BEFORE THE U.S. DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C.

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1 BEFORE THE U.S. DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C. Applications of ALITALIA-LINEE AEREE ITALIANE-S.p.A Docket No. OST for exemption from Subparts K and S of Part 93 of Title 14, Code of Federal Regulations, pursuant to 49 U.S.C (b)(1) ANSWER OF THE CITY OF CHICAGO Communications with respect to this document may be sent to Mary Rose Loney, A.A.E. Kenneth P. Quinn Commissioner WINTHROP, STIMSON, PUTNAM Department of Aviation & ROBERTS City of Chicago 1133 Connecticut Avenue, NW O Hare Int l Airport Washington, DC Terminal 2 Mezzanine Level (202) Chicago, IL (202) (fax) quinnk@winstim.com Eduardo Cotillas Deputy Corporation Counsel City of Chicago, Department of Law 121 N. La Salle St., Room 610-A Chicago, IL (312) Counsel for the City of Chicago April 8, 1999

2 BEFORE THE U.S. DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C. Applications of ALITALIA-LINEE AEREE ITALIANE-S.p.A Docket No. OST for exemption from Subparts K and S of Part 93 of Title 14, Code of Federal Regulations, pursuant to 49 U.S.C (b)(1) ANSWER OF THE CITY OF CHICAGO On March 24, 1999, Alitalia-Linee Aeree Italiane-S.p.A ( Alitalia ) applied for an exemption to enable it to operate five weekly nonstop roundtrip combination flights between Chicago O Hare International Airport ( O Hare ) and Rome Fiumicino Airport beginning June 1, 1999 and continuing through October 31, The City of Chicago ( Chicago ), owner and operator of O Hare, hereby answers the Alitalia application, and strongly urges the Department of Transportation ( Department ) to grant expeditiously the slot exemption requested in this application. First, as detailed more fully below, grant of this exemption is in the public interest, providing both inter- and intra-gateway competition, and benefiting the traveling and shipping public. Second, Alitalia first attempted to secure slots through FAA s regular slot allocation. Although Alitalia applied to the FAA after the standard deadline, Alitalia had good reason in these particular circumstances. As it discussed in its application, Alitalia was compelled to discontinue its Chicago-Rome service in 1998 as the result of certain restrictions on its aircraft fleet arising from conditions imposed by the European Commission as part of the Commission s

3 approval of Altalia s financial restructuring plan. Alitalia reallocated its slots to provide Chicago-Milan service. When Alitalia restored its ability to provide Chicago-Rome service, the carrier approached the FAA for slots. However, the FAA informed Alitalia that it was unable to grant Alitalia s request for summer 1999 slots. Accordingly, Alitalia is seeking an exemption from the Department. Third, as required by the Department and urged by Chicago, Alitalia will operate this service with Stage 3 Boeing 767 aircraft. Finally, grant of this application is fully consistent with the bilateral air service obligations of the United States under the new U.S.-Italy conditional open skies agreement. As the Department is aware, Chicago strongly supports the liberal use of the Secretary s slot exemption authority to ensure the highest and best use of O Hare s available capacity. Toward that end, Chicago urges prompt, favorable action on Alitalia s application. Discussion Subparts K and S of 14 C.F.R. Part 93 designate O Hare, among others, as a high density traffic airport and prescribe certain air traffic rules for the operation of aircraft at this airport. These regulations limit the number of allocated Instrument Flight Rule (IFR) operations (takeoffs or landings) for specified classes of users during certain periods of the day. Sections and (a)(3) of the high density rule provide that slots may be allocated to foreign air carriers. Moreover, Section (a)(6) provides a mechanism by which the FAA allocates additional slots at O Hare for international scheduled air carriers and commuter operations. Finally, pursuant to 49 U.S.C (b)(1), the Secretary may, by order, grant exemptions from the requirements of Subparts K and S to enable air carriers and foreign air 2

4 carriers to provide foreign air transportation using Stage 3 aircraft, upon a finding that such action is in the public interest. Alitalia s slot application meets all the necessary criteria, and therefore should be granted. The Department should grant this slot exemption request because it is clearly in the public interest. 1 Alitalia would be returning service to the O Hare-Rome market, which would provide important benefits to passengers and shippers. As part of the Department s recent U.S.- Italy Combination Service Proceeding, Chicago actively supported the application of American Airlines ( American ) for the award of frequencies to serve Rome from Chicago precisely because such an award offered the opportunity to restore service in a well-developed and proven market. 2 Alitalia has had a long history of well-performing service at O Hare. However, as stated above, Alitalia was compelled to discontinue its Chicago-Rome service in 1998 as the result of certain conditions imposed by the European Commission. Until that time, Alitalia s load factors in the Chicago-Rome market exceeded 80%. 3 Alitalia s departure from the market left Rome as the largest destination in Europe without nonstop service from Chicago. Resumption of this service will not only provide immediate benefits to the travelling and shipping community in a market that historically enjoyed strong demand, but also fill a significant gap in O Hare s international service. 1 See Kuwait Airways Corporation (Order ); Turkish Airlines (Order ); Polski Linie Lotnicze LOT, S.A. (LOT) (Order ); Lufthansa German Airlines ( Lufthansa ) (Order ); Iberia Lineas Aereas de Espana, S.A. (Order and ); Scandinavian Airlines System ( SAS ) (Order ); Compania Mexicana de Aviacion, S.A. ( Mexicana ) (Order ); SAS (Order ); Lufthansa (Order ); Societe Air France (Order ); Mexicana (Order ); All Nippon Airways Co., Ltd. (Order ); Japan Airlines Company, Ltd. (Order ); Singapore Airlines Ltd. (Order ); and LOT (Order ) (in which the Department granted exemptions under similar circumstances). 2 Docket OST See the following documents submitted by the City of Chicago Direct Exhibits (December 16, 1998); Rebuttal Exhibits (December 30, 1998); Brief (January 13, 1999); Joint Statement of Objections of American Airlines, Inc. and The City Of Chicago to Order (March 3, 1999). 3 DOT T-100 Report, Year Ended May 31,

