UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

Issued by the Department of Transportation on February 13, 2004

NOTICE OF ACTION TAKEN -- DOCKET OST 2003-16444

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________________________________________________________

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:  AMERICA WEST AIRLINES, INC. (America West), and
MESA AIRLINES, INC. (Mesa),  filed 10/30/03 for:

XX  Exemption for two years for America West and Mesa under 49 U.S.C.
§40109 to provide the following service:

Scheduled foreign air transportation of persons, property, and mail
between (1) the terminal point Phoenix, Arizona, and the terminal point
San Jose del Cabo, Mexico; and (2) the terminal point Phoenix, Arizona,
and the terminal point Puerto Vallarta, Mexico.  The joint applicants
state that they will use the requested authority to permit Mesa to offer
service in the subject markets with regional-sized aircraft (CRJ-900s),
placing the code of America West on its flights.  The applicants state
that America West will also provide year-round service in the markets
with its own B757 and/or B-737 aircraft, in addition to Mesa’s new
direct-carrier service (own-aircraft) flights.   

Applicant rep:   Joanne W. Young (202) 861-1532    DOT Analyst:  Linda
L. Lundell (202) 366-2336

D I S P O S I T I O N

XX  Granted Mesa exemption request, subject to conditions (see below)

XX  Granted request to convert America West’s current exemption to
serve the Phoenix-San Jose

            del Cabo/Puerto Vallarta markets from seasonal to year-round
service (see below)

XX  Granted code-share authorizations for the services proposed, subject
to conditions (see below)

The actions to grant Mesa’s exemption request, along with the America
West/Mesa code-share authorizations, above, were effective when taken:
February 13, 2004, through February 13, 2006.

The action to convert America West’s exemption authority, as described
above, from seasonal to year-round service was effective when taken:
February 13, 2004, through October 29, 2004. 

Action taken by:   Paul L. Gretch, Director	

		        Office of International Aviation	

XX  Authority granted is consistent with the aviation agreement between
the United States and the Mexico.

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

XX  Holder’s certificates of public convenience and necessity

XX  Standard Exemption Conditions (attached)

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Special Conditions:  The U.S.-Mexico exemption authority granted is
subject to the dormancy notice requirements set forth in condition 7 of
Appendix A of Order 88-10-2.  Consistent with our policy, the dormancy
notice period will begin April 1, 2004, the applicants’ proposed
startup date for these services.  

The code-share operations conducted under this authorization are subject
to the following conditions:  (a) the code-sharing operations conducted
under this authority must comply with 14 CFR 257 and with any amendment
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; and that the passenger
liability of the operating carrier be unaffected; and (b) the authority
granted here is specifically conditioned so that neither America West
nor Mesa shall give any force or effect to any contractual provisions
between themselves that are contrary to these conditions.

Responsive Pleadings:  Alaska filed an answer to the application. 
America West and Mesa filed a joint reply to Alaska’s answer, and
United Air Lines, Inc. (United), filed a reply to Alaska’s answer. 
Continental Airlines, Inc. (Continental), and ExpressJet Airlines, Inc.
(ExpressJet) each filed a surreply.  

Alaska opposes the application, stating that, although its authority to
serve the markets (seasonally) is currently dormant, its authority is
protected under the Department’s blanket dormancy waiver Order
2003-4-18, which gives carriers until February 15, 2004, to state
whether or not dormant services could be resumed by April 1, 2004. 
Alaska states that, in this regard, it is in the process of reviewing a
number of service options for next winter, but that it can now state
that it does not plan to resume Phoenix-San Jose del Cabo/Puerto
Vallarta services by April 1 or, otherwise, during the off-peak period.

