BEFORE THE 

DEPARTMENT OF TRANSPORTATION 

OFFICE OF THE SECRETARY 

WASHINGTON, D.C. 

) 

Application of ) 

) 

National Air Cargo Group, Inc. d/b/a ) 

National Airlines ) 

) 

for an exemption pursuant to 49 U.S.C. § 40109 ) 

and an amended certificate of public convenience ) 

and necessity pursuant to 49 U.S.C. § 41102 ) 

(foreign scheduled air transportation of persons, ) 

property and mail) ) 

) 

Dockets OST-2012-0204 

ANSWER OF NATIONAL AIRLINES TO 

OBJECTIONS AND MOTION OF UNITED AIRLINES 

Correspondence with respect to this document should be addressed to: 

Mark W. Atwood 

Elizabeth J. Wadsworth 

Joshua P. Stein 

Cozen O'Connor 

The Army & Navy Club Bldg. 

1627 I Street, N.W. 

Washington, D.C. 20006 

Tel. (202) 463-2513 

Counsel for National Airlines 

September 4, 2013 
BEFORE THE 

DEPARTMENT OF TRANSPORTATION 

OFFICE OF THE SECRETARY 

WASHINGTON, D.C. 

) 

Application of ) 

) 

National Air Cargo Group, Inc. d/b/a ) 

National Airlines ) 

) 

for an exemption pursuant to 49 U.S.C. § 40109 ) 

and an amended certificate of public convenience ) 

and necessity pursuant to 49 U.S.C. § 41102 ) 

(foreign scheduled air transportation of persons, ) 

property and mail) ) 

) 

Docket OST-2012-0204 

ANSWER OF NATIONAL AIRLINES TO 

OBJECTIONS AND MOTION OF UNITED AIRLINES 

In a transparent ploy to delay, if not prevent, competition, United Airlines, the 

world's largest passenger carrier, has filed (over four months late) its objections to the 

Department's tentative grant of authority to National Airlines for scheduled passenger 

service between the United States and points in Afghanistan, via the United Arab 

Emirates. 

As will be shown in this answer, the purported objections of United — a 

disappointed bidder for the GSA contract for the same routes — are totally without merit, 

are based on false assumptions, and mischaracterize National's filings and applicable 

law. The Department should waste no time in dismissing United's objections without 

further delay to grant of National's authority. 
I. United's Objection Should be 

Dismissed as Untimely and Inappropriate. 

United's objections are directed at findings made in Order 2013-4-12, served 

April 15, 2013. National requested, prior to the issuance of the Order, that the 

Department shorten the period for responses. United, among others, was served with 

that motion, and did not object to it. Accordingly, the Department required responses to 

the Order to be filed within three days, i.e. by April 18. United also declined to file 

objections to the Order at that time. Now, four months later,United, stung by its loss of 

six U.S.-Dubai routes to National, 1has filed a lengthy objection in an attempt to derail 

National's plans. United excuses its extreme tardiness by claiming that only when the 

General Services Administration "City-Pair Program" contract was awarded on August 

16 did it realize that National planned to code share with Emirates on flights from seven 

U.S. points, and thus asserts that National's application, and the Department's ShowCause Order, were defective. 

Had there been a significant change in circumstances or plans that would have 

affected National's authority request, its showing of ability to perform, or the basis of the 

Department's tentative findings, National would have amended its application 

accordingly. However, as will be shown below, noneof the assertions made by United 

have any bearing on the authority needed, National's financial or managerial 

competence to perform the proposed services, or the correctness of the Department's 

findings. 

Not only is United's manufactured indignation spectacularly ill-timed and 

unwarranted, but it has chosen the wrong forum in which to make these assertions. Its 

I United also bid for the same city pairs into Dubai for which National was selected. Though 

United was awarded a total of 1,730 routes, it apparently covets National's six routes as well. 

2 
arguments are relevant not to National's route authority, which was the subject of the 

Order, but only, at most, to the request (which has not yet been made) for authorization 

of the codeshare with Emirates, and to GSA's award of the contract (which United has 

now formally protested). 

