\\DC - 037428/000001 - 3453677 v1 BEFORE THE DEPARTMENT OF TRANSPORTATION

WASHINGTON, D.C.

In the Matter of EXPANDED CARGO TRANSFER FLEXIBILITY AND EXPANDED AIR SERVICES AT INTERNATIONAL AIRPORTS IN ALASKA ) ) ) ) ) ) ) Docket DOT-OST-2010-0200 Docket DOT-OST-1996-1600 Docket DOT-OST-1999-5035

APPLICATION OF THE STATE OF ALASKA TO RENEW EXEMPTION FOR EXPANDED CARGO TRANSFER AUTHORITY AND EXPANDED AIR SERVICES AT INTERNATIONAL AIRPORTS IN ALASKA
Communications with respect to this document should be addressed to: John Parrott, AAE Airport Manager Ted Stevens Anchorage Int’l Airport Anchorage, Alaska 99501 Jesse VanderZanden, AAE Airport Manager Fairbanks International Airport 6450 Airport Way, Suite 1 Fairbanks, Alaska 99709
Peter Putzier Senior Assistant Attorney General State of Alaska, Department of Law Transportation Section—Airports 1031 W. 4th Avenue, #200 Anchorage, Alaska 99501 Jeffrey N. Shane Patrick R. Rizzi HOGAN LOVELLS US LLP Columbia Square 555 Thirteenth Street, N.W. Washington, DC 20004 +1 202 637 6851/5659 jeff.shane@hoganlovells.com patrick.rizzi@hoganlovells.com Counsel for State of Alaska Department of Law

July 23, 2012\\DC - 037428/000001 - 3453677 v1 BEFORE THE DEPARTMENT OF TRANSPORTATION

WASHINGTON, D.C.

In the Matter of EXPANDED CARGO TRANSFER FLEXIBILITY AND EXPANDED AIR SERVICES AT INTERNATIONAL AIRPORTS IN ALASKA ) ) ) ) ) ) ) Docket DOT-OST-2010-0200 Docket DOT-OST-1996-1600 Docket DOT-OST-1999-5035 July 23, 2012

APPLICATION OF THE STATE OF ALASKA TO RENEW EXEMPTION FOR EXPANDED CARGO TRANSFER AUTHORITY AND EXPANDED AIR SERVICES AT INTERNATIONAL AIRPORTS IN ALASKA
Pursuant to 49 U.S.C. § 40109(c) and Subpart C of the Department’s Rules of Practice, the State of Alaska (“Alaska”) hereby requests that the Department of Transportation renew the blanket exemption authority from 49 U.S.C. § 41301, described below, granted to all foreign carriers authorized to serve the United States so that they may continue to engage in expanded cargo transfer activities and expanded air service at the Alaska International Airports. 1 In addition, Alaska requests that this authority be renewed for a period of not less than two years, and that the Department provide clear indication in any renewed authority to the effect that, absent

1 The “Alaska International Airports” are Ted Stevens Anchorage International Airport and Fairbanks International Airport.Application of the State of Alaska for Renewal Page 2

\\DC - 037428/000001 - 3453677 v1extraordinary circumstances, the Department would anticipate routine multiyear extensions of the authority in the future. 2 This exemption authority is, and has been, critically important in enabling the Alaska International Airports to remain competitive with foreign airports as international cargo transfer/transit hubs and as meaningful waypoints for international air services.

I. THE AUTHORITY REQUESTED. The authority for which renewal is being sought has four fundamental parts. First, in order to maintain and enhance the competitive position and profile of the State of Alaska and the Alaska International Airports as highlydesirable and advantageous points for the transit, transfer, and transshipment of international air cargo traffic, Alaska requests that the following specific blanket exemption authority be renewed for foreign air carriers which currently hold or subsequently receive effective Department authority to perform scheduled foreign air transportation of cargo so that they may

2 The existing exemption expires on August 19, 2012, and Alaska requests renewal prior that date. However, in filing this application, Alaska invokes and relies upon the automatic extension provisions of the Administrative Procedure Act, 5 U.S.C. § 558(c), as implemented by Part 377 of the Department’s Special Regulations, to continue the authority in effect pending the Department’s final determination on this renewal request. This application, which involves exemption authority conferred upon foreign air carriers, is timely pursuant to § 377.10(c)(3). See also Notice of Action Taken, dated Oct. 25, 2006, at n.1 (Docket DOT-OST-1996-1600) (noting that authority had remained in effect under 5 U.S.C. § 558(c) and Part 377 pending final determination on the application for renewal).Application of the State of Alaska for Renewal Page 3

