BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C.

Joint Application of DELTA AIR LINES, INC. and AEROVIAS DE MEXICO, S.A. DE C.V. Under 49 U.S.C. §§ 41308 and 41309 for A pproval of and A ntitrust I mmunity for A lliance A greements ) ) ) ) ) ) ) ) ) D ocket DOT - OST - 2015 -

JOINT APPLICATION FO R APPROVAL OF AND AN TITRUST IMMUNITY FOR ALLIANCE AGREEME NTS Communications with respect to this document should be sent to:
Anko van der Werff Chief Revenue Officer David Lamoyi General Counsel Aerovias de Mexico, S.A. de C.V



### . Paseo de la Reforma 445 Col. Cuauhtemoc, 06500, Mexico City, D.F., Mexico Glen Hauenstein Executive Vice President

& Chief Revenue Officer DELTA AIR LINES, INC. 1030 Delta Boulevard Atlanta, Georgia 30320

Robert E. Cohn Patrick R. Rizzi HOGAN LOVELLS US LLP Columbia Square 555 Thirteenth Street, NW Washington, DC 20004 Tel. 202 637 4999/5659 Counsel for AEROVIAS DE MEXICO, S.A. DE C.V Ben Hirst Executive Vice President

& Chief Legal Officer Alexander Van der Bellen Managing Director, Regulatory and International & Associate General Counsel Christopher Walker, Regional Director

– Regulatory and International Affairs DELTA AIR LINES, INC. 1212 N ew York Avenue, NW Suite 200 Washington, DC 20005 Tel. 202

- 842

- 4184

March 31 , 2015Table of Contents
I

. Introduction

................................ ................................ ................................ .......... 1 II. Executive Summary

................................ ................................ ............................. 4 III. Description of the Agreements

................................ ................................ ............. 6 A. JCA Agreement

................................ ................................ ........................ 7 1. Network Working Group

................................ ............................... 9 2. Revenue Management and Pricing Working Group

...................... 9 3. Marketing and E

- Commerce Working Group

.............................. 10 4. Operations Working Group

................................ ......................... 11 5. Finance Working Group

................................ .............................. 11 B. Implementing Agreements

................................ ................................ ..... 11 IV. The Application Is Consistent with the Department’s Legal Stand ards for Granting Immunity.

................................ ................................ ............................ 11 V. A Grant of Immunity Is Required to Produce Important Public Benefits.

............. 12 A. The Delta/Aeromexico JCA Will Enable the Parties to Provide Substantial Consumer Benefits through New Services and Increased Competition.

................................ ................................ .......... 15 1. The Proposed Alliance Will Provide Consumers With the Benefit of an Expanded Joint Network.

................................ ....... 15 2. Upgauging to Larger and More Efficient Aircraft.

........................ 16 3. A New JCA Hub at Los Angeles Serving Transborder routes.

................................ ................................ ........................ 18 4. Increased Frequency and Improved Schedule at Los Angeles and New York.

................................ .............................. 20 5. Improved Service Between the U.S. and Mexico Regional Cities.

................................ ................................ ......................... 20 6. More Effective Sales Presence on Both Sides of the Border.

................................ ................................ ....................... 21 7. Airport Co

- location and Streamlined Service Will Improve the Customer Experience.

................................ .......................... 21 B. The JCA’s Substantial Consumer Benefits that Cannot Be Achieved without Antitrust Immunity.

................................ ...................... 22VI. U.S.

- Canada Experience Confirms The Compelling Benefits of Transborder Joint Alliances.

................................ ................................ .............. 24 VII. The Proposed Alliance Will Improve Competition and Consumer Choice on U.S.

- Mexico Routes and Will Not Reduce Competition in Any Relevant Market.

................................ ................................ ................................ .............. 25 A. The Proposed JCA Will Enhance Competition.

................................ ...... 26 1. United States

- Mexico

................................ ................................ .. 26 2. Overlap City

- Pairs

................................ ................................ ...... 27 B. Substantial New Entry Will Be Enabled.

................................ ................. 29 VIII. Granting ATI is Consistent With Mexico’s Expectations in Entering Into a Liberalized Transborder Agreement.

................................ ................................ .. 30 IX. The Joint Applicants Will Not Implement the Alliance Agreements without Antitrust Immunity.

................................ ................................ ............................. 32 X. Mexico Has Established Procedures for Antitrust Approval of Airline Alliances.

