Order 01-09-12

Order 01-9-12

American Airlines, Inc. and British Airways PLC

Order 01-9-12
OST-01-10387
OST-01-10388

Issued September 17, 2001
Served September 17, 2001

Order

Approval of and Antitrust Agreement

We have decided to extend the date for the filing of answers to the subject application to October 19, 2001, and to extend the date for the filing of replies to the answers to October 26, 2001. We have also decided to deny the motions of Continental and Northwest in all other respects.

It has been the policy of the U.S. Government to negotiate and implement open skies agreements with countries throughout the world. We here enjoy a unique opportunity to reach this goal with the United Kingdom. We understand, however, that the U.K. is likely to be unwilling to sign an open skies agreement unless and until we have granted the applicant's request for approval and antitrust immunity. Because of a pending challenge to the U.K.'s authority to sign a bilateral aviation services agreement with the United States, we must act promptly on the application filed here by American and British Airways. Currently, each member state of the European Union negotiates separately its bilateral aviation relations with the United States. The Commission of the European Union has asked the European Court of Justice to rule that the Commission - and not individual member states - is the appropriate party to negotiate aviation relations with the United States. The ECU is expected to issue its ruling soon. A favorable ruling for the Commission could seriously inhibit our ability to reach an Open-Skies agreement with the United Kingdom.

As noted, the existence of an open skies agreement is one necessary precondition for considering the approval and grant of immunity to airline alliances such as the one at issue in this proceeding. It is our intention to reach such an arrangement with the U.K. before we make our tentative decision in this case. In this regard, as Continental notes, we have scheduled talks with the U.K. We have already received assurances from representatives of the U.K. that the U.K. also intends to reach full agreement on a new open-skies accord before a tentative decision in this case. Therefore, any analysis of the impact of the proposed alliance on competition should presume the existence of an U.S.-U.K. open skies agreement that contains all of the essential elements of our Model Open-Skies agreements, including those elements enumerated by FedEx.

Our procedures, as amended, will give the parties an adequate opportunity to provide their analysis of that impact and to participate in the development of a record on this issue. It will also provide them with the opportunity to address the impact of slot restrictions at London's Gatwick and Heathrow airports on the ability of U.S. airlines to enter and compete effectively in relevant markets, and to propose remedies for ensuring effective access to those airports if they believe that slot restrictions would otherwise prevent such access. Since the ability of U.S. airlines to serve those airports is a critical consideration in our evaluation of the proposed alliance, we will carefully examine all evidence of record on this issue in reaching a decision in this case.

By: Susan McDermott