[PUBLIC VERSION] 

BEFORE THE 

DEPARTMENT OF TRANSPORTATION 

WASHINGTON, D.C. 

Joint Application of 

AMERICAN AIRLINES, INC. 

BRITISH AIRWAYS PLC 

FINNAIR OYJ 

IBERIA LiNEAS AEREAS DE ESPANA, S.A. 

ROYAL JORDANIAN AIRLINES 

under 49 U.S.C. §§ 41308 and 41309 for 

approval of and antitrust immunity for 

alliance agreement 

Docket DOT-OST-2008-0252 

SUPPLEMENTAL COMMENTS 

OF VIRGIN ATLANTIC AIRWAYS 

Communications with respect to this document should be directed to: 

Jill Brady 

General Counsel 

VIRGIN ATLANTIC AIRWAYS, LTD. 

The Office, Manor Royal 

Crawley, West Sussex RH10 9NU 

United Kingdom 

Anita M. Mosner 

Sophy Chen 

HOLLAND & KNIGHT LLP 

2099 Pennsylvania Avenue NW, Suite 100 

Washington, DC 20006-6801 

Phone: (202)419-2604 

Fax: (202) 955-5564 

Email: anita.mosner@hklaw.com 

Email: sophy.chen@hklaw.com 

Attorneys for 

VIRGIN ATLANTIC AIRWAYS LTD. 

Date: January 11, 2010 
[PUBLIC VERSION] 

BEFORE THE 

DEPARTMENT OF TRANSPORTATION 

WASHINGTON, D.C. 

Joint Application of 

AMERICAN AIRLINES, INC. 

BRITISH AIRWAYS PLC 

FINNAIR OYJ 

IBERIA LINEAS AEREAS DE ESPANA, S.A. 

ROYAL JORDANIAN AIRLINES 

under 49 U.S.C. §§ 41308 and 41309 for 

approval of and antitrust immunity for 

alliance agreement 

Docket DOT-OST-2008-0252 

SUPPLEMENTAL COMMENTS 

OF VIRGIN ATLANTIC AIRWAYS 

On December 21, 2009, the U.S. Department of Justice ("DOJ") filed comments1 

in this docket concerning the Joint Applicants' request for approval of and antitrust 

immunity ("ATI") for their various alliance activities. In those comments, DOJ expressed 

strong concerns about the potential impact of the proposed alliance on consumers and 

fares in relevant markets. Pursuant to the Department's December 22, 2009, Order,2 

Virgin Atlantic is filing these Supplemental Comments. 

Virgin Atlantic agrees with the concerns DOJ has raised about the competitive 

and consumer harms the proposed link-up would cause if the Department were to grant 

ATI. DOJ considered at length the competitive structure of the U.S.-London Heathrow 

market and determined that collaboration between American and BA on five of their six 

U.S.-London Heathrow routes, the most significant transatlantic routes, would threaten 

1

 Comments of the Department of Justice, Docket OST-2008-0252 (Dec. 21, 2009) ("DOJ 

Comments"). 

2

 Order 2009-12-16, Dockets OST-2008-0252 and OST-2002-13861 (Dec. 22, 2009) (setting the 

deadline for supplemental comments at January 11, 2010, to respond to late-filed pleadings). 
[PUBLIC VERSION] 

considerable harm to consumers.3 DOJ also found that potential competitive entry 

would be unlikely to mitigate this threat.4 

Virgin Atlantic is supportive of DOJ's comments and particularly concurs with the 

observations made about constraints on access to Heathrow. DOJ sees the risks of 

consumer harm threatened by the alliance and recommends that the Department 

impose strict conditions to protect competition. Virgin Atlantic urges the Department to 

deny the application outright. 

