Order 2010-7-8 

Served: July 20, 2010 

UNITED STATES OF AMERICA 

DEPARTMENT OF TRANSPORTATION 

OFFICE OF THE SECRETARY 

WASHINGTON, D.C. 

 

 

Issued by the Department of Transportation 

on the 20th Day of July 2010 

Joint Application of: 

AMERICAN AIRLINES, INC. 

BRITISH AIRWAYS PLC 

FINNAIR OYJ 

IBERIA LÍNEAS AÉREAS DE ESPAÑA, S.A. 

ROYAL JORDANIAN AIRLINES 

Under 49 U.S.C. §§ 41308-41309 for approval of 

and antitrust immunity for alliance agreements

 

Docket DOT-OST-2008-0252 

Joint Application of: 

AMERICAN AIRLINES, INC.

 and

BRITISH AIRWAYS, PLC 

Under 14 C.F.R. Part 212 and 49 U.S.C. § 40109 

for amended statements of authorization 

Docket DOT-OST-2002-13861 

FINAL ORDER 

I. SUMMARY

 By this order, we approve a series of agreements establishing an alliance among five 

members of “oneworld” – American Airlines, British Airways, Iberia, Finnair, and Royal 

Jordanian (collectively, the “Joint Applicants” or “applicants” or “oneworld”) and grant 

them antitrust immunity to implement those agreements. The agreements include plans 

for an integrated joint venture in which American, British Airways, and Iberia would 

cooperate on all of their transatlantic flights and services. We have concluded that the 
2 

joint venture, as well as the overall alliance, is, on balance, pro-competitive and that it is 

likely to generate substantial public benefits to the traveling and shipping public. 

 To ensure adequate competition and enhance the public benefits of the alliance, our 

approval and grant of immunity is subject to a number of conditions.1 Among the 

conditions is a requirement that the applicants relinquish landing and takeoff rights, 

otherwise known as "slots,” at London’s Heathrow International Airport (“Heathrow”) so 

that competitors may launch competing services.2 This slot remedy requires oneworld to 

transfer four Heathrow slot pairs to competitors, which will be sufficient to support four 

new daily round-trip flights between the United States and Heathrow. The 

implementation of the slot remedy will be governed by procedures agreed to by the 

applicants and the European Commission, which oversees European slot regulation. We 

find that these procedures are sufficient to achieve the Department’s objectives for the 

slot remedy. 

II. BACKGROUND

Under the umbrella of the oneworld alliance, the five applicants in this case plan to 

enhance commercial cooperation on a worldwide basis. The focus of the alliance’s 

efforts, at least initially, is the implementation of an integrated joint venture operated by 

American, British Airways, and Iberia. The joint venture partners will share revenues 

and cooperate on all major aspects of airline service in transatlantic markets in an attempt 

to provide more competitive products and services to customers. 

To implement the joint venture, as well as the overall alliance, the applicants are 

seeking three actions by the Department: (1) a grant of blanket code-share authority for 

American and British Airways, (2) approval of their commercial alliance agreements, and 

(3) a grant of immunity from the U.S. antitrust laws to implement the alliance 

agreements. 

On February 13, 2010, the Department issued a show-cause order with our proposed 

decision. The Show-Cause Order explained that we had tentatively decided to grant the 

applicants’ requests, subject to conditions, and provided an opportunity for public 

comments.3 In the Show-Cause Order, we tentatively concluded that the oneworld 

alliance would be, on balance, pro-competitive and that it would be likely to produce 

 

1 We provide a list and description of the conditions in Section IV(E) of this order. 

2 A slot is the right to takeoff or land at a particular time and date at a slot-controlled airport such 

as Heathrow. To conduct a daily round-trip flight, airlines must hold a pair of slots for each day 

of the week - one slot for landing and one for takeoff. In this way, one slot pair is sufficient to 

support one daily round-trip flight, or seven weekly frequencies, to/from the slot-controlled 

airport. 

3 Order 2010-2-8 (Feb. 13, 2010). 
3 

substantial benefits for the traveling and shipping public.4 We also tentatively found that 

the alliance would enhance competition by creating a viable third immunized alliance that 

is comparable to and competitive with the product and service offerings of oneworld’s 

competitors, Star Alliance and SkyTeam, which have already received grants of antitrust 

immunity and are proceeding with their own alliance plans and integrated joint ventures.5

To support the tentative conclusions in the Show-Cause Order, we conducted a 

review of the record evidence and made a number of tentative findings. We assessed the 

changes in market structure and competitive effects that would result from the alliance 

and tentatively concluded that the alliance would not substantially reduce competition in 

any relevant market. This tentative conclusion included the imposition of a slot remedy 

that would allow competitors to launch new services to the United States from Heathrow. 

The slot remedy we proposed in the Show-Cause Order required the applicants to make 

four slot pairs available at Heathrow: two pairs for services in the Boston-London market 

to address potential lost competition where we tentatively determined the effects would 

be most acute (the “fixed slots”), and two pairs for services in any U.S.-Heathrow 

markets to address potential network-level effects (the “flex slots”). We also set forth 

some general principles that should govern the transfer of slots at Heathrow and the 

establishment of a workable “implementation mechanism.” 

We tentatively found that approval of the alliance, as conditioned, would produce a 

number of potential benefits for the traveling and shipping public, including: 

 Lower fares on more itineraries between city-pairs; 

 Accelerated introduction of new routes; 

 Additional flights on existing routes; 

 Improved schedules; 

 Reduced travel and connection times; and 

 Product and service enhancements that would allow the applicants to provide 

full reciprocal access to their networks. 

The tentative conclusions in the Show-Cause Order were premised upon a number of 

additional conditions, including the requirements that the oneworld carriers submit 

progress reports and Origin and Destination Survey data to the Department on a regular 

basis and implement the alliance within 18 months to ensure that public benefits 

promised by the alliance are realized as soon as possible. The Department also 

tentatively required the applicants to make a number of changes to their joint venture 

agreement to remove competitive constraints and maximize public benefits.6

 

4 Order 2010-2-8 at 28-29 (Feb. 13, 2010). 

5 See Order 2010-2-8 at 2 (Feb. 13, 2010). 

6 The applicants filed an amended Joint Business Agreement on March 30. See Letter to Ms. 

Dorothy Beard, Chief of DOT Dockets, from Paul Jasinski, Carl Nelson, and William Karas, 

Attorneys for American Airlines, British Airways, and Iberia (Mar. 30, 2010). 
4 

In the Show-Cause Order, the Department also noted that the European Commission 

(the “Commission”) was conducting its own review of this transaction. That review is 

now complete. On July 14, the Commission announced that it had made a final decision 

that would allow the alliance to proceed under immunity from enforcement action for a 

period of 10 years.7 The Commission’s decision includes a slot remedy at Heathrow and 

establishes a detailed mechanism to implement that remedy. The remedy and the 

implementation mechanism are set forth in formal written commitments, undertakings 

made to the Commission by the joint venture partners American, British Airways, and 

Iberia (the “Commitments”), which have been declared legally binding by the 

Commission. 

Throughout this case, we have considered the views of the U.S. Department of 

Justice, as well as other commenting parties. We consulted with DOJ as part of our 

preliminary assessment of the competitive effects of the alliance. When DOJ filed 

comments on the record, we adopted many of its recommendations. 

III. RESPONSIVE PLEADINGS

 We invited public comment on the Show-Cause Order. The comment period closed 

on April 14, 2010. The Department received a number of comments in response to the 

Show-Cause Order. We summarize the responsive pleadings below. 

