			  UNITED STATES OF AMERICA

		        DEPARTMENT OF TRANSPORTATION

			  OFFICE OF THE SECRETARY

			          WASHINGTON, D.C.

Issued by the Department of Transportation on April 29, 2004   

NOTICE OF ACTION TAKEN -- DOCKET OST-2004-16945

________________________________________________________________________
___________________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 AMERICAN AIRLINES, INC. (AMERICAN) and COMPANIA
MEXICANA DE AVIACION, S.A. DE C.V. (MEXICANA),  filed 1/27/04, and
amended on 3/16/04, and supplemented on 4/1/04, for:

Code-Share Authorization for American:

American and its affiliates request a statement of authorization, and
Mexicana and its affiliate request any necessary underlying exemption
authority (including the right to integrate such authority with their
existing foreign air carrier permits and exemptions), in order for
American and its affiliates to display the “MX*” designator code in
conjunction with foreign air transportation of persons, property, and
mail on flights operated by American (or its affiliates) (1) between
points in the United States, (2) between points in the United States and
points in Mexico, and (3) between points in the United States and points
in third countries (either nonstop or via intermediate points in third
countries).

Code-Share Authorization for Mexicana:

Mexicana and its affiliate request a statement of authorization, and
American and its affiliates request any necessary underlying exemption
authority (including the right to integrate such authority with their
existing certificates and exemptions), in order for Mexicana and its
affiliate to display the “AA*” designator code in conjunction with
foreign air transportation of persons, property, and mail on flights
operated by Mexicana (or its affiliate) (1) between points in Mexico,
(2) between points in Mexico and points in the United States, and (3)
between points in Mexico and points in third countries (either nonstop
or via intermediate points in third countries).

The code-share partners provide a listing of specific code-share routes
that they intend, initially, to serve under this arrangement (see
attachments).  

Responsive Pleadings:

ATA Airlines, Inc. (ATA), filed an answer to the application, opposing
grant of the Chicago-Mexico City portion of the request on the basis of
competition concerns.  Mexicana and American filed a joint reply to
ATA’s answer to which ATA filed a surreply. Mexicana and American
filed a joint response to ATA’s surreply. We address this matter in
the Remarks Section below.  No other party filed in connection with the
captioned application.

Applicant reps: Carl B. Nelson, Jr. (AA) (202) 496-5647 and Charles F.
Donley II (MX) (202) 626-6840  

DOT Analyst: Linda L. Lundell (202) 366-2336

2

D I S P O S I T I O N

1.  We grant exemption authority to American and its affiliates, to the
extent necessary, to provide scheduled foreign air transportation of
persons, property, and mail between points in the United States and
points within Mexico beyond American’s authorized Mexican gateway
points for transborder services, for the purpose of blind-sector
code-sharing services operated between the Mexican gateway points and
other points within Mexico on services operated by Mexicana or its
affiliate, Aerocaribe;

2.  We grant exemption authority to Mexicana and its affiliate,
Aerocaribe, to the extent necessary, to provide scheduled foreign air
transportation of persons, property, and mail between points in Mexico
and points in the United States beyond Mexicana/Aerocaribe’s
authorized U.S. gateway points for transborder services, for the purpose
of blind-sector code-sharing services operated between the U.S. gateway
points and other points within the United States on services operated by
American or its affiliates;

3.  We grant to American and its affiliates a statement of authorization
under Part 212 of the Department’s regulations to display the airline
designator code of Mexicana and its affiliate, Aerocaribe, on all
flights operated by American and its affiliates within the United States
beyond Mexicana/Aerocaribe’s authorized United States gateways for the
carriage of Mexicana/Aerocaribe’s authorized Mexico-U.S. traffic;

4.  We grant to Mexicana and its affiliate, Aerocaribe, a statement of
authorization under Part 212 of the Department’s regulations to
display the airline designator code of American and its affiliates on
all flights operated by Mexicana and its affiliate, Aerocaribe, within
Mexico beyond American’s (and its affiliates’) authorized Mexican
gateways for the carriage of American/its affiliates’ authorized
U.S.-Mexico traffic;

