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2001-U.S.-Argentina Combination Service Proceeding

Order 2001-7-12 denies the application of Continental Airlines, Inc. in the captioned docket to delay institution of its authorized New York/Newark-Buenos Aires scheduled combination services, and institue an expedited carrier selection proceeding to determine which carrier should be authorized to use seven weekly frequencies for U.S.-Buenos Aires service that become available on December 1, 2001.

By:  Susan McDermott

2001 U.S.-Argentina Combination Service Proceeding / 1999 U.S.-Argentina Combination Service Case / American Airlines, Inc. / Delta Air Lines, Inc.

Although American and United together experienced losses of $799 million for the second quarter of 2001 alone, they are apparently willing to accept even greater losses instituting seven additional weekly Argentina flights to protect themselves from competition by a new, fourth airline on U.S.-Argentina routes over the long term. Although Delta is apparently facing large losses on its Atlanta-Buenos Aires route despite the termination of LAPA’s flights and codesharing with LAPA, Delta is prepared to add to the $90 million in overall losses it experienced in the second quarter by instituting New York (JFK)-Buenos Aires flights which would divert traffic from its Atlanta flights and lack the support of a true hub at JFK. Why? To protect its Atlanta flights from Continental’s New York/Newark-Buenos Aires competition. Although American, United and Delta have each announced that they anticipate further losses this year and expect to retire aircraft and reduce their planned capacity,3 they each claim to be prepared to institute new Argentina flights December 1, 2001. Rather than abetting these carriers’ plans to limit U.S.-Argentina competition in the long run, the Department should reconsider its decision and grant Continental’s request for an exemption to institute New York/Newark-Buenos Aires service December 1, 2002. Only by granting Continental’s request can a fourth network be added to U.S.-Argentina routes for the benefit of competition in the long run. Even if the Department does not grant Continental’s request on reconsideration, however, it should at least give comparative consideration to Continental’s proposal to institute service December 1, 2002.

Given the complexity of deciding between at least three applicants and at least three gateways, Continental questions whether the Department can lawfully base any decision on the truncated procedures it proposes to use, particularly after it concluded only last year that full evidentiary procedures were required for a virtually-identical Argentina case. Even with truncated procedures, however, history suggests that the Department’s own decision-making process will take so much time that service is unlikely to commence by December 1, 2001, in any event. Nonetheless, the additional information requirements Continental seeks and the additional issue of evaluating the public benefits of deferring the institution of new services for 12 months or less to secure new entry will not delay the proceeding.

Counsel:  Continental and Crowell Moring, Bruce Keiner, 202-624-2615

2001 U.S.-Argentina Combination Service Proceeding; 1999 U.S.-Argentina Combination Service Case; American Airlines, Inc.; and Delta Air Lines, Inc.

Continental presumes that it somehow knows better than American, Delta, or United that new service to Argentina cannot be viable until December 1, 2002. Continental has recently pulled service from markets in South America, including Brazil and Chile, while American and other carriers have kept their service levels intact. American does not need advice from Continental on the "wisdom" of serving Argentina or any other market, nor does the Department. Finally, Continental contends that Order 2001-7-12 "does not explicitly preclude Continental from applying for seven frequencies to institute service on December 1, 2002". That is nonsense. The Department denied Continental's request for an exemption to delay its start-up until December 2002. Order 2001-7-12 set a highly expedited procedural timetable "so that we can complete this case in sufficient time for the selected carrier to promote and commence its services on December 1; withdrew Continental's frequencies "so that they will be available for use by another carrier for services commencing this December"; and stated the Department's desire "to ensure that the selected carrier can commence its services in time for a December start-up" Continental should not be allowed to appear as an applicant with a start-up proposal of December 1, 2002. That would only burden the record in a highly expedited case, and serve no purpose in the Department's process of choosing a replacement carrier willing to start service on December 1, 2001.

