 

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, DC

Issued by the Department of Transportation on July 16, 2004

   NOTICE OF ACTION TAKEN -- UNDOCKETED

________________________________________________________________________
_________________________________

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).

BACKGROUND

On June 18, 2004, the United States and the People’s Republic of China
(PRC) initialed a protocol amending the U.S.-PRC aviation agreement. 
The amended agreement greatly expands the opportunities for the air
carriers of both countries, including the opportunities for charters. 
In this regard, (among other things) under the new agreement, each Party
shall approve applications by the airlines of the other Party for 75
one-way charter flights annually from August 1 of each year, between
points in China Zone 1 and  U.S. points on city pairs served by Chinese
carriers’ scheduled services of the same type (combination or
all-cargo) as the proposed charter flight, and 75 one-way charter
flights annually from August 1 of each year, between points in China
Zone 2 and U.S. points on city pairs served by Chinese carriers’
scheduled services of the same type (combination or all-cargo) as the
proposed charter flight.

XX  Request of Kalitta Air, Inc., for allocation of 29 U.S.-China
all-cargo charter frequencies

By letter of June 28, 2004, Kalitta Air requested an allocation of 29
all-cargo charters to provide service over the routing Shanghai –
(Khabarovsk, Russia) – (Anchorage) – Chicago.  Kalitta proposes to
operate these charters between August 11 and November 24, 2004.  These
flights would fall under the annual 75-flight limitation for China Zone
1.

Evergreen filed a response, stating that because procedures are not in
place for allocation of charters, it believes that it is inappropriate
for the Department to approve Kalitta’s request, and that it is
necessary for the Department to provide interested carriers with advance
notice of what procedures will be established to distribute the
available charters for Zones 1 and 2.  

Kalitta responded, stating that its application was served on interested
parties and no carrier (including Evergreen) has requested a specific
charter allocation or stated how it would be prejudiced by an award of
29 charters to Kalitta.  Kalitta maintains that Evergreen knows that a
procedural delay will force the shipper to opt for alternative lift from
another carrier.  Kalitta states that it made a decision not to apply
for the newly-available all-cargo designation in the market, and would
concentrate on charter operations; that, in contrast, Evergreen is
seeking such scheduled designation; and that it was clear during the
U.S. China negotiations that expanded charter opportunities would be
agreed, and on that basis Kalitta sought out the customer for the
flights for which it seeks authority here.

Evergreen responded, stating that it has a history of operating charters
in the U.S.-China market; that if Kalitta’s request is granted, other
carriers will lose the chance to conduct those operations; that
Evergreen expects to operate 25 charters in the market in the coming
year; and that demand from other carriers may cause the frequency caps
to be reached quickly, requiring an allocation mechanism.  Evergreen
states that its seeking of scheduled rights in the U.S.-China market is
not relevant to this proceeding; that the

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Department needs to establish formal procedures for the allocation of
these charters under the Ashbacker doctrine; and that we should not
grant a large number of flights to Kalitta without further consideration
of this matter.  Evergreen suggests that we allocate the available
charters on a monthly basis to assure an equitable distribution.

Applicant rep:   Mark W. Atwood    (202) 463-2512    DOT Analyst: 
Sylvia Moore    (202) 366-6519

D I S P O S I T I O N

XX  Granted (See Remarks)

The above action was granted on    July 16, 2004  and will be effective 
August 1, 2004, through  November 28, 2004

Action taken by:   Karan K. Bhatia

		    Assistant Secretary for Aviation

		        and International Affairs

Remarks:  We have decided to grant Kalitta the charter frequencies it
seeks for its Shanghai-Chicago service.  It is our policy to ensure that
the operating rights available to U.S. carriers are fully utilized. 
Significantly, Kalitta is the only carrier with demonstrably firm plans
to use any of the available U.S.-China charter opportunities at this
time.  While Evergreen has stated that it “expects to operate
approximately 25 charter flights from China during the next 12 calendar
months….” it has presented neither an application nor firm plans for
any such flights, nor has it persuasively demonstrated that the granting
of Kalitta’s request, which would still leave a pool of 46 available
charters, would preclude Evergreen’s plans. No other carrier responded
to Kalitta’s request.   Against this background, we find that, under
the circumstances presented, the public interest supports a decision to
approve Kalitta’s request now.  Saying that, we nevertheless
appreciate Evergreen’s desire for some greater degree of procedural
guidance on future awards of U.S.-China charters.  Thus, we intend, on
an expedited basis, to address by subsequent separate action the
question of procedures for allocating the remaining numerically limited
charter opportunities available under the U.S.-China agreement.  While
we have not yet decided on what those procedures might be, if
comparative procedures should need to be employed, we intend to take
into consideration the award we have made here to Kalitta.

An electronic version of this document is available on the World Wide
Web at:

http://dms.dot.gov//reports/reports_aviation.asp

 China Zone 1 consists of Shanghai, Beijing, and Guangzhou.

 China Zone 2 consists of Anhui, Fujian, Guangdong (except Guangzhou),
Hebei, Henan, Hubei, Hunan, Jiangsu, Jiangxi, Shandong, Shanxi, Tianjin,
and Zhejiang.

 Ashbacker Radio Corp. vs. FCC, 326 U.S. 327 (1945).

 Letter of Evergreen International Airlines to Paul L. Gretch, Director,
Office of International Aviation, dated July 13, 2004, at 2.

 Thus, contrary to Evergreen’s assertions, we do not see an Ashbacker
problem in proceeding on Kalitta’s request.