\\DC - 037428/000001 - 3453677 v1 engage in the following cargo transfer activities at the Alaska International Airports:
1. To transfer cargo from any of their aircraft to any of their other aircraft ( i.e. , on-line cargo transfers), provided that both aircraft are operating to/from a point in the carrier’s homeland;
2. To make changes, at points in Alaska, in the type or number of aircraft used to transport cargo, provided that in the outbound direction the transportation beyond Alaska is a continuation of the transportation from the carrier’s homeland to Alaska, and in the inbound direction the transportation to the carrier’s homeland is a continuation of the transportation from behind Alaska ( i.e. , all forms of change of gauge for cargo operations, including “starburst” change of gauge); 3. To commingle cargo moving in foreign air transportation with cargo traffic not moving in foreign air transportation;
4. To discharge cargo in Alaska for transfer to a U.S. carrier for onward carriage to a final destination in the U.S.A. or in a third country, and to uplift from Alaska cargo transferred from a U.S. carrier which was transported by that carrier to Alaska from a point of origin elsewhere in the U.S.A. or in a third country ( i.e. , interline cargo transfers to/from U.S. carriers); and
5. To discharge cargo in Alaska for transfer to another foreign carrier for onward carriage to a final destination in a third country, and to uplift from Alaska cargo transferred from another foreign carrier which was transported by that carrier to Alaska from a point of origin in a third country (i.e. , interline transfers of cargo moving in foreign air transportation to/from other foreign carriers).
This part of the requested authority is the same authority that the Department first granted to foreign air carriers in late 1996 andsubsequently amended/renewed several times, and then most recently reissued in August 2010. See, e.g., DOT Order 1996-11-2; Notices of ActionApplication of the State of Alaska for Renewal Page 4

\\DC - 037428/000001 - 3453677 v1 Taken, dated Nov. 3, 1997, Nov. 3, 1998, Nov. 29, 2000, Dec. 2, 2002, Oct. 25, 2006 (Docket DOT-OST-1996-1600); DOT Order 2007-4-10; Notice of Action Taken, dated Aug. 19, 2010 (Dockets DOT-OST-2010-0200, 1999- 5035, 1996-1600) (“August 2010 NOAT”). Second, in order to enhance the competitive position and profile of the State of Alaska and the Alaska International Airports as highly desirable and advantageous waypoint stops or final destinations for air service, Alaska requests that the Department renew exemption authority for all foreign air carriers that currently hold or subsequently receive effective Department authority to serve points in the United States to allow them also to serve any point or points in Alaska, and to co-terminalize points in Alaska with other U.S. points for which they hold Department authority. This part of the requested authority is the same authority that the Department first granted to foreign air carriers in 1999 and most recently re-issued in August 2010. See DOT Order 1999-5-9; August 2010 NOAT. Third, Alaska requests that this exemption authority be renewed for a period of not less than two years, and that the Department provide an unequivocal declaration therein to the effect that, absent extraordinary circumstances, it would anticipate routine multi-year extensions of this authority in the future. Fourth , Alaska requests that the Department once again – as it did in DOT Order 1999-5-9 and, most recently, in the August 2010 NOAT –Application of the State of Alaska for Renewal Page 5

\\DC - 037428/000001 - 3453677 v1 reiterate its ongoing invitation to foreign air carriers to apply for authority to serve new U.S. points on an extra-bilateral basis, so long as such flights also serve Alaska. Importantly, the Application is not seeking authority for cabotage operations. Indeed, it seeks nothing more than exemption authority that has previously been granted (with the exception of the requested statement about future multi-year renewals being likely absent extraordinary circumstances).

II. RENEWAL OF THE REQUESTED BLANKET EXEMPTION IS IN THE PUBLIC INTEREST. Under 49 U.S.C. § 40109(c), the Department may grant exemptions if they are “consistent with the public interest.” As detailed below and as the Department previously recognized in granting and renewing this authority in the past, renewal of the blanket exemption is clearly in the public interest. It will continue to enhance the State of Alaska’s ability to attract foreign carriers to use the Alaska International Airports as transit, transfer, and trans-shipment hubs for international air cargo, thereby benefiting the State, its airports, its residents, and its businesses. Moreover, it would help create important new economic opportunities for U.S. carriers. Accordingly, Alaska urges the Department to renew this authority without delay.Application of the State of Alaska for Renewal Page 6

