BEFORE THE - AirlineInfo



BEFORE THE

DEPARTMENT OF TRANSPORTATION

WASHINGTON, D.C.

)

Application of )

)

Virgin Nigeria Airways Limited )

) Docket OST-2005-

For an exemption from )

49 U.S.C. § 41301, et seq. )

(U.S. – Nigeria) )

)

APPLICATION OF VIRGIN NIGERIA AIRWAYS LIMITED

FOR AN EXEMPTION

Communications with respect to this document should be sent to:

Dr Yemi Osindero David E. Schaffer

Head, Corporate Development David E. Schaffer Associates LLC

Funke Adeyemi 9205 Hambletonian Place

Legal Officer & Company Sec Vienna, VA 22182

Virgin Nigeria Airways Ltd (703) 938-3062

3rd Floor 17 Ligali Ayorinde Street (703) 938-3063 (fax)

Victoria Island Dschaffer2@

Lagos Nigeria

yemi.osindero@ Counsel for Virgin Nigeria Airways Ltd

adefunke.adeyemi@

Dated: December 22, 2005

NOTE: ANY PARTY MAY FILE AN ANSWER TO THIS APPLICATION. ANSWERS TO THIS APPLICATION ARE DUE TO BE FILED AT DOT ON OR BEFORE JANUARY 6, 2006.

BEFORE THE

DEPARTMENT OF TRANSPORTATION

WASHINGTON, D.C.

)

Application of )

)

Virgin Nigeria Airways Limited )

) Docket OST-2005-

For an exemption from )

49 U.S.C. § 41301, et seq. )

(U.S. – Nigeria) )

)

APPLICATION OF VIRGIN NIGERIA AIRWAYS LIMITED

FOR AN EXEMPTION

Pursuant to 49 U.S.C. § 40109, 14 CFR Part 211, and 14 CFR Part 302, Subpart C of the Department’s Procedural Regulations, Virgin Nigeria Airways Limited (“Virgin Nigeria”), a foreign air carrier incorporated in and with a principal place of business in Nigeria, hereby requests an exemption from 49 U.S.C. § 41301, et seq., so that it may engage in scheduled foreign air transportation of persons, property, and mail between Nigeria and the United States.

Simultaneously with this application for an exemption, Virgin Nigeria is filing an application for a foreign air carrier permit. Virgin Nigeria hereby incorporates by reference information contained in the aforementioned permit application.

As the Department knows, the aviation sector in Africa, and particularly in Nigeria, has been in turmoil. When Nigerian Airways ceased operations in 2002, it left Nigeria without a flag carrier. With the demise of its National state-owned carrier, and the lack of a robust aviation infrastructure within Nigeria, the Nigerian Government faced significant challenges with respect to catering to the needs of its 130 million inhabitants and burgeoning work force and the consequences of a growing economy whilst providing safe and secure transportation. This is especially important for Nigeria and other developing countries who seek greater foreign direct investment, international trade and global interaction. Aviation is also crucial to supporting Nigeria’s leading role in Africa and increasingly, globally.

Faced with a critical need for safe and dependable air transport services, the Federal Government of Nigeria resolved to turn to the private sector for help in establishing a new national flag carrier. As a result of an international tender process, and following months of audits and due diligence, Virgin Atlantic Airways was selected to be a technical partner to the new national flag carrier, which was formed as Nigerian Eagle, and is now called Virgin Nigeria. The fact that Virgin Nigeria has Virgin Atlantic as its technical partner and 49% shareholder helps to ensure safety and security is maintained in Virgin Nigeria’s services.

The creation of Virgin Nigeria is a crucial step in the continuing economic development of Nigeria and Africa, increasing trade links not just externally but throughout Africa, enhancing the development of the African continent. Options for travelers to or from Africa have been limited, and the availability of safe and secure air transportation that meets international standards has been sporadic. The entry of Virgin Nigeria into the market has been a welcome development in meeting this demand. Due to its domestic, regional and international services, Virgin Nigeria is already helping to provide safe and secure air transportation services within the African continent.

