BEFORE THE 

DEPARTMENTS OF TRANSPORTATION, STATE AND 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 with respect to this document should be sent to: 

Nancy S. Sparks 

Managing Director 

Regulatory Affairs 

FEDERAL EXPRESS 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 

Courtney E. Felts 

Senior Counsel 

Regulatory Affairs 

FEDERAL EXPRESS CORPORATION 

3620 Hacks Cross Road 

Building B, 3rd Floor 

Memphis, Tennessee 38125 

(901) 434-8632 (phone) 

(901) 434-8283 (fax) 

Email: cefelts@fedex.com 

Attorneys for 

FEDERAL EXPRESS CORPORATION 
BEFORE THE 

DEPARTMENTS OF TRANSPORTATION, STATE AND 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 

Federal Express Corporation ("FedEx") appreciates the opportunity to participate in this 

information docket. We want to thank the Secretaries of State, Transportation and 

Commerce for their interest in hearing all stalceholders on the concems presented by three 

large U.S. network carriers- American Airlines, Delta Air Lines and United Airlines 

(together, the "Big 3"), who are claiming that three carriers from the United Arab Emirates 

("UAE") and Qatar, Qatar Airways, Etihad Airways and Emirates, (together, the "Gulf 

Carriers"), are in some way competing unfairly in the U.S. intemational aviation market. 

Included in the claims of the 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UAE and Qatar are either outdated or inconsistent with statutory U.S. aviation policy.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 of Open Skies, Fifth 

Freedoms, is not necessary or valuable, which gravely concerns FedEx which relies on these 

opportunities. 

FedEx is filing in this docket primarily to defend Open Skies, not the position of the Gulf 

Carriers. However, we are concemed that some of the arguments (and proposed "solutions") 

against the Gulf Carriers could result in damage to FedEx, the U.S. all-cargo industry or U.S. 

interests writ broadly. Because of that, we may counter some of the arguments against the 

Gulf carriers, if we believe that they endanger Open Skies as a policy or attack the terms of 

the agreements. Furthermore, we believe that FedEx's operations in the region are also at 

risk. As the largest U.S. airline presence in the Gulf, we represent the most logical target 

victim of any retaliation brought on by a U.S. action in violation of its commitments. 
Since this is a complex group of claims, supplemented by lengthy documents that have taken 

the Big 3 years to prepare and months to fully reveal to the public, we have not attempted to 

address every argument in detail. Because of that, and in the interests of fully participating in 

the Open Govermnent process here, we welcome any questions or explanations that any part 

of the U.S. govermnent might have for FedEx. 

FedEx's chief executive officer, David J. Bronczek, has already written a letter to the 

Secretaries of State, Transportation and Commerce, dated February 18, 2015. We attach that 

as Exhibit 1 to the filing and ask that it be considered an integral part of our filing. 

Background 

FedEx has long been a proponent of Open Skies agreements. We see Open Skies as a natural 

evolution of aviation deregulation that allowed our company to invent and develop the 

express delivery industry, stmting with U.S. deregulation of cargo aviation in 1977. Today, 

the 115 Open Skies agreements negotiated by the U.S. govermnent have opened markets for 

our fleet of 660 aircraft, allowing us to move U.S. shipments and to provide our end-to-end 

delivery services to over 220 countries and territories around the world. 

The first Open Skies agreement in 1992 with the Netherlands 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, saw the advantages for them to gain open access to foreign markets. Exploiting 

the Open Skies agreements' virtual elimination of barriers to entty, the Big 3 were able to put 

together their own version of a global air network. Their networks were formed not through 

adding their own flights, but tlu·ough their code-shm·ing arrangements, in which U.S. 

passengers no longer flew entire trips on U.S. aircraft. This was followed by their antitrustimmunized relationships, which allowed them to legally agree upon prices and divvy up 

markets with certain foreign airlines. While the Big 3 was discovering that Open Skies 

helped them to limit competition, FedEx followed its own plan. Using the Fifth Freedoms 

provided under these agreements, FedEx built an actual global airline, using U.S. aircraft 

piloted by U.S. crews. 

