Virgin Blue International Airlines Pty Ltd

OST-2007-28705 - Exemption and Foreign Air Carrier Permit - US-Australia

July 6, 2007

Application for an Exemption and a Foreign Air Carrier Permit - Bookmarked

Motion for Confidential Treatment

VBIA is seeking an exemption and a Foreign Air Carrier Permit that would enable it to provide scheduled foreign air transportation of persons, property, and mail on the following routes:

1. From Australia via New Zealand, New Caledonia, Fiji, American Samoa, Canton Island, French Polynesia, Mexico and Canada to the gateway points of Honolulu, San Francisco, Los Angeles, New York, and three points to be selected by the Government of Australia and to an additional eight points (which may be changed from time to time) in the United States only via one or more of the specified and/or selected gateway points and beyond to Canada, Mexico, the United Kingdom and Europe and beyond (Australia South Pacific Route 1(a) and (b));
2. From Australia via any two points in Asia (including Hong Kong, Japan, Korea, and Taipei and may be changed from time to time) to any three points in the United States to be chosen from Honolulu, Los Angeles, San Francisco, and New York and one other point to be selected by the Government of Australia (Australia North Pacific Route); and
3. From Australia to Guam and the Commonwealth of the Northern Mariana Islands and beyond to any two points to be chosen from Tokyo, Nagoya, Fukuoka, Seoul, Taipei, Beijing and one additional point to be specified. The beyond points may be changed from time to time (Australia Guam and the Commonwealth of Northern Mariana Islands Route).
4. From points beyond Australia via Australia and intermediate points to a point or points in the United States and beyond. (These rights are applicable only to all-cargo services.)
5. Between the United States and any point or points. (These rights are applicable only to all-cargo services.)

VBIA initially plans to operate scheduled Australia-US services on the South Pacific route, utilizing B777-300 aircraft. Services are scheduled to commence in November 2008.

Counsel: Holland & Knight, Anita Mosner, 202-419-2604, anita.mosner@hklaw.com

July 23, 2007

Answer of United Air Lines

In proposing to fly to the United States, however, Virgin Blue announces that it will begin operating 10 weekly frequencies between Australia and the United States over the South Pacific Route, as defined in the U.S.-Australia Agreement. The capacity MOUs of the U.S.‑Australia Agreement, on the other hand, limit a new carrier to no more than four weekly frequencies as an initial schedule with growth limited to annual increments governed by detailed formulas of the capacity MOUs.

As the Department is aware, these capacity MOUs contain limits that were imposed at the insistence of the Government of Australia, which sought to protect its carriers from U.S. carrier competition. Australia has not hesitated to enforce these capacity limits when doing so suits its interest. For example, when United in the early 1990s proposed daily services over the North Pacific Route between the United States and Australia via Japan, the Government of Australia insisted upon strict adherence to the frequency limits of the U.S.‑Australia Agreement, rendering United's proposed schedule uneconomical, and protecting Australian carriers from additional competition by United for U.S.‑Australia and U.S.‑Asia traffic.

Virgin Blue expresses its support for open competition on U.S.-Australia routes, but the actions of the Government of Australia suggest that it does not share their views, rather Australia prefers maintaining one of the most restrictive bilateral air-service regimes still in existence now that the infamous Bermuda II Agreement will sunset next year. Virgin Blue would be able to operate the 10-weekly frequency schedule it proposes if Australia were to sign an open-skies agreement, which the United States has consistently announced to be its goal. Until, however, Australia is prepared to eliminate the restrictive capacity limits and numerous other vestiges of protectionism under the current U.S.-Australia Agreement, the United States should not unilaterally waive those restrictions when Australian carriers propose new or expanded services that exceed the limits imposed at their own government's behest. Should the United States choose to waive existing capacity limitations in the U.S.‑Australia Agreement, there is simply no guarantee that Australia will reciprocate. Indeed, based on experience, United fully expects the Government of Australia to hold it to the strict limits of the capacity MOUs were United again to propose services over the North Pacific Route.

