BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C. ) Request ) ) of Silk Way West Airlines ) Docket OST 2014-0111 to amend issued exemption authority and ) pending application for a foreign air carrier permit ) and motion to expedite processing ) (Baku-Hong Kong-Chicago-New York-Luxemburg-Baku) )
CONSOLIDATED REPLY OF SILK WAY WEST AIRLINES TO ANSWERS OF NATIONAL AIRLINES, KALITTA AIR AND NATIONAL AIR CARRIER ASSOCIATION
Communications with respect to this document should be sent to: KAMRAN GASIMOV Director /CEO SILK WAY WEST AIRLINES Heydar Aliyev International Airport Baku, AZ-1 044 , Republic of Azerbaijan

Dated: November 5, 2014 GLENNP. WICKS EKATERINA A. GRIMES THE WICKS GROUP , PLLC 733 lOth Street NW, Suite 3002 Washington, DC 20001 (202) 457-7790 gpwicks @ wicks -group.com ekagrimes @ wicks- group .com For: SILK WAY WEST AIRLINES

### BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D

. C. ) Request ) ) of Silk Way West Airlines ) Docket OST 2014-0111 to amend issued exemption authority and ) pending application for a foreign air carrier permit ) and motion to expedite processing ) (Baku-Hong Kong-Chicago-New York-Luxemburg-Baku) )


### CONSOLIDATED REPLY OF SILK WAY WEST AIRLINES TO ANSWERS OF NATIONAL AIRLINES, KALITTA AIR AND NATIONAL AIR CARRIER ASSOCIATION
On October 8 , 2014 , Silk Way West Airlines ("Silk Way West) submitted to the Department of Transportation ("Department") a request that the exemption authority granted to it by Order 2014-8-125 in Docket DOT-OST-2014-0111be expanded to allow it to implement scheduled air transportation of property and mail on the route Baku-Hong Kong-Chicago-New York-Luxemburg-Baku , with no US domestic cargo transportation between the points ofChicago and New York ("Request to Amend " ). Silk Way West further motioned the Department for expedited consideration of its Request to Amend, and
was polling the US carriers on the attached service list. In its Request to Amend Silk Way West stated that it was requesting the broader authority and the expedited consideration of its request in order to ensure greater economic efficiency and a better benefit to the current market of cargo air transportation. Silk Way West further maintained that an expedited consideration and grant of its Request to Amend is in the public interest as Silk Way West will provide the much needed services in the U .S .-Azerbaijan aviation market , as well as in the broader international market of cargo air transportation by providing additional capacity and helping to meet the requirements for cargo air transportation services in the high season and peak demand

. Silk



### - 2

-Way West ' s ability to timely implement its service during the high season will also serve as
a justification and incentive for its recent acquisition ofbrand new Boeing 747-8F aircraft. Silk Way West also stated that, pending finalization of the broader bilateral undertakings between the United States and the Republic of Azerbaijan, its proposed services that are the subject of the Request to Amend are based upon comity and reciprocity between the Government of the United States and the Government ofAzerbaijan, and that Silk Way West had been formally designated by the State Civil Aviation Administration of the Republic of Azerbaijan (SCAA) to operate the proposed services. A formal letter from the State Civil Aviation Administration ofthe Republic of Azerbaijan confirming Silk Way West's designation for the specific route requested herein, as well as reiterating SCAA ' s adherence to the principles of comity and reciprocity in considering any similar applications from US carriers, is being currently transmitted to the Department. Silk Way West continued polling its Request to Amend past the requested shortened comment period pending transmission of the designation and reciprocity letter to the Department. On October 20, 2014, Silk Way West received the Answer of National Airlines ( " National " ) to Silk Way West ' s Motion to Expedite Processing containing an objection to the Motion to Expedite and a statement that National 

