Order 2010-2-6

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C. 

Issued by the Department of Transportation

on the 4th day of February, 2010

 Served: February 4, 2010

Applications of

Kalitta Air, L.L.C.

Southern Air, Inc.

for certificate and/or exemption authority 

(U.S.-China All-Cargo)

Dockets DOT-OST-2009-0329

 -0307

ORDER INSTITUTING PROCEEDING

SUMMARY

By this order we institute the 2010 U.S.-China All-Cargo Designation and Frequency Allocation

Proceeding to select a carrier for a designation to serve the U.S.-China market, and for allocation 

of frequencies that become available effective March 25, 2010.

1

BACKGROUND

On May 22, 2007, representatives of the United States and the People’s Republic of China (PRC) 

signed a memorandum of consultations reflecting ad referendum agreement on an amended 

U.S.-PRC aviation agreement that expands opportunities for air carriers of both countries. The 

agreement provides for annual increases in service opportunities through 2012. We are instituting 

this proceeding to award expanded rights available to U.S. air carriers effective March 25, 2010. 

Specifically, we note that one additional U.S. air carrier may be designated to operate either 

 1 We will also award economic authority, as appropriate.

In the Matter of 

2010 U.S.-CHINA ALL-CARGO 

DESIGNATION AND FREQUENCY 

ALLOCATION PROCEEDING

Docket DOT-OST-2010-0017
2

scheduled combination or all-cargo services between the United States and China. Also, 21 

weekly combination frequencies and 15 weekly all-cargo frequencies will become available to 

U.S. carriers to serve points in China Zone 1 or China Zone 2.2 3

Southern Air, Inc. (Southern) and Kalitta Air, L.L.C. (Kalitta) have each filed an application for 

the available designation opportunity to provide all-cargo services, as well as frequencies to serve 

the U.S.-China market. Specifically, Southern requests exemption authority and allocation of six 

weekly all-cargo frequencies.4 Kalitta requests exemption authority, certificate authority and 

allocation of six weekly all-cargo frequencies.5

15-day answer period for Southern’s application had run.

Kalitta filed its application six days after the 

6

 Each carrier answered and replied to 

the other’s application.

7 Kalitta states that the Department must consider the two applications 

together in a competitive proceeding, whereas Southern states that the Department should deny 

Kalitta’s motion to late-file and reject Kalitta’s untimely pleadings as violative of the 

Department’s rules of practice and prejudicial to Southern. 

DECISION

We have carefully considered the arguments raised by Southern and Kalitta. Although we 

recognize that Kalitta’s competing application was not timely filed, we do not believe, in the 

circumstances presented, that the six-day delay in filing by Kalitta warrants depriving the 

Department of an opportunity to determine which of the two proposals presented would better

serve the interests of the shipping public and would better maximize use of our rights under the 

U.S.-PRC aviation agreement. Nor are we persuaded that Southern has suffered prejudice of a 

type or degree that would outweigh the benefits to the public of the Department’s engaging in 

such a comparative selection. Therefore, we have determined that the public interest would best 

be served by considering Kalitta’s application along with Southern’s and by instituting a carrier 

selection proceeding for that purpose. 

We have decided to institute the 2010 U.S.-China All-Cargo Designation and Frequency 

Allocation Proceeding to award the available designation to a U.S. all-cargo air carrier to operate 

air services between the United States and China and to allocate to the selected carrier the

 2 As defined by the amended agreement, China Zone 1 consists of Beijing, Shanghai, and Guangzhou. China Zone 2 

consists of Fujian, Guangdong (except Guangzhou), Hebei, Jiangsu, Shandong, Tianjin, and Zhejiang.

