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OST-02-11273

 


U.S.-Turkey Combination Service Third-Country Code-Share Opportunities

OST-02-11273 Served January 7, 2002 Notice U.S.-Turkey Combination Service Third-Country Code-Share Opportunities

By this notice we invite U.S. certificated air carriers interested in using third-country code-share opportunities in the U.S.-Turkey market to file applications as specified below in the captioned docket. On May 2, 2000, the United States and Turkey signed an open-skies air transport agreement. The  agreement includes a three-year transition for the operation of third-country code-share combination services. For the first two years of the transition, i.e., through March 31, 2002, up to five U.S. airlines could provide code-share services to Turkey in conjunction with third-country carriers and collectively could operate a total of 35 weekly frequencies. From April 1, 2002, through March 31, 2003, up to seven U.S. airlines could offer such services, operating a combined total of 49 weekly frequencies (an increase of two additional airlines and 14 weekly frequencies). Effective April 1, 2003, there will be no restrictions on the operation of third-country code-share combination services.

Based on actions we took to award the available third-country code-share opportunities during the first and second years of the transition, Delta Air Lines, Northwest Airlines and United Air Lines now hold authority to serve the U.S.-Turkey market via intermediate points with their respective  code-share partners, Air France, KLM and Lufthansa. Northwest and United are each allocated fourteen weekly frequencies for their code-share services while Delta is allocated seven weekly code-share frequencies, for a total of 35. We are now beginning the process whereby we can award additional authority in light of the new opportunities that become available in the final part of the transitional phase-in. Specifically, by this notice we request that all U.S. air carriers interested in using the third-country code-share opportunities becoming available April l, 2002 to file applications for those services with the Department no later than January 28, 2002. Answers
The agreement entered into force on August 13, 2001.

We note that on December 27, 2001, Continental Airlines, Inc. filed an application in Docket OST-2001-11250 for a third-country code-share authorization and allocation of frequencies to operate code-share services in the U.S.-Turkey market with KLM beginning April l, 2002. We will consolidate this application 
into the proceeding established by this notice. Accordingly, answers to Continental's application, which normally would be due on January 11, will instead be due on the dates established by this notice to such applications should be filed by February 7, 2002. Replies to answers should be filed by February 14, 2002.

By:  Paul Gretch


U.S.-Turkey Combination Service Third-Country Code-Share Opportunities

OST-02-11273 January 28, 2002 Amendment to Application of Continental Airlines for Frequency Allocation U.S.-Turkey Combination Service Third-Country Code-Share Opportunities
    Service List  

Counsel:  Crowell Morning, Bruce Keiner, 202.624.2615, rbkeiner@cromor.com

OST-02-11273 January 28, 2002 Application of Delta Air Lines for Third-Country Codeshare Frequencies U.S.-Turkey Combination Service Third-Country Code-Share Opportunities
    Attachment:  Proposed U.S.- Istanbul Service Summer 2002  
    Service List  

Delta Air Lines, Inc. ("Delta") hereby applies for an allocation of seven weekly frequencies to operate daily third-country codeshare service between Milan, Italy (MXP), and Istanbul, Turkey (IST). Delta plans to operate its proposed services in conjunction with Alitalia-Linee Aeree Italiane-S.p.A ("Alitalia"). Alitalia is one of Delta’s charter SkyTeam alliance partners. The Department recently granted antitrust immunity to Delta and Alitalia, which will facilitate and enhance the consumer benefits attainable through this fully integrated alliance. Milan will be an entirely new and highly desirable connecting gateway for U.S. carrier codeshare service to Turkey.

Counsel:  Shaw Pittman, Alexander Van der Bellen, 202.663.8060

OST-02-11273 January 28, 2002 Application of United Air Lines for Frequency Allocation U.S.-Turkey Combination Service Third-Country Code-Share Opportunities
    Attachment:  Proposed U.S.- Istanbul Service Summer 2002  
    Service List  

United Air Lines, Inc. ("United") submits the following application for an allocation of seven weekly frequencies in order to expand its existing third-country code-share services between the United States and Turkey in conjunction with Lufthansa German Airlines ("Lufthansa").  By this application, United is requesting seven weekly frequencies in order to introduce a second daily third-country code-share service between Istanbul and Frankfurt.

