BEFORE THE DEPARTMENTS OF TRANSPORTATION, STATEAND COMMERCE OFFICE OF THE SECRETARY WASHINGTON, D.C.

Information on Claims Raised About State Owned Airlines in Qatar and the UAE ) ) ) Dockets:



## ______________________________) DOT -OST-2015-0082 DOS-2015-0016 DOC 2015-001

COMMENTS OF FEDERAL EXPRESS CORPORATION

Communications withrespect to this document should be sent to: Nancy S. Sparks Managing Director Regulatory Affairs FEDERALEXPRESS CORPORATION 1700 Pem1sylvaniaAvenue, N.W. Suite 950 Washington, D.C. 20006 (202) 393-9286 (phone) (202) 628-0654 (fax) Email: nssparkslalfedex.com

Dated: May 29,2015 M. Rush O'Keefe, Jr. Senior Vice President and General Counsel Steven H. Taylor Vice President Regulatory Affairs CourtneyE. Felts Senior Counsel Regulatory Affairs FEDERALEXPRESS CORPORATION 3620 Hacks Cross Road Building B, 3rdFloor Memphis, Tennessee 38125 (901) 434-8632 (phone) (901) 434-8283 (fax) Email: cefelts@fedex.com Attorneys for FEDERAL EXPRESS CORPORATIONBEFORE THE DEPARTMENTS OF TRANSPORTATION, STATE AND COMMERCE OFFICE OF THE SECRETARY WASHINGTON, D.C.

Information on Claims Raised About State Owned Airlines inQatar and the UAE ) ) )



## ______________________________) Dockets: DOT -OST-2015-0082 DOS-2015-0016 DOC 2015-001

COMMENTS OF FEDERAL EXPRESS CORPORATION

Federal Express Corporation ("FedEx") appreciates the opportunity to participate in this information docket. We wantto thank the Secretaries ofState, Transportation and Commerce for their interest in hearing all stalceholders on the concems presentedbythree large U.S. network carriers- American Airlines, DeltaAir Lines and United Airlines (together, the "Big 3"), who are claiming thatthree carriers from the United Arab Emirates ("UAE") and Qatar, Qatar Airways, Etihad Airways and Emirates, (together, the "Gulf Carriers"), are in some way competingunfairly in the U.S. intemational aviation market.
Included inthe claims ofthe Big 3 are assertions that the Open Skies agreements with the UAE and Qatar are either outdated or inconsistent with statutory U.S. aviation policy. Folded into those arguments is an assertion that a main element ofOpen Skies, Fifth Freedoms, is not necessary or valuable, which gravely concerns FedExwhich relies on these opportunities.
FedEx is filing inthis docket primarily to defend Open Skies, nottheposition ofthe Gulf Carriers. However, we are concemed that some ofthe arguments (and proposed "solutions") against the GulfCarriers could result in damage to FedEx, the U.S. all-cargo industry or U.S. interests writbroadly. Because ofthat, we may counter some ofthe arguments against the Gulfcarriers, ifwe believe thatthey endanger Open Skies as a policy or attack the terms of the agreements. Furthermore, we believe thatFedEx's operations inthe region are also at risk. As the largest U.S. airline presence in the Gulf, we represent the most logical target victim ofany retaliation brought onby a U.S. action inviolation ofits commitments.Since this is a complex group ofclaims, supplemented by lengthy documents that have taken the Big 3 years to prepare and months to fully reveal to the public, wehave not attempted to address every argument indetail. Because ofthat, and inthe interests offully participatingin the Open Govermnentprocess here, we welcome any questions or explanations that any part ofthe U.S. govermnent might have for FedEx.
FedEx's chiefexecutive officer, David J. Bronczek, has already written a letter to the Secretaries ofState, Transportation and Commerce, dated February 18, 2015. We attach that
as Exhibit 1to the filing and ask that itbe considered an integral part ofourfiling. Background
FedExhas long been a proponent ofOpen Skies agreements. We see Open Skies as a natural evolution ofaviation deregulationthat allowed our company to invent and develop the express delivery industry, stmting with U.S. deregulation ofcargo aviation in 1977. Today, the 115 Open Skies agreements negotiated by the U.S. govermnenthave opened markets for
our fleet of660 aircraft, allowing us to move U.S. shipments and to provide our end-to-end delivery services to over 220 countries andterritories around the world.
The first Open Skies agreement in 1992 with theNetherlands was not greeted by all U.S. airlines with equal enthusiasm. As the Open Skies concepts were refined, U.S. carriers, even the Big 3, sawthe advantages for themto gain open access to foreign markets. Exploiting the Open Skies agreements' virtual elimination ofbarriers to entty, the Big 3 were able to put together their ownversion ofa global air network. Their networks were formed not through adding their ownflights, buttlu·ough their code-shm·ing arrangements, in which U.S. passengers no longer flew entire trips onU.S. aircraft. This was followed by their antitrustimmunizedrelationships, which allowedthemto legally agree upon prices and divvy up markets with certainforeign airlines. While the Big 3 was discovering that Open Skies helpedthemto limit competition, FedEx followed its ownplan. Using the Fifth Freedoms provided under these agreements, FedEx built an actual global airline, using U.S. aircraft piloted byU.S. crews.