3 In addition to the frequencies that become available March 2010, there are seven frequencies available for 

combination and/or all-cargo services specifically limited to serving points in China Zone 2, and six as yet 

unallocated all-cargo frequencies available for services to points in China Zone 1 or China Zone 2. Also, as a result 

of the return by US Airways, Inc., of its U.S.-China designation and frequencies, a combination designation and 

seven weekly combination frequencies are currently available. See letter dated October 28, 2009, in Docket 

DOT-OST-2007-28567. 4 Southern states that it plans to operate three weekly round-trips between Los Angeles and Shanghai, and three 

weekly round-trips between Chicago and Shanghai. 5 Kalitta states that it plans to operate three weekly round-trips between Shanghai-Anchorage-Chicago-New YorkAnchorage-Shanghai and three weekly round-trips between Guangzhou-Khabarovsk (fuel)-Anchorage-Los AngelesAnchorage-Guangzhou. 6 Kalitta’s application was accompanied by a motion to consolidate its application with the exemption application 

filed by Southern. 7 Certain pleadings were accompanied by motions to late-file and for leave to file. In the interest of ensuring a 

complete record, we will grant the various motions. 
3

frequencies to operate the services. We will also entertain applications from incumbent carriers 

for the remaining all-cargo frequencies.

8 9

 The designation opportunity and 15 newly available 

frequencies become available on March 25, 2010.

While we recognize that the March 2010 designation opportunity may be awarded to either a 

combination or all-cargo carrier, we note that a designation opportunity is available immediately 

for a combination carrier, as well as seven weekly combination frequencies.

10 We further note 

that while there are no designations immediately available for all-cargo carriers to serve the U.S.-

China market, two all-cargo carriers have applied for the designation opportunity and frequencies 

available effective March 25, 2010. We now have the opportunity to utilize fully valuable rights 

in the U.S.-China market by awarding the 2010 designation opportunity and frequencies to an allcargo carrier.11

As the applications filed are already ripe and all interested parties have had an opportunity to file 

competing requests, we will not provide for additional applications here. Accordingly, we will 

(1) consolidate the captioned applications into the proceeding we are instituting here in a newly 

established docket for this proceeding; (2) invite the captioned carriers in this proceeding to 

supplement and/or amend the already-filed applications; and (3) establish the procedural 

schedule for deciding the case. All documents hereafter should be filed in the newly assigned 

docket for this proceeding. We will award the U.S.-China route authority at issue in the form of 

exemption authority and a temporary, experimental certificate of public convenience and 

necessity under 49 U.S.C. section 41109(c).12 The duration of the exemption authority will be 

two years or until the effective date of the certificate authority, and the certificate authority will 

be for five years.

13

In awarding the rights available in this proceeding, our principal objective will be to maximize 

the public benefits that will result from the various awards of authority in this case. In this 

regard, we will consider which applicants will be most likely to offer and maintain the best 

service for the shipping public. We will consider the effects of the applicants’ service proposals 

on the overall market structure and level of competition in the U.S.-China market, and any other 

market shown to be relevant, in order to promote an air transportation environment that will 

sustain the greatest public benefits. In addition, we will consider other factors historically used 

for carrier selection where relevant. Based on the material in the record, we will consider 

whether it is in the public interest to award backup authority in this case.

 8 By the “remaining” all-cargo frequencies we mean the as yet unallocated frequencies that are available now and 

those that become available March 2010 that are not allocated to the newly designated carrier as a result of this 

proceeding. Incumbent carriers should request new or amended certificate authority, as needed, to operate the 

frequencies. 9 In the case where frequencies are undersubscribed, we may take separate action with respect to frequency awards to 

incumbent carriers and may do so by final Department action.

10 See note 3, above. 11 We note that the limitations on scheduled all-cargo carrier designations and frequencies will be removed effective

March 25, 2011. 12 We have decided to issue both exemption authority and certificate authority in this proceeding since the designation 

and frequencies are available within the next two months. This would allow the selected carrier to begin taking 

advantage of the March 2010 rights under exemption authority until the effective date of the certificate authority. 13 See 14 CFR § 399.18 and 14 CFR § 399.120.
4

The agreement, in general, provides for all-cargo services from any point or points in the United 

States, either nonstop or via any intermediate points, to any point or points in China and beyond 

to any points. However, in this proceeding, the use of the available frequencies is limited to 

China Zone 1 and China Zone 2.14 

PROCEDURES AND EVIDENCE

Procedures and Evidence

We have decided to use written, non-oral, show-cause procedures under Rule 210 of our 

regulations (14 CFR 302.210) in deciding this case. We believe that such procedures are 

appropriate to establish an evidentiary record and make a selection with the least possible delay 

and without unnecessary costs to the applicants. We will also not require a traffic forecast from 

the applicants.

