Order 2014-11-19

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

Issued by the Department of Transportation

On the 26th day of November, 2014

Saudi Arabian Airlines Corporation Served: November 26, 2014 

Violations of 49 U.S.C. §§ 41301 and 41712 Docket OST-2014-0001

CONSENT ORDER

This consent order concerns Saudi Arabian Airlines Corporation’s (Saudia) 

advertisement and sale of air service between Jeddah, Saudi Arabia, and Los Angeles, 

California, prior to the carrier holding requisite economic authority from the Department

in violation of 49 U.S.C. § 41301 and 49 U.S.C. § 41712. This order directs Saudia to 

cease and desist from such further violations and assesses a compromise civil penalty of 

$50,000. 

Applicable Law

In addition to applicable Federal Aviation Administration safety requirements, foreign air 

carriers that offer or provide air transportation into or out of the United States must hold 

economic authority in the form of a foreign air carrier permit issued by the Department of 

Transportation pursuant to 49 U.S.C. § 41301, or a valid exemption from this section. 

The violation of any term, condition or restriction contained in a permit or exemption 

constitutes a violation of section 41301.1

 It is also a violation of the authority provisions 

of 49 U.S.C. § 41301, for a foreign air carrier to hold out service in the U.S. for which it 

does not possess, at the time of the holding out, all requisite authorizations from the 

Department.2 Such conduct is also an unfair and deceptive practice and an unfair method 

of competition within the meaning of 49 U.S. C. § 41712.

 1 See, e.g., Thai Airways International Company Ltd., Violations of 49 U.S.C. § 41301, 41703, and 41712, 

Order 2008-09-15; Export Air del Pens, S.A., Order 93-10-2. 

2 See, Notice on Advertising of Scheduled Service in Foreign Air Transportation- Use of the Notation 

“Subject to Government Approval” (62 Fed. Reg. 51,175 (September 30, 1997)).
2

The holding out of air transportation includes listing or advertising service in any 

medium reasonably likely to reach the public, such as computer reservations systems, the 

internet, or published media, such as the Worldwide Edition of the Official Airline Guide.

If the carrier has an application for economic authority pending with the Department, the 

service may not be listed or advertised until that application is approved.

3

 

Background

On March 3, 2014, Saudia filed an application in Docket DOT-OST-2014-0030 

requesting exemption authority to provide scheduled foreign air transportation 

commencing March 31, 2014, between Saudi Arabia and the United States. According to 

Saudia’s application, the service would be conducted between Jeddah and Los Angeles 

three times per week (Monday, Thursday, and Saturday). On March 24, 2014, the 

Department granted and made effective the carrier's application for an exemption to 

operate its proposed service. 

Prior to receiving Departmental economic authority to operate the proposed service, 

Saudia launched an advertising campaign about its proposed service via a number of 

public forums, including the carrier’s website, emails, newspapers, magazines, and social 

media sites. Although Saudia did not operate service on the proposed route prior to 

receiving authorization, the advertising campaign resulted in significant ticket sales and 

revenue prior to Saudia having economic authority to operate the route. As such, 

Saudia’s advertisement and sale of proposed air service between Jeddah and Los Angeles 

prior to March 24, 2014, violated sections 41301 and 41712. 

 

Mitigation

In mitigation, Saudia states that its staff was unfamiliar with the Department’s rules as 

they apply to sales and advertising by foreign air carriers and had no intention of 

violating such rules. Saudia notes that the only regulation on the issue, 14 CFR § 201.5, 

does not directly apply to foreign air carriers at this time, and the carrier maintains that 

the Department’s Office of Aviation Enforcement and Proceedings (Enforcement Office) 

did not adequately notify industry of the 1997 Federal Register notice (Notice). The 

Notice advises foreign carriers that advertising service for which they lack the requisite 

economic authority from the Department violates the authority provisions of 49 U.S.C. 

section 41301 and is an unfair and deceptive practice under 49 U.S.C. section 41712, and 

sets forth the Enforcement Office’s policy of applying the standards of 14 CFR § 201.5 to 

foreign air carriers. Accordingly, Saudia believes the Department should take reasonable 

steps to either amend its regulations or better display the Notice to enable foreign air 

