OST-95-657 / Federal Express / US-Saudi Arabia Cargo / Reply of Federal Express / October 10, 1997

Application of :

for an exemption pursuant to 49 U.S.C. § 40109

(U.S.-Saudi Arabia Cargo Service)

Saudia does not object to the grant of Federal Express' renewal application, but does seek further clarification of the contract cargo charter flight operation provided for Federal Express by Falcon Express, Inc. (Falcon) between Dubai and Riyadh and Jeddah, for the purpose of enabling Federal Express to serve Jeddah and Riyadh in connection with the round-the-world DC-10-30

- 2 - FedEx Reply to Saudia

freighter line-haul flight operated by Federal Express which stops at Dubai on a daily basis. Saudia expresses its concern that the cargo charter flight operation performed by Falcon for Federal Express between Dubai and Riyadh/Jeddah may be in the nature "of a third-country code-sharing arrangement" which is not permitted under the existing U.S.-Saudi Arabia Bilateral (Saudia Answer, pp. 1-2).

As indicated in that Supplement, the arrangement between Federal Express and Falcon is in no way a "code-share" arrangement. The sole purpose of the contract cargo charter flights performed by Falcon for Federal Express is to enable Federal Express to provide expedited and reliable air express and time-definite air freight service between Saudi Arabia and the United States, by providing a direct link between Saudi Arabia and the existing around-the-world DC-10-30 freighter line-haul operation operated by Federal Express. /l

Federal Express does not hold out or sell cargo transportation to any part of the world using Falcon's designator code, and Falcon does not hold out or sell any cargo service using Federal Express' designator code. For that reason, no

1/ As noted in Supplement No. 1, the operations by Falcon between Dubai and Saudi Arabia are not provided for the exclusive use of Federal Express, although Federal Express is guaranteed a specified minimum amount of cargo capacity on each flight.

- 3 - FedEx Reply to Saudia

aspect of the arrangement between Federal Express and Falcon could be viewed as a "code-share" agreement.

Existing air express and freight traffic levels between the U.S. and Saudi Arabia would not economically support the operation of direct DC-10-30 freighter operations by Federal Express to Jeddah and Riyadh. The charter flight operations performed for Federal Express by Falcon enable Federal Express to provide direct service to Saudi Arabia utilizing cargo space on the much smaller 4,000-pound payload Beech-1900 all-cargo aircraft, which is ideally suited to current traffic volumes carried by Federal Express between the U.S. and Saudi Arabia.

Federal Express trusts that the foregoing explanation is sufficient to resolve the concern expressed by Saudia in its Answer.

WHEREFORE, Federal Express respectfully requests the Department to renew the exemption authority most recently granted by Order 96-1-4, so as to authorize Federal Express to provide scheduled foreign air transportation of property and mail between points in the United States and Saudi Arabia, as described in its Application, for a two-year period through November 29, 1999.

Respectfully submitted,

Federal Express and Nathaniel Breed of Shaw Pittman