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OST-2005-20406 - 2005 Los Angeles-Mexico City Combination Service Proceeding

 

Undocketed - Delta's Letter to US Air Carrier Licensing, January 21, 2005


2005 Los Angeles-Mexico City Combination Service Proceeding

Order 2005-2-8
OST-2005-20406
OST-2005-20069 - American Airlines - Los Angeles-Mexico City
OST-2005-20071 - Continental Airlines - Los Angeles-Mexico City
OST-2005-20073 - Alaska Airlines - Los Angeles-Mexico City
OST-2005-20096 - America West Airlines - Los Angeles-Mexico City

Issued and Served February 14, 2005

Instituting Order

In view of our ability to designate only one additional U.S. carrier to serve the Los Angeles‑Mexico City market, and in light of the competing applications filed for this limited‑entry route right, we have decided to institute the 2005 Los Angeles‑Mexico City Combination Service Proceeding to select one primary and one backup carrier to provide scheduled foreign air transportation services of persons, property, and mail in the Los Angeles‑Mexico City market.

The supplemental information is to be filed no later than seven (7) calendar days from the service date of this order. The Parties' responses to these submissions and their briefs will be due seven (7) calendar days thereafter.

By: Karan Bhatia


 

February 14, 2005

Re: Clarification for Filing Supplemental Information

Given that February 21, 2005 is a legal holiday, as a matter of clarification, supplemental information is to be filed no later than close of business on Tuesday, February 22, 2004. The Parties' responses to these submissions and their briefs will be due no later than close of business on Tuesday, March 1, 2005.

By: Office of International Aviation, Brian Hedberg


February 14, 2005

Re: Alaska Airlines Request for Additional Time

Given the short time frames provided for in the instituting order, I am asking on behalf of Alaska Airlines that each of the two respective due dates of the 21st and 28th, as stated in the order, be slipped by one day. The stated supplementation date of the 21st is a federal holiday and should be moved to the 22nd. Shifting the rebuttal date from the 28th until the 29th will then preserve the same 7 calendar period for rebuttals and should not affect the decisional process. I would ask that you consider this e mail as the equivalent of a formal request. However, if the Department feels that this request needs to be submitted on paper, I would kindly ask that you advise me at your early convenience. I will also file this request tomorrow morning with the Docket Section.

Counsel: Squire Sanders, Marshall Sinick



February 15, 2005

Re: Confidentiality Affidavit of Bruce Keiner, Jr. for Continental Airlines

Counsel: Crowell & Moring, Bruce Keiner, Jr.



February 22, 2005

Supplement of Alaska Airlines - Bookmarked

Selection of Alaska will not only increase intragateway competition at Los Angeles, but will also enhance intergateway competition‑a claim no other applicant in this proceeding can seriously make. Every other applicant serves Mexico City from its principal hub and, in some cases, from multiple hubs, and every other applicant will have the incentive, and the ability, to divert traffic from Los Angeles to support its operations at other U.S. gateway points. Unlike each of the other applicants, Alaska will have absolutely no incentive to divert traffic from Los Angeles to support other U.S. gateway cities. Injection of a new proven competitive force into the U.S.‑Mexico City markets is especially important in view of the limited number of designations available under existing bilateral restrictions. The Department has an opportunity in this proceeding to provide not only Los Angeles passengers, but also U.S. consumers on the West Coast, with a new travel alternative to Mexico City.

Counsel: Squire Sanders, Marshall Sinick, 202-626-6651, msinick@ssd.com


February 22, 2005

Exhibits of American Airlines in Response to Order 2005-2-8 - Bookmarked

In the forecast year ended March 31, 2006, American expects to carry 186,946 passengers between Los Angeles and Mexico City, including 140,337 passengers in the local market, 18,566 passengers from on-line U.S. connecting cities, and 28,042 passengers to cities in Mexico beyond Mexico City (AA* on Mexicana-operated codeshare flights).

American presently offers codeshare service between Los Angeles and Mexico City on flights operated by Mexicana  If American is awarded authority in this proceeding, its codeshare service with Mexicana will continue, and American will propose that Mexicana display the MX* code on American's Los Angeles‑Mexico City operations.

Los Angeles‑Mexico City is the largest U.S.‑Mexico city‑pair market. With the exit of Delta Air Lines as of January 30, 2005, the remaining U.S. carrier is long‑term incumbent United Air Lines.

Counsel: American, Carl Nelson, 202-496-5647, carl.nelson@aa.com


February 22, 2005

Supplemental Application of America West Airlines for an Exemption

Direct Exhibits of America West Airlines - Bookmarked

In 2004, America West committed to expanding its competitive position at LAX, and our goal is to continue growing our LAX service. As discussed in its Application, since September 2003 America West has rapidly expanded its presence at LAX, beginning transcontinental service from Boston and New York, increasing the number of cities it serves from two to nine and increasing daily LAX departures 40 percent. No other carrier offering at least ten daily departures at LAX can claim this level of growth over this period. Currently, American and Alaska are by far the dominant carriers in the LAX-Mexico market.

