Document ID: DOT-OST-1997-2880-0016
Agency: dot
Document Type: Notice
Title: Notice of Action Taken re Continental Airlines, Inc. and Virgin Atlantic Airways Limited
Posted Date: 2003-08-22T04:00Z

UNITED STATES OF AMERICA

		        DEPARTMENT OF TRANSPORTATION

			  OFFICE OF THE SECRETARY

			          WASHINGTON, D.C.

    Issued by the Department of Transportation on August 22, 2003

NOTICE OF ACTION TAKEN – DOCKET OST-1997-2880

________________________________________________________________________
________________________________

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).

Joint Application of CONTINENTAL AIRLINES, INC. AND VIRGIN ATLANTIC
AIRWAYS LIMITED, filed  July 8, 2003, to amend Notice of Action Taken
dated  October 3, 1997, and confirmed by Order 97-11-19 in this Docket,
in order to grant new exemption authority and statements of
authorization to Continental and Virgin Atlantic, to provide the
carriers with the following additional authority: 

XX  Exemption for Continental under 49 U.S.C. §40109 to provide the
following service:

Scheduled foreign air transportation of persons, property, and mail
between any point or points in the United States and any point or points
in the United Kingdom, directly and via intermediate points, and beyond
the United Kingdom to any point or points in third countries, limited to
operations under its code-sharing agreement with Virgin Atlantic,
whereby Continental will place its code on flights operated by Virgin
Atlantic; and to combine this authority with authority at other points
Continental is authorized to serve by certificate or exemption.

XX  Exemption for Virgin Atlantic under 49 U.S.C. §40109 to provide the
following service:

Scheduled foreign air transportation of persons, property, and mail
between any point or points in the United Kingdom and any point or
points in the United States, via Virgin Atlantic’s authorized U.S.
gateways, and beyond the United States to any point or points in third
countries, limited to operations under its code-sharing agreement with
Continental, whereby Virgin Atlantic will place its code on flights
operated by Continental.

XX Statement of Authorization for Continental under 14 CFR Part 212 to:

Display Virgin Atlantic’s “VS*” designator code on flights
operated by Continental between (1) points in the United States; (2)
points in the United States and regional airports in the United Kingdom,
either nonstop or via third-country intermediates; and (3) points in
the United States and points in third countries, either nonstop or via
third-country intermediates.

XX Statement of Authorization for Virgin Atlantic under 14 CFR Part 212
to:

Display Continental’s “CO*” designator code on flights operated by
Virgin Atlantic between (1) points in the United Kingdom; (2) points in
the United States and regional airports in the United Kingdom either
nonstop or via third-country intermediates; and (3) points in the
United Kingdom and points in third countries, either nonstop or via
third-country intermediates.

The applicants initially propose to conduct code-share operations under
this authority over the routes set forth in Appendix D to this Notice.

Applicant reps:  Bruce Keiner (Continental) (202) 624-2615 and Anita
Mosner (Virgin Atlantic) (202) 294-5890

DOT Analyst:    George Wellington (202) 366-2390

D I S P O S I T I O N

XX  Granted (subject to limitations and conditions, see below)

The above action was effective when taken: August 22, 2003, through
August 22, 2005.

Responsive Pleadings:  United Air Lines, Inc. and British Midland
Airways Limited d/b/a bmi (United/bmi) and the City of Houston and the
Greater Houston Partnership (the Houston Parties) filed answers to the
request.  Continental and Virgin Atlantic filed replies.  United/bmi
filed a consolidated response to the replies of the applicants.

The Houston Parties support the application.

United/bmi state in their pleadings that they have no objection to the
request so long as the Department grants the application for code-share
authority that United/bmi have filed in Docket OST 2003-15758, but that
otherwise, the request should be denied.  United/bmi state that the
proposed Continental/Virgin Atlantic arrangement would allow Continental
to place its code on any Virgin Atlantic flight between the United
States and the United Kingdom, including flights to and from London
Heathrow and London Gatwick.  They state that the currently-authorized
extrabilateral Continental/Virgin Atlantic code-share primarily benefits
Virgin Atlantic, while United/bmi have entered into a similar code-share
arrangement where the operating carrier, United, would receive the
greater benefit.  Moreover, they state that the new authority at issue
in the applicants’ July 8, 2003, request will enable them to enhance
their extrabilateral code-sharing and that it far exceeds the
beyond-gateway or U.S.-Manchester authority held by United/bmi.