National's Service Proposal Was (and Is) Accurate. 

United maintains that National did not disclose the true nature of its planned 

service, in that its application references only the Washington Dulles-Dubai city pair as 

the likely market for codesharing with an unnamed U.S. or foreign carrier, whereas the 

GSA has now awarded National a "City-Pair Program" contract for government air 

transportation between six additional U.S. points and Dubai and/or points in 

Afghanistan. 

In fact, however, National never said or hinted that it intended to limit its service 

to one U.S. point; rather, its authority request was for "a point or points in the United 

States, a point or points in the United Arab Emirates, and beyond to a point or points in 

Afghanistan...." It referenced the Dulles-Dubai sector because that was the only citypair that, at that time, it anticipated offering via codeshare in conjunction with its DubaiAfghanistan operation. Subsequently, it became aware of the GSA's request for service 

at six additional U.S. points, and in March it made a bid for that contract. National made 

the Department fully aware of the scope of the planned GSA service in extensive 

discussions with DOT officials prior to issuance of the Order; at no time did they suggest 

that National needed to supplement its application. 

3 
Thus, National did not amend its application to reflect the additional codesharing 

because (1) it did not require additional route authority, (2) it did not affect the financial 

projections on which its fitness showing was based, (3) the GSA contract had not yet 

been awarded, and (4) the codesharing would, in any event, be the subject of a further 

application before the Department. 

The Department in 1993 abandoned the requirement of a detailed "illustrative 

service proposal" by applicants for authority. Since then the rules have required only "a 

description of the service to be operated..." (emphasis added). (14 CFR § 204.3(t).) 

The service description is relevant to whether the carrier has the financial and other 

resources to operate the service, and thus consists of financial projections that include 

specific cost items associated with the operation of flights. Items that account for 

negligible costs are irrelevant to the financial projections and fitness analysis. Because 

the addition of six points -- to be served by Emirates under a codeshare -- would not 

entail any significant expenditures, and indeed has no impact on the "service to be 

operated" by National, there is no reason why its application needed to be amended to 

so reflect. 

Ill. National's Use of the Emirates' Codeshare at Seven U.S. 

Points Does Not Affect the Department's Finding of Fitness. 

United has made numerous assertions intended to create the erroneous 

perception that National's marketing of flights from seven U.S. points, as opposed to 

one, will create a burden it will be unable to support. For example: 

"The Dulles-Dubai route was the only codeshare market that National Airlines 

accounted for in the financial information it provided to the Department." 

(Objections at 6.) 

4 
O "National Airlines must be able to show that it is adequately prepared to 

handle proposed operations that are orders of magnitude more complex than 

those that it currently provides." (Id. at 4.) 

O "National Airlines will undoubtedly be required to make a substantial 

investment that was not contemplated in its application." (Id. at 7.) 

• "The Department's tentative decision only specifically referenced the single 

Dulles-Dubai codeshare segment." (Id. at 4.) 

• "National Airlines would also need to completely overhaul — or, in many 

instances, design and implement — company policies, including its existing 

contract of carriage that currently contemplates only passenger charter 

transportation with a single aircraft." (Id. at 9.) 

All of these statements are demonstrably false. 

United is wrong in assuming that National's service proposal was based even in 

part on the Dulles-Dubai codeshare. In fact, all of the cost elements laid out in the 

service proposal were related almost entirely to the carrier's operation between Dubai 

and Afghanistan. National made this explicit in its analysis of start-up costs (Exhibit NA4), where it estimated $50,000 for legal work related to obtaining authorization of the 

operation, which included a small amount for working out the codeshare agreement. 

This work has already been done, and adding six points to the agreement would not 

cause any further legal expense. National also stated (at footnote 1) that it did not 

anticipate any further startup expense for the codeshare beyond the legal fees. The 

extension of the codeshare to six other points does not change that calculation. 