Discussion
FedEx supports Open Skies, period. FedExhas enthusiastically suppmted Open Skies agreements in all mm·kets because they provide and protect opportunities to expand our global air network. Throughprovisions available to all commercial operators, Open Skies agreements allow carriers the rights not only to offer unrestricted bilateral services (back and forth between the two countries, called Third and FourthFreedomrights), but also therights to participate inthird-country mm·ketplaces while connecting U.S shippers to markets

2beyond (called Fifth Freedoms). With Fifth Freedoms, used in combination with other Open Skies provisions such as change-ofgauge and operational flexibility, FedExhas been able to export its hub-and-spoke system and thus extend its network globally. Under Open Skies agreements, FedEx now has established regional hubs outside the U.S., including one at Dubai inthe UAE. This pmticularfacility allows U.S.-origin flights to connectthe U.S., Europe, China and Asia via a well-situated hub in betweenthose points at Dubai International Airport.
The Big 3 assert inpublic forums that they support Open Skies. Yet, in their white paper, theyfiercely attack it. They say that Open Skies agreements are "inconsistent with DOT's statutory mandate," thatthey "are facilitating subsidized Gulfcompetition," and are "premised on outdated assumptions." This doesn't sounds like "support" ofOpen Skiesthat sounds like they want to end Open Skies as a U.S. policy and go backto the dm·k ages of government control ofthe marketplace. Open Skies agreements are consistent with DOT's statutory mandate. The main goal ofU.S. aviation policy as stated by Congress has been setforth in 49 U.S.C. §4010l(e). In their white paper ("Restoring Open Skies: The Need to Address Subsidized Competition from State-Owned Airlines 

### in Qatm· and the UAE"), the Big 3 have pulled selectively from this statute, making it appear that U.S. international aviation policy must be formulated first and foremost to secure U.S. airlines' profits. Instead, we conclude that the main goal ofU.S. aviation policy is to create oppmtunities for international air services to be suppliedto the tme intended beneficiaries ofU.S. policy, the U.S. air transportation consumers. The airlines providing those services canbe U.S. airlines, butthey do nothave to be. Itis the consumers that U.S. law focuses on, with the success ofthe airlines and their employees flowing naturally from customer satisfaction.
The Big 3 accurately quote 49 U.S.C. §4010l(e)(l), inwhich Congress expressed as one of its goals "the attainment ofthe opportunity for air caniers to maintain and increase their profitability in foreign air transportation" [emphasis added]. However, the Big 3 then distmi that provisionto readin a statutory entitlementto profitability. Ourread is that the law requires the U.S. executive branchto foster a regulatory environment --the "oppminnity"- in which profitability can be created (or lost) bythe operators themselves.
As an expression ofthis U.S. policy, Open Skies agreements are intended to create those oppmiunities. Under U.S. international aviation law andpolicies, the U.S. government is to create openings for U.S. caniers to enter into the global marketplace. Intum, U.S. airlines
are expected to use those openings to provide consumers with efficient services, to serve desired markets, to establish appropriate pricing and to offer reasonable routings and frequencies, so as to attract and retain U.S. consumers. The old-time govemmentaljob of