\\DC - 037428/000001 - 3453677 v1 A. Department Precedent Supports Renewing the Blanket Exemption Authority. There is substantial, on-point Department precedent for renewing the authority requested in this Application. In 1996 and 1999, the State of Alaska and the Alaska International Airports requested the same blanket exemption authority that they seek here. After due consideration, the Department granted the blanket exemption authority on an industry-wide basis, concluding that it was in the public interest. Thus, in granting the exemption permitting expanded opportunities for cargo transfers in 1996, the Department wrote: It would provide important public benefits to the State of Alaska. We noted that the Department, and the Civil Aeronautics Board before it, have long recognized the critical importance of air services to the economy of Alaska, and have acted to support Alaska’s efforts to attract air services to the state. . . .. We stated our view that the authority we proposed to grant would enable carriers to utilize fully the geographic advantages of Alaska as a cargo hub, would facilitate greater development of international operations at Alaskan airports, and would create new business opportunities for U.S. carriers. DOT Order 1996-11-2, at 2. Similarly, in granting exemption authority facilitating expanded air services to Alaska by foreign air carriers in 1999, the Department wrote: We remain of the view that these regulatory measures will facilitate the operation of new international services to Alaskan points, thereby helping to offset the service reductions experienced by Alaska airports, and providing the potential for significant benefits to Alaska and its economy.Application of the State of Alaska for Renewal Page 7

\\DC - 037428/000001 - 3453677 v1 DOT Order 1999-5-9, at 4. 3 Most recently, just two years ago, the Department stated that “[o]ur previous public interest findings in the referenced Dockets remain valid and support reinstatement of these authorities.” August 2010 NOAT. This compelling public interest rationale has lost none of its force, and thus the Department has a solid policy basis upon which to renew this exemption authority expeditiously. B. Renewal of the Exemption Is In The Public Interest. The blanket exemption authority will continue to provide substantial public interest benefits for the State of Alaska, the Alaska International Airports, and the businesses and residents of the State, as the Department previously recognized in granting this blanket exemption authority for foreign air carriers. See August 2010 NOAT; DOT Order 1996-9-19, at 4 (Show Cause Order); DOT Order 1996-11-2, at 2 (Final Order); DOT Order 1999-5-9, at 4-5. Alaska is the largest State in terms of land mass. It has vast expanses of untamed, rugged wilderness and a very limited ground transportation network. Air transportation and the State’s airports are vital links for most Alaskans and, for many remote Alaskan communities, the only link to the

3 The State of Alaska further notes that the Department has also similarly granted certain blanket authority to foreign air carriers to provide expanded passenger and cargo services at Guam’s Antonio B. Won Pat International Airport, to provide expanded cargo services and transfer activities at the airports of the Commonwealth of the Northern Mariana Islands, and to engage in expanded cargo services and transfer activities at Honolulu International Airport and Kona International Airport in Hawaii. See, e.g., DOT Order 2006-12-21 (Guam); DOT Order 2007-4-9 (Northern Mariana Islands); DOT Order 1992-12-10 (Honolulu, Kona).Application of the State of Alaska for Renewal Page 8

\\DC - 037428/000001 - 3453677 v1 outside world. As then Senator Ted Stevens has emphasized: “The Federal Government’s vast ownership of lands in Alaska and the limited access to those lands means that air transportation is the only way to reach most rural communities in Alaska.”4 Indeed, the aviation industry is estimated to have contributed $3.5 billion to the State’s economy in 2007, representing approximately 8% of the gross state product. See Report: The Economic Contribution of the Aviation Industry to Alaska’s Economy, January 2009, by Northern Economics. 5 Ted Stevens Anchorage International Airport accounts for 1 in 10 jobs in Anchorage, and Fairbanks International Airport provides 1 in 20 jobs in Fairbanks. It is hard to overstate the importance of aviation to Alaska, its residents, and its businesses. Given its importance, the need to encourage and support air transportation in Alaska has long been recognized. For example, the U.S. Congress has codified special cargo transfer rights at Alaska for eligible cargo in 49 U.S.C. § 41703(e). The corresponding section of the Conference Report accompanying the legislation acknowledged that “Alaska's geographic location and distance from the contiguous 48 States creates special needs, challenges and opportunities. Alaska has a unique geographic location as a technical and refueling stop for all cargo services between Asia, on the one