Counsel:  Wilmer Cutler, Jeffery Manley, 202.663.6670, jmanley@wilmer.com


U.S.-Turkey Combination Service Third-Country Code-Share Opportunities

OST-02-11273 February 7, 2002 Answer of Continental Airlines

Word File

U.S.-Turkey Combination Service Third-Country Code-Share Opportunities

Among the applicants for new U.S.-Turkey codeshare frequencies, only Continental' would be a new entrant on U.S.-Turkey routes and initiate U.S.­Turkey service at two additional U.S. hubs, introducing an entire U.S. route network to the U.S.-Turkey market for the first time. Both Delta and United would duplicate the double daily frequencies they are already authorized to offer between the U. S. and Turkey without introducing any new airlines or U. S. networks to U.S.­Turkey routes. Continental urges the Department to grant its application for 14 U.S.-Turkey frequencies and to deny the applications by Delta and United.

Continental is the only new entrant in this proceeding. Instead of duplicating the existing Delta and United Turkey service, the Department should authorize Continental's daily New York/Newark-Istanbul and Houston-Istanbul service with its codeshare partner KIM and bring an additional domestic network online for service between the United States and Turkey. The codeshare service proposed by Delta and United would simply duplicate domestic networks already serving Turkey, but awarding Continental 14 weekly U.S. -Turkey frequencies will increase competition among the carriers and alliances providing service between the United States and Turkey. Only by designating a new carrier for U.S.-Turkey service can the Department take full advantage of the new opportunities available under the U.S.-Turkey bilateral aviation agreement.

United is requesting seven U.S.-Turkey frequencies so it can provide a second, duplicative daily flight between Frankfurt and Istanbul with its codeshare partner Lufthansa. As it stands now, United already holds 14 U.S.-Turkey third-­country codeshare frequencies, more than any other applicant. If United's request in this proceeding is approved, United would hold more U.S.-Turkey codeshare frequencies than any other U.S. carrier. The Department must provide Continental, which has no U.S.-Turkey frequencies, an opportunity to initiate new service between the United States and Turkey before allowing United to offer redundant connecting codeshare service.

Counsel:  Crowell Morning, Bruce Keiner, 202.624.2615, rbkeiner@cromor.com

OST-02-11273 February 7, 2002 Consolidated Answer of Delta Air Lines U.S.-Turkey Combination Service Third-Country Code-Share Opportunities

This is the last year remaining under the third-country codeshare phase-in restrictions of the U.S.-Turkey open skies agreement. It is also a year of unique challenges for carriers such as Delta, that have pioneered service to the middle east region. The grant of additional third-country codeshare frequencies to Delta will optimize the public benefits attainable from these valuable opportunities and is critical to Delta's ability to maintain and expand service to Turkey. Delta has submitted one of the strongest U.S.-Turkey service proposals. In conjunction with Alitalia, Delta would offer convenient and efficient nonstop- to-nonstop round-trip Istanbul connections from six U.S. cities - more than any other applicant.

Significantly, by authorizing codeshare service with Delta's new SkyTeam partner, the Department would bring the benefit of an entirely new transatlantic network to bear on U.S.-Turkey service. By contrast, United already operates fourteen U.S.-Turkey frequencies with Lufthansa, and Continental proposes to codeshare on exactly the same KLM flights as its domestic partner, Northwest. There are substantially greater untapped opportunities available through the Delta/Alitalia network, than the already well­funded Turkey codeshare networks operated by KLM and Lufthansa. In addition, it would be unfair to exclude Italy's flag carrier from enjoying the benefit of a single codeshare opportunity to Turkey with its U.S. partner, while conferring triple or quadruple Turkey codeshare frequencies to the flag carriers of Germany and the Netherlands.