Appended to this order is an evidence request for the benefit of the parties to this case. We 

emphasize that the evidence request includes specific instructions regarding the type and format 

of the information to be submitted. We view adherence to these directives as critical to our 

consideration of the proposals in carrier selection cases. We put applicants in this case on notice 

that we expect full compliance with the evidence request appended to this order. Any carrier not 

in full compliance in any material respect with our request will be subject to elimination from 

consideration for an award in this case. In addition to the material requested, applicants and any 

other parties may submit any additional information they believe will be useful to us in reaching 

a decision. 

Consistent with our standard practice, the frequencies allocated in this proceeding will be for an 

indefinite term, provided the carrier continues to hold the underlying economic authority to serve 

the market. The awarded frequencies will also be subject to a start-up condition and our standard 

90-day dormancy condition. For any frequency not used for a period of 90 days (once 

inaugurated and for any reason other than seasonal use), the allocation as to that frequency will 

expire automatically and the unused frequency will revert to the Department for reallocation.15 

Procedural Timetable

The Agreement provides valuable new rights for U.S. carriers to serve China effective 

March 25, 2010. We believe that it is in the public interest to select carriers on a timetable that 

will allow the selected carriers to enjoy the maximum benefit of these rights as soon as they 

become available. To this end, we are establishing the following procedural schedule for 

submissions:

Petitions for Reconsideration: February 10, 2010

Answers to Petitions: February 12, 2010

 

 14 See note 2, supra. 15 We remind applicants that the frequency to be awarded is for weekly operations. A scheduled carrier may not 

bank frequencies from one week to another. Failure to use the subject frequency on a weekly basis will result in the 

forfeiture of the unused frequency for that particular week. 
5

Amendments and/or supplements to alreadyfiled applications and incumbent carrier

applications for additional frequencies: February 22, 2010

 Answers: March 3, 2010

 Replies: March 10, 2010

All dates are delivery dates and all submissions must be filed in the docket assigned to this

proceeding. An original and five copies of all submissions are to be received at the Department 

of Transportation, Dockets, no later than the dates indicated.16 Because of security screening 

procedures of all incoming mail to the Department, parties are encouraged to electronically 

submit documents to Dockets via the Federal eRulemaking Portal in order to guarantee receipt of 

the pleadings in the necessary time limits.17

http://www.regulations.gov

Electronic submissions can be completed by 

following the instructions at the website: . 

Additionally, service by facsimile or electronic mail is authorized. Parties should include their 

fax numbers and email addresses on their submissions and should indicate the method(s) of 

service used on their certificates of service.

ACCORDINGLY,

1. We institute the 2010 U.S.-China All-Cargo Designation and Frequency Allocation

Proceeding in Docket DOT-OST-2010-0017, to be decided by non-oral, show-cause procedures 

under Rule 210 of our regulations (14 CFR 302.210);

2. The proceeding will consider the following issues:

(a) Which carrier should be selected for the available designation and how many frequencies 

should it be allocated to provide scheduled all-cargo service to points in China Zone 1 or 

China Zone 2;

(b) How should the remaining available all-cargo frequencies be allocated; and18

(c) What terms, conditions, and limitations, if any, should be placed on the frequencies 

awarded in this proceeding.

3. Petitions for reconsideration of this order shall be filed no later than 3 days from the date of 

service of this order; answers to petitions shall be due no later than 2 days thereafter;

4. Applications and evidentiary material should be filed in accordance with the procedural 

schedule set forth in this order; 

 16 The original filing should be on 81⁄2" x 11" white paper using dark ink (not green) and be unbound without tabs, 

which will expedite use of our docket imaging system.

17 You should also provide courtesy e-mail copies of your submissions to the U.S. Air Carrier Licensing Division at: 

esta.rosenberg@dot.gov and thuy.cooper@dot.gov. 18 See note 3, supra.
6

5. We grant the various motions, as referenced in this order; and

6. We will serve this order on all U.S. certificated air carriers operating large aircraft, the 

National Air Carrier Association, the Air Transport Association, the U.S. Department of State 

(Office of Aviation Negotiations), the Federal Aviation Administration (AFS-200), and the 

Ambassador of the People’s Republic of China in Washington, DC.

