OST-98-3419 / OST-97-2913 / 1998 US-Japan Combination Service Proceeding / Application of Delta Air Lines / February 10, 1998

Notice: Delta proposes that this amended application be processed pursuant to Subpart Q, 14 C.F.R. § 302, and the Department's Notice dated February 3, 1998. Any person who wishes to support or oppose this application must file an answer by February 17, 1998, and must serve that answer upon Delta and all persons served with this amended application.

Application of

under 49 U.S.C. Sections 41102 and 41108 for a certificate of public convenience and necessity.

Certificate authority authorizing Delta to engage in scheduled foreign air

1/ To the extent necessary, Delta requests a waiver of 14 C.F.R. 302.18 (b) to permit Delta to incorporate its request for consolidation in this document. This amendment is being filed pursuant to the Department's Notice which stated that carriers should seek consolidation of previously-filed applications; therefore consolidation should be granted.

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transportation of persons, property and mail between the terminal points:

2. Allocation of one weekly frequency to enable Delta to increase its nonstop service between Los Angeles, California and Tokyo, Japan from six weekly flights to daily service;

3. Allocation of twenty-one weekly frequencies to enable Delta to provide daily nonstop service commencing in 1998 between: (1) Atlanta and Tokyo, (2) Portland and Osaka, and (3) Portland and Fukuoka;

4. Allocation of twenty-one weekly frequencies to enable Delta to provide daily nonstop service after January 1, 1999, between: (1) Atlanta and Osaka, (2) Cincinnati and Tokyo; and (3) New York (JFK) and Tokyo.

5. Route integration authority to permit Delta to combine services that will be operated pursuant to the grant of this application with all other Delta services authorized by existing certificates and exemptions granted by the Department (to the extent consistent with applicable international agreements).

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The Department's Notice solicited applications for all 90 frequencies available to non-incumbent carriers through the year 2000 under the new agreement, and for this reason Delta is compelled to request authority for its planned future (post-1998) operations on the New York-Tokyo, Atlanta-Osaka and Cincinnati-Tokyo routes. However, Delta strongly urges the Department to allocate only those requests which contemplate service commencing during 1998 and to defer consideration of future services for allocation on a year-by-year basis, consistent with the Department's approach with respect to the allocation of U.S.-Canada route rights under the February 24, 1995 U.S.-Canada bilateral agreement. See, Order 95-2-57.

In further support of this application, Delta states the following:

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1. Aircraft. Delta plans to operate all of its new U.S.-Japan services using McDonnell Douglas MD-11 or other suitable aircraft as Delta may determine to be appropriate and consistent with market conditions at any given time. Delta's MD-11 aircraft have a three-class international seating configuration of 18 first class, 40 business class, and 200 economy class seats, offering a total of 258 seats. /2

2. Start-Up Dates. The proposed start-up dates for Delta's U.S. -Japan service are as follows:

A. Los Angeles-Tokyo - Delta will implement the additional weekly nonstop flight between Los Angeles and Tokyo on or about June 1, 1998. /3

B. Atlanta-Tokyo - Delta proposes to implement daily nonstop service between Atlanta and Tokyo on or about July 1, 1998. /4

2/ Certain aircraft may have a slightly different seating configuration offering 248 total seats.

3/ Delta is concurrently filing an application for pendente lite frequency allocation for the Los Angeles-Tokyo frequency.

4/ This start-up date assumes the prompt award of the requested authority and the availability of at least ninety days after the Department's issuance of an order granting Delta the authority. Delta has also filed a pendente lite exemption and frequency request for the authority necessary to implement daily Atlanta-Tokyo service.

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C. Portland-Osaka. Portland-Fukuoka - Delta proposes to implement daily nonstop service on the Portland-Osaka and Portland-Fukuoka routes on or about October 28, 1998.

D. New York-Tokyo, Cincinnati-Tokyo, Atlanta-Osaka - Delta proposes to begin service on the New York (JFK)-Tokyo, Cincinnati-Tokyo and Atlanta-Osaka routes after January 1, 1999; the precise start-up dates have not been established at the current time.

3. Rankings. Pursuant to the Department's Notice Delta ranks its proposed U.S.-Japan routes as follows: /5

5/ Delta places a high priority on being awarded the single frequency necessary to .."top-off" its Los Angeles-Tokyo service and establish a full pattern of daily service. However, because this involves only one additional weekly flight, it is difficult, if not impossible, to rank this request among Delta's daily service proposals. If the Department nonetheless requires a ranking, Delta would place it fourth, after Portland-Fukuoka.

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4. The Public Interest Supports; The Grant Of Delta's Application.

A. Atlanta-Tokyo. Portland-Osaka, Portland-Fukuoka - Delta's initial application discussed in detail the substantial public interest reasons why Delta should be awarded certificate authority for these routes. Delta's service will provide substantial service and competitive benefits, improve the U.S.-Japan competitive market structure, and be fully consistent with U.S. international aviation policy.

B. Los Angeles-Tokyo - The grant of Delta's modest request for a single weekly frequency is important to Delta's ability to offer daily service and compete on a more equal footing with the U.S. and Japanese incumbents for Los Angeles-Tokyo traffic. Los Angeles-Tokyo is one of the largest and most important U.S.-Japan city-pairs. Delta's service between Los Angeles and Tokyo has been severely hindered by a restriction unique to Delta, limiting its service to only six weekly flights. Delta's inability to offer a full pattern of daily service has placed Delta at a significant competitive disadvantage, especially in light of the fact that every other U.S. and Japan carrier serving Los Angeles-Tokyo operates at least daily service. The ability to offer service seven days a

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week is particularly critical for Delta to compete effectively for business travelers who require the flexibility and convenience of daily service. Delta's unique competitive disadvantage will be exacerbated under the new bilateral agreement, which eliminates all restrictions on U.S. and Japanese incumbent carriers, each of which serves the Los Angeles-Tokyo route. For this reason, one of the primary objective of the U.S. negotiators was to obtain the ability for Delta to "top-off" its Los Angeles-Tokyo service and immediately operate seven weekly flights. The Department should place a high priority on promptly eliminating this frequency restriction which has competitively disadvantaged' Delta's Los Angeles-Tokyo service since 1991.