Discussion 

FedEx supports Open Skies, period. FedEx has enthusiastically suppmted Open Skies 

agreements in all mm·kets because they provide and protect opportunities to expand our 

global air network. Through provisions 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 Fourth Freedom rights), but also the rights 

to participate in third-country mm·ketplaces while connecting U.S shippers to markets 

2 
beyond (called Fifth Freedoms). With Fifth Freedoms, used in combination with other Open 

Skies provisions such as change-of gauge and operational flexibility, FedEx has 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 in the UAE. This pmticular facility allows U.S.-origin flights to connect the U.S., 

Europe, China and Asia via a well-situated hub in between those points at Dubai 

International Airport. 

The Big 3 assert in public forums that they support Open Skies. Yet, in their white paper, 

they fiercely attack it. They say that Open Skies agreements are "inconsistent with DOT's 

statutory mandate," that they "are facilitating subsidized Gulf competition," and are 

"premised on outdated assumptions." This doesn't sounds like "support" of Open Skiesthat sounds like they want to end Open Skies as a U.S. policy and go back to the dm·k ages of 

government control of the marketplace. 

Open Skies agreements are consistent with DOT's statutory mandate. The main goal of U.S. 

aviation policy as stated by Congress has been set forth 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 of U.S. 

aviation policy is to create oppmtunities for international air services to be supplied to the 

tme intended beneficiaries of U.S. policy, the U.S. air transportation consumers. The airlines 

providing those services can be U.S. airlines, but they do not have to be. It is the consumers 

that U.S. law focuses on, with the success of the airlines and their employees flowing 

naturally from customer satisfaction. 

The Big 3 accurately quote 49 U.S.C. §4010l(e)(l), in which Congress expressed as one of 

its goals "the attainment of the opportunity for air caniers to maintain and increase their 

profitability in foreign air transportation" [emphasis added]. However, the Big 3 then distmi 

that provision to read in a statutory entitlement to profitability. Our read is that the law 

requires the U.S. executive branch to foster a regulatory environment --the "oppminnity"-

in which profitability can be created (or lost) by the operators themselves. 

As an expression ofthis U.S. policy, Open Skies agreements are intended to create those 

oppmiunities. Under U.S. international aviation law and policies, the U.S. government is to 

create openings for U.S. caniers to enter into the global marketplace. In tum, 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 govemmental job of 

3 
controlling the market was left behind with deregulation. That is the true message of 49 

U.S.C. §40101(e). 

In addition to distorting subsection (1) of 49 U.S.C. §40101(e) to read in a grant of 

govermnent-mandated market dominance, the Big 3 overlook the remainder of 49 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 of permissive international authority" and eliminate operational 

and marketing restrictions "to the greatest extent possible." Reading all of this together, 

Congress is instructing the executive branch to go out and negotiate Open Skies agreements 

for the ultimate benefit of U.S. shippers and travelers. 

U.S. aviation law says that "equivalent benefits" are to be obtained for U.S. airlines OR for 

U.S. consumers. The Big 3 rely heavily on 49 U.S.C. 4010l(e)(8), stating that foreign 

carriers are only to entitled to increase their access "if exchanged for benefits of similar 

magnitude for [U.S.] air carriers or the traveling public ... " [emphasis added]. In this case, we 

believe that the consumers should be allowed to be winners. Open Skies policy put an end 

to a "balance of benefits" trade-off between national champions, and relies instead on the 

"balance of opportunities" for all airlines. This version of the old "benefits" concept 

provides that possible benefits gained by foreign carriers weigh on the U.S. side if such 

benefits accrue to American travelers. This would apply when the U.S. carriers do not fully 

exploit such opportunities themselves. This provision requires the marketplace (the 

"travelling public") to decide the matter of "balance," instead of the government. In the 

situation under 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 of opportunity." It reflects the drafters' 

concerns that ifleft to 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. It does not apply to subsidies 

(see our discussion of the relevant provision, below) butit guarantees a general absence of 

favoritism, creating equal opportunities for all carriers in a market. 

The Big 3 seem to think that local laws and customs (such as labor laws and taxation rates) 

that work to the benefit of carriers on their home turf are "unfair" advantages. However, 

this is definitely a step too far. In international aviation, a carrier is only taxed on its income 

in its home tenitory, whether the rate is high or low. This is just a pragmatic solution to a 

potentially complex problem for an industry involving cross-border services, mobile assets 

4 
and mobile employees. Othetwise, there would be multiple layers of taxation, on any 

operation. We can only imagine how many complaints there would be about unfair taxes if 

U.S. carriers had to pay taxes in high rate foreign jurisdictions 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 on nationality. If a carrier is barred from an 

airport, is subject to levies solely because it is a foreign carrier, is prohibited from setting up 

a sales office or is otherwise treated differently in the marketplace by the host goverrnnent, 

then it does not have the opportunity to compete fairly. This is not what is alleged by the Big 

3. It is FedEx's view, in the absence of such an allegation of discrimination, that the general 

complaints about issues other than subsidy are simply not actionable under the Open Skies 

agreements in place. 

