OST-98-3333 / US Airways / Charlotte-London Gatwick / January 15, 1998

NOTICE: Answers supporting or opposing this Application must be filed and served upon US Airways and all parties served with this Application on or before January 30, 1998.

Application of

US AIRWAYS, INC. / Docket OST-98-3333

for an exemption pursuant to 49 U.S.C. § 40109

(Charlotte-London (Gatwick))

APPLICATION OF US AIRWAYS, INC. FOR EXPEDITED GRANT OF

EXEMPTION AUTHORITY AND REALLOCATION OF DESIGNATION

Designations for U.S. flag service to London are extremely valuable but scarce national resources. By this Application of US Airways, Inc., the Department has an important opportunity to reallocate one of these valuable resources that is not being used to a carrier who will offer new access to London from an extensive East Coast air transportation network. Charlotte-London (Gatwick) service -- operated by a new participant in the U.S.-London market -- will provide new competition for a rapidly growing area of the U.S. now served only by a foreign flag carrier, intergateway competition to the current mid-Atlantic and Southeast U.S. gateways to London, and immediate benefits to U.S. travellers.

Application of US Airways

Accordingly, pursuant to 49 U.S.C. § 40109 and Subpart D of the Department's Rules of Practice (14 C.F.R. Part 302), US Airways, Inc. applies for a two-year exemption from 49 U.S.C. § 41101 to engage in scheduled foreign air transportation of persons, property and mail between the terminal point of Charlotte, North Carolina and the terminal point London (Gatwick), United Kingdom. To facilitate this service, US Airways requests that the Department withdraw the Ft. Lauderdale-London designation held by Laker Airways, Inc. ("Laker") because Laker has discontinued scheduled air service and plans to operate charter only service on this route. This designation therefore is dormant and unutilized. US Airways is ready, willing and able to put this scarce bilateral designation to optimum use.

Beginning on May 7, 1998, a month after its new Philadelphia-Gatwick service commences, US Airways proposes to inaugurate new daily nonstop Gatwick service from Charlotte, utilizing B767 aircraft, pending the opening up of Heathrow Airport to other U.S. air carriers. It respectfully requests expedited consideration and grant of this Application to enable US Airways to complete marketing plans, initiate the selling of service, and commence operations this spring. Delay would only prolong the current underutilization of the U.S.'s rights under the restrictive U.S.-U.K. bilateral, an untenable situation that is plainly not in the national interest. US Airways is prepared to fly this route promptly and consumers on both sides of the Atlantic should have this choice available to them.

Application of US Airways

I. OVERVIEW

As part of US Airways' plan to restore its U.S.-London service, US Airways seeks to commence daily nonstop service from its Charlotte gateway beginning on May 7. Although US Airways initially will operate to London Gatwick Airport, as soon as access to Heathrow Airport becomes available, US Airways will operate exclusively to Heathrow.

US Airways plans to provide daily London (Gatwick) service as part of its network through its major hub at Charlotte, providing new U.S.-flag online service to over 50 behind-gateway U.S. cities. U.S. consumers will gain important public benefits from the introduction of U.S. flag competition in a market now served exclusively by a foreign carrier. US Airways will offer both intergateway and intragateway competition, stimulating the U.S.-London market, which has lacked new competitive service in recent years.

US Airways requests that Charlotte be designated as a new "rover" gateway under Bermuda II. In 1993 US Airways divested all of its London routes, including Charlotte-London, as a condition of BA's investment in the then-USAir. US Airways has now determined to restore its competitive service to London from Charlotte.

Since a moveable "rover" gateway designation is currently dormant, the U.S. has unexercised rights under the current bilateral which are not being utilized to benefit American consumers. US Airways' proposed Charlotte service will put this scarce resource to its highest and best use.

Ft. Lauderdale received a designation in May 1996 based on Laker's proposal to operate two weekly flights in the market and increase its frequencies as the market developed. At that time, DOT admonished Laker that if it did not increase its frequencies above two per week in 1997 and another application was filed, DOT might withdraw the Ft. Lauderdale designation.

Laker has never operated more than two flights per week and has terminated all scheduled service in the market -- it now plans to serve the market only with charter service. Clearly, US Airways' proposal would put this designation to optimum use.

Application of US Airways

II. US AIRWAYS WILL OFFER THE PUBLIC NEW U.S.-FLAG DAILY NONSTOP AND ON-LINE CONNECTING SERVICE TO LONDON.

US Airways will make the best use of the scarce bilateral resources currently available to U.S. carriers. /1 Its plans to initiate daily nonstop B767 service from Charlotte undoubtedly will provide the best and most competitive use for the designation currently held by Ft. Lauderdale/Laker.