Counsel:  American, Carl Nelson, 202.4965647, carl.nelson@aa.com 

That American, Delta and United may be losing money and curtailing service on some routes, while proposing to offer new U.S.-Buenos Aires service, is not because each seeks to block Continental's entry into the Argentina market. Rather it reflects the fact that each of these carriers believes that (unlike Continental) it can operate a new Buenos Aires service from the selected U.S. city profitably over the long run. In the case of American's DFW-Buenos Aires proposal, with which DFW Airport is most familiar, this is almost self-evident. American operates its major U.S. hub at DFW, with over 750 daily departures, and it already operates daily nonstop flights most successfully from DFW to four other South America cities - Sao Paulo, Caracas, Santiago and Lima. These flights all experience high load factors. Both DFW Airport and American are confident that American's proposed service in the larger DFW-Buenos Aires market will be similarly successful.

Continental while intimating that carriers should avoid new international services in this time of "huge losses" is itself starting up new international service. Just this week Continental announced that it would resume a second daily nonstop flight between Newark and Tel Aviv.

Counsel:  Silverberg Goldman, Michael Silverberg, 202.944.3305, mgoldman@sgbdc.com 

The most basic requirement for maximizing the public interest benefits from the available frequencies is to ensure that they are fully and promptly used. In that regard, the Department was entirely correct in its determination to place the frequencies resulting from Continental's December 1, 2001 service default at issue, and to consider only December 1, 2001 replacement proposals.

The Department's current evidence request contains all the information that is necessary and relevant to select a new Argentina carrier for December 1, 2001 service. Continental's call for additional evidence concerning alternative aircraft deployments, profitability analysis, and the like are unprecedented and Continental itself admits that "such information has not normally been required in the Department's route proceedings." Petition at 6. Contrary to Continental's contentions, further requirements to gather, submit and debate these superfluous issues will inevitably add complication and delay to the proceeding, and would compromise the Department's ability to reach a final decision by September 1. Since Continental does not appear to be a viable December 1 participant in this proceeding, the Department should not entertain Continental's request to heap additional superfluous evidentiary requests upon the viable applicants.

Counsel:  Shaw Pittman, Alexander Van der Bellen, 202.663.8060

Given its own unwillingness to start service on December 1, 2001, Continental has made its primary goal the delay of any other carrier's efforts to do so in an attempt to secure the benefits for Continental at a later date when that better suits its own corporate purposes. To that end, Continental single-mindedly has advocated in its petition for reconsideration every conceivable measure in its, by now, well-developed repertory of route case delaying tactics aimed at preventing the Department from quickly deciding this case under the aggressively expedited schedule it has adopted in Order 01-7-12.

The Department should confirm the expedited schedule it has adopted and act decisively to deny the various requests of Continental. The Department's schedule provides that the last submissions are due on August 6, 2001. This schedule is designed to enable the Department to reach a final decision in time for the successful applicant to promote new U.S.-Argentina services scheduled to begin on December 1, 2001. There is nothing new in Continental's petition that would support a different and less expedited procedure, and that petition should be denied for the reasons set forth below.

Counsel:  Wilmer Cutler, Jeffery Manley, 202.663.6670, jmanley@wilmer.com  

2001 U.S.-Argentina Combination Service Proceeding; 1999 U.S.-Argentina Combination Service Case; American Airlines, Inc.; and Delta Air Lines, Inc.

We have decided to grant Continental's petition for reconsideration, and, on reconsideration, to affirm our decision to deny Continental's request to delay startup of the New York/NewarkBuenos Aires authority awarded Continental in Order 2001-1-14. We will also deny the other relief sought by Continental in its petition.

