OST-98-3785 / Alaska Airlines / Los Angeles-La Paz, Mexico / April 27, 1998

In the matter of the application of

ALASKA AIRLINES, INC. / Docket No. OST-98-3785

for an exemption to provide service between Los Angeles, California, on the one hand, and La Paz, Mexico, on the other hand.

Pursuant to 49 U.S.C. 40109 and Subpart D of the Procedural Regulations of the Department of Transportation (the "Department"), Alaska Airlines, Inc. ("Alaska") hereby respectfully requests an exemption from 49 U.S.C. 41101, and from any regulations of the Department to the extent necessary to permit Alaska to engage in the scheduled foreign air transportation of persons, property and mail between Los Angeles, California, on the one hand, and La Paz, Mexico, on the other hand. Alaska requests that the Department grant Alaska such authority for a two year period. Alaska plans to commence year-round service in the Los Angeles-La Paz market on October 28, 1998, and to operate two weekly flights using Stage 3 MD-80 aircraft. Alaska also requests that the Department process this application expeditiously so that Alaska may enter as soon as possible the new service in the

Application for an Exemption

Dockets OST-98

April 27, 1998

various computer reservation systems and begin advertising, accepting reservations and selling tickets.

The public interest would be served by the Department authorizing Alaska to provide service between Los Angeles and La Paz. The Los Angeles gateway has traditionally been the single most important gateway for travel to Mexico. Alaska's proposed service between Los Angeles and La Paz would provide Southern California passengers with the benefit of having a U.S. carrier operate nonstop service between those two cities. Currently, only Aero California operates nonstop flights between Los Angeles and La Paz. American Airlines, Inc. places its code on Aero California flights thereby code-sharing in the market. Thus, a designation is available for Alaska's service.

Alaska has a proven record of success in the West Coast-Mexico markets, has an extensive north-south route system providing substantial traffic support, already provides service between West Coast cities and Mexico, and is committed to bringing the benefits of its service to California-La Paz passengers. Accordingly, the public interest would be well-served by the Department authorizing Alaska to service the Los Angeles-La Paz market.

The beyond single-plane and single carrier service benefits Alaska provides its Mexico passengers are considerable. Alaska's route system extends from Barrow to San Diego providing Alaska with substantial beyond traffic support for Alaska's

Application for an Exemption

Dockets OST-98

April 27, 1998

service to Mexico. Alaska carries a substantial number of connecting passengers to Mexico from Alaska's other major West Coast cities including Fairbanks, Anchorage, Juneau, Seattle, Portland, San Francisco, San Diego and Vancouver. This extensive beyond network of on-line cities guarantees significant service benefits to Alaska's Mexico-bound passengers.

The Los Angeles-La Paz route is covered by the U.S.-Mexico Air Transport Agreement which authorizes designated U.S. carriers to operate from a point or points in the United States to a point or points in Mexico. Alaska remains duly licensed and qualified to perform these services. In further support hereof, Alaska states as follows:

1. Alaska Airlines, Inc. has its principal headquarters located at 19300 Pacific Highway South, Seattle, Washington 98188. Alaska Airlines is incorporated under the laws of the State of Alaska and is a wholly-owned subsidiary of Alaska Air Group, Inc., which is incorporated under the laws of the State of Delaware.

2. Alaska Airlines, Inc. is a citizen of the United States within the meaning of Section 101(16) of the Federal Aviation Act of 1958, as amended. All of Alaska's directors and at least two-thirds of its other managing officers are U.S. citizens and, to Alaska's knowledge, the owners of record of at least 75% of Alaska's outstanding voting securities are U.S. citizens.

Application for an Exemption

Dockets OST-98

April 27, 1998

3. Alaska has repeatedly been found fit, willing and able to provide interstate and foreign air transportation. The Department is requested to take official notice of Alaska's continuing fitness. See, em Orders 82-ó-80, 82-8-69, 81-12-131 and 81-1-30.

4. Alaska plans to commence nonstop twice weekly service in the Los Angeles-La Paz market on October 28, 1998 All operations will be conducted with Stage 3 MD-80 aircraft.

5. Alaska submits that its application raises no environmental or energy issues. Similarly, approval of this application will not result in a near-term increase in fuel consumption of ten million gallons or more.

WHEREFORE, for the foregoing reasons, Alaska Airlines, Inc. respectfully requests that the Department grant Alaska Airlines exemption authority for two years to operate scheduled service foreign air transportation between Los Angeles,

Application for an Exemption

Dockets OST-98

April 27, 1998

California, on the one hand, and La Paz, Mexico, on the other hand, or such other relief as the Department deems necessary and appropriate.

Respectfully submitted,

Marshall S. Sinick, Esq.

Heather M. Boals, Esq.

Squire, Sanders & Dempsey L.L.P.

1201 Pennsylvania Avenue, N.W.

Suite 500

Washington, D.C. 20004

(202) 626-6651

Alaska Airlines, Inc.

Washington Counsel

DATED: April 27, 1998