OST-98-3449 / JAL / Emergency Exemption / February 9, 1998

NOTICE: The instant application asks, pursuant to 14 C.F.R. § 302.410 ("Emergency Exemptions"), that the Department of Transportation forgo the normal period for answers and replies and grant the subject exemption authority immediately or after a shortened answer period. Answers or objections to this application or to the request for immediate action therefore should be filed with the Department as quickly as possible, with copies served on the undersigned and all persons listed in the attached service list. If the Department denies the instant request for emergency treatment, then any . person may support or oppose this application by filing an answer by February 24, 1998, and serving a copy of the answer on the undersigned and all persons listed in the attached service list.

Application of

JAPAN AIRLINES COMPANY, LTD. / Docket OST-98-3449

for an Exemption under 49 U.S.C. Section 40109(c)

(Implementation of 1998 Memorandum of Consultations)

Specifically, JAL asks, in keeping with Tab A (Paragraph A) and Tab C (Paragraph A) of the 1998 MOC, that it be granted immediate exemption authority permitting it to operate both combination and all-cargo services between any point or points behind Japan, any point or points in Japan, any intermediate point or points, any point or points in the territory of the United States, and any point or points beyond the United States, without any limitation on frequency or capacity. JAL also asks that such authority be granted consistent with the provisions of Tab F ("Operational Flexibility") and Tab G ("Change of Gauge") of the 1998 MOC. Finally, JAL asks that this exemption authority be granted for a period not less than one year in duration. /1 The exemption authority sought herein would not affect JAL's existing permit authority; it would merely bridge the gap between JAL's existing permit authority and the broader operating rights accorded JAL under the 1998 MOC.

As the Department is aware, JAL currently enjoys substantial operating authority in the Japan-U.S. air transport market (third- and fourth-freedom), and to a limited extent between the U.S. and points beyond (fifth-freedom). Some of JAL's operations are conducted pursuant to economic authority embodied in its foreign air carrier permits; other operations are conducted pursuant to exemption authority that the Department has granted from time to time.

JAL recognizes that an alternative to this single, comprehensive request for exemption authority consistent with the provisions of the 1998 MOC might be a long parade of individual

applications for service-specific grants of amended or incremental exemption authority. Some applications would be for the purpose of expanding JAL's frequencies; others would seek ability to coterminalize points in the U.S.; still others would propose new gateway points in the U.S. or beyond. Each application would be largely a formality, given the broad rights accorded JAL in the 1998 MOC; and yet each would generate a small mountain of paper, given the Department's service requirements and the ever-expanding number of interested parties.

For these reasons, JAL urges the Department to depart at last from the patchwork approach to JAL's economic authority that has characterized so much of its history in the U.S. market.

Consistent with the important departure reflected in the 1998 MOC, the Department should award JAL a single, comprehensive exemption covering all services that JAL is eligible to provide under the new agreement, and superseding all current grants of exemption authority. /2 If awarded for a period of one year, this single grant would have the distinct advantage of requiring JAL to apply for a renewal once a year. Similarly, interested parties and the Department would have to deal with the renewal of JAL's exemption authority only one time each year. If the authority were granted for an indefinite period (subject, of course, to continuing Departmental oversight), JAL, interested parties, and the Department would be wholly emancipated from the costly and mostly pointless administrative burden associated with exemption renewals.

In support of this application, JAL states the following:

1. Japan Airlines Company, Ltd., is a corporation organized and existing under the laws of Japan. It has continuously engaged in the transportation of persons, property, and mail between Japan and points in the United States since 1953, when it received its first foreign air carrier permit from

2/ As indicated at 2, supra, the authority currently set forth in JAL's air carrier permits would not be affected by the proposed comprehensive exemption authority. JAL will shortly file an application seeking to amend its foreign air carrier permits in keeping with the opportunities established in the 1998 MOC.

the Civil Aeronautics Board ("CAB"), pursuant to Order E-8032 (November 16, 1953). JAL's current foreign air carrier permits were issued by the CAB on August 14, 1970 (Order 70-8-66) and July 7, 1981 (Order 81-8-135).

2. In addition to the services authorized by its foreign air carrier permits, JAL also operates certain other services, including all-cargo services, based on exemption authority granted in keeping with certain bilateral agreements concluded by the United States and Japan. Examples are the Memorandum of Understanding of April 30, 1985 ("1985 MOU"); the Memorandum of Understanding of November 6, 1989 ("1989 MOU"); and the Memorandum of Understanding relating to all-cargo services of April 16, 1996 ("1996 All-Cargo MOU"). /3

3. On January 30, 1998, the United States and Japan signed a Memorandum of Consultations addressing "a full range of issues" relating to the U.S.-Japan civil aviation relationship. Attachment B to the 1998 MOC sets forth in detail certain understandings regarding the elements to be included in a Memorandum of Understanding on those issues discussed which are

to be finally negotiated in Tokyo and incorporated in the final text of the Memorandum of Understanding.

