BEFORE THE

DEPARTMENT OF TRANSPORTATION

WASHINGTON, D.C.

)

Application of )

)

JAT AIRWAYS A.D. BELGRADE ) Docket DOT-OST-2013-0177

)

for an Exemption pursuant to )

49 U.S.C. § 40109 )

)

)

Application of )

)

ETIHAD AIRWAYS P.J.S.C. ) Docket DOT-OST-2013-0178

)

for a Statement of Authorization )

pursuant to 14 C.F.R. Part 212 )

)

MOTION FOR LEAVE TO FILE AND

CONSOLIDATED SURREPLY OF DELTA AIR LINES, INC.

Communications with respect to this document should be addressed to:

Alexander Van der Bellen

Managing Director, Regulatory Affairs

& Associate General Counsel

Christopher Walker

Regional Director, Regulatory Affairs

DELTA AIR LINES, INC.

1212 New York Avenue, N.W.

Washington, D.C. 20005

(202) 842-4184

sascha.vanderbellen@delta.com

chris.walker@delta.com

October 22, 2013
BEFORE THE

DEPARTMENT OF TRANSPORTATION

WASHINGTON, D.C.

)

Application of )

)

JAT AIRWAYS A.D. BELGRADE ) Docket DOT-OST-2013-0177

)

for an Exemption pursuant to )

49 U.S.C. § 40109 )

)

)

Application of )

)

ETIHAD AIRWAYS P.J.S.C. ) Docket DOT-OST-2013-0178

)

for a Statement of Authorization )

pursuant to 14 C.F.R. Part 212 )

)

MOTION FOR LEAVE TO FILE AND

CONSOLIDATED SURREPLY OF DELTA AIR LINES, INC.

In the interest of a more complete record for decision, Delta Air Lines, Inc. 

(“Delta”) requests leave to file this Consolidated Surreply to Jat Airways a.d. Belgrade 

(“JAT”) for an exemption, and to Etihad Airways P.J.S.C. (“Etihad”) for a Statement of 

Authorization. As detailed in Delta’s Answer of October 4, 2014, these applications 

raise serious policy concerns given (i) the prevalence of state ownership and state 

subsidy of both carriers, (ii) Etihad’s effective of control of JAT through various 

management arrangements, (iii) the extrabilateral nature of the authority, and (iv) the 

extraordinary circuity of the proposed routing between Europe and the U.S. via Abu 

Dhabi and absence of any tangible consumer benefits. 
Delta Air Lines Consolidated Surreply

Page 2

We offer the following additional points to the claims made by JAT and Etihad in 

their respective Replies:

1. Etihad asserts that even if it exerts effective control over JAT, 

Etihad’s investment in JAT should receive a waiver of the Serbian citizenship 

requirement (if there were a bilateral agreement), as DOT has done for other open skies 

countries. Delta disagrees. When state sponsorship and state subsidy are at play, as 

they are here, DOT should not grant open-ended waivers that have a detrimental effect 

on U.S. carriers. Grant of JAT and Etihad’s applications would be an open invitation to 

capacity dumping as part of UAE state policy to funnel traffic over its hubs as part of its 

economic development policy. U.S. carriers cannot be expected to compete against 

foreign states whose carriers are instruments of state policy. We note that DOT has a 

statutory mandate to “strengthen[] the competitive position of air carriers to at least 

ensure equality with foreign air carriers, including the attainment of the opportunity for 

air carriers to maintain and increase their profitability in foreign air transportation.” 49 

USC § 40101 (a)(15). U.S. flag carriers cannot maintain and increase profitability in the 

transatlantic in the face of state-sponsored carriers operating from subsidized hubs in 

the Middle East. 

2. JAT and Etihad argue that a Serbian government decision to 

approve the Etihad/JAT arrangement “is entitled to considerable deference” from DOT. 
Delta Air Lines Consolidated Surreply

Page 3

They cite no precedent or support for this position because there is none. On the 

contrary, DOT policy calls for DOT to review whether JAT is substantially owned and 

effectively controlled by Serbian citizens without making any presumptions based on the 

views of the Serbian government (which, as a party to the JAT/Etihad transaction, is 

hardly objective) or any other factors. All of the cases that JAT/Etihad cite where DOT 

granted a waiver of the ownership/control requirement involved countries where the 

U.S. had a bilateral agreement in place, which is not the case here. More 

fundamentally, the issue of whether to grant a waiver is not a matter of “comity and 

reciprocity”; the applicable test is whether DOT can “conclude that there is nothing in 

the ownership structure that would be inimical to U.S. aviation policy or interests.” DOT 

Foreign Air Carrier Information Packet, Sept. 2000, at 5 (emphasis added). Delta, A4A 

and ALPA have put forward strong arguments that the JAT/Etihad investment 

arrangement and the proposed codesharing “would be inimical to U.S. aviation policy or 

interests.” 

