BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C.

Application of

AIR CHINA LIMITED d/b/a AIR CHINA for exemption authority pursuant to 49 U.S.C. § 40109 Docket DOT-OST-2013-0001

ANSWER OF THE CITY OF HOUSTON AND THE GREATER HOUSTON PARTNERSHIP

Communications with respect to this document should be sent to: Mario C. Diaz Director Ian Wadsworth Chief Commercial Officer Department of Aviation CITY OF HOUSTON 16930 John F. Kennedy Blvd. Houston, TX 77032 (281) 233-3000 (281) 233-1859 (fax) Robert Harvey President and Chief Executive Officer GREATER HOUSTON PARTNERSHIP 1200 Smith Street, Suite 700 Houston, TX 77002 (713) 844-3600 (713) 844-0200 (fax) Rachel B. Trinder Jol A. Silversmith ZUCKERT, SCOUTT & RASENBERGER, L.L.P. 888 Seventeenth Street, N.W. Washington, D.C. 20006-3309 (202) 973-7927 (202) 342-0683 (fax) rbtrinder@zsrlaw.com jasilversmith@zsrlaw.com For the City of Houston and the Greater Houston Partnership

Dated: January 3, 2013BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C.

Application of

AIR CHINA LIMITED d/b/a AIR CHINA for exemption authority pursuant to 49 U.S.C. § 40109 Docket DOT-OST-2013-0001

ANSWER OF THE CITY OF HOUSTON AND THE GREATER HOUSTON PARTNERSHIP

The City of Houston and the Greater Hous ton Partnership (collectively, “Houston” or the “Houston Parties”) respectfully submit this answer in support of the application of Air China for exemption author ity to operate combination se rvices between Houston and Beijing. The Houston Partie s strongly support Air China’s application (as well as its forthcoming application for a corresponding amendment to its foreign air carrier permit), and urge that the exemption be granted promptly and expediti ously so that Air China can begin necessary preparations for the new flights, whic h it plans to commence in July of this year. Houston currently is the la rgest U.S. city without nons top service to China – a factor that has impeded t he ability of the City and Houston-based businesses to maximize trade and growth with one of the world’s most impor tant economies. As noted in Air China’s application, Houston is a point open to se rvices by Chinese carriers pursuant to the bilateral air transportation ag reement between the U.S. and China. The establishment of scheduled nonstop se rvice between Houston and Beijing wouldAnswer of the City of Houston and the Greater Houston Partnership Page 2

represent a significant additional step in enhancing the City’s global transportation network and its future gr owth and prosperity. Despite the current lack of nonstop air se rvices between Houston and China, the City and region have impressive trade links both with China in general and with Beijing in particular, with the Houston/Galveston Customs District ranking as China’s 10thlargest U.S. gateway for international trade. China is Houston’s overall fifth-largest trading partner by value, and October 2012 year-to-date dat a shows a 12% growth in

trade between Houston and China over the same period in 2011. For 2011, the overall

annual trade between Houston and China was valued at $11.9 billion, an increase of 30.8% over 2010, and reflecting annual com pound growth of 20.5% since the year

2000. These figures include significant air trade with China, despite the lack of nonstop services. In 2011, Houston was China’s twel fth-largest U.S. gateway for airborne trade by value and weight; the airborne trade tota led 13.0 million kilogram s, with a value of more than $882.9 million. Additionally, between 2005 and 2011, passenger traffic between Houston and China gr ew at an annual rate of 4.5%. The Houston Parties anticipate considerable stimul ation of traffic once Air China’s proposed services are inaugurated, benefitting both t he Houston economy and the U. S. economy as a whole. Additional data provided by the Greater Houston Part nership show that 840 companies in Houston have business or tr ade connections with China; 51 firms with headquarters in Houston and 46 6 with branches in Houston operate a total of 2,734 subsidiaries in China; and 11 Chinese and Hong Kong firms have subsidiaries in theAnswer of the City of Houston and the Greater Houston Partnership Page 3

greater Houston area. China maintains its consulate for t he southwestern region of the U.S. in Houston (one of 94 countries to do so – the third-largest consulate concentration in the U.S.), and local trade associations include the Asian Chamber of Commerce and

the U.S.-China Federal Association of Busine ss Councils. The city of Shenzhen is one of Houston’s international sister cities, and the city of Dalian is a sister port. Additionally, of Houston’s Asian-American populati on – the largest such community in Texas – 19% (or nearly 1 in 5) are Chinese-American. The relationships that Houston has for ged with China despite the lack of nonstop

air service also are consistent with Houston’s status as the premier international city of

the southwest. Houston is the nation’s fo urth-largest city, and the greater Houston region is the U.S.’s fifth- largest Metropolitan Statistica l Area (“MSA”), with a population

of 6.1 million. Houston has an unusually diverse econom ic base and a global reach. While energy remains a cornerstone of the ec onomy (11 of the top 25 publicly-traded oil and gas firms are based in Houston), the me tropolitan area also includes significant manufacturing facilities, especia lly in the aerospace and chem ical industries; over 190 life science companies; and more than 100 hospitals and health clinics, including the world’s largest medical facility , the Texas Medical Ce nter. In total, twenty-five Fortune 500 companies are based in greater Houston (the third-largest concentration in the U.S.). The Gross Regional Product of th e greater Houston area was $442 billion in 2011 and is estimated to be $475 billion for 2012; if it were a sovereign nation, the greater Houston area would rank as the world’s 26th largest economy.Answer of the City of Houston and the Greater Houston Partnership Page 4