4. Attachment B of the 1998 MOC, at Tab A, sets forth the rights of two "Japanese incumbent combination airlines" (including JAL) that will be included in the forthcoming Memorandum of Understanding. Section I.A. provides that the Japanese incumbent combination airlines -

5. Tab C of Attachment B of the 1998 MOC sets forth a new Annex 1 to the 1996 All-Cargo MOU. Paragraph A provides that Japanese incumbent all-cargo airlines, including JAL -

6. Attachment B of the 1998 MOC also permits airlines, designated by the parties to enjoy substantial operational flexibility (Tab F) and to enjoy liberal change-of-gauge opportunities (Tab G).

7. The 1998 MOC records the intentions of the respective aeronautical authorities "to take necessary measures to implement the provisions of the agreement," as of January 30, 1998, on the basis of comity and reciprocity, pending conclusion of the interim agreement. Accordingly, the Department need not await the formal conclusion of negotiations toward an interim agreement as a prerequisite to granting the exemption authority sought by JAL. Implementation of the agreed new opportunities based solely on the 1998 MOC itself was explicitly contemplated by the parties.

8. The exemption authority sought by JAL, consistent with the parties' intention in negotiating the 1998 MOC, Will significantly enhance the capacity and geographic scope of JAL's combination and all-cargo operations, thereby increasing competition and enhancing the quality of services in the U.S.Japan air transport market. JAL will be in a position to promote its services in a more flexible way, thereby bringing important new economic benefits to the United States through increased tourism and trade revenues. For these reasons, the proposed exemption authority is also very clearly in the public interest.

9. The frequency increases and other new services contemplated by JAL in the near term are likely to result in , incremental operations that would result in a net annual increase in aircraft fuel consumption of 10 million gallons or more, as specified in 14 C.F.R. 313.4(a)(1). Accordingly, the Department's grant of the requested exemption authority is likely to be a "major regulatory action" for purposes of 14 C.F.R. Part 313 (Implementation of the Energy Policy and Conservation Act"). On the other hand, the signing of the 1998 MOC and widely publicized official predictions of the economic benefits likely to flow therefrom make clear that the U.S. Government has already determined that, notwithstanding the implications for aviation fuel consumption, the award of new operating authority in this important market, including the expanded exemption authority sought by JAL in the instant application, is in the public interest.

10. JAL recognizes that it will remain subject to the Department's regulations, including the requirement that it obtain prior authorization pursuant to Part 212 of the Department's regulations for code-sharing and blocked-space services that it may wish to provide.

11. JAL is seeking to conform its exemption authority to the opportunities made available in the 1998 MOC on an emergency basis pursuant to Rule 410 of the Department's Rules of Practice ("Emergency Exemptions"), 14 C.F.R. § 302.410. JAL's most urgent requirement is to obtain exemption authority, consistent with the 1998 MOC, enabling it to operate frequencies in its third-, fourth-, and fifth-freedom markets in excess of the limits imposed on those operations by prior interim agreements. For example, JAL plans to increase weekly combination frequencies as soon as possible in the Tokyo-Chicago and Los Angeles-Sao Paulo markets.

Given the extent of the public participation in the bilateral consultations, the public interest will be far better served by making these important service enhancements available to the traveling and shipping public at the earliest possible moment than by delaying them unnecessarily out of deference to the normal exemption application procedure. /4 JAL asks, therefore, pursuant to Rule 410, that the Department grant the

4/ If the Department wishes to ascertain whether there might be some hitherto unexpressed but still relevant opinion regarding the exemption authority proposed herein, it could, as an alternative to forgoing the answer/reply opportunity entirely, provide a dramatically reduced period for comment -- e.g., three days for answers and one day for replies.

requested exemption authority immediately /5 and forgo the normal period for answers and replies.

WHEREFORE, Japan Airlines Company, Ltd., respectfully requests that the Department grant the instant application for comprehensive exemption authority enabling it to operate both combination and all-cargo services between any point or points behind Japan, any point or points in Japan, any intermediate point or points, any point or points in the territory of the United States, and any point or points beyond the United States, without any limitation on frequency or capacity, and in keeping with provisions of the 1998 MOC that provide operational flexibility and liberal change-of-gauge opportunities. JAL asks that this exemption authority be granted for a period not less than one year in duration.

Respectfully submitted,

Jeffrey N. Shane

Timothy E. Stumpff

WILDER, CUTLER & PICKERING

2445 M Street, N.W.

Washington, D.C. 20037-1420

(202) 663-6000

Counsel for JAPAN AIRLINES COMPANY, LTD.

DATED: February 9, 1998

5/ JAL does not argue that its application is triggered by an Emergency" in the normal sense of that term; it believes, however, that the expedited action contemplated in Rule 410 is entirely warranted here.