BEFORE THE 

DEPARTMENT OF TRANSPORTATION 

WASHINGTON, D.C. 

 PUBLIC 

Joint Application of VERSION

 

DELTA AIR LINES, INC.; 

VIRGIN BLUE AIRLINES PTY LTD; 

VIRGIN BLUE INTERNATIONAL AIRLINES PTY 

LTD d/b/a V AUSTRALIA; 

PACIFIC BLUE AIRLINES (NZ) LTD; and 

PACIFIC BLUE AIRLINES (AUST) PTY LTD 

Docket DOT-OST-2009-0155 

 

Under 49 U.S.C. §§ 41308 and 41309 for Approval 

of and Antitrust Immunity for Alliance 

Agreements 

 

JOINT APPLICANTS’ RESPONSE TO 

INTERIM ORDER 2010-11-22

January 31, 2011 
i 

Communications with respect to this document should be sent to: 

Merren McArthur 

 Group Executive, Corporate Advisory 

Dayna Field 

 Senior Counsel 

The Virgin Blue Group 

P.O. Box 1034 

Spring Hill QLD 4004 

Australia 

+617 3333 6801 

merren.mcarthur@virginblue.com.au 

dayna.field@virginblue.com.au 

Anita Mosner 

Holland & Knight 

2099 Pennsylvania Avenue, N.W., Suite 100 

Washington DC 20006 

(202) 419-2604 

anita.mosner@hklaw.com 

for: VIRGIN BLUE AIRLINES PTY LTD, 

VIRGIN BLUE INTERNATIONAL AIRLINES 

PTY LTD d/b/a V AUSTRALIA, 

PACIFIC BLUE AIRLINES (NZ) LTD, and 

PACIFIC BLUE AIRLINES (AUST) PTY LTD 

Andrea Fischer Newman 

 Senior Vice President, Government 

Affairs 

Alexander Van der Bellen, 

 Managing Director, Government Affairs 

and Associate General Counsel 

Jeff Morgan 

 Regional Director, Government Affairs 

DELTA AIR LINES, INC. 

1212 New York Avenue, N.W. 

Washington, DC 20005 

(202) 842-4184 

sascha.vanderbellen@delta.com 

 
BEFORE THE 

DEPARTMENT OF TRANSPORTATION 

WASHINGTON, D.C. 

 

Joint Application of 

 

DELTA AIR LINES, INC.; 

VIRGIN BLUE AIRLINES PTY LTD; 

VIRGIN BLUE INTERNATIONAL AIRLINES PTY 

LTD d/b/a V AUSTRALIA; 

PACIFIC BLUE AIRLINES (NZ) LTD; and 

PACIFIC BLUE AIRLINES (AUST) PTY LTD 

Docket DOT-OST-2009-0155 

 

Under 49 U.S.C. §§ 41308 and 41309 for Approval 

of and Antitrust Immunity for Alliance Agreements

 

JOINT APPLICANTS’ RESPONSE TO 

INTERIM ORDER 2010-11-22

INTRODUCTION 

Delta Air Lines, Inc. (“Delta”), Virgin Blue Airlines Pty Ltd (“Virgin Blue”), Virgin 

Blue International Airlines Pty Ltd (“V Australia”), Pacific Blue Airlines (NZ) Ltd, and 

Pacific Blue Airlines (Aust) Pty Ltd1

 (the “Joint Applicants”) appreciate the opportunity to 

respond to Interim Order 2010-11-22. The Interim Order directed the Joint Applicants to 

provide additional information regarding changes to their planned cooperation in four 

specific subject areas. Our responses to each of these items are detailed below. 

Item 1: Updated and finalized written alliance agreements incorporating the 

proposed commercial changes and capacity commitments. 

The Joint Applicants have provided an executed copy of a Mutual Capacity 

Commitment Agreement (“MCCC”) at Exhibit A. The Joint Applicants have provided an 

 

1

 These carriers are referred to collectively as the “Virgin Blue Carriers.” 
Joint Response 

Page 2 

executed copy of an Amendment to their Joint Venture Framework Agreement at Exhibit 

B. 

(A) The MCCC formalizes Delta and V Australia’s commitment that they will not 

reduce nonstop service between the U.S. and Australia below their respective historical 

service baselines as a result of the Department’s approval of and grant of antitrust 

immunity for the Virgin Blue Group/Delta alliance agreements. The MCCC is intended to 

eliminate any concern that Delta and Virgin Blue Group would reduce their nonstop U.S.-

Australia service level as a result of ATI. 

(B) The Amendment to the Joint Venture Framework Agreement brings 

behind/beyond segment revenue into the joint venture’s settlement mechanism, as 

specifically requested by the Department. This document formalizes the proposed 

revisions to Exhibit B of the joint venture agreement regarding calculation of beyond 

contribution in the joint venture settlement that the Joint Applicants submitted to the 

Department in their October 13, 2010 pleading. 