### will be filing answers to the application to amend Silk Way West' s authority " due to problems it has encountered in Azerbaijan." On October 23, 2014, Silk Way West received a second answer of National enumerating its objections that in most general terms boiled down to generally unsubstantiated statements that the Department should not grant the requested authority on the grounds that it is " incredibly broad " in nature, and that National has "on multiple occasions " not received crew visas " in and out of Baku." On October 24, 2014, Silk Way West submitted a response to both National's filings in which it demonstrated its analysis of the nature ofNational's alleged visa issues as really not rising to the level of a bilateral aviation comity and reciprocity issue, and typically



### - 3

-resolved in the normal course of business for National Airlines , and reiterated its request for the amended authority. Silk Way West also notified the Department that it had completed the poll of its pending Request to Amend, and , with the exception ofNational ' s objection to shorten the comment period and its subsequent answer, had not received any procedural or substantive objections, comments or answers from any other carrier on the service list. Following its Response, on October 29 , 2014 , Silk Way West received the third Answer of National Airlines , as well as Answers ofNational Air Carrier Association and Kalitta Air in the above-captioned proceeding, and is hereby submitting its consolidated response ( " Consolidated Response " ) to the referenced Answers , as follows: l. Reply to National Airlines With respect to the October 29 , 2014 Answer ofNational Airlines , Silk Way West notes that National has failed to add any substance to its previous allegations of "effectively being denied crew visas in and out of Baku, " but simply restated that in the absence of a bilateral agreement between the United States and Azerbaijan it viewed instant proceeding as a forum to express its alleged dissatisfaction with the status of visa issuance for its crews. Indeed, it is a misnomer to suggest that " visas out of' Azerbaijan can be a problem in principle, just like visas " out of' any other country. National' s odd reference to problems with visas " out of Baku " provides further evidence that there is no substance to National ' s obj ection. At best , National ' s allusion to visas " out of Baku " makes Silk Way West think that the analysis that it presented in its October 24 Response, that focused on instances when an extension of the 72-hour visa-free stay in Baku was required for certain crews, was precisely on the point and demonstrated that the issue, that was not by any stretch a demonstration of failing comity and reciprocity in the first place (because the visafree stay was being granted to crews consistently) , was successfully resolved. In its October 29 , 2014 Answer National al s o cited to alleged "significant problems as sociated with the price of fuel required to be uploaded in Baku," and stated that

" in earlier flights National uploaded fuel at pre-negotiated rates from its regular fu el

- 4
-supplier," but "in later flights National was obliged to purchase fuel from a designated fueler at a per gallon rate that was 22% higher than National ' s pre-negotiated price. " In connection with this allegation , Silk Way West would like to stress that without the benefit of a clearer explanation of the circumstances and the nature of " earlier" versus " later" flights it would find it hard to comment on this specific statement. However, it would like to refer to its broader analysis of the aeronautical services rates and their application at Baku International Airport in this pleading below. Finally, in its October 29 , 2014 Answer National further stressed the significance ofthe Hong Kong and Luxemburg markets for US carriers and stated that there is no basis "for the award of such substantial 3rd country authority on the basis of comity and reciprocity 

### which has not been demonstratetf' (emphasis added). In this regard , Silk Way West would like to once again stress that in the most precise meaning of comity and reciprocity as the reciprocal grant of specific equivalent traffic rights and economic authority by aviation authorities ofone country to carriers from another country (as demonstrated by numerous confirmations filed by aviation authorities from numerous countries worldwide in Docket DOT-OST-2006-24269) , it would be very hard to say that comity and reciprocity, including in the grant of 3rd country authority , has not been consistently demonstrated by the Azeri aviation authorities to numerous US carriers over the period of at least five recent years. Indeed , US carriers , and cargo carriers in particular, have been actively operating, including fifth freedom flights, in and out of Baku for many years , while Silk Way West is in fact the first Azeri cargo carrier that is effectively trying to start an operation and has applied for such authority, and does not seem to be shown much comity and reciprocity so far.

