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OST-2019-0021 - Kalitta Air against The Kingdom of the Netherlands, Amsterdam Airport Schipol, and Stichting Airport Coordination Netherlands - International Fair Competitive Practices Act of 1974 - Withholding of Slots
Kalitta Air, LLC against The Kingdom of the Netherlands, Amsterdam Airport Schipol, and Stichting Airport Coordination Netherlands
OST-2019-0021 - International Air Transportation Fair Competitive Practices Act of 1974, as Amended
January 29, 2019
Kalitta Air seeks sanctions or other appropriate measures in response to actions by the Government of the Netherlands, Amsterdam Airport Schiphol, and Stichting Airport Coordination Netherlands that wrongfully withheld slots necessary for Kalitta to operate its scheduled cargo services. At the same time, Dutch carriers and others are being permitted to continue operations in competition with Kalitta. Respondents have acted contrary to Articles 3(1), 3(4) and 15 of the Air Transport Agreement between the United States and the Member States of the European Union and thus, unless Respondents act promptly to correct this discriminatory and anticompetitive situation, sanctions are appropriate.
Kalitta Air has operated scheduled cargo services between Amsterdam Airport Schiphol and New York with 8747 aircraft twice-weekly for the past 15 years. The carrier primarily transports heavy freight and general cargo westbound, and it is the only US all-cargo air carrier providing service between AMS and the United States.
Until the Summer 2017 scheduling season, Kalitta was accorded the slots that it held historically - two landing and two takeoff slots, on Thursdays/Fridays and Sundays. Under the EU rule and the WSG, carriers are entitled to continue to hold slots from one scheduling season to the next so long as they operate in accordance with the "80/20 Rule," (EEC/95/93, Article 8(2) and Article 14(4) and (6)). This is a "use-or-lose" rule similar to those in effect at US airports, which are designed to prevent carriers from hoarding unused or insufficiently used slots to the detriment of other carriers. In 2017, however, AMS reached its annual capacity limit of 500,000 operations, and ACNL adopted the policy of strictly enforcing a narrow interpretation of the 80/20 Rule. Kalitta was informed at that time by ACNL that because fewer than 80 percent of its operations fell within the slot times, it was not entitled to receive its historic slots during the Summer 2017 season. Kalitta contested this conclusion, but ACNL refused to allocate the historic slots. Subsequently it was allocated two slots from the ad hoc slot pool. A similar scenario occurred for the Winter 2017 slot scheduling season. Some weeks after the beginning of the Summer 2018 season, Respondents Airport Authority and ACNL were forced as a result of litigation to transfer approximately 10,000 slots to the pool of unused slots, and as a result, four slots were allocated to Kalitta for the remainder of Summer 2018. As will be described below, Kalitta has received no slots for the current Winter 2018 season, and it has been advised that it is unlikely to receive any.
Counsel: Cozen O'Connor, Mark Atwood, 202-463-2513
Issued and Febraury 6, 2019
Kalitta alleges that the Respondents have wrongfully withheld slots necessary for Kalitta to operate its scheduled cargo services at Amsterdam Airport Schiphol, while Dutch carriers and others are being permitted to continue operations in competition with Kalitta. Kalitta asserts that the Respondents’ actions are inconsistent with the terms of the US-EU Air Transport Agreement; European Union Regulation EEC 95/93, as amended); and the IATA Worldwide Slot Guidelines. Kalitta contends that the Respondents’ actions are unjustifiably and unreasonably discriminatory, and impose unjustifiable and unreasonable restrictions on Kalitta’s access to the Amsterdam-New York air cargo market.
Kalitta states that the Department should take the necessary steps to encourage the Dutch government to address the situation. Kalitta requests that the Department begin processes provided in the IATFCPA legislation, and to restrict or suspend cargo air transportation by Dutch carriers until the situation has been equitably resolved.
In order to develop the record for our consideration of this matter, we invite interested persons to answer the Complaint of Kalitta in Docket OST-2019-0021 within fourteen days from the service date of this order. Answers filed should include all data, evidence, and arguments upon which the parties rely to support their positions, and should cover all substantive and procedural issues that they wish the Department to consider. Replies to any answers should be filed no later than ten days thereafter.