However, if the Department were to decide to approve the Joint Application 

(despite the clear and significant competitive harm this alliance would cause), then Virgin 

Atlantic would urge the Department to impose conditions in addition to the slot 

divestitures and carve-outs that DOJ recommends in order to reinstate effective 

competition. These conditions should include, among other things, prohibiting the Joint 

Applicants from withdrawing from existing interline agreements with non-oneworld 

carriers and requiring Joint Applicants to offer competing carriers interline prorates at 

their hub airports that are no less favorable than those they charge to each other.5 

I. DOJ HAS CONCLUDED CORRECTLY THAT ATI WOULD SIGNIFICANTLY 

HARM COMPETITION, AND THAT ENTRY AT HEATHROW WOULD NOT BE 

SUFFICIENT TO PREVENT THESE EFFECTS. 

Like Virgin Atlantic, DOJ has concluded that a grant of ATI to the Joint Applicants 

in this particular case would inflict significant competitive harms upon consumers. 

Specifically, DOJ expressed concern about a loss of competition in five of the six U.S.-

London Heathrow markets in which American and BA compete against each other on a 

3

 See DOJ Comments, at 9-17. 

4

 See id., at 17-22. 

5

 See Answer of Virgin Atlantic Airways, Docket OST-2008-0252 (May 18, 2009) ("Virgin Atlantic 

Answer"), at 82. 
[PUBLIC VERSION] 

nonstop basis.6 DOJ observed that one-stop services do not pose competitive discipline 

on nonstop U.S.-London Heathrow services.7 

Virgin Atlantic also concurs with DOJ's comments concerning entry constraints at 

London Heathrow and especially with DOJ's finding that that sufficient entry into the 

relevant markets here—especially entry at Heathrow ("the most attractive London 

airport")—is unlikely.8 While there are a number of reasons why entry is unlikely in many 

of the overlap markets served by AA and BA—such as the existence of fortress hubs on 

both ends of the route—a key and overriding factor behind the difficulty of entry at 

Heathrow is the scarcity of slots there.9 

DOJ found that "[e]ntry at Heathrow would be difficult"10 because slots are 

available only on the secondary market.11 Moreover, to the very limited extent that slots 

are even available, they are available only outside of peak hours and therefore are not 

suitable for use for services from the United States.12 DOJ has reviewed the assertions 

advanced by the Joint Applicants that new entry has occurred at London Heathrow since 

the conclusion of the EU-U.S. open skies deal and that further new entry is both possible 

and likely, and has correctly discounted those assertions, noting that the vast majority of 

the "new" services touted by the Joint Applicants were in fact switches of existing 

6

 See DOJ Comments, at 7-9. See also Virgin Atlantic Answer, at 39-58. 

7

 See DOJ Comments, at 9-10. 

8

 See id., at 18. 

9

 See id., at 18-22. In this way, this proceeding involves the same, if not exacerbated, problem as 

the 2001 AA/BA proceeding, in which the Department ordered slot divestitures to address the 

entry problem. See Order 2002-1-12, Docket No. OST-2001-11029 (Jan. 25, 2002) ("Entry into 

Heathrow airport is constrained by landing and take-off limitations ('slots') and by facility 

limitations. The evidence before us indicates that it will be difficult for other carriers to obtain slots 

and facilities to begin or expand U.S.-Heathrow service in the short run, either through the slot 

allocation process or from code share/alliance partners, without divestiture."). 

10

 DOJ Comments, at 20. 

11

 Id., at 20-21. 

12

 Id. Virgin Atlantic noted this problem as well. See Virgin Atlantic Answer, at 21-31. 
[PUBLIC VERSION] 

services from Gatwick to Heathrow.13 In addition, DOJ noted that "there are no 

examples of truly new entry into Heathrow from which to infer that entry is likely to 

prevent competitive harm were Applicants to implement their agreements."14 

In a similar vein, many of DOJ's observations about the fact that carriers so 

quickly moved their services away from Gatwick to Heathrow support Virgin Atlantic's 

view that Heathrow is a separate relevant market.15 DOJ observed that there are a 

wealth of connecting services at Heathrow that are not available at Gatwick and that 

consumers place a high value on these connecting options.16 Indeed, DOJ found that 

many corporate travel managers prefer a carrier that provides service to London 

Heathrow rather than other London airports—even when their companies were 

indifferent among the London airports for local U.S.-London travelers—because 

Heathrow offers better connecting opportunities.17 

Due to the competitive and consumer harm threatened by the alliance—and a 

lack of credible competitive entry—Virgin Atlantic strongly urges the Department to deny 

the application outright. Virgin Atlantic urges DOT to consider carefully and give great 

weight to a recent statement made by British Airways that undermines completely the 