Is "traffic shifting" another term for competition? Despite the Big 3' s stated desire to keep 

government out of the market's workings, they seem to want the U.S. govemment to 

guarantee their continued market share, as if U.S. consumers must be fumteled to the 

"correct" choice of a U.S. carrier each time they travel. We carmot accept the idea that 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 law to U.S. airlines. If consumers want to 

use a foreign carrier, that should not be a problem that the U.S. government needs to fix, but 

instead should be a capitalistic challenge for the losing carrier. 

It is not the responsibility for a new entrant to a market to create new customers. If that 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. That may be what is happening in the 

instant case, but we are not going to try to parse the issue. Whether it is market stimulation 

or shifting of consumer allegiance, FedEx fails to see how free choice for customers is a 

"trade violation" under the Open Skies agreements. 

Fifth Freedoms are valuable and well-used rights by both passenger and cargo airlines. Fifth 

Freedoms are valuable for many carriers, including FedEx. The white paper talks about Fifth 

Freedoms as if they were only available to the Gulf carriers, rather than part of the model 

Open Skies agreement. The Big 3 say in their white paper that Fifth Freedoms are "an 

anacln·onism" and dismiss their value as a core element of Open Sides. The reality is that 

they rely on them directly and indirectly for their global operations. First, Delta remains the 

largest U.S. user of passenger Fifth Freedoms with its operations over Narita Airport in 

Japan. Right now, it appears that they carry Fifth Freedom traffic to at least six Asian cities 

from their hub at Narita. These Fifth Freedom rights, originally granted in the 1952 U.SJapan agreement, were the star in Delta-predecessor Northwest's crown, and remain a 

5 
significant part of the Delta network in Asia today. United also appears to use its Narita 

rights for some Fifth Freedom flights as well. Second, under DOT policy, U.S. carriers must 

possess the underlying economic authority for a segment if they want to place their code on a 

partner's flight. So, many of the alliance flights that the Big 3 put their passengers on-the 

foreign caniers flights that bear one of the Big 3 's code -must be supported by the 

underlying Fifth Freedom right granted under an Open Skies agreement. For example, for a 

Delta flight from Atlanta to Amsterdam to Milan, Delta must have Fifth Freedom rights fi·om 

AMS to MXP, or the U.S. govennnent will not allow Delta to sell that portion of the flight 

under its DL code. 

Despite the fact that the Big 3 use this type of rights in their own operations and to support a 

basic part of their alliances, they claim that their use by others is "opportunistic." A flight 

that stops in Milan en route to Dubai apparently isn't efficient when Emirates does it, it is 

"unfair". The Emirates Milan Fifth Freedom operation (Fifth Freedom points can be 

intermediate points, despite their usual meaning of "beyond"- they are just third country 

opportunities) is squarely within the terms of the Open Skies agreement. Yet the Big 3 make 

it sound like they m·e cheating. If Delta's use of Fifths at Narita isn't opportunistic, then why 

is Emirates' flight to Milan? 

For FedEx, as noted above, Fifth Freedoms are critical to our system. Fifth Freedoms have 

nothing to do with fuel stops and aircraft range, despite position taken by some Big 3 

representatives (those are Second Freedoms, the right to make technical stops, and are 

included in most bilateral air services agreements, Open Skies or not). Like the Big 3, we use 

Fifth Freedoms to support our global network. However, we use ours to fly our own aircraft, 

not to hand over U.S. traffic to foreign airline partners via code-share marketing magic. 

Indeed, the cunent FedEx schedule includes a flight route Dubai - Milan MalpensaMemphis, operated with Boeing 777 aircraft flown by U.S. crew. If Fifth Freedom rights 

were withdrawn from the Emirates flight operating between the U.S. and Dubai via 

Malpensa, how could the U.S. hang onto the reciprocal rights on which FedEx depends for its 

minor image Fifth Freedom flight? Without Fifth Freedoms- a tent pole right in Open Skies 

-all U.S. cmTiers, passenger and cargo, would be out of the international network business. 