As noted in our instituting order, the frequencies at issue constitute valuable rights that we do not believe should be wasted. While Continental is not prepared to use the authority it was awarded when the rights become available, three other carriers have reaffirmed their plans to use the frequencies should they be selected in the 2001 Argentina Proceeding. Moreover, these three carriers have done so with the full understanding of our expectation that the carrier we select implement such service when the rights become available this December. In these circumstances, and given our desire to ensure the maximum levels of service possible to the public and to make full use of the rights available under our agreement with Argentina, we are not persuaded that the public interest is better served by withholding the re-awarding of these rights. Therefore, we affirm our decision to deny Continental's request in the captioned docket for an exemption from the startup conditions on its award in Order 2001-1-14.

These same considerations persuade us that it is not in the public interest to permit Continental's 2002 proposal to compete in this proceeding for either the primary or backup award. Our goal in this case is to authorize service to the public commencing this December, when the frequencies become available under the U.S.-Argentina aviation agreement. Continental's proposal for 2002 service is not consistent with that objective. Further consideration of such a proposal would serve only to complicate and delay unnecessarily a case that is already being processed in an expedited manner to ensure timely reallocation of the frequencies.

We will also deny Continental's request that we expand the evidentiary information requested in this case. We have made clear in the instituting order that we are prepared to consider only proposals for service commencing this December. The supplemental evidentiary material that we requested in our instituting order calls for evidence concerning the carriers proposed routings, traffic forecasts, traffic diversion and service changes, as well as information from the carriers about their aircraft availability and service implementation plans to demonstrate their commitment and ability to commence the services proposed. Continental has not demonstrated that information beyond that which we requested is needed to generate an adequate record for decision.

By:  Susan McDermott

2001 U.S.-Argentina Combination Service Proceeding

Counsel:  American, Carl Nelson, 202.4965647, carl.nelson@aa.com 

Counsel:  Silverberg Goldman, Micheal Goldman, 202.944.3305, mgoldman@sgbdc.com   

Counsel:  Shaw Pittman, Robert Cohn, 202.663.8060, robert.cohn@shawpittman.com  

Counsel:  Wilmer Cutler,  Jeffery Manley, 202.663.6670, jmanley@wilmer.com 

2001 U.S.-Argentina Combination Service Proceeding

By:  MWAA, Edward Faggen, 703.417.8615, Edward.Faggen@mwaa.com 

2001 U.S.-Argentina Combination Service Proceeding

It is apparent that the transmission of the testimony of James A. Wilding in support of United Airlines was not successful. Even though the testimony was submitted with my Motion, the Pleading, Exhibits 1-14 and the Service List, everything but the testimony is in the docket. The testimony was submitted separately and we received a '`submission successful" reply. Nevertheless, we are now advised that only a small portion actually was received and that the testimony is not in the docket. This testimony is of critical importance to this proceeding. To complete this record we are resubmitting the testimony and request that it be placed in the docket with the Metropolitan Washington Airport's Authority submission, immediately before Exhibit 1. All materials. including this testimony of James A.Wilding, were served upon the persons in our service list so there should be no need for reservice. Only the Department's docket does not have this testimony due to an error in transmission. Please include this testimony in the docket.

