BEFORE THE 

DEPARTMENT OF TRANSPORTATION

WASHINGTON, D.C.

)

Request )

)

of Silk Way West Airlines to amend authority ) Docket OST 2014-0111

(Baku-Hong Kong-Chicago-New York-Luxemburg-Baku) )

)

RESPONSE OF SILK WAY WEST AIRLINES

TO SURREPLY OF KALITTA AIR 

AND MOTION FOR LEAVE TO FILE

Communications with respect to this document should be sent to:

KAMRAN GASIMOV GLENN P. WICKS

Director/CEO EKATERINA A. GRIMES

SILK WAY WEST AIRLINES THE WICKS GROUP, PLLC

Heydar Aliyev International Airport 733 10th Street NW, Suite 3002

Baku, AZ-1044, Republic of Azerbaijan Washington, DC 20001

(202) 457-7790

gpwicks@wicks-group.com

 ekagrimes@wicks-group.com

For: SILK WAY WEST AIRLINES

Dated: December 1, 2014
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BEFORE THE 

DEPARTMENT OF TRANSPORTATION

WASHINGTON, D.C.

)

Request )

)

of Silk Way West Airlines to amend authority ) Docket OST 2014-0111

(Baku-Hong Kong-Chicago-New York-Luxemburg-Baku) )

)

RESPONSE OF SILK WAY WEST AIRLINES 

TO SURREPLY OF KALITTA AIR 

AND MOTION FOR LEAVE TO FILE

Following the submissions filed in the above referenced docket and in 

connection with the Surreply of Kalitta Air LLC to Reply of Silk Way West Airlines and 

Motion for Leave to File submitted on November 12, 2014, Silk Way West Airlines (“Silk 

Way West) would like to note as follows:

In its Surreply Kalitta Air LLC (“Kalitta”) essentially restated its earlier 

arguments. In so doing, it did not provide additional new analysis for its opposition to Silk 

Way West’s pending Request to Amend Authority. Rather, Kalitta’s Surreply, has offered 

pricing data related to landing fees that are based on landings and take offs at US airports. 

This appears to be a tortured effort to compare legal precedent in the US that supports the 

proposition that disparate charges at airports is an acceptable practice with actual cargo

handling fees that are based on handling and equipment services rendered at airports in the 

Caspian region. In short, Kalitta’s Surreply deliberately distorts the actual circumstances in 

Baku and attempts to lead the Department into a bilateral dispute for the narrow purpose of 

protecting its Hong Kong business. Given the facts restated in the Surreply as well as the 

aforementioned inconsistent price analysis, Silk Way West is compelled to reply so as to 

correct the record before the Department.
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Specifically, Kalitta repeats its allegation that the “inordinately high and 

blatantly discriminatory” cargo handling and fuel prices at Baku International Airport result 

in the fact that “Azerbaijan does not offer comity and reciprocity in any commercially 

meaningful sense.” In its Surreply Kalitta states that when it operates a charter in Baku 

under a contractual arrangement with DHL, “which is under contract with Silk Way,” it is 

charged “no cargo handling fee”, but when it operates outside such an arrangement it is 

charged 0.50 EUR (0.64 USD) per kilo of cargo. It further compares these cargo handling 

rates to landing fees and the differentials between signatory and non-signatory carrier 

landing fees at a number of US airports. In doing so, Kalitta has essentially compared two 

completely different types of charges in two completely different settings, and consequently, 

has fundamentally misrepresented its commercial relationships in Baku before the 

Department. 

As such, Silk Way West wishes to correct the record as follows: 

1. Kalitta first repeats its allegation that there is no real competition in Baku by 

suggesting that cargo carriers must work with the Silk Way Group of companies to get 

beneficial treatment. This is untrue. In fact, the contract to which Kalitta is a party is one in

which Silk Way participates as a part of the APL team before U.S. Transportation Command 

(USTC). Kalitta itself is contracted to APL through DHL in order to allow for advanced 

payment for its services through DHL. In that instance, National Air Cargo (NAC) is the 

competing bidder for services to USTC. NAC uses its own aircraft for services and is 

quoted for cargo handling charges for Baku Cargo Terminal (BCT). Those charges are 

negotiated directly with BCT. 