5.  We grant exemption authority to American and its affiliates, to the
extent necessary, to provide scheduled foreign air transportation of
persons, property, and mail between the following city-pair markets: 
Chicago-Durango/Guadalajara/Morelia/Zacatecas, Denver-Mexico City, Los
Angeles-Guadalajara/Mexico City/Cancun/Leon/Zacatecas/Morelia,
Oakland-Guadalajara/Leon/Zacatecas, Portland-Guadalajara, New
York/Newark-Mexico City, Las Vegas-Guadalajara/Mexico City, San
Antonio-Guadalajara/Mexico City, San Francisco-Guadalajara/Mexico
City/Morelia, and San Jose-Guadalajara/Morelia, Sacramento-Guadalajara,
including route integration authority to combine this exemption with all
existing certificate and exemption authority held by American and its
affiliates;

6.  We grant to Mexicana and its affiliate, Aerocaribe, a statement of
authorization under Part 212 of the Department’s regulations to
display the airline code of American and its affiliates on all flights
operated by Mexicana and its affiliate, Aerocaribe, in the following
transborder markets for the carriage of American/affiliates’
authorized traffic:  Chicago-Durango/Guadalajara/ Morelia/Zacatecas,
Denver-Mexico City, Los Angeles-Guadalajara/Mexico City/Cancun/Leon/
Zacatecas/Morelia, Oakland-Guadalajara/Leon/Zacatecas,
Portland-Guadalajara, New York/Newark-Mexico City, Las
Vegas-Guadalajara/Mexico City, San Antonio-Guadalajara/Mexico City, San
Francisco-Guadalajara/Mexico City/Morelia, and San
Jose-Guadalajara/Morelia, Sacramento-Guadalajara, along with all
U.S.-Mexico transborder routes listed in the Attachment, page 2;

3

7.  We grant exemption authority to Mexicana and its affiliate,
Aerocaribe, to the extent necessary, to provide scheduled foreign air
transportation of persons, property, and mail between the following
city-pair markets:  Boston-Cancun, Dallas/Ft. Worth-Aguascalientes,
Dallas/Ft. Worth-Leon, and St. Louis-Cancun, including route integration
authority to combine this exemption with all existing foreign air
carrier permit and exemption authority held by Mexicana and its
affiliate, Aerocaribe;

8.  We grant to American and its affiliates a statement of authorization
under Part 212 of the Department’s regulations to display the airline
code of Mexicana and its affiliate, Aerocaribe, on all flights operated
by American and its affiliates in the following transborder markets for
the carriage of Mexicana/Aerocaribe’s authorized traffic: 
Boston-Cancun, Dallas/Ft. Worth-Aguascalientes, Dallas/Ft. Worth-Leon,
and St. Louis-Cancun, along with all U.S.-Mexico transborder routes
listed in the Attachment, page 1;

 

9.  We grant to American and its affiliates, to the extent necessary, a
statement of authorization under Part 212 of the Department’s
regulations to display the airline code of Mexicana and its affiliate,
Aerocaribe, on all flights operated by American and its affiliates
between Mexicana/Aerocaribe’s authorized U.S. gateways and beyond to
points in third countries (either nonstop or via intermediate points in
third countries for the carriage of Mexicana/Aerocaribe’s authorized
beyond-U.S. traffic on a blind-sector basis);

10.  We grant, sua sponte, to the extent necessary, special
authorization to Mexicana and its affiliate, Aerocaribe, under Part 216
of the Department’s regulations to provide the blind-sector service
proposed between Mexicana/Aerocaribe’s authorized U.S. gateways and
beyond to points in third countries (either nonstop or via intermediate
points in third countries for the carriage of Mexicana/Aerocaribe’s
authorized Mexico-U.S. traffic in combination with Mexico-third country
traffic (no local traffic rights between the United States and third
countries));