Virgin Atlantic filed objections and a reply.8 In its objections, Virgin Atlantic 

argues that the Department’s findings are not based on substantial evidence and that the 

remedies proposed are insufficient to address the potential competitive harm created by 

the alliance.9 Virgin Atlantic believes that the Department has not paid enough attention 

to the unique dynamics of the alliance, notably the competitive conditions at Heathrow 

airport.10 In Virgin Atlantic’s view, the record demonstrates that the alliance is a threat 

to competition because slots at Heathrow are scarce and costly, there is little chance of 

competitive entry on the routes in which the applicants offer overlapping services, and 

services operated by other alliances via connecting points in Continental Europe offer no 

meaningful competition on the nonstop overlap routes. Virgin Atlantic also argues that 

the public benefits of the alliance are overstated. Virgin Atlantic asserts that there is no 

reason to believe that the applicants will deliver on some of the potential benefits of 

alliances, such as new nonstop routes, more frequencies, and greater overall capacity. 

 

7 See Press Release, European Commission, Antitrust: British Airways, American Airlines and 

Iberia Commitments to Ensure Competition on Transatlantic Passenger Air Transport Markets 

Made Legally Binding, July 14, 2010, available at

http://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=1_39596. 

8 Objection of Virgin Atlantic (Mar. 30, 2010); Reply of Virgin Atlantic (April 14, 2010). 

9 Objection of Virgin Atlantic at 4 (Mar. 30, 2010). 

10 See Objection of Virgin Atlantic at 5, 6-7, 10, 12, 13-14 (Mar. 30, 2010); Reply of Virgin 

Atlantic at 3-4 (April 14, 2010). 
5 

In its April 14th reply, Virgin Atlantic revisits many of the same points raised in its 

objections. Virgin Atlantic argues that the slot remedy is inadequate because it does not 

require new entrants to launch competing services before the alliance is approved. Virgin 

Atlantic also contends that the applicants’ proposed changes to the joint venture 

agreement are insufficient to address competitive concerns.11

The Interactive Travel Services Association and the American Society of Travel 

Agents (collectively referred to as “ITSA/ASTA”) filed objections on behalf of travel 

agents and distributors.12 Like Virgin Atlantic, ITSA/ASTA argues that the Department’s 

tentative decision is not based on substantial evidence. Additionally, ITSA/ASTA asserts 

that the alliance will harm travel agents unless it is conditioned upon a “carve-out” to 

prevent oneworld from coordinating the distribution of airline services. The tentative 

decision is flawed, ITSA/ASTA believes, because it fails to consider the cumulative 

competitive harm created by three large immunized alliances, it fails to address how the 

concentration in U.S.-U.K. markets will affect travel distribution, and it fails to explain 

why the proposed remedies will address harm to travel agents. In the event that the 

Department does not impose a carve-out for travel distribution, ITSA/ASTA asks the 

Department to require the applicants to report annually on their coordination activities 

with regard to travel distribution. 

Mr. Hubert Horan filed objections.13 Mr. Horan rejects all of the Department’s 

findings. Specifically, he states that the Department has failed to conduct a legitimate 

competitive analysis and has ignored evidence of large consumer welfare losses. 

Additionally, he states that the Department has used false and illegitimate claims as the 

entire basis for its determination that immunity is required by the public interest. In sum, 

Mr. Horan argues that we must reject the immunity application on both competitive and 

public interest grounds. 

The Dallas/Ft. Worth International Airport (“DFW”) filed a reply.14 DFW’s reply 

focuses on the discussions in the Show-Cause Order and Virgin Atlantic’s objections 

concerning the London-Dallas/Ft. Worth route. London-DFW is an “overlap” route in 

which American and British Airways currently provide the only nonstop service. DFW 

expresses support for a grant of immunity even though the alliance will reduce the 

number of non-stop competitors on that route. DFW believes that the alliance is procompetitive and will benefit DFW and its travelers because the London-DFW route will 

 

11 Virgin Atlantic has also argued that the terms of the joint venture agreement are “absolutely 

dispositive of the question whether this proposed alliance will produce any alleged public 

benefits,” and thus interested parties need the opportunity to comment on proposed revisions. 

Objection of Virgin Atlantic at 16 (Mar. 30, 2010). This issue is moot because, on March 30, the 

applicants submitted their proposed changes in response to the Show-Cause Order. All parties had 

the opportunity to review and comment before the reply period ended. 

12 Objections of ITSA/ASTA (Mar. 30, 2010). 

13 Comments of Hubert Horan (Mar. 4, 2010). 

14 DFW Reply (April 14, 2010). 
6 

develop into a “pipeline” route with improved services. DFW states that increased 

frequencies on the London-DFW route, a better spread of nonstop flights throughout the 

day, and the new American nonstop service on the Madrid-DFW route are clear public 

benefits resulting from the immunized alliance. DFW claims that Virgin Atlantic’s 

concerns about competition on the London-DFW route are misplaced. In particular, 

DFW disagrees with Virgin Atlantic’s contention that a “carve-out” of immunity for 

certain types of traffic on the London-DFW route is necessary; rather, DFW contends that 

such a carve-out remedy would be counter-productive because a high percentage of the 

traffic on the route is connecting and will reap benefits from the improved services that 

are made possible by the alliance coordination. 

The Joint Applicants filed comments, an amendment to the Joint Business 

Agreement, and a reply.15 In their comments, the applicants express their overall support 

for the tentative decision and their willingness to adopt the proposed remedies in order to 

receive final approval. Nevertheless, the applicants disagree with certain aspects of the 

Show-Cause Order. For example, the applicants disagree with the Department’s finding 

that U.S.-Heathrow services constitute a separate relevant market, and thus they do not 

believe that there is a solid foundation for a slot remedy. Further, the applicants do not 

agree that the Joint Business Agreement should be modified to eliminate competitive 

constraints affecting capacity decisions. However, rather than contest the issue, they 

have submitted a revised agreement to address the Department’s concerns. The revision 

provides that all decisions for the joint venture will be made by consensus, and that 

parties to the agreement will have a unilateral right to add capacity.16

The applicants express their support for the Department’s efforts to consult with the 

European Commission on certain aspects of this case, since the applicants sought 

simultaneous review of the alliance in the United States and Europe. The applicants state 

that this case presents an opportunity to show that the Department can work with the 

European Commission. To this end, the applicants seek a modification of the tentative 

decision to ensure that the final remedies adopted by the Department and the Commission 

are compatible. Specifically, they ask the Department to delay the disposition of the flex 

slots until the summer of 2013.17 

In their reply, the applicants urge the Department to set aside the objections filed by 

commenters and grant final approval of the alliance. The applicants argue that Virgin 

Atlantic’s objections have no merit because Virgin Atlantic has ignored the secondary 

market for Heathrow slots, downplayed the competitive constraint offered by one-stop 

service, discounted the public benefits offered by the alliance, and failed to point out any 

 

15 Joint Applicants’ Comments (Mar. 30, 2010); Letter to Dorothy Beard, Chief of DOT Dockets, 

from Paul Jasinski, Carl Nelson, and William Karas, Attorneys for American Airlines, British 

Airways, and Iberia (Mar. 30, 2010); Joint Applicants’ Consolidated Reply (April 14, 2010). 

16 See Joint Applicants’ Comments at 8 (Mar. 30, 2010). 

17 DFW supports this request. See DFW Reply at 3 (April 14, 2010). Virgin Atlantic does not 

oppose it; however, it prefers a longer period of time. See Reply of Virgin Atlantic at 6-7 (April 

14, 2010). 
7 

fatal flaws in the proposed remedies. The applicants argue that ITSA/ASTA’s objections 

have no merit because the travel agents have misstated the positions of the Department of 

Justice and the European Commission, failed to meet their burden of proof in showing 

that the Department incorrectly dismissed their arguments, and relied upon theories of 

harm that are not supported by evidence or economic theory. Finally, the applicants 

argue that Mr. Horan’s objections are also without merit because he draws false 

conclusions from flawed data and his criticism of the public benefits is not well founded. 

