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OST-2013-0068 - Virgin Altantic, Delta Air Lines, Air France, KLM and Alitalia - Antitrust Immunity for Alliance Agreements

http://www.delta.com/
http://www.virgin-atlantic.com/
http://www.airfrance.us/
http://www.klm.com/
http://www.alitalia.com/

 

International Air Alliances - Greater Transparency Needed on DOT's Efforts to Monitor the Effects of Antitrust Immunity - GAO Report

OST-2001-10429 - Delta, Air France, Alitalia and Czech Airlines - Antitrust Immunity
OST-2002-11842 - Delta, Korean Air Lines, Air France, Alitalia and Czech Airlines - Antitrust Immunity
OST-2004-19214 - Delta, KLM, Northwest, Air France, Alitalia and Czech Airlines - Antitrust Immunity

OST-2013-0069 - Delta and Virgin Atlantic - US-UK Reciprocal Codesharing

OST-2013-0077 - Air Tahiti, Delta, Air France, KLM and Alitalia - Antitrust Immunity for Alliance Agreements

 


Virgin Atlantic Airways, Ltd., Delta Air Lines, Inc., Société Air France, Koninklijke Luchtvaart Maatschappij N.V. and Alitalia Compagnia Aerea Italiana S.p.A.

OST-2013-0068 - Approval of and Antitrust Immunity for Alliance Agreements


April 8, 2013

Joint Application for Approval of an Antitrust Immunity for Alliance Agreements - Bookmarked

Motion for Confidential Treatment

Delta and Virgin Atlantic have entered into a comprehensive Joint Venture Agreement to combine their respective passenger services on routes between North America and the United Kingdom. The Joint Venture will be a more effective competitor on US-UK routes, and in particular on US-London routes. The Joint Venture sits alongside a recently announced transaction pursuant to which Delta will invest $360 million to acquire the 49% equity stake in Virgin Atlantic currently held by Singapore Airlines.

The Joint Applicants have also executed a five-way Coordination Agreement among Delta, Virgin Atlantic, Air France, KLM and Alitalia to facilitate coordination of the two joint ventures on North America-UK routes. Collectively, these are the Alliance Agreements for which antitrust immunity is sought.

Approval of and antitrust immunity for the Alliance Agreements is in the public interest and will create important consumer benefits estimated to exceed $187 million per year. The Delta/Virgin Atlantic Joint Venture enables both carriers to overcome their respective weaknesses: Delta will gain access to Virgin Atlantic’s LHR slot portfolio and London sales presence; Virgin Atlantic will gain access to Delta’s large network and distribution strength in North America. On the important NYC-LHR and BOS-LHR routes, the transaction benefits consumers by enabling the JV Parties to combine frequencies and retime flights, creating a new and more effective competitor to the dominant AA/BA Alliance. The Joint Venture would also enable new direct service from Seattle to LHR. In the UK, Delta will have the opportunity to connect passengers to Virgin Atlantic’s budding UK network, and additional benefits would be enabled by coordination with the other Joint Applicants, particularly on North America-UK regional routes that are served via Amsterdam and Paris. Antitrust immunity is essential to the full realization of the consumer benefits and procompetitive effects of the Joint Venture.

Counsel: Holland & Knight, Anita Mosner, 202-419-2604 for Virgin Atlantic / Zuckert Scoutt, Richard Mathias, 202-973-7917 for Alitalia / Hogan Lovells, Robert Cohn, 202-637-4999 for Air France and KLM / Alexander Van der Bellen, 202-842-4184 for Delta


April 8, 2013

Customer Support Letters

Please find enclosed letters from 39 businesses expressing support for Delta and Virgin Atlantic's joint venture proposal.

Counsel: Delta, Alexander Van der Bellen, 202-842-4184


 

Served April 10, 2013

Notice Suspending Procedural Schedule and Providing Access to Documents

Along with their application, the Joint Applicants filed a motion under 14 CFR § 302.12 of the Department's regulations seeking confidential treatment for supporting documents and information. They state that this material is confidential, proprietary, and commercially sensitive, which qualifies it for being withheld from public disclosure. They ask that access to this material be limited to counsel and outside experts who have filed valid confidentiality affidavits.

In order to afford interested parties prompt access to the documents in the record, we will grant immediate interim access to all documents covered by the Rule 12 Motion to counsel and outside experts for interested parties who file appropriate affidavits with the Department in advance. Moreover, Parties will be permitted to make copies of the documents, at the Dockets facility, for use by persons who have filed confidentiality affidavits. We also find it appropriate to grant interim access to any subsequent materials that may be filed in this case under a Rule 12 Motion under the same terms, unless the party filing the Motion objects.

We suspend the procedural schedule in this proceeding until we have determined that the record of this case is substantially complete. At that time, we will announce a procedural schedule, including an opportunity for public comment.

By: Susan Kurland


 

April 22, 2013

Confidentiality Affidavits for US Airways Group
Howard Kass, Benjamin Slocum

Counsel: US Airways, Howard Kass, 202-326-5153

 

April 29, 2013

Confidentiality Affidavits for American Airlines
Robert Wark, James Kaleigh


 

May 3, 2013

Supplemental Interrogatories

Confidential Responses

By: Delta and Virgin Atlantic


 

May 6, 2013

Confidentiality Affidavits for US Airways Group
Howard Kass, Benjamin Slocum

 

May 13, 2013

Confidentiality Affidavits for United Air Lines
Brett Hart, Thomas Bolling, Karine Faden


May 13, 2013

Confidentiality Affidavits for Tampa International Airport
Michael Goldman, Gigi Garber Rechel

Counsel: Crowell & Moring, Gerald Murphy, 202-508-8855

 

May 14, 2013

Confidentiality Affidavits for British Airways and Garofalo Goerlich
Don Hainbach, Natasha Franklin


 

Served May 14, 2013

Notice Establishing Procedural Schedule

On April 10, 2013, we issued a Notice suspending the procedural schedule and providing access to documents. On May 3, 2013, the Joint Applicants submitted supplemental interrogatories.

We have finished our initial review of the application and all supporting materials submitted by the Joint Applicants. The record is now substantially complete. We establish the following procedural schedule for public comments:

Answers - must be filed no later than 21 calendar days from the date of issuance of this Notice;

Replies - must be filed no later than 7 business days after the last day for filing an answer.

By: Susan Kurland


 

May 15, 2013

Confidentiality Affidavits for Air Line Pilots Association
Russell Bailey, David Semanchik, Louise Fawbush

 

May 16, 2013

Confidentiality Affidavit for International Airlines Group
Niamh McCarth

 

May 20, 2013

Confidentiality Affidavit for International Airlines Group
Chris Haynes


 

May 23, 2013

Questionnaire to Slot Coordinators

The Directorate-General for Competition of the European Commission must now investigate the effects of the Transaction on competition in particular on the markets for air transport of passengers. To this end,
the Commission needs to gather relevant information from the Parties as well as from other actors such
as consumer associations, airport managers, slot coordinators and civil aviation authorities.

By: DGCEC


 

May 1, 2013

DOT Ex-Parte Letter to FedEx Corporate Vice President

By: Susan Kurland


May 1, 2013

DOT Ex-Parte Letter to Interpublic Group

By: Susan Kurland


 

June 4, 2013

Answer of the Atlanta Parties in Support of Delta and Virgin Atlantic

The Atlanta Parties (including Hartsfield·Jackson Atlanta International Airport, Atlanta Convention & Visitors Bureau and the Metro Atlanta Chamber) enthusiastically support the application of Delta and Virgin Atlantic for antitrust immunity. By working together, Delta and Virgin Atlantic will be a stronger and morc effective competitor on North America-UK routes, including London Heathrow, the largest and most important transatlantic dest ination. With Virgin's strong sales and brand presence in the UK, we expect that more UK visitors will travel to and through Atlanta on Delta's existing serv ices, and that increased demand may support additional Atlanta-UK flights in the future.

Delta's very first transatlantic serv ice, starting in 1978, was to London Gatwick Airport. However, it was not until 2008, some 30 years later, that Delta finally gained access to London's preferred Heathrow Airport as a result of the landmark US-EU open skies agreement. In fact, due to the lack of sufficient Heathrow slots, Delta continued to use Gatwick for a portion of its Atlanta-London service until April of last year. Because of Delta's "non-incumbent" status, Delta's presence at LHR and Atlanta's development as a gateway to the UK have lagged behind other cities such as Dallas/Ft. Worth, Miami and Chicago which are served by the AA/BA alliance.

The Atlanta parties believe that the joint venture with Virgin Atlantic will strengthen Delta as a carrier and Atlanta as a gateway to the UK As Delta's largest hub, Atlanta is well situated to benefit from increased traffic generated by the Joint Venture. We note that Chicago has 6 daily AA/BA flights to London Heathrow, and that Miami and DallasfFt. Worth have 4 flights each. Using remedy slots obtained from the AAiBA alliance, Delta was recently able to increase from two to three daily LHR flights, and we believe Atlanta has the potential to support more LHR service in the future.

By: City of Atlanta, Louis Miller


June 4, 2013

Answer of the Delta Master Executive Council of the Air Line Pilots Association, International in Support of Delta and Virgin Atlantic

Delta and Virgin Atlantic, together with Delta’s existing European alliance partners, have requested antitrust immunity so that Delta and Virgin Atlantic can form a North America-UK joint venture. The joint venture will improve service and competition on US-UK routes, particularly at London Heathrow Airport, where service today is dominated by the AA/BA alliance. The joint venture will increase Delta’s competitive presence at LHR. It will also produce new flying opportunities for Delta and its employees, including plans for Delta to operate new nonstop Seattle-LHR service as part of the joint venture. For these reasons, the Delta Master Executive Council, the Delta chapter of the Air Line Pilots Association, International strongly supports the request of Delta and Virgin Atlantic for antitrust immunity.

By: Delta MEC, Kingsley Roberts


June 4, 2013

Answer of Massport in Support of Delta and Virgin Atlantic

The Massachusetts Port Authority, owner and operator of the Boston Logan International Airport, strongly supports the Application of Delta and Virgin Atlantic for antitrust immunity to form a North America-UK joint venture. The Boston Metropolitan Statistical Area comprises a population of more than 4.5 million residents, and Boston is a major commercial and financial center for the Northeastern United States. We have a great need and strong demand for frequent and competitive service to London - our largest international market (with over 527,000 origin-destination passengers armually) and the leading business and financial center in Europe.

Massport is pleased to have daily Boston-London Heathrow flights offered by both Delta and Virgin Atlantic, along with four daily flights offered by the American/British Airways (AA/BA) alliance. However, because customers - particularly time-sensitive business travelers - demand schedule options and flexibility, the single daily services of Delta and Virgin Atlantic are not fully competitive with the much more expansive offering of AA/BA. By working together, Delta and Virgin Atlantic will be able to optimize their schedules and offer a more attractive product with better time-of-day coverage. For example, Delta and Virgin Atlantic operate departures from Boston to LHR just one hour apart at 18:30 and 19:30. The carriers have indicated that they plan spread the flights out by pushing the later departure to 21:30, and will also make similar improvements to their westbound flights from LHR to Boston. These schedule adjustments will significantly improve time-of-day schedule coverage, providing Boston-London customers with greater convenience and competitive choice.