Counsel: Baker Hostetler, David Kirstein, 202-861-1532


February 22, 2005

Supplement to Application of Continental Airlines

Exhibits - Bookmarked

Continental forecasts that it will carry over 65,000 Los Angeles‑Mexico City passengers annually. Continental will offer a wide range of fares between Los Angeles and Mexico City, from low discount fares to first class fares geared to business travelers. Continental did not codeshare with Delta on its Los Angeles‑Mexico City flights, and Continental has no current plans to offer codeshare service on its proposed Los Angeles‑Mexico City flights with Delta or Aeromexico. Continental will offer interline connections with other airlines, including Aeromexico in Mexico City, and in Los Angeles. Continental may in the future implement code sharing on Aeromexico or Aerolitoral flights beyond Mexico City to offer additional on‑line connecting services.

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



March 1, 2005

Rebuttal Comments of Alaska Airlines - Bookmarked

A review of the supplementary proposals submitted by other applicants in this proceeding reaffirms that Alaska's proposal best satisfies the selection criteria set forth in the Department of Transportation's instituting order. Most importantly, Alaska is the only new entrant applicant at Mexico City. The enormous competitive benefits resulting from this fact alone justifies selection of Alaska over the competing applicants. When Alaska's new entrant status is combined with its multiple daily service, impressive Los Angeles presence, extensive West Coast‑Pacific Northwest‑State of Alaska network, demonstrated success in developing Mexico markets, number one position in both the West Coast‑Mexico and Los Angeles‑Mexico markets and strong incentive to compete against the incumbent Los Angeles‑Mexico City carriers, the superiority of Alaska's proposal is clear. The Department should grant Alaska an exemption to serve Los AngelesMexico City and promptly designate Alaska under the U.S.‑Mexico bilateral as the market's second U.S. carrier.

Counsel: Alaska and Squire Sanders, Marshall Sinick, 202-626-6651, msinick@ssd.com


March 1, 2005

Brief of America West Airlines and Rebuttal Exhibits - Bookmarked

All the applicants, except Continental, propose two daily round trips operating at approximately the same times. Accordingly, the single most important public benefit the Department can achieve in this restricted market is introducing price competition, thereby lowering the general fare level and delivering substantial savings to consumers. America West's service will focus on bringing the maximum benefit of low‑cost service to the large local LAX-MEX market. As America West explained in its Direct Exhibits, the introduction of its low‑cost service will immediately benefit this market by reducing the average LAX-MEX fare from $191 to no more than $168, or at least a 12 percent reduction. This will generate annual savings of over $15.5 million to current consumers. The reduced fares will also stimulate the market by creating approximately 161,330 new consumers annually and over $27.1 million in new consumer value.

Counsel: Baker & Hostetler, Joanne Young, 202-861-1532


March 1, 2005

Reply and Brief of American Airlines - Bookmarked

American will provide the most capacity, serve the largest number of passengers, provide the largest number of U.S. cities with on‑line one‑stop service behind Los Angeles, and provide the only codeshare service on the route to points in Mexico beyond Mexico City.

Alaska and America West failed in material respects to comply with the evidence request, and their applications should be dismissed. The Department should proceed immediately to a final order selecting American as the second U.S. carrier on the Los Angeles‑Mexico City route.

Counsel: American, Carl Nelson, 202-496-5647, carl.nelson@aa.com


March 1, 2005

Brief of Continental Airlines - Bookmarked

Rebuttal Exhibits - Bookmarked

Continental urges the Department to grant Continental authority to implement its realistic proposal to operate daily nonstop roundtrip service between Los Angeles and Mexico City to serve this primarily-local market and provide Continental with an anchor route to support its Los Angeles-Mexico service initiatives. Continental has developed a comprehensive U.S. -Mexico network including cities both large and small on both sides of the border. Continental's network of 30 Mexican cities is more than twice the number of cities served by American, its largest rival in Mexico.  Neither Alaska nor America West has even attempted to build a comprehensive U.S.-Mexico network, despite opportunities open to them for flights between all of their hubs and points throughout Mexico, including Mexico City. Continental has developed a strong identity throughout the U.S.-Mexico marketplace and serves both hub and non-hub cities from Mexico City, and this strength at Mexico City will enable Continental to develop traffic effectively on the Los Angeles-Mexico City route.

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



March 4, 2005

Supplement One to Application of Alaska Airlines

Alaska Airlines, Inc. hereby submits this supplement to its pending application for an exemption to operate scheduled service between Los Angeles, California, and Mexico City, Mexico. Attached hereto is correspondence in strong support of Alaska's application sent to the Department of Transportation by various members of Congress as well as business leaders and employees of Alaska Airlines.