As recently as last week, NAC won those contractual bids with USTC because 

it offered an overall price that was lower than that offered by APL. This fact in itself is 

evidence that there is effective competition at Baku airport. However, consistent with the 

principle that similarly situated carriers be treated in the same way, NAC was quoted the 

exact same cargo handling charges as was APL, in which Silk Way was a participant. 
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Kalitta specifically misled the Department by stating that no handling charges were imposed

when it flies under the DHL arrangement. In fact, they were. Kalitta itself was not a party 

to the actual bid and instead was an all in charter price. In short, Kalitta was twisting the 

facts by claiming that there were no handling charges imposed on Silk Way operations. 

There were handling charges in the contract, but they were born by APL and ultimately by 

the customer, USTC. Kalitta knows full well that it would not have been expected as a 

simple wet lessor to bear those handling charges. Indeed, when Kalitta charters its aircraft 

to Coyne, for example, in Dubai, it does not pay airport handling charges either. Rather 

Coyne does, as does APL in the arrangement in Baku. It is normal industry practice that 

when chartering an airplane the charterer takes care of cargo handling charges itself. By 

stating that when operating with Silk Way it receives no cargo handling fees Kalitta is 

deliberately misleading DOT. Kallita knows very well that in similar arrangements 

operators never get charged for cargo handling. Those charges are flowed through to the 

ultimate customer. Kalitta has deliberately omitted all this information in an effort to make 

a flashy numerical comparison statement. Unfortunately for Kalitta, that flashy price 

comparison is simply untrue.

2. Further, Kalitta makes allegations to the Department related to the actual cargo

handling fees. Speaking of its individual charters, Kalitta cites the alleged cargo handling 

rate of .50 EU (.64USD) per kilogram and compares it to the erroneously, as has just been 

shown above, alleged “no fee” for its flights as part of the APL program. It further argues 

that this high fee amounts to a “royalty” and becomes prohibitive on a Boeing 747 load of 

100,000 kegs. In point of fact, Kalitta’s argument is an unfair characterization. This fee is a 

published fee, but is subject to negotiation based upon airport use. Indeed, it is well known

that throughout the region actual airport cargo handling fees are negotiable depending on the 

frequency of operations. At this time, there are two operators, one operating over 170 

flights per month (Silk Way West), and the other operating 140 flights per month

(Cargolux), that are the highest frequency operators at the airport. They both receive the 
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same, advantageous, pricing arraignments for cargo handling services, with the fee of 0.08

USD per kilo. One other major carrier that operates 45 flights per month receives the rate of 

0.15 USD per kilo for handling charges. Silk Way West itself, therefore, does not have a 

rate that is lower than similarly situated carriers as it relates to cargo handling charges. 

Indeed, Silk Way West’s rate is the same as the next highest operator at the airport, as noted 

above. 

In Kalitta’s case, when it operates as part of the APL team, APL and NAC are 

quoted the exact same cargo handling rate of approximately 0.10 USD per kilo. Naturally, 

Kalitta itself does not receive any cargo handling charges. Kallita simply charters out its 

aircraft. Given the nature of the competition at the airport, and extensive USTC operations, 

Silk Way cannot legitimately differentiate between users of like status at the airport and has 

undertaken to ensure fair and equal pricing based on utilization, as is USTC’s requirement. 

Kalitta should know full well how this bidding process works, and USTC is certainly also 

aware of all the airport related charges, including cargo handling fees, related to its 

extensive use of the Baku cargo facilities. Simply stated, Kalitta has twisted, for its own 

narrow commercial purposes in the Hong Kong market, how cargo handling fees are 

charged at Baku.

Kalitta attempts to compare its experience as a one off charter operator with 

the above described high frequency arrangements. On information and belief, Kalitta 

operated one flight to Baku with 27,265 kgs of cargo. It was offered the published rate of 

0.50 EUR per kg of cargo, for a total cargo handling charge $13,632.50 EUR. This is 

nowhere near the $64,000.00 that it appears to be intimating it was charged when it presents 

its theoretical calculation for a fully loaded Boeing 747. This is completely misleading. 