United/bmi note that the Department recently turned down United’s
request to implement its antitrust immunity with bmi, and states that
now United and bmi are requesting the ability to allow bmi to code share
on United’s U.S.-London Heathrow flights, the same kind of
extrabilateral code-share authority Continental and Virgin Atlantic are
seeking to renew and expand, and that this request would offer
comparable public benefits to the Continental/Virgin Atlantic
arrangement.

Virgin Atlantic states that while it will not address the merits of a
United/bmi application pending in another Docket, the authority sought
by United/bmi is different and broader than the new authority
Continental and Virgin Atlantic are seeking here.  It states that,
contrary to the assertion of United/bmi, Continental and Virgin Atlantic
are not seeking new U.S.-London code-share authority, but only authority
between the United States and regional U.K. airports, and that this new
authority is “virtually identical” to that already held by
United/bmi and American/British Airways.  It states that the Department
has found that such services provide public benefits, including benefits
from the carriage of beyond-segment code-share passengers.  Virgin
Atlantic disputes United/bmi’s claim that its code-share arrangement
with Continental is imbalanced in its favor, stating that the
arrangement will benefit both carriers

Continental also states that it and Virgin Atlantic are not requesting
to market transatlantic services to London airports, only to regional
U.K. airports.  It states that the addition of the proposed
Continental/Virgin Atlantic beyond-gateway code-share services will have
very little impact on United or bmi.  It further states that United/bmi
already have extensive code-share operations, and that it opposes the
award of code-share authority between the United States and London
Heathrow to either American/British Airways or United/bmi, because of
their dominance at London Heathrow.  Continental also states that to the
extent United/bmi are opposing renewal of the existing
Continental/Virgin Atlantic authority in this Docket, they are too late;
and that while United/bmi have been denied U.S.-London Heathrow
code-sharing authority, it is because of the unwillingness of the United
Kingdom to open London Heathrow to effective new competition.

Decision:  We have decided to amend the Notice of Action Taken dated
October 3, 1997, in this Docket, to add to the authority conferred by
that Notice the exemptions and statements of authorization for
Continental and Virgin Atlantic described herein, subject to certain
limitations and conditions.

Our action here grants the applicants the following authority, subject
to the conditions described herein:

Continental: 

 I. Exemption authority to conduct scheduled foreign air transportation
of persons, property, and mail between any point or points in the United
States and regional airports in the United Kingdom, directly and via
intermediate points, and beyond the United Kingdom to any point or
points in third countries, limited to operations under its code-sharing
agreement with Virgin Atlantic, whereby Continental will place its code
on flights operated by Virgin Atlantic; and to combine this authority
with authority at other points Continental is authorized to serve by
certificate or exemption.  

II. A statement of authorization to display Virgin Atlantic’s
“VS*” designator code on flights operated by Continental between (1)
points in the United States; (2) points in the United States and
regional airports in the United Kingdom, either nonstop or via
third-country intermediates; and (3) points in the United States and
points in third countries, either nonstop or via third-country
intermediates.

Virgin Atlantic: 

 I. Exemption authority to conduct scheduled foreign air transportation
of persons, property, and mail between any point or points in the United
Kingdom and any point or points in the United States, via Virgin
Atlantic’s authorized U.S. gateways, and beyond the United States to
any point or points in third countries, limited to operations under its
code-sharing agreement with Continental, whereby Virgin Atlantic will
place its code on flights operated by Continental.

 II. A statement of authorization to display Continental’s “CO*”
designator code on flights operated by Virgin Atlantic between (1)
points in the United Kingdom; (2) points in the United States and
regional airports in the United Kingdom either nonstop or via
third-country intermediates; and (3) points in the United Kingdom and
points in third countries, either nonstop or via third-country
intermediates.

Our basis for grant of this authority, as limited and conditioned by
this Notice, is the 1995 Memorandum of Consultations between the United
States and the United Kingdom (MOC).  We also find that the services we
are authorizing will enhance competition in the markets involved, to the
benefit of the traveling and shipping public.  Moreover, the authority
is comparable to authority we recently granted to American and British
Airways (see Order 2003-5-33).

We have decided not to grant Continental the broad authority it seeks to
hold out code-share services between any point in the United States and
London, as such expansive authority is not available to a carrier of the
United States at this time.

With respect to the concerns raised by United/bmi and not already
addressed above, we find, in light of the public interest and
precedential factors already cited, that the question of which carrier
in a code-share relationship may benefit more is not decisional here. 
As to United/bmi’s assertion that we should grant Continental/Virgin
Atlantic the authority they seek only if we grant the application of
United/bmi for code-share authorities in Docket OST-2003-15758, we note
that the United/bmi request is pending before the Department and we will
issue a decision in that case soon.

