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OST-2019-0031 - Wet-Lease Statements of Authorization Under 14 CFR Part 212; Foreign Air Carriers of the European Union, Iceland, Norway and Switzerland - Order to Show Cause - Terminate Effectiveness of Certain Wet-Lease Statements of Authorization

 

US and EU Sign Standalone Agreement Allowing US Carriers to Provide Wet-Lease Services - DOT Press Release - August 27, 2019

Cargolux Office of International Aviation Filings
OST-2018-0066 - Brussels Airlines and Eurowings - EU-US Codesharing
Air Tanker and Thomas Cook Filings
Privilege Style and Air Europa Filings
Portugalia and TAP Filings
White Airways and TAP Filings
SunExpress and EuroWings Filings
Lufthansa Cityline and Lufthansa Filings
ASL Airlines Ireland (fka Air Contractors (Ireland)) and Aer Lingus

 


Wet-Lease Statements of Authorization Under 14 CFR Part 212; Foreign Air Carriers of the European Union, Iceland, Norway and Switzerland

Order 2019-2-17
OST-2019-0031

Issued and Served February 21, 2019

Order to Show Cause

By this order, we tentatively find that it is in the public interest for the US Department of Transportation to terminate the effectiveness of certain wet-lease statements of authorization granted under 14 CFR Part 212 that are held by various foreign air carriers of the European Union, Iceland, Norway, and Switzerland that permit them to engage as wet-lessors in lease operations to other affected carriers. The order also tentatively sets forth the position of the Department regarding the effectiveness of current statements of authorization as well as future applicable wet-lease operations between affected carriers.

We propose to take these actions due to the longstanding competitive disadvantage US carriers have faced vis-à-vis the affected carriers as a result of the time constraints US carriers are subjected to by EU Regulation No. 1008/2008, and the unsuccessful effort of the EU to satisfactorily resolve this matter over an unreasonably excessive period of time, despite its repeated commitment to do so.

In early 2017, the United States, the EU, Iceland, and Norway began negotiating the standalone “Agreement with Respect to Time Limitations on Arrangements for the Provision of Aircraft with Crew, ”which will prohibit time limitations on wet-lease operations provided for by article 10(9) of the ATA. The parties successfully completed drafting of the text of the Wet-Lease Agreement on February 2, 2018, and noted their intent to begin provisionally applying the agreement upon signature. During negotiations, the European delegation specified that any binding agreement upon the EU Member States would require coordination with the EU Member States.

More than a full year has now passed, and the coordination process with the EU Member States remains incomplete. This has meant that there has been neither signature nor provisional application, let alone a final agreement being brought into force. Nor is there any firm indication as to when those steps will occur. Meanwhile, US carriers continue to suffer from the competitive disadvantage created by EC 1008/2008, and the unlevel playing field it perpetuates in the US-EU wet-lease market.

The Department emphasizes that its goal is the satisfactory resolution of this wet-lease issue. If the Commission takes the necessary steps to proceed to the provisional application of the stand-alone Wet-Lease Agreement negotiated in February 2018, we are prepared to vacate this order or simply not finalize our proposed tentative decision.

By: Joel Szabat


 

March 4, 2019

Re: Reply/Objection by Switzerland

Wet-leasing for flights in 3rd and 4th freedoms between Switzerland and the United States between air carriers operating under Article 3 of the Switzerland-US ATA are covered by the provisions an leasing in the Switzerland-US ATA and da not fall under the scope of the article an leasing in Regulation (EC) No 1008/2008.

Switzerland therefore does not participate in the negotiation of the standalone "Agreement with Respect to Time Limitations an Arrangements for the Provision of Aircraft with Crew" between the US and the EU, lceland and Norway.