IV. DECISION

We have decided to approve the applicants’ requests to permit them to implement 

their alliance, subject to conditions. In arriving at our decision, we have applied the 

relevant legal and policy standards to the facts of this case and have considered the views 

expressed by commenting parties. We have determined that no individual or party has 

made a convincing argument that we erred in our tentative findings or conclusions in the 

Show Cause Order. Therefore, today we are making those findings and conclusions final, 

subject to the minor modifications described below. 

A. Decisional Standards 

We evaluate the code-share request by American and British Airways under 14 

C.F.R. Part 212. Where airlines have underlying economic authority from the 

Department, we will issue a statement of authorization to allow code sharing if we find 

that it is in the public interest. In determining the public interest, we consider, among 

other things, the extent to which the authority sought is covered by and consistent with 

bilateral agreements to which the United States is a party, the extent to which a foreign 

applicant’s home country deals with U.S. air carriers on the basis of substantial 

reciprocity, and whether the applicants have previously violated our code-share rules.18 

We evaluate the applicants’ antitrust immunity request under 49 U.S.C §§ 41308-

41309. We engage in a two-step analysis of foreign air transportation agreements 

submitted for our approval. We must first determine under § 41309 whether the 

agreements are adverse to the public interest because they would substantially reduce or 

eliminate competition (the “competitive analysis”). If so, we must determine whether 

they are nonetheless necessary to meet a serious transportation need or to achieve 

important public benefits. U.S. foreign policy goals are a key element of these benefits. 

If we make that finding, we will approve the agreements, provided that these public 

benefits cannot be met or achieved by reasonably available and materially less 

anticompetitive alternatives. A party opposing approval has the burden of showing that 

the agreement or request would substantially reduce or eliminate competition and that 

less anticompetitive alternatives are available. On the other hand, the party seeking 

 

18 14 C.F.R. § 212.11. 
8 

approval of the agreement or request must submit evidence establishing the transportation 

need or public benefits. 

If we approve the agreements under the analysis outlined above, we next decide 

whether to grant immunity under 49 U.S.C. § 41308. Under § 41308(b), Congress has 

given the Department the authority to exempt airlines from the antitrust laws to the extent 

necessary to allow a proposed transaction to proceed, provided that the exemption is 

required by the public interest. While the public interest determination under both 

sections 41309(b) and 41308(b) entails a comparison of anti-competitive effects and 

public benefits, the standard in section 41308(b) (“required by” rather than “not adverse 

to”) is higher.19 We grant immunity if the public interest requires it and the parties to 

such an agreement would not otherwise go forward with the transaction.20

If we determine that the transaction would substantially reduce or eliminate 

competition, yet meets the test for approval under section 41309(b)(1), then we must

exempt the parties to the transaction, pursuant to 49 U.S.C. § 41308(c). 

In this case, we have concluded that the transaction will not substantially reduce or 

eliminate competition, will not be adverse to the public interest, and will not otherwise 

violate the statute. We further conclude that the grant of antitrust immunity described 

below is required by the public interest and necessary to allow the applicants to proceed 

with the transaction. 

Below, we address the arguments made by commenting parties in response to the 

Show-Cause Order by topic area, outline the minor changes that we are making in 

response to the comments, and explain our final decision. 

B. Competition 

In the Show-Cause Order, we tentatively found that the alliance should be approved 

because, as conditioned, it would not be adverse to the public interest and would not 

substantially reduce competition.21 Two commenting parties who oppose the application 

– Virgin Atlantic and Mr. Hubert Horan – object to our findings. 

Virgin Atlantic argues that our tentative decision cannot be reconciled with a number 

of our findings in the Show-Cause Order. Virgin Atlantic argues that the Department 

 

19 See United/ Lufthansa, Docket DOT-OST-96-1116, Order 96-5-12 at 2 (May 9, 1996); Star, 

Docket DOT-OST-2008-0234, Order 2009-4-5, at 18 (April 7, 2009), quoting Northwest/KLM, 

Docket 46371, Order 93-1-1 at 11 (Jan. 11, 1993). See also SkyTeam I, Docket DOT-OST-2004-

19214, Order 2005-12-12 at 32 (Dec. 22, 2005); Air Canada/ Austrian/ bmi/ LOT/ Lufthansa/ 

SAS/ Swiss/ TAP/ United, Docket DOT-OST-2005-22922, Order 2006-12-17 at 15 (Dec. 18, 

2006).

20 See SkyTeam II, Docket DOT-OST-2007-28644, Order 2008-4-17 at 17 (April 9, 2008); Air 

Canada/ Austrian/ bmi/ LOT/ Lufthansa/ SAS/ Swiss/ TAP/ United, Docket DOT-OST-2005-

22922, Order 2006-12-17 at 8 (Dec. 18, 2006). 

21 Order 2010-2-8 at 28-29 (Feb. 13, 2010). 
9 

should not grant antitrust immunity to the oneworld alliance agreements because of their 

negative effects in the overlap markets and the lack of constraints on the combined power 

of American and British Airways.22

Virgin Atlantic would have us disapprove the application outright on the basis that 

there is some potential harm in certain specific nonstop overlap markets, regardless of the 

severity of that harm or the potential competitive benefits to be derived from the alliance 

as a whole. This approach is too narrow. Consistent with the statute and our precedents, 

we made a broad assessment of the alliance at the network, country-pair, and city-pair 

levels, and applied a balancing test. We tentatively concluded that: 

On the one hand, the proposed alliance will provide a third global network that 

can better discipline the fares and services offered by the Star and SkyTeam 

alliances. The enhanced inter-alliance competition is beneficial for consumers 

across many markets, in particular the hundreds of transatlantic markets in 

which the applicants become more competitive as a direct result of the alliance. 

Travelers in those markets instantly gain new competitive options. On the 

other hand, the proposed alliance will increase concentration in several U.S.-

London markets where the applicants would be in a position to potentially 

leverage substantial advantages in frequency, schedules, and access to corporate 

customers to exclude rivals. To address these potential anti-competitive effects, 

we have proposed a flexible slot transfer remedy that would require the 

applicants to make available four slot pairs at Heathrow to allow competitors to 

introduce new services.23 

In our analysis, we weighed both pro- and anti-competitive effects across a number of 

different markets, consistent with statute and precedent.24 Virgin Atlantic provides no 

sound basis to justify ignoring the broader competitive environment. While it is true that 

the transaction will result in a reduction in the number of competitors in nonstop overlap 

markets, the analysis does not end there. Accordingly, we considered a number of 

factors, such as traffic volume and connecting share in the affected markets, to more 

thoroughly assess the competitive effects of the alliance. A more thorough examination 

revealed that the anti-competitive effects in the nonstop overlap markets would be 

limited.25 As DFW pointed out in its reply, the connecting services available in the 

nonstop overlap markets discipline the fares charged for nonstop service.26 For example, 

in the case of the Dallas/Ft. Worth-London route, which concerned Virgin Atlantic 

because it will effectively have one competitor in the nonstop market following the 

transaction, we determined that approximately one-quarter of the passengers already use 

connecting services in the overall city-pair. 

 

22 Objection of Virgin Atlantic at 6-7 (Mar. 30, 2010). 

23 Order 2010-2-8 at 28-29 (Feb. 13, 2010). 

24 See, e.g., Star, DOT-OST-2008-0234, Order 2009-4-5 at 6-13 (April 7, 2009) (conducting a 

broad assessment of the alliance at the network, country-pair, and city-pair levels). 

25 Order 2010-2-8 at 21, Table 5 (Feb. 13, 2010) (showing connecting share, market size, and 

structural factors in each nonstop overlap market). 

26 DFW Reply at 2 (April 14, 2010). 
10 

Furthermore, Virgin Atlantic’s analysis of the constraints at Heathrow airport does 

not prove that the agreements are anti-competitive and should, therefore, be disapproved. 