................................ ................................ ................................ ........... 32 XI. Slots at Mexico City

................................ ................................ ........................... 34 XII. Conclusion

................................ ................................ ................................ ......... 35BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C.

Joint Application of DELTA AIR LINES, INC. and AEROVIAS DE MEXICO, S.A. DE C.V. Under 49 U.S.C. §§ 41308 and 41309 for A pproval of and A ntitrust I mmunity for A lliance A greements ) ) ) ) ) ) ) ) ) D ocket DOT - OST - 2015 -

JOINT APPLICATION FO R APPROVAL OF AND AN TITRUST IMMUNITY FOR ALLIANCE AGREEME NTS 

### I. Introduction Delta and Aeromexico 1 have entered into a comprehensive JCA Agreement 2 (JCA) to coordinate their respective passenger services on routes between the United States and Mexico (the “Proposed Alliance”) . The Proposed Alliance will be a more effective competitor on U.S.

- Mexico transborder routes by linking the comb ined networks of Delta and Aerom exico to create a third viable network competitor on U.S.

- Mexico routes. The Proposed Alliance will create a strong new competitor that is better than the sum of its parts. Delta’s and Aeromexico’s respective assets complement each other's:
Aeromexico ’s Mexico City, Monterrey and Guadalajara hubs provide Delta with the
network access it needs to interior Mexico in ord er to compete with the Texas hubs of

1 Common names are used throughout. Delta and Aeromexico are sometimes referred to herein as the “JCA Parties.”
2 Hereinafter the “JCA Agreement” or “JCA.”Joint Application Page 2
American and United. For its part, Delta provides Aeromexico with a broad North American network and strong marketing and distribution presence throughout the U.S.
American and United are the largest U.S.

- Mexico comp eti tors with 25 and 22 percent U.S.

- Mexico market shares, respectively. Exhibit JA

- 1

. Both of the leading U.S. carriers have broad network coverage into Mexico from their Texas hubs. Aeromex ico
and Delta rank as a distant 3 rd and 4 th place competitors with 14 and 11 percent market shares, respectively. 3 Id. N either Delta nor Aeromexico individually has the ability to offer a single carrier network of comparable scope and scale to compete with United and
American

. Id

. Delta and Aeromexico applaud the landmark bilateral air services agreement initialed by the U.S. Government and Mexico on November 21, 2014. Once entered into force the new agreement will provide for full liberalization on U.S.

- Mexico transborder
routes , removing previous designation limitations which restricted carriers’ ability to introduce beneficial new services and limited new entry and competition. This agreement provides a sound framework to support the proposed transborder JCA agreement between Delta and A eromexico

– and the substantial increase in new transborder network service and competition it will produce.
Delta and Aeromexico have extensive experience as partners and have been codesharing for more than 20 years and were founding members of the SkyTea m Alliance . However, because of antitrust risk and commercial independence the carriers are competit ors, and they are unwilling to grant open access to each other’s networks, resulting in sub

- optimal inventory access and fewer and less attractive options for

consumers , slower growth of service , and constrained capacity on transborder routes

. By collaborating under a JCA, the parties can create bank structures and connectivity to

3 OAG Seat Shares, March 2015.Joint Application Page 3
better serve network passengers. Antitrust immunity is essential for each carrier to effectively plug into the respective hub networks on both sides of the border

. Accordingly, Delta and Aeromexico 4 hereby apply for antitrust immunity for the Alliance Agreements (described below) so that Delta and Aeromexico can implement
their metal neutral JCA

. The Joint Applicants seek limited transborder immunity which covers the commercially sensitive activities contemplated by the J CA

. Antitrust immunity for the Alliance Agreements is necessary for Delta and Aeromexico to achieve th e synergies and public benefits that will flow from the JCA

. This Joint Application is made pursuant to 49 U.S.C. §§ 41308 and 41309. The Delta/ Aeromexico A lliance will create “metal neutrality” between Delta and Aeromexico

on passenger routes between the United States and Mexico

. The JCA include s all nonstop transborder routes operated by Delta and/or Aeromexico , as well as behind and beyond connecting flights within the respective countries. A number of new and updated
commercial agreements will be entered into as part of the JCA that provide for bilateral codesharing, lounge access, and reciprocal frequent flyer programs (“FFP ”)

. Collectively, these are the Alliance Agreements for which antitrust immunity is sought. 5
The alliance that would be fo rmed by these agreements (the “Proposed Alliance”) meets the DOT’s standard for approval of and granting of antitrust immunity because it will produce significant public benefits, and will not substantially reduce or eliminate competition in any relevant m arket.

