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OST-01-8949

 


In the Matter of American Airlines, Inc. and Trans World Airlines, Inc.--Unfair Methods of Competition in Violation of 49 U.S.C. $ 41712

OST-01-8949 February 21, 2001 Third-Party Complaint of AirTran Airways and Request to Commence Enforcement Proceeding

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Unfair Methods of Competition in Violation of 49 U.S.C. Section 41712
    Attachment:  Docket Complaint OST-01-8948  
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Here, it is sufficient to say that, unless the Department takes prompt and firm corrective action, American's acquisition of the TWA slots will: (1) allow American to aggregate and control over one- half of the slots at DCA and, together with United, control over two-thirds of the slots and scheduled passenger operations at that vital airport; (2) allow American, working together with United, which already operates more than 85% of the flights at gate-limited Washington Dulles International Airport ("IAD"), to combine their dominance over the Washington area business traffic market at both IAD and DCA; (3) enable American, and its partner, United, to extract monopoly rents from the time-sensitive passengers in that market; and (4) ensure that the public assets - take-off and landing slots -- essential to competitive entry at DCA and the possible limitation of monopoly rents, are locked away from AirTran Airways, and other bona fide competitors, in a vested United-American duopoly. If the United-US Airways-American and American-TWA deals close, without the timely and curative intervention of the Department, business travelers and public officials using DCA and IAD will likely be forced to pay hundreds of millions of dollars in tribute annually to American and United in the form of supra-competitive fares.

American's proposed acquisition of the TWA slots is thus part of a bold, "in-your-face," plan by the nation's two largest air carriers that requires, for its implementation, anti-competitive abuse and manipulation of the FAR Part 93.221 slot "buy-sell" process by both the slot sellers and acquirers involved. Over the years, that process has always favored the wealthiest air carriers, with no one first inquiring how that wealth was obtained. This economic dynamic has made it virtually impossible for new, low-fare air carriers, such as AirTran Airways, to gain more than marginally competitive entry at the restricted-access airports (or, in AirTran Airways' case, no entry whatsoever at DCA). However, the American-United plan to lock up both major Washington airports used by business travelers through coordinated "buy-sell" deals involving concurrent actions by four air carriers (American, United, US Airways and TWA), as well as DC Air, a non-air carrier DCA slot-holder to be controlled by American, radically distorts even the questionable fairness of that process and would, if allowed, effectively foreclose any hope of competitive new entry by low-fare air carriers at DCA.

Counsel:  Wiley Rein, Bert Rein, 202.719.7045


In the Matter of American Airlines, Inc. and Trans World Airlines, Inc.--Unfair Methods of Competition in Violation of 49 U.S.C. $ 41712

OST-01-8949 February 21, 2001 Additional Information of AirTran Airways' Third-Party Complaint Unfair Methods of Competition in Violation of 49 U.S.C. Section 41712

Counsel:  Wiley Rein, Bert Rein, 202.719.7045


In the Matter of American Airlines, Inc., US Airways, Inc. and United Air Lines, Inc.-- Unfair Methods of Competition in Violation of 49 U.S.C. $ 41712 and In the Matter of American Airlines, Inc. and Trans World Airlines, Inc.--Unfair Methods of Competition in Violation of 49 U.S.C. $ 41712

OST-01-8948
OST-01-8949
February 27, 2001 Grant of Extension of Answer Date Unfair Methods of Competition in Violation of 49 U.S.C. Section 41712
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Counsel:  American, Carl Nelson, 202.496.5647, carl_nelson@aa.com


AirTran Airways, Inc. v American Airlines, Inc. and Trans World Airlines - Unfair Methods of Competition in Violation of 49 U.S.C. $ 41712

OST-01-8949 March 23, 2001 Answer of American Airlines

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Unfair Methods of Competition in Violation of 49 U.S.C. Section 41712

TWA uses l4 of its DCA slots to provide nonstop service to its St. Louis hub. Continuation of that service is absolutely critical to the viability of the St. Louis hub, as well as to employment opportunities for TWA personnel at DCA, STL, and throughout TWA's system. TWA uses its two beyond-perimeter slots to operate nonstop service to Los Angeles. The balance of TWA's DCA slots are currently leased on a short-term basis to other carriers. With the combined operations of American and TWA at DCA, American anticipates using those slots to expand its services to meet growing passenger demand.

Clearly, the Department should reject AirTran's attempt to strip away these vital assets, as doing so would undermine the very premise of the American/TWA agreement, which is to maintain TWA's existing services for the benefit of the public, affected communities throughout the United States including the St. Louis hub, and TWA's employees.

In any event, the Department cannot properly use its jurisdiction under 49 USC 4l7l2 to overturn the FAA's buy-sell rule, as doing so would violate the Administrative Procedure Act, 5 USC 553, as well as be contrary to the fundamental legal presumption against retroactive changes in rules. Indeed, AirTran and its trade association, the Air Carrier Association of America, have repeatedly tried -- and failed -- to persuade the FAA to amend or suspend the buy-sell rule. On December 4, 2000, AirTran filed a rulemaking petition (FAA-2000-8455) to suspend the transfer of DCA and LGA slots, on which the FAA has taken no action. The ACAA has filed successive petitions to amend the buy-sell rule, which the FAA has either denied (FAA 30203 and FAA-00-8235, denied by letter of James W. Whitlow, FAA Deputy Chief Counsel, December 11, 2000), or on which the FAA has taken no action (FAA-200l-9l56, filed March l3, 200l). AirTran's challenge to the buy-sell rule belongs at the FAA, and not in a complaint docket at DOT.