Had Kalitta operated with 100 tons, based upon utilization and consistent with BCT’s goal 

to attract cargo to the airport in large volumes, it would have been discounted 50% off of the 

published rates, had it simply requested it.
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3. Similarly, Kalitta misleads the Department on fuel prices in Baku. It cites the 

published price of $3.74 USD per gallon. However, it specifically omits that it was in fact 

charged $2.90 per gallon for its one-off operation in Baku. Thus, in real life, when 

compared with other major users, as will be shown below, the price differential is not 84 

cents per gallon, as suggested by Kalitta. Kalitta once again failed to cite its actual prices 

and the fact that simply calling the airport and requesting dispensation from the published 

rates for its one-off charter resulted in a price that is identical to the price offered to DHL in 

recognition of the 130 charter flights operated by Kalitta under the DHL subcontract. 

Hence, Kalitta has again twisted the facts. 

Going back to the larger operational setting on fuel prices, the fuel rates offered at 

the airport range from the $2.42 USD for the highest utilization airline, to $2.49 USD for the 

next highest, to $2.57 USD for the next highest utilization carrier, and to $2.72 USD-

$2.87USD for lower utilizations. In fact, the difference between 130 cargo charters in a year 

and 140 operations per month is only 33 cents per gallon. This is not an unreasonable 

variation based on utilization. Kalitta cannot in all seriousness argue that there is an 

astounding 84 cents per gallon difference when they themselves were never charged that

rate.

4. Kalitta again cites that the Silk Way group of companies is part of the 

management of the Baku Airport. It uses this point to as much as attempt to insinuate wrong 

doing by virtue of the fact the Silk Way group of companies manage a number of businesses 

at the airport. In doing so, it says nothing of the fact that Baku is one of the most 

competitive airports in the region both for cargo services and for transit flights. Substantial 

capacity at the airport has been painstakingly built in order to attract companies such as 

Cargolux and Malaysian Airlines, not to mention competitors of Silk Way and Silk Way 

West, such as NAC, Volga-Dnepr (AN 124/IL 76), Antonov Airlines (AN 124), Fly Dubai, 

Aviacon Zitotrans (IL 76) and many others. Were it not for the high quality services, 

competitive pricing, and substantial added value (such as warehousing and refrigeration 
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facilities), Baku would not have been able to compete as it now does in the open market. 

And Kalitta knows this. 

5. The point is that Kalitta knows that Silk Way West will effectively compete in 

Hong Kong. Kalitta is right to refer to it as an important market. Kalitta states that Mr. 

Wallace is not an employee of Kalitta and that it is inappropriate to raise individual 

personalities into the discussion. However, it is certainly relevant when the exclusive GSA 

of Kalitta is heavily invested in the Hong Kong market, which Kalitta is now attempting to 

preclude Silk Way West from competing in after having taken full advantage of de facto 

open skies regime in its operations in Baku. To suggest that he has nothing to do with it 

obfuscates the key point—namely that Kalitta does not suffer from a defect of comity and 

reciprocity in Azerbaijan, its concern is rather to protect its and its exclusive GSA’s long 

standing ties to the Hong Kong market from competition. As such, Kalitta’s narrow and 

anticompetitive commercial interests should not be treated as a decisive factor in a broader 

determination of the principles of comity and reciprocity. Rather, the actual facts present in 

Baku should be considered. Unfortunately, Kalitta, and the GSA who regularly arranges its 

operations, have arguably played fast and loose with the facts to create an impression that 

the facts are not in fact a reality.

6. To conclude, the analysis of the differential between signatory and nonsignatory pricing does not seem to be a very productive other than to validate that 

differential treatment is not per se a problem. It needs to be considered on a case by case 

basis. Here, Baku is a very competitive airport for both charter cargo and technical stops in 

its regional context. Baku offers de fact open skies and actual competitive pricing in the 

region. Hence, comity and reciprocity exist, in spite of Kalitta distorted representation of 

the facts. Rather, the simple fact that, by its own statement, Kalitta operated as many as 130 

(ONE HUNDRED AND THIRTY) fifth freedom flights in and out of Baku in the past 12 

months – and that is Kalitta only, not to count NAC, Atlas and others – is far more 
- 8 -

indicative of the simple fact that Azerbaijan has been consistently providing broad types of 

authority, including fifth freedom authority, to multiple U.S. carriers for multiple years. 

