Continental and Air France / Blanket Codeshare Authority / June 16, 1998

Mr. Paul L. Gretch

Director

Office of International Aviation

Department of Transportation

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

Washington, D.C. 20590

Dear Mr. Gretch:

Continental and Air France /1 jointly request blanket statements of authorization under 14 C.F.R. Parts 207 and 212 to engage in code-share operations consistent with the U.S.-France Memorandum of Consultations ("MOC") signed on April 8, 1998. The Joint Applicants ask the Department to grant the requested statements of authorization for an indefinite period as soon as possible but no later than June 26, 1998 so marketing of these services can begin before the proposed July I startup date.

In support of their Joint Application, Continental and Air France state as

follows:

1. A key feature of the new MOC between the U.S. and France is that it provides new opportunities for codesharing between airlines of the U.S. and France. Continental and Air France have entered into an agreement that provides for codeshare services consistent with the MOC, including U.S.-France transatlantic, intra-France, intra-U.S. and third-country code-share services (on a blind sector basis). The Department has already approved Continental/Air France code sharing between the U.S. and Paris, between Paris and other points in France and between Paris and third-countries in Europe. (See Notice of Action Taken May 8, 1998)

1/ Common names of carriers are used.

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9. Continental and Air France are now seeking blanket authority under Parts 207 and 212 of the Department's regulations to implement expanded codesharing services. This expanded authority will permit the Joint Applicants to fully implement their code-share agreement and benefit more fully from opportunities in the INIOC. The Joint Applicants specifically seek:

2/ This authority would permit Continental and Air France to conduct expanded third-country code-share operations and transatlantic U.S.-France codesharing, which are already authorized by the May 8 approval, over third-country intermediate points, which is not specifically authorized by that approval. All of Continental's and Air France's third-country code-share authority will be exercised subject to the blind-sector limitations contained in the bilateral.

3/ The Department's May 8, 1998 Notice authorizes Air France to display Continental's designator code on flights between the United States and Paris only, and between Paris only and other points in France and certain third countries. The Joint Applicants request that this authority under Part 212 be expanded to include flights operated by Air France between the United States and any point in France (either nonstop or over intermediate points), and between any France city-pairs as well as third-country code-share service.

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3. Continental and Air France ask the Department to grant the requested statements of authorization for an indefinite period, consistent with recent practice and the May 8, 1998 approval of the Joint Applicants' initial code-share services. /4 The Joint Applicants also request expedited consideration and issuance of the statements of authorization bv June 26, 1998 so Continental and Air France can begin marketing these new code-share services before the peak summer travel season. A list of the initial code-share points covered by this application is attached in Exhibit A. /5

Grant of this application is fully consistent with Article 8(7) of the new U.S.-France Air Transport Agreement and the Department's May 8, 1998 approval of transatlantic, intra-France and initial third-country code sharing by Continental and Air France. The proposed third-country code-share services on Exhibit A, which Continental and Air France plan to begin July 1, are consistent with applicable bilateral agreements or are supported by principles of comity and reciprocity. /6

5. Granting the blanket statements of authorizations requested is in the public interest because it will give the Joint Applicants broad flexibility to provide additional code-share services that will enhance international competition and increase service options for travelers seeking service between the United States and France and beyond. Approval of the requested blanket authority will also conserve the Department's staff resources because it will obviate the need for Continental and Air France to apply for approval each time they augment their code-share operations. Granting Continental expanded third-country code-share authority beyond France will also allow Continental to benefit fully from the rights available to U.S. carriers under the MOC (and other bilateral understandings) and to enter

4/ Continental and Air France will accept a condition that their authorities remain in effect as long as the carriers' underlying authority to serve the markets at issue remains in effect and the underlying code-share agreement remains in effect and approved by the Department.

5/ Continental and Air France request a waiver of the 45-day advance filing requirements in Parts 207 and 212. Continental and Air France plan to begin marketing and sales activities on or about June 26, 1998, and to begin operating service to the points listed in Exhibit 1 on or about July 1, 1998. Continental and Air France will provide written notice to the Department at least 30 days prior to implementing service to additional points under the requested authority.

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new markets quickly. Addition of Continental's on-line connections to additional third-country destinations will provide travelers with new service alternatives and inject new competition between the U.S. and those foreign points.

6. The Department has already fully evaluated and approved the Joint Applicants' code-share agreement, and the services covered by this application are consistent with the terms of the MOC. Consequently, this application is noncontroversial and should be granted expeditiously.

7. The Department's May 8 notice awarded Continental exemption authority to provide scheduled foreign air transportation of persons, property and mail between U.S. points and points in France, directly and via intermediate and beyond points to any point or points in third countries. Continental's authority to serve intermediate and beyond points in con)unction with its U.S.-France services is limited to countries with which the U.S. has signed open-skies agreements and/or countries which Continental holds authority to serve under certificates or exemptions issued by the Department and for which it holds route integration authority. With respect to the implementation of new code-share service via intermediate points and beyond the U.S. and France to third countries, Continental and Air France will implement such services only to the extent permitted by the carriers' respective international route authorities and the applicable bilateral agreements.

8. Granting the requested statements of authorization is consistent with Department policy and precedent. The Department has recognized that code-share arrangements "can provide a cost-efficient way for carriers to enter new markets, expand their systems and obtain additional flow traffic to support their operations." (U.S. International Air Transportation Policy Statement, April 1995 at 4) The Department has previously granted blanket statements of authorization in situations where the applicable bilateral agreements permitted broad code-share services. (E.g., Order 98-4-8 (United/Lufthansa); Delta/Austrian Airlines, Delta/Sabena and Delta/Swissair, Statements of Authorization granted April 30, 1997)

9. A redacted version of the Code Share Agreement between Air France and Continental dated November 8, 1996, as amended, was filed with the

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Department as part of the Continental/Air France Joint Application dated April 16, 1998. /7

10. Continental states that its code-sharing with Air France will have no impact on Continental's CFAF commitments. Air France and Continental agree to conform to the provisions of 14 C.F.R. 399.88 with respect to the code-sharing services at issue in this Joint Application.

Because Continental and Air France intend to begin advance marketing and sale of these code-share flights prior to the July 1, 1998 start of their service, the Joint Applicants ask the Department to grant the statements of authorization requested by this Joint Application as soon as possible but no later than June 26, 1998.

Respectfully submitted,

Lorraine B. Halloway Michael F. Goldman

CROWELL & MORING LLP BAGILEO, SILVERBERG & GOLDMAN LLP

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

Exhibit A

*Continental's application for authority is pending in Docket OST 98-3888