OST-97-2911 / OST-95-498 / OST-97-2552 / OST-97-2553 / OST-97-2554 / US-South Africa / Answer of United to Continental / October 2, 1997
U.S.-SOUTH AFRICA THIRD-COUNTRY CODE-SHARE OPPORTUNITIES
Applications of
UNITED AIR LINES, INC. | OST-95-498
NORTHWEST AIRLINES, INC. | 97-2552
DELTA AIR LINES, INC. | 97-2553
CONTINENTAL AIRLINES, INC. | 97-2554
for U.S.-South Africa Third-Country Code-Share Service Opportunities
ANSWER OF UNITED AIR LINES, INC.
United Air Lines, Inc. ("United") pursuant to
Order 97-9-18 submits the following answer to the objections of Continental Airlines, Inc. ("Continental") in the above-captioned proceeding:1. In Order 97-9-18 the Department tentatively selected United and Northwest Airlines, Inc. ("Northwest") as the carriers to be designated for the first two third-country code-share opportunities to be available under the U.S./South Africa bilateral air services agreement. This selection was based on the conclusion that the services of United and Northwest offered "the greatest benefits to the traveling public due to the greater level of service they would provide ... providing more service options to the traveling and shipping public..." In addition, the Department noted that United and Northwest offered nonstop-to-nonstop connections from more U.S. cities and would "more
Answer of United
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fully utilize the limited first year routes for third-country code-share services." Order 97-9-18 at 5.
2. Although the selection process centered primarily on the proposals of United, Northwest and Delta Air Lines, Inc. ("Delta"), only Continental has filed an objection to the Department's tentative decision. The Department had tentatively dismissed Continental's application due to that carrier's inability to exercise the available code-share rights under its proposed arrangement with Air France:
There is currently no bilateral aviation agreement with France. Moreover, there is insufficient reciprocity with France to warrant approval of joint operations by Continental and Air France. Indeed, France has followed a consistent policy of not authorizing new code-share operations pending conclusion of a new agreement between the two countries. Thus, as Continental is currently not in a position to implement its proposed code-share services, we tentatively conclude that it is not eligible at this time for award of the third-country code-share authority at issue.
Order 97-9-18 at 4.
3. Continental urges that the Department defer selection until after upcoming bilateral negotiations with France scheduled to take place in the latter part of October. Alternatively, Continental suggests that the designations be conditionally awarded to United and Northwest on a short-term basis pending completion of the U.S./France negotiations.
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Continental has been making this same argument in codeshare proceedings for nearly a year with no visible signs of success. Thus, in the U.S.-India Third-Country Code-Share Opportunities Proceeding, Dockets OST-96-1966, et al., Continental urged a similar deferral or conditional authorization pending completion of U.S./France negotiations then scheduled for December 1996. Consolidated Reply of Continental, dated December 4, 1996 at 3. There was no agreement reached at that time, and the Department rejected Continental's argument there for the same reasons cited in the show cause order in this case and quoted above. See
Order 97-2-26 at 4. Notwithstanding two rounds of negotiations with France since Continental first sought deferral, outstanding issues with France are no nearer resolution today than they were then. Indeed, because of the recent change of government in France, the chances of a successful resolution of aviation issues may be even more remote today than they were when Continental first sought deferral last December.Continental made a nearly identical plea for deferral or short-term approval in the recent proceeding for selection of a carrier to use a new code-share opportunity under the U.S./Egypt agreement. /1 That plea was rejected by the Department at virtually the same time that it issued the show cause order in
1/
Consolidated Reply of Continental, dated August 26, 1997, in Docket OST-97-2822 at 2.
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this proceeding. The Department there selected Delta and dismissed Continental's competing application for reasons that are equally applicable here:
We are not prepared to delay or condition authorization of Delta's service pending resolution of the bilateral and regulatory requirements necessary for consideration of the proposed Continental/Air France codeshare service. The U.S.-Egypt third-country code-share opportunity is available immediately and represents a valuable operating right that the United States obtained in exchange for rights for Egyptian carriers. We conclude that the public interest calls for use of those U.S.-carrier rights. As we stated above, Delta is in a position to operate its proposed code-share operations, and plans to begin its service on October 26, 1997. Therefore, we conclude that authorization of its service at this time is in the public interest and will ensure prompt use of this valuable opportunity.
Order 97-9-16 at 3-4.
4. In this case, the U.S.-South Africa code-share opportunities are available on November 1, 1997 and both United and Northwest propose to use them on that date. There is no more reason to defer a decision in this case to await the wholly uncertain outcome of the U.S./France negotiations than there was in the U.S.-Egypt or the U.S.-India case. Moreover, there is even less justification to grant conditional short-term authority here than in the U.S.-Egypt case because there are additional U.S.-South Africa opportunities available at an agreed later date, whereas only one U.S.-Egypt opportunity was available.
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Despite the overlapping issues in the two cases, Continental has not even attempted to distinguish this case from that involving the U.S.-Egypt opportunity despite the contemporaneous issuance of the two orders.
5. United urges the Department to issue a final order adopting its tentative conclusion in Order 97-9-18 and to do so without further delay. United needs adequate lead time to promote its new code-share services prior to the bilaterally-agreed effective date of November 1, 1997. Further delay merely attenuates the value of the U.S./South Africa opportunities and prolongs the monopoly enjoyed by South African Airways. Continental's repetitious agreements should be dismissed for the same reason already given in Orders 97-9-16 and 97-2-26. Continental's continued attempts to defer timely implementation of code-share opportunities that Continental is itself unable to utilize should not be tolerated. This issue has long been settled, and Continental has made no colorable argument to support a different result.
In these circumstances, the Department should not waste any further time in this proceeding by preparing yet another detailed order disposing of Continental's repetitious arguments. The show cause order should be immediately made final by adopting
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the same conclusions applied in the final order issued in the contemporaneous U.S.-Egypt proceeding. /2
6. To the extent that Continental has sought to raise arguments relating to the alleged superiority of its code-share services with Air France, the Department's tentative dismissal is without prejudice to those arguments being raised in a subsequent proceeding involving future U.S.-South Africa code-share opportunities. The next such opportunity will become available on November 1, 1998 and if Continental at that time has an eligible code-share partner, it will be fully entitled to seek that opportunity by urging the same benefits to derive from its proposed service as those it urged in this proceeding.
Respectfully submitted,
JOEL STEPHEN BURTON
GINSBURG, FELDMAN and BRESS, CHARTERED
1250 Connecticut Avenue, N.W.
Suite 700
Washington, D.C. 20036
(202) 637-9130
Counsel for
UNITED AIR LINES, INC.
DATED: October 2, 1997
2/ In dismissing Continental's similar applications in previous proceedings, the Department made its action effective immediately rather than making the dismissal on a tentative basis subject to objection. E.g.:, Orders 97-9-16 and 97-2-26.