By: Massport, Edward Freni


June 4, 2013

Answer of the Port Authority of New York and New Jersey in Support of Delta and Virgin Atlantic

The Port Authority of New York and New Jersey supports the Application of Delta and Virgin Atlantic for antitrust immunity to form a North America-UK joint venture. With nearly 1.5 million annual O&D passengers, New York-London is the single largest and most important transatlantic route, linking the business and financial centers of the respective continents. New York is also an important hub gateway providing onward connecting opportunities to scores of cities in the US, Canada and Mexico. Through the formation of the joint venture, Delta and Virgin Atlantic will be able to offer an improved joint product with more attractive schedules, and enhanced connecting opportunities. These services will better meet the needs of New York-London travelers, as well North American customers transiting via New York.

Counsel: PANYNJ, Susan Baer, 212-435-3741


June 4, 2013

Answer of the Port of Seattle in Support of the Joint Applicants

The Port of Seattle, owner-operator of Seattle-Tacoma International Airport respectfully submits this Answer supporting the application of Delta and Virgin Atlantic, for antitrust immunity. Approval would allow Delta and Virgin Atlantic to implement their Joint Venture, and would enable Delta to establish new nonstop Seattle to London Heathrow service. This new service will be received enthusiastically by the Seattle traveling public and the entire Pacific Northwest Region. Seattle urges the application be granted on an expedited basis.

Seattle needs and deserves competitive nonstop service to London.

Counsel: Isabel Safora, 206-787-3216


June 4, 2013

Answer of the Tampa International Airport

The Tampa International Airport submits this Answer to the Delta/Virgin Atlantic ATI Application filed with the Department on April 8, 2013. TPA supports grant of the Joint Application believing it can lead to new Delta or Virgin Atlantic nonstop service between TPA and the United Kingdom.

The Delta/Virgin Atlantic JV will offer "a meaningful competitive alternative" to the American/British Airways Alliance on US-UK routes, as AA/BA now accounts for 59% of all US-UK capacity. Delta and Virgin Atlantic claim that other public benefits will result from their new JV, including new nonstop service on the Seattle-London Heathrow route and the potential for new nonstop service between Salt Lake City and London. TPA would like to see new nonstop Tampa-Manchester and/or Tampa-London service added to that list.

Counsel: Silverberg Goldman, Michael Goldman, 202-944-3305


June 4, 2013

Answer of Wayne County Airport Authority in Support of Delta and Virgin Atlantic

Detroit Metropolitan Airport fully supports Delta Air Lines' request for antitrust immunity with Virgin Atlantic Airways. Detroit is a major hub for Delta. Delta and its partners currently offer eight daily nonstop transatlantic flights to five European destinations, including London Heathrow Airport. Through the joint venture with Virgin Atlantic, Delta will gain an important new marketing partner in the UK, and, for its part, Virgin will gain access to Delta’s North American network, including the large array of US, Canadian, and Mexico destinations served by Delta from Detroit. The joint venture will strengthen DTW as a gateway to London, and, in particular, will enhance intergateway competition with Chicago, where AA/BA operate a combined six daily LHR flights.

By: WCAA, Joe Cambron, 734-942-3550


 

June 10, 2013

Support Letter of City of Boston

On behalf of the City of Boston, I am writing you to ask for your consideration and approval of antitrust immunity for the Delta/Virgin Atlantic joint venture. Boston is a major commercial and financial center for the Northeastern United States .. We have a great need and strong demand for frequent and competitive service to London - our largest international market and the leading business and financial center in Europe.

By: Mayor Thomas Menino


 

Order 2013-8-21
OST-2013-0068
- Approval of and Antitrust Immunity for Alliance Agreements

Issued and Served August 30, 2013

Show Cause Order - Bookmarked

The applicants have requested a grant of antitrust immunity from the US antitrust laws in order to allow Delta and Virgin Atlantic to operate a joint venture between North America and the United Kingdom. If the application is given final approval, the ATI Applicants will coordinate their international operations through the Joint Venture and the close commercial relationship that will occur by virtue of Delta’s 49% stake in Virgin Atlantic.

Through the Joint Venture Agreement, Delta and Virgin Atlantic will coordinate their network planning, revenue management, pricing, sales, and other functions in covered markets. The two carriers will jointly promote their products and services in a “metal neutral” fashion, and will also pool their revenues and share profits. With the exception of Virgin Atlantic, the parties to this application will also continue to operate the SkyTeam Joint Venture, which the Department approved and immunized in 2008. The SkyTeam Joint Venture, focused on the US-Europe market and behind and beyond, and the Delta-Virgin Atlantic Joint Venture, focused on the North America-United Kingdom market, will co-exist and be managed separately.

Based on our evaluation and analysis of the present application, we tentatively conclude that, overall, the alliance will be pro-competitive. In reaching this conclusion, we make the following tentative findings: (1) inter-alliance competition will likely be strengthened in the US-Europe and US-United Kingdom markets; (2) there are unlikely to be anti-competitive effects in any city-pair markets because there are no city-pair markets in which both Delta and Virgin Atlantic currently provide the only nonstop service; and (3) competition will likely be strengthened in the large New York-London market.

We also tentatively conclude that the ATI Applicants have made a strong showing that substantial public benefits are likely to result from their proposed immunized cooperation. These claimed benefits include additional services and schedule optimization, elimination of “double marginalization” or double markups, and other improvements. We tentatively conclude that antitrust immunity is necessary to achieve most of these important benefits. The ATI Applicants have also stated that they will not implement the Joint Venture without antitrust immunity.

Because the proposed Joint Venture is part of a transaction that included Delta purchasing a 49% equity stake in Virgin Atlantic for $360 million, we tentatively determine that there is added economic incentive for the ATI Applicants to fully implement the Joint Venture, which will make it possible for the carriers to pass on the additional benefits of an immunized alliance to consumers.

Provided that the ATI Applicants accept the conditions that we are proposing below, we tentatively conclude that the potential benefits of the application outweigh any potential harm. Therefore, we tentatively grant antitrust immunity, subject to conditions, to the ATI Applicants. We direct any interested parties to state why we should not adopt these findings and conclusions in a final order. Parties have 14 calendar days in which to file answers and 7 calendar days in which to submit replies.

By: Susan Kurland


 

Order 2013-9-14
OST-2013-0068
- Approval of and Antitrust Immunity for Alliance Agreements

Issued and Served September 23, 2013

Final Order

The underlying request for antitrust immunity covers a series of alliance agreements between Virgin Atlantic, Delta, Air France, KLM and Alitalia. The ATI Alliance Agreements include a Joint Venture Agreement between Delta and Virgin Atlantic, a five-way Coordination Agreement among Virgin Atlantic, Delta, Air France, KLM and Alitalia, and several implementing agreements between Delta and Virgin Atlantic, including a Codeshare Agreement, a Special Prorate Agreement, a Lounge Agreement, and a Frequent Flier Program Agreement.

We have decided to approve the application, permitting the ATI Applicants to implement the ATI Alliance Agreements, subject to conditions. As explained in detail in the Show Cause Order, we have applied the relevant legal and policy standards carefully. No party has opposed the ATI Applicants’ request during the proceeding, and the facts and circumstances remain unchanged since the issuance of the Show Cause Order.

Against this background, we are today making final our tentative findings and conclusions.

By: Susan Kurland


 

Order 2014-12-17
OST-2013-0068 - Approval of and Antitrust Immunity for Alliance Agreements
OST-2007-28644 - Approval of and Antitrust Immunity for Alliance Agreements
OST-2002-11842 - Approval of and Antitrust Immunity for Alliance Agreements
OST-2001-10429 - Approval of and Antitrust Immunity for Alliance Agreements

Issued and Served December 29, 2014

Order

One of the carriers, Alitalia, is transferring its entire business from one entity, Alitalia - Compagnia Aerea S.p.A.’s to a new entity, Alitalia – Società Aerea Italiana S.p.A. as part of a restructuring and recapitalization. The details of the transaction are provided in the public proceeding in which the Department has tentatively approved Alitalia’s request to transfer its foreign air carrier permit and related authorizations, and granted New Alitalia an exemption to permit the carrier to serve the United States pending the issuance of a new foreign air carrier permit. On December 22nd, Alitalia’s counsel sent a letter to the Department, providing an update on the status of the transfer. Counsel stated that, effective January 1, 2015, New Alitalia would succeed Old Alitalia with respect to the latter’s existing business arrangements, including the alliance and joint business arrangements that were examined in the antitrust immunity proceeding. Counsel further state that the carriers have no plans to change the core commercial terms of the agreements as a result of the transfer, and that the arriers covered by the relevant orders have been consulted in connection with the letter and have agreed to the modification of the ordering paragraphs as requested.

Based upon this information, we have decided to make a technical change in Alitalia’s antitrust immunity to reflect the updated and correct legal name of the company. The change allows New Alitalia to become the holder of the authority upon the closing of the transaction, effective as soon as January 1st, 2015. We find that the transfer of Alitalia’s assets to a new entity raises no new competitive or policy issues. Thus, the findings and conclusions in the underlying orders – Orders 2002-1-6, 2002-6-18, 2008-5-32, and 2013-9-14 – remain valid, and the antitrust immunity remains in effect.

By: Susan Kurland

OST-2014-0210 - Alitalia - Exemption and Foreign Air Carrier Permit - EU-US Open-Skies



July 20, 2018

Joint Motion to Amend Order 2013-9-14 to Approve and Extend Antitrust Immunity to Amended and Restated Transaltantic Joint Venture Agreement

Delta Air Lines, Inc., Koninklijke Luchtvaart Maatschappij, N.V., Société Air France and Virgin Atlantic Airways, Ltd. hereby ask the Department to amend DOT Order 2013-9-14 to add their Amended and Restated Transatlantic Joint Venture Agreement to the list of “ATI Alliance Agreements” which are approved and immunized by that Order. When implemented, the Amended JVA will replace the two pre-existing JV Agreements among the Parties, which currently operate in parallel as approved by the 2013 Order.

The 2013 grant of antitrust immunity involved “a new joint venture that would operate in parallel to an existing immunized joint venture.” The Department correctly determined that this presented no competitive concerns because “relatively few passengers fly between the US and London via continental European hubs.” The Department noted that it “encourages carriers to take a holistic view of the alliance network in order to foster metal neutrality that leads to public benefits otherwise unobtainable.” It correctly predicted that “Virgin Atlantic may eventually seek to be fully integrated into the existing SkyTeam Joint Venture at some future point.”

Five years later, the Amended JVA will replace Delta’s two parallel transatlantic joint ventures with a combined joint venture that will integrate the commercial activities of the Parties and establish metal neutrality between Virgin Atlantic, on the one hand, and Air France and KLM, on the other, for the first time. The enhanced cooperation will create substantial additional consumer benefits, without any harm to competition. The joint venture will provide enhanced codesharing, improved routing options, reduced costs, and increased synergies. The joint venture will also enhance competition with other carriers and alliances, and, in particular, enable the Parties to compete more effectively with British Airways and its partners in and beyond the United Kingdom.

There are no nonstop overlaps between Virgin Atlantic, on the one hand, and Air France and KLM, on the other, and relatively few transatlantic passengers connect to the United Kingdom via continental European hubs. Virtually all of the traffic they carry to/from the United States already falls within the scope of one of the parallel preexisting metal-neutral joint ventures with Delta. The replacement of the two preexisting Delta joint ventures with a single, metal-neutral joint venture will significantly enhance competition and will not in any way be adverse to the public interest.

