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OST-2015-0070 - Delta Air Lines and AeroMexico - Antitrust Immunity for Alliance Agreements

http://www.delta.com/
https://aeromexico.com/

https://delta-aeromexico.com

 

Slot Assignment Phase of the Antitrust Immunity Proceeding

COFECE-025-26 - Impone COFECE Condiciones a Concentracion Aerovias de Mexico-Delta, para Eliminar Riesgos Detectados en la Operacion

 


Delta Air Lines, Inc. and Aerovias de Mexico, S.A. de C.V.

OST-2015-0070 - Antitrust Immunity for Alliance Agreements

March 31, 2015

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

Delta and AeroMexico have entered into a comprehensive JCA Agreement to coordinate their respective passenger services on routes between the United States and Mexico. The Proposed Alliance will be a more effective competitor on US-Mexico transborder routes by linking the combined networks of Delta and AeroMexico to create a third viable network competitor on US-Mexico routes.

American and United are the largest US-Mexico competitors with 25 and 22 percent US-Mexico market shares, respectively. Both of the leading US carriers have broad network coverage into Mexico from their Texas hubs. AeroMexico and Delta rank as a distant 3rd and 4th place competitors with 14 and 11 percent market shares, respectively. Neither Delta nor AeroMexico individually has the ability to offer a single carrier network of comparable scope and scale to compete with United and American.

The JCA includes all nonstop transborder routes operated by Delta and/or AeroMexico, as well as behind and beyond connecting flights within the respective countries. A number of new and updated commercial agreements will be entered into as part of the JCA that provide for bilateral codesharing, lounge access, and reciprocal frequent flyer programs. Collectively, these are the Alliance Agreements for which antitrust immunity is sought.

The JCA will create new efficiencies that improve the customer experience and lower costs, such as co-locating airport operations when and where possible. In particular Delta and AeroMexico are committed to establishing a new colocation initiative at LAX and JFK, which the carriers view as important to realizing the benefits of the JCA.

Counsel: Hogan Lovells, Robert Cohn, 202-637-4999 for AeroMexico / Alexander Van der Bellen, 202-842-4184 for Delta


 

Served April 8, 2015

Notice Suspending the Procedural Schedule

On March 31, 2015, Delta Air Lines, Inc. and Aerovias de Mexico, S.A. de C.V. filed a joint application requesting approval of and antitrust immunity for alliance agreements covering routes between the United States and Mexico.

When an application for antitrust immunity is submitted, the Department’s procedural rules require us to promptly determine whether the application is complete (see 14 CFR § 303.40). We have determined that the application submitted by Delta and AeroMexico is not yet substantially complete. The Joint Applicants have not submitted supporting documents and the Department does not have sufficient information on the record to evaluate whether the application meets established standards and policies.

There is an additional, threshold matter in this case. The Department’s policy has been to consider requests for antitrust immunity only when all of the elements of an open-skies agreement are available to carriers (see Order 1992-8-13; Order 2008-4-17 at 2). The liberalized air transport agreement between the United States and Mexico, initialed in Washington, D.C., on November 21, 2014, does not contain all of the elements of an open-skies agreement. However, the initialed agreement provides a framework to introduce those elements in the future.

For both of these reasons, we are here suspending the procedural schedule. We will announce a procedural schedule, including an opportunity for public comment, at a later date.

By: Susan Kurland


 

Served April 30, 2015

Notice Providing Access to Confidential Documents

On March 31, 2015, Delta Air Lines, Inc. and Aerovias de Mexico, S.A. de C.V. filed a joint application requesting approval of and antitrust immunity for alliance agreements covering routes between the United States and Mexico. As is our standard practice, the Department on April 8th suspended the procedural schedule to provide time for the Joint Applicants to submit documents in support of their application. The Joint Applicants submitted documents on April 17th. By this Notice, we are providing interested parties with access to those documents and other materials that may be submitted in this proceeding in the future. The Department will continue to review all materials to determine whether additional information is necessary.

Affiants having filed affidavits may examine the documents at the Department of Transportation at the Dockets office. Affiants must present a stamped copy of the affidavit filed with the Department of Transportation before examination of the documents. Immediately after the completion of any judicial review of our final decision in this docket or the expiration of the 60-day period within which a person may petition for judicial review, all persons who have filed confidentiality affidavits in this proceeding are hereby directed to file a notice or record in the docket stating that all copies of the applicants’ confidential materials have been destroyed or returned to the applicants.

By: Susan Kurland


 

May 1, 2015

Confidentiality Affidavits of United Airlines and Crowell & Moring
Thomas Bolling, Abby Bried, Katherine Caplan, Gerald Murphy

 

May 4, 2015

Confidentiality Affidavits of American Airlines and Tailwind Consultants
Stephen Johnson, Howard Kass, Robert Wark, Robert Wirick, Abigail Donovan, James Kaleigh, Morris Garfinkle

 

May 8, 2015

Confidentiality Affidavits of JetBlue Airways and Eckert Seamans
Robert Land, Brandon Nelson, Evelyn Sahr, Jonathan Linde and Drew Derco

 

May 11, 2015

Confidentiality Affidavits of Dechert LLP
Paul Denis, Thomas Miller, Rajiv Venkataramanan, Gourav Jindal

 

May 13, 2015

Confidentiality Affidavits of Virgin America and Zuckert Scoutt
John Varley, Jonathon Foglia, Malcolm Benge

 

May 14, 2015

Confidentiality Affidavits of American Airlines
Howard Kass, Abigail Donovan

May 15, 2015

Confidentiality Affidavits of Houston Airport System and Zuckert Scoutt
Rachel Trinder, Jol Silversmith, James Thumpston

 

May 15, 2015

Confidentiality Afidavits of Alaska Airlines and Cozen O'Connor (Antitrust Immunity)
Herman Wacker, Kyle Levine, Jennifer Thompson, Jeremy Ross, David Heffernan, Kenneth Hines

 

May 19, 2015

Confidentiality Afidavits of Alaska Airlines (Antitrust Immunity)
Marshall Sinick

 

June 1, 2015

Confidentiality Affidavits of Volaris, Holland & Knight and Von Wobeser y Sierra (Antitrust Immunity)
Anita Mosner, Jennifer Nowak, Jaime Esteban Pous Fernandez, Miguel Angel Alba Moreno, Sergio Rabago Moreno, Fernando Carreno Nunez de Alvarez

 

July 14, 2015

Re: Confidentiality Affidavits for ABC Aerolineas d/b/a Interjet - Moffett Roller, Lee Bauer, Jacquelyn Gluck, Luis Garcia, Gabriela Ceniceros, Sonjia Murray

Counsel: Roller & Bauer, Moffett Roller, 202-331-3300


 

July 2, 2015

Motion of JetBlue Airways to Require Submission of Additional Documents and Data

As JetBlue has experienced first hand, access to MEX is extremely limited due to the airport's strict slot controls. Although JetBlue was able to obtain two slot pairs at MEX, they were at less than optimal operating times (in the 0000, 0500, 2200 and 2300 time periods) and were difficult for JetBlue to secure. If the Application is approved, Delta and Aeromexico would, combined, operate nearly half the slots at MEX. While the Joint Applicants argue that the new US-Mexico bilateral will remove certain entry constraints in the United States-Mexico market, "triggering potential new entry by carriers including American, JetBlue, Interjet and Volaris," it is extremely unlikely that such potential will be realized at MEX. To the contrary, a grant of ATI would likely further inhibit competition at an airport where new entrants and carriers with few slots are already severely disadvantaged.

The Department has faced access issues before in the context of an application for ATI, most notably in regard to London Heathrow Airport (Heathrow). American and British Airways' unsuccessful applications for grants of ATI in 1997 and 2001 were made before the conclusion of an open skies agreement with the United Kingdom or the European Union and were opposed (by, among others, Delta and Northwest) because of slot access issues at Heathrow.

Counsel: Eckert Seamans, Evelyn Sahr, 202-659-6600


 

July 14, 2015

Answer of Joint Applicants to Motion of JetBlue Airways

The slot regime at MEX already permits carriers to buy, sell, trade, exchange, and lease slots, and Mexico is in the process of transitioning to the IATA World Slot Guidelines. Contrary to JetBlue’s claims, U.S. and other Mexican carriers have been able to enter and expand operations at MEX. Indeed, while JetBlue complains that it did not receive its preferred, optimal timings at MEX, JetBlue admits that it was, in fact, able to obtain slots for new services on the Ft. Lauderdale–MEX route. In addition, JetBlue is introducing new service on the Orlando–MEX route this upcoming winter season which is not even mentioned in its Motion.

Counsel: Hogan Lovells, Robert Cohn, 202-637-4999 for AeroMexico / Alexander Van der Bellen, 202-842-4184 for Delta


 

July 21, 2015

Motion for Leave to File and Reply of JetBlue Airways

JetBlue respectfully requests that the Department, consistent with well-established precedent, establish a complete factual record regarding the slot allocation procedures at MEX. The Joint Applicants should be treated no differently than similarly-situated applicants in past ATI proceedings. A grant of ATI is extraordinarily powerful and should not be approved lightly, especially in this era of fewer and fewer major airlines. Given the factual circumstances of this case, including severe slot constraints at MEX and the Mexican Government’s internal investigations into the competitive dynamics at play there, particularly involving Aeromexico, the Department, in order to ensure the consumer benefits the Joint Applicants claim are inherent in this joint venture, should proceed cautiously and only after a thorough review of a complete record. The Joint Applicants’ cursory statements regarding the slot processes at MEX are not sufficient and warrant careful scrutiny as the Department considers what evidence is necessary before setting a procedural schedule for public comment.

Counsel: Eckert Seamans, Evelyn Sahr, 202-659-6600




July 23, 2015

Supplemental Confidential Documents

Delta hereby provides this supplement to the confidential document production in the Delta/Aeromexico antitrust immunity proceeding. Delta adopts and incorporates by reference the Joint Motion for Confidential Treatment (April 17, 2015) covering then-existing and future confidential submissions to this docket.

DL-0000789
DL-0000805
DL-0000806

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




Order 2015-7-18
OST-2015-0070
- Antitrust Immunity for Alliance Agreements

Issued and Served July 31, 2015

Order Requesting Additional Information

We have considered the evidence submitted to date in light of JetBlue’s two motions and the initial response by the Joint Applicants. Our review indicates that additional and more detailed information, including of the type suggested by JetBlue, is required to ensure that the record in this case will be substantially complete, pursuant to the Department’s regulations and precedent.7 We are therefore requiring the Joint Applicants to submit additional documents and data, as well as to answer clarification questions about relevant issues such as slot allocations, slot management rules, and projected public benefits from the joint venture. Without the additional information requested, the Department will not have sufficiently detailed evidence to make an informed decision on issues raised by this case.

When the additional evidence requested has been submitted, and the governments of Mexico and the United States have completed the internal procedures necessary to bring into force the agreement initialed on November 21, 2014, we will have all the necessary elements to determine that the record is substantially complete, to establish a procedural schedule, and to consider the request for antitrust immunity on its merits.

  • General Information
  • Clarification Questions & Accompanying Documents
  • Airport Access Questions
  • Carrier Holdings Questions
  • Consumer Benefits Questions
  • Documents
  • Data

By: Susan Kurland


 

August 7, 2015

DOT Questions Regarding Slots at Mexico City and Toluca

Attached are questions concerning access to slots and facilities at Benito Juarez International Airport and Toluca International Airport, for which your answers will be extremely helpful as the US Department of Transportation processes the application of Delta Air Lines and Aeromexico for immunity from US antitrust laws. We would greatly appreciate if we could receive your response by September 18, 2015.

By: Susan Kurland


 

OST-2015-0129 - Antitrust Immunity - American and Qantas
OST-2015-0070 - Antitrust Immunity - Delta and AeroMexico

September 2015

Questions on Access to Slots and Facilities at Mexican Airports

Carrier Slot Details and Summary at Mexico City

Criteria for slots allocation is given according to the following factors, Type of service: i) passengers scheduled, ii) non-scheduled in the form of charter iii) regular cargo, and iv) non-scheduled air transport in the form of charter cargo; and to determine priorities in the allocation process in accordance of the effective period of operation. The slots are allocated to each airline or aircraft operator as an individual company and are not allocated in block, these are assigned according to the season and therefore have a finite effect for the season allocated (winter / summer). The basic difference with WSG IATA is that these give them historical rights to the slots at the airlines, whereas for national legislation the only priority considered is if they were operated in the previous season, regardless of when these were assigned. The allocation of slots takes place for organization and planning purposes of the flights at the airport. Another difference is that national legislation takes into consideration a rule, of not having delays attributable to aircraft operators in schedules allocated over 15% or assigned slots with a minimum operation rate of 85%.

Landing and takeoff times allocated to the carriers can not be bought, sold, or leased, may be exchanged or transferred to other carriers, provided both are up to date in the payment of airport and air navigation services, providing at the aerodrome in question; the hours in question had been used for at least one year by the original carrier, and the airport administrator is notified of the operation, specifying the time in question.

By: SCT Mexico

Answer of JetBlue Airways to Interjet Amendment Application - Docket OST-2011-0159, October 13, 2015

 


 

November 6, 2015

Joint Applicants' Response to Order Requesting Additional Information

AeroMexico and Delta are eager to move forward with their Joint Cooperation Agreement, and to bring new services to the market. However, implementation of new services cannot proceed until a grant of antitrust immunity is obtained from the Department. Therefore, in light of the compelling public interest benefits of the Joint Application, the Joint Applicants urge the Department to declare the record complete and to proceed as expeditiously as possible to approve this Joint Application.

  • Airport Access
  • Carrier Holdings
  • Consumer Benefits

Counsel: Hogan Lovells, Robert Cohn, 202-637-4999


 

November 12, 2015

Supplemental Documents and Request for Confidential Treatment

As follow-up to the Joint Applicants’ Response to Order Requesting Additional Information, Question No. 26 (dated November 6, 2015) in the above-referenced docket, AeroMexico encloses the following documents: AM000719-AM000896; AM(T)000111-AM(T)000289 (English translations). See attached Index. Aeromexico requests confidential treatment for these additional documents, as it has for its other documents, and adopts and incorporates by reference herein its Motion for Confidential Treatment under 14 CFR 302.12 (April 17, 2015).

Counsel: Hogan Lovells, Robert Cohn, 202-637-5600


 

November 24, 2015

Confidentiality Affidavit of United Airlines
Mika Clark

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


 

December 22, 2015

Updated Document Index and Certification

Counsel: Delta, Christopher Walker, 202-842-3949


 

April 15, 2016

Second Motion of JetBlue Airways to Require Submission of Additional Documents and Data

JetBlue Airways Corporation hereby moves the Department to (1) compel Delta Air Lines, Inc. and Aerovias de Mexico, S.A. de C.V. to fully respond to its July 31, 2015 Order Requesting Additional Information related to their application for antitrust immunity and; (2) expand its request for additional information as explained in detail below. Although the Joint Applicants responded to the Department’s request for additional information, their response was perfunctory and did not fully respond to the request. Moreover, additional developments in the last several months have altered the competitive context surrounding the Joint Applicants’ ATI application.

In July 2015, JetBlue filed a motion urging the Department to require submission of additional documents and data before declaring the record substantially complete and establishing a procedural schedule. The Department agreed with JetBlue and issued a comprehensive request for additional information it deemed necessary to fully and properly evaluate the Joint Applicants’ request for ATI. The Department also sent a questionnaire to the Mexican Government seeking information on the anti-competitive airport access policies and procedures currently in place at Mexico City International Airport.

The submissions made by the Mexican Government and the Joint Applicants in response to the Department’s inquiries were, unfortunately, woefully incomplete and only serve to raise more questions. The Department previously stated in this proceeding that “[w]ithout the additional information requested, the Department will not have sufficiently detailed evidence to make an informed decision on issues raised by this case,” and notably, as explained below, the answers to many of the Department’s questions were missing, incomplete or contradictory. Neither submission meets the Department’s standards for ATI proceedings and, as such, cannot be the basis for the Department to set the procedural schedule for this ATI proceeding.

The response from the Mexican Government did not answer important questions posed by the Department about the status of a new Mexico City airport. The Mexican Government’s response was also inconsistent with representations made by AeroMexico and Delta concerning the legal ability of carriers to buy, sell or lease MEX slots. For example, the Mexican Government’s response stated that “landing and takeoff times allocated to the carriers cannot be bought, sold, or leased” but the Joint Applicants claimed the opposite in their response to JetBlue’s July motion, asserting that “[t]he slot regime at MEX already permits carriers to buy, sell, trade, exchange, and lease slots.”

The Joint Applicants also appear to have failed to answer several questions, particularly in the “Consumer Benefits” section of questions, altogether. In response to the Department’s questions concerning consumer benefits - which address competitive matters at the heart of this and other ATI proceedings - the Joint Applicants responded ten times with the following statement: “Please see attached Compass Lexecon paper on consumer benefits.” The Compass Lexecon paper on “consumer benefits”, prepared by paid consultants, was submitted confidentially and cannot be reviewed by the public. Additionally, some of the Department’s very specific requests were partially or completely ignored by the Joint Applicants and also are not publicly reviewable. JetBlue brought these inconsistencies and omissions to the Department’s attention in October 2015. Without a complete evidentiary record, however, the Department cannot fully consider a grant of ATI at this time.

Counsel: Eckert Seamans, Evelyn Sahr, 202-659-6600

OST-2016-0046 - Exemptions and Statements of Authorization - Mexico City/Guadalajara-Seattle




April 26, 2016

Joint Answer to Second Motion of JetBlue Airways for Additional Documents and Data

After an unexplained delay of more than five months since the Joint Applicants submitted detailed responses on November 6, 2015 to the Department’s Order (DOT Order 2015-7-18) requesting additional information on the Joint Application, JetBlue has now filed a “Second Motion” requesting that the Department require still more information and data, claiming that the Joint Applicants’ Response was “perfunctory” and “did not fully respond to the request”. This is simply incorrect. The Joint Applicants fully responded to the Department’s request more than five months ago. Nothing in JetBlue’s vague new motion identifies any bona fide gap in the completeness of the record. It is clear that JetBlue’s motion was filed for tactical, not substantive, purposes to delay the commencement of a procedural schedule on the Joint Application that was filed over a year ago. JetBlue’s motion lacks merit and certainly does not warrant any further delay in this proceeding.

The central premise of JetBlue’s motion is its contention that the responses of the Joint Applicants to the Department’s supplemental evidence request last year were “perfunctory” and not fully responsive. That is false. The Joint Applicants have collectively supplied DOT with hundreds of internal documents, along with a detailed 38-page point-by-point response to the specific questions the Department posed. That extensive narrative response to the Department’s questions itself incorporated by reference an additional 25-page comprehensive econometric study conducted by Compass Lexecon documenting more than $100 million in annual consumer benefits that will flow from the network expansion made possible by the proposed JCA when it is implemented. Contrary to JetBlue’s belated assertion that these responses last year were “woefully incomplete”, the Joint Applicants have been fulsome and candid in their responses. The timing of JetBlue’s motion, more than five months after the Joint Applicants’ response, transparently reveals JetBlue’s real intent -- to delay consideration of the Joint Application. Any further delay would harm competition for air service between the US and Mexico by delaying the implementation of the new liberal bilateral air transport agreement and by impeding Delta and AeroMexico from offering the traveling public all of the attractive new competitive service options and transborder network expansion that this JCA will bring.

JetBlue’s lead assertion is not related to any response by the Joint Applicants. It is a complaint that the response voluntarily submitted by the Mexican Government to the Department’s inquiries directed to that sovereign nation was, in JetBlue’s view, not sufficient. Specifically, JetBlue asserts that the Government of Mexico did not answer two of the eighteen questions posed in Assistant Secretary Susan Kurland’s August 7, 2015 letter (ignoring the detailed answers to all of the other questions in its 20-page response to the Department’s inquiry). The two questions asked the Mexican Government to (1) identify any facility constraints at Toluca International Airport that would prevent existing carriers from expanding US-Mexico service from or new entrants from commencing service at that airport as an alternative to Mexico City International Airport, and (2) provide an update on the plans for a new and larger Mexico City airport. JetBlue makes no effort to explain why the Mexican Government’s answers to these two questions are critical to the establishment of a procedural schedule, or indeed, to the Department’s ability to render a decision on the Joint Application. The Joint Applicants have clearly established in the record that, under the current conditions, including the current slot regime at MEX, the JCA will generate overwhelming consumer benefits and should be approved and immunized without further delay. The Mexican Government confirmed in its response that several new entrant carriers, including JetBlue, have been able to gain access and commence service to MEX under the current slot regime. Additional information from the Mexican Government concerning whether new entrants could also offer competitive service from TLC as an alternative to MEX and/or whether an expanded new airport at Mexico City will render the current slot constraints at MEX moot in the near future could only strengthen the case for immediate approval of the JCA.

Counsel: Delta, Christopher Walker, 202-216-0700


 

May 2, 2016

Motion for Leave to File and Reply of JetBlue Airways

The Joint Answer does not address the legitimate concerns raised in JetBlue’s second motion regarding the inadequacy of the evidentiary record in this proceeding. The Joint Applicants provided the Department with a confusing application in 2015, supplied an evidentiary record that is incomplete today and now expect the Department to ignore its own rigorous standards and precedent while adjudicating this proceeding. It is axiomatic that questions related to the status of a newMexico City International Airport and the ability of carriers to gain access to slots are central to the Department’s competitive analysis. Although the Joint Applicants attempt to finesse the statements they earlier introduced to the record, the Department has no ability, on the basis of the current record, to definitively address the important airport access issues relevant in this proceeding and their effect on competition at MEX. The current evidentiary record is confusing and incomplete (and, more than a year after the application was filed, increasingly stale) and could greatly harm JetBlue and other competing carriers, and thus the travelling public, should the Department not have access to adequate information to craft a divestiture remedy to address the anti-competitive effects that could result from an ATI grant.

The Joint Applicants’ refusal to submit an English-language copy of the COFECE report is troubling as the report could clarify basic facts about the slot situation at MEX, and ultimately hasten the Department adjudicating this proceeding. The claim that “[t]he Joint Applicants do not currently possess an English translation of the preliminary assessment” should concern the Department. It is clear that the Joint Applicants simply do not want the COFECE report introduced in this proceeding. Moreover, the Joint Applicants suggest that JetBlue introduce the COFECE report to the record but JetBlue is not an applicant requesting the extraordinary relief of immunity from the antitrust laws. The burden is not, nor should it be, on JetBlue. The Joint Applicants are solely responsible for providing the Department with a complete application and evidence in support of their request for ATI

The Department will be unable to make such a determination without requiring the submission of the two COFECE documents as part of the public record in this proceeding. The Joint Applicants should not fear increased public transparency and the Department should not allow the Joint Applicants to avoid it. The Joint Applicants’ refusal to fully comply with the Department’s evidence request and reluctance to expand the public record will simply not suffice during this time of heightened attention to global aviation competition issues. Delta itself is responsible for much of the increased attention to such competition issues and yet apparently expects the Department to not conduct a complete analysis for its application.

Counsel: Eckert Seamans, Evelyn Sahr, 202-659-6600


 

May 2, 2016

Withdrawal of Confidentiality Affidavit of Jonathan Linde (JetBlue Airways)

On behalf of JetBlue Airways Corporation, we hereby withdraw the Confidentiality Affidavit of Jonathan Linde submitted in this docket on May 8, 2015.

Counsel: Eckert Seamans, Evelyn Sahr, 202-659-6665





May 3, 2016

Reply of Southwest Airlines and Motion for Leave to File

Southwest Airlines files this Reply and Motion for Leave to File in response to the Joint Answer of Delta Air Lines and AeroMexico to JetBlue’s Second Motion for Additional Documents and Data filed in this docket on April 26, 2016. In their Answer, the Joint Applicants object to JetBlue’s assertion that the factual record for the Delta-AeroMexico Antitrust Immuity (ATI) proceeding is incomplete and urge the Department to establish a procedural schedule without delay. In so doing, the Joint Applicants insinuate that no access problems exist at Mexico City International Airport (MEX) for new entrant carriers, describing as an “inconvenient fact” that Southwest and other new entrants have obtained slots at MEX. Based on Southwest’s experience, however, the Joint Applicants’ insinuation in this regard is incorrect.

Southwest therefore files this Reply to correct the record, as well as to address larger US- Mexico aviation policy issues currently before the Department. As a new entrant to Mexico, Southwest shares JetBlue’s concerns regarding the difficulty of gaining effective access to MEX. Contrary to the Joint Applicants’ assertion, Southwest has found it exceedingly difficult to gain viable access to MEX and currently holds only three MEX slot pairs. Southwest has made repeated requests for additional MEX slots, but those requests have either been rejected or granted only for sub-optimal times.6 Moreover, Southwest has encountered a high degree of difficulty in communicating with, and understanding the slot allocation process utilized by, Aeropuerto Internacional de la Ciudad de Mexico, which operates the slot program at MEX.

While new entrant access to Mexico City remains a significant and unresolved problem, Southwest believes an equally important policy consideration is the need for expedited implementation of the newly liberalized US-Mexico Aviation Agreement. As the Department knows, on April 26 the Mexican Senate ratified the Agreement by a vote of 81-4 following unanimous support for the Agreement from the Mexican Senate’s Foreign Relations Committee. The two countries are now closer than ever to achieving an historic liberalized aviation agreement. When effective, this Agreement will enable new competition, lower airfares and increased business and leisure travel between the two nations. However, none of the consumer or competitive benefits will materialize until the Agreement is formally entered into force with an exchange of diplomatic notes. We urge the US Government to work with its Mexican counterparts to make the Agreement effective as quickly as possible.

Given the recent Mexican Senate ratification of the new Aviation Agreement, authorization by the DOT and DGAC of specific grants of extrabilateral authority based on comity and reciprocity should not be controversial. This is especially the case should there be any significant delay before the Agreement is brought into force. Such grants would enable competition by both US and Mexican carriers that otherwise would not occur, thereby providing new travel options for passengers and substantial consumer benefits.

Counsel: Robert Kneisley, 202-263-6284




Order 2016-5-9
OST-2015-0070
- Antitrust Immunity for Alliance Agreements

Issued and Served May 13, 2016

Order Requesting Additional Information

In light of new developments underscored by COFECE’s reviews, and arguments made by both JetBlue Airways and Southwest Airlines, we have determined that clarification of some of the issues central to this case as well as some additional evidence is required to complete the record. The Department and interested parties need further clarification on precisely how the current slot administration procedures are administered, as well as further information on any existing plans to reform these procedures to address the competition issues raised by COFECE that are at the heart of this case. In particular, our review of the current record indicates that additional information regarding MEX slots management and the airport’s response to COFECE’s findings, as well as information detailing COFECE’s reported approval of the Joint Venture and the associated remedies, are required to ensure that the record in this case will be substantially complete pursuant to the Department’s regulations and precedent. We do not believe this additional information will be burdensome to produce or generate any excessive delays in processing the case. We have limited the follow up evidence request to the information that is necessary to address the issues that have been raised by the pleadings and by relevant actions of the Mexican authorities since this record was established. For example, we do not find that it is necessary to require the Joint Applicants to opine on COFECE’s slot recommendations in this forum, as JetBlue has argued.

We direct Delta Air Lines Inc. and Aerovias de Mexico S.A. de C.V to file the additional information and evidence described in the Attachment to this Order as a supplement to its application.

By: Jenny Rosenberg




May 13, 2016

Supplement to Order 2016-5-9

On February 19, 2016, the Comision Federal de Competencia Economica released the results of its investigation into the slot administration regime at Mexico City’s Benito Juárez International Airport. Additionally, we understand that the Mexican Government has signed a Memorandum of Understanding with the International Air Transport Association to assist in establishing best practices in slot administration at MEX.

In light of these developments, we seek to better understand both existing procedures for the allocation and management of slots at MEX, and to gain details regarding any firm plans by AICM to change or modify them in the foreseeable future. This will enable us to form a complete picture of the current regime (and if and how it is likely to change in the near future) given that market entry at MEX is an important decisional factor in this case.

By: Jenny Rosenberg




May 13, 2016

Confidentiality Affidavits for Southwest Airlines and Campbell-Hill Aviation Group
Robert Kneisley, Leslie Abbott, Brian Campbell, James Lundy, Reid Appleby, Rex Edwards, Eric Ford


 

May 27, 2016

Joint Applicants' Response to Order Requesting Additional Information

AeroMexico and Delta are prepared to move forward with their Joint Cooperation Agreement and to bring new services and enhanced public benefits to the market. However, implementation of new services cannot proceed until a grant of antitrust immunity is obtained from the Department. Now that the Mexico Senate has ratified the new bilateral air service agreement, and the Joint Applicants have fully responded to the Department’s requests for information and documents, the Joint Applicants respectfully request that the Department promptly issue a scheduling order to consider the merits of the Joint Application and ultimately realize the significant consumer and new service benefits that the ATI-approved JCA would generate.