Action taken by:   Paul L. Gretch, Director	

                               Office of International Aviation	

Except to the extent exempted or waived, this authority is subject to
the terms, conditions, and limitations indicated:

	XX   Continental’s certificates of public convenience and necessity

	XX   Virgin Atlantic’s foreign air carrier permit

	XX   Standard Exemption Conditions (attached as Appendices A and B)

------------------------------------------------------------------------
------------------------------------------------------------------------
------------Conditions:  The exemption authority granted to Continental
and Virgin Atlantic is limited to services provided on a code-share
basis only.  The code-share operations conducted under this
authorization are subject to the conditions contained in Appendices A,
B, and C below.  Continental and Virgin Atlantic may initially conduct
the authorized code-share operations over the routes set forth in
Appendix D to this Notice; and may conduct code-share operations in
additional markets subject to the terms, conditions, and limitations of
this Notice, and in particular conditions (b) and (e) of Appendix C.

The route integration authority granted to Continental is subject to the
condition that any service provided under this exemption shall be
consistent with all applicable agreements between the United States and
the foreign countries involved.  Furthermore, (a) nothing in the award
of the route integration authority granted should be construed as
conferring upon Continental rights (including fifth-freedom intermediate
and/or beyond rights) to serve markets where U.S. carrier entry is
limited unless Continental notifies the Department of its intent to
serve such a market and unless and until the Department has completed
any necessary carrier selection procedures to determine which carrier(s)
should be authorized to exercise such rights; and (b) should there be a
request by any such carrier to use the limited-entry route rights that
are included in Continental’s authority by virtue of the route
integration authority granted here, but that are not then being used by
Continental, the holding of such authority by route integration will not
be considered as providing any preference for Continental in a
competitive carrier selection proceeding to determine which carrier(s)
should be entitled to use the authority at issue.

________________________________________________________________________
_________________

On the basis of data officially noticeable under Rule 24(g) of the
Department’s regulations, we found the applicants qualified to provide
the services authorized.

Under authority assigned by the Department in its regulations, 14 CFR
Part 385, we found that (1) our action was consistent with Department
policy; (2) grant of the application was consistent with the public
interest; and (3) grant of the authority would not constitute a major
regulatory action under the Energy Policy and Conservation Act of 1975. 
 To the extent not granted, 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 entitled 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 effective when taken, 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://dms.dot.gov/reports_aviation.aspAPPENDIX A 

U.S. CARRIER EXEMPTION CONDITIONS

In the conduct of the operations authorized, the U.S. carrier
applicant(s) shall:

(1)  Hold at all times effective operating authority from the government
of each country served;

(2)  Comply with applicable requirements concerning oversales contained
in 14 CFR 250 (for scheduled operations, if authorized);

(3)  Comply with the requirements for reporting data contained in 14 CFR
241;

(4)  Comply with requirements for minimum insurance coverage, and for
certifying that coverage to the Department, contained in 14 CFR 205;

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

(6)  Comply with all applicable requirements of the Federal Aviation
Administration and with all applicable U.S. Government requirements
concerning security.  To assure compliance with all applicable U.S.
Government requirements concerning security, the holder shall, before
commencing any new service (including charter flights) to or from a
foreign airport, contact its Principal Security Inspector (PSI) to
advise the PSI 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; and

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

The authority granted shall be effective only during the period when the
holder is in compliance with the conditions imposed above.

APPENDIX B

FOREIGN CARRIER 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, including, but not limited to, 14 CFR Parts 129, 91, and
36, and with all applicable U.S. Government requirements concerning
security.  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 Principal Security Inspector (PSI) to advise the PSI 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 changes 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 to 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 waiver 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 against 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 destination, 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 operations 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
limitations 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 period 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.

CODE-SHARE CONDITIONS			APPENDIX C

The code-share operations authorized here are subject to the following
conditions:

(a)  The statements of authorization will remain in effect only as long
as (i) Continental and Virgin Atlantic continue to hold the necessary
underlying authority to operate the code-share services at issue, and
(ii) the code-share agreement providing for the code-share operations
remains in effect; 

(b)  Continental and/or Virgin Atlantic must notify the Department no
later than 30 days before they begin any new code-share service under
the code-share services authorized here.  Such notice shall identify the
market(s) to be served, which carrier will be operating the aircraft in
the code-share market added, and the date on which the service will
begin.  Such notices should be filed in Docket OST-1997-2280; 

