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Updated: Tuesday, May 25, 2010 12:40 PM


OST-2009-0168 - 2009 US-Hong Kong Fifth Freedom All-Cargo Frequency Proceeding


2009 US-Hong Kong Fifth-Freedom All-Cargo Frequency Proceeding

Order 2009-7-21
OST-2009-0168
OST-2009-0137 - FedEx - Allocation of One Hong Kong-Seoul Fifth-Freedom All-Cargo Frequency
OST-2009-0142 - Kalitta - Allocation of One Hong Kong-Seoul All-Cargo Frequency
OST-2009-0143 - UPS - Allocation of One Hong Kong-Seoul Frequency

Issued and Served July 28, 2009

Order Instituting Proceeding

We have decided to institute the 2009 US-Hong Kong Fifth-Freedom All-Cargo Frequency Exchange Proceeding to award a carrier the available Hong Kong-Seoul frequency in exchange for one of the selected carrier’s weekly all-cargo fifth-freedom frequencies from another Hong Kong-fifth-freedom market, using expedited procedures.

As the applications filed are already ripe and all interested parties have had an opportunity to file competing requests, we will not provide for additional applications here. Accordingly, we will (1) consolidate the captioned applications into the proceeding we are instituting here in a newly established docket for this proceeding; (2) invite the captioned carriers in this proceeding to supplement and/or amend the already-filed applications; and (3) establish the procedural schedule for deciding the case.

Procedural Timetable:

Petitions for Reconsideration August 3, 2009
Answers to Petitions August 6, 2009
Amendments and/or supplements to already-filed applications August 12, 2009
Answers August 19, 2009
Replies August 24, 2009

By: Christa Fornarotto



OST-2009-0168
OST-2009-0142 - Kalitta - Allocation of One Hong Kong-Seoul All-Cargo Frequency

August 11, 2009

Motion of Kalitta Air for Withdrawal of Application

Hereby moves to withdraw its application filed June 11, 2009 in the above-referenced docket for allocation of one Hong Kong-Seoul fifth-freedom all-cargo frequency. During the intervening two months, the dynamics of the cargo market at Hong Kong have changed significantly, such that KaliUa is now running eight weekly flights from that point at full capacity. Given those circumstances, the carrier believes that to divert capacity to the Korea-U.S. market would not be a wise use of its resources, and would not benefit its loyal and long-standing customers in the Hong Kong market.

Counsel: Sher & Blackwell, Mark Atwood, 202-463-2513




August 12, 2009

Re: Supplement to Application of Federal Express

FedEx Express estimates that approximately eighty percent of the fifth-freedom traffic carried on the Seoul-Hong Kong leg of the proposed flight will be express/small package traffic and that the remaining twenty percent will be general air freight.

With regard to the issue of whether there should be a backup award in this proceeding, FedEx Express maintains that the Department's grant of its application, rather than Kalitta's or UPS's, will maximize the benefit of this valuable, limited resource to the shipping public. However, if the Department allocates this frequency to either Kalitta or UPS and determines that a backup award is appropriate under the circumstances, FedEx Express hereby requests such backup authority as alternative relief.

Counsel: FedEx, Bailey Leopard, 901-434-6664


August 12, 2009

Re: Supplement No. 1 to Application of UPS

UPS plans to operate the frequency using a B-747 aircraft with a payload capacity of 257,000 pounds. Federal Express proposes to operate the frequency utilizing an MD-11 aircraft with a payload capacity of 196,000 pounds. UPS will offer shippers approximately 396,000 pounds of additional capacity in the Hong Kong-Korea fifth-freedom market. An award to UPS provides shippers with the most capacity in the Hong Kong-Korea fifth-freedom market.

In the Instituting Order, the DOT also stated that it would consider the effect the service proposals have on the overall competitive environment. An award to UPS would have the greatest impact on the competitive environment of the Hong Kong fifth-freedom market since it would allow UPS, a new entrant in the Hong Kong-Korea fifth-freedom market, to double its service in this market. Polar Air Cargo holds six Hong Kong-Korea fifth-freedom frequencies and Federal Express holds four Hong Kong-Korea fifth-freedom frequencies. As the "new entrant" in the Hong Kong-Korea fifth-freedom market, UPS holds only one Hong Kong-Korea fifth-freedom frequency. An award to UPS will increase the services available to both express and general freight shippers and greatly increase competition among U.S. and foreign air carriers in the Hong Kong-Korea fifth-freedom market.