Alaska requests that, even though it is not in a position to offer
off-peak service in the markets, the Department not withdraw its
designation but instead consider less anticompetitive alternatives for
handling the America West/Mesa application here.  In this regard, Alaska
suggests the following options: (1) interpret the proposed America
West/Mesa proposed operations as a wet-lease arrangement so that
designations are not required for both carriers; (2) engage in full
discussions with the Government of Mexico regarding the need to
eliminate the practice of requiring two designations for such
affiliated-carrier services and, if this fails, use only one designation
opportunity for the America West/Mesa proposed service, temporarily
withdrawing and reassigning the designation between them as needed to
meet the seasonal demand; or (3) assign Alaska’s designation to Mesa
temporarily through October 31, 2004, to permit Mesa to begin service on
April 1, if America West can demonstrate that it has in the past and
will continue to operate year-round service in both markets.  Alaska
states that it would be prepared to advise the Department by April 30,
2004, whether it will resume seasonal operations for the 2004-2005
winter season, and that option #3, above, would allow Mesa to begin the
proposed service on April 1, while preserving the possibility that
competitive services could be reintroduced by Alaska in the Phoenix-San
Jose del Cabo/Puerto Vallarta markets.

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In their joint reply, America West/Mesa state that each of the proposed
alternatives is unworkable.  America West/Mesa state that Alaska has
confirmed that it will not resume service in the markets by April 1, and
that its authority in the markets is dormant and, thus, the designations
are available.  America West/Mesa state that its proposed service is not
a wet lease, nor like a wet lease; that reallocation of Alaska’s
designation to Mesa does not effect a de facto and de jure monopoly for
a single U.S. carrier, as U.S. carriers can put their code on Mexican
carrier flights in the markets, or any U.S. carrier can, in the future,
petition the Department like America West/Mesa are doing here, to
withdraw a designation and reallocate it; and that Alaska’s proposed
option to have America West/Mesa share one designation is unworkable, as
America West and Mesa intend to operate year-round mainline and CRJ
service concurrently.  America West/Mesa state, further, that Alaska
historically operated only seasonal winter service, four days weekly
with 140-seat aircraft, and that the proposed America West/Mesa service
provides many more benefits with year-round, mixed fleet service.

In its reply, United states that a separate designation for Mesa for the
type of services proposed should not be needed, and that the proposed
commuter services should be considered a “wet lessor.”  United
states that, while the Department has granted similar affiliated-carrier
requests, such practice turns an agreement that was intended to assure
the opportunity for at least two U.S. carriers to compete in a given
city-pair market into one where a single carrier can pre-empt its
competitors by supplementing its own service with some commuter service.
 United states that the best solution would be, as Alaska has proposed,
to treat such services like a wet lease and include the commuter in the
designation of the carrier whose designator code appears on the flights.

In their surreplies, both Continental and ExpressJet state that they
engage in similar U.S.-Mexico services as those proposed by America
West/Mesa, and that they oppose any change in the Department’s policy
to allow for such services, unless and until interpretations permitting
such operations using only one designation are agreed upon between
Mexico and the United States.  In this regard, ExpressJet explains that,
if the Department were to accede to the Alaska/United position,
ExpressJet’s service on several U.S.-Mexico routes would be
jeopardized and the public would be deprived of the combination of
service with ExpressJet’s regional jets and Continental’s large
jets, which allow the carriers to meet public demand which fluctuates by
season, day of week, and hour of the day, with appropriate service. 
Continental and ExpressJet maintain that neither Alaska nor United has
proposed any flights in the subject markets here, and that valuable
services offered by code-share partners should not be disrupted because
Alaska and United might someday want to offer flights of their own on
the routes.  ExpressJet states that, if and when Alaska or United
propose direct-carrier service on a U.S.-Mexico route where two
affiliated airlines are already designated, the Department can then
consider the relative merits of the affiliated-carrier designations and
the Alaska and/or United proposal(s) in accordance with normal
procedures.

Decision:   We have carefully examined the evidence presented in this
case, and have decided that it is in the public interest to (1) grant
the exemption request of Mesa for the proposed services, along with the
requested America West/Mesa code-share authorizations; (2) withdraw the
dormant designation authority of Alaska to serve the Phoenix-San Jose
del Cabo/Puerto Vallarta markets; (3) designate Mesa for direct-carrier
service in the Phoenix-San Jose del Cabo/Puerto Vallarta markets; and
(4) convert America West’s current exemption authority to provide
direct-carrier service in the subject markets from seasonal service to
year-round service.

