Order 201 1

- 1 1

- 1 2

Served: November 9 , 2011



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 9 th Day of November , 201 1

Joint Application of :

AMERICAN AIRLINES, INC.

and

QANTAS AIRWAYS LIMIT ED

under 49 U.S.C. § 41309 for approval of Joint Business Agreement Docket DOT

- OST

- 201 1

- 0111

FINAL ORDER

I. S UMMARY

By this order, the Department of Transportation grants approval of the application of American Airlines, Inc. and Qantas Air ways Li mited ( “American/Qantas”

, “ AA /QF ” or

“ oneworld ”). The oneworld a pplicants have requested a pproval to implement a Joint Business Agreement (“ JBA ”). T hese air carriers already have basic marketing agreements in place to sell each other’s products and servi ces and are seeking to increase integration of their respective networks through the JBA.

Based on our evaluation of the oneworld a pplication, we determine that approving the JBA would likely promote inter

- al liance competition in the U.S.

- A ustralia and U.S.

- New Zealand

markets and produce a stronger overall competitive environment, leading to enhanced consumer

benefits

.

By optimizing the joint network, the oneworld a pplicants state that they will be able to “more closely coordinate and improve their p roduct offerings between the U.S. and the South Pacific.” 1
More specifically, American and Qantas claim that approval of the JBA will result in improved network schedules, aligned frequent flyer benefits, new corporate and leisure fare products,

1 Se e Joint Application, at 6.2 lo w er far es
, and greater availability. We conclude that the oneworld a pplicants have provided

evidence that substantial public benefits are likely to result from their proposed cooperation

. These benefits include a broad range of service, fare, facility, and prod uct improvements.

Provided that the oneworld a pplicants abide by the conditions that we propose here , we conclude that the potential benefits of the application outweigh any potential harm. Therefore,

we approve the Joint Business Agreement , subject to the conditions in Section V

.

II. S UMMARY OF THE R ECORD

On June 8 , 20 11 , the oneworld a pplicants filed the AA/QF Appl ication , which included a copy of the JBA, in Docket DOT

- OST

- 20 11

- 0 111

. The Applicants note that they will not proceed with the proposed J BA absent approvals from the U.S. and Australian governments

. 2

On June 10 , 20 11

, we issued a N otice granting interim access to confidential documents submitted with the applications, limited to interested parties who filed confidentiality affidavits. 3

W e also declared the record in the case to be substantially complete and established a procedural schedule for public comments and responses. Answers were due on July 1 and r eplies were due

on July 13

.

Dallas

- Fort Worth International Airport (“ DFW ” ) fi led an answer. DFW expressed strong support for the American/Qantas a pplication

, encouraging the D epartment to approve th is application in order to allow AA and QF to better coordinate services related to QF’s new

Dallas/Fort Worth

– Sydney route as well as to enhance U.S.

- South Pacific competition among global alliances

. 4 No other answers and no replies were filed.

III. D ECISIONAL S TANDARDS

The request pending in this docket is for approval of a Joint Business Agreement between

AA/ QF

.

Under 49 U.S.C § 41 309, we engage in a n analysis of foreign air transportation agreements submitted for our approval. We determine under § 41309 (b) whether the agreements are adverse to the public interest because they would substantially reduce or eliminate competition (th e “competitive analysis” ). If we make that affirmative determination

, § 41309 (b)(1)(A) directs

us to decide whether the agreements are nevertheless necessary to meet a serious transportation need or to achieve important public benefits ; U.S. foreign poli cy goals are a key element of these

benefits

. If , however, we do not find the agreements to be adverse to the public interest, § 41309(b) directs us to approve them.

2 See Joint Application, at 4.

3 See Docket DOT

- OST

- 2011

- 0111; Notice Providing Access to Documents and Suspending Procedural Schedule ( June 10, 2011 ).

4 See Docket DOT

- OST

- 2011

- 0111; Answer of Dallas

- Fort Worth International A irport, at 1 ( July 1, 2011 ).3 IV. D ECISION

Under § 41309 (b) , we must determine whether the agreement is adverse to the p ublic interest

because it would substantially reduce or eliminate competition

. The oneworld a pplicants provided, within their application, a competitive summary table using Marketing Information Data Tapes ( “MIDT” ) booking data. 5 Between the U.S. and Aus tralia, Qantas ’ booking share totaled 40 percent

, followed by immunized United/Air New Zealand at 27 percent and immunized Delta/V Australia at 22 percent.

AA and QF have no overlapping nonstop transpacific routes . AA states that i t does not have

aircr aft currently capable of providing nonstop service between the U.S. and Australia and that

its existing labor agreements preclude nonstop flights over U.S.

- South Pacific stage lengths

. 6

A ccordingly , we conclude that American is unlikely to become a nonsto p competitor between

the U.S. and Australia

, and that no reduction in the number of nonstop competito rs would result from approving the application

.