- 5 -2. Reply to NACA In its October 29, 2014 Answer, the National Air Carrier Association (''NACA") purports to be sp eaking on behalfof its broader membership base, but in reality restates the p osition ofonly one of its members , National, and cites specifically to National ' s October 24 Answer, and the same alleged " difficulty obtaining visas for crew members." NACA's submission , therefore , offers no more than the generalized statements and scant facts as National 's earlier Answer that it i s so lely based on. While NACA may certainly repre sent its members as it sees fit , the DOT should not g ive weight to NACA 's
answer as it offers no additional infonnation than that proffered by National, and neither has made any effort to respond to Silk Way's detailed response which provides concrete evidence that no bilateral issue exists in fact. Indeed , DOT should avo id catering to what appears to be no more than an effort to avoid comp etition which will clearly benefit the
shipping public and is supported by the existence of comity and reciprocity. 3 Reply to Kalitta Air The Answer of Kalitta Air ( " Kalitta " ) filed on October 29, 2014 , carne after National 's filin gs of October 20 and 23 , and followed an initial no comment response to Silk Way We st 's Reque st to Amend authority. Kalitta ' s Answer focuses on two ke y aspects of its , obviously recon sidered, po sition: the context of the bilateral status between the countries , and certain alleged issues that Kalitta experienced in its operations to/ from/through Baku as having " implications for the state of comit y and reciprocity. " Silk Way West has already addressed the state of comity and reciprocity and bilateral aspects ofthe i ssue in its consecutive submi ssion s in the captioned Docket. Whil e focusing primari ly on Kalitt a ' s purported doing business i ssu es, Silk Way stresses that Kalitta has been the beneficiary of extensive fifth freedom operation approv als to/from Baku. I t is deeply of fen sive that the narrow business issue ofKalitta (and Mr. Wallace in particular) of attempting to shield Kalitta from com p etition by Silk Way West with Mr. Wallace 's long standin g commercial contacts in Hong Kong sh ould cause them to forget 

### - 6

-the extensive rights already granted to Kalitta over the many years. DOT should not itself lose sight of this fact when evaluating Kalitta ' s now reconsidered position with respect to Silk Way West's pending Request to Amend. Kalitta alleges that the cost ofcertain aeronautical services , such as cargo handling fees and fueling fees , at Baku International Airport " make it very uneconomical for
a carrier to operate there unless that carrier has a contractual relationship with Silk Way

- in which case, the costs are dramatically lower. " In providing the examples of varying costs and analyzing them , Kalitta indicates that many of the services at the airport are operated by companies affiliated with Silk Way through Silk Way Group, and admits that Silk Way "should not be penalized for being such a successful conglomerate." However, Kalitta at the
same time maintains that the described status make s Azerbaijan into a " not an open and competiti ve market for US carriers

- unless , of course , they contract with Silk Way." Many of the airport services are indeed provided by companies that are members of Silk Way Group, however, the key point in the arrangement of services and fee s does not lay in the absence or presence of a "contract with Silk Way" as Kalitta would put it , but rather in the continuous, or contract nature of the operation versus one-off charter arrangements. Much as is the case in the operating practices ofUS airports , including such major ones as for example JFK, the rates charged to carriers that are signatories to respective airport agreements (involving quite a few criteria required to be met in order to become a signatory) differ from the rates for airlines that are not. Similar differentiation may be seen in fuel pricing based on the volumes and contractual discounts. The same principle is explicitly supported by the Department ofTran sportation, Federal Aviation Administration ("FAA " ) "Policy Regarding Airport Rates and Charges," 78 Fed. Reg. 175, Sept. 10 , 2013 , at Sect. 3.1.1., that specifically state that " [t]he prohibition on unjust discrimination [in aeronautical fees] doe s not prevent an airport proprietor from mak ing reasonable distinctions among aeronautical users (such as signatory and non-signatory carriers) and assessing higher fees on certain categories of aeronautical u sers based on those di st inction s

- 7-(such as higher fees for non-signatory carriers , as compared to signatory carriers). " The concept is the same: similar users pay similar prices. Ifa carrier signs a contract, agrees to a longer term and meets the requisite level of service then such carrier receives the same pricing as any other carrier doing the same. U.S