By:  MWAA, Edward Faggen, 703.417.8615, Edward.Faggen@mwaa.com 

2001 U.S.-Argentina Combination Service Proceeding

Counsel:  American, Carl Nelson, 202.496.5647, carl.nelson@aa.com

Counsel:  Silverberg Goldman, Micheal Goldman, 202.944.3305, mgoldman@sgbdc.com 

Counsel:  Shaw Pittman, Robert Cohn, 202.663.8060, robert.cohn@shawpittman.com  

Counsel:  MWAA, Edward Faggen, 703.417.8615, Edward.Faggen@mwaa.com 

Counsel:  Washington Task Force, Stephen Gelband

Counsel:  Wilmer Cutler, Jeffery Manley, 202.663.6670, jmanley@wilmer.com 

2001 U.S.-Argentina Combination Service Proceeding

Counsel:  Shaw Pittman, Robert Cohn, 202.663.8060, robert.cohn@shawpittman.com  

By:  Port Authority, Bradley Rubinstein, 212.435.3623

2001 U.S.-Argentina Combination Service Proceeding

Counsel:  Shaw Pittman, Alexander Van der Bellen, 202.663.8060

2001 U.S.-Argentina Combination Service Proceeding

Counsel:  Shaw Pittman, Alexander Van der Bellen, 202.663.8060

2001 U.S.-Argentina Combination Service Proceeding

Counsel:  Shaw Pittman, Alexander Van der Bellen, 202.663.8060

2001 U.S.-Argentina Combination Service Proceeding

By this notice, we request that each carrier applicant in the above-referenced proceeding file a statement indicating whether or not there has been any change to its plans to serve this market differing from its proposal. Filings should be submitted in the form of a letter to the Department, Dockets, Docket OST-2001-10198, U.S. Department of Transportation, 400 Seventh Street SW, Room PL-401, Washington, DC 20590, by no later than Wednesday, September 19, 2001. It has been the Department's intention to issue soon a tentative decision in the above-referenced proceeding. However, in light of recent events, we believe that it is in the public interest to request that each carrier applicant answer the above question.

By:  Paul Gretch

2001 U.S.-Argentina Combination Service Proceeding

American Airlines, Inc. hereby responds to the Department's Notice of September 18, 2001, asking each carrier applicant in this proceeding to indicate "whether or not there has been any change to its plans to serve this market differing from its proposal." American hereby states that if it is chosen for the award in this proceeding, it intends to start daily nonstop service between Dallas/Ft. Worth and Buenos Aires on June 15, 2002. Because fleet availability is uncertain at this time, American will start service with either B767 or B777 aircraft. If American starts with B767 aircraft, American intends to upgauge to B777 aircraft as soon as possible based on fleet availability.

Counsel:  American, Carl Nelson, 202.496.5647, carl.nelson@aa.com

This letter is in response to the Department's September 18, 2001 Notice in the captioned proceeding. Delta remains strongly committed to instituting New YorkBuenos Aires service as soon as economic circumstances permit; however, the unprecedented events of September 11 make it impossible at this time to predict with any certainty when startup will be possible. While there has been an immediate and precipitous drop in airline traffic, the long term impacts of last week's events are not yet known. Therefore, Delta recommends that the Department defer a decision on the merits of this proceeding for a period of at least six months.

Counsel:  Shaw Pittman, Robert Cohn, 202.663.8060, robert.cohn@shawpittman.com 

United Air Lines, Inc. offers the following response to the Department's Notice, dated September 18, 2001, in the above-referenced proceeding: The tragic events of last week have caused every U.S. air carrier, including United, to reassess its existing and planned services. In response to this reassessment, the Department has recognized the need for current information regarding carrier plans for implementing services proposed in the above-referenced proceeding. This will confirm that United remains committed to the Washington Dulles - Buenos Aires services it proposed in its exhibits in this proceeding.

Given the ongoing and fundamental reassessment of services by all U.S. carriers, neither United's management nor any responsible U.S. carrier management can offer an intelligent projection at this time as to when it could begin new services two or three months from now when the Department's award in this case is likely to become effective. United will begin its proposed services at a date to be determined based on circumstances prevailing at the time the authority to be awarded in this case becomes effective. If selected, United will work closely with the Department's staff to assure as timely a startup as is possible consistent with prevailing conditions.

Counsel:  Wilmer Cutler, Jeffery Manley, 202.663.6000, jmanley@wilmer.com 

2001 U.S.-Argentina Combination Service Proceeding

In light of the fact that all participants in this proceeding have conceded they cannot proceed with their prior proposals in light of the aftermath of September 11, Delta again urges the Department to defer its decision on the merits of this proceeding. Delta agrees with United that it is impossible for any participant to responsibly predict when it will be in a position start its proposed Argentina service. Both United and American have announced tens of thousands of employee lay-offs within the last few days. All participants have announced significant cutbacks in their scheduled operations. Indeed, according to the most recent SSIM data schedule information, United has already withdrawn additional frequencies from U.S.- Argentina itself, frequencies formerly used for JFK-EZE service. No carrier knows what conditions will prevail next month, let alone next year.