The difference between FedEx and the Big 3 is that we acknowledge the value of these rights 

to create jobs for U.S. aviation workers and improved services for U.S. customers, while they 

choose to ignore it. 

For FedEx, the Gulf Open Skies agreements are valuable, not problematic. FedEx has a 

significant hub 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 of the 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 

6 
today's staff totals 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 

in 41 countries in the Middle East, Afi-ica and beyond. Additionally, we connect four other 

countries in the Gulf region by truck. This is an impmiant location for FedEx. In fact, we are 

now expanding that facility to increase its capacity by 50%. 

All of this is possible because of the U.S.-UAE Open Skies agreement. It provides 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. It includes 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 which the 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 connection from 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 investment to the UAE rose from $3.6 billion in 2004 to $24.6 billion in 2013, 

increasing 6-fold in just 9 years. The UAE has trade relations with every state in the United 

States, as well as the District of Columbia, 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 of this important trading relationship. 

It is impmiant to note that the Gulf Carriers compete vigorously with FedEx in the air cargo 

arena. Cargo is important to them- for example, Etihad just announced in its 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 Gulf Carriers present in 

the U.S. market. We are not standing by, watching the Big 3 battle these formidable 

competitors with no risk to our business. ill addition to the bellies of the 25 passenger 

aircraft they operate to the U.S. each day (including the Boeing 777, which has cargo space 

almost equal to a 73 7 freighter), the Gulf Caniers have a combined freighter fleet of 3 7 

freighters and they operate to seven dedicated U.S. points. And they 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 that the essence of Open 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 by the Big 3 demands. FedEx employs almost twice as 

many people as any of the Big 3 companies and our total enterprise operations (e.g., FedEx 

7 
Corporation) employ more than the Big 3 combined. We operate to more U.S. airports than 

do any of the Big 3 and have hundreds of employees at multiple locations in every U.S. state. 

In short, we have the jobs and the U.S. presence that give us a significant stake in U.S. 

aviation policy. 

Our segment of aviation has a powerful overall economic effect. In addition to jobs directly 

created, the air express industry has an indirect job creation effect. A 2015 Frontier 

Economics study showed that world express industry employment is 585,000, Total DII 

(direct, indirect and induced) employment is almost 3 million. Of that 3 million, 1.4 million 

air express DII jobs are in North America. 

And of course, FedEx is also a key customer of U.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 could tln·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), each with General Electric-manufactured engines. Just like the Gulf 

Carriers, FedEx is a major customer of the U.S. aerospace industry, and we use those aircraft 

to fly the global routes made possible because of Open Skies. 

FedEx's intemational business is inextricably linked to cross-border trade, because products 

need cargo transportation to move. We partner with the Department of Commerce to 

promote trade in a wide variety of ways. FedEx became 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 of Commerce. Over these years, FedEx 

and the USCS have led multiple trade missions, supported over 600 Gold Keys, and reached 

more than 60,000 U.S. exporters through trade events and export assistance programs. This 

alliance is now in its 11th year of supporting the President's National Export Initiative. 

"Trade principles" cannot be selectively borrowed from a regime that does not apply. In their 

most recent letter (dated, Aprill7, 2015, now placed in this docket), the chief executive 

officers of the Big 3 seek to invoke the World Trade Organization ("WTO") rules as a basis 

of resolving 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 in the goods agreement, the GATT, not the services agreements, 

the GATS). 

Our view is that if the Big 3 want the U.S. to apply WTO-type limits on subsidies, they have 

to be ready to accept the other basics of trade regimes that go along with such rules. Trade 

agreements do more than address complaints, they liberalize markets. In order for the parties 

8 
to agree on the applications of rigorous trade disciplines such as a prohibition on subsidies, 

each party must put something valuable on the table. For the U.S. in most cases, that 

valuable item is domestic market access. 