By: Joel Szabat
In our view there is no correlation between traffic rights as agreed upon in the 19 February 2019 US-EU agreement and the slots that are also necessary to operate via AMS as a slot coordinated airport on the basis of the EU-slot regulation.
Furthermore, the US-EU agreement does not contain any provisions on slots, which are thus covered by the specific rules on EU-slot regulation of the Party concerned within the EU. For the Netherlands, the rules on slots are covered by the EU-slot regulation, which has been acknowledged by Kalitta Air. The EU-slot regulation is directly binding for the Netherlands. This means that the European Commission can start infringement proceedings if the Netherlands acts contrary to EU law.The EU-slot regulation applies not only to intra-Community services operated by Community air carriers, but also to non-Community air carriers, such as Kalitta Air, when operating within the European Union. Based on the principles of sovereignty as enshrined in the Chicago Convention, Community carriers must similarly abide with the slot regulations that are applicable in the United States when operating with the United States on the basis of the US-EU agreement.
Because the EU-slot regulation requires the coordinator to be fully independent, the Dutch Aviation Act (established by the administration and parliament) prescribes that the minister cannot provide policy rules for the slotcoordinator and can also not revoke decisions by the slot coordinator. These rules have been implemented to safeguard the required independent position of the slot coordinator.
This means that the Dutch government cannot interfere in the slot-allocation process in any form or way and is for instance not permitted to ask ACNL to reserve slots for Kalitta Air or any other airline based on any aeropolitical regime such as the US-EU Agreement or any other motive.
As there is no link between traffic rights and slots this means that foreign airlines that operate via AMS will always have to obtain slots irrespective of the applicable bilateral or EU agreement. In view of the scarce capacity at AMS, which has reached its maximal allowed capacity of 500.000 movements earlier than forecasted, this has led to the situation that a number of airlines aside from Kalitta Air have also not always been able to obtain the slots they requested for at AMS.
By: Rob Huyser
Under Dutch law, an interested party may lodge an objection against an order. As Kalitta LLC disagrees with the Slot Allacation List Winter 2018 and Slot Allocation List Summer 2019, it lodged objections against these orders. In line with the General Administrative Law Act, Kalitta was given the opportuniy to be heard. This hearing took place on February 5th. At this moment Kalittas objections are under ACNLs consideration. ACNL expects to make a decision at the end of February or beginning of March. In case Kalitta disagrees with ACNLs decision on their objections, an appeal at the district court is possible.
As long as the objections are under consideration, ACNL cannot reply in substantive terms but confines itself to the following. ACNL allocates slots in line with EU Regulation EEC 95/93 and the IATA Worldwide Slot Guidelines. The allocation of slots is independent from the assignment of traffic rights under bilateral air service agreements.
Without taking a position with regard to Kalittas objections, ACNL ascertains that there are some errors of fact in Kalittas complaint to the Department of Transportation.
By: Herman Vreeburg
JetBlue hereby answers in support of Kalitta and urges the Department to promptly approve Kalitta’s complaint and take steps to address the alleged withholding of slots at Amsterdam Airport Schiphol. In the Delta-Virgin Atlantic-Air France-KLM antitrust immunity proceeding, JetBlue urged the Department “to require the Joint Applicants and/or relevant government entities to provide a detailed breakdown, on the record, of slot allocation and ownership/control at AMS.” JetBlue submitted this request because AMS is an increasingly saturated airport with almost no slots available. The anti-competitive slot dynamic at AMS, as described in Kalitta’s IATFCPA complaint, only serves to further deter the introduction of competitive services from new entrant carriers like JetBlue, and restrict US carrier rights under the US-EU Open-Skies Agreement. Kalitta’s complaint especially warrants review because KLM - the main airline and slot holder at AMS - operates with a grant of ATI from the Department and is currently seeking an expanded ATI grant in Docket OST-2013-0068.