5 Chicago possesses a strong and well-established ethnic, religious and business community of interest with Italy. Chicago is home to over 490,000 Italian Americans, 4 and the Chicago region Dioceses has more than 3.3 million Catholics. 5 Alitalia s service will also strengthen the already considerable economic interaction between Illinois and Italy for the 87 companies directly involved in Illinois-Italy commerce. 6 In fact in 1997 alone, airborne trade between Chicago and Italy exceeded $1.5 million. 7 In summary, Chicago respectfully submits that the service to be provided with the grant of these slot exemptions is clearly in the public interest, and urges that the application be granted as soon as possible. 4 U.S. Bureau of the Census statistics. 5 The Chicago region includes the Joliet, Rockford, Gary and Chicago Dioceses. The Official Catholic Directory, Illinois is home to 39 affiliates of Italian companies and 48 companies with Italian operations. U.S. Department of Commerce statistics. Uniworld Business Publications Inc., American Firms Operating in Foreign Countries, U.S. Bureau of the Census. 4

6 WHEREFORE, for the foregoing reasons, Chicago respectfully requests that the Department grant expeditiously Alitalia s application for an exemption from Subparts K and S of 14 C.F.R. Part 93. Respectfully submitted, /s/ Kenneth P. Quinn Kenneth P. Quinn Dated April 8, 1999 WINTHROP, STIMSON, PUTNAM & ROBERTS 1133 Connecticut Avenue, N.W. Suite 1200 Washington, D.C (202) (202) (fax) quinnk@winstim.com Counsel for the City of Chicago 5

7 Certificate of Service I hereby certify that I have this date served a copy of the foregoing Answer on all persons on the attached service list by first class mail, postage prepaid this 8th day of April, 1999, on the following service list. /s/ Kenneth P. Quinn Kenneth P. Quinn Washington, D.C. April 8, 1999

8 SERVICE LIST Richard D. Mathias Frank J.Costello David Heffernan Zuckert, Scoutt, & Rasenberger, L.L.P th Street, N.W., Suite 600 Washington, DC R. Bruce Keiner Lorraine B. Halloway Crowell & Moring 1001 Pennsylvania Avenue, N.W., Suite 1000 Washington, DC Hershel Kamen Managing Director International and Regulatory Affairs Continental Airlines, Inc Myth Street, Suite 831F Mail Code HQSGV Houston, TX Carl B. Nelson, Jr. Associate General Counsel American Airlines, Inc th Street, N.W., #600 Washington, DC Jeffrey A. Manley Kirkland & Ellis 655 Fifteenth Street, N.W. Washington, DC Lawrence M. Nagin Executive Vice President, Corporate Affairs, and General Counsel US Airways Crystal Park Four 2345 Crystal Drive Arlington, VA Robert E. Cohn Shaw, Pittman, Potts & Trowbridge 2300 N Street, N.W. Washington, DC Megan Rae Poldy Associate General Counsel Northwest Airlines, Inc th Street, N.W. Suite 310 Washington, DC R. Daniel Devlin Richard J. Fahy, Jr. Trans World Airlines, Inc th Street, N.W. Suite 350 Washington, DC Nathaniel P. Breed, Jr. Shaw, Pittman, Potts & Trowbridge 2300 N Street, N.W. Washington, DC R. Tenney Johnson 2121 K Street, N.W. Suite 800 Washington, DC Donald T. Bliss O Melveny & Myers LLP th Street, N.W. Suite 500 West Washington, DC The Hon. David Marchick Deputy Assistant Secretary for Transportation Affairs U.S. Department of State 2201 C Street, N.W., Room 5830 Washington, DC 20520

9 Lorelei Peter Scott Donnelly Airspace and Air Traffic Law Branch Office of Chief Counsel Federal Aviation Administration 800 Independence Avenue, S.W. Washington, DC Gabriella Navarra Embassy of Italy 1601 Fuller Street, N.W. Washington, DC