However, the Big 3 have not suggested an end to the U.S. restriction on foreign direct 

investment in U.S. airlines. The U.S. is the richest aviation market in the world and yet one 

of the most restricted in terms of domestic access. One might argue that the failure to open 

up the U.S. market is, in itself, a subsidy for all U.S. airlines- or at least a special and 

exclusive economic benefit granted by the government. FedEx has long beim on record 

supporting an end to protection of the U.S. market and would gladly support opening up U.S. 

aviation to foreign direct investment today. But, it would appear that market access is not 

one of the trade principles that the Big 3 support. Our view is that if"trade principles" are to 

apply, let's use all of them, not just the few that might create new market advantages. 

State ownership does not mean "competition with the government." The global marketplace 

of airlines 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 of the Chicago 

Convention particularly singled out discriminatory treatment as an evil to be avoided, noting 

the need for "equality of opportunity" in the preamble. The fact that the U.S. never created a 

government-owned airline did not mean that it did not embrace this concept of "national 

champions," and the U.S. champions included the predecessors of some of the Big 3. During 

the period before Open Skies, the U.S. carefully negotiated agreements tailored specifically 

to the needs of those national champions which did little to create or assist new market 

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 or reorganization) and some staying in the govermnentowned starting gate either by choice or necessity. The presence in a market by a 

govemment-owned airline did not stop the U.S. fi·om seeking oppmiunities for U.S. carriers 

in those markets. If it had, there would be virtually no markets open to U.S. carriers today. 

Open Skies agreements eliminated U.S. government favoritism among carriers and allowed 

all comers to compete. The U.S. carrier selection process was finished, since rights were not 

limited by Open Skies agreements. In many cases, the result was that foreign markets were 

flooded with flights fi·om three or more U.S. passenger carriers, while the receiving nation 

only had a single carrier - often with a small or inadequate fleet- with which to 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 of the Gulf 

countries, the Big 3 are saying that Open Skies market access principles are "outdated," since 

apparently they never plarmed on the Gulf carriers being effective competitors. That doesn't 

9 
seem like a strong public policy argument for undoing a reciprocal market access agreement 

that benefits both U.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 of antitrust prosecution. Singapore, Malaysia, Sandia, SAS, 

Finnair- the list of government-owned carriers whose ±lights the Big 3 put their brand on is 

extensive. Others, such as Alitalia and JAL, are now privatized, but in the recent past they 

were bailed out and reorganized by their governments, just like the Big 3 have been rescued 

by U.S. banlcruptcy and pension guarantee laws. It would appear that the Big 3 accept some 

types of foreign government financial intervention- for their commercial allies - but not 

others. 

The Big 3 argue that because the expansion of the Gulf Carriers has been supported by their 

governments as a matter of stated national economic policy, they are an "instrument of the 

government." What does this mean? A number of the Big 3 's closest commercial partners 

are the focal points oftheir governments' aviation policies and are constantly benefited. 

Even the Big 3 want to be government policy beneficiaries: see their pursuit of a U.S. 

"National Airline Policy," which would do just that. The presence of supportive government 

policies alone do not violate the Open Skies' agreement promise of"fair and equal 

opportunity to compete." 

FedEx is not going to review and rebut the allegations of subsidies; we will leave that to the 

Gulf Carriers. However, we endorse the succinct review of what is and is not a subsidy 

presented in the filing in this docket by the International Airline Group ("lAG"). lAG is 

well-informed on these issues, since it is a former state-owned entity itself, now facing heavy 

competition from the Gulf Carriers without feeling the need to seek government protection. 

A freeze on capacity is not the remedy prescribed by the existing aviation agreement for 

alleged subsidies, or by "trade principles," for that matter. Under the Gulf Open Skies 

agreements, if subsidies are found to create competitive harm, the solution is in pricing, not 

in capacity. The Open Skies agreements with the UAE and Qatar do talk specifically about 

subsidies. But the solution- stated right in the agreement- is not to close off or limit the 

market, but to adjust pricing. This is also the standard remedy in trade agreements- if 

subsidies create an unfair advantage, you add a "countervailing duty" to adjust pricing fairly. 