So long as Delta receives an award of seven frequencies, Delta takes no position on which carrier receives the second daily codeshare opportunity. While Delta's proposal surpasses Continental's in terms of service benefits, Delta nonetheless considers it likely that the Department will award Continental seven frequencies. However, as demonstrated herein, all of the benefits of Continental's proposal can be attained with a single award of seven frequencies. Awarding Continental an entire additional traunch of Turkey frequencies to fund a single poorly-timed Houston connection would be a waste of a valuable bilateral opportunity. Delta should also receive priority for its second Turkey codeshare opportunity (its first with Alitalia), before United receives its third opportunity with Lufthansa.

Counsel:  Shaw Pittman, Alexander Van der Bellen, 202.663.8060

OST-02-11273 February 7, 2002 Answer of Houston and the Greater Houston Partnership U.S.-Turkey Combination Service Third-Country Code-Share Opportunities
    Service List  

Houston has developed important economic ties with Turkey, founded on the City's preeminent position in the energy industry. Houston-based companies, such as Conoco, Inc., are actively engaged in the distribution of natural gas and electrical power generation in Turkey. Overall, more than 160 Houston-based companies trade goods and services with Turkey and eleven have subsidiaries in Turkey. In 2000 (the most recent year for which data is available), Houston exchanged nearly 200,000 kilograms of air cargo with Turkey, despite the lack of any direct air services. That same year, the seaborne trade between the Port of Houston and Turkey was valued at more than $507 million, of which more than 71 % consisted of exports from Houston; Turkey was Houston's sixth-largest seaborne export market in Western Europe. In addition, Turkey is among the more than 70 nations that maintain a consulate in Houston; Houston is home to a chapter of the Turkish American Businessmen's Association; and Houston and Istanbul are official sister cities, further solidifying the economic and cultural ties between Turkey and Houston.

Continental would provide a new air bridge between Houston and Istanbul. In addition, it is the only carrier in this proceeding that would be a new entrant in the U.S.­Turkey market. The Department long has recognized the importance of authorizing new competition in limited-entry international markets, including by means of third-country code-share opportunities. In the U.S.-Ukraine Third-County Code-Share Opportunities case, the Department awarded the available frequencies to American Airlines on the basis that it "would increase the number of competitors in the most significant Ukraine market and would enhance competition among the code-share partnerships serving that city." Order 2000-8-11, at 4 (Aug. 10, 2000). In this proceeding, the selection of Continental, which does not now serve Turkey, would accomplish a similar purpose.

Counsel:  Leftwich Douglas, Rebecca Taylor, 202.434.9100, rltaylor@ldpllc.com 

OST-02-11273 February 7, 2002 Consolidated Answer of United Air Lines U.S.-Turkey Combination Service Third-Country Code-Share Opportunities
    Exhibits:  U.S.- Turkey Service  
    Service List  

The current competitive structure of the U.S.-Turkey market is as follows: two carriers operate daily nonstop service using their own aircraft: Delta and Turkish Airlines. American Airlines, Inc. code shares with THY on an unrestricted-frequency basis. Third-country code-share service, which is subject to frequency restrictions, is provided by United, Northwest Airlines, Inc., and Delta (in conjunction respectively with Lufthansa, KLM, and Air France). Delta is the only carrier that operates both nonstop and third-country code-share services.

In response to the Department's January 7, 2002 notice, three carriers have applied for a total of 28 frequencies to support the following services:

United

7 frequencies

US - Istanbul via Frankfurt with Lufthansa

Delta

7 frequencies

US - Istanbul via Milan with Alitalia

Continental

14 frequencies

7 x Newark - Istanbul via Amsterdam with KLM

 

 

7 x Houston - Istanbul via Amsterdam with KLM

United's application for seven frequencies should be granted on the basis of the superior public benefits its proposed services would offer compared to the other applicants. United would use seven frequencies to offer a second daily U.S.-Istanbul service in conjunction with Lufthansa via Frankfurt; each of the other applicants also proposes daily code-share service to Istanbul, but United would use its second daily service to offer more total benefits than the others.