Counsel: Hogan Lovells, Robert Cohn, 202-637-4999 for AeroMexico / Alexander Krulic, 202-216-0700 for Delta





May 28, 2015

Correspondence Between Department of Transportation and Direccion General de Aeronautica Civil

On behalf of the US Department of Transportation, I write to express DOT's intention to work with the Directorate General of Civil Aviation to exercise our discretion in this area to provide for maximum flexibility for US and Mexican airline operations. Specifically, I propose that, effective the date that the Agreement enters into force, our two aeronautical authorities should give positive consideration to any applications submitted by US and Mexican airlines for service to or from any specific point or points described in Annexes I(A)(l)(d), I(A)(2)(g) and II(l)(A)(l)(b) of the Agreement.

This arrangement is not intended to be understood, as a waiver of, or to affect any applicable requirements under the Agreement, including the requirement of airlines of each Party to the Agreement to obtain "operating authorizations and technical permissions" pursuant to Article 3 of the Agreement, or the right of each Party to the Agreement to revoke "operating authorizations and technical permissions" pursuant to Article 4 of the Agreement, or any licensing procedures, including any public interest finding, required by each aeronautical authority in order to approve operating authorizations and technical permissions.

If DGAC affirms the foregoing understandings, the DOT intends to consider the air services relationship between our two countries as providing all of the elements of DOT Order 1992-8-13 to the airlines of both countries, and would be in a position to give definite and formal consideration to any applications that involve international airline alliance agreements between airlines of both of our countries.

By: Paul Gretch


 

May 31, 2016

Additional Information Response of Mexico City International Airport

By: Mexico City International Airport




May 31, 2016

Mexico City International Airport Operating Rules - Guidelines for the Allocation of Landing and Takeoff Times

By: Mexico City International Airport


 

June 7, 2016

Re: Confidentiality Affidavit for JetBlue Airways
Dayan Hochman

Counsel: Eckert Seamans, Evelyn Sahr, 202-659-6600


 

Served June 15, 2016

Notice Establishing Procedural Schedule

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: Jenny Rosenberg


 

June 30, 2016

Comments of Travelers United

Simply stated, granting ATI to Delta/AeroMexico is not in the public interest. At best, the proposal provides no benefit to American consumers overall and almost certainly will result in higher fares for the traveling public. In fact, its approval would significantly undercut the consumer benefits that are readily achievable if the US and Mexico would simply implement the new bilateral aviation that was recently negotiated and ratified by the Mexican Senate.

Importantly, this request for ATI between Delta and AeroMexico, which will result in the coordinated control of 50 percent of the Mexico City Airport slots, is anti-competitive and anti-consumer.This market needs more competition, not less.

Any ATI request by nature is anti-competitive and so the Department of Transportation, in protecting and promoting the public interest, must thoroughly scrutinize this proposal and require Delta and AeroMexico 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 Delta/AeroMexico ATI request should be rejected.

By: Charles Leocha, 202-713-9596


 

July 6, 2016

Answer of the City of Atlanta in Support of the Joint Applicants

The City of Atlanta, respectfully submits this Answer supporting the application of AeroMexico and Delta, for antitrust immunity. The City believes that permitting the Joint Applicants to implement their joint venture would greatly benefit the traveling public. With approval of this application for antitrust immunity, consumers will benefit through new direct service options, increased capacity on the busiest US-Mexico routes, and enhanced competition. The increased service the joint venture would provide will better meet the demands of Atlanta businesses and consumers, by giving travelers more options and schedule flexibility. The City urges the application be granted on an expedited basis.

By: Mayor Kasim Reed




July 6, 2016

Answer of Hartsfield-Jackson Atlanta International Airport in Support of the Joint Applicants

Hartsfield-Jackson Atlanta International Airport, respectfully submits this Answer supporting the application of AeroMexico and Delta, for antitrust immunity. Approval would allow AeroMexico and Delta to implement their Joint Venture, greatly benefiting the traveling public. With approval of this application for antitrust immunity, consumers will benefit through new direct service options, increased capacity on the busiest US-Mexico routes, and enhanced competition. The increased service provided by the joint venture will better meet the demands of Atlanta businesses and consumers, by providing travelers with more options and schedule flexibility. H-JAIA urges the application be granted on an expedited basis.

By merging two distinct network s, travelers will also see greater scheduling flexibility and expanded flight options under the proposal. The Alliance would result in a seamless hub, increasing access to Mexico, a strategic and growing market for businesses and travelers in our region. Efficiencies created by the joint venture will improve the experience for customers while lowering costs through increa sed competition. And with Delta's hub operation here at H-JAIA, passengers from Aeromexico will have access to thousands of destinations across the country.

By: Roosevelt Council, 404-210-5121

 


July 6, 2016

Answer of Hawaiian Airlines

The Joint Applicants have requested the extraordinary relief of ATI even though the US has not reached an open-skies agreement with Mexico. If that relief is granted, AeroMexico will be combined with Delta in an immunized alliance. The grant will eliminate the competition between one of the world’s largest airlines and Mexico’s “only full service carrier.” This “metal neutral” joint venture will have significant market share and presumably market power on important US-Mexico.

The Department must require the Joint Applicants to carry their heavy burden of demonstrating that the grant of ATI is “necessary...to achieve important public benefits.” In recent ATI proceedings, Hawaiian has submitted evidence of the anticompetitive impact of granting ATI. By analyzing pricing trends in the Transatlantic market as market concentration has increased through the grant of ATI, Hawaiian demonstrated that fares and yields have increased while load factors and costs have remained comparatively flat, leaving consumers to pay higher prices. In contrast, markets that have not been significantly impacted by ATI, such as Latin America, have seen comparatively lower yields over time.

Now, Delta and Aeromexico are leading a wave of Latin American ATI applications. The Department should be extremely skeptical of this application – particularly because the Joint Applicants have asked the Department to abandon its longstanding policy of requiring a fully-liberalized open-skies agreement before granting ATI. Granting their request before a true open-skies agreement has been reached will make it more difficult to reach such an agreement with Mexico and, perhaps more importantly, other countries. In addition, there is substantial evidence that significant barriers to entry protect incumbent airlines from new entrant, independent carrier competition in the US-Mexico market. The Department should grant immunity only if it concludes that the US-Mexico market is in fact open to competition from independent carriers.

If ATI is granted, it should be on conditions that ensure that the grant of ATI is and will remain in the public interest. Specifically, any grant of ATI should be: (1) for a limited duration so that the Department can verify that the Joint Applicants’ promised public interest benefits have been realized; and (2) on the condition that Aeromexico submit O&D survey data to the Department that US airlines may access, subject to confidentiality protections.

Counsel: Cooley LLP, J. Parker Erkmann, 202-842-7800

 

July 6, 2016

Answer of Interjet

Unless any award of ATI is subject to conditions imposed to protect competition, a new entrant such as Interjet will be unable to obtain slots that would enable it to offer service at times that would be competitive with the times of flights operated by the Joint Venture. Otherwise, the depth of the Joint
Venture’s slot holdings at JFK would essentially ensure that the JV could schedule its flights between JFK and Mexican points to operate at times when slots would be least available to a competitor, namely, at times that would be attractive to the public but also when the airport flight traffic would be the most congested. At present the more congested period generally starts in the late morning and extends throughout the evening.

Interjet now operates two daily rotations between Mexico City and JFK and is planning to add a third rotation on or about August 11, 2016, to operate service between JFK and Cancun. Unfortunately, Interjet has found it necessary to schedule the flights for all three rotations so that the flights arrive or depart JFK at times when slots are either not required or when slot demand is low.

The most effective remedy for the Department to ensure that the Joint Venture is unable to exert undue monopoly power over the JFK-MEX market in particular is to require Delta to divest a significant number of its JFK slots at desirable times. Such a divestiture would then enable new entrant and smaller carriers such as Interjet to introduce new, genuinely competitive service between
JFK and points in Mexico.

Counsel: Moffett & Roller, Moffett Roller, 202-331-3300




July 6, 2016

Answer of JetBlue Airways

In examining whether an alliance is likely to create or enhance market power, the Department examines “(1) whether the alliance would significantly increase market concentration; (2) whether the alliance would cause potential competitive harm; and (3) whether new entry into the market would be timely, likely, and sufficient either to deter, or to discipline, the potential competitive harm.” In the absence of a meaningful slot remedy, the Delta/AeroMexico Joint Venture does not satisfy any of these criteria. Given the lack of an Open-Skies agreement and the anti-competitive dynamics that exist at MEX, JetBlue implores the Department to thoroughly examine the competitive impact that an ATI grant would have on the United States-MEX market.

For the foregoing reasons, JetBlue urges the Department to only grant ATI in this proceeding if it conditions such a grant as described above. This ATI proceeding will be a turning point for the Department. It is an opportunity for the Department to affirm its historic precedents and ensure that ATI grants will only be considered when competitive entry is guaranteed. It is no longer feasible for the Department to justify ATI grants on the specter of three-way inter-alliance competition in the transatlantic and transpacific markets. In the context of a short-haul metal-neutral joint venture, the Department faces a new scenario where it must account for the ability of numerous independent and non-aligned carriers to serve markets, increase competition, provide low airfares and stimulate traffic. Because of the anti-competitive slot dynamics at MEX, JetBlue and other similarly situated carriers do not have the ability to provide any of those consumer-friendly attributes.

New entry and the ability for carriers to serve markets is at the heart of the Department’s aviation policy and no carrier is more symbolic of that policy than JetBlue. On the other hand, Delta has a demonstrated history of seeking to prevent competition. JetBlue has expanded beyond the US market and is now rapidly increasing service in Central and Latin America and the Caribbean. To support this expansion, JetBlue is especially reliant on Open-Skies agreements with Colombia, Peru and other countries in the Americas. And, although the new US-Mexico Air Transport Agreement is not an Open-Skies agreement, it will nonetheless open up valuable opportunities for US and Mexican carriers to serve markets that have historically been closed. However, these historic opportunities will primarily benefit established legacy carriers and not help consumers if airlines like JetBlue are unable to obtain initial or increased access to certain markets such as Mexico City. Without carriers such as JetBlue exercising competitive restraint on the legacy carriers, the new US-Mexico Air Transport Agreement will fail to create the liberalized environment that the United States and Mexico worked so hard to foster, to the detriment of consumers and US aviation interests.

Counsel: Eckert Seamans, Evelyn Sahr, 202-659-6600




July 6, 2016

Answer of Los Angeles World Airports in Support of the Joint Applicants

Los Angeles World Airports, owner-operator of Los Angeles International Airport, respectfully submits this Answer supporting the application of Aeromexico and Delta, for antitrust immunity. Approval would allow AeroMexico and Delta to implement their Joint Venture, and enable the Joint Applicants to establish new nonstop LAX-Mexico service. We believe this new service will be received enthusiastically by the Los Angeles traveling public and all of Southern California. LAWA urges the ATI application be granted on an expedited basis.

The ability to expand Mexico service further is hindered until ATI between Delta and AeroMexico is approved. For example, as Aeromexico and Delta explained in their Evidence Request Response on November 6th, 2015, “trans-continental Delta planes that might otherwise sit overnight at west coast airports [like LAX], waiting to fly a return flight to the east in a demanded time-channel, could be used for new flights into Mexico without impacting their rotation and increasing their utilization. Only with the sales support and brand recognition of Aeromexico would these flights be feasible.”

By: Deborah Flint




July 6, 2016

Answer of the Metro Atlanta Chamber in Support of the Joint Applicants

The Metro Atlanta Chamber respectfully submits this Answer supporting the application of Aeromexico and Delta, for antitrust immunity. By working together, Delta and Aeromexico will be a stronger and more effective competitor on North America-Mexico routes. Approval would allow Aeromexico and Delta to implement their Joint Venture, greatly benefiting the traveling public in the Metro Atlanta Region and the many businesses and passengers throughout the country who rely on Hartsfield-Jackson Atlanta International Airport, the world’s most traveled airport. With approval of this application for antitrust immunity, consumers will benefit through additional direct service options, increased capacity on the busiest US-Mexico routes, and enhanced competition. The increased service provided by the joint venture will better meet the demands of Atlanta businesses and consumers, by providing travelers with more options and schedule flexibility. The Chamber urges the application be granted on an expedited basis.

By: Hala Moddelmog, 404-586-8434




July 6, 2016

Answer of the Metropolitan Airports Commission (MSP) in Support of the Joint Applicants

The State of Minnesota and the Upper Midwest region has greatly benefited from previous grants of antitrust immunity by the Department of Transportation. The successful joint venture between Delta and Air France/KLM has resulted in direct service between MSP and Amsterdam, The Netherlands three times per day and daily year round MSP-Paris, France service. These international destinations not only provide our residents with direct service to important European markets, but also provide convenient one-stop connections to points around the globe that would not have been possible for MSP travelers without the granting of antitrust immunity. It is our hope that a joint venture between Delta and AeroMéxico will provide similar benefits to better connect the Upper Midwest to Mexico and points beyond into Latin America. Better access to these markets is critical to our region’s economy.

The proposed alliance will directly benefit MSP businesses and travelers. Mexico is Minnesota’s second largest trade partner market. In 2015, Exports from Minnesota to Mexico increased by 6 percent to $2.4 billion. In 2015, over 450,000 passengers traveled between MSP and Mexico, Latin, Caribbean, and South America markets, representing significant passenger demand that would benefit from improved access through antitrust immunity. Additionally, several major companies headquartered in Minnesota have significant operations in Mexico. These companies include 3M, Cargill, Ecolab, Best Buy, Polaris, General Mills, Toro Company and St. Jude Medical, just to name a few. Cargill alone employs about 17,000 people in Mexico.

This partnership will allow both Delta and AeroMéxico to better serve travelers across both the United States and Mexico. The proposed partnership would give both airlines the ability to provide new non-stop services. The new travel options and increased capacity would benefit businesses and consumers. The partnership would also provide better scheduling and options to those communities with existing service. Given the benefits to consumers in both countries and the importance of the US-Mexico business relationship, we urge you to approve the request for antitrust immunity betwteen Delta and AeroMexico.

By: Brian Ryks




July 6, 2016

Answer of Southwest Airlines

Motion for Confidential Treatment and to Withhold Information from Public Disclosure

In approaching this proceeding, we urge the Department to bear in mind that the US-Mexico transborder aviation market is unlike any other the Department has considered in the context of an ATI proceeding. Not only is the transborder market heavily dominated by Delta and other US legacy carriers plus AeroMexico, particularly at MEX, but low cost carriers face severe barriers to entry that prevent them from mounting an effective competitive check to high-fare legacy service. US legacy carriers plus AeroMexico operate 73% of all flights between the two countries. US LCCs provide only 12% of the transborder service, one-sixth as much as the legacy carriers and AeroMexico. The Joint Applicants currently serve 62 transborder routes and with ATI would become the single largest transborder operator. Significantly, Delta/AeroMexico operate 46% of all flights between the US and Mexico City during slot controlled hours, whereas US LCCs operate only 2%.

Significantly, the US-Mexico market suffers not only from an unbalanced competitive structure and serious barriers to entry by LCCs, but also a near-complete lack of transparency for access to Mexico’s most important airports, primarily MEX and CUN. Until the severe market access issues for LCCs at both MEX and CUN are satisfactorily addressed, there is no basis for a grant of ATI. Of course, the newly liberalized bilateral agreement has not gone into effect despite having been agreed to between the two governments nearly seven months ago. But even after the new agreement becomes effective, the current severe barriers to LCC entry and expansion will continue to exist. In other words there will be no open entry for low cost carriers at key Mexico airports even under the liberalized agreement. Unless and until these market failures are addressed in a way that enables LCCs to grow and compete in US-Mexico service, so that they can provide an effective competitive check to an immunized DL/AM alliance, ATI should not be granted.

Southwest would very much like to expand its service to Mexico and has already extended the Southwest Effect of lowering fares and increasing passengers in the limited number of transborder markets it is able to serve. However, to provide off-setting competition to the immunized alliance, new entrant LCC carriers like Southwest require commercially viable airport access to expand service in the critical US-Mexico trans-border markets. Accordingly, the Department should take concrete steps to improve the competitive US-Mexico market structure by providing US LCCs with commercially viable access to key Mexican markets as a condition of granting antitrust immunity to the Joint Applicants for their Proposed Alliance.

Counsel: Southwest, Robert Kneisley, 202-263-6284




July 6, 2016

Answer of Wayne County Airport Authority in Support of the Joint Applicants

The Southeast Michigan region has benefited from previous grants of antitrust immunity by the Department of Transportation. ATI services from Detroit include Delta, Air France/KLM, and Alitalia flights to Amsterdam, The Netherlands, Paris, France, Frankfurt, Germany, Munich, Germany and Rome, Italy, as well as United/Lufthansa non-stops to FRA. These international destinations not only provide our residents with direct service to important European markets, but also provide convenient one-stop connections to points around the globe. DTW has also greatly benefited from the joint venture between Delta and Virgin Atlantic, with the continuation of two daily flights to London Heathrow. It is our hope that a joint venture between Delta and AeroMexico will provide similar benefits to better connect the State of Michigan to Mexico and points beyond in Latin America.

Better access to these markets is uniquely critical to our region's economy and the proposed alliance will directly benefit Michigan businesses and travelers. Air service to Mexico is important for a variety of different reasons across America and, for most American cities, the air traffic mix consists primarily of either leisure traffic to Mexico's tourist destinations or traffic derived from large regional populations with cultural ties to Mexico. Detroit is unique in that Detroit's traffic to Mexico is heavily tied to the automobile industry. As a result, service to interior Mexico is critical for Detroit as it provides access to key industrial production areas for the United States' "Big 3" automakers, General Motors, Ford, and FCA US. In particular, access to hubs in Monterey and Mexico City allow automobile industry related passenger traffic to move between Detroit and Mexican production locations. Such links, served as conveniently as possible, are crucial to keeping "The Motor City" economically humming. Moreover, these passengers are not just employees of the Big 3, but also include employees of the hundreds of auto suppliers that have their headquarters or regional headquarters in our region. Uncompetitive service on these routes threatens these jobs because those companies could choose to relocate to other cities with more convenient ties, or even service their auto clients using offices in places like Japan, China, Italy, or Germany rather than basing employees in Metro Detroit.

Given the benefits to consumers in both countries and the importance of the United States-Mexico business relationship , we urge you to approve the request for antitrust immunity between Delta and AeroMexico.

By: Thomas Naughton




July 16, 2016

Reply of The Joint Applicants

The JCA Parties seek immunity for an alliance that will enhance competition and provide substantial benefits not otherwise attainable without ATI. The Joint Application has received broad support from numerous parties. Hawaiian, Interjet, JetBlue and Southwest, whose comments reflect their desire to advance their own business interests, rather than those of consumers, are the only carriers who have opposed it. The responding carriers and Travelers United do not demonstrate that the JCA will result in harm to consumers. Neither have they disproven, nor even challenged, the significant benefits that the JCA Parties have presented in the Joint Application. These respondents’ claims do not withstand scrutiny, have been thoroughly refuted, and provide no basis for disapproval or further delay. The DOT should promptly approve and grant the antitrust immunity application.

Counsel: Hogan Lovells, Robert Cohn, 202-637-4999 for AeroMexico / Delta, Christopher Walker, 202-216-0700

 

July 15, 2016

Reply of Southwest Airlines

In addition to the other conditions spelled out in its Answer, Southwest urges the Department torequire that all Delta/Aeromexico slot divestitures mandated in this proceeding be allocated solely to US LCCs. Enabling a meaningful increase in US LCC service will enhance the long-term competitive framework of US-Mexico transborder markets and provide an essential ounterbalance to the reduction in competition that will result from an immunized Delta/Aeromexico alliance.

Counsel: Southwest, Robert Kneisley, 202-263-6284

 

July 15, 2016

Reply of Volaris

Volaris agrees with JetBlue, lnterjet and Southwest that the Department must take into account access to slots at Mexico City when determining how to rule in this case. Volaris agrees with Southwest's assertion that the US-Mexico market is heavily dominated by US legacy carriers and Aeromexico and that LCCs which seek to serve the market face significant barriers to entry. However, these barriers prejudice Mexican LCCs as much as they prejudice US LCCs. While Southwest states that US LCCs provide only 12% of US-Mexico transborder service, Mexican LCCs are not much better off - providing only 13% of transborder service. While Volaris understands the frustration expressed by US low cost carriers with regard to MEX access, Volaris emphasizes that Mexican low cost carriers face similar barriers. Accordingly, Volaris disagrees with the assertion that any slot divestiture required as a condition to a grant of ATI should be available only to US low cost carriers. Increasing access to slots at MEX and JFK with desirable timing for both US and Mexican low cost carriers will allow for greater competitive options for travelers between the US and Mexico.

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




July 27, 2016

Consolidated Surreply of American Airlines

American submits the following Consolidated Surreply to the filings made by Hawaiian, JetBlue, and Southwest in this proceeding proposing to block American and other carriers from obtaining any slots and associated facilities at Mexico City International Airport divested by Delta and AeroMexico in connection with the Joint Application, and proposing new and unprecedented limitations on grants of antitrust immunity by the Department.

Even if the Department has the authority to compel the disposition of the MEX slots, the Department should place no conditions on which US carriers may and may not utilize them, much less the blatantly anticompetitive conditions sought by JetBlue and Southwest. The restrictions that JetBlue and Southwest seek are unprecedented, unsupported, and ultimately unsupportable. JetBlue provides no justification for its argument that American or any other carrier should be disfavored, while Southwest’s argument rests on its baseless categorical contention that “US legacy carriers do not compete against each other in any meaningful way and therefore do not have a disciplining effect on each other’s fares.” The Department has repeatedly recognized that American can provide meaningful competition against Delta and United in international service. American’s ability to inject meaningful competition on US-Mexico routes served by Delta is made clear from Delta’s recent efforts to obstruct and delay American from inaugurating new service to Mexico from LAX. There is no reason for the Department to deny American or any other carrier the ability to bring that competition against Delta and AeroMexico in US-Mexico service by granting JetBlue’s and Southwest’s extraordinary requests.

The Department should reject the requests of Hawaiian and JetBlue to limit grants of antitrust immunity to three years. As American and Qantas explained in their Joint Reply in the pending proceeding concerning their application for antitrust immunity, joint businesses developed by alliance partners require significant long-term investments that airlines would have no incentive to make if grants of antitrust immunity were limited to a short duration. The airlines forming a joint business must invest considerable resources in marketing their new service to the traveling public, optimizing affected schedules and fares, and integrating their operations. Should the proposals by Hawaiian and JetBlue be adopted, airlines seeking to benefit passengers by forming alliances to broaden their networks would be unable to make long-term investments, which would make alliances less attractive to the airlines and far less beneficial to passengers.

Counsel: Dechert LLP, Paul Denis, 202-261-3300


 

July 28, 2016

Surreply of Southwest Airlines and Motion for Leave to File

Motion for Confidential Treatment and to Withhold Information from Public Disclosure

Southwest Airlines files this Surreply to address incorrect and misleading statements contained in the Joint Reply submitted by Delta/AeroMexico and the Reply filed by Volaris, in this docket on July 15, 2016.

The Joint Applicants assert throughout their Joint Reply that ample slot capacity exists at Mexico City International Airport at commercially viable times, and therefore there is no need to divest any more than the eight slot pairs ordered by COFECE. This claim is flatly incorrect, and the analysis that the Joint Applicants offered to support it is incomplete and misleading at best. In fact, the assertion is so contrary to reality it falls of its own weight. If it really were true that “many slots are currently available at commercially viable times,” Southwest (and other small/new entrants at MEX) would have been more than happy to accept and use such slots, rather than being relegated to the earliest and latest hours of the day that are extremely inconvenient to passengers and harmful to Southwest’s ability to compete at MEX. However, the opposite of the Joint Applicants’ claim is true: The airport has repeatedly denied Southwest’s many requests to launch new service to MEX at reasonable times of the day.

Other US carriers, like JetBlue, have experienced similar problems in being unable to acquire MEX slots at commercially viable times.

Volaris filed a Reply on July 15, 2016, which is its first pleading in this case. While Volaris provided evidence confirming that there are no MEX slots currently available at commercially viable times, it conveniently ignores the fact that it holds 40 slot pairs at MEX that it uses for Mexican domestic service. This is nearly six times the number of slots it uses for US-MEX transborder service. As discussed throughout this proceeding, Southwest and other US LCCs have no such reserve MEX slot pool to fund future growth in US-MEX markets. On the other hand, with 40 slot pairs in domestic Mexico service, Volaris has the ability to reallocate any number of those slots to US-transborder markets.

Accordingly, Volaris is in a very enviable position. It can self-fund an enormous amount of growth in the US-MEX market and has a competitive advantage in competing with US LCCs because the US carriers cannot obtain slots at MEX except through the remedial mechanism proposed in this case. For that reason, Southwest reiterates that all slot divestitures mandated by the DOT should be allocated solely to US LCC carriers, and that at least 21 slot pairs should be divested by the Joint Applicants at MEX.

Counsel: Southwest, Robert Kneisley, 202-263-6284


 

August 1, 2016

Answer to Unauthorized Surreply of Southwest Airlines and Motion for Leave to File of Volaris

On July 28, Southwest Airlines filed in this docket an unauthorized Surreply which largely concerned access to slots at Mexico City, a key issue in this proceeding. In that Surrreply, Southwest contended that Volaris should not be permitted to receive remedy slots in this case because of its nationality and because it allegedly has an "enviable position" at Mexico City. Volaris is submitting this short response in order to correct the record, and to demonstrate that its limited slot holdings at Mexico City would not enable it to launch new services to the US from Mexico City without effectively dismantling its own Mexican domestic route network, a step that would be both operationally and commercially untenable, and a decision that Southwest itself would probably never choose to make.

Forcing a carrier to abandon successful service in one market in order to participate in another does not promote efficient competition, nor does it serve the best interests of consumers. The suggestion that Volaris should abandon important domestic service in order to expand its international service would be contrary to the interest of the traveling public. The limited MEX slots that Volaris holds and uses for domestic service certainly do not create a "reserve MEX slot pool" that are simply open and waiting for Volaris to use for transborder service.4 Volaris seeks to expand its ability to serve the US market from MEX, not to slash its service elsewhere, an action that would prejudice consumers and limit Volaris' ability to offer any meaningful competition to AeroMexico in both the Mexican domestic and US-Mexico markets.

If the Department should decide to impose slot remedies in order to neutralize anticompetitive effects of a grant of ATI, Volaris requests that the Department allocate any divested slots to both US and Mexican low cost carriers, which will best serve the public interest.

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


 

August 9, 2016

Consolidated Response of Southwest Airlines

Southwest files this Consolidated Response to the Consolidated Surreply filed by American in this docket on July 27, 2016 and the “Answer” filed by Volaris on August 1, 2016. In their respective filings, American and Volaris each assert they should be entitled to share in any Mexico City slots and facilities that the Department orders Delta/Aeromexico to divest as a condition of granting antitrust immunity for their joint venture alliance. Both American and Volaris are wrong, for different reasons.

American argues that limiting divested MEX slots only to US low-cost-carriers is “unprecedented, unsupported, and ultimately unsupportable.” But to the contrary, both the DOT and DOJ have repeatedly limited the allocation of divested slots and facilities at constrained airports to low-cost and small carriers. It is American’s demand to share in divested MEX slots that is “unsupported, and ultimately unsupportable.” In fact, prior to its July 27 Surreply, several weeks into the proceeding, American had made no request for slots; no service proposal for the use of additional slots; and no projection of additional traffic and public benefits. Nor has American indicated what fares it would charge. In fact, American makes the astonishing admission that it does not care whether the Department orders slot divestitures or not: “American takes no position on whether the Department should require any divestitures in this proceeding . . .” Given American’s lack of interest in slot divestitures until Southwest and JetBlue raised the issue, it is highly disingenuous for American to now demand that it must have an equal opportunity in the allocation. It is also unjustified on its face: During the slot controlled hours, American operates more than five times the number of MEX flights than the US LCCs combined (11 round trips per day for American compared to Southwest’s 2 and JetBlue’s zero). American claims that it can provide meaningful competition against Delta and United in international services. American provides no data to support this claim, however, and an examination of legacy carrier pricing in domestic markets indicates otherwise.

