Order 2014-1-13

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

Issued by the Department of Transportation

on the 17th day of January, 2014

Served: January 17, 2014

Application of

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

 

for an exemption under 49 U.S.C. §40109 

ORDER DISMISSING APPLICATION

Summary

By this order we dismiss the request of Jat Airways a.d. Belgrade (JAT), a foreign air carrier of Serbia, for 

an exemption under 49 U.S.C. § 40109 to permit it to conduct certain U.S. services.

Application

By application filed September 19, 2013, JAT requests an exemption under 49 U.S.C. § 40109 to the extent 

necessary to permit it to hold out service to the United States by placing its designator code on flights 

operated by JAT’s current or future commercial partners, which hold the appropriate authority to operate 

service to the United States, or through authorized lease arrangements. JAT states that it has immediate 

plans to offer code-share service to the United States on flights operated by Etihad Airways P.J.S.C. 

(Etihad).

1 2 JAT states that it is a Serbian carrier and that, although the United States and Serbia do not 

currently have a bilateral air service agreement in place, the principles of comity and reciprocity warrant 

approval of JAT’s requested authority.

 1 See Application of Etihad in Docket DOT-OST-2013-0178, for a statement of authorization under 14 C.F.R. Part 212 to display 

the “JU” designator code of JAT on flights operated by Etihad to the United States. Etihad states that it will initially display the 

“JU” code on Etihad flights that connect with JAT’s services to Belgrade between Abu Dhabi, on the one hand, and New York 

(JFK), Chicago, and Washington, DC, on the other hand. 2 Subsequent to JAT’s application for an exemption, Air Berlin PLC & Co. Luftverkehrs KG (Air Berlin) filed an application in 

Docket DOT-OST-2013-0183, for a statement of authorization under 14 C.F.R. Part 212 to display the “JU” designator code of 

JAT on certain Air Berlin transatlantic flights between Germany and the United States. Air Berlin states that it will initially 

display the “JU” code between Dusseldorf and New York (JFK); and between Berlin, on the one hand, and New York (JFK) and 

Chicago, on the other hand.
In its application, JAT states that it is a joint stock company owned by the Serbian Government, but notes 

that it is in negotiations with Etihad, a foreign carrier of the United Arab Emirates that has proposed to 

purchase a 49% stake in JAT. JAT further states that its 10-member Board of Directors consists of all 

Serbian citizens, with one member, the President, holding dual Serbian/Australian citizenship. JAT asserts

that if the purchase deal with Etihad is finalized, JAT will remain substantially owned and effectively 

controlled by Serbian citizens.

Responsive Pleadings

Airlines for America (A4A), the Air Line Pilots Association (ALPA), and Delta Air Lines, Inc. (Delta) 

each filed answers in opposition to the application of JAT.3 JAT and Etihad each filed a reply to the 

objecting parties.4

 Delta filed a surreply, to which JAT and Etihad both filed responses.5 The positions of 

the parties are summarized below.

A4A notes that the United States and Serbia do not have an aviation agreement, and argues that grant of the

extrabilateral authority being sought by JAT is not in the public interest. A4A asserts that JAT’s service 

proposal to provide code-share service on Etihad flights over a Belgrade-Abu Dhabi-U.S. routing involves 

approximately 4,700 miles of unnecessary circuity, and would provide no public benefit. A4A further 

claims that, in addition to the proposed purchase by Etihad, JAT also stands to receive substantial state aid 

from the Government of Serbia, which would distort competition in the aviation system and deprive

consumers of the benefits of fair competition. A4A also contends that a critical decisional consideration in 

this case should be that Etihad’s outright management of JAT/Air Serbia combined with its ownership 

interest demonstrates, or at a minimum strongly suggests, that Etihad will effectively control JAT/Air 

Serbia.

ALPA states that there is no air transport agreement in place between the United States and Serbia, and

that, if there were, it would almost certainly include a clause requiring that substantial ownership and 

effective control of JAT be vested in Serbia or Serbian nationals. ALPA also notes the pending sale of 

49% of JAT to Etihad, and cites press reports indicating that, as part of this investment, Etihad would be 

extensively involved in JAT’s management.6 ALPA argues that effective control of JAT would then lie 

with Etihad, not Serbia or Serbian nationals. 

Among other concerns, Delta’s objection takes issue with the absence of a bilateral air services agreement 

between the United States and Serbia, and argues that JAT and Etihad have mischaracterized Etihad’s 

ownership and effective control of JAT, which Delta claims are significantly more extensive than suggested

on the record and result in de facto effective control of JAT by Etihad.

7 Delta also argues that the 

JAT/Etihad state subsidies and a proposed CBP pre-clearance facility in Abu Dhabi will have harmful 

effects on U.S. carriers, resulting in competitive deficiencies and marketplace distortions.

 3 Delta filed a consolidated answer to the application of JAT and the application of Etihad, in Docket DOT-OST-2013-0178, for 

a statement of authorization to code share with JAT.