Counsel:  United and Wilmer Cutler, Jeffrey Manley, 202.663.6670, jmanley@wilmer.com

Index


U.S.-Turkey Combination Service Third-Country Code-Share Opportunities

OST-02-11273 February 14, 2002 Reply of the City of Chicago in Support of the Application of United Air Lines U.S.-Turkey Combination Service Third-Country Code-Share Opportunities

Chicago is the third largest U.S.-Istanbul market. Traffic from Chicago to Istanbul is robust and growing, with the number of passengers on Turkish Airlines alone increasing by 41 during the period 1999-2001. United has requested seven weekly frequencies to introduce additional third-country code-share service between O'Hare (and nine other U.S. gateways) and Istanbul via Frankfurt.

Counsel:  Pillsbury Winthrop, Kenneth Quinn, 202.775.9898, kquinn@pillsburywinthrop.com 

OST-02-11273 February 14, 2002 Reply of Continental Airlines

Microsoft Word File

U.S.-Turkey Combination Service Third-Country Code-Share Opportunities

Only by awarding Continental' frequencies for U.S.-Turkey codeshare service can the Department ensure that new competition for U.S.-Turkey passengers will be injected into the U.S.-Turkey market pending the termination of codeshare limitations next year. Since Delta and United are both engaged in antitrust-­immunized codeshare alliances with their U.S.-Turkey partners, neither carrier will offer any new competition, any on-line connection or any new on-line fare which could not be offered through its antitrust-immunized alliances. Every single one of the service benefits alleged by Delta and United can be provided today as on-line services by their partners. In sharp contrast, Continental competes with KIM, its codeshare partner, and can offer new U.S.-Turkey fares and services independently. Only by selecting Continental will the Department provide an entirely new network to compete with existing U.S.-Turkey services, and only by providing Continental, the only new entrant in this proceeding, with U.S.-Turkey frequencies will the Department take full advantage of the new opportunities available under the U.S.­Turkey bilateral aviation agreement. Continental urges the Department to grant it seven frequencies for New York/Newark-Istanbul service via Amsterdam immediately and, in the interest of expedition, withdraws its request for seven frequencies to offer Houston-Amsterdam-Istanbul service.

Counsel:  Crowell Morning, Bruce Keiner, 202.624.2615, rbkeiner@crowell.com 

OST-02-11273 February 14, 2002 Consolidated Reply of Delta Air Lines

Microsoft Word File

U.S.-Turkey Combination Service Third-Country Code-Share Opportunities

Delta requires an additional allocation of seven frequencies, so that it can maintain twice-daily year-round service to Turkey. Delta's six-gateway proposal serving Istanbul via Milan ranks as one of most efficient and beneficial uses for seven of the fourteen available frequencies. By contrast, the competing applications of Continental and United are each subject to serious flaws and weaknesses, meriting, at best, secondary consideration.

So long as Delta receives an award of seven frequencies, Delta would not object to Continental receiving seven frequencies. However, to the extent the Department must chose between an award to Delta or Continental, Delta is clearly the superior choice. Continental's proposal ranks last in terms of the critical nonstop-to-nonstop connecting benefits emphasized by the Department in third-country codeshare cases. Indeed, Continental's answer is conspicuously devoid of any discussion of the service benefits of its proposal. This is because they are so minimal. Continental would serve just two U.S. gateways, compared to six for Delta. Moreover, Continental has requested a full seven frequencies to fund a single poorly-timed eastbound Houston connection, serving, in effect, just one gateway per service opportunity.

Delta is the only U.S. carrier that has seized the open-entry direct service opportunities that are available to all carriers under the U.S.-Turkey transitional open skies agreement - a fact for which Delta should be rewarded, not punished. United attempts to turn a vice into a virtue, proclaiming that "United, unlike Delta, relies exclusively on third-country code share service in order to compete in the U.S.-Turkey market." United's decision to eschew hard-won direct service rights is no justification to reward United with triple the number of Turkey codeshare frequencies as Delta. United is, of course, free to supplement its codeshare frequencies with direct service at any time.

