OST-96-1381 / OST-97-2877 / Korean Air Lines / Seoul-Denver / Intermodal Cargo Service / Consolidated Reply of Korean / September 19, 1997

Application of Korean Air Lines Co., Ltd.

Seoul-Denver

Application of Korean Air Lines Co., Ltd.

Intermodal Cargo Service

Korean Air Lines Co., Ltd.

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operate intermodal service between three U.S. city-pairs (Los Angeles-Houston, Dallas/Fort Worth-Houston, and Portland-Seattle) in lieu of the three city-pairs named in the current CAL exemption.

1. In its exemption amendment applications, Korean Air does not request any expansion of existing rights. In the case of its Denver authority, KAL merely requests the substitution of San Francisco for Los Angeles, as the intermediate point on Korean Air's Seoul-Denver services. In the case of its intermodal cargo service, KAL merely requests the substitution of three U.S. city-pairs for the three U.S. city-pairs authorized in KAL's current exemption authority.

2. The Department's previous findings that the public interest is served by the authority granted to Korean Air for it" Denver and intermodal cargo services will remain unchanged with

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the amendments of those exemptions requested by KAL. The travelling and shipping public will significantly benefit from Korean Air's continued services.

In the case of Denver, the City and County of Denver point out in their answer supporting KAL's request that KAL's Denver service, which commenced in May of this year, "is playing an important role in meeting the needs of the people and businesses of Denver and the Intermountain West for better international service and is stimulating additional trade and tourism between Colorado and Korea." Denver also notes that Korean Air's service is the only non-stop or single-plane service to the Far East from Denver and without Korean Air's service, Denver passengers would be required to use connecting services and that "highly unsatisfactory situation would place Denver area businesses at a serious competitive disadvantage in shipping and receiving cargo and would impose burdens and inconvenience on business and tourist travelers.

3. United has filed an answer in response to both of Korean Air's applications, requesting the Department to defer action on the applications. In its answer, United mischaracterize" KALE' applications as seeking an "expansion" of existing authority. That statement is not correct. As previously discussed, the application for Denver service merely substitutes San Francisco for Los Angeles as the intermediate point on the Seoul-Denver

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service, and the application for intermodal services merely substitutes three new city-pair markets for three existing city-pair markets.

United further states that there should be no "expansion" of KAL's authority pending completion of ongoing U.S.-Korea aviation negotiations. United makes the unsubstantiated claim that the negotiations have been "broken off" because the Government of Korea believes that Korean carriers have all the U.S. authority they desire, and United believes the Government of Korea will not grant extrabilateral rights to U.S. carriers, such as codesharing rights. Based on these speculations, United urges the Department to defer action on KAL's applications. The Department should reject the United request. The U.S. and Korea have had two rounds of negotiations on a new aviation agreement and, after the last round, it was agreed that further talks would be scheduled through diplomatic channels -- a normal procedure in aviation negotiations. Regarding code-share operations, United has not applied for any such operations involving service to Korea and has no basis for its speculation. In addition, as the Department i" fully aware, code-share operations already exist between Korean and U.S. carriers.

United also states that no "additional rights should be given to Korean Air due to undefined, unsubstantiated so-called "unresolved" issues relating to U.S. carriers doing business in

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Korea. Again, United misstates KAL's requests in the pending applications. Korean Air asks for no "additional rights, and the Department must reject United's request for deferral of action based on nothing but unstated and unsupported "issues."

4. Federal Express has filed an answer to KAL's request to amend its exemption for intermodal services to substitute three new U.S. city-pair markets for the currently authorized three city-pair markets and has requested the Department to defer action on Korean Air's application. Federal Express correctly notes that it "provides all-cargo service to and from Korea through Seoul's Kimpo International Airport, and exercises [Federal Express'] right to perform self-handling operations on a satisfactory basis at that airport."

In other words, there is no issue of any kind under the current U.S.-Korea air services agreement with respect to the Federal Express service to/from Korea. However, Federal Express goes on to note the construction by the Government of Korea of a new international airport at Inchon, Korea, with completion in late 2000, or later, according to Federal Express. Federal Express cites various "areas of uncertainty" about the new airport, but does not -- and cannot -- claim that its concern" reflect any violation of the current U.S.-Korea aviation agreement and, as already noted, Federal Express acknowledges that it currently operates satisfactorily under the current

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agreement. Yet based on speculations about construction of and operations at the new airport at Inchon, Federal Express asks for deferral of action on KAL's intermodal application. The Department should reject that request for deferral.

5. The issues before the Department are very straightforward in considering Korean Air's applications in the above-referenced dockets. First, Korean Air does not request any additional authority in these applications, but merely amendment of KAL's current authority for substitutions -- the substitution of an intermediate point for the current intermediate point in the case of Denver, and the substitution of three city-pair markets for the current three city-pair markets in the case of the intermodal services. Second, the services operated under the amended exemption authorities would continue to be in the public interest. The travelling and shipping public would continue to benefit from KAL's service and, in the case of the Denver services, the Denver civic and business community would continue to benefit as a result of the services. Finally, the requests of United and Federal Express for deferral of action on the amendment applications are not based on any claims of adverse harm to those carriers under the current U.S.-Korea aviation agreement. Rather, those carriers speculate on various matter" which are simply irrelevant to Korean Air's pending applications.

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WHEREFORE, Korean Air Lines Co., Ltd. respectfully requests the approval of its applications pending in DOT Dockets OST-96-1381 and OST-97-2877.

Respectfully submitted,

ZUCKERT, SCOUTT & RASENBERGER, L.L.P.

James Devall

William H. Callaway, Jr.

Counsel for Korean Air Lines Co., Ltd.

September 29, 1997