### Order 2014-6-7 Served: July 1, 2014 UNITED STATES OF AMERICA DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C. Issued by the Department of Transportation On the First day of July, 2014

________________________________________________ : AER LINGUS GROUP PLC , ET AL., : : DOT

-OST-2007-28118 v. : : LOS ANGELES WORLD AIRPORTS, ET AL. : : ORDER TO SHOW CAUSE
Summary This Order proposes to grant the September 4, 2013, motion of the Los Angeles World Airports (LAWA) to dismiss , with prejudice, the joint complaint by 22 foreign air carriers operating out of the Tom Bradley International Terminal (TBIT Carriers) 1 

### at the Los Angeles International Airport (LAX) , and to terminate the proceeding.The proposed actionis based on our tentative findings that: twentyof the TBIT Carriers signed rate agreements with LAWA that relinquished their rights to proceed with the subject case ; one TBIT Carrier (Aer Lingus)entered into an independent settlement agreement with LAWA that resolved its fee dispute; and the other TBIT Carrier (Mexicana)entered into a partial settlement agreement with LAWA about its fee dispute, is in liquidation and

1 The Complainant TBIT Carriers included Aer Lingus Group Plc (Aer Lingus); Air Pacific; Air Tahiti Nui; All Nippon Airways Co., Ltd.; Asiana Airlines, Inc.; British Airways Plc; Cathay Pacific Airways Limited; China Airlines, Ltd.; China Eastern Airlines; Compañia Mexicana de Aviación, S.A. de C.V. (Mexicana) ; Deutsche

-Lufthansa AG; El Al Israel Airlines Ltd.; EVA AIRWAYS Corp.; Japan Airlines International Co., Ltd.; Korean Air Lines Co., Ltd.; LAN Airlines S.A.; Lan Peru, S.A.; Philippine Airlines, Inc.; QANTAS Airways Limited; Singapore Airlines Limited; Swiss International Air Lines Ltd.; and Thai Airways International Public Co., Ltd.undergoing an asset sale in bankruptcy , and was subject to a Federal Aviation Administration (FAA) termination of its operations specifications. Accordingly, by this Order, we tentatively find that there is no significant di spute remaining in this proceeding
. We direct interested parties to show cause why the Department should not dismiss the joint complaint ofthe TBIT Carriers and terminate the proceeding as moot. Any objections to this Order are to be filed no later than 21 days from the issuance date of this Order and any answers to objections shall be filed no later than seven days thereafter.


### Background On April 30, 2007 , the TBIT Carriers filed a joint complaint against the Respondents 2 about Los Angeles World Airport 's (LAWA 's ) use ofa new " rentable space " methodology that calculated airline charges based on a share of common areas including public corridors, lobbies , and restrooms
- rather than based only on the TBIT
space occupied by the airlines ("useable space" methodolog y). The TBIT Carriers requested that we determine that a "significant dispute " existed , under 49 U.S.C. § 47129 , and that the fee increases were unreasonable, unjustified and unjustly di scr iminatory , under the Anti-Head Tax Act, 49 U.S.C. § 40116 and the Airport Improvement Program grant assurances , 49 U.S.C. § 471 07(a)
. They al so asked u s to order Respondents to refund , with interest, all fee s the TBIT Carriers paid under protest that we deem to be unlawful, under the Secretary's administrative authorities, 49 U.S.C. §§ 40113(a) or 47129. The TBIT Carriers also sought to re s erve their contingent right to file a complaint

2 The Respondents include the Lo s Ange les World Airports (LA WA) , operator of Lo s Angeles International Airport (LAX) , owned by the City of Lo s Angele s (City). 2

### under Section 47129 , pending final court action on a pending request for reconsideration
or rehearing en bane 

### of a recent court decision3 

### in another Section 47129 proceeding finding foreign air carriers were not " air carriers" for purposes of Section 47129
. Respondents ' answer to the joint complaint stated that foreign air carriers were not proper complainants under Section 47129 , the TBIT Carriers failed to raise a "signi ficant dispute " under Section 47129 , the joint complaint was procedurally deficient, and requested that we dismiss the joint complaint or move it to the FAA for docketing under