Item 2: A report on the Navitaire programming and testing process and the 

date on which the upgrade was completed. 

The Joint Applicants explained in their response to the Show Cause Order that 

the Virgin Blue Group was expecting delivery of the Navitaire code necessary to support 

codesharing by Delta on Virgin Blue. This is contained in Navitaire’s New Skies version 

3.3.1. The code was delivered and on-site testing of the functions relating to the 

Deltamatic and Navitaire code was conducted by Virgin Blue and Delta IT professionals 

in Delta’s Minneapolis office during January 2011. The testing systems were configured 

for a direct link between Deltamatic and Navitaire which enabled successful 

communication between the systems and a comprehensive check of all functions 

(including core reservations, inventory and check-in) to be completed. 
Joint Response 

Page 3 

Testing was successfully completed during the week of January 24-28. All minor 

issues that arose in the testing were resolved and re-tested, and there are no 

outstanding technical issues remaining to implement system-wide freesale codeshare 

between Delta and Virgin Blue using Navitaire. Testing scenarios were successfully 

created to test the following: 

Codeshare Carrier Disclosure 

Testing ensured that Delta Marketing flights correctly display Virgin Blue as the 

Operating Carrier on all codeshare flights when schedules or flight availability is 

searched, and when codeshare flights are sold. The testing also ensured that 

Virgin Blue can easily and clearly identify flights that are operating as Delta 

codeshare flights - see Screenshot # 1. Test itineraries were also produced to 

show that all airline disclosure information is displayed accurately and clearly. 

Booking creation and updates 

Testing was completed on various booking scenarios. Bookings were 

successfully created using various types of flights, combining Delta, Delta 

codeshare and Virgin Blue flights in one itinerary. The bookings were also cross 

referenced to show each other's booking reference numbers, and connecting 

flights between the two airlines are also shown in each airline’s reservation 

record. 

Tests were also performed to ensure that any flight changes or cancellations 

were also successfully communicated between the two systems – see 

Screenshot # 2. Passenger split-aways, name changes and schedule changes 

were also tested to ensure all standard booking functionality is working correctly. 
Joint Response 

Page 4 

Special Service Requests 

Testing was performed to ensure that all supported Special Service Requests 

(such as Wheelchairs, Infants, Frequent Flyer Numbers, and seat requests) 

could all be successfully communicated and confirmed between the systems – 

see Screenshots # 3 and 4. 

Third Party bookings 

Testing was completed using travel agent systems such as Sabre and 

Worldspan. This was to ensure travel agents will also be able to sell the 

codeshare flights and ensure all bookings are synchronized. 

Availability 

Availability tests were performed to ensure that accurate flight availability is 

transmitted between Deltamatic and New Skies. 

E-Ticketing 

E-Ticket testing was performed so that Delta electronic tickets can be issued and 

accepted by Virgin Blue. 

Check-In 

Codeshare bookings were checked-in in the test system to ensure they will be 

correctly accepted at the airport. 

Post Departure 

Post departure testing was performed to ensure that flown passengers are 

identified correctly for purposes of accounting, revenue reporting and application 

of mileage points. 
Joint Response 

Page 5 

NEXT STEPS

The IT development required to enable the implementation of a freesale 

codeshare between Delta and Virgin Blue has been delivered and successfully tested; 

however, the new release of New Skies will not “go live” until early April 2011. The 

planned “go live” date is driven by factors unrelated to the Navitaire system development 

necessary to support Delta codesharing on Virgin Blue; it is simply to enable Virgin Blue 

to conduct Disaster Recovery testing on its reservation system to ensure Virgin Blue’s 

core systems are stable and operational in case of an extraordinary circumstance or 

outage. This Disaster Recovery testing is an important precaution but wholly unrelated 

to the alliance between Delta and the Virgin Blue Group. The compatible systems and 

procedures necessary to support broad codesharing between Delta and each of the 

Virgin Blue Group carriers are now ready. 

Given that the Joint Applicants are now in a position to deliver the substantial 

public benefits resulting from the Alliance, the Joint Applicants respectfully request that 

the Department proceed with the substantive evaluation of their application. 
Joint Response 

Page 6 

ILLUSTRATIVE SCREEN SHOTS: 

Screenshot # 1 – Flight Disclose and booking cross reference 
Joint Response 

Page 7 

Screenshot # 2 – Booking cancelled 
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Screenshot # 3 - Infant 
Joint Response 

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Screenshot # 4 – Hearing and Visually Impaired passengers 

Item 3: A detailed status report on any third-country regulatory or other 

approvals required to implement the revised alliance agreements or an 

explanation of why approvals are not required. 