We directly addressed the issue of Heathrow access in the Show-Cause Order. Even 

though the immunized oneworld members will collectively hold almost half of Heathrow 

slots, there are still a number of other competitors at Heathrow. There are also some 

important mitigating factors that Virgin Atlantic does not adequately consider. First, 

since the provisional application of the U.S.-EU open-skies agreement, at least three 

major airlines have begun serving the United States from Heathrow, and the overall U.S.-

Heathrow market has enjoyed an expansion and diversification of services.27 The new 

entrants have enhanced competition and will continue to exert competitive discipline in 

the market when the joint venture is implemented. 

Second, airlines have increasing flexibility to acquire slots from commercial partners 

or on the secondary market. Virgin Atlantic’s characterization of this flexibility as 

“fanciful” is not supported by the record.28 On the contrary, the record contains 

convincing evidence that trading mechanisms have accommodated new entry in the 

market.29 Moreover, approval of the oneworld alliance will not prevent Virgin Atlantic 

from adding new transatlantic services because, if there is sufficient demand, it has slots 

available to do so if it chooses.30 

Virgin Atlantic is correct that slot trading may require carriers to reduce their shorthaul or feeder flights, which would be an opportunity cost of the trade.31 However, we 

disagree that the opportunity cost would inevitably cause competitive harm. As the 

applicants point out, airlines and their alliance partners have sufficient flexibility to 

maintain their networks with existing slot portfolios while still adding long-haul services. 

For example, airlines can use prime slots more efficiently by using larger aircraft.32 The 

more flexible trading environment will help to create a more credible threat of new entry 

if the oneworld alliance were to attempt to charge supra-competitive prices. That threat 

reduces the risk of potential harm. Additionally, there will be opportunities for new entry 

as a result of the slot remedy imposed here. 

 

 

27 Order 2010-2-8 at 13, footnote 40 (Feb. 13, 2010). 

28 Objection of Virgin Atlantic at 8 (Mar. 30, 2010). 

29 Order 2010-2-8 at 13, footnote 40 (Feb. 13, 2010). In fact, since the Show-Cause Order was 

issued, both Delta and Continental have announced plans for new Heathrow services from the 

New York City area. See Press Release, Delta Air Lines, Delta Adding New Service Between 

New York and Key Business Markets, May 11, 2010; Press Release, Continental Airlines, 

Continental Airlines Announces Additional New York-Heathrow Flights for Summer, Winter 

2010, Jan. 29, 2010. 

30 The record reflects that Virgin Atlantic is leasing a number of slots to competitors that it could 

instead use for transatlantic services. See, e.g., Reply of Virgin Atlantic at 5 (April 14, 2010). 

31 See, e.g., Objections of Virgin Atlantic at 8 (Mar. 30, 2010). 

32 See Joint Applicants’ Consolidated Reply at 5 (April 14, 2010). 
11 

Mr. Horan’s objections are broader than Virgin Atlantic’s. He rejects the entirety of 

the Department’s competitive analysis because, in his view, the Department did not 

conduct a legitimate Clayton Act market power test. According to Mr. Horan, the 

Department fails to acknowledge the “extreme concentration” in the North Atlantic 

market and “multi-billion dollar consumer welfare losses,” which should preclude 

approval of the alliance.33

The applicants respond that Mr. Horan draws false conclusions from flawed data. 

They assert that, even if Mr. Horan’s view of market conditions were correct, the alliance 

would be the solution to the problem because it would enhance inter-alliance 

competition.34

Mr. Horan does not accurately characterize the Department’s analysis. We did, in 

fact, conduct an in-depth competitive analysis, which included the Clayton Act test to 

assess market power and potential supply-side responses (new entry) in relevant markets. 

We thoroughly reviewed competitive changes at the network, country-pair, and city-pair 

levels using historical data to estimate market shares pre- and post-transaction. The posttransaction shares did not, in our view, support the conclusion that the alliance would be 

in a position to exercise power to restrict capacity or raise fares above competitive levels 

for a number of reasons: the shares were not high enough to raise concerns, there were 

other significant competitors in the market, or there was connecting competition that 

would discipline the alliance.35 Moreover, we conditioned our approval upon the 

adoption of a flexible slot remedy that would mitigate the potential harm identified, 

restore lost competition, and discipline oneworld’s network. 

C. Public Benefit Issues 

In the Show-Cause Order, we tentatively found that the alliance would likely produce 

substantial public benefits, and that a grant of antitrust immunity is required by the public 

interest to fully realize those benefits.36 Both Virgin Atlantic and Mr. Horan object to 

those findings. 

Virgin Atlantic argues that the public benefits identified in the Show-Cause Order are 

overstated. Due to prevailing competitive conditions, such as high market share and 

Heathrow’s slot constraints, Virgin Atlantic asserts that the alliance will decrease – not 

increase – capacity, and thus the alliance’s purported public benefits will never 

materialize. 

The essence of Virgin Atlantic’s argument is that the alliance will acquire undue 

market power and that it will use that increased market power to restrict capacity and 

raise fares to the detriment of consumers. Our competitive analysis, grounded in 

 

33 Comments of Hubert Horan at 1, 4 (Mar. 4, 2010). 

34 Joint Applicants’ Consolidated Reply at 17-18 (April 14, 2010). 

35 Order 2010-2-8 at 23-24 (Feb. 13, 2010).

36 Order 2010-2-8 at 36 (Feb. 13, 2010). 
12 

historical traffic data, found otherwise.37 With the conditions we are placing on our 

approval, the alliance will not likely enable the applicants to raise fares above 

competitive levels. It will likely result in increased capacity, due to the efficiencies and 

incentives created by the joint venture. By creating economies of scale, scope and 

density,38 the joint venture positions the alliance to improve the utilization of existing 

capacity and enhance traffic flows over several hubs in Europe, not just British Airways’ 

hub at Heathrow.39 The tentative findings in the Show-Cause Order were based on a 

detailed review of the joint venture agreement, the operating environments in London and 

Madrid, and the structure of the affected markets which, in the Department’s experience, 

suggests that benefits such as new direct routes and increased capacity are likely to 

develop over time as synergies from the joint venture are realized.40 We see nothing in 

Virgin Atlantic’s submission that persuades us to alter those findings here. 

Virgin Atlantic does not believe that the historical benefits of the existing immunized 

alliances will materialize in this case. Virgin Atlantic relies on the notion that oneworld 

is different from the other alliances because it operates a hub at slot-constrained 

Heathrow. As discussed above, however, we do not find that Heathrow’s slot constraints 

are dispositive here. The current operating environment at Heathrow will not shield 

oneworld from competition. Due to the growing presence of alliances and the 

increasingly liquid market for slot trades, oneworld’s competitors will be able to respond 

if service is reduced below competitive levels. Since oneworld will be subject to 

competitive forces, it has a clear incentive to maximize the efficiencies of the joint 

venture and pass on benefits to the consumer. 

Mr. Horan objects because he believes that the public benefit findings in the ShowCause Order are based entirely upon claims about cooperative pricing.41 Focusing on 

this single issue, Mr. Horan rejects the idea that the alliance will utilize a grant of 

antitrust immunity to price more efficiently on combined itineraries. 

Contrary to Mr. Horan’s assertions, our decision to approve the alliance is not based 

solely on the theory of cooperative pricing. It is based upon a broader set of public 

benefits that are likely to result from the alliance, such as greater options for travelers due 

to schedule and inventory coordination, volume discounting, expanded access to discount 

fares, reduced costs, and expanded code sharing and frequent-flyer program 

 

37 See Order 2010-2-8 at 29 (Feb. 13, 2010). 

38 “Economies of scale” occur when increases in a firm’s size lower the costs of production for 

each unit being sold. “Economies of scope” refers to lower costs obtained by providing and 

marketing a wider range of related products. “Economies of density” refers to lower costs from 

serving more customers, due to spreading fixed costs over a larger number of people and serving 

more people with a given network or facility. It should be noted that economies of scale, scope, 

and density only increase up to a certain point, after which per-unit costs begin to rise. 

