OST-00-7194 / OST-00-7078 / OST-00-7196 / OST-00-6792 / OST-00-7191 / US-Vietnam Third-Country Codesharing / Answer of United Air Lines / April 14, 2000

Application of

for U.S.-Vietnam exemptions code share designations and frequencies

Joint Application of

under 14 CFR Part 212 for Blanket Statements of Authorization to Engage in Code-Share Services

CONSOLIDATED ANSWER OF UNITED AIR LINES, INC.

United Air Lines, Inc. pursuant to the Department's notice dated April 5, 2000, in Docket OST-00-7194, submits the following consolidated answer to the above-captioned applications of Delta, Northwest, and American for exemptions, designations, and

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frequencies to offer code-share services in conjunction with third country carriers between the U.S. and Vietnam:

I . Under the Memorandum of Discussions ("MOD") concluded on March 3, 2000 between the governments of the U.S. and Vietnam, three U.S. carriers may operate code-share services between the U.S. and Vietnam with third-country carriers. A total of 21 weekly frequencies may be allocated among U.S. carriers for such services.

2. On March 16, 2000, United applied for one of the three U.S. carrier codeshare opportunities and 14 frequencies in order to offer code-share services between the U.S. and Vietnam via Bangkok with Thai Airways International Public Company Limited ("THAI"). 1/ Under this arrangement United would operate services in its own aircraft between the U.S. and Bangkok via Tokyo where they would connect with THAI's nonstop services to Ho Chi Minh City (7 weekly), Hanoi (4 weekly), and Da Nang (3 weekly). In order to code share on each of these services United will need 14 weekly frequencies.

3. Delta has requested seven frequencies to code share with Air France to Ho Chi Minh City and Hanoi via Paris and Singapore. Northwest has requested six frequencies to code share to Ho Chi Mirth City and Hanoi with Malaysia Airways ("MAS") via Kuala Lumpur. American has requested three weekly frequencies to code share with Swissair to Ho Chi Minh City via Zurich and Singapore. Based on these filings, U.S. carriers have requested a total of 30 weekly frequencies and four third-

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country code-share opportunities, although only 21 frequencies and three opportunities are available. The Department will, in these circumstances, have to choose among the applicants for allocation of the available frequencies and opportunities.

4. United opposes the applications of Delta, Northwest and American and the joint application of Northwest/MAS to the extent they would preclude the grant of United's application to code share with THAI. Only United and THAI will offer code share services to Ho Chi Minh City on a daily basis, and only United and THAI will serve three international destinations in Vietnam. Grant of the United/THAI applications will, in these circumstances, maximize U.S. carrier services under the terms of the U.S.-Vietnam MOD which allows such services to be offered to a total of three points in Vietnam.

5. Ho Chi Minh City (formerly Saigon) is by far the largest origin and destination market for passengers between the U.S. and Vietnam. According to 1999 CRS booking data, 96 percent of U.S.- Vietnam traffic moves to and from Ho Chi Minh City. 2/ Hanoi is the second largest market with approximately 4 percent of the total. United/THAI is the only code-share partnership that can offer daily service to the largest destination (Ho Chi Minh City). In addition, United/THAI offers more services to Hanoi than any other partnership.

2/ United has used CRS booking data because they include both foreign and U.S. carrier traffic. DOT O&D Survey data do not include the large portion of U.S.-Vietnam traffic that moves exclusively on foreign carriers, especially from the West Coast gateways.

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6. United's services will connect to THAI's Vietnam service at THAI's Bangkok hub. There is more nonstop service to Vietnam from Bangkok than from any other foreign point (OAG, July 2000). United offers transpacific services in its own aircraft between six U.S. gateways and Bangkok via United's hub at Tokyo Narita: Los Angeles, San Francisco, Seattle, Chicago, New York, and Honolulu. /3 Each of United's five U.S. mainland gateways is among the top 10 U.S. markets to/from Vietnam. Indeed, United's transpacific gateways alone account for 60 percent of the total U.S.-Vietnam traffic.

By far the largest U.S.-Vietnam city-pair markets are Los Angeles-Ho Chi Minh City (29.2 percent) and San Francisco-Ho Chi Minh City (16.5 percent). New York-Ho Chi Minh City is third with 4.4 percent and Seattle-Ho Chi Minh City is fourth, with 4.1 percent. United will offer two-stop connections between all of its U.S. gateways (including the four largest O&D markets) and three points in Vietnam via Tokyo and Bangkok. Passengers between Seattle and Bangkok will have single-plane, 278-seat B777 service, with a stop at Tokyo Narita. Passengers from the other gateways will make convenient online connections to United's Seattle-Tokyo-Bangkok B777 service at United's Tokyo Narita hub. At Tokyo Narita, passengers will make connections involving convenient connecting times in both directions (between one and three hours). United's other transpacific flights, including the Seattle-Tokyo-Bangkok flights, operate from adjacent gates at Narita's Terminal One, facilitating seamless online connections.

