^i'PARTMENTOF 

^:A^iSPORTATION 

.;KET OPERATIONS 

.:; m ?L! p 3=25 lAWOFHCfiS 

GAROFALO GOERLICH HAINBACH PC 

1300 NEW HAMPSHIKE AVENUE N V • SurTE SOD • W,\6HINCTON DC 20036-6802 

TEI^PHONE 202 776-3970 • FACSlMlue 202 776-3975 

WV«iT('.COfr-AI»UW.COM 

August 6, 2010 

Paul L. Gretch, Director 

Office of International Aviation 

U.S. Department of Transportation 

1200 New Jersey Avenue, S.E. 

Washington, D.C. 20590 

Re: Consolidated Response to Submissions of Atlas Air. FedEx and UPS 

Dear Mr. Gretch: 

Southern Air Inc. subniits the following consolidated response to the July 30, August 2 

and August 3 submissions, respectively, of Atlas Air, Inc., United Parcel Service Co. and 

Federal Express Corporation. To the extent necessary. Southern requests leave to submit this 

response in order to provide a necessary rejoinder to Atlas's latest arguments and to respond to 

UPS's and FedEx's assertions. 

Atlas, FedEx and UPS urge the Department to confer upon them the immediate benefit of 

being both a scheduled and a charter carrier in the bifurcated U.S.-Brazil market. However these 

carriers may dress up their arguments, the fact remains that Southern and the other carriers who 

must rely on the charter pool for market access would be prejudiced significantly were DOT to 

grant the requested waiver. Nor would it otherwise be in the public interest for the Department 

to cast aside the charter procedures it has tailored for the capacity-controlled U.S.-Brazil market. 

Atlas's characterization of its waiver request as a "no brainer"' is wholly incoaect. As 

the Department has stated, "Our procedures are designed to ensure that new entrant and ad hoc 

charter operators are able to secure charter authorizations throughout the charter year, lest they 

be precluded from conducting U.S.-Brazil operations, and have proven effective in this regard."^ 

In issuing its 2010-11 Brazil charter notice a few weeks ago, the Department undoubtedly 

considered whether it would be prudent to revise the procedures discussed in Order 2008-11-10, 

and decided to maintain the status quo. If the matter is a "no brainer" now, it would have been a 

"no brainer" a few weeks ago as well. Clearly DOT did not see it that way ... nor should it have 

seen it that way. Moreover, even if the Department were prepared to revisit its conclusions, any 

change should be effected only as a result of a comprehensive policy analysis, not in the 

abbreviated context of a waiver application. 

Atlas Reply, July 30. 2010, at 2. 

In the Matter of Brazil Cargo Charter Authorizations, Order 2008-11-10 at 4. 
GAROFALO GOERLIC H HAINBACH vc 

Paul L. Gretch, Director 

August 6, 2010 

Page 2 

In its most recent submission. Atlas attempts to Justify its position as pro-competitive -

an argument that was absent from Atlas's original waiver application, apart fix>m the absurd 

suggestion that the waiver would place Atlas and other scheduled carriers on "equal footing"^ 

with charter carriers in the Brazil market. As noted, tmder the proposed waiver, all rights of 

scheduled and charter carriers would accrue immediately to the several carriers holding U.S.-

Brazil scheduled all-cargo authority ... while the best-case scenario for U.S.-Brazil charter 

carriers, including Southern, would be charter opportunities only for upwards of a year. That is 

not at all equal. Further, the effect of the proposed waiver would actually be fl«ft'-competitive: 

Its existence would discourage new entry in the U.S.-Brazil charter market, and its effects could 

drive existing carriers, such as Southern, from the market. 

In their July 30 and August 2 submissions. Atlas and UPS imply that the solution for 

Southern is to apply for and receive scheduled U.S.-Brazil authority so that Southern, too, may 

become a beneficiary of the proposed waiver. Even assuming adequate scheduled frequencies 

would be available, that "solution" is totally illusory as it would likely take a year or more for 

Soirthem to obtain a Brazilian scheduled license. Further, Southern, when faced with the 

scheduled-or-charter choice all carriers have faced in the U.S.-Brazil all-cargo market, opted for 

the flexibility inherent in the charter mode in that market. Why should Southern be penalized -

and Atlas and other carriers rewarded - under circumstances where Atlas and the others may 

have erred in their choice? 

At the very least, if the Department is prepared to change the rules on which Southern 

and other charter carriers have relied in their decision-making, it should do so only on the basis 

of show-cause procedures* and with a minimum of one year's prior notice. That period would be 

necessary to provide carriers that have selected the charter mode, such as Southern, a reasonable 

opportunity to obtain effective U.S. and Brazilian scheduled authority so as to have an 

opportunity to compete with the likes of FedEx, UPS and Atlas. 

