OST-02-11739

OST-02-11739

Aerolineas Cerntales de Colombia, S.A. (ACES) and Aerovias Naconales de Colombia, S.A. (Avianca)

OST-02-11739	March 4, 2002	Application for Exemption and Statement of Authorization	Miami- Cali/Cartegena
		Codeshare Agreement
		Exhibit 1: Routes Operated AV
		Service List

Aerolineas Centrales de Colombia, S.A., hereby applies for an exemption from 49 U.S.C. 41301 to operate nonstop service between Miami, FL, on the one hand, and Cali and Cartagena, Colombia, on the other. Also, ACES and Aerovias Nacionales de Colombia, S.A. request a Statement of Authorization pursuant to Part 212 of the Department's regulations that would permit ACES to display the airline designator code of Avianca on flights operated by ACES between Miami, on the one hand, and Cali, Cartegena, and Medellin, on the other. ACES requests that this authority be granted for a period of at least two years.

With the approval of the appropriate Colombian Governmental authorities, ACES and Avianca have formed a strategic alliance in order to enable both carriers to maintain viable, competitively effective operations between Colombia and the United States. The Colombian airlines' services to the U.S. have suffered severely from the decline in business traffic during the last year and the impact of the events of September 11 on travel to and from the U.S. In addition, the economy of Colombia has been in recession for several years and the country continues to be embroiled in armed, civil strife. As a result, ACES and Avianca have incurred financial losses that threaten their long-term competitive viability. Accordingly, the two airlines have agreed to restructure and rationalize their operations and to enter into a codesharing agreement.

ACES will begin nonstop service between Cali and Miami on a single, daily roundtrip basis. ACES will also begin nonstop service between Cartagena and Miami on a single, daily roundtrip basis. The new Cartagena service will also serve Medellin behind/beyond Cartagena and replace one of ACES's two daily nonstop Medellin-Miami roundtrip services. These services will be operated with A-320 aircraft and ACES proposes to commence these flights on May 20, 2002. Besides the above-mentioned suspension of one of ACES's two current Medellin-Miami roundtrip flights, ACES will suspend also its single daily Bogota-Miami roundtrip flight.

ACES requests authority to display Avianca's designator code on its flights between Miami and Cali, Cartagena, and Medellin. This will enable Avianca to market and ticket service for the first time on a nonstop basis on the Cali-Miami and Medellin-Miami routes. Also, by codesharing on ACES, Avianca will be able to remain as a competitor on the Cartagena-Miami route where it will suspend its own current, single daily roundtrip flight. The addition of Avianca as a marketing carrier on these flights will support the economic viability of ACES's new service in these smaller markets.

They compete against American Airlines, which is 37 times the size of Avianca and 100 times the size of ACES, in the Bogota/Cali-Miami markets as well as Lan Chile in the primary Bogota-Miami market. In addition, American, under a unilateral, extra-bilateral authorization granted by the Colombian Government, proposes to commence competitive nonstop service in the Medellin-Miami market on June 1, 2002. (Application of American Airlines, Docket OST-2002-11620, February 19, 2002) The codesharing agreement will preserve and strengthen competition by enabling ACES and Avianca to maintain their services and to operate more effectively and efficiently in the Colombia-Miami markets.

ACES's new Cali-Miami daily flight will provide the first nonstop competition to American in that market. Its smaller A-320 aircraft is better suited to that sized market than it is to the Bogota market in which its competitors operate larger A-300/600 and B-757 aircraft.

Counsel: Zuckert Scoutt, Richard Mathias, 202.298.0683, and Squire Sanders, Robert Papkin, 202.626.6600

Aerolineas Centrales de Colombia, S.A. and Aerovias Nacionales de Colombia, S.A.

OST-02-11739

Field March 4, 2002
Issued March 14, 2002

Notice of Action Taken

Exemption/Statement of Authorization - Miami-Cali/Cartegena

Exemption to permit ACES to conduct scheduled foreign air transportation of persons, property and mail between Cali and Cartagena, Colombia, on the one hand, and Miami, FL, on the other hand. (2) Statement of authorization pursuant to X4 CFR 212 of the Department’s regulations to permit ACES to display the airline designator code of AVIANCA on flights operated by ACES between Cali, Cartegena and Medellin, Colombia, on the one hand, and Miami, FL, on the other hand.

By: Paul Gretch