OST-99-6210 / New US-Argentina Combination Service Opportunities / Application of United Air Lines / September 22, 1999

 

NEW U.S.-ARGENTINA COMBINATION SERVICE OPPORTUNITIES / Docket OST-99-6210

 

 

APPLICATION OF UNITED AIR LINES. INC.

 

 

Pursuant to the Department's Notice dated September 8, 1999, in the above-captioned proceeding, United Air Lines Inc. ("United") requests that it be allocated seven U.S. -Argentina combination service frequencies for daily nonstop service between Los Angeles, California, and Buenos Aires, Argentina, effective September 1, 2000. In support of its request, United submits the following:

1. INTRODUCTION AND SUMMARY

United proposes to operate daily nonstop services between Los Angeles and Buenos Aires. United will start these services September 1, 2000, when seven additional frequencies become available. United needs all seven of the first phase frequencies it seeks in order to assure its ability to implement a daily nonstop service pattern. The services will be operated with state-of-the-art B777-200 aircraft configured with amenities specially designed to accommodate passengers over the long-haul, 6,114-mile flight between Los Angeles and Buenos Aires. These aircraft will offer significant benefits to both passengers and shippers.

United's service will be the only nonstop service by any carrier -- U.S. or foreign -between Los Angeles and Buenos Aires. Los Angeles is the third largest U.S. market for services

 

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to Argentina, even without nonstop service. United's new nonstop service will benefit passengers in Los Angeles and throughout its system by providing a new and much-needed West Coast gateway to Argentina and by creating one-stop connections to Argentina over Los Angeles. By serving a new gateway, United's proposal offers passengers and shippers an important alternative to existing services in the U.S. -Argentina market and therefore promotes intergateway competition. Los Angeles is also ideally located as a gateway for passengers throughout the Western U.S. which is the only region of the U.S. that lacks a convenient gateway to Argentina.

 

II. UNITED'S DAILY LOS ANGELES-BUENOS AIRES NONSTOP FLIGHTS OFFER E%IPORTANT NEW BENEFITS TO U.S. PASSENGERS AND SHIPPERS TO ARGENTINA.

United requests seven of the 14 weekly U.S. -Argentina frequencies available in this proceeding in order to operate daily combination service operating nonstop between Los Angeles and Buenos Aires starting September 1, 2000. /1 A schedule for these services is attached as Exhibit UA-1. United will operate these services on a year-round basis, using B777-200 aircraft configured with 292 seats. See Exhibit UA-2.

United currently operates 21 weekly U.S.-Argentina nonstop services. This includes daily services between Buenos Aires, on the one hand, and Chicago, Miami and New York QFK), on the other.

United's proposal to offer daily nonstop service between Los Angeles and Buenos Aires will produce far more benefits to U.S. travelers, shippers and the economy than any other

1/ In the alternative, United would accept the seven frequencies available in phase two and would, in that case, start services on June 1, 2001.

 

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services proposed in this proceeding. Los Angeles is the third largest U.S. market for service to Buenos Aires. See Exhibit UA-3. Despite its status as the third largest U. S. passenger market to Argentina, Los Angeles remains without any nonstop service by any carrier. United's proposed Los Angeles-Buenos Aires service will be the only nonstop service operated by any carrier between Los Angeles and Argentina. Los Angeles is currently the only large U.S. air service market (over 3 00 passengers per day or I 10,000 passengers a year) that lacks nonstop service to Buenos Aires. Id.

In addition to the important nonstop benefits to the large number of passengers in the local Los Angeles-Buenos Aires market, United's proposed nonstop service will provide improved service to Latin America for the entire Western United States. In addition, United will offer direct nonstop to one-stop connections to passengers in numerous additional cities served via its hubs at San Francisco and Denver.

United operates 198 departures (increasing to 217 effective October 31, 1999) serving 28 U.S. cities from Los Angeles. When United Express services are included, there are a total of 392 daily departures at Los Angeles serving 47 cities in the United States. See Exhibit UA-5. Initiating Buenos Aires service from the Los Angeles gateway with these strong connections will fill the substantial service void that has had a dampening effect on commerce and tourism between the Western United States and South America's second-largest economy.

United's new Los Angeles-Buenos Aires nonstop flights would originate at its San Francisco hub, with single-flight-number service. United's Shuttle by United service operates 38 daily flights between San Francisco and Los Angeles each way, offering numerous convenient

 

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connecting opportunities to the new Los Angeles-Buenos Aires flight. By scheduling one of these connections as single-flight-number service, United will offer an important new choice for passengers between its San Francisco hub and Buenos Aires.

