Served September 11, 1995
ORDER ON RECONSIDERATION
Application of | | TRANSNET LIMITED d/b/a | Dockets 47731 SOUTH AFRICAN AIRWAYS | 48466 | for exemptions under 49 U.S.C. section | 40109 |
Summary
In this order we grant the petition of Transnet Limited d/b/a South African Airways (SAA) for reconsideration or stay of Order 95-8-10, and affirm our action in that order.
Background
Aviation relations between the United States and South Africa are governed by principles of comity and reciprocity, as there is no bilateral aviation agreement between our countries. On this basis, we granted SAA exemption authority to conduct scheduled foreign air transportation of persons, property and mail between (1) Johannesburg, South Africa, and New York, New York, via the intermediate point Ilha do Sal, Cape Verde; (2) Johannesburg/Cape Town and Miami, Florida; and (3) Johannesburg and Los Angeles, California (and, on this Los Angeles route, to commingle blind sector traffic not moving in foreign air transportation between Johannesburg and Rio de Janeiro, Brazil); and to engage in charter foreign air transportation under the Department's regulations governing charters (14 CFR Part 212). [1]
SAA now conducts four round-trip scheduled combination flights per week in the Johannesburg-Ilha do Sal-New York market, two round-trip scheduled combination flights per week in the Johannesburg-Capetown-Miami market, and a once-weekly "programmed" cargo charter between Johannesburg and New York. American Airlines, the only U.S. carrier conducting scheduled service in the South Africa-U.S. market, operates those services on a code-share basis on SAA's scheduled Johannesburg-New York flights.
The United States has been engaged in ongoing negotiations with the South African Government towards reaching a bilateral air services agreement. At the latest round of talks, held the week of July 31, 1995, a number of key issues for the United States were not resolved, including the ability of U.S. carriers to conduct operations to South Africa under code-sharing arrangements with third-country air carriers. While no agreement was reached at those talks, the South African authorities stated that, on the basis that SAA was conducting a total of seven weekly South Africa-U.S. frequencies, they would permit U.S. carriers to conduct seven round-trip frequencies in the market.
In light of these developments, by Order 95-8-10, issued August 4, 1995, as clarified by Notice issued August 10, 1995, we renewed, for a one-year term, the exemption authority held by SAA to conduct various scheduled and charter services in the South Africa-U.S. market, and conditioned that authority to limit the carrier, effective August 16, 1995, to the operation of seven weekly round-trip frequencies in the South Africa-U.S. market (the number of frequencies it was then performing).[2]
Petition
On August 16, 1995, SAA filed a petition for reconsideration of Order 95-8-10 (as clarified by our Notice of August 10, 1995).[3] SAA expressly does not question the Department's legal authority to issue the order. However, SAA questions whether the order advances U.S. aviation interests. Specifically, SAA states that our order was designed to preserve the status quo, but that our understanding that the status quo represented seven frequencies was inaccurate. SAA states that it planned to increase its weekly South Africa flights from seven to nine this fall; that it had begun marketing these new frequencies; and that it has booked more than six thousand passengers on these services.[4] It states that Order 95-8-10 does not, therefore, maintain the status quo with regard to SAA's services, but in fact forces it to reduce these services back to seven frequencies, with resultant disruption to the carrier and the public. SAA urges the Department to modify Order 95-8-10 to recognize that the status quo includes frequencies already offered and sold in the South Africa-U.S. market prior to issuance of that order.[5] In the alternative, SAA suggests that the Department should stay the effectiveness of Order 95-8-10 pending further negotiations between the United States and South Africa, and use the negotiating and working group processes to resolve bilateral differences, especially on third-country code-sharing issues.
SAA states that it recognizes that the United States places high priority upon securing third-country code-sharing rights for U.S. carriers. However, given the existence of full reciprocity, i.e., the South African Government's willingness to permit U.S. carriers to offer additional U.S.-South Africa services, it would be inappropriate and premature for the Department to block SAA's nine frequencies because of the South African Government's reluctance to authorize third-country code-share operations.