Alaska is especially appreciative of the strong endorsement given its application by Chairman Don Young of the House Transportation and Infrastructure Committee as well as Representatives Earl Blumenauer, Darlene Hooley and David Wu. These letters confirm the support Alaska's application enjoys and the public benefits that will result from selection of Alaska.

Counsel: Alaska and Squire Sanders, Marshall Sinick, 202-626-6651, msinick@ssd.com



February 25, 2005

Re: Ultimate Travel Letter in Support of Alaska Airlines

By: Linda Riley



March 8, 2005

Supplement Two to Application and Motion for Leave to File of Alaska Airlines

Attached hereto is a letter from the entire Washington State Congressional Delegation, including Senators Murray and Caniwell as well as Representatives Dicks, McDermott, Hastings, Inslee, Smith, Baird, Larsen, McMorris and Reichert, strongly supporting Alaska's application. Alaska is very appreciative of the Washington Delegation's endorsement of its proposed services.

Alaska is also attaching a supplement to its Exhibit AS-2, which provides further detail with respect to Alaska's beyond-market schedules. Notwithstanding American's position in its Reply, Alaska believes its application, including Exhibit AS-2, complies fully in every material respect with the Department's instituting order and that its application establishes without question that Alaska is the best choice to replace Delta on the Los Angeles-Mexico City route. So that there is no doubt, however, as to Alaska's commitment to this service or its compliance with the instituting order, Alaska is submitting this supplement to its schedule identifying elapsed travel times for its beyond-market connecting services.

Counsel: Alaska and Squire Sanders, Marshall Sinick, 202-626-6651, msinick@ssd.com


March 9, 2005

Motion of American Airlines to Strike Late-Filed Direct Exhibit of Alaska Airlines

As American urged in its reply and brief of March 1, Alaska's application should be dismissed for failure to comply in material respects with item (3) of the evidence request. That called for proposed schedules, including flight numbers, complete routings from origin to destination (including behindgateway and beyond-gateway points), with elapsed times, departure and arrival times, equipment types including seating configuration, days scheduled, and classes of service offered. Alaska submitted none of this information with respect to behind Los Angeles connecting schedules on the due date, and now asks that its supplemental filing be accepted two weeks late and after replies and briefs have been submitted.

If there is ever to be a proceeding in which the Department enforces its evidentiary rules, this is that proceeding. In light of "the need to restore service quickly" on the Los Angeles-Mexico City route, the Department imposed unusually expedited procedural dates, allowing one week for direct exhibits and one week for replies and briefs.

Counsel: American, Carl Nelson, 202-496-5647, carl.nelson@aa.com



March 10, 2005

Reply and Motion for Leave to File of Alaska Airlines

American's motion is nothing more than an obvious attempt by American to seize on a technicality in the hope that such a tactic would overshadow the manifest inferiority of its proposal on the merits. Beyond that, American misreads the Department's instituting order and then greatly exaggerates the single item of information that Alaska did not initially provide, the elapsed time of travel for its beyond-market passengers, information which in any event is readily available from multiple public sources.

Counsel: Alaska and Squire Sanders, Marshall Sinick, 202-626-6651, msinick@ssd.com



March 14, 2005

Supplement Three to Application of Alaska Airlines

Attached hereto is correspondence in strong support of Alaska's application from Washington State Governor Christine O. Gregoire and Governor Theodore R. Kulongoski of Oregon. Also supporting Alaska's application are members of the city council of the City of Los Angeles, the Port of Seattle and the Alaska Airlines Master Executive Council of the Air Line Pilots Association, International, in addition to numerous Alaska employees and business leaders. Alaska is deeply grateful for the support given its application.

Counsel: Alaska and Squire Sanders, Marshall Sinick, 202-626-6651, msinick@ssd.com



March 18, 2005

Supplement Four to Application of Alaska Airlines

Attached hereto is correspondence endorsing Alaska's application from the Hon. James K. Hahn, Mayor of the City of Los Angeles, and Los Angeles County Supervisor Don Knabe. Also supporting Alaska's application is the Alaska Airlines Master Executive Council of the Association of Flight Attendants as well as local business leaders. Alaska is very appreciative of the strong support given its application.