On August 1 Volaris filed another “me too” objection to allocating divested slots only to US low cost carriers. Southwest already rebutted Volaris’ arguments in its Surreply filed July 28, 2016, and Volaris’ latest filing offers nothing new. In brief, Volaris operates 40 MEX slot pairs in non-transborder markets and 7 slot pairs in transborder markets. If Volaris deems it important to expand its service to the US it can easily shift service from one or more of its domestic markets to a US-Mexico market. The US Department of Transportation has no obligation to assist Mexican carriers to obtain slots at their own airport. Volaris, and any other Mexican carrier, are free to petition their government for assistance in expanding access to MEX.

Counsel: Southwest, Robert Kneisley, 202-263-6284


 

August 15, 2016

Response of American Airlines to Southwest Airlines

Southwest’s opposition to American’s Surreply and Volaris’s Answer makes clear that its primary purpose in this proceeding is to make the pool of carriers eligible for any divested MEX slots as small as possible, thereby maximizing its chance of receiving a large number of slots. But the imposition of constraints on slot transfers at this early stage of the process is likely to prevent public benefits from being maximized. If Southwest is so confident that its use of any divested slots will produce the greatest public benefits, then Southwest should be willing to compete against all carriers. Rather than categorically preclude American or others from acquiring any divested slots, the Department should ensure that all carriers, including American, Southwest and Volaris, have the opportunity seek the divested slots.

Consel: American, Howard Kass


 

September 19, 2016

Consolidated Surreply of JetBlue Airways and Motion for Leave to File

JetBlue moves for leave to file this consolidated surreply in response to recent filings made by the Joint Applicants, Southwest, Volaris and American. Good cause exists for the Department to accept JetBlue’s consolidated surreply as it will help contribute to a complete record and assist the Department in reaching a fully-informed and equitable decision in this proceeding. JetBlue will not restate all the prior persuasive arguments it has made in multiple dockets expressing deep concerns about the lack of transparency associated with the Department’s unlimited antitrust immunity grants and the lack of periodic review of such grants and will instead respond and correct recent comments made in this docket regarding a potential slot remedy.

JetBlue is pleased that the new United States-Mexico air transport agreement entered into force on August 21, 2016 and applauds the Department’s tireless efforts in working to liberalize US-Mexico aviation relations. With the Agreement now in place, the Department can evaluate the Joint Applicants’ request for ATI in accordance with its normal rigorous standards. As the Department is aware, five US and Mexican airlines have now, separately and independently, expressed concerns on the record over significant access issues at Mexico City International Airport and how a lack of transparency and inability to secure slots at commercially viable times has had a detrimental impact on competition within the US-Mexico City market. As JetBlue and others have noted, any ATI grant should therefore include a substantial slot remedy addressing these serious concerns.

JetBlue urges the Department to ignore misleading arguments put forth by the Joint Applicants and American and to instead only consider the Joint Applicants’ extraordinary immunity request if it also develops a slot remedy that will promote meaningful competition at MEX and benefit the US traveling and shipping public.

Counsel: Eckert Seamans, Evelyn Sahr, 202-659-6600


 

September 21, 2016

Support Letters

  • City of Austin - Department of Aviation
  • Greater Austin Chamber of Commerce
  • AMEP

Counsel: Hogan Lovells, Robert Cohn, 202-637-5600


 

September 22, 2016

Comment from Salvador Villasenor

DOT has no legal capacity to impose any slot remedy at MEX international airport due Benito Juarez International Airport is based in a foreign county ruled by Mexican DOT. Also because if DOT should require any divestitures in this proceeding to the Mexican Administration that would be an open violation to Mexican sovereignty.

On the other hand this proceedings regard only and exclusively for leave to file surreply regarding immunity request by the applicants.

American and other carriers have operated to Mexico since 1942 and before and have earned the right to use legally those slots as long as they do not fail to comply. Should the DOT require any divestiture in this proceeding would cause damages contend able at court by those carriers.

Therefore the Department should ignore the misleading arguments put forth by Southwest and Jet Blue and instead only consider the immunity request issue.


 

September 28, 2016

Confidentiality Motion of ABC Aerolineas d/b/a Interjet
Charles Greene


 

September 12, 2016

Ex-Parte Letter to Mexican Secretary of Communications and Transport

By: Anthony Foxx




August 12, 2016

Ex-Parte Letter to Director of Minnesota Trade Office

By: Jenny Rosenberg




August 12, 2016

Ex-Parte Letter to Detroit Regional Chamber of Commerce

By: Jenny Rosenberg




October 24, 2016

Ex-Parte Letter to Heber, CA Public Utility District

By: Jenny Rosenberg




October 24, 2016

Ex-Parte Letter to Imperial County Transportation Commission

By: Jenny Rosenberg




October 24, 2016

Ex-Parte Letter to Imperial County Board of Supervisors

By: Jenny Rosenberg




August 1, 2016

Ex-Parte Letter to Asociacion Chilena de Empresas de Turismo Achet

By: Jenny Rosenberg


 

Order 2016-11-2
OST-2015-0070
- Antitrust Immunity for Alliance Agreements

Issued and Served November 4, 2016

Order to Show Cause

Based on our evaluation of the application, we tentatively conclude that, as conditioned, the alliance will not substantially reduce or eliminate competition, however, the application does raise questions as to whether the Joint Applicants would be able to exert market power at MEX and JFK where there is limited opportunity for new entry. In order to protect consumers in these markets, we tentatively propose that the Joint Applicants divest 24 slot-pairs at MEX and six slot-pairs at JFK to US or Mexican low-cost carriers and low-fare carriers for transborder service. This remedy would allow for new, competitive entry at these airports that would not otherwise be possible. We are also proposing other conditions on our approval, including limiting our grant of ATI to five years and requiring that the Joint Applicants remove certain anticompetitive provisions from the alliance agreements. We are also proposing standard conditions, such as the obligation to submit traffic data and annual alliance reports. We have tentatively concluded that, if the Joint Applicants implement these remedies and conditions, the potential benefits of the alliance will outweigh any potential competitive harm.

We have also tentatively concluded that a grant of ATI is required by the public interest because the proposed JV would provide a number of valuable public benefits including a third network competitor on par with the current first and second largest competitors, increased transborder capacity, enhanced price and service options, expanded reach of Delta’s existing network into smaller, regional Mexican markets, and enhanced efficiency of both carriers’ transborder services, all net benefits to consumers.

Therefore, subject to the proposed remedies and conditions, we tentatively grant approval of the application, and antitrust immunity to, the applicants. We direct any interested parties to show cause why we should not adopt these tentative findings and conclusions in a Final Order. Parties have 14 calendar days from the service date of this Order to file answers and seven business days from that date to file replies.

By: Jenny Rosenberg


 

November 16, 2016

Withdrawal of Confidentiality Affidavit of Dayan Hochman

On behalf of JetBlue Airways Corporation, we hereby withdraw the Confidentiality Affidavit of Dayan Hochman submitted in this docket on June 7 , 2016.

Counsel: Eckert Seamans, Evelyn Sahr, 202-659-6600


 


November 16, 2016

Comments of the Direccion General de Auernautica Civil Mexico

DGAC would not ordinarily interject itself to comment on a regulatory decision by another country. However, we feel compelled in this case to submit comments on the record because the Order proposes to impose remedies (slot divestitures) and a five-year duration of the “approval” that are excessive and unprecedented. DGAC views DOT’s tentative decision to be inconsistent with the spirit of the recently liberalized bilateral aviation agreement between the United Mexican States and the United States of America in order to provide conditions that allow Mexican carriers to be competitive given the natural asymmetry between the aviation industries of both countries. DGAC therefore respectfully, but firmly, requests that the USDOT reconsider the conditions tentatively proposed on the JCA.

By: DGAC




November 17, 2016

Comments of Aeropuerto Internacional de la Ciudad de Mexico

AICM submits that it is the role of AICM to administer the slot allocation process in Mexico City pursuant to article 63 of the Airports Law. In addition to that pursuant to Article 21 of the Civil Aviation Law Regulations, each slot allocated AICM has to be ultimately authorized by DGAC. The DOT's view of how slots should be allocated in Mexico (based on outdated facts as shown above) is unprecedented and unnecessary.

AICM respectfully requests that the DOT consider these comments and revise its proposed remedy to align with COFECE's remedy, based on current, accurate information relating to the MEX slot environment.

By: MEX


 

November 17, 2016

Ex-Parte Letters to:

Senator David Perdue (R-GA)

Congressman Joseph Crowley (NY-14)

Georgia Congressional Delegation - John Lewis (GA-5), Tom Graves (GA-14), Stanford Bishop (GA-2), Lynn Westmoreland (GA-3), David Scott (GA-13), Rob Woodall (GA-7), Buddy Carter (GA-1), Doug Collins (GA-9), Tom Price (GA-6), Austin Scott (GA-8), Barry Loudermilk (GA-11), Jody Hice (GA-1), Rick Allen (GA-12)

By: Anthony Foxx


 



November 18, 2016

Objections of the Joint Applicants

Specifically, the JCA Parties object to the divestitures and limitations proposed in the Show Cause Order, which are unprecedented, arbitrary, and untethered to any potential alleged harms related to the JCA. The proposed conditions would jeopardize the sizeable consumer and economic benefits that the Show Cause Order recognized would flow from the proposed JCA. Moreover, they would severely diminish the economic viability of the JCA, and would compel the JCA Parties to reconsider undertaking it. If the JCA is not implemented, the traveling public would lose the entirety of the projected benefits, including the introduction of new routes, increased frequencies, and expanded transborder service.

DOT must artificially limit a market to justify its proposed JFK remedies. Specifically, DOT contradicts its previous decisions and rulemakings, as well as economic reality, by excluding EWR from the New York City market. As its sole justification for this deviation from long-standing precedent, DOT asserts that demand for EWR service is high and that access at certain hours “may not be possible.” This erroneous justification – useful at most to assess the likelihood of entry – is belied by the fact that multiple carriers have launched new service at EWR since the lifting of slot restrictions at that airport. In addition, United Airlines operates a large hub at EWR and already provides two daily non-stop flights on NYC-MEX. When actual, announced, and potential competition at JFK and EWR is assessed, it is clear that NYC-MEX enjoys vibrant competition and requires no remedy.

To justify the proposed MEX divestitures, DOT relies on outdated information, ignores key facts, and makes incomplete assumptions that cannot serve as a foundation for reasoned decision making. Perhaps most noticeably, DOT asserts that the slot administration regime at MEX hinders competition because it does not adhere to the IATA Worldwide Slot Guidelines. In reaching this conclusion, DOT relied on a preliminary COFECE staff report premised on mistaken and outdated information. In fact, in its Comments filed in the Docket in response to the Show Cause Order, Aeropuerto Internacional de la Ciudad de México, the MEX slot administrator states that it has already begun the process of implementing the WSG for the summer 2017 slot season and “declares that it undertakes to adopt those IATA WSG recommendations for slot allocations at MEX by no later than the second quarter of 2017.”

Even if one accepts DOT’s flawed competitive effects framework, the proposed conditions are excessive and arbitrary. They bear no relation to any theoretical anticompetitive effects from the JCA and are not premised on a reasoned analysis of the impacted relevant markets. In New York City, the remedy neither seeks to replace the lost competition (the single daily round-trip operated by Delta) nor seeks to replicate the five daily roundtrips operated by both airlines (two of which are operated in non-slot controlled hours). Instead, it seeks to provide competitors free access to six slot pairs at JFK. This remedy does not correspond to the competitive overlap, and has no basis in the record. The proposed MEX remedy is similarly unrelated to any theory of competitive effects. The 24 slot pairs constitute three quarters of the slot pairs used by Aeroméxico for U.S.-Mexico transborder service and 10 percent of its entire MEX slot portfolio. Moreover, the 24 slot pairs total three times Delta’s entire holdings at MEX. Delta uses its MEX slots to service eight different routes, only one of which provides even a theoretical basis for any competitive concern.

Counsel: Alexander Krulic, 202-216-0700 for Delta / Hogan Lovells, Robert Cohn, 202-637-2500 for AeroMexico

November 18, 2016

Objections of American Airlines

Unlike some of the carriers favored by the Department, American and other carriers pursued a deliberate strategy of growing services to Mexico City. American facilitated its growth through its investment in its Dallas/Fort Worth hub, as well its investment in acquiring assets at MEX. At the same time, some carriers pursued different opportunities. For example, JetBlue has served Cancun for “nearly a decade,” but did not even apply to serve Mexico City until November 2014. Likewise, Virgin has elected to serve three destinations in Mexico, but not Mexico City. Under the Department’s view, American’s growth should be obstructed so that the carriers that chose not to invest in service to Mexico City can catch up. The Department’s tentative remedy demonstrates a refusal to accept the outcomes that resulted from the operation of the market.

Indeed, the Department wrongly treats American’s Dallas/Fort Worth hub as a “structural advantage in the market,” as though American obtained its hub through accident or chance. To the contrary, American’s Dallas/Fort Worth hub is a reflection of how well American has responded to consumer demand. American invested substantial resources in building and maintaining its Dallas/Fort Worth hub, and in operating a hub-and-spoke system that provides numerous benefits to the traveling public. Those benefits include a higher frequency of service, service to communities of all sizes through utilization of different aircraft sizes, service on longhaul international routes, and a range of airport amenities such as airport lounges. The ability to offer those benefits makes American well suited to inject needed competition against the Delta-AeroMexico joint venture on the JFK-MEX route, due to American’s hub at JFK.

Under the Department’s tentative decision, however, American is denied the mere opportunity to seek slots for additional service toMEX from any airport that will bring the benefits of hub-and-spoke service to travelers to and from Mexico City. Instead, the Department’s decision improperly restricts the divested MEX slots to a subset of US carriers that cannot provide the same level of service. While this may benefit the carriers favored by the Department, it will not benefit the traveling public.

The Department’s tentative restriction is also unsupported by precedent. None of the prior remedies cited by Southwest and relied upon by the Department restricted the availability of slots at an international airport to a favored subset of carriers. Those remedies instead concerned slots at domestic airports, where the disfavored carriers generally held a substantial portion of the total available slots. For example, the FAA previously denied LaGuardia Airport slots to carriers that already held more than five percent of the total slots at the airport. Likewise, in approving the merger between American and US Airways, the Department of Justice blocked Delta from acquiring slots at Reagan National Airport due to its substantial presence at the airport. Here, by contrast, American holds only a miniscule amount of the total slots at MEX, and accounts for just 2.65% of the total peak-day MEX operations, according to the Department’s Order. That is no reason to block American from seeking to grow its service to Mexico City through acquisition of the divested slots at MEX.

American does not deny that carriers with a smaller presence at MEX may be able to bring a different set of competitive benefits to the traveling public. As the slot data described above demonstrates, American is one of those smaller carriers at MEX. All American seeks is the opportunity to participate in the Department’s process for allocating the divested MEX slots in competition with other carriers that are small slot-holders. Rather than unduly limit the allocation process to a small subset of favored carriers before being presented with any service proposals, the Department should open the process to all carriers, regardless of their past investment or noninvestment in US-Mexico City service.

Counsel: Dechert LLP, Paul Denis, 202-261-3300




November 18, 2016

Objections and Comments of Delta Master Executive Council of the Air Line Pilots Association, International

As the Show Cause Order rightly concludes, the JCA will bring about substantial consumer benefits. Those benefits include (1) a third network competitor in the transborder market; (2) increased transborder capacity; (3) a new transborder hub at LAX; (4) the potential development of an additional regional hub in Mexico; (4) expanded reach of the joint network into the interior of the US and Mexico; (5) more convenient schedules; and (6) improved price and service options across the joint network. These benefits will increase competition and consumer choice and lead to lower prices for service between the US and Mexico.

In turn, the JCA will benefit Delta’s pilots because the joint network’s lower prices and improved service options will stimulate more travel and attract passengers from less competitive carriers. Demand for Delta pilots will rise because Delta will add flights to its existing transborder routes and implement new routes to Mexico. The new passengers flowing into Delta’s network will spur increased demand for connecting flights at Delta hubs. Moreover, Delta’s expanded network and capacity will benefit not only travelers and Delta’s pilots, but all of Delta’s current employees, plus the additional employees needed to serve these new routes. Delta pilots appreciate the benefits and opportunities that alliances like the JCA can deliver.

The onerous limitations set forth in the Show Cause Order will negatively impact the scope and benefits of the JCA, for two primary reasons.

First, the requirement to divest twenty-four slot pairs at MEX and six at JFK will undercut the Joint Applicants’ ability to serve those airports with optimal frequency and efficiency. Constraining the Joint Applicants in this manner will likely cause the Joint Applicants to cut existing competitive services so as to redeploy their remaining slots for transborder flights. The resulting decrease in connectivity will harm Delta and Aeromexico’s ability to compete and deliver the benefits of the JCA, and consumers and pilots will pay the price. There is no reasonable basis for this proposal.

Second, the five-year term of the Department of Transportation’s approval will diminish the Joint Applicants’ incentive to make the investments needed to realize the benefits of cooperation. In particular, they may not make investments that will take more than five years to become sufficiently profitable. Capital-intensive and time-intensive investments, such as new hub facilities at LAX, co-location projects at other airports, and route optimization activities will be particularly at risk.

For the reasons stated above, the JCA will benefit consumers, Delta’s pilots and employees, and a range of communities in the United States. The proposed limitations in the Show Cause Order would greatly reduce those benefits. Accordingly, the Delta MEC urges the Department of Transportation to set aside those limitations and unconditionally approve the Joint Application.

By: John Malone




November 18, 2016

Comments of Hawaiian Airlines

Hawaiian supports the Department’s decision to limit the duration of ATI to five years and require the applicants to file a new application for continued immunity. In prior proceedings where ATI has been granted indefinitely, the recipients of ATI have been under no obligation to demonstrate that the promised benefits of ATI have been realized. The grant of antitrust immunity for a limited time will allow the Department to review the authorization and receive public comments to determine whether the grant has, in fact, been in the public interest.

Hawaiian respectfully disagrees with the Department’s decision not to impose Hawaiian’s proposed condition to make O&D survey data of foreign carriers available to independent carriers. The Hawaiian Answer argued that immunized alliances have superior access to data that puts smaller, independent carriers at a disadvantage and this should be remedied through conditions imposed in ATI proceedings. The Order refused to impose this condition because it concluded that Hawaiian’s assumption that joint venture partners have superior access to data was not supported.8 But the Department’s reasoning assumes that foreign carriers have no access to US O&D survey data and that the US carriers do not share such data with their foreign partners. Even assuming complete compliance with the Department’s regulation prohibiting foreign access to US O&D survey data, the Department ignores the fact that the foreign carrier can share its data with its US joint venture partner, granting the US partner access to a superior data set than an independent carrier can access.

In addition, the Department ignores the fact that a US carrier can share the insights derived from the US O&D survey data, even if the partner does not share the data itself, with their partners while undertaking joint, immunized network planning and revenue management activities. The immunized joint ventures have an institutional advantage over independent carriers, and the Department has the opportunity to level the playing field. It should do so by imposing Hawaiian’s proposed condition in this and other ATI proceedings.

Counsel: Cooley LLP, Parker Erkmann, 202-842-7800

 

November 18, 2016

Comments of Interjet

The divestiture of six slot-pairs by the Delta-AeroMexico Joint Venture at JFK International Airport, and twenty-four slot-pairs at Mexico City International Airport, as DOT has proposed in its Order to Show Cause, is wholly insufficient to remedy the negative effects that a grant of ATI would have on competition at the slotconstrained JFK and MEX airports. Because of the artificial constraints on competition and barriers to new entry in the JFK-MEX market in particular and the large market share and other competitive advantages that the Joint Venture will give the Joint Applicants, the proposed divestitures are insufficient to protect consumers.

The Department should order the divestiture of at least ten slot-pairs at JFK and substantially more than twenty-four at MEX. A decision that the Joint Venture should divest thirty-six of its slot-pairs at MEX would not be unreasonable.

Interjet also objects to the Department’s preliminary determination that Interjet should be precluded from bidding on the divested MEX slots. There is no logical or legal basis for the Department’s assumption that Interjet’s status as the second-largest slot holder at MEX should preclude Interjet from competing with other low-cost carriers for the divested slots.

With regard to the Department’s inquiry as to the hourly limit on divestitures at JFK, Interjet maintains that the hourly limit should vary based on the total number of slots the Joint Applicants hold during the hour in which a slot is requested. Likewise, with regard to the Department’s inquiry as to the appropriate procedures to follow regarding the transfer of divested slots, Interjet asserts that redivesting carriers should be required to offer those slots for sale to carriers in any of the carrier categories that DOT ultimately determines to be eligible to receive MEX/JFK slots to be divested in this proceeding – provided that the carriers agree to use the redivested slots for transborder service.

Counsel: Roller & Bauer, Moffett Roller, 202-331-3300




November 18, 2016

Comments of JetBlue Airways

In Order 2016-11-2, the Department proposed requiring the divestiture of 24 slot pairs at MEX and six slot pairs at New York City’s John F. Kennedy International Airport. It then requested comments from interested parties on specific procedural questions regarding the proposed slot divestitures at MEX and JFK.

JetBlue is prepared to switch its existing flights at MEX to commercially viable slot times and to initiate additional flights. Following the entry into force of the new United States-Mexico air transport agreement, JetBlue obtained expanded Department economic authority in order to serve any transborder market. JetBlue agrees with the broad concepts of the Department’s proposed slot remedy, including that a slot remedy be in place in time for the Summer 2017 IATA scheduling season. However, JetBlue does not believe that all 24 slot pairs must be made available in time for the Summer 2017 IATA scheduling season; JetBlue proposes that the 24 slot pairs be divided over three years such that 10 slot pairs would be made available in 2017, and seven pairs each in 2018 and 2019 until all 24 slot pairs are available.

Earlier in this proceeding, JetBlue suggested that the Department craft a slot divestiture similar to the remedy implemented in the 2008 oneworld proceeding, where American and British Airways made “commitments” to the European Commission, in coordination with the Department, as part of the approval process for their transatlantic joint venture. Similarly, under JetBlue’s proposal, Delta and Aeromexico would not be required to immediately divest all 24 MEX and six JFK slot pairs. Rather, Delta and Aeromexico would enter into a binding contractual commitment with the Department, before the ATI grant is effective, that would make the slot pairs available over a set period of time, with the first slots becoming available at the same time that the ATI grant becomes effective. JetBlue proposes that 10 slot pairs at MEX be made available the first year with seven additional slot pairs made available in each of the following two years, and that all six JFK pairs be made available immediately. During the process, the Department’s competition staff could work jointly with COFECE to ensure compatibility between the two remedies and that any ministerial functions (regarding local AICM/DGAC or FAA approvals for slot transfers) are completed.

The analysis and proposed remedy in Order 2016-11-2 will ensure that JetBlue is able to compete in the important United States-Mexico transborder market. JetBlue is eager to begin additional service to Mexico with its award-winning service and market-stimulating low airfares. JetBlue urges the Department to expeditiously and simultaneously issue both a final order and an order instituting a proceeding to allocate the newly available remedy slots as soon as possible.

Counsel: Eckert Seamans, Evelyn Sahr, 202-659-6600




November 18, 2016

Answer of Southwest Airlines

Southwest strongly supports the Department’s tentative decision to require the Joint Applicants to divest 24 slot pairs at Mexico City International Airport an action the Order describes as “necessary to remedy the potential competitive harm resulting from the transaction.” However, Southwest urges the Department to make these slots available solely to US low cost carriers, as there is no reasonable justification for allowing Mexican airlines, which already possess huge numbers of MEX slots, to acquire even more slots from this very limited and special-purpose pool.

Further, because of the unique circumstances prevailing at MEX, Southwest believes that the Department should grant ATI for a period no longer than three years (instead of the proposed five years) and require annual ATI reviews to ensure that the airport is conforming its slot management system to transparent, international norms including the IATA Worldwide Slot Guidelines. We also urge the Department to take action at Cancun to ensure the WSGs are fully implemented and Delta’s excessive Saturday schedule peaking is addressed.

Counsel: Southwest, Robert Kneisley, 202-263-6284


November 18, 2016

Answer of Volaris

Volaris' involvement in this proceeding has been limited to closely monitoring the docket and submitting limited pleadings to ensure that any approval granted will not create a barrier to the entry and expansion of Volaris and other carriers in the US-Mexico market. Volaris will not here address the merits of the Show Cause Order and the grant of immunity other than to provide comments in support of the remedies recommended by the Department in order to prevent potential competitive harm. Volaris commends the Department for recognizing the scope of the slot access problem at both John F. Kennedy International Airport and Benito Juarez International Airport, acknowledging that competitive discipline can be provided by both US and Mexican low cost carriers, and limiting the term of antitrust immunity in order to closely monitor the immunized arrangement for anti-competitive impacts. Volaris also supports the Department's tentative decision to condition the approval on full implementation of the new US-Mexico Air Transport Agreement, including the understanding that the Agreement provides for unrestricted own-metal fifth-freedom rights.

Volaris applauds the Department's decision to award the divested slots to both US and Mexican LCCs and low fare carriers. Volaris is gratified that DOT recognizes that it is not in the public interest to limit slot remedies based on carrier nationality, but rather upon the ability to efficiently meet the demands of consumers. Volaris agrees that competitive discipline is best provided by US and Mexican low cost carriers, as the barriers to entry at MEX prejudice low cost carriers from both countries. Volaris is eager to exercise the expanded rights granted by DOT under its new Foreign Air Carrier Permit by providing additional low cost daily service from MEX to five additional US points (including JFK) and increase frequencies on three more routes, which it is currently unable to launch due to the unavailability of commercially viable slot timings. As noted in its earlier Reply, Volaris uses its MEX slots more efficiently than other carriers, carrying the greatest number of passengers per slot used, and offering the most diverse array of destinations per slot. The expansion of Volaris service made possible by the availability of divested slots would provide additional competition on these routes and make available additional low cost options for travelers in these markets, and would also provide important access to small and medium size cities in Mexico.

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


 

November 30, 2016

Updated Confidentiality Affidavit of Houston Airport System
Rachel Trinder

Counsel: Trinder Aviation & Aerospace Advocacy, Rachel Trinder, 703-927-5667





November 30, 2016

Reply of the Joint Applicants

DOT should grant ATI without any additional conditions beyond DOT’s standard ATI conditions and those conditions imposed by the Mexican Federal Economic Competition Commission, which the JCA Parties have already agreed to implement. For the reasons outlined in the JCA Parties’ Objections and below, the JCA Parties object to the divestitures and limitations proposed in the Show Cause Order, which have no basis in any antitrust or economic principles and are unprecedented, arbitrary, and untethered to any potential alleged harms related to the JCA. Competing carriers filed Answers, Comments, or Objections either supporting the remedies imposed by DOT in the Show Cause Order or urging additional slot divestitures and other remedies. No commenter has disputed, and in fact some support, that the JCA will result in substantial public benefits. The responding carriers also make no credible claims that the JCA would reduce or substantially eliminate competition in any relevant market, and several engage in facially implausible assertions about the state of the overall US-Mexico market - a market about which DOT expressed no competitive concerns.

The more extreme remedies sought by these responding carriers bear no relationship to any potential competitive effects of the ATI grant to the JCA. Instead, these rivals are engaged in a transparent effort to use the ATI application as a convenient vehicle to extract from the JCA Parties an exorbitant number of airport slots to improve their own competitive positions. But it is well settled that antitrust law, on which DOT’s competitive analysis is based, protects consumers and the competitive process, not competitors.

The true intent of the responding carriers is evident in their requests. JetBlue, which has among the largest slot portfolios at New York John F. Kennedy International Airport, seeks a rolling divestiture of Mexico City International Airport slots but an immediate divestiture of JFK slots, because it knows that will weaken Delta’s hub at that airport. Similarly, Interjet, the second largest slot holder at MEX, seeks expansive slot divestitures at MEX - more slots than Delta holds at MEX, more slots than COFECE required the JCA Parties to divest, and more slots than even DOT itself has sought - that would further expand its already extensive holdings and weaken rival Aeroméxico.

Further, the requests of these competing carriers reveal their lack of commercial effort on their own behalf. Instead, they seek to use the regulatory process to obtain that which they could more appropriately pursue themselves. Specifically, various carriers clamor for divestiture of more of the JCA Parties’ slots despite the fact that AICM and DGAC have stated in formal comments filed in the docket that there are no pending slot requests at MEX. And Southwest demonstrates its lack of understanding of MEX by requesting the divestiture of gates, an impossibility because all gates at MEX are common-use gates.

DOT’s proposed remedies represent an effort to use the ATI application as leverage to overhaul the MEX slot allocation process. But, wholly apart from the fact that DOT’s concerns have already been addressed by the formal commitment of Mexico’s DGAC and AICM, filed in this docket, to fully implement the IATA Worldwide Slot Guidelines within 145 days, it is not appropriate as a matter of law or policy for DOT to use the ATI process to attempt to regulate a slot regime outside of the United States. Moreover, doing so could be expected to reduce consumer welfare in the long term by deterring future procompetitive joint ventures. Even assuming that it were appropriate to engage in such an effort, DOT’s concerns in this case are based on incorrect and outdated information. Notably, both AICM and DGAC stated that the COFECE “preliminary” report on slots at MEX relied on outdated and mistaken information.

