Order 2013

- 7

- 21

Served: July 3 1 , 2013



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 3 1 st d ay of July , 2013

Joint Application of

AIR TAHITI NUI. ; SOCIÉTÉ AIR FRANCE ; DELTA AIR LINES, INC

. ; KONINKLIJKE LUCHTVAA RT

MAATSCHAPPIJ N.V. ; and

ALITALIA COMPAGNIA A EREA

ITALIANA S.P.A.

Under 49 U.S.C. §§ 41308 and 41309 for Approval of and Antitrust Immunity for Alliance Agreements Docket DOT

- OST

- 20 13

- 0 077

ORDER REQUESTING ADDITIONAL INFORMATION

Summary

By this Order, the Department requests additional information, as described in the Attachment,

from Air Tahiti Nui, Société Air France, Delta Air Lines, Inc., Koninklijke Luchtvaart Maatschappij N.V., and Alitalia Compagnia Aerea Italiana S.p.A. (collectively, the “Joint Applicants”) . We find that the additional information is necessary to analyze the application and

make a d ecision . We believe that, with the satisfactory submission of the information requested, the evidence of record should be sufficient for us to establish a procedural schedule and act on this application.

Background

In this proceeding, the Joint Applic ants seek antitrust immunity to form a new transatlantic joint

venture alliance . Following the initial submission of the application on April 15, 2013

, 1 the Department issued a Notice on April 19 suspending the procedural schedule and granting access

to the confidential documents submitted along with the initial application

. 2 The Notice specifically stated that we would determine whether the record is substantially complete before establishing a procedural schedule.

1 See Joint Application.

2 See Notice (April 19, 2013).2 Decision

We recognize and appreciate the efforts made by the Joint Applicants to identify and submit, in conjunction with their application, information and supporting documentation based on evidence requests issued by the Department in past antitrust immunity case s. As we have stated before, however, we retain the option of seeking additional, relevant information on a case

- by

- case
basis. 3

Our review of the record indicates that additional information is required to ensure that the

record in this case is substa ntially complete, pursuant to the Department’s regulations. 4 We are therefore requiring the Joint Applicants to submit updated documents, as well as to answer a limited number of clarification questions about relevant issues

. Without the additional

infor mation requested , the Department will not have sufficiently detailed evidence to make an

informed decision on issues raised by this case

.

Accordingly, the Department directs the Joint Applicants to provide the Department with the

additional data and evi dentiary information set forth in the A ttachment. This information should

be filed in Docket DOT

- OST

- 20 13

- 0 077 , in accordance with Department rules. We remind the applicants of the importance of discussing the merits of the case on the public record to the maximum extent possible. Unnecessarily broad redactions are contrary to the public interest and result in delay in reviewing the application. To t he extent necessary, the applicants may seek confidential treatment of the information as set forth in the Department’s regulations. We emphasize that we do not seek duplicative filings; to the extent that the Joint Applicants affirm that information soug ht in the attachment has already been filed in the docket, they need only identify which documents satisfy the request.

With the satisfactory submission of the information requested in the attachment, the evidence of

record should be sufficient for us to establish a procedural schedule for comments and other such responsive pleadings necessary to act on the application.

ACCORDINGLY:

1. We direct Air Tahiti Nui, Société Air France, Delta Air Lines, Inc., Koninklijke Luchtvaart Maatschappij N.V., and Ali talia Compagnia Aerea Italiana S.p.A. to file the additional

information and evidence described in the Attachment to this Order as a supplement to its application

.

3 See, e.g. , American/ British Airways/ Iberia/ Finnair/ Royal Jordanian Case, Order 2008

- 12

- 11 at 5 (Docket

DOT

- OST

- 2008

- 0252).

4 14 C.F.R. § 303.3 2. We will serve this order on all parties on the service list in this docket.

By:

SUSAN L. KURLAND Assistant Secretary for Aviation

and International Affairs

(SEAL)

An electronic version of this document is available on the World Wide Web at: http://www.regulations.govAttachment 1

- 4 ATTACHMENT

Request for Additional Information

Docket DOT

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- 0 077

General Instructions

1. The following definitions of terms used in this request apply:

A. “You,” “Your,” “Your Company,” “Joint Applicants,” “Partner(s),” “Party,” or “Parties”

means Air Tahiti Nui (“ TN ”)

, Société Air France (“ AF ”) , Delta Air Lines, Inc. (“DL”)

, Koninklijke Luchtvaart Maatschappij N.V. (“ KL ”) , and Alitalia Compagnia Aerea Italiana S.p.A. (“ AZ ”)

, as well as each of their regional affiliates, individually and collectively. These definitions also include your domestic and foreign parents, predecessors, divisions, and all officers and directors who work at your corporate headq uarters (the site where your chief executives and senior operating, marketing, and financial officers are located).