SAA further states that Order 95-8-10 thwarts legitimate U.S. policy objectives and is detrimental to the public interest. SAA submits that the order treats South Africa more harshly than a number of other governments which have resisted the introduction of third-country code-shares;[6] affords unwarranted priority to code-sharing services and is not in keeping with the Department's objective set forth in its Statement of United States International Air Transportation Policy of securing maximum direct service opportunities for U.S. airlines; and would fail to advance the long-term interests of U.S. carriers wishing to serve the U.S.-South Africa market. Finally, SAA urges that the order should be modified to ensure the availability of adequate U.S.-South Africa service to meet consumer needs.[7]
Responsive Pleadings
On August 23, 1995, Northwest Airlines, Inc., United Air Lines, Inc., USAfrica Airways, Inc., Trans World Airlines, Inc. (TWA), and the National Air Carrier Association (NACA) filed answers to SAA's petition.
Northwest, United, USAfrica and TWA oppose the petition. Both Northwest and United state that the Department's action in Order 95-8-10 is fully consistent with the goals of its Statement of United States International Air Transportation Policy, specifically with the goal of providing U.S. carriers with improved opportunities to develop and offer a variety of forms of service. Northwest states that the order is the only "leverage" the United States has to gain the ability for U.S. carriers to compete with SAA in the market by code sharing with third-country carriers. United states that
the Department is not treating SAA more harshly than carriers of other countries that have restricted U.S.-carrier code-share services. Northwest states that the order, as clarified, does maintain the status quo on SAA's frequencies, and that SAA should be able to accommodate any displaced passengers on its existing authorized frequencies. United urges the Department to direct SAA to cease and desist from further sales of its expanded services, and either offer refunds or alternate services to those passengers booked on such flights. Both Northwest and United indicate a willingness for the Department to consider temporary relief for SAA but only if reciprocal and coextensive relief is forthcoming with respect to pending U.S.-carrier code-share services.
USAfrica states that the Department's decision in Order 95-8-10 is reasonable and appropriate, and will not result in any harm to SAA, the traveling public, or the ongoing bilateral negotiation process. It notes that the United States has never placed any frequency limits on SAA operations; and that SAA has had the prerogative of determining its own frequency level without restraint, and then having its government impose that level as a unilaterally-determined limit on U.S. carriers.
TWA states that it is appropriate, where U.S. carriers are subject to a regime of comity and reciprocity, that the United States adopt means to limit foreign carrier service increases in order to keep those carriers on an equal footing with U.S. carriers. It states that SAA has had total freedom to increase or decrease service at will, while U.S. carriers are limited to matching SAA's service; and that it supports the basic principle of requiring SAA to file individually each time it desires to increase frequencies in the future, pending resolution of a bilateral agreement. TWA states that, while it agrees with SAA that the Department is affording unwarranted priority to code-share services, the proposed restrictions in Order 95-8-10 are appropriate and should be used as leverage to achieve a reasonable bilateral agreement with South Africa.
NACA states that the views expressed by SAA are not consistent with NACA's understanding of the most recent U.S.-South Africa negotiations, and that SAA does not appear to be speaking for its government. It states that if the South African Government provides for increased U.S.-carrier frequencies and agrees to a reasonable country-of-origin or Belgian-type charter regime, then there would be a basis for further intergovernmental sessions and for the Department to focus on the instant application. NACA recommends that the U.S. Government seek the views of the South African Government with respect to SAA's petition and seek a solution which will permit U.S. carriers to obtain reasonably high frequency levels for scheduled service and to operate charters under liberal rules.
On August 28, 1995, SAA filed a reply, stating that the answers fail to place the U.S.-South Africa relationship in its appropriate context; do not acknowledge the ongoing process associated with concluding a bilateral agreement; and fail to disprove its contention that the Department has treated SAA more harshly than other U.S. trading partners. SAA notes that since filing its petition, the South African Government has indicated its willingness to authorize U.S. carriers to provide up to ten weekly direct frequencies in the U.S.-South Africa market, and encourages the Department to agree to South Africa's proposal to form a working group to examine and resolve any differences on the political and commercial implications of third-country code sharing.
Decision
We have decided to grant SAA's petition, and, on reconsideration, to affirm our action in Order 95-8-10 (as clarified by our Notice of August 10, 1995). We took our action in that order after a careful review of our overall aviation relationship with South Africa. The market is one in which SAA is the only direct service carrier in the market, with the only U.S.-carrier service being flown by SAA under its code share with American. We have tried to alleviate this situation by providing, through the bilateral negotiating process, for expanded opportunities for U.S. carriers to conduct operations to South Africa. Those opportunities would respond to the needs of both direct service and code-share carriers.