Counsel: Hogan Lovells, Robert Cohn, 202-637-5600 for AeroMexico / Christine Wilson, 202-216-0700 for Delta




November 30, 2016

Response of American Airlines to Objections and Comments to Order 2016-11-2

The Department should reject calls to make final its tentative decision to prejudge the demand of the travelling public and restrict certain carriers from acquiring any of the slots to be divested at Mexico City International Airport. Should the Department resolve the allocation of divested slots without considering proposals from a spectrum of different carriers that provide a variety of benefits, the traveling public will be harmed. Rather than attempt to restructure the market through regulatory fiat and add additional restrictions to the remedy imposed by COFECE by favoring a small subset of carriers, the Department should permit all carriers, including American, to apply for an allocation of the divested slots.

The proposed constraints on the Department’s ability to allocate the divested MEX slots - some of which were tentatively adopted by the Department—are nothing more than self-serving requests intended to restrict competition for the divested slots. This is illustrated by Southwest’s extraordinary proposal that all Mexican carriers should be prohibited from obtaining any of the divested slots. This proposal is untethered from any analysis of public benefits, and is instead based solely on carriers’ existing slot holdings at MEX. According to Southwest, the US network carriers and all Mexican carriers should be denied any opportunity to acquire the divested slots simply because they happen to hold more slots at MEX than Southwest and other carriers. In other words, the carriers that prioritized growth at other airports should be rewarded with exclusive access to the divested MEX slots, while all of the carriers that responded to consumer demand and invested in growth at MEX should be precluded from further expanding services at MEX.

The Department’s tentative decision already condemns American and other US network carriers to that fate, but Southwest requests that the Department go even further, and compel Volaris and VivaAerobus to “redeploy” their MEX slots currently used to serve “relatively small Mexican domestic markets” if they want to inaugurate new transborder services at MEX. Southwest would have the Mexican carriers slash existing domestic service from which there is obviously appreciable demand rather than utilize any divested slots, just so that Southwest and smaller US carriers can hoard all of the newly available slots. This proposed handout, according to Southwest, also is supported by the Department’s tentative finding that “American and United already have a substantial number of [MEX] slots that they may use to make adjustments in their schedules or offerings, including increasing capacity by using larger aircraft.” If the US carriers that account for just two to three percent of the total peak-day operations at MEX should be forced to redeploy their slots to inaugurate new transborder services, then all Mexican carriers should be forced to do so as well, Southwest reasons.

Rather than supporting Southwest’s proposal, that line of reasoning highlights the flaw in the Department’s tentative decision. The inauguration of new transborder services using new slots will do far more to enhance competition and benefit the traveling public than inaugurating those services through schedule and aircraft adjustments, which necessarily involve reducing service at other times or on other routes. Whether those service reductions affect existing transborder services or domestic services in Mexico, members of the traveling public that currently rely on those services will suffer. No carrier - US or Mexican - should be confined to “mak[ing] adjustments in their schedules or offerings” to grow their transborder services at MEX.

Because the Department’s tentative decision to exclude American and other carriers from obtaining any divested MEX slots places the interests of a small subset of carriers over the interests of the traveling public, as made clear by Southwest’s self-serving request for further restrictions, and because it is not compatible with the remedy imposed by COFECE, the Department should open its process for allocating the divested slots to all carriers, including American.

Counsel: Dechert LLP, Paul Denis, 202-261-3300




November 30, 2016

Consolidated Reply of JetBlue Airways

No party raised new arguments that would warrant the Department altering the tentative findings in Order 2016-11-2. The Department’s show cause order was based on an extensive 21-month evidentiary record and its analysis and conclusions were consistent with past precedent in antitrust immunity proceedings. JetBlue, Hawaiian, Southwest, Interjet and Volaris all filed in support of the Department’s analysis and some, like Interjet and Southwest, even urged the Department to expand its proposed remedy. The Department now faces a statutory deadline of December 31, 2016, to issue a final order. JetBlue urges the Department to promptly issue a final order and to direct the Joint Applicants to state on the record within seven calendar days whether or not they will accept the Department’s proposed remedy and proceed with the Joint Venture.

JetBlue fully supports the Department’s tentative decision in Order 2016-11-2. JetBlue is not opposed to ATI grants per se and is fully cognizant of the realities of foreign ownership restrictions that restrict the ability of airlines in a globalized world. ATI, however, is an extraordinary and powerful tool of regulatory relief that can and has lead to anti-competitive impacts. The Department should only grant ATI when there is a full Open-Skies agreement in effect and when competition is ensured through, among many other factors, availability of slots and the ability for independent airlines to operate as an effective competitive counterweight in an international market. ATI grants should also be monitored by the Department to ensure that the results are not harming consumers and the traveling public. The Department’s tentative decision to impose a slot remedy, strike exclusivity clauses, and limit the ATI grant to five years are all appropriate safeguards that are necessary to protect competition and should guide the Department in future ATI proceedings.

Counsel: Eckert Seamans, Evelyn Sahr, 202-659-6600




November 30, 2016

Consolidated Reply of Southwest Airlines to Objections to Show Cause Order 2016-11-2

In their objections, the Joint Applicants claim that DOT’s proposed remedies are “excessive and arbitrary,” jeopardizing the synergies of the Joint Carrier Agreement, potentially undermining the entire alliance. However, the record in this proceeding shows otherwise. The Joint Applicants’ claims are exaggerated and without a factual basis. They should not deter the Department from implementing the divestiture as proposed.

The Joint Applicants suggest that DOT’s proposed remedies somehow “offend principles of international comity” and are “inconsistent with the spirit of the recently liberalized bilateral aviation agreement between the United Mexican States and the United States of America.” This argument has no merit.

As the Joint Applicants well know, it is the “longstanding policy of the Department not to consider requests for ATI in a market until all of the elements of an Open Skies agreement are available to carriers.” Thus, bringing the modernized US-Mexico air service agreement into force was a prerequisite for DOT to undertake review of the Joint Applicants’ ATI application. In every ATI proceeding, the Department engages in a fact-dependent, multi-step evaluation of the proposed alliance agreements and their impact on competition and the public interest as required by 49 USC § 41308 and § 41309. While the existence of an Open Skies agreement is a prerequisite to such an inquiry, it is in no way a guarantee of a preordained outcome or a less rigorous ATI review. In this particular case, the Department is well aware of the severe difficulties that US new entrants and LCCs have experienced in gaining competitive access to MEX, which threatens to stifle the potential benefits of Open Skies. It is hardly surprising, therefore, that the Department would place significant conditions on a grant of ATI to address these problems of competitive access, especially given that the DL/AM alliance will remain the dominant force at that airport following the divestitures.

In fact, only a few days ago the Department rejected the American-Qantas ATI application, despite the fact that the US and Australia have enjoyed an Open Skies relationship for almost a decade. Any suggestion that the Joint Applicants’ ATI application was somehow “guaranteed” to be approved by the Department with only divestitures and conditions acceptable to the Joint Applicants has no basis in fact and should be disregarded.

We urge the Department to make its tentative decision final with only the few changes outlined above and in Southwest’s prior filings. The Department’s proposed conditions on the grant of ATI, along with the changes advocated by Southwest, will enable a meaningful increase in US. LCC service that will provide essential competition and benefits to consumers that are even more critical in the face of an immunized Delta/Aeromexico alliance.

Counsel: Southwest, Robert Kneisley, 202-263-6284




November 30, 2016

Reply Comments from the "Frente por la Defensa de la Aviacion Nacional"

Needless to say FDAN represents 75% of aviation employees within Mexico among Pilots, Air Traffic Controllers, Flight Attendants, Mechanics, Customer Service Representatives, Ground Personnel and we strongly support full implementation of the JCA without the incredibly constrain conditions proposed in the Order to Show Cause.

The JCA will benefit travelers through increased capacity and service options, lower prices, expanded reach of the joint network into the interior of the US and Mexico, and more convenient schedules. These consumer benefits will translate into benefits for servicing America and Mexico's connectivity thus AeroMexico's employees, by increasing demand for our services and additional flights. The JCA will also benefit travelers, competition and AeroMexico's employees by enabling AeroMexico/Delta to be a stronger third network competitor on trans border routes on par with the first and second largest trans border carriers (American, United). This is all the more important for Mexico's largest carrier as the liberalized air services agreement between Mexico and the United States of America opens up the trans border market and unleashes the larger US airlines.

Nevertheless the tremendous limitations on the JCA proposed in the Order to show cause, would substantially reduce these benefits for both travelers and carriers employees alike. Despite the counterparts' assertions, it is clear that significant and detrimental competitiveness issues rise if unfounded conditions on the JCA proposed in the order to show cause become final.

By: Eric Mayett Moreno

 

November 30, 2016

Objections and Comments of The Association Sindical de Pilotos Aviadores de Mexico

ASPA represents the Aeromexico pilots and has a significant interest in this proceeding because the proposed Joint Cooperation Agreement and the Department's tentatively proposed divestitures on the Show Cause Order, will have a substantial impact on ASPA pilots as it would mean Pilot job positions.

ASPA believes that the JCA as presented by the applicants is fair and equitable and offers significant potential benefits for Aeromexico, Delta, their employees, the tourism and business sector, flyingpublic and the population that will be benefited from the increase in air services. However, ASPA is concerned that the onerous and arbitrary conditions suggested in the Show Cause Order are not consistent with the public interest as it presently stands, with the proposed unprecedented and punitive remedies beyond any DOT precedent, the JCA will not achieve its promised enhancements and efficiencies because those benefits depend on an non limited JCA and more than that, they would severely diminish the economic viability of the JCA and severely damage the fundaments of the recently revised Bilateral Aviation Agreement between the United Mexican States and the United States of America, as the Mexican Government repeatedly made clear during the consultations onthe agreement the previous two years, the antitrust immunity for its carriers was a fundamental prerequisite for Mexico’s agreement to the new bilateral.

By: ASPA, Captain Mario Alberto Gonzalez Aguilera


 

December 5, 2016

Ex-Parte Letter to Ministry of Communications and Transportation of Mexico

By: Anthony Foxx


 

Order 2016-12-13
OST-2015-0070
- Antitrust Immunity for Alliance Agreements

Issued and Served December 14, 2016

Final Order

The Joint Applicants have requested a grant of immunity from the US antitrust laws in order to allow Delta and AeroMexico to operate a joint venture between the United States and Mexico. Based on its analysis, the Department believes the proposed alliance has the potential to deliver substantial public benefits to the travelling public, including broader connectivity between the United States and Mexico, improved network coordination, reduced travel times, and improved efficiency. However, the Department also identified significant competitive issues that could prevent the public from realizing those benefits if left unchecked. Therefore, in order to ensure adequate competition in the covered market, thereby making the approval of the alliance pro-consumer, our grant of antitrust immunity is subject to a number of conditions. Among those conditions is the requirement that the Joint Applicants divest 24 slot-pairs at Mexico City’s Benito Juarez International Airport and four slot-pairs at New York City’s John F. Kennedy International Airport. We will also limit the duration of our grant of ATI to five years, among other conditions.

The Department received numerous comments from a broad range of stakeholders in response to the Department’s Show Cause Order (2016-11-2). In response to those comments, we have made adjustments to our conditions that we believe will make them more effective and strike the proper balance. The Department believes that if the remedies and conditions are adopted, the proposed alliance will not reduce competition and will provide substantial public benefits.

The Department affirms its tentative decision to require the divestment of 24 slot-pairs. As explained in the Show Cause Order, this remedy reflects the eight slot-pairs that constitute the immediate concentration of the Joint Applicants at MEX post-transaction (consistent with COFECE’s remedy), as well as 16 additional slot-pairs to provide adequate competition to ensure that public benefits from the Joint Applicants’ planned growth at MEX are realized by ensuring sufficient competitive entry. As part of their application, the Joint Applicants provided detailed plans for growing transborder services if the JV is approved. Based on the evidence in the record, these services can, and likely will, be introduced under the existing slot regime which the COFECE report deemed anticompetitive and a barrier to an essential input (i.e., MEX). In order to ensure that both the price and service benefits of the Joint Applicants’ new services are passed along to consumers, DOT seeks to foster the requisite competition by enabling new entry.

In answer to the challenge that the divestiture is contrary to Mexican law, the Department must point out that the Joint Applicants are availing themselves of US law for the purposes of obtaining antitrust immunity. The Department’s grant of such authority is within its discretion, and not something that AeroMexico is entitled to as a matter of right. The grant of such authority subject to one or more conditions is not inconsistent with US or, for that matter, Mexican law. If the Joint Applicants are unable to comply with such a condition in a manner that is consistent with Mexican law, their failure to meet the condition will result in the ATI not becoming effective. AeroMexico is not unaware that the Department may impose conditions on its US authority, as its foreign carrier permit has long been subject to numerous conditions, including one that states the Department may amend or modify those conditions.

The Department disagrees with Southwest, Interjet, and American. The Department’s remedy is focused on providing access at MEX to carriers that do not have it, and have demonstrated that they cannot achieve it otherwise, in order for them to provide competitive service, disciplining the JV. Southwest has provided no evidence to demonstrate that the competition provided by Mexican LCCs is any less vigorous or of any less quality than that provided by US LCCs. Interjet and American’s arguments that they should be eligible to receive MEX slots are misplaced. The objective of the Department’s remedy is to inject sufficient competition at MEX to discipline the dominant position of the Joint Applicants at MEX. The Department believes that the most efficient way to do this, requiring the least number of divestitures, is to link LCC and low-fare carrier networks to MEX, thereby ensuring adequate network competition. We then determined the eligibility of LCC and low-fare carriers based on their level of slot holdings at MEX, and their ability and willingness to launch competitive service in a timely fashion. By its own admission, Interjet has over 26% of the slots at MEX, more by far than any other carrier besides AeroMexico. Interjet does not need assistance to achieve competitive access at MEX; it already has it.

The Department acknowledges that for some, but not all, passengers, EWR is a substitute airport for JFK. The airports have overlapping, but not identical, catchment areas; the two airports are not perfect substitutes that can be freely interchanged. As the Department of Justice pointed out in its recent antitrust complaint against United at EWR, “Airlines do not view service at other airports as reasonable substitutes for the service offered at Newark, and thus they are unlikely to switch away from slots at Newark in response to a small but significant increase in the price of slots. Thus, slots at Newark constitute a relevant market under the antitrust laws.”

This new, even if limited, competition for a subset of consumers, as well as the fact that slot divestitures themselves have a significant monetary impact on the divesting carriers, has led the Department to lower its divestiture requirement at JFK to four slot-pairs. This number comports with AeroMexico’s existing complement of JFK slots used to serve Mexico City. We have further decided to limit to two the number of slots that must be divested in the peak-hours at JFK of 1500-2059. This will limit the loss of what are presumably the most financially and operationally valuable slots to the Joint Applicants. It will also alleviate the impact that the divestitures will have on the Joint Applicants’ trans-Atlantic hub operation at JFK.

The US-Mexico market is rapidly changing and will likely continue to do so as airlines and consumers adapt to the new liberalized marketplace. At the same time, the uncertainty surrounding the slot regime at MEX could mean that “the Department would have to carefully consider whether it could approve a new application if tendered, and, if it were to do so, whether additional divestitures would be necessary.” The competitive balance and the policies governing allocation of slots at MEX are fluid and the Department needs to retain the ability to fully reexamine the basis for granting ATI. Accordingly, the Department finalizes its decision to set a five-year time limit on its grant of ATI.

By: Jenny Rosenberg


 

December 21, 2016

Notice of the Joint Applicants

Delta Air Lines, Inc. and Aerovias de Mexico, S.A. de C.V. accept the Department's approval of antitrust immunity for their proposed Joint Cooperation Agreement with the conditions set forth in the DOT's Final Order, dated December 14, 2016, with the following comments.

The Department's Final Order recognizes the substantial consumer benefits associated with the Delta-AeroMexico JCA, but imposes onerous conditions unsupported by precedent or economic theory. These include the number of divestitures, the nature of the divestitures, and the five-year expiration date on the approval. The unprecedented conditions were imposed not to address any competitive concerns - because the Final Order acknowledges that robust competi tion exists - but instead because of a perceived interest of the public that DOT determined it needed to address. In markets with robust competition; the public interest is not served by the Government favoring a particular type of competitor, imposing a redistribution of assets, and deciding who should compete where. Earlier well-established ATI precedent from the Department has recognized that substantial consumer benefits are generated even when the JV partners hold a much larger combined market share than what would exist if this Delta-AeroMexico JCA were approved without conditions.

If ATI policy has changed such that ATI alliances will only be approved after a reengineering of competition, the cost of such alliances will become so high that it will create serious questions about how ATl alliances are formed in the future and jeopardize the substantial consumer benefit s associated with such alliances.

Counsel: Hogan Lovells, Robert Cohn, 202-637-5600 for AeroMexico / Christine Wilson, 202-216-070 for Delta


 

January 5, 2017

Joint Applicants' Notice

On December 14, 2016, the Department issued its Final Order (Order 2016-12-13) in the above-captioned matter, granting approval of, and antitrust immunity for, the proposed alliance agreements between Delta Air Lines, Inc. and Aerovias de Mexico, S.A. de C.V., subject to conditions. The Final Order allowed the Joint Applicants to designate two non-consecutive hours during the saturated period at Mexico City Benito Juarez International Airport in which they will not be obligated to transfer more than four slots per hour. The Joint Applicants designate the following two non-consecutive hours at MEX: 0900-1000 and 1500-1600.

Counsel: Hogan Lovells, Robert Cohn, 202-637-5600 for AeroMexico / Christine Wilson, 202-216-0700 for Delta


 

Order 2017-1-6
OST-2015-0070
- Antitrust Immunity for Alliance Agreements

Issued and Served January 6, 2017

Instituting Order

DL-AM Slot Request Form

By this Order, the Department of Transportation institutes the Slot Assignment Phase of the Delta-Aeromexico ATI Proceeding to allocate slots being divested by Delta Air Lines, Inc. and Aerovías de México, S.A. de C.V. at Mexico City’s Benito Juarez International Airport and New York City’s John F. Kennedy International Airport, pursuant to the terms of DOT Order 2016-12-13. The Department is requesting proposals from eligible carriers to utilize the divested slots. The Department will choose among the proposals received based on criteria discussed in Order 2016-12-13.

Initially, 14 MEX slot-pairs and two JFK slot-pairs, must be transferred by the Joint Applicants to the carriers chosen by the Department through this proceeding.

The remaining 10 MEX slot-pairs and two JFK slot-pairs also will be assigned through this proceeding; however, the carriers we select to obtain the Phase Two slots must demonstrate to the Department that they have exhausted reasonable efforts to acquire the slots themselves through the respective airports’ normal allocation process before the Joint Applicants will be required to transfer them. Phase Two must be completed in time for slots to be transferred for use in the IATA Northern Summer 2018 scheduling season.

The Final Order established lists of eligible carriers to receive slots at each airport. At MEX, the carriers are: Alaska, Southwest, JetBlue, Frontier, Sun Country, Virgin America, Allegiant, Spirit, Hawaiian, Volaris, and VivaAerobus. At JFK, the carriers are: Alaska, Southwest, Frontier, Sun Country, Virgin America, Allegiant, Spirit, Hawaiian, Interjet, Volaris and VivaAerobus.

At MEX, the Final Order establishes an hourly divestiture limit of six slots per hour; however, the Joint Applicants have the option to protect up to two non-consecutive hours in which they will not be required to divest more than four slots. The Joint Applicants filed a notice in the docket on January 5, 2016, designating the hours of 09:00-09:59, and 15:00-15:59 as their protected hours.

As stated above, the Joint Applicants face a May 17, 2017, deadline in order to comply with COFECE’s conditional approval of the joint venture. In order to accommodate that deadline, the Department is establishing the procedural schedule as outlined below:

Proposals - January 23, 2017
Answers - January 30, 2017
Replies - February 6, 2017

By: Jenny Rosenberg


 

January 23, 2017

Application of ABC Aerolineas d/b/a Interjet for Slot Allocation at JFK International Airport

Hereby submits a request for a slot-pair to be awarded at John F. Kennedy International Airport during Phase One of the Slot Assignment Phase of the Delta-AeroMexico ATI Proceeding. Interjet specifically requests a slot-pair to accommodate a daily 4:25pm arrival at JFK from Mexico City International Airport and a 5:40pm daily departure from JFK to MEX, effective for the IATA 2017 Summer Season. In the alternative, Interjet applies for a Phase One slot-pair with a JFK arrival from MEX at 9:00pm and a departure at 10:15.

Counsel: Roller & Bauer, Moffett Roller, 202-331-3300

 

January 23, 2017

Application of Aeroenlaces Nacionales d/b/a vivaAerobus for an Exemption and Slot Allocation

vivaAerobus is seeking three slot pairs in MEX in Phase 1 of the allocation process for new daily routes to LAX and LAS, as well as four weekly frequencies to San Antonio and three weekly frequencies to Oakland. In Phase 2 of the allocation process, vivaAerobus is requesting an additional six (6 slot pairs in MEX for routes to LAX (a second daily), JFK (double daily), IAH (daily), and ORD (daily), OAK (four frequencies a week), and SAT (three frequencies a week). For JFK, viva requests two (2) slot pairs to match two slot pairs at MEX for a double daily to MEX. These new routes will provide consumers in the markets with the largest number of VFR travelers a very low cost option. Additionally, it will provide a very low cost non-stop overlap routes between JFK and MEX.

vivaAerobus has a unique relationship with its owner, Grupo - IAMSA which links vivaAerobus to IAMSA’s massive bus services and routes throughout Mexico. This allows passengers to purchase tickets at and connect through over 300 bus stations throughout Mexico and includes 100 destinations beyond its airport network, most of which are not easily accessible by aircraft. With the award of the additional slot pairings in MEX, it will be able to offer its low cost air transportation services to 260 million IAMSA customers who can receive a 50% discount on the ground portion of their trip.

Counsel: Kirstein & Young, David Kirstein, 202-331-3348




January 23, 2017

Application of Alaska Airlines for Allocation of US-Mexico City Slot Pairs

Alaska plans to operate four daily scheduled combination roundtrip flights year-round between Los Angeles (twice daily), San Francisco (daily) and San Diego (daily), on the one hand, and MEX, on the other hand. In order of priority:

  • Alaska's first daily Los Angeles-MEX southbound service would depart Los Angeles at 8:15a.m., with arrival at MEX at 2:00p.m. On the return/northbound trip, the aircraft would depart MEX at 5:35p.m., with arrival in Los Angeles at 7:50p.m.
  • Alaska's daily San Francisco- MEX southbound service would depart San Francisco at 10:15a.m., with arrival at MEX at 4:35p.m. On the return/northbound trip, the aircraft would depart MEX at 3:00p.m., with arrival in San Francisco at 6:00p.m.
  • Alaska's second daily Los Angeles-MEX southbound service would depart Los Angeles at 12:00p.m., with arrival at MEX at 6:00 p.m. On the return/northbound trip, the aircraft would depart MEX at 1:35p.m., with arrival in Los Angeles at 4:05 p.m.
  • Alaska's daily San Diego-MEX southbound service would depart San Diego at 7:00a.m. with arrival at MEX at 12:45p.m. On the return/northbound trip, the aircraft would depart MEX at 6:50p.m., with arrival in San Diego at 9:05p.m.

Alaska will operate 178-seat Boeing B737-900ER aircraft (with 16 First Class seats, 24 Premium Class seats, and 138 Economy Class seats) on its first daily Los Angeles-MEX flights and on its daily San Francisco-MEX flights . Alaska will operate 76-seat Embraer E-175 (with 12 First Class seats, 12 Premium Class seats, and 52 Economy Class seats) on its second daily Los Angeles-MEX flights and on its single daily San Diego-MEX flights.

Counsel: Cozen O'Connor, David Heffernan, 202-912-4800




January 23, 2017

Proposal of JetBlue Airways

In accordance with Order 2017-1-6, JetBlue herein submits a proposal to utilize divested slots at Mexico City International Airport. JetBlue seeks four Phase One slot pairs and two Phase Two slot pairs. If granted, JetBlue’s proposal would add service from MEX to Fort Lauderdale-Hollywood International Airport, Orlando International Airport (MCO) and Los Angeles/Long Beach Airport, three important transborder markets.

JetBlue proposes to use four Phase One slot pairs for twice-daily, year-round service to both FLL and MCO beginning on September 5, 2017, operated by 162-seat Airbus A320 aircraft, and to use two Phase Two slot pairs for twice-daily, year-round service to Los Angeles/Long Beach beginning on September 4, 2018, also operated by 162-seat Airbus A320 aircraft (JetBlue's entire Airbus A320 fleet will undergo a cabin restyling beginning this year which will result in each aircraft having 162 Core seats).

Counsel: Eckert Seamans, Evelyn Sahr, 202-659-6600




Janaury 23, 2017

Application of Southwest Airlines for Mexico City Slots

Southwest hereby applies for the following four MEX slot pairs, in the order of preference shown below:

One daily slot pair for Houston (Hobby)-Mexico City (HOU-MEX-HOU)

  • HOU to MEX (2050 arrival), MEX to HOU (0700 departure)

One daily slot pair for Houston (Hobby)-Mexico City (HOU-MEX-HOU)

  • HOU to MEX (1045 arrival), MEX to HOU (1140 departure)

One daily slot pair for Fort Lauderdale-Mexico City (FLL-MEX-FLL)

  • FLL to MEX (1245 arrival), MEX to FLL (1340 depature)

One daily slot pair for Los Angeles-Mexico City (LAX-MEX-LAX)

  • LAX to MEX (2200 arrival), MEX to LAX (0750 departure)

Southwest requests that the two HOU-MEX slot pairs be awarded in Phase One of the proceeding and the FLL-MEX and LAX-MEX slot pairs be awarded in Phase Two. If either of the HOU-MEX slots are not awarded in Phase One, Southwest requests they be awarded in Phase Two. Southwest will operate all of its Mexico City service with 143-seat Boeing 737-700 aircraft and will operate all slots seven days-a-week, year round.

Counsel: Southwest, Robert Kneisley, 202-263-6284

 

January 23, 2017

Application of Volaris for an Allocation of Slots

Volaris is seeking five new slot pairs at MEX for 2017 and three slot pairs at MEX for 2018. Volaris seeks one new slot pair at JFK in 2017, and another in 2018. Following is a summary of its slot requests, listed by order of priority:

Phase 1 - 2017
MEX-JFK Daily, additional frequency in market
MEX-SAT Daily, new route
MEX-IAD Daily, new route
MEX-ORD Daily, additional frequency in market
MEX-LAX Daily, additional frequency in market

JFK slot Daily, JFK-MEX, needed to operate MEX-JFK as proposed above

Phase 2 - 2018
MEX-OAK Daily, needed to offer year round service
MEX-DEN Daily, needed to offer year round service
MEX-ONT (.5) new route
MEX-SJC (.5) new route

JFK slot Daily, for proposed new JFK-CUN service

To the extent the Department does not grant all of its MEX slot requests in phase 1, Volaris would be willing to accept an allocation of such slots in phase 2.

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


 

January 26, 2017

Notice of JetBlue Airways

On January 23, 2017, JetBlue submitted a proposal to use four Phase One slot pairs and two Phase Two slot pairs at Mexico City International Airport. JetBlue proposed to use the two Phase Two slot pairs for non-stop service between Los Angeles/Long Beach Airport and MEX. The proposal noted that JetBlue “anticipates that LGB will be able to handle international arrivals in 2018” and that in “the event that JetBlue is unable to immediately begin MEX-LGB service on September 4, 2018, JetBlue requests that the Department award it two Phase Two slot pairs for two daily flights to Los Angeles International Airport that would be switched to LGB at the earliest possible date.” On January 24, 2017, the Long Beach City Council rejected a proposal that would allow international flights at LGB. As such, JetBlue respectfully requests that the Department consider its proposal for Phase Two remedy slots for non-stop service to LAX rather than LGB. All other aspects of JetBlue’s proposal remain the same, including the proposed schedules for MEX-Los Angeles service. JetBlue requests that the Department, as well as other carriers in this proceeding, evaluate JetBlue’s Phase Two request in light of this development.

Counsel: Eckert Seamans, Evelyn Sahr, 202-659-6600


 

January 30, 2017

Answer of ABC Aerolineas d/b/a Interjet to Applications for Allocation of Slots at John F. Kennedy International Airport

Interjet and Volaris are the only applicants for the two JFK slot-pairs available in Phase One, and Interjet and Volaris are each seeking one slot-pair for use in service between JFK and MEX. Volaris requested a JFK slot-pair to accommodate a daily arrival from MEX at 14:10 and a daily departure from JFK to MEX at 15:30.

