OST-97-2966 / Iberian / Exemption, Codesharing with American /October 2, 1997

NOTICE: Answers supporting or opposing this application are due on October 17, 1997.

Application of

under 49 USC 40109 for exemption (U.S.-Spain; codesharing with American Airlines)

Iberia Lineas Aereas de Espana, S.A. ("Iberia") hereby applies for exemption authority, pursuant to 49 USC § 40109, in order to engage in the foreign air transportation of persons, property and mail from Spain to Baltimore/Washington, D.C. International Airport ("BWI") via New York ("JFK"). This authority is needed to implement fully the codeshare agreement between Iberia and American Airlines, Inc. (American"), attached to those airlines' joint application of today's date for statements of authorization under Parts 207 and 212 of the Department's regulations.

The air services agreement between the united States and Spain provides, in Note (2) to Part B of Annex I, that an airline designated by the Government of Spain (i.e., Iberia) may serve only one airport in the Washington/Baltimore area. Further, Note (2) states that the Spanish government will notify the U.S. government of the airport selected prior to the commencement of service. Annex B to the Iberia-American codeshare agreement contemplates Iberia codeshare service on American aircraft to Washington National Airport (DCA) and BWI.

Iberia will ask its government to select DCA under the bilateral agreement and to so notify the U.S. prior to December 1, 1997, the scheduled date for commencement of codeshare service. Therefore, codeshare service to BWI would be extrabilateral, necessitating the Department's grant of this exemption application.

The exemption authority requested herein is clearly in the public interest and should be granted. First, as a general matter, the Department has recognized that codesharing in international markets provides substantial benefits to consumers. See, pp. 4-5 of the Department's International Air Transportation

1/ Air Transport Agreement signed on February 20, 1973 between the United States of America and the Kingdom of Spain, as amended by the Memorandum of Understanding of November 27, 1991 between those governments.

Policy Statement. Second, grant of this application will specifically benefit residents and businesses in the Washington/ Baltimore area by bringing seamless codeshare service between the U.S. and Spain to yet another airport in the vicinity, thus providing increased service and competition in the market. Finally, U.S.-Spain codeshare service is explicitly authorized in Paragraph E of the 1991 U.S.-Spain Memorandum of Understanding. Permitting Iberia to hold out codeshare service to BWI would allow it to take advantage of the codesharing opportunities contemplated by the bilateral.

Iberia requests the Department to expeditiously grant this application so that codeshare service may begin on December 1, 1997, as planned.

Respectfully submitted,

William Karas

Steptoe & Johnson LLP

1330 Connecticut Avenue, N.W.

Washington, D.C. 20036

Phone: (202) 429-6223

Fax: (202) 429-3902

Attorney for IBERIA LINEAS AEREAS DE ESPANA, S.A.

October 2, 1997