3controlling the market was left behind with deregulation. That is the true message of49 U.S.C. §40101(e).
In addition to distorting subsection (1) of49 U.S.C. §40101(e) to read in a grant of govermnent-mandated market dominance, the Big 3 overlookthe remainder of49 U.S.C. 40101(e), which repeatedly talks about other ways the govemment should create a regulatory environment in which consumers are benefited. See, for example, subsection (2), on pricing freedom for U.S. and foreign carriers. In subsection (4) and (5), the executive branch is to obtain "the maximum degree ofpermissive international authority" and eliminate operational and marketing restrictions "to the greatest extentpossible." Reading all ofthis together, Congress is instructing the executive branch to go out and negotiate Open Skies agreements for the ultimate benefit ofU.S. shippers andtravelers.
U.S. aviation law says that "equivalent benefits" are to be obtained for U.S. airlines ORfor U.S. consumers. The Big 3 rely heavily on49 U.S.C. 4010l(e)(8), stating thatforeign carriers are only to entitled to increase their access "ifexchangedfor benefits ofsimilar magnitude for [U.S.] air carriers orthe traveling public

..." [emphasis added]. In this case, we believe that the consumers should be allowed to be winners. Open Skies policyput an end to a "balance ofbenefits"trade-off between national champions, and relies instead on the "balance ofopportunities" for all airlines. This version ofthe old "benefits" concept provides that possible benefits gained by foreign carriers weigh on the U.S. side ifsuch benefits accrue to American travelers. This would apply whenthe U.S. carriers do notfully exploit such opportunities themselves. This provisionrequires the marketplace (the "travellingpublic") to decide the matter of"balance," instead ofthe government. In the situationunder review, U.S. consmners seem to be opting for increased foreign canier competition.
In "fair and equal opportunity to compete," the emphasis is on "opportunity." The Open Skies concept of"fair and equal opportunity to compete" comes directly from the language in the Chicago Convention's preamble, "equality ofopportunity." Itreflects the drafters'
concerns thatifleftto their own devices, national govermnents would favor their own carriers (see more on this below). The drafters were worried about discrimination. The
concern has been carried over into the Open Skies agreements. Itdoes not apply to subsidies (see our discussion ofthe relevant provision, below) butit guarantees a general absence of favoritism, creating equal opportunities for all carriers in a market.
The Big 3 seemto think that local laws and customs (such as labor laws and taxationrates) that work to the benefit ofcarriers on their home turfare "unfair" advantages. However, this is definitely a step too far. Ininternational aviation, a carrier is only taxed on its income in its home tenitory, whether the rate is high or low. This isjust a pragmatic solutionto a potentially complexproblem for an industry involving cross-border services, mobile assets


### 4and mobile employees. Othetwise, there would be multiple layers oftaxation, onany operation. We can only imagine howmany complaints there wouldbe about unfair taxes if U.S. carriers had to pay taxes in high rate foreignjurisdictions in addition. These local law concepts are outside today's air services agreements and should remain that way.
What cannot be tolerated is discrimination based onnationality. Ifa carrier is barred from an airport, is subject to levies solelybecause it is a foreign carrier, is prohibited from setting up
a sales office or is otherwise treated differently in the marketplacebythe host goverrnnent, then it does not have the opportunity to compete fairly. This is not what is alleged by the Big 3. Itis FedEx's view, inthe absence ofsuch an allegation ofdiscrimination, that the general complaints about issues other than subsidy are simply not actionable under the Open Skies agreements inplace.
Is "traffic shifting" anothertermfor competition? Despite the Big 3's stated desire to keep government out ofthe market's workings, they seem to want the U.S. govemmentto guarantee their continued market share, as ifU.S. consumers mustbe fumteled to the "correct" choice ofa U.S. carrier each time they travel. We carmot accept the ideathat is

woven into the white paper (and the subsequent economic analysis released by the Big 3) that it is against U.S. policy for traffic to be "shifted away" from U.S. airlines by effective foreign competition. U.S. passengers are not assigned by lawto U.S. airlines. Ifconsumers wantto
use a foreign carrier, that should notbe a problem that the U.S. government needs to fix, but instead should be a capitalistic challenge for the losing carrier.
Itis not the responsibility for a new entrant to a marketto create new customers. Ifthat were hue, then in a mature market, new entrants would be prohibited. What new entrants need to do is to "build a better mousetrap" by offering a more attractive product, either in its features

or its pricing. Then, consumers vote with their feet. Thatmay bewhat is happening inthe instant case, but we are not going to try to parsethe issue. Whether it is market stimulation