As the Department has recognized on several occasions, air service is a driver of economic development. DOT’s open skies policies are geared toward facilitating the movement of passengers and goods, with air service being the bridge enabling meaningful trade development between two points. If air service is a measure of the potential air service, the current situation in Africa is not encouraging. There are 2,468 direct flights to the Caribbean, 2,105 to Mexico, 855 to Asia, 600 to Central America and 548 to South America from the U.S., but only 23 direct flights between the United States and Africa, and, indeed, no direct flights between the United States and Nigeria. The services to be offered by Virgin Nigeria will fill a large service gulf, and will be of major economic and political significance, connecting one of the largest economies in Africa to the world’s largest economy. Nigeria is a strategically important oil producing ally of the United States. The introduction of direct service to the United States by Virgin Nigeria will permit the development of trade links and enhance the effectiveness of strategic initiatives such as the United States African Growth and Opportunity Act (AGOA). [1]

While understanding that having a capable technical partner would be absolutely critical to the safety, security and success of the new airline, the Nigerian Government was also mindful of its continuing need to develop its own aviation infrastructure. To that end, the Government is continuing to upgrade its regulatory oversight and facilities. Following recent air crashes in Nigeria, the President has directed the Minister of Aviation to report directly to him, on a monthly basis, the progress being made with standardizing the aviation infrastructure in the country. The President has also set up a special task force including the Managing Director of Virgin Nigeria, which is to carry out urgent supplies, repairs and maintenance of all aviation infrastructure in the country to meet international standards. It is the Government’s intention that Nigeria becomes a safe skies country in the very near future and Virgin Nigeria would welcome the assistance of the FAA in this effort.

As will be shown below, an award of authority to Virgin Nigeria would be consistent with the U.S.-Nigeria Open Skies Agreement, settled U.S. aviation policy, and the broader public interest. By approving this Application, the Department will not only give Nigeria the economic lifeline it needs, but it will also send a signal to the larger African aviation community that the United States stands squarely behind private sector solutions to Africa’s aviation challenges.

In support of this Application, Virgin Nigeria states as follows:

1. The registered address of Virgin Nigeria Airways Limited is 188, Awolowo Road, Ikoyi Lagos, Nigeria and its operational address is Murtala Mohammed International Airport, Ikeja, Lagos and Ark Towers, 3rd Floor, 17, Ligali Ayorinde Street, Victoria Island Lagos. Virgin Nigeria is a Private Limited Liability Company. It is based in Nigeria and organized under the laws of the Federal Republic of Nigeria, specifically the Federal Republic of Nigeria Companies and Allied Matters Act, 1990.

2. As explained more fully in Virgin Nigeria’s Application for a Foreign Air Carrier Permit, Virgin Nigeria meets the ownership and control requirements set forth in the US-Nigeria Open Skies Agreement. A majority share (51%) of Virgin Nigeria’s stock is owned by major Nigerian investors. These investors represent many of Nigeria’s largest companies. These investors meet frequently and have appointed their own shareholder representative, in Chief S. Adegbite (a well-respected Nigerian businessman) to monitor day-to-day issues at the company. More than half of Virgin Nigeria’s Board of Directors are Nigerian citizens, including the Board’s Chairman. As noted in Virgin Nigeria’s Application for a Foreign Air Carrier Permit, Virgin Nigeria is planning to sell its shares in an IPO on the Nigerian Stock Exchange in the next few years. This share flotation will further increase the percentage of Nigerian ownership in the company.

More than half of Virgin Nigeria’s officers and key management personnel are Nigerians including its chief pilot, controller, and heads of planning, corporate development, legal, information technology, security and public affairs. As was explained in Virgin Nigeria’s Permit Application, the Company is undertaking a concerted effort to train and recruit qualified Nigerian staff for key positions, so that over time, Nigerians can cover all the key roles in the company.

Virgin Atlantic Airways holds the remaining 49% interest in Virgin Nigeria. Virgin Atlantic holds this interest because it was selected by the Government of Nigeria to be the technical partner for the new flag carrier. When it established its framework for creating a new flag carrier, the Government of Nigeria determined that the technical partner needed to have an ownership stake in the new carrier in order to ensure that the partner would have a financial stake and hence give its fullest assistance in the creation of the new entity.