11.  The exemption authority granted to American and its affiliates is
effective immediately for a period of two years from the date of this
notice, subject to the conditions outlined below;

12.  The exemption authority and special authorization granted to
Mexicana and its affiliate, Aerocaribe, is effective immediately for a
period of one year from the date of this notice, subject to the
conditions outlined below;

13.  We dismiss the request for longer-term exemption authority for
Mexicana and Aerocaribe (see remarks, below);

14.  The statements of authorization granted, above, are effective
immediately and shall remain in effect indefinitely, subject to the
conditions outlined below;

15.  All of the exemption authority granted by this Notice is limited to
operations conducted on a code-share basis only.

16.  The U.S.-Mexico transborder exemption authority granted to American
and its affiliates is subject to the dormancy notice requirements set
forth in condition 7 of Appendix A of Order 88-10-2.

Action taken by:	Karan K. Bhatia

			Assistant Secretary for Aviation

			  And International Affairs

XX  The authority granted is consistent with the aviation agreement,
comity and reciprocity, and/or the overall aviation relationship between
the United States and the foreign countries involved.4

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

	XX   American and its affiliates’ certificates of public convenience
and necessity

	XX   Mexicana and Aerocaribe’s foreign air carrier permits

	XX   Standard Exemption Conditions (attached)

Additional Conditions:

The route integration authority granted is subject to the following
conditions:  

The applicants are subject to the condition that any service provided
under this exemption shall be consistent with all applicable agreements
between the United States and the foreign countries involved.  

Furthermore, (a) nothing in the award of the route integration authority
granted should be construed as conferring upon the applicants rights
(including fifth-freedom intermediate and/or beyond rights) to serve
markets where U.S. carrier entry is limited unless the applicant(s)
notifies the Department of its intent to serve such a market and unless
and until the Department has completed any necessary carrier selection
procedures to determine which carrier(s) should be authorized to
exercise such rights); (b) should there be a request by any carrier to
use the limited-entry route rights that are included in the
applicants’ authority by virtue of the route integration exemption
granted here, but that are not then being used by the applicants, the
holding of such authority by route integration will not be considered as
providing any preference for the applicants in a competitive carrier
selection proceeding to determine which carrier(s) should be entitled to
use the authority at issue.

The code-share operations authorized are subject to the following
conditions:

 The respective statements of authorizations will remain in effect only
as long as (i) the subject U.S. carriers and the subject Mexican-flag
carriers continue to hold the necessary underlying authority to operate
the code-share services at issue, and (ii) the code-share and/or
alliance agreement providing for the code-share operations remains in
effect; 

  The subject U.S. carriers and/or the subject Mexican-flag carriers
must notify the Department (Office of International Aviation, Room
6412), by letter, no later than 30 days before they begin any new beyond
gateway code-share service under the blanket beyond-gateway code-share
services authorized by this action.  Such notice shall identify the
market(s) to be served, which carrier will be operating the aircraft in
the code-share market added, and the date on which the service will
begin.  Such notices must be filed in Docket OST-2004-16945; 

 The subject U.S. carriers and/or the subject Mexican-flag carriers must
promptly notify the Department (Office of International Aviation) if the
code-share agreement is no longer effective or if the carriers decide to
cease operating all or a portion of the approved code-share services. 
(Such notice should be filed in Docket OST-2004-16945);  

 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 the operating carrier shall not permit the 5

            code of its U.S. code-sharing partner to be carried on any
flight that enters, departs, or transits

	 the airspace of any area for whose airspace the Federal Aviation
Administration has issued a 

	 flight prohibition; 

      (e)  The carriers will comply with section 4.4 of the code-share
agreement as amended

             March 16, 2004, which was submitted to the Department on
that date; and

(f)  The authority granted here is specifically conditioned so that
neither the subject U.S. carriers 

      nor the subject Mexican-flag carriers shall give any force or
effect to any contractual  

      provisions between themselves that are contrary to these
conditions.

