2007 US-China Combination Frequency Allocation Proceeding

Order 2007-2-10
OST-2006-25275

Issued and Served February 8, 2007

Final Order

By this Order, we make final our tentative findings and conclusions set forth in Order 2007-1-4, and allocate United Air Lines, Inc. seven weekly combination frequencies for its proposed Washington (Dulles)-Beijing combination services in the U.S.-China market. Under the protocol to the U.S.-China agreement, these rights become available on March 25, 2007.

We grant United’s request to integrate Beijing on its Certificate of Public Convenience and Necessity for Route 246 with its authority to serve Washington, D.C. on its Certificate of Public Convenience and Necessity for Route 130. We will also grant United’s request to change the proposed start-up date for its Washington (Dulles)-Beijing service to March 28, 2007.

We are not persuaded by Continental’s argument that because of United’s position as the carrier having the largest number of frequencies in the market, United’s selection is counter to the Department’s pro-competition policy. We disagree. As stated above, we selected American in 2006 based on the record in that case to address a competitive deficit in those circumstances. While considering the number of frequencies and the current service of each applicant, and in analyzing the record before us, we weighed the various carrier selection factors in light of the particular circumstances presented in this specific case. We tentatively concluded that the public interest benefits of United’s service proposal -- gaining the first-ever nonstop service to China from a new gateway representing the largest O&D market in this proceeding, coupled with the largest capacity to maximize the benefits of that new service -- were compelling. Nothing asserted by Continental in its objections would now persuade us to change that analysis and conclusion.

We do not agree with Northwest’s argument that our tentative decision erroneously prioritizes the needs of local Washington, D.C., passengers over the U.S. cities that would have received new service via Detroit. While Northwest’s proposed service would offer convenient connections through Detroit from a substantial behind-gateway catchment area, United’s proposal immediately rectifies the most critical shortfall in the current U.S.-China market -- the lack of any nonstop service to China from the largest U.S. market without such service -- the Washington, D.C. metro area. We found that United’s Washington, D.C. (Dulles)-Beijing proposal fills that service gap with significant capacity and provides other valuable service benefits, including the added value of beyond gateway code-share services in China, which, in sum, clearly outweigh the potential attributes of Northwest’s Detroit-Shanghai nonstop service.

By: Andrew Steinberg