Counsel: Hogan Lovells, Robert Cohn, 202-637-4999 for Delta / Pillsbury Law, Charles Donley, 202-663-8448 for Air France/KLM / Julian Homerstone for Virgin Atlantic


 

Served July 23, 2018

Notice of Suspension of Procedural Schedule

On July 20, 2018, Virgin Atlantic Airways, Ltd., Delta Air Lines, Inc., and Société Air France, Koninklijke Luchtvaart Maatschappij N.V. filed a motion in the above docket requesting the Department of Transportation amend Order 2013-9-14 by granting approval of and antitrust immunity for an amended and restated alliance agreement.

The period of time to file answers to a motion is limited under 14 CFR § 302.11. However, the Department has decided to suspend the procedural schedule here, as we have done with initial applications for antitrust immunity. We note that the Joint Applicants have not yet filed materials in support of their motion. In subsequent actions, we will provide appropriate access to any documents and information that are filed along with a request for confidential treatment. When we determine that the record is substantially complete, we will announce a procedural schedule, including an opportunity for public comment.

By: Joel Szabat


 

August 7, 2018

Notice of Access to Confidential Documents

On August 3, 2018, the Joint Applicants filed a motion under 14 CFR § 302.12 of the Department’s regulations seeking confidential treatment for supporting documents and information. They state that this material is confidential, proprietary, and commercially sensitive, which qualifies it for being withheld from public disclosure. They ask that access to this material be limited to counsel and outside experts who have filed valid confidentiality affidavits.

In order to afford interested parties prompt access to the documents in the record, we will grant immediate interim access to all documents covered by the Rule 12 Motion to counsel and outside experts for interested parties who file appropriate affidavits with the Department. Due to the time elapsed since the last action in this proceeding, the Department will not accept affidavits previously filed in this docket as valid. Parties seeking access to confidential materials must file new affidavits executed after the date of this notice.

Parties having filed proper affidavits will be permitted to make copies of the documents, at the Dockets facility, for use by persons who have filed confidentiality affidavits. We also find it appropriate to grant interim access to any subsequent materials that may be filed in this case under a Rule 12 Motion under the same terms, unless the party filing the Motion objects.

By: Joel Szabat


 

August 10, 2018

Confidentiality Affidavits of Holland & Knight
Jennifer Nowak, Anita Mosner

Counsel: Holland & Knight

 

August 13, 2018

Confidentiality Affidavits of Holland & Knight
Benjamin Slocum

Counsel: Holland & Knight


 

August 10, 2018

Confidential Document Production of Air France/KLM

Societe Air France and Koninklijke Luchtvaart Maatschappij N.V. hereby submit in the above-captioned proceeding the enclosed CD containing AFKL's confidential document production and document index. As indicated on the index, portions of three documents have been redacted. In each
case, the redacted material contains confidential details regarding actual or potential joint business arrangements between AFKL and one or more Asian carriers that involve transactions or markets unrelated to the pending motion to amend Order 2013-9-14.

Counsel: Pillsbury Law, James Dick, 202-663-8044


 

August 9, 2018

Confidentiality Affidavits for Air France/KLM
Manal Maila, Jean Sentenac, Jeanette Ten Cate



August 22, 2018

Confidentiality Affidavits for Pillsbury, Winthrop, Shaw, Pittman
Charles Donley, Edward Sauer, James Dick, Jeetander Dulani


 

August 23, 2018

Submission of Confidential Documents of Virgin Atlantic

On behalf of Virgin Atlantic Airways, we hereby submit the enclosed thumb drive containing Virgin Atlantic's confidential document production in support of the above-referenced proceeding.

Counsel: Holland & Knight, Anita Mosner, 202-419-2604


 

August 24, 2018

Confidentiality Affidavits of Delta Air Lines
Scott McClain, Alexander Krulic, Christopher Walker, Steven Seiden, Robert Cohn, Patrick Rizzi

Counsel: Delta, Steven Seiden, 202-243-3581

 

August 29, 2018

Confidentiality Affidavits of United Airlines
Thomas Bolling, Abby Bried, Ishan Bhabha, Natacha Lam, Chahira Solh, Laura Collins, Katharine Caplan

Counsel: Jenner & Block, Natacha Lam, 202-639-6350

 

September 5, 2018

Re: Confidentiality Affidavits of JetBlue Airways
Robert Land, Reese Davidson

Counsel: JetBlue, Reese Davidson

 

September 5, 2018

Withdrawal of Confidentiality Affidavits of JetBlue Airways

On behalf of JetBlue Airways Corporation, I hereby withdraw my confidentiality affidavit submitted in this docket on September 5, 2018.

Counsel: JetBlue, Reese Davidson

 

October 2, 2018

Confidentiality Affidavit of United Airlines
Mika Clark

Counsel: Jenner & Block, Natacha Lam, 202-639-6350

 

November 19, 2018

Re: Confidentiality Affidavits of Eckert Seamans for JetBlue Airways
Evelyn Sahr, Drew Derco, Alexander Marriott

Counsel: Eckert Seamans, Drew Derco, 202-659-6665


 

November 27, 2018

Motion of JetBlue Airways

As a public policy matter, JetBlue has been clear and consistent that it does not oppose limited grants of ATI nor joint ventures per se, but rather strongly believes that airlines should only receive such extraordinary regulatory relief when there is meaningful regulatory scrutiny including a set-term limit, a bar on exclusivity clauses and an examination of airport access issues. In this particular case, JetBlue asks only that the Department perform an up-to-date comprehensive competition analysis, built on a new evidentiary record, that examines the slot situation at London-area airports as it currently exists. This approach would be consistent with three decades of Department precedent for ATI cases involving the United Kingdom. Issuance of this type of routine evidence request, which is consistent with Department precedent, should not lead to any delays and will ensure fair and equitable treatment for JetBlue and all other stakeholders. It is especially warranted here because the Department has not comprehensively examined this dynamic market in more than five years.

Counsel: JetBlue, Robert Land, 202-715-2565


 

December 3, 2018

Confidentiality Affidavits of American Airlines
James Kaleigh, Andrew Paik

Counsel: Latham & Watkins, Andrew Paik


 

December 6, 2018

Joint Answer of Virgin, Delta, Air France, KLM and Alitalia to Motion of JetBlue Airways

The Department should reject the JetBlue Motion. As described in the Parties’ Joint Motion, the Amended JVA will simply combine Delta’s two already-approved transatlantic joint ventures with an amended agreement that will close the small seam between the existing JVs by establishing metal neutrality between Virgin Atlantic, on the one hand, and Air France and KLM, on the other. When it reviewed the Parties’ initial request for ATI, the Department engaged in a broad and thorough analysis of the Parties’ operations and determined that the arrangement would enhance competition in the relevant markets. The point of focus covered by the Joint Motion is new cooperation between Virgin Atlantic and Air France/KLM, carriers that do not compete with each other on any nonstop route. By contrast, JetBlue is attempting to re-litigate the Department’s grant of ATI approval for the Delta-Virgin Atlantic JV and related alliance agreements.

There is no justification for delaying the Department’s review of the Parties’ July 20, 2018 Joint Motion for ATI-approval of the Amended JVA. The Parties have supplied the Department with a voluminous set of documents and data, sufficient to assist the Department’s review of the Joint Motion and Amended JVA. The information and data already in the record clearly demonstrate that the Amended JVA raises no material issues with respect to competitive harm or slot concentration at any UK or European airport, and that it will deliver substantial benefits to the traveling public, which can only be achieved with ATI. The Department already has sufficient information and data to declare the record to be substantially complete and render a fully informed decision.

Launching an open-ended expedition in this docket into broader issues such as slot access at all London-area and European airports now – more than four months after the filing of the Joint Motion for approval of this JV – would delay the proceeding and harm consumers by preventing the Parties from delivering important consumer benefits to the traveling public. There is no justification for such delay. The Parties urge the Department to deny the relief sought in JetBlue’s Motion and promptly issue a notice establishing a procedural schedule for public comments on the merits of the Joint Motion.

Counsel: Hogan Lovells, Robert Cohn, 202-637-4999 for Delta / Pillsbury Law, Charles Donley, 202-663-8448 for Air France/KLM / Julian Homerstone for Virgin Atlantic


 

December 14, 2018

Confidentiality Affidavit of United Airlines
Anna Arshad

Counsel: Jenner & Block, Christine Sanquist, 202-639-5341


 

December 17, 2018

Motion for Leave to File and Surreply of JetBlue Airways

JetBlue wholeheartedly agrees with Delta that the APA requires the Department to treat this antitrust immunity application in a manner that is consistent with past precedent. JetBlue does not, however, agree with the Joint Applicants’ attempts to minimize what is at stake in this proceeding, nor with their request that the Department completely ignore precedent, rush to declare the record substantially complete, and issue a decision granting ATI, all in the absence of a complete and up-to-date evidentiary record. The Joint Applicants self-describe their application as an innocuous attempt to close a “small seam” between existing grants of ATI that they assert needs further global immunization from the antitrust laws, an action the Department recently characterized as a “discretionary grant of extraordinary relief from the antitrust laws.” But the Joint Applicants’ attempts to frame their significant request for global immunity as a piece of cloth with a seam that needs repair wholly fails, and should be rejected. Immunization from the antitrust laws is not an administrative formality. It is a significant and serious matter, particularly where, as here, an unrestricted grant of immunity has long-lasting potential to result in reduced competition and consumer harm.

Despite the Joint Applicants’ statements, JetBlue is not seeking “an open-ended expedition in this docket into broader issues such as slot access at all London-area and European airports.” In fact, JetBlue’s request is narrowly tailored, entirely consistent with Department precedent, and limited to access issues at those hub airports where the conglomerate joint venture will primarily operate (LHR, LGW, AMS and CDG) and where slot concentration is greatest.

Moreover, this is not an academic or theoretical issue for JetBlue. New aircraft developments make it possible for JetBlue to serve western Europe from its northeastern United States focus cities. Primera Air and other carriers have already proven that the A321neo can be used to serve transatlantic routes and the first A321LR was recently certified and delivered to Arkia in Israel. JetBlue’s first A321neo aircraft is due for delivery in 2019 and JetBlue has options to convert future deliveries to the A321LR variant. However, at the recent IATA Slot Conference in Madrid, several European airport slot allocation officials informed JetBlue representatives to “not bother” submitting further routine slot requests at concentrated airports. This statement is indicative of the reasons the Department must examine slot dynamics at constrained European airports where the Joint Applicants are seeking expanded immunity.

JetBlue also does not seek to cause undue delay to the Joint Applicants’ ATI expansion request. JetBlue only requests that this proceeding include the required and necessary relevant information, on the record, concerning airport access issues in Europe that have far-reaching implications on the competitive landscape of the transatlantic market. On average, it can take 8-12 months, or longer, for the Department to build an evidentiary record in ATI cases. The Joint Applicants filed their ATI request less than five months ago. The Department also now has an ATI traffic jam with applications from American-LATAM, American-Qantas and Hawaiian-JAL (all of which were submitted ahead of the Joint Applicants’ request) in addition to Delta-Virgin Atlantic-Air France-KLM in line for processing and adjudication. As such, issuance of a routine evidence request, which is consistent with precedent, should not lead to any delays and will ensure fair and equitable treatment for JetBlue and all other stakeholders.