Greater Houston also is a dr iving force in the U.S. economic recovery. It was the last major (defined as the 20 largest MSAs by population) metropolitan area to report job losses, and is a leader in job recovery ; as of September 2012, it had recovered 170% of lost jobs, and between 2010 and 2011 the metropo litan area’s economy grew by 2.35%. Key factors expected to fuel Ho uston’s future growth include the expansion of the Panama Canal, scheduled for comple tion in 2015. Conservative estimates anticipate that containerized cargo utilizing the Port of Houston will grow 10% annually as a result of the expansion, with Hous ton’s Asian trading partners the most likely source of growth. Houston and HAS long have been actively engaged in seeking China air service. Their commitment to the development of t he market has included numerous airport-toairport and government-to-government cont acts. For example, airport cooperation agreements have been signed between HAS and twelve ma jor Chinese airports, specifically those in Be ijing, Dalian, Hangzhou, Nin gbo, Shandong, Shanghai, Shenyang, Shenzhen, Chengdu, Xi’an, Chongqi ng, and Liaoning. HAS also continues to provide educational programs to Chinese av iation officials, offe ring professional and executive development programs to Chinese airports, China’s Air Traffic Management Bureau, airlines, and governmen ts (central, provincial, and municipal). Annually some

150 officials from all over China attend t hese programs, including from nearly 70% of China’s civil aviation airports. Additionally, as the Department know s, Houston also has been a consistent supporter of U.S. efforts to liberalize the nation’s bilateral air transportation agreement with China.Answer of the City of Houston and the Greater Houston Partnership Page 5

Accordingly, the City, the Houston Air port System and its fl agship airport, George Bush Intercontinental (IAH) are fully pr epared to welcome and support Air China’s services. As the Department is aware, IAH is one of the nation’s premier international gateways, ranking as the sev enth-largest international pass enger gateway in the U.S. in 2011, with more than 8.6 million in ternational passengers. Traffic is strong and growing, with international passenger tra ffic at IAH showing an increase of 1.9% for the first eleven months of 2012 over the same period in 2011. IAH is the largest hub for the world’s largest airline, United Airlines – whic h is a Star Alliance partner of Air China. With more than 650 daily departures; serv ice to more than 170 international and domestic destinations on a nonstop basis; and more than 40.1 million total passengers, IAH also was the seventh-largest airport in t he U.S. for total passenger traffic in 2011. Thus IAH is an ideal gateway for China service, supplementi ng strong local demand with an extensive network of behind/beyond-Houston connections. Passengers and shippers utilizing Air China’s services to IAH also would enjoy the extensive benefits offered by one of the world’s key global gateways. The first “Model Port” and a leader in the Department of Homeland Security’s Global Entry Program, IAH offers state-of -the-art passenger arrivals pr ocessing and FIS facilities, world-class perishables cargo processing, and a Cargo Center capable of handling the world’s largest aircraft. IAH is alwa ys on the cutting edge of technology and infrastructure enhancements, and is a leader in implementation of NEXTGEN technology. HAS also has initia ted capital improvement projects for IAH that will further

enhance international and other airport facilities, boost the Houston economy, createAnswer of the City of Houston and the Greater Houston Partnership Page 6

local construction jobs over a 7-10 year period, and enhance customer service, amenities and options for travelers and shi ppers. The groundbreaking for significant expansion and renovations to international terminal D is expected to occur in 2014. WHEREFORE, the Houston Parties urge t he Department to promptly grant the pending exemption application of Air Chi na, so that the latter may commence preparations to begin service in the Houston-Beijing market as soon as possible, and further grant the forthcoming application to make corres ponding changes to Air China’s foreign air carrier permit. Respectfully submitted,

Rachel B. Trinder Jol A. Silversmith ZUCKERT, SCOUTT & RASENBERGER, L.L.P. 888 Seventeenth Street, N.W. Washington, D.C. 20006-3309 (202) 973-7927 (202) 342-0683 (fax) rbtrinder@zsrlaw.com jasilversmith@zsrlaw.com For the City of Houston and the Greater Houston Partnership Dated: January 3, 2013CERTIFICATE OF SERVICE I certify that on this 3rd day of January 2013, a copy of the foregoing was served on the parties named below in accordance wi th the Department’s Rules of Practice.

Jol A. Silversmith

George Tompkins, Jr. Counsel for Air China george.tompkinsjr@wilsonelser.com

Robert Wirick American Airlines robert.wirick@aa.com

Alexander Van Der Bellen Sametta C. Barnett Delta Air Lines Sascha.vanderbellen@delta.com sametta.c.barnett@delta.com Ranjit Seth Robert Foster Evergreen International Airlines ranjit.seth@evergreenairlines.com robert.foster@evergreenairlines.com G. Bailey Leopard Angeline Garbuzinski Federal Express Corporation gbleopard@fedex.com anbird@fedex.com Kevin Montgomery Peter Beckett Polar Air Cargo kevin.montgomery@polaraircargo.com peter.beckett@polaraircargo.com

Dan Weiss United Airlines dan.weiss@united.com Lorraine B. Halloway Gerald F. Murphy Counsel for United Airlines lhalloway@crowell.com gmurphy@crowell.com

Anita Mosner Jennifer Nowak Counsel for United Parcel Service anita.mosner@hklaw.com jennifer.nowak@hklaw.com

Howard Kass Benjamin Slocum US Airways howard.kass@usairways.com benjamin.slocum@usairways.com esta.rosenberg@dot.gov barbara.hairston@dot.gov john.allen@faa.gov info@airlineinfo.com