OST-97-2856 / Federal Express / US-Vietnam All-Cargo / September 10, 1997

Application of

for grant of an exemption pursuant to 49 U.S.C. § 40109
(U.S.-Vietnam All-Cargo Service)

Pursuant to Rule 407 of the Rules of Practice of the Department, Federal Express Corporation (Federal Express) hereby submits its Reply in response to the Answer of Northwest Airlines, Inc. (Northwest) to the application of Federal Express for grant of an exemption to authorize Federal Express to engage in scheduled all-cargo air transportation between points in United States and Ho Chi Minh City, Vietnam. 1/

Federal Express notes that Northwest does not oppose grant of the authority requested by Federal Express, provided that Northwest's own pending application for U.S.-Vietnam authority is considered and acted upon concurrently.

1/ As a matter of clarification, it is important to note that Federal Express already holds legally-valid, but dormant, U.S.-Vietnam all-cargo certificate authority, which has expired but continues in force by operation of law (5 U.S.C. § 558(c)). The sole purpose of Federal Express' exemption application in this proceeding is to provide an updated basis for the expedited grant of interim authority pursuant to procedures which are less cumbersome than the certificate renewal process.

FedEx Reply to Northwest U.S.-Vietnam All-Cargo 2

Federal Express believes, however, that applications for scheduled all-cargo authority to serve Vietnam should be dealt with separately from applications for scheduled passenger and combination service authority. Those two types of service are addressed to very different markets, and it is highly probable that they will be viewed as raising differing issues by Vietnam. Moreover, the majority of the actively-pending Vietnam applications involve requests for all-cargo authority only. The processing of those more immediate applications should not be delayed to await the arrival of possible future applications for U.S.-Vietnam passenger authority.

Federal Express vigorously disagrees, however, with Northwest's assertion that the Department should defer action on all of the pending Vietnam all-cargo applications until after the Department has determined

"whether the Government of Vietnam is prepared to allow U.S. air carriers to commence scheduled service between the United States and Vietnam, either on the basis of comity and reciprocity or upon the conclusion of a new bilateral agreement between the two countries" (Northwest Answer, p. 3).

The Department has long since established a firm commitment to unrestricted competition as a fundamental tenet of its international aviation policy

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(see, e.g., April 1995 Statement of U.S. International Aviation Policy, pp. 1, 7-8). That policy has been the central objective of U.S. international aviation bilateral negotiations in every region of the world for many years, and has been applied with particular emphasis (and success) in the context of countries with highly restrictive competition policies. Indeed, Northwest itself has been an outspoken advocate of the position that the U.S. should not compromise in its efforts to reach an "open skies" agreement with Japan (see, e.g., Aviation Daily, September 4, 1997, p. 406).

Federal Express strongly urges the Department to act in accordance with its long-settled pro-competition policies, rather than waiting passively to see if Vietnam might prefer to attempt to impose restrictions on the level of competition in the U.S.-Vietnam cargo market. It is wholly appropriate for the U.S. to take the initiative in asserting its own pro-competition objectives -- particularly in the area of all-cargo services in this newly-reopened market -- and Federal Express is confident that Vietnam will readily perceive the benefits of unrestricted air cargo services to its economic growth and its enhanced access to international import and export markets.

Accordingly, Federal Express urges the Department to act immediately to grant the pending application of Federal Express for U.S.-Vietnam all-cargo authority, and such other Vietnam cargo service applications as the Department deems appropriate. Following the grant of those applications, Federal Express

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urges the Department to support each of those applicants in their efforts to obtain requisite operating authority from the Government of Vietnam.

WHEREFORE, Federal Express urges the Department to issue an Order or Notice of Action Taken granting an exemption to Federal Express to provide scheduled all-cargo foreign air transportation between the United States and Ho Chi Minh City, Vietnam, pending final action on the pending application of Federal Express for renewal of its U.S.-Vietnam certificate authority, and to grant such other pending applications for U.S.-Vietnam all-cargo authority as the Department deems appropriate.

Respectfully submitted,

SHAW PITTMAN, Nathaniel P. Breed, Jr.

A. Doyle Cloud, Jr. , Gina F. Adams
FEDERAL EXPRESS CORPORATION