Order 2011-10-21

U N I T E D S

T A T E S O F A

M E R I C A D E P A R T M E N T O F T R A N S P O R T A T

I O N UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation on October 26, 2011

Served: October 26, 2011

In the matter of

AEROLINEAS ARGENTINAS, S.A.

under Section 41310(c)(2) of the International Air Transportation Fair Competitiv e Practices Act, as amended Docket DOT-OST-2003-15092

ORDER TO SHOW CAUSE

Summary

By this Order, we propose to remove counterm easures imposed upon Aerolineas Argentinas, S.A. (Aerolineas) in 2003 that required it to establish a nd pay certain amounts into a U.S. escrow account. We tentatively end the requirement for Aerolinea s to maintain the escrow account and order

disbursement of the escrowed funds.

Background

This matter arises out of a complaint under former se ction 2(b) of the International Air Transportation Fair Competitive Practices Act, as amended, (49 U.S.C. 41310(d)), filed by American Airlines, Inc. (American), Federal Express Corporation (Fed Ex), United Air Lines, Inc. (U nited) and United Parcel Service Co. (UPS), referred to here as the Joint Complainants, against the Government of Argentina and Aerolineas Argentinas, S.A. (A erolineas) in 2003. The complaint al leged that the Government of Argentina violated the Air Transport Agreement be tween the United States and Argentina by imposing unreasonable airport charges (for landing fees, parking and air traffic control) on U.S. air carriers at

Buenos Aires International Air port (Aeropuerto Internacional Mini stro Pistarini de Ezeiza—EZE) (Ezeiza) and by requiring the Joint Complainants to pay airport charges approximately three times higher than those paid by Aerolineas. Aerolineas had obtained judicial reli ef allowing it to pay in pesos at a more favorable exchange rate.

By Order 2003-6-33 we approved the complaint, but deferred on the issue of countermeasures. By Order 2003-11-26, we imposed certain countermeasur es on Aerolineas. Under the terms of the countermeasures, Aerolineas’s foreign air carrier perm it is conditioned by requiring the carrier to remit into a U.S. escrow account, on a per-flight basis, until further order of the Department, the differencebetween what it actually pays for services at Ezeiza and the higher amounts it would be paying if it were not benefiting from discri minatorily favorable treatment vis-à-vis U.S. carriers.

Despite a number of unsuccessful attempts in different venues to have this condition lifted, 1 Aerolineas began paying the required amount into an es tablished escrow account beginning January 2004, and continues to submit weekly reports in accordance with the terms and conditions for escrow payments prescribed in an appendix to Order 2003-11-26. In essence, Aerolineas has been paying into the

escrow account the difference between the amount it pays for services at Ezeiza in pesos and the amount it would be paying for these servic es if it paid in U.S. dollars.

Recent Developments

Following a March 2, 2011, motion from the Joint Co mplainants, and subsequent submissions from Aerolineas and from the Joint Complainants, the reco rd now supports the tenta tive conclusion that the matter of discriminatory treatment has been re solved and there no longe r exists any need for

countermeasures. 2

According to Aerolineas, an October 2009 decision of the Argentina Supreme Court determined that Aerolineas should have paid its airport charges at th e higher dollar rate as oppos ed to the lower, more favorable peso rate. Under that ruling, Aerolineas has been paying fees to Aeropuertos Argentina 2000 S.A. (AA2000), the concessionary that manages Ezei za, at the same rates as the Joint Complainants since June 2010, and to the Administracion Naci onal de Aviacion Civil (ANAC) since August 2010. However, Aerolineas owes AA2000 and ANAC the difference between the amounts Aerolineas had been paying since 2002 and the higher amounts it shoul d have paid under the ruling of the Argentina Supreme Court. 3

The issue remaining before us is the appropriate disposition of the funds in the escrow account. 4 The Joint Complainants do not take issue, in principle, with the assertions of Aerolineas that it should not be required to pay the differential tw ice, once in the United States and also in Argentina. They agree that if Aerolineas pays the fu ll amount of the differential fr om 2002 to 2010 to an appropriate Argentinean entity, and certain c onditions are met, the discrimination against the Joint Complainants would be cured and they would relinquish their claim to the U.S. escrow account.