Counsel: JetBlue, Robert Land, 202-715-2565


 

December 28, 2018

Joint Response to Unauthorized Surreply of JetBlue Airways and Supplemental Production of Airport Slot Information

As described in detail in the JV Parties’ Joint Answer on December 6, the Department engaged in a broad and thorough analysis of the JV Parties’ operations leading up to its decision in the 2013 proceeding to grant approval. The Department correctly determined that the arrangement would enhance competition in the relevant markets and benefit the traveling public. The Joint Motion seeks to enhance cooperation between Virgin Atlantic and Air France/KLM. JetBlue appears to be attempting to use this docket to second guess and re-litigate the Department’s well-reasoned grant of ATI approval for the Delta-Virgin Atlantic joint venture and related alliance agreements.

In doing so, JetBlue ignores the evidence already in the record establishing that the existing transatlantic joint ventures have delivered enormous public benefits, and the combination of the JVs will generate still more, without any adverse effects on competition. The combined joint venture will enhance competition with other carriers and alliances, and, in particular, will enable the JV Parties to compete more effectively with British Airways, American Airlines, Aer Lingus, and their many oneworld partners in and beyond the United Kingdom.

JetBlue also seeks to misuse this docket as a platform for debate about airport access issues in Europe that are not affected in any material way by the Proposed JV. In its unauthorized Sur-reply JetBlue calls for the JV Parties to produce slot information about AMS and CDG – two airports which Virgin Atlantic does not serve – and about LHR, where the Parties to the Proposed JV collectively hold just 8% of the available slots.

As cited above, Virgin Atlantic does not currently serve either AMS or CDG, so the proposed transaction will have no competitive effect whatsoever on operations, slot concentration, or the competition dynamics at either of those airports. For Heathrow, the JV Parties have already placed extensive information into the record concerning their operations at the airport. JetBlue’s characterization of the JV Parties’ change in their LHR slot holdings from 5% to 8% as a “staggering” 60% is ridiculous and merely reflects the increase of small numbers. While, mathematically, the JV Parties’ LHR slot share will increase by 60%, that is because they are starting from a very small base. The JV’s combined share of 8% of the slots at LHR will remain very small compared to IAG’s 60% share. JetBlue cites no precedent for the premise that a JV with an 8% share of slots at an airport is any cause for competitive concern. There is no such precedent. And the JV Parties’ presence at LGW is even smaller – 1% – with Virgin Atlantic the only JV Party who operates there.

As the JV Parties have already detailed extensively in the record, one of the key competitive benefits of the Proposed JV will be their improved ability to compete effectively with British Airways and its JV partners by combining their LHR resources. The fact that the transaction will increase the JV Parties’ combined presence at LHR (albeit only slightly) actually weighs heavily in favor of a speedy approval.

Counsel: Scott McClain for Delta / Pillsbury Law, Charles Donley, 202-663-8448 for Air France/KLM / Michael Lukes for Virgin Atlantic


 

Order 2019-1-3
OST-2013-0068
- Approval of and Antitrust Immunity for Alliance Agreements

Issued and Served January 23, 2019

Order Denying Motion of JetBlue Airways and Establishing Procedural Schedule

On July 20, 2018, Virgin Atlantic Airways, Ltd., Delta Air Lines, Inc., Société Air France, and Koninklijke Luchtvaart Maatschappij N.V. filed a motion to amend Order 2013-9-14 to approve and extend antitrust immunity to an amended and restated trans-Atlantic joint venture agreement. The Applicants also filed a joint motion pursuant to Rule 12 of the Department’s procedural regulations seeking confidential treatment for supporting documents and information that they filed along with their motion.

On July 20, 2018, we issued a Notice suspending the procedural schedule and, on August 7, 2018, we issued a Notice providing access to documents. By this Order, the Department denies the motion of JetBlue Airways, Inc. and establishes a procedural schedule for public comments in this proceeding.

We deny the relief sought by JetBlue in its motion. In their December 28, 2018, pleading, the Applicants supplemented the record with slot holding information sought by JetBlue. JetBlue’s arguments concerning the complications of Brexit and the potential purchase of FlyBe by Virgin are, at this point, only hypothetical. While we are not discounting JetBlue’s concerns about trans-Atlantic competition and European airport access, the record contains all the information necessary to adjudicate the competitive issues raised in this matter. Interested parties have sufficient information upon which to base any comment they wish to file on the merits of the Applicants’ motion. Under these circumstances, we conclude that an evidence request would not be necessary or useful. Furthermore, we have finished our initial review of the application and all supporting materials submitted by the Joint Applicants. We have determined that the record is now substantially complete, and we direct all interested parties to file answers no later than 14 calendar days from the issuance of this Order and replies will be due no later than seven business days from the last date for filing an answer.

By: Joel Szabat


 

OST-2008-0252 - Antitrust Immunity
OST-2013-0068 - Antitrust Immunity

January 30, 2019

Motion of JetBlue Airways to Consolidate and Petiiton for Reconsideration of Order 2019-1-3

Both applications present common issues that the Department must adjudicate, including the current competitive landscape in transatlantic markets, issues related to slot access at various key European airports – most importantly, London Heathrow Airport – and the broader policy question of how to treat two existing immunized joint ventures that are seeking to grow through equity investments and corporate restructuring. For administrative efficiency, and consistent with precedent, JetBlue urges the Department to consolidate these proceedings for contemporaneous consideration and decision, which will enable the Department to develop a common evidentiary record and promote administrative efficiency. Consolidation at this stage in the proceedings will not delay the Department’s consideration of either pending ATI request and will aid the Department in working through the backlog created by the recent lapse in government appropriations.

JetBlue also requests that the Department reconsider its decision in Order 2019-1-3 denying JetBlue’s motion to require the Joint Applicants in Docket OST-2013-0068 to file additional information and requesting that DOT undertake a more rigorous review when considering this (and other) ATI applications. As explained further below, JetBlue respectfully submits that the Department reached erroneous conclusions in denying JetBlue’s motion. While JetBlue intends to honor the procedural schedule set by Order 2019-1-3, it believes that the Department’s conclusions in Order 2019-1-3 should be re-examined.

Counsel: JetBlue, Robert Land, 202-715-2565


 

February 6, 2019

Comments of Air Travel Fairness

In recent years, Delta and a few other airlines have taken a number of actions to prevent the dissemination of fare, schedule, and availability information to OTAs and metasearch entities and to restrict their legitimate and pro-consumer practices if they do receive such information.

The Department has previously determined that a carve-out from antitrust immunity was necessary to ensure that competition with respect to distribution of air transportation services would not be harmed. (Order 2001-1-19 at 16, Ordering Paragraph 1 (antitrust immunity does not cover any activities of the airlines as owners of computer reservation systems businesses); Order 2000-4-22 at 18 (same); Order 1996-5-26 at 31-32 (same); Order 1992-11-27 at 16 (same). Such a carve-out is likewise necessary here.

By: ATE, Christopher Grimm

https://www.airtravelfairness.org/

 

February 6, 2019

Answer of JetBlue Airways

This proceeding involves a request to add Virgin Atlantic to a previously immunized joint venture agreement between Delta and Air France-KLM. JetBlue does not oppose limited grants of antitrust immunity per se, but under applicable law, the Department cannot grant ATI without completing a thorough review and reaching a reasoned, on-the-record determination that applicants for ATI have satisfied the requisite statutory test. In addition, airlines should only receive such extraordinary regulatory relief subject to conditions that protect competition by ensuring meaningful opportunities for new entry to counteract the anticompetitive effects of consolidation of market share and power in the hands of a few very large immunized alliances. Such conditions also must ensure vigorous ongoing review of ATI alliances, including a set term limit whereby the Department will conduct a subsequent de novo review to decide whether a grant of ATI should be renewed, and a prohibition against exclusionary conduct by ATI recipients.

In this case, as explained below, the Applicants have failed to satisfy the statutory test and therefore the Department must deny their Joint Motion. If, however, the Department decides to disregard the statute’s direction and grant the Joint Motion, it must impose stringent and effective conditions to ensure new entry and competition, including a condition that will provide JetBlue and other new entrant carriers access to two key European slot-controlled airports: London Heathrow Airport and Amsterdam Airport Schiphol.

Counsel: JetBlue, Robert Land, 202-715-2565


 

February 8, 2019

Consolidated Joint Answer of Virgin Atlantic, Delta and KLM/Air France to Petition for Reconsideration and Motion to Consolidate

The JV Parties commend the Department’s decision in Order 2019-1-3 denying the Motion filed by JetBlue on November 27, 2018, determining the record to be substantially complete, and establishing a procedural schedule for public comments. The JV Parties look forward to the Department’s prompt approval of the request to add the Amended and Restated Transatlantic Joint Venture Agreement to the list of “ATI Alliance Agreements” already approved by Order 2013-9-14. JetBlue’s Petition for Reconsideration of Order 2019-1-3 and its related Motion to Consolidate the Joint Motion with the wholly unrelated Application of American Airlines and its partners in Docket OST-2013-0068 are without merit and should be denied.

JetBlue has repeatedly filed motions and petitions in this docket raising extraneous issues in an apparent effort to delay the ability of the JV Parties to deliver these substantial benefits to the traveling public. In the Scheduling Order, the Department correctly dismissed these arguments. JetBlue’s petition for reconsideration of that decision raises no new arguments and is one more meritless effort at delay.6 None of the issues raised by JetBlue’s petition for reconsideration have any bearing on the Joint Motion or the competitive issues discussed therein.

Counsel: Hogan Lovells, Robert Cohn, 202-637-4999 for Delta / Pillsbury Law, Charles Donley, 202-663-8448 for Air France and KLM / Julian Homerstone for Virgin Atlantic

 


February 15, 2019

Consolidated Joint Reply of the JV Parties

The extensive evidentiary record in this matter, which the Department has duly determined to be substantially complete, demonstrates unequivocally that Delta’s existing transatlantic JVs have delivered enormous public benefits and that the combination of those JVs will generate still more, without any adverse competitive effects. The Amended JVA fully satisfies the Department’s standards for approval and grant of ATI: it will not substantially reduce or eliminate competition in any relevant market and is not adverse to the public interest. The Amended JVA will enhance competition with other carriers and alliances, enable the JV Parties to compete more effectively with British Airways/American Airlines and their oneworld partners in and beyond the United Kingdom, and will not impact slot concentration at any European airport. For these reasons and more, the Department should approve and grant ATI to the Amended JVA and related agreements.

JetBlue’s Answer strains to find fault with the Joint Motion on procedural grounds and then expounds on other issues that are either peripheral or unrelated to the Amended JVA. JetBlue’s objection is without merit and should be denied. It is yet another attempt by JetBlue to delay the Department’s review of the Joint Motion and extract unnecessary, self-serving remedies from the JV Parties in order to advance JetBlue’s parochial commercial interests. In its filings, JetBlue has failed to demonstrate how the Amended JVA would reduce or substantially eliminate competition in any relevant market. Nor has JetBlue presented any credible information that would undercut the JV Parties’ showing, based on well-established, reliable QSI modeling, that the Amended JVA will result in substantial consumer benefits.