Remarks:

	Responsive Pleadings

In its answer, ATA states that its sole concern is with the
Chicago-Mexico City market, which it states is one of the more
economically significant U.S.-Mexico markets and a market into which ATA
has been seeking entry for the past several years.  ATA argues that the
Chicago-Mexico City market represents the classic hub-to-hub nonstop
overlap market and that both the Department of Transportation and the
Department of Justice have recognized that extensive hub-to-hub
codesharing in overlapping markets presents a serious threat to
competition and that the Department of Justice has made clear its
opposition to codesharing proposals with hub-to-hub overlaps. ATA
maintains that, while American and Mexicana describe the proposed
code-share as a replacement of Mexicana’s arrangement with United,
which terminated March 31, 2004, there is an important difference.  ATA
states that the proposed American/MX code-share will create a far more
dominant aligned carrier grouping in the Chicago-Mexico City market than
any proposed or existing code-sharing group.  ATA argues that, at the
same time, longstanding designation limitations imposed by the
U.S.-Mexico bilateral agreement preclude ATA or other carriers from
offering a competitive response. ATA urges that the Department seek
approval from the Mexican Government for a third designation opportunity
in the Chicago-Mexico City market.  ATA states that, if such approval is
not obtained, the Department should exclude approval of the
Chicago-Mexico City portion of the instant request until such time as
the Mexican Government authorizes additional U.S. carrier entry.  

Mexicana and American filed a joint reply to ATA’s answer, stating
that ATA’s objection should be denied and the joint application of
Mexicana and American approved without delay or restriction. 
Mexicana/American argue that extra-bilateral issues are not appropriate
for resolution in licensing cases and that the Department has denied
similar objections, concluding that such U.S. carrier concerns could be
addressed more appropriately through diplomatic channels and bilateral
discussions aimed at increasing commercial opportunities generally,
rather than for only two specific carriers.  Mexicana and American state
that, under no circumstance, should the Department seek unilaterally to
coerce amendment of the bilateral while denying Mexicana and American
operating rights already agreed to by both countries, contained in the
bilateral, and awarded to other competing carriers and alliances.

In its surreply, ATA argues that the joint applicants have disregarded
the principal issue in the case, i.e., the unacceptable level of
dominance in the critical Chicago-Mexico City market that would exist if
the 

6

application were approved and the total lack of new entry as a
competitive check on their prospective behavior.  It also reiterates its
request that the Department undertake consultations to seek a third
designation between Chicago and Mexico City or an understanding that
Midway would be treated as a point separate from Chicago O’Hare.  

In its response to ATA’s surreply, Mexicana and American state that
ATA’s repeated claims that American and Mexicana would dominate the
Chicago-Mexico City market is without basis, includes gross
misstatements of American’s and United’s services, and omits
Chicago-Mexico City service

operated by US Airways and Air Canada.  Mexicana and American maintain
that the American/Mexicana arrangement precisely replicates the
United/Mexicana arrangement that the Department unconditionally approved
in 1997—both American and United operate one daily nonstop, and
Mexicana operates three daily nonstops, and competitive daily nonstop
service is operated by Aeromexico.

	Decision on Chicago-Mexico City

ATA would have us withhold the award of valuable operating authority
currently available under the U.S.-Mexico bilateral agreement and that
could immediately provide benefits to the traveling public, benefits all
the more important in light of the recent ending of the United/Mexicana
U.S.-Mexico code-share arrangement.  Furthermore, ATA would have us
continue to withhold this authority until the completion of efforts to
secure additional rights that ATA seeks to use at Chicago.  We shall not
adopt ATA’s suggested approach.  It is not our policy to allow
valuable operating rights to go unused, particularly when another
carrier is interested in using those rights and is in a position to do
so and has firm plans to do so, as is the case with the joint applicants
here.  Against this background, and in the circumstances presented, we
conclude that it is consistent with the public interest to award the
Chicago-Mexico City authority requested.  American and Mexicana have
also requested only code-share authority, not antitrust immunity, and
their implementation of their code-share arrangement will be fully
subject to the antitrust laws.  Moreover, as revised by the applicants,
section 4.4 of their code-share agreement should provide significant
assurance that each of the two carriers will independently set its own
fares in markets served by both partners, given that we must take into
account the rights created by the U.S.-Mexico bilateral agreement.

