OST-96-2016 / Docket OST-97-2680 / US-Brazil Combination

1997 U.S.-BRAZIL COMBINATION SERVICE PROCEEDING

Petition of

DELTA AIR LINES, INC.

to modify, suspend or revoke certificate authority authorizing Continental Airlines, Inc. to provide Newark, New Jersey - Rio: de Janeiro, Brazil Foreign Air Transportation.

Joint Answer of the Newark/New Jersey Parties Page 2

Jersey/New York travelers and shippers can enjoy Continental's much-needed Newark-Rio de Janeiro service without interference from a disappointed competitor.

In support of their position, the Newark/New Jersey Parties state as follows:

1. Delta cites no precedent for the extraordinary relief it seeks, and the Newark/New Jersey Parties are aware of none. Continental's July 10 commencement of Newark-Sao Paulo/Rio de Janeiro service satisfied the startup condition in the Brazil authority awarded by the Department, and any unused frequencies would not become dormant until 90 days from the July 10 commencement date. There is no legal basis for the Department to take route authority away from Continental while it is serving the market for which it holds such authority. The Department will have ample opportunity to consider allocation of Brazil frequencies when Continental and Delta apply to renew their Brazil frequencies.

2. Granting Delta's petition would penalize the many travelers and shippers who are eagerly awaiting Continental's new nonstop Newark-Rio de Janeiro service and who will benefit greatly from the service. Newark International Airport is today the sixth largest mainland U.S. international gateway, with over three million annual international passengers, New Jersey is the nation's most densely populated state and over six million people live within 25 miles of Newark International Airport. New Jersey civic parties supported

Joint Answer of the Newark/New Jersey Parties Page 3

Continental in this case because Continental was the only applicant proposing both nonstop Newark/New York-Rio de Janeiro and nonstop Newark/New York-Sao Paulo service, and the Newark/New Jersey Parties welcome Continental's daytime Newark-Rio de Janeiro flights. Nonstop Newark access to Rio de Janeiro is particularly important to future international trade efforts of New Jersey because Brazil is the State's largest trading partner in South America. NJP-T-2 at 1. New Jersey is home to many Brazilian-owned U.S.-subsidiaries and many U.S. companies with subsidiaries in Brazil, and New Jersey is also a strong market for travelers visiting friends and relatives in Rio de Janeiro.

3. Giving Continental's seven Newark-Rio de Janeiro frequencies to Delta would prevent Newark International Airport from becoming a new gateway airport for Rio de Janeiro and would inconvenience thousands of business travelers, vacationers and shippers who are looking forward to Continental's new nonstop service. Delta did not propose nonstop JFK-Rio de Janeiro service, and Delta's best Rio de Janeiro service for the huge Newark/New York-Rio de Janeiro market is one-stop JFK service over Sao Paulo at almost the same times American and Varig provide nonstop JFK-Rio de Janeiro service and five other carriers (American, TransBrasil, United, Varig, and VASP) provide the same JFK-Sao Paulo service.

4. Delta's chief complaint is that Continental offers a daytime southbound Newark-Rio de Janeiro departure. As Delta itself shows, however,

Joint Answer of the Newark/New Jersey Parties Page 4

5. Allowing Continental to begin nonstop Newark-Rio de Janeiro service is far more important than adding seven additional weekly JFK-Sao Paulo nonstop flights to the 30 weekly nonstop flights already operated in that market without providing any additional Newark/New York-Rio de Janeiro nonstop service. Unlike JFK, Newark has no existing Rio de Janeiro service. Only by allowing Continental to implement its Newark-Rio de Janeiro service will the Department significantly enhance market structure, with a new nonstop Rio de Janeiro service at a new gateway. Newark will compete effectively for Rio de Janeiro traffic with the existing Atlanta, JFK and Miami gateways. The record in this case shows that Newark has been growing more rapidly than JFK as an international

Joint Answer of the Newark/New Jersey Parties Page 5

passenger gateway since 1989, and Newark's five-year growth rate in international passengers is more than double JFK's growth rate for the same period. NJP-6; CO-R-112. One reason Newark international traffic surges when Continental begins new international service is that Newark is convenient for many travelers in Manhattan and for the New Jersey traveling public. Continental and Newark should be permitted to provide alternative Brazil service to this large segment of the traveling public.

6. Continental has been offering its Newark-Rio de Janeiro service for sale, and travelers and shippers have already purchased transportation on Continental's flights. The Newark/New Jersey Parties believe the daytime flights Continental is offering will prove as popular as Continental's morning Newark-London departure. In any event, granting Delta's eleventh-hour petition would wreak havoc on the transportation plans of many business travelers, vacationers and shippers, causing them great inconvenience.

CONCLUSION

There is no reason to modify, suspend or revoke Continental's Newark-Rio de Janeiro route authority as Delta proposes. Doing so would be detrimental to thousands of travelers and shippers in the huge Newark/New York-Rio de Janeiro market and reduce competition among air carriers and gateways in the U.S.-Brazil

Joint Answer of the Newark/New Jersey Parties Page 6

market. The Newark/New Jersey Parties urge the Department to dismiss Delta's petition.

Respectfully submitted,

Samuel Crane

Samuel Crane, President

Regional Business Partnership(Newark)

Carlos T. Kearns, Director

Division on International Trade

New Jersey Department of Commerce and Economic Development

July 15, 1997