Order 95-8-37

UNITED STATES OF AMERICA
DEPARTMENT OF TRANSPORTATION
OFFICE OF THE SECRETARY
WASHINGTON, D.C.

Served: Aug 29 1995

In the Matter of U.S.-Germany			|
						|
Third/Fourth/Fifth-Freedom Frequency		|	Docket OST-95-334
Allocations for the 1995-1996 Winter		|
Season						|

Summary

By this order, we allocate the available third/fourth/fifth-freedom frequencies for the 1995-1996 winter season in the U.S.-Germany markets as follows: (a) third/fourth-freedom (267 weekly frequencies): American Airlines, Inc., 49; Continental Airlines, Inc., 7; Delta Air Lines, Inc., 115; Northwest Airlines, Inc., 10; Trans World Airlines, Inc., 7; United Air Lines, Inc., 63; USAir, Inc., 14; leaving 2 weekly frequencies unallocated; and (b) fifth-freedom (148 weekly frequencies): Delta Air Lines, Inc., 92; and United Air Lines, Inc., 28, leaving 28 weekly frequencies unallocated.

Background

Under the provisions of the Agreement for Transitional Arrangements for Air Transport Services, signed May 24, 1994 ("Agreement") scheduled combination services of U.S. carriers are subject to seasonal frequency limitations. For the 1995-1996 winter season, U.S. scheduled combination carriers may operate a total of 267 weekly round-trip frequencies for U.S.-Germany (third/fourth-freedom) services and 127 weekly round-trip frequencies for Germany third-country (fifth freedom) services.[1] The Agreement further provides that thirty days prior to each traffic season, each Party shall notify the other Party through diplomatic channels of the initial allocation of the frequencies among its airlines.[2]

By Notice, served July 24, 1995, the Department invited interested U.S. carriers to apply for allocation of the available frequencies no later than August 4, 1995. Answers were due no later than August 11, 1995, and replies no later than August 16, 1995.

I. Applications

A. Third/Fourth-Freedom Frequencies

The following seven U.S. carriers filed applications requesting a total of 265 third/fourth-freedom frequencies: American Airlines, Inc.; Continental Airlines, Inc.; Delta Air Lines, Inc.; Northwest Airlines, Inc.; Trans World Airlines, Inc.; United Air Lines, Inc.; and USAir, Inc. Of these applicants, one proposes a reduction in service from its 1994/95 winter season level, two propose an increase over last year's service level and four propose the same level of service as last year.

American requests a total of 49 third/fourth-freedom frequencies for service in the U.S.-Germany market, which is an increase of seven weekly frequencies from last winter season. Twenty-eight frequencies will be used to operate daily nonstop service in the Chicago-Frankfurt, Chicago-Duesseldorf, Dallas/Ft. Worth-Frankfurt, and Miami-Frankfurt markets with B767 aircraft, and 21 frequencies will be used to operate three daily flights in the U.S.-London (Heathrow)-Frankfurt markets under a code-share arrangement with British Midland Airways Limited, using B767 or MD11 on the transatlantic segment and B737 on the intra-European segment. American states that it will carry no local traffic between London and Frankfurt.

Continental requests seven weekly frequencies for nonstop service in the Newark-Frankfurt market with its own DC-10-30 aircraft.[3]

Delta requests 115 weekly frequencies. Delta would operate 38 weekly frequencies between Atlanta and Germany (serving Frankfurt (21), Munich (7) and Stuttgart (7)); 12 weekly frequencies between Cincinnati and Germany (serving Dusseldorf (5) and Frankfurt (7)); 12 weekly frequencies between Washington, DC and Germany (serving Frankfurt (7) and Hamburg (5)); 42 weekly frequencies between New York (JFK) and Germany (serving Frankfurt (21), Munich (7), Berlin (7), Stuttgart (7)); and 7 weekly frequencies each between Los Angeles and Orlando, on the one hand, and Frankfurt, on the other hand. From the 115 frequencies, Delta will use its own aircraft on 84 weekly frequencies; will use 19 weekly frequencies pursuant to a code-share arrangement with Swissair and its subsidiary Crossair via Zurich, and 12 weekly frequencies pursuant to a code-share arrangement with Austrian Airlines via Vienna in accordance with the 1994 U.S.-Germany Transitional Agreement.[4]

Northwest requests 10 weekly U.S.-Germany third/fourth-freedom frequencies to operate ten- times-per-week service in the Detroit-Frankfurt market. Northwest states that it will operate this service with DC-10 aircraft.

TWA requests seven weekly U.S.-Germany third/fourth-freedom frequencies to operate daily round-trip New York-Frankfurt service, using B-767 aircraft.

