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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

)

)

)

)

)

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)

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.1In 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

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extraordinary 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 highly

desirable 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

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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 and

subsequently amended/renewed several times, and then most recently reissued in August 2010. See, e.g., DOT Order 1996-11-2; Notices of Action
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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

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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

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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

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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

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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.”4Indeed, 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.5Ted 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

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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.pdf
Application of the State of Alaska for Renewal

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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.7These 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

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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

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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 and
Application of the State of Alaska for Renewal

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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

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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,

JJeffrey 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 Law
Application of the State of Alaska for Renewal

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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