The fact that American has purported to identify a date certain seven months from now when it believes it will be able to initiate new Argentina service should not sway the outcome. It may well be that demand patterns will permit viable service by then, in which case Delta would also be committed to initiating the JFK-EZE service it has proposed at that time. Conversely, the aftermath of September 11 may continue to threaten the survival of the industry well into next year, in which case neither American nor any other participant will be in a position to do so, regardless of what American says today. Delta remains committed to bringing new competition to JFK-EZE as soon asit is feasible to do so. No participant should be penalized for the current uncertainty, nor should any carrier be rewarded by claiming to predict what no one can in the current climate.

Counsel:  Shaw Pittman, Robert Cohn, 202.663.8060, robert.cohn@shawpittman.com 

2001 U.S.-Argentina Combination Service Proceeding

If the Department is now going to consider proposals for instituting Argentina service in 2002, it should solicit applications from all interested carriers, including Continental, once the parameters affecting the aviation industry have become clearer. Delta and United recognize that the tragic events of last week make forecasting a startup date for new Argentina services impossible at this time. United says the “tragic events of last week have caused every U.S. air carrier . . . to reassess its existing and planned services” and “neither United’s management nor any responsible U.S. carrier management can offer an intelligent projection at this time as to when it could begin new services two or three months from now.” Similarly, Delta says “the unprecedented events of September 11 make it impossible at this time to predict with any certainty when startup will be possible” and “the long term impacts of last week’s events are not yet known.” Although America says it “intends” to start its proposed service on June 15, 2002, it concedes “fleet availability is uncertain at this time.”

Under all these circumstances, the Department should defer any further consideration of the proposed Argentina awards for six months, as Delta suggests, and solicit new applications at that time so applicants can make Argentina proposals, and the Department can evaluate them, in light of airline industry realities as they exist at that time. Delta’s reply says it “may well be that demand patterns will permit viable service” next year, but “the aftermath of September 11 may continue to threaten the survival of the industry well into next year, in which case neither American nor any other participant will be in a position” to institute new Argentina service. Given the current uncertainties facing the airline industry, this is no time to be making decisions based on forecasts made under entirely different circumstances or attempting to evaluate future prospects based on current circumstances.

Like the applicants in this proceeding, Continental has committed to providing Argentina service, and it was denied the opportunity to be an applicant in this proceeding. No other party represents Continental’s interest, and acceptance of this response is necessary to complete the record. Thus, Continental requests any leave which may be required to submit this letter.

Counsel:  Crowell Morning, Bruce Keiner, 202.624.2500, rbkeiner@crowell.com 

2001 U.S.-Argentina Combination Service Proceeding

Based on the applicants' responses and further consultations among United's key departments, United urges that the Department proceed immediately to issue a final decision in this proceeding. That decision should choose a primary and a backup carrier. The startup date should be set at June 15, 2002, consistent with American's proposal. United for its part is willing to accept an award based on that startup date. The selection of that date is also consistent with Delta's request for a six month deferral. Indeed, Delta has stated in a subsequent letter that it would accept a commitment "to initiating the JFK-EZE service it has proposed" in June 2002 assuming that "demand patterns permit viable service by then." Letter of Robert E. Cohn, dated September 20, 2001.

On September 21, 2001, Continental filed a letter proposing that the Department defer the proceeding for six months at which time it should reopen the entire proceeding and allow Continental to reapply. United strongly opposes the course recommended by Continental. That carrier has consistently, since June 6, 2001, urged that it be permitted to defer any service to Argentina until at least December 1, 2002. There is nothing in Continental's latest filing to indicate that it has changed its decision. Continental's proposed deferred startup date is nearly six additional months beyond the June 15, 2002, date offered by United and American and which is also apparently acceptable to Delta. Such a lengthy deferral is not consistent with the Department's decision to secure the most expeditious utilization of the new frequencies available for US-Argentina services.

