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Office of International Aviation Filings for March 13, 2017


Applications for Statement of Authorization and Wet Leases:

None

Answers and Replies:

Aruba Airlines - Objections of World Atlantic Airlines, Miami Air, Eastern Air Lines, XTRAirways and NACA / Reply of Aruba Airlines to Objections of Swift Air and World Atlantic Airlines / Reply of Aruba Airlines to Objections of XTRA Airways and Eastern Air Lines / Reply of Aruba Airlines to Objection of NACA / Support Letter of Gulfstream Air Charter / Response of XTRAirways to Gulfstream Air Charter / Reply of Swift Air to Reply of Aruba Airlines

Notices of Consistency:

None

Approvals, Dismissals and Suspensions:

None




Arubaanse Luchtvaart Maatschappij N.V. d/b/a Aruba Airlines


March 1, 2017

Objection of Caribbean Sun Airlines d/b/a World Atlantic Airlines

Caribbean Sun Airlines, Inc. d/b/a World Atlantic Airlines objects to the extrabilateral, seventh-freedom charter application filed on February 24, 2017 by Arubaanse Luchtvaart Maatschappij N.V. d/b/a Aruba Airlines. Over the past eighteen months, Aruba Airlines has established a history of relying unduly on seventh-freedom US-Cuba operations, currently basing two aircraft in Miami largely to support these operations. It is not in the public interest to allow Aruba Airlines to continue this business model in the US-Cuba market.

The demonstrated reliance of Aruba Airlines on US-Cuba traffic is more troubling. As explained in Condor, "[i]t has long been US aviation policy, even where reciprocity is not an issue, to require foreign airlines to place substantial reliance on their US-homelancl services, with fifth-freedom operations taking a secondary, supportive role." In 2016, Aruba Airlines applied for over 1000 round-trip US-Cuba charter flights, often on very short notice. But by year's end, Aruba Air reported only 342 round-trip Aruba-US flights, roughly a three-to-one ratio in favor of seventh-freedom service.

Now Aruba Air has applied, on four days' notice, to continue its extended, fifth-freedom operations, seemingly as Gulfstream Air Charter's exclusive aircraft operator, for an additional nine months. On the numbers available now, it seems that Aruba Airlines intends to continue operating more fifth-freedom flights than flights to and from its homeland. This is not the "secondary, supportive role" that the Department expects for the non-homeland operations of foreign carriers, and the Department therefore should deny, or place substantial limits on, Aruba Air's request.

Counsel: Mietus Law, John Mietus, 202-747-5212


March 2, 2017

Objection of Miami Air

Miami Air International, Inc. respectfully submits this memorandum of objection to the above-referenced application of Aruba Airlines for a statement of authorization. Miami Air initially responded without objection to the application; however, in light of additional information filed since the application was served, now objects. Miami Air also wishes to state its concurrence with the objections filed by Swift Air, LLC and Caribbean Sun Airlines, Inc. d/b/a World Atlantic Airlines.

The basis for Miami Air's objection is Aruba Airlines' continued, undue reliance on fifth- and seventh-freedom operations in relation to its third- and fourth-freedom services. Aruba Airlines' 2016 record demonstrates a staggering number of applications for round-trip US-Cuba charter flights out of Miami (more than 1000 flights). This is in comparison to the 342 round-trip Aruba-US flights operated by Aruba Airlines in 2016. The current pending application is for an additional 275 round-trip US-Cuba flights out of Miami to be performed through September 2017.

World Atlantic Airlines' objection aptly points out that Aruba Airlines currently has two aircraft based in Miami for its US-Cuba operations. This presence has become increasingly frustrating for US air charter operators, not only because of Aruba Airlines' undue reliance on these fifth- and seventh-freedom operations, but also because a similar economic opportunity does not exist for US carriers in Aruba.