Aerolineas states that a trust has been estab lished between AA2000, Argentina’s Department of Transportation, and the Organismo Regulador del Sistema Nacional de Aeropuertos (ORSNA) for the

1 See Order 2004-1-15, issued January 15, 2004, and the decision of the U.S. Court of Appeals for the District of Columbia in Aerolineas Argentinas S.A. v. U.S. Department of Transportation , 415 F.3d 1 (D.C. Cir. 2005).

2 For the sake of securing a complete record we will grant all motions for leave to file and deem the subsequent submissions part of the record. The substantive submissions consist of the following: Aerolineas Argentinas’ Response to Joint Complainants’ March 2, 2011 Motion, and Aerolineas Argentinas’ Motion [for various relief], dated April 29, 2011 (Response of Aerolineas); Aerolineas Argentinas’ Notice of Filing Deloitte Report, dated May 2, 2011; Motion of Joint Complainants for Leave to File and Reply to Response of Ae rolineas Argentinas, S.A., dated May 6, 2011 (Reply of Joint Complainants); Aerolineas Argentinas’ Surreply to Joint Compla inants’ May 6, 2011 Reply (Surreply of Aerolineas), dated May 13, 2011; Aerolineas Argentinas’ Notic e of Filing Deloitte Report in Support of its Motion, dated June 14, 2011.

3 In its pleadings, Aerolineas explains that the fees owed from 2002-2010 consist of two amounts--one is the differential amount owed for the period referred to generally by the parties as 2002-2004 and the other is the differential amount owed for the period referred to as 2004-2010.

4 Aerolineas retained Deloitte to conduct an audit of the amount that would cover the period of discriminatory treatment, from September 2002 to January 2004. See the Notices of Filing Deloitte Report dated May 2, 2011 and June 14, 2011, in

the instant docket. The audit results are not contested.purpose of financing Argentina’s ai rport infrastructure and services , and that Aerolineas and AA2000 have agreed, with the approval of ORSNA, that amounts owed by Aerolineas to AA2000 would be paid to the trust. 5 Aerolineas has further agreed with ANAC that amounts owed to ANAC as a result of the Argentina Supreme Court’s decision would be paid directly to ANAC in two installments. 6

The Joint Complainants argue that the Fideicomiso trust is not the appropriate Argentinean entity to

receive the escrow funds because it is too broad as currently configured in that it is designed to finance airport infrastructure and improve services at Argentina’s National Airport System. They argue that allowing the fees they pay for services at Ezeiza to be used elsewhere would be contrary to the “just and reasonable” user charges pr ovision of the United States-Argentina Air Transport Agreement, among other things, and that the trus t must be amended to require that any funds transferred from the

U.S. escrow account will be used at Ezeiza. 7

Aerolineas states that it is not a party to the trust and cannot instru ct it, nor can Aerolineas amend, modify or change it. 8 Further, Aerolineas asserts that if th e Joint Complainants have a grievance with the rates charged at Ezeiza, this is not the appropr iate proceeding in which to litigate such claims. Aerolineas requests that the Department disb urse $9,138,513 of the escrow account funds to the
Fideicomiso trust to cover the 2004-2010 differential, disburse the amounts owed by Aerolineas for the 2002-2004 differential to the Fideicomiso trust, retu rn to Aerolineas any remaining escrow account funds after the disbursements to the Fideicomiso trust, 9 remove the conditions placed on its foreign carrier permit by Order 2003-11-26, and terminate the escrow account requirements imposed as a countermeasure by Order 2003-11-26.

Decision

As a result of a decision of the Supreme Court of Argentina in October 20 09, finding that Aerolineas should have paid airport charges in dollars and requiring that it now do so, we tentativel y conclude that the matter of discriminatory treatment vis-à-vis U. S. carriers has been resolved and there no longer

exists a basis for the continue d imposition of the countermeasur es imposed upon Aerolineas by Order 2003-11-26. Accordingly, we propose to discharge Aero lineas of its obligation to maintain and make payments into a U.S. escrow account established pursuant to the condition imposed on Aerolineas’s foreign air carrier permit by Order 20 03-11-26, and to direct the Escrow Agent to disburse the funds as directed by the Department. Following disbursement of all funds in the escrow account Aerolineas may dissolve it.