B. “Application for Antitrust Immunity” means the Joint Applicants’ application for Approval of and Antitrust Immunity for Alliance Agreement submitted to DOT on April

15 , 20 13 . “ATI” refers to antitrust immunity.

C. “Alliance Agreement(s)” has the same meaning as defined by the Joint Applicants on

page 1 of their Application for Antitrust Immunity.

D. “Document(s)” means (1) all written, recorded, transcribed, electronic, or graphic material, including letters, electronic mail, memoranda, reports, studies, forecasts, lists, and directives, as well as minutes and records of meetings, conferences, telephone or other conversations or communications; a nd (2) all information contained in data processing equipment. Except where otherwise specified, a request for Documents is

limited to documents created or revised since September 15, 2012

. Copies of Documents requested herein shall be full, complete and unredacted. For each Document, if not contained in the Document itself, include the date of preparation and the name and title of each individual who prepared the Document.

E. “Discuss” mean s analyze, constitute, summarize, report on, consider, recommend, set forth, or describe a subject, regardless of the length of the discussion. Documents that merely mention or refer to a subject without further elaboration do not discuss that subject. D ocuments that discuss a particular subject include all Documents that contain reports, studies, forecasts, analyses, plans, proposals, evaluations, recommendations, directives, procedures, policies, guidelines, or any other comments that address or

concern the subject, or that constitute a discussion of the subject.

F. “And” and “or” shall be construed disjunctively and conjunctively as necessary in order to bring within the scope of each information directive all responses that might otherwise

be construed to be outside its scope.Attachment 1

- 5 G. “Plans” means tentative and preliminary proposals, recommendations, analyses, forecasts, or considerations, whether or not finalized or authorized, as well as those that have been adopted.

2. All responses to these information di rectives shall reflect the cumulative knowledge of the responding Parties and shall be accompanied by a sworn statement or statement under penalty of perjury, executed by a responsible officer of the responding Party, that the responses are full, complete, and accurate. All responses shall identify clearly the information directives to which they respond, as well as the person(s) who is (are) the source(s) of the information. Supplemental responses shall be submitted in the event that

information is disco vered after submission of the initial responses.

3. To the extent th at any responsive documents are written in a foreign language, provide a copy of the original document, as well as an English translation of the document.

4. Documents produced in resp onse to any request shall be consecutively numbered, and shall be marked with the number of the request to which they respond. Responding carriers shall prepare an index of the documents produced, setting forth the document number, date, preparer, address ee, and subject of each document, and the information directive to which it responds.

5

. These information directives are requesting only material and documents now or previously located at corporate headquarters of any of the Parties (the site where the Parties’ chief executives and senior operating, marketing, and financial officers are located) and only those documents, material, and messages prepared by or for the Board of Directors, senior management, or middle management responsible for strategic pl anning, marketing, alliance relations, pricing, revenue management, or schedule and route planning.

6

. Please pr ovide a privilege log identifying and describing all withheld documents, as required by 14 C.F.R. § 303.04(h).

7

. Please provide an original and two copies of all Documents. The original filing should be on 8.5" x 11" paper using dark ink and be unbound without tabs

, which will expedite use of our docket imaging system. To the extent that the carriers deem it necessary, they may seek

confide ntial treatment of the information as set forth in the Department’s regulations.

Clarification Questions & Accompanying Documents

Please provide responses to the following questions and all Documents that discuss the issues

addressed in each of the following questions . Do not resubmit Documents that were already submitted to DOT in response to the information request drafted by the Joint Applicants and presented with your Application for Antitrust Immunity in Docket DOT

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. Whether previ ously or newly submitted, you should identify the reference number(s) of the Documents responsive to the requests below:Attachment 1

- 6 1. To supplement the application, p rovide a more detailed description of the structure, scope, and procedures of the proposed joint venture and clarify its relationship to the existing, broader SkyTeam joint venture

. In particular, please:

(a) Provide the definition and meaning of “transatlantic routing” as used in the Joint Application, the AF

- TN Joint Venture Agreement, and Antitrust C ompliance Protocols.