Then, you let the market decide if those bananas or cars or cell phones 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 specifically forbid unilateral action. They do 

require consultations, where the complaining side must notify the other side of the reasons 

10 
for "its dissatisfaction." This is not to be the dissatisfaction of a small group of carriers, but 

the dissatisfaction of the government. The requirement that the governments present the case 

to each other is why FedEx is welcoming this procedure as a pre-condition to the U.S. 

requesting consultations. In FedEx's view, a request for consultations is an accusation of 

wrong-doing and should not be undertalcen lightly or only as a fact-finding mission. The 

U.S. should not request consultations based on one group's assertions. It should do first its 

own analysis and then decide, based on all of the facts, if there is probable cause for 

proceeding. What might have been better- and more in keeping with U.S. due processwould have been for the Big 3 to institute a proceeding 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 of holding 

private meetings where they could put their points across unchallenged. Now that the U.S. 

has chosen to follow its "open government process," we have confidence that the U.S. 

government will apply the smne rigorous analysis and open-mindedness that it would have 

employed under IATFCP A to any review of these claims. We applaud the decision to decide 

first if there is adequate, umebuttable evidence of unfair competition and resultant harm 

before requesting consultations. 

FedEx is being put at risk by the request for urtilateral action from a small group ofU.S. 

airlines, both in the Middle East and around the world. The confidence that we have in the 

continuation of the U.S.-UAE Open Skies agreement has allowed us to invest in the Dubai 

facility and flight operations. However, the request of the Big 3 for an immediate remedy of 

limiting Gulf canier access to the U.S. market- even before the U.S. analysis is completed 

and before the consultation process is complete- would result in a breach of the U.S.-UAE 

agreement, in particular Article 11, clause 2- "neither Party should unilaterally limit the 

volmne of traffic, fi·equency or regulations of service ... " While such a limit on competition 

might satisfy the goals of the Big 3, it would be hmmful to FedEx and to all other U.S. 

airlines that rely on Open Skies agreements to operate internationally. 

A violation of the existing Open Skies agreement would invite retaliation or renunciation of 

their agreement by the UAE. In either case, as the U.S. airline with the most flights to and 

from the UAE, we believe that we would potentially be subject to the greatest harm. FedEx 

strongly urges the U.S. not to take this or any other action on a unilateral basis. 

FedEx has been told repeatedly by representatives of the Big.3 that "cargo won't be 

affected." However, we believe that the risk is real, especially if the U.S. were to proceed 

with the freeze on new flights. As noted above, that would clearly be a breach of the 

agreement. Once an Open Skies agreement is put in play, all provisions are open to 

becoming possible bases of retaliation. Or, the agreement could be renounced, which is an 

all-or-nothing procedure. In either case, stated above, we believe that we would be caught in 

II 
the middle as the largest beneficiary of the openness for the U.S. side. We just don't see how 

we could be kept out of the potential cross-fire, even if it was not the intent of the Big 3 to 

involve us. 

Finally, looking beyond the situation with the Gulf Carriers, 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. If unhappy, 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 of U.S. protectionism chilling 

their intentions. FedEx believes that a breach of these agreements would affect the entire 

U.S. aviation industry, including the Big 3, and we urge the Secretaries not to proceed in that 

way. 

May29, 2015 

12 

Respectfully submitted, 

FEDERAL EXPRESS CORPORATION 

Nancy S .. parks 

Managing Director 

Regulatory Affairs 
David J. Bronczelc 

President and Chief Executive Officer 

fec:Ex 

Express 

February I 8, 20 I 5 

The Honorable John F. Kerry 

Secretary of State 

U.S. Department of State 

2201 C Street, N.W. 

Washington DC 20520 

The Honorable Anthony Foxx 

Secretat·y of Transpottation 

U.S. Department of Transportation 

1200 New Jersey Avenue, S.E. 

9th Floor 

Washington DC 20590 

The Honorable Penny S. Pdtzkcr 

Secretary of Commerce 

U.S. Department of Commerce 

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 

Building A. 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 of promoting, negotiating, and then honoring Open Skies bilatet'al aviation agreements. 

Fed Ex has grown tremendously since its first night of operations 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. Our ability to exploit the rights set forth in those agreements means 

that Fed Ex 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-paying jobs. 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 protect them 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 of these opportunities, closing off those markets to our customers. 

Retrenchment in any way from Open Skies by the U.S. would jeopardize 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 

support of U.S. ship pel's. 

FedEx urges the U.S. government to honor the Open Skies agreements it has negotiated with over ll 0 

countries in evel'y region of the world. There is no need to consult with our Open Skies partners absentpublic proof that 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 of the economic benefits that Open Skies provides to the people ofthe United States. 

Please feel free to contact me if we can provide you any additional information. 

David J. Bronczek 

President & CEO 

FedEx Express 

DJB/273202