Regarding the disbursement of the funds collected in the escrow account to an appropriate Argentinean entity, we propose to honor the reque st of Aerolineas to disburse the funds to the Fideicomiso trust. The decision of the Supreme Court of Argentin a makes Aerolineas liable to AA2000 and ANAC for payment of the 2002-2004 differential and the 2004-2010 differential, amounts that are currently held

5 The formal name of the trust is the Fideicomiso de Fortaleci miento del Sistema Nacional de Ae ropuertos, referred to here

as the Fideicomiso trust.

6 See Response of Aerolineas at 6.

7 See Reply of Joint Complainants.

8 See Surreply of Aerolineas at 3.

9 Aerolineas states that, due to misinterpretation of the Department’s Order 2003-11-26, it continued to deposit weekly amounts into the escrow account even though it had begun paying at the same exchange rate as the Joint Complainants, and has therefore overpaid $1,466,009.43 into the escrow account since June 2010. See Response of Aero lineas. Aerolineas agrees that this amount should be applied first to the 2002-2004 differential and any remaining balance returned to

Aerolineas. See Surreply of Aerolineas at 3.in the escrow account, and the Argen tine entities have agreed with Ae rolineas that such amounts shall be paid to the Fideicomiso trust. We find no persua sive basis in the Joint Complainants’ objection to disregard or dishonor this arrangement. Order 2003-11-26 only addressed th e higher exchange rate imposed on U.S. air carriers. The instant procee ding regarding the Aerolineas escrow is not the appropriate venue to consider whether the rates charged at Ezeiza are contrary to the “just and reasonable” user charges provision of the United States-Argentina Air Transport Agreement. Accordingly, we have tentatively decided to grant the motion of Aerolineas to disburse the funds as proposed. 10 To the extent excess funds remain in th e escrow account after the 2002-2004 differential

and the 2004-2010 differential have been disbursed to the Fideicomiso trust, we tentatively grant the motion of Aerolineas that any exce ss funds be returned to it.

ACCORDINGLY,

1. We tentatively grant the April 29, 2011 motion of Aerolineas Argentinas, S.A. and tentatively discharge Aerolineas Argentinas, S.A. of its obl igation to establish and remit into an escrow account with a U.S. Bank payments in the am ount and manner prescribed in this docket pursuant to the condition imposed on Ae rolineas’s foreign air carrier permit by Order 2003-11-26;

2. We direct all interested partie s to show cause why the tentativ e decisions set forth above should not be made final;

3. Comments in response to this order shall be filed with the Department of Transportation, Dockets, in Docket DOT-OST-200315092, Docket Operations, M-30, West Building Ground Floor, Room W12-140, 1200 New Jersey Avenue , SE, Washington, DC, 20590, no later than 7 calendar days from the date of service of this order, and any replies thereto shall be filed no later than 5 calendar days thereafter, and shal l be served on all parties named in ordering paragraph 6, below;

4. If timely and supported objections are filed, we w ill accord full considera tion to the matters or issues raised by the objections before we take further action. In the event no comments are filed, all further procedural steps shall be deem ed waived, and the Department shall enter an order, subject to the disapproval of the Pres ident pursuant to 49 U.S.C. 41307, which shall make final our tentative findings and conclusions set forth in this order; 11 and

10 Consistent with this result, we have tentatively decided to deny the March 2, 2011 motion of the Joint Complainants that the funds be disbursed to the Joint Complainants.

11 Since provision is made for the filing of comments to this order, we will not entertain petitions for reconsideration.5. We will serve this order on American Airlines , Inc., Federal Express Corporation, United Air Lines, Inc., United Parcel Service Co., Aerolinea s Argentinas, S.A., the U.S. Department of State, the Assistant U.S. Trade Representativ e (South America), Office of the U.S. Trade Representative, the U.S. Department of Co mmerce, and the Ambassador of Argentina in Washington, D.C.

By:

SUSAN L. KURLAND Assistant Secretary for

Aviation and International Affairs

(SEAL)

An electronic version of this document is available on the World Wide Web at: www.regulations.gov