The better course is to proceed to issue a final decision on the present record and afford the selected carrier a longer than usual startup period. This is not the time for the Department to subject carriers to the needless expense and delay of yet another round of carrier selection procedures. Moreover, the Department's staff, as well as the staffs of the applicants, will have more critical matters to address in the months ahead. The record in this proceeding is complete and all applicants have confirmed their original service plans except for a startup date. By setting the startup date at June 15, 2002, the Department can proceed to a final decision that will meet its original goal of assuring the most expeditious possible use of the new U.S.-Argentina frequencies. By accepting Continental's proposal for deferral and reopening, on the other hand, the Department would guarantee a further six month delay in implementation of new services, as well as the additional cost and manpower associated with another route proceeding.

Counsel:  Wilmer Cutler, Jeffery Manley, 202.663.6000, jmanley@wilmer.com 

2001 U.S.-Argentina Combination Service Proceeding

The Department's Notice of September 18, 2001 directed each of the three applicants -- American, Delta, and United -- to indicate "whether or not there has been any change to its plans to serve this market differing from its proposal." In response, Delta said that it is "impossible to predict" when startup of its proposed New York (JFK)-Buenos Aires service could occur, and that the Department's decision should be deferred for "at least six months." United said that it could not offer an "intelligent projection" of a new startup date for proposed Los Angeles-Buenos Aires service, and named no new date. American was the only applicant to specify a new startup date -- June 15, 2002 -- for its proposed Dallas/Ft. Worth--Buenos Aires service.

In these circumstances, the Department should conclude this proceeding by awarding the available authority to American. Neither Delta nor United came forward with a revised startup date, a key carrier selection factor for frequencies that become available on December 1, 2001. Indeed, this proceeding was instituted because Continental announced that it would default on its startup commitment, and the Department did not want the frequencies to remain unused for an extended period.

United's assertion on September 24, 2001 that it, too, would start service on June 15, 2002 lacks any credibility, given United's statement only a few days ago that its management cannot offer an "intelligent projection" of a new date. Delta's proposal that a decision be deferred for six months or more would in effect prevent new service for a far longer period, since the winning applicant will require several months beyond the decision date to implement operations. Continental's contention that the Department should institute yet another proceeding at some future date should be rejected out-of-hand. There have already been two route cases to allocate the seven frequencies at issue, and it would be burdensome, wasteful, and contrary to the public interest in finality to conduct a third proceeding for the same authority.

The Department should now decide this case by awarding seven weekly frequencies to American to operate daily nonstop service between Dallas/Ft. Worth and Buenos Aires, effective June 15, 2002. If, however, the Department is inclined to defer its decision in light of market uncertainties caused by the terrorist attacks on September 11, 2001, we suggest that the case be held in abeyance until January 2, 2002. On that date, the three applicants should be required to commit to a firm startup date, or else withdraw from the proceeding. Thereafter, the Department should promptly issue its decision so that the winning applicant may undertake preparations for instituting service.

• It is well-established that "the principle of administrative finality is ... an element of the public interest, and that principle demands that the record in route cases be brought to a close as expeditiously as possible. We are not prepared... to reopen the record simply because parties ... desire an additional bite at the apple. To do so would be to invite interminable delay and to deprive the market of competitive services found to be required by the public interest." See Chicago-New Orleans Nonstop Route Proceeding, 73 CAB 543, 550 (1977).

Counsel:  American, Carl Nelson, 202.496.5647, carl_nelson@aa.com

2001 U.S.-Argentina Combination Service Proceeding

Each of the incumbent applicants has now argued that Argentina service should not begin until 2002 and that the Department should not institute a new proceeding to award frequencies because the institution of service has been delayed. These are precisely the same Continental arguments the Department rejected last year. Continental’s potential entry into the Argentina race has prompted two of the applicants to conclude that they can, despite previous statements to the contrary, firmly commit to institute service despite the current economic turmoil and uncertainty facing the aviation industry. Just last week, United said “neither United’s management nor any responsible U.S. carrier management can offer an intelligent projection at this time as to when it could begin new services two or three months from now.” After American announced that it would start Dallas/Fort Worth-Argentina service in June 2002 (albeit with alternative aircraft proposals), United suddenly decided it is also prepared to make such a commitment.

