OST-00-7513 / US-Ecuador All-Cargo / Reply of Arrow Air / June 30, 2000

OF ARROW AIR, INC.

Arrow Air, Inc. (Arrow) herein submits its reply to the answers filed by other parties to this proceeding.

1. Atlas Air, Inc. (Atlas) raises first the issue of the financial condition the parent company of Arrow and Fine Air Services, Inc. (Fine Air), Fine Air Services Corp (Fine Corp). Atlas argues the possibility that neither applicant might be able to effectively utilize the three additional weekly frequencies. Arrow wants to assure the Department that its present Ecuador all-cargo service is profitable and that its proposed additional service will also be profitable. Arrow's profitable operations are in no way at risk due to any real or imagined financial problems of Fine Corp. Furthermore, whatever future financial problems may arise with the parent company, in the unlikely event it were to affect Arrow's Ecuador operations, the Department always has the option to reallocate frequencies should that need arise, as in this proceeding.

Atlas next simply states that Arrow's service proposal is inferior to that proposed by Atlas. As was discussed in Arrow's answer to the Atlas application, the Atlas service proposal is by no means assured as permissible under the U.S.-Ecuador air service agreement. It is significant that Atlas proposes no specific alternative.

ARROW AIR, INC CONSOLIDATED REPLY

Furthermore, daily service is far more preferable in this market than once weekly service. Arrow will put more capacity into the market, along with more frequent service, than is possible under Atlas' proposal.

Atlas next focuses on Arrow's service pattern involving Quito and Guyaquil. It should be noted that depending on traffic requirements in the several markets involved, Arrow will operate (1) southbound into Ecuador with a stop at Guyaquil before Quito, or (2) with a direct flight to Quito with a traffic stop northbound at Guyaquil, and/or if northbound payload requires it, (3) a technical stop at Calli, Colombia. Arrow has found that this flexibility best serves the interest of shippers. Arrow does not now, nor will it if awarded the three additional frequencies, fail to maximize its allocation of frequencies.

Finally, Atlas argues that if Fine Air and Arrow merge, the five weekly frequencies currently allocated to the two carries will be the only ones dedicated to general cargo and will be "in the hands of one company". This, of course, is based on the premise that the seven frequencies previously allocated to Challenge Air Cargo, Inc. and now controlled by United Parcel Service, Inc., will be used for small package service.

While an application to merge Fine Air and Arrow is pending before the Department, there is no know timetable for acting upon that application, nor is the eventual outcome known. The Department, should it approve the merger, could, and probably would, require that

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some of the current authority in limited entry markets held by one or both carriers be re-allocated to other carriers.

However, the Department has not acted, and until it does, Arrow submits that the pending merger should not be a bar to favorable consideration of Arrow's proposal.

2. Evergreen International Airlines, Inc. (Evergreen) makes similar arguments regarding the pending Arrow/Fine merger application and the superiority of its own service proposal, which is very similar to - and subject to the same serious questions as - that of Atlas.

3. Gemini Air Cargo (Gemini) also raises the Arrow/Fine merger issue.

Arrow's statements herein above regarding Atlas' answer, apply to equally Evergreen's and Gemini's as well.

Based upon its experience in the U.S. - Ecuador scheduled allcargo market, experience that the above three applicants do not have, Arrow strongly believes that more frequent service is of far greater ben6fit to shippers that much less frequent service with larger capacity equipment.

Respectfully submitted

Allan W. Markham

ALLAN W. MARKHAM, PC

Counsel for ARROW AIR, INC.