OST-98-3441 / OST-98-3435 / Northwest / Federal Express / US-Japan / Answer of United / March 5, 1998

In re Application of

NORTHWEST AIRLINES, INC.

for a New or Amended Certificate of Public Convenience and Necessity Authorizing Scheduled Foreign Transportation of Persons, Property and Mail (U.S.-Japan-Asia/Pacific)

Application of

for amendment of a certificate of public convenience and necessity pursuant to 49 U.S.C. §41110 (U.S.-Japan All-Cargo Service)

CONSOLIDATED ANSWER OF UNITED AIR LINES, INC.

United Air Lines, Inc. ("United") submits the following consolidated answer to the above-captioned joint applications of Northwest Airlines, Inc. ("Northwest") and Federal Express Corporation ("Fed Ex"):

1. By their captioned applications, Northwest and Fed Ex seek expansion of their authority as incumbent U.S. carriers consistent with the provisions of the U.S./Japan Memorandum of Consultations, concluded on January 30, 1998 ("MOC"). United

Consolidated Answer of United

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Each of these applications seeks authority commensurate with incumbent U.S. carrier route rights under the MOC. These include the right to serve between any point in the U.S. and any point in Japan via any intermediate, beyond or behind point.

2. The form in which authority was requested differs slightly among the three applications. United requested authority to provide U.S.-Japan combination and all-cargo service in conjunction with service to points in other countries it was already authorized to serve. Such third countries would be served pursuant to route integration authority. Route integration will enable United to combine services on its new U.S.-Japan route with services authorized in other certificates and exemptions. This route integration service is subject to the condition that it must be consistent with applicable international agreements. Moreover, where new route integration service involves a limited-entry market, notice must be given to DOT which may then determine whether carrier selection is required.

3. Fed Ex applied for a route similar to that requested by United but added at the end of the route description the words "with full traffic rights." With two exceptions, Fed Ex neither

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names the third countries it intends to serve in conjunction with its U.S.-Japan service nor does it seek specific route integration authority to effectuate such service by referencing other route authority it holds. /1

4. Northwest in its application seeks two new routes: one for combination and one for all-cargo services. With respect to its combination service route, Northwest specifically requests authority to serve as intermediate and beyond points all countries in IATA Region TC3 and attaches a list of such countries. With respect to its all-cargo route, Northwest requests authority to serve all intermediate and beyond points in all third countries located anywhere. Like Fed Ex, Northwest does not name the third countries to be served on its all-cargo route and, like Fed Ex, Northwest does not seek in its application specific all-cargo route integration authority involving points it is already authorized to serve. /2

1/ Fed Ex proposes new services beyond Japan to Macau and Indonesia. In addition, Fed Ex proposes to carry local "fifthfreedom" traffic on its existing Japan-China flights which currently operate as blind sectors.

2/ In a subsequent consolidated answer dated February 20, 1998, Northwest requests inclusion of a route integration condition in other U.S. and Japanese carrier authorizations issued pursuant to the MOC similar to that already contained in United's Certificate of Public Convenience and Necessity for Route 130. See Order 98-10-8. This would presumably include the route certificate of Northwest, as well as Fed Ex. United agrees

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6. If the Department is prepared to grant specific new route authority involving services to unnamed points in all third countries in conjunction with service to Japan, as implicitly requested by both Fed Ex and Northwest for all-cargo services, then United seeks the same flexibility. If, on the other hand, the Department will only authorize services to named intermediate, beyond and behind points to be served in conjunction with U.S.-Japan service, then the applications of Fed

cont'd

as to U.S. carrier authorizations but questions the need for such a condition in Japanese carrier authorizations.

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Ex and Northwest for all-cargo authority may be deemed overly broad. /3 In that case, United urges that the broad-based right to serve Japan in conjunction with third countries intermediate to or beyond Japan or behind the U.S. be accomplished through route integration such as United has requested.

7. With respect to Fed Ex's request for appending a reference "with full local traffic rights" to its all-cargo route, United urges that such language not be included. The availability of local traffic rights is normally assumed as being included in a U.S. carrier's foreign route authority unless there is a specific "blind sector" condition precluding the exercise of such rights. If the Department were to append the phrase "with full local traffic rights" as requested by Fed Ex, that could be interpreted as excluding such rights on the hundreds of U.S. carrier foreign route segments where that language does not appear. There is no need for the language proposed by Fed Ex under the normal principles of route interpretation. United objects to its inclusion in circumstances where, to do so, could prejudice other carriers whose route descriptions lack this redundant appendage.

3/ See, e.g., 14 CAR §201.4(e).

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8. Northwest, by its application, seeks an expansion of the third countries it may serve on its U.S.-Japan combination route to include all such countries in the Asia/Pacific region as defined by IATA Region TC3. As noted previously, United has amended its own application to include a similar request. United has no objection to the grant of Northwest's application for combination route authority to all points in this region so long as United's similar application, as amended, is granted to include the same geographic scope of authority. /4

4/ In the event that the Department declines to grant the full authority requested by Northwest and United to serve all points in IATA Region TC3, it is important that the route integration condition as contained in United's certificate for Route 130 be modified slightly. The modification is needed to allow United to serve points on one segment of Route 130 in conjunction with points on other segments of that same route certificate. As now drafted, the route condition limits integration to "services on this certificate [for Route 130] with services authorized by other Department of Transportation certificates or exemptions." Similar route integration language should be included in Northwest's certificate for Route 129 and should be incorporated in the Department's standard route integration certificate condition wherever a certificate contains multiple route segments.

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seeks authority to serve all points in countries such as China and Russia notwithstanding agreed bilateral limits on the points which U.S. carriers may serve in those countries. If the Department is now prepared to grant Northwest authority to serve all points in countries such as Vietnam, China, and Russia in response to the instant certificate application, then it should also grant similar authority to United and, in addition, renew United's existing authority to serve Vietnam on its certificate for Route 130.

United urges the Department, however, not to delay the processing of these U.S.-Japan applications while it resolves issues relating to countries such as Vietnam, Russia and China. If those issues are deemed to require additional legal analysis, those authorizations should be deferred and the broader U.S.Japan authority issued immediately consistent with applicable agreements.

9. Finally, United also notes that applications have been filed by the incumbent Japanese carriers, Japan Airlines, All Nippon Airways and Nippon Cargo Airlines. /5 By these applications, Japanese carriers seek amended foreign air carrier permit and exemption authority to include expanded U.S.-Japan

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rights comparable to the certificate authority requested by their counterpart U.S. incumbent carriers. United also urges the Department to process all of these applications expeditiously. Moreover, United urges that all of these U.S. and Japanese incumbent carrier applications be granted at the same time so that one carrier or group of carriers does not obtain an unfair competitive advantage over other carriers similarly situated.

Respectfully submitted,

JOEL STEPHEN BURTON

GINSBURG, FELDMAN and BRESS CHARTERED

1250 Connecticut Avenue, N.W.

Suite 800

Washington, D.C. 20036

(202) 637-9130

Counsel for UNITED AIR LINES, INC.

DATED: March 5, 1998