OST-99-6225 / OST-99-6226 / OST-99-6227 / American and Aerolineas Argentinas / Joint Rejoinder of American and Argentinas / October 29, 1999

Applications of

for exemptions under 49 U.S.C. § 40109 and Statements of Authorization underl4 CFR Part 212

American Airlines, Inc. ("American") and Aerolineas Argentinas, S.A. ("Aerolineas") submit this joint rejoinder to the response of United Air Lines ("United") dated October 20, 1999. American and Aerolineas also move for leave to file this rejoinder in the interest of a complete record for the Department's consideration.

On the very day that the Department resoundingly rejected for the third time the efforts of United to block the implementation of an open-skies agreement and an alliance in Chile, United once again seeks to place obstacles in the path of the transition to open skies that has been negotiated by the Governments of the United States and Argentina. United's continuing attempts to establish that competition between the United States and Latin America is of a different nature than competition between the United States and Europe, and that a different approach and analysis are required for open skies agreements and alliances in Latin America have now been thoroughly discredited by the Department's Order on United's Petition for

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United's response makes it clearer than ever that United is simply dissatisfied with the outcome of the recent bilateral negotiations between the United States and Argentina, and that United now seeks to enlist the Department in United's effort to prevent the benefits of those negotiations from being realized. United claims that it supported the conclusion of an open skies agreement with Argentina, but now that such an agreement was achieved in a manner that United finds uncongenial, United seeks to overturn the essence of the agreement. United concedes that Argentina insisted that transitional capacity increases must be accompanied by comparable phases of codeshare approvals. Yet, United disingenuously argues that refusal to approve the codeshare as negotiated will only "delay the implementation of new service opportunities," and somehow achieve what United believes to be a "procompetitive result".

To the contrary, the fact is that refusal to approve the codeshare element of the new bilateral would nullify the agreement, which is precisely what United as an incumbent in a currently closed market is seeking to achieve. The Department should reject United's position and move forward to carry out the terms of that agreement while performing its proper functions with respect to the terms and conditions of any codeshare approval. While United seems to believe there is some conflict between applying the terms of the agreement as written ("the literal language") and the so-called "public benefits" that United feels are not present, there are fewer

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more well-settled points than that the terms of a bilateral aviation agreement are the best evidence for determining that the grant of certain authority is in the "public interest." /1

United relies on a series of newspaper stories to support several of the allegations in its response, but those stories certainly provide no basis for initiating a sweeping investigation of what United calls "the cartelization of South America that is being undertaken by American and its partners." For example, United seeks to support its theory that price competition between Miami and Central America has been reduced by referring to a recent interview with the CEO of the TACA Group. However, those comments in no way support such a conclusion. Furthermore, the Department's careful evaluation of the open-skies experience in Central America in Order 99-10-20 conclusively establishes that open skies is having a positive effect on competition in the U.S.-Central American market, with no substantial diminution of services in that market. /2

Another press report cited by United deals with the possibility that LAN Chile is considering acquisition of an interest in Aerolineas. United leaps from this story to postulate a merger of American, LAN Chile and Aerolineas. This is sheer speculation. Moreover, if such an event ever does occur, the competitive implications, if any, can be addressed at that time. But the fact is, as United well knows, that investment in Aerolineas by carriers of countries other than Argentina or the United Sates was a subject fully discussed during the recent bilateral negotiations. The new agreement between the United States and Argentina contains broad provisions on third-country investment, and although United may view these provisions as "unprecedented" as other parts of an agreement United does not like, they provide a firm basis for a carrier such as LAN Chile to consider an investment in Aerolineas without the sinister implications suggested by United.

1/ See, S. Rep. No. 96-329, at 4 (1979) reprinted in 1980 U.S.C.C. A.N. 54, 57 ("The negotiation of a bilateral agreement itself represents a determination by the Government of the United States that the grant of route authority provided for under the bilateral is in the 'public interest'."

2/ See Order 99-10-20, pp. 5-6.

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The response of United offers little that is new and nothing that is relevant or that should delay in any way the prompt approval of what American and Aerolineas have requested and what has been agreed to by the Governments of the United States and Argentina. Most of United's arguments were rejected on the very day they were filed by Order 99-9-20 on Reconsideration in the American-LAN Chile proceeding. The Department should move forward in an expeditious manner so that all of the authority requested by American and Aerolineas is granted, and the public benefits of new entry by additional U.S. carriers in the U.S.-Argentina market may be achieved.

Respectfully submitted

ROBERT D. PAPKIN of Squire Sanders Dempsey for Aerolineas Argentinas

CARL B. NELSON, JR. of American Airlines

October 29, 1999