UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation on May 22

, 20 13



### NOTICE OF ACTION TAKEN

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_______________________________________________ _________________________________________________ ________ This serves as notice to the public of the action described below, taken by the Department official indicated (no additional confirming order will be issued in this matter).

Applicant : 8165343 CANA DA INC. D/B/A AIR CANADA ROUGE ( AC rouge )

Date Filed: April 26, 2013

Relief requested: Exemption under 49 USC §4 0109 and a foreign air carrier permit under 49 USC §41301 to permit the applicant to engage in scheduled and charter foreign air transportat ion of persons, property, and mail between the

United States and Canada as provided for in the U.S.

- Canada Air Transport Agreement as follows: 1

(1) Scheduled foreign air transportation of persons, property, and mail from points behind Canada, via Canada and intermediate points, to a point or points in the United States and beyond;

(2) Scheduled and charter foreign air transportation of property and mail between any point or points in the United States and any other point or points;

(3) Charter foreign air transportation of persons, property , and mail between any point or points in the United

States and any point or points in a third country or countries, provided that, except with respect to cargo charters, such service constitutes part of a continuous operation, with or without a change of aircraft, that includes service to

Canada for the purpose of carrying local traffic between Canada and the United States; and

(4) Other charter trips in foreign air transportation and other charters in accordance wi th 14 CFR Part 212 of the Department’s regulations.

Applicant representative: Anita M. Mosner, 202

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- 2604 DOT analyst: David R. Christofano , 202

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- 0584

Responsive pleadings: None

DISPOSITION

Action: Approved (exemption authority only) 2 Action date: May 22 , 20 13

Effective dates of exemption authority granted: May 22 , 20 13 , through May 22 , 20 1 5

. The statement of authorization granted to AC Rouge is effective May 22 , 2013, and will remain in effect for an indefinite duration , subject t o conditions.

Basis for approval (bil ateral agreement/reciprocity): United States

- Canada A ir Transport Agreement

.

Except to the extent exempted/waived, this authority is subject to the terms, conditions, and limitations of our standard exemption conditio ns (attached as Appendix A)

.

1 The applicant stat es that it will operate its flights on behalf of Air Canada pursuant to a capacity purchase agreement , and that Air Canada will remain the entity marketing, offering

, and selling the service under the (AC*) designator code

. AC Rouge further states that, i n order to commence sales in the peak travel season, it is seeking expedited relief from the Department.

2 AC rouge also requested a foreign air carrier permit to engage in its proposed services. We will act on that portion of its request separately. In addition , t o the extent necessary, we also grant

, sua sponte

, AC rouge a statement of authorization under 14 CFR Part

212 for an indefinite duration to permit it to display the (AC*) code of Air Canada on its U.S. services.Special conditions/Remarks: Based on the record in this case , w e found that AC r ouge is operationally and financially qualified to conduct the proposed services, 3 and that it is substantially owned and effectively controlled by citizens of

its homeland

. 4

As noted by AC rouge

, the Canadian Transportation Agency has permitted Air Canada to conduct business as AC rouge, but AC rouge is still in the process of obtaining its own operating certificate from Transport Canada. 5 In the circumstances presented, w e have decided to approve the request of AC rouge for exemption authority subject to the following additional conditions : 1) the holding out and sale of service operated by AC rouge , including any services held

out under the (AC*) designator code of Air Canada, must be made on a “subject to U.S. Government approval” basis until AC rouge has been licensed to conduct its proposed services by Transport Canada and secures Operations Specifications from the Federal Aviation Adminis tration; and 2) AC rouge may not commence U.S. flight operations until such actions by Transport Canada and the Federal Aviation Administration have been completed

.

With respect to the statement of authorization we are granting AC rouge to conduct U.S. s ervices under the (AC*) designator code of Air Canada pursuant to the capacity purchase agreement between the two carriers, such services must be carried out in compliance with 14 CFR Part 257.

Action taken by: Paul L. Gretch, Director, Office of Inte rnational Aviation

________________________________________________________________________________________________________ Under authority assigned by the Department in its regulations, 14 CFR Part 385, we found that (1) our action was consistent w ith

De partment policy; (2) the applicant was qualified to perform its proposed operations; (3) grant of the authority was consisten t with the public interest; and (4) grant of the authority would not constitute a major regulatory action under the Energy Policy a nd Conservation Act of 1975. To the extent not granted/deferred/dismissed, we denied all requests in the referenced Docket. We may amend, modify, or revoke the authority granted in this Notice at any time without hearing at our discretion.

