OST-96-1672 / Delta Air Lines / Waiver from Dormancy Requirements, US-Russia / Reply of Delta Air Lines / September 26, 1997

Application of

DELTA AIR LINES, INC.

for a waiver from the dormancy requirements relating to its U.S.-Russia combination frequencies.

REPLY OF DELTA AIR LINES, INC.

Delta has not yet been able to implement its full complement of new online services to Russia, owing principally to actions of the Russian Ministry of Transport in refusing to allow Delta's third-country code-share services. /1

1/ The Department has currently pending before it an IATFCPA complaint filed by United for similar violations by Russia in failing to approve United's proposed Russia-Germany services.

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opportunity to provide expanded online services to Russia.2Delta replies as follows to Baltia's Answer:

1. The essence of Baltia's answer is that cooperative marketing agreements do not provide "U.S.-Russia uplift" and therefore do not produce meaningful public benefits. Baltia's indictment of code-sharing is in complete contravention of the Department's well-settled policy, as embodied in the International Policy Statement and countless orders affirming the numerous and important public benefits stemming from U.S. carrier code-share services. It is unnecessary and superfluous for Delta to repeat all of the Department's findings here.

2. Baltia neglects the fact that Delta is the only U.S. carrier now providing nonstop transatlantic service between the United States and Russia. Delta's code-share services are designed to augment its pattern of direct service and to more effectively compete for U.S.-Russia traffic against Aeroflot and large foreign-flag carriers such as British Airways, Lufthansa and KLM offering transatlantic service to Russia via their large European hubs.

2/ On September 23, 1997, the Department orally granted Delta's request on an interim basis, through September 30, 1997, to give the Department time to consider the issues raised by Baltia.

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3. The grant of the requested waiver to Delta does not in any way impact Baltia's plans to implement U.S.-Russia service. Delta has expressly agreed to relinquish the 1.5 frequencies it recently received to Baltia, if Baltia is able to make good on its stated service plans.

4. Baltia provides no reason for the Department to act inconsistently with its established precedent in granting United virtually identical relief when the Russian Government refused to allow United's proposed Russia-Germany services in conjunction with Lufthansa. ~ Order 96-10-1. Contrary to Baltia's claim, Delta did not have "foreknowledge" that Russia would act inconsistently with its U.S. bilateral commitments, which specifically provide for code-share services. Russia's objection to the United-Lufthansa arrangement was apparently predicated on specific provisions contained in the Germany-Russia bilateral. Delta's proposed code-share services operate via Belgium, Austria and Switzerland, which all hold separate and distinct treaties with Russia governing air transport services. In fact, Delta was able to implement its services in conjunction with Swissair via Zurich. The fact that Russia is acting in an inconsistent and unpredictable manner is no basis for denying Delta's requested relief.

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WHEREFORE, Delta respectfully requests that the Department grant its request for a waiver of the dormancy conditions as proposed in Delta's September 18, 1997 application, and grant such other and further relief as the Department deems to be in the public interest.

Respectfully submitted,

Robert E. Cohn

Alexander Van der Bellen

SHAW, PITTMAN, POTTS & TROWBRIDGE

2300 N Street, N.W.

Washington, D.C. 20037

(202) 663-8060

Counsel for DELTA AIR LINES, INC.