In their joint application, the oneworld a pplicants point to a number of benefits to be realized by cons umers , including : (1) improved schedules and frequencies ; (2) increased behind and beyond Pacific Gateway connecting opportunities; (3) joint use airport facilities ; (4) improved coordination of connecting passengers and streamlined check

- in ; (5) new fare products and zonal

fare reductions ; (6) enhanced frequent flyer reciprocity; and (8) cohesive product offering s to corporate clients. 7

We have evaluated the claimed benefits in light of their commercial incentives, the provisions of the JBA, the structu re and evolution of the transpacific market, and our historical

exper ience with alliances. We specifically note the oneworld a pplicants ’ intention to support and expand new ly launched QF nonstop services , implement product enhancements, and invest in join t

- use facilities

. 8

Additionally, we find that a pproving the JBA will lead to e nhanc ed inter

- alliance competition

across the South Pacific. United and Air New Zealand have operated with immunity for 10 years

and Delta and V Australia received antitrust im munity for their transpacific joint venture this

year

. Approving the AA/QF JBA will allow these oneworld carriers to deepen their cooperation, compete more effectively with the existing immunized carrier groupings, and create and sustain

consumer benefits

.

Based on our analysis of the potential competitive effects and public benefits of the proposed

a greements, we approve the oneworld J BA

.

5 See Joint Application, at 15.

6 See Joint Application, at 2.

7 See Joint Application, at 5

- 6.

8 See Joint Application, at 5.4 V. C ONDITIONS

In this section, we summarize and explain the proposed conditions and remedies to be applied to our approval of the JBA

.

A. A NNUAL R EPORTING

We find that it is necessary for the oneworld a pplicants to report to the Department concerning commercial developments in their alliance and the degree to which the public

benefits envisioned in the A pplication ar e being realized. As we have in recent decisions, we are requiring annual report ing. 9 The report should focus on progress made toward achieving the

JBA’s stated goals, specific actions taken to implement the JBA, present or future planned cooperation bet ween AA/QF in all core airline functions, and a discussion of the public benefits that are being realized.

B. O PERATION UNDER A C OMMON N AME

Becaus e implementation of the oneworld a pplicant ’ s JBA could raise important consumer issues and “holding out” questio ns , if AA/ QF choose to operate under a common name or use “common brands,” the oneworld applicants must seek separate approval from the Department prior to such operations. For example, it is Department policy to consider the use of a single air

carrier d esignator code by two or more airlines to be unfair and deceptive

, unless the airlines give reasonable and timely notice to passengers of the actual operator of the aircraft. 10

A CCORDINGLY :

1. We approve the Joint Business Agreement 11 between American Airli nes, Inc., and Qantas Airways Limited , in so far as such agreements relate to foreign air transportation. Without regard to other conditions described in the ordering paragraphs below, the approval shall remain in effect indefinitely, subject to Ordering Paragraph 4

, provided that the oneworld a pplicants :

a. Submit for prior approval subsequent subsidiary agreements implementing their

most recent Joint Business A greement ; 12

b. Resubmit the JBA before five years from the date of issuance of this order;

c. Obtain p rior approval if they choose to operate or hold out service under a common name or use common brands;

9 See Star Final Order 2009

- 7

- 10, at 26 (July 10, 2009); oneworld Final Order 2010

- 7

- 8, at 15 (July 20, 2010)

10 See 14 C.F.R. § 399.82.

11 The Joint Business Agreement is Exhibit 1 of the Joint Application of American Airlines, Inc. and Qantas Airways Limited for approval of Joint Business Agreement (June 8, 2011).

12 Regarding this requiremen t, we do not expect the oneworld a pplicants to provide the Department with minor technical understandings that are necessary to implement fully their day

- to

- day operations but that have no additional substantive significance. We do, however, expect and di rect them to provide the Department with all unredacted contractual instruments that implement or materially alter, modify, or amend the cooperation agreements, joint ventures, or confidentiality guidelines.5 2. We direct the oneworld applicants to file with the Director of the Office of Aviation Analysis a verified statement(s) in Docket OST

- 201 1

- 0 111 attesting that the Joint Business Agreement has been executed and implemented and a complete and unredacted copy of the most recent American/Qantas Joint Business Agreement and any appendices;

3. We direct the A pplicants to submit annual progress reports to the Office of Aviation Analysis, beginning one year from the date of issuance of this order, and continuing each year thereafter while their JBA is effective; 13

4. We determine that we may amend, modify, or revoke this authority at any time without hearing; and

5. We wi ll serve this Order on all parties on the service list in this docket.

By:



### S USAN 

### L. K URLAND Assistant Secretary for Aviation

and International Affairs

(SEAL)

An electronic version of this document is available at: http://www.regulations.gov

13 We expect the oneworld applicants to delive r the progress report by the close of business on the anniversary date. If that date falls on a weekend or federal holiday, the oneworld a pplicants may deliver the report by the close of business on the following business day.