" Part 16 " ( 14 CFR Part 16). The TBIT Carriers replied by renewing their original requests. Thereafter, the TBIT Carriers moved that we adopt the record in an earlier proceeding involving LAX 4 

### (known
as 

### LAX lll) as full and complete evidence and testimony in this procee ding and enter summary disposition for the TBIT Carriers, on the grounds that the 

### LAX 111 record addressed whether : new and increased maintenance and operation (M&O) terminal charges were unreasonable and/or unjustly discriminatory ; the " rentable space" formula
was justified and reasonable ; and the market method used to set a component of terminal rent was reasonable. The Respondents sought additional time to file their opposition to the TBIT Carriers ' motion
. In July , 2007 , we partially granted Respondents ' request, noting the "novelty and complexity of the issues raised" in the TBIT Carriers' motion. See, DOT Order 2007-7-20 (July 26, 2007)
. Respondents subsequently filed an opposition to the TBIT Carriers ' motion, requesting that we deny the motion and clarify the procedures governing the joint complaint. The TBIT Carriers replied in support of their motion
.

3 See, Port Authority of New York and New Jersey v. Dept. of Transportation, 479 F
. 3d 2 1 (D.C
. Cir. 2007)
. As Re spondents indicated in a sub sequently filed Notice to us, the Court denied the foreign airlines ' petitions for rehearing and for rehearing en bane. l.Q.,_. at 33. 4 Alaska Airlines, Inc
. v . Lo s Angeles World Airports, Docket No
. OST-2007-27331 (LAX 1/1)

. 

### 3A joint motion was filed by the parties on October 31 , 2008, to stay the proceedings until the earlier of the date they jointly agree to apply to release the stay, and 45 days after issuance of a final, non-appealable decision in the 

### LAXIll proceedings. 5 In the course of the 

### LAX III remand proceedings, the parties settled their disputes , and , on July 3, 2013 , we issued a Final Order in 

### LAXIII that dismissed the claims of the remaining carriers with prejudice and terminated the proceeding
.6 No petition for judicial review of that Order was filed within the 60-day prescribed statutory time period, under 49 U.S.C. § 46110(a). On September 4 , 2013 , Respondents moved to dismiss the TBIT Carriers ' complaint with prejudice. Respondents explained that 20 TBIT Carriers relinquished their rights to proceed with this case (known as LAXIV) , under the terms of new rate agreements they signed , respectively, with LAWAin December, 2012. 7 Respondents further stated that Aer Lingus ceased operations at LAX in 2008 , that , in August 2009, Aer Lingu s and the City entered into a settlement agreement under which Aer Lingus received a cash refund

5 See Order 2007

- 6-8 (June 15 , 2007) , finding that the new and increased M&O terminal charges on the useable space were reasonable and not unju stly discriminatory ; the "rentable" s pace methodo logy for Terminal s I and 3 was reasonably calculated but unju stly di s criminatory in effect ; and the market value component of terminal rent for Terminal 3 was unreas onable because it did not cons titute an objective determination of fair market value for terminal space and wa s unju stly discriminatory a s applied
. On petitions for review by both the TBIT Carriers and the City , the United State s Court of Appeals for th e Di strict of Columbia Circuit granted each petition in part, denied each petition in part, and remanded certain iss ues to the DOT for further proceedings. Alaska Airlines . Inc
. v . U
. S
. Department of Transportation, 575 F.3d 750 (D
.C. Cir
. 2009).

_The remanded iss ues included : requirin g DOT either to justifY or to abandon its disparate treatment of airfield and non-airfield space ; directing DOT either to justifY or abandon its objection to the C ity ' s con s idering non-aeronautical use s when s etting terminal rents bas ed upon FMY ; directing DOT to con s ider any argument of the Terminal I Airlines ' arguments that the 60-day limitation ought not be enforced against them ; directing DOT to revi s it the Terminal 1/3 Carrier s' complaint of di s crimination and to apply to them the burden of persuasion that their di sparate treatment is unjust ; and, fmally , dire cting DOT to explain why thi s case does not present the extraordinary s ituation in which the alleged monopoly power is relevant to a fee dispute or, if it cannot, then go on to consider whether LAX had monopoly power in a relevant market. 6 See Order 2013-7

