American Airlines, Inc. and Transportes Aereos del Mercosur, S.A.

NEW

September 23, 1997

This serves as interim notice to the public of the action described below, taken orally by the Department official indicated; the confirming order or other decision document will be issued as soon as possible.

Joint Application of American Airlines, Inc. and Transportes Aereos del Mercosur, S.A. filed 10/10/96 and amended 4/30/97 and 7/30/97 in Docket Undocketed for:

XX Statement of Authorization under 14 CFR Part 207 for:

American to display Transportes Aereos del Mercosur, S.A. (TAM-Mercosur, formerly Lineas Aereas Paraguayas S.A. (LAP)’s "PZ" designator code on flights operated by American in the Miami-Asuncion, Paraguay market.

American states that at the time of the application its Miami-Asuncion flights were operated via Sao Paulo, Brazil.

XX Statement of Authorization under 14 CFR Part 212 for:

TAM-Mercosur to display American Airlines, Inc.’s "AA" designator code on flights operated by TAM-Mercosur in the Miami-Asuncion, Paraguay market.

Paraguay is a Category 3 country under the FAA IASA Program, and TAM-Mercosur is not currently serving the United States. The applicants state that TAM-Mercosur will not display American’s designator code until such time as TAM-Mercosur resumes service in the market.

Applicant reps.: Carl B. Nelson, Jr. 202-496-5647 DOT analyst: Linda Senese, 202-366-2367 , Robert P. Silverberg 202-944-3300

DISPOSITION

XX Granted American’s Statement of Authorization, subject to conditions (See below)

XX Dismissed TAM-Mercosur’s application for a Statement of Authorization (See below)

The above actions were effective when taken: September 23, 1997, through September 23, 1998

XX Under assigned authority (14 CFR 385) by:

Paul L. Gretch, Director
Office of International Aviation
(Petitions for review may be filed from now until
10 days after the confirming order/letter issues.
Filing of a petition shall not stay the effectiveness of this action.)

XX Authority granted is consistent with the overall state of aviation relations between the United States and Paraguay.

Except to the extent exempted or waived, this authority is subject to the terms, conditions, and limitations indicated:

XX Holder’s certificate of public convenience and necessity

_____________________________________________________________________________________

Special Remarks: The authority granted is coextensive with the duration of the exemption granted TAM-Mercosur on September 23, 1997, Docket OST-97-2422.

Conditions: The code-sharing operations authorized herein must comply with 14 CFR 399.88 of the Department’s regulations and any amendments to the Department’s regulations concerning code-share arrangements that may be adopted and are expressly conditioned upon the requirements that the subject foreign air transportation be sold in the name of the carrier holding out such service in computer reservation systems and elsewhere, and that the carrier selling such transportation (i.e., the carrier shown on the ticket) accept all obligations established in its contract of carriage with the passenger.

Answers: United filed an answer to the amended application seeking deferral until the Government of Paraguay agreed to an accommodation by which the TAM-Mercosur and United/Varig code shares would be permitted pending amendment of the U.S.-Paraguay bilateral regarding code-share services. (This superseded earlier comments filed by United to the original application) Continental filed an answer to the original application stating that it took no position with respect to American’s request to place LAP’s code on American’s Miami-Paraguay flights while Paraguay remained under Category 3 status of the FAA’s International Aviation Safety Assessment (IASA) Program. Continental, however, urged the Department to reconsider the public interest of reciprocal code-sharing by the carriers if LAP is again permitted to serve the U.S. with its own aircraft (Category 1 under IASA) because there would be only two carriers serving the market. (Continental did not file an answer to the amended application). American and LAP filed replies, stating that since both carriers would continue to serve the market and that five other foreign carriers also serve the market, there was no basis to withhold approval of the carriers’ applications. LAP also stated that it would not oppose an application by United to serve Paraguay under a code-share arrangement with Varig. These replies were accompanied by motions for leave to file otherwise unauthorized documents, which we granted.

The U.S.-Paraguay aviation agreement does not include provisions governing code-sharing operations. Because of this and the specific interest of at least one U.S. carrier in serving Paraguay under a third-country code-share arrangement, the United States Government requested a statement from the Government of Paraguay regarding reciprocity with respect to code sharing, including third-country code-sharing services by other U.S. carriers, such as that proposed by United. By letter dated September 10, 1997, the Ambassador of Paraguay stated that Paraguay would favorably consider United’s request to serve Paraguay under a code-share arrangement with Varig subject to United’s compliance with all applicable licensing and other local requirements. The Government of Paraguay further indicated that it was prepared to enter into a exchange of notes with the United States which would recognize the right of airlines of each Contracting Party to enter into cooperative marketing arrangements, such as code-sharing, with an airline of a third country subject to appropriate limitations.

Given the Government of Paraguay’s representations with respect to code-sharing services, we concluded that reciprocity with Paraguay supported approval of American’s application. We emphasize, however, that our approval is based on the representations of the Paraguayan Government. Should such reciprocity not be forthcoming, we reserve the right to review our decision here and to modify it accordingly should circumstances warrant.

Dismissal: We decided to dismiss, without prejudice, TAM-Mercosur’s application for a statement of authorization to code-share on flights operated by TAM-Mercosur in the Miami-Asuncion market. As noted above, Paraguay is a Category 3 country under the FAA’s IASA Program and, as a result, foreign air carriers of Paraguay are not permitted to serve the United States with their own aircraft and crew. In the event that Paraguay is subsequently reclassified as a Category 1 country under IASA, and TAM-Mercosur seeks to serve the United States with its own aircraft and crews and to code-share with American on flights operated by TAM-Mercosur, it would be free to reapply for that authority at that time. Given our dismissal of TAM-Mercosur’s application, there was no need to address the reciprocal code-sharing issues raised by Continental.