4 Hereinafter the “Joint Applicants.” The Joint Applicants request t hat the grant of antitrust immunity (“ATI”) extend to their majority

- owned corporate affiliates. See 2009 Star ATI , DOT Order 2009

- 7

- 10, at 27, Ordering Paragraph 1; 2011 Star ATI , DOT Order 2011

- 11

- 16, at 7 & 11, Ordering Paragraph 1 (granting ATI to the “majority

- owned affiliates” of the Joint Applicants).
5 Appendix A contains an abstract of the JCA.Joint Application Page 4



### II. Executive Summary Delta and Aeromexico seek to form a highly coordinated , immunized alliance for U.S.

- Mexico service that will enable the JCA Part ies to compete more effectively on
transborder routes. Delta and Aeromexico respectfully submit that the Proposed Alliance meets the Department’s public interest standard for approval and is consistent with previous grants of immunity for similar alliance arrangements. The recently initialed
transborder a greement between the U.S . and Mexico creates the foundation for Mexican and U.S. carriers to forge closer ties with each other.
The Proposed Alliance will de liver important public benefits

. By joining together , Delta and Aeromexico will create a better network and offer a better product

-- and will
thus be able to compete more effectively than either carrier can on it s own, or would ever be able to, in the absence of the JCA . Specifically:

• Together, Delta and Aeromexico will have the ability to operate a seamless and integrated network linking nearly 11,000 U.S.

- Mexico city

- pairs. Exhibit JA

- 2

.

• Antitrust immunity is essential to optimize connectivity and revenue management over and maximize joint selling activities with respect to the hub networks of both carriers, which have been developed on each side of the border. In the absence of ATI, each carrier acts in its own self interest, whereas acting together the carriers can offer a more att ractive and competitive joint product to consumers

• Delta and Aeromexico will be able to leverage schedule and aircraft efficiencies to launch additional transborder flights during slower demand hours. For example, instead of having a Delta or Aeromexico aircraft sit on the ground at West Coast hubs or focus cities until the next morning, the aircraft could efficiently be used to fund additional transborder turnaround flights.

• Delta forecasts up to 14 new ATI enabled routes over the next 5 years and up t o 39 additional daily departures. Exhibit JA

- 3

. Neither carrier acting alone could achieve these benefits, but close c ooperation , access to each other’s domestic networks, and relying on each other’s point of sale marketing and distribution expertise, will enable important new service and competitive benefits .

• Among the three major U.S. Network carriers, Delta is the only carrier without a Texas hub. Consequently, unlike American and United, Delta does not have the ability to efficiently reach import ant and rapidly growing secondary cities in Mexico with short

- range, smaller

- gauge equipment. E stablishing immunized hub sJoint Application Page 5
with Aeromexico in Mexico City , Monterrey and Guadalajara will enhance service and competition.

• An immunized Delta/Aeromexico alliance will create a third network player with sufficient critical mass to challenge American and United. American and United are effectively tied as the leading carriers in the market with 25 and 22 percent market shares, respectively. Aeromexico and Delt a tr ail distantly with 14 and 11 percent shares.

• Working together Aeromexico and Delta plan to develop Los Angeles into a n important JCA hub covering the top 10 West Coast

- Mexico markets. Delta’s growing hub at LAX, combined with Aeromexico’s marketing presence south of the border create s these important new JCA

- enabled routes.

• Delta and Aeromexico will optimize their schedules to improve service and consumer choice on the largest and most important U.S.

- Mexico routes: New York

- MEX and Los Angeles

- MEX. Working together the carrier s will add service and avoid overlapping “wingtip” flights to create a n im pr o ved, high

- quality, high

frequency product.

• Aeromexico is Mexico’s only remaining network carrier providing service to cities large and small across t he country

. By entering into a JCA with Delta, Aeromexico becomes more durable competitor to new entrant carriers that are poised to enter large and important U.S.

- Mexico routes.

• Delta and Aeromexico will create a metal

- neutral codeshare network covering all flights between the United States and Mexico. The revenue management techniques employed by the JCA are designed to ensure full access of each party’s inventory to the other, and will eliminate “ double marginalization” markups because both carriers share in the revenue of the entire journey.

• The JCA enables Delta and Aeromexico to have a more effective and efficient joint sales force, increasing their ability to compete more effectively for corpor ate accounts and agency business.