39 See Order 2010-2-8 at 30-32 (Feb. 13, 2010). 

40 See Order 2010-2-8 at 22 (Feb. 13, 2010). 

41 Comments of Hubert Horan at 8 (Mar. 4, 2010) (stating that “The entire public benefit 

question boils down to an absolutely clear-cut, digital “double marginalization” dispute). 
13 

reciprocity.42 In the Show-Cause Order, we tentatively determined that there would be a 

range of potential benefits resulting from the alliance, and that fare reductions from 

cooperative pricing would be just one of many potential benefits.43 Mr. Horan does not 

persuade us to change those conclusions. Specifically as to cooperative pricing, Mr. 

Horan has failed to convincingly demonstrate why the type of cooperative pricing 

benefits realized by other alliances would not be forthcoming here. 

D. Distribution Issues 

In the Show-Cause Order, we considered ITSA/ASTA’s argument that the alliance 

would harm travel agents. We then considered and tentatively rejected ITSA/ASTA’s 

proposed “carve-out” remedy that would prevent the applicants from coordinating in the 

areas of sales and distribution. ITSA/ASTA object to the decision, arguing that the 

Department failed to consider the harm that will befall travel agents and distributors and 

how the conditions proposed in the Show-Cause Order would address that harm. 

We find no sound basis in ITSA/ASTA’s objection to change the tentative decision. 

While some of the facts in this case are different from the Star case, ITSA/ASTA has not 

persuaded us why those differences compel a different result. ITSA/ASTA’s emphasis 

on factual differences ignores the Department’s fundamental tentative finding that the 

alleged harm (the reduction in travel agent commissions) is attributable to structural 

changes in the travel industry and not grants of antitrust immunity. Our tentative 

decision to reject ITSA/ASTA’s request was based on this finding, yet it is not addressed 

in ITSA/ASTA’s objections. 

ITSA/ASTA also argues that the Department has failed to consider the cumulative 

competitive harm of immunizing oneworld “together with Star and SkyTeam.”44 

ITSA/ASTA’s premise is that an additional immunized alliance in the transatlantic 

market will give three airline groups excessive control and market power, allowing them 

to offer less competitive terms to travel distributors and ultimately consumers. The 

evidence does not support ITSA/ASTA’s view. As shown in the Department’s 

competitive analysis in the Show-Cause Order, the transaction will not result in anticompetitive market shares in the transatlantic market. Instead, it will create a viable third 

alliance, which will be an improvement from the status quo. The three major immunized 

alliances will have comparable market shares and the incentive to compete.45 

ITSA/ASTA has not supplied any persuasive evidence to show that the future structure of 

the market – with three alliances and a number of independent competitors – would have 

a detrimental effect on sales and distribution. We think the evidence shows the 

likelihood of a contrary effect: airlines will compete vigorously to develop more 

effective means of selling and distributing their products and services. The benefits of 

 

42 See Order 2010-2-8 at 2, 30 (Feb. 13, 2010). 

43 Order 2010-2-8 at 2, 30-32 (Feb. 13, 2010). 

44 Objections of ITSA/ASTA at 6 (Mar. 30, 2010). 

45 See Order 2010-2-8 at 13-14 (Feb. 13, 2010). 
14 

this enhanced competition are likely to extend to all participants in the market, including 

travelers, travel agents, and travel distributors. 

ITSA/ASTA goes on to argue that the Department has failed to explain how our 

proposed remedies would alleviate harm to travel agents and distributors in the U.S.-

Heathrow market.46 We have already addressed a key pillar of this argument by finding 

that any potential harm suffered by travel agents and distributors would not be 

attributable to the alliance. Additionally, we have also addressed how the proposed 

remedies would alleviate potential competitive harm in the U.S.-Heathrow market. In the 

Show-Cause Order, we stated that the slot remedy is designed to address “lost 

competition, particularly where it is most acute, in the Boston-London market, while also 

addressing the diffuse network-level effects of the proposed alliance across all U.S.-

London markets....”47 We also made clear that the purpose of the remedy was to 

encourage new competitive entry by airlines. By enhancing competition and creating 

more opportunities for airline services in the U.S.-Heathrow, we would expect travel 

agents and distributors to potentially benefit along with travelers. 

 

Throughout its objections, ITSA/ASTA requests that we remedy the alleged harm to 

travel agents and distributors by preventing oneworld from coordinating in the areas of 

sales and distribution. As in the Star case, we find that such a remedy is not justified.48

The benefits of the joint venture are inextricably linked to the joint venture partners’ 

plans to cooperate in the areas of sales and distribution, and ITSA/ASTA has not 

provided us with a valid reason to interfere in the joint venture operations in this manner.

Lastly, ITSA/ASTA requests that distribution issues be covered in the annual 

reporting that the applicants must provide to the Department as a condition of approval. 

As we stated in the recent Star case, the Department intends that annual reports should 

cover all core airline activities undertaken to achieve the full range of public benefits, 

which include cooperation in sales and distribution and joint negotiations with travel 

agents.49 Therefore, we agree to ITSA/ASTA’s request. We will require the Joint 

Applicants to provide a comprehensive report in this and other areas of cooperation. 

E. Conditions of Final Approval and Grant of Antitrust Immunity 

The Show-Cause Order tentatively approved the alliance, subject to the following 

conditions: 

(1) The transfer of four slot pairs to competitors at Heathrow airport; 

(2) Timely implementation of a revised joint venture agreement to ensure prompt 

realization of public benefits; 

 

46 Objections of ITSA/ASTA at 9-10 (Mar. 30, 2010). 

47 Order 2010-2-8 at 26 (Feb. 13, 2010). 

48 See Star, DOT-OST-2008-0234, Order 2009-7-10 at 24 (July 10, 2009). 

49 See Star, DOT-OST-2008-0234, Order 2009-7-10 at 26 (July 10, 2009). 
15 

(3) Annual reporting regarding the progress of the alliance; 

(4) Origin & Destination Survey data reporting; 

(5) Withdrawal from IATA tariff coordination; 

(6) Separation of CRS management functions from the alliance; 

(7) The obligation to seek prior approval of any common branding; and 

(8) Standard procedures for code sharing.50 

Additionally, the Department stated that the proposed alliance must operate within a 

liberalized regulatory framework, such as that provided by the U.S.-EU Air Transport 

Agreement.51 We hereby make final our tentative decision to impose all of the above 

conditions, with one minor modification to the slot remedy, as discussed below. 

1. Slot Remedy 

In the Show-Cause Order, we tentatively concluded that a slot remedy is necessary to 

preserve competition that would be lost as a result of the alliance. The slot remedy 

requires that four slot pairs be transferred: two fixed slots in the Boston-London market 

and two flex slots that could be used in any U.S.-Heathrow market. The Department 

sought comment on an appropriate mechanism for implementing the slot remedy. We 

tentatively determined that any such mechanism should comport with the following 

general principles: 

(1) Eligibility must be limited to airlines that are not members or affiliates of 

oneworld; 

(2) Slots made available by oneworld must be at times that are usable for transatlantic 

service; 

(3) oneworld may decide to lease slots on a long-term basis, and collect some 

compensation under the lease; 

(4) The slot remedy must be administered expeditiously and independently by a 

trustee, who is approved by DOT; and 

(5) The slot remedy should, to the extent possible, be compatible with any remedy 

adopted by the European Commission.52

 

50 Order 2010-2-8 at 36-39 (Feb. 13, 2010). 

51 Order 2010-2-8 at 29 (Feb. 13, 2010). 

52 Order 2010-2-8 at 26-27 (Feb. 13, 2010). 
16 

The applicants have been discussing a slot remedy with the Commission for several 

months on a separate track. The product of that discussion – the Commitments described 

in the Background section of this order53 – is now final and binding on the oneworld 

carriers. The Commission adopted the Commitments in its final decision on July 14. 

