Order 2015-6-6

 UNITED STATES OF AMERICA

 DEPARTMENT OF TRANSPORTATION

 OFFICE OF THE SECRETARY

 WASHINGTON, D.C.

Issued by the Department of Transportation 

on the 5th day of June, 2015

 Served: June 5, 2015

Joint Application of

ALASKA AIRLINES, INC.

 and

AMERICAN AIRLINES, INC.

 Docket DOT-OST-2015-0025

 

for transfer of international route authority

pursuant to 49 U.S.C. §§ 40109, 41105

 Docket DOT-OST-2005-20406

 Docket DOT-OST-2010-0222

Docket DOT-OST-2015-0042

Application of 

ALASKA AIRLINES, INC.

for amendment of exemption

Application of 

AMERICAN AIRLINES, INC.

for amendment of exemption

Application of 

DELTA AIR LINES, INC. 

for an exemption pursuant to 49 U.S.C. § 40109

(Los Angeles-Mexico City)
2

FINAL ORDER

Summary

By this order the Department makes final its tentative decision, as set forth in Order 2015-4-10,

to (1) grant the joint application of Alaska Airlines, Inc. (Alaska) and American Airlines, Inc. 

(American) for transfer to American of international route authority held by Alaska authorizing 

scheduled foreign air transportation between Los Angeles, California, and Mexico City, Mexico;

and (2) grant the requests of Alaska and American for amended exemption authority to permit 

American to serve the Los Angeles-Mexico City route with its own aircraft, and permit Alaska to 

display its two-letter designator code on American’s flights between Los Angeles and Mexico 

City. 

Background

By application filed February 11, 2015, Alaska and American (collectively, the “Joint 

Applicants”), requested the transfer to American of international route authority held by Alaska 

authorizing scheduled foreign air transportation of persons, property, and mail between Los 

Angeles, California, and Mexico City, Mexico.1 2 The Joint Applicants stated that American 

plans to commence double-daily nonstop service between Los Angeles and Mexico City on June 

4, 2015, and that Alaska would display its AS* designator code on the American-operated 

flights.

By Order 2015-4-10, issued April 17, 2015, the Department tentatively decided to (1) grant the 

joint application of Alaska and American for transfer to American of international route 

authority held by Alaska authorizing scheduled foreign air transportation between Los Angeles 

and Mexico City, and (2) grant the requests of Alaska and American for amended exemption 

authority to permit American to serve the Los Angeles-Mexico City route with its own aircraft, 

and permit Alaska to display its two-letter designator code on American’s flights between Los 

Angeles and Mexico City. The Department directed all interested persons to show cause why 

the Department should not make final the tentative decision. 

The Department further tentatively found that the current condition of the U.S.-Mexico market 

did not warrant deviating from the Department’s normal disinclination to consolidate competing 

route applications with a transfer request, and it tentatively dismissed the application of Delta Air 

Lines, Inc. (Delta) for exemption authority to serve the Los Angeles-Mexico City market. 

 1 Alaska holds exemption authority to engage in scheduled foreign air transportation of persons, property, and mail 

between Los Angeles and Mexico City. See Notice of Action Taken dated August 25, 2014 in Docket DOT-OST2005-20406. American holds exemption authority to hold out code-share service only between Los Angeles and 

Mexico City. See Notice of Action Taken dated July 19, 2012 in Docket DOT-OST-2010-0222, kept in force 

pursuant to American’s timely filed renewal application. 

2 Under the U.S.-Mexico aviation agreement, two U.S. carriers may be designated to provide scheduled foreign air 

transportation of persons, property and mail between Los Angeles, California, and Mexico City, Mexico. Currently, 

Alaska and United Airlines, Inc. (United) are designated to provide service between Los Angeles and Mexico City, 

meaning that the market is fully subscribed. 
3

The Department allowed 10 calendar days for the filing of objections to its tentative decision and 

seven calendar days for answers to objections.

Responses to Tentative Decision

On April 27, 2015, the Joint Applicants filed comments supporting the Department’s tentative 

decision, and Delta filed objections. On May 4, 2015, the Joint Applicants filed an answer to 

Delta’s objections. 