Clearly, what the three incumbents fear most is that new-entrant Continental will be given a fair opportunity to compete for the new Argentina frequencies once the effects of the aftermath of September 11 have become clearer. They ignore the fact that the extraordinarily-simplified procedures used for the current case could be used again and that exclusion of Continental from the current proceeding solely because it did not propose to institute services on December 1, 2001, would be entirely unfair if one of the current incumbents were now awarded authority to start services in 2002. Like the other applicants, Continental’s service proposal never changed; all Continental sought was a deferral of the startup date.

Counsel:  Crowell Moring, Bruce Keiner, 202.624.2615, rbkeiner@cromor.com

As United correctly points out, each of the three applicants has confirmed its commitment to implement its U.S.-Argentina service proposal subject to a deferred startup date. United’s letter requests that the Department proceed to issue a final decision based on the present record subject to a start-up date of June 15, 2002. Delta remains committed to the implementation of its proposed new entrant service between New York and Buenos Aires. Therefore, Delta agrees with United’s approach and confirms that it would accept an award of the seven weekly frequencies at issue in this proceeding with a June 15, 2002 startup date. If the Department accepts United's proposal, given the level of uncertainty affecting the entire industry, Delta further recommends that the Department require the selected carrier to confirm in writing no later than 90 days prior to June 15, 2002 its intention to commence service on or before that date.

Delta believes that issuing a decision based on the existing record, coupled with the notice requirement recommended by Delta, would most effectively achieve the Department's objectives to ensure optimal and expeditious utilization of valuable limited-entry rights between the United States and Argentina.

Counsel:  Shaw Pittman, Robert Cohn, 202.663.8060, robert.cohn@shawpittman.com  

United Air Lines, Inc. ("United") takes this opportunity to respond briefly to the letters of American Airlines, Inc. ("American") and Delta Air Lines, Inc. ("Delta") dated September 25, 2001.1 All three applicants have now adopted June 15, 2001, as a startup date and have urged the Department to issue a decision using that date for the deadline for introduction of service. In these circumstances, there is no reason for further delay and the Department should issue a decision based on the comparative merits of the service proposals offered by each carrier.

American has attempted to influence the Department's decision by claiming to be the "only applicant" to adopt a new startup date. This is not the case given the recent letters of United and Delta adopting June 15, 2001, as their own startup date. In an attempt to overcome United's decision to adopt a June 15 startup date, American has taken out of context language in United's September 19, 2001, letter. United, in that letter, stated that "neither United's management nor any responsible U.S. carrier management can offer an intelligent projection at this time as to when it could begin new services two or three months from now when the Department's award in this case is likely to become final." (Emphasis supplied.) American left out the underscored portion of United's statement. In fact, both American and Delta have demonstrated the validity of United's statement, and all of the applicants have selected a startup date that falls beyond the critical period of the next two or 2 three months.

Based on the applicants' response to the Department's September 18, 2001, notice, United urges that the Department issue a decision in this proceeding without any additional delay. United is confident that its own Washington Dulles-Buenos Aires proposal is superior to those of the other applicants but will rely upon the existing record to demonstrate that point.