(b) Describe the specific routes that are covered by the proposed AF/TN joint venture. For additional clarity, please also indicate whether, and to what extent, the sample list of

itineraries below would be covered . To the extent that m ore than one of the applicants operates a flight on a segment shown below, please explain whether the coverage under the proposed AF/TN joint venture changes. If the answer differs based upon which direction the passeng er is traveling , the identities of t he operating carriers, or the carrier codes on the ticketed itinerary , please explain. Also, for each of these itinerary types, describe who will make scheduling, pricing, and revenue management (availability) decisions and how they will be made (e.g., on the basis of what prorate agreements). In each case, describe how metal neutrality will be achieved across all itinerary types and paths, despite the exclusion of some SkyTeam carriers from the AF

- TN joint venture

agreement

.

PPT

- LAX (either direction)

, PPT

- LAX

- CDG (either direction)

, P PT

- LAX

- CDG

- VIE (either direction , including all AF/KL destinations

behind CDG ) , and

PPT

- LAX

- CDG

- FCO (either direction , including all AZ destinations

behind FCO ).

(c) Explain how cooperation would be handled when the applicants are operating flights that contain some passengers that are covered by the joint venture and others that are not. For example, since both AF and TN fly all segments on the PPT

- LAX

- CDG route, but are only seeking antitrust immunity for their cooperation o n “transatlantic routings,” there may be some passengers on the companies’ aircraft that are covered by the joint venture

and others that are covered by other marketing

, sales , and prorate arrangements

. H ow will the pricing, capacity management, and impor tantly, revenue management, be handled separately for those distinct categories of passengers? Under these circumstances, w ould the operating carrier have the incentive to prioritize seat inventory

for LAX

- PPT passengers

, on which it would not share revenue, over the seat inventory

for Europe

- PPT or LAX

- Europe passengers
, on which it would share revenue?

(d) Describe the extent to which services to PPT will remain covered by the existing, broader SkyTeam joint venture and how any overlap will be r econciled for purposes of the JVs and to what extent the economic incentives for the member carriers promote metal neutrality

.Attachment 1

- 7 (e) Describe how pricing will work in the proposed joint venture and whether it will be handled by one party or another depending up on direction or the specific origin and destination for the ticketed itinerary

.

2. Consumer benefits achieved through alliance s derive from both the scope of the combined network and the alignment of economic incentives. Moreover, the Department has routinely stated that grants of a ntitrust immunity should be reserved for cases where substantial

consumer benefits will be realized , such as through the linking of networks

, and where those

consumer benefits could not be readi ly achieved through other less anticompetitive means ( see, e.g., Order 2010

- 9

- 4 , at 1 )

. Please explain how the Joint Applicant s’ limited arrangement is compatible with th e aforementioned policy and describe how substantial

benefits will derive from the proposed alliance given the limited scope of the proposed

alliance , even within its geographic scope ( e.g. , AZ and TN do not have the same underlying commercial arrangements as AF/TN

, limiting the network cooperation even among SkyTeam members).

3. Please de scribe how the applicants intend to achieve the reduction of double marginalization, as described in the Joint Application at 39 , and estimate the potential value to consumers overall and U.S. consumers in particular

.

4. Will both the TN and AF flights car ry the DL code on the LAX

- CDG and LAX

- PPT segments and will Delta SkyMiles members based in the United States earn miles, including elite qualifying miles

, on TN

- operated flights to/from both CDG and PPT ?

5. Typically, airline partners engage in bilateral or multi

- later al cooperation at “arms

- length” as a first step in building a mutually beneficial partnership. What efforts have been made to optimize arms

- length cooperation prior to this application and why is immunity and a joint venture necessary to link the parties networks on a single “trunk route” (LAX

- CDG)? Please address the question generally and then with respect to each of the following areas:

(a) Code sharing and marketing support

– How will the new codeshare operate differently from the existing AF

- TN code share? How many additional points will be added and why is a grant of antitrust immunity necessary to add them? Why is a joint venture necessary for a full reciprocal code share? Are th ere any steps that could yet be taken with respect to marketing support and frequent flyer cooperation?

(b) Breadth of network

– Why is the joint venture agreement limited to cooperation between AF and TN, thus excluding other members of the SkyTeam immunized alliance (and joint applicants in this proceeding) such as Alitalia?

(c) Co

- location

– To what extent will AF, TN, and the other immunized SkyTeam partners

co

- locate at CDG and LAX, and why is a grant of immunity necessary to achieve this objective ?