- 1 (July 3 , 2013)
. 7 Each agreement contained the following clause : 12
. Pending USDOT Complaints
. 12 .2. If Airline i s a complainant in A er Lingus Gro up PL C. v. Los Ang eles WorldAirport s, USDOT Docket No. OST-2007-28118 (" LAX IV " ) , Airline acknowledges and agrees that its complaint in such proceeding before the USDOT does not now present a significant dispute within the meaning of49 U .S. C . § 47129(c)(2) and consents to its di smi ss al with prejudice
. 4from the City, and the parties agreed , among other things, to resolve their disputes about terminal fees and charges at LAX. 8 Respondents further sta ted that Mexicana was a party (along with the other TBIT Carriers) to a 2008 partial settlement agreement with the City regarding the new terminal charges at LAX and received a terminal rental credit for future rent; that Mexicana filed for bankruptcy in Mexico and the United States on or about August 3, 2010 , and suspended operations at LAX on or about August 28 , 2010
. The TBIT Carriers did not file in response to Respondents ' motion to dismiss. Accordingly, we contacted counsel for the TBIT Carriers and received preliminary verbal confirmation that the subject issues had been resolved for 21 of the 22 TBIT Carriers. S ub sequently , we held discussions with counsel for Mexicana about Mexicana ' s attempts to negotiate terms for its possible return to LAX ; we also facilitated direct talks between LAWA and Mexicana. Nonetheless, we have not received Mexicana's consent to the dismissal ofthe subject case. In April , 2014, we learned that Mexicana was undergoing liquidation and that a Mexican judge ordered a sale ofMexicana' s assets. 9 On April30 , 2014 , effective May 29 , 2014 , FAA terminated Mexicana's operations specifications , under the authority provided by 14 CFR Part 129. The FAA took such action due to Mexicana not possessing an air carrier operating certificate or aircraft, and not engaging in operations. Taking into account the above discussion and preliminary facts , we tentatively find that the respective TBIT Carriers have settled their fee disputes with the Respondents , that

8 The Aer Lingu s Settlement stated: Upon payment by the CITY to Aer Lingus, {Aer Lingus) will not seek a further refund from the CITY with respect to any a spect of fees or charges (such as landing fees , terminal fee s and rental fees) it incurred in connection with its operations at LAX
. Section s I , I
. I(e)
. 9 See "S upplemental Disclosure by Maru E
. Johansen Pursuant to II U
. S.C. § 1518 Regarding Statu s of Concurso Proceeding ." 04117/ 14 , ECF No
. 325 , In re: Compania Mexicana de Aviacion, S
.A.de C
. V
. , Debtor in a Foreign Proceeding, (Bankr
. S
. D.N
.Y
.) (Case No
. 10-14182). "[T]he Compan y' s proceeding s in Mexico have changed in status from proceedings seeking a reorganization result to proceedings in the nature ofa liquidation. " See al so http :/ /big story.ap.org/article/mexico-ends -bid-revive-mexicana-airline
. 5one TBIT Carrier no longer is in operation, and that no significant dispute exists under Section 47129. ACCORDINGLY, I. We direct all interested persons to show cause why the Department s hould not grant Respondents' Motion for Di smissal with Prejudice ofthe TBlT Carriers ' Complaint, and dismiss, with prejudice , the claim s of Aer Lingus Group Pic ; Air Pacific; Air Tahiti Nui; All Nippon Airways Co., Ltd.; Asiana Airlines , Inc. ; British Airways Pic ; Cathay Pacific Airways Limited; China Airlines, Ltd.; China Eastern Airlines ; Compafiia Mexicana de Aviaci6n, S.A. de C.V.; Deutsche-Lufthan sa AG ; El AI Israel Airlines Ltd .; EVA AIRWAYS Corp
. ; Japan Airlines International Co., Ltd. ; Korean Air Lines Co
. , Ltd. ; LAN Airlines S.A.; Lan Peru, S.A.; Philippine Airlines, Inc.; QANTAS Airways Limited; Singapore Airlines Limited; Swiss Internati onal Air Lines Ltd. ; and T hai Airways International Public Co., Ltd. , in thi s action; 2. Objections or comments to our tentative findings and conclus ion s s hall be filed no later than 21 days from the issuance date ofthi s Order. Answers to objections s hall be due no later than seven busines s days thereafter ; and 3. This Order will be served on the persons listed in the Service List. SO ORDERED By: 

