005/2006 US-China Air Services Case and Designations

Order 2005-3-40
OST-2004-19077

Issued March 29, 2005 | Served April 1, 2005

Final Order - Bookmarked

By this Order, we make final the remainder of our tentative findings and conclusions set forth in Order 2005-2-14, and award American Airlines, Inc. certificate authority to provide combination services in the U.S.-China market and allocate to American seven weekly combination frequencies for its proposed Chicago-Shanghai services. Under the U.S.-China bilateral agreement, these rights become effective on March 25, 2006. We also make final our tentative decision to select American as a backup to Continental Airlines, Inc.'s primary award for 2005, awarded by Order 2005-3-24 on March 17, 2005, and Delta Air Lines, Inc. as a backup to American's primary award for 2006. We further make final our tentative decision to allocate the 12 weekly all-cargo frequencies available on March 25, 2006 as follows: three weekly frequencies each to Federal Express Corporation, Northwest Airlines, Inc., Polar Air Cargo, Inc., and United Parcel Service Co.

By: Karan Bhatia

OST-2004-19077 - 2005/2006 US-China Air Services Case and Designations

May 2, 2005

Reply of the Port Authority of New York and New Jersey

The Port Authority believes that the Shanghai service proposed by Continental will expand significantly the growth of the economic, social and cultural ties between the United States' largest, more populous metropolitan region and home of the nation's largest financial and banking center, and China, which is the number one trade partner of the New York Customs District. Therefore the Port Authority of New York and New Jersey urges the Department to begin a proceeding now that would lead to nonstop Shanghai service from the New York/New Jersey metropolitan region.

By: Port Authority of New York and New Jersey, William DeCota

OST-2007-28567 - 2007/2008/2009
OST-2004-19077 - 2005/2006

Filed July 30, 2008 | Issued August 13, 2008

Notice of Action Taken

OST-2004-1907 - Conversion of two New York/Newark-Beijing frequencies from year-round service to seasonal service.

OST-2007-28567 - By Order 2005-3-24, the Department allocated to Continental seven frequencies to operate daily New York/Newark-Beijing service. Continental has been operating this service since June 15, 2005. By Order 2007-12-26, the Department allocated to Continental seven frequencies to operate daily New York/Newark-Shanghai service, commencing March 2009. Continental requests authority to operate two of its seven Shanghai frequencies and two of its seven Beijing frequencies on a seasonal basis so that it will have the flexibility to reduce its U.S.-China schedules to five or six weekly flights on a seasonal basis as needed.

By: Paul Gretch