Counsel: Alaska and Squire Sanders, Marshall Sinick, 202-626-6651, msinick@ssd.com



March 9, 2005

Re: Applause Travel Letter in Support of Alaska Airlines

By: Anne Edmaun


March 9, 2005

Re: Bourke Travel Letter in Support of Alaska Airlines

By: Kim McKee-Bourke


March 7, 2005

Re: Carlson Wagonlit Travel Letter in Support of Alaska Airlines

By: Lara Cole


March 25, 2005

Re: Corporate VAT Management Letter in Support of Alaska Airlines

By: Jim Kelly


March 10, 2005

Re: Cortan Industries Letter in Support of Alaska Airlines

By: Roger Coursan


March 4, 2005

Re: Theodore Kulongoski, Governor of Oregon Letter in Support of Alaska Airlines

By: Theodore Kulongoski


March 11, 2005

Re: Lumberman's Underwriting Alliance Letter in Support of Alaska Airlines

By: James Trenter


March 8, 2005

Re: Myrna's Travel Service Letter in Support of Alaska Airlines

By: Shirlee Lugus


March 8, 2005

Re: Myrna's Travel Service Letter in Support of Alaska Airlines

By: Kathy Skelton


March 23, 2005

Re: Portland Business Alliance Letter in Support of Alaska Airlines

By: Bob Van Brocklin


March 11, 2005

Re: Regence Blueshield Letter in Support of Alaska Airlines

By: Mary McWilliams


March 10, 2005

Re: Seattle-Tacoma International Airport Letter in Support of Alaska Airlines

By: Mark Reis


March 11, 2005

Re: Travel House Letter in Support of Alaska Airlines

By: Robert Kerr


March 4, 2005

Re: Travel in Style & Class Act Tours Letter in Support of Alaska Airlines

By: Carol Kennedy


March 7, 2005

Re: Travel Pie Letter in Support of Alaska Airlines

By: Ian Quartermaine


March 4, 2005

Re: Uptown Landing Cruise & Travel Letter in Support of Alaska Airlines

By: Joan Bush



March 4, 2005

Correspondence of Oregon State Congressional Delegation in Support of Alaska Airlines

By: Earl Blumenauer, Darlene Hooley, and David Wu


March 4, 2005

Correspondence of Washington State Congressional Delegation in Support of Alaska Airlines

By: Patty Murray, Maria Cantwell, Norm Dicks, Jim McDermott, Doc Hastings, Jay Inslee, Adam Smith, Brian Baird, Rick Larsen, Cathy McMorris, and Dave Reichert



Order 2005-05-01
OST-2005-20406 - Los Angeles-Mexico City Combination Service Proceeding

Issued and Served May 4, 2005

Final Order - Bookmarked

The Los Angeles-Mexico City market is the third largest U.S. Origin and Destination (O&D) market (behind New York-Mexico City and Miami-Mexico City, respectively) encompassed by the U.S.-Mexico agreement. Although the market enjoys the benefits of some connecting traffic, local traffic accounts for the vast majority of the over 670,000 passengers carried on nonstop flights between Los Angeles and Mexico City. In that same year, before Delta withdrew services on the route, the designated Mexican-flag carriers, Mexicana and Aeromexico, carried over 75% of the passengers in the non-stop market. Mexicana alone carried over 55% of the total non-stop passengers in the market. Given the Mexican carriers' dominance in the Los Angeles-Mexico City market, the loss of Delta's direct-carrier services, and the termination of Delta's code-share services with Continental and Northwest on the Los Angeles-Mexico City route, it is in the public interest to restore quickly the full complement of U.S. carrier operated services and to choose an applicant with a strong service proposal that also demonstrates a strong incentive to compete in this market, currently dominated by foreign carriers.

After careful examination of the proposals in this case, we have decided to select Alaska as the primary carrier to provide foreign scheduled combination air service between Los Angeles, California, and Mexico City, Mexico. In addition, we have decided to select America West for back‑up authority in the subject market

By: Karan Bhatia



March 5, 2007

Application of Alaska Airlines for Renewal of Exemption

Alaska Airlines, Inc. hereby requests renewal of the exemption authority granted to it by the Department of Transportation in the above-captioned docket to perform scheduled foreign air transportation of persons, property and mail between Los Angeles, California, and Mexico City, Mexico. This exemption authority expires on May 4, 2007. Alaska requests renewal of this authority for a two-year period on its existing terms and conditions.

Alaska currently operates twice daily roundtrip scheduled flights on the Los Angeles-Mexico City route using B737 aircraft.

Counsel: Squire Sanders, Marshall Sinick, 202-626-6651, msinick@ssd.com



Filed March 5, 2007 | Issued May 8, 2007

Notice of Action Taken

Renewal of exemption for two years under 49 U.S.C. 40109 to provide the following service: scheduled foreign air transportation of persons, property, and mail between Los Angeles, California, and Mexico City, Mexico.

By: Paul Gretch



March 2, 2009

Application for Renewal of Exemption

Alaska Airlines, Inc. hereby requests renewal of the exemption authority granted to it by the Department of Transportation in the above-captioned docket to perform scheduled foreign air transportation of persons, property and mail between Los Angeles, California, and Mexico City, Mexico. This exemption authority expires on May 8, 2009. Alaska requests renewal of this authority for a two-year period on its existing terms and conditions. Alaska currently operates daily roundtrip scheduled flights on the Los Angeles-Mexico City route using B737 aircraft.

