OST-97-2823 / Undocketed / American and China Airlines / Answer of Federal Express / August 25, 1997

Application of :

AMERICAN AIRLINES, INC.

under 49 U.S.C. § 40109 for an exemption (U.S.-Ho Chi Minh City via Taipei, property and mail code-sharing with China Airlines, Ltd.)

Application of

CHINA AIRLINES, LTD.

for amendment of a Statement of Authorization pursuant to 14 C.F.R. Part 212

August 25, 1997

Pursuant to Rule 406 of the Rules of Practice and Part 212.5(e) of the Economic Regulations of the Department of Transportation (the Department), Federal Express Corporation (Federal Express) hereby submits this Answer in response to the Applications of American Airlines, Inc. (American) and China Airlines, Ltd. (CAL) for grant of an exemption and Statement of Authorization to authorize American to provide scheduled all-cargo foreign air transportation between the United States and Ho Chi Minh City, Vietnam, pursuant to a code-sharing and blocked-space agreement with CAL utilizing flights operated by

FedEx Answer to AA/CAL

U.S.-Vietnam Cargo

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CAL between Taipei, Taiwan and Ho Chi Minh City, connecting to services operated by American between the U.S. and Taipei.

Federal Express is not opposed to the grant of the applications of American and CAL, provided that the pending application of Federal Express for renewal of its U.S.-Vietnam all-cargo certificate authority, and/or the contemporaneous application of Federal Express for U.S.-Vietnam all-cargo exemption authority, are granted concurrently.

In support of this Answer, Federal Express states further as follows:

1. Federal Express holds authority to provide scheduled all-cargo foreign air transportation between the U.S. and Vietnam pursuant to its certificate of public convenience and necessity for Route 205-F. The Vietnam authority in that certificate was originally granted to The Flying Tiger Line, Inc. (Flying Tigers) for a five-year term, through February 13, 1990, by Order 85-2-39, served March 5, 1985. That certificate authority was transferred to Federal Express by Order 89-5-10, served May 5, 1989. On August 16, 1989, Federal Express filed a timely application for renewal of its U.S.-Vietnam certificate authority, and invoked the automatic-extension provisions of Section 558(c) of the Administrative Procedure Act, 5 U.S.C. § 558(c), as implemented by Part 377 of the Department's Special Regulations, 14 C.F.R. § 377, to continue in effect its temporary certificate authority to serve Vietnam pending final action by the Department on its renewal application. To date, as a result of the prolonged suspension of all commercial air service between the U.S. and Vietnam, the Department has not yet taken action on the foregoing renewal application.

FedEx Answer to AA/CAL

U.S.-Vietnam Cargo

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2. In light of the prolonged involuntary dormancy of Federal Express' U.S.-Vietnam certificate authority, and the staleness of the information contained in Federal Express' August 1989 renewal application, Federal Express is filing contemporaneously a Supplement No. 1 to its pending certificate renewal application for the purpose of furnishing updated information relating to the planned all-cargo service between the U.S. and Vietnam which Federal Express seeks authority to operate. In addition, in the interest of expedition, Federal Express is submitting a separate contemporaneous application for exemption authority to enable Federal Express to commence service to Vietnam in the near future.

3. At the present time, there is no bilateral air transport service agreement in effect between the U.S. and Vietnam. Federal Express believes, however, that the Government of Vietnam will agree to allow one or more U.S. air cargo carriers to commence scheduled cargo service to Vietnam on the basis of comity and reciprocity prior to the conclusion of a new bilateral agreement between the two countries. In view of the uncertainty shrouding the question of whether Vietnam will attempt to limit the number of U.S. carriers authorized to serve Vietnam, Federal Express submits that its pending Vietnam all-cargo exemption application may be mutually exclusive as a matter of law or economic fact with American's application for the same authority. In that circumstance, the two applications must be granted contemporaneous consideration, under the rule of the Ashbacker Doctrine. /1

1/ Ashbacker Radio Corp. v. F.C.C., 326 U.S. 327 (1945).

FedEx Answer to AA/CAL

U.S.-Vietnam Cargo

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4. Federal Express is not urging the Department to undertake a carrier-selection proceeding to select either Federal Express or American, but not both, to provide cargo service to Vietnam. On the contrary, Federal Express urges the Department to grant its application, and does not oppose grant of the American-CAL code-share applications. Federal Express believes that the concurrent grant of both pending U.S.-Vietnam cargo applications is consistent with the Department's sound and long-established pro-competition policy. In light of the possibility that the Government of Vietnam has not yet embraced that policy, however, Federal Express believes that it is necessary to act upon the two pending applications by Federal Express and American simultaneously, in order to afford both carriers an equal opportunity to seek requisite operating authority from the Government of Vietnam.

WHEREFORE, Federal Express urges the Department to issue an Order or Notice of Action Taken granting an exemption to Federal Express to provide scheduled all-cargo foreign air transportation between points in the United States and Ho Chi Minh City, Vietnam, concurrently with any action the Department may take on the pending applications of American and China Airlines for the same authority in the captioned proceedings.

Respectfully submitted,

Nathaniel P. Breed, Jr. of Shaw Pittman

A. Doyle Cloud, Jr. of FEDERAL EXPRESS CORPORATION