Counsel: Dentons, Laura Jennings, 202-496-7178


March 2, 2017

Reply of Aruba Airlines to Objections of Swift Air, World Atlantic Airlines and Miami Air

Swift urges the Department "reevaluate" its "analytical framework for applying Part 212" ,apparently by involving the Department in an economic analysis to determine not just whether reciprocity exists, but also to determine whether there is an "equivalent economic opportunity to serve the home country of the applicant carrier" before granting an application. Aruba urges the Department to reject this notion out of hand.

Notwithstanding the important policy issues raised by the specter of the Department's intervention in the market and the impossible task of determining whether "an equivalent economic opportunity" exists in the homeland market of an applicant foreign carrier, Swift is effectively urging the Department to amend Part 212. This proceeding is not the proper forum for such an exercise; Swift is free to petition the Department for a rulemaking.

Miami Air echoes Swift's interventionist concern about "economic opportunity" while also acknowledging that "it is the Department's long-standing policy to give charterers the maximum
flexibility to choose the direct air carrier to best meet their needs."

As the Department is aware, the beginning of scheduled service between the US and Cuba in late 2016 has significantly impacted the charter market. Aruba understands that a number of public charter operators have withdrawn from the market, thus reducing the pool of potential business for US charter carriers. More than a year passed while Aruba performed charter service for Gulfstream without a word from Swift or WAA (and until December 2016, from Miami Air). Now, with the market contracting, these carriers suddenly raise an "undue reliance" concern. This is yet another, albeit more indirect, way of forcing the Department's hand into providing what is in effect a right of first refusal for US carriers. As it has done so many times before 16, the Department should once again firmly reject such a policy.

Aruba has not "unduly relied" on seventh freedom traffic, and none of the Objectors have identified any Department precedent, or articulated any sound basis, for denying the balance of Aruba's application in support of Gulfstream's public charter program. For the foregoing reasons, the Department should (i) immediately exercise its authority under Part 212 and grant the balance of Aruba's application, and (ii) strike Miami Air's objection from the record.

Counsel: Zuckert Scoutt, David Endersbee, 202-973-7935


March 3, 2017

Objection of XTRAirways

TEM Enterprises, Inc. d/b/a XTRAirways respectfully submits this objection to a February 24, 2017 application by Aruba Airlines (as amended February 28, 2017) for 550 7th freedom charter flights to be operated between MIA-HAV/SNU over the 7 month period March 1-September 30, 2017, with MIA-HAV service to be operated on a daily schedule and MIA-SNU on a twice-weekly schedule.

Since in 2016 Aruba Airlines applied for over 1000 7th Freedom charter flights, and only operated 683 3rd/4th Freedom flights during that same period, the current application for 550 7th Freedoms over a 7-month period clearly indicates a continuing substantial and primary reliance on those operations contrary to Department policy. This is clearly not the secondary or supportive role the Department expects of foreign carriers serving the US and grant of the extra-bilateral authority is not in the public interest.

Counsel: Pierre Murphy, 202-776-3980


March 3, 2017

Objection of Eastern Air Lines

Eastern Air Lines Group, Inc. joins Swift Air, ·world Atlantic Airlines, Miami Air International, and XTRAirways in objecting to the extrabilateral, seventhfreedom charter application filed on February 24, 2017 by Arubaanse Luchtvaart Maatschappij N.V. d/b/a Aruba Airlines. Eastern agrees with the other objectors that it is not in the public interest for Aruba Airlines to continue its level of seventhfreedom activity indefinitely.

Eastern has been operating a significant number of US-Cuba charters alongside Aruba Airlines over the past year. And Eastern has grown concerned as evidence mounts that Aruba Airlines intends to remain indefinitely, and seek to underprice Eastern and other US air carriers, in a market it has no bilateral right to serve. There's also no indication that the Cuba operations of Aruba .Airlines are to be balanced by an increase in the now-modest, Aruba-US flying that airline also performs.

In short, after watchful waiting Eastern has concluded that Aruba Airlines has relied unduly on seventh-freedom traffic for its US business and intends to continue on that path. Such activity is inconsistent with the "secondary, supportive role" to which Department policy limits non-homeland operations by foreign carriers. The Department therefore should deny the request of Aruba Airlines or move to actively reduce its presence in the US-Cuba market.