With its disengagement from British Airways ("BA"), US Airways is now in a position to restore its competitive service to London. US Airways will launch Philadelphia-London service in April of this year, and now plans to add daily nonstop service between Charlotte and London's Gatwick Airport. Like Philadelphia, Charlotte-London was one of the routes that US Airways relinquished five years ago as a result of the BA investment. Now, as BA seeks approval of its new alliance with American Airlines ("AA"), a vigorous, independent US Airways is ready, willing and able to reenter and compete in the U.S.-London market.

1/ This application is supplemental to, not in lieu of, US Airways' application pending in Docket OST-96-1660 for authority to serve London (Heathrow) from Philadelphia, Boston, Charlotte, and Pittsburgh. In order to compete fully in the U.S.-U.K. market, US Airways must serve Heathrow, particularly in light of BA's entrenched position at US Airways' primary gateways. For the interim, however, Gatwick service is the only available means of moving toward US Airways' goal of competing fully in the U.S.-U.K. market, since bilateral progress toward opening Heathrow appears stalled. Thus, US Airways seeks exemption authority to serve London (Gatwick) from its Charlotte hub.

Application of US Airways

Pending transfer of services to Heathrow, Charlotte-Gatwick will nonetheless fit into US Airways' transatlantic strategic expansion plan. Along with US Airways' services to Frankfurt, Madrid, Munich, Paris and Rome, which have been expanded significantly during the last two years, its proposed Pittsburgh-Paris service, and US Airways' upcoming Philadelphia-Gatwick and Philadelphia-Amsterdam routes, the proposed Charlotte-Gatwick route will strengthen US Airways' international route network and enhance its participation in international markets. Key to US Airways' development as a major international carrier is restoring its competitive London services, with interim operations to Gatwick and ultimately services to Heathrow.

Last year Charlotte lost its position as a gateway hub for on-line services between London and the many communities on US Airways' network. US Airways now proposes to restore on-line service to London via the Charlotte gateway, which in the past has proven to be a very well-situated and successful East Coast gateway for U.S. flag service to London, but today is one of the largest U.S. cities served exclusively by a foreign air carrier. US Airways -- the largest carrier at Charlotte with over 90% of the total seats -currently operates over 450 daily flights through its Charlotte hub to and from 100 U.S. communities. As shown on the attached chart (Exhibit A), US Airways' reinstatement of London service via Charlotte will generate seamless connecting service to over 50 behind gateway points. US Airways' London service to this vibrant hub plainly will stimulate the local economy, expand Charlotte's job base, and generate valuable benefits for businesses and travelers in the Carolinas.

Application of US Airways

This Application is in furtherance of the substantial commitment US Airways already has made to Charlotte. US Airways employs over 6,300 employees and spends approximately $700 million annually in the City. US Airways is also a significant economic factor for the state of North Carolina, with over 11,000 employees and expenditures of almost $1.3 billion a year in the state. US Airways is investing in Charlotte in order to improve and expand the service it offers the travelling public there. It has approved the expenditure of over half a million dollars for the expansion of its core administrative operation in Charlotte.

US Airways' proposed new service will provide important, new intragateway competition at Charlotte. Consumers in this growing area of the country should have the opportunity to fly a U.S. carrier to London, but currently are captive to a foreign carrier under the highly restrictive U.S.-U.K. bilateral. The new US Airways operation, additionally, will enhance intergateway competition for London traffic at other U.S. gateways in the Eastern United States, including Atlanta and Washington, where the two British carriers also have strong market positions, and Raleigh-Durham served by AA. This new service, importantly, will challenge the monopoly the proposed AA/BA alliance otherwise would have to the Carolinas, served now only by BA at Charlotte and AA at Raleigh-Durham.

At Charlotte, US Airways will use its hub at that gateway to feed its own flights, thus providing passengers with true single-carrier service and the advantages of a

Application of US Airways

seamless operation. Reallocation of the Ft. Lauderdale gateway is the Department's best means to enhance competition immediately under the existing restrictive bilateral.