or shifting ofconsumer allegiance, FedEx fails to see how free choice for customers is a "trade violation" under the Open Skies agreements.
FifthFreedoms are valuable and well-used rights by both passenger and cargo airlines. Fifth Freedoms are valuable for many carriers, including FedEx. The white papertalks about Fifth Freedoms as ifthey were only available to the Gulfcarriers, rather thanpart ofthe model Open Skies agreement. The Big 3 say in their white paper that FifthFreedoms are "an anacln·onism" and dismiss their value as a core element ofOpen Sides. The reality is that theyrely on them directly and indirectly for their global operations. First, Deltaremains the largest U.S. user ofpassenger Fifth Freedoms with its operations overNaritaAirport in Japan. Right now, it appears that they carry Fifth Freedomtraffic to at least six Asian cities from their hub atNarita. These FifthFreedomrights, originally granted inthe 1952 U.SJapan agreement, were the star inDelta-predecessorNorthwest's crown, and remain a
5significantpart ofthe Deltanetwork inAsia today. United also appears to use its Narita rights for some Fifth Freedomflights as well. Second, under DOT policy, U.S. carriers must possess the underlying economic authority for a segmentifthey wantto placetheir code on a partner's flight. So, many ofthe alliance flights that the Big 3 puttheir passengers on- the foreign caniers flights that bear one ofthe Big 3's code -mustbe supported by the underlying Fifth Freedom right granted under an Open Skies agreement. For example, for a Deltaflight from Atlanta to Amsterdamto Milan, Delta must have Fifth Freedomrights fi·om AMS to MXP, orthe U.S. govennnent will not allow Deltato sell that portion ofthe flight under its DL code. Despitethe fact that the Big 3 use this type ofrights intheir own operations and to support a basic part oftheir alliances, they claimthat their use by others is "opportunistic." A flight that stops in Milan enroute to Dubai apparently isn't efficient when Emirates does it, it is "unfair". The Emirates MilanFifth Freedom operation (Fifth Freedompoints can be intermediatepoints, despite their usual meaning of"beyond"- they arejustthird country opportunities) is squarely within the terms ofthe Open Skies agreement. Yetthe Big 3 make it sound like they m·e cheating. IfDelta's use ofFifths atNaritaisn't opportunistic, then why is Emirates' flight to Milan?
For FedEx, as noted above, FifthFreedoms are critical to our system. FifthFreedoms have nothing to do with fuel stops and aircraft range, despite position taken by some Big 3 representatives (those are SecondFreedoms, the right to make technical stops, and are included in most bilateral air services agreements, Open Skies ornot). Like the Big 3, we use Fifth Freedoms to support our global network. However, we use ours to fly our own aircraft, notto hand over U.S. traffic to foreign airline partners via code-share marketing magic. Indeed, the cunentFedEx schedule includes a flight route Dubai

- Milan MalpensaMemphis, operated withBoeing 777 aircraft flown byU.S. crew. IfFifth Freedomrights
were withdrawn from the Emirates flight operating betweenthe U.S. and Dubai via Malpensa, how could the U.S. hang onto the reciprocal rights on whichFedEx depends for its minor image Fifth Freedom flight? Without FifthFreedoms- a tent pole right in Open Skies -all U.S. cmTiers, passenger and cargo, would be out ofthe international network business. The difference between FedEx and the Big 3 is that we acknowledge the value ofthese rights to createjobs for U.S. aviation workers and improved services for U.S. customers, while they choose to ignore it.
For FedEx, the GulfOpen Skies agreements are valuable, notproblematic. FedEx has a significanthub facility at Dubai International Airpmt. Each week, we operate 44 FedEx flights through that airpmt, connecting the U.S. and Europe with China and three points in India. Only two ofthe Big 3 even operate to the Gulf, and those two (Delta and United) each only operate a single bilateral flight each day. FedEx has been at Dubai since 1998, and

6today's stafftotals 650 employees and vendors. In addition to our own flights, we connect there with 700 weekly flights on 16 airlines and speed U.S. expmiers' packages to 46 cities in41 countries in the Middle East, Afi-ica and beyond. Additionally, we connect four other countries inthe Gulfregion by truck. This is an impmiant location for FedEx. In fact, we are now expanding that facility to increase its capacity by 50%.
All ofthis is possible because ofthe U.S.-UAE Open Skies agreement. Itprovides Fifth Freedoms and change-of-gauge provisions that allow us to operate the hub-and-spoke system form and move shipments among various world regions. Itincludes the intermodal provisions that supp01i our trucking regime and allows us to fully access customs facilities there. We find the U.S-UAE agreement to be a valuable treaty whichthe U.S. must continue to honor in its fullest terms.