Interjet’s new service would compete directly with highly-convenient flight times offered by the Joint Applicants. It would also compete with the new service to be introduced by Volaris. The alternative, awarding Volaris only a single slot during the 15:00-20:59 period and awarding Interjet a slot-pair at less commercially attractive times (such as the 21:00/22:15 times that Interjet’s Slot Application proffered as a second choice) would provide for less competitive service during peak hours. This clearly deficient approach would leave three of the four slots (for two slot-pairs) in the 15:00- 20:59 period unutilized in Phase One.

Counsel: Roller & Bauer, Moffett Roller, 202-331-3300




January 30, 2017

Answer of JetBlue Airways

JetBlue is an advocate of Open-Skies and free competition and does not oppose Alaska, Interjet, Southwest, VivaAerobus and Volaris serving any of the routes for which they submitted proposals. However, with carriers seeking more remedy slots than are available, the Department must consider additional relevant factors when determining which proposals best provide maximum competitive benefits. These factors strongly support a grant to JetBlue of six MEX slot pairs.

As an initial matter, JetBlue urges the Department to split the available slots such that 50% are allocated to US carriers and 50% to Mexican carriers. Unlike other carriers, JetBlue has consistently urged the Department to deem Mexican carriers eligible to participate in any slot remedy proceeding. JetBlue believes that Mexican carrier participation is crucial in order to craft a slot remedy benefiting airlines and consumers in both countries. Given the strenuous objections to the Department’s MEX slot remedy from various Mexican parties including unions and aeronautical authorities, principles of comity and reciprocity suggest that allocating a slot remedy equally between US and Mexican carriers best comports with the stated goals of both the Department and COFECE. Three US carriers collectively sought 14 MEX slot pairs while three Mexican carriers sought 17 MEX slot pairs and 5 JFK slot pairs.

Of the 28 available slot pairs at MEX and JFK, a grant of 14 slot pairs to US carriers and 14 to Mexican carriers would allow five US and Mexican carriers to obtain slots at MEX and each of the three Mexican carriers that participated in this proceeding to gain crucial access to JFK, which the Department identified as a major goal of the slot remedy. Such a breakdown would also allow the Department to fully grant each US carrier request.

If the Department adopts JetBlue’s proposal to evenly split the 28 available remedy slot pairs among US and Mexican carriers, then 14MEX slot pairs would be allocated to US carriers, 10 MEX slot pairs would be allocated to Mexican carriers and 4 JFK slot pairs would be allocated toMexican carriers. JetBlue has included an appendix below that demonstrates how the proposals submitted by the six carriers could be tweaked to accommodate virtually every request given that JetBlue and Southwest have indicated on the record their plans to return slot pairs that are commercially unviable for FLL/MCO/HOU but that other carriers could use for parts of proposed services. If the Department’s proposed divestiture results in a Mexican carrier receiving a viable arrival slot but a departure slot the carrier believes is unviable, those carriers could always use their ample MEX slot portfolios to cover those departure slots as necessary. Because the Department limited the grant of ATI to five years and noted that it plans to re-examine the slot situation in the coming years,Mexican carriers that do not receive a full allocation now would also have ample opportunity to request additional slots in any future remedy proceeding.

Counsel: Eckert Seamans, Evelyn Sahr, 202-659-6600




January 30, 2017

Consolidated Answer of Southwest Airlines

Southwest urges the Department to grant all US carrier requests in full before allocating any MEX slots to Mexican carriers. Not only would this be consistent with the Trump Administration’s clearly stated goal to put America’s interests first, but there is no basis for depriving US carriers of scarce MEX slots in order to increase the holdings of Mexican carriers that already have vastly more slots than all eligible US carriers combined.

US LCC carriers have a miniscule presence at MEX, while Mexican LCCs have large portfolios of MEX slots that are currently used for domestic Mexico service and could be repurposed to transborder service at their discretion. US LCCs have no such option. Further, US consumers will predominantly fly US flag carriers in transborder markets and thus will benefit exponentially more from added US LCC flights than from additional Mexican LCC service, which is already plentiful at MEX. It is the responsibility of the United States Department of Transportation to act in the United States public interest. In this case, that responsibility would be achieved by putting American carriers’ interests first. In fact, comparing the applicants’ service proposals side-by-side shows beyond doubt that Southwest’s proposed service will produce by far the greatest benefits for US consumers.

In sum, there is no policy or competitive justification for allocating slots to Mexican carriers until all US carrier requests are satisfied. It would not advance the US public interest for the US government to allocate scarce divested slots to foreign airlines in a manner that penalizes US carriers.

Counsel: Southwest, Robert Kneisley, 202-263-6284




January 30, 2017

Consolidated Answer of vivaAerobus

As recognized in the Department’s Frequency Allocation for US-Cuba routes (Order 2016-8-38), a top priority is to “maximize opportunities for the substantial communities most likely to benefit.” Because MEX is the primary hub of travel to and from Mexico, the Mexican and Mexican-American communities are the primary markets that need to be serviced. vivaAerobus is proposing service to seven US cities, which have the largest Mexican populations in the US. Importantly, most travelers in these markets are Visiting Friends and Relatives passengers - passengers who by a wide margin favor, indeed need the lowest possible fares, and who would thus directly benefit from viva’s service. As Mexico’s only Ultra LCC, with costs per available seat kilometer (CASK adjusted) 27% below its closest competitor, viva is in a unique position to provide the greatest benefit to these consumers and therefore assist the department in meeting its public interest objectives. Importantly, viva’s very low prices will also serve as a check on the fares of other low cost and legacy carriers, ensuring the Department’s goal of quality competition is met in the market.

As Southwest recognized in its application, its low fares have and will stimulate passenger growth in their market, by offering existing passengers lower fares and giving an opportunity to new passengers who would not fly absent the low fares (i.e. Southwest Effect). viva concurs with this analysis, and highlights that viva fares are even lower than Southwest and every other carrier which submitted an application. With the lowest fares in the market, viva will be able to significantly stimulate passenger growth in the seven markets it wishes to enter.

Again, It bears emphasis that viva is uniquely positioned to provide the most extensive network connecting benefits behind MEX due to the ticketing relationship with by Grupo-IAMSA. No other carrier applying for MEX slot pairs is able to offer consumers this expansive Mexican network. Despite other carriers’ arguments regarding their ability to service connecting flights throughout their network, they are simply unable to reach non-airport accessible locations beyond MEX. In addition, viva is able to offer a 50% discount on bus fares so their passengers are able to reach their final destination for as little cost as possible.

Awarding these routes to viva will, within 2 years create an entire ULCC network from MEX that will greatly benefit US and Mexican travelers and ensure access to low fares. vivaAerobus’ full proposal will provide new frequencies in seven major markets and introduce ULCC service where none now exists, and create an affordable service that can directly reach a vast potential market via its bus connections. viva will be the anchor in each market that keeps prices low, and will increase the average traveler’s ability to travel throughout the US and Mexico.

Counsel: Kirstein & Young, David Kirstein, 202-331-3348




January 30, 2017

Answer of City and County of Denver in Support of Volaris

Denver International Airport supports Volaris’ application for a daily nonstop flight between DEN and MEX beginning in March 2018. Providing daily year-round service in this growing market will fulfill the Department’s primary objective in this proceeding, namely maximizing competitive benefits. Growing the DEN-MEX market to daily year-round service will specifically meet a goal articulated by the Department: enhancing the quality of competition, such as by offering additional frequencies in major markets or introducing the benefits of new business models.

It should be noted that DEN is the only airport to which an airline has proposed an allocation of MEX slots in this proceeding that does not already have daily year-round service in the MEX market itself or within a 60 mile drive. It is also by far the largest US market that does not have daily nonstop service to MEX. The Department has a unique opportunity to rectify this problem and not simply further entrench the status quo. The number of requests for slots in this case is minimally higher than the number of slots available and the Department will only be called upon to deny a few requests. Against this backdrop, it is clear that awarding Volaris a set of slots for the establishment of year-round daily nonstop service between DEN and MEX affords the Department the opportunity to continue the long standing goal of strengthening inter carrier, inter gateway and inter regional competition while at the same time ensuring a multitude of pricing and service options. The Department’s choice in this case is clear.

By: Kim Day




January 30, 2017

Answer of Ontario International Airport in Support of Volaris

The Ontario International Airport Authority, the owner and operator of Ontario International Airport strongly encourages the United States Department of Transportation to award six pairs of 2018 operational slots each week at Benito Juárez International Airport in Mexico City, México, to Concesionaria Vuela Compañía de Aviación, S.A.P.I., for Volaris to operate three weekly round-trip services between ONT and its hub at MEX.

By: Mark Thorpe




January 30, 2017

Washington Airports Task Force in Support of Volaris

The Washington Airports Task Force fully supports the application of Volaris for an allocation of MEX slots for service to IAD, and further respectfully requests that the Department specifically approve Volaris' proposal to provide daily nonstop service between Mexico City and Washington Dulles. We do this in the belief that approval of Volaris' 3rd highest priority proposal will provide additional air service choices to the area's residents and visitors, benefit the region's tourism industry, and enhance local economic and cultural growth in the Washington metropolitan area.

By: Keith Meurlin, 703-572-8714




January 30, 2017

Answer of the City of Houston in Support of Southwest Airlines and vivaAerobus

Houston supports the applications of: (1) Southwest Airlines, Inc. for two of the Phase One slot pairs to enable double-daily William P. Hobby Airport-Mexico City services (or alternatively Phase Two slots), and (2) Aeroenlaces Nacionales, S.A. de C.V.’s application for one of the Phase Two slot pairs to enable daily service between George Bush Intercontinental Airport and Mexico City (and vivaAerobus’ related permit and exemption applications contained therein).

Counsel: Rachel Trinder, 703-927-5667




January 30, 2017

San Diego International Airport in Support of Alaska Airlines

I write in support of the application of Alaska Airlines, Inc. for an allocation of takeoff and landing slots at Mexico City's Benito Juarez International Airport to enable it to introduce daily nonstop roundtrip scheduled air service between San Diego, California and Mexico City. San Diego is the only new gateway to Mexico City proposed in this proceeding. Additionally, Alaska Airlines is the only new carrier proposing service to Mexico City. If Alaska were awarded all four slot pairs requested, it would still have fewer scheduled flights to Mexico City than any of the other carriers applying for slots.

By: Thella Bowens


 

February 2, 2017

Notice of JetBlue Airways

JetBlue hereby submits an updated Excel spreadsheet to reflect its request for Phase Two remedy slots at Mexico City International Airport to provide twice daily non-stop service to Los Angeles International Airport. JetBlue previously filed a timely proposal to use two Phase Two slot pairs to serve LAX in the event that Long Beach Airport was unable to handle international arrivals and later notified the Department when the Long Beach City Council rejected a proposal that would allow international flights at LGB. This updated Excel spreadsheet clarifies that JetBlue seeks solely to serve MEX-LAX, not MEX-LGB. The proposed flight schedule times previously submitted in the original Excel spreadsheet remain identical and are unchanged in this new spreadsheet. To the extent necessary under the Department’s procedural regulations, JetBlue moves for leave to file this updated Excel spreadsheet.

Counsel: Eckert Seamans, Evelyn Sahr, 202-659-6600


 

February 3, 2017

Comments of Lieutenant Governor of California

I write in support of the Alaska Airlines, Inc. application for an allocation of slots at Mexico City's Benito Juarez International Airport to enable them to introduce daily nonstop roundtrip scheduled air service between Mexfoo City and three different California cities: Los Angeles, San Diego and San Francisco.

By: Gavin Newsom


 

February 6, 2017

Consolidated Reply of Alaska Airlines

Alaska and other applicants have argued that the Department can and should allocate the available MEX slots to enable each applicant to implement all or a majority of its proposed services. Given that the US carriers submitted more modest slot requests and have demonstrated that they would compete more effectively with Delta/Aeromexico, the US carrier applicants should receive the slots they have requested. As Alaska, Southwest, and JetBlue demonstrated, this can be accomplished while still enabling Volaris and vivaAerobus to implement the majority of the services they have proposed. This would be a very reasonable outcome given that Volaris and VivaAerobus requested an excessive share of the available slots (17 out of 24 slot pairs) and their services would generate fewer competition and consumer benefits.

Among the five applicants, Alaska's selection will generate the most benefits by adding a new US carrier competitor to the US-MEX market and enabling Alaska to further expand its existing network of western US-Mexico services. Alaska's proposed services will enhance competition with Delta/ Aeromexico and provide new competitive nonstop and connecting service options for consumers on three important western US-MEX routes: Los Angeles-MEX (the largest US-MEX O&D market, where Alaska, operating double-daily service, will compete with Delta/AeroMexico and four other incumbents), San Francisco-MEX (where Alaska will compete with Delta/Aeromexico and two other incumbents), and San Diego-MEX, where Alaska will restore daily nonstop service. No other applicant can match those benefits and therefore Alaska merits an award of four of the 24 available MEX slot pairs.

Counsel: Cozen O'Connor, David Heffernan, 202-912-4800

 

February 6, 2017

Reply of City & County of Denver, Operator of Denver Int'l Airport, in Support of Volaris

None of the Answers or other submissions in this docket change the Parties’ support of Volaris’ application for a year-round daily nonstop flight between DEN and MEX beginning in March 2018. In fact, after reading the submissions in the docket it is even more clear that awarding Volaris slots for use between DEN and MEX should be a top priority of the Department and is one of the most important allocations the Department can make in this proceeding to ensure the public interest standard is met. As the Parties previously stated, providing year-round daily service in this growing market will fulfill the Department’s primary objective in this proceeding, namely maximizing competitive benefits through the strengthening of low fare service in this critical market and by establishing year-round daily nonstop service in a market that needs it.

Volaris’ application for slots to be used in the DEN-MEX market is but one in a case that will allow for the allocation of a host of slots. As such, the Parties take no position on which other carriers or airports are awarded the remainder of the slots, so long as one set of slots is awarded to Volaris for use in the DEN-MEX market. It is not disputed that DEN is the only airport to which an airline has proposed an allocation of MEX slots in this proceeding that does not already have year-round daily service in the MEX market itself or within a 60-mile drive and it is not disputed that DEN is by far the largest US market that does not have year-round daily nonstop service to MEX. As such the Department’s choice remains clear – awarding Volaris a set of slots for year-round daily nonstop DEN-MEX service.

By: Kim Day




February 6, 2017

Reply of the City of Houston

The Department emphasized in its Instituting Order that it will select proposals that “provide the maximum competitive benefits possible from new (preferably daily) services … taking into account a carrier’s ability to exercise competitive discipline.” See Order 2017-1-6. The award of the modest number of slots requested for Houston-Mexico City services would satisfy this goal as well as long-standing pro-competitive Department precedent. The awards requested for Houston by Southwest for William P. Hobby Airport-Mexico City services and by vivaAerobus for services between George Bush Intercontinental Airport and MEX would at a minimum (i) enable new service between one of the US’s largest cities most in need of such service and Mexico’s capital city; (ii) introduce additional price discipline in existing markets; (iii) enhance inter-carrier competition; (iv) enable new entrant service; (v) expand and enhance inter-gateway competition; (vi) add new low-cost service options for consumers; (vii) significantly expand the profile of LCC competition in the Houston-Mexico City market; (viii) enhance the availability of competitive services for behind-gateway consumers; (ix) enable the introduction of new business models; and (x) enhance the quality of competition in the US-Mexico air transportation market overall, as well as specifically in the Houston-MEX market. These pro-competitive developments would directly satisfy the Department’s stated purpose in requiring the slot divestitures, by ensuring “competition in the environment in which the [Delta-AeroMexico] joint venture will operate”.

Counsel: Rachel Trinder, 703-927-5667




February 6, 2017

Reply of Interjet in Support of JFK Airport

Based on the lack of opposition to Interjet’s Application, as well as the reasons set forth in Interjet’s filings in this proceeding, the Department should grant Interjet’s request for a JFK slot-pair to use to provide service between JFK and MEX, specifically, a daily arrival from MEX at 16:25 and a corresponding daily departure from JFK to MEX at 17:40, effective for the IATA 2017 Summer Season. As Interjet explained in its Answer, Interjet proposes that the Department should approve the Volaris request for one Phase 1 JFK slot-pair subject to a slight schedule change of subtracting 31 minutes from Volaris’ proposed arrival and departure times. In particular, changing the original departure time of Volaris’ JFK rotation from 15:30 to 14:59 would prevent Volaris' departure slot from falling within the 15:00 to 20:59 period during which the Joint Applicants are not required to divest more than two slots and thereby enable the Joint Applicants to grant Interjet's request for slots at 16:25 and 17:40.

By awarding Interjet its requested 16:25-17:40 JFK slot-pair, the Department will maximize competition in the JFK-MEX market. As the Department has previously stated, the New York-Mexico City route is the transborder market on which new competition will be needed the most following the grant of ATI to the Joint Venture, and Interjet is well positioned to provide the needed competition. Granting Interjet the JFK slots that it has requested will not impede the slot requests and service plans of the other eligible carriers which are applying for slots in this proceeding. Interjet stands out as the only carrier who met no opposition from the other eligible carriers regarding its requested slot times.

Counsel: Roller & Bauer, Moffett Roller, 202-331-3300

 

Febraury 6, 2017

Consolidated Reply of JetBlue Airways

Alaska is an outlier in this proceeding, criticizing other carriers’ well-supported proposals and opposing the consensus proposals put forth by JetBlue, Southwest, Volaris and Interjet. JetBlue and Southwest urged the Department to grant ALL US carrier requests, even where it would mean increased competition on a route that both carriers would serve such as FLL-MEX and LAX-MEX. In contrast to this principled public policy approach, Alaska’s primary goal appears to be to try to insulate itself from competition in the LAX-MEX market. The Department should be especially wary of Alaska’s proposal in the LAX-MEX market, which included suggesting that other carriers’ LAX-MAX proposals be rejected and that JetBlue’s LAX-MEX application be dismissed.8 In fact, it is unclear if Alaska’s proposal, which involved two of four flights being operated by affiliate carriers, is even procedurally eligible to receive remedy slots as those affiliate carriers were not deemed eligible by the Department to participate in the proceeding.

This is a market that the Department closely examined less than two years ago, when Alaska made a “business decision to transfer a route,” a limited-entry route at that, to its legacy-carrier partner American. The Department, sensitive to criticism at the time that airlines should not be allowed to select their competitors, only approved the route transfer for a one-year time period.

Alaska deceptively ignores that it codeshares on American’s 2x daily LAX-MEX service and instead claims to have “no US-MEX service whatsoever.” In another recent Department proceeding, Alaska noted that it “still serves Los Angeles-Mexico City by codesharing on American’s flights.” Alaska’s past sleight of hand and loose recitation of “facts” in separate proceedings should be carefully considered by the Department.

Despite Alaska’s blatant hypocrisy and bad-faith actions in seeking to restrict competition at LAX, JetBlue maintains that all US carrier requests should be granted, including Alaska/SkyWest’s request for MEX slots to operate 2x daily LAX-MEX service.20 Alaska (by codeshare), American, Delta/Aeromexico and United all provide LAX-MEX service, a quintessential legacy carrier route connecting two of the world’s largest cities with a combined population of over 30,000,000 people.21 An award allowing JetBlue, Southwest and Alaska (with its own metal) to add service would be entirely justified and would in fact provide significant competitive restraint against the legacy carriers entrenched in this important market.

Counsel: Eckert Seamans, Evelyn Sahr, 202-659-6600

 


February 6, 2017

Reply of the Metropolitan Washington Airports Authority in support of Volaris

United Airlines and Aerome xico currently provide service between MEX and IAD. MWAA values its relationship with, and supports the service offered by, its in cumbent carriers. This service provides excellent value for the travelling public . At the same time, MWAA supports the additional low fare service that Volaris will provide, recognizing the broader regional economic benefits associated with growing the market between the two nations' capital regions.

MWAA believes that adding new low fare service at IAD will stimulate traffic at the airport, thus contributing to IAD's overall vitality and improving the overall operations and cost efficiencies of the airport. New service at IAD will help make existing operations less costly and more profitable, and will make the entire airport more cost-competitive for all operators. Accordingly, MWAA urges the Department to award Volaris the requested additional service between IAD and MEX.

By: MWAA, Philip Sunderland




February 6, 2017

Consolidated Reply of Southwest Airlines

Southwest and JetBlue are in agreement that the Department should grant US carriers all 14 of the MEX slot pairs they have requested in this proceeding. However, JetBlue’s underlying rationale for this conclusion is that:

...principles of comity and reciprocity suggest that allocating a slot remedy equally between US and Mexican carriers best comports with the stated goals of both the Department and COFECE.

Southwest disagrees. Not only has JetBlue misinterpreted the doctrine of comity and reciprocity, but it has cited no precedent to support its application in this proceeding. In fact, principles of comity and reciprocity are not applicable to the remedy being fashioned in this proceeding for protecting consumers against anticompetitive behavior resulting from the immunized joint venture agreement of Delta and AeroMexico.

As the Department knows, the principles of comity and reciprocity are most often invoked when two governments are crafting an exchange of operating rights that is not covered by a specific provision in a bilateral agreement. In such a situation, when authorizing scheduled services, a country might, as a matter of comity, approve services by a foreign airline but insist on reciprocity for its flag carriers. But, there is neither a logical basis nor precedent for applying principles of comity and reciprocity to this remedy proceeding.

Furthermore, JetBlue’s assertion regarding comity and reciprocity conflicts directly with the Department’s repeated statements in the ATI proceeding that its evaluation of the Joint Applicants’ alliance agreements was independent of negotiations between the two countries over a liberalized bilateral agreement. While the adoption of the new Air Transport Agreement provided the necessary foundation for the Department to consider the carriers’ ATI application, the DOT repeatedly made clear that conferring immunity for the DL/AM joint venture (subject to any necessary remedies) is not intertwined with the bilateral relationship.

Finally, JetBlue’s reference to COFECE is puzzling. While the Department has taken steps to ensure its larger remedy will also satisfy COFECE’s smaller remedy requirement, this proceeding is before DOT alone. COFECE’s separate review of the DL/AM alliance does not justify, much less require, an even split of DOT-mandated MEX slot divestitures imposed as a condition of granting immunity from the US antitrust laws. This is especially true given that US LCCs operate at such a severe disadvantage to Mexican LCCs at Mexico City, a fact that JetBlue inexplicably ignores. In sum, while JetBlue’s Answer reaches the right conclusion that US carrier applicants should be granted all 14 MEX slot pairs they request, its underlying reasoning is flawed.

Counsel: Southwest, Robert Kneisley, 202-263-6284

 

February 6, 2017

Consolidated Reply of vivaAerobus

The Department is poised to make critically important decisions on how to allocate the 24 MEX and 4 JFK slot pairs. These allocations were deemed necessary to offset the potential anticompetitive effects of the Delta/AeroMexico alliance and introduce new business models and low fare competition. VivaAerobus is poised to make a major contribution to this effort, with its innovative ULCC business plan that includes more expansion in the cross-border market, profitable operations, the most modern fleet of any applicant, the lowest costs, and a new user friendly website. Moreover, viva now participates in the Saber GDS, Expedia, and metasearch engines, making its flights, and its essential air to bus connections readily available. In Mexico, where the road system and airport infrastructure are less developed then in the US, this ground transportation system is incredibly important.

Viva believes on review, the Department will agree that the allocation it proposed, giving each applicant their first 3 Phase 1 priorities and most of their Phase 2 requests, will best further the competitive and public interest goals of bringing a range of low-fare options to the most important US-MEX markets. In addition, it would enable travelers, including the very large and underserved Visiting Friends and Relative segment, to benefit from the new US-Mexico bilateral.

Counsel: Kirstein & Young, David Kirstein, 202-331-3348




February 6, 2017

Consolidated Reply of Volaris

The Department initiated this proceeding for a very specific purpose - to authorize US-Mexico City and JFK-Mexico services that can quickly impose competitive discipline upon the Delta-AeroMexico joint venture. The Department indicated that time was of the essence, requiring carriers to launch their new services during the course of this upcoming IATA traffic season. Noting the specific purpose of the required divestiture, and understanding that Mexican carriers can impose competitive discipline upon Delta-AeroMexico as effectively as US carriers can, the Department made a specific decision not to limit its issuance of remedy slots to US carriers.

While Volaris has indicated its comfort with the US carriers having their slot requests allocated in full (or close thereto), Volaris takes exception to the claims of "entitlement" or preference for US carriers that have been made by Southwest and Alaska. (JetBlue has broken from the others, arguing for parity in allocation.) Volaris believes that the allocation decision should not be based on the nationality of the airline receiving the slots, but on whether the recipient will make prompt and full use of the slots they receive, looking most closely at the overlap markets deemed to be at risk by the regulators.

Despite the claims of the US carriers to the contrary, Volaris offers an attractive and viable competitive alternative to Delta-AeroMexico. When Volaris enters a market served by AeroMexico, fares tend to go down, even if it is able to offer a limited number of frequencies in competition with AeroMexico. Volaris' average fares in the Mexico City markets it serves have decreased over the last several years. Furthermore (and contradicting Alaska's claims), Volaris does carry both US-originating traffic and business traffic.

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


 

February 10, 2017

Letters in Support of Alaska Airlines - 7MB

Letters in Support of Alaska Airlines' Proposed Los Angeles-Mexico City:

The Honorable Gavin Newsom, Lieutenant Governor of the State of California
The Honorable Ben Allen, California State Senate, 26th State Senate District
The Honorable Autumn R. Burke, California State Assembly, 62nd Assembly District
The Honorable Bob Blumenfield, Councilmember, City of Los Angeles, 3rd District
The Honorable Mike Bonin, Councilmember, City of Los Angeles, 11th District
Los Angeles World Airports
Mexico Tourism Board
California Travel Association
Los Angeles Area Chamber of Commerce
Los Angeles County Economic Development Corporation
Sister Cities of Los Angeles

Letters in Support of Alaska Airlines' Proposed San Francisco-Mexico City:

The Honorable Gavin Newsom, Lieutenant Governor of the State of California
The Honorable Kevin Mullin, Speaker Pro-Tempore, California State Assembly
The Honorable Edwin M. Lee, Mayor of the City and County of San Francisco
Mexico Tourism Board
California Travel Association
Bay Area Council
San Francisco Chamber of Commerce
San Francisco Travel Association

Letters in Support of Alaska Airlines' Proposed San Diego-Mexico City:

The Honorable Gavin Newsom, Lieutenant Governor of the State of California
The Honorable Toni G. Atkins, California State Senate, 39th State Senate District
San Diego County Regional Airport Authority
Mexico Tourism Board
California Travel Association
San Diego Regional Economic Development Corporation
World Trade Center San Diego
San Diego Tourism Authority

Counsel: Cozen O'Connor, David Heffernan

 

February 14, 2017

City of Los Angeles in Support of Alaska Airlines

I write in support of the application of Alaska Airlines for an allocation of slots at Mexico City's Benito Juarez International Airport to enable double-daily nonstop roundtrip scheduled air service between Los Angeles International Airport and Mexico City. I am very pleased that Alaska has proposed to introduce double-daily nonstop service to Mexico City from Los Angeles. I strongly urge the Department to award Alaska the MEX slots necessary to implement this service.

By: Mayor Eric Garcetti

 

February 6, 2017

Califnoria Assemblymember Autumn Burke in Support of Alaska Airlines

I write in support of the application of Alaska Airlines , Inc. for an allocation of slots at Mexico City's Benito Juarez International Airport to enable it to introduce double daily non top roundtrip scheduled air service between Los Angeles, California and Mexico City. I am very pleased that Alaska has proposed to introduce double daily nonstop service to Mexico City from Los Angeles. I strongly urge the Department to award Alaska the MEX slots necessary to implement this service.

By: Autumn Burke


 

Order 2017-3-1
OST-2015-0070
- Antitrust Immunity for Alliance Agreements

Issued and Served March 2, 2017

Order to Show Cause

By this Order, the Department is tentatively proposing to assign 24 slot-pairs at Mexico City’s Benito Juarez International Airport and four slot-pairs at New York’s John F. Kennedy International Airport. These slot-pairs are being divested by Delta Air Lines, Inc. and Aerovias de Mexico, S.A. de C.V. as a condition of a grant of antitrust immunity from the Department (see Order 2016-12-13, December 14, 2016) for a joint venture covering air transportation between the United States and Mexico.