III. LAKER HAS TERMINATED ITS SCHEDULED FT. LAUDERDALE SERVICE.

Laker has terminated scheduled service from Ft. Lauderdale to London and plans to compete using charter service only. Thus, this valuable designation is now dormant. DOT contemplated just this scenario and the solution is simple:

We note that Laker has proposed to operate at a level of only two roundtrip frequencies a week. However, Laker has expressly characterized this as an "initial" service proposal, saying that it expects to increase frequencies as the market develops. In this regard, we put Laker on notice (as we did when we recently granted Laker exemption authority to serve the Miami-London market), that should it not increase its frequency level, and should another U.S. carrier seek to serve U.S. Route 1 with a proposal that offers a superior level of service, and requiring a choice between it and Laker, we reserve the right to revisit the issue and to reconsider our award to Laker.

Order 96-5-36 at 4.

Because Laker will utilize a charter designation at Ft. Lauderdale, the City will continue to benefit from Laker's service. Granting US Airways' Application thus will result in a new U.S. gateway receiving daily nonstop London service with no adverse impact on existing service. Moreover, Laker holds a separate designation for Miami which, in US Airways' view, provides it with ample alternative authority. In these circumstances the public interest compels prompt reallocation of the designation for US Airways' nonstop service.

Application of US Airways

US Airways' intention to commence operations on May 7, 1998, only several months from today, are ambitious but accomplishable if its Application is considered on an expedited basis. It has only recently become clear that the Ft. Lauderdale designation will not be used and US Airways has acted promptly on its proposal to put that designation to an immediate use, for the benefit of consumers and shippers alike. Expedited treatment will enable US Airways to complete its facilities planning, initiate marketing activities and begin to sell service in support of a May 7, 1998 starting date, following shortly on the heels of the launching of Philadelphia-London service.

IV. REQUIRED SHOWINGS

1. US Airways is a Delaware corporation with its principal office at Crystal Park Four, 2345 Crystal Drive, Arlington, Virginia 22227. US Airways is a citizen of the United States within the meaning of 49 U.S.C. § 40102(a)(15)(C) and is fit, willing and- able to serve the U.S.-U.K. market. US Airways holds various certificates of public convenience and exemption authorities. See, e.g., Orders 97-7-2 and 96-3-17. Pursuant to Rule 24 of the Department's Rules of Practice, US Airways requests that the Department take official notice of all information previously filed to establish the company's fitness.

2. US Airways is committed to inaugurate daily service from Charlotte to Gatwick on May 7, 1998, utilizing B767 aircraft configured for 203 seats. A route map illustrating US Airways' proposed service patterns is attached as Exhibit B. Illustrative

Application of US Airways

service schedules, including aircraft type and capacity, are included as Exhibit C.

Anticipated annual operating statistics and estimated fuel consumption are detailed in Exhibit D.

3. As detailed in Exhibit D, US Airways' fuel consumption for the proposed new services would not exceed the ten million gallon threshold specified in Section 313.4(a)(1) of the Department's regulations. US Airways anticipates no difficulties in obtaining adequate fuel supplies for this service. The substantial consumer benefits generated by the new operations, moreover, provide ample evidence that the grant of US Airways' application will serve the public interest.

4. The exemption authority requested by US Airways is fully consistent with and is authorized by the U.S.-U.K. Air Transport Agreement. Ft. Lauderdale holds a designation that is moveable on U.S. Route l in Annex I of the Agreement. Allocation of the Ft. Lauderdale designation to Charlotte will permit US Airways to commence new daily nonstop service from this hub to/from London (Gatwick).

5. US Airways will accept and abide by all terms, limitations and conditions which the Department normally attaches to exemption authority for foreign air transportation.

WHEREFORE, US Airways, Inc. requests that the Department:

Application of US Airways

(a) consider this Application on an expedited basis;

(b) grant an exemption from 49 U.S.C. § 41101, effective for a period of two years, authorizing US Airways to engage in scheduled foreign air transportation of persons, property and mail between the terminal point of Charlotte, North Carolina, and the terminal point London (Gatwick Airport), United Kingdom;

Charlotte; and

(d) designate US Airways for the purpose of operating Charlotte-London services under the U.S.-U.K. Air Transport Agreement.

Dated: January 15, 1998

Respectfully submitted,

Donald T. Bliss

David T. Beddow

O'Melveny & Myers LLP

555 13th Street, N.W.

Suite 500 West

Washington, D.C. 20004-1109

(202) 383-5300

Exhibit A - US Airways Proposed Charlotte-London (LGW) Connections
Exhibit B - US Airways Proposed Charlotte-London (LGW) Route
Exhibit C - US Airways Proposed Schedule for Charlotte-London (LGW) Service
Exhibit D - US Airways Proposed Charlotte-London (LGW) Service (Annual Operating Statistics)
Service List