Counsel:  Shaw Pittman, Robert Cohn, 202.663.8060, robert.cohn@shawpittman.com 

OST-02-11273 February 14, 2002 Consolidated Reply of United Air Lines - With Exhibits U.S.-Turkey Combination Service Third-Country Code-Share Opportunities

The record in this case overwhelmingly supports the allocation of seven of the 14 newly available U.S.-Turkey third-country code-share frequencies to United. Only United would use these frequencies to offer meaningful additional consumer benefits. United will offer improved roundtrip one-stop connections to Istanbul at ten U.S. gateways, more than any other applicant. United's services via Frankfurt will offer more convenient elapsed times than those proposed by the other carriers at their gateways. Moreover, only United will offer the convenience of an afternoon departure westbound from Istanbul with a same-day connection to the U.S. The other applicants offer only early morning departures, between 6:00-6:30 am, requiring passengers to leave for the airport before daylight.

The other applicants also have focused on their corporate benefits, rather than public benefits, to support their applications. Delta argues the importance of allowing it to add a code share with Alitalia, apparently to reward that carrier and its homeland for supporting an open skies agreement and to enable Delta.to improve its new relationship with Alitalia. Delta would use the additional frequencies to increase its schedule to a total of three daily U.S.-Istanbul services, more than any other U.S. carrier. Delta, already by far the largest U.S. carrier in the U.S.-Turkey market, would use additional frequencies to solidify its market position without offering any discernible additional benefit to passengers.

Continental hopes to receive the award of all 14 of the available frequencies merely because it is a "new entrant" carrier. The service Continental would offer is, however, not new but would duplicate code-share service currently offered by Northwest on the same KLM flights between Amsterdam and Istanbul. Continental would serve only two U.S. gateways (Newark and Houston). Any corporate benefits of new entry for Continental are far outweighed by the superior consumer benefits offered by United's second daily Istanbul service. The Department should decide this code-share proceeding, as it has those in the past, on the basis of public benefits. On that basis, it is clear that seven of the frequencies should be awarded to United for its second daily U.S.-Istanbul service.

Counsel:  Wilmer Cutler, Jeffery Manley, 202.663.6670, jmanley@wilmer.com


U.S.-Turkey Combination Service Third-Country Code-Share Opportunities

Order 02-4-09
OST-02-11273
Issued April 11, 2002
Served April 12, 2002
Order to Show Cause U.S.- Turkey Combination Service Third-Country Code-Share Opportunities
    AttachmentService Proposals  

We have tentatively decided to (1) select Delta and United to serve Turkey under their respective third-country code-share arrangements, and (2) allocate each 7 weekly frequencies to provide its service.  

Delta's code-share service with Air France offers on-line connecting service to 8 U.S. cities, throughout the United States, via Paris. Under its proposal here, it would serve 6 U.S. cities via Milan, affording passengers an additional service option via a new European intermediate point. In addition, two U.S. cities, Newark and Miami, would receive the first convenient, daily roundtrip service in the market from Delta.

United currently offers connecting service to 15 U.S. cities and it proposes to serve 10 U.S. cities on its second Istanbul service via Frankfurt. While, as argued by some parties, United does not propose service to any new U.S. cities, its proposal would improve its U.S.-Istanbul service in several markets. Specifically, by code sharing on both its existing flight and the proposed flight, United would be able to improve its elapsed time by approximately four hours in six markets (Atlanta, Dallas/Ft. Worth, Detroit, Newark, Miami and Philadelphia). It would also improve its current elapsed time by up to nearly two hours in four other markets (Boston, Washington, New York and Chicago). Thus, awards to United and Delta would improve service to 10 U.S. cities, providing shorter elapsed travel time and/or new code-share service options.

