OST-97-2145 / OST-97-2201 / US-Philippines Route 2 / Reply of Northwest / August 15, 1997

Applications of

UNITED AIR LINES, INC.

for allocation of all-cargo frequencies under the United States-Philippines Air Transport Services Agreement (Route 2)

REPLY OF NORTHWEST AIRLINES. INC.

In its Objections, United relies solely on its previous pleadings. United offers no new rationale or evidence to support reversal of the Department's tentative decision. Indeed, all of the arguments proffered in United's Objections already have been responded to by Northwest is previous pleadings and carefully -considered by the Department in the SCO:

· Allocation of the two available frequencies to Northwest, a new all-cargo entrant, will enhance competition in the U.S.-Philippines market to a greater extent than would an award to United. Consolidated Response of Northwest Airlines at 6-7, (March 25, 19~7); SCO at 5.

· Northwest's conversion of some of its existing combination frequencies to operate all-cargo service would be directly contrary to the public interest. Northwest has consistently used its combination frequencies and its operations have provided valuable services to the public and significantly enhanced competition in the U.S.-Philippines market. Consolidated Response of Northwest Airlines at 5-6 (March 25, 1997); SCO at 6-7.

· United's reliance on the concept of "competitive parity" as the Department's primary decisional criteria is misplaced in the context of this proceeding. The Department's tentative award to Northwest is based on a number of broad public interest considerations which are set forth in a well-reasoned and exhaustive manner in the SCO. Amended Application of Northwest Airlines at 5 (April 21, 1997); SCO at 7.

· Both carriers in this proceeding propose twice weekly turnaround service between the United States and the Philippines. The mere fact that one of Northwest's flights will not turnaround in Manila does not preclude Northwest's ability to carry U.S.-Philippines traffic in both directions on that flight. Reply of Northwest Airlines at 3-4 May 23, 1997); SCO at 6.

· Northwest's proposed intermediate stem in Thailand,- on one of its U.S.-Philippines all-cargo flights will not effect the superiority of Northwest's service proposal. /1 First, Northwest's larger B-747F aircraft will provide greater overall capacity than United's DC-10 aircraft. This is particularly decisional given the limited number of frequencies available. Second, shippers of general cargo typically are not concerned by the inclusion of intermediate stops on a flight itinerary. Third, given the developing nature of the U.S.-Philippines all-cargo market, the carriage of some fifth-freedom traffic is likely to contribute to the overall success of cargo service between the countries. Indeed, United's existing U.S.-Philippines all-cargo operations, as well United's services proposed in this proceeding, involve intermediate stops demonstrating the benefit of support traffic as the Philippine market develops. Reply of Northwest Airlines at 3-5 (May 23, 1997); SCO at 5-6.

· The Department's acceptance of Northwest's amended service proposal under the circumstances of this proceeding is in the public interest and fully consistent with long-standing

1/ United's belated complaint that the Department did not require submission of detailed traffic composition data in this proceeding should not be accorded any consideration. It has been more than six months since Northwest's Application. If United sincerely wanted a full evidentiary hearing in this case, it would have requested one long ago. The motivation behind United's complaint is transparent -- United is attempting to delay as much as possible Northwest's entry into the U.S.Philippines all-cargo market.

Departmental precedent. United's rights have not been prejudiced as a result. Reply of Northwest Airlines at 2-3 (May 2 1997); SCO at 2-3 n. 4. Indeed, almost four months have passed since Northwest amended its Application, during which United could have amended its own proposal and/or submitted any additional evidence it deemed relevant. Having failed to do so, United has no grounds to complain now.

The record overwhelmingly supports the Department's tentative allocation to Northwest of the two newly available U.S.-Philippines Route 2 all-cargo frequencies. United has offered no rationale for reversal of the Department's tentative decision beyond those already considered and rejected by the Department in the SCO. In these circumstances, the Department should proceed directly to a Final Order confirming its tentative selection of Northwest in this proceeding.

Northwest further urges the Department to issue its Final Order immediately. A mere six weeks remain until the frequencies at issue here may be operated under the terms of the U.S.Philippines Air Transport Services Agreement. Northwest's Application in this proceeding has been pending for six months. The Department should not allow United's redundant arguments to further delay Northwest's ability to begin immediate preparations for entry into the U.S.-Philippines market.

Respectfully submitted,

Megan Rae Poldy

Associate General Counsel

NORTHWEST AIRLINES, INC.

901 15th Street, N.W.

Suite 310

Washington, D.C. 20005

(202) 842-3193

August 15, 1997