United's assertion that addition of further city-pairs will be "orders of magnitude 

more complex" is a gross exaggeration. No significant new investment will be needed, 

as tasks such as bookings, ticketing, customer call centers, refunds, banking, aircrew 

training and line station arrangements have all been contracted out. Operational and 

passenger-handling functions will be handled by the operating carrier. Any remaining 

5 
tasks are expected to be handled by existing National staff. If any additional personnel 

are needed as time passes, the number will be small. 

United is flatly wrong in stating that the Order cites only the Dulles-Dubai citypair. The Department did not cite that market at all. There is simply no mention of it. 

National's codesharing was clearly not a major concern of relevance to its fitness to 

undertake the service. The Department did, however, make clear what it considered a 

"substantial expansion" of National's plans, and held that were the carrier to operate 

more than two passenger aircraft or operate its own aircraft on the U.S.-UAE leg of the 

service, it would be required to provide notice and fitness-related information. 2It made 

no mention of changes to the codesharing arrangement. 

United is equally wrong in assuming that National needs to overhaul or adopt 

new policies to contend with passenger operations. While National appreciates United's 

advice on how to operate passenger service, the carrier is quite aware of its 

responsibilities and how to exercise them, and has had plenty of time to prepare. All the 

legal and policy work necessary to comply with those responsibilities has already been 

done. 3The addition of six other codeshare points does not add perceptibly to this work. 

IV. Compliance with the Consumer Protection 

Rules at Additional Codeshare Points Will 

Not Create Significant New Expense for National 

United has gone to great pains to point out the numerous consumer protection 

requirements applicable to U.S. scheduled passenger carriers, such as implementing a 

Customer Service Plan, codeshare disclosures, accommodating disabled passengers, 

2 Order 2013-4-12, at 11. 

3Since National cannot yet offer scheduled passenger services, the relevant documents and 

policies, such as a revised contract of carriage, naturally do not yet appear on its website. 

6 
disclosing baggage allowance and fees, handling customer complaints and processing 

credit card transactions. United notes that compliance "is both costly and extremely 

resource-intensive," requiring "infrastructure upgrades and personnel hiring and 

training." 

This would be true if National were establishing its own operations at the seven 

U.S. points. But, of course, these points will be served entirely by Emirates under a 

codeshare agreement. The workload on National as a marketing carrier will be minimal. 

The rules cited by United require the marketing carrier to take legal responsibility to 

ensure these responsibilities are met — not to do the work itself. 

National is well aware of these requirements, and had some time ago undertaken 

the necessary preparation with respect to its first U.S. codeshare point, Washington 

Dulles. Adding six other codeshare points will cause some marginal additional work, 

but does not create any new burdens National must now meet. The carrier has already 

created a Lengthy Tarmac Delay Plan (LTDP), Customer Service Plan (CSP), and 

passenger service Contract of Carriage. It already has policies for accommodating 

disabled passengers, handling complaints and baggage claims. These policies will be 

fully needed for its own Dubai-Afghanistan operations even if the codeshare service 

were never implemented. National expects to work closely with its codeshare partner to 

coordinate the relevant provisions of their contracts of carriage and to ensure that 

National's codeshare passengers are treated in accordance with its LTDP and CSP and 

other regulations applicable to National. 

At the risk of being tedious, we must once again stress the only relevant point: 

adding six more U.S. codeshare points required under the GSA contract will not create 

7 
any material additional work or expense not already incurred. Significantly, the DOT 

rules do notrequire a marketing carrier to physically post personnel (even contractors) 

at each point served by an operating carrier. Perhaps United chooses of its own accord 

to base personnel at codeshare destinations such as Chiang Mai, Rotorua or Manama, 

thus incurring great additional expense — though frankly that seems improbable. 

Nonetheless, while the rules do affix legal responsibility, they recognize that the 

essence of codesharing is that the marketing carrier gets to stay home. 

All United has done is to recite the very obvious regulatory requirements with 

which National is already prepared to comply — though with the addition of intimidating 

words such as "operational complexity," "myriad regulatory obligations," "costly," etc. It 

has not shown how these regulations require a marketing carrier to expend significant 

financial or personnel resources to accommodate additional codeshare points. In fact, 

they do not. 