The UAE is an important trading partner for the U.S. and FedEx's direct connectionfrom the U.S. to our hub in Dubai supports that trade flow. According to the UAE embassy, the UAE is the United States' single largest export market in the Middle East. U.S. exports and foreign direct investmentto the UAE rose from $3.6 billion in 2004 to $24.6 billion in 2013, increasing 6-fold injust9 years. The UAE has trade relations with every state 

### inthe United States, as well as the District ofColumbia, Puetio Rico, and the Virgin Islands. More than 1,000 U.S. films have a presence in UAE, from Bechtel and ExxonMobil to Starbucks and Cold Stone Creamery. FedEx believes that its connections to the UAE are impmiant for the continued growth ofthis important trading relationship.
Itis impmiantto note thatthe GulfCarriers compete vigorously withFedEx in the air cargo arena. Cargo is important to them- for example, Etihadjust announced inits earnings report that cargo contributed 14% to its total revenue. By supporting the Open Skies agreements, FedEx is accepting the strong competitive challenge that the three GulfCarriers presentin the U.S. market. We are not standing by, watching the Big 3 battle these formidable competitors withno risk to our business. illaddition to the bellies ofthe 25 passenger aircraft they operate to the U.S. each day (including the Boeing 777, which has cargo space almost equal to a 737 freighter), the GulfCaniers have a combined freighter fleet of3 7 freighters and they operate to seven dedicated U.S. points. Andthey are growing: Emirates just started fi·eighter service five times a week to Columbus, Ohio (which includes a Fifth Freedom stop in Copenhagen). However, we believe thatthe essence ofOpen Skies- an expanded competitive market- is what U.S. shippers deserve and we are throwing the best
we have into this fight.
FedEx and other cargo operators use Open Skies to create U.S. jobs and promote U.S. trade and that contribution is threatened bythe Big 3 demands. FedEx employs almost twice as many people as any ofthe Big 3 companies and our total enterprise operations (e.g., FedEx

7Corporation) employ morethanthe Big 3 combined. We operate to more U.S. airports than do any ofthe Big 3 and have hundreds ofemployees at multiple locations in every U.S. state. In short, wehave thejobs and the U.S. presence that give us a significant stake in U.S. aviation policy.
Our segment ofaviation has a powerful overall economic effect. In addition tojobs directly created, the air express industry has an indirectjob creation effect. A 2015 Frontier Economics study showedthat world express industry employmentis 585,000, Total DII (direct, indirect andinduced) employment is almost 3 million. Ofthat 3 million, 1.4 million air express DIIjobs are in North America.
And ofcourse, FedEx is also a key customer ofU.S aerospace manufacturers, which are major U.S. employers and exporters. These purchases include aircraft that we use in our international operations. As our international operations continue to grow, we can grow our fleet. A limit on access to international markets couldtln·eaten that progress. At the present time, FedEx is operating Boeing aircraft across its fleet- Boeing 777, 767 and 757 aircraft. We presently have a total of 104 firm orders and options for Boeing aircraft (29 Boeing 777 and 75 Boeing 767), eachwith General Electric-manufactured engines. Just like the Gulf Carriers, FedEx is a major customer ofthe U.S. aerospace industry, and we use those aircraft to fly the global routes made possiblebecause ofOpen Skies.
FedEx's intemational business is inextricably linked to cross-border trade, because products need cargo transportation to move. We partner with the Department ofCommerceto promote trade in a wide variety ofways. FedExbecame the first strategic alliance partner of the U.S. Commercial Service ("USCS") in 2004, helping create a program which now includes over 100 partnerships for the Department ofCommerce. Overthese years, FedEx and theUSCS have led multiple trade missions, supported over 600 Gold Keys, and reached
more than 60,000 U.S. exporters throughtrade events and export assistance programs. This alliance is nowin its 11th year ofsupporting the President's National Export Initiative.
"Trade principles" cannot be selectively borrowed from a regime that does not apply. Intheir mostrecent letter (dated, Aprill7, 2015, now placed inthis docket), the chiefexecutive officers ofthe Big 3 seek to invokethe World Trade Organization ("WTO") rules as a basis ofresolving their subsidy claims. They do this, knowing full well that the WTO rules do not apply to air transport services nor do the subsidy rules apply to services at all (the subsidy rules are only agreed-upon inthe goods agreement, the GATT, notthe services agreements, the GATS).
Our viewis that ifthe Big 3want the U.S. to apply WTO-type limits on subsidies, they have to be ready to accept the other basics oftrade regimes that go along with suchrules. Trade agreements do more than address complaints, they liberalize markets. In order for the parties