With regard to the matter of competition, we note that consumers will
still have a number of carriers to choose from in this market. 
Specifically, although the United/Mexicana code-share arrangement has
been terminated, United continues to provide nonstop transborder service
in the Chicago-Mexico City market with its own aircraft, and US Airways
provides nonstop transborder service in the market pursuant to a
code-share arrangement with United.  In addition, Delta Air Lines
provides nonstop transborder service in the market pursuant to a
code-share arrangement with Aeromexico.  This being said, we would
certainly favor the enhanced competition that would result from
additional U.S. carrier authority beyond the current limits in the
U.S.-Mexico bilateral agreement, and indeed have worked to achieve this
end.  However, we have as yet been unsuccessful in our attempts to
obtain approval for additional designations in the U.S.-Mexico markets. 


	Miscellaneous

		Term of Authority

In the captioned application, the carriers’ request, among other
things, that Mexicana and Aerocaribe be granted exemption authority for
a two-year term.  Consistent with our standard policy for licensing 			
									7

Mexican-flag carriers, we have granted the subject exemption authority
for a one-year period, and have dismissed the request for longer-term
authority.

________________________________________________________________________
_______

On the basis of data officially noticeable under Rule 24(g) of the
Department’s regulations, we found the applicants qualified to provide
the services authorized.  We further 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 or dismissed,
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.

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

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



			ATTACHMENT

Page 1 of 5

U.S.-MEXICO TRANSBORDER CODE-SHARE SERVICES

INITIALLY PROPOSED MARKETS WHERE THE “MX” CODE WILL BE PLACED ON AA
FLIGHTS (Both the U.S. and Mexican code-share partners already held the
requisite underlying authority needed to conduct the services proposed):


Chicago-Acapulco

Chicago-Cancun

Chicago-Mexico City

Chicago-Puerto Vallarta

Chicago-San Jose del Cabo

Dallas/Ft. Worth-Acapulco

Dallas/Ft. Worth-Cancun

Dallas/Ft. Worth-Cozumel

Dallas/Ft. Worth-Guadalajara

Dallas/Ft. Worth-Ixtapa/Zihuatanejo

Dallas/Ft. Worth-Mexico City

Dallas/Ft. Worth-Monterrey

Dallas/Ft. Worth-Puerto Vallarta

Dallas/Ft. Worth-San Jose del Cabo

Miami-Cancun

		Los Angeles-San Jose del Cabo

		New York-Cancun

Miami-Mexico City

INITIALLY PROPOSED MARKETS WHERE THE “MX” CODE  WILL BE PLACED ON AA
FLIGHTS (American already holds the requisite underlying authority to
conduct the code-share services proposed.  Mexicana/Aerocaribe receive
new underlying authority by this Notice to conduct the services
proposed): 

Boston-Cancun

Dallas/Ft. Worth-Aguascalientes

Dallas/Ft. Worth-Leon

St. Louis-Cancun



			ATTACHMENT

Page 2 of 5

U.S.-MEXICO TRANSBORDER CODE-SHARE SERVICES

INITIALLY PROPOSED MARKETS WHERE THE “AA” CODE WILL BE PLACED ON
MEXICANA/AEROCARIBE FLIGHTS IN THE FOLLOWING MARKETS 

(Mexicana already holds the requisite underlying authority to conduct
the code-share services proposed.  American and its affiliates receive
new underlying authority by this Notice to conduct the services
proposed): 