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
APPENDIX

EVIDENCE REQUEST

I. Procedures and Ground Rules

In the interest of a complete and adequate record, the parties should provide the following 

information. In responding to this evidence request, all parties are advised to heed the 

admonitions and notice regarding compliance contained in the attached order.

II. Request for Information and Evidence

Submit, at a minimum, the following:1 2

1. Proposed schedules and startup dates for each route segment, with complete routings for 

origin and destination of all flights (including any linear routing proposals). Indicate the 

equipment types for each route segment (or linear routing), and include all payload capacities 

for each aircraft in U.S. pounds.

3 Indicate whether the proposed U.S.-China services will be 

offered on a roundtrip or one-way basis. For all of the proposed services, indicate any 

variation of frequencies/routings by traffic season, if applicable. If not applicable, so indicate. 

If carriers will utilize change of gauge in equipment in their operations, indicate where and 

specify all information, as required below, for all aircraft. If change of gauge is not part of the 

carrier’s proposed schedule, so indicate;

2. Indicate the percentage of express/small package and general air freight expected to be 

carried. If mail is expected to be carried, this should also be shown separately;

3. Specify capacity for all aircraft proposed for operations in the U.S.-China all-cargo market in 

this proceeding and clearly indicate how much of that capacity will be dedicated for (a) U.S.-

China traffic for each flight, (b) third country-China traffic for each flight, and (c) third 

country-third country traffic; 

4. Indicate whether the aircraft to be used in the proposed schedules are (a) on hand or (b) on 

order. If on hand, indicate where, and the extent to which, those aircraft are currently being 

used by the applicant. If on order by purchase or lease, indicate when they will be delivered 

and how the aircraft will be financed. Indicate whether the aircraft to be used comply with 

 1 The original filing should be on 81⁄2" x 11" white paper using dark ink (not green) and be unbound without tabs, 

which will expedite use of our docket imaging system. In the alternative, parties are encouraged to use the electronic 

submission capability available through the Federal eRulemaking Portal (http://www.regulations.gov) and follow the 

online instructions for filing submissions. Additionally, service by facsimile or electronic mail is authorized. Parties 

should include their fax numbers and email addresses on their submissions and should indicate the method(s) of 

service used on their certificates of service. 

2 Incumbent all-cargo carriers seeking additional frequencies are required to answer item number 11 only. 3 The carriers must specify the actual equipment type, including payload capacity in U.S. pounds, for each

proposed route segment. Please note that, if an unspecified mix of equipment is proposed for the subject services, 

rather than specific equipment per route, we may elect to evaluate the proposal based on the smallest aircraft 

presented, and make our decision accordingly. 
2

FAR-36. If not, indicate specific plans for achieving compliance. Also, indicate whether the 

acquisition of needed aircraft has an impact on the specified schedules above; 

5. Estimated number of gallons of fuel to be consumed by aircraft type in the first year of 

operation as a result of the proposed service, and indicate the availability and method of 

obtaining the necessary fuel; 

6. A brief description of the types and frequency of services the applicant currently provides, if 

any, between the United States and China; 

7. A statement describing the benefits of the carrier’s proposed service to the public interest;

8. Indicate whether the carrier will accept a partial grant of its frequency allocation application, 

how such allocation would be used, and the startup date for such services if different from 

above. Also, state whether there is a minimum number of frequencies that the carrier will 

accept;

9. Specify whether the applicant’s service will be operated in conjunction with any cooperative 

arrangement (e.g., wet lease, code share) with any other U.S. air carrier and/or any foreign 

carrier. If such services will be operated, provide a detailed description regarding such 

operations, as well as a copy of the cooperative agreement, if not already filed with the 

Department;

10. Indicate whether, if the applicant is not selected for the primary award, the applicant would 

accept a backup award. If the carrier is selected for backup authority, will it accept a 

condition that (i) permits it to implement the authority within the first year should the primary 

carrier withdraw from the market, and (ii) the authority expires at the end of one year should 

the authority not be activated; 

11. Specify how many frequencies the carrier is seeking and how the frequencies will be used. For 

all of the proposed services, indicate any variation of frequencies/routings by traffic season, if 

applicable. If not applicable, so indicate.4 

Applicants are also free to submit any additional relevant information that they believe will help 

us in making our decision.

 4 We may address any such requests for frequencies from incumbent carriers separately and by final Department 

action.