Order 20 1 3

- 4

- 9
UNITED STATES OF AMERICA
DEPARTMENT OF TRANSPORTATION
OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Departmen t of Transportation
on the 12 th day of April , 20 1 3

Served: April 12 , 201 3

Dockets:

DOT

- O ST

- 2013

- 0041

DOT

- OST

- 2013

- 0045

DOT

- OST

- 2013

- 0046

ORDER INSTITUTING PROCEEDING

Summary

By this order we institute the 2013/2014 U.S.

- Brazil Combination Frequency Allocation Proceeding to
select U.S. carriers to use (1) th e 14 weekly combination frequencies that may be used to serve any point in Brazil, which become available October 1, 2013; and (2) the 14 weekly combination frequencies that may be used to serve any point in Brazil, which become available October 1, 2014 ; as set forth in the
Memorandum of Consultations between the United States and Brazil dated March 19 , 2011 (MOC)

. These frequencies are referred to as “unrestricted” in this order. 1 T hree applicants

, American Airlines,

Inc. (American), Delta Air Lines, In c. (Delta), and US Airways, Inc. (US Airways), have applied for an

1 Unrestricted frequencies are the only newly available fr equencies that can be used for service between U.S. points and Sao Paolo, Brazil. 2013/2014 U.S.

- BRAZIL COMBINATION FREQUENCY PROCEEDING

DOCKET

- DOT

- OST

- 2013

- 0072

Applications of

AMERICAN AIRLINES, INC.

DELTA AIR LINES, INC.

for allocation of combination service frequencies (U.S.

- Brazil)

Application of

US AIRWAYS, INC.

for exemp tion authority under §40109 of Title 49 U.S.C., and allocation of combination service frequencies (U.S.

- Brazil)2 award of unrestricted frequencies, and will have an opportunity to file supplemental
information/evidence and comment s so that we may proceed with a decision in this matter

.

Background

On March 1 9 , 2011, the United States and Brazil signed an agreement (the Agreement) that will establish Open Skies between the United States and Brazil by October 2015. Pending the exchange of diplomatic notes bringing the Agreement into force, the terms of the MOC are being applied on a comity and reciprocity basis. The four

- stage increase in frequencies available for scheduled combination and
all

- cargo services provided for by the MOC will apply until October 1, 2015. On that date, provided that the Agr eement has entered into force, all numerical and destination limitations on frequencies will
be removed.

By N otice dated February 15, 2013, we invite d applications for the third and fourth stages of the newly available frequencies. 2 In response, we rece ived applications from three U.S. carriers for the unrestricted frequencies in order to provide combination service from various points in the United S tates
to Sao Paulo

. The applicants seek more frequencies to serve Sao Paulo than become available under the MOC, t hus

, we are instituting this proceeding to allocate (1) the 14 unrestricted frequencies that are available as of October 1, 2013 ; and (2) the 14 unrestricted frequencies that become available October 1,

2014

. 3

Applications

On February 28, 2013

, American filed an application in Docket DOT

- OST

- 201 3

- 0041

. American requests an allocation of seven U.S.

- Brazil combination frequencies available October 1, 2013; and

seven U.S.

- Brazil combination frequencies available October 1, 2014. American proposes to institute daily nonstop service to Sao Paulo from Los Angeles beginning November 21, 2013. American also proposes to institute daily nonstop service to Sao Paulo from Chicago beginning November 20, 2014.

On March 4 , 2013, Delta filed an application in Docket DOT

- OST

- 2013

- 0045. Delta requests an
allocation of the 14 frequencies that become available October 1, 2013; and seven frequencies that become available October 1, 2014. Delta proposes to use the October 2013 frequencies to add a second daily Atlanta

- Sao Paulo service , and to add a second daily New York (JFK)

- Sao Paulo service , both beginning December 15, 2013

. 4 Delta proposes to use the October 2014 frequencies to continue its current daily Detroit

- Sao Paulo nonstop service after it transfers seven of its currently

- held frequencies to US Airways under an agreement between the two carriers

. 5

2 We previously invited applications for the first and second stages of scheduled combination and all

- cargo frequencies that became available in October 2011 and October 2012

. See Notice dated April 6, 2011.