(A) Third-Country Competition Approvals 

The Joint Applicants seek to form a comprehensive Joint Venture for North 

America-South Pacific service. The relevant foreign jurisdictions affected by the 

proposed joint venture include Canada and Mexico in North America, and Australia and 

New Zealand in the South Pacific. All necessary filings in Australia have been 

completed and the Australian Competition and Consumer Commission (ACCC) 

approved the proposed joint venture without condition on December 10, 2009. 

With respect to compliance with local third-country competition laws, no further 

regulatory filings or approvals will be required prior to implementation of the joint venture 

in Canada or Mexico. The Joint Applicants have completed a self-assessment and 
Joint Response 

Page 10 

concluded that because V Australia does not operate any service to/from Canada or 

Mexico and because the joint venture will have no adverse effect on competition, no 

further filings or approvals are required pursuant to the local competition laws in either 

Canada or Mexico. Canada does not have a mandatory notification and approval 

process for such joint ventures, and the notification and approval process in Mexico is 

not applicable because V Australia does not operate to/from that country. 

Delta does not operate service to/from New Zealand and the joint venture will 

have no adverse effect on competition in New Zealand. However, New Zealand 

competition law provides for a joint venture approval process, and the Joint Applicants 

decided to seek the approval of the New Zealand Ministry of Transport for the joint 

venture to minimize any legal risks of their cooperation in New Zealand. A copy of this 

application is attached at Exhibit C. 

(B) Third-Country Codeshare Approvals 

Third country codesharing is allowed under the respective bilateral aviation 

agreements between the U.S. and Australia, on the one hand, and Canada, Mexico, and 

New Zealand, on the other hand. The Joint Applicants have now completed all 

necessary regulatory filings in Canada, Mexico, and New Zealand to implement third 

country codesharing to and from these jurisdictions: 

 Canada V Australia has applied for an economic license from the Canadian 

Transportation Agency (CTA) for the underlying authority to hold out codeshare 

service to/from Canada. Delta, V Australia, and SkyWest Airlines, Inc. 

(“SkyWest”) have also jointly applied to CTA for authorization for V Australia to 

place its code on U.S.-Canada flight segments operated by Delta and/or 

SkyWest, which will enable V Australia to offer online service between points in 

the South Pacific and Canada via the U.S. No other regulatory approvals are 
Joint Response 

Page 11 

required to implement this codeshare other than the routine filing of schedules 

and tariffs. 

 Mexico V Australia and Delta, and V Australia and SkyWest, have filed 

applications with the Mexican DGAC for V Australia to codeshare on various 

Delta and/or SkyWest operated U.S.-Mexico routes, which will enable V Australia 

to offer online service between points in the South Pacific and Mexico via the 

U.S. No other regulatory approvals are required to implement this codeshare 

other than the routine filing of schedules and tariffs. 

 New Zealand Delta has held an Open Aviation Market License from the New 

Zealand Ministry of Transport since 2002. Under the applicable regulations, 

Delta needs only to provide a codeshare schedule filing notification to the New 

Zealand Ministry of Transport 30 days in advance of the codeshare 

implementation date. No further regulatory steps are required by the New 

Zealand Ministry of Transport for Delta to implement codesharing on Virgin Blue 

Group carrier operations to/from New Zealand.2

 

The Joint Applicants note the following additional positive regulatory developments 

which will support the immediate introduction of codesharing between them under the 

proposed joint venture: 

 Delta submitted a codeshare safety audit of V Australia to FAA AFS-50, and 

FAA has since transmitted a “no objection” communication to DOT. Given 

these developments, we expect the Department’s licensing division will 

 

2

 For the sake of completeness, Virgin Blue notes that the Australian International Air Services 

Commission (IASC) has approved a variation to Pacific Blue Australia’s allocation of capacity on 

the Australia-New Zealand route to support the codeshare arrangement with Delta. No IASC 

approval is required for Canada or Mexico. 
Joint Response 

Page 12 

promptly approve V Australia’s application in Docket DOT-OST-2009-0156 to 

carry Delta’s code. 

 Delta submitted a codeshare safety audit of Pacific Blue New Zealand to 

FAA AFS-50. We expect that the Department’s licensing division will 

promptly approve Pacific Blue New Zealand’s application in Docket DOTOST-2009-0156 to carry Delta’s code upon receipt of the “no objection” 

communication from FAA.3

 The Department has approved SkyWest’s application for a blanket statement 

of authorization for SkyWest to display V Australia’s code on intra-U.S. and 

U.S.-third country flights. This provides all necessary U.S. government 

authority for V Australia to codeshare on SkyWest’s Delta Connection flights, 

which will complement V Australia’s codesharing on Delta mainline flights 

both within the U.S. and to Canada and Mexico. See Department Action on 

Application in Docket DOT-OST-2009-0156. 