3. Virgin Atlantic Airways Limited, which is 51% owned by a British citizen and 49% by Singapore Airlines, has been invited to become involved in Virgin Nigeria in order to provide quality assurance and ensure safety standards in line with international best practices. The current state of development of aviation infrastructure in Nigeria means it must look to other countries for managerial and technical support of Nigeria’s new flag airline. This is not harmful to the interests of the United States and is in fact fully consistent with the U.S.’s “Safe Skies for Africa” initiative. The “Safe Skies for Africa” initiative states that African nations must assume ownership of the initiative:

➢ by recognizing the importance of aviation safety and security to their economic development; and

➢ by marshalling the political will to turn these civil aviation goals into realities.

The initiative recognizes the role that assistance from the private sector can play and encourages the countries in question to utilize foreign technical expertise where necessary. The approach adopted by the Nigerian Government to its flag carrier project is closely in line with this US policy.

4. In similar circumstances, the Department has found that “developing countries … may need to seek outside technical and managerial support for their aviation enterprises because of the lack of such resources in their countries.” This situation should not require a finding that such a carrier is subject to foreign control.[2] However, to the extent that a question exists regarding the ownership and control of Virgin Nigeria, it would not be inimical to U.S. aviation policy or interests to waive the ownership and control standards in this case and grant the requested authority. As was explained above, the Government of Nigeria is in the midst of rebuilding its aviation infrastructure, and has sought the services of a technical partner for its flag carrier as it needs to ensure that the new carrier is operated safely and in accordance with international standards. Moreover, the fact that Nigeria is not rated Category 1 under the International Aviation Safety Assessments (IASA) by definition requires that Virgin Nigeria seek a non-Nigerian partner to provide the services at issue in this application. While every effort is being made to develop the necessary skills within Virgin Nigeria’s own workforce, the fact is that Virgin Nigeria for the time being will require significant foreign assistance in order to be in a position to exercise its rights under the U.S.-Nigeria Open Skies Agreement.

5. In Virgin Nigeria’s view, the Government of Nigeria should be commended for the fact that it sought assistance from the private sector when it sought to rebuild its flag carrier. The decision to seek to have a new, privately owned flag carrier (as opposed to attempting to rebuild the previous state-owned carrier), and to have a private company assist in the operations of that carrier, is squarely consistent with the Department’s 1995 International Aviation Policy. For that reason alone, the Department should, to the extent necessary, waive its ownership and control rules in this instance.

6. Although the U.S.’s own Safe Skies for Africa Policy alone should justify a waiver here, there is other precedent which would support such an action.[3] The Department has waived those standards in other cases where there was less than the 51% homeland ownership that exists here.[4] It has even issued a waiver where there were problems in the aviation relationship[5] and where the non-homeland owner was a British corporation despite the lack of an open skies agreement with the United Kingdom.[6] Indeed, the Department has waived this requirement even with regard to another company which had Virgin Group Investments as a 46% shareholder, finding that the investment was not inimical to the aviation interests of the United States, and citing various public policy reasons for its approval.[7] The considerations favoring such a waiver are particularly compelling here given the open skies agreement between the U.S. and Nigeria, and the overall U.S. interest in promoting economic development in Africa and ensuring a safe and secure air transportation system there.

7. Virgin Nigeria seeks authority to conduct scheduled foreign air transportation of persons, property, and mail in accordance with the Air Transport Agreement between the Government of the United States of America and the Government of the Federal Republic of Nigeria on the following routing:

From points behind Nigeria via Nigeria and intermediate points to a point or points in the United States and beyond.

For all cargo-services, between the United States and any point or points.

Virgin Nigeria also requests authority to provide charter air transportation in accordance with the rights granted in Annex 2, Section 1 of the U.S.-Nigeria Open Skies Agreement, and Part 212 of the Department’s Economic Regulations. Virgin Nigeria would exercise all rights in accordance with the terms of the U.S.-Nigeria Open Skies Agreement, including, without limitation, Annex 1, Section 2.

8. Initially, Virgin Nigeria will operate non-stop scheduled service between Lagos and New York or Newark four times per week, eventually increasing to a daily service. It is proposed that this service would be provided by an Airbus 340-311 aircraft under an Aircraft, Crew, Maintenance, and Insurance (ACMI) agreement with Virgin Atlantic Airways.