• The JCA will create new efficiencies that improve the customer experience and lower costs, such as co

- locating airport operations when and where possible. In particular Delta and Aeromexico are committed to establishing a new colocation initiative at LAX and JFK, which the carriers view as important to realizing the benefits of the JCA

. The Proposed Alliance is consistent with the liberalized U.S.

- Mexico transborder agreement and U.S. aviation policy, which has long recognized the formation of alliances as an important procompetitive tool. The JCA will produce important efficiencies , and the open transborder agreement provides a fully competitive environment that ensures
those benefits will be passed along to consumers. T he Department approved both theJoint Application Page 6

United/Air Canada and American/Canadian immunized alliances under a similar open transborder agreement with Canada. Ord er 97

- 9

- 21; Order 96

- 7

- 21. Implementation of the United/ Air Canada immunized alliance has produced m ajor service and capacity increases in the U.S.

- Canada transborder market , and similar

- if not greater

- benefits can be expected on U .S.

- Mexico transborder routes.
Delta and Aeromexico require antitrust immunit y to deliver the significant public benefits of their Proposed Alliance . The JCA Parties cannot share profits, scheduling , network and pricing plans or undertake many of the other joint activities contemplated by
the JCA and the Alliance Agreement s in the absence of antitrust immunity. No other
similar alliance has been willing to proceed with its agreements in the absence of immunity from the Department. The Joint Applicants respectfully submit that the Alliance Agreements meet the Department’s p ublic interest standard for approval and are consistent with a long line of decisions that conferred antitrust immunity upon similar alliance arrangements. 

### III. Description of the Agreements The JCA Parti es intend to for m an integrated alliance. A grant of ant itrust immunity by the Department , coupled with the approval of such a “concentration” by Mexico, will enable the JCA Parties to produce new and more effective competition, new service and other consumer benefits, and significant efficiencies

– all objecti ves for which the DOT has granted antitrust immunity.
There can be no doubt that the JCA Parti es are fully committed to achieving these objectives. In fact, Delta has acquire d a 4.17 percent equity stake in Aeromexico

. Delta’s interests clearly lie in a long

- term commitment to the success of Aeromexico and
the JCA . Delta’s investment in Aeromexico creates an alignment of financial incentives that will ensure that the benefits of the JCA are realized

.Joint Application Page 7

The JCA is consi stent with the alliance agreements that the Department has approved and immunized in other recent ATI cases. 6 The JCA is detailed and provides for a great degree of cooperation, which helps ensure that the immunized JCA will produce substantial consumer b enefits. 

### A. JCA Agreement The JCA between Delta and Aeromexico covers all nonstop flights operated by
Delta and Aeromexico between the United States and Mexico , as well as the JCA
Parties ’ behind and beyond flights within the U.S. and Mexico that connect to
t ransborder services. The JCA creates metal neutrality between the two carriers and provides a detailed blueprint for how the JCA Parties will implement and coordinate their operations on Proposed Alliance routes. The JCA is structured to ensure that each carrier is motivated to maximize the profitability of the Proposed Alliance as a whole. The integrated commercial activities contemplated by the JCA create significant efficiencies that can be implemented only with antit rust immunity. Integrated commercial activities provided for in the JCA include:

• 50

- 50 sharing o f incremental contribution generated by the JCA above baseline performance , together with 20 percent sharing of incremental beyond and behind revenue, ensuring that the JCA Parties are fully incentivized to achieve shared goals and efficiencies.

• Network and scheduling decisions relative to the JCA Parties ’ operations on JCA routes will be planned for and made jointly to optimize the Delta/Aeromexico competitive offering against rival carriers . This will allow the JCA Parties to optimize frequency and capacity and to promote connectivity between the JCA Parties ’ operations.

• Metal neutrality, which ensures that the JCA Parties will implement metal neu tral sales and distribution policies and programs with respect to service on JCA routes without preference to a JCA P arty’s own operated flights.

6 See, e.g. , Delta/Virgin Atlantic DOT Order 2013

- 9

- 14 , DOT Order American Airlines/British Airways, DOT Order 2010

- 7

- 8, at 22; SkyTeam II ATI, DOT Order 2008

- 5

- 32, at 4; U.S.

- Japan Alliance Case, DOT Order 2010

- 11

- 10, at 3.Joint Application Page 8

• Reciprocal code sharing on all U.S.

- Mexico services and beyond routes within