Counsel: United, Julie Oettinger, 202-296-2370, julie.oettinger@united.com

August 1, 2007

Reply of Virgin Blue to Comments of United Air Lines

VBIA is pleased that United has raised no substantive objection to the issuance of operating authority to VBIA. See Answer of United, Docket OST-2007-28705, (United "can readily attest to Virgin Blue's qualifications to operate.") However, VBIA takes exception to United's views with regard to VBIA's proposed service pattern. As will be explained below, the Department in this docket is charged with assessing VBIA's fitness and qualification to serve the United States, and is not being called upon to approve VBIA's proposed level of service. The question of capacity is to be resolved through separate channels, consistent with the US-Australia Agreement. As the Department noted in the case of Jetstar, the licensing and capacity allocation decisions are separate issues. See, Notice of Action Taken, Jetstar Airways Pty. Limited, Docket OST-2006-24923, May 26, 2006. Accordingly, VBIA urges the Department to approve this Application without delay.

Counsel: Holland & Knight, Anita Mosner, 202-419-2604, anita.mosner@hklaw.com

September 18, 2007

Supplement to Application for an Exemption and a Foreign Air Carrier Permit

First, VBIA has selected the trade name, "V Australia," under which it will serve the US-Australia market. The V Australia trade name was the winning entry in a "name the airline" competition in Australia. VBIA requests that the Department issue the requested operating authorizations to "Virgin Blue International Airlines Pty. Limited d/b/a V Australia." VBIA has asked the Australian Government to designate V Australia pursuant to the provisions of Article III of the Air Transport Agreement between Australia and the United States. It is VBIA's understanding that this designation has been transmitted through diplomatic channels.

Second, as required by 14 C.F.R. § 211.20(t), attached is an executed copy of OST Form 4523 (Waiver of Liability Limits under the Warsaw Convention).

Counsel: Holland & Knight, Anita Mosner, 202-419-2604, anita.mosner@hklaw.com

November 6, 2007

Second Supplement - Bookmarked

On July 6, 2007, Virgin Blue International Airlines Pty Limited d/b/a V Australia filed in this docket an Application for a Foreign Air Carrier Permit and corresponding exemption authority. V Australia submitted a supplement that provided additional information in support of its Application on September 18, 2007. V Australia submits additional information in support of its Application:

• Foreign Air Carrier Certificate of Insurance
• Corporate Emergency Response Plan
• Passenger Manifest Information Plan (Redacted)

Counsel: Holland & Knight, Anita Mosner, 202-419-2604, anita.mosner@hklaw.com

February 14, 2008

Re: Support Letter of Australian Government

The Australian Government strongly supports the V Australia proposal. V Australia's sister company, Virgin Blue Airlines Pty Ltd., is a well established Australian domestic airline that has an Air Operator's Certificate and an approved Transport Security Program. The Virgin Blue Group's other international carriers, Pacific Blue and Polynesian Blue are already successfully operating international air services throughout the South West Pacific. The Department considers that V Australia is well advanced in progressing its start-up and will meet all the relevant Australian legal requirements necessary to commence operations.

By: Michael Taylor, 02-6275-7573

Filed July 6, 2007 | Supplemented September 18 and November 6, 2007 | Issued February 15, 2008

Notice of Action Taken

Exemption under 49 USC §40109 and a foreign air carrier permit under 49 USC §41301 to permit the applicant to engage in scheduled foreign air transportation of persons, property, and mail between the United States and Australia to the full extent authorized by the U.S.-Australia Air Transport Agreement. The applicant also requests authority to engage in charter trips in foreign air transportation and other charters in accordance with Part 212 of the Department’s regulations.

V Australia also requested a foreign air carrier permit to engage in its proposed services. We will act on that portion of its request separately.

By: Paul Gretch