8to agree on the applications ofrigorous trade disciplines such as a prohibition on subsidies, eachparty mustput something valuable onthetable. For the U.S. inmost cases, that valuable itemis domestic market access. However, the Big 3 have not suggested an end to the U.S. restriction on foreign direct investment inU.S. airlines. The U.S. is the richest aviation market inthe world and yet one ofthe mostrestricted interms ofdomestic access. One might argue thatthe failure to open up theU.S. marketis, initself, a subsidy for all U.S. airlines- or atleast a special and exclusive economic benefit granted by the government. FedExhas longbeim onrecord supporting an end to protection oftheU.S. market and would gladly support opening up U.S. aviation to foreign direct investmenttoday. But, it would appear thatmarket access is not
one ofthe trade principles thatthe Big 3 support. Our view is thatif"trade principles" are to apply, let's use all ofthem, notjustthe few that might create newmarket advantages.
State ownership does not mean "competitionwith the government." The global marketplace ofairlines has always included government-owned and government-invested carriers. Historically, most countries designed their aviation policies to favor their own carriers as "national champions" in international aviation. For that reason, the drafters ofthe Chicago Conventionparticularly singled out discriminatory treatment as an evil to be avoided, noting theneed for "equality ofopportunity" in the preamble. The fact thatthe U.S. never created a government-owned airline did notmeanthat it did not embrace this concept of"national champions," and the U.S. champions includedthe predecessors ofsome ofthe Big 3. During the period before Open Skies, the U.S. carefully negotiated agreements tailored specifically to theneeds ofthose national champions which did little to create or assist newmarket participants. Meanwhile, other countries' government-owned champions were maturing at different paces, some going through successful privatizations, some struggling with privatization (and needing a bailout orreorganization) and some staying inthe govermnentowned starting gate eitherby choice ornecessity. The presence in a marketby a govemment-owned airline did not stop the U.S. fi·om seeking oppmiunities for U.S. carriers inthose markets. Ifithad, there wouldbe virtually no markets opento U.S. carriers today. Open Skies agreements eliminatedU.S. government favoritism among carriers and allowed all comers to compete. The U.S. carrier selectionprocess was finished, since rights were not limited by Open Skies agreements. Inmany cases, the result was that foreign markets were flooded withflights fi·om three or more U.S. passenger carriers, while the receiving nation onlyhad a single carrier

- often with a small or inadequate fleet- withwhichto answer. That apparently seemed fair to the Big 3, then. But when some national carriers thrived and fought back, such reciprocal access did not seem as attractive. In the case ofthe Gulf countries, the Big 3 are saying that Open Skies market access principles are "outdated," since apparently they neverplarmed onthe Gulfcarriers being effective competitors. That doesn't

9seem like a strongpublic policy argument for undoing a reciprocal market access agreement that benefits bothU.S. carriers and U.S. consumers.
In order to exploit Open Skies agreements, the Big 3 allied themselves with many government-owned carriers, and in some cases, even got the rights to price-fix and divide the markets with them without fear ofantitrustprosecution. Singapore, Malaysia, Sandia, SAS, Finnair- the list ofgovernment-owned carriers whose ±lights the Big 3 puttheir brand onis extensive. Others, such as Alitalia and JAL, are nowprivatized, but in the recent pastthey
were bailed out and reorganized by their governments,justlike the Big 3 have beenrescued by U.S. banlcruptcy and pension guarantee laws. Itwould appear that the Big 3 accept some types offoreign government financial intervention- for their commercial allies

- but not others.
The Big 3 argue that because the expansion ofthe GulfCarriers has been supported by their governments as a matter ofstated national economicpolicy, they are an "instrument ofthe government." What does this mean? A number ofthe Big 3's closest commercialpartners
are the focal points oftheir governments' aviation policies and are constantly benefited. Even the Big 3 want to be government policybeneficiaries: see their pursuit ofa U.S. "National Airline Policy," which would dojustthat. The presence ofsupportive government policies alone do notviolate the Open Skies' agreement promise of"fair and equal opportunity to compete."
FedEx is not going to review and rebutthe allegations ofsubsidies; we will leave that to the GulfCarriers. However, we endorse the succinct review ofwhat is andis not a subsidy presented inthe filing inthis docket bythe International Airline Group ("lAG"). lAG is well-informed onthese issues, since it is a former state-owned entity itself, nowfacing heavy competitionfrom the GulfCarriers without feeling the needto seek governmentprotection.
A freeze on capacity is notthe remedy prescribedbythe existing aviation agreement for alleged subsidies, or by "trade principles," for that matter. Underthe GulfOpen Skies agreements, ifsubsidies are found to create competitive harm,the solution is inpricing, not in capacity. The Open Skies agreements with the UAE and Qatar do talk specifically about subsidies. But the solution- stated right inthe agreement- is not to close offor limit the market, but to adjust pricing. This is also the standard remedy intrade agreements- if subsidies create anunfair advantage, you add a "countervailing duty" to adjust pricing fairly. Then, you letthe market decide ifthose bananas or cars or cellphones are as attractive at the higher price (subsidized price plus duty) to consumers as before. Closing the market to competition certainly is not a petmitted remedy under the Open Skies agreements.
The Open Skies agreements then go on to specificallyforbid unilateral action. They do require consultations, where the complaining side must notify the other side ofthe reasons