As a small and growing international airline with a significant presence in Boston and New York City, two of the largest international markets in the United States, JetBlue is keenly aware of the threat that immunized alliances can pose to the ability of small airlines to compete in the global marketplace. JetBlue strongly believes that airport access, including the availability of gates and slots to promote competition, must always be paramount when the Department is carrying out its international aviation responsibilities. In this case, Kalitta has seemingly raised a bona fide competitive issue. JetBlue agrees with Kalitta that the Department should begin the processes provided for in the IATFCPA legislation which could lead to restrictions or suspension of Dutch carrier access to the United States if the situation is not resolved.
Counsel: JetBlue, Robert Land, 202-715-2565
Kalitta alleges the Kingdom of the Netherlands, Amsterdam Airport Schiphol and Stichting Airport Coordination Netherlands improperly deprived Kalitta of slots for operations at Amsterdam Airport Schiphol and commenced enforcement proceedings against Kalitta, when Kalitta has conceded it has not operated in accordance with the terms of the slots that were previously granted to it.
Despite its admission, Kalitta asks the Department of Transportation to act prematurely against KLM and “restrict or suspend” its US cargo operations through the imposition of countermeasures until Kalitta gets its way. KLM strenuously objects to any such unjustified action.
Kalitta has failed to demonstrate it suffered discrimination. However, to the extent the Department finds any merit in Kalitta’s allegations, the proper course of action is to consult the Dutch Government. It is abundantly clear from the IATFCPA’s legislative history that negotiation—not retaliation—is the most appropriate and effective way to resolve such disputes.
At a minimum, to be successful an IATFCPA complaint must allege that a US carrier is being unlawfully and unreasonably discriminated against by a foreign government. No such showing has been made in this case. To the extent Kalitta may be experiencing difficulties with its AMS operations, it is the result of Kalitta’s own failure to abide by AMS’ longstanding and well-known slot policies and requirements, which are based on Council Regulations No 95/93 of 18 January 1993 on common rules for the allocation of slots at Community airports. Kalitta cannot and should not be permitted to leverage its admitted failures at AMS into a successful argument for imposing restrictions on KLM or any other Dutch carrier.
Kalitta’s allegation that KLM and its affiliates received preferential treatment from ACNL is patently false. The information referred to by Kalitta regarding purported operations without slots by KLM is inaccurate. The misinformation contained in Kalitta’s Complaint came from a report issued by ACNL and posted on its website. The data included are incorrect.
Kalitta’s Complaint ignores the availability of other airports, nearby to AMS, where Kalitta could easily perform its operations without the slot difficulties it claims it has at AMS. These airports, which serve currently as operating bases for other larger US cargo carriers, offer Kalitta a ready solution that will provide greater flexibility than could AMS, even after the flexible local rule is implemented. Under no circumstance should the Department impose countermeasures against KLM or its affiliates when Kalitta has the option of operating via at least two or more other nearby airports with facilities fully capable of handling its flights.
In summary, Kalitta’s discrimination claim is unfounded and any difficulty Kalitta may be having at AMS is the result of its own failures. Kalitta has been treated no differently at AMS than KLM and its affiliates. Further, a local rule which could facilitate Kalitta’s continued operations at AMS is nearing implementation, and there are at least three airports near to AMS offering Kalitta equivalent facilities. In any case, nothing in Kalitta’s allegations justifies departure from the Department’s well-established precedents under which diplomatic discussions are preferred to the imposition of countermeasures. For these reasons, KLM submits that Kalitta’s Complaint should be denied and dismissed without the imposition of countermeasures.
Counsel: Pillsbury Law, Charles Donley, 202-663-8000
February 28, 2019
By Order 2019-2-4, in response to the January 29, 2019 Complaint of Kalitta Air, the Department instituted this proceeding under the International Air Transportation Fair Competitive Practices Act. It required the filing of answers 14 days after the service date of the order, and replies, if any, 10 days thereafter. On February 19-20, 2019, answers to the Complaint were filed by the Dutch Ministry of Infrastructure and Water Management, Airport Coordination Netherlands, KLM Royal Dutch Airlines N.V., and JetBlue Airways Corporation. Kalitta intends to file a reply to these answers, which under the Order would be due March 4, 2019.