Moreover, Atlas has, among other authority, has the right to fly Baku-Hong Kong-USA 

routing. 

Silk Way West reiterates that 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 U.S. carriers over the period of 

at least five recent years. Indeed, U.S. 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. It would not be an overstatement to say that, 

so far, it has not been given similar treatment as its U.S. counterparts. 

Silk Way West urges that DOT should avoid catering to what appears to be no 

more than an effort by just two operators to be shielded from the very market forces that the 

open bilateral market of the U.S and Azerbaijan have been fostering over the past five or 

more years, and to avoid broader competition which will clearly benefit the shipping public 

and is supported by the existence of comity and reciprocity. The mere fact that Silk Way 

holdings is an airport service provider, and that prices for services at the airport are pinned 

to demand, as well as the quality of the facilities and the need to maintain them, does not

constitute a defect in comity and reciprocity.

What Kalitta (and National) are 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 was highly convenient for Kalitta (and National) 

to take advantage of the de facto open skies (and a liberal crew visa scheme for National) 

available to them in Baku at least since 2009. But now, when Silk Way West wishes to 

receive the same treatment in the United States, they are the ones to object.
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Finally, with respect to the remark by Kalitta that the formal letter from the 

Azeri aviation authorities confirming their adherence to the principles of comity and 

reciprocity “has not appeared on the docket to this date” Silk Way West would like to state 

that, in the absence of a bilateral agreement, the SCAA letter, just as the letter submitted in 

connection with its initial application, was transmitted to the Department through diplomatic 

channels, outside Silk Way West’s control. Silk Way West, therefore, was not in a position 

to submit it to Docket DOT-OST-2006-24269 directly. To the best of Silk Way West’s 

knowledge, the letter was presented by the Embassy of Azerbaijan quite some time ago, 

through its channels with the Department of State, and should be in the Department’s 

possession. However, Silk Way West has a courtesy copy of the said letter available to it, 

and would be ready to submit it to the Docket any time should the Department instruct it to 

do so.
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* * * * * * *

WHEREFORE, Silk Way West respectfully requests that the Department not 

condone the delay tactic by Kalitta and National to prevent Silk Way West from entering the 

U.S. market, and grant its request to amend the authority granted to it earlier so as 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 U.S. domestic cargo transportation 

between the points of Chicago and New York), or such other or further relief as the 

Department determines to be appropriate and consistent with the public interest. Silk Way 

West also respectfully motions the Department for leave to file and expedited consideration 

of its pending Request.

Respectfully submitted,

 

GLENN P. WICKS

Counsel for Silk Way West Airlines

_______________________________

EKATERINA A. GRIMES

Consultant for Silk Way West Airlines
CERTIFICATE OF SERVICE

I hereby certify that I have on this day served a copy of the foregoing document upon 

each of the following electronic mail addresses:

sascha.vanderbellen@delta.com TGillies@southernair.com

sametta.c.barnett@delta.com info@airlineinfo.com

chris.walker@delta.com anita.mosner@hklaw.com

dshort@fedex.com jennifer.nowak@hklaw.com

sllunsford@fedex.com dsmalls@ups.com

nssparks@fedex.com slachter@cozen.com

gbleopard@fedex.com pmurphy@lopmurphy.com

msinick@ssd.com kleake@ggh-airlaw.com

enisson@nac.aero EngleTS@state.gov

mwiegele@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

rsilverberg@sgbdc.com

jjohnson@sgbdc.com

jrichardson@johnrichardson.com

mriordan@johnrichardson.com

jcanny@amerijet.com

john@mietuslaw.com

rpommer@atlasair.com

matwood@cozen.com

nwallace@wallaceair.com

agoerlich@ggh-airlaw.com

dhainbach@ggh-airlaw.com

judy@lac.lynden.com

rzerkel@lac.lynden.com

gwhite@lac.lynden.com

jdavis@lac.lynden.com

Ekaterina A. Grimes Dated: December 1, 2014