BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, DC

Transcription

1 BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, DC In the matter of APPLICATION OF JAT AIRWAYS A.D. BELGRADE Docket DOT-OST FOR AN EXEMPTION PURSUANT TO 49 U.S.C ANSWER OF AIRLINES FOR AMERICA Communications with respect to this document should be sent to David A. Berg James L. Casey AIRLINES FOR AMERICA 1301 Pennsylvania Avenue, NW Washington, DC Phone Fax Attorneys for Airlines for America Dated October 4, 2013

2 BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, DC In the matter of APPLICATION OF JAT AIRWAYS A.D. BELGRADE Docket DOT-OST FOR AN EXEMPTION PURSUANT TO 49 U.S.C ANSWER OF AIRLINES FOR AMERICA Airlines for America submits this answer to the application of JAT Airways A.D. Belgrade ( JAT ) for an exemption pursuant to 49 U.S.C (the Application ) to provide scheduled foreign air transportation of persons, property and mail between Serbia and the U.S. on a codeshare basis with Etihad Airways P.J.S.C. ( Etihad ). JAT and Etihad propose to display the JAT JU* airline designator code on flights that Etihad operates to the United States, initially from Abu Dhabi to New York (JFK), Chicago (ORD) and Washington DC (IAD), connecting with JAT s services to Belgrade, Serbia. Application at 1, 1. 1 We oppose the Application. Because the service proposal can fairly be described as bizarre, at best, and JAT reportedly is receiving substantial state aid, the public interest does not support granting it. Furthermore, the Application and information in the public domain indicate that JAT, rebranded as Air Serbia, is (or soon will be) under the effective control of a non- Serbian citizen. For these reasons, the Application should be denied. 1 Etihad has submitted a parallel application for a statement of authorization pursuant to 14 C.F.R. Part 212 to engage in the proposed codesharing services with JAT. Docket DOT-OST-0178, September 19, 2013.

3 2 Discussion The Application acknowledges that no economic authority exists between the Republic of Serbia and the United States to engage in the proposed codeshare operation. Application at 3. JAT further acknowledges that the Republic of Serbia is currently rated as Category 2 under the Federal Aviation Administration s International Safety Assessment (IASA) program. Application at 2, 2. Furthermore, JAT does not claim a lack of air service between Serbia and the United States or that the proposed service would enhance competition in the Serbia-U.S. market. Indeed, both JAT and Etihad note existing service in the market. JAT application at 2, n. 2; Etihad application at 2, n. 3. Not mentioned in JAT s application but strikingly remarkable and significant here is the fact that the application proposes grant of code-share authority for itineraries that would require approximately 4700 additional, unnecessary statute miles on a backhaul routing. 2 That would mean at least ten more hours in the air for a passenger using the proposed service and unknown amount of time on the ground at Abu Dhabi. Thus, the proposed service is highly inefficient and, as a practical matter, provides no public benefit. The Associated Press reported on August 2 nd that JAT on October 1 st would cease operations and be rebranded as Air Serbia. http// 3 That article also stated that Etihad will have a 49 percent stake in the new airline and the Government of Serbia will have a 51 percent stake in it. JAT also reportedly has received, or is about to receive, substantial state aid from the Serbian 2 The Belgrade Abu Dhabi segment is 2359 statute miles. That mileage must then be doubled to approximately 4700 statute miles for the entire Belgrade U.S. service, taking into account the Abu Dhabi U.S. segment. 3 See also Etihad Airways August 1, 2013 press release Etihad Airways and Government of Serbia unveil strategic partnership to secure future of Serbian national airline. http//