Delta asserts that, instead of relying on the 1989 Horizon-San Juan Canadian Transfer Case, the 

Department should have relied on the more recent 1997 U.S.-Argentina All-Cargo Frequency 

Proceeding. Delta argues that under that later precedent the Department would have been 

required to hold a competitive proceeding to determine the best use of the Los Angeles-Mexico 

City authority. Delta asserts that in such a proceeding its thrice-daily proposal should prevail 

over American’s twice-daily proposal.

Delta also argues that, even under the standards of the earlier Horizon case, contemporaneous 

consideration of the American and Delta applications would still be required because there are 

strong policy reasons for reviewing the U.S.-Mexico market. In this regard, Delta asserts that

American holds 25 percent U.S.-Mexico market share, compared to Delta’s 11 percent.

3

 Delta 

states that selecting it to serve the Los Angeles-Mexico City route would better serve the 

Department’s competitive objectives.

 

Finally, Delta contends that if the Department were to approve the transfer without conducting a 

proceeding, “logic and precedent will compel the same deference to all future market-based 

transfers,”4 and the Department should straightforwardly announce this policy in its final order.

The Joint Applicants assert that Delta merely restated arguments that were rejected in the show 

cause order, and that “Delta offers no basis for the Department to alter its tentative findings and 

conclusions.”5 The Joint Applicants argue that the Department applied the proper statutory 

standard and found that the Joint Applicants have satisfied the prerequisites for approval of their 

proposed route transfer. The Joint Applicants state that they have satisfied the public interest test 

and that Delta has failed to persuade the Department to deviate from its usual policy of 

disfavoring comparative consideration of competing applications. The Joint Applicants urge the 

Department to finalize its tentative decision without delay.

Decision

After careful consideration of all of the pleadings, the Department has decided to make final its 

tentative decision to approve the Joint Applicants’ request to transfer to American the 

international route authority held by Alaska, authorizing scheduled foreign air transportation of 

persons, property, and mail between Los Angeles, California, and Mexico City, Mexico, subject 

to conditions. The Department also makes final its tentative decision to amend American’s and 

 3 Delta Objections, at page 2. 4 Id. at 3. 5 Joint Answer of Alaska Airlines, Inc. and American Airlines, Inc. to Objections of Delta Air Lines, Inc., at page 2.
4

Alaska’s respective exemption authorities to (1) allow American to serve the Los AngelesMexico City route with its own aircraft, and (2) permit Alaska to display its two-letter designator 

code on American’s flights between Los Angeles and Mexico City. 

In Order 2015-4-10, the Department tentatively concluded that it should decide this exemption 

transfer application based on certificate transfer policies and precedents. The Department noted 

that it directly addressed the question of the appropriate decisional framework for an exemption 

route transfer case in 1989, and it determined at that time that the proper regulatory framework 

for exemption route transfers was the same as for certificate transfers, namely section 401(h) of 

the Federal Aviation Act, the predecessor provision to 49 U.S.C. § 41105.6 The Department 

tentatively determined that it should follow a similar approach in deciding this exemption 

transfer application. 

Although Delta, as it did prior to the show-cause order, has quoted language from the 1997 

Argentina Frequency Proceeding to challenge this position, the Department sees nothing in the 

Argentina decision that would overrule the clear findings of the Horizon case, that in an 

exemption transfer such as that involved here, the well-established statutory and regulatory 

framework for certificate transfers should apply. 

In applying the certificate transfer framework, the Department tentatively found that the transfer 

met the standards for approval. Specifically, the Department noted that American’s proposed 

Los Angeles-Mexico City service will exceed the frequency levels currently operated by Alaska, 

and that American would provide new intragateway competition at Los Angeles and 

intergateway competition in the western United States. The Department also noted that, despite 

the transfer, Alaska would remain a presence in the market by virtue of its code-sharing on 

American’s flights. The Department tentatively found that these benefits would not conflict with 

important international aviation policy objectives or otherwise be inconsistent with the public 

interest.

The Department finds nothing in Delta’s objections that persuades us to change those tentative 

findings. Instead, Delta concentrates on asserting that, whichever of the two precedents the 

Department applies, the Horizon case or the Argentina case, Delta should receive a competitive 

proceeding, and in such a proceeding its proposal should prevail. 