It is telling that Florida West and Centurion - the primary market participants other than 

Southern that rely on the charter pool - declined to provide non-objections to Atlas's 

application.* Indeed, given that Polar Air is affiliated with Atlas and that Arrow Air has ceased 

operations, the carriers independently supporting Atlas's application are limited to FedEx and 

' Atlas Application, July 22,2010, at 3. 

* The Department issued U.S.-Brazil scheduled authority to Centurion Air Cargo on August 5, 2008. In 

response to Centurion's subsequent requests stemming prinuu'ily from Brazilian administrative procedures and 

complications, DOT has extended Centurion's start-up deadline nearly two years while the carrier awaits Brazilian 

scheduled licensing; see Docket DOT-OST-2008-0228. Though not every applicant may experience the difficulties 

Centurion has faced, it is clear the Brazilian licensing process is extraordinarily time-consuming. 

^ Such procedures were used, appropriately, in conjunction with the late 2008 expansion of U.S.-Brazil 

charter opportunities. See Docket DOT-OST-2008-0349. 

* See Atlas Reply, July 30,2010, Gist paragraph. 
GAKOFAJLO GOERLIC H HAINBACH pc 

Paul L, Gretch, Director 

August 6, 2010 

Page 3 

UPS. That support is only natural given that the two industry behemoths stand to benefit as 

much if not more than Atlas under the requested waiver - but that status hardly excuses the 

injury Southern and others would suffer by a sudden change to the competitive rules of 

engagement in the U.S.-Brazil market. 

UPS's alternative proposal - that for the first six months of the charter year, scheduled 

carriers be permitted 10 flights per month from the charter pool with unlimited access thereafter 

- is only marginally less deficient than Atlas's proposal. Up to 60 charters per scheduled carrier 

over a six-month period is fer more than would be necessary to destroy the balance the 

Dqpartment has crafted tmder the bilaterally-imposed constraints. The answer for UPS, Atlas 

and FedEx is resort to the Department's existing mechanism for case-by-case waivers in the 

public interest. 

FedEx argues that given the number of annual charter frequencies available under the 

bilataral, a charter carrier could operate the fiinctional equivalent of scheduled service usiog 

charter allocations. That proposition is highly doubtful for a nimiber of reasons, but even if it 

were correct, under the proposed waiver it would apply equally for scheduled carriers - i.e., such 

carriers could operate their usual pattern of scheduled service plus an extensive, scheduled-like 

pattern of charter service. In fact, for a carrier possessing the resources of FedEx, this would 

present an opportunity to expand its overall market share to achieve a dominant position. That 

would scarcely be ui the public interest, particularly in a restricted-capacity market. 

FedEx argues additionally that without the waiver requested by Atlas, a "waste of scarce 

opporttmities" will occur during the 2010-11 charter year, based primarily on the existence of 

unused charter frequencies for the 2009-10 year. The unused 2009-10 allocations, however, 

indicate only that the needs of shippers were fulfilled without resort to the fiill con[5>lement of 

charter service authorized under the bilateral. If additional shipper demand had existed, FedEx 

and others would have met it, particularly during the last two months of the charter year. In short 

there is no logical basis for suggesting that the Department's existing procedures have resulted or 

will resuh in wasted opportunities. 

As stated previously. Southern would prefer art open skies U.S.-Brazil regime where 

there is no need for DOT to balance the rights of competitors. Until then, however, it would not 

be in the public interest for the Department to treat this non-open skies market as though it were 

an open skies market. Southern thwefore reiterates its strong objection to the requested waiver. 

Sincerely, 

Aaron A. Goerlich 

Garofalo Goerlich Hainbach PC 

Counsel for Southern AirJnc, 
GAROFALO GOERLICH HAINBACH PC 

Paul L. Gretch, Director 

August 6, 2010 

Page 4 

cc: Mary Street 

Esta Rosenberg 

Brian Hedberg 

Bemice Gray 

All persons on attached service list 
GAROFALO GOERLICH HAINBACH PC 

Paul L. Gretch, Director 

August 6, 2010 

Page 5 

Certificate of Service 

I hereby certify that on August 6, 2010, a copy of the following Application of Southern 

Air Inc. was service via email to the following persons: 

I^UJli^/y^ ^ 

Knstina R. Pickholtz 

Pierre Murphy (Arrow) pmurphy@lopmurphy.com 

Russell Pommer (Atlas) rpommer@atlasair.com 

William Evans (Centurion) Bill@mietuslaw.com 

Nancy Sparks (FedEx) nssparks@fedex.com 

Bailey Leopard (FedEx) gbleopard@fedex.com 

Marshall S. Sinick (Florida West) msinick@ssd.com 

Mark Atwood (Kalitta) matwood@sherblackwell.com 

Kevin Montgomery (Polar) Kevin.montgomery@polaraircargo.com 

David Vaughan (UPS) dvaughan(gkelleydrye.com 

Danielle Fisher (UPS) dfisher@kelleydrye.com 

Malcolm L. Benge (World) mlbenge@zsrlaw.com 

Robert Silverberg (ABX Air Inc.) rsilverberg@sgbdc.com