(c)  Continental and/or Virgin Atlantic must notify the Department
immediately if the code-share agreement under which these code-share
services are operated is no longer in effect or if the carriers decide
to cease operating all or a portion of the approved code-share services.
 We expect this notification to be received within 10 days of such
non-effectiveness or of such decision.  Such notices should be filed in
Docket OST-1997-2280;

(d)  The code-sharing operations conducted under this authority must
comply with 14 CFR 257 and with any amendments to the Department’s
regulations concerning code-share arrangements that may be adopted. 
Notwithstanding any provisions in the contract between the carriers, our
approval here is expressly conditioned upon the requirements that the
subject foreign air transportation be sold in the name of the carrier
holding out such service in computer reservation systems and elsewhere;
that the carrier selling such transportation (i.e., the carrier shown on
the ticket) accept responsibility for the entirety of the code-share
journey for all obligations established in its contract of carriage with
the passenger; that the passenger liability of the operating carrier be
unaffected; and that the operating carrier shall not permit the code of
its U.S. code-sharing partner to be carried on any flight that enters,
departs, or transits the airspace of any area for whose airspace the
Federal Aviation Administration has issued a flight prohibition; 

(e)  The authority to operate to third countries is subject to the
condition that any service provided under the statement of authorization
shall be consistent with all applicable agreements between the United
States and the foreign countries involved.  Furthermore, (i) nothing in
the award of this blanket statement of authorization should be construed
as conferring upon Continental and Virgin Atlantic rights (including
code-share, fifth freedom intermediate and/or beyond rights) to serve
markets where U.S. carrier rights are limited unless Continental and
Virgin Atlantic notify us of their intent to serve such a market and
unless and until the Department has completed any necessary carrier
selection procedures to determine which carrier(s) should be authorized
to exercise such rights;1 and (ii) should there be a request by any
carrier to use the limited-entry route rights that are included in
Continental and Virgin Atlantic’s authority by virtue of the blanket
statement of authorization granted here, but that are not being used by
Continental and Virgin Atlantic, the holding of such authority will not
be considered as providing any preference for Continental and Virgin
Atlantic in a competitive carrier selection proceeding to determine
which carrier(s) should be entitled to use the authority at issue; and

(f)  The authority granted here is specifically conditioned so that
neither Continental nor Virgin Atlantic shall give any force or effect
to any contractual provisions between themselves that are contrary to
these conditions.

________________________

1 The notice in paragraph (b) above can be used for this notification.

APPENDIX D

The Joint Applicants initially propose to conduct code-share operations
in the following markets:

Continental (CO*) on Virgin Atlantic (VS) between London and:

Lagos, Nigeria

Port Harcourt, Nigeria

Virgin Atlantic (VS*) on Continental (CO) between New York/Newark and:

Albany, NY

Birmingham, AL

Boston, MA

Buffalo, NY

Burlington, VT

Cleveland, OH

Ft. Lauderdale, FL

Hartford, CT

Houston, TX

Indianapolis, IN

Jacksonville, FL

Las Vegas, NV

Los Angeles, CA

Manchester, NH

Nashville, TN

New Orleans, LA

Norfolk, VA

Omaha, NE

Orlando, FL

Portland, ME

Providence, RI

Rochester, NY

Syracuse, NY

Tampa, FL

Washington, DC

West Palm Beach, FL

Sao Paulo, Brazil

Halifax, Canada

Montreal, Canada

Ottawa, Canada

Quebec, Canada

Toronto, Canada

 That Notice gave (1) Continental an exemption to conduct scheduled
operations between named U.S. cities and London Heathrow; named U.S.
cities and London Gatwick, and Orlando and Manchester, limited to
code-share operations with Virgin Atlantic; (2) Continental a statement
of authorization to display Virgin Atlantic’s code on Continental
flights between Newark and London Gatwick; and (3) Virgin Atlantic a
statement of authorization to display Continental’s code on Virgin
Atlantic flights over the routes granted to Continental by exemption in
(1) above.  The carriers filed an application to renew this authority,
and the authority remains in effect under the provisions of the
Administrative Procedure Act, 5 U.S.C. §558(c), and 14 CFR Part 377 of
the Department’s regulations.

 “Regional airports” in the United Kingdom refer to all U.K.
airports, except Heathrow and Gatwick.

 United/bmi accompanied this latter pleading with a motion for leave to
file late.  We will grant the motion.

 As noted in footnote 1 above, the other authority contained in the
Notice of Action Taken dated October 3, 1997, in this Docket, remains in
effect under the provisions of the Administrative Procedure Act, 5
U.S.C. §558(c), and 14 CFR Part 377 of the Department’s regulations. 
Our action here amending this Notice of Action Taken does not affect the
status of that previously awarded authority.