In its tentative decision the Department noted that while it can, and generally does, elect to treat 

transfer applications on their own merits, it is not precluded from consolidating route transfer 

applications with competing route applications; however, it has done so only in certain carefully 

defined circumstances. Usually those circumstances involve cases where there are strong public 

policy reasons for reviewing the general service needs and status of a market.7

 

Delta contends that there are strong policy reasons to conduct such a review here. Delta states 

that in the U.S.-Mexico market, American commands a 25 percent market share compared to 

 6 In re: joint request of Horizon Air Industries, Inc. d/b/a Horizon Air and San Juan Airlines, Inc. to transfer 

transborder commuter designations and related authority in four U.S.-Canada markets, Undocketed, Orders 89-3-22 

and 89-5-14. 7 Order 2015-4-10, at 6.
5

Delta’s 11 percent. Delta contends that relative competitive benefits were primary 

considerations in the selection of Alaska for Los Angeles-Mexico City service in 2005.8 

Notwithstanding Delta’s market share assertions, the Department does not find that the transfer 

of this single route triggers “strong public policy reasons” for the Department to deviate from its 

normal disinclination to consolidate competing route applications with a transfer request and 

review the overall needs of the market.

9

 As noted in the show-cause order, however, the 

Department is sensitive to the recent negotiation of a modernized air transport agreement with

Mexico that could result in substantial changes in the market within the next year. It was against 

this background that the Department tentatively decided to limit its approval of the Joint 

Applicants’ requests for amended exemption authorities to a period of one year. The Department 

said that a timely renewal application would provide an appropriate vehicle for consideration of 

whether the situation prevailing in the market at that time might call for a different regulatory 

treatment. The Department, having now weighed all of the responses to the tentative decision, 

continues to hold that position.10 

ACCORDINGLY,

1. The Department makes final its tentative findings and conclusions set forth in Order 2015-4-

10;11

2. The Department grants American Airlines, Inc. amended exemption authority under 49 

U.S.C. § 40109 for one year to engage in scheduled foreign air transportation of persons, 

property, and mail between Los Angeles, California, and Mexico City, Mexico;12

3. The Department grants Alaska Airlines, Inc. amended exemption authority under 49 U.S.C. § 

40109 for one year to engage in scheduled foreign air transportation of persons, property, and 

mail between Los Angeles, California, and Mexico City, Mexico, subject to the condition 

that the services may be provided on a code-share basis only, effective upon the inauguration 

of own-metal service in the market by American Airlines, Inc., under the authority set forth 

in ordering paragraph 2 above; 13

 8 Delta Objections, at 2. 9 As the Department discussed in Order 2015-4-10, at 5 n10, a variety of considerations were involved in its decision 

to select Alaska for the Los Angeles-Mexico City route -- considerations going well beyond the single question of 

market share. 

10 The Department is not persuaded to grant Delta’s request for a generic Department policy pronouncement about 

future transfers. Any future applications seeking the transfer of international route authority will be considered on 

the record and in the circumstances presented at that time. 11 The Department will address the designation requests for this market through normal diplomatic channels, 

consistent with its established practice. 

12 Consistent with the Department’s standard practice for U.S.-Mexico licensing authority, the Department will 

require American to institute service in the market within 90 days after the service date of this order. In addition, the 

exemption authority granted is subject to the 90-day dormancy condition and dormancy notice requirements set forth 

in condition 7 of Appendix A of Order 88-10-2. 13 Consistent with the Department’s standard practice for U.S.-Mexico licensing authority, the Department will 

require Alaska to institute code-share service in the market within 90 days after the service date of this order. In 

addition, the exemption authority granted is subject to the 90-day dormancy condition and dormancy notice 

requirements set forth in condition 7 of Appendix A of Order 88-10-2.
6

4. The Department dismisses the application of Delta Air Lines, Inc. in Docket DOT-OST2015-0042, for exemption authority under 49 U.S.C. § 40109 to engage in scheduled foreign

air transportation of persons, property, and mail between Los Angeles, California, and 

Mexico City, Mexico;

5. The Department will serve a copy of this order on Alaska Airlines, Inc.; American Airlines, 

Inc.; Delta Air Lines, Inc.; the Mexican Ambassador to the United States in Washington, DC; 

the Federal Aviation Administration; and the U.S. Department of State (Office of Aviation 

Negotiations).

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:

http://www.regulations.gov