OST-97-3269 / OST-97-3271 / US-Brazil / Consolidated Answer of Continental Airlines / January 5, 1998
Application of
AMERICAN AIRLINES, INC. /
Docket OST-97-3269for allocation of seven weekly U.S. - Brazil combination frequencies (Miami-Manaus)
Application of
UNITED AIR LINES, INC. /
Docket OST-97-3271for a combination frequency allocation under the U.S./Brazil bilateral air services agreement of 1989 as amended
CONSOLIDATED ANSWER OF
CONTINENTAL AIRLINES, INC. TO APPLICATIONS OF
AMERIC AN AIRLINES, INC. AND UNITED AIR LINES, INC.
American /l and United have each applied for the seven additional U.S.-Brazil frequencies which become available October 1, 1998. American seeks the frequencies for daily Miami-Manaus service, and United seeks the frequencies for
1/ Common names are used for carriers.
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daily Los Angeles-Sao Paulo service, although each city-pair already receives service commensurate with the traffic available.
Continental opposes any award of frequencies to either American or United which would preclude Continental from instituting daily Houston-Brazil service and states as follows in support of its position:
1. American and United, the two incumbent airlines with the most U.S. Brazil frequencies, each have applied for all of the frequencies which become available in 1998. If either application were granted, one of the large incumbents would pre-empt new competition by Continental at its Houston hub. Unlike the American and United proposals, service at Continental's Houston hub would add service at a new hub gateway which today receives no single-plane Brazil service despite being the largest U.S. city without nonstop Brazil service.
2. When American last sought seven frequencies for Miami-Manaus service, the Department said:
" . . . American proposes service in one of the smallest U.S.-Brazil markets . . . and it projects carrying the fewest passengers of any of the applicants in this case. In these circumstances, . . . we . . . concluded that the service and competitive benefits offered by American's Miami-Manaus service were small, and considerably less valuable than awards to other carriers."
(
Order 97-4-13 at 5-6) Moreover, if American really believes Miami-Manaus service is important, the Department has suggested a way for American to offer it: "Given the overall level of frequencies held by American, to the extent that it believes that demand in the Miami-Manaus market warrants nonstop service, it is
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free to use frequencies from its existing allocation to meet that demand." (Order 97-4-13 at 6) Although American's application is entitled to comparative consideration with the applications of Continental, Delta and United' the results of that comparison are already evident.
3. United now serves Brazil through its Chicago hub and its Miami and New York gateways and offers code-share service through its Star Alliance partner, VARIG. Brazil's largest airline. United would use seven scarce Brazil frequencies to duplicate Los Angeles-Sao Paulo service already offered by United and its code-share partner (VARIG) as well as three other carriers. Clearly, expanding United's Brazil horizons even further to duplicate existing service offers far fewer public benefits than Continental's opening a new hub gateway for Brazil passengers and shippers.
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For the foregoing reasons, Continental urges the Department to deny the applications of American and United to the extent they could prevent Continental from instituting Houston-Brazil nonstop service.
Respectfully submitted,
CROWELL & MORING LLP
R. Bruce Keiner, Jr.
Steven A. Mirmina
Counsel for Continental Airlines, Inc.