By: Federal Office of Civil Aviation

https://www.bazl.admin.ch




March 5, 2019

Joint Answer of the Lufthansa Group and United Airlines

DOT's Order seeks to raise the stakes in a government-to-government dispute that has been going on for too long and needs to be resolved quickly. However, the solution to this problem is not actions proposed by DOT's Order to Show Cause. Instead, US and EU (and relevant EU member state) government representatives should act promptly to adopt and implement the "mutually agreed-upon resolution" necessary to avoid the considerable harm that will result from the termination and limitation of these valuable wet-lease arrangements.

The Lufthansa Group and United respectfully request that the Department not finalize its Order to Show Cause, but rather provide additional time for EU Member States to adopt the "Resolutions on the Agreement with Respect to Time Limitations on Arrangements for the Provision of Aircraft with Crew" and/or to work directly with France to find resolution on the matter. While the Lufthansa Group and United support the Department's goal of expediting a resolution of this dispute, we urge the Department to consider ways to avoid the severe market disruptions and adverse impact on the traveling public that would result from DOT's finalization of the Order to Show Cause. Should the Department decide to make final its decision, the carriers ask that the Department extend the effective date to October 1. Such timeline is reasonable given it will take DOT time to review answers and replies and issue a final notice. At such time, the carriers would remove the flights from selling schedules and begin the process of rebooking passengers or issuing refunds. Allowing the flights in question to operate through the summer season is reasonable given the volume of potentially impacted consumers and because seats for rebooking passengers are already limited during the peak spring and summer travel months.

Such action would inflict considerable harm and inconvenience on Lufthansa/United's passengers and the carriers themselves and would seriously disrupt the air transportation services provided by Lufthansa/United in the impacted transatlantic markets. On Lufthansa/United alone, over 400,000 passengers would be impacted by the DOT order. Indeed, no other carriers would be more adversely affected by DOT's proposal than the Lufthansa Group and United.

Counsel: Arthur Molins, 516-296-9234 for Lufthansa / Daniel Weiss, 872-825-6828 for United

 

March 6, 2019

Response of Tampa International Airport to Joint Answer of Luthansa Group and United

In January, Lufthansa's TPA-FRA flights operated with an average load factor of 94%1. Thousands of passengers are holding tickets for upcoming Lufthansa TPA-FRA flights this year. TPA is entering its peak Spring Break period when passenger activity and airline load factors are particularly high.

Any disruption of Lufthansa's flights would immedi ately cause enormous impact to those passengers who would struggle to find reaccomodation on remaining flights operated by other airlines because they are already nearly full. Many travelers would likely cancel their trips and thus cause a cascade of negative impacts to our region's hotels, restaurants, ground transportation providers, and other businesses that rely on international visitors for their livelihoods.

An airline's fleet and crew allocation require long-term planning. If Lufthansa's operation is disrupted, there is no guarantee that TPA-FRA flights will return. That would cause potentially irreparable harm to the economy of our state and our region.

By: Joseph Lopano


 

March 5, 2019

Re: Support Letter for Eurowings/Lufthansa Group Wet-Lease Authorizations of Las Vegas Convention and Visitors Authority

On behalf of the destination of Las Vegas, please accept this letter showing our support of the current wet-lease agreements allowing transatlantic flights operated by the Lufthansa Group of Airlines. This agreement includes Eurowings, which will launch its inaugural service from Dusseldorf, Germany, to Las Vegas, Nevada, this summer.

With nearly 43 million visitors each year, Las Vegas is one of the most popular travel destinations in the world. Germany, the third largest overseas market for Las Vegas, brings more than 213,000 German travelers annually to the destination. Utilizing an Airbus A330 and operating July 3-0ctober 25, 2019, Eurowings will provide air service from Dusseldorf, Germany, to McCarran International Airport three times weekly. This seasonal service will generate more than $25 million to local economy.

By: Las Vegas Convention and Visitors Authority




March 5, 2019

Re: Comments of Lee County (Florida) Port Authority

The economic impact on three weekly flights to Dusseldorf is $100 million a year, and the amount of other business that is generated in Florida is significant. Many of the German passengers have purchased homes in the Southwest Florida region, which ultimately generates non-homesteaded tax revenues for the counties of their residence.