3/ Service to Seattle is offered on a single-plane basis with a stop at Narita. Services from the other U.S. gateways connect to this Seattle-Tokyo-Bangkok flight at Narita. Bangkok remains beyond the nonstop range of existing commercial aircraft.

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At Bangkok, passengers will connect to THAI's flights to Vietnam. Because of the extreme distances involved and the time differences between the U.S. and Bangkok, existing schedules create connections that involve layovers at Bangkok. To make these connections more attractive, United will provide overnight accommodations to all First, Business, and full fare Economy class passengers traveling between the U.S. and Vietnam on UA-coded tickets.

7. The United/THAI code-share services to Vietnam are superior to those of any other carrier partnership, particularly for passengers in the three large West Coast markets where over 50 percent of U.S.-Vietnam traffic originates or terminates. All codeshare partnerships will be offering two-stop services at best: United at Tokyo and Bangkok, Delta at Paris and Singapore, Northwest at Osaka or Tokyo and Kuala Lumpur, and American at Zurich and Singapore.

United will, however, offer its passengers the option of making most of the trip on United's own aircraft, which operate daily between United's six U.S. gateways and Bangkok. Delta and American, on the other hand would require passengers from the large West Coast markets either to use foreign flag carriers for the entire trip or to make an additional stop to connect to their U.S. flag transatlantic services at an Eastern or Midwestern gateway, (e.g., Atlanta, Cincinnati, Dallas or New York). Under the Delta/Air France and American/Swissair arrangements, most of the flying for two-stop services will, therefore, be done on foreign-flag aircraft and most of the revenue will be exported to the foreign-flag operator's homeland. Under the United/THAI service, on the

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other hand, United will do most of the flying for two-stop services in its own aircraft, and the revenues will remain in the U.S., to the benefit of the U.S. balance of payments.

Northwest will offer two-stop service in its own aircraft to its Kuala Lumpur connection point but, unlike United's daily services to Bangkok, Northwest only serves Kuala Lumpur three days per week. On other days, passengers will have to connect to MAS services at Los Angeles or Tokyo. Moreover, Northwest offers two-stop service in its own equipment via Osaka and Kuala Lumpur from the West Coast gateways of Los Angeles and Seattle, but not from San Francisco, where three-stop service would be the best available. In addition, Northwest's best service between New York and Vietnam is also three-stop (via Detroit or Minneapolis, Japan and Kuala Lumpur) unless the New York passenger connects to MAS at Narita.

United will offer superior and seamless two-stop services to the top four U.S.-Vietnam city pairs, accounting for over 54 percent of the total 0 & D traffic. None of the other applicants can match that coverage of the U.S.-Vietnam market.

8. Only United and THAI offer daily service to Ho Chi Minh City, which is by far the most popular Vietnam destination for U.S. passengers. Delta and Northwest would each offer service to Ho Chi Minh City four times per week, and American three times per week. United's daily services to Ho Chi Minh City, the commercial center of Vietnam, are an important benefit, as the Department has previously recognized in carrier selection cases involving code-share opportunities. Order 95-5-4 at 5, 6 and Order 97-918 at 5.

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United also offers more weekly frequencies to Hanoi, the capital of Vietnam, than the other applicants: United -- four, Delta --three, Northwest -- two, and American -- none. Moreover, only United can offer services to a third point in Vietnam, Da Nang.

9. United with its own equipment will offer two-stop service (the best available) to more U.S. gateways than the other carriers:4/

United - LAX, SFO, SEA, ORD, JFK, HNL

Delta - A TL CVG and JFK

Northwest - DTW, MSP, SEA, LAX, HNL

American - DFW

United's two-stop gateways account for more of the U.S. - Vietnam traffic than do those served by the other carriers: United -- 60%; Northwest 3 7%; Delta -- 10%; and American -- 2%.

10. United also code shares on All Nippon Airways (ANA) flights between the U.S. and Japan. These United/ANA code shares would create additional two-stop connection services between the U.S. and Vietnam at ANA's U.S. gateways: Los Angeles, Washington /5, New York, Chicago, Honolulu and San Francisco. United also

4/ This comparison includes those services which are operated by the U.S. flag carrier in its own equipment from the U.S. gateway. For example, services where the foreign partner operates the entire service between the U.S. gateway and Vietnam are not included (e.g., AA*/SR: LAX-ZRH-SIN-SGN and DL*/A-F: LAX-CDG-SIN-SGN).

5/ Washington is the seventh largest U.S.-Vietnam market with 3.8 percent of the traffic. When Washington is included with United's other two-stop gateways, United offers two-stop service to gateways accounting for over 64 percent of the total market.