Compatibility of the Remedies 

 The Department’s slot remedy is similar to that of the Commission’s. Both remedies 

aim to make four slot pairs available immediately. Whereas the Department requires two 

slot pairs for Boston-Heathrow and two slot pairs to competitors of the oneworld alliance 

for any U.S.-Heathrow services, the Commission requires two slot pairs for BostonHeathrow and two additional slot pairs for use in two specific U.S. markets served from 

Heathrow. Under the Commission’s remedy, these latter two pairs are initially 

designated for nonstop services in Dallas/Ft. Worth-London (one pair) and MiamiLondon (one pair). If, however, no competitors utilize either or both of the latter two slot 

pairs within two years, the unused slots may be used on a flexible basis for any U.S.-

Heathrow services, provided those services offer one-stop competition to Dallas/Ft. 

Worth and Miami. In this way, the Commission’s approach is essentially the same as the 

Department’s, except for the initial two-year period in which the use of the latter two 

pairs of slots is limited to Heathrow-Dallas/Ft. Worth and Miami nonstop services. 

The Commission has also set aside an additional three slot pairs for services in the 

New York-London market. However, given the new entry that has occurred or is planned 

in the market, the Commission will not require the applicants to make those slot pairs 

available at this time. The New York-London slot pairs will only be required to be made 

available if the new services are canceled and if the total number of frequencies operated 

by oneworld’s competitors is reduced below a threshold that the Commission has 

identified as necessary to maintain adequate competition.54

The New York-London set-asides are unique to the Commission’s handling of this 

transaction. We have not proposed an equivalent condition. Nevertheless, the possible 

disposition of these slot pairs may affect how the Department’s remedy is implemented. 

If at any time there are available flex slots under the Department’s remedy, and slots are 

made available by oneworld in the New York-London market pursuant to the 

 

53 A draft of the Commitments was made available for public comment by Notice in the Official 

Journal of the European Union. See Notice in Case COMP/39.596, 2010/C 58/07, Mar. 3, 2010. 

The applicants provided notice of the Commitments in the docket. See Letter to Dorothy Beard, 

Chief of DOT Dockets, from Jeffrey Ogar, Attorney for American Airlines (April 9, 2010), 

Docket DOT-OST-2008-0252. The Commission made minor changes and published the final 

Commitments with its final decision on July 14. See Press Release, European Commission, 

Antitrust: British Airways, American Airlines and Iberia Commitments to Ensure Competition on 

Transatlantic Passenger Air Transport Markets Made Legally Binding, July 14, 2010, available at

http://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=1_39596. 

54 See Commitments at § 1.1.3, July 14, 2010, available at

http://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=1_39596. 
17 

Commitments, any new entry in New York utilizing the slots provided by oneworld 

would satisfy the criteria for flex slots and reduce the obligations by the requisite amount. 

In short, the slot pairs designated for New York-London service by the Commission 

would “count” as flex slots for our purposes if they were ever utilized by competitors. 

This is a logical result, and one that is necessary to ensure that the remedies imposed by 

the Department and the Commission are compatible. 

In the same vein, the applicants suggest a minor modification to the remedy proposed 

by the Department in the Show-Cause Order. Specifically, they ask the Department to 

delay the implementation of the flex slot remedy until the summer of 2013, consistent 

with the Commission’s timeline. Additionally, the applicants wish to ensure that their 

obligation to provide flex slots is satisfied to the extent that competitors introduce 

nonstop service in the London-Dallas/Ft. Worth and Miami markets. 

We agree to the suggested modification and note that no party opposes it. This minor 

adjustment will eliminate inconsistency between the remedy packages proposed by us 

and the Commission, prevent the possibility of unnecessarily additive remedies, and give 

consumers the best chance of obtaining new entry on the Dallas/Ft. Worth-London and 

Miami-London nonstop overlap routes. Importantly, this modification does not impair 

our objective of encouraging new entry. We have considered Virgin Atlantic’s opinion 

that Summer 2013 is too early to allow competitors to take advantage of flex slots.55 

Although we are willing to make a small change from the remedy described in the ShowCause Order to ensure consistency, we believe that our objective of encouraging new 

entry will be better met if the delay in creating flex slots is as brief as possible. We think 

that the applicants’ suggested approach is the most reasonable solution available under 

the circumstances. 

As a matter of procedure, the Commitments offered to the Commission are far more 

detailed than the general principles that we set forth in the Show-Cause Order. 

Nevertheless, we find that the Commitments fully comport with those principles and will 

achieve the Department’s objectives in imposing a slot remedy. The Commitments ensure 

an efficient, open, and transparent process that will effectively restore lost competition. 

Rather than creating a wholly separate process with the same objective, we think the 

public interest is best served in this case by establishing a single mechanism for 

implementing the slot remedy, governed by the detailed Commitments. The Department 

will consult with the Commission on all major competitive issues. The Department will 

separately reserve the right to approve the Trustee.56 We will also maintain oversight of 

the alliance and its compliance with the slot remedy by virtue of our statutory authority 

and the standard condition that we are placing on the grant of immunity, which permits us 

to review the matter at any time.57

 

55 See Reply of Virgin Atlantic at 7 (April 14, 2010). 

56 See Ordering Paragraph 3. 

57 See Ordering Paragraph 10 of this Order. 
18 

Implementing the Remedies 

The Commitments establish the following mechanism to implement the slot remedy: 

 The process begins at the end of August 2010 to allow the competitors to launch 

new services by March 2011, which is the beginning of the International Air 

Transport Association (“IATA”) 2011 Summer Season; 

 The oneworld carriers will name a candidate to serve as Trustee to manage the 

day-to-day tasks; 

 Potential recipients of slots must demonstrate that they are independent of and 

unconnected to oneworld, and that they cannot otherwise obtain commercially 

viable slots from their own portfolios or the general slot pool; 

 Potential recipients must submit requests for slots at least seven weeks prior to the 

Slot Request Submission Deadline published by IATA. At least one week prior to 

the Slot Request Submission Deadline, the oneworld carriers will identify the 

slots they would release to meet the requests, and those slots must be within +/- 

60 minutes of the times requested. If the oneworld carriers do not have slots 

within that window, they must offer to provide slots that are closest in time to the 

original request; 

 By the Slot Request Submission Deadline, potential recipients must submit a 

formal proposal. The proposal will include key terms such as the timing of the 

slot and the frequencies/schedule to be operated, as well as a detailed business 

plan. The potential recipient must also describe any potential compensation it is 

willing to offer for the slots; 

 In the event that there are multiple airlines interested in a single slot, the 

competing proposals will be ranked by the Trustee and the Commission. 

Preference will be given to the airline(s) that provide the most effective 

competitive constraints on the identified city-pair, without regard to the country in 

which the airline is licensed or has its principal place of business. The most 

effective competitive constraints for a given city-pair will be determined by a 

number of factors, including whether the airline will operate year-round service, 

the number of services/frequencies, overall capacity, pricing structure, and service 

offerings. 

 If, following this evaluation, several airlines would provide similarly effective 

competitive constraints, proposals will then, and only then, be ranked by the types 

of compensation offered; 

 Prior to the IATA scheduling conference, the Trustee will inform the potential 

recipients of their rankings. Within three weeks of the end of the conference, 

winners will be selected and the Trustee will supervise the negotiation of a slot 
19 

release agreement, which shall be concluded within six weeks of the end of the 

conference; and 

 Slots will be transferred by long-term lease. If, for whatever reason, slots are not 

transferred in the initial years of the Commitments, they remain available for 

lease while the Commitments are in force, which is 10 years. Recipients have 

significant flexibility to determine the lease term; they may enjoy a lease term of 

up to 10 years. They may terminate early or renew annually for the full period 

that the Commitments are in force. 

The mechanism established by the Commitments will achieve the Department’s 

objective of encouraging new entry. Because the Commitments are taking effect in 

tandem with a grant of antitrust immunity, airlines interested in using the slots will be 

able to start operations before the alliance is significantly developed. 