While I understand that reciprocity is important in your wet lease decisions, it is not in the public's best interest or the interest of the United States to terminate the effectiveness of certain wet lease statements of authorization granted under 14 CFR Part 212. By so doing, it will limit access to underserved international markets in the US that are experiencing significant growth in these markets with air carriers that utilize wet lease agreements.

I urge you not to apply a blanket termination of these agreements, but rather continue to work with the European Commission on a resolution. European countries that have indicated they are agreeable to the February 2, 2018 negotiated wet lease resolution should not be penalized because another EU country is raising concerns even though they, potentially, will not be impacted by the termination of these agreements as DOT is proposing.

By: Jeff Mulder




March 7, 2019

Comments of Airports Council International - North America

ACI-NA and its members were pleased when the US and the EC were able to arrive at an agreement-in-principle to finally create parity for parties on both sides of the Atlantic in February 2018, but we have been dismayed that authentication of this agreement has been held up by internal European disagreement over the most basic of elements.

As a result of these facts, it is understandable that the DOT seeks to take action in its SCO to break through the European bureaucratic morass, but it does so potentially at the expense of US airport operators and the communities they serve. DOT’s proposed timeline for the withdrawal of authorizations on March 30, 2019 is unnecessarily short and will cause disruption and inconvenience to consumers. These consumers tend to be leisure travelers and historically have longer planning horizons for their travel. The lost revenue and economic impact to US communities will be immediate and given the preponderance of discretionary travel on these flights, perhaps permanent. In addition, for air carriers serving congested airports, many of the slots and operating authorities for these flights have been secured for the upcoming scheduling season and the usurping of rights will lead to inefficient airport operations and a misuse of scarce airport capacity.

ACI-NA urges the DOT to continue its efforts to pressure the Europeans to resolve their technical disagreements with the proposed agreement and to not place US economic interests in jeopardy in order to resolve this dispute.

By: Kevin Burke




March 7, 2019

Re: Objection of ASL Airlines and Aer Lingus

ASL Ireland has been operating flights from Ireland to the East Coast of the United States of America since 2014 with a fleet of B757-200 aircraft pursuant to a wet lease arrangement with Aer Lingus. This wet lease arrangement enables Aer Lingus to operate services for which it does not have appropriate aircraft in its own fleet. Services currently operated pursuant to this wet lease arrangement include flights from Shannon to JFK and Boston, and from Dublin to Bradley, Philadelphia and Washington Dulles. Aer Lingus will also be commencing a service from Dublin to Minneapolis this coming summer which will be operated by ASL Ireland. The continuation of this wet-lease arrangement is critical for the continued operation of these services pending the delivery to Aer Lingus of new A321NEO LR aircraft, the delivery of which has been subject to delays on the part of the aircraft manufacturer.

As the Department of Transportation is aware, ASL Ireland received the benefit of a statement of authorization to engage in a long-term wet-lease with Aer lingus, granted on December 18, 2013, in Notice of Action Taken OST-2013-0135. In the period since the Authorization has been granted, ASL Ireland and Aer lingus have successfully operated a number of services between Ireland and the United States which serves not only our mutual interests but the interests of the travelling public.

By: ASL Airlines, John Rawl and Aer Lingus, Greg Kaldahl




March 7, 2019

Joint Answer in Objection of Cargolux Airlines International and Cargolux Italia

Cargolux and Cargolux Italia note the Department's timing to release the Order in advance of the March 8, 2019, US-EU Joint Committee meeting. The Cargolux Carriers are hopeful the Order provides the last push enabling the US and EU to resolve this issue. At the same time, however, Cargolux and Cargolux Italia are concerned that if no resolution is reached at the upcoming Joint Committee meeting, the Department's decision to finalize its Order might have an effect contrary to that intended, and make it more difficult to obtain an ultimate solution to this issue.