 

3

 A codeshare safety audit of Pacific Blue Australia is not required because, as explained in 

Docket DOT-OST-2009-0157, Pacific Blue Australia does not have an Australian Aircraft 

Operator Certificate. Pacific Blue Australia relies exclusively on aircraft wet-leased from Virgin 

Blue and Pacific Blue New Zealand to conduct its operations. The Department has already 

authorized Delta to codeshare on Virgin Blue, and we expect that the Department will act to 

approve Pacific Blue Australia’s pending application in Docket DOT-OST-2009-0156 for a 

statement of authorization to display Delta’s code promptly upon receipt of a “no objection” 

communication from FAA regarding Pacific Blue New Zealand. 
Joint Response 

Page 13 

Item 4: At such time as the Applicants submit the above additional 

information, they should also provide the latest available passenger and 

fare data, with additional explanation, to substantiate their assessment that 

market conditions have stabilized. 

The Joint Applicants are submitting updated internal traffic and fare data and 

MIDT data to the confidential docket on CDs. Specifically, Delta and Virgin Blue Group 

have each submitted monthly internal traffic and fare data for the period September 

2010 through December 2010 inclusive, which picks up from the August 2010 endpoint 

of their most recent internal data submissions to the Department. The Joint Applicants 

have submitted U.S.-South Pacific MIDT data for calendar 2010, which supplements the 

year-ended August 2010 MIDT data most recently provided to the Department. The 

updated data continues to support the observations in the Joint Applicants’ October 13, 

2010 pleading that the U.S.-Australia marketplace has stabilized. 

Capacity 

V Australia and Delta launched U.S.-Australia operations in February 2009 and 

July 2009 respectively. Figure 1 below shows that overall U.S.-Australia seat capacity 

increased concomitant with V Australia and Delta’s respective entries into the market. 

However, with the exception of some capacity expansion over the past couple of months 

(driven primarily by short-term seasonal frequency adjustments by United to its Los 

Angeles-Sydney services), seat capacity has effectively been stable for a year and half. 

United’s short-term service adjustments may have been an opportunistic response to 

Qantas’ suspension of A380 service as a result of the Singapore incident. In any event, 

the fact that the market has stabilized at this new, higher level of equilibrium 

demonstrates that the market is no longer in flux and can sustain the type of procompetitive service envisioned by the joint venture. 
Joint Response 

Page 14 

Figure 1 

Booking Share 

A booking share time series analysis provides further evidence that the U.S.-

Australia market has stabilized. As illustrated by Figure 2 below, prior to 2009, the U.S.-

Australia market was dominated by Qantas/American and United/Air New Zealand, 

which held booking shares on the order of 55% and 30%, respectively. The market 

share picture changed instantly and significantly when V Australia and Delta began their 

U.S.-Australia operations in February 2009 and July 2009. However, Figure 2 shows a 

relatively stable new competitive equilibrium has emerged. Specifically, during the past 

year, there has been little variation in each competitor’s relative market position, with 

Qantas/American’s share ranging between 41% and 46%, United/Air New Zealand’s 

share ranging between 26% and 30%, V Australia’s share ranging between 13% and 

15%, and Delta’s share ranging between 7% and 8%. 
Joint Response 

Page 15 

Figure 2 

 Fares

[CONFIDENTIAL] 
Joint Response 

Page 16 
Joint Response 

Page 17 

[END CONFIDENTIAL]
Joint Response 

Page 18 

CONCLUSION

In light of the additional information provided here, the Joint Applicants respectfully 

request that the Department approve and grant antitrust immunity to the Joint Applicants’ 

Alliance Agreements under 49 U.S.C. §§ 41308 and 41309. 

Respectfully submitted, 

Merren McArthur 

for Virgin Blue Airlines Pty Ltd, 

Virgin Blue International Airlines Pty 

Ltd d/b/a V Australia, 

Pacific Blue Airlines (NZ) Ltd, and 

Pacific Blue Airlines (Aust) Pty Ltd 

Alexander Van der Bellen 

for Delta Air Lines, Inc. 
CONFIDENTIAL 

EXHIBIT A 
CONFIDENTIAL 

EXHIBIT B 
EXHIBIT C 






























CERTIFICATE OF SERVICE

A copy of the foregoing has been served this 31st day of January, 2011, upon the 

following persons via email: 

carl.nelson@aa.com 

howard_kass@usairways.com 

benjamin.slocum@usairways.com 

hkamen@coair.com 

dan.weiss@coair.com 

jeffrey.manley@united.com 

steve.morrissey@united.com 

jhill@dlalaw.com 

urskr@state.gov 

todd.homan@dot.gov 

peter.irvine@dot.gov 

christopher.mandel@dot.gov