. airports typically demo nstrate this by creating categories of users with separate pricing applicab le to each category. Any user that fits into the category receives that pricing

. It may be noted that while such an approach may be viewed as " discriminatory ", in that not everyone pays the s ame pricing, it is not

" unju st ly " so , in that there is a rational reason for the approach and it is applied consistently

. Kalitta would urge the Department to believe that there is a defect in comity and reciprocity , when in fact what is happening in Baku is precisely what happens at many airports in the United States

. The reality is that there is a substantially similar approach being used at Baku International Airport , as occurs at US airports and is accounted for in applicable US regulatory guidance. The mere fact that Silk Way holding is an airport service provider, and that prices for services at the airport are pinned to demand, does not constitute a defect in comity and reciprocity. What Kalitta is attempting to do is to suggest that there are problems without accounting for the airport specific environment and the volume of airport services used by
each operator. Indeed, it should be noted that many non-Azeri carriers benefit from vo lume prices for airport services. Baku ha s become a powerful hub airport in the region by competing with alternative airports such as Dubai or Astana. Kalitta fails to account for this because it has a narrow commercial purpose- to protect its position in the US-Hong Kong market, at all costs. Ignoring the fact that any itinerant carrier at any airport might well be subject to higher charges , and reasonably so , is highly misleading

. The Department should not accept the argument suggested by Kalitta as it is , like the arguments of National before it , an invitation to protect another failing US carrier from the very market forces that the open bilateral market ofth e U.S and Azerbaijan have been fostering over the past five or
more years . Indeed, it was highly convenient for Kalitta (and National) to take advantage of



### - 8-the de facto open skies available to them in Baku at least since 2009. But now, when Silk Way West wishe s to rec eive the same treatment in th e U nited State s , the y are the fir st to
o bject. 

## * * * * * * * WHEREFORE , S ilk Way West re spe ctf ull y requests that the Department grant its request for a foreign air carrier permit and exemption, as amended, to allow it to imp lement schedul ed air tran sportation ofprop ert y and mail on the route Baku-Hong KongChicago -New York-Luxemburg -Baku (with no US domestic cargo transportation between the points of Chicago and New York), or such other or further relief as the Department determine s to be appropriate an d consistent with the public interest. Silk Way West also
re spectfull y motion s the Department for expedited co n sideration of its pending Reque st. Respectfu lly submitted ,



# ~ffl):(/_ GLENN P. WICKS

Cons ultant f orCERTIFICATE OF SERVICE I hereby certify that I have on thi s day served a copy of the foregoing document upo n each of the following electronic mail addresses: sascha.vanderbellen@delta.com sametta.c
.barnett @ delta.com chris.walker @ delta

.com dshort @ fedex

. com s lluns ford@fedex.com nssparks @ fedex

.com gbleopard @ fede x .com ms inick @ ssd .com eni sson @ nac.aero mwiege le@ nac . aero kevin

.montgomery @ polaraircargo.com peter.beckett @ polaraircargo.com dan . weiss @ coair.com dan .weiss @ united.com pdoell @ naca. cc robert.wirick @aa

.com francis.heil@aa.com howard kass @ usairways.com benjamin. slocum@usairways.com rs ilverberg @s gbdc.com j j

ohnson @s gbdc.com jrichardson@ johnrichardson

.com mriordan@ johnrichardson.com j canny @amerijet.com john@mietuslaw.com mommer @ atlasair.com matwood @cozen .com nwallace @wallaceair.com agoerlich@ggh-airlaw

.com dhainbach @ ggh-airlaw

.com judy @ lac

. lynden.com rzerkel@lac.lvnden.com gwhite @ lac

.lynden.com jdavi s@lac. lynden.com

Ekaterina A. Grimes TGillies@southemair.com info @airlineinfo .com anita.mosner@hklaw .com j ennifer. nowak@ hkl aw .com d small s@ up s.com stephen.lachter@lachterlaw

.com pmumhy @ lopmumhy.com kleake @ ggh

-airlaw .com Engle TS@state

.gov

Dated : November 5 , 2014