Persons entit led to petition the Department for review of the action set forth in this Notice under the Department’s regulations, 14 CFR §385.30, may file their petitions within seven (7) days after the date of issuance of this Notice. This action was effec tive when

t aken, and the filing of a petition for review will not alter such effectiveness.

An electronic version of this document is available on the World Wide Web at: http://www.regulations.gov

3 The applicant incorporated int o the record its financial submissions that are available at: http://www.aircanada.com/en/about/investor/rep_info.html

. 4 AC rouge states that it is a wholly

- owned subsidiary of Air Canada, a foreign air carrier of Canada that is substantially owned and effectively controlled by citizens of Canada. See Order 2008

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- 23. The record indicates that AC rouge’s President/Chief Executive Officer, Board Members, and key management personn el are all citizens of Canada.

5 AC rouge included in its application correspondence from Transport Canada indicating that at this point Transport Canada does not foresee any significant impediments that would hinder the issuance of a homeland Air Operator Certificate to AC rouge near its planned start of operations on July 1, 2013.

### Appendix

Foreign Ca rrier Exemption Conditions

In the conduct of the operations authorized, the foreign carrier applicant(s) shall:

(1) Not conduct any operations unless it holds a currently effective authorization from its homeland for such operations, and it has filed a copy of such authorization with the Department;

(2) Comply with all applicable requirements of the Federal Aviation Administration, the Transportation Security Administration, and with all applicable U.S. Government requirements concerning security, incl uding, but not limited to, 14 CFR Parts 129, 91, and 36 and 49 CFR Part 1546 or 1550, as applicable. To assure compliance with all applicable U.S. Government requirements concerning security, the holder shall, before commencing any new service (including charter flights) from a foreign airport that would be the holder’s last point of departure for the United States, contact its International Industry Representative (IIR (formerly referred to as International Principal Security Inspector) to advise the I IR of its plans and to find out whether the Transportation Security Administration has determined that security is adequate to allow such airport(s) to be served ;

(3) Comply with the requirements for minimum insurance coverage contained in 14 CFR Part 205, and, prior to the commencement of any operations under this authority, file evidence of such coverage, in the form of a completed OST Form 6411, with the Federal Aviation Administration’s Program Management Branch (AFS

- 260), Flight Standards Service (any c hanges to, or termination of, insurance also shall be filed with that office);

(4) Not operate aircraft under this authority unless it complies with operational safety requirements at least equivalent to Annex 6 of the Chicago Convention;

(5) Conform t o the airworthiness and airman competency requirements of its Government for international air services;

(6) Except as specifically exempted or otherwise provided for in a Department Order, comply with the requirements of 14 CFR Part 203, concerning waiv er of Warsaw Convention liability limits and defenses;

(7) Agree that operations under this authority constitute a waiver of sovereign immunity, for the purposes of 28 U.S.C. 1605(a), but only with respect to those actions or proceedings instituted again st it in any court or other tribunal in the United States that are: (a) based on its operations in international air transportation that, according to the contract of carriage, include a point in the United States as a point of origin, point of destinatio n, or agreed stopping place, or for which the contract of carriage was purchased in the United States; or (b) based on a claim under any international agreement or treaty cognizable in any court or other tribunal of the United States. In this condition, the term "international air transportation" means "international transportation" as defined by the Warsaw Convention, except that all States shall be considered to be High Contracting Parties for the purpose of this definition;

(8) Except as specifically authorized by the Department, originate or terminate all flights to/from the United States in its homeland;

(9) Comply with the requirements of 14 CFR Part 217, concerning the reporting of scheduled, nonscheduled, and charter data;

(10) If charter oper ations are authorized, except as otherwise provided in the applicable aviation agreement, comply with the Department's rules governing charters (including 14 CFR Parts 212 and 380); and

(11) Comply with such other reasonable terms, conditions, and limitat ions required by the public interest as may be prescribed by the Department, with all applicable orders or regulations of other U.S. agencies and courts, and with all applicable laws of the United States.

This authority shall not be effective during any p eriod when the holder is not in compliance with the conditions imposed above. Moreover, this authority cannot be sold or otherwise transferred without explicit Department approval under Title 49 of the U.S. Code.

1 2/2007