V. National's Codeshare is Fully 

Consistent with the Fly America Act. 

United's argument's concerning the Fly America Act are as vacuous as those 

concerning National's fitness United admits that the Fly America Act allows U.S. 

carriers to engage in codesharing with foreign carriers, but it implies that some sort of 

"balance" is necessary. Its point is that for a foreign carrier to operate a long haul, 

leaving the U.S. carrier to fly a relatively short leg, just — somehow -- isn't fair. 

The GSA contracting process, however, was carried out in accordance with the 

requirements of the Fly America Act, and United has not cited any authority to the 

contrary. The Comptroller General has determined that service provided by a U.S.-flag 

8 
carrier using space on aircraft owned and operated by a foreign air carrier under a 

codesharing agreement is transportation provided by a U.S.-flag carrier for purposes of 

the Fly America Act. 4Likewise, GSA regulations expressly provide that "U.S. flag air 

carrier service also includes service provided under a code share agreement with a 

foreign air carrier in accordance with Title 14, Code of Federal Regulations when the 

ticket, or documentation for an electronic ticket, identifies the U.S. flag air carrier's 

designator code and flight number." 5Neither the Comptroller General's decisions nor 

the applicable GSA regulations contain any requirement of "balance" or "proportionality" 

between U.S. and foreign carrier stage length. Nor, in fact, do they contain any 

requirement that the U.S. carrier operate any portion of the flight at all. United's 

complaint that the subject arrangement makes it possible for a foreign carrier to skirt the 

Fly America Act is hauntingly similar to the argument made by American, and firmly 

dismissed by the GAO, 19 years ago, that such U.S.-foreign carrier codeshares have 

"created a 'loophole' that allows foreign air carriers to obtain city pairs contracts even 

though they are not eligible to participate in the CRAF program." 6 

United observes that the Comptroller General recommended that the Department 

of State and GSA consider incorporating into the travel management policy restrictions 

designed to ensure that "the U.S. carrier maintains a significant role in the transaction" 

and does not simply act "as a booking agent for the foreign carrier."' GAO did not adopt 

this as a legal requirement, but instead committed it to the relevant agency's policymaking discretion. GSA has exercised this discretion and expressly decided to omit 

4 See, Fly America Act — Code Sharing — Transportation by U.S. Carrier, B-240956, Sept. 25, 

1991, 70 Comp. Gen. 713; American Airlines, B-258721, Dec. 29, 1994, 95-1 CPD if 5. 

5Federal Travel Regulation, 41 CFR § 301-10.134. 

6 matter of American Airlines, supra, at 2. 

7 Fly America Act — Code Sharing, supra, at 9-10. 

9 
restrictive conditions such as the one United now seeks to impose. Instead, GSA 

adopted only the restriction that the Comptroller General opined was required by the Fly 

America Act: that the entire ticket be issued by the U.S. carrier. 8GSA in adopting this 

rule considered whether to impose more restrictive conditions on code-share 

arrangements, including requiring the use of the U.S. carrier's ticket stock and requiring 

the U.S. carrier to bear the financial risk of empty seats on aircraft operated under a 

codeshare. GSA declined to impose those requirements, noting that such restrictions 

would impede U.S. air carriers and the goals of the Fly America Act: . 

The final rule provides that U.S. flag air carrier service includes service 

provided by a foreign air carrier under a code share agreement when the 

ticket, or documentation in the case of an electronic ticket, identifies the U.S. 

flag air carrier's designator code and flight number. It is GSA's position that 

codesharing between U.S. flag air carriers and foreign air carriers increases 

opportunities for U.S. flag air carriers to expand into new international 

markets, which in turn promotes revenues to U.S. flag air carriers, thereby 

furthering the goals of the Fly America Act. 9 

Even if United asserts that there is a legal requirement that a U.S. carrier 

maintain a significant role in the transaction, which there is not, National in fact 

proposes to play a significant role in these transactions: it will market and sell the 

transportation, receive the revenue and keep the profit above what it pays to the 

operating carrier, and it will operate the final leg of the service into Afghanistan on its 

own aircraft. Similar to the codeshare arrangements used by many other airlines, 

including United, the codeshare flights in this case between the United States and 

Dubai make it possible for National to offer service between two countries (the U.S. and 

Afghanistan), even though it does not fly its own aircraft over a portion of the route. 