Counsel: Mietus Law, John Mietus, 202-747-5212


March 6, 2017

Reply of Aruba Airlines to Objections of XTRA Airways and Eastern Air Lines

The Department should strike XTRA's objection as sheer opportunism. XTRA should not be entitled to withdraw a "no objection" simply because its aircraft suddenly become available and because it thinks that it can latch on to enough other objections in order to persuade the Department to interfere in the marketplace and to eliminate a competitor from the highly-competitive US-Cuba charter market. First, and as noted in Aruba's March 2 reply, if the polling process is to have any integrity, the Department should hold carriers accountable to their polling replies. Otherwise, the predictable result will be a scrum of follow-on objections that make no new arguments and raise no new issues, and which consume the Department's valuable time. Second, the fact that XTRA now has aircraft available is entirely immaterial; there is no right of first refusal for US charter carriers (see Aruba reply at 5 and infra). Third, the fact that XTRA may have subsequently spent more time pondering the record of Aruba's charter applications on behalf of Gulfstream does not justify a withdrawal of "no objection". XTRA was served with Aruba's application, had ample time to consider it, and even with an erroneously lower stated level of third- and fourth-freedom flights on the application, XTRA deliberately chose not to object. The Department must act firmly to prevent its established polling procedures from becoming the victim of gamesmanship.

For its part, Eastern first expresses concern that Aruba will "underprice Eastern and other US carriers," and as a secondary matter also raises undue reliance concerns. Eastern cites to no policy or precedent (nor can it) that would vest the Department with the role of price adjudicator
for foreign carriers. Indeed, such interventionism is squarely at odds with the core principles of the US-Aruba Open Skies Agreement, which in Articles 11 and 12, provide, inter alia, that each party is to permit the marketplace to control the provision of air transportation services without government interference; that there is no right of first-refusal; and that prices are
to be determined by the marketplace.

Counsel: Zuckert Scoutt, David Endersbee, 202-973-7935


March 7, 2017

Objection of National Air Carrier Association

We are confused as to how Air Aruba seems to believe the lack of objections from previous applications for these extra bilateral rights seems to exclude them from scrutiny of current or future applications. The continual and increasing accumulation of US/Cuba flights by Air Aruba, seemingly always on very short notice, requires careful review by the Department of Transportation.

We do not believe there are any reciprocity issues related to this case. This is almost entirely an undue reliance case. While the numbers have varied in the various answer and objections of the parties involved in this application , the Department approved 861 round trip flights from Miami to various airports in Cuba2 iust a little over a year ago. When one factors in the current application for 275 round trips, the total comes to 1136 round trips over approximately a year and a half. This is in contrast to Air Aruba's 683 flights in 2016. This is a clear case of undue reliance on charter operations.

NACA firmly believes the traveling public as well as Gulfstream Air Charter, Inc. (the name of the charterer) will have more than enough options for air travel from Miami to Cuba. Demand will be met by newly started scheduled service by US carriers as well as the vast array of other US and foreign charter carriers.

By: NACA, A. Oakley Brooks


March 8, 2017

Reply of Aruba Airlines to Objection of National Air Carrier Association

Now, having sat on the sidelines through two tranches of objections, and without requesting leave to file or explaining the excessive delay, NACA opportunistically files an objection that cites to no Department policy or precedent, but rather exhorts the Department to reject Aruba's application based on undue reliance concerns (stating, without support, that it is a “clear case”). While NACA concedes that “[w]e do not believe there are any reciprocity issues related to this case,” NACA also states that the traveling public will have other Miami-Cuba options, both by scheduled US carriers and the “vast array of other US and foreign charter carriers.” NACA is wrong on both of its arguments.

NACA points out that more than a year ago, the Department approved an application for a significantly larger number of charter flights than are at issue here. However, this was before the Department allocated US-Cuba scheduled frequencies; the addition of scheduled service to the market has fundamentally changed the charter programs. In its analysis, the Department should consider Aruba's decreasing seventh freedom service from after the inauguration of scheduled service (which occurred in late 2016 with respect to Havana), as the pre-scheduled service conditions will never again exist and are thus an inappropriate benchmark for an undue reliance analysis. In any event, and unlike the carriers involved in a number of the Department’s undue reliance cases, Aruba operates daily service to the US (with seasonal exceptions).