10for "its dissatisfaction." This is not to be the dissatisfaction ofa small group ofcarriers, but the dissatisfaction ofthe government. The requirement that the governments present the case to each other is why FedExis welcoming this procedure as a pre-conditionto the U.S. requesting consultations. In FedEx's view, a request for consultations is an accusation of wrong-doing and should notbe undertalcen lightly or only as a fact-finding mission. The U.S. should notrequest consultations based on one group's assertions. It should do first its
own analysis and then decide, based on all ofthe facts, ifthere is probable cause for proceeding. Whatmight have beenbetter- and more 

### inkeeping with U.S. due processwould have beenfor the Big 3 to institute aproceeding under the existing U.S. statutory remedy for unfair competition in international aviation, the International Air Transportation Fair Competitive Practices Act ("IATFCPA"). However, they choose the route ofholding private meetings where they could puttheir points across unchallenged. Nowthat the U.S. has chosen to follow its "opengovernment process," we have confidence that the U.S. government will apply the smne rigorous analysis and open-mindedness that it would have employed under IATFCPA to any review ofthese claims. We applaud the decision to decide first ifthere is adequate, umebuttable evidence ofunfair competition and resultant harm before requesting consultations.
FedEx is being put at risk bythe request for urtilateral action from a small group ofU.S. airlines, bothinthe Middle East and around the world. The confidence that we have in the continuation ofthe U.S.-UAE Open Skies agreement has allowed us to invest in the Dubai facility and flight operations. However, the request ofthe Big 3 for animmediate remedy of limiting Gulfcanier access to the U.S. market- evenbefore the U.S. analysis is completed and before the consultationprocess is complete- would result ina breach ofthe U.S.-UAE agreement, inparticular Article 11, clause 2- "neitherParty shouldunilaterally limit the volmne oftraffic, fi·equency or regulations ofservice

..." While such a limit on competition might satisfy the goals ofthe Big 3, it would behmmful to FedEx andto all other U.S. airlines that rely on Open Skies agreements to operate internationally.
A violation ofthe existing Open Skies agreement would invite retaliation or renunciation of their agreement bythe UAE. In either case, as the U.S. airline with the most flights to and from the UAE, we believe that we would potentiallybe subjectto the greatest harm. FedEx strongly urges the U.S. not to take this or any other action on a unilateral basis.
FedEx has beentold repeatedly by representatives ofthe Big.3 that "cargo won'tbe affected." However, we believe that the risk is real, especially ifthe U.S. were to proceed with the freeze onnew flights. As noted above, that would clearly be a breach ofthe agreement. Once an Open Skies agreement is put 

### inplay, all provisions are open to becomingpossible bases ofretaliation. Or, the agreement could be renounced, which is an all-or-nothing procedure. In either case, stated above, we believethat we would be caught in

IIthe middle as the largest beneficiary ofthe openness for the U.S. side. Wejustdon't see how
we couldbe kept out ofthe potential cross-fire, even ifit was notthe intent ofthe Big 3 to involve us. Finally, looking beyondthe situation with the GulfCarriers, an open and flagrant violation of
an Open Skies agreement by the U.S. would undermine the entire U.S. policy efforts to advance aviation liberalization. Ifunhappy, existing Open Sldes partners would no longer feel the need to comply with the agreements now in place. Those countries considering a new Open Skies agreement would suddenly feel the cold wind ofU.S. protectionism chilling their intentions. FedEx believes that a breach ofthese agreements would affect the entire U.S. aviation industry, including the Big 3, and we urge the Secretaries not to proceed inthat way.