We also tentatively find that the selection of Delta and United would increase competition in the U.S.-Turkey market and best enhance market structure. Awards to these carriers would provide competitive service at six U.S. cities under their proposals. The awards would enable both Delta and United to operate twice daily service in the U.S.-Istanbul market on a year-round basis. As Northwest also operates twice daily service in the U.S.-Istanbul market, three U.S. carriers could operate double daily Istanbul service, maximizing the level of competitive services in the market.

By:  Susan McDermott


U.S.-Turkey Combination Service Third-Country Codeshare Opportunities

OST-02-11273 April 22, 2002 Objections of Continental Airlines U.S.-Turkey Combination Service Third-Country Codeshare Opportunities

The Department's tentative decision to award all of the newly-available U.S.­Turkey codeshare frequencies to Delta' and United rests on an entirely faulty premise: that allocations to these carriers would provide broad "service and competitive benefits." In fact, no service or competitive benefits whatever would result from such allocations, and the Department's tentative decision is explicable only if the Department has established a deliberate policy of awarding limited-entry codeshare authority to the largest antitrust-immunized alliances because the Department wants to enhance such alliances at the expense of smaller, un­immunized alliances and independent airlines such as Continental. If the Department is truly interested in offering consumers service and competitive benefits by the award of Turkey codeshare frequencies, it must reverse its tentative decision and award Continental seven of the new frequencies.

Counsel:  Continental and Crowell Moring, Bruce Keiner, 202-624-2615


U.S.- Turkey Combination Service Third-Country Codeshare Opportunities

OST-02-11273 April 29, 2002 Answer of Delta Air Lines to Objections

Microsoft Word File

U.S.- Turkey Combination Service Third-Country Codeshare Opportunities

For the reasons explained below, the Department should immediately affirm its tentative decision in a Final Order, so that the selected applicants can implement their proposed new services. Since the new opportunities have already become effective on April 1, 2002, it is critical that the Department act without delay, so that carriers can make effective use of these valuable bilateral rights during the 11 month transitional period remaining under the U.S.-Turkey open skies agreement.

Counsel:  Delta and Shaw Pittman, Robert Cohn, 202.663.8060, robert.cohn@shawpittman.com 

OST-02-11273 April 29, 2002 Answer of United Air Lines U.S.- Turkey Combination Service Third-Country Codeshare Opportunities

Continental has failed to offer any basis for the Department to modify its well-reasoned tentative decision. By filing its repetitive objections, however, Continental delays the Department's final decision and jeopardizes timely marketing of new competitive U.S. carrier services in the peak summer season which begins in a few weeks. This delay works to the advantage of Continental's transatlantic partners, Northwest and KLM, which are already offering double daily code­share services between U.S. gateways and Istanbul via Amsterdam, but deprives the public of the timely introduction of the important new competitive choices that would be offered by United.

Counsel:  United and Wilmer Cutler, Jeffrey Manley, 202.663.6670, jmanley@wilmer.com


U.S.-Turkey Combination Service Third-Country Code-Share Opportunities

Order 02-6-08
OST-02-11273
Issued June 17, 2002
Served June 18, 2002
Final Order

Microsoft Word File

U.S.- Turkey Combination Service Third-Country Code-Share Opportunities

Order 2002-6-8, the Department makes final the tentative decision in Order 2002-4-9 to select Delta Air Lines, Inc. (Delta), and United Air Lines, Inc. (United), to serve Turkey, under code-share arrangements with their respective third-country code-share partners, and to award each carrier seven weekly frequencies to perform its service.

In short, Continental has failed to persuade us that the Delta and United proposals, which would expand the U.S. carrier competitive service offerings to a number of U.S. cities, somehow deserve less merit than Continental’s proposal, which would benefit only a single U.S. city -- and a city already enjoying service to Turkey from a variety of carriers including Continental’s own codesharing partner Northwest.  We note that Continental's service proposal plans to use the same KLM flight for its third-country code-share service that Northwest now uses for its third-country code-share service.

By:  Susan McDermott


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