4 148 Cong. Rec. S7277 (July 24, 2002) (emphasis added) (statement of Senator Stevens in support of the Rural Services Improvement Act).
5 Available at http://www.alaskaasp.com/admin/Docs/Economic%20contribution%20of%20the_Aviation%20industr y%20report--compiled.pdf.Application of the State of Alaska for Renewal Page 9

\\DC - 037428/000001 - 3453677 v1 hand, and Europe and North America on the other.” H.R. Rep. No. 108-334, at 140 (2003). Alaska is located half-way between Asian countries and the continental United States, and it is only 91⁄2 hours (flight time) from 90% of the world. 6 And, of course, “[t]he Department, and Civil Aeronautics Board before it, have long recognized the critical importance of air services to the economy of Alaska, and have acted to support Alaska’s efforts to attract air services to the State.” DOT Order 1996-9-19, at 4. Aviation is as critical to Alaska’s economy and its residents as ever, but the challenges facing Alaska in attracting and maintaining air transportation remain today. With the ongoing global economic downturn, the increase in ultra-long-range aircraft that can overfly locations like Alaska, and the increased access to overflight routes and cargo transfer airports in other countries, the Alaska International Airports face numerous competitive and economic challenges to maintaining and developing their attractiveness as air cargo waypoints and transfer hubs for foreign air carriers. Due to the global recession, overall traffic is still well below the 2006 levels. Therefore, it is all the more important for the State of Alaska to retain this exemption authority to remain competitive and to avoid adding friction to the global air cargo economy and the place of the Alaska International Airports in that global economy.

6 Alaska Freight Gateway Brochure, available at http://dot.alaska.gov/aias/assets/ANC_Economic_Engine_Brochure_7.pdfApplication of the State of Alaska for Renewal Page 10

\\DC - 037428/000001 - 3453677 v1 Indeed, after receiving the exemption authority at issue in mid-2010, the State of Alaska moved quickly to alert foreign carriers and shippers to the air cargo and related transfer benefits available to them in Alaska. Among other things, the State of Alaska held “Air Cargo Summits” in 2010 and 2011 to explain the benefits of the Department’s exemption authority and answer any questions related thereto. 7 These summits were well attended by foreign air cargo carriers, and several carriers indicated that the availability of this exemption authority would be very important to them in deciding whether to transit the Alaska International Airports in the first place or, if already operating there, expanding their respective services. A third Air Cargo Summit will be conducted on October 7-8, 2012. 8 The Alaska International Airports also posted and publicized information about the scope of this authority for foreign air carriers. And, representatives of the State of Alaska visited several Asian countries to promote the availability of these air cargo opportunities in Alaska. These substantial efforts have begun to pay off. Indeed, for example, as a result of Alaska’s recent promotional efforts, Korean Air Lines (“KAL”) now uses paragraph (1) of the exemption authority each day, thereby

8 The Department generously sent knowledgeable representatives of its Office of International Aviation to both previous Summits, and is expected to send a representative to the third Summit in October. Given their detailed understanding of the opportunities available under the exemption authority for which renewal is sought herein, the participation of these experts represented an immense contribution to the proceedings and ensured that the participating foreign carriers received the most accurate account of the opportunities available to them under the exemption authority. The State of Alaska wishes to express its profound gratitude to the Department for its willingness to participate and thereby to maximize the value of the Summits to the foreign carrier representatives present.Application of the State of Alaska for Renewal Page 11

\\DC - 037428/000001 - 3453677 v1 optimizing the loads on 4-5 of its aircraft operating transpacific service and enabling KAL to shuffle the cargo among their own aircraft for transport onto further destinations. The State of Alaska needs this exemption authority renewed in order to build on this momentum. The renewal of this authority for not less than two years will enable Alaska (i) to maintain and expand its profile as a welcoming, advantageously-located point for the transfer, transit, and trans-shipment of international cargo between different continents, and (ii) to continue providing another opportunity for foreign air carriers to develop and use air cargo transfer facilities at the Alaska International Airports. It will enhance the ability of Alaska and the Alaska International Airports to compete more effectively with foreign airports in the Russian Federation, the Middle East, and Canada, among others, as a hub for international air cargo transportation between different continents and via the polar routes. It will provide foreign air carriers with opportunities (beyond August 2012)available only in Alaska that offer a uniquely economical and efficient fuelpayload trade-off. It will improve the economics and efficiencies associated with air trade between the United States and foreign partners, thereby inuring to the broader benefit of the United States as a whole. These efforts, in turn, will continue to yield substantial public interest benefits for Alaska, its airports, and its residents, as was the case when the original blanket exemption was in effect in 1997 and in 2004.Application of the State of Alaska for Renewal Page 12