3. Etihad falsely claims that “it operates to a commercial mandate and 

does not receive state subsidies.” This is contradicted by the statements of its own 

CEO, attached, that “Etihad does not focus so much on making money, but on the 

connectivity.” And, in truth, Etihad has received billions in state aid to launch the airline 

and remain afloat in the face of chronic losses. Despite its history of unprofitable 

operations, Etihad continues to add aircraft and acquire more carriers, bringing them 
Delta Air Lines Consolidated Surreply

Page 4

under the umbrella of its state sponsored enterprise. The Department should not 

further this strategy by granting extrabilateral authority to JAT to serve the United States 

under the commercial control of Etihad.

4. We note that the European Commission has been studying the 

problem of subsidized competition and is working on an external aviation policy and 

new bilateral fair competition language to address these concerns. The EU has for 

many years been concerned about subsidies received by non-EU carriers (including 

Gulf carriers) to the detriment of competing EU carriers. Regulation 868/2004 was 

introduced in 2004 with the aim of protecting EU carriers against subsidization and 

unfair pricing in the supply of air services from non-EU countries, but it has proved too 

difficult to apply this Regulation in practice. Thus, the European Commission’s new 

“External Aviation Policy – Addressing future challenges” published in September 2012 

proposed changes to improve the EU’s legal position, including the inclusion of standard 

“fair competition” clauses in existing bilateral air services agreements between EU 

Member States and non-EU countries. More recently, in July 2013, the European 

Parliament published a resolution calling on the European Commission to (amongst 

other things): (i) conduct a study on State aid received by competitors at global level 

and its impact on EU airlines; (ii) propose urgent revision or replacement of Regulation 

868/2004; and (iii) engage in dialogue with Gulf countries with a view to enhancing 

transparency and safeguarding fair competition. 
Delta Air Lines Consolidated Surreply

Page 5

5. It has also been reported that in August 2013, the European 

Commission put the Serbian authorities on notice that, to the extent that Etihad is 

deemed to have “effective control” of JAT, this would violate the ECAA Agreement and 

Regulation 1008/2008 given that JAT would be controlled by nationals of a non-ECAA 

State1. It therefore appears that, in addition to the EU’s overriding concerns about 

subsidies provided to non-EU airlines by Gulf states, the Commission is investigating 

whether the proposed arrangement would comply with its airline ownership rules and 

would place Serbia in breach of its obligations under the ECAA Agreement.

Given the unique circumstances of this case, the EU’s apparent concerns are helpful 

and instructive as the Department considers this extraordinary request to extend 

extrabilateral relief to JAT and Etihad to serve the United States. The EU’s opposition 

to unfair state subsidy of airlines mirrors the statutory obligation on the Department to 

oppose applications which could harm US carriers and the competitive environment 

within which they operate. Although the position in the EU remains unresolved, we 

would encourage the Department to act to protect the position of US carriers in the face 

 1 Serbia is a signatory to the Multilateral Agreement for the Establishment of a European Common 

Aviation Area (the ECAA Agreement), which applies Regulation (EC) No 1008/2008 of the European 

Parliament and Council of 24 September 2008 providing common rules for the operation of air 

services in the EU, including nationality conditions for granting airline operating licences. Serbia is in 

the process of joining the EU and in any event will become bound by these nationality rules when it 

does so. 
Delta Air Lines Consolidated Surreply

Page 6

of transatlantic competition from a European airline which would be effectively owned, 

controlled and subsidized by Etihad. 

* * *

For the foregoing reasons, and those stated in our Answer, Delta objects to the 

above-captioned applications of JAT and Etihad and urges the Department to deny 

them both. 

Respectfully submitted,

_____________________________

Alexander Van der Bellen

Managing Director, Regulatory Affairs

 & Associate General Counsel

DELTA AIR LINES, INC.

CERTIFICATE OF SERVICE

A copy of the foregoing Surreply has been served this 22nd day of October, 2013, upon the 

following persons via email:

anita.mosner@hklaw.com

Jennifer.Nowak@hklaw.com

robert.wirick@aa.com

francis.heil@aa.com

anbird@fedex.com

sllunsford@fedex.com

dan.weiss@united.com

howard.kass@usairways.com

rsilverberg@sgbdc.com

jjohnson@sgbdc.com

tom.fosko@airtransport.com

jcanny@amerijet.com

jrichardson@johnlrichardson.com

rpommer@atlasair.com

john.palo@evergreenairlines.com

charters@evergreenairlines.com

matwood@cozen.com

mlbenge@zsrlaw.com

kevin.montgomery@polaraircargo.com

peter.beckett@polaraircargo.com

john.allen@faa.gov

Russell.Bailey@alpa.org

dberg@airlines.org

kglatz@airlines.org

paul.gretch@dot.gov

todd.homan@dot.gov

Peter.Irvine@dot.gov

info@airlineinfo.com