At MEX:

Alaska:

  • 2 slot-pairs for service to LAX – Phase One
  • 1 slot-pair for service to SFO – Phase One
  • 1 slot-pair for service to SAN – Phase One

JetBlue:

  • 2 slot-pairs for service to FLL – Phase One
  • 2 slot-pairs for service to MCO – Phase One
  • 2 slot-pairs for service to LAX – Phase Two

Southwest:

  • 2 slot-pairs for service to HOU – Phase One
  • 1 slot-pair for service to FLL – Phase Two
  • 1 slot-pair for service to LAX – Phase Two

Volaris:

  • 1 slot-pair for service to SAT – Phase One
  • 1 slot-pair for service to JFK – Phase One
  • 1 slot-pair for service to LAX – Phase One
  • 1 slot-pair for service to DEN – Phase Two
  • 1 slot-pair for service to IAD – Phase Two
  • 1 slot-pair for service to SJC – Phase Two
  • 1 slot for service to ONT – Phase Two9
  • 1 slot for service to ORD – Phase Two
  • 1 slot for service to OAK – Phase Two

VivaAerobus

  • 1 slot-pair for service to LAS – Phase One
  • 2 slot-pairs for service to JFK – Phase Two

At JFK:

Interjet:

  • 1 slot-pair for service to MEX – Phase One

Volaris:

  • 1 slot-pair for service to MEX – Phase One

VivaAerobus:

  • 2 slot-pairs for service to MEX – Phase Two

By: Susan McDermott


 

March 13, 2017

Comments of City & County of Denver

Denver has not taken a position at any point in this proceeding as to the merits of the other applications for slots or the benefits provided by any of the other services proposed. We continue to hold this position and therefore cannot comment directly on the other tentative findings and conclusions of the Department as they relate to any allocation of slots other than the allocation provided to Volaris for a year-round daily nonstop flight between DEN and MEX. Although this is true, given the need to start planning for this important new service and the efforts that will be provided to ensure that the new flight is as successful as we all recognize it will be, we urge the Department to finalize its tentative findings and conclusions as quickly as possible.

The public benefits that a year-round daily nonstop flight between DEN and MEX will provide, and the benefits that low fare airlines bring to this market are without question. I strongly encourage the Department to finalize its tentative decision quickly so that the benefits of this decision can be provided to the traveling public without delay.

By: Kim Day




March 13, 2017

Comments of Interjet

Interjet acknowledges and accepts the Department’s approval of Interjet’s request for a Phase One slot-pair at JFK to accommodate daily Interjet urges the Department to finalize the Departments’ tentative decision to award to Interjet one slot-pair at John F. Kennedy International Airport in Phase One of this proceeding in order to accommodate an arrival from, and departure to, Mexico City International Airport at 16:25 and 17:40, respectively.

Interjet urges the Department to revisit the Department’s decision to exclude Interjet from the slot allocation proceeding at MEX. The Department has failed to provide any basis that would support its decision to exclude Interjet from competing for MEX slots.

Interjet is prepared to submit a request promptly for the divested MEX slot-pairs that Interjet would utilize for transborder service. The Department should then issue a revised Order to Show Cause that adjusts the MEX allocation after fair consideration of the additional competition to be provided by the introduction of additional service by Interjet.-MEX service with a 16:25 arrival and a 17:40 departure. Interjet, however, renews its objections to the Department’s decision to exclude Interjet from the MEX remedy and urges the Department to reconsider its SCO accordingly.

Counsel: Roller & Bauer, Moffett Roller, 202-331-3300




March 13, 2017

Comments of JetBlue Airways

JetBlue again commends the Department for creating a viable slot remedy at Mexico City International Airport, and is confident that the remedy proposed in the March 2, 2017, Order to Show Cause will achieve the Department’s goals and balance the anti-competitive effects that would otherwise result from an antitrust immunity grant. The Department’s diligent efforts to address the competitive access issues at MEX will surely result in increased competition in the United States-Mexico transborder market and directly benefit consumers and the traveling public in both countries. JetBlue is eager to enhance its existing service at MEX with flights at commercially viable times so that it can better deliver its award-winning service and market-stimulating low airfares to consumers. As such, JetBlue welcomes the Department’s tentative award of six MEX slot pairs and urges the Department to promptly issue a final order so that JetBlue can complete the slot transfer process and begin implementing commercial plans to utilize the remedy slots as soon as possible.

Counsel: Eckert Seamans, Evelyn Sahr, 202-659-6600




March 13, 2017

Answer of Southwest Airlines

Southwest supports the Department’s proposed MEX slot pair allocation and urges that the Order be finalized as soon as possible so that the recipient carriers can initiate service and thereby provide competition with the Delta/AeroMexico joint venture.

Southwest also supports the important conditions the Department places on the divested MEX slots and their transfer to recipient carriers contained in Section IX of the Order. Southwest appreciates the Department’s detailed conditions and continued oversight, which will help ensure the divested slots can be used for their intended purpose.

Counsel: Southwest, Robert Kneisley, 202-263-6284

 


March 10, 2017

Comments of vivaAerobus

In its original application Viva requested two JFK slot-pairs to match with 2 MEX slot-pairs for double daily MEX-JFK service. Viva has revised its Phase 2 JFK slot-pair requests to comply with the Department’s order that it not include slots during the 15:00-20:59 hours.

In Viva’s Application, its first priority was service from MEX to LAX. Viva now requests the Department allow it to drop one its Phase 2 MEX-JFK services and utilize the MEX slot pair for service to LAX. Because of the blocked slot times at JFK, Viva has been forced to use a commercially difficult schedule for one of the flights, which departs MEX at close to 11:00 pm and arrives at JFK at 5:00 am. Given these limitation, Viva believes enabling it to enter the MEX-LAX market would provide substantially more consumer benefits. Despite the claims of Volaris, Viva has taken into account the higher US operating costs in proposing the average MEX-LAX fare of $78, which is much lower than its closest competitor. Moreover, its investments in its fleet and technological capabilities will ensure that Viva will sustain this service. Finally, as explained in Viva’s earlier submissions, Viva’s service from LAX will enable passengers to utilize the numerous bus lines to travel to dozens of smaller villages unreachable by aircraft.

Counsel: Kirstein & Young, David Kirstein, 202-331-3348

 


March 13, 2017

Comments of Volaris

The Department denied Volaris' request for a Phase 2 JFK slot in favor of vivaAerobus, which tentatively was granted two JFK slots in order to operate double-daily JFK service. Volaris notes that vivaAerobus has since requested that the Department allow it to switch one of its authorized Phase 2 services from New York (JFK)-MEX to LAX-MEX,6 which means that, if granted, vivaAerobus would operate only a single daily service to JFK, which potentially could free that slot for use by Volaris. To the extent that the Department permits vivaAerobus to make that substitution of desired services, Volaris respectfully requests that the Department revise its tentative decision and grant Volaris its desired Phase 2 slot at JFK so that it might launch scheduled JFK-CUN service in Phase 2.

Volaris largely concurs with the tentative findings made by the Department. Volaris respectfully requests, however, that the Department be prepared to withdraw and reallocate any slots that are not promptly used by the designated awardees. Volaris further requests that to the extent the Department allows vivaAerobus to change its Phase 2 service plans, that Volaris be granted the Phase 2 slot at JFK that would have been used for vivaAerobus' second daily JFK-MEX service.

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


 

March 22, 2017

Consolidated Answer of Alaska Airlines to Comments on Order to Show Cause

It is a testament to the fairness of the Department's tentative decision regarding the assignment of the available MEX slots that no applicant has objected to it. Alaska takes no position on the Department's tentative decision regarding the assignment of the other 20 MEX slot pairs among the other applicants. However, Alaska takes issue with vivaAerobus' request to use one of its two tentatively awarded Phase Two MEX slot pairs for LAX-MEX service rather than for JFK-MEX service, as required by the Show Cause Order. In making its tentative decision, the Department proposed specific assignments of slots not only by individual carrier but also by the route to be served. If the Department wanted to allow carriers to move slots from one route to another, it would have incorporated such flexibility into its instituting order and tentative decision. The Department, however, did exactly the opposite: it required applicants to specify the routes (and specific airports) they were prepared to serve and assigned slots based on the competitive benefits to be derived from service to MEX from those points.

The Department, in its orders approving and granting antitrust immunity to the Delta/ AeroMexico joint venture and in its instituting order, made it abundantly clear that it was particularly concerned about a substantial reduction in competition on the JFK-MEX route following implementation of an antitrust-immunized Delta/AeroMexico joint venture, which is a hub-to-hub route for Delta/AeroMexico, with slot-based entry barriers at both ends of the route. The Department made clear that it wanted to allocate the JFK remedy slots to enable the introduction of new nonstop low-cost carrier services on the JFK-MEX route in competition with Delta/AeroMexico. The Department's tentative decision addressed those concerns by authorizing four new daily nonstop services on the route, but ifvivaAerobus' request to transfer its second JFK-MEX award to the LAX-MEX route were granted, the Department would forfeit one of those four new service opportunities on the JFK-MEX route. The Department, having determined that the public interest would be best served by deploying the available JFK remedy slots on the JFK-MEX route, should not be deterred from finalizing its proposed decision, particularly in light of vivaAerobus' statement that it is willing to operate twice-daily JFK-MEX service. The Department generally disfavors revising its tentative awards of operating authority in limited-entry route/frequency/slot proceedings in response to individual carrier requests, and should continue to apply that policy in this case.

In conclusion, Alaska urges the Department to issue a final order confirming its tentative assignment of slots as soon as possible so that Alaska and the other slot recipients can complete the additional steps necessary to implement their proposed services without delay.

Counsel: Cozen O'Connor, David Heffernan, 202-912-4800




March 22, 2017

Request of Delta Air Lines for Waiver of FAA Order

Delta Air Lines hereby respectfully requests a waiver from certain restrictions in the Order Limiting Operations at John F. Kennedy International Airport first published on January 18, 2008 and most recently amended and extended by Notice dated June 21, 2016. This waiver is necessary to permit Delta to permanently transfer, in accordance with the Department of Transportation’s Order to Show Cause 2017-3-1 (and the subsequently to-be-issued Final Order) mandating that Delta transfer four JFK operating authorizations to carrier(s) selected by DOT.

Granting this waiver, and the subsequent transfer of slots to the DOT-selected carriers, will allow Delta and Aerovias de Mexico, S.A. de C.V. to move towards full implementation of their Joint Cooperation Agreement, to the benefit of the traveling public, as DOT found would be the case in approving and granting antitrust immunity to the Delta-AeroMexico. See Order 2016-12-13. The JFK Order does not provide for the permanent transfer of JFK slots as envisioned by the DOT’s Show Cause Order, which is not time-limited. Hence, the terms of the JFK Order do not allow for the slots transfers as ordered by DOT as a condition to final approval of the JCA between Delta and Aeromexico.

A waiver is necessary so that Delta can fulfill its obligations under the terms of the Department’s Show Cause Order. Accordingly, there is good cause to forgo a notice and comment period as the DOT proceeding has already provided for sufficient notice and comment. Allowing public comments would only delay Delta and Aeromexico from bringing the DOT-validated benefits of the JCA to the US-Mexico market, and would delay other carriers from starting their own service with the transferred slots for the IATA Northern Summer 2017 season as envisioned by DOT.

Counsel: Delta, Christopher Walker, 202-216-0700

FAA-2007-29320 - Operating Limitations at New York JFK

 

March 22, 2017

Answer of City of Houston

In its March 13, 2017 Answer, Southwest reiterated its firm commitment to commencing the proposed new services promptly. The two Phase One slot-pairs tentatively awarded to Southwest for these services will enhance competition on multiple levels. As the Department noted, Southwest is one of the carriers “best positioned and most likely to provide … competition” to the Delta-AeroMexico joint venture. The new services will expand consumer options and competition not only at Hobby but also at Houston overall – the #1 US-Mexico gateway – and will enhance low fare connectivity to dozens of destinations throughout the nation. As noted in Houston’s January 30, 2017 Answer, ample precedent exists for this award. No comments or objections have been filed that would support a change to the Department’s tentative decision, and Houston asks that the Department make the award final as soon as possible.

Counsel: Trinder Aviation & Aerospace Advocacy, Rachel Trinder, 703-927-5667




March 22, 2017

Consolidated Reply of Southwest Airlines

In its comments to the Order, Viva “now requests the Department allow it to drop one of its Phase 2 MEX-JFK services….and utilize the MEX slot pair for service to LAX.” Viva bases this request on its claim that the available slot times for its second JFK-MEX roundtrip are “commercially difficult.” However, this appears to be a circumstance of Viva’s own making, since the Department stated clearly in its Final Order (issued December 13, 2016) that only two JFK slots would be awarded in the peak hours of 1500 – 2059. The Department repeated the same limitation in its January 6 Instituting Order (“During the 15:00-20:59 period, the Joint Applicants shall not be obligated to transfer more than 2 slots total.”). Despite this, Viva requested peak hour slot times for both of the JFK slot pairs in its application. Thus Viva knew with certainty it would be required to move at least one of its JFK slot pairs to non-peak times if both were awarded. Accordingly, it seems disingenuous for Viva to now cite the non-availability of peak JFK slot times as a justification for moving one of its slot pairs to another market. Viva could easily have avoided this issue in its application by taking into account the Department’s previously stated limitation on the divestiture of peak hour JFK-MEX slots.

Interjet uses its comments to the Show Cause Order to “renew” its objection to being excluded from the Department’s allocation of divested MEX slots. This argument is both untimely and baseless. The merits of the Delta-Aeromexico immunized joint venture, the number of slots to be divested as a condition of approval, and carrier eligibility to receive the divested slots are all issues that were thoroughly aired during the DOT’s 20-month evaluation of the ATI application. As part of that process, the Department determined inter alia that Interjet was ineligible to receive divested MEX slots due to its status as the second largest slot holder at MEX with more than 26 percent of the slot pairs at the airport. The DOT finalized its decision regarding Interjet’s eligibility, over Interjet’s objections, in its December 13 Final Order. Therefore, the issues currently before the DOT in this “Slot Assignment Phase” of the ATI proceeding are properly limited to the allocation of the divested slots to eligible carriers. This is not the appropriate forum for Interjet to rehash its arguments regarding carrier eligibility.

For the reasons given above and in its prior pleadings, Southwest supports the Department’s proposed MEX slot pair allocation and urges the DOT to finalize its Show Cause Order as soon as possible so that the recipient carriers can initiate service in competition with the Delta/AeroMexico joint venture using the divested slots.

Counsel: Southwest, Robert Kneisley, 202-262-6284

 

March 22, 2017

Reply of vivaAerobus to Comments and Objections of Interjet

The Department emphasized in the Instituting Order (Order 2017-1-6) its decision-making with respect to slot distribution would be done to maximize competition and new service in the US-MEX market. Granting additional MEX slots to Interjet, which currently holds 313 MEX slots, would not accomplish this goal. In the Final Order (Order 2016-12-13) the Department fully explored the eligibly of carriers for JFK and MEX slot-pairs, and deliberately recognized Interjet’s saturation in the MEX marketplace: “By its own admission, Interjet has over 26% of the slots at MEX, more by far than any other carrier besides AeroMexico. Interjet does not need assistance to achieve competitive access at MEX; it already has it.”

Viva requests that the Department reject any reconsideration of its Final Order and confirm its divestiture to Interjet for one slot-pair at JFK for service to MEX.

Viva reiterates its request to change one of its awarded MEX-JFK routes to a MEX-LAX route which would provide true ULCC competition in that market. This change would be in line with the Department’s goal of maximizing competition in the highly traveled MEX-LAX market.

Counsel: Kirstein & Young, David Kirstein, 202-331-3348


 

March 24, 2017

Ex-Parte Letters to:

California State Senator Toni Atkins
Los Angeles Councilmember Mike Bonin

San Francisco Travel Association President & CEO

By: Susan McDermott


 

Order 2017-4-6
OST-2015-0070
- Antitrust Immunity for Alliance Agreements

Issued and Served April 10, 2017

Final Order

After reviewing the comments and responsive pleadings that have been filed, the Department is largely adopting the assignments it tentatively proposed in Show Cause Order 2017-3-1, with one change to the assignment of JFK slots. The Department has decided upon the following slot assignments:

At MEX:

Alaska:

  • 2 slot-pairs for service to LAX – Phase One
  • 1 slot-pair for service to SFO – Phase One
  • 1 slot-pair for service to SAN – Phase One

JetBlue:

  • 2 slot-pairs for service to FLL – Phase One
  • 2 slot-pairs for service to MCO – Phase One
  • 2 slot-pairs for service to LAX – Phase Two

Southwest:

  • 2 slot-pairs for service to HOU – Phase One
  • 1 slot-pair for service to FLL – Phase Two
  • 1 slot-pair for service to LAX – Phase Two

Volaris:

  • 1 slot-pair for service to SAT – Phase One
  • 1 slot-pair for service to JFK – Phase One
  • 1 slot-pair for service to LAX – Phase One
  • 1 slot-pair for service to DEN – Phase Two
  • 1 slot-pair for service to IAD – Phase Two
  • 1 slot-pair for service to SJC – Phase Two
  • 1 slot for service to ONT – Phase Two
  • 1 slot for service to ORD – Phase Two
  • 1 slot for service to OAK – Phase Two

VivaAerobus

  • 1 slot-pair for service to LAS – Phase One
  • 2 slot-pairs for service to JFK – Phase Two

At JFK:

Interjet:

  • 1 slot-pair for service to MEX – Phase One

Volaris:

  • 1 slot-pair for service to MEX – Phase One
  • 1 slot for service to CUN – Phase Two

VivaAerobus:

  • 3 slots for service to MEX – Phase Two

By selecting VivaAerobus’ revised JFK slot-times, the Department is able to accommodate Volaris’ original JFK-CUN request. VivaAerobus’ revised slot-times require only three slots for its operations, as its requested 0500 arrival at JFK is outside of the airport’s slot-controlled hours. Likewise, Volaris requested JFK slots at 0700 and 2300 for its proposed CUN service. 2300 is also outside of the slot-controlled hours at JFK. Therefore, Volaris requires only one slot (at 0700) to operate the service. As there are no other competing requests for the available JFK slots, the Department will assign the remaining JFK slot made available by VivaAerobus’ revised request to Volaris for service to CUN.

The Department denies VivaAerobus’ request to move its second JFK service to LAX. The Department noted the importance of the JFK-MEX nonstop overlap route in crafting its remedy. The ATI Show Cause and Final Orders noted that JFK-MEX is a nonstop overlap market that raises competitive concerns, requiring a route-specific remedy. The importance of this market was discussed in detail in the ATI phase of this proceeding. This is in large part why VivaAerobus’ second proposed JFK-MEX service was originally chosen over a competing request for JFK-CUN service by Volaris.

Interjet contends that the Department has exceeded its statutory jurisdiction in reaching its determination on the appropriate slot remedy. The lynchpin of Interjet’s argument is that the Department is effectively usurping the power of Mexican authorities, particularly Aeropuerto Internacional de la Ciudad de México and Direccion General de Aeronautica Civil, “to administer slot allocation at MEX.” But Interjet misinterprets the Department’s decision and suggests a problem of comity that does not actually exist. As the Department has explained, it does not, and cannot, allocate slots at MEX. The Department has conditioned its discretionary grant of ATI on the Joint Applicants’ divestiture of certain assets, as well as their transfer of those slots, in a manner that is compatible with Mexican laws and procedures; a condition that the Joint Applicants voluntarily accepted. The onus is now on the Joint Applicants to comply with that condition. Although the Department has determined the carriers to which the Joint Applicants will transfer the slots, as set forth below, the ultimate approval of those slot transfers at MEX continues to rest with AICM. If the Joint Applicants do not obtain approval of the slot transfers, then the Department’s grant of ATI will simply not enter into force.

By: Susan McDermott


 

May 4, 2017

DOT Granting Approval of Agreements

We are in receipt of the following slot transfer agreements submitted to the Department of Transportation for prior approval:

  • Between Delta and Interjet, executed April 25, 2017
  • Between Delta and Volaris, executed April 20, 2017
  • Between AeroMexico and Alaska, executed April 20, 2017 (two agreements)
  • Between AeroMexico and Volaris, executed April 20, 2017 (two agreements)
  • Between AeroMexico and JetBlue, executed April 26, 2017 (two agreements)
  • Between AeroMexico and Southwest, executed April 26, 2017
  • Between AeroMexico and VivaAerobus, executed May 3, 2017

The Department has reviewed these agreements and has determined that they meet the terms and conditions established in Department Orders 2016-12-13 (December 14, 2016) and 2017-4-6 (April 10, 2017). The Department therefore grants its approval to these agreements.

Once all other necessary approvals have been received and all other terms and conditions of Orders 2016-12-13 and 2017-4-10 * have been satisfied, Delta and Aeromexico should place a notice to that effect in docket DOT-OST-2015-0070, stating that the joint venture has been implemented. The Department's grant of antitrust immunity will become effective from the date that notice is submitted for a period of five years.

By: Todd Homan


 

May 5, 2017

Joint Applicants' Notice

The Joint Applicants submitted each of the executed Slot Assignment Agreements to the Department for prior approval, and the Department notified the Joint Applicants of its approval on May 4, 2017.

The implementation date of the Joint Cooperation Agreement will be the first Business Day following the date ATI becomes effective (i.e., May 8, 2017).

Accordingly, pursuant to DOT Order 2016-12-13, Ordering Paragraph 3, as a result of the submission of this Notice in the public docket, the approval of and grant of antitrust immunity for the Alliance Agreements between Delta and Aeromexico is effective as of today.

Counsel: Hogan Lovells, Robert Cohn for AeroMexico / Christine Wilson for Delta




September 22, 2017

Notice of Southwest Airlines of MEX Phase Two Slot Availability

Pursuant to Order 2017-4-6, Southwest Airlines Co. hereby provides notice that rights to the following two Mexico City Phase Two slot pairs are available for permanent reallocation at no compensation to eligible carrier(s):

MEX Slot Pair 1 1245A 1340D
MEX Slot Pair 2 2200A 0750D

This Notice is being served on representatives of all eligible carriers on the attached service list and filed in the referenced docket. If your carrier wishes to acquire the rights to either or both of the slot pairs listed above, please notify Leslie Abbott in writing by October 2, 2017.

Counsel: Southwest, Robert Kneisley, 202-263-6284


 

October 16, 2017

DOT Approval of Transfer of Slots From Southwest to VivaAerobus

The Department has received the request of Southwest Airline Co. to transfer its rights to acquire two Mexico City Phase Two slot pairs to VivaAerobus. These slot pairs are being made available as a condition of the Department's approval of alliance agreements and a grant of antitrust immunity to Delta Air Lines, Inc. and Aerovias de Mexico, S.A. de C.V. The slot pairs (and this transfer) are subject to the terms and conditions of Orders 2016-12-13 and 2017-4-6. The slot pairs in question are:

MEX Slot Pair 1 1245 A 1340 D
MEX Slot Pair 2 2200 A 0750 D

Southwest states that VivaAerobus was the only carrier to request the slot pairs and that it is not receiving compensation from VivaAerobus in consideration for the transfer. Pursuant to the terms of Order 2017-4-6, the Department grants its approval to the transfer of the rights to the above slot pairs from Southwest to VivaAerobus. The Department now considers VivaAerobus to hold the rights to the two Phase Two slot pairs previously granted to Southwest as described in Appendix A of Order 2017-4-6. The slot pairs remain subject to all terms and conditions established in Orders 2016-12-13 and 2017-4-6, including the requirement to exhaust all reasonable efforts to obtain commensurate slots through the normal slot allocation procedures at Mexico City before the Joint Applicants will be required to provide them.

By: Todd Homan


 

Served November 21, 2017

Notice

Order 2017-4-6, issued on April 10, 2017 in this docket, directed, as a condition of a grant of antitrust immunity, the divestiture of certain slots at New York’s John F. Kennedy International Airport and Mexico City’s Benito Juarez International Airport to selected carriers, in two phases. Slots constituting the second phase of divestitures are subject to an exhaustion of efforts requirement whereby the carriers awarded Phase Two slots must request the identified slots from the slot coordinators at JFK and MEX and show that their request(s) were not fulfilled, before the Joint Applicants would be required to divest the slots.

The Final Order established a deadline of November 21, 2017, by which, if the recipient carriers are not granted the requested slots (within a +/- 60-minute window), the Joint Applicants would be obligated to provide them. The Department is hereby directing carriers awarded Phase Two slots by Order 2017-4-6 to submit evidence to the Department of their timely request(s) for Phase Two slots and any denials and/or evidence of non- or incomplete responses from the respective slot coordinators, no later than November 27, 2017. Carriers should file that evidence in this docket. The Department will then review the evidence submitted and promptly notify the Joint Applicants of their Phase Two slot divestiture obligations, pursuant to Order 2017-4-6.

By: Susan McDermott


 

November 27, 2017

Re: Notification of JetBlue Phase Two Slot Requests

JetBlue submitted a timely request with the Mexico City International Airport slot coordinator for two additional slot pairs for new service effective March 25, 2018. The slot request was submitted in accordance with applicable MEX procedures. A copy of the slot request is attached as Exhibit A. Ten days after the request was submitted, JetBlue received a rejection message. A copy of the rejection message is attached as Exhibit B.

The Department has stated that “[i]f [competing Phase Two airlines] do not receive a complete response, or are not granted slots within a 60-minute window of their requests, the Department will consider that the competing airlines have exhausted all reasonable efforts to obtain slots. At this point, the Joint Applicants’ obligation to transfer remedy slots as a condition of maintaining their antitrust immunity will be triggered. The Department will notify the Joint Applicants if they are obligated to provide these remedy slots.”

As such, JetBlue respectfully requests that the Department confirm its compliance with the “exhaustion of efforts” requirement for the Phase Two remedy slots and notify Delta and AeroMexico of their obligation to divest additional slots in order to maintain their antitrust immunity grant.

Counsel: JetBlue, Robert Land

 

November 27, 2017

Re: VivaAerobus Slot Request

Pursuant to the Notice issued on November 21, 2017, and Orders 2016-12-13, 2017-1-6, and 2017-4-6, viva submitted timely requests for the Phase Two slot-pairs at JFK and MEX to the appropriate authorities. Viva submitted their JFK slot-pair requests on November 7, 2017 to the FAA and were denied ten days later, the correspondence between viva and the FAA is attached as Exhibit 1. As required in the aforementioned Orders, we respectfully request the Department notify the Joint Applicants that viva’s efforts have been exhausted and they are obligated to divest the JFK slot pairs to viva.

On November 14, 2017, viva submitted a written request to AICM regarding their MEX slot-pairs. AICM has responded (attached as Exhibits 2), that it will be able to provide slots at the specific times or times that will accommodate viva’s flights.

Counsel: Kirstein & Young, David Kirstein

 

November 27, 2017

Notification of Volaris

Motion for Confidential Treatment

Volaris is writing to notify DOT that it submitted a timely, written request to the slot administrator at Mexico City International Airport, AICM, for allocation of slots for the Summer 2018 Scheduling Season, including the Phase Two slots identified in this docket.

AICM did not provide a complete response to Volaris' request by November 21, 2017. AICM responded to Volaris on November 17, 2017 indicating that the Phase Two slots requested could be subject to modified timing and can only be confirmed following AICM's reconciliation process for the current season. AICM did not provide a date by which this decision will be made and Volaris has not received any notice since that letter.

Accordingly, pursuant to footnote one on page two of Order 2017-4-6, Volaris respectfully requests that the Department deem Volaris to have exhausted reasonable efforts to obtain these slots from AICM and to take action on the Phase Two divestiture awarded to Volaris in this docket.

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


 

Served February 28, 2018

Notice of Phase II Record Update

The Final Order established a deadline of November 21, 2017, by which, if the recipient carriers were not granted the requested slots (within a +/- 60-minute window), the Joint Applicants would be obligated to provide them. On November 21, 2017, the Department issued a notice directing carriers awarded Phase Two slots by Order 2017-4-6 to submit evidence in this docket of their timely request(s) for Phase Two slots and any denials and/or evidence of non- or incomplete responses from the respective slot coordinators, no later than November 27, 2017.

The Department has been made aware that the Mexico City Airport Authority subsequently announced that it would publish final Summer-2018 slot assignments on February 18, 2018.4 The airport authority later announced that having concluded the assignment process, there would be a short period (ending on February 21, 2018) for carriers to request changes or additions to their assignments. Owing to this process in Mexico City, the Department requests that Phase Two recipient carriers file in this docket, no later than March 7, 2018, updated evidence indicating their timely requests for the assigned slots and which of those slots they have received from the Mexico City Airport Authority. The Department also requests that carriers seeking to obtain Phase Two JFK slots use this opportunity to refresh the record with all available evidence showing that they met the exhaustion of efforts requirements at that airport, subject to the same deadline of March 7, 2018.

The Department will give the Joint Applicants until March 14, 2018 to reply with any comments.