Under the U.S.-Mexico aviation agreement, up to two U.S. carriers may be
designated to operate direct-carrier service in a given city-pair
market.   Mesa needs a designation for the services proposed here.  As
discussed above, both America West and Alaska are already designated to
provide scheduled direct-carrier service in the Phoenix-San Jose del
Cabo/Puerto Vallarta markets.  However, Alaska is not now using its
authority and has provided no firm plans to resume services.  

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It is not our policy to allow valuable operating rights to go unused,
particularly when another carrier is interested in serving the routes
and has firm plans to do so.  While Alaska maintains that its authority
is protected under the Department’s blanket dormancy waiver Order
2003-4-18, it has clearly stated that it will not meet the resumption of
service deadline for the Phoenix-San Jose del Cabo/Puerto Vallarta
markets specified in that order.  In the circumstances presented, with
carriers ready and willing to use the authority at issue, we find that
the public interest calls for withdrawing Alaska’s designation.   

With respect to United, we appreciate the concerns raised here regarding
the use of two designations for affiliated-carrier services in
U.S.-Mexico markets.  Indeed, we have sought Mexican aviation
authorities acceptance of such services without the need for separate
designations.  However, such an arrangement has not been forthcoming. 
We will continue our efforts in this regard.  However, under the
circumstances, we believe that the public interest is best served by
granting the requested authority here for the proposed services while we
continue to work on this issue with the Mexican aviation authorities.  
Notwithstanding this, however, should a competing U.S. carrier present a
proposal to provide regularly-scheduled service in the subject city-pair
markets with its own aircraft, we would be prepared to reconsider
whether, in the circumstances presented, award of the authority granted
here continues to be in the public interest.

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_____________________________

On the basis of data officially noticeable under Rule 24(g) of the
Department’s regulations, we found the applicant 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 

U.S. Carrier Standard 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.

											8/2003

   America West already holds authority to provide scheduled foreign air
transportation service in the Phoenix-San Jose del Cabo/Puerto Vallarta
markets (see Notice of Action Taken dated October 29, 2002, in Docket
OST-1995-736).  Based on information provided by America West at that
time, however, that authority was issued for seasonal services.  Under
these circumstances, and in light of the proposed year-round America
West/Mesa services described above, we will handle the America West
exemption request herein as a request, instead, to convert its current
exemption authority in Docket OST-1995-736 to serve the Phoenix-San Jose
del Cabo/Puerto Vallarta markets from seasonal to year-round service. 
Our action here has no effect on the duration of the exemption authority
granted in Docket OST-1995-736 (set to expire October 29, 2004).     

   The applicants also seek designation authority for Mesa to provide
direct-carrier service in the subject markets (America West is already
designated to provide direct-carrier service on the routes).  In this
regard, the applicants request that the Department withdraw, for reasons
of dormancy, the designation of Alaska Airlines, Inc. (Alaska), to serve
the subject markets and to designate Mesa in its place.   

   Continental and ExpressJet each accompanied their surreply with a
motion for leave to file an otherwise unauthorized document.  We grant
the motion of each carrier here. 

   Code-share authorizations are also required for certain of the
services proposed here.  Pursuant to the aviation agreement, up to four
U.S. carriers may be authorized to provide code-share services in a
given city-pair market.  Currently, Northwest is the only carrier
authorized to provide code-share service in the Phoenix-San Jose del
Cabo/Puerto Vallarta markets.  Thus, there are three additional
code-share authorizations available at this time.

   By Order 2003-4-18, the Department granted temporary blanket dormancy
waivers to U.S. combination carriers serving limited-entry markets
through March 31, 2004.  Pursuant to that order, carriers have until
February 15, 2004, to file a notice with the Department listing each
limited-entry market in which it will not resume service beginning April
1, 2004.    

    Given the clear evidence of record that Alaska is not using the
authority and has demonstrated no firm plans to do so, we see no
persuasive reason to reach the merits of its suggested alternatives to
withdrawal of its designation.  We note, however, as we discuss below in
the context of United’s comments, that we have engaged in efforts with
the Mexican Government to secure a change in Mexican policy on the need
for separate designations in situations such as this.

   See Notice of Action Taken dated January 14, 2004, in Docket
OST-2003-16529, in the matter of the application of Mesa for
Phoenix-Mazatlan exemption authority. 

