OST-00-6824 / American and Cathay Pacific / Answer of Northwest Airlines / February 8, 2000

Joint Application of

under 14 CFR Part 212 for statements of authorization (reciprocal codesharing) and under 49 USC 40109 for related exemption authority

ANSWER OF NORTHWEST AIRLINES, INC.

On January 24, 2000, American Airlines, Inc. ("American") and Cathay Pacific Airways, Ltd. ("Cathay Pacific") filed a joint application seeking broad extra-bilateral authority to implement an extensive code-sharing program. Northwest Airlines, Inc. ("Northwest") hereby submits the following answer in opposition to that application.

In brief summary, American proposes to place its designator code on Cathay Pacific's flights between Hong Kong, on the one hand, and Los Angeles, San Francisco, and New York, on the other, while Cathay Pacific would place its code on American's flights in a total of 43 continental U.S. city-pair markets beyond Los Angeles, San Francisco, and New York. In addition, American wants to third-country code-share on Cathay Pacific flights beyond Hong Kong to points in Thailand, Singapore, the Philippines, Malaysia, and Indonesia, while Cathay Pacific would place its code on American flights beyond the United States to points in Mexico, Brazil, Chile, Argentina, and Venezuela, as well as other points in the Caribbean and Central America.

Answer of Northwest Airlines

Page 2

The overwhelmingly extra-bilateral nature of the Joint application is not in dispute. As American and Cathay Pacific have acknowledged, the existing U.S.-Hong Kong bilateral agreement does not contain a code-sharing provision. /1 In addition, that agreement permits Hong Kong carriers to operate combination service to no more than six points in the continental United States and beyond to points in Canada and up to two points in other third countries. Cathay Pacific holds authority to serve Los Angeles, New York, San Francisco, and Seattle; /2 thus, Cathay Pacific's request for authority to serve over 30 additional U.S. points is well beyond what is permitted by the bilateral.

The American/Cathay Pacific joint application appears to be premised on the assumption that the United States and Hong Kong will reach a new bilateral agreement during the forthcoming inter-governmental consultations, which are scheduled for April in Hong Kong. The prospect of these consultations, however, provides the very reason why the Department should dismiss the American/Cathay Pacific application or, at a minimum, take no action on the application pending a new bilateral agreement that incorporates broad new service rights for all U.S. carriers. It is absolutely imperative that the United States not cede its leverage at the negotiating table by granting any extra-bilateral authority to American and Cathay Pacific in advance of the April talks.

1/ Joint Application of American Airlines, Inc. and Cathay Pacific Airways, Ltd., January 24, 2000 (OST-00-6824), at 4.

Answer of Northwest Airlines

Page 3

While American and Cathay Pacific express optimism about the prospects for a new bilateral agreement that would pave the way to implementation of their code-share plans, American and Cathay Pacific also must recognize that the agenda for the forthcoming bilateral consultations will include other important and potentially difficult issues.

Any new U.S.-Hong Kong bilateral accord must incorporate significant new fifth freedom rights for U.S. carriers, both combination and all-cargo. It is essential that U.S. carriers be allowed to operate combination and all-cargo services via intermediate points in Japan, and to third countries beyond Hong Kong, with full fifth freedom traffic rights. In addition, any new code-sharing provision must establish the right of U.S. carriers to operate code-share services to Hong Kong, including via Japan, and beyond Hong Kong to third countries. Arthur K.W. Ho, Hong Kong's Deputy Secretary for Economic Services, who led the Hong Kong delegation at the informal inter-governmental meetings held in Washington in January, recently stated that "we want to be an aviation hub. We hope to see more service in Hong Kong." /3 In order to achieve that goal, Hong Kong must grant the United States broad fifth freedom and third-country codesharing rights. The Department, meanwhile, should not even consider granting extra-bilateral authority to American and Cathay Pacific until Hong Kong takes that essential step forward.

3/ "New Hong Kong Policy Frees Airlines to Decide Flight Frequency," Dow Jones Newswires, January 31, 2000.

Answer of Northwest Airlines

Page 4

WHEREFORE, Northwest Airlines Inc., requests that the Department dismiss the joint application of American Airlines, Inc. and Cathay Pacific Airways, Ltd. for code-sharing and related authority or, at a minimum, take no action on the joint application until the United States has obtained a new, substantially liberalized bilateral agreement providing new service opportunities for all U.S. carriers, as further described above.

Respectfully submitted,

Mega Rae Rosia

Managing Director, Government Affairs & Associate General Counsel

NORTHWEST AIRLINES, INC.

901 15th Street, N.W.

Suite 310

Washington, D.C. 20005

(202) 842-3193

February 8, 2000