# >/v<1.J)rJ Brandon Belford Deputy Assistant Secretary for Aviation and International Affairs

An electronic version ofthis document is available at www.regulations.gov , DOT

- OST-2007 -2 7331. We s erved a copy of this Order on li ste d in the Service List. July 1 , 2014, on the perso n s

6

### SERVICE LIST

U.S. DOT Dockets U.S. Department of Transportation 1200 New Jersey Avenue, S.E., Washington, DC 20590 Steven S. Rosenthal J.D. Taliaferro KAYE SCHOLER LLP 901 Fifteenth Street, N. W., Suite 1100 Washington, DC 20005-2327 srosenthal @ kayescholer.com; jtaliaferro @ kayscholer.com
Michael Feuer

Los Angeles City Attorney Raymond S. Ilgunas

General Counsel of LAW A Tamami Yamaguchi

Deputy City Attorney City of Los Angeles Attorney's Office Los Angeles World Airports One World Way Los Angeles, CA 90045 rilgunas @ lawa.org ; Brian K. McCalmon KLGATES 1601 K Street, NW Washington, DC 20006-1600 Brian.mccalmon @ klgates.com Paul C. 

### Jasinski General Counsel Americas James B. Blaney Senior Counsel Americas British Airways PLC 72-20 Astoria Blvd Jackson Heights, NY 11370 Jim.blaney @ ba.com Arthur J. Molines General Counsel, North America 7

### Deutsche Lufthansa AG 1640 

### Hempstead Turnpike East Meadow, NY 11554 

### Arthur.molins @ dlh.de William C. Heuer, Partner Duane Morris LLP 1540 

### Broadway New York, NY 10036-4086 

### David A
. Berg Vice President & 

### General Counsel Airlines for America 1301 

### Pennsylvania Avenue, NW Washington, DC 20004 

### dberg@airlines.org Robert P
. Silverberg Silverberg, Goldman & 

### Bikoff, LLP 1101 30th 

### Street, N.W. Suite 120 

### Washington, DC 20007 

### rsilverberg@sgbdc.com Scott P. Lewis Anderson & 

### Kreiger LLP One Canal Park, Suite 200 

### Cambridge, MA 02141 

### slewis@andersonkreiger.com Tom Devine General Counsel Airports Council International- North America 1601 

### L Street, NW, Suite 300 

### Washington, DC 20036 

### tdevine@aci-na
. org Nancy Kessler Office of General Counsel, U.S. Department of Transportation 1200 

### New Jersey Avenue, S.E
. Washington, DC 20590 

### nancy.kessler@dot
. gov The Honorable Richard C. Goodwin Administrative Law Judge Office of Hearings, U.S. Department of Transportation 55 

### M Street, S.E. Washington, DC 20590 

### richard
. goodwin@dot.gov; patricia.mattbews@dot.gov 8

### Judith S. Kaleta Deputy General Counsel U.S. Department of Transportation 1200 New Jersey Avenue, S.E., W92-312 Washington, DC 20590 judy.kaleta@dot.gov
Paul M. Geier Assistant General Counsel for Litigation U.S. Department of Transportation 1200 New Jersey Avenue, S.E., W94-310 Washington, DC 20590 paul.geier@dot.gov Susan Kurland Assistant Secretary for Aviation

and International Affairs U.S. Department of Transportation 1200 New Jersey Avenue, S.E., W88-314 Washington, DC 20590 susan.kurland@dot.gov Brandon Belford Deputy Assistant Secretary for Aviation

and International Affairs U.S. Department of Transportation 1200 New Jersey Avenue , S .E. , W88-324 Washington, DC 20590 

### brandon.belford@dot.gov Kathryn B. Thomson

General Counsel U.S. Department of Transportation 1200 New Jersey Ave., S.E., W92-308 Washington, DC 20590 kathryn.thomson@dot.gov



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