9. Nigeria and the United States have an open skies agreement. Virgin Nigeria has been formally designated by the Federal Government of Nigeria in accordance with that agreement to provide air transportation to the United States. Grant of the requested authority to Virgin Nigeria is clearly consistent with the open skies bilateral between the U.S. and Nigeria. This agreement also permits the operation of such services pursuant to wet lease arrangements. See U.S.-Nigeria Open Skies Agreement, Article 8, paragraph 7.[8] Although Virgin Nigeria is aware that U.S. airlines seeking entry into Nigeria have experienced difficulties in the past, the Government of Nigeria has assured Virgin Nigeria that it would promptly approve air service proposed by any U.S. air carrier, a view which has been expressed by Nigerian Government officials on visits to the United States Department of Transportation.

10. Virgin Nigeria is fit, willing, and able to provide the air transportation for which authority is sought. As explained at length in the accompanying Foreign Air Carrier Permit Application, Virgin Nigeria is well financed and has a strong management team. Given the fact that Nigeria currently is not Category 1 under the International Aviation Safety Assessment (IASA) Program, the flight operations described herein will be performed by pursuant to a wet lease arrangement with a carrier from a country which is rated as Category 1 under the IASA program.

11. Virgin Nigeria has been licensed by its homeland government to provide the services at issue here. A copy of Virgin Nigeria’s Nigerian license is attached.

12. Virgin Nigeria has obtained insurance which exceeds the Department’s requirements. A copy of Virgin Nigeria’s Certificate of Insurance will be provided to the Department.

13. Virgin Nigeria will ensure that its Aviation Disaster Family Assistance and Passenger Manifest plans are filed with the Department.

14. A completed form OST-4523 will be provided to the Department.

15. Virgin Nigeria asks that it be granted authority to provide this service no later than March 2006 so that it can make the necessary arrangements and begin service in May 2006. It further asks that the exemption remain in effect for a two year period, or until 90 days after favorable action is taken on its application for a foreign air carrier permit.

WHEREFORE, Virgin Nigeria respectfully requests that the Department grant the exemption described herein, and grant such further relief as it deems necessary.

Respectfully submitted,

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Counsel for Virgin Nigeria Airways Limited

Dated: December 22, 2005

CERTIFICATE OF SERVICE

I hereby certify that on this 22nd day of December 2005, a copy of the foregoing application was served in accordance with the Department’s Rules of Practice on the parties named below.

Carl Nelson, Jr.

Associate General Counsel

AMERICAN AIRLINES

1101 17th Street, N.W.

#600

Washington, D.C. 20036

car1.ne1son@

Stephen Lachter

ASTAR AIR CARGO

Lachter & Clements

1150 Connecticut Avenue, N.W.

Suite 900

Washington, D.C. 20036

lachtcr@

Gary Garofalo

AIR TRANSPORT INTL

Garofalo, Goerlich Hainbach

1200 New Hampshire Avenue, N.W

Suite 800

Washington, D.C. 20036

ggarofalo@ggh-

Hershel Kamen

CONTINENTAL AIRLINES

Dept. HQSGV

P.O. Box 4607

Ilouston, TX 772 10-4607

hkanien@

Charlene Kennedy

DELTA AIR LINES

1275 K Street, N.W.

Suite 1200

Washington, D.C. 20005

charlene.kennedy@

Tom Lydon

EVERGREEN INTERNATIONAL

140 1 New York Avenue, NW

Suite 530

Washington, DC 20005-2 147

tom.lydon@

Angela Garbuzinski

FEDERAL EXPRESS

3620 Hacks Cross Road

Building B, 3rd Floor

Memphis, TN 3 8 125

anbird@

Marshall Sinick

FLORIDA WEST INTERNATIONAL

Squire Sanders & Dempsey

1201 Pennsylvania Avenue, N.W., #400

Washington, D.C. 20004

msinick@

Mark Atwood

KALITTA AIR

Sher & Blackwell

1850 M Street, NW

Suite 900

Washington, DC 20036

matwood@

Megan Rae Rosia

NORTHWEST AIRLINES

901 15th Street, N.W.

#500

Washington, D.C. 20005

megan.rosia@

Kevin Montgomery

POLAR AIR

1747 Pennsylvania Avenue, NW

Suite 875

Washington, DC 20006

kevin.montgomery@

Jeffrey Manley

UNITED AIRLINES

Wilmer Cutler Pickering Hale and Dorr LLP

2445 M St., N.W.

Washington, D.C. 20037

jeffrey.manley@

David Vaughan

UPS

Kelley, Drye & Warren

1200 19th Street, N.W.

