Docket OST-97-2373 Docket OST-97-2371 Docket OST-97-2372 | May 5, 1997

Application of :

for allocation of seven weekly U.S.-Chile combination frequencies

Application of :

for a new or amended certificate of public convenience and necessity pursuant to 49 U.S.C. § 41102 and for designation and allocation of U.S.-Chile frequencies

Application of :

for frequency allocation (U.S.-Chile Combination Service Opportunities)

Delta, /1 United and the Regional Business Partnership (Newark) have answered Continental's application for nonstop Newark-Santiago authority as well

1/ Common names of carriers are used.

Consolidated Reply of Continental

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as the Delta and United applications for U.S.-Chile authority. Continental replies as follows to these answers:

1. Delta claims that "the U.S.-Chile bilateral agreement" provides "only one U.S.-flag combination service opportunity and seven (7) weekly frequencies which are now available (Delta Answer at 1), and United says "there are three applications for the same U.S.-Chile service opportunity." (United Answer at 2) In fact, U.S.-Chile designations are unrestricted, and, so far as Continental has been able to ascertain, four weekly one-stop frequencies are not now being used. /2 Under these circumstances, it appears that only Continental is proposing to operate seven weekly nonstop U.S.-Chile flights. /3 Since the right to operate nonstop frequencies is so clearly superior to, and different from, the right to operate one-stop frequencies, the Department should award Continental the seven

2/ The Department's notice seeking applications for U.S.-Chile authority says that because "7 weekly frequencies for one-stop service on a year-round basis are operated by United" the Department does "not intend to subject these frequencies to reallocation." Continental has been unable to locate any action by the Department awarding more than three of the seven one-stop frequencies to United or any more than three one-stop flights actually being operated by United. This being so, the Department must request applications for the four one-stop frequencies and allocate them as well so that valuable operating rights are not wasted. (See e.g., Order 95-2-30 at 5)

3/ Delta has attempted to keep its options open by requesting authority via intermediate points but failing to indicate which markets it will serve. Thus, Delta may or may not be competing for the seven non-stop frequencies available, and the Department must insist that Delta comply with the Department's requirements to specify the markets it would serve before the Department determines any further steps to be taken in connection with the award of Chile authority.

Consolidated Reply of Continental

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weekly nonstop frequencies and require Delta and United to compete for the four weekly one-stop frequencies available.

2. Delta claims that an "award to Delta will maximize public benefits and competition between the United States and Chile . . . and between the U.S. and Latin America . . ." arguing that "Delta is the only applicant proposing to establish a new U.S. gateway to Chile and the only applicant proposing to provide service to Chile from two major U.S. hubs." (Delta Answer at 2) Delta fails to explain how adding service at two cities with almost no Santiago traffic would "maximize competition," particularly since the impact of Delta's Cincinnati hub would be minimized by the fact that any connecting traffic would require at least two stops. Moreover, as both Continental and the Regional Business Partnership pointed out, Newark is both a new gateway and a major hub serving an area with far more U.S.-Chile traffic than Atlanta and Cincinnati combined. Finally, unless Delta specifies what intermediate markets it will serve, its application should not even be considered in any proceeding the Department institutes.

3. United says it "cannot comment on the comparative merits of either Continental's or Delta's proposed service" without seeing the precise schedules to be operated (United Answer at 2), but the superiority of Continental's nonstop service at a new hub gateway compared to United's proposal to add one-stop flights wing-tipping nonstop flights at a well-served gateway is obvious no matter when Continental's flights depart or arrive.

Consolidated Reply of Continental

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For the foregoing reasons, Continental urges the Department to award Continental seven frequencies to operate nonstop Newark-Santiago service and to institute appropriate proceedings to determine whether Delta or United should be permitted to operate the four weekly one-stop U.S.-Chile frequencies which are also available.

Respectfully submitted,

CROWELL & MORING LLP

R. Bruce Keiner, Jr.

Counsel for Continental Airlines, Inc.

May 5, 1997