BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C. ) In the matter of the application of ) ) TRANS AMERICAN AIRLINES, S.A. ) Docket OST-2000- ) for an exemption from 49 U.S.C. §41301 ) ) APPLICATION FOR EXEMPTION Communications with respect to this document should be addressed to: Robert D. Papkin SQUIRE, SANDERS & DEMPSEY L.L.P. 1201 Pennsylvania Avenue, N.W. P.O. Box 407 Washington, D.C. 20044 (202) 626-6601 Counsel to Trans American Airlines, S.A. DATED: October 3, 2000 BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C. ) In the matter of the application of ) ) TRANS AMERICAN AIRLINES, S.A. ) Docket OST-2000- ) for an exemption from 49 U.S.C. §41301 ) ) APPLICATION FOR EXEMPTION Trans American Airlines, S.A. (“Trans Am”),1 pursuant to 49 U.S.C. 40109, hereby requests an exemption from 49 U.S.C. 41301 and from any other provisions of Title 49 and the Economic Regulations of the Department of Transportation (“Department”) to the extent necessary to permit Trans Am to engage in the scheduled foreign air transportation of persons, property and mail between Lima, Peru, and Miami, Florida. Trans Am requests that any exemption granted by the Department pursuant to this application remain in effect for a period of at least two years. Trans Am intends to commence scheduled service between Lima and Miami on December 1, 2000. In further support of its application, Trans Am states as follows: 1 Trans American Airlines, S.A. transacts business as TACA Peru. Trans Am will hold out services between the United States and Peru under the trade name TACA Peru, and requests any approval necessary for the use of that name in the services that are the subject of this application. Application for Exemption Docket OST-2000-________ October 3, 2000 The Applicant Trans Am is a sociedad anonima organized and existing under the laws of the Republic of Peru. Trans Am’s headquarters are located in Lima, Peru, from which it conducts all operations. Trans Am commenced domestic operations in October 1999. Domestic services are being conducted with B737-200 aircraft seating 111 passengers in two classes of service. These aircraft are dry-leased from TACA International Airlines, S.A. International services commenced in July 2000 with Trans Am’s institution of flights from Lima to Buenos Aires and Sao Paulo. Trans Am also presently operates international services to San Jose, Caracas and Mexico City. Future plans for expansion of international services expected to commence on November 15, 2000, include flights from Lima to Bogota, La Paz and Panama City. Trans Am’s principal office is located at the following address: Trans American Airlines, S.A. Av. Comandante Espinar 331 Miraflores Lima 18, Peru Trans Am is a citizen of the Republic of Peru. Trans Am’s stock is forty-nine percent owned by Berly, S.A., a company organized under the laws of Peru and owned entirely by TACA, S.A. TACA, S.A. is a Bahamian corporation whose ultimate owners are Salvadoran and who are also the principal shareholders of TACA International Airlines, S.A. The remaining fifty-one percent of Trans Am’s stock is owned by Daniel Ratti, a Peruvian citizen who is also Chairman and President of Trans Am. Trans Am’s Board of Directors consists of three persons all of whom, including the chairman, are citizens of Peru. Trans Am’s senior management team consists of thirteen 2 Application for Exemption Docket OST-2000-________ October 3, 2000 persons, all of whom are Peruvian citizens. Exhibit A hereto lists each of Trans Am’s directors, key management officials and their citizenship. Exhibit B includes brief biographical information on certain key management officials of Trans Am. Trans Am submits it is owned and controlled by Peruvian citizens. Trans Am’s majority shareholder is a citizen of Peru, half of its Board members are Peruvian, the Chairman of the Board is a citizen of Peru, and all of its senior management is Peruvian. The Government of Peru has licensed and designated Trans Am under the open skies agreement between the United States and Peru with full knowledge of the ownership structure of Trans Am. Trans Am thus believes it fully satisfies the bilateral’s requirement that substantial ownership and effective control of the carrier lie in the hands of Peruvian citizens. Should the Department nevertheless be hesitant to make this finding, Trans Am submits it would be appropriate for the Department to waive the requirement. Waiver of the ownership and control standards in this instance would clearly be consistent with the public interest and in accordance with the Department’s practice in past cases. In reviewing foreign carrier applications for operating authority, the Department’s policy has been to require that the carrier demonstrate that it is substantially owned and effectively controlled by citizens of its homeland. This policy is reflected in Article 3.2 of the U.S.