6. If the JV is implemented

, what specifically do you expect to happen to prices and capacity? Absent the JV, what would happen? Address all segments, but pay special attention toAttachment 1

- 8 whether either or both carriers would decrease, increase, or maintain capacity betwe en LAX

and PPT . In light of AF’s current restructuring efforts, which include evaluating route profitability, what are AF’s plans for continuing to serve PPT?

7. Describe in detail AF and TN’s annual financial performance on the PPT

- LAX

- CDG route

, breaking out the performance by segment and describing the relative revenue and traffic

contributions of the Europe

- originating, France

- originating, U.S.

- originating, Tahiti

– originating, and other

- country

- originating segments for the past three y ears. (Remember to

include documentation as directed above.)

8. Please explain how the protocols the Joint Applicant s intend to implement will preclude

coordination of pricing on LAX

- PPT itineraries despite the Joint Applicants ’ coordinat ion of pricing on CDG

- PP T itineraries.

Data

9. Prior to and after the filing of this application, DOT staff consulted with the J oint A pplicant s ’ representatives concerning the scope of data that the Department would likely require in analyzing this application

. T he Department further requested that the data provided in support of the immunity request conform to certain specifications

. A copy of the data request by the Department i s attached

. Although t he applicants have made a number of efforts to

submit the data requested us ing the required specifications, we have determined that there are

still some deficiencies in the submissions that require correction or clarification :

(a) Air France must resubmit its response to the attached Origin and Destination data request

with fa re data converted to U.S. Dollars.

(b) Air Tahiti Nui should clarify whether the four data files submitted with the same content but with descriptions stating that the files represent four different geographical areas are indeed correct, are consistent with what the carrier intended to submit, and are fully and accurately responsive to the Department’s request for Origin and Destination data as specified in the attachment to this order.

10. With regard to the applicants’ MIDT submission, d o the Joint Appli cants object to a limited public disclosure by the Department of aggregated market share (including nonstop and connecting share) from the data set ?Attachment 1

- 9 MIDT Traffic Data

Using MIDT data for the most recent 12

- month period available

, provide directional net passenger bookings for all Tahitian origin and destination airport pair markets for all airlines and all US to Europe origin and destination airport pair markets that Air Tahiti Nui served during the period . Include the following data elements:

Field 1: Trip O riginating A irport

Field 2: Booked Point of Sale Country Code

Field 3: Airport Path and Marketing Carrier Designator String by Leg

Example: A Paris

– Los Angeles

– Papeete directional trip with segments marketed by TN

, AF respectively would be reported as “ CDG TN LAX AF PPT ”. Use a “//” to represent the marketing carrier

on any ARNK (Arrival Not Known) segments.

Field 4: Volume of Net Bookings

Include an explanation of the trip break methodology used to create direct ional trips from itinerary data.

Origin Destination Fare Data

1. For all itineraries that Air Tahiti Nui participates in, a ll itineraries involving Tahiti that touch a US or European point should be provided . The Department prefers the O&D data represent an internal 100% census of itineraries meeting the above criteria ; however suitable alternatives may be considered

, if proposed. Data should be submitted on a quarterly basis for the most recent year ended period for which data is available. Provide all information for any itinerary that was begun during the periods described above irrespective of when the full itinerary was completed.

Provide the itinerary in an origin

- destination (by direction of travel) format, referred to as

“market directional.” Provide the number of (1) passengers, (2) market fare, (3) purchase class, (4) period, (5) airport sequence, (6) operating carrier code se quence, (7) change in operating carrier flag, (8) ticketing/marketing carrier code sequence, (9) change in ticketing/marketing carrier flag, (10) origin, (11) destination, (12) number of market coupons, (13) sequence number

of each market directional that makes a full itinerary, (14) total distance flown (all kilometers converted to miles), (15) distance between the origin and destination (all kilometers converted to miles), (16) unique itinerary identifier, (17) one

- way/round

- trip itinerary identifier, (18 ) reporting carrier, and a (19) full itinerary online identifier. Fares must include all taxes, fees, and applicable surcharges (partic ularly any fuel surcharges paid )

. Provide the passenger counts summarized by the unique combination of period, flight se quence, ticketing/marketing carrier sequence, operating carrier sequence, reporting carrier, directional market fare, one

- way/round

trip itinerary identifier, full itinerary online identifier, and purchase class value.

For itineraries that include a segme nt provided by ground transportation, note the ground segment

as ‘

— ‘ in the tkcarriergroup and opcarriergroup variables.