Second, the “vast array” of charter carriers theoretically available to serve the US-Cuba market is a chimera. As ably detailed by Gulfstream in its March 8 letter to the Department in support of Aruba’s application, none of the objecting US charter carriers has an appropriate aircraft or demonstrated ability to perform reliable, on-time service for Gulfstream's flights. For a variety of reasons, US-Cuba charter flights are unique, and in this case the market has spoken loud and clear: Aruba's aircraft and service meets Gulfstream's (and thus the traveling public's) needs. And substituting one of the “vast array” of hypothetical foreign carriers for Aruba's service, as NACA suggests, simply adds unnecessary time, transaction costs and uncertainty for both Gulfstream and the traveling public. Terminating a successful, ongoing commercial relationship between a US charter operator and a foreign carrier simply for the sake of changing the carrier, when no viable alternative carrier is available, is demonstrably not in the public interest.

Counsel: Zuckert Scoutt, David Endersbee, 202-973-7935


March 8, 2017

Support Letter of Gulfstream Air Charter

Five U.S. charter airlines have objected to Aruba Airlines' application. Yet, none of these airlines can provide the air transportation services that Gulfstream seeks. One objecting carrier apparently provides charter air transportation services exclusively for a competitor and has advised that it cannot operate the charter flights for Gulfstream. A second carrier has indicated that it is not interested in operating charter flights to/from Cuba over the long term. A third objecting carrier has an aircraft that currently is undergoing maintenance and is not available until sometime in May. A fourth objecting carrier operates older aircraft with limited cargo space for baggage. Unfortunately, Gulfstream has concerns about the fifth carrier's reliability. In the past, this carrier had repeated and on-going flight delays that disrupted Gulfstream's services and caused travelers to miss scheduled activities or connecting flights.

Gulfstream wants to continue offering its valuable indirect air carrier services in a highly restrictive market. It can only do so, if it can secure transportation services from a reliable carrier that operates newer, fuel efficient aircraft with the capacity necessary to accommodate Licensed Travelers and all of their baggage. Throughout this past year, Aruba Airlines has been the only carrier that has offered the services Gulfstream has requested. The Company, therefore strongly supports Aruba Airlines' application and requests that the Department promptly grant the requested statement of authorization in its entirety.

Counsel: Zuckert Scoutt, David Endersbee, 202-973-7935


March 9, 2017

Response of XTRAirways to Gulfstream Air Charter

In a broad-brush attack on the US charter carrier business, Gulfstream states variously regarding the US carriers which have filed herein that, inter alia, the US charter carriers have: no aircraft availability due to maintenance; operate "exclusively" for a competing OFAC Cuba charterer; operate less fuel-efficient aircraft than A320s; are not interested in operating to Cuba over the long term; operate "older aircraft with limited cargo space for luggage"; are overall totally unreliable, with "repeated and on-going flight delays," etc. Gulfstream is careful not to address any of its factual statements to any particular US carrier.

However, to the extent these charges are made against XTRA specifically, the statements are totally incorrect. XTRA is an operator of B737-400 and B737-800 type aircraft. Just as with the A320 aircraft type, these aircraft are the standard aircraft operated by US charter and scheduled carriers. XTRA's business consists of the operation of long-term track charters for large US tour operators as well as more short-term and ad hoc series of charters. XTRA also has operated flights to Cuba from Miami, both on a sub-service basis as well as directly, for OFAC licensed Cuba charterers. Further, on the very short MIA-Cuba flights at issue herein, the B737-400 aircraft XTRA would operate to Cuba are comparable in every way to the 20-year old A320 aircraft of the type operated by Aruba Airlines, particularly as regards fuel-bum and luggage capacity! on MIA-Cuba flight sectors.