Counsel: Kelley Drye, David Vaughan, 202-342-8462



August 19, 2009

Answer of Federal Express to Supplement No. 1 of UPS

With regard to UPS's statements regarding "available capacity" on page 4 of its Supplement No.1, and with regard to its overall focus on capacity in this case, FedEx Express notes that UPS's statements assume that no US-Hong Kong O&D traffic will be carried on the Seoul-Hong Kong leg of its westbound flight, which seems extremely unlikely. Moreover, UPS's focus on capacity ignores demand in the marketplace and whether UPS will actually be able to sell traffic to fill that "available capacity." In this regard, it is telling that UPS expects only two percent of its Seoul-Hong Kong traffic to be high-value, time-sensitive express traffic and only three percent of its Hong Kong-Seoul traffic to be express.

In contrast, FedEx Express seeks this only available Hong Kong/Seoul fifth-freedom frequency to primarily benefit the high-value, time-sensitive express market by providing express customers with a more complete, five-day-per-week service. As stated in its August 12, 2009 supplement filed herein, FedEx Express anticipates that approximately eighty percent of the fifth-freedom traffic carried on the Seoul-Hong Kong leg ofthe proposed flight will be express/small package traffic.

Counsel: FedEx, Bailey Leopard, 901-434-6664


August 19, 2009

Answer of UPS to Application of FedEx

An allocation of the frequency to FedEx would not increase competition in this limited entry market and would result in the underutilization of this valuable frequency.

FedEx's proposed use of MD-11 aircraft will not maximize the capacity available to the shipping public with this Hong Kong-Seoul fifth-freedom frequency. The MD-11 has a payload capacity of 196,000 pounds compared to the B-747 aircraft with a payload capacity of 257,000 pounds that UPS will use to operate the frequency. Since FedEx did not specify the available capacity on the through routing as required by the Instituting Order, neither UPS or the DOT can determine the additional capacity that FedEx would add to the Hong Kong-Korea fifth-freedom market with its proposed use of the frequency. FedEx estimates that eighty percent of the fifth-freedom traffic carried on the Seoul-Hong Kong leg of the flight will be express/small package and the remaining twenty percent will be general air freight. Since FedEx did not provide any weight or position numbers to support its 80/20 forecast, it is unknown how much of the actual capacity on the flight will be express/small package versus general air freight.

In contrast, UPS will operate the frequency with B-747 aircraft with a payload capacity of 257,000 pounds. As discussed in UPS's Supplement, UPS will provide the shipping public with 396,000 pounds of additional capacity in the Hong Kong-Korea fifth-freedom market. In addition, UPS will offer this capacity to all categories of service - express, general air freight and mail.

Counsel: Kelley Drye, David Vaughan, 202-342-8462



August 24, 2009

Reply of Federal Express to Answer of UPS

UPS accuses FedEx Express of not providing information required by the Department's Instituting Order. As FedEx Express understands the Instituting Order's request for information, UPS's accusation is false. In this regard, FedEx Express refers the Department and UPS to its previous filings in Docket Nos. OST-2009-0137 and OST-2009-0143 and herein (see, e.g., footnote 1 on page 1 of its June 2, 2009 Application for Immediate Allocation).

As FedEx Express implied in its August 19, 2009 Answer to Supplement No.1 to the Application of UPS, it questions the utility of UPS's statements regarding capacity on the Hong Kong/Seoul legs of its proposed fifth-freedom service. However, in order to provide the Department with additional, comparable information, FedEx Express anticipates that approximately 147,600 pounds of capacity will be available on the Seoul-Hong Kong leg of its existing flight for fifth-freedom traffic. Again, as it stated in its Answer to UPS's Supplement No.1, FedEx Express finds it extremely unlikely that the entire capacity of UPS's Seoul-Hong Kong flight will be committed to Seoul-Hong Kong O&D traffic.

Counsel: FedEx, Bailey Leopard, 901-434-6664


August 24, 2009

Reply of UPS to Answer of Federal Express

In its Answer, FedEx criticizes UPS's focus on available capacity in this proceeding. UPS's focus on the available capacity is in direct response to the DOT'S information request in the Instituting Order that applicants provide the available capacity on the through routing. FedEx did not provide this information to the DOT. While it is easy for FedEx to question UPS's forecast and the available capacity since UPS provided the information required by the DOT to effectively evaluate UPS's proposed use of the frequency, UPS, along with the DOT, can only guess how much of the actual capacity on FedEx's proposed Seoul-Hong Kong flight will be allocated to fifth-freedom traffic or how much will be express/small package versus general air freight.