Comments filed by the OTA-funded trade “coalition” Air Travel Fairness are also without merit. ATF urges the Department to make its approval of the Amended JVA contingent upon the JV Parties adhering to certain distribution practices. The Department should reject this demand.

Counsel: Hogan Lovells, Robert Cohn, 202-637-4999 for Delta / Pillsbury Law, Charles Donley, 202-663-8448 for Air France/KLM / Julian Homerstone for Virgin Atlantic




February 15, 2019

Travelers United Comments on Request to Approve and Extend Antitrust Immunity to Amended and Restated Transatlantic Joint Venture Agreement

Travelers United, Inc., submits these comments in response to the Virgin Atlantic-Delta-Air France-KLM Joint Venture Application. Given the current consolidation of the aviation marketplace and the airline alliance agreements already in place, no additional ATI-JVAs should be granted.

If DOT focuses on the sheer concentration levels and fundamental concerns about airport access and the need for competition being allowed to enter the market we cannot imagine DOT approval of this request.

Simply stated, granting Virgin Atlantic-Delta-Air France-KLM JVA is not in the public interest. At best, the proposal provides no additional benefit to American consumers overall and almost certainly will result in higher fares and more restrictions on baggage transfers, passenger transfers, issuance of boarding passes, and less service for the traveling public.

Any JVA request by nature is anticompetitive and so the Department of Transportation, in protecting and promoting the public interest, must thoroughly scrutinize this proposal and require Virgin Atlantic- Delta-AirFrance-KLM to meet a very high burden in demonstrating their claims of consumer benefits.

After careful review of this latest ATI proposal, Travelers United has concluded that the Virgin Atlantic- Delta-AirFrance-KLM JVA request should be rejected.

By: Travelers United, Charles Leocha, 202-713-9596


 

OST-2008-0252 - Antitrust Immunity
OST-2013-0068 - Antitrust Immunity

February 20, 2019

Motion for Leave to File and Reply of JetBlue Airways

Delta and its partners, and American and its partners have submitted new information on the record regarding Flybe, Brexit, and the slot situation at London’s Heathrow Airport, which is critical to the Department of Transportation’s adjudication of the applications at issue. JetBlue hereby moves for leave to submit this Reply to clarify the record in support of its pending motion for consolidation and petition for reconsideration and to address the new information the applicants have introduced into the record. In Order 2019-1-3, the Department did not merely determine that the record was “substantially complete”; it reached erroneous factual conclusions that, as JetBlue has explained, should be reconsidered and addressed in order to remedy deficiencies in the administrative record in this proceeding. These deficiencies, if not corrected, threaten the structural integrity of this proceeding and raise Administrative Procedure Act concerns.

JetBlue believes that consolidation is warranted and that the evidentiary record must be significantly enhanced. The Expanded oneworld JV Carriers assert that “no substantial overlap exists” and that the applications involve “different carriers with different joint business agreements, from different countries, and operating on different citypairs.” But these statements conveniently ignore that the joint ventures seeking new immunity all currently operate under the US-EU Open-Skies Agreement framework and involve US, UK and EU airlines that will soon be implicated by Brexit. They cite Order 2001-11-10, which consolidated the American-British Airways and United-bmi applications, but where the Department declined to further consolidate those two cases with an ATI request from Delta-Air France. They attempt to distinguish it by noting that “[t]he only commonality between the Aer Lingus Motion and the SkyTeam Motion is the involvement of transatlantic carriers, a connection that the Department has considered and rejected before.” But the 2001 order occurred before the 2007 comprehensive US-EU aviation agreement and before the formation of pan-European multistate joint ventures. More importantly, the Department in Order 2011-11-10 stated that “access to Heathrow is not a significant issue in the Delta/Air France case.” It is clearly an issue here. The logic and rationale of the 2001 order cited by the Expanded oneworld JV carriers actually fully supports consolidation today; the conclusions they draw from the 2001 order are inapposite due to the changed circumstances.

Counsel: JetBlue, Robert Land, 202-715-2565

 

February 22, 2019

Motion for Leave to File Surreply and Sur-Reply of Travel Fairness Now

In our initial comments submitted in this proceeding, we urged the Department to condition its grant of antitrust immunity on prohibiting the joint applicants from using their amended joint venture and other agreements to jointly or collectively restrain distribution of airline fare, schedule, and availability information by the OTAs and metasearch entities. These airline practices harm consumers and competition by diminishing a consumer’s ability to quickly and easily compare fare, schedule, and availability information and to see multi-carrier itineraries and other expanded opportunities.

To our knowledge, the Department has not previously considered, in proceedings in which the alliance partners are seeking antitrust immunity, the nature and extent of the concerted anti-consumer and anticompetitive actions of alliance partners raised in our comments. The Department would therefore benefit from a more complete and accurate record, which this sur-reply is intended to provide. JV Parties describe the online travel distribution industry in a manner that is starkly at odds with the reality of business for online travel agents, metasearch entities and consumers who are aware of the restrictions airlines have imposed in recent years on the online display of fare, schedule, and availability information by third parties. Delta and other airlines are attempting to disintermediate comparison shopping sites in an effort to force consumers onto their own websites, where they prioritize premium flights and higher fares. Airlines have taken additional steps to suppress or block OTAs and metasearch providers from displaying many of the lowest fare options and multiple-carrier itineraries that include their segments or their code-share partners. It is critical that the Department identify this significant consumer harm and take steps to prohibit airlines from continuing to manipulate a highly concentrated marketplace under the cloak of antitrust immunity.

By: Travel Fairness Now, Christopher Grimm

 

February 26, 2019

Motion for Extension of Time and for Leave to File an Otherwise Unauthorized Document, and Comments of the American Antitrust Institute in Response to Consolidated Joint Reply

First, even if 11,000 new online routes eventually materialize as a result of expanded immunity, such new network efficiencies will invariably change the dynamics of competition in the transatlantic and interconnected markets. Immunized coordination among the airlines in the Sky Team joint venture is guaranteed to affect a larger number of nonstop and connecting transatlantic routes flown by the alliance partners that utilize different hubs in Europe. In the challenged merger of US Airways and American Airlines, the US Department of Justice correctly argued that the merging airlines competed head-to-head on both nonstop and connecting routes: “American and US Airways compete directly on thousands of heavily traveled nonstop and connecting routes. Millions of passengers benefit each year from head-to-head competition that this merger would eliminate.”10 The DOT should take the same approach here, recognizing that the parties’ own public benefits analysis supports the notion that Virgin Atlantic and Air France/KLM could indeed compete head-to-head on nonstop and connecting routes.

Second, by arguing that they need expanded immunity to compete in the “alliance market,” the parties acknowledge that competition involving immunized joint ventures occurs at a broader network level. Because the different alliances utilize different gateways in the US and Europe, the parties thus also implicitly acknowledge that competition occurs on both nonstop and connecting routes. In sum, the parties cannot have it both ways – exploiting the asymmetry of narrow market definition for competitive effects analysis while advocating for a broad market definition to support their public benefits claims. Aside from this basic point, granting immunity to a rival alliance simply to “keep up” with other alliances opens the doors for unbridled grants of immunity as more airlines joins alliances and the alliances account for an increasingly larger proportion of segments of global traffic. Such a non-containment policy is akin to granting mergers that are motivated by the quest for enhanced market power to compete more effectively against a powerful rival or a powerful buyer or seller.

The AAI therefore encourages the DOT to reject the parties’ argument that they require expanded immunity to competitive more effectively with the other alliances. The entrenchment of the three alliances in a tight oligopoly creates stronger incentives to cooperate rather than compete and potentially forecloses smaller unaligned, unallied carriers that can inject competitive discipline on nonstop and connecting transatlantic routes. Competition and consumers are poorly served by an approach that assumes that head-to-head competition between only three alliances will produce benefits for consumers.

By: AAI, Diana Moss, 720-233-5971


 

Benefits of Preserving Consumers' Ability to Compare Airlines Fares - Study by Charles River Associates

At a time when independent, transparent comparison shopping is most needed, some airlines are attempting to restrict access to their fare and schedule information, reduce the ability of consumers to easily compare prices, and drive travelers to their own websites, which do not offer price comparisons with other airlines. For the reasons set out in this report, this combination of airline concentration with heightened attempts to lead travelers away from OTAs and metasearch travel sites is likely to lead to higher average airfares, increase consumers’ search costs, make entry into city-pair routes by smaller airlines more difficult, reduce transparency, and strengthen the market power of the major airlines.

By: Charles River Associates


 

February 28, 2019

Correction to Comments of the American Antitrust Institute

The American Antitrust Institute (AAI) files this correction to the comments it originally submitted in this docket on February 26, 2019. On page 14 of the comments, in the first line of the second full paragraph, “at the 22” should be changed to “at selected airports of the 22.” At page 15 of Exhibit A, the same change should be made to the same sentence.

Given the context and the remainder of the paragraph, AAI believes it is apparent that the sentence was addressing only the selected airports (which are identified in Table 2), but it formally submits this correction nonetheless.

By: AAI, Diana Moss, 720-233-5971


 

March 5, 2019

Response of Joint Venture Parties in Opposition to Motion of American Antitrust Institute for Extension of Time and for Leave to File an Unauthorized Document

The JV Parties oppose the motion of the American Antitrust Institute to file a late Answer in opposition to their Joint Motion. The Joint Motion has been pending since July 2018 and the authorized briefing period under the Department’s Order establishing a procedural schedule, Order 2019-1-3, has concluded. There is no justification for AAI’s failure to comply with the Department’s procedural schedule, given that AAI’s filing mainly rehashes the rhetoric and flawed empirical conclusions of its own white paper, originally published a year ago in March 2018.

More important, granting the motion to file AAI’s Unauthorized Answer would not be in the public interest, because the filing contains erroneous and misleading statements about the economic literature and the record in this proceeding.

The statements in the Unauthorized Answer concerning the competitive trends on transatlantic routes since 2013 are also incorrect. Although it purports to be a “reply” to the Consolidated Joint Reply of the JV Parties, the Unauthorized Answer ignores the market data that the JV Parties presented showing there has been significant new entry on transatlantic routes since 2013, and that the share of traffic carried by the three major transatlantic alliances has eroded over the same period. As the record confirms, competition on transatlantic routes has intensified – not diminished – in the five years since the Delta/Virgin Atlantic JV was implemented. The Unauthorized Answer simply parrots inaccurate data claims made by JetBlue in a previous, authorized answer in the docket, and adopts the same flawed analysis used by JetBlue by combining the market shares of the three separate JV alliances as if they were a single economic actor.

AAI has not met its burden to prove any actual harm to competition as a result of the proposed transaction, nor does it refute the extensive evidence in the record that the metal-neutral cooperation of the JV Parties has resulted in significant expansion of capacity in the transatlantic and many other consumer benefits, consistent with the findings of the great weight of economic literature.

Counsel: Hogan Lovells, Robert Cohn, 202-637-4999 for Delta / Pillsbury Law, Charles Donley, 202-663-8448 for Air France/KLM / Julian Homerstone for Virgin Atlantic


 

March 8, 2019

Re: Update on Flybe

On February 8, in their Consolidated Joint Answer to JetBlue’s Petition for Reconsideration and Motion to Consolidate, the JV Parties described how a consortium, including Virgin Atlantic, was attempting to rescue Flybe from liquidation.