3 See our February15, 2013, Notice for a full description of the combination and all

- cargo frequencies
available.

4 Delta currently operates once

- daily services in the Atlanta

- Sao Paulo and New York (JFK)

- Sao Paulo

market s.

5 See Docket FAA

- 2010

- 0109

.3 On March 4 , 2013, US Airways filed an application in Docket DOT

- OST

- 2013

- 0046. US Airways requests an allocation of seven U.S.

- Brazil frequencies that be come available October 1, 2013, and

seven U.S.

- Brazil frequencies that become available October 1, 2014. 6

US Airways proposes to use seven October 2013 frequencies to continue without interruption its
Charlotte

- Sao Paulo service which it will institute on June 8, 2013

, using seven frequencies temporarily
leased from United Air l ines, Inc. (United)

. 7 US Airways states that it will return the seven temporarily leased frequencies to United, if awarded the seven October 2013 frequencies it seeks here. US A irways
proposes to use the seven October 2014 frequencies to institute daily Philadelphia

- Sao Paulo services.

Proceeding

In light of the competing applications and responsive pleadings filed, w e are instituting the 201 3/2014

U.S.

- Brazil Combination Frequ ency Allocation Proceeding to select a carrier or carriers to use the 14
unrestricted U.S.

- Brazil combination frequencies that b ecome available October 1, 2013 ; and to select a
carrier or carriers to use the 14 unrestricted U.S.

- Brazil combination frequenc ies that b ecome available October 1, 2014 . To ensure that we have a complete record in this matter, we request that each of the captioned applicants amend and/or supplement their existing applications, as specified below, and file
those amendments and/or supplements in this Docket.

Our principal objective in this proceeding will be to maximize public benefits

. In this regard, we will consider which applicant s will be most likely to offer and maintain the best service for the traveling and shipping public . We will also consider the effects of the applicants’ service proposals on the overall competitive environment, including effects on the market structure and on competition in the U.S.

- Brazil
market , and any other market shown to be relevant . In additio n, we will consider other factors historically used for carrier selection, where relevant.

We expect to allocate the frequencies for an indefinite term, subject to a start

- up condition and our
standard 90

- day dormancy condition. For any frequency not use d for a period of 90 days, the allocation with respect to that frequency would expire automatically and revert to the Department for reallocation.

We believe that written, non

- oral procedures under Part 302 of our regulations (14 CFR 302) are appropriate and that by using these procedures we can establish a complete evidentiary record and make timely awards with the least possible delay and without unnecessary costs to the applicants. In the interest of expediting the award of these valuable route rights, we will reserve the right to go directly to a final order, should the complete record in this proceeding justify such action. We find no material issues of fact that would warrant an oral evidentiary hearing. We intend to resolve issues and award the

su bject authority on the basis of pleadings filed in this proceeding. If, however, upon review of the record, we determine that additional information is required and/or modified procedures are necessary

6 US Airways also requests an exemption under 49 U.S.C. §40109 to engage in scheduled foreign air transportation of persons, property, and mail from the United States, via intermediate points, to any point or points in Brazil and beyond. US Airways currently holds exemption authority for scheduled foreign air transportation of persons, property, and mail between Charlotte, North Carolina, and Rio de Janeiro and Sao Paulo, Brazil. See Docket DOT

- OST

- 2009

- 0003.

7 See Docket DOT

- OST

- 2010

- 0183.4 for the adjudication of this case, we reserve the rig ht to request additional information and/or to modify our proceeding in th is matter.

Evidentiary Requirements

In light of the upcoming availability of new U.S.

- Brazil frequencies

, we intend to conduct this proceeding in a manner that will facilitate our reaching a prompt final decision

. 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. We will, however, require that the captioned applicants amend and/or supplement their existing applications, as per the schedule set out below, with the information requested in this section.

E xcept for procedural dates, applications should conform to Part 302, Subpart C of the Department’s regul ations (14 CFR Part 302). All pleadings should be filed with the Department of Transportation, 1200 New Jersey Avenue, S.E., West Building Ground Floor, Room W12

- 140, Washington, D.C. 20590, in the captioned Docket for the 2013/2014 U.S.

