 

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, DC

Issued by the Department of Transportation on August 9, 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. 
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.

By letter dated June 28, 2004, Kalitta Air, Inc. requested an allocation
of 29 charters to a point in China Zone 1.  Evergreen filed a response
to Kalitta’s request stating that it believed it was necessary for the
Department to provide interested carriers with advance notice of what
procedures would be established to distribute the available charters for
Zones 1 and 2.  We granted Kalitta’s request on July 16 and stated
that we would address the question of procedures for allocating the
remaining charters by separate action.  On August  5, 2004, the
Department notified U.S. carriers of procedures to distribute the newly
available charter opportunities between the United States and the
People’s Republic of China (PRC).  

XX  Request of Polar Air Cargo, Inc., for allocation of 24 U.S.-China
all-cargo charter flights

By letter dated July 23, 2004, Polar requested an allocation of 24
one-way charters to provide service over the routing Shanghai –
(Anchorage) – Chicago.  Polar proposes to operate these charters
between September 8 and October 31, 2004.  

XX  Request of Kalitta Air, Inc., for allocation of 4 U.S.-China
all-cargo charter flights

By letter dated July 26, 2004, Kalitta requested an allocation of an
additional four one-way charters to provide service over the routing
Shanghai – (Khabarovsk, Russia) – (Anchorage) – Los Angeles. 
Kalitta proposes to operate these charters between August 25 and
September 22, 2004.  

Evergreen and Kalitta filed answers to Polar’s request, and Polar
filed a reply.  Evergreen requests that the Department withhold a
decision on Polar’s request until the Department issues procedures to
be followed for allocation of the remaining Zone 1 and Zone 2 charter
flights.

2

Kalitta objected to Polar’s request, stating that Polar is an
applicant for a U.S.-China designation and frequencies and should not be
permitted to receive a large number of the available charters until the
Department’s decision on the scheduled designation is made.  Kalitta
argues that Polar’s receipt of this number of charters would preclude
other carriers from discussing any extended program with potential
customers, leaving Polar able to commence its scheduled operations
(assuming it is awarded the scheduled designation) without this added
competition from the lower-priced charter alternatives in the market. 
Kalitta maintains that even if the charters were returned to DOT for
reallocation, they would have been unavailable during the period when
shippers are most likely to be arranging their charter lift for the
year, particularly at the peak season.

Polar notes that Evergreen did not specifically object to an allocation
to Polar but asked that the Department issue procedures to be followed
before acting on applications.  Polar states that it has entered into a
contract and that the limited time remaining to receive approval and
complete necessary arrangements in advance of the charter flights
requires prompt action on Polar’s request.  

Polar notes that Kalitta has already received 29 charters.  It states
that, should Polar be fortunate enough to win the new designation, CAAC
approval will have to be obtained before service can begin, and thus,
these charters will be the only means of serving the market during the
months of September and October.  Polar further states that if selected
for scheduled service, and if scheduled operations are allowed to
commence before the end of the period for which these charters are
requested, Polar will return the remaining charters to the Department
for reallocation. 

Applicant reps:   Kevin Montgomery (Polar) 202-828-1002   DOT Analyst: 
Sylvia Moore 202-366-6519

	             Mark Atwood (Kalitta) 202-463-2512

DISPOSITION

XX  Granted (See Remarks)

The above action was granted to Polar on   August 9, 2004, and will be
effective  September 8, 2004,  through  October 31, 2004

The above action was granted to Kalitta on August 9, 2004, and will be
effective August 25, 2004, through  September 22, 2004

Action taken by:	 Paul L. Gretch, Director

	               Office of International Aviation

Remarks:  We have decided to grant Polar and Kalitta the charter flights
they seek for U.S.-China cargo service to a point in Zone 1.  It is our
policy to ensure that the operating rights available to U.S. carriers
are fully utilized.  No other carrier has presented an application to
operate any charters at this time.  Both Polar and Kalitta have
demonstrated that they have firm plans to utilize the charters.  With
respect to the concerns raised by Evergreen, we have, as noted above,
issued procedures for the allocation of the charters at issue here. 
With respect to Kalitta’s concerns, we do not see as dispositive the
fact that Polar is an applicant in the 2004 Cargo Designation and
2004/2005 All-Cargo Frequencies (U.S.-People’s Republic of China)
Proceeding to determine the recipient of the newly-available scheduled
cargo designation in the U.S.-China market.  A decision in that
carrier-selection case has not been made, so Polar has no ability to
serve the U.S.-China market other than by using the charters available
from the pool.  Moreover, as noted, Polar has

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agreed that, if it is selected for the available scheduled cargo
designation, it will return to the pool any unused charters upon
commencement of its scheduled service in the market.  We find that,
under the circumstances presented, the public interest supports a
decision to approve Polar’s and Kalitta’s requests.

With the grant of these requests, 18 charters remain in the pool for
Zone 1.

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

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

 On July 24, 2004, the Protocol was signed and formally brought into
force.

 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.

 The August 5 Notice assigns to the Director of the Office of
International Aviation the authority to administer distribution of the
flights from the charter pool for this and subsequent years, and where
deemed in the public interest, to waive the restrictions on the charter
pool.