What Gulfstream fails to address and is totally silent on, is the only issue in this case: the undue reliance of its carrier on US 7th Freedom operations for its US operations when compared with its historic and current levels of US-homeland operations. As for Gulfstream's assertion that only Aruba Airlines is a reliable carrier, operating newer, fuel-efficient aircraft with the capacity to accommodate Cuba baggage, Gulfstream fails to state that other Cuba OFAC charterers use predominantly US carriers (or foreign carriers that do not place undue reliance on their 7th Freedom operations for their US service), which operate the same category of aircraft.

Counsel: Pierre Murphy, 202-776-3980


March 10, 2017

Reply of Swift Air to Reply of Aruba Airlines

Aruba Airlines asks the Department to conclude that there has been no undue reliance because it has proposed 275 seventh freedom round trips over a seven month period while performing 341 roundtrips between Aruba and the United States in the last year. A thorough examination of the record demonstrates that the applications of Aruba Airlines for US-Cuba charters have been far more extensive. Since 2016, Aruba Airlines has sought approval for 1677 extra-bilateral, round-trip operations.

This is an astounding level of reliance on seventh freedom operations. Aruba has applied to operate 1677 round trips and 3373 total extra-bilateral operations over a 20 month period, which is an average of nearly 169 per month. Meanwhile, Aruba Airlines claims to have operated 683 Aruba-US operations during 2016, which averages nearly 57 per month. The ratio of seventh freedom to US-home country operations is nearly 3 to 1.

A finding of undue reliance in these circumstances is consistent with Department precedent. The Department has rejected applications that place less reliance on extra-bilateral operations. When Condor Flugdienst GmbH applied to operate 400 fifth freedom charters while it had only operated 242 round trip US-Germany flights in the prior year (a ratio of less than 2 to 1), the Department concluded that the proposed fifth-freedom operations did not take “a secondary, supportive role” to US-home country operations. In Condor the Department was careful to avoid establishing a formula for determining undue reliance, but the circumstances surrounding Aruba Airlines’ application presents an even more compelling case for the same finding. Rather than the seasonal service proposed in Condor, Aruba Airlines has established a permanent line of business operating year-round between the United States and Cuba while flying comparatively token US-Aruba operations. With US carriers willing and able to perform these operations, the Department should deny the Application.

Second, the contentions of Gulfstream and Aruba Airlines that US carriers are unable to provide the proposed services are meritless. In its letter, Gulfstream makes a generalized assertion than none of the objecting carriers can provide the same service as Aruba Airlines, stating (without identifying the carriers) that: (1) one US carrier has an exclusive arrangement with a rival carrier service provider; (2) one carrier is not interested in a long-term Cuba-US contract; (3) one carrier’s aircraft is undergoing maintenance; (4) one carrier’s aircraft are old and lack space for baggage; and (5) one carrier is not reliable. For its part, Aruba Airlines has asserted that “no viable alternative carrier is available.” None of these purported reasons demonstrate a compelling need for Gulfstream to use Aruba Airline’s services. Swift does not have an exclusive contract with any CSP and stands ready to provide service on the proposed routes within 30 to 60 days. Moreover, the purported maintenance issues do not justify grant of the Application. Required C-checks and other maintenance are part of the charter business, and airlines develop schedules that take maintenance into account. The fact that one airline may have an aircraft in heavy check does not warrant the grant of extra-bilateral authority over a seven month period. Swift also submits that its 737-400 aircraft are more than adequate for the proposed flying. Not only has Swift regularly flown for other CSPs, but Aruba Airlines has contracted with Swift to provide sub-service on these same routes. In Swift’s experience in this market, the baggage capacity of the 737-400 has not been an issue. In the absence of a compelling need among travelers and shippers for Aruba Airline’s services, the Department should reject the attempt to establish a permanent extra-bilateral service that is completely out of balance with its US-homeland services.

Counsel: Cooley LLP, Parker Erkmann, 202-776-2036

Application for Statement of Authorization - February 24
Order 2017-3-7 - Granting Statement of Authorization - March 10

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