Joint Applicants' claim about access to London Heathrow and the "fluidity" of the slot 

market there.18 

Indeed, a recent statement made by the Chief Executive of BA himself refutes 

the claims that slots at Heathrow can be readily obtained. During a conference call with 

13

 DOJ Comments, at 22. 

14

 Id. 

15

 See id., at 18-19 ("Applicants' documents 

|") (citations omitted); Virgin Atlantic 

Answer, at 12-19. 

16

 See DOJ Comments, at 18-19. 

17

 Id. 

18

 See "British Airways Walsh: Heathrow Full, More Slots Eyed," Wall Street Journal (Nov. 13, 

2009), at http://online.wsi.com/article/BT-CO-20091113-709704.html. 
[PUBLIC VERSION] 

financial analysts about the proposed merger between British Airways and Iberia, Willie 

Walsh claimed that one of the key rationales for the deal was the ability of the alliance to 

expand at Madrid. As Mr. Walsh said, "It's well recognized that Heathrow is full, but 

Madrid has capacity."19 Acknowledging his own desire for slots at Heathrow (and their 

extreme scarcity), Mr. Walsh also stated; "If Lufthansa is looking to dispose of bmi, then 

we are definitely interested."20 Although the Joint Applicants have made numerous 

claims in this case about the ability of other airlines to launch competitive service at 

Heathrow, money talks. British Airways' commentary to the financial community should 

be accorded greater evidentiary weight than the wide array of self-serving statements 

made in this docket.21 

II. DOJ HAS CONCLUDED CORRECTLY THAT JOINT APPLICANTS HAVE 

OVERSTATED THE POTENTIAL BENEFITS OF ATI. 

DOJ has concluded that Joint Applicants have overstated the magnitude and 

value of the passenger benefits to be derived from ATI in this case,22 a conclusion Virgin 

Atlantic shares23 and supports. The Joint Applicants assert that passengers will benefit 

from an expansion of capacity of routes covered by their Joint Venture, but expansion is 

not among the Joint Applicants' objectives for seeking ATI. Contrary to the Joint 

Applicants' assertions, Virgin Atlantic has described before BA's announced plans to 

manage capacity downwards and reduce its short-haul aircraft fleet.24 

19

 Id. 

20

 Id. 

21

 Virgin Atlantic also wishes to correct a press account submitted by the Joint Applicants, which 

appears to imply that Virgin Atlantic has declined to bid on slots at Heathrow held by bmi. See 

"bmi Struggles to Get Sale of Landing Slots Off the Ground," The Times (Nov. 12, 2009), at 

http://business.timesonline.co.uk/tol/business/industry sectors/transport/article6913220.ece. 

Virgin Atlantic has not been approached or asked to submit an offer for the slots that allegedly are 

for sale. To that extent, the news reports submitted by the Joint Applicants are erroneous. 

22

 See DOJ Comments, at 22-28. 

23

 See Virgin Atlantic Answer, at 68-76. 

24

 See Answer of Virgin Atlantic Airways, Docket OST-2008-0252 (Sep 17, 2009), at 5. 
[PUBLIC VERSION] 

In addition, DOJ has recognized capacity constraints at London Heathrow that 

limit the ability to expand service. Unless AA/BA can obtain more Heathrow slots (which 

clearly are not available), they will be unable to expand their range of connecting 

opportunities without having to make trade-offs between short-haul spoke frequencies 

and routes and long-haul trunk frequencies and routes. Therefore, London Heathrow 

capacity constraints, rather than lack of ATI, are the primary barrier to expansion of the 

Joint Applicants' service offerings. Moreover, the Joint Applicants have claimed that 

certain new nonstop services would not be introduced in the absence of immunity, but 

nevertheless have introduced such services in the past several months.25 

More importantly, Joint Applicants tout additional connecting service as a benefit 

of this proposed alliance, 

|.26 Also, Joint Applicants' assertion is undermined by the recognized 

capacity constraints at London Heathrow and BA's own fleet plans.27 Clearly, especially 

in light of the significant competitive harm that would result from this proposed tie-up, 

ATI would not produce sufficient consumer benefits to overcome this problem. For this 

reason as well, Virgin Atlantic urges the Department to deny the application. 