The Department will then review the record and promptly notify the Joint Applicants of their Phase Two slot divestiture obligations pursuant to Order 2017-4-6.

By: Joel Szabat


 


March 7, 2018

Response of vivaAerobus

AICM has granted viva its requested Phase Two slots at Mexico City’s Benito Juarez International Airport. However, as evidenced in the attached emails, the FAA has not granted viva requested Phase Two slots at JFK, and has met the exhaustive efforts requirement of Order 2017-4-6.

Also, as previously advised, delivery of the A320neo viva needs for the Phase II MEX/JFK service has been delayed due to the widely reported problems with the Pratt & Whitney engines. Viva currently expects delivery in time to begin service to JFK by the end of October 2018. We will continue to keep the Department updated on the delivery of viva’s new aircraft for the JFK service.

Counsel: Kirstein & Young, David Kirstein, 202-331-3348




March 7, 2018

Re: Supplemental Evidence of vivaAerobus

In follow up to our filing of earlier today, attached is additional correspondence between FAA and viva from May 3, 2017 to October 30, 2017, regarding viva’s timely request for Phase Two slot assignments at JFK.

Counsel: Kirstein & Young, David Kirstein, 202-331-3348




March 7, 2018

Re: Updated Evidence of JetBlue Phase Two Slot Correspondence

The Department originally contemplated that Phase Two carriers would be in receipt of slots in order to begin service in the IATA Summer 2018 season. MEX/AICM has not allocated a sufficient number of slots in order for JetBlue to publish flight schedules for a fifth and sixth daily slot pair. As such, JetBlue respectfully requests that the Department confirm its compliance with the “exhaustion of efforts” requirement for the Phase Two remedy slots and notify Delta and AeroMexico of their obligation to divest additional slots to JetBlue in order to maintain their antitrust immunity grant. So as to allow for sufficient advance publication of schedules, and to comply with MEX’s use-or-lose provisions, JetBlue is willing to have the slot transfer agreement(s) become effective at a later date during the IATA Summer 2018 season, so long as the slot transfer agreement(s) allows JetBlue access to a complete fifth and sixth slot pair in order to facilitate the operation of daily service.

Although JetBlue was allocated slots on certain days of the week for the fifth and sixth slot pair, effective March 25, 2018, JetBlue nonetheless respectfully requests that the Department require Delta/AeroMexico to transfer the legal rights to a fifth and sixth MEX slot pair in entirety, that is, for all days of the week. If JetBlue obtains the fifth and sixth slot pair from Delta/AeroMexico, JetBlue will inform MEX/AICM that it will not be using the partially-allocated fifth and sixth slot pairs which, in any event, might return to MEX/AICM due to non-use before any slot transfer agreement(s) are completed and approved by the Department. If and when MEX/AICM re-allocates those additional day-of-the-week slots, then Delta/AeroMexico could seek MEX/AICM permission to use those additional day-of-the-week slots as part of their overall MEX slot portfolio.

Counsel: JetBlue, Robert Land

 

Re: Response of Concesionaria Vuela Compania de Aviacion d/b/a Volaris

Although Volaris requested divested slots to operate the OAK-MEX, ONT-MEX and ORD-MEX
legs of service to these cities, because the requested slot times were outside of saturated hours, DOT did not grant these slots in Order 2017-4-6. We note that AICM did not approve these slots despite the hours listed, and therefore, Volaris lacks half of the slot pair needed to operate these services. We respectfully request any relief the Department deems appropriate in order to allow Volaris to fully operate the services described in Order 2017-4-6.

In its February 28 Notice, the Department also requested Phase Two slot recipients refresh the record with evidence supporting the exhaustion of efforts with regard to awarded JFK slots. Attachment 4 contains correspondence frnm the FAA indicating that FAA has not granted the slots required to operate the Phase Two JFK-CUN service, and will not be able to do so until May 17, 2018. Accordingly, pursuant to footnote one on page two of Order 2017-4-6, Volaris respectfully requests that the Department deem Volaris to have exhausted reasonable efforts to obtain these slots from the FAA and to take action on the Phase Two JFK divestiture awarded to Volaris in this docket.

Counsel: Holland & Knight, Anita Mosner, 202-955-3000




March 13, 2018

Request of JetBlue Airways for Department Action

JetBlue only received slots for the Summer 2018 season. JetBlue will be expected to apply with AICM for slots for the Winter 2018/19 season in the coming months. If AICM repeats the timeline that it followed for Summer 2018, JetBlue may again not receive Winter 2018/19 allocations until days before the new season is to begin. At that point, JetBlue will likely have already begun operations of the fifth and sixth daily flight and advance ticket sales will likely be underway. Given the unknown history and origin of these new slots, as well as similar questions about their historic priority, there is no guarantee that JetBlue will be granted the same times for the Winter 2018/19 season, which could cause severe operational challenges. As the Department has witnessed throughout this proceeding, the slot allocation procedures at MEX are, and continue to be, incredibly opaque, especially for new entrant or smaller carriers operating at MEX. This, coupled with the fact that the MEX slot issue has become politically contentious in Mexico, make it entirely possible that JetBlue will not be granted the same-timed slots for the winter season.

JetBlue respectfully requests that the Department fully adjudicate this matter before ticket sales can begin for the fifth and sixth daily flight. As a legal matter, JetBlue fully complied with DOT Orders 2016-12-13, 2017-1-6 and 2017-4-6. JetBlue submitted a timely request with the AICM for two additional slot pairs to fund new service effective March 25, 2018 and that request was denied. The Department previously concluded that, if slots were not granted by November 21, 2017, “it will consider the recipient carrier(s) to have exhausted all reasonable efforts to obtain slots” and “the Joint Applicants’ obligation to transfer remedy slots as a condition of maintaining their antitrust immunity will be triggered.” JetBlue’s request for the Department to confirm its compliance with the ‘exhaustion of efforts’ requirement and mandate the slot divestiture remains pending. The Department would thus be legally entitled to declare an exhaustion of efforts, and “provide timely notice to the Joint Applicants [that] they are obligated to provide these remedy slots.”

JetBlue urges the Department to do so, as its preference would be that the Department require Delta/AeroMexico to transfer a clean fifth and sixth slot pair to JetBlue, which would convey with historical priority and allow JetBlue to operate new MEX service with reasonable advance notice.7 JetBlue respectfully reiterates, as noted in its March 7, 2018 submission, that JetBlue is willing to have the slot transfer agreement(s) become effective at a later date during the Summer 2018 season, so long as the slot transfer agreement(s) allows JetBlue access to a complete fifth and sixth slot pair in order to facilitate the operation of daily service.

Alternatively, if the Department determines that AICM’s March 7, 2018 grant of additional slots obviates the need for an additional slot transfer, JetBlue respectfully requests that the Department take action to ensure that the slots at issue can be viably used by JetBlue and confirm that the fifth and sixth slot pair awarded by AICM are explicitly tied to Delta/AeroMexico’s ATI grant. Although the Department cannot directly grant JetBlue a waiver from AICM’s use-or-lose slot regulation, or provide JetBlue a comfort letter regarding the interim time period, the Department can clarify to the Joint Applicants that it is a condition of their antitrust immunity grant that JetBlue be allowed to operate a fifth and sixth daily MEX flight unhindered, and consistently in future seasons, and indicate that any actions taken otherwise could result in an immediate revocation of their antitrust immunity grant.

Counsel: JetBlue, Robert Land




March 14, 2018

Joint Motion for an Extension of Time

In the late afternoon of March 13 (at 5:33 pm) – i.e., at the close of business the day before reply comments from Delta and Aeromexico were due, JetBlue served a supplemental submission in the form of an unauthorized letter to Todd Homan providing new information and making additional demands with respect to MEX slot allocations.

Delta and AeroMexico hereby request a brief extension of time, until Monday, March 19, by which to submit their reply comments regarding the Phase Two slot allocations.

Counsel: Hogan Lovells, Robert Cohn, 202-637-5600 for AeroMexico / Alexander Krulic, 202-216-0700 for Delta


 

March 19, 2018

Joint Reply of Delta Air Lines and AeroMexico

In its March 7 filing, JetBlue claimed that AICM provided only a “partial slot allocation for the fifth and sixth slot pairs” at MEX in that the allocated slots “were not consistently scheduled and were not awarded on a substantial number of days throughout the Summer 2018 season.” On March 13, six days after it received an additional allocation from AICM, JetBlue submitted a letter to Todd Homan. While in that letter JetBlue claims that it had received “the majority of slots requested”, it footnotes this phrase to explain that it “was not granted one pair of slots on March 30th, 2018”. JetBlue’s claim is inconsistent with AICM’s March 13 letter which states that JetBlue was allocated the slots it requested through the Slotix system which was formalized on March 8, 2018. JetBlue did not request an 18:50 slot for March 30.

Moreover, even if JetBlue request March 30 slots and was not allocated one pair of slots for March 30, it appears from JetBlue’s letter that it may not have intended to operate the MEX service on March 30. Thus, JetBlue’s Letter notes that it would begin service “several weeks or months in the future”.35 In fact, it is unclear if and when JetBlue will begin service with the Phase Two slots in the Summer 2018 season. It refers to the AICM allocation process for Winter 2018 and states that “[a]t that point [i.e., when the Winter allocation process begins later this year], JetBlue will likely have already begun operations of the fifth and sixth daily flight and advance ticket sales will likely be underway”. Nor can JetBlue reasonably contend that it delayed selling or otherwise preparing for the Summer 2018 season services with the Phase Two slots based on when AICM made its slot allocations because, under the Final Order, if AICM did not provide the requisite Phase Two slots that JetBlue requested (which AICM has) and JetBlue could demonstrate its exhaustion of all reasonable efforts (which JetBlue cannot), AeroMexico would be required to do so. But, the fact is that according to AICM, JetBlue was allocated the Phase Two slots by AICM. JetBlue’s request that the Department force Delta/Aeromexico to transfer to JetBlue all of the Phase Two slots in the face of JetBlue’s allocation of Phase Two slots by AICM is unjustified and inconsistent with the Final Order.

There is no basis for the Department to require AeroMexico to divest any Phase Two slots to JetBlue.

Counsel: Hogan Lovells, Robert Cohn, 202-637-5600 for AeroMexico / Alexander Krulic, 202-216-0700 for Delta


 

March 26, 2018

Response of VivaAerobus to Joint Reply of Delta Air Lines and AeroMexico

VivaAerobus submits this response to the Joint Reply of Delta/AeroMexico filed on March 19, 2018 seeking to exempt itself from the commitments it made to the Department as a quid pro quo to receive antitrust immunity for their joint venture in the cross-border US-Mexico market which also facilitated Delta becoming a significant shareholder in AeroMexico’s parent company. Having achieved the full benefit of antitrust immunity, the Department should reject their flimsy excuses and require Delta/Aeromexico to follow through with their commitment to provide Viva the only slot it needs at JFK as provided in Final Order 2017-4-6.

Delta/Aeromexicco had timely and ample notice of the needed slot such that there is absolutely no prejudice to them. First, the carriers were served with Viva’s November 27, 2017 response to the Department November 21, 2017 Notice requesting the status of the awardees slot requests and whether slots would be needed from Delta/AeroMexico and copies of the confidential exhibits were provided to counsel for both carriers.

Moreover, as shown by the attached email, counsel for Viva contacted Delta’s counsel on February 8, 2018 to remind Delta that Viva notified the Department in November that it would need slots. Viva’s counsel explained that it would not need the slots until October, when it would receive a new aircraft, and asking whom at Delta Viva should contact to work out the slot times. There was never any response to this email. Delta/AeroMexico’s final argument to avoid their commitment to the Department that they are somehow prejudiced by Viva not needing the slots until the end of the summer 2018 season is frivolous. First, the slot divestitures are not for one season – they are permanent. Second, Delta/AeroMexico actually benefit by being able to continue operating the slot through the summer season. Again, the purpose of the divestitures in this market is to address the Department finding that this specific market lacked sufficient competition. With hundreds of aircraft between Delta and AeroMexico it is impossible to imagine they cannot find a productive use of this slot for an additional seven months until Viva receives its new aircraft. Third, the Delta/AeroMexico argument that Viva has plenty of aircraft to substitute is false. Viva currently has a small fleet of 24 aircraft, compared with 68 for Volaris and about 920 for Delta/AeroMexico. Clearly it would be a significant burden for Viva to take aircraft off other routes to operate the JFK/MEX route. Indeed, requiring Viva to take aircraft off existing routes would not only harm Viva’s reputation but would likely provide a direct competitive benefit to Aeromexico since the two airlines overlap on many routes.

Counsel: Kirstein & Young, David Kirstein, 202-331-3348


 

March 28, 2018

Motion for Leave to File and Surreply of Volaris

As required by Order 2017-4-6, Volaris timely filed evidence that it had requested the remedy slots from AICM and that AICM had provided an incomplete response to the request as of November 21, 2017. Rather than promptly allocating the slots, the Department three months later required an additional submission from recipient carriers. Despite the fact that the Joint Applicants will now be required to divest fewer slots as a result of the delay, Delta and AeroMexico now urge the Department to strictly comply with the Joint Applicants' interpretation of Order 2017-4-6 in order to avoid complying with an agreed-to condition of the antitrust immunity the Joint Applicants now enjoy.

Indeed, if the Order had been followed, Volaris would already have a full complement of the slots awarded to it - which is more than it is requesting following AICM's belated allocations. Accordingly, the Joint Applicants' insistence upon strict adherence to the Order is disingenuous at best.

In requesting that the Department deny slots allocated to Volaris based on spurious claims that the carrier's slot requests were invalid, the Joint Applicants completely ignore the fact that the divestiture was a critical condition to the Department's grant of ATI, deemed necessary to "alleviate the competitive harm likely to result from the transaction and to ensure sufficient competition" in the trans border market. Without requiring the divestiture of Phase Two slots, there will not be sufficient competition to discipline the immunized alliance. The Department should not allow the Joint Applicants to use the delays in the slot allocation process (delays that were beyond the control of Volaris and the other carriers seeking remedy slots) to defeat the remedy imposed by the Final Order granting ATI to the Joint Applicants.

It would be arbitrary and capricious for the Department to deny awarded slots to recipients which have been unexpectedly adversely affected by aircraft delivery issues that are widespread and well-known to the industry. The fact is that regardless of aircraft delays, the Summer 2018 traffic season is already here, and remedy slots still have not been allocated. When the Department set November 2017 as the deadline, it was clearly to ensure that carriers could have their slots well in advance of the summer season, as was contemplated in the Department's April 2017 Order. Accordingly, Volaris urges the Department to find its remedies exhausted and to require the Joint Applicants to divest the slots allocated to Volaris pursuant to Order 2017-4-6.

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


 

April 4, 2018

Motion for Leave to File and Joint Response of Delta Air Lines and AeroMexico

Delta and AeroMexico hereby seek leave to file this Response to the unauthorized filings submitted by Viva Aerobus and Volaris regarding Phase Two slots at John F. Kennedy International Airport and Benito Juarez Mexico City International Airport. Viva’s and Volaris’ unauthorized filings misapply the Department’s Phase Two slot process, distort the relevant facts, and contain erroneous and inapposite arguments in their attempts to convince the Department that they have “exhausted all reasonable efforts” to obtain additional Phase Two slots from the FAA (for JFK) and from AICM (for MEX).

There is no evidentiary basis to support a decision to divest any Phase Two slots to Viva (for JFK) nor to Volaris (for MEX/JFK) because of one or more of the following: (1) they have received such JFK/MEX slots within 60 minutes of the times awarded to them by the Department, and/or (2) they did not exhaust all reasonable efforts in accordance with the DOT Final Order because they are either (a) seeking slots different from those that the Department awarded to them, or (b) do not plan to use the slots the Department awarded to them until the Winter 2018 season (contrary to and inconsistent with their DOT proposals) and the slot allocation process for that season has not yet occurred.

Although Volaris acknowledges “that it no longer requires the use of the JFK-CUN slots awarded in this proceeding,” it makes reference to complying with Ordering Paragraph 7 of Final Order 2017-4-6, which deals with transferring slots. Having not received JFK slots in the context of this proceeding, it is not clear what Volaris envisions in a future transfer. Volaris’ failure to notify the Department in its November filing in this Docket of a need for JFK slots should nullify any claim by Volaris that it is entitled to those slots. Because Volaris has not shown that it exhausted all reasonable efforts to obtain JFK slots from the FAA for IATA Northern Summer 2018 season, it has failed to meet the standard established by the Department in Final Order 2017-4-6. As such, Delta/AeroMexico are not required by Ordering Paragraph 3 to transfer the JFK slots assigned to Volaris.

If Viva was not notified of the delayed delivery of its Airbus 320neo aircraft until February 13, 2018, which is the purported reason for delaying the inauguration of the Phase Two slot service, then its counsel must have been prescient when he reached out to Delta on February 8, 2018, to notify that “viva will not actually need the slots until October when it gets delivery of a new aircraft.” What is more likely is that Viva made a commercial decision to delay startup of its JFK-MEX flight, undercutting the promised consumer benefits but minimizing costs for the airline, and now Viva is trying to have its cake and eat it too by securing a slot from Delta/AeroMexico after either failing to exhaust all reasonable efforts to properly and timely obtain slots through the FAA’s slot allocation process.

Counsel: Hogan Lovells, Robert Cohn, 202-637-5600 for AeroMexico / Alexander Krulic, 202-216-0700 for Delta


 

April 6, 2018

Motion for Leave to File and Reply of VivaAerobus

Delta and AeroMexico’s filing simply repeats the misguided arguments made in their March 19, 2018 filing. Importantly, the approval of Delta and AeroMexico’s antitrust immunity was subject to, inter alia, a public interest test, which includes assurance there will be “adequate competition to not only mitigate any potential harm from the proposed transaction, but to guarantee that the anticipated public benefits are likely to be realized." Delta and AeroMexico continue to try and circumvent the Department’s public interest finding that new competition in the JFK-MEX market was critical to approval of their request for antitrust immunity. Moreover, they have utterly failed to demonstrate a scintilla of harm by their retaining use of the single slot needed by Viva through the Summer Season. Their filings are nothing more than a very transparent attempt to reinterpret Final Order 2017-4-6, to undermine the Department’s public interest findings so they can control this route and prevent competition by an innovative low fare airline.

Delta and AeroMexico repeat their bogus argument that Viva did not submit requests for the Department assigned slots until after the established deadline. Viva was the first carrier to request JFK slots and asked for times that would be more desirable for its customers and for competition. As explained in its March 26, 2018 filing, the times requested for the afternoon flights were only 15 minutes later than the Department’s listed times and well within the 60 minute window. When FAA could not accommodate all the requested times, Viva reapplied on November 5, 2017, well before the November 21 date by which FAA had to respond. On November 17, FAA advised Viva that it could not provide the one slot Viva is seeking from Delta and AeroMexico.

It is frankly preposterous for these antitrust immunized carriers to assert that Viva had not “exhausted all reasonable efforts to obtain slots.” Indeed, there is nothing further Viva could have done to obtain that slot. Moreover, the correspondence between Viva and the FAA Slot Office attached to Viva’s March 26 filing demonstrates that even if it initially had asked for the precise time listed in the Order 2017-4-6, FAA would not have been able to provide the slot.

As Viva stated in its initial application for slot allocation, it has proven over the last decade that it’s very low fare services are highly valued by friends and relative travelers to and from its many destinations throughout Mexico, where it has earned a reputation as a highly respected low cost operator. Viva directly serves the public interest by offering services that are unmatched by any other carrier in the market.

The Department should ensure that the competition it deemed critical to approval of the grant of immunity is made available by requiring Delta and AeroMexico to live up to their commitment and transfer the needed Phase Two JFK slot to Viva.

Counsel: Kirstein & Young, David Kirstein, 202-331-3348


 

May 8, 2018

Notification of JetBlue Airways of Phase Two Slot Destination Change

In accordance with DOT Orders 2016-12-13, 2017-1-6 and 2017-4-6, JetBlue hereby notifies the Department of its intention to change the US destinations of the two Phase Two remedy slot pairs it was awarded at Mexico City International Airport. Specifically, JetBlue plans to change the US destination of the first Phase Two MEX slot pair from Los Angeles International Airport to Boston Logan International Airport and plans to change the US destination of the second Phase Two MEX slot pair from LAX to New York John F. Kennedy International Airport. JetBlue plans to begin operating its new JFK/BOS-MEX service no later than November 1, 2018.

Counsel: JetBlue, Robert Land


 


Order 2018-5-34
OST-2015-0070
- Antitrust Immunity for Alliance Agreements

Issued and Served May 23, 2018

Order to Show Cause

Of the 20 Phase Two slots that were subject to divestiture at Mexico City’s Benito Juarez International Airport (10 pairs), and of the four slots at New York’s John F. Kennedy International Airport (2 pairs), this Order proposes to direct the Joint Applicants to divest fewer than two less-than-daily slots at MEX and only one daily slot at JFK. The proposed decision strikes an appropriate balance between the Department’s interest in facilitating the competitive services envisioned by the slot remedy, granting flexibility for the recipient carriers who have experienced unexpected difficulties in providing immediate service, and ensuring fairness to the Joint Applicants, providing them with a date-certain when they will know if divestitures will be necessary.

The Department has tentatively determined that VivaAerobus, Volaris and JetBlue have acted reasonably to satisfy the exhaustion of efforts requirements contained in Orders 2016-12-13 and 2017-4-6; and that a small number of Phase Two slots awarded by Order 2017-4-6 were not provided by the slot coordinators at JFK and MEX, as described below, and must be divested. However, we have tentatively determined to make these divestiture requirements subject to the recipient carriers’ ability to commence services utilizing the slots by the end of the Summer-2018 season.

JFK:

At JFK, we tentatively determine that the Joint Applicants must divest one slot to VivaAerobus. The Joint Applicants have argued that VivaAerobus failed to properly and timely request its awarded Phase Two slots from the JFK slot coordinator (the FAA, an operating administration of the Department) and, therefore, they should not be required to divest any JFK slots. The Department tentatively disagrees.

VivaAerobus was awarded Phase Two JFK slots at 09:00, 13:25 and 14:55 local (or 13:00, 17:25, and 18:55 UTC). VivaAerobus requested its Phase Two slots from the FAA at 13:40, 17:25, and 18:55 local. The request stated that the slots requested were in local time; however, it appears that VivaAerobus converted its awarded times to UTC, but then stated that the request was in local time. This seems to be the Joint Applicants’ reference to VivaAerobus requesting “slots inconsistent with the timings awarded to it by Order 2017-4-6.” After clarifying this discrepancy with the carrier, the FAA was able to accommodate two of VivaAerobus’s Phase Two slot awards within the +/- 60-minute window provided for in Order 2017-4-6, by offering slots at 14:00 and 16:55 UTC (10:00 and 12:55 local). The FAA was unable to accommodate the 18:55 UTC (14:55 local) request within the +/- 60-minute window.

MEX:

At MEX, VivaAerobus has stated that it received all requested Phase Two slots directly from AICM and is not seeking divesture slots from the Joint Applicants.

Likewise, JetBlue belatedly received all requested slots at MEX. While JetBlue states that “its preference would be that the Department require Delta/Aeromexico to transfer a clean fifth and sixth slot pair to JetBlue…”, the Department, consistent with the terms of Order 2017-4-6, will not require the Joint Applicants to divest slot pairs that have already been allocated to a recipient carrier through the airport’s slot allocation procedure.

Volaris requests that the Department direct the divestiture of slots sufficient to operate its Phase Two MEX-SJC and MEX-ORD services, as well as additional slots that were not awarded by the Department because they were outside of the saturated hours at MEX. The Department does not find convincing the Joint Applicants’ argument that the letter obtained from AICM evinces sufficient slots being made available for these services from AICM. Volaris argues that, while slots were allocated at these times, they were for different services. AICM’s public website displays the final Summer-2018 slot allocations for each carrier. For Volaris, the slots that the Joint Applicants claim were assigned by AICM for SJC service (at 11:00, 20:55 and 21:55 local) are all allocated for services to Monterrey, Cancun, Merida, Los Mochis, Guadalajara, Ixtapa-Zihuatanejo, Los Angeles, Chihuahua and Tijuana. It appears that only one slot at 21:55 local was allocated for SJC service. The Department therefore tentatively requires the Joint Applicants to divest sufficient slots to Volaris in order for Volaris to operate this service in accordance with the terms of Order 2017-4-6.

The evidence is similar regarding Volaris’s ORD service. The Joint Applicants claim that “Volaris has received 420 slots at 23:50Z (18:50 local), or enough for one daily frequency to OAK and one daily frequency to ORD, to cover the entire Summer 2018 season.” However, the final slot allocations posted by AICM to its website show that Volaris’s 18:50 local slot allocations are assigned to MTY, GDL, MID, Puerto Vallarta, ZIH, TIJ, JFK, and LAX. The Department therefore tentatively requires the Joint Applicants to divest sufficient slots to Volaris in order for Volaris to operate this service in accordance with the terms of Order 2017-4-6. However, for the reasons discussed below, the Department proposes to make these divestitures contingent on Volaris’s ability to commence service before the end of the Summer-2018 season (i.e., October 27, 2018). If Volaris is unable to begin either or both services by that date, the Joint Applicants’ obligation to divest the respective slots will expire.

Regarding the slots outside of the saturated hours at MEX that the Department did not award, the Department tentatively agrees with the Joint Applicants that we should not retroactively award them here. The Department will, however, take note of the fact and the process that occurred when it reevaluates the competitive situation in the market. The Department will exercise flexibility should Volaris wish to repurpose the slots it did receive from AICM for other transborder markets, given its lack of complete slot-pairs.

By: Joel Szabat




Order 2018-5-37
OST-2015-0070
- Antitrust Immunity for Alliance Agreements

Issued and Served May 23, 2018

Erratum

By Order 2018-5-34, issued May 23, 2018, the Department, among other things, directed all interested parties to show cause why the tentative findings of that Order should not be made final. The Order states that: “Objections or comments to our tentative findings and conclusions shall be due not later than seven calendar days from the service date of this Order, and answers to objections shall be due no later than seven business days thereafter.”

The dates for objections or comments is seven business days (not calendar days) from the service date of that Order. This erratum amends Order 2018-5-34 accordingly.

By: Joel Szabat


 

May 30, 2018

Response of vivaAerobus to Order to Show Cause

The Department carefully reviewed the facts on the record, and correctly determined that viva had “exhausted reasonable efforts” and acted diligently to obtain the JFK and MEX slots it requires to perform the service awarded by the Department. Moreover, as the Department notes, Delta/AeroMexico failed to demonstrate any harm they would sustain by viva not beginning service until October. In this connection, Viva intends to commence service on or about October 15, 2018, which is prior to the October 27, 2018 deadline stated in the Show Cause Order. Viva will advise Delta/AeroMexico of this start date.

Importantly, in reaching its conclusion, the Department noted that competition in the JFK/MEX market was a critical element in its decision to approve the alliance. The public interest will be well served as viva brings new low fares to travelers in the JFK-MEX market operating the route with new A320neoaircraft.

Counsel: Kirstein & Young, David Kirstein, 202-331-3348


 

June 4, 2018

Comments of Volaris

Volaris supports the Department's continued finding that the public interest requires divestiture of slots at MEX, and that services provided by new entrant carriers are needed in order to provide some semblance of competitive discipline to the Delta/AeroMexico joint venture.

Given that these slots will finally be awarded nearly halfway through the summer 2018 traffic season, and more than six months after carriers were required to state their requirements for this season's service, Volaris questions the fairness of requiring carriers to start up their new operations before the end of the summer season. Given the commercial uncertainty created by the extreme delays in this case (which were entirely outside of the control of Volaris), Volaris urges the Department to consider greater flexibility with regard to start-up timing, allowing carriers to launch service in the early Winter 2018/2019 season, in accordance with market demand. While it is understood that the Department desired to have new entrant carriers offer new services with remedy slots as soon as possible, the Joint Applicants should not be rewarded by a requirement that the new entrants be required to launch their service at the lowest part of the season.

Volaris also is concerned that the Department has tentatively declined to provide a more direct operational solution to remedy DOT's denial of requested slots outside of saturated hours, which was based on a mistaken assumption that AICM would award them. However, Volaris appreciates the Department's willingness to exercise flexibility should Volaris need to repurpose awarded slots in light of the lack of complete slot pairs.

Volaris understands the challenges the Department faces in fashioning and implementing slot remedies in ATI cases, and generally applauds the Department's actions in this case. While Volaris will undertake to launch its new services in accordance with the requirements of the Show Cause Order, it is concerned that the lack of transparency and responsiveness seen in this case should not be permitted to inure to the benefit of the Joint Applicants.