May29, 2015

12 Respectfully submitted,

FEDERAL EXPRESS CORPORATION

Nancy S

..parks Managing Director Regulatory AffairsDavid J. Bronczelc President and Chief Executive Officer 

# fec:Ex Express

February I8, 20I5

The Honorable John F. Kerry Secretary ofState U.S. Department ofState 2201 C Street, N.W. Washington DC 20520

The Honorable Anthony Foxx Secretat·y ofTranspottation U.S. Department ofTransportation 1200 New Jersey Avenue, S.E. 9th Floor Washington DC 20590

The Honorable Penny S. Pdtzkcr Secretary ofCommerce U.S. Department ofCommerce 1401 Constitution Avenue, N.W. Washington DC 20230

Re: FedEx Support for Open Sides

Dear Secretaries Kerry, Foxx and Pritzker: Exhibit 1 3610 Hacks Cross Road BuildingA. 3rd floor Memphis, TN 38125 Telephone 901.434.3366 Fax 901.434.3929 djbronmek@fedex.com

I am writing to express FedEx's strong support for Open Skies and the U.S. government's long established policy ofpromoting, negotiating, and then honoring Open Skies bilatet'al aviation agreements.
FedEx has grown tremendously since its first night ofoperations in 1973. Our fiscal yeat· 20 14 revenue was $45.6 billion and we are among the most admired companies in the world. Thanks to more than 300,000 outstanding FedEx team members, FedEx serves more than 220 countries and territories and continues to offer new products and services around the globe. Out· aircraft fleet numbers more than 660 aircraft, including new Boeing 777s and 767s. Here in the U.S, we serve every address in every community and our aircraft can be seen at almost 300 U.S. airports.

Our industry is an essential component of a rebounding American economy. The connectivity we provide for U.S. businesses, both small and large, is critical for their global expansion. FedEx is proud to be a leader in the President's National Export Initiative.Dave Bronczek- FedEx Express February 18,2015 Page 2 of2

FedEx and the other U.S. cargo carders depend on Open Skies to provide our aircraft and their imp01tant cargo access to global marketplaces. Ourability to exploit the rights set forth in those agreements means that FedEx aircraft span the globe. Air cargo carrier, such as FedEx, move the high-value, time-sensitive products essential for the U.S. to create more high-payingjobs. We also are leaders in carrying American products in the B2C markets of e-commerce, where there are new cross-bordet' opportunities for U.S. small and medium enterprises. We cannot operate internationally and provide efficient, cost-effective services without Open Skies. Recently, several U.S. passenger carriers have questioned Open Sides, specifically as it relates to Middle Eastern carriers. These U.S. passenger cal'l'iers do not fly extensively between foreign points like FedEx does. They believe they have little to risk by limiting foreign carrier access to U.S. markets. What they want is for the U.S. government to protectthem from competition from able, attractive new entrants.
For FedEx, the Open Skies agreements wilh the Middle Eastern countries are very valuable. Under the agreement with the U.A.E., we have established a hub in Dubai, where FedEx flights fi·om the U.S. crisscross with our flights from India and Asia in order to move U.S. products into local markets. This hub also acts as our gateway into Africa. Presently, FedEx alone operates almost two-thirds more flights to the Middle East than all the U.S. passenger carriers combined. Modifications to this agreement might spell the end ofthese opportunities, closing offthose markets to our customers.
Retrenchment in any way from Open Skies by the U.S. wouldjeopardize the economic growth benefits that air cargo provides. Retrenchment would result in higher fares and fewer options for flying passengers. Retrenchment benefits only a very few. The U.S. should not return to the restrictive, inefficient, expensive agreements of the past where customet·s, communities, air cargo, and the greater U.S. economy suffered.
FedEx is not alone in its support fm· Open Skies. Airpmts, travelers and other U.S. airlines have already addressed this issue publicly. Those groups have laid out the benefits for passengers created by this successful, long-standing policy. We appreciate the opportunity to make the case on the cargo side, in supportofU.S. shippel's.
FedEx urges the U.S. government to honor the Open Skies agreements it has negotiated with over ll0 countries in evel'y region ofthe world. There is no need to consult with our Open Skies partners absentpublic proofthat alleged unfair competition meets the standards long established in U,S. law. The U.S. should not capitulate to the interests of a few carriers who stand ready to put their narrow, protectionist interests ahead ofthe economic benefits that Open Skies provides to the people ofthe United States.
Please feel free to contactme ifwe can provide you any additional information.

David J. Bronczek President & CEO FedEx Express

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