Saturday, 31 October 2020

Airline Wars: Southwest Airlines Objects to Volaris Costa Rica’s FACP Application

Q COSTA RICA – Southwest Airlines has lodged an objection against the application by Volaris Costa Rica for a Foreign Air Carrier Permit (FACP) and Exemption Authority from the United States Department of Transportation (DOT).

Volaris welcoming at the Juan Santamaria (San Jose) airport. The ultra low-cost carriers began operations in Costa Rica in December 2015. Photo ICT

The US carrier contends that Volaris Costa Rica is not a Costa Rican company but is wholly owned by a Mexican airline, thus failing the citizenship requirement.

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Volaris Costa Rica said it is pursuing its application for a FACP under the terms of the 1997 US-Costa Rica Air Transport Agreement. Its application states that Volaris Costa Rica is wholly owned by Controladora Vuela Compania de Aviacion, a publicly-traded Mexican company, but goes on to say that Volaris Costa Rica itself will be managed and operated by Costa Rican citizens, with the board and senior management to be predominantly Costa Rican. It then respectfully asks that the requirement that substantial ownership of the airline rest in the homeland of the carrier be waived, citing past cases.

Southwest’s objection states that Volaris Costa Rica is a Mexican company which is attempting to use its Costa Rican subsidiary to gain seventh freedom rights between Costa Rica and the United States, undermining the latest US Mexico bilateral air services agreement, and placing US carriers at a disadvantage against their Mexican counterparts.

The primary evidence Southwest calls upon is that Costa Rican citizens have no shareholdings of Volaris Costa Rica, therefore violating the requirement that citizens of Costa Rica have “substantial ownership and effective control” of its airlines seeking to fly to the United States.

The US carrier also criticises Volaris Costa Rica’s claim that it will be controlled by Costa Rican citizens. No President or CEO is named, it says, and the two Costa Rican board members are over the age of 70. The third board member, Mexican Jaime Esteban Pous Fernandez, is also the Chief Legal Officer of Volaris. Southwest states that none of the ‘senior key management officials’ named by Volaris Costa Rica hold any strategic positions such as Chief Financial Officer (CFO) or head of aircraft operations contending that this is proof that strategic decisions will be made by Volaris and not Volaris CR.

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Southwest also rejects the cases cited by Volaris Costa Rica about having its ownership requirement waived, claiming that those cases are materially different. In twelve of the nineteen cases cited, the airlines involved were 51% or more owned by their homeland, whereas Volaris Costa Rica has no Costa Rican ownership whatsoever.

A unit of its Mexican namesake Volaris, the Costa Rican low-cost carrier began operations in December last year using an A320-200 wet-leased from its parent. It currently offers regular flights from the San Jose airport, the Juan Santamaria (SJO) to Guatemala  City, Guatemala (GUA), San Salvador, El Salvador (SAL), and Managua, Nicaragua (MGA) that started on April 2.

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