Request of 

Silk Way West Airlines 

to amend issued exemption authority and 

pending application for a foreign air carrier 

permit, and motion to expedite processing 

(Baku-Hong Kong-Chicago-New YorkLuxembourg-Baku) 

) ) ) 

) ) ) ) ) ) 

ANSWER OF 

KALITTA AIR. LLC 

Docket OST 2014-0111 

Communications with respect to this document should be addressed to: 

October 29, 2014 

Mark W. Atwood 

Cozen O'Connor 

The Army & Navy Club Bldg. 

1627 I Street, N.W. 

Washington, DC 20006 

(202) 463-2513 

matwood@cozen.com 

Counsel for 

Kalitta Air, LLC 
Request of 

Silk Way West Airlines 

to amend issued exemption authority and 

pending application for a foreign air carrier 

permit, and motion to expedite processing 

(Baku-Hong Kong-Chicago-New YorkLuxembourg-Baku) 

) 

) ) ) ) ) ) ) ) 

ANSWER OF 

KALITTA AIR, LLC 

Docket OST 2014-0111 

Kalitta Air, LLC, hereby responds to the Request, filed October 8, 2014, by Silk 

Way West Airlines ("Silk Way") to amend its exemption authority awarded by Order 

2014-8-15 ("the Order") and to amend its application for a foreign air carrier permit. The 

amendment requested by Silk Way would alter its operating authority from a purely 

Third and Fourth Freedom (Baku-New York) route to add two key intermediate points 

(Hong Kong and Luxembourg), with full Fifth Freedom cargo rights. 

Kalitta Air objects to this request, for the reasons enumerated below: 

1. As the Department noted in the Order, aviation relations between the United 

States and Azerbaijan are governed by comity and reciprocity. To put it simply, the 

Department is not obligated to give Silk Way anything; the decision is entirely within the 

Department's discretion. 1 Following its normal practice in cases where there are no 

underlying bilateral rights, the Department granted Silk Way limited Third and Fourth 

• See, e.g. , Application of JAT Airways A.D. Belgrade, Order 2014-1-13. 
environment for U.S. air carriers at Baku in fact demonstrates protectionism that refutes 

any claim of comity and reciprocity. The costs charged on the ground at Baku make it 

very uneconomical for a carrier to operate there unless the carrier has a contractual 

relationship with Silk Way- in which case, the costs are dramatically lower. 

3. Kalitta Air has operated a number of flights from Baku to points in 

Afghanistan, transporting military equipment. Most of these have been under a subcontract with DHL, which had been contracted by Silk Way. It has also operated a small 

number of flights having no connection with Silk Way. For example, for a flight to be 

operated into Baku in April, independent of Silk Way, Kalitta was told by the Manager of 

the Baku Cargo Terminal, which has a monopoly on cargo handling at the airport, that a 

"Ramp cargo handling fee for offloading/loading cargo on apron is charged in the 

amount of 0.50 Eur per kg." This flight was subsequently operated, and this rate was 

charged to the carrier. 

4. This rate of EUR 0.50 (currently $0.64) per kilogram is vastly higher than any 

such charge that Kalitta Air has encountered anywhere in the world, and can only be 

considered a "royalty" intended to keep out foreign competition. For a full 8747 load of 

100,000 kgs., the charge would come to $64,000. Worldwide, average costs would 

range from $5,000 to $15,000- in other words, flights to or from Baku would start out 

with an economic penalty of $49,000 to $59,000. Significantly, however, when Kalitta 

2 Order 2014-8-15, at fn. 4. 

2 
5. Ramp cargo handling fees are not the only discriminatory cost element at 

Baku. Fuel is also priced according to whether or not a carrier is operating in 

conjunction with Silk Way. For one thing, it is not possible for carriers to purchase jet 

fuel directly from the national fuel company, which has a monopoly on the product. 

Kalitta understands that company sells jet fuel only to Baku Cargo Terminal (an affiliate 

of Silk Way), or directly to Silk Way itself. Thus, visiting carriers must deal with one of 

those two Silk Way Group entities, or other fuel suppliers who purchase from them. The 

prices, not surprisingly, differ depending on who is purchasing. On flights operated 

under the DHL/Silk Way contract, Kalitta has been paying $2.90 per gallon, which is in 

line with other prices in the Middle East. For flights operated independent of this 

contract, Kalitta has paid about $3.74 per gallon, which is far above prices in the region, 

and makes it difficult to compete with Silk Way. Interestingly, the airport encourages 

technical stops (a valuable source of landing fees), and makes the fuel prices for such 

flights relatively attractive. It is only on revenue cargo flights operated outside a Silk 

Way contract that the very high price is charged. 

6. Silk Way has set itself up as the gatekeeper of all air transportation (at least in 

the cargo sphere) in and out of Azerbaijan. The Silk Way Group owns and controls not 

only the Baku Cargo Terminal, but also the airport's ground handling, catering, 

maintenance and repair, duty free shop, business aviation and helicopter service, not to 

3 
Silk Way has exercised this very considerable power to ensure that anyone who wants 

to fly into Baku does so on their terms. Azerbaijan is not an open and competitive 

market for U.S. air carriers- unless, of course, they contract with Silk Way. 

7. The particular market that Silk Way is seeking in the referenced application 

happens to be a vital market for U.S. cargo carriers- the Hong Kong-United States 

market.4 U.S. carriers such as Kalitta make a significant part of their annual revenue by 

servicing Hong Kong. This, however, itself is not an open and free market. The 

October 2002 Hong Kong-United States Memorandum of Understanding contains 

severe restrictions on the number of points at which carriers may exercise Fifth 

Freedom traffic rights, as well as the number of flights allowed. These "Hong Kong Fifth 

Freedom slots" are very valuable commodities for U.S. carriers. It is not in the interest 

of the public or the U.S. aviation industry for the United States to allow a foreign carrier 

into such a critical and restricted market when it has no bilateral basis for the request, 

and in fact actively restricts competition from other carriers through its dominance of the 

airport and all of its infrastructure and services. 

' See, Silk Way Group website, www.silkwaygroup.com. 

1 Indeed, the carrier's urgent need for expedited consideration appears to be intended to enable 

tt to take advantage of the peak cargo season out of HKG, which is about to commence. 

4 
Dated: October 29, 2014 

5 

Mark W. Atwood 

Cozen O'Connor 

The Army & Navy Club Bldg. 

1627 I Street, N.W. 

Washington, DC 20006 

(202) 463-2513 

matwood@cozen.com 

Counsel for 

Kalitta Air, LLC 
sascha.vanderbellen@delta.com 

sametta.c.bamett@delta.com 

chris. wa lker@delta. com 

dshort@fedex.com 

sllunsford@fedex.com 

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g bleopa rd@ fedex.com 

msinick@ssd.com 

enisson@nac.aero 

mwiegele@nac.aero 

kevin. montg omery@pola ra ircargo. 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@ sg bdc.com 

jjohnson@sgbdc.com 

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mriordan@ johnrichardson.com 

jcanny@amerijet.com 

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info@ airlineinfo.com 

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