OST-2007-28950 - Vietnam Airlines - Exemption and Foreign Air Carrier Permit

Vietnam Airlines requests issuance of an exemption and a foreign air carrier permit authorizing the Company to engage in scheduled foreign air transportation of persons, property, and mail from points behind Vietnam via Vietnam and intermediate points to a point or points in the United States and beyond, consistent with the Air Transport Agreement in effect between the United States and Vietnam and the points and countries selected by the Government of Vietnam thereunder. Vietnam Airlines further requests authority to engage in charter foreign air transportation of persons, property, and mail (i) between any point or points in Vietnam and any point or points in the United States, (ii) between any point or points in the United States and any point or points in a third country or countries, provided that such service constitutes part of a continuous operation, with or without a change of aircraft, that includes service to Vietnam for the purpose of carrying local traffic between Vietnam and the United States, and (iii) as otherwise authorized under the provisions of 14 C.F.R. Part 212.

Commencing on or about October 28, 2008, Vietnam Airlines plans to provide roundtrip scheduled combination service between Ho Chi Minh City and Los Angeles via Osaka (but requests initial exemption authority for all points and countries presently selected by the Government of Vietnam, and flexible permit authority allowing for future selection changes). The Company plans to offer five weekly roundtrip flights during the peak season and four weekly roundtrip flights during the off-peak season, and intends to increase the service to daily by 2011. The proposed service will initially be operated using Boeing 777-200ER HGW aircraft configured with 307 seats in three classes: 25 business class; 54 deluxe economy and 228 economy.

Northwest Airlines hereby answers the application of Vietnam Airlines for exemption and permit authority. Vietnam Airlines proposes to commence service on a Ho Chi‑Minh City‑Osaka‑Los Angeles routing. Northwest has no objection to Vietnam Airlines' request for the exemption authority necessary to operate its proposed services. However, its request for "full, model open skies route authority" under a long‑term permit is at odds with the restrictions of Annex IV.

As noted in Vietnam Airlines' application, Vietnamese and U.S. carriers are prohibited from carrying fifth freedom traffic via Japan, due to the highly restrictive "special provisions" of Annex IV. The number and selection of service points are also strictly limited.

In light of Vietnam Airlines' new interest in serving the United States, Northwest urges the U.S. Government to engage the Government of Vietnam in discussions to ease the restrictions of Annex IV - especially the limitations fifth freedom traffic, which will impeded the efficient operation of Vietnam Airlines' proposed service via Japan.

Unfortunately, Northwest urges the Department to defer action on Vietnam Airlines' foreign air carrier permit application, under the false assumption that such deferral would help bring about the elimination of the Annex IV provisions of the U.S.-Vietnam Air Transport Agreement. However, the deferral suggested by Northwest would in no way contribute to that goal, nor would it be consistent with Department precedent.

Vietnam Airlines concedes that it may be appropriate to lift U.S.-Vietnam bilateral limitations in response to emerging demands in the marketplace and the balanced service aspirations of U.S. and Vietnamese carriers. Indeed, it is precisely these commercial and economic considerations, and not the specific format of the foreign air carrier permit issued to Vietnam Airlines, that will bring the Vietnamese and United States governments together to discuss liberalization of the bilateral provisions. In its application, Vietnam Airlines openly acknowledges the existing Annex IV provision and explicitly requests that its permit be limited by the bilateral restrictions in place at any given time. Thus, in spite of the flexible open-skies permit language requested by Vietnam Airlines, its services would remain effectively constrained by the existing bilateral limitations. As a result, it is the actual elimination of these restrictions that may motivate Vietnam Airlines to encourage its government to come to the table to get them removed, rather than the prospect of gaining approval of its initial foreign air carrier permit.