The Cargolux Carriers urge the Department to exercise caution and not rush to finalize its Order while the EU and its constituent countries take the final steps to bring the Standalone Wet Lease Agreement into force. The objections raised by one of the EU member nations, which have delayed the application of the Standalone Wet Lease Agreement, are procedural in nature. As such, Cargolux and Cargolux Italia (and other EU air carriers) have no ability to influence their resolution. Yet, if the Department finalizes its Order, the Cargolux Carriers, as well as shippers and importers in both the US and EU, will suffer the economic impacts.

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

 

March 7, 2019

Joint Answer of Eurowings and the Clark County Department of Aviation

The DOT order would directly jeopardize Eurowings’ ability to operate its Las Vegas service from Dusseldorf, which for this calendar year would entail 50 arrivals with nearly 15,000 incoming seats between early July and late October. Last year, Eurowings began their service to Las Vegas earlier, which permitted nearly 16,700 inbound passengers during its summer 2018 run. These numbers are significant when considering Germany’s strong economy and the noteworthy spending power its citizens possess. While the Department may well be frustrated with the length of time it has taken EU regulatory authorities to approve the new Wet-Lease Agreement, the correct remedy for this situation is not to penalize carriers such as Eurowings or aviation facilities operated under the Clark County Department of Aviation such as McCarran International Airport that use wet-leases in order to more efficiently serve the travelling public.

DOT’s Order seeks to raise the stakes in a government-to-government dispute that has been going on for too long and needs to be resolved quickly. However, the solution to this problem is not actions proposed by DOT’s Order to Show Cause. Instead, US and EU (and relevant EU member state) government representatives should act promptly to adopt and implement the “mutually agreed-upon resolution” necessary to avoid the considerable harm that will result from the termination and limitation of these valuable wet-lease arrangements.

Should the Department decide to make final its decision the carriers ask that the Department extend the effective date to October 1, 2019. Such timeline is reasonable given it will take DOT time to review answers and replies and issue a final notice. At such time, the carriers would remove the flights from selling schedules and begin the process of rebooking passengers or issuing refunds. Allowing the flights in question to operate through the summer season is reasonable given the volume of potentially impacted consumers and because seats for rebooking passengers are already limited during the peak spring and summer travel months.

By: Rosemary Vassiliadis, 702-261-4525


 

Served March 13, 2019

Notice Suspending Proceeding

At the 22nd US-EU Joint Committee Meeting held in Washington, DC on March 8, 2019, delegations representing the United States, the European Union, Iceland, and Norway initialed the text of the standalone agreement on wet leasing.3 The initialing allows the European Union to begin the internal process needed for final approval of the standalone agreement on wet leasing; a process that, according to the European Union delegation, would be completed within three to five months. Once that process is complete, the Parties can sign and begin provisionally applying the agreement.

Based on the notable progress reached on this matter at the recent US-EU Joint Committee Meeting as described above, the Department has decided to suspend the captioned proceeding until August 30, 2019. This will provide the European Union with five additional months to complete the internal process related to application of the standalone agreement on wet leasing. As the Department stated in Order 2019-2-17, its goal is the satisfactory resolution of this wet-lease issue. The Department finds that suspension of this proceeding for this additional time is consistent with that goal.

By: Joel Szabat




Order 2019-8-20
OST-2019-0031

Issued and Served August 27, 2019

Order Vacating Order 2019-2-17 and Terminating Proceeding

In Order 2019-2-17, the Department tentatively determined to take certain regulatory actions with respect to imposing duration limitations on current and prospective wet-lease statements of authorization held by, or to be granted to, foreign air carriers of the European Union, Iceland, Norway, and Switzerland. Recent developments have culminated in the successful resolution of this matter.

By this Order, the US Department of Transportation vacates Order to Show Cause 2019-2-17, issued in this Docket on February 21, 2019, and terminates the proceeding launched by that order.

By: Joel Szabat

 


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