Kalitta Air requests additional time to prepare its response to the answers on the basis that a number of persons whose input is required are currently on travel. Complicating things, undersigned counsel will be overseas during the week of the reply date. Thus, it would be very difficult to file the kind of response that would be most helpful to the Department's consideration of this matter prior to March 14.
Counsel: Cozen O'Connor, Mark Atwood, 202-463-2513
Served March 4, 2019
On February 28, 2019, Kalitta filed a motion requesting that the Department extend by 10 days – until March 14, 2019 – the time for filing replies to answers. Kalitta requests the additional time on the basis that a number of persons whose input is required are currently on travel, and that its counsel will be overseas during the week of the reply date. Kalitta asserts that the requested delay would not be prejudicial to any party, since it was Kalitta that initiated the proceeding.
Kalitta conducted a poll on its motion, and no party objects to the requested extension.
In these circumstances, we have decided to grant the requested 10-day extension. We find that the requested extension would not prejudice the interest of any party and would provide for a more complete record in this proceeding.
By: Brian Hedberg
March 14, 2019
KLM opposes JetBlue’s request for the imposition of countermeasures against KLM. JetBlue’s position appears to be based entirely on JetBlue’s erroneous assumption that Kalitta Air, LLC’s Complaint is meritorious. As KLM’s Answer in this proceeding explained in detail, Kalitta’s scheduling difficulties at AMS are solely the result of Kalitta’s failure to observe applicable slot requirements. Every carrier—including KLM and its affiliates—is subject to the same slot requirements, and it is every carrier’s responsibility to understand the slot requirements and abide by them. Kalitta failed to do so.
JetBlue does not appear to have fully investigated the circumstances surrounding Kalitta’s Complaint before commenting. Instead, JetBlue chose to use this proceeding (as it has used other proceedings) to repeat its request that the Department of Transportation compel carriers to provide JetBlue slots at a variety of European airports. JetBlue’s unjustified demand was addressed fully in Docket OST-2013-0068. We will not repeat that response here.
JetBlue’s Answer adds nothing to Kalitta’s Complaint—no new facts, no additional information, and no explanation as to why Kalitta should be excused from failing to observe the AMS slot requirements. In short, neither Kalitta nor JetBlue has offered any basis on which the Department could grant Kalitta’s request for retaliatory action against KLM. The Department should deny and dismiss Kalitta’s Complaint without the imposition of countermeasures.
Counsel: Pillsbury Law, Charles Donley, 202-663-8000
March 14, 2019
JetBlue's arguments underscore the fact that the issue of U.S. carrier access to AMS is not a problem unique to Kalitta. While the kind of scheduled passenger services contemplated by JetBlue do not give rise to the sorts of problems Kalitta has experienced in maintaining its historic slot status, JetBlue nonetheless indicates that it has faced a similar "no entry" sign at Amsterdam Schiphol.
While the opponents of the Complaint focused largely on whether Kalitta may have committed technical errors in the way it requested its slots (which Kalitta denies), what is really at stake here is a much broader issue: the meaning of "Open Skies" bilaterals and the broad traffic rights they promise when one of the most important airports in Europe has effectively declared itself closed to new entry. This ought to be particularly concerning in an environment where so many slots are concentrated in the hands of an enormous multi-national incumbent which is part of an alliance which enjoys antitrust immunity from the Department. Notably, this alliance (which includes KLM, Delta, Air France and Virgin Atlantic) is currently seeking an expanded grant of ATI, which would significantly benefit KLM's market power.
While Kalitta is cognizant of the constraints imposed by limited capacity and political opposition to increased airport operations on environmental grounds, it seems all too easy for a government to take full advantage of bilateral promises of open entry, yet hide behind the mechanism of a "neutral" slot coordinator when it comes time to make the difficult decisions needed to actually implement those traffic rights. The Department is very well aware of how limitations on airport access can frustrate competitive entry, whether deliberately or inadvertently. If a government makes the commitment to permit open entry by another nation's air carriers, surely it is required to do more than simply pass the buck to an organization over which it claims no control.
