BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C.

Transcription

1 BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C. Joint Application of UNITED AIR LINES, INC. AND SCANDINAVIAN AIRLINES SYSTEM Docket OST for renewal of blanket Statements of Authorization to code-share under 14 C.F.R. Part 212 (U.S.-Scandinavia) ANSWER OF Communications with respect to this document should be sent to Rebecca G. Cox Vice President, Government Affairs 1350 I Street, N.W. Washington, DC Hershel I. Kamen Staff Vice President, International & Regulatory Affairs P.O. Box 4607 HQSGV Houston, TX R. Bruce Keiner, Jr. Thomas Newton Bolling CROWELL & MORING LLP 1001 Pennsylvania Avenue, N.W. Washington, DC (202) Counsel for Continental Airlines, Inc. May 18, 2000

2 BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C. Joint Application of UNITED AIR LINES, INC. AND SCANDINAVIAN AIRLINES SYSTEM Docket OST for renewal of blanket Statements of Authorization to code-share under 14 C.F.R. Part 212 (U.S.-Scandinavia) ANSWER OF United, 1 an incumbent carrier at London Heathrow, proposes to expand the entrenched position of its Star Alliance at this closed airport by codesharing with SAS between New York/Newark and London Heathrow while Continental is still denied the ability to operate London Heathrow flights at New York/Newark, where it is the only hub carrier, and introduce new U.S.-flag operations on this route. The United/SAS application should be deferred until London Heathrow skies are opened to enable Continental to operate New York/Newark-London Heathrow flights with a 1 Common names are used for airlines. May 18, 2000

3 Page 2 frequency sufficient to compete with the U.S.-London Heathrow service provided by United and other incumbent airlines. Continental states as follows in support of its position 1. The United/SAS blanket codeshare authorization does not allow them to introduce new service by fiat. The Department said explicitly that the authority to operate to third countries is subject to the condition that any service provided under the statement of authorization shall be consistent with all applicable agreements between the United States and the foreign countries involved and should not be construed as conferring upon United rights (including code-share... rights) to serve markets where U.S. carrier rights are limited... unless and until the Department has completed any necessary carrier selection procedures to use the limited entry route rights that are included in United s authority by virtue of the blanket statement of authorization... 2 Thus, the proposed United/SAS service is expressly subject to the Department s review and consideration under the U.S.-U.K. bilateral aviation agreement and relationship, where U.S.-London Heathrow (and Gatwick) rights are limited. United itself has urged the Department to defer action on codeshare applications pending conclusion of a bilateral agreement guaranteeing the rights of U.S. carriers, including particularly United s right to 1999, at 2. 2 Department Action on Application in Docket OST , May 24,

4 Page 3 offer service on the route sought, 3 and to defer a U.S.-London codesharing approval until the introduction by other carriers of significant new service between Heathrow and Gatwick Airports and the United States. 4 The same principles United has used to object to other codeshare arrangements on limited-entry routes should apply to the United/SAS London Heathrow codeshare proposal. 2. United is one of two U.S. carriers that continue to reap the benefits of highly restricted access to London Heathrow under Bermuda II. United should not be allowed to expand the scope of its advantage to include New York/Newark- London Heathrow codesharing with its Star Alliance partner, SAS, until Continental can operate competitive New York/Newark-London Heathrow flights. United s codeshare proposal with SAS would allow SAS, a London Heathrow incumbent that enjoys antitrust immunity with United and a substantial ownership stake in British Midland (the second-largest holder of London Heathrow slots), to provide London Heathrow service at Newark International Airport, Continental s primary transatlantic gateway airport, while Continental would remain without the ability to operate competitive flights. The Department should not exacerbate this 3 For example, when Northwest applied for authority to codeshare with Cyprus Airways, United objected to approval of the proposed service unless United was allowed to provide U.S.-Cyprus service with Lufthansa between the U.S. and Cyprus. (See United s November 17, 1999 answer to the joint application of Cyprus Airways and Northwest for exemptions and statements of authorization, Docket OST , at 2) 4 See United s February 22, 2000 answer in Docket OST , at 2.

5 Page 4 iniquitous competitive imbalance by allowing United and SAS to codeshare between New York/Newark and London Heathrow until U.S.-London Heathrow access is liberalized. 3. The Department should continue to endeavor to reach a comprehensive agreement with the U.K. government to open U.S.-London Heathrow routes to new competition by U.S. airlines such as Continental instead of devoting any resources to piecemeal requests for London Heathrow authority by incumbent airlines such as United and SAS. The Department must continue to seek an open-skies agreement with the U.K. government that is both comprehensive and truly effective in creating new competition on U.S.-London routes, including the most important U.S.-London route between New York/Newark and London Heathrow, where Continental will be able to provide new vigorous competition and offer hub connections. 4. Passengers and shippers on the New York/Newark-London Heathrow route urgently need a truly open agreement that will expand competition, not new codeshare service by two London Heathrow incumbents whose antitrust immunity eliminates price competition between them. Awarding more London Heathrow authority to United under these circumstances would produce no pro-competitive benefits and would increase the severe imbalance the Department must remedy under a liberalized agreement to eliminate the harm that currently exists for passengers and shippers under the Bermuda II regime. For the foregoing reasons, Continental urges the Department to defer the United/SAS application for New York/Newark-London Heathrow codeshare

6 Page 5 authority unless and until Continental is permitted to operate flights between New York/Newark and London Heathrow with a frequency sufficient to compete with the U.S.-London Heathrow service by United and other incumbent airlines. Respectfully submitted, CROWELL & MORING LLP R. Bruce Keiner, Jr. rbkeiner@cromor.com Thomas Newton Bolling tbolling@cromor.com Counsel for Continental Airlines, Inc. CERTIFICATE OF SERVICE I certify that I have this date served the foregoing document on counsel for United and SAS in the manner specified in the Department s Rules of Practice. May 18, Thomas Newton Bolling