We note Virgin Atlantic’s remaining concerns that the Department’s remedy is 

inadequate because it provides too few slots to competitors and allows the applicants to 

retain ownership over the slots and potentially collect limited compensation when the 

slots are leased. Virgin Atlantic prefers that the applicants be required to permanently 

divest a greater number of slots without compensation. 

We think that the transfer of four slot pairs by long-term lease is the most reasonable 

and proportionate approach to address the anti-competitive effects associated with the 

alliance without imposing unnecessary costs upon the applicants. In 2002, we tentatively 

required the divestiture of 16 slot pairs in the American/ British Airways II case. In this 

case, however, the changes in the competitive environment that have occurred since 2002 

require a different approach. A liberalized open-skies-plus agreement now governs the 

market, a number of airlines are already providing new transatlantic services at Heathrow 

as a result of that agreement, and airlines are enjoying increasing flexibility to serve the 

U.S.-U.K. market by acquiring or trading for slots. 

Our approach in this case is consistent with prevailing market conditions. We note 

that Virgin Atlantic is itself leasing some of its Heathrow slots to other carriers. We do 

not think airlines will be deterred from serving the U.S.-Heathrow market simply because 

the slots will be leased. We agree with Virgin Atlantic, however, that the prospect of 

new entry is directly affected by its cost. Among other things, the total price of the slots 

must be acceptable. The Commitments do not consider the amount of compensation 

offered by an airline unless there are multiple airlines interested in the same slot and 

those airlines would each provide similar competitive constraints in the market. Thus, if 

there are committed new entrants, the price will be set by what the new entrants are 

willing to pay. 

In sum, we are satisfied that the remedy proposed in the Show-Cause Order, as 

modified, is appropriate because it is reasonable under the circumstances and 

proportionate to address the potential competitive harm. We are also satisfied because 

the Commitments offered by the oneworld carriers to the Commission will achieve the 

Department’s objectives and effectively implement the slot remedy. Under these 
20 

circumstances, we find that the applicants have met the statutory and policy standards 

required for approval of the alliance and a grant of antitrust immunity. 

2. Changes to the Joint Venture Agreement 

In the Show-Cause Order, we tentatively determined that the applicants needed to 

make changes to their joint venture agreement to enhance the economic incentives 

necessary to provide maximum public benefits. The specific changes were detailed in a 

confidential appendix. 

On March 30, the applicants submitted a revised joint venture agreement to address 

the concerns raised by the Department.58 Virgin Atlantic argues that the revisions to the 

joint venture agreement are not sufficient.59 Virgin Atlantic continues to believe that the 

terms of the agreement will allow the applicants to maintain a “firm clamp” on pricing 

and capacity in the U.S.-Heathrow market. 

We are satisfied with the changes to the agreement, because they are specifically 

designed to promote metal neutrality, which will enhance the benefits of the alliance for 

the traveling public. With the conditions that we are placing on our approval, we have 

found that the applicants will not be able to exercise anti-competitive market power in the 

U.S.-U.K. market. Virgin Atlantic’s continued objections to the revised agreement are not 

convincing. 

3. Decision Not to Impose Carve-Outs 

In the Show-Cause Order, we tentatively determined not to impose “carve-outs” on 

nonstop overlap routes. Virgin Atlantic and Mr. Horan ask us to reconsider this position. 

Virgin Atlantic suggests that the carve-outs should apply to all hub-to-hub nonstop 

overlap markets in which competitive entry is unlikely. Virgin Atlantic also states that 

the Department’s willingness to grant immunity before the joint venture is implemented 

is at odds with settled precedent. Mr. Horan argues that we have no evidence to support 

our conclusion about carve-outs. Based on his experience in the field, Mr. Horan 

suggests that carve-outs are manageable because airlines can readily optimize alliances 

where some nonstop routes are carved out. 

We are not persuaded to reverse our tentative findings or conclusions. Neither Virgin 

Atlantic nor Mr. Horan provides any factual or statistical evidence that demonstrates why 

carve-outs would be necessary. Additionally, both commenting parties misunderstand 

key facts underpinning our tentative decision. 

Contrary to Virgin Atlantic’s assertions, our decision is not at odds with precedent. 

As the applicants point out, the Department does not make a practice of imposing carve-

 

58 See Letter to Ms. Dorothy Beard, Chief of DOT Dockets, from Paul Jasinski, Carl Nelson, and 

William Karas, Attorneys for American Airlines, British Airways, and Iberia (Mar. 30, 2010). 

59 Reply of Virgin Atlantic at 8 (April 14, 2010). 
21 

outs prior to joint venture implementation. The carve-outs in the Star case to which 

Virgin Atlantic refers were pre-existing carve-outs that had been in place for many years, 

dating back to the initial United/Lufthansa case in 1996.60 In a recent case, the 

Department determined that the pre-existing carve-outs would no longer be appropriate in 

light of new joint venture cooperation; however, we had no basis to remove the carveouts until the joint venture was implemented.61 Here, in contrast, there are no preexisting carve-outs. 

We are, however, taking precautions to ensure that the joint venture is implemented 

quickly following the grant of antitrust immunity to ensure the prompt realization of the 

anticipated public benefits. The applicants must, therefore, submit an executed and 

complete joint venture agreement within 18 months of the effective date of their 

authority. 

Mr. Horan’s comments do not account for the true scope and applicability of the 

Department’s traditional carve-outs. The carve-outs imposed in the SkyTeam and Star

cases, as well as in other alliance cases, did not affect all traffic on covered routes. 

Instead, in most cases, they prohibited the alliance partners from coordinating services for 

full-fare, business, and first-class local traffic from the U.S. point-of-sale.62 In other 

cases, the carve-outs prohibited airlines from coordinating services for all fare classes in 

the local nonstop market.63 When the SkyTeam and Star applicants presented the 

Department with integrated joint ventures of substantial scope, the Department ultimately 

decided that the carve-outs would undermine the efficiencies of the joint venture, and 

thus we removed the carve-outs on affected routes. (Certain carve-outs remain on routes 

that are not subject to joint venture cooperation.) The key point is that carve-outs 

affecting only certain passengers on the aircraft introduce inefficiencies for joint venture 

partners whose alliance is otherwise pro-competitive. The costs of managing the carveout for select fare classes or select travelers disrupt the efficient functioning of the joint 

venture and impair metal-neutrality, which limits the benefits for both nonstop and 

connecting passengers.64 In short, we have concluded that the disadvantages of carveouts outweigh the advantages in markets where there is joint venture cooperation. We 

find that this conclusion applies to the facts of this case as well. 

 

60 See United/ Lufthansa Case, Docket DOT-OST-1996-1116, Order 96-5-27 (May 20, 1996). 

61 See Star, Docket DOT-OST-2008-0234, Order 2009-7-10 at 18 (July 10, 2009) and Order 

2009-4-5 at 12-13 (April 7, 2009). See also SkyTeam II, Docket DOT-OST-2007-28644, Order 

2008-4-17 at 9-10 (April 9, 2008). 

62 See e.g., Delta/ Air France/ Alitalia/ Czech Case, Docket DOT-OST-2001-10429, Order 2002-

1-6, Appendix A (Jan. 18, 2002). 

63 See United/ Air Canada Case, Docket DOT-OST-1996-1434, Order 97-9-21, Appendix A 

(Sept. 19, 1997). 

64 The applicants submitted, and the Department considered before making its tentative decision, 

some specific evidence from oneworld on this issue. See Joint Applicants’ Answer to 

Department of Justice Comments at 45-51 (Jan. 11, 2010). 
22 

In light of everything stated above, we make final the findings and conclusions in the 

Show-Cause Order, with the single modification described in the previous section. We 

will serve this order on all parties on the service list in this docket. 