FedEx did not provide any information on the available capacity for the Seoul-Hong Kong market utilizing the proposed frequency. Instead, FedEx only provided the DOT with an estimate that eighty percent (80%) of the fifth-freedom traffic carried on the Seoul-Hong Kong leg of the flight will be express/small package and the remaining twenty percent (20%) will be general air freight. While FedEx's 80/20 forecast may seem impressive on its face, without any weight or position numbers to support the forecast it is unknown how much FedEx's proposed use of the frequency will actually benefit the high-value, time-sensitive express traffic market.

Counsel: Kelley Drye, David Vaughan, 202-342-8462



Order 2009-11-1
OST-2009-0168

Issued and Served November 3, 2009

Order to Show Cause

By this order, we tentatively award United Parcel Service Co. the available Hong Kong-Seoul fifth-freedom all-cargo frequency opportunity. The frequency may be used to serve any point in Korea; however, as each applicant proposes to serve Seoul, we will refer to it in this order as a Hong Kong-Seoul frequency.

UPS currently operates one Seoul-Hong Kong frequency with full traffic rights and five services on a blind sector basis. The carrier intends to convert one of its blind sector flights into a service with full traffic rights. UPS proposes to use the one weekly Hong Kong-Seoul frequency opportunity on a year-round basis as part of the following service: Louisville-Anchorage-Seoul-Hong Kong-Seoul-Anchorage-Louisville. UPS intends to use B-747 aircraft with a payload capacity of 257,000 pounds, and would dedicate 257,000 pounds of capacity to the Seoul-Hong Kong leg and 147,000 pounds of capacity to the Hong Kong-Seoul leg.

We tentatively find that it is in the public interest to have a back-up carrier in place, if necessary, for immediate implementation of service should UPS not institute service or if its authority in the subject market becomes dormant. Given that FedEx Express is already in the market operating on a blind-sector basis, we anticipate that it could readily activate back-up authority should the occasion arise. In this regard, we have tentatively decided to award FedEx Express back-up authority. We note that FedEx Express stated that it would accept an award of backup authority if it were not awarded primary authority.

FedEx Express currently operates four Hong Kong-Seoul frequencies with full traffic rights and one service on a blind sector basis. The carrier intends to convert its blind sector flight into a service with full traffic rights. FedEx Express proposes to use the one weekly Hong Kong-Seoul frequency on a year-round basis as part of the following service: Memphis-Anchorage-Seoul-Hong Kong. FedEx Express intends to use MD-11 aircraft with a payload of 196,000 pounds, and would dedicate 147,600 pounds of capacity to the Seoul-Hong Kong leg.

By: Susan Kurland



November 13, 2009

Response of UPS to Order to Show Cause

United Parcel Service Co. hereby responds in support of the Order to Show Cause issued by the Department of Transportation issued on November 3, in the captioned proceeding. The Department correctly found that an allocation of the frequency to Federal Express Coiporation would not increase competition in this limited entry market and would result in underutilization of this valuable frequency. In contrast, the award to UPS would increase competition and result in more service and capacity in the market.

An allocation of the frequency to UPS would allow UPS, a relatively new entrant in the Hong Kong-Seoul fifth-freedom market, to double its service in this market and increase the services available to both express and general freight shippers. The additional frequency would also permit UPS to gain a competitive foothold in the Hong Kong-Korea fifth-freedom market and compete more effectively with FedEx, Polar and foreign carriers.

Counsel: Kelley Drye, David Vaughan, 202-342-8462



Order 2009-12-5
OST-2009-0168

Issued and Served December 8, 2009

Final Order

By this Order we make final our tentative findings and conclusions set forth in Order 2009-11-1, and award United Parcel Service Co. the available Hong Kong-Seoul fifth-freedom all-cargo frequency opportunity. We also make final our tentative decision to award Federal Express Corporation backup authority.

No objections were filed in response to the tentative decision. For the reasons cited in Order 2009-11-1, we have decided to proceed to final order in this matter. We find that in the context of this case an award of the available frequency opportunity to UPS, with the enhanced competition benefits that UPS’s proposal would bring, will better serve the public interest.

We will impose a start-up condition for this award. The frequency opportunity is available immediately. Accordingly, we will require UPS to begin exercising the frequency opportunity in the Hong Kong-Seoul market within 90 days of the issue date of this Order. If UPS does not begin exercising the frequency opportunity awarded in this proceeding within 90 days, it will lose the opportunity to use one of its existing US-Hong Kong fifth-freedom frequencies in the Hong Kong-Seoul market.

By: Susan Kurland



May 10, 2010

Re: Amendment and Returning of Frequencies of UPS

United Parcel Service, Inc. hereby notifies the Department that it inaugurated round trip service using the Hong Kong-Seoul fifth-freedom frequency awarded in the above-referenced proceeding on December 24, 2009. UPS ceased service on one Hong Kong-Macapagal, Philippines round trip frequency and converted that frequency to the Hong Kong-Seoul frequency referred to above.