4 Etihad’s pleading was filed as a consolidated reply, to the answers filed in response to JAT’s application in the instant Docket, 

and to Delta’s answer filed in response to Etihad’s own application in Docket DOT-OST-2012-0178. 5 Delta, JAT, and Etihad all accompanied their pleadings with motions for leave to file, which we will grant. 6 Answer of ALPA, at 2-3. 7 Consolidated Answer of Delta, at 9-10.
JAT and Etihad assert that approval of exemption authority to JAT is in the public interest, and claim that 

the objections of A4A, ALPA, and Delta are without merit and irrelevant. JAT further asserts that its 

request is not limited to code-share service over Abu Dhabi, but rather, is for broad exemption authority to 

code-share with any of its commercial partners, including Air Berlin, which has a pending application 

before the Department to code-share with JAT.

JAT acknowledges the lack of an air services agreement between the United States and Serbia, but asserts 

that the principles of comity and reciprocity require approval of JAT’s application. JAT states that two 

U.S. carriers currently serve Serbia on a code-share basis, and that neither of those carriers objected to 

JAT’s application. JAT and Etihad urge the Department to treat Delta’s objections as irrelevant, especially 

since Delta serves neither Serbia nor Abu Dhabi.

As for JAT’s ownership and control, JAT and Etihad state that the proposed investment by Etihad is subject 

to review by the Serbian civil aviation authorities, and the carriers assert that the determination of the 

Serbian government is entitled to considerable deference. JAT notes, however, that should the Department 

not find it to be substantially owned and effectively controlled by Serbian citizens, the Department has the 

ability to waive its ownership and control policy. JAT maintains that ownership and control of JAT will 

remain with Serbian citizens upon completion of the transaction with Etihad, but requests a waiver to the 

extent that the Department deems it necessary. JAT and Etihad assert that there is ample precedent for such

a waiver, particularly in light of the open-skies agreement in place between the United States and the 

U.A.E.

Decision

We have decided to dismiss JAT’s request for exemption authority. In determining whether to grant 

exemption authority to a foreign carrier under 49 U.S.C. § 40109, we must find that the authority would be 

consistent with the public interest. Based upon the specific circumstances presented in this case, we cannot 

make that finding.

The United States and Serbia have no bilateral air service agreement obligating the Department to license 

JAT to provide service to the United States. The Department, therefore, must determine in its discretion 

whether granting JAT’s request is in the public interest. In seeking to make a public interest determination 

in the circumstances of this case, we are faced with certain critical elements, centering on the issue of 

JAT’s ownership and control, that are unresolved on the record. 8 9 

The objecting parties raise specific allegations-- allegations that appear to be supported by publicly 

available statements made by both Etihad and JAT – indicating that, notwithstanding Serbian retention of 

majority ownership in JAT and representation in its organizational structure, Etihad will likely nevertheless 

wield extensive control over JAT’s day-to-day operations.

10 In the face of these specific, concrete 

 8 While we recognize that a number of other issues were raised in the pleadings, our analysis at this juncture has been focused on 

the ownership and control issue, a well-established decisional factor in our determination as to whether to award economic 

authority to a foreign air carrier applicant.

9 We note that JAT asserts that we owe great deference to the ownership and control decision of its homeland government. 

While there are indeed cases in which we give particular deference to a foreign government’s decision, these cases involve 

situations in which we have reached formal agreement with foreign partner countries regarding reciprocal recognition of 

homeland fitness and citizenship determinations. We have no such agreement with the Government of Serbia.

10 See footnotes 6 and 7 supra, and accompanying text.
allegations that cast serious doubt on its statements regarding its ownership and control, JAT merely 

responded with generalities and reiterations of earlier assertions that do not adequately refute these 

allegations. Without such evidence, we have no persuasive basis to make an affirmative public interest 

finding in favor of JAT’s application. 

JAT and Etihad assert that, notwithstanding the ownership and control concerns that have been raised, we 

could nevertheless proceed to award JAT its requested authority by granting a waiver of our ownership and 

control policy. To grant such a waiver, however, we must be able to find that the waiver would not be 

inimical to U.S. aviation policy or interests. The inadequacy of the record does not allow us to make 

findings necessary to determine whether or not the standard for granting a waiver has been met. 

Taking into account all of the circumstances presented in this case, we have therefore decided to dismiss 

the application.

ACCORDINGLY,

1. We dismiss the request of Jat Airways a.d. Belgrade for an exemption under 49 U.S.C. § 40109;

2. We grant all motions for leave to file otherwise unauthorized documents in the captioned docket; and

3. We will serve a copy of this order on Jat Airways a.d. Belgrade; Etihad Airways P.J.S.C. ; the Air Line 

Pilots Association; Airlines for America; Delta Air Lines, Inc.; the Embassy of Serbia in Washington, D.C.;

the Department of State, and the Federal Aviation Administration.

By:

SUSAN L. KURLAND

Assistant Secretary for Aviation

and International Affairs

(SEAL)

Appendix

An electronic version of this document is available on the World Wide Web at:

http://www.regulations.gov