As the JV Parties noted in their Consolidated Joint Answer to JetBlue’s Petition for Reconsideration and Motion to Consolidate, the prospective acquisition of Flybe by Virgin Atlantic will have no material impact on the Amended JVA or the relevant competition issues before the Department in this proceeding. Flybe does not own any aircraft capable of serving transatlantic markets. Flybe operates a small number of slots at London’s Heathrow Airport (about 1.5% of total LHR slots), but, as described below, even if those slots were attributed to Virgin Atlantic, the combined holdings of the JV Parties at Heathrow would still be only about 9% of LHR slots, a fraction of the slot holdings of British Airways/IAG and its partners (including AA, bmi, Iberia, Finnair, and Aer Lingus) at the airport. Indeed, the set of slots that Flybe operates at LHR are held in connection with divestitures required by British Airways’ acquisition of bmi to mitigate oneworld’s overwhelming dominance at the airport. Despite that, JetBlue has sought to use the potential rescue of Flybe as an excuse to try and delay the Department’s approval of the Joint Motion. To avoid any uncertainty in the matter, the JV Parties provide the following information for the Department and other interested parties in the docket.

Counsel: Delta, Scott McClain / Virgin Atlantic, Michael Lukes / Pillsbury Winthrop, Charles Donley for Air France-KLM


 


March 11, 2019

Reply of the American Antitrust Institute to Response of Joint Venture Parties in Opposition to Motion for Extension of Time and Leave to File an Unauthorized Document

The JV Parties’ Response is notable for what it does not say. The Response does not dispute AAI’s contention that the Department’s determination regarding the JV Parties’ request for expanded immunity would be significantly enhanced by (1) addressing several problematic, foundational assumptions involving immunity for the alliances; (2) considering the implications of US airline consolidation for the competitive issues surrounding immunity; and (3) recognizing the implications of the Sky Team joint venture’s changed abilities and incentives to compete should the Joint Motion be granted. It likewise does not dispute that AAI’s comments help fill in the gaps in the record on these issues, or that contributions toward a more full and complete record constitute good cause for leave to file otherwise unauthorized documents, as one of the JV Parties has itself argued in other proceedings. Moreover, although the JV Parties characterize AAI’s comments as a “rehash” of “rhetoric and flawed empirical conclusions” contained in AAI’s white paper, they do not engage with the merits of the white paper or even attempt to support this aggressive claim.

The silence speaks volumes. The JV Parties use the occasion of their Response to divert attention away from the Department’s task at hand and the core competition issues raised in AAI’s comments and white paper. They ignore that the goal of this proceeding is to ensure that the Department’s decision is based on complete information, particularly given more recent changes in the alliance landscape, the full scope of academic literature on competitive effects and efficiencies, and analysis performed by AAI which importantly links domestic consolidation with competitive concerns over immunity. It is vital for the Department to consider these issues in order to promote competition and to protect consumers.

In opposing AAI’s motion, the JV Parties’ muster only petty distractions. AAI’s motion for an extension of time and for leave to file an otherwise unauthorized document should be granted, and the important substantive issues raised in AAI’s comments should be carefully considered.

By: AAI, Diana Moss, 720-233-5971




March 11, 2019

Request of Joint Venture Parties for Confidential Treatment of Airport Slot Information

On December 28, 2018, the JV Parties filed a Joint Response in this docket that, among other things, enclosed a supplemental production of airport slot information for London Heathrow and London Gatwick. Subsequent to their filing, the JV Parties received a request from the proprietor of the Online Coordination System website asking the JV Parties to designate the LHR and LGW slot information as confidential in this docket. In furtherance of this request, the JV Parties are hereby requesting confidential treatment of Exhibits A and B of their filing, and submit herewith a redacted copy of the filing for placement in the public docket. The confidential version of the filing will continue to be made available by the JV Parties to any persons who have submitted confidentiality affidavits to the docket.

In support of this request, the JV Parties adopt and incorporate by reference the Joint Motion for Confidential Treatment Under 14 CFR § 302.12 filed in this docket on August 3, 2018. They request that, from this date forward, their confidential document and data productions receive maximum confidentiality protection under all applicable rules and regulations, including DOT Rules of Conduct and applicable exemptions from the Freedom of Information Act.

Counsel: Delta, Steven Seiden, 202-216-0700


 

OST-2019-0021 - International Air Transportation Fair Competitive Practices Act of 1974, as Amended
OST-2013-0068 - Approval of and Antitrust Immunity for Alliance Agreements

March 20, 2019

Motion for Leave to File and Response of JetBlue Airways

JetBlue Airways Corporation hereby moves for leave to file this response to the unauthorized submissions of Delta Air Lines, Inc. and its partners on March 8, 2019 and March 11, 2019. The Conglomerate SkyTeam JV Carriers’ shifting statements regarding the Flybe acquisition continue to lack candor regarding the acquisition’s significance and direct relevance to these proceedings. Consequently, the administrative record continues to lack important information and transparency. Clarity regarding existing slot holdings as well as new developments affecting such holdings at London Heathrow Airport is crucial because the Department cannot analyze the competition implications of the Conglomerate SkyTeam JV Carriers’ request for an expanded grant of ATI without such clarity. The Conglomerate SkyTeam JV Carriers have now admitted, on the record, that they have accumulated twelve additional LHR slot pairs (approximately 1.5% of all slots in use at LHR) as a result of the Virgin Atlantic consortium’s acquisition of Flybe. This begs the question why does Delta need to retain remedy slots from previous antitrust immunity proceedings involving transatlantic joint ventures? Delta’s position in the marketplace has fundamentally changed from new entrant at LHR in 2008 to entrenched incumbent slot holder (along with its numerous immunized alliance and equity investment partners, it is the second largest holder of LHR slots) and Heathrow slot landlord in 2019. The acquisition of Flybe’s twelve LHR slot pairs should remove any doubt about the appropriateness of allowing Delta/Virgin Atlantic to be eligible for continued use of remedy slots, the purpose of which is to enable new entry and competition for dominant incumbents, not to entrench a carrier or alliance’s dominance.

JetBlue takes no position on the merits of Kalitta’s complaint. However, in these circumstances, the Department should not grant additional ATI without imposing competition-protective safeguards to ensure that US carriers can obtain slots at LHR and AMS.

Counsel: JetBlue, Robert Land, 202-715-2565

 

April 2, 2019

Re: Motion of JetBlue Airways for Leave to File an Aviation Daily Article

JetBlue Airways Corporation hereby moves for leave to file and requests that the Department take official notice, pursuant to Rule 24, of the Aviation Daily article titled “Virgin Atlantic To Use Flybe As A Growth Platform” dated April 2, 2019.

The article quotes Virgin Atlantic Executive Vice-President of Commercial Juha Jarvinen explaining that the acquisition of Flybe will “dramatically change [Virgin Atlantic]” and describing how Virgin Atlantic is “actively working on planning our next steps” following the acquisition of Flybe. The Aviation Daily article also quotes Mr. Jarvinen describing how “Flybe’s slots will also create opportunities for growth, strengthening links with Air France-KLM’s hubs in Amsterdam and Paris Charles de Gaulle” and “boost [Virgin Atlantic’s] own long-haul growth.”

These assertions are quite different than the statements made by the carriers earlier in this proceeding, when they claimed that it is “self-evident” that the “potential acquisition of Flybe does not change the competitive analysis relevant to this proceeding.” The candid statements by a senior Virgin Atlantic executive reported in the press highlight the need for the Department, consistent with precedent, to carefully examine the issue of Flybe.

Counsel: JetBlue, Robert Land


 

Order 2019-4-20
OST-2008-0252
- Antitrust Immunity
OST-2013-0068 - Antitrust Immunity

Issued and Served April 24, 2019

Order

By this Order, the US Department of Transportation acts on outstanding requests by multiple parties in the above-captioned dockets. We grant JetBlue Airways Corporation’s petition for reconsideration of Order 2019-1-3 but, upon review, we affirm our initial findings from that order; we deny JetBlue’s motion for consolidation; and we grant motions for leave to file unauthorized pleadings. In a separate and future order, the Department will consider the merits of the underlying request for antitrust immunity that remains pending in Docket OST-2013-0068.

We are denying JetBlue’s motion to consolidate the Oneworld and Blue Skies proceedings. Under the Department’s procedural regulations, “[t]he Department … may consolidate … two or more proceedings that involve substantially the same parties, or issues that are the same or closely related, if it finds that such consolidation … will be conducive to the proper dispatch of its business and to the ends of justice and will not unduly delay the proceedings.” Further, “[t]he burden of seeking consolidation … shall rest upon the applicant.” The regulation is permissive, rather than prescriptive, in that it allows the Department to consolidate proceedings, if certain conditions are met, but does not require it. JetBlue has not met its burden to show that the predicate conditions have been met; namely, that the issues are the same or closely related and that consolidation will not unduly delay the proceedings.

The precedents cited by JetBlue involved carriers seeking initial approval of, and antitrust immunity for, transatlantic and transpacific alliances. Those proceedings were similar in that they were seeking to establish alliances between a US and foreign carrier(s). The Blue Skies proceeding involves a group of carriers that already hold bilateral and, in some instances, multilateral immunity, and that seek to replace their existing immunized joint venture agreements with one consolidated agreement. The Oneworld proceeding involves the addition of a completely new carrier to a preexisting immunized joint venture. The proceedings at hand are in this way not similar, and these differing circumstances tend not to support consolidation.

JetBlue also fails to demonstrate how consolidation would not unduly delay the proceedings. The two proceedings at issue are at significantly different stages of the Department’s review process. The Blue Skies motion was filed in July 2018, more than five months prior to the Oneworld motion filed in December 2018. At the time of JetBlue’s motion for consolidation, the Department had reviewed the Blue Skies motion as well as the supporting documentation and data supplied by the parties, determined the record to be substantially complete, and issued a scheduling notice. Conversely, the procedural schedule is still suspended in the Oneworld proceeding while the Department reviews the parties’ supporting documentation and determines whether an evidence request will be necessary. The Blue Skies proceeding is several procedural steps farther along than the Oneworld proceeding, and consolidating them would significantly delay the Department’s adjudication of the Blue Skies matter while it reviewed the sufficiency of the Oneworld record.

By: Joel Szabat


 

Order 2019-8-2
OST-2013-0068
- Approval of and Antitrust Immunity for Alliance Agreements

Issued and Served August 2, 2019

Order to Show Cause

By this Order, the US Department of Transportation tentatively approves, and tentatively grants global antitrust immunity to, alliance agreements submitted by Delta Air Lines, Inc., Société Air France, Koninklijke Luchtvaart Maatschappij N.V., and Virgin Atlantic Airways, Ltd.

The proposed alliance would remove the existing gaps preventing full coordination between Delta’s two parallel joint ventures with Virgin on the one hand, and Air France/KLM on the other. As part of this tentative decision, we are also tentatively revoking our previous grants of ATI amongst the Joint Applicants as well as CSA Czech Airlines and Alitalia Compagnia Aerea Italiana S.P.A. after six months. As the Amended JVA will replace the previously immunized agreements, our previous grants of ATI will be obsolete. Further, while both Czech and Alitalia were included in previous alliance agreements, neither is included in the agreements at issue here. As such, the underlying predicate for ATI covering these carriers no longer exists. We are also proposing a five-year review requirement, as well as our standard conditions.

