OST-00-7513 / US-Ecuador All-Cargo / Answer of Evergreen / June 27, 2000

EVERGREEN INTERNATIONAL AIRLINES, INC.

Pursuant to the Department's June 15, 2000 notice, Evergreen International Airlines, Inc. ("Evergreen") /1 hereby answers the applications of Atlas and Gemini (each, as supplemented) and Arrow and Fine Air for U.S.-Ecuador all-cargo authority. Arrow and Fine Air as incumbents already hold, respectively, three and two weekly frequencies. Each applicant, including Evergreen, seeks the three frequencies made available because of cessation of operations by Kitty Hawk International. For the reasons set forth herein the proposals of the other applicants do not measure up to Evergreen's and some have aspects that are contrary to the public interest.

Arrow and Fine Air.

These two incumbents together already hold a total of five frequencies between them. Since 1999, they have been under the common ownership of Fine Air's parent (Fine Corp.) pursuant to temporary, pendente lite, exemption from

1/ Carriers hereafter are referred to by commonly used names.

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the route transfer prior approval requirement of 49 U.S.C. §41105. /2 On April 6, 2000, they applied for final DOT approval of the route transfer, including transfer of Arrow's U.S.-Ecuador all-cargo authority so as to permit the two companies to merge into one surviving company, to be known as Arrow Air.

It would be contrary to the public interest to allow a further concentration of limited U.S.-Ecuador all-cargo frequencies by award of all the additional frequencies at issue to either Fine or Arrow or to the surviving carrier if the merger is approved. When it last allocated these three U.S.-Ecuador all-cargo frequencies in 1997 (to AIA/Kitty Hawk), the Department denied separate applications of Arrow and Fine for additional frequencies on the ground that "our overall goals in the U.S.-Ecuador all-cargo market would be best served by adding new competition rather than authorizing incumbent carriers to increase their services. /3 The planned merger of Arrow and Fine, which would reduce to two the number of scheduled all-cargo carriers with authority to operate in the U.S.-Ecuador market, provides an even stronger reason for the Department to continue to adhere to this policy in reallocating the three available frequencies. Moreover, for reasons discussed herein, Evergreen's application is the far superior one in any

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event and would bring a strong new competitor to the U.S.-Ecuador all-cargo market.

Atlas and Gemini. On the assumption that the Department is prepared to accept as permissible the proposals of Evergreen and Atlas to carry over a weekly frequency from one week to the next in order to operate an alternating pattern of one and two weekly flights, Evergreen, Atlas and Gemini would each use all the available frequencies. /4 But there the comparisons cease. Gemini would operate DC-10 aircraft having at most 75 percent of the capacity of Evergreen's B747-100/200 aircraft. Evergreen, although necessarily offering a less frequent scheduled service pattern, would provide at least the same capacity as offered by Gemini. While both Atlas and Evergreen propose to serve the market with B747 freighters and with the same number of weekly flights, Evergreen proposes turnaround service that will allow it to dedicate the capacity of its aircraft to U.S.-Ecuador traffic. Atlas, in contrast, will not be able to do this because on each of

4/ If the Department is not prepared to make such a determination at the present time, it could still bring desired new competition to the market by allocating two weekly frequencies to Evergreen and the remaining frequency to one of the incumbent applicants in the present case.

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its flights it will combine U.S.-Ecuador service with service to and from Colombia. /5

Evergreen's proposal, furthermore, offers important service features that are not offered by Atlas or any other applicant. Evergreen, and Evergreen only, proposes to serve New York in addition to Miami, thus providing valuable added opportunities for shippers in the U.S. and in Ecuador. Further, its New York flights would operate as a continuation of existing Evergreen services from points in Asia (Hong Kong, Taipei, Singapore and Djakarta). Thus, in a way that cannot be duplicated by any other applicant, Evergreen would take full advantage of the three available frequencies as a complement to its existing scheduled service pattern. Evergreen is the only applicant that would provide service to Latacunga. It is also a more experienced scheduled all-cargo air carrier than the other applicants and is well positioned to build on its prior charter experience in the Ecuador market.

When weighed in the balance, Evergreen's application is the far superior one. Additionally, the applications of both Atlas

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and Gemini present special concerns. Both carriers characterize themselves as primarily ACMI carriers. An ACMI carrier operates on behalf of other airlines, i.e., carrying traffic not of its own, but traffic generated by its customer airlines.

As Atlas makes quite clear on its web site, under the heading Competitive Advantages, its ACMI business is best served if it avoids competing with its airline customers:

Atlas has numerous foreign airline customers, particularly Latin American airlines, as Evergreen has previously pointed out. /6

Likewise, Gemini wet leases its aircraft to foreign air carriers the Department's own records indicate. The public interest and the Department's stated objective to promote competition clearly would not be served if Atlas or Gemini were to be granted precious limited entry authority and use it to provide ACMI service on

6/ In Evergreen's Consolidated Reply of June 1, 2000.

behalf of the foreign air carriers who appear to be their main customers.

Respectfully submitted,

EVERGREEN INTERNATIONAL AIRLIFS,, INC.

Richard P. Taylor

David H. Coburn

Benjamin R. Achenbach

STEPTOE & JOHNSON LLP

Its Attorneys

June 27, 2000

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