 

III. INTRODUCTION OF A NEW U.S. GATEWAY WILL GREATLY IMPROVE COMPETITION IN THE U.S.-ARGENTINA MARKET

The Department has previously emphasized the competitive importance of introducing a new gateway to Latin America. See, e.g., US.-Brazil Combination Case, Order 99-3-26 (Houston favored over New York or Los Angeles where those cities already had nonstop service to Brazil) and U.S. -Colombia Combination Case, Order 93-9-12 (Houston selected over Miami where latter already had nonstop service to Colombia). In the US.-Brazil proceeding, supra , Continental aggressively and repeatedly argued that its application for the Houston-Sao Paulo service was superior to other applications, because Continental proposed to introduce Houston as a new gateway to Brazil and South America. The Department agreed with that assessment and stated that the introduction of a new gateway was "a strong factor in Continental's selection." (Order 99-3-26 at 6)

In addition, the Department has declared that when there are restrictions applicable to U.S. carrier rights to a foreign country, such as apply to Argentina at present, the Department's "long-standing goal has been to insure gateway access to the foreign market to as many U.S. cities as possible. For this reason, the opening of a new U.S. gateway for international service has been a significant consideration in carrier selection cases." (Order 99-4-14 at 5)

 

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Los Angeles is a superior gateway to Atlanta for selection in phase one of the

U.S./Argentina transitional agreement. More passengers would be benefitted by new nonstop service at Los Angeles than would be the case at Atlanta. Los Angeles is the third largest U.S. gateway to Argentina while Atlanta ranks only 10. Indeed, there are more than seven times as many Argentina passengers in the Los Angeles market as there are in Atlanta. (Exhibit UA-3) In addition, the need for improved service to Buenos Aires is far greater in the Western region of the U.S., which would be served by United's Los Angeles-Buenos Aires service, than it is in the

Southeastern U.S., which would be served by Delta's proposed Atlanta-Buenos Aires service. Exhibit UA-4. Atlanta already has nonstop service to Buenos Aires operated by the Argentine carrier, LAPA, and passengers in the Southeastern U.S. can also be conveniently served via the Miami gateway. In these circumstances, selection of Los Angeles as the first new gateway to

Argentina will produce more new service benefits than would selection of Atlanta, an important decisional factor.

Los Angeles-Buenos Aires passengers will enjoy a considerable improvement in their service as a result of United's nonstop flights. In addition, the Los Angeles-Buenos Aires service will allow United to provide effective intergateway competition, especially with

American's established Latin American gateway at Miami. United has a substantial network of United Express commuter service at Los Angeles, as well as at San Francisco and Denver, and alliance relationships with Air Canada, Air New Zealand, All Nippon Airways and Mexicana, all of which it will use to develop traffic over the new Los Angeles gateway. With United's effective network and strong connectivity at Los Angeles, United will be able to provide an important

 

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service improvement and additional competitive choices for passengers who now connect at the dominant Miami gateway.

 

IV. UNITED'S SERVICE AT THE NEW LOS ANGELES GATEWAY WOULD FILL A SIGNIFICANT SERVICE VOID IN THE WEST

United's Los Angeles-Buenos Aires nonstop service will also offer important online connecting benefits to passengers in the Western United States served via the new Los Angeles gateway. These benefits include an important new online service option for passengers in all of the largest U.S.-Argentina markets in the Western U.S. region. By extending its Latin America service to a major connecting center such as Los Angeles, United can offer customers in the Western United States more direct services than are available at existing or proposed gateways.

The Eastern and Central regions of the U.S. currently have access to multiple direct Argentina connections to services provided by United at Chicago; American, United and Aerolineas Argentinas at Miami and New York; and the Argentine carrier, LAPA, at Atlanta. The Western portion of the country, in stark contrast, is underserved, without a single convenient gateway to Argentina. Particularly, for passengers in the large San Francisco, San Diego, Portland, Seattle, Phoenix, and Las Vegas markets, United's services from Los Angeles will offer important new gateway opportunities that will provide passengers at these points better service to Argentina than is available at current alternative gateways. Continental's and Delta's applications for Newark and Atlanta service, respectively, do not address the service void in the West. Los Angeles is well situated geographically to serve and succeed as a gateway to Latin America for

 

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the Western United States, and United is uniquely well-positioned at Los Angeles to assure that success.