Counsel: Squire Sanders, Marshall Sinick, 202-626-6651



Filed March 2, 2009 | Issued March 18, 2009

Notice of Action Taken

Renewal of scheduled foreign air transportation of persons, property, and mail between Los Angeles, California, and Mexico City, Mexico.

By: Paul Gretch



December 9, 2010

Application of Alaska Air for Renewal of Exemption

Alaska Airlines, Inc. hereby requests renewal of the exemption authority granted to it by the Department of Transportation in the above-captioned docket to perform scheduled foreign air transportation of persons, property and mail between Los Angeles, California and Mexico City, Mexico. This exemption authority expires on March 18, 2011. Alaska requests renewal of this authority for a two-year period.

Counsel: Squire Sanders, Marshall Sinick, 202-626-6651



Filed December 9, 2010 | Issued February 1, 2011

Notice of Action Taken for Alaska Airlines

Renewal of scheduled foreign air transportation of persons, property and mail between Los Angeles, California and Mexico City, Mexico for Alaska Airlines.

By: Paul Gretch


 

October 12, 2012

Application of Alaska Airlines for Renewal of Exemption

Alaska Airlines, Inc. hereby requests renewal of the exemption authority granted to it by the Department of Transportation in the above-captioned docket to perform scheduled foreign air transportation of persons, property and mail between Los Angeles, California and Mexico City, Mexico. This exemption authority expires on February 1, 2013. Alaska requests renewal of this authority for a two-year period. Alaska currently operates twice daily roundtrip scheduled flights on the Los Angeles-Mexico City route using B737 aircraft.

Counsel: Squire Sanders, Charles Donley, 202-626-6840


 

Filed October 12, 2012 | Issued November 6, 2012

Notice of Action Taken

Renewal of scheduled foreign air transportation of persons, property and mail between Los Angeles, California and Mexico City, Mexico.

By: Paul Gretch


 

August 5, 2014

Application for Renewal of Exemption

Alaska Airlines, Inc. hereby requests renewal of the exemption authority granted to it by the Department of Transportation in the above-captioned docket to perform scheduled foreign air transportation of persons, property and mail between Los Angeles, California and Mexico City, Mexico. This exemption authority expires on November 6, 2014. Alaska operates daily roundtrip service on the Los Angeles-Mexico City route using B737 aircraft.

Counsel: Squire Patton Boggs, Charles Donley, 202-626-6840


 

Filed August 5, 2014 | Issued August 25, 2014

Notice of Action Taken

Renewal of scheduled foreign air transportation of persons, property and mail between Los Angeles, California and Mexico City, Mexico.

By: Paul Gretch


 

OST-2015-0025 - Transfer of International Route Authority
OST-2005-20406 - 2005 Los Angeles-Mexico City Combination Service Proceeding
OST-2010-0222 - American - US-Mexico Codesharing with Alaska Airlines

February 11, 2015

Joint Application for Transfer of International Route Authority and Applications for Amendment of Exemptions

Alaska Airlines, Inc. and American Airlines. Inc. hereby request that the Department of Transportation approve the transfer to American of international route authority held by Alaska authorizing scheduled foreign air transportation of persons, property and mail between Los Angeles. California and Mexico City, Mexico. The Joint Applicants request further that the Department amend their current exemption authorities in the captioned dockets to (i) allow American to serve the Los Angeles-Mexico City route with its own aircraft, and (ii) permit Alaska to display its two-letter designator code on American's flights between Los Angeles and Mexico City. The Joint Applicants request that both exemptions be reissued for a two-year period.

Alaska holds an exemption authorizing it to engage in scheduled foreign air transportation of persons, property and mail between Los Angeles and Mexico City. Notice of Action Taken dated August 25, 2014 (Docket OST-2005-20406). American holds un exemption authorizing it to hold out codeshare service only between Los Angeles and Mexico City. Notice of Action Taken dated July 19, 2012 (Docket OST-2010-0222); renewal currently pending.

The Joint Applicants request also that the United States designate American for service in the Los Angeles-Mexico City market, and that the Department allocate a codcshare authorization to Alaska for its continuing Los Angeles-Mexico City codeshare service.

American intends to commence double-daily service on the Los Angeles-Mexico City route on June 4, 2015. The Joint Applicants therefore request expedited approval of this application so that all necessary government approvals can be obtained in Mexico and so that marketing and sale can begin without delay.

