98-214 / Continental and Air France / Joint Application / April 16,1998

Mr. Paul L. Gretch

Director

Office of International Aviation

Department of Transportation

400 7th Street, S.W., Room 6402

Washington, DC 20590

Dear Mr. Gretch:

Continental Airlines, Inc., Continental Express, Inc. (Continental) and Compagnie Nationale Air France (Air France) are filing this joint-application seeking statements of authorization for an indefinite duration to implement a code-sharing agreement between Continental and Air France.

Air France hereby requests, under 14 CFR Part 212, a statement of authorization to permit it to display the "CO" designator code of Continental on flights operated by Air France between points in the U.S. and Paris, France, and between Paris, on the one hand, and other French points and points in Europe, on the other hand.

Continental hereby requests, under 14 CFR Part 207, a statement of authorization to permit it to display the "AF11 designator code of Air France on flights operated by Continental between points in the U.S. and points in France, and on flights operated by Continental between domestic U.S. city-pairs.

Appendix A lists the city-pair sectors on which the "CO" designator will be displayed on Air France flights; Appendix B lists the city-pair sectors on which the "AF" designator will be displayed on Continental flights.

Continental and Air France intend to commence such code-sharing services on June 1, 1998, but plan to open such services for sale to the general public as soon as possible and no later than April 30, 1998, subject to the receipt of all necessary approvals. Air France

Mr. Paul L. Gretch

April 16, 1998

Page 2

and Continental therefore request that the Department grant the statements of authorization requested for an indefinite period as soon as possible but no later than April 30, 1998. Pursuant to 14 CFR 207.10(e) and 212.5(e), any answer in opposition would be due by April 27, 1998.

A new Air Transport Agreement is now in effect between the United States and France. A Memorandum of Consultations bringing the new liberalized Agreement into effect ad referendum was signed on April 8, 1998 in Paris. Under Article 8(7) of the new Air Transport Agreement, Continental and Air France are authorized to engage in code-sharing on flights operated between the United States and France either directly or via third countries, and on flights operated beyond the United States and France to third countries, e.g., "the agreed routes" as defined under the bilateral Agreement. The same provision of the Agreement commits the Department to grant approvals for such codesharing between airlines of the U.S. and France, such as Continental and Air France, provided that the carriers "(a) hold the appropriate authority and (b) meet the requirements normally applied to such arrangements." Continental and Air France clearly meet these requirements. The proposed code-sharing is therefore consistent with the public interest, and the requested statements of authorization should be granted expeditiously under 14 CFR parts 207 and 212.

In a nutshell, under the carriers, agreement, Continental and Air France will code-share on each other's transatlantic flights between Paris and Newark and Paris and Houston. In addition, Continental will code-share on Air France's Miami-Paris flights and initially on Air France flights between Paris and thirteen (13) domestic French points, and beyond Paris to points in Germany, Belgium, Denmark, Sweden, Norway, Switzerland, Austria and Finland. (These are European countries that have entered into Open Skies Agreements with the United States.)

Air France in turn will code-share on Continental domestic flights between Newark and Houston and various U.S. cities, including Cleveland, Dallas/Fort Worth, Detroit, Syracuse and Pittsburgh (See Appendix B).

A redacted version of the Code Share Agreement between Air France and Continental dated November 8, 1996 as amended in April, 1998 is being filed with the Department as part of this Joint Application. /1 Under the Agreement, Air France and Continental will code-share by blocking seats on each other's U.S.-France flights; each carrier will

1/ A copy of the redacted Code Share Agreement may be obtained by contacting Michael Goldman ((202) 944-3305) or Lorraine Halloway ((202) 624-2538), counsels for Air France and Continental, respectively.

Mr. Paul L. Gretch

April 16, 1998

Page 3

continue to price its own services independently whether an code-share flights or its own operated flights. The carriers will remain competitors on each of these routes; antitrust immunity is not being requested.

Air France holds authority under its foreign air carrier permit to provide service between points in France and the U.S. points New York/Newark, Boston, Chicago, Washington, Houston, Los Angeles and Anchorage. Order 76-2-25 (January 7, 1976). Air France also holds exemption authority to serve other routes between the U.S. and France. See Orders 93-3-3 and 95-2-47. On April 27, 1993 Air France filed for renewal of its permit and exemption authorities, and invoked the automatic extension process of federal law to maintain its effectiveness pending renewal (D. 48777). Air France has now filed in Docket OST 98-3739 on April 14, 1998 an exemption application for U.S.-France "all points" authority in order to hold out and offer service between France and any point or points in the United States as authorized by the route schedule of the new U.S.-France Open Transatlantic Agreement. Specifically, grant of this exemption authority will provide Air France the authority it needs to hold out code-share services to and from domestic U.S. cities served by Continental behind Air France's transatlantic gateways at Newark and Houston (and eventually Miami). Air France requested that the Department act favorably on its application in Docket OST 98-3739 by April 30, 1998. Upon grant of its exemption application, Air France will hold all authority needed to conduct the code-share services described in this Joint Application.

Continental holds exemption authority to provide Houston-Paris and Newark-Paris service and to combine that service with other service authorized by Continental certificates and exemptions. In addition, Continental holds U.S.-Belgium, U.S.-Germany and U.S.-Switzerland authority on Route 29-F, and integration authority (see Orders 97-7-16 and 97-3-24). Continental has applied for U.S.-France authority and additional authority to serve Austria, Denmark, Norway, Sweden, Finland and other points via France.

Continental states that its code-sharing with Air France will have no impact on Continental's CRAF commitments.

Air France and Continental agree to conform to the provisions of 14 CFR 399.88 with respect to the code-sharing services at issue in this Application.

As noted, because Continental and Air France intend to begin advance marketing and sale of these code-share flights prior to June 1, 1998, the Applicants request that the Department grant the Statements of Authorization requested by this Joint Application as soon as possible but no later than April 30, 1998.

Mr. Paul L. Gretch

April 16, 1998

Page 4

Respectfully submitted,

Lorraine B. Halloway

CROWELL & MORING, L.L.P.

Michael F. Goldman

BAGILEO, SILVERBERG & GOLDMAN