III. THE IMPOSITION OF CONDITIONS UPON APPROVAL WOULD NOT 

REMEDY THE COMPETITIVE HARM CAUSED BY THE ALLIANCE. 

Virgin Atlantic agrees with DOJ's concerns about the grave competitive harm that 

would result if the Department were to grant ATI to the Joint Applicants. However, Virgin 

Atlantic does not believe that placing conditions on any grant of immunity as a means of 

25 See Virgin Atlantic Answer, at 69 (noting that American introduced service between Dallas/Ft. 

Worth and Madrid on May 4, 2009, in the absence of immunity). 

26 

27 

See DOJ Comments, at 24-25. 

See Note 24. 
[PUBLIC VERSION] 

mitigating the substantial risks would be effective. It is for this reason that Virgin Atlantic 

urges the Department to deny the application outright. 

If the Department were to decide to approve the application despite the 

significant concerns raised by DOJ and other parties to this proceeding, then the 

Department should impose strong conditions upon the grant of immunity, including 

conditions above and beyond those recommended by DOJ.28 As identified by DOJ, the 

ability to access connecting traffic is a significant barrier to entry. As such, the 

Department should prohibit the Joint Applicants from withdrawing from existing interline 

agreements with non-oneworld carriers, and should require the Joint Applicants to offer 

competing carriers interline prorates at their hub airports that are no less favorable than 

those they charge to each other.29 

In addition, slots made available for competitive service—whether unencumbered 

or earmarked—should be made available at no cost to the recipient. This is consistent 

with the Department's Show Cause Order in the 2001 AA/BA ATI proceeding.30 Also, 

they should be made available at suitable times for transatlantic service.31 DOJ's 

comments make the critical point that frequency and time of day are important factors in 

28

 See Virgin Atlantic Answer, at 82, for discussion of the ineffectiveness of slot remedies alone 

for addressing competitive distortions associated with ATI. 

29

 See id. 

30

 See Order 2002-1-12. Virgin Atlantic notes that this is established practice in the European 

Union, where the European Commission has ordered slot divestments without compensation to 

the divesting airline. See, e.g., Air France/KLM, COMP/M.3280 (Feb 11, 2004); Lufthansa/Swiss, 

M.3770 (July 4, 2005); Air France/Alitalia, COMP/38.284/D2 (Apr. 7, 2004). In addition, BA would 

reap windfall profits if it were compensated for divested slots (as it received a majority of its 

London Heathrow slots at no cost). Moreover, to require a recipient to pay for slots would render 

slot remedies ineffective, as that would only increase the cost of entry for the entrant. Instead of 

encouraging entry or expansion of existing competition, this could result in reducing competition 

rather than remedying the significant anticompetitive effects of the alliance. 

31

 Throughout Order 2002-1-12, the Department used the characterization "useable slots" to 

make clear that the divested slots would have to enable other airlines to effectively replace the 

competition lost due to the AA/BA tie-up. 
[PUBLIC VERSION] 

the success of competitive service.32 Divestitures of badly-timed slots will not provide 

opportunities for the recipients to make sufficient entry that will discipline the Joint 

Applicants in the relevant markets.33 

While DOJ focused on new entry in its comments34, it is essential to note that 

both incumbent and new entrant carriers should be eligible to receive divested slots. 