8 See, Federal Travel Regulation, § 301-10.134. 

9Federal Travel Regulation; User of Commercial Transportation, Fly America Act, 63 Fed. Reg. 

63417 (Nov. 13, 1998) (emphasis added). 

10 
Finally, United asserts that it is the Department's responsibility to enforce the Fly 

America Act. United, however, has shown no authority to support this proposition. 

Instead, it very curiously relies on two DOT orders that frankly have nothing to do with 

the Fly America Act. Order 98-12-8 (Application of Korean Airlines, Ltd.) involved a 

review of a statement of authorization to carry U.S. mail under a code-share 

arrangement. This was governed by the USPS statutes and regulations, 1° not Fly 

America. In upholding the staff action, DOT simply stated that such arrangement was 

consistent with those the GSA deemed authorized under Fly America. Order 95-8-4 

(Application of Loken Aviation, Inc.) similarly involved the Postal Service statute. The 

Department deferred the question of the legality of the arrangement, holding that it was 

"a matter ultimately to be determined by the Postal Service under its statutes and 

regulations." If relevant at all, this case actually supports the legality of National's 

codeshare arrangement under the Fly America Act. 

Conclusion 

For a carrier of the stature of United Airlines to submit an objection so utterly 

bereft of serious legal merit starkly reveals the carrier's true motive: simply to cause 

further delay to National's long-overdue authorization for U.S.-U.A.E.-Afghanistan 

scheduled passenger service. United is well aware of the October 1 deadline for 

implementation of service under the GSA contract, and has made no secret that it will 

use whatever means are at its disposal to thwart National's plans. The Department 

must not let its procedures be used for such clearly anticompetitive purposes. 

National applied for this authority in December 2012 — over eight months ago. 

While the carrier understands the circumstances that have greatly delayed issuance of 

10Particularly 39 CFR § 5402, et seq. 

11 
the final order in this proceeding, no purpose will be served by taking United's meager 

bait and delaying the final order still further. National strongly urges the Department to 

dispose of United's objections in a separate order, rather than to recall the final order 

from Presidential review and make further amendments to it. That step would cause at 

least another 60-day delay in the startup of service that the Department has recognized 

to be of benefit to the public. 

ACCORDINGLY, National Airlines asks that the Department deny United Airlines' 

Motion for Leave to File, dismiss its objections, and proceed without further delay to 

issue the final order granting National the requested authority. 

Respectfully submitted, 

Mark W. Atwood 

Elizabeth J. Wadsworth 

Joshua P. Stein 

Cozen O'Connor 

The Army & Navy Club Bldg. 

1627 I Street, N.W. 

Washington, D.C. 20006 

Counsel for National Airlines 

Dated: September 4, 2013 

12 
abeth J. Wadsworth 

CERTIFICATE OF SERVICE 

I certify that I have served the foregoing document on the following persons on 

this 4th day of September, 2013, in accordance with the Department's Rules of 

Practice: 

francis.heilaa.com 

robert.wirick@aa.com 

jrichardsonAjohnlrichardson.corn 

russell.pornmeratlasair.com 

sascha.vanderbellendelta.com 

sarnetta.c.barnettRdelta.com 

esauer@ssd.com 

chartersevergreenairlines.com 

kevin.montqomery(W,polaraircargo.com gmurphy@crowell.corn 

agoerlich@ggh-airlaw.corn 

anita.mosnerAhklaw.corn 

jennifer.nowakAhklaw.corn 

howard.kass@usairways.com Benjamin.slocumusairways.com mbengezsrlaw.corn 

psanderlinkalittaair.com 

john.allenAfaa.qov 

lhallowaycrowell.com 

LEGAL\17182743\I