 3 We note that 14 CFR § 201.5 of the Department’s rules also prohibits an applicant from advertising, 

listing schedules or accepting reservations for proposed service until the air transportation covered by its 

application has been approved by the Department. Although section 201.5 covers only U.S. carriers 

applying for certificate authority, the Department applies the standards set forth in section 201.5 regarding 

the holding out and sale of proposed service by applicants for foreign air carrier permits.
3

carriers to be aware of the enforcement policy with regard to the advertising of service to 

or from the U.S. by foreign carriers before it is enforced. In addition, Saudia asserts that 

its staff mistakenly believed that no further Department authorizations were needed for 

the new LAX route based on the existence of the recently entered into US-Saudia Arabia 

Open Skies Agreement. Saudia states that it filed its exemption application immediately 

upon becoming aware of the need for such filing, and the exemption authorization was 

received prior to Saudia initiating the air service. Finally, Saudia states that its long 

record of operation throughout the world attests to its commitment to meeting regulatory 

requirements, and that this is its first alleged violation of these provisions.

Decision

The Enforcement Office has carefully considered all of the information available to it, but 

continues to believe that enforcement action is warranted. In order to avoid litigation, the 

Enforcement Office and Saudia have reached a settlement of this matter. Without 

admitting or denying the violations described above, Saudia agrees to the issuance of this 

order to cease and desist from future violations of 49 U.S.C. §§ 41301 and 41712, and to 

the assessment of $50,000 in compromise of potential civil penalties otherwise assessable 

against the carrier. This compromise assessment is appropriate in view of the nature and 

extent of the violations in question, serves the public interest, and establishes a deterrent 

to future similar unlawful practices by Saudia and other foreign air carriers. 

This order is issued under the authority contained in 49 CFR Part 1 and 14 CFR 385.15.

ACCORDINGLY, 

1. Based on the above discussion, we approve this settlement and the provisions of the 

order as being in the public interest;

2. We find that Saudi Arabian Airlines Corporation violated 49 U.S.C. § 41301, as 

described above, by advertising and selling tickets for foreign air transportation prior to 

receiving appropriate authority from the Department for the specified foreign air 

transportation;

3. We find that, by engaging in the conduct described in paragraphs 2, above, Saudi 

Arabian Airlines Corporation engaged in an unfair and deceptive practice and an unfair 

method of competition in violation of 49 U.S.C. § 41712;

4. We order Saudi Arabian Airlines Corporation and all other entities owned and 

controlled by or under common ownership with Saudi Arabian Airlines Corporation and 

its successors and assignees to cease and desist from further violations of 49 U.S.C. 

§§ 41301 and 41712;
4

5. We assess Saudi Arabian Airlines Corporation $50,000 in compromise of civil 

penalties that might otherwise be assessed for the violations described in ordering 

paragraphs 2 and 3, above. Of this amount, $25,000 shall be paid within sixty days of the 

date this order is issued. The remaining $25,000 of the penalty assessed here shall be 

suspended for one year following the service date of this order and shall be forgiven 

unless Saudi Arabian Airlines Corporation fails to comply with the payment provisions of 

this order or commits other violations of 49 U.S.C. § 41301, 49 U.S.C. § 41712, or this 

order during that period, in which case the entire unpaid portion of the assessed penalty 

shall become due and payable immediately; and

6. Payments shall be made by wire transfer through the Federal Reserve 

Communications System, commonly known as "Fed Wire," to the account of the U.S. 

Treasury. The wire transfers shall be executed in accordance with the instructions 

contained in the Attachment to this order. Failure to pay the penalty as prescribed shall 

subject Saudi Arabian Airlines Corporation to the assessment of interest, penalty, and 

collection charges under the Debt Collection Act and to possible enforcement action for 

failure to comply with this order. 

This order will become a final order of the Department 10 days after its service date 

unless a timely petition for review is filed or the Department takes review on its own 

initiative.

BY:

BLANE A. WORKIE

Acting Assistant General Counsel for

 Aviation Enforcement and Proceedings

An electronic version of this document is available at

www.regulations.gov