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 , 2013BEFORE 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 consum er 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 Ser bian 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 hav e 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 (wh ich, 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 ini mical 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 “wou ld 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 focu s 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 a ircraft and acquire more carriers, bringing themDelta 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 c oncerned 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 subsidi z ation and

unfair pricing in the sup ply 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 r esolution 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) e ngage 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

State 1 . It therefore appears that, in addition to the EU’s overriding concern s 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.

Give n 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 unf air 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 en courage the Department to act to protect the position of US carriers in the face

1 Serbia is a signa tory 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 st ated 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 22 nd 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