This, too, is consistent with the Department's Show Cause Order in the 2001 AA/BA ATI 

proceeding.35 As DOJ recognized, entry needs to be "timely, likely, and sufficient in 

magnitude, character and scope"36 in order to prevent adverse effects from a loss of 

competition37 and "entry by a new competitor that will obtain a small market share is 

unlikely to be sufficient."38 As such, entry of a small carrier with a small market share 

may not be best placed to mitigate the loss of competition posed by the alliance. For 

example, Virgin Atlantic has noted that AA/BA on a combined basis would operate 

almost an hourly "shuttle" service between JFK and London Heathrow, a frequency no 

competitor could ever hope to compete with. While Virgin Atlantic questions whether the 

loss of competition in the JFK-London Heathrow market can be remedied, the 

Department simply must bear in mind DOJ's comments about the importance of 

frequency of service in certain key U.S.-London Heathrow markets.39 For this reason, 

the number of divested slots must be sufficient to permit competitors to compete 

effectively with the service and schedule provided by the Joint Applicants. Only in this 

32

 See DOJ Comments, at 13 ("Frequency, as well as time of day, can be an important driver for 

corporate contract selections and for individual business passengers.") and 21 ("[Tjime of day is 

important for arrivals from the United States..."). 

33

 See id., at 14 n.41 (discussing the optimal timing of AA and BA's Heathrow-bound departures 

from New York as compared to flights operated by Delta and Continental). 

34

 See id., at 30-31. 

35

 See Order 2002-1-12. 

36

 DOJ Comments, at 17. 

37

 See id. 

38

 Id. 

39

 See id., at 13. 
[PUBLIC VERSION] 

way can the Department prevent the loss of competition that DOJ and Virgin Atlantic 

have identified will occur if the Department approves the application. 

As Virgin Atlantic has argued in this Docket (and as DOJ has apparently agreed), 

the proposed alliance threatens harm for consumers and threatens to severely distort (if 

not obliterate) competition in the U.S.-London Heathrow market. Indeed, American itself 

has argued that alliances between two entrenched competitors can pose competitive 

threats that cannot be effectively remedied. Tom Horton, American's CFO, has said: 

"Yielding slots at Narita does not remedy the regulatory problem [that a Delta-Japan 

Airlines link-up would pose] because the real issue is that competitors could not 

practically contest the dominance of SkyTeam and Star. We think DOT is also unlikely 

to accept market 'carve-outs' as a remedy, as they undermine a true joint venture and 

there is no evidence they protect consumers."40 

American's comments are particularly damning because, when compared to the 

AA-BA combine, a Delta-JAL alliance would involve fewer overlap routes (only three 

U.S. mainland-Japan overlap routes versus six U.S.-London Heathrow routes for AA-BA) 

and lower market shares (60% versus up to 100% for AA-BA). oneworld's vehemence 

in its opposition to a Delta-JAL tie-up (e.g., "If JAL were to consider joining another 

alliance, in this case SkyTeam, it would raise intractable competition issues and face 

severe regulatory opposition in the US because of the stranglehold this combination 

would hold on Japan-USA travel, with more than 60 percent of the market."41) serves to 

underscore the hypocrisy of its claim that the AA/BA combine does not threaten 

competition in the U.S.-London Heathrow market. Indeed (and although Virgin Atlantic 

40

 "Tom Horton Argues American's Case in the Tug of War for Japan Airlines," Dallas Morning 

News (Dec. 2, 2009), at http://aviationbloq.dallasnews.com/archives/2009/12/tom-horton-arquesamericans-ca.html. 

41

 "oneworld's 'Total Value Proposition' Makes It By Far the Best Alliance for Japan Airlines," PR 

Newswire (Dec. 2, 2009), at http://www.prnewswire.com/news-releases/oneworlds-total-valueproposition-makes-it-bv-far-the-best-alliance-for-iapan-airlines-78383682.html. 
[PUBLIC VERSION] 

takes no position on JAL and its prospective alliance partners), the fact is that access to 

Tokyo Narita is indeed expected to improve following the recent opening of an extension 

to its second runway. In addition, new opportunities for international air services at 

Tokyo Haneda Airport will become available when its fourth runway opens later this 

year. In contrast, growth at Heathrow will not likely occur before 2020. 

