OST-2007-26805 - Delta and Aeroflot - US-Russia Codesharing

OST-2007-26805 - Statements of Authorization and Related Exemption - US-Russia Codesharing

The Joint Applicants have entered into a reciprocal codesharing agreement, under which (i) Delta will display Aeroflot's "SU*" designator code on Delta-operated flights between Aeroflot's New York (JFK) gateway and Atlanta, Cincinnati, Orlando, San Francisco, and Seattle, and (ii) Aeroflot will display Delta's DL* designator code on Aeroflot-operated flights between Moscow and St. Petersburg, Krasnodar, and Koitsovo- Ekaterinburg, Russia. All codeshare traffic will connect to/from transatlantic service on a blind-sector basis (i.e., there will be no local traffic).

Delta is seeking exemption authority for St. Petersburg only to the extent necessary in that Delta may already hold such underlying authority by virtue of segment 3 of its Certificate of Public Convenience and Necessity for Route 616, which lists this point, in conjunction with Delta's blanket route integration certificate issued by Order 2006-1-1.

Under Annex I, Section 2(B), of the 2005 MOC, the Russian Federation may designate two additional U.S. points for Russian-carrier service and five additional points in the United States for codeshare service only. By Application dated October 13, 2006, Northwest/Aeroflot (OST-2006-26106)indicated that the Russian Federation would shortly name Minneapolis and Detroit for codeshare services, and by Application dated October 31, 2006, Continental/Aeroflot (OST-2006-26257)indicated that Cleveland would likewise be designated shortly by the Russian Federation.

Counsel: Garofalo Goerlich, Don Hainbach, 202-776-3976 for Aeroflot / Delta and Hogan & Hartson, Robert Cohn, 202-637-4999/5659

American does not object to this application, provided that the Department obtains assurances from the Government of the Russian Federation that Russia will promptly approve applications by U.S. carriers, including American, to engage in third‑country codesharing between the U.S. and Russia via intermediate points in Europe, consistent with the terms of the U.S.‑Russia Air Transport Agreement, as amended.

On November 8, 2006, American submitted a similar answer to the joint application of Northwest Airlines, Inc. and Aeroflot Russian Airlines for codeshare authorization currently pending in OST-2006-26106.

As United explained in its answer and response to the similar applications of Aeroflot with Continental and Northwest, the Russian authorities have, up until now, been inconsistent in their application of the ASA to code-share services involving U.S. carriers. They have refused to approve United/Lufthansa's proposed code-share service between Frankfurt and two points in Russia (Moscow and St. Petersburg), which is also consistent with the ASA.

United and Lufthansa have recently filed another application with the Russian authorities to offer daily code‑share services on these routes starting on or about March 25, 2007, the same startup date proposed by Delta and Aeroflot (and by Continental/Northwest and Aeroflot).

Given the checkered history of Russia's compliance with the code-share terms of the ASA, the Department should not act to approve code-share services to the U.S. by Aeroflot (or any other Russian carrier) with Delta (or with Northwest or Continental) until it has received appropriate assurances that Russia has approved United's code-share service with Lufthansa. It should be noted that the Annexes governing code-share service expire by their terms on March 25, 2007, the startup date proposed by Delta and Aeroflot. The Department should also receive assurances that Russia will apply the code-sharing Annexes on a non-discriminatory basis to both same country and third-country code-shares after March 25 before acting on the pending Aeroflot applications.

American and United urge the Department to defer action on the DeltaAeroflot Application in this docket until the U.S. Government receives "assurances" from the Russian Government concerning approval of their respective applications to engage in third-country carrier codesharing between the United States and Russia via intermediate European points. (See generally Answers of American and United, dated January 18, 2007.) The Department should not accept the invitation of American and United to delay the benefits for U.S. consumers and shippers flowing from the bilateral codesharing envisioned by the Delta-Aeroflot Application.

Counsel: Garofalo Goerlich, Don Hainbach, 202-776-3976, dhainbach@ggh-airlaw.com for Aeroflot / Hogan & Hartson, Robert Cohn, 202-637-4999, recohn@hhlaw.com for Delta

In our answer on January 18, 2007, we stated that we do not object to the applicants' request for bilateral codeshare authorization, provided that the Department obtains assurances from the Government of the Russian Federation that it will promptly approve requests by U.S. carriers, including American, to engage in third-country codesharing between the U.S. and Russia via intermediate points in Europe, consistent with the terms of the existing U.S.-Russia Air Transport Agreement.

In their reply, Delta and Aeroflot contend that "[t]he approach advocated by American... could prejudice future U.S.-Russia negotiations and ultimately impede U.S. efforts to obtain broader codeshare authority opportunities and could jeopardize or delay additional liberalization with Russia."

However, no further negotiations are required between the U.S. and Russia to address third-country codesharing for U.S. carriers such as American in the U.S.-Russia market. Those rights are already provided by the current U.S.-Russia Air Transport Agreement. The issue is not negotiation of additional rights, but implementation by Russia of bilateral provisions that are already in effect. The Department should defer action on the Delta/Aeroflot application pending assurances that Russia will approve third-country codesharing arrangements which do not require additional negotiations.