C. New York-Cincinnati-Tokyo, Atlanta-Osaka.

i. New York-Tokyo: New York-Tokyo is one of the largest and most important U.S.-Japan routes, and New York (JFK) is Delta's largest international gateway. Delta's ability to provide nonstop service between New York and Tokyo will significantly enhance intragateway and intergateway competition against the entrenched incumbents, each of which serves the route. Delta has a significant presence at New York and would inject strong new entrant competition for both local New York-Tokyo travelers, and travelers

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behind the New York gateway. Delta's ability to integrate the New York-Tokyo route with its extensive and growing international network and domestic system at JFK will greatly enhance global network competition, particularly with respect to Europe-Asia traffic.

ii. Atlanta-Osaka - Osaka is Japan's second largest international gateway, and Atlanta-Osaka service is an important long-term objective for Delta's transpacific strategy. Authorizing Delta to provide service from Atlanta to Japan's two major traffic centers of Tokyo and Osaka would allow Atlanta to emerge as a powerful transpacific gateway and maximize intergateway competition. Delta's Atlanta hub is the largest single carrier hub in the world, enabling Delta to provide extensive online service to hundreds of cities in the United States and throughout the world. Furthermore, the ability to expand Atlanta-Japan service to Osaka would provide a strong foundation for Delta's expansion of services from Atlanta to other Asian points, just as Delta was able to do across the Atlantic.

iii. Cincinnati-Tokyo - Cincinnati is Delta's second largest hub. Delta's proposed future service between Cincinnati and Tokyo would create a new Japan gateway, significantly enhancing service and competitive

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opportunities for travelers between the midwest and Japan. In particular, intergateway competition with existing hub gateways at Chicago, Detroit and Minneapolis/St. Paul would be increased. Furthermore, the Cincinnati-Tokyo route would result in significant economic and infrastructure benefits for the Cincinnati metropolitan area and the communities served by Delta's extensive Cincinnati hub.

5. Delta's U.S.-Japan Service Record. Delta's successful track record in implementing and growing service to Japan and other international destinations demonstrates its ability successfully to operate the services proposed in this application. Delta has offered Portland-Tokyo service since 1986, and Portland-Nagoya and Los Angeles-Tokyo service since 1991. Delta's fulfillment of its commitment to develop Portland as an important competitive gateway to Asia and the success of Delta's existing Japan services demonstrate Delta's ability to develop and sustain new U.S.-Japan routes that create convenient services in local markets and add intergateway competition with existing services.

6. Energy and Environmental Considerations. In light of the compelling public interest benefits that will result from Delta's new U.S.-Japan

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services, Delta submits that although its proposal will result in an increase of more than 10 million gallons in annual fuel consumption, these energy and environmental considerations are outweighed by the substantial public benefits. The Department has made similar findings on numerous occasions. See e.g., Order 92-9-62 at n.6; Order 91-10-46 at n.6; and Order 91-1-53 at n.6. The Department's conclusions in those cases are equally applicable to Delta's U.S.-Japan proposals.

Furthermore, when viewed in the context of today's enormous global air transportation industry, the environmental impact of Delta's proposed services would be de minimus. To the extent that any requirement to prepare an environmental analysis may exist under the Department's Procedural Regulations, Delta hereby requests a waiver from such requirements.

7. The Department Should Defer Consideration of the Award of Post-1998 Services

Consistent with the Department's Notice, Delta has filed for its Japan service requirements through the year 2000. Nevertheless, Delta recommends that the Department allocate frequencies only for applications demonstrating actual plans to begin service in 1998. The Department should defer

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consideration of the remainder of the frequencies for allocation on a year-by year basis.

The new U.S.-Japan agreement provides 90 additional frequencies for non-incumbent carriers through the year 2000. Given the dynamic nature of the airline industry, it make no sense for the Department to allocate opportunities for which there are no actual near-term service plans. The public interest and the maximization of the valuable route opportunities available under the new agreement would best be served by deferral of future route proposals. To do otherwise would create the real risk that frequencies will be wasted when carriers that have received frequencies for future operations later decide not to operate the service, thereby delaying utilization of valuable route rights by other carriers.

Thus, Delta urges the Department to employ a phase-in approach similar to the one it utilized in allocating limited-entry Canadian authority, where proposals were solicited on an annual basis for rights to serve Toronto, Montreal and Vancouver. A similar approach here would ensure that the Department considers up-to-date proposals that are both realistic and likely to be implemented on a timely basis.

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WHEREFORE, Delta Air Lines, Inc. respectfully requests that the Department expeditiously grant this amended application for certificate authority and allocation of frequencies, consolidate Delta's application in Docket OST-97-2913 into the 1998 U.S.-Japan Combination Service Proceeding, and grant such further relief as the Department deems to be consistent with the public interest.

Respectfully submitted,

Robert E. Cohn

Alexander Van der Bellen

SHAW PITTMAN POTTS & TROWBRIDGE

2300 N Street, N.W.

Washington, D.C. 20037

(202) 663-8060

Counsel for DELTA AIR LINES, INC.