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


 

June 13, 2018

Joint Answer of Delta Air Lines and Aerovias de Mexico to Comments of Volaris

Delta and AeroMexico do not believe that the Phase Two slot recipient carriers exhausted reasonable and timely efforts to obtain Phase Two slots at John F. Kennedy International Airport and Benito Juarez Mexico City International Airport, or, have already obtained them in the ordinary course. Nonetheless, the Joint Applicants did not object to the Department’s Show Cause Order, recognizing that the Department exercised discretion in taking an equitable approach and attempting to strike “an appropriate balance” between the interests of the Department, the Phase Two slot recipient carriers, and the Joint Applicants. See DOT Order 2018-5-34.

However, Volaris’ request to allow it to begin service after the Summer 2018 season should be rejected. See Volaris’ Comments, dated June 4, at page 2 (urging the Department “to consider greater flexibility with regard to start-up timing, allowing carriers to launch service in the early Winter 2018/2019 season, in accordance with market demand”). The Phase Two slots have been tied to the Northern Summer 2018 season since the original ATI approval over 1½ years ago. See DOT Order 2016-12-13, Appendix A. The Department’s Show Cause Order correctly reaffirmed that “Orders 2016-12-13 and 2017-4-6 required the demonstration of exhaustion of efforts in the Summer-2018 season” and that “[w]e therefore currently do not have scope to extend the process beyond that season.” DOT Order 2018-5-34, at 11. There is no reasonable justification for the Department to now reverse its position and extend the deadline for the initial use of the Phase Two slots beyond the Summer 2018 season.

Counsel: Hogan Lovells, Robert Cohn, 202-637-5600 for AeroMexico / Alexander Krulic, 202-216-0700 for Delta


 

Order 2018-7-2
OST-2015-0070
- Antitrust Immunity for Alliance Agreements

Issued and Served July 3, 2018

Final Order

Based upon its review of the evidence in the record, the Department hereby finalizes its tentative findings and conclusions that VivaAerobus, Volaris, and JetBlue have acted reasonably to satisfy the exhaustion of efforts requirements contained in Order 2016-12-13 (December 14, 2016) and Order 2017-4-6 (April 10, 2017). The Department also determines that a small number of Phase Two slots awarded by Order 2017-4-6 were not provided by the slot coordinators at New York’s John F. Kennedy International Airport (JFK) and Mexico City’s Benito Juarez International Airport (MEX) and must be divested, subject to the recipient carriers’ ability to commence services utilizing the slots by the end of the Summer-2018 season. Of the 20 Phase Two slots that were to be divested at MEX (10 pairs), and of the four slots that were to be divested at JFK (two pairs), this Order directs the Joint Applicants to divest less than two slots at MEX and only one slot at JFK. No pleadings were received disputing these findings and conclusions.

The only issue contested in the pleadings is the Department’s tentative finding to make the divestitures contingent on the recipient carriers’ ability to commence service with the slots before the end of the Summer-2018 season (i.e. by October 27, 2018). Volaris urges the Department to grant it flexibility to delay the start-up of its Phase Two services until the Winter-2018/19 season given the delays in the Summer-2018 slot allocation process at MEX. The Joint Applicants argue that the terms of Orders 2016-12-13 and 2017-4-6 do not permit the Department to extend the Phase Two process beyond the Summer-2018 season. The Department agrees with the Joint Applicants.

While we sympathize with Volaris’s position given the delays and uncertainty that occurred in the Phase Two process, we agree with the Joint Applicants that the Final Orders (2016-12-13 and 2017-4-6) did not provide for the extension of the Phase Two process beyond the Summer-2018 season, and we see no compelling reason to revisit those provisions at this time. We do, however, affirm our decision to allow the recipient carriers the flexibility to commence their Phase Two services as late in the Summer-2018 season as necessary. If, however, the recipient carriers are unable to begin their Phase Two services utilizing the divested slots by the end of the season, we have determined that the Joint Applicants’ divestiture obligations will expire with respect to the number of slots that are not used to launch Phase Two services. The Department reiterates its recommendation that the recipient carriers make all possible efforts to commence services as soon as possible. As with the other competitive services enabled in Phase One and Phase Two, we expect carriers to have the opportunity to operate these services on a year-round basis.

By: Joel Szabat


 

August 27, 2018

Request of Volaris for Continued Allocation and Waiver and Extension of Service Start Date of Phase Two Slots

Volaris hereby requests a continued allocation of Phase Two slots at Mexico City, so that Volaris can launch important new US-Mexico City services to offer competitive discipline to the Delta/AeroMexico alliance, and benefit the traveling public. In order to make such services a reality , Volaris requests a waiver of the requirement that recipients of Phase Two slots at MEX commence service during the IATA Summer 2018 season; an extension of the date by which it must commence service using Phase Two MEX slots transferred from Delta Air Lines, Inc. and Aerovias de Mexico, S.A. de C.V.; and a corresponding extension of the obligation of the Joint Applicants to transfer slots necessary for Volaris to operate its Phase Two MEX-San Jose and MEX-Chicago services. Volaris further requests that, to the extent the Mexico City International Airport slot administrator declines to award the slots in future seasons necessary for Volaris to commence or continue service between MEX and Oakland, Denver and Ontario on the dates described herein, similar relief be granted.

Good cause exists for the Department to grant this relief to Volaris, and to continue the obligations of the Joint Applicants. The reasons for Volaris' delay in commencing service are caused entirely by third parties over whom Volaris has no control; the Department has a longstanding practice of granting start-up extensions for circumstances outside a carrier's control; and not granting the extension could substantially weaken the competitive remedy the Department imposed on the immunized alliance. Furthermore, Volaris has made its best efforts to comply with the IATA Summer 2018 start date requirement for Phase Two slots, and is requesting the minimum extension necessary to commence service using its Phase Two slot assignments.

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




August 28, 2018

Notice of Volaris of Slot Destination Change

Concesionaria Vuela Compania de Aviacion, S.A.P.I. de C.V. d/b/a Volaris writes to notify the Department of its intention to change the US destinations of two Phase One remedy slot pairs it was awarded at Mexico City International Airport. These changes are as follows:

Original Route New Route
Mexico City-Los Angeles-Mexico City Mexico City-Orlando (MCO)-Mexico City
Mexico City-New York (JFK)-Mexico City Mexico City-Miami-Mexico City

The Phase One remedy slots used for service to San Antonio remain unchanged.

Volaris plans to begin operating these new routes with Phase One slot pairs on October 15, 2018.

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


 

September 6, 2018

Joint Answer of Delta Air Lines and AeroMexico

Volaris’ recent network growth undercuts its claims not to be able to add Phase Two routes at this time. Volaris has recently initiated service on a number of new routes, as well as added a number of new frequencies to existing routes. Volaris’ decision to delay service using the Phase Two slots appears to be a commercial choice reflecting its priorities and strategy, not the result of any hardship. In addition, Volaris has previously made this same request, and the Department has twice rejected it. Volaris’ latest Request does not provide any basis for the Department to reverse its previous decisions. Delta and Aeromexico jointly answer the Volaris Request and respectfully ask that it be denied.

Counsel: Hogan Lovells, Robert Cohn, 202-637-5600 for AeroMexico / Alexander Krulic, 202-216-0700 for Delta


 

September 13, 2018

Motion for Leave to File and Reply of Volaris

By Joint Answer filed September 6, 2018, Delta and Aeromexico seek to escape the Department 's carefully considered remedy of slot divestiture, imposed as a condition to a grant of antitrust immunity. In doing so, the Joint Applicants mischaracterize statements made by Volaris in support of its request, or ignore certain basic facts.

it is somewhat ironic that the Joint Applicants would point to Volaris' "relatively large fleet of nearly 70 Airbus 320-family aircraft" when the Joint Applicants have a combined fleet of 998 aircraft. Volaris' 5 aircraft represent 7% of the carrier's entire fleet - a very substantial figure. For the Joint Applicants, a shortage of five aircraft may be a manageable (perhaps even trivial) matter, but for Volaris it most decidedly is not. Their large fleet size gives them flexibility to absorb aircraft delivery delays, by delaying the retirement of old aircraft or shifting existing aircraft among lines of flying. By contrast, five aircraft are a significant portion of Volaris' small fleet, making it difficult to absorb aircraft delivery delays, while still covering its schedule and keeping spare aircraft available.

The Joint Applicants argue that "[e]ach of the four cases cited by Volaris involved the inability of the carrier to obtain slots from the foreign government authority," and therefore do not support Volaris' request. They would have the Department look only at the divestiture aspect of this case, and ignore the root cause that created the need for the slot divestiture remedy in the first place - the inability to obtain slots from AICM at MEX. Even with the divestiture remedy, Volaris' request still fundamentally implicates "the inability of the carrier to obtain slots from the foreign government authority," and Volaris should receive the same flexibility granted to carriers in similar cases.

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




October 19, 2018

Notice of Volaris of JFK Phase One Slot Availability

Volaris hereby provides notice that rights to the following New York John F. Kennedy International Airport Phase One slot pair are available for temporary reallocation during the Winter 2018-19 operating season, at no compensation, to eligible carriers:

JFK Slot Pair 1329 A 1429 D

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




Order 2018-10-14
OST-2015-0070
- Antitrust Immunity for Alliance Agreements

Issued and Served October 22, 2018

Order Denying Requested Relief of Volaris

By this Order, the Department of Transportation is denying the relief sought by Vuela Compania de Aviacion, S.A.P.I de C.V, namely a waiver of the requirement that recipients of Phase Two slots at Mexico City’s Benito Juarez International Airport must commence services in the IATA Summer 2018 season, an extension of the date by which it must commence services using Phase Two slots transferred from Delta Air Lines, Inc. and Aerovias de Mexico, S.A. de C.V., and a corresponding extension of the obligation of the Joint Applicants to transfer slots necessary for Volaris to operate its Phase Two MEX-San Jose and MEX-Chicago services.

The Department continues to sympathize with Volaris’s situation, and the carrier is correct that Pratt & Whitney’s and Airbus’s delivery issues are well known and documented. However, the Department established the divestiture, its terms, and the process for administering it in the Final Order, and implemented this established process through a series of subsequent orders. The Joint Applicants accepted the terms of the divestiture, including the provision that it would be completed by the end of the IATA Summer 2018 season. Were we to extend the process now, we would be changing the rules after the fact and affecting the rights and options of multiple parties with regard to the Phase Two slots in question.

We continue to believe that Volaris can provide valuable competition in the MEX-US market, and we urge the carrier to exhaust all reasonable efforts to take advantage of the opportunities provided by its Phase Two slot award before the established deadline.

By: Joel Szabat


 

December 19, 2018

Notice of Southwest Airlines of Mexico City Slot Availability

Pursuant to Order 2017-4-6, Southwest Airlines Co. hereby provides notice that rights to the following two Mexico City slot pairs are available for permanent reallocation at no compensation to eligible carrier(s) beginning on either February 8 or 9, 2019:

MEX Slot Pair 1 2045 A 0705 D
MEX Slot Pair 2 1110 A 1200 D

This Notice is being served on representatives of all eligible carriers on the attached service list and filed in the referenced docket. If your carrier wishes to acquire the rights to either or both of the slot pairs listed above, please notify Leslie Abbott in writing by January 4, 2019.

Counsel: Southwest, Robert Kneisley, 202-263-6284

 

February 8, 2019

Re: Southwest Airlines Dispostion of Mexico City Slots

On December 19, 2018, Southwest Airlines provided notice to eligible carriers pursuant to Order 2017-4-6 that rights to the following two Mexico City slot pairs were available for reallocation on February 8 or 9, 2019:

MEX Arrival Slots MEX Departure Slots
2045 A 0705 D
1110 A 1200 D

Written expressions of interest were due via letter or e-mail no later than 5:00PM EST on Friday, January 4, 2019. Southwest did not receive any expressions of interest and is therefore returning the two slot pairs to Aeropuerto Internacional de la Ciudad de México.

Counsel: Southwest, Robert Kneisley, 202-263-6284


 

May 9, 2019

Notice of Volaris of JFK Phase One Slot Availability

Pursuant to Order 2017-4-6, Concesionaria Vuela Compania de Aviacion, S.A.P.I. de C.V. d/b/a Volaris hereby provides notice that rights to the following New York John F. Kennedy International Airport Phase One slot pair are available for permanent reallocation, at no compensation, to eligible carriers for use in US-Mexico trans-border service:

JFK Slot Pair 1329 A 1429 D

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


 

June 11, 2019

Disposition of Volaris' JFK Phase One Slots

On May 9, 2019, Concesionaria Vuela Compariia de Aviacion, S.A.P.I. de C.V. d/b/a Volaris provided notice to eligible carriers pursuant to DOT Order 2017-4-6, that rights to the following New York John F. Kennedy International Airport Phase One slot pair were available for permanent reallocation, at no compensation, to eligible carriers for use in providing US-Mexico trans-border service:

JFK Arrival Slot JFK Departure Slot
1329 1429

Written expressions of interest were due via email no later than May 16, 2019. Volaris did not receive any expressions of interest and is therefore returning the slot pair to the Federal Aviation Administration.

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


 

July 3, 2019

Motion to Amend Order 2016-12-13

Motion for Confidential Treatment

Delta Air Lines, Inc. and Aerovías de Mexico S.A. de C.V. hereby move the Department to amend Order 2016-12-13, which approved and granted antitrust immunity to their Joint Cooperation Agreement. The Parties ask the Department to eliminate Condition 4, which provides that “the approval and grant of antitrust immunity shall expire five years from the date upon which the Joint Applicants submit[ted] the notice described in Ordering Paragraph 2.” Unless the Department takes action to prevent it, ATI for the JCA will expire on December 21, 2021, causing significant commercial disruption and harming the public interest by undermining the substantial public benefits the JCA has generated. If the Department grants this motion, those public benefits will not be disrupted but rather will continue to expand; and ATI for the JCA will remain subject, as always, to the Department’s annual oversight process and its inherent authority to amend, modify, or revoke it at any time.

Changed circumstances since December 2016 justify this relief. Factual developments since the Department issued Order 2016-12-13 have proven the Department correct in its prediction that the JCA would result in substantial public benefits. Experience also demonstrates that the JCA has not harmed competition and that access to slots at Benito Juarez Mexico City International Airport is not a material barrier to entry in the transborder markets. During the same period, Mexico has substantially transformed slot administration at the airport. In light of these developments, there is no continuing justification for the expiration condition, which threatens to harm the public interest if it is not removed. Granting this motion will conform Order 2016-12-13 to the precedent set in nearly every other ATI Order ever issued by the Department.

If, however, the Department concludes that there remains a continuing need for a formal periodic review process in addition to the Department’s standard annual reporting requirement and inherent oversight authority, the Parties move in the alternative that the Department amend Order 2016-12-13 by removing the expiration condition and substituting a periodic self-assessment procedure similar to that proposed for the American-Qantas joint venture in the Department’s recent Show Cause Order. If the Department deems it necessary, it could require the Parties to conduct a self-assessment based on criteria appropriate to the unique facts of this case at some reasonable fixed interval as established by the Department. The Department could then review the self-assessment and take whatever future actions it deems appropriate. As it has proposed to do in the American-Qantas case, the Department should make clear that “the antitrust immunity would remain in effect unless and until the Department took action on the public record.” While the Parties maintain there is no need for review beyond the Department’s longstanding annual reporting requirement and inherent oversight authority, removing the expiration condition and substituting a self-assessment and formal review process similar to the one the Department has proposed for American-Qantas would at least mitigate the business uncertainty and threat of harm to the public interest in the interim that is created by the language of Order 2016-12-13.

Counsel: Alexander Krulic, 202-216-0700 for Delta / Marco Campos Maldonado for AeroMexico


 

July 5, 2019

Motion of JetBlue Airways for Extension of Time to Answer

JetBlue hereby moves the Department for an extension of time to answer the Delta-AeroMexico Motion to Amend Order 2016-12-13. On July 3, 2019, Delta-AeroMexico submitted a motion requesting a significant modification to their antitrust immunity grant. The Delta-AeroMexico motion, which is a 30-page filing (plus supporting documents) raises numerous complex issues of fact and law that require careful review.

In light of the novel nature of Delta-AeroMexico’s request, which was filed on the eve of a long holiday weekend, JetBlue hereby moves the Department for a modest 14-calendar-day extension for parties to submit answers. If the Department grants JetBlue’s motion, the deadline for parties to file answers would be July 29, 2019.

There is recent precedent for the relief JetBlue seeks. On December 19, 2018, Delta filed a similar motion seeking broad changes to conditions related to its authority to serve Tokyo Haneda Airport. In light of the holiday season, however, Delta notified the Department and parties by email that it would not object to an extension of time for interested parties to submit an answer. American and United filed answers to Delta’s motion on January 7, 2019, nearly three weeks later (OST-2016-0048). In other ATI cases, the Department routinely suspends the procedural schedule to allow parties sufficient time to review the record.

Delta-AeroMexico are seeking modification of an ATI condition that will not impact them until December 2021, 2½ years from now. In light of these circumstances, JetBlue respectfully requests a modest 14-day extension of time for parties to file answers so that all interested stakeholders have sufficient opportunity to thoroughly review the record, including supporting documentation, and prepare responses for the Department’s consideration.

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

 

July 8, 2019

Re: Letter of Alaska Airlines in Support of Motion of JetBlue Airways

As JetBlue correctly notes, the Delta/AeroMexico motion, which was filed just before the Independence Day holiday, raises complex issues that require careful review. Interested parties should be afforded sufficient time to conduct such a review and prepare their responses. JetBlue's request to extend the answer deadline to July 29, 2019 is reasonable and Alaska Airlines urges the Department to grant it.

Counsel: Cozen O'Connor, David Heffernan, 202-463-2537


 

July 9, 2019

Consolidated Answer of Delta and AeroMexico

In order to allow JetBlue, Alaska, and any other interested parties sufficient time to prepare their substantive responses to the Motion, the Parties hereby advise the Department that they have no objection to the proposed extension.

The Parties also wish to note for the record that the only confidential information that they submitted to the Department in relation to their Motion was the non-redacted version of the Motion. The redacted material contains two figures showing the results of a confidential, forward-looking, joint network analysis identifying certain transborder routes that may be at risk if the Department does not grant the relief sought.

Consistent with standard Departmental practice and procedures, the Parties will make available the confidential (i.e., non-redacted) version of the Motion to qualified individuals following the Department’s issuance of a notice granting access to materials covered by the Parties’ Joint Motion for Confidential Treatment filed July 3, 2019.

Counsel: Alexander Krulic, 202-216-0700 for Delta / Marco Campos Maldonado for AeroMexico




July 10, 2019

Re: Hawaiian Airlines in Support of Motion of JetBlue Airways

Hawaiian Airlines supports the motion of JetBlue Airways requesting that the Department extend until July 29, 2019 the deadline for interested parties to submit answers to the motion to amend filed by Delta Air Lines and AeroMexico on the eve of the Independence Day holiday in this docket. The Motion to Amend requests that the Department eliminate one of the conditions imposed in Order 2016-12-13 approving and granting antitrust immunity for the Delta/AeroMexico joint venture but limiting the duration of the approval and grant to five years.

Given the complex issues of fact, law and aviation policy presented in the Motion to Amend’s 30 pages of text, JetBlue’s request for an extension until July 29, 2019 for interested parties to respond is reasonable. The Department will benefit from granting interested parties additional time beyond the typical seven business days to evaluate the arguments and evidence presented in the Motion to Amend. Indeed, Delta and AeroMexico subsequently have stated that they do no object to the JetBlue request for an extension. Hawaiian Airlines therefore urges the Department to grant the JetBlue motion.

Counsel: Cooley LLP, Parker Erkmann, 202-776-2036




Served July 12, 2019

Notice Granting Access to Documents and Extending Answers to Motion Date

To afford interested parties prompt access to the document in the record, we will grant immediate interim access to material covered by the Rule 12 Motion to counsel and outside experts for interested parties who file appropriate affidavits with the Department in advance.

The Department has decided to extend the deadline for answers to the JV Parties’ Motion to Amend Order 2016-12-13 to August 2, 2019. The extended time should provide interested parties sufficient time to access the confidential material as well as the opportunity to respond.

By: Joel Szabat


 

July 18, 2019

Confidentiality Affidavits of Alaska Airlines
John Rossi, Elena Krafcik, Rachel Welford, David Heffernan

Counsel: Cozen O'Connor, Rachel Welford


 

August 1, 2019

Answer of Travel Fairness Now Opposing Motion to Amend Order 2016-12-13

Regrettably, Delta and other legacy airlines have embarked on a campaign to impose restrictions on the online display of fare, schedule and availability information by third parties. Delta and other airlines are attempt ing to eliminate comparison shopping sites in an effort to force consumers onto their own websites, which only display their own flights and fares, regardless of whether prices are higher or flights are less convenient than what competitors offer. These airlines have taken additional steps to censor, suppress or block OTAs and metasearch providers from displaying many of the lowest, published and publicly available fare options and multiple-carrier itineraries that can provide the flying public with lower airfares and more convenient flights.

Travel Fairness Now urges the Department to deny the Joint Applicants' Motion to Amend Order 2016-12-13, which sunsets the Department's grant of antitrust immunity after five years (2021), requiring the Joint Applicants to submit a new application for antitrust immunity subject to a de novo review by the Department. It is critical that the Department thoroughly review public interest and competition issues before it agrees to extend antitrust immunity to the Joint Applicants' joint venture past 2021. As part of this review, the Department should inquire of the Joint Applicants whether any agreement for which these airlines seek approval and antitrust immunity directs or permits the parties to agree mutually to restrict the display and dissemination of schedule, fare or availability information to online travel agents and metasearch companies.

TFN believes that antitrust immunity for airline partnerships - including the joint venture between Delta and AeroMexico that is the subject of this proceeding - has made it more difficult for consumers to see all the airline, airfare and schedule options for more costly international travel, resulting in the flying public paying more and getting less. In fact, we are aware of cases where US airlines' most anti-consumer distribution practices have been extended to their partners once antitrust immunity has been granted, and, even before they have that approval

Protecting the public interest is required by statute for any grant of antitrust immunity to codeshare and joint venture agreements between and among US and foreign airlines. To satisfy this statutory mandate, the Department should determine that any existing or future grant of approval and antitrust immunity in this proceeding does not extend to any agreement or understanding between the Joint Applicants to constrain the direct or indirect distribution of airline information to the traveling public by any intermediary.

By: Kurt Ebenhoch

Motion of Delta and AeroMexico to Amend Order 2016-12-13 - July 3



August 1, 2019

Confidentiality Affidavit of JetBlue Airways
Robert Land

Counsel: JetBlue, Robert Land


 

August 2, 2019

Answer of Alaska Airlines

Motion for Confidential Treatment and to Withhold Information from Public Disclosure

Alaska does not oppose DOT’s policy of granting ATI to airline alliances that satisfy the statutory requirements and, despite significant reservations, did not oppose Delta-AeroMexico’s application for ATI. Now, however, Alaska feels compelled to oppose the instant motion due to the anticompetitive and anti-consumer effects of Delta-AeroMexico’s immunized cooperation.

DOT should deny Delta-AeroMexico’s motion to eliminate the only remaining condition that provides some assurance of transparency and public accountability regarding the effects of Delta-Aeromexico’s immunized JV. DOT should resist pressure from Delta-AeroMexico to excuse them from the oversight that was a pre-condition to granting them ATI. Delta-AeroMexico will not be harmed by waiting until 2021 for DOT to conduct its de novo review as scheduled. US-Mexico markets are in flux, with the MEX slot system in transition and reductions in service by smaller carriers that are struggling to compete with the Delta-AeroMexico immunized JV. It is too soon to predict what outcomes and trends may emerge in these markets. Therefore, it would be premature for the Department to eliminate the five-year term limit condition, which is a vital competition-protection measure. Instead, DOT should engage in rigorous continuing oversight of the effects of its decision to grant ATI to Delta-AeroMexico. If Delta-AeroMexico decide to seek de novo review after five years, that will be a more appropriate time for DOT to evaluate the market, the impact of granting ATI to Delta-AeroMexico, and the effectiveness of the conditions DOT imposed.

Counsel: Cozen O'Connor, David Heffernan, 202-912-4800




August 2, 2019

Answer of JetBlue Airways

In support of their wholly unnecessary request, the Alliance Parties: (1) repeat flawed arguments about how a time limit will have a chilling effect on continued investment in the Delta/AeroMexico JV, (2) criticize the results of the Department’s well-reasoned and appropriate slot remedy while highlighting alleged, untested changes to the slot allocation system at Benito Juarez Mexico City International Airport that have only recently been introduced, and (3) trumpet the benefits they assert have already been achieved as a result of the JV. JetBlue urges the Department to reject these assertions and deny the Alliance Parties’ motion.

DOT’s decision to impose a five-year term limit on the Alliance Parties’ grant of antitrust immunity was the result of a detailed review of thousands of pages of materials, over a multi-year proceeding. The five-year condition was neither “arbitrary” nor a “threat… to the public interest.” Rather, the Department deemed an established expiration term appropriate after a thorough and reasoned analysis of several key foundational issues: a highly complex and fluid market, coupled with significant questions aboutmarket access and the ability of unaligned carriers to provide competition in a marketplace dominated by the Alliance Parties’ JCA. That foundation has not eroded, and is in fact still standing strong. In these circumstances, it is not appropriate to amend Order 2016-12-13. For all of the reasons noted herein, JetBlue respectfully requests that the Department deny the Alliance Parties’ motion in its entirety.

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

 



August 2, 2019

Answer of Southwest Airlines

The Parties ask the Department to eliminate Condition 4 of the Order, which provides that “the approval and grant of antitrust immunity shall expire five years from the date upon which the Joint Applicants submit[ted] the notice described in Ordering Paragraph 2.” If the Department does not grant this relief, the Joint Applicants “move in the alternative that the Department amend Order 2016-12-13 by removing the expiration condition and substituting a periodic self-assessment procedure similar to that proposed for the American-Qantas joint venture in the Department’s recent Show Cause Order.”

Southwest opposes both requests

Southwest urges the Department to retain the current review provisions in the Delta-AeroMexico Final Order which place the burden on the Parties to demonstrate how continuing to grant ATI for their Joint Venture is in the public interest. These provisions are important safeguards for competition and will enable the Department to more effectively address competitive concerns in the US-Mexico and US-MEX markets.

Counsel: Southwest, Robert Kneisley, 202-263-6284


 

August 5, 2019

Re: Confidentiality Affidavits of Delta Air Lines
Scott McClain, Alexander Krulic, Christopher Walker, Steven Seiden

Counsel: Delta, Steven Seiden


 

August 15, 2019

Consolidated Reply of Delta Air Lines and Aerovias de Mexico and Motion for Leave to File

Delta and AeroMexico move for leave to file this Consolidated Reply to the Answers of Southwest, JetBlue, Alaska Airlines, and Travel Fairness Now in opposition to the Parties’ Motion to Amend Order 2016-12-13. None of the Objectors deny the many public benefits the Delta/AeroMexico Joint Cooperation Agreement has created, including expanded transborder capacity, expanded codesharing, and improved schedule offerings. None dispute that the government of Mexico and the Mexico City airport authority, “AICM,” have fundamentally overhauled the legal framework for slot allocation at MEX since 2016. The Objectors assert that the JCA is harming competition, but a review of their comments makes clear that the opposite is true. What the Objectors are actually complaining about are the public benefits that the JCA is generating, and the increased competition that the JCA has brought about. No Objector identifies any actual competitive harm from the JCA. Nor does any Objector present any basis for concluding that the Department’s ongoing oversight and its authority to modify or revoke ATI at any time is not sufficient to address any speculative or hypothetical future competitive harm. The Objectors present no compelling reason for concluding that a confidential periodic review process similar to what the Department has adopted in the American-Qantas proceeding, and recently proposed in the Delta-Air France-KLM-Virgin Atlantic proceeding, would not be sufficient to address any hypothetical future issues, while at the same time being far less wasteful and commercially disruptive than a de novo proceeding.

No Objector has presented any compelling reason for concluding that the Department’s ongoing oversight and inherent authority to modify or revoke ATI at any time is insufficient for dealing with whatever future circumstances they speculate might occur. Nor have they presented any compelling reason for concluding that a confidential review process similar to the one the Department adopted in the American-Qantas proceeding (Order 2019-7-7), and has now proposed in the Delta-Air France-KLM-Virgin Atlantic alliance proceeding (Order 2019-8-2), is not more than adequate to address any such future contingencies. In both cases, the Department has proposed to conduct a periodic review of its grant of ATI, without the burden and expense of a de novo proceeding, and with the critical condition that the granted ATI will remain in effect without interruption while that periodic review is conducted. If the Department concludes that any formal periodic review of the JCA is required, it should adopt a similar process here.

Counsel: Scott McClain for Delta and AeroMexico


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