- Brazil Combinatio n Frequency Allocation Proceeding , and should include, at a minimum, the following information . The base year for responding to this evidence request should be 12 months ended October 1, 2014, for the combination frequencies
that become available October 1, 2013; and 12 months ended October 1, 2015, for the combination frequencies that become available October 1, 2014. 8 9

1. Provide a f irm date for instituting service, and single

- plan e and nonstop

- to

- nonstop connecting schedules proposed to be operated in th e applicable base year with a break

- down for peak and
off

- peak seasons. Identify all seasonal service, if any, and specify the period during which the
seasonal services would be offered.

Proposed schedules should contain flight numbers, complete routings from origin to destination (including behind

- gateway and beyond

- gateway points and elapsed time for services), airports served, departure and arrival times, equipment types (including seat configuration by class of service), days scheduled, and classes of service offered;

2. A brief description of the types of service the applicant currently provides, if any, between the
United States and Brazil , including the types of service (state whet h er the services are code

- share operations, seasonal or year

- round, cha rter, and/or scheduled) and include frequency levels and type (restricted or unrestricted) by city

- pair market; 10

8 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 submi ssion capability available through the Dockets FDMS Internet site ( http://www.regulations.gov ) by following the instructions on the web site. Additionally, service by
facsimile or electronic mail is authorized.

9 Applications and responsive pleadings should contain sufficient detail, including sources, bases, assumptions and methodologies, so that, without further clarification, any party can derive the final
results from the basic data.

10 There are three types of restricted frequencies. One type can be used at any point or points in Brazil subject to the restriction that these frequencies may not be used at Sao Paulo’s Guarulhos International Airport until infrastructure

- related constraints at the airport are remove d ; the second type can be used at any point or points in Brazil, except Sao Paulo Terminal; and the third type can be used at any point or5 3. If the carrier seeks an award for both the October 2013 and October 2014 frequencies and/or seeks authority to serve more than one city

- pair m arket, indicate the carrier’s order of preference for selection. Also provide, for each city

- pair market request, the minimum number of frequencies that the carrier would accept to institute service; and

4. Should the Department decide to make backup awards in this proceeding, provide a statement as to whether the carrier will accept backup authority with a condition that (a) permits it to implement the authority within the first year should the primary carrier withdraw from the market; and (b) should the au thority not be activated, the authority expires at the end of one year

.

To the extent that any of the requested information has already been provided on the record, applicants

may refer to that information in their supplemental pleadings. Applicants may, of course, also submit any additional information beyond that requested if they believe it would be useful to us in reaching a
decision.

We view adherence to these directives as critical to our consideration of the proposals in carrier
selection cases. We put the applicants in this case on notice that we expect full compliance with the evidence request in this order. Any carrier not in full compliance in any material r espect with our request will be subject to elimination from consideration for an award in this case.

Motion of Delta

On March 7, 2013, Delta filed a motion requesting that the Department compel US Airways and United to file additional information. Delta takes issue with the US Airways position that it would be required
to discontinue its Charlotte

- Sao Paulo services if it is not awarded the seven October 2013 frequencies it has requested . Delta states that the temporary allocation of United’s seven frequencies to US Airways
will remain in effect until the conclusion of the IATA winter 20 14

- 15 traffic season, a time that
coincides with Delta’s transfer of seven U.S.

- Brazil frequencies to US Airways under the Delta/US Airways arrangement. Delta contends, therefore, that US Airways will have the necessary frequencies
to continue i ts Charlot te

- Sao Paulo services uninterrupted , unless the United/US Airways lease agreement requires US Airways to return those frequencies as a result of the recently announced merger between US Airways and American. Delta asserts that the Department should compel US Airways and United to file their lease agreement in the record for this case, and that US Airways should state its planned use of the seven frequencies it will obtain from Delta in 2015. Delta further asserts that the Department should compel United to state its planned use for the seven frequencies it is currently leasing to US Airways, when they are returned.