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code shares on ANA's flights between Tokyo and Bangkok and with THAI between Taipei and Bangkok, offering additional United code-share seats for U.S.-Vietnam passengers when the seats on United's own Tokyo-Bangkok flights are full. /6

11. Because four of United's two-stop gateways are also hubs (Los Angeles, San Francisco, Chicago, and Washington) and Seattle is a major connecting complex, United will be able to offer three-stop services to virtually its entire U.S. network. United serves 52 U.S. cities nonstop from San Francisco, 48 from Los Angeles, 115 from Chicago and 65 from Washington Dulles. At Seattle, United offers nonstop service to 17 North American cities. The other carriers serve only two or three hubs as two-stop gateways to Vietnam: Delta (Atlanta and Cincinnati), Northwest (Detroit and Minneapolis/St. Paul), and American (Dallas/Ft. Worth, Chicago and Miami).

12. United will offer more code-share seats to/from Ho Chi Minh City than any other applicant. THAI operates A300-600 aircraft for its BKK-SGN services. These aircraft are configured with a total of 247 seats in Business and Economy classes. All of these seats are available for sale to U.S.-Vietnam code-share passengers. This capacity compares with other carriers services to Ho Chi Minh City as follows. 7/

6/ United connects to THAI's Taipei-Bangkok services on United flights between San Francisco and Taipei.

7/ With respect to Hanoi, United/THAI would offer 792 weekly seats (two weekly A300-600 and two weekly B737-400 services) compared to Northwest/MAS at 288 seats. Delta/Air France operate three B747-400 weekly flights to Hanoi but did not provide seating information.

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13. United's transpacific routings will offer shorter elapsed times for passengers from the large West Coast markets than will the more circuitous services of the other carriers. For example, the distance from Los Angeles to Ho Chi Minh City via Tokyo and Bangkok is 8,799 miles, while via Atlanta, Paris and Singapore it would be 13,680 miles, and via Dallas, Zurich and Singapore, 13,555 miles. On outbound trips, United's LAX-SGN services would have elapsed times of 32:25 hours, compared to 41:22 hours for Delta's LAX-ATL-CDG-SIN-SGN three-stop service and 42:58 for American's LAX-DFW-ZRH-SIN-SGN service. If passengers use two-stop service operated exclusively by foreign carriers, the AA/SR elapsed time is 36:00 hours and DL/AF is 28:40. Although Northwest services with MAS are more circuitous via KIX and KUL (9,430 mile) than United's via NRT and BKK, the elapsed times are a

8/ Some seats on Air France and Swissair flights to SGN will be blocked for traffic to/from SIN, limiting the number of seats they can sell to/from SGN to less than the full capacity of their aircraft.

9/ Contrary to the Department's April 5, 2000 Notice, Delta has failed to provide the seating capacity of Air France B777 aircraft operated between Paris and Ho Chi Minh City.

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comparable. Northwest/MAS two-stop service is 33:00 hours compared to United/THAI at 32:25.

With 21 frequencies available it would be possible to award United 14 so that it can implement its full service pattern of daily service to Ho Chi Minh City and less-than-daily to Hanoi and Da Nang. None of the other carriers offers such a comprehensive service pattern to Vietnam. The Department can award one or two of the other carriers sufficient frequencies for their less-than-daily patterns using the seven frequencies remaining after United's more comprehensive service proposal has been implemented. Such a division of the frequencies would maximize U.S. carrier services and passenger benefits under the terms of the MOD.

Moreover, it is reported that Delta has concluded or will soon conclude a marketing cooperation agreement with Vietnam Airlines that includes code sharing. 10/ Code sharing between U.S. and Vietnamese carriers is also authorized by the MOD and is not subject to any limit as to the number of code-share frequencies that can be operated. Before deciding this case, the Department should request Delta to report on the status of its code-share relationship with Vietnam Airlines, including the number of code-share frequencies and markets where they propose to code share. It would be contrary to the public interest to allocate seven third-country code-share frequencies to Delta to support

10/ AIRLINE BUSINESS (October 1999), "Vietnam In US Link-up Deal" by Nick Ionides (Vietnam Airlines confirms holding code-share discussions with Delta; observers say Delta/Vietnam Airlines tie-up likely for services between the U.S. and Vietnam via Paris). See <www.reedbusiness.com/aerospace.htm>.

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code shares with Air France if Delta is able to offer code-share services with Vietnam Airlines over these same routings which are not subject to any limit on frequencies.

15. In the event United does not receive its full allocation of 14 frequencies, United will give priority to the provision of daily service to Ho Chi Minh City, which is by far the largest U.S.-Vietnam market. United will require seven frequencies for those daily Ho Chi Minh City code-share services.

Only United has any use for frequencies in excess of seven weekly. The Department should award United as many additional frequencies as is feasible after other carriers' services, which are found to produce consumer benefits, have been accommodated. United will use any frequencies above seven to offer as many services to Hanoi and Da Nang as it can schedule consistent with the number of frequencies United is allocated and consistent with the maintenance of daily frequencies to Ho Chi Minh City.

Respectfully submitted,

JEFFREY A. MANLEY

WILMER, CUTLER & PICKERING

2445 M Street, N.W.

Washington, D.C. 20037

(202) 663-6670

Counsel for UNITED AIR LINES, INC.

DATED: April 14,2000