 

UNITED STATES OF AMERICA   

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, DC

Issued by the Department of Transportation on May 11, 2004

   NOTICE OF ACTION TAKEN -- DOCKET OST-2004-17279

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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).

Background

By Order 2004-3-3 we instituted the 2004 Hong Kong Fifth-Freedom
All-Cargo Frequency Proceeding to select carriers to operate 18
fifth-freedom frequencies available for U.S. carrier services in the
Hong Kong fifth-freedom market.  Four carriers  (Federal Express
(FedEx), Northwest Airlines (Northwest), Polar Air Cargo (Polar), and
United Parcel Service (UPS)) filed initial applications on March 23,
2004.   FedEx, Northwest, and Polar requested frequencies for services
in the Hong Kong-Seoul market, and those requests exceeded the number
available for service to that city.   UPS requested frequencies for Hong
Kong service via Singapore to Macapagal.   On April 2, 2004, FedEx,
Northwest, and Polar filed a joint motion regarding the allocation of
frequencies in the Seoul-Hong Kong market and requested the suspension
of the procedural timetable in the proceeding.

Application of United Parcel Service filed 4/15/04 for:

XX  Allocation of three frequencies for weekly all-cargo Hong Kong
fifth-freedom frequencies:  UPS states that it will use two of the
requested frequencies in the Hong Kong-Bangkok market and one in the
Hong Kong-Singapore market beginning in October 2004.  UPS states that
there are sufficient frequencies to meet this request, noting that of
the 18 available in 

(See Reverse Side)

2

the above-referenced proceeding six have been allocated to UPS for
Singapore-Macapagal service and five have been requested by the other
applicants in the proceeding for Seoul-Hong Kong service.  Thus, seven
frequencies will be unallocated if those requests are granted.

Northwest and Polar filed a joint answer, and FedEx filed a separate
answer.  

All three carriers urge the Department not to allow the application of
UPS to slow down action on the unopposed joint motion of FedEx,
Northwest, and Polar for Hong Kong-Seoul frequencies, and all three
maintain that the UPS application is untimely, given that in March UPS
had requested and was granted dismissal from the balance of the
proceeding.  Northwest and Polar argue that if the Department decides to
reach the merits of the UPS application, it should do so in a separate
proceeding.  FedEx argues that the UPS application is not eligible for
contemporaneous consideration because it was filed after the
Department’s filing deadline, and FedEx also argues that the
application is not mutually exclusive.

Applicant rep:  David Vaughan  202-955-9864   DOT Analyst:   Linda
Senese   202-366-2367

D I S P O S I T I O N

XX  Granted (Allocation of 3 frequencies:  2 for Bangkok-Hong Kong
all-cargo service and 1 for Singapore-Hong Kong all-cargo service,
subject to conditions, see below)

XX Termination, sua sponte, of the 2004 Hong Kong Fifth-Freedom
All-Cargo Service Proceeding  (see Remarks below). 

The above action was effective when taken: May 11, 2004. The allocation
of frequencies will remain in effect indefinitely, subject to
conditions.  Under the terms of the October 19, 2002, U.S.-Hong Kong
MOU, these frequencies become available for use on October 26, 2004.

By:      Susan McDermott			

            Deputy Assistant Secretary for

	   Aviation and International Affairs	

		    

XX  The authority granted is consistent with the October 19, 2002,
Memorandum of Understanding between the Government of the United States
and the Government of the Hong Kong Special Administrative Region of the
People’s Republic of China, with the aviation agreement between the
United States and the Kingdom of Thailand, and with the Multilateral
Agreement on the Liberalization of International Air Transportation
(Singapore).

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

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Conditions:  Consistent with our standard practice, the frequency
allocation granted is subject to the condition that if any of the
frequencies are not used for a period of 90 days, the allocation as to
each of those frequencies will expire automatically and the frequencies
will revert to the Department for reallocation.  The 90-day dormancy
period will begin on October 26, 2004.

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Remarks:  The Department’s instituting order in the 2004 Hong Kong
Fifth-Freedom All-Cargo Proceeding called for applications on March 23,
2004, and made no provision for supplemental applications.  While UPS
requested and was granted on March 31, 2004, dismissal from the 

balance of the proceeding, we will accept its application as a
supplement to its previous application (as amended by its motion for
immediate action subsequently granted on March 31, 2004), and will
entertain it in the public interest in the circumstances presented.  
This supplement seeks allocation for frequencies for services to points
sought by no other party (i.e., two frequencies for Hong Kong-Bangkok
service and one frequency for Singapore service). We have reviewed the
carrier’s request and find that grant of this request will provide
public interest benefits.  It is our policy to seek to maximize use of
valuable route rights.  In these circumstances, we will award UPS the
frequencies it seeks for Bangkok-Hong Kong and Singapore-Hong Kong
service. We note that with this action there are no other frequencies
available at Singapore. We may amend, modify, or revoke the authority
granted in this Notice at any time without hearing at our discretion.

Since by this action, and our contemporaneous action on the joint motion
of FedEx, Northwest, and Polar, we will have granted all matters before
us in this proceeding, we will also, sua sponte, terminate the 2004 Hong
Kong Fifth-Freedom All-Cargo Service Proceeding. 

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

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

 Sixteen of these frequencies become available under the MOU on October
26, 2004.  Two frequencies were frequencies that remained available from
an earlier proceeding.  These frequencies were awarded one each to
Northwest and Polar on a pendente lite basis for Seoul-Hong Kong
services.  See Order 2004-3-3, at 6.

 Certain cities have city-pair caps, and services via those cities are
limited.  The MOU only permits 12 weekly fifth-freedom frequencies in
the Seoul-Hong Kong market.  The Department has allocated 7 of those 12
frequencies on a permanent basis, and thus, only 5 frequencies are
available for Seoul-Hong Kong services. 

 On March 24 (and supplemented March 29) UPS filed a motion for
immediate allocation of frequencies for the Singapore-Macapagal service
and also for UPS’ dismissal from the balance of the proceeding.  In
its motion, it also withdrew the backup authority requested for Seoul
that had been in its original application.  There was no objection to
the UPS request.  Thus, on March 31, 2004, the Department allocated UPS
6 Hong Kong frequencies for its proposed Hong Kong-Singapore-Macapagal
service and also dismissed UPS from the balance of the 2004 Hong Kong
Fifth-Freedom All-Cargo Frequency Proceeding.

 On April 6, 2004, the Department suspended the remaining procedural
schedule established in the instituting order until further notice.  We
are contemporaneously acting on the joint motion of FedEx, Northwest,
and Polar, regarding the allocation of Hong Kong-Seoul frequencies.

 On April 19, 2004, the Department shortened the answer period for
comments on the subject application to April 23, 2004.  On April 23,
2004, FedEx filed a motion for an extension of time in which to file
comments.  By Notice dated April 27, 2004, the Department extended the
answer period and reinstated April 30, 2004 as the answer period to the
subject application.

 On May 3, UPS advised the Department’s staff that it was not going to
file a reply to the answers.

 UPS should properly have sought reinstatement into the proceeding and
should have filed a motion for leave to file an otherwise unauthorized
document.  Taking into account all the elements of record, including the
absence of substantive opposition to the UPS request and our ability to
process this matter without delaying our action on the pending joint
motion of FedEx, Northwest, and Polar, we will not withhold action over
a non-prejudicial procedural infirmity.

 While after this action four frequencies will remain available for
fifth-freedom all-cargo services in the Hong Kong market, any requests
for authority to use such frequencies will be considered separately and
should be filed in new dockets.