Provide a description of the methodologies used to determine market directional trip break s within itineraries and the prorate for ass igning the market directional fare from the full itinerary fare. DOT proposes using the industry standard “four hour rule” for intra

- North American travel

and the “24

- hour rule” for all other travel to determine market directiona l trip break s. DOT prefer s the use of the square root of the miles methodology for market directional fare proration

. Square root of the miles methodology distributes the itinerary revenue by dividing the itineraryAttachment 1

- 10 fare by the square root of the number of miles distance between a irports in the itinerary. To the extent the applicants prefer to use alternative methodologies for determining market directional trip breaks or prorates , the y are required to provide appropriate methodological descriptions and

validation.

The purchase c lass values should provide detail that allows for the evaluation of a given itinerary’s level of service purchased. The classes should be broken down by both Restricted and Unrestricted fares sold in First Class, Business Class, Premium Economy, and Econo my cabins. DOT is open to alternative mappings and levels of detail that the applicants may suggest. If multiple purchase classes are assigned to different segments in a market directional provide the most premium class assigned from any of the segments in the market directional

.

Figure 1 provides a detailed listing of the variables required (meta data) and Figure 2 provides a sample of the final format. The minimum combination of variables that make each row unique (composite primary key for the dataset) is highlighted in yellow.

Provide the data electronically as a comma separated value (CSV) or other delimited text file

f ormat. If a format other th a n CSV is selected

, provide the meta

- data detail necessary to allow for the loading of the data into a relational database environment.Attachment 1

- 11 Figure 1

- Technical description of the dataset to provide

Market (Directional)

1 AirportGroup Sequential order of airport routing in the market directional, “:” separated, 3 di designator

2 Dest Market of travel destination for the passenger(s), 3 digit IATA airport code designato

3 Itin_Online Indicates if for entire itinerary the passengers stayed on the same carrier for all operated

4 Itin_RoundTrip Indicates if passengers flew one way or round trip for the itinerary, 0=One

- way, 1=R

5 ItinID Identifies all market directionals for a single itinerary with the same v alue

6 MktCoupons Total number of segments traveled for the directional market

7 MktFare Fare paid by passengers for the market directional

8 MktMilesFlown Total track miles for each segment of the market directional minus ground miles

9 MktSeq Identifies the order the market directionals are traveled

1 0 NonStopMiles Market origin to destination distance, excludes ground segments (radian miles, point

1 1 OpCarrierChange Identifies if there is a change to the operating carrier in the segments within the direc

1 2 OpCarrierGroup Sequentially identifies the operating carriers for each segment of the directional, “:”

1 3 Origin Market of travel origination for the passenger(s), 3 digit IATA airport code designato

1 4 Passengers Number of passengers flying for the market directional record

1 5 Period Period first segment of the itinerary was flown, four digit year plus single dig it quart

1 6 PurchaseClass Restricted and Unrestricted sales of First Class, Business Class, Premium Economy,

1 7 RpCarrier Code for the carrier that reports the data to DOT

1 8 TkCarrierChange Identifies if there is a change to the ticketing/marketing carrier in the segments
1=Yes, 0=No

19 TkCarrierGroup Sequentially identifies the ticketing/marketing carriers for each segment of the m separatedAttachment 1

- 1 2 Figure 2

– Sample of the final format of the dataset to provideItinIDMktSeqMktCouponsPeriodOriginDestAirportGroupTkCarrierChangeTkCarrierGroupOpCarrierChangeOpCarrierGroupRPCarrierPassengersMktFare

1 1 2 20 121 PPT CDG PPT : LAX : CDG 0 TN : TN 1 TN :A F TN 5 900

1 2 2 2 0121 CDG PPT CDG : LAX:PPT 0 TN:TN 0 AF:AF TN 5 900

2 1 3 20 123 PPT CDG PPT:LAX:SFO:LAX:CDG 1 TN:DL:DL:TN 1 TN:OO:OO:TN TN 20 1247

3 1 4 20 122 GOA PPT GOA:CDG:SFO:LAX:PPT 1 AF:AF:DL:TN 1 DB:AF:OO:TN TN 3 1139

3 2 3 2 0122 PPT GOA PPT:LAX:CDG:GOA 1 TN:AF:AF 1 TN:AF:DB TN 3 1126

4 1 5 20123 MAD PPT MAD:CDG:SFO:LAS:LAX:PPT 1 AF:AF:

-- :DL:TN 1 AF:AF:

-- :OO:TN TN 2 1314

4 1 1 20073 PPT MAD PPT:LAX:CDG:MAD 1 TN:AF:AF 1 TN:AF:AF TN 2 1304

* Indicates primary key