			Chicago-Guadalajara

			Denver-Mexico City

			Los Angeles-Guadalajara

			Los Angeles-Mexico City

			Oakland-Guadalajara

			San Antonio-Guadalajara

			San Antonio-Mexico City

			San Francisco-Guadalajara

			San Francisco-Mexico City

			Chicago-Durango

			Chicago-Morelia

			Chicago-Zacatecas

			Los Angeles-Cancun

			Los Angeles-Leon

			Los Angeles-Zacatecas

			New York/Newark-Mexico City

			San Jose-Guadalajara

			Las Vegas-Guadalajara

			Las Vegas-Mexico City

			Los Angeles-Morelia

			Oakland-Leon

			San Francisco-Morelia

			Oakland-Zacatecas

			Portland-Guadalajara

			Sacramento-Guadalajara

			San Jose-Morelia

INITIALLY PROPOSED MARKETS WHERE THE “AA” CODE WILL BE PLACED ON
MEXICANA/AEROCARIBE FLIGHTS IN THE FOLLOWING MARKETS

(Both the U.S. and Mexican code-share partners already held the
requisite underlying authority needed to conduct the services proposed):


		

			Chicago-Mexico City

			Chicago-Monterrey

			Miami-Cancun

			Los Angeles-San Jose del Cabo

			Miami-Mexico City



			ATTACHMENT

Page 3 of 5

INTRA-MEXICO CODE-SHARE SERVICES

INITIALLY PROPOSED MARKETS WHERE THE “AA” CODE WILL BE PLACED ON
MEXICANA/ AEROCARIBE FLIGHTS BETWEEN AA/AA* AUTHORIZED MEXICAN GATEWAYS
AND:1 

Acapulco			 

Cancun			 

Chetumal			 

Ciudad del Carmen		 

Cozumel			

Guadalajara			

Hermosillo			

Bahias de Huatulco		

Leon				

Manzanillo				

Mazatlan

Merida

Mexicali

Mexico City

Minatitlan

Monterrey

Morelia

Nuevo Laredo

Oaxaca

Puerto Escondido

Puerto Vallarta

Saltillo

San Jose del Cabo

Tampico

Tijuana

Tuxtla

Veracruz

Villahermosa

Zacatecas

Ixtapa/Zihuatanejo



			ATTACHMENT

Page 4 of 5

INTRA-U.S. CODE-SHARE SERVICES

INITIALLY PROPOSED MARKETS WHERE THE “MX” CODE WILL BE PLACED ON
AMERICAN AND ITS AFFILIATES’ FLIGHTS BETWEEN MX/MX* AUTHORIZED U.S.
GATEWAYS AND:2 

Albuquerque			Las Vegas			Salt Lake City	

Atlanta				Los Angeles			San Antonio 

Austin				Miami				San Diego

Baltimore			Milwaukee			San Francisco 	

Boston				Minneapolis/St. Paul		San Jose  

Charlotte			Nashville			Seattle 

Chicago (MDW)		Newark			St. Louis 	

Chicago (ORD)		New Orleans			Tampa	

Cincinnati			New York (JFK)		Tucson

Cleveland			New York (LGA)		Washington, D.C. (DCA)

Columbus			Oakland			Washington, D.C. (IAD)

Dallas/Ft. Worth		Omaha

Denver				Ontario

Detroit				Orlando

El Paso			Philadelphia

Fresno				Phoenix

Honolulu			Pittsburgh

Houston			Portland

Indianapolis			Raleigh

Kansas City			Sacramento

ATTACHMENT

Page 5 of 5

THIRD-COUNTRY CODE-SHARE SERVICES

INITIALLY PROPOSED MARKETS WHERE THE “MX’ CODE WILL BE PLACED ON
AMERICAN AND ITS AFFILIATES’ FLIGHTS BETWEEN MX/MX* AUTHORIZED U.S.
GATEWAYS AND:3