Counsel: Cozen O'Connor, David Heffernan, 202-463-2537 for Alaska Air / Howard Kass, 202-326-5153 for American


 

OST-2015-0025 - Transfer of International Route Authority
OST-2005-20406 - 2005 Los Angeles-Mexico City Combination Service Proceeding
OST-2010-0222 - American - US-Mexico Codesharing with Alaska Airlines

March 6, 2015

Joint Reply of Alaska Airlines and American Airlines to Answer of Delta Air Lines

Delta's answer is nothing more than a spurious effort to obstruct and delay implementation of American's new nonstop service on the Los Angeles-Mexico City route. The Joint Applicants' agreement to transfer the route authority is the type of market-based transaction that the Department has routinely approved without consolidating applications from other carriers. There is no legal or practical scenario whatsoever in which the authority at issue will be transferred, or awarded, to Delta. If the Department fails to promptly approve the route transfer application, Alaska (which has consistently operated the route either on a once- or twice-daily basis in full compliance with the terms of the authority) will continue to operate the route.

It should be noted that Delta once held the authority to serve Los Angeles-Mexico City but returned it to the Department, which ultimately led to Alaska securing the route. See Order 2005-2-8, Feb. 14, 2005, at 2. In the Los Angeles-Mexico City market, two US carriers, Delta and United Air Lines, Inc., held underlying authority and designation under the US-Mexico bilateral agreement to provide direct carrier (own aircraft) services. However, by letter submitted January 21, 2005, Delta notified the Department that it would terminate service in this market on January 31, 2005.

In addition to answering the joint application, Delta filed an Application for Exemption (in Docket OST-2015-0042). The Joint Applicants hereby reserve the right to file a separate answer to Delta's application. The Joint Applicants will not address here that contingent application's lack of comparative merit because the Department's rejection of Delta's answer and prompt approval of the joint application would render moot Delta's application. In fact, Delta's application is not only contingent but wholly theoretical because, as discussed above in text, either the Department will promptly approve the Joint Applicants' route transfer application or the Joint Applicants will withdraw the application and Alaska will continue to operate the Los Angeles-Mexico City route. Of course, if the Department approves the joint application before the 15 calendar day period for filing answers to the Delta application expires, the Joint Applicants will have no need to submit an answer to the Delta application.

Counsel: Cozen O'Connor, David Heffernan, 202-463-2537 for Alaska Air / Howard Kass, 202-326-5153 for American


 

Order 2015-4-10
OST-2015-0025
- Transfer of International Route Authority
OST-2005-20406 - 2005 Los Angeles-Mexico City Combination Service Proceeding
OST-2010-0222 - American - US-Mexico Codesharing with Alaska Airlines
OST-2015-0042 - Delta - Los Angeles-Mexico City

Issued and Served April 17, 2015

Order to Show Cause

By this order the Department tentatively decides to (1) grant the joint application of Alaska Airlines, Inc. and American Airlines, Inc. for transfer to American of international route authority held by Alaska authorizing scheduled foreign air transportation between Los Angeles, California and Mexico City, Mexico, and (2) grant the requests of Alaska and American for amended exemption authority to permit American to serve the Los Angeles-Mexico City route with its own aircraft, and permit Alaska to display its two-letter designator code on American’s flights between Los Angeles and Mexico City.

As a threshold matter, the Department has examined the proper regulatory framework for considering the proposed transaction. The Joint Applicants cite two statutory provisions that they regard as dispositive: 49 USC §§ 40109 and 41105. The first sets forth the Department’s authority to issue exemptions and the second addresses the Department’s power to transfer certificates. The exemption statute imposes a public interest test. The Joint Applicants assert that the public interest test in this context incorporates the Department’s public interest test for deciding certificate transfer cases. That assertion, combined with the Joint Applicants’ express reliance on the certificate transfer provision of the statute, means that the Department should decide the present exemption transfer application based on certificate transfer policies and precedents. Furthermore, they contend that when those policies and precedents are applied to the facts of this case, their application warrants approval without the need for the Department to consider competitive applications for the route.

Delta, on the other hand, asserts that the certificate transfer precedents are not applicable here because no certificate authority is actually being transferred. Delta cites the Department’s instituting order in the 1997 US-Argentina All-Cargo Frequency Proceeding, Order 1997-11-35, in support. Delta argues that, because the certificate precedents are inapplicable, the Department should consider competitive applications and that, if it did so, it would select Delta’s application.

The Department tentatively decides that the Joint Applicants’ position is the more persuasive. In 1989 the Department directly addressed the question of the appropriate decisional framework for an exemption route transfer case. The Department decided that the proper regulatory framework for exemption route transfers was the same as for certificate transfers, namely section 401(h) of the Federal Aviation Act, the predecessor provision to 49 USC § 41105.