We direct all interested persons to show cause why we should not issue an order making final our tentative findings and conclusions discussed herein. Objections or comments to our tentative findings and conclusions shall be due no later than 14 calendar days from the service date of this Order, and answers to objections shall be due no later than 7 business days thereafter. In the event that no objections are filed, all further procedural steps shall be deemed waived, and we may enter an order making final our tentative findings and conclusions.

JetBlue has argued that, in order to grant ATI to the Amended JVA, the Joint Applicants must demonstrate, and the Department must validate, significant public benefits that will be generated by the Amended JVA. This is the standard the Department typically applies in a de novo alliance/ATI application. As we have stated above, the case before us is not a de novo application, but rather the replacement of two separate, and approved, alliance agreements with a single integrated agreement. As such, we must examine whether the Amended JVA would preserve and enhance the public benefits on which the grants of ATI for its predecessor agreements were predicated.

Based upon our analysis, we expect that the proposed transaction will maintain the existing public benefits that have been generated from the current SkyTeam and Delta/Virgin joint ventures and will likely incrementally increase consumer benefits overall.

By: Joel Szabat


 

August 16, 2019

Comments of American Antitrust Institute

A decision to grant immunity under both §§ 41309(b) and 41308(b) “entails a balancing of any anti-competitive effects against likely public benefits.” The Show Cause order states that the DOT’s analysis “indicates that the maintenance of the existing public benefits of the SkyTeam and Delta/Virgin joint ventures, as well as the likely incremental benefits gained from the Amended JVA, make a grant of ATI required by the public interest.” However, the Show Cause Order does not include a discussion of any adverse potential fare effects of immunizing the parties from antitrust liability if they coordinate on fares and other terms of trade. Many of these concerns were raised in AAI’s and other comments but the Show Cause Order does not acknowledge or respond to them.

For unexplained reasons, the Show Cause Order’s analysis appears to give greater weight to proposed public benefits and less weight to the risk of adverse competitive effects. This is troubling. At a minimum, the results of important new empirical studies showing adverse fare effects should be properly recognized in the public record. The most recent study on immunity by Brueckner and Singer is especially noteworthy in that it utilizes the longest time series of data of any study (i.e., 1997-2016) to assess the fare effects of immunity. This data covers early grants of immunity in the 1990s and 2000s and more recent grants made in the 2010s.

The Brueckner and Singer study reinforces previous studies (that rely on shorter time series) finding that immunity results in higher fares on transatlantic nonstop routes. Indeed, Brueckner and Singer conclude that “The GTG results imply that, in the latter part of the sample period, granting antitrust immunity to two previously nonaligned carriers is equivalent to removing a competitor, with a consequent increase in fares (an effect seldom seen in previous work).” The study also finds positive effects of immunity that, on net, outweigh the negative: “Cooperation between alliance partners reduces the fares for connecting interline trips relative to the fares charged by nonaligned carriers, with carriers that enjoy ATI or JV status both charging fares that are indistinguishable from online fares.” But the study suggests that regulators exercise caution, noting that their “simulations show that the downside is larger for alliances whose GTG markets are ‘thick,’ having substantial traffic.” The transatlantic routes at issue in this proceeding are most definitely “thick.”

It is well known that highly concentrated markets are not conducive to competitive outcomes. They are far more likely to result in explicit or tacit coordination between market players – in this case the three major airline alliances (SkyTeam, Star, and oneworld) – than in hard-nosed competition. By focusing exclusively on market dominance, the Show Cause Order ignores the implications of continued high concentration in two major transatlantic market areas. The significance of this cannot be understated. As AAI noted in its comments, expanding immunity to Virgin Atlantic will bring the airline under the umbrella of a larger and more powerful immunized joint venture. The airlines that are party to an immunized agreement can coordinate in more and different ways than could be achieved when the Sky Team and Delta-Virgin Atlantic joint ventures agreements operated “in parallel.”19 This will solidify the role of an immunized SkyTeam on transatlantic routes. The fact that the Show Cause Order ignores high alliance concentration in transatlantic markets is not only problematic in the instant case, but for immunity policy more broadly.

By: Diana Moss, 720-233-5971




August 16, 2019

Comment of the Delta Master Executive Council of the Air Line Pilots Association, International

The Delta MEC believes that additional conditions are necessary to ensure that Delta-operated services and US aviation workers do in fact realize the promised benefits of the Amended JVA. The MEC therefore respectfully urges the Department to expand the scope of its proposed 5-year review of the Amended JVA to assess its impact on US aviation jobs and the balance of flying and growth opportunities generated in joint venture markets, and to impose an interim review of the Amended JVA on December 31, 2019 to ensure that satisfactory progress is being made on those metrics.

In 2013, the Delta MEC expressed strong support for the Delta-Virgin joint venture on the basis that it would “produce new flying opportunities for Delta and its employees”—and thereby grow and enhance US job and career opportunities—through expanded service offerings between the US and the United Kingdom. Nearly six years later, the promised growth in US-UK services has accrued almost exclusively to Virgin, and the promised US job and career opportunities predicated on Delta operational expansion in that market have failed to materialize. In fact, Delta-operated flying in the critical New York-London market has actually decreased since the Delta-Virgin joint went into effect. This use of the JV mechanism to effectively outsource Delta flying to a foreign carrier whose flight crews work under substantially less favorable wages and work rules is fundamentally inconsistent with the Department’s public interest objectives of strengthening the competitive position of US air carriers relative to foreign air carriers, and encouraging fair wages and working conditions.

Because of the manner in which the Delta-Virgin joint venture has been used, the MEC has serious concerns that, if approved, the Amended JVA might be deployed to similar effect. Specifically, the agreement significantly reduces Delta’s financial incentive to expand its own operations in the Amended JVA markets and gives the Joint Applicants latitude to grow non-US carrier transatlantic operations exclusively for years before requiring any corresponding growth in US-staffed Delta-operated transatlantic services. Therefore, absent a meaningful commitment from Delta to grow its joint venture service offerings equitably with those of its alliance partners, the Delta MEC believes that additional conditions are necessary to ensure the promised benefits of the alliance are realized by US aviation employees. Specifically, should the Department grant final approval of, and ATI to, the Amended JV, the Delta MEC respectfully requests that the Department expand the scope of its proposed 5-year review, in the manner described below to assess the balance of flying opportunities generated under the alliance and the related impact on US aviation jobs. In addition, the MEC respectfully urges the Department to require an interim review on December 31, 2019 to evaluate whether satisfactory progress is being made towards those objectives.

By: Delta MEC ALPA, Ryan Schnitzler

Answer of Delta MEC ALPA in Support of Delta and Virgin Atlantic - June 4, 2013





August 16, 2019

Comments of JetBlue Airways

JetBlue respectfully disagrees with both DOT’s tentative decision to extend another grant of ATI to the Conglomerate SkyTeam JV Carriers as well as its reasoning for doing so. DOT’s Show Cause Order reflects a strong presumption in favor of granting ATI that does not accord with the statute or DOT’s longstanding policy of not granting ATI absent de facto as well as de jure open skies. DOT has deferred completely to the Conglomerate SkyTeam JV Carriers’ claims regarding the benefits of their immunized cooperation. If DOT had addressed JetBlue’s substantive comments and questioned and tested the SkyTeam JV Carriers’ claims, it would have found that they do not withstand scrutiny.

At a minimum, if DOT is determined to grant the Conglomerate SkyTeam JV Carriers’ request for additional ATI, DOT should attach a condition that would address the lack of de facto open skies at AMS and LHR by ensuring that JetBlue and other new entrants will have the opportunity to offer a sorely needed competitive alternative to the three dominant immunized alliances. In addition, DOT should impose a time limit of no more than five years on the duration of the proposed grant of ATI, along with an opportunity for the Conglomerate SkyTeam JV Carriers to obtain de novo review of any application they may wish to file to renew their ATI. Such an on-the-record, public proceeding would provide a forum in which to address the “competition concerns” arising from this decision within a specific timeframe while also being responsive to the GAO’s concern that DOT ensure greater transparency and public accountability in its ongoing oversight of immunized alliances.

Counsel: JetBlue, Robert Land, 202-715-2565




August 16, 2019

Comments of the Joint Applicants on Show Cause Order 2019-8-2

The Joint Applicants applaud the public interest determination underpinning the Department’s tentative grant of ATI to the Amended JVA and respectfully request that the Department promptly issue a final order so that the Joint Applicants can begin delivering the substantial consumer benefits that will flow from the Amended JVA. To that end, the Joint Applicants assure the Department that they are prepared to accept the conditions specified in the Show Cause Order, subject to proposed modifications with respect to tentative ordering paragraph 3.

The Joint Applicants respectfully request that Condition 3 be modified in the final order to: (1) avoid any potential adverse impact on the ATI authorities upon which Delta and Korean Air rely for their recently launched joint venture; and (2) provide a procedural path to allow the current and longstanding ATI-enabled cooperation between the Joint Applicants and Alitalia to continue without interruption while the Department reviews a motion for approval of a revised commercial agreement that will govern their cooperation in the future.

The Joint Applicants’ understanding is that the intent of this condition is to end any historical grants of ATI that have been rendered obsolete to the extent they apply to agreements that are no longer in effect and/or are no longer necessary to support antitrust immunized cooperation. The Joint Applicants understand and accept this objective. However, as currently proposed, Condition 3 would produce two unintended consequences: (1) it could be read to terminate the ATI grant which supports the Delta-Korean Air Joint Venture and (2) it would result in a disruption of ATI-enabled cooperation with Alitalia pending completion of and review by the Department of a new planned commercial agreement between the Joint Applicants and Alitalia. This would harm the public interest by causing at least the temporary loss of ATI-enabled public benefits of cooperation with Alitalia that has been in place and actively implemented by Delta, Air France, KLM, and Alitalia for many years.

The Joint Applicants believe this proposed modification strikes an appropriate balance between the Joint Applicants’ compelling interest in preserving ATI with Alitalia during the pendency of a potential docketed proceeding to continue cooperation with the Joint Applicants and the Department’s stated interest in eliminating obsolete authorities from its ATI dockets.

Counsel: Hogan Lovells, Robert Cohn, 202-637-4999 for Delta / Pillsbury Law, Charles Donley, 202-663-8448 for Air France andn KLM / Michael Lukes for Virgin Atlantic




August 16, 2019

Comments of Kalitta Air

In May 2019, the Department dismissed, without prejudice, Kalitta's IATFCPA complaint by Order 2019-5-2, after the Dutch authorities adopted the so-called "Local Rule 2," which was intended to make slots more readily available to cargo carriers. Kalitta initially had hoped that this rule, which takes effect at the end of this month, would bring about some relief. Unfortunately, it is now clear that it will not help save the carrier's operation, as it is only effective if a carrier already has "historic" slots. Since Kalitta no longer has any, it must continue to rely on any spare slots that become available. It is still operating with the 37 slots that it has accumulated for the Summer 19 season, which may be sufficient to cover the flights scheduled in the next 10 weeks. However, despite the carrier's repeated and continuing efforts to obtain slots, come Winter 19 season on October 27, it appears that Kalitta will have no slots, as its requests have been refused, and it is on a lengthy wait list. Lacking any slots at the beginning of the season, the carrier may finally have to terminate its 15-year Amsterdam scheduled service.