American has also refiled its by now familiar argument that the credibility of United's proposed startup is suspect based on actions it has taken in the Chicago-China market (American letter at 2, n. 1). American again complains that United chose to start Chicago-China nonstop service to Beijing rather than Shanghai. In fact, American in its own exhibits in Docket OST-99-6323 indicated that it might decide to serve Beijing rather than Shanghai from Chicago and specifically requested from DOT the authority to do so. United based its own decision, which was made in consultation with community representatives, on its actual experience with U.S.- Shanghai nonstop service and determined that nonstop service to Beijing would offer benefits to more consumers, as American itself had concluded in requesting the flexibility to serve Beijing. In any event, American's own record of non-performance of route case promises entitles its proposal to no preference over United's. American was selected over United for Los Angeles-Guadalajara service based on a proposal of three daily daytime services only to reduce its actual service to a single daily red-eye flight, the minimum necessary to keep United off the route. See
Docket 50418.

Counsel:  Wilmer Cutler, Jeffery Manley, 202.663.6000, jmanley@wilmer.com 

2001 U.S.-Argentina Combination Service Proceeding

We have decided to terminate the 2001 US.-Argentina Combination Service Case in Docket OST-2001-10198. We intend to institute a new proceeding early next year to determine how the available frequencies should be allocated.

This case was instituted to provide for new service in the U.S.-Argentina market this December. Our instituting order indicated that a December start up was critical to participation in this proceeding and all three of the current applicants had committed to using the rights at that time. However, the most recent pleadings show that no party would start new U.S.-Argentina service in December, or, for that matter, until June 2002 at the earliest, if selected. Against this background, we have decided to terminate the captioned proceeding. We intend to institute a new proceeding early next year that would entertain applications from all interested carriers for allocation of the seven weekly frequencies.

By:  Susan McDermott

2001 U.S.-Argentina Combination Service Proceeding

Thank you for your letter of July 26 supporting the application of United Air Lines for authority to operate daily nonstop service between Washington Dulles and Buenos Aires, Argentina. Under our aviation agreement with Argentina, we have rights that become available for U.S. airlines to provide air services between the United States and Argentina, beginning December 1. The Department instituted an expedited proceeding in July to select an airline to use these rights. A critical aspect of this case was the ability of an airline to start service this December. United is one of three U.S. carrier applicants. When the case was instituted, each of the three applicants committed to beginning service in December. On September 18. following the events of September 11, the Department requested that the applicants in this case update the record as to their current service plans. The applicants now all state that they could no longer meet the December startup date, and would be unable to institute new Argentina service for at least six months. In light of these developments, the Department decided to terminate the pending proceeding. We intend to institute a new proceeding early next year that would entertain applications to serve Argentina from all interested carriers, including United. For your convenience, I am enclosing a copy of the Department's order, which fully explains the Department's decision in this matter.

By:  Norman Mineta 

In the Matter of U.S.- Argentina Combination Servicve Frequencies

All of the carriers have indicated that they remain interested in using the available frequencies. Delta and Continental, however, state that, in light of the economic conditions in Argentina that have recently deteriorated significantly, they could not provide a firm date as to when they would be in a position to inaugurate new service in the market. Continental further urges the Department to defer any further action to allocate the frequencies until the end of 2002. United echoes the concerns cited by Delta and Continental and states that it would not be in a position to commence its proposed service until the summer 2003 traffic season. United urges the Department to await the recovery of the Argentine economy before it allocates the seven new frequencies. American also notes the economic situation in Argentina, but states that it would begin its proposed Dallas/Ft. Worth-Buenos Aires service no later than November 2002, and possibly sooner, depending upon the availability of aircraft and the economic conditions in Argentina. American urges the Department to institute a proceeding promptly to allocate the available frequencies. In the absence of competing applications, American states that its application should be approved.

Taking into account all of the circumstances presented, including the comments filed in response to our February 14 request, we have decided to defer institution of a proceeding to make a permanent award of the frequencies at issue. All of the commenting parties have reaffirmed their interest in providing service in the Argentina market at some time in the future. At the same time, all of the commenting parties have recognized the downturn in the Argentine economy and the uncertainty surrounding its recovery, particularly in the near term. Against this background, we do not believe that the public interest is best served by making a decision at this time on the permanent award of the rights at issue.

By:  Read Van de Water

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