United requests a total of 63 third/fourth-freedom frequencies. United would operate a daily service each between Chicago and Washington (Dulles) and Frankfurt; a daily blocked-space, code-share service with British Midland between Los Angeles and Frankfurt over London (Heathrow); daily services under a blocked-space, code-share arrangement with Lufthansa in the following markets: San Francisco-London (Heathrow)-Hamburg; Washington (Dulles)-London (Heathrow)-Munich, New York (JFK)-London (Heathrow)-Berlin (Tegel); and daily connecting services under a code-share arrangement with Lufthansa in the following markets: New York (JFK)-London (Heathrow)-Duesseldorf; New York (JFK)-London (Heathrow)-Cologne; and Washington (Dulles)-Amsterdam-Frankfurt. United states that all transatlantic segments are operated by United.

USAir requests 14 weekly third/fourth-freedom frequencies. USAir would operate once-daily round-trip services on a nonstop basis in the Boston-Frankfurt and Philadelphia-Frankfurt markets, using its own B-767-200 aircraft.

B. Fifth-Freedom Frequencies

Delta and United are the only two applicants for the available frequencies.

Delta requests 92 fifh-freedom frequencies to be operated in the following markets:[5] Amsterdam-Stuttgart (7), Athens-Frankfurt (7); Bombay-Frankfurt (7), Budapest-Frankfurt (5), Istanbul-Frankfurt (7), Moscow-Frankfurt (7); Vienna-Frankfurt (14); Vienna-Hamburg (5); Warsaw-Frankfurt (7); Zurich-Dusseldorf (5); Zurich-Frankfurt (7), Zurich-Munich (7); and Zurich-Stuttgart (7). Delta states that it will use 54 frequencies with its own aircraft and will use 26 fifth-freedom frequencies for service pursuant to the Delta-Swissair/Crossair code-share arrangement (via Zurich) and 12 fifth-freedom frequencies for services pursuant to a Delta-Austrian code-share arrangement (via Vienna).

United requests renewal of its 28 fifth-freedom frequencies. The frequencies would be operated between London (Heathrow) and four points in Germany. The London-Hamburg, London-Munich, London-Berlin (Tegel) will be operated by Lufthansa under a blocked-space, code-share arrangement. The London (Heathrow)-Frankfurt service will be operated by British Midland under a blocked-space/code-share arrangement. United states that continuation of these services is in the public interest.

II. Responsive pleadings

Four carriers filed answers to the applications.

American, Delta and United state that there are sufficient frequencies available to meet the requests of all applicants and urge the Department to proceed to a final order allocating the frequencies. All three carriers state that their proposed operations are in the public interest as they will provide the travelling public with more service options.

TWA states that while it does not object to grant of all frequency allocation requests, it does not believe that the requests of American, Delta and United for additional frequencies to conduct code-sharing operations should be granted grandfather status. TWA maintains that the Department should allow carriers to operate frequencies under a code share, but rather than grant grandfather status to any code-share operations, the Department should maintain flexibility to award allocations to carriers that may desire to operate direct service in future seasons.

Delta and United filed separate replies to TWA's answer. Both oppose TWA's position that requests for additional frequencies to conduct code-share operations should not be granted grandfather status. They argue that there is no basis to distinguish between code-share and direct services; that the proposed operations would provide a variety of competitive service options for the travelling and shipping public; and that interruptions in proposed services would have an adverse impact on operating efficiencies.

Decision

After careful review of the record in this proceeding, we have decided to grant the applicants' requests for third/fourth and fifth-freedom frequencies for the 1995/1996 winter season in full and allocate the following carriers the necessary third/fourth and fifth freedom frequencies to operate their proposed services: (a) third/fourth-freedom frequencies: American, 49; Continental, 7; Delta, 115; Northwest, 10; TWA, 7; United, 63; and USAir, 14; and (b) fifth- freedom frequencies: Delta, 92 and United, 28. We also are establishing the procedures similar to those used in previous years for allocating the remaining available frequencies and for reallocating any returned frequencies that carriers subsequently find may be unused during the coming winter season.

Third/fourth- and fifth-freedom services in the U.S.-Germany market by U.S. air carriers represent valuable route rights obtained through negotiations in exchange for valuable operating rights for German air carriers. In these circumstances, we find that award of the available frequencies is in the public interest. Moreover, allocation of the requested frequencies will enable U.S. carriers to facilitate continuation of the existing incumbent carrier services in the market, and there are sufficient frequencies available this year to meet the demand for the proposed services.

