OST-97-2965 / American Airlines / Exemption, Codesharing with Iberia / October 2, 1997
NOTICE: Answers supporting or opposing this application are due on October 17, 1997.
Application of :
AMERICAN AIRLINES, INC.
under 49 USC 40109 for exemption (U.S.-Spain and beyond; code-sharing with Iberia)
APPLICATION OF AMERICAN AIRLINES, INC.
FOR EXEMPTION
American Airlines, Inc., under 49 USC 40109, hereby applies for exemption authorizing it to engage in foreign air transportation of persons, property, and mail between (1) New York (JFK), Chicago, and San Juan and Madrid, Spain; (2) points in the United States, via Madrid, and Alicante, Bilbao, Jerez de La Frontera, La Coruna, Las Palmas, Sevilla, Valencia, and Vigo, Spain; and (3) points in the United States, via Madrid, and Marseille, France and Porto, Portugal.
The requested exemption authority will be used to implement a proposed codeshare arrangement between American and Iberia Lineas Aereas de Espana, S.A., as described in the agreement attached to their accompanying joint application (undocketed) for statements of authorization under 14 CFR Parts 207 and 212. To implement these services, American requires the underlying route authority it is seeking herein.
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The Air Transport Agreement between the United States and Spain of February 20, 1973, as amended, explicitly provides for codeshare services between designated airlines of each Party. See Memorandum of Understanding, November 27, 1991, para E ("Code Share"):
"In operating or holding out the authorized services on the agreed routes, a designated airline of either Party, which holds appropriate authority to provide such service, may on the basis of reciprocity, and subject to the requirements normally applied to such agreements, enter into cooperative marketing arrangements with another airline which also holds appropriate authority, provided that the arrangement does not include cabotage or revenue pooling."
The authority requested by American is in most respects consistent with the bilateral agreement:
o On the transatlantic segments, American requires route authority to serve Madrid from New York (JFK), Chicago, and San Juan. Such service is authorized by the route description for U.S. Route 1.
o For points in Spain beyond Madrid, the additional authority American requires is extrabilateral, as these points are not specifically named in U.S. Route 1. American is seeking such authority on the basis of comity and reciprocity.
o For points in third countries beyond Madrid, the proposed arrangement is fully consistent with the bilateral agreement, as American would not be exercising local traffic
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rights between Spain and these points. American requires authority to serve Marseille, France and Porto, Portugal, via Madrid.
The Department has granted extrabilateral route authority in a number of cases as required to support codesharing services between U.S. and foreign carriers. See Continental/Alitalia, Order 94-10-27, October 21, 1994; Deltat/Virgin Atlantic, Order 95-2-28, February 10, 1995. The Department found that both of those arrangements, which are in some respects extrabilateral, warranted approval in the public interest, notwithstanding limitations on U.S. carrier entry imposed by the U.S.-Italy and U.S.-U.K. bilateral agreements. The Department should clearly reach the same conclusion here with respect to the codeshare services proposed by American and Iberia.
The U.S.-Spain market is served by five U.S. carriers operating highly competitive nonstop and network services. TWA and Delta are the largest, with 14 weekly frequencies each (TWA serves New York-Madrid and New York-Barcelona, and Delta serves Atlanta-Madrid/Barcelona and New York-Madrid. Continental has seven weekly frequencies (Newark-Madrid), and US Airways has seven (Philadelphia-Madrid). American, with seven weekly frequencies between Miami and Madrid, ranks among the smaller of the U.S. carriers serving Spain. In addition to Iberia, Air
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Europa operates seven weekly frequencies between New York (JFK) and Madrid. By its codeshare arrangement with Iberia, American will provide consumers with new service and fare options, and bring increased competition to the marketplace.
American and Iberia are planning to implement their codeshare agreement beginning on December 1, 1997. American requests expedited approval of this application so that advance marketing and sales of the proposed services can commence as soon as possible, and the public can begin to benefit from the enhanced competition that will result.
Respectfully submitted,
CARL B. NELSON, JR.
Associate General Counsel
American Airlines, Inc.
October 2, 1997