On March 18, 2013, United and US Airways filed answers opposing Delta’s motion. United asserts that it is not a party to this frequency proc eeding and is not obligated to provide information as to how it would elect to use the frequencies, should they be returned by US Airways. United further asserts that disclosure of its lease agreement with US Airways is not necessary for the Department to evaluate the applications in this proceeding.

points in Brazil, except Rio de Janeiro and Sao Paulo Terminal. Carriers should be specific in characterizing the frequencies they hold

.6 US Airways argues that there is no basis to require US Airways or United to disclose their private agreement, or for US Airways to speculate as to how it will use frequencies it will obtain in 2015. US
Airwa ys urges the Department to deny Delta’s motion and either allocate the frequencies that were advertised in the Department’s February 15, 2013 Notice or institute a carrier selection proceeding.

On March 22, 2013, Delta filed a consolidated reply to the an swers of United and US Airways. 11 Delta states that interested parties and the Department should have access to the United/US Airways frequency lease agreement, to determine whether US Airways and American should be considered independent entities, in ligh t of the carriers’ planned merger. Delta also stands by its request for information as to United’s planned use of the returned US Airways frequencies.

On March 25, 2013, US Airways filed a letter stating that it has already addressed the issues raised in Delta’s consolidated reply, and urging the Department to deny Delta’s motion.

We have decided to deny Delta’s motion to compel US Airways and United to file additional
information. In the circumstances presented, we do not see a need to compel the info rmation proposed by Delta. In reaching this result , w e note that Delta has questioned US Airways’ need for frequencies US Airways said it was seeking to continue i t s Charlotte

- Sao Paulo service. Delta’s motion

, and the pleadings filed in response, have a lready provided the parties an initial opportunity to address this issue

. I n the applicants’ subsequent submissions, we fully expect this issue to be developed further on the record as carriers advance the merits of their proposals. Therefore , we conclud e that o ur above evidence request, combined with any other information and argument as the parties may choose to provide, should provide for an adequate record upon which to make a decision.

Procedural Timetable

In light of our stated goal of reaching a prompt final decision , we intend to process this case on an
accelerated procedural schedule. Therefore, we are establishing the following procedural schedule for
submissions:

Petitions for Reconsideration: April 17, 2013
Answers to Petitions: April 22, 2013 Supplements/Amendments to Applications : April 24, 2013

Answers: May 3, 2013 Replies: May 14, 2013

In consideration of the accelerated schedule, as discussed above, we authorize service by facsimile or
electronic mail. Parti es should include their fax numbers and/or e

- mail addresses on their submissions and should indicate on their certificates of service the methods of service used. Applicants not using facsimile or electronic mail must provide an original and five copies of all submissions to the Department of Transportation, Dockets, no later than the dates indicated. Please also provide an electronic copy of all responsive pleadings to: Esta.Rosenberg@dot.gov and Brett.Kruger@dot.gov

.

11 Delta accompanied its reply with a request for leave to file. We grant this request.7 ACCORDINGLY,

1. We institute the 2013/2014 U.S.

- Brazil Combination Frequency Allocation Proceeding in Docket

DOT

- OST

- 201 3

- 0072 , to be decided by written, non

- oral procedures under Part 302 of our regulations (14 CFR Part 302 ) ;

2

. We consolidate the applications of American Airlines, Inc. (Docket DOT

- OST

- 2013

- 0041); Delta Air Lines, Inc. (Docket DOT

- OST

- 2013

- 0045); and US Airways, Inc. (Docket DOT

- OST

- 2013

- 0046)
into the 2013/2014 U.S.

- Brazil Com bination Frequency Allocation Proceeding ;

3. This proceeding will consider which carrier or carriers should be selected to operate (1) the 14 U.S.

- Brazil combination frequencies that may be used to serve any point in Brazil, that become available
October 1, 2013; and (2) the 14 U.S.

- Brazil combination frequencies that may be used to serve any point in Brazil, that become available October 1, 2014 (as described in the text of this order), and, to the extent necessary, underlying exemption authority to prov ide the service;

4. Further submissions should be filed in accordance with the procedural schedule set forth in this order;

5

. We deny the March 7, 2013 motion of Delta Air Lines, Inc.; and

6 . We will serve this order on American Airlines, Inc.; Del ta Air Lines , Inc.; US Airways, Inc. ; United

Air l ines, Inc.; the U. S. Department of State (Office of Aviation Negotiations) ; the Federal Aviation
Administra tion; and the Ambassador of Brazil 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 http://www.regulations.gov