Tokyo, Japan				Guayaquil, Ecuador			Marsh Harbor, Bahamas	

Brussels, Belgium				Quito, Ecuador			Montego Bay, Jamaica

Zurich, Switzerland			Lima, Peru				Nassau, Bahamas

Frankfurt, Germany			Asuncion, Paraguay			Nevis, Leeward Islands

Madrid, Spain				Montevideo, Uruguay			Point a Pitre, Guadeloupe

Paris, France				Anguilla, West Indies			Port au Prince, Haiti

London, United Kingdom (LGW)		Antigua, West Indies			Port of Spain,
Trinidad

London, United Kingdom (LHR)		Aruba, Aruba				Providenciales, Turks &
Caicos

Manchester, United Kingdom 		Barbados, Barbados			Puerto Plata,
Dominican Republic

Rome, Italy					Bermuda (Atlantic Ocean)		Punta Cana, Dominican Republic

Calgary, Canada				Bonaire, Netherlands Antilles		Santiago, Dominican
Republic

Montreal Dorval, Canada			Canouan Island, Windward Islands	Santo
Domingo, Dominican Rep.

Toronto, Canada				Casa de Campo, Dominican Rep.	St. Kitts, Leeward
Islands	

Vancouver, Canada			Curacao, Netherlands Antilles	St. Lucia, West Indies


Buenos Aires, Argentina			Dominica, Dominica			St. Maarten, Netherlands
Antilles

La Paz, Bolivia				Freeport, Bahamas			Tortola, British Virgin Islands

Santa Cruz, Bolivia			George Town, Bahamas

Rio de Janeiro, Brazil			Grand Cayman Island, West Indies

Sao Paulo, Brazil				Grenada, Windward Islands

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Foreign Carrier Standard Exemption Conditions

In the conduct of the operations authorized, the foreign carrier
applicant(s) shall:

(1)  Not conduct any operations unless it holds a currently effective
authorization from its homeland for such operations, and it has filed a
copy of such authorization with the Department;

(2)  Comply with all applicable requirements of the Federal Aviation
Administration, including, but not limited to, 14 CFR Parts 129, 91, and
36, 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) from a foreign airport that
would be the holder’s last point of departure for the United States,
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;

(3)  Comply with the requirements for minimum insurance coverage
contained in 14 CFR Part 205, and, prior to the commencement of any
operations under this authority, file evidence of such coverage, in the
form of a completed OST Form 6411, with the Federal Aviation
Administration’s Program Management Branch (AFS-260), Flight Standards
Service (any changes to, or termination of, insurance also shall be
filed with that office);

(4)  Not operate aircraft under this authority unless it complies with
operational safety requirements at least equivalent to Annex 6 of the
Chicago Convention;

(5)  Conform to the airworthiness and airman competency requirements of
its Government for international air services;

(6)  Except as specifically exempted or otherwise provided for in a
Department Order, comply with the requirements of 14 CFR Part 203,
concerning waiver of Warsaw Convention liability limits and defenses;

(7)  Agree that operations under this authority constitute a waiver of
sovereign immunity, for the purposes of 28 U.S.C. 1605(a), but only with
respect to those actions or proceedings instituted against it in any
court or other tribunal in the United States that are: (a)  based on its
operations in international air transportation that, according to the
contract of carriage, include a point in the United States as a point of
origin, point of destination, or agreed stopping place, or for which the
contract of carriage was purchased in the United States; or (b)  based
on a claim under any international agreement or treaty cognizable in any
court or other tribunal of the United States.  In this condition, the
term "international air transportation" means "international
transportation" as defined by the Warsaw Convention, except that all
States shall be considered to be High Contracting Parties for the
purpose of this definition;

(8)  Except as specifically authorized by the Department, originate or
terminate all flights to/from the United States in its homeland;

(9)  Comply with the requirements of 14 CFR Part 217, concerning the
reporting of scheduled, nonscheduled, and charter data;

(10) If charter operations are authorized, except as otherwise provided
in the applicable aviation agreement, comply with the Department's rules
governing charters (including 14 CFR Parts 212 and 380); and

(11) Comply with such other reasonable terms, conditions, and
limitations required by the public interest as may be prescribed by the
Department, with all applicable orders or regulations of other U.S.
agencies and courts, and with all applicable laws of the United States.

