OST-95-979 / OST-95-980 / Undocketed / Continental Airlines and Continental Express / Czech Airlines / Codesharing, US-Czech Republic - Renewal and Amendment / October 8, 1997

NOTICE: Any person may file an answer supporting or opposing this Joint Application on or before October 23, 1997 with copies served on the Joint Applicants and all persons served with the Joint Application.

Application of

CONTINENTAL AIRLINES, INC. AND CONTINENTAL EXPRESS, INC.

Docket OST-96-979

for renewal and amendment of an exemption pursuant to 49 U.S.C. § 40109 (U.S.-Czech Republic)

Application of

Docket OST-95-980

for renewal and amendment of an exemption from 49 U.S.C. § 41301

Applications of

Undocketed

for renewal and amendment of Statements of Authorization under Parts 207 and 212 of the Department's Regulations to engage in code-sharing

Pursuant to 49 U.S.C. § 40109, Parts 207 and 212 of the Department's Regulations and Rule 402 of the Department's Rules of Practice, Continental, /1 Continental Express and CSA (collectively, the "Joint Applicants") apply to renew

1/ Common names of carriers are used.

Joint Application of Continental,

Continental Express and Czech Airlines

Page 2

their exemptions and statements of authorization for Newark-Prague and Newark-Atlanta, Boston, Chicago (ORD), Cleveland, Denver, Detroit, Houston, Indianapolis, Los Angeles, Orlando, Miami, Minneapolis/St. Paul, Pittsburgh, San Francisco, St. Louis, Tampa and Washington, D.C. (BWI, DCA and IAD) codeshare services.

The Joint Applicants also ask the Department to amend their code-share authorities to permit: (1) Continental to serve Bratislava and Kosice, Slovak Republic on a code-share basis with CSA; (2) CSA to display the Continental "CO" designator code on its Prague-Bratislava/Kosice flights; (3) CSA to serve Buffalo, Columbus, Kansas City (Missouri), New Orleans, Phoenix, Rochester (New York), Seattle and Mexico City on a code-share basis with Continental and Continental Express; and (4) Continental and Continental Express to display CSA's "OK" designator code on their flights between Newark and Buffalo, Columbus, Kansas City (Missouri), New Orleans, Phoenix, Rochester (New York), Seattle and Mexico City.

The Joint Applicants ask the Department to make the new and amended authority effective until February 2, 1999 and request expeditious action on this application so the carriers can begin marketing the new services covered by the amendment request, many of which are scheduled to begin on October 26, 1997 /2

2/ The Joint Applicants rely on the automatic extension provisions of 5 U.S.C. § 668(c) and Part 377 of the Department's regulations to continue their existing code-share authorities beyond their current expiration dates pending action on this renewal application.

Joint Application of Continental,

Continental Express and Czech Airlines

Page 3

In support of their request for renewal and amendment, the Joint Applicants state as follows:

1. By Order 96-3-17, the Department granted (1) Continental an exemption to engage in scheduled foreign air transportation between Newark and Prague on a code-share basis with CSA; (2) CSA an exemption to serve Atlanta, Boston, Chicago (ORD), Cleveland, Denver, Detroit, Houston, Indianapolis, Los Angeles, Miami, Minneapolis/St. Paul, Orlando, Pittsburgh, San Francisco, St. Louis, Tampa and Washington, D.C. (BWI, DCA and IAD) on a code-share basis with Continental and Continental Express; (3) statements of authorization permitting Continental and Continental Express to display the CSA "OK" designator code on their flights between Newark and Atlanta, Boston, Chicago (ORD), Cleveland, Denver, Detroit, Houston, Indianapolis, Los Angeles, Miami, Minneapolis/St. Paul, Orlando, Pittsburgh, San Francisco, St. Louis, Tampa and Washington, D.C. (BWI, DCA and IAD) and (4) CSA a statement of authorization to display the "CO" designator code on CSA's Newark-Prague flights. /3 The Joint Applicants plan to continue these code-share services and to expand them to include both Continental code-sharing on CSA Prague-Bratislava/Kosice flights and CSA code-sharing on Continental and Continental Express flights between

3/ This authority expires February 2, 1998.

Joint Application of Continental,

Continental Express and Czech Airlines

Page 4

Newark and Buffalo, Columbus, Kansas City (Missouri), New Orleans, Phoenix, Rochester (New York), Seattle and Mexico City.