IV. CONCLUSION 

For the reasons set forth in DOJ's comments and elsewhere in the record, Virgin 

Atlantic respectfully urges the Department to deny the application. In the alternative, 

Virgin Atlantic requests that the Department impose tough remedies—those 

recommended by Virgin Atlantic in addition to DOJ's recommendations—sufficient to 

counteract the significant competitive harm that Joint Applicants will cause if they are 

permitted to operate with antitrust immunity. 

Anita M. Mosner 

Sophy Chen 

HOLLAND & KNIGHT LLP 

2099 Pennsylvania Avenue NW, Suite 100 

Washington, DC 20006-6801 

Phone:(202)419-2604 

Fax: (202) 955-5564 

Email: anita.mosner@hklaw.com 

Email: sophy.chen@hklaw.com 

Attorneys for 

VIRGIN ATLANTIC AIRWAYS LTD. 

10 
[PUBLIC VERSION] 

CERTIFICATE OF SERVICE 

I hereby certify that I have this date served the foregoing document on the persons 

identified below by causing a copy to be sent by electronic mail. 

anbird@fedex.com 

andrew.forman@cwt.com 

aserranzana@geclaw.com 

benjamin.slocum@usairways.com 

bill@mietuslaw.com 

bkeiner@crowell.com 

blabow@omm.com 

bob.kneisley@wnco.com 

bruce.rabinovitz@wilmerhale.com 

byerlyjr@state.gov 

carl.nelson@aa.com 

cdonley@ssd.com 

cgosain@steptoe.com 

cjsimpson@zsrlaw.com 

cwilson@omm.com 

david.heffernan@wilmerhale.com 

dfisher@kelleydrye.com 

dhainbach@ggh-airlaw.com 

diarmuid.ryan@hammonds.com 

dkirstein@yklaw.com 

donna.kooperstein@usdoj.gov 

dvaughan@kelleydrye.com 

dwight.moore@ustranscom.mil 

ebailey@wileyrein.com 

efaberman@wileyrein.com 

gmurphy@crowell.com 

howard_kass@usairways.com 

james.garzia@apgnet.com 

jashetaylor@gibsondunn.com 

jeff.ogar@aa.com 

jeffrey.manley@united.com 

jennifer.trock@pillsburylaw.com 

jhill@dlalaw.com 

jill.ptacek@usdoj.gov 

jim.ballough@faa.gov 

jrichardson@johnlrichardson.com 

julie.oettinger@united.com 

jyoung@yklaw.com 

karine.faden@freshfields.com 

kevin.montgomery@polaraircargo.com 

konstantinos.adamantopoulos@hammonds.com 

kquinn@pillsburylaw.com 

lachter@starpower.net 

leslie.abbott@wnco.com 

lhalloway@crowell.com 

libowd@sullcrom.com 

mamaila@airfrance.fr 

mchopra@jamhoff.com 

mcmillin@woa.com 

mgerchick@gerchickmurphy.com 

mgoldman@sgbdc.com 

mholland@condonlaw.com 

mroller@rollerbauer.com 

mrosia@crowell.com 

msinick@ssd.com 

npeterson@wileyrein.com 

paul.jasinski@ba.com 

paul.yde@freshfields.com 

peter.irvine@dot.gov 

pmurphy@gerchickmurphy.com 

pmurphy@lopmurphy.com 

prrizzi@hhlaw.com 

pruden@asta.org 

rbkeiner@crowell.com 

rclayman@geclaw.com 

recohn@hhlaw.com 

rick.rule@cwt.com 

robert.land@jetblue.com 

rsilverberg@sgbdc.com 

russell.bailey@alpa.org 

sametta.c.barnett@delta.com 

sami.sarelius@finnair.fi 

sascha.vanderbellen@delta.com 

scott.mcclain@delta.com 

sllunsford@fedex.com 

thomas.bolling@coair.com 

tmuris@omm.com 

todd.homan@dot.gov 

wkaras@steptoe.com 

Jennifer M. Nowak 

January 11,2010 

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