This authority shall not be effective during any period when the holder
is not in compliance with the conditions imposed above.  Moreover, this
authority cannot be sold or otherwise transferred without explicit
Department approval under Title 49 of the U.S. Code.

											8/2003		

   Specifically, the joint applicants in this application are as
follows:  American (and its affiliates TWA Airlines LLC, American Eagle
Airlines, Inc., Executive Airlines, Inc., d/b/a American Eagle), and
Mexicana (and its affiliate Aerovias Caribe, S.A. de C.V. d/b/a
Aerocaribe (Aerocaribe)).

 The supplement contained information that had been redacted from the
copy of the code-share agreement that the joint applicants had
previously submitted with their application.  The supplement was
accompanied by a joint motion for confidential treatment.  We issued a
notice governing access to this material on April 8, 2004, in the
present docket.  We will handle the merits of the motion on
confidentiality separately. 

 ATA’s surreply and the joint response of Mexicana/American were
accompanied with motions for leave to file an otherwise unauthorized
document. We will grant the motions.

   Authority granted by this notice is subject to the conditions
outlined below, see also remarks, below.

   In the joint application filed, the parties included a statement
requesting “any necessary exemption authority” to conduct the
code-share services proposed.  In Exhibit A, page 4, the applicants
provided a listing of specific transborder exemption authority needed
for Mexicana/Aerocaribe to conduct the services proposed.  While no
specific listing was provided for American and its affiliates, after
review of the application, we determined that American (and its
affiliates), needed the exemption authority outlined here.  

   We expect this notification to be received within 10 days of such
non-effectiveness or of such decision.

 Under the U.S.-Mexico aviation agreement, only two U.S. carriers may be
designated to provide direct-carrier (own aircraft) service in a given
city-pair market.  American and United Air Lines (United) currently hold
the available designations for service in the Chicago-Mexico City
market, and both carriers operate direct-carrier services in the market.
 Under the agreement, up to four U.S. carriers may offer code-share
services on a given city-pair route.  Currently, there are two
authorized code-share operations in the Chicago-Mexico City market: 
Delta Air Lines with Aerovias de Mexico and United with USAirways. 
United was also  previously authorized to code-share with Mexicana in
the Chicago-Mexico City market, but the United-Mexicana code-share
arrangement ceased March 31, 2004. 

 We are unpersuaded by ATA’s assertion that this arrangement is
somehow anticompetitive.  In this regard, we note that while ATA cited
the Department of Justice in support of its position, that Department in
fact reviewed the American/Mexicana application and (unlike the American
Airlines-TACA case cited by ATA, Answer at 4, n.4) elected not to file
any comments with us. 

 See,Notices of Action Taken dated January 14, 2004, in Docket
OST-2003-16529 and dated February 13, 2004, in Docket OST-2003-16444.

1   We note that the blanket beyond-gateway code-share authority granted
by this Notice is subject to the 30-day notice provision discussed in
the body of this Notice.  Thus, the carriers will be required to file
such notice should the code-share partners decide to institute new
code-share services in markets not listed here.

2   We note that the blanket beyond-gateway code-share authority granted
by this Notice is subject to the 30-day notice provision discussed in
the body of this Notice.  Thus, the carriers will be required to file
such notice should the code-share partners decide to institute new
code-share services in markets not listed here.

3   We note that the blanket beyond-gateway code-share authority granted
by this Notice is subject to the 30-day notice provision discussed in
the body of this Notice.  Thus, the carriers will be required to file
such notice should the code-share partners decide to institute new
code-share services in markets not listed here.