-Peru open skies agreement. The Department has, however, approved waivers from this requirement in numerous cases where it has determined that non-homeland ownership and control would not be inimical to aviation interests of the United States: In this regard, for many years, the United States government has followed a general policy, reflected in our bilateral aviation agreements, of requiring that substantial ownership and effective control of foreign air carriers operating to this 3 Application for Exemption Docket OST-2000-________ October 3, 2000 country be vested in nationals of their home countries…At the same time, we have been prepared to waive that policy in specific cases where we have been able to find that the proposed non-homeland ownership and control would not be inimical to U.S. aviation policy or interests.2 The Department has found on many prior occasions that waiver of the control and ownership standards was justified, would serve the public interest and would not be inimical to U.S. aviation interests, including cases involving Peruvian carriers. Most recently, the Department waived its ownership and control standards in a case involving the Peruvian carrier Lan Peru, S.A. Despite evidence that forty-nine percent of the carrier’s stock is owned by Chilean interests and that only four of seven directors are Peruvian, the Department nevertheless approved a waiver. In approving the waiver, the Department stated “despite the presence of non- homeland interests, we found that there was nothing in the ownership and control of the carrier that would be inimical to U.S. aviation policy or interests.”3 The Department also approved recently a waiver for the Peruvian cargo carrier Cielos del Peru, S.A. Seventy percent of Cielos’ stock is owned by Argentine citizens, the chairman of Cielos’ board of directors is an Argentine citizen and recent former CEO of the Argentine carrier STAF, and fewer than all of its senior management are Peruvian citizens. The Department nevertheless approved a waiver of its ownership and control standard, citing the U.S.-Peru open skies agreement and noting again that approval would not be inimical to U.S. interests.4 In other cases involving liberal bilateral relationships, the Department has not hesitated to approve waivers from its ownership and control standards, and has in fact approved previously 2 Application of Air Aruba, N.V., Order 99-3-21, March 23, 1999. 3 Notice of Action Taken, Docket OST-99-6192, September 17, 1999. 4 Notice of Action Taken, Docket OST-95-617, August 31, 1999. 4 Application for Exemption Docket OST-2000-________ October 3, 2000 applications from carriers in which TACA International Airlines, S.A. has held a substantial interest.5 Trans Am submits that the existence of open skies agreements between the United States and Peru and between the United States and El Salvador justifies approval of a waiver in this instance. The Proposed Service Trans Am plans to begin scheduled service between Lima and Miami on December 1, 2000, utilizing A319 and A320 aircraft dry-leased from Lineas Aereas Costarricenses, S.A. These aircraft will be configured to seat 12 business class and 108 coach class and 12 business class and 138 coach class passengers, respectively. The aircraft will also carry belly cargo and mail in amounts up to 16,500 lbs. and 20,800 lbs., respectively. Service between Lima and Miami will be offered at a level of seven weekly roundtrip frequencies. Consistent with its Peruvian license and the terms of the open skies agreement between the United States and Peru, Trans Am requests from the Department an exemption permitting it to engage in the scheduled foreign air transportation of persons, property and mail between Lima, Peru, and Miami, Florida. Fitness Trans Am’s operations are regulated by the Government of Peru. Peru is a contracting State to the Convention on International Civil Aviation (“Chicago Convention”) and observes all applicable ICAO standards. Appended hereto as Exhibit C is a copy of Trans Am’s 5 See, e.g., Application of Nicaraguense de Aviacion S.A., Order 92-7-6, July 6, 1992 (approving a waiver of the ownership and control standards notwithstanding TACA International Airlines’ ownership of forty-nine percent of NICA’s stock, noting that although TACA might derive some economic benefit from its investment, approval of the waiver was nonetheless justified). See also Application of Aerolineas Centroamericanas, S.A., Order 92-9-2, 5 Application for Exemption Docket OST-2000-________ October 3, 2000 homeland operating license authorizing it to serve Lima-Miami. This license represents all of the authority Trans Am requires from the Peruvian Government to provide the service described herein. The address of the Peruvian aeronautical authority is: Direccion General de Transporte Aereo del Peru Av.