Counsel: Cozen O'Connor, Mark Atwood, 202-463-2513
March 20, 2019
JetBlue Airways Corporation hereby moves for leave to file this response to the unauthorized submissions of Delta Air Lines, Inc. and its partners on March 8, 2019 and March 11, 2019. The Conglomerate SkyTeam JV Carriers’ shifting statements regarding the Flybe acquisition continue to lack candor regarding the acquisition’s significance and direct relevance to these proceedings. Consequently, the administrative record continues to lack important information and transparency. Clarity regarding existing slot holdings as well as new developments affecting such holdings at London Heathrow Airport is crucial because the Department cannot analyze the competition implications of the Conglomerate SkyTeam JV Carriers’ request for an expanded grant of ATI without such clarity. The Conglomerate SkyTeam JV Carriers have now admitted, on the record, that they have accumulated twelve additional LHR slot pairs (approximately 1.5% of all slots in use at LHR) as a result of the Virgin Atlantic consortium’s acquisition of Flybe. This begs the question why does Delta need to retain remedy slots from previous antitrust immunity proceedings involving transatlantic joint ventures? Delta’s position in the marketplace has fundamentally changed from new entrant at LHR in 2008 to entrenched incumbent slot holder (along with its numerous immunized alliance and equity investment partners, it is the second largest holder of LHR slots) and Heathrow slot landlord in 2019. The acquisition of Flybe’s twelve LHR slot pairs should remove any doubt about the appropriateness of allowing Delta/Virgin Atlantic to be eligible for continued use of remedy slots, the purpose of which is to enable new entry and competition for dominant incumbents, not to entrench a carrier or alliance’s dominance.
JetBlue takes no position on the merits of Kalitta’s complaint. However, in these circumstances, the Department should not grant additional ATI without imposing competition-protective safeguards to ensure that US carriers can obtain slots at LHR and AMS.
Counsel: JetBlue, Robert Land, 202-715-2565
Issued and Served April 1, 2019
By Order 2019-2-4, issued February 6, 2019, we invited interested persons to file answers to Kalitta’s complaint by February 20, 2019, and replies to answers by March 4, 2019. JetBlue Airways Corporation, KLM Royal Dutch Airlines N.V., the Dutch Ministry of Infrastructure and Water Management, and ACNL filed answers to Kalitta’s complaint. Kalitta and KLM filed replies, and JetBlue filed a response.
It is our understanding that discussions have been taking place between Kalitta, ACNL, and other Dutch authorities concerning the slot issues raised in Kalitta’s complaint. Furthermore, the Department has been working with the Dutch Government in an effort to resolve this matter. Given these circumstances, we believe that the public interest is best served by extending for 30 days the deadline for action on Kalitta’s complaint to provide additional time to resolve this matter.
We extend through May 1, 2019, the period for taking action on the Complaint of Kalitta Air, LLC.
By: Joel Szabat
Issued and Served May 1, 2019
The Department has decided to dismiss without prejudice Kalitta’s complaint and to terminate the proceeding in the captioned docket.
Kalitta made clear in its complaint and reply that it saw the Local Rule as a potential remedy to resolving its problems, and it urged that the Rule, or similar measures, be adopted and speedily implemented. Kalitta expressly urged the Department to encourage the Dutch Government to address the situation, and the Department did so. The Local Rule has now been formally adopted and will be implemented beginning on August 31. In these circumstances, we find that the public interest favors our dismissing the complaint without prejudice and thereby allowing time for implementation of the Local Rule and for Kalitta to work with the Dutch authorities and to assess whether the Rule has addressed its concerns as anticipated.
The Department will continue to monitor the situation and in particular the implementation of the Local Rule, and the Department reserves the right to revisit the matter should circumstances warrant. Furthermore, we emphasize that, because our dismissal is without prejudice, nothing in our present action is intended to preclude Kalitta from seeking such Department assistance as may be appropriate to address its concerns.
By: Joel Szabat