Docket OST-97-2822 / US-Egypt / Reply of Continental / August 26, 1997

CONTINENTAL AIRLINES, INC.

1. Delta predictably urges the Department to dismiss or defer Continental's application and to designate Delta for U.S.-Egypt third-country code-sharing. While dismissing Continental's application would undoubtedly promote the private interests of Delta and its global alliance partners, doing so would be contrary to the public interest in expanding competition in international markets and among global partnerships. The U.S. has only one third-country code-share designation to allocate in this proceeding. The Department would waste a valuable opportunity to enhance competition among U.S. carriers and among global alliances if it allowed Delta, which already benefits from an antitrust-immunized

1/ Common names of carriers are used.

Consolidated Reply of Continental

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global mega-alliance and numerous other third-country code-share opportunities, to snatch the one U.S. -Egypt code-share designation available. /2

2. With only one designation available, the Department must, as Delta correctly suggests, give comparative consideration to both pending applications. Doing so is consistent with well-settled practice and will promote the public interest in expanding competition in the U.S.-Egypt market and among global alliances. Delta does not deny that Continental proposes more third-country service to/from Egypt than Delta does and that all of Continental's transatlantic service will be operated by Continental, while most of Delta's transatlantic service will be operated by Swissair. Another round of U.S.-France bilateral talks is scheduled for mid-October 1997. To the extent the Department is concerned that negotiation of a U.S.-France bilateral agreement will delay use of the code-share opportunity, moreover, the Department could award Delta a temporary designation on a short-term basis pending completion of negotiations with France and approval of the Continental/Air France code-share arrangement.

3. American, which is not an applicant in this proceeding, says Air France should not benefit from third-country code-sharing since France has not approved

2/ Delta complains that Continental's application should be dismissed as incomplete because it does not include a copy of the Continental/Air France codeshare agreement. The Department awarded U.S.-India third-country code-share' authority to Delta, although Delta failed to attach a copy of its code-share agreement to its application in Docket 96-1969. Continental has asked for a waiver of the agreement-filing requirement and has advised the Department that its code-share agreement will be submitted when a statement of authorization is sought.

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American third-country code-sharing. American's opposition is clearly a red herring. The true beneficiary of a U.S.-Egypt code-share designation is Continental, since Air France already provides its own direct Egypt services. Continental will gain the right to sell U.S.-Egypt through services, and Continental will be operating the transatlantic flights involved. Moreover, as American knows, the French bilateral proposal provides for third-country codesharing by carriers of both sides, and Continental's application is contingent on successful negotiation of a new U.S.-France bilateral agreement.

For the foregoing reasons, the Department should give comparative consideration to both pending applications and select Continental for the one available designation.

Respectfully submitted,

CROWELL & MORING LLP

R. Bruce Keiner, Jr.

Lorraine B. Halloway

Counsel for Continental Airlines, Inc.

August 26, 1997