For a US carrier to be forced out of Amsterdam would be very damaging to the US Government's efforts to secure fair and equal treatment for its carriers - especially in light of the generous grants of ATI to the Dutch carrier and its partners, and most particularly in light of the USG's consistent practice of making slots available for service by foreign carriers authorized under bilateral agreements. Whether or not the Department views this as a legal requirement of an air transport agreement, it has
honored the spirit of these agreements by ensuring availability of at least a basic level of slots to foreign carriers. The Dutch government, unfortunately, does not seem to feel the need to act reciprocally.

The "remedy" the Department proposes for the anticompetitive situation at AMS is simply to require -five years hence - that the SkyTeam carriers submit a self-assessment to the Department on a confidential basis, which, among other topics, must address access issues at AMS. The Department, however, offers no assurance that it would take any specific action to address anticompetitive issues at the airports; rather DOT commits only to informally review the self-assessment. This seems to Kalitta a very weak and far-off attempt to address a grave situation which already exists - insuperable barriers to entry at a vitally important European hub airport. It will do nothing to ameliorate Kalitta's situation, as it faces imminent loss of its important Amsterdam service.

In 2016, in the context of granting ATI to the Delta-AeroMexico joint venture, the Department expressed concern about the dominance of the Joint Applicants over slots at Mexico City (Order 2016-12-13). The condition imposed on the ATI recipients in that case was divestiture of 24 slot pairs at MEX - 14 to be made available to eligible competitors as soon as practicable, and 10 to be made available once requesting carriers had exhausted reasonable efforts to obtain MEX slots on their own. Kalitta suggests that a condition of that nature in this case - making slots available to carriers that show that they have exhausted other avenues to obtain slots (as Kalitta did some time ago) - would demonstrate the Department's actual concern for its carriers' ability to implement the route rights to which they are entitled under international agreement. Air carriers, both US and foreign, should be reminded that antitrust immunity is an extraordinary privilege, not an entitlement; it should be granted only when it is clear that the competitive situation at the affected airports is acceptably open, and that it will not reward efforts to maintain market dominance.

Counsel: Cozen O'Connor, Mark Atwood, 202-463-2513





August 16, 2019

Objections of Travel Fairness Now

Delta's restrictive distribution tactics and consumer display manipulation have spread to its foreign airline partners with whom it has entered into code share agreements that are granted antitrust immunity. These tactics cause independent travel distributors the flying public chooses to use to lose content and distribution rights, limiting marketing channels and driving consumers to airline websites that do not show all the airlines, flights and fares on a given route.

Independent comprehensive displays of travel information not only help consumers find lower priced options and better flight schedules, but they also create a visible competitive market that puts downward pressure on fares as carriers are more inclined to match competitors' lower fares, which increases the number of affordable seats in a market. Thus, it is consumers who are deprived - unwittingly - of travel options that are more convenient and less costly.

Any deference to an airline's business practices, including joint activities as part of a codeshare alliance, that might be due in a freely competitive landscape should not be extended where the airline industry is highly concentrated and the particular airline exploits its market power vis-a-vis all other online travel industry stakeholders to harm consumers. Antitrust laws were written to promote consumer welfare through competition, and there should be no expectation of entitlement to immunity from them. To the contrary, a high standard should be applied and requests for immunity given careful consideration. This consideration must evolve over time as new data, history and actual experience come to light. The distribution practices now being employed by Delta were not something that was anticipated when the airlines were first granted immunity with their N partners as an incentive to adopt an Open Skies agreement with the US. The current tactics, however, are not that different from when airlines started to bias the display results in the Computer Reservation Systems they owned. While the approach may differ, it demonstrates the same abuse of market power to limit online transparency and reduce price competition.

To address this ample showing of consumer harm, the Department should condition its grant of antitrust immunity on the parties' commitment not to engage in any agreement to restrict online access to published airline information. This condition would not affect any public benefits cited by the joint applicants, nor would it involve the Department in regulating fares or schedules. Instead, the Department has an opportunity to ensure transparency in a manner that would protect the consumer travel opportunities and savings that existed prior to the parties receiving antitrust immunity.

By: Kurt Ebenhoch

 

August 16, 2019

Re: Comments of Angela Min

My name is Angela J. Min, and I strongly object to the global antitrust immunity sought by Delta, AirFrance, KLM and Virgin Atlantic.

To begin, I find the whole matter, a bit odd. An airlines suddenly requesting an extended global antitrust immunity. This despite immunities already in place. When confronted by other complainants with why it must be so, Delta says this is not a de novo request, that it already had such immunity in place. If that is so, then why all the legal fuss to press for new immunity? It makes no sense.

The illegal basis of all of Delta’s motions, because of its illegal association with Korean Airlines, illegally owned by the Cho family of South Korea. Korean Airlines founded by the family of Shin Yong Wook, my grandfather. This, as the DOT is undoubtedly aware but most certainly the President is aware -- of the hidden truth, upon which an entire lie is now being constructed in the form of “anti-trust immunity” - under which the truth may be ever increasingly hidden over time, and across the world. As I can only imagine how far it has gone to hide the truth so far, what other matters it seeks to hide as well. My strong urging therefore, for Delta’s complete retraction of its request for extended antitrust immunity, until such legal matters of the true ownership of Korean Airlines, may be settled.

Should the DOT fail to support this retraction, or dismiss my objections out of hand, it will be duly noted -- and my promise that this will become a core banner issue of my campaign, as I run against the President in candidacy for office, as President of the United States.

By: Angela Min


August 27, 2019

Answer of JetBlue Airways

JetBlue opposes the Joint Applicants’ attempt to alter the conditions of Order 2019-8-2 so that it may extend ATI to Alitalia, an airline that is neither a party to the joint venture agreement under review nor even an applicant in this proceeding.

JetBlue supports DOT’s tentative decision to terminate “obsolete” ATI authority. In response to DOT’s well-reasoned decision proposing to terminate ATI because “there would no longer be an underlying basis or need for antitrust immunity,” the Joint Applicants have submitted a thinly-veiled objection in which they agree to accept DOT’s tentative decision only “subject to the[ir] proposed modifications.” But the proposed modifications they seek would fundamentally alter the very essence of DOT’s tentative decision and actually result in an opposite outcome than DOT’s show cause order intended.

DOT’s tentative decision in Order 2019-8-2 to include a six-month wind down period is appropriate. Any request by the Joint Applicants to add a carrier to a previously immunized JV should trigger a de novo review in light of the facts and circumstances at the time of the request and on the basis of a new evidentiary record. In conclusion, JetBlue respectfully urges DOT to not alter the proposed condition 3 in Order 2019-8-2 and to clarify that an application to add a new carrier to a previously immunized JV will trigger a de novo review.

The Joint Applicants also invented a novel interpretation that DOT’s decision to remove ATI from Alitalia “could be read to terminate the ATI grant which supports the Delta-Korean Air Joint Venture” (Comments of the Joint Applicants on Show Cause Order 2019-8-2 at 3). But DOT reviewed, approved and immunized the Delta-Korean joint venture agreement in 2017. By its plain language, Condition 3 of Order 2019-8-2 in no way threatens the Delta-Korean joint venture. JetBlue has no objection to DOT clarifying that removal of ATI from Alitalia will have no effect on the Delta-Korean joint venture, which will remain immunized pursuant to Order 2002-1-6 and DOT’s letter of November 17, 2017. To the extent the Joint Applicants rely on ATI for broad coordination agreements from 2002, DOT’s tentative decision does not threaten the integrity of those agreements, but rather merely removes Alitalia from the protection of those agreements due to the Joint Applicants’ own decision to exclude Alitalia from their new joint venture 16 years later. The 2002 broad coordination agreement can also simply be updated to reflect Alitalia’s exit and re-submitted to DOT pursuant to the standard terms and conditions of Order 2002-6-18. In these circumstances, DOT can simply clarify that ATI for the Delta-Korean and Delta-Air France-KLM-Virgin Atlantic joint ventures will remain valid after issuance of a final order.

Counsel: JetBlue, Robert Land, 202-715-2565




August 27, 2019

Consolidated Reply of the Joint Applicants

The Department should reject JetBlue’s effort to extract slots for its own commercial use as part of this proceeding. Contrary to JetBlue’s persistent allegations, the Amended JVA will not have any material impact on slot concentration at any UK or European airport. Virgin Atlantic does not operate to Amsterdam Airport Schipol or Paris Charles de Gaulle Airport. And, as the Department correctly notes in its Show Cause Order, even assuming that the acquisition of Flybe by the consortium in which Virgin Atlantic owns a minority interest gives Virgin Atlantic control of the Flybe slot portfolios at LHR and AMS, that transaction would result in just “two percent more slots for the SkyTeam partners” at the two airports. Moreover, at LHR, the incremental gain in slots resulting from the Flybe transaction will result in an approximately 10 percent share of slots for the Joint Applicants at that airport. The Department was correct to observe that “this would not result in a meaningful change in SkyTeam’s market share at LHR and would be unlikely to result in competitive harm.” Even after the Amended JVA is implemented, the Joint Applicants would remain the third-largest alliance at LHR and continue to face competition from alliances with much larger slot portfolios – particularly oneworld.

Kalitta largely repeats arguments it made in its recent IATFCPA complaint relating to its slot issues at AMS. In dismissing Kalitta’s IATFCPA complaint and terminating that proceeding, the Department noted that “Kalitta made clear in its complaint and reply that it saw the Local Rule as a potential remedy to resolving its problems.” The Department further advised that it would continue to monitor the implementation of the Local Rule and “revisit the matter should circumstances warrant.” The Local Rule has been formally adopted and will be implemented beginning on August 31. To the extent Kalitta is unsatisfied with the Local Rule, there are appropriate channels available to it to attempt to address its concerns (e.g., engagement with ACNL and the Dutch authorities). This proceeding is not one of those channels.

AAI’s Comments mirror those of JetBlue. AAI asserts, without empirical support, that overall concentration in the transatlantic market is too high and that the concentration and slot restrictions at LHR and AMS prevent new entry. The Department was right to disregard AAI’s comments in this proceeding in the Show Cause Order, and should do so again in the final order.

Travel Fairness Now’s comments are peripheral to this matter and without merit to the proceeding. Just as it did in February 2019, when it was called Air Travel Fairness, TFN proposes that the Department make its approval of the Amended JVA contingent upon the Joint Applicants adhering to certain distribution practices. The “relief” sought by TFN would most directly benefit the financial interests of its member company OTAs by giving them an extraordinary structural advantage in their commercial negotiations with airlines about product distribution. If Delta and other airlines have products that the OTAs want to sell, the companies can negotiate the terms and conditions of those arrangements. In no other industry does a distributor have a “right” to be another company’s agent and sell their product. The Department should not intervene in these commercial negotiations by limiting the Joint Applicants’ ability to work together on distribution in connection with this proceeding.

Counsel: Hogan Lovells, Robert Cohn, 202-637-4999 for Delta / Pillsbury Law, Charles Donley, 202-663-8448 for Air France andn KLM / Michael Lukes for Virgin Atlantic

 


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