 

V. UNITED'S NONSTOP SERVICES WELL BE FLOWN IN NEW STATE-OF-THE-ART B777-200 AIRCRAFT

United's new Los Angeles-Buenos Aires nonstop service will be operated in our new state-of-the-art B777-200 aircraft. These aircraft are designed for comfortable passenger service over long intercontinental stage lengths such as the 6,114-mile Los Angeles-Buenos Aires route. These new aircraft are described in Exhibit UA-2. United will offer a full range of international services, including First, Business and Economy Class. This three-class international service is especially important in a long-haul international market such as U.S. -Argentina that experiences a relatively high proportion of non-discretionary business traffic. The B777 aircraft include amenities such as video monitors at every seat in all classes as well as laptop power and phones at each seat in the First and Business Class Sections.

These aircraft will also offer the United First Suite configuration. This new and innovative service will make United the first U.S. airline to provide a lie-flat bed and integrated work station on its fleet of international aircraft. The First Suite is designed specifically for business travelers. It creates a total office environment with an individual and private work station large enough to accommodate a laptop computer, an inseat phone that will allow data transmission, and onboard laptop power. When in bed mode, the First Suite provides customers with a private sleeping area with a comfortable mattress. All business class seats will also have laptop and telephone connections.

 

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VI. UNITED'S CHOICE OF GATEWAY AND EQUIPMENT ARE DESIGNED TO OFFER IMPORTANT NEW BENEFITS TO CARGO SHIPPERS

United's B777-200 aircraft will also offer important benefits to cargo shippers in the U.S.-Argentina market. This long-haul aircraft can carry a significant cargo load with normal passenger loads between Los Angeles and Buenos Aires. It will have up to 30,000-35,000 pounds of cargo capacity per flight available for freight and mail each way between Los Angeles and Buenos Aires. With its connections at Los Angeles to United's domestic network as well as its transpacific combination service and DC 10 freighters, United can offer a frequent and reliable cargo product to shippers and forwarders throughout the Western U.S. and the Pacific Rim.

Argentina is California's second largest export market in South America. California is itself the major source of U.S. exports to Argentina. Exports from California exceed those from New York, New Jersey, and Georgia. /2 United States exports to Argentina are concentrated in high-value time-sensitive goods that are ordinarily transported by air cargo, such as telecommunications equipment and industrial machinery. /3

2/ Source: International Trade Administration, USDOC, Office of Trade and Economic Analysis.

3/ Source: U.S. Department of Commerce Country Commercial Guide.

 

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VII. UNITED HAS MADE A SIGNIFICANT INVESTMENT AT THE LOS ANGELES INTERNATIONAL AIRPORT DESIGNED TO MAKE IT A MORE CONVENIENT INTERNATIONAL GATEWAY.

Recognizing the importance of Los Angeles as an international gateway, United has recently expended $260 million to expand and improve the quality of its services at Los Angeles International Airport ("LAX'). In particular, United has revamped its terminal facilities, with a view to improving arrivals and connections for international passengers. An integral part of these improvements is in the internal passenger processing facilities at LAX. The upgrade and location of United's clearance and transit facilities in its own terminal provide convenient connections for Argentina passengers with onward flights to both U.S. and overseas destinations as well as to those terminating their flights at Los Angeles. These improved connecting times are reflected in the single-flight-number services United has proposed for its San Francisco-Buenos Aires passengers. See Exhibit UA-1. United's continued commitment to LAX increases convenience for travelers and makes Los Angeles an ideal gateway airport to a major overseas destination such as Buenos Aires.

 

VIII. RESPONSE TO SEPTEMBER 8,1999, NOTICE

United provides the following response to the specific requests of the Department in its September 8, 1999 Notice:

1. See Exhibit UA-1.

2. United will use seven frequencies on a year-around basis.

3. See Exhibit UA-2.

 

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4. United will start on September 1, 2000, or, in the alternative, on June 1, 2001.

United already holds the necessary underlying route authority. See United's Certificate of Public Convenience and Necessity for Route 632, Segment l(b). (Order 97-10-8). United is fit, willing, and able to perform, and currently is performing, such scheduled foreign air transportation and is well suited to provide such service in the future. United requests that the Department take official notice pursuant to Rule 24 of the Rules of Practice of all data filed to establish such fitness.

 

IX. CONCLUSION

On the basis of the foregoing, United Air Lines, Inc. respectfully requests that the Department grant this application for an allocation of seven U.S. -Argentina frequencies to enable United to provide scheduled foreign air transportation of persons, property and mail on a nonstop basis between Los Angeles and Buenos Aires, and that the Department grant any other further or additional relief deemed to be consistent with the public interest and this application.

 

Respectfully submitted,

Jeffrey A. Manley

KIRKLAND & ELLIS

655 Fifteenth Street, NW

Washington, D.C. 20005

(202) 879-5161

Counsel for UNITED AIR LINES, INC.

DATED: September 22, 1999