Regarding grandfathering, we will not accord a different status to any of the frequencies allocated. Frequency allocation occurs at the beginning of each traffic season. In making our start-of-season allocations, our consistent policy has been to accord grandfather status to all the frequencies awarded whether they would be operated in direct service or on a code-share basis. TWA has provided no persuasive reason for us to follow a different policy here.[6]

Procedures for Allocating Remaining Frequencies and for reallocating any returned frequencies:

Two third/fourth-freedom frequencies and 28 fifth-freedom frequencies are available for allocation now since the number requested falls below the number permitted under the Transitional Agreement. We have decided to establish the following procedures for allocation of these frequencies. Any carrier interested in using any of the remaining available frequencies for the 1995/1996 winter season should notify the Director, Office of International Aviation, by letter and serve a copy of that letter upon all U.S. certificated carriers authorized to operate foreign scheduled combination air transportation with large aircraft. In such a letter, an applicant should specify the aircraft to be used, the market(s) to be served, the proposed date for commencement of service, the pattern of service throughout the traffic season, and where applicable, a description of how the proposed service integrates into the applicant's other German operations. The applicant must specifically state in that letter that answers and/or competing applications for frequency(ies) requested should be received by the Director, Office of International Aviation, no later than 10 calendar days from the date of the application. If a response(s) is(are) filed, we will issue a notice or order on further allocation procedures.

We remind all carriers that the third/fourth/fifth-freedom frequencies are valuable rights that should not be wasted. We expect and require that upon a carrier's determination that all or a portion of its allocation will not be used, that carrier will promptly notify the Department in writing (letters addressed to the Director, Office of International Aviation) of such determination and will return those flights to the Department for reallocation.[7] The carrier's letter should be served on all parties to this proceeding and on all other U.S. combination air carriers authorized to operate long-range services with large aircraft. The U.S. Air Carrier Licensing Division will keep a record of such returns and will post the carrier notifications in the U.S. Air Carrier Licensing Division, Room 6412, and in the OST Docket Section, Room PL-401.

Consistent with procedures established for previous seasons,[8] any carrier interested in using returned frequencies for the 1995/1996 winter season should follow the procedures as outlined above for applying for unallocated frequencies. The procedures are identical and accordingly need not be repeated here.

ACCORDINGLY,

1. We allocate 265 of the available 267 weekly frequencies for third/fourth-freedom services in the U.S.-Germany market during the 1995/1996 winter season (i.e., November 1, 1995 - March 31, 1996) as follows: American, 49 frequencies; Continental, 7; Delta, 115; Northwest, 10; TWA, 7, United, 63, and USAir, 14;

2. We allocate 120 of the available 148 weekly frequencies for fifth-freedom services in the U.S.-Germany market during the 1995/1996 winter season (i.e., November 1, 1995 - March 31, 1996) as follows: 92 weekly frequencies to Delta and 28 weekly frequencies to United;

3. Carriers must use the procedures established herein to apply for either unallocated frequencies or returned frequencies and any subsequent allocation applications;

4. To the extent not granted, we deny all other requests in this proceeding;

5. We will not entertain petitions for reconsideration of this order; and

6. We will serve a copy of this order on all applicants in this proceeding.

			MARK L. GERCHICK
			 Acting Assistant Secretary for
			 Aviation and International Affairs

(SEAL)

1. Article 6, Section 1(B)(1)(a). Furthermore, under Article 6, Section 1(B)(2), the United States’ designated airlines may operate an additional 21 weekly round-trip fifth-freedom frequencies since the United/Lufthansa rights in the London- Germany market noted in Appendix B have been initiated. The total number of fifth-freedom frequencies (i.e. 148), however, may be reduced up to a total of seven frequencies if an airline designated by the United States (other than the United/Lufthansa cooperative arrangement noted in Appendix B) holds out local traffic rights between London Heathrow and a point or points in Germany through a code-share arrangement. Therefore, the total number of fifth-freedom frequencies available as of November 1, 1995, may range between 141 and 148, depending on the designated airlines’operations.

2. Article 6, Section 5A.

3. Continental states that during the summer of 1996, it expects to increase its frequencies to 14 weekly.

4. Delta states that the Department has previously issued Swissair/Crossair a Statement of Authorization to code share with Delta in connection with U.S.-Germany service. Delta and Austrian filed concurrently a Statement of Authorization request to permit Austrian to display Delta’s airline designator code on certain flights provided by Austrian between Vienna, Austria and Germany. We will act on this request separately.

5. The number of weekly frequencies for each market is indicated in parentheses following the market.

6. The only DOT precedent cited by TWA in support of its proposed approach is not on point to the facts of this case. That case did not involve a start-of-season allocation but rather a reallocation of returned frequencies.

7. This process is similar to procedures used previously (Orders 95-2-26 and 94-9-26 and orders cited therein).

8. See, e.g., Orders 95-2-26, 94-9-26, and 94-4-38.