2. The expanded code-share services proposed are consistent with the U.S.-Czech Republic bilateral agreement. Section 7(a)(i) of Article 8 of the 1995 Air Transport Agreement between the Government of the United States of America and the Government of the Czech Republic ("Agreement") authorizes designated airlines of each party to "enter into cooperative marketing arrangements such as . . . code-sharing . . . arrangements with an airline" which "hold[s] the appropriate authority from both Parties." (Agreement at 10) Annex 1 of the Agreement authorizes airlines designated by the Czech Republic to serve New York, Chicago and Houston directly and, in addition, to serve 30 code-share points after September 1, 1997 (Agreement at 22). Under the expanded Continental/CSA agreement, CSA will be serving a total of 24 U.S. points and one Mexican point on a code-share basis. The Slovak Republic has indicated it would approve code-sharing between Continental and CSA at Bratislava and Kosice. Finally, the government of Mexico permits code-share services on an extrabilateral basis. /4

4/ Although the U.S.-Mexico bilateral does not provide for code-sharing, Mexico does permit code-sharing by U.S. and third-country carriers. Thus, the U.S. has granted U.S.-Mexico authority for code-sharing between U.S. and third-country carriers. See, e.g., Order 94-10-27 (code-sharing by Alitalia on Continental flights between Houston and Mexico City).

Joint Application of Continental,

Continental Express and Czech Airlines

Page 5

3. The Department has recognized the public benefits resulting from airline code-sharing in numerous cases and has granted both U.S. and foreign carriers the exemptions necessary to implement such code-sharing arrangements, even on an extra-bilateral basis. /5 In its International Air Transportation Policy Statement, the Department confirmed that code-sharing arrangements such as this one serve the public interest because they provide benefits in terms of increased service and increased competition. In particular, the Department noted, "Code sharing and other cooperative marketing arrangements can provide a cost-efficient way for carriers to enter new markets, expand their systems and obtain additional flow traffic to support their operations by using existing facilities and scheduled operations." (International Air Transportation Policy Statement at 4, April 1996)

4. Continental, Continental Express and CSA will continue to comply with the Department's rules for code-sharing set forth in Section 399.88 of the Department's regulations and the standard conditions attached by the Department to code-sharing authorizations.

5. In response to the Department's June 1, 1995 directive, Continental states that the proposed code-share arrangement will have no impact on its commitment to the Civil Reserve Air Fleet Program.

5/ E.g., Order 95-5-23 (American/Canadian International); Order 95-2-28 (Delta/Virgin); Order 94-4-43 (United/Lufthansa); Order 94-3-33 (Delta/Varig).

Joint Application of Continental,

Continental Express and Czech Airlines

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6. In light of the October 26, 1997 start-up date for the proposed new code-share services, Continental, Continental Express and CSA ask for expeditious action granting this application.

WHEREFORE, the Joint Applicants ask the Department to (1) renew the exemptions and statements of authorization granted to Continental, Continental Express and CSA permitting (a) Continental to serve Newark-Prague on a codeshare basis with CSA, (b) CSA to serve Atlanta, Boston, Chicago (ORD), Cleveland, Denver, Detroit, Houston, Indianapolis, Los Angeles, Miami, Minneapolis/St. Paul, Orlando, Pittsburgh, San Francisco, St. Louis, Tampa and Washington, D.C. (BWI, DCA and IAD) on a code-share basis with Continental and Continental Express, (c) Continental and Continental Express to display the CSA designator code on flights between Newark and Atlanta, Boston, Chicago (ORD), Cleveland, Denver, Detroit, Houston, Indianapolis, Los Angeles, Miami, Minneapolis/St. Paul, Orlando, Pittsburgh, San Francisco, St. Louis, Tampa and Washington, D.C. (BWI, DCA and IAD), and (d) CSA to display the Continental designator code on flights between Newark and Prague; (2) grant Continental exemption authority to serve the Newark-Bratislava/Kosice markets via Prague on a code-share basis with CSA; (3) grant CSA exemption authority to serve Buffalo, Columbus, Kansas City (Missouri), New Orleans, Phoenix, Rochester (New York), Seattle and Mexico City; (4) grant Continental and Continental Express authority to display CSA's "OK" designator code on their flights between Newark and

Joint Application of Continental,

Continental Express and Czech Airlines

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Buffalo, Columbus, Kansas City (Missouri), New Orleans, Phoenix, Rochester (New York) Seattle and Mexico City; and (5) grant CSA a statement of authorization to display the Continental code on its Prague-Bratislava/Kosice flights. The Joint Applicants ask that both their renewed and expanded authority be effective through February 2, 1999.

Respectfully submitted,

Allan Mendelsohn of Mendelsohn Szymkowicz for Czech

Bruce Keiner of Crowell Moring for Continental

October 8, 1997