\\DC - 037428/000001 - 3453677 v1 In sum, granting the requested exemption is consistent with Department precedent and the public interest. Conversely, failure to issue the exemption would be at odds with Department precedent, inimical to the public interest, and undermine the reasonable expectations of foreign carriers with respect to this exemption authority; it would compromise Alaska’s role as an attractive, competitive international air cargo hub and an economical, efficient waypoint for intercontinental travel; it would increase the State’s isolation; and it would encourage and buttress the efforts of Alaska’s foreign competitors to act as international air cargo transfer, transit, and trans-shipment hubs of choice. Accordingly, the Department should grant the requested blanket exemption authority immediately for another period of not less than two years period.

III. A DEPARTMENTAL STATEMENT ABOUT FUTURE EXTENSIONS IS WARRANTED. As noted above, the State of Alaska is also requesting that the Department provide a clear indication in the renewed exemption authority to the effect that, absent extraordinary circumstances, the Department would anticipate routine multi-year extensions of this authority in the future. Such a statement would significantly enhance Alaska’s ability to attract foreign carrier service and compete with cargo hubs in other countries. Air carriers often look beyond two years when it comes to making significant commitments for new and/or expanded cargo services andApplication of the State of Alaska for Renewal Page 13

\\DC - 037428/000001 - 3453677 v1 facilities. For an air carrier to develop, construct, and/or expand its cargo operations to/from/via Alaska and an air cargo transfer hub there, the airline must make a long-term commitment with substantial financial/capital resources and a significant lead-time. Without some level of reassurance or commitment by the Department to maintain this important exemption authority beyond the two-year period of effectiveness (as Alaska is asking for), foreign carriers may be reluctant to establish and expand such operations. In order to provide such reassurance that this exemption authority will not be withdrawn or otherwise allowed to expire after a mere two additional years, thereby undermining Alaska’s efforts to entice the air cargo activities made possible by the exemption authority, the Department should provide the clear indication of its future expectations that the State of Alaska seeks.Application of the State of Alaska for Renewal Page 14

\\DC - 037428/000001 - 3453677 v1 WHEREFORE, for the foregoing reasons, the State of Alaska respectfully urges the Department to renew the subject exemption authority consistent with the instant application. Respectfully submitted,

J Jeffrey N. Shane Patrick R. Rizzi HOGAN LOVELLS US LLP 555 Thirteenth Street, N.W. Washington, DC 20004 +1 202 637 6851/5659 Counsel for State of Alaska Department of LawApplication of the State of Alaska for Renewal Page 15

\\DC - 037428/000001 - 3453677 v1 CERTIFICATE OF SERVICE I hereby certify that a copy of the foregoing Application of the State of Alaska for Renewal of an Exemption has been served this 23rd day of July 2012, upon each of the following addressees: carl.nelson@aa.com; robert.wirick@aa.com; francis.heil@aa.com; james.kaleigh@aa.com; sascha.vanderbellen@delta.com rbkeiner@crowell.com; dan.weiss@united.com; steve.morrissey@united.com; jonathan.linde@united.com david.heffernan@wilmerhale.com bob.kneisley@wnco.com robert.land@jetblue.com marshall.sinick@squiresanders.com; charles.donley@squiresanders.com; edward.sauer@squiresanders.com anbird@fedex.com gbleopard@fedex.com anita.mosner@hklaw.com matwoood@cozen.com george.carneal@hoganlovells.com kevin.montgomery@polaraircargo.com jrichardson@johnlrichardson.com lhalloway@crowell.com efaberman@wileyrein.com howard.kass@usairways.com; benjamin.slocum@usairways.com jhill@dowlohnes.com john@mietuslaw.com mgoldman@sgbdc.com; rsilverberg@sgbdc.com dhainbach@ggh-airlaw.com; agoerlich@ggh-airlaw.com mlbenge@zsrlaw.com dkirstein@yklaw.com; jyoung@yklaw.com cjsimpson@zsrlaw.com; dmendersbee@zsrlaw.com pmurphy@lopmurphy.com lachter@starpower.net rpommer@atlasair.com romanow@pillsburylaw.com jasilversmith@zsrlaw.com george.tompkinsjr@wilsonelser.com esahr@eckertseamans.com wkaras@steptoe.com gwalden@pattonboggs.com

___________________________ Patrick Rizzi