Counsel: American, Carl Nelson, 202.496.5647, carl_nelson@aa.com

OST-01-8949 March 23, 2001 Answer of Trans World Airlines Unfair Methods of Competition in Violation of 49 U.S.C. Section 41712
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AirTran's complaint should be immediately dismissed on the grounds that it does not adequately allege the Department's jurisdiction over the transfer of slots from TWA to American. Specifically, AirTran's complaint urges the Department to take remedial action to remove TWA's slots from the asset transfer now approved by the bankruptcy court without citing a single piece of Department precedent to support such an action. Indeed, the only precedent AirTran cites is the Department's long-standing regulations that expressly support the sale of the slots in question. In fact, AirTran cites the Federal Aviation Administration's own "buy sell rules" as set forth in 14 C.F.R. Part 93.221. These rules have been in existence for many years and have always permitted the transfer and sale of slots. See, for example, 50 Fed. Reg. 52195 December 20, 1985 (setting forth the "buy sell" provisions of the FAA's slot rules). The petition now- submitted by AirTran follows its recent failure, through the Air Carrier Association of America to solicit the FAA to change the "buy sell" rules through repeated petitions for rule making. In those petitions, AirTran, through its association, has requested that the FAA consider changing these rules - to no avail. As such, AirTran has attempted to use DOT's discretionary enforcement powers to change the long-standing rule on which TWA and American relied in proceeding with the above referenced asset-based transaction.

Counsel:  TWA, Glenn Wicks, 202.457.7790


AirTran Airways, Inc. v American Airlines, Inc. and Trans World Airlines - Unfair Methods of Competition in Violation of 49 U.S.C. $ 41712

OST-01-8949 April 4, 2001 Motion for Leave to File and Reply of AirTran Airtran Airways Unfair Methods of Competition in Violation of 49 U.S.C. Section 41712
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Counsel: Wiley Rein, Bert Rein, 202.719.7045


In the Matter of American Airlines, Inc., US Airways, Inc. and United Air Lines, Inc.-- Unfair Methods of Competition in Violation of 49 U.S.C. $ 41712 and In the Matter of American Airlines, Inc. and Trans World Airlines, Inc.--Unfair Methods of Competition in Violation of 49 U.S.C. $ 41712

OST-01-8948
OST-01-8949

April 9, 2001
Docketed May 11, 2001
Letter for the Air Carrier Association Concerning the High Density Rule Unfair Methods of Competition in Violation of 49 U.S.C. Section 41712

While airlines may agree to take steps to share, combine, or merge operations, those airlines still need appropriate governmental approval to implement those business decisions if they involve government authority or assets. For example, they could not transfer international authorities without the specific approval of the Department of Transportation. Nor do they have the right to do as they wish with slots.

Counsel:  Air Carrier Association of America, Edward Faberman


Order 03-10-7
OST-01-8948 - Unfair Methods of Competition in Violations of 49 U.S.C. Section 41712
OST-01-8949 - Unfair Methods of Competition in Violations of 49 U.S.C. Section 41712

Issued and Served October 7, 2003

Order | Word

Although our broad authority under 49 U.S.C. §41712 does give us jurisdiction over the matters alleged in AirTran's complaints, we dismiss them, in part as moot and in part for failing to establish a basis for further investigation. Because we are dismissing the complaints, we do not reach the issue of our power to order divestiture of slots.

As a threshold matter, we reject the respondent carriers' assertions that with the sunset of section 408 of the Federal Aviation Act of 1958, as amended, the source of our former authority to review and rule on mergers and acquisitions before they could be consummated, the Department lost all jurisdiction over such transactions. Congress has given us a mandate to foster and encourage legitimate competition and prohibit unfair methods of competition in 49 U.S.C. §40101 and the authority to do the latter in 49 U.S.C. §41712. Section 41712 (formerly §411 of the Federal Aviation Act of 1958, as amended), which Congress modeled on §5 of the Federal Trade Commission Act, 15 U.S.C. §45, empowers us to prohibit anticompetitive conduct (1) that violates the antitrust laws, (2) that is not yet serious enough to violate the antitrust laws but may well do so if left unchecked, or (3) "[that], although not a violation of the letter of the antitrust laws, is close to a violation or is contrary to their spirit," E.I. Du Pont de Nemours and Co. v. Federal Trade Commission, 729 F.2d 128, 136-137 (2d Cir. 1984); see United Air Lines, Inc., v. Civil Aeronautics Board, 766 F.2d 1107, 1112, 1114 (7th Cir. 1985) and cases cited therein; see also H.R. Rep. No. 98-793, 98th Cong., 2d Sess. (1984) at 4-5.

By: Samuel Podberesky


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