Suite 500

Washington, D.C. 20036

dvaughan@

Howard Kass

US AIRWAYS

2345 Crystal Drive

Alexandria, VA 22227

howard_kass@

Mark McMillin

WORLD AIRWAYS, INC.

HLH Building

I 0 1 World Drive

Peachtree City, GA 30269

mcmillin@

James Ballough

Flight Standards Service

Federal Aviation Administration

800 Independence Avenue, S.W.

Room 821

Washington, DC 20591

jim.ballough@

John Richardson

AMERIJET INTERNATIONAL

John L. Richardson

555 13th Street, N.W.

Suite 420 West

Washington, D.C. 20005

JRichardson@

Moffett B. Roller

Counsel for Gemini Air Cargo

Roller & Bauer, PLLC

1020 Nineteenth Street, N.W., Suite 400

Washington, DC 20005

mroller@

Russell E. Pommer

Associate General Counsel and Director of

Regulatory Affairs

Atlas Air, Inc.

1747 Pennsylvania Ave., N.W., Suite 875

Washington, DC 20006

rpommer@

R. Bruce Keiner, Jr.

Lorraine B. Halloway

Counsel for Continental Airlines

Crowell & Moring LLP

1001 Pennsylvania Avenue, N.W.

Washington, DC 20004

rbkeiner@

lhalloway@

Robert E. Cohn

Counsel for Delta Air Lines

Hogan & Hartson LLP

555 13th Street, N.W.

Washington, DC 20004

recohn@

John Byerly

Deputy Assistant Secretary of Transportation Affairs

Department of State

2201 C Street, NW

Washington, D.C. 20520

byerlyjr@

John A. Morganti, Manager

New York International Field Office, EA29

Federal Aviation Administration

AMB Cargo Building #75, Room 238

JFK International Airport

Jamaica, NY 11430

Nancy S. Sparks

Managing Director

Regulatory and Industry Affairs

Federal Express Corporation

1101 Pennsylvania Avenue, N.W.

Suite 600

Washington, D.C. 20004

nssparks@

William DeCota

Director

Bradley Rubinstein

Manager, Industry and Regulatory Relations

Aviation Department

Port Authority of New York and New Jersey

225 Park Avenue South, 9th Floor

New York, NY 10003

brubinst@

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[1] Title I of the Trade and Development Act of 2000, Public Law 106-200, 19 U.S.C. 3721 et seq.

[2] See, Antigua and Barbuda Airways International, Ltd., d/b/a/ Grand Atlantic Airways, 91-4-26 (April 18, 1991).

[3] See, e.g., Lan Dominicana, Notice of Action Taken, Docket OST-2003-14701 (April 1, 2003) waiving ownership and control requirement when Chilean interests held 49% of Dominican carrier. See also, Oasis International Airways, Order 93-7-28 (waiving ownership and control requirement when British company held 42% of Spanish carrier, despite fact that neither Britain nor Spain had an open skies arrangement with the United States).

[4] See, for example, Application of Air Plus Argentina (Docket OST-99-6400) where there was only 27% homeland ownership and Application of Cielos del Peru, S.A. (Export Air) in Docket OST-95-617 where there was only 30% homeland ownership.

[5] See Application of Aerolane, Lineas Aerea Nacionales del Ecuador S.A. d/b/a Lan Ecuador, Order 2003-3-9, March 12, 2003 where an exemption was granted despite the lack of an open skies agreement with Ecuador and the problems two US. airlines were experiencing in getting a code-share approved there.

[6] Application of Premiair (Docket OST-97-2167), February 28, 1997. See also the case of Air Aruba (Order 99-3-21) where an exemption was granted to Aruba’s flag carrier in the light of the open skies agreement between the U.S. and Aruba even though there was no open skies agreement between the U.S. and Venezuela, the country of the non-homeland owner of Air Aruba.

[7] See e.g. Virgin Blue Airlines PTY Limited, Notice of Action Taken Dated July 25, 2002, Docket OST-2002-12470.

[8] Virgin Nigeria understands that the operator of its wet lease service must apply for a Statement of Authorization to provide the services described herein., and anticipates that this request will be filed in the next few weeks.

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