4 3 government. The AP reported that Officials said Etihad and Serbia will immediately invest $40 million each into the new company. A further $60 million each will be provided in the future. The new company will be managed by Etihad in the next five years. Id. In addition to Serbia s cash infusion, it has also been reported that the Serbian government is writing off JAT debt to give Air Serbia a fresh start. 4 DOT recognizes that such financial aid by governments to their national airlines distorts competition and deprives the aviation system and consumers of the benefits of fair competition. U.S. International Aviation Policy Statement, November 1, 1994, at 9. Significantly, the JAT application does not explain the effect of the change in ownership and management agreement on the requested operating authority. The effect, however, is a critical decisional consideration. Etihad s outright management of Air Serbia combined with its ownership interest demonstrates, or at a minimum strongly suggests, that Etihad will effectively control JAT/Air Serbia. The CAPA Centre for Aviation ( CAPA ), following a presentation in August by Etihad CEO James Hogan, noted the following about the effect of Etihad s management of Air Serbia Under the partnership Etihad Airways will take over Air Serbia s administration, revenue management and training (which will move to Abu Dhabi). 5 CAPA also noted after finalizing the Etihad investment, Air Serbia announced that three of its 12 planned new routes would be to Abu Dhabi, Beirut and Cairo. 6 The Air Serbia management arrangement closely follows the model Etihad established with its five-year management of Air Seychelles. With respect to that agreement, CAPA reports that Air Seychelles has personnel in Etihad s offices. 7 4 Air Serbia s upcoming expansion under Etihad to see creation of Eastern European hub, September 9, 2013, found at http//centreforaviation.com/analysis/air-serbias-upcoming-expansion-under-etihad-to-seecreation-of-eastern-european-hub Id. 6 Id. 7 Etihad reports another 6 months record double-digit growth; 20% of revenues from partnerships, July 9, 2013, found at http//centreforaviation.com/analysis/etihad-reports-another-6-months-record-doubledigit-growth-20-of-revenues-from-partnerships

5 4 The Department employs a totality of circumstances test to determine control. Order (December 27, 2006). Based on the facts and circumstances discussed above, the Department must resolve the question whether Serbian nationals control (or will control) Air Serbia and, if the answer is no which we think is the correct answer, decide whether it is in the public interest to grant a waiver from normal ownership and control requirements. If the U.S. had an air transport agreement with Serbia, it would include the standard provision in the model air transport agreement. That provision would require that substantial ownership and effective control of Air Serbia to be vested in Serbia and/or nationals of Serbia. Air Transport Agreement Model Text, Article 3, January 12, 2012, found at http// JAT/Air Serbia should not be permitted to escape this standard requirement simply because the U.S. and Serbia do not yet have an air transport agreement in place. Conclusion JAT s Application is unusual, lacking in facts and requires extraordinary scrutiny. It seeks extra-bilateral authority that current circumstances do not justify. There is existing service in the Serbia-United States market and the proposed codeshare service is plainly not in the public interest because of its extraordinary circuitry and the substantial state aid JAT/Air Serbia has received (or is receiving). Finally, it is apparent from the announced change in the ownership and structure of JAT and public statements by Etihad s CEO that effective control lies with Etihad. For all of these reasons, the Application should be denied. Alternatively, the

6 5 Department should delay action until it conducts a thorough investigation of the ownership and control of JAT/Air Serbia. Respectfully submitted, AIRLINES FOR AMERICA David A. Berg Senior Vice President & General Counsel James L. Casey Vice President & Deputy General Counsel 1301 Pennsylvania Avenue, NW Washington, DC Ph Fax dberg@airlines.org

7 6 CERTIFICATE OF SERVICE I hereby certify that I have this date served the foregoing application on the persons identified below by causing a copy to be sent by electronic mail. anita.mosner@hklaw.com robert.wirick@aa.com francis.heil@aa.com sascha.vanderbellen@delta.com anbird@fedex.com sllunsford@fedex.com dan.weiss@united.com howard.kass@usairways.com rsilverberg@sgbdc.com jjohnson@sgbdc.com tom.fosko@airtransport.com jcanny@amerijet.com jrichardson@johnlrichardson.com rpommer@atlasair.com john.palo@evergreenairlines.com charters@evergreenairlines.com matwood@cozen.com mlbenge@zsrlaw.com kevin.montgomery@polaraircargo.com peter.beckett@polaraircargo.com john.allen@faa.gov uskrs@state.gov David A. Berg October 4, 2013