Currently, UPS holds ten Hong Kong-Clark fifth-freedom frequencies with five of these frequencies routed through Singapore. UPS ceased all Hong Kong-Clark fifth-freedom operations in conjunction with the relocation of UPS's intra-Asia hub from Clark. Thus, the five Hong Kong-Clark non-stop frequencies are being returned to the pool. With respect to the five Hong Kong-Clark frequencies which were operated via Singapore, UPS will cease using three of these altogether (returning them to the pool), and will eliminate the Clark stop on the other two. Thus, UPS is returning a total of eight frequencies to the pool-the five which were operated Hong Kong-Clark non-stop and three of those which were operated to Clark via Singapore.

In addition, UPS advises the DOT that it is amending the routing of five of its fifth-freedom flights between Hong Kong and Cologne to exclude the stop at Mumbai. Under the 2002 Memorandum of Understanding between the United States and Hong Kong, designated US carriers such as UPS may omit stops at any point without loss of any right to uplift or discharge traffic otherwise permissible.

Despite the return of these frequencies, UPS continues to operate eleven Hong Kong fifth-freedom frequencies that the DOT awarded UPS: six Cologne frequencies (with one via Mumbai and five via Dubai); three Singapore frequencies; and two Seoul frequencies.

Counsel: Kelley Drye, Danielle Fisher



May 21, 2010

Re: Amendment of Return of Frequencies of UPS

On May 10, 2010, United Parcel Service, Inc. filed a letter returning eight Hong Kong fifth-freedom frequencies to the pool. UPS mistakenly returned one Hong Kong-Singapore frequency that it continues to need. Therefore, UPS hereby amends its letter of May 10, 2010 to the DOT to return seven frequencies to the pool-five which were operated Hong Kong-Clark non-stop and two which were operated to Clark via Singapore.

Counsel: Kelley Drye, Danielle Fisher, 202-342-8528


 

OST-2004-17279 - 2004 Hong Kong Fifth Freedom All-Cargo Frequency Proceeding
OST-2009-0168 - 2009 US-Hong Kong Fifth-Freedom All-Cargo Frequency Proceeding

April 30, 2020

Re: Returning of Four Fifth Freedom Frequencies

United Parcel Service Co. presently holds 4 frequencies for fifth freedom service between Hong Kong, China and Singapore, Singapore. Three of these frequencies were originally allocated in March 2004 for service from HKG to SIN, continuing onto Diosdado Macapagal International Airport, Philippines. The fourth frequency was allocated in May 2004 for HKG-SIN nonstop service.

See DOT Notice of Action Taken, Docket OST-2004-17279 (awarding 6 fifth freedom frequencies to UPS for HKG-SIN-CRK service). UPS subsequently eliminated the stop in SIN for 1 of these 6 frequencies (see Letter from UPS to DOT, Docket OST-2004-17279); and returned 2 HKG-SIN-CRK frequencies to DOT for reallocation while also eliminating the SIN-CRK segment for the 3 frequencies it retained (see Letters from UPS to DOT (May 10, 2010, and May 21, 2010), Docket OST-2009-0168).

Effective immediately, UPS hereby returns all 4 of these frequencies for fifth freedom service between HKG and SIN to the Department for reallocation to other carriers.

Counsel: Holland & Knight, Anita Mosner, 202-419-2604


 

OST-2004-17279 - 2004 Hong Kong Fifth Freedom All-Cargo Frequency Proceeding
OST-2009-0168 - 2009 US-Hong Kong Fifth-Freedom All-Cargo Frequency Proceeding

May 1, 2020

Re: Returning Fifth Freedom Frequencies Amendment

UPS has reviewed its operations and determined that one of the three March 2004 frequencies being used for HKG-SIN service should not have been returned. Accordingly, UPS hereby amends its frequency return to only return two of the March 2004 HKG-SIN frequencies, as well as the May 2004 HKG-SIN frequency. UPS will continue to operate 1x/weekly HKG-SIN service using the March 2004 frequency it is retaining.

UPS is filing this amendment only one day after its initial letter, and no action has been taken yet by the Department towards reallocating the frequencies returned by UPS. Furthermore, the four frequencies have the Department’s standard 90-day dormancy provision attached to them.3 In an effort to allow the Department to maximize the use of a valuable resource, UPS returned the frequencies prior to the expiration of the dormancy period. However, had UPS continued to hold the frequencies while allowing the dormancy period to run, the result would have been the same – UPS would have returned the three frequencies for HKG fifth freedom service described herein.

Counsel: Holland & Knight, Anita Mosner, 202-419-2604


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