ACCORDINGLY: 

1. We approve and grant antitrust immunity to alliance agreements between and 

among American Airlines, Inc. (along with its affiliates American Eagle, Inc. 

and Executive Airlines, Inc. d/b/a American Eagle), British Airways PLC 

(along with its affiliate OpenSkies SAS), Finnair OYJ, Iberia Líneas Aéreas 

de España, S.A., and Royal Jordanian Airlines, in so far as such agreements 

relate to foreign air transportation.65 The grant of this authority is subject to 

the condition that the Joint Applicants: 

a. Submit for prior approval subsequent agreements implementing their 

Alliance Agreements;66 

b. Resubmit the Alliance Agreements before five years from the date of 

issuance of the final order in this case; and 

c. Obtain prior approval if they choose to operate or hold out service under a 

common name or use common brands; 

2. Subject to the conditions set forth in the attached Appendix A, we renew the 

existing statements of authorization of American Airlines, Inc. and British 

Airways Plc and amend their existing authority to allow blanket reciprocal 

open-skies code sharing under 14 CFR Part 212 for: 

a. The display of British Airways Plc’s “BA” designator code on flights 

operated by American Airlines, Inc. or its affiliates between (i) points in 

the United States, (ii) points in the United States and points in the 

European Union (either nonstop or via intermediate points in third 

countries), (iii) points in the United States and points in third countries, 

and (iv) points in the European Union and points in third countries; and 

 

65 The alliance agreements shall mean those agreements referred to on page 2 and Exhibits JA-1 

and JA-4 of the Joint Application filed on August 14, 2008 in this docket. 

66 Regarding this requirement, we do not expect the Joint Applicants 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 

direct 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/antitrust guidelines. For avoidance of doubt, the applicants shall submit any slot 

release agreements entered into pursuant to the immunized alliance and any agreements with a 

trustee. All documents shall be submitted to the Director, Office of Aviation Analysis. 
23 

b. The display of American Airlines, Inc.’s “AA” designator code on flights 

operated by British Airways Plc between (i) points in the European Union, 

(ii) points in the European Union and points in the United States (either 

nonstop or via intermediate points in third countries), (iii) points in the 

European Union and points in third countries, and (iv) points in the United 

States and points in third countries; 

3. We direct the Joint Applicants to make available four slot pairs at London’s 

Heathrow International Airport to duly authorized airlines that are not 

affiliates of the applicants or members of oneworld, for a period of up to 10 

years from the date of the issuance of this order, at times that are usable for 

transatlantic services, for the purpose of introducing new services between the 

U.S. and London as described in this order. The Joint Applicants shall 

nominate and submit for prior approval to the Department a candidate or 

candidates to serve as Trustee to administer the transfer of the slots; 

4. We direct the Joint Applicants to file with the Director of the Office of 

Aviation Analysis the following as evidence that the joint venture agreement 

(known as the “Joint Business Agreement”) has been implemented: 

a. Verified statement(s) in Docket OST-2008-0252 attesting that the Joint 

Business Agreement has been executed and implemented; and 

b. A complete and unredacted copy of the Joint Business Agreement with 

appendices. 

If the Joint Applicants do not make the filings described in this ordering 

paragraph within eighteen months of the date of the issuance of this order, the 

authority granted in Ordering Paragraph 1 (including the grant of antitrust 

immunity) will expire; 

5. We direct the Joint Applicants 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 the Alliance Agreements are 

effective;67 

6. We direct American Airlines, Inc., British Airways PLC, Finnair OYJ, Iberia 

Líneas Aéreas de España, S.A., and Royal Jordanian Airlines to withdraw, or 

to remain withdrawn, from participation in any International Air Transport 

Association tariff coordination activities that discuss any proposed through 

fares, rates, or charges applicable between the United States and any countries 

 

67 The Joint Applicants shall deliver the progress report by the close of business on the 

anniversary date. If that date falls on a weekend or federal holiday, the Joint Applicants may 

deliver the report by the close of business on the following business day. 
24 

whose airlines have been or are subsequently granted antitrust immunity, or 

renewal thereof, to participate in similar alliance activities with a U.S. 

airline(s); 

7. We delegate to the Director of the Office of International Aviation the 

authority to determine the applicability of the directive set forth in Ordering 

Paragraph 6 as to specific prices, markets, and tariff coordination activities, 

consistent with the scope and purpose of the condition, as previously 

described; 

8. We direct British Airways PLC, Finnair OYJ, Iberia Líneas Aéreas de España, 

S.A., and Royal Jordanian Airlines, to begin or to continue to report fullitinerary Origin-Destination Survey of Airline Passenger Traffic for all 

passenger itineraries that include a U.S. point;68 

9. We defer action on all motions for confidential treatment submitted in this 

docket to date; and 

10. We may amend, modify, or revoke this authority at any time without hearing. 

By: 

SUSAN L. KURLAND 

Assistant Secretary for Aviation 

and International Affairs 

(SEAL) 

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

 

68 We treat the foreign airlines’ O&D data as confidential, do not allow U.S. airlines any access 

to the data, and do not allow foreign airlines any access to U.S. airline O&D Survey data. We use 

these data only for internal analytical purposes. 
1 

APPENDIX A 

Code-Share Conditions 

The statements of authorization are subject to the following conditions: 

(1) The statements of authorization will remain in effect only as long as (a) American and British 

Airways continue to hold the necessary underlying authority to operate the code-share services at issue, 

and (b) the code-share agreement providing for the code-share operations remains in effect; 

(2) American and/or British Airways must notify the Department no later than 30 days before they begin 

any new code-share service under the code-share services authorized here. Such notice shall identify the 

market(s) to be served, which carrier will be operating the aircraft in the code-share market added, and the 

date on which the service will begin. Such notices should be filed in Docket DOT-OST-2002-13861; 

(3) American and/or British Airways must notify the Department immediately if the code-share 

agreement under which these code-share services are operated is no longer in effect or if the carriers 

decide to cease operating all or a portion of the approved code-share services. Such notices should be 

filed in Docket DOT-OST-2002-13861;69

(4) The code-sharing operations conducted under this authority must comply with 14 CFR Part 257 and 

with any amendments to the Department's regulations concerning code-share arrangements that may be 

adopted. Notwithstanding any provisions in the contract between the carriers, our approval here is 

expressly conditioned upon the requirements that the subject foreign air transportation be sold in the name 

of the carrier holding out such service in computer reservation systems and elsewhere; that the carrier 

selling such transportation (i.e., the carrier shown on the ticket) accept responsibility for the entirety of 

the code share journey for all obligations established in its contract of carriage with the passenger; and 

that the passenger liability of the operating carrier be unaffected; 

(5) Any service provided shall be consistent with the provisions of the U.S.-EU agreement, and all 

applicable agreements with other foreign countries involved. Furthermore, (a) nothing in the award of the 

blanket statement of authorization to American should be construed as conferring upon American rights 

(including code-share, fifth-freedom intermediate and/or beyond rights) to serve markets where U.S. 

carrier rights are limited unless American notifies us of its intent to serve such market and unless and until 

the Department has completed any necessary carrier selection procedures to determine which carrier(s) 

should be authorized to exercise such rights;70 and (b) should there be a request by any carrier to use the 

limited-entry route rights that are included in American’s authority by virtue of the blanket statement of 

authorization granted here, but that are not being used by American, the holding of such authority will not 

be considered as providing any preference for American in a carrier selection proceeding to determine 

which carrier(s) should be entitled to use the authority at issue. 

(6) The authority granted here is specifically conditioned so that neither American nor British Airways 

shall give any force or effect to any contractual provisions between themselves that are contrary to these 

conditions; and 

(7) We may amend, modify, or revoke the authority granted at any time without hearing at our discretion. 

 

69 We expect this notification to be received within 10 days of such non-effectiveness or of such 

decision. 

70 The notice referenced in condition (2) above may be used for this notification.