The Department does not view the 1997 Argentina instituting order cited by Delta as persuasive. The Department’s 1997 order stated quite clearly that what was involved in the 1997 Argentina situation was a “frequency allocation case” and that “frequency allocations are not certificate awards.” That 1997 case did not involve the traditional type of route transfer that was before the Department in 1989, and that is before the Department here.

Having tentatively determined that the Department should decide this transfer as it would decide a certificate transfer under § 41105, the Department must now determine whether the transfer satisfies the standards set forth in the statute.

In this case, the Department tentatively finds that the transfer meets the standards for approval. Specifically, the Department notes that American’s proposed Los Angeles-Mexico City service will exceed the frequency levels currently operated by Alaska (American plans to offer two daily flights, as opposed to Alaska’s single daily). Furthermore, American would provide new intragateway competition at Los Angeles to existing service offered by United, codeshare service offered by Delta, and the services of Mexican carriers. Moreover, as Los Angeles is already an American hub, its Los Angeles-Mexico City service will provide new online connecting options to passengers in the western United States, thereby increasing intergateway competition. Finally, the Department notes that, despite the transfer, Alaska will remain a presence in the market by virtue of its codesharing on American’s flights. The Department tentatively finds that these benefits would not conflict with important international aviation policy objectives or otherwise be inconsistent with the public interest.

The Department tentatively finds that the current condition of the US-Mexico market does not warrant deviating from our normal disinclination to consolidate competing route applications with a transfer request. Saying that, the Department is cognizant that the United States and Mexico recently concluded negotiations on a modernized air transport agreement, and the Department anticipates that there could be substantial changes in the market within the next year. Against this background, the Department tentatively finds it in the public interest to limit its approval of the Joint Applicants’ requests for amended exemption authorities to a period of one year. A timely renewal application will provide an appropriate vehicle for consideration of whether the situation prevailing in the market at that time might call for a different regulatory treatment.

By: Brandon Belford


 

OST-2015-0025 - Transfer of International Route Authority
OST-2005-20406 - 2005 Los Angeles-Mexico City Combination Service Proceeding
OST-2010-0222 - American - US-Mexico Codesharing with Alaska Airlines
OST-2015-0042 - Delta - Los Angeles-Mexico City

April 27, 2015

Joint Comments of American and Alaska Air

The Joint Applicants intend to start service this summer, as soon as they are able to obtain the requisite authority in Mexico. To meet this commencement date and still allow sufficient time for marketing and sales of their new services, the Joint Applicants must begin advertising and selling tickets as soon as possible. The Joint Applicants therefore respectfully request that the Department promptly issue its order finalizing the findings and conclusions of its Show Cause Order, and affirming the transfer of the Los Angeles-Mexico City route to American on the conditions set forth therein.

Counsel: Cozen O'Connor, David Heffernan, 202-463-2537 for Alaska Air / Howard Kass, 202-326-5153 for American


 

OST-2015-0025 - Transfer of International Route Authority
OST-2005-20406 - 2005 Los Angeles-Mexico City Combination Service Proceeding
OST-2010-0222 - American - US-Mexico Codesharing with Alaska Airlines

May 4, 2015

Joint Answer of Alaska Airlines and American Airlines to Objections of Delta Air Lines

Delta offers no basis for the Department to alter its tentative findings and conclusions. Rather, Delta merely restates arguments that the Department, with sound reasoning, rejected in the show cause order. The core of Delta's legal argument is that the Department should disregard the precedent reflected in the Horizon-San Juan Canadian Transfer Case that "the proper regulatory framework for exemption route transfers [i]s the same as for certificate transfers." Delta continues to insist that the 1997 US-Argentina All-Cargo Frequency Proceeding supports the proposition that carrier selection is required in this case. The Department, however, sensibly rejected that argument in the show cause order, noting "[t]hat 1997 case did not involve the traditional type of route transfer that was before the Department in 1989 [in the Horizon case], and that is before the Department here."

Next, Delta argues that, "even if the ... Horizon case is controlling," comparative consideration of the Delta and American applications is "still required." Delta then contradicts this assertion by implicitly conceding what is indisputably true: that the decision whether to initiate a carrier selection proceeding in these circumstances is a matter of discretion for the Department. As the Department explained, its longstanding policy is to presumptively allow route transfers (and not grant comparative consideration of competing applications except in rare and exceptional circumstances) as long as the Joint Applicants satisfy the statutory public interest test. In this case, the Department tentatively determined that American's proposed service and Alaska's continued presence in the Los Angeles-Mexico City market via codesharing satisfy that test. The Department again noted its longstanding "general policy disfavoring consolidation" absent "strong public policy reasons for reviewing the service needs and status of the market." The Department then concluded that "the current condition of the US-Mexico market does not warrant deviating from our normal disinclination to conso lidate competing route applications with a transfer request."

In short, the Department, applying the correct statutory standard, tentatively found that the Joint Applicants have satisfied the prerequisites for approval of their proposed route transfer and that Delta failed to persuade the Department that it should deviate from its general policy disfavoring comparative consideration of competing applications. Delta's repetition of arguments that the Department soundly rejected in the show cause order provides no basis for the Department to question the merits of its tentative decision. Therefore, the Department should finalize its tentative decision without delay.

In order to facilitate a smooth transfer from Alaska to American and for the Joint Applicants to begin advertising and selling tickets as soon as possible, the Joint Applicants respectfully request that the Department promptly issue an order finalizing the findings and conclusions of the show cause order, and affirming the transfer of the Los Angeles-Mexico City route to American subject to the conditions set forth in the show cause order.

Counsel: Cozen O'Connor, David Heffernan, 202-463-2537 for Alaska Air / Howard Kass, 202-326-5153 for American


 

Order 2015-6-6
OST-2015-0025
- Transfer of International Route Authority
OST-2005-20406 - 2005 Los Angeles-Mexico City Combination Service Proceeding
OST-2010-0222 - American - US-Mexico Codesharing with Alaska Airlines
OST-2015-0042 - Delta - Los Angeles-Mexico City

Issued and Served June 5, 2015

Final Order

By this order the Department makes final its tentative decision, as set forth in Order 2015-4-10, to (1) grant the joint application of Alaska Airlines, Inc. and American Airlines, Inc. for transfer to American of international route authority held by Alaska authorizing scheduled foreign air transportation between Los Angeles, California, and Mexico City, Mexico; and (2) grant the requests of Alaska and American for amended exemption authority to permit American to serve the Los Angeles-Mexico City route with its own aircraft, and permit Alaska to display its two-letter designator code on American’s flights between Los Angeles and Mexico City.

Although Delta, as it did prior to the show-cause order, has quoted language from the 1997 Argentina Frequency Proceeding to challenge this position, the Department sees nothing in the Argentina decision that would overrule the clear findings of the Horizon case, that in an exemption transfer such as that involved here, the well-established statutory and regulatory framework for certificate transfers should apply.

In applying the certificate transfer framework, the Department tentatively found that the transfer met the standards for approval. Specifically, the Department noted that American’s proposed Los Angeles-Mexico City service will exceed the frequency levels currently operated by Alaska, and that American would provide new intragateway competition at Los Angeles and intergateway competition in the western United States. The Department also noted that, despite the transfer, Alaska would remain a presence in the market by virtue of its code-sharing on American’s flights. The Department tentatively found that these benefits would not conflict with important international aviation policy objectives or otherwise be inconsistent with the public interest.

The Department finds nothing in Delta’s objections that persuades us to change those tentative findings. Instead, Delta concentrates on asserting that, whichever of the two precedents the Department applies, the Horizon case or the Argentina case, Delta should receive a competitive proceeding, and in such a proceeding its proposal should prevail.

Notwithstanding Delta’s market share assertions, the Department does not find that the transfer of this single route triggers “strong public policy reasons” for the Department to deviate from its normal disinclination to consolidate competing route applications with a transfer request and review the overall needs of the market. As noted in the show-cause order, however, the Department is sensitive to the recent negotiation of a modernized air transport agreement with Mexico that could result in substantial changes in the market within the next year. It was against this background that the Department tentatively decided to limit its approval of the Joint Applicants’ requests for amended exemption authorities to a period of one year. The Department said that a timely renewal application would provide an appropriate vehicle for consideration of whether the situation prevailing in the market at that time might call for a different regulatory treatment. The Department, having now weighed all of the responses to the tentative decision, continues to hold that position.

By: Susan Kurland



OST-2005-20406 - 2005 Los Angeles-Mexico City Combination Service Proceeding
OST-2010-0234
- Exemption - Sacramento/San Jose-Guadalajara
OST-2014-0078 - Exemption - Portland-San Jose del Cabo/Puerto Vallarta

March 30, 2016

Application for Renewal of Exemptions

Alaska Airlines, Inc. hereby applies to renew its exemptions from the provisions of 49 USC § 41101 authorizing it to engage in scheduled foreign air transportation of persons, property and mail between: 1) Portland, Oregon, on the one hand, and San Jose del Caba and Puerto Vallarta, Mexico, on the other hand; 2) Los Angeles, California and Mexico City, Mexico; and 3) San Jose, California and Guadalajara, Mexico. The exemption authority for Alaska's Portland-San Jose del Cabo/Puerto Vallarta service expires on May 29, 2016, the exemption authority for its Los Angeles-Mexico City service expires on June 5, 2016, and the exemption authority for its San Jose-Guadalajara service expires on June 13, 2016. Alaska requests that the exemptions be renewed for a period of at least two years consistent with DOT precedent.

Counsel: Cozen O'Connor, David Heffernan, 202-463-2537

 


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