In this regard, we have been doing no more than seeking to implement the policies we clearly delineated in our Statement of United States International Air Transportation Policy. We said there, for example, that our objectives include providing "carriers with unrestricted opportunities to develop types of service and systems based on their assessment of marketplace demand," and that "[c]arriers should be able to pursue both direct service using their own equipment and indirect service through commercial relationships with other carriers."[8] In two rounds of negotiations with South Africa, the U.S. position was set forth in the most explicit terms. The South African authorities have remained unwilling, however, to permit U.S. carriers to gain access to the market through code shares with third-country carriers.
Our action in Order 95-8-10, to renew SAA's U.S. authority but to hold the carrier to its current level of operations represents an appropriate action in relation to the South African Government's position. Significantly, our action does not require SAA to cease operating a single flight. The carrier remains fully able to operate the level of services that it itself had previously decided on and implemented. Our action simply maintains the status quo while we continue our attempts to reach an accord with the South African Government on the aviation matters which remain outstanding.
SAA is incorrect in asserting that we are treating it more harshly than carriers of similarly-situated countries. Indeed, our most recent precedents demonstrate our willingness in comparable circumstances to go further than we have here and to remove foreign carriers' existing Department authority in the face of their homelands' refusal to permit our carriers to conduct code shares with third-country carriers. Given that no U.S. carrier currently conducts direct operations in the market (other than by code share on SAA), that the South African Government consistently has unilaterally limited available U.S. carrier frequencies, and that the South African Government has refused repeated requests to allow U.S. carriers to serve the market through third-country code sharing arrangements, we see no reason to alter our approach.
As to the question of SAA sales of the additional frequencies, we have shortened the procedural dates in this case, and otherwise expedited its processing, to give the carrier our decision at the earliest possible date, so that it can make alternate arrangements for the passengers it has booked on the affected flights. In this connection, we note that the proposed new services would both be introduced at U.S. gateways where SAA already provides regular services. This, combined with the nearly three-month lead time between the announcement of our frequency limit and SAA's proposed frequency increase, reasonably should enable the carrier to be able to accommodate any passengers who might already have booked, as well as to ensure that no additional passengers are booked on flights that the carrier will be unable to provide.
It is our sincere hope that the issues which led us to take this action can all be resolved before the dates on which SAA planned to introduce its additional flights. In this connection, we note that SAA urges the Department to agree to the South African Government's proposal--personally extended to the Secretary in a letter from South Africa's Transport Minister--to form a working group on third-country code sharing. The Secretary has accepted the South African Transport Minister's suggestion to hold such a bilateral working group session, and our two governments will shortly establish the date for this session. Furthermore, the Secretary has informed the South African Transport Minister that if, after the working group meeting, South Africa is prepared to include third-country code sharing provisions in the U.S.-South Africa aviation agreement, the United States would be ready to meet quickly in the interest of reaching an agreement that would address the two sides' respective concerns. Thus, we remain fully prepared to work with the South Africans to bridge our differences and see our two countries moving to develop and solidify our aviation relationship.
ACCORDINGLY,
MARK L. GERCHICK Acting Assistant Secretary for Aviation and International Affairs
(SEAL)
[2] We noted that SAA was operating six round-trip scheduled combination flights per week and a seventh all-cargo flight on a charter basis in the South Africa-U.S. market, and stated that our action should not be viewed as permitting SAA to add a seventh scheduled flight while continuing to operate the all-cargo flight on a charter basis.
[3] By Notice dated August 18, 1995, we shortened to August 23, 1995, the period of time within which interested parties may respond to SAA’s petition, and provided for the filing of replies by August 28, 1995.
[4] SAA states that, in addition to operating six passenger flights (four to New York and two to Miami) and one all-cargo flight, it has been holding out for sale, since July 3, 1995, two additional passengers flights (one each to New York and Miami) which are scheduled to begin on October 30 and November 3, 1995, respectively.
[5] In addition to increasing the number of allowable frequencies to nine, SAA proposes that we agree to a working group with the South African authorities to discuss third-country code-sharing issues, and that we seek a commitment from those authorities to discuss these issues at the next round of bilateral negotiations between our governments.
[6] SAA cites Israel, Egypt and Italy as examples of countries treated more favorably by the Department under similar circumstances.
[7] In this connection, SAA states that, if the United States maintains its position, it would request, at the very least, authority to operate its two new frequencies for a 179-day period.
[8] See 60 FR 21841, May 3, 1995, at 21844 (emphasis added).