OST-98-3436 / Federal Express / US-Japan All-Cargo Service / February 5, 1998

Notice: Answers to this Application are due to be filed on February 20, 1998.

Application of :

FEDERAL EXPRESS CORPORATION : Docket OST-98-3436

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

(U.S.-Japan All-Cargo Service)

Federal Express Corporation (Federal Express) hereby applies, pursuant to 49 U.S.C. §40109 and Subpart D of the Procedural Regulations (14 C.F.R. Part 302.400, et seq.) of the Department of Transportation (the Department), for grant of an exemption to the extent necessary to grant or confirm the authority of Federal Express to operate scheduled all-cargo foreign air transportation between any point or points in the U.S. and any point or points in Japan, and to perform such transportation to points in third countries beyond Japan which Federal Express is authorized to serve in conjunction with its existing scheduled all-cargo services between the U.S. and Japan.

Concurrently herewith, Federal Express is filing a separate application for amendment of its existing certificate authority to provide scheduled foreign air transportation of property and mail between points in the United States,

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Specifically, the 1998 MOC provides and/or confirms that Federal Express, as an incumbent U.S.-flag all-cargo carrier under the 1952 Agreement, enjoys the right to operate scheduled all-cargo services between any point or points in the U.S. and any point or points in Japan, either directly or via intermediate points without limitation, and beyond Japan, with full traffic rights, to any point or points outside of Japan.

Federal Express requests that the foregoing exemption authority be granted immediately, for a one-year term, or until 60 days after final action by the Department granting the concurrent certificate application by Federal Express, whichever is sooner.

In support of this Application, Federal Express states as follows:

1. The specific authority requested by Federal Express in this application is the grant of an interim short-term exemption: (1) authorizing

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Federal Express, or confirming the existing authority of Federal Express, to serve any point in Japan in connection with its performance of scheduled all-cargo foreign air transportation between any point or points in the U.S. and Japan, and (2) authorizing Federal Express, or confirming the existing authority of Federal Express, to provide scheduled all-cargo foreign air transportation between the U.S. and various countries, which Federal Express holds effective authority to serve, in the Asia/Pacific region and beyond that region, operated either directly or via an intermediate stop in Japan, with 5th freedom traffic rights between Japan and such third countries, subject to applicable aviation bilateral agreements.

Federal Express requests that the foregoing exemption authority be granted immediately for a period of one year, or until 60 days after final action by the Department granting the concurrent certificate amendment application by Federal Express for the same authority, whichever is sooner.

2. The specific new services which Federal Express plans to inaugurate immediately upon receipt of requisite approvals by the Government of Japan are the operation of new all-cargo flights between Tokyo and/or Osaka, on the one hand, and Jakarta, Indonesia, and Macau, Macau, on the other hand. In addition, Federal Express currently provides scheduled all-cargo service on a blind-sector basis between Japan and Beijing and Shanghai, China. In accordance with the 1998 MOC, Federal Express plans to begin carrying local 5th freedom traffic on its Japan-China operations in the immediate future.

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As noted below, Federal Express already holds all requisite U.S. Government authority to perform all of the foregoing new services, and Federal Express believes that its planned new services are consistent with all applicable aviation bilateral agreements between the U.S. and each foreign country involved, including Japan. Each of the foregoing planned new services, however, is, or may be, subject to the receipt by Federal Express of further specific approval which may be required by the Government of Japan.

3. Federal Express hereby adopts and incorporates by reference all of the assertions contained in its concurrent U.S.-Japan certificate amendment application pertaining to its corporate existence, U.S. citizenship, existing operations, fitness to operate the proposed service, description of its proposed near-term service plans, and the consistency of the proposed service with the applicable and effective aviation bilateral agreements between the U.S. and Japan and with the public interest standards of the Federal Aviation Statutes (49 U.S.C. § 40101, et al.).

4. Federal Express holds current and effective authority to provide scheduled all-cargo foreign air transportation, as requested in this application, as follows:

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5. The sole purpose of this exemption application is to enable the Department to take immediate action, without the inherent and unavoidable delays involved in the processing of formal certificate applications, to confirm the authority of Federal Express to operate scheduled all-cargo air service to Indonesia, Macau and China in its Asia/Pacific operations via Japan as an intermediate point, with full 3rd, 4th and 5th freedom traffic rights (subject to applicable bilateral agreements) and without frequency or capacity restrictions.

As noted above, Federal Express believes that it already holds all of the authority requested in this exemption application to serve each of the countries at issue, and various other countries, in its operations beyond Japan. The purpose of this application is to obtain a formal affirmation of that authority by the U.S. Department of Transportation in order to avoid any risk of delay in the processing and approval of a schedule revision filing relating to the three countries at issue which Federal Express expects to file with the Government of Japan in the near future. Federal Express has encountered such delays, and partial refusals to approve its flight schedules by the Government of Japan in the past, based on a disagreement between the U.S. and Japan bearing on the scope of the 5th freedom traffic rights available to U.S. carriers under the 1952 Agreement.

Federal Express does not anticipate that it will encounter any such delays in the future, based on the understandings reached between the U.S. and Japan which are now contained in the January 30, 1998 Memorandum of

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Consultations (the 1998 MOC), but Federal Express is seeking grant of the requested short-term interim exemption, pending the formal amendment of its U.S.-Japan certificate authority to conform to the terms of the 1998 MOC, in an abundance of caution, to avoid any possible uncertainty or delay pertaining to the approval by Japan of its forthcoming U.S.-Japan flight schedule revisions.

6. Federal Express submits that grant of the foregoing exemption authority, as requested in this application, is wholly consistent with the terms of the 1952 U.S.-Japan Bilateral Agreement, as amended and/or confirmed by the 1998 MOC between the U.S. and Japan. Grant of the requested exemption is also consistent with the public convenience and necessity, in that it will afford immediate increased operating flexibility to enable Federal Express to adjust the routing and frequency of its U.S.-Japan services more quickly in response to shifting operational or traffic-demand considerations. That increased operating flexibility will enhance the ability of Federal Express to provide efficient, reliable and high-quality all-cargo service between the U.S. and Japan, on which thousands of its customers rely to meet their U.S.-Japan expedited air express and time-definite air freight transportation requirements.

WHEREFORE, Federal Express respectfully requests the Department to issue an order granting an exemption to Federal Express to authorize Federal Express, or to confirm the existing authority of Federal Express, to provide scheduled foreign air transportation of property and mail between points in the United States and all points in Japan, either directly or via intermediate points,

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and beyond Japan to other countries in the Asia/Pacific region and beyond, as requested in this application.

Respectfully submitted,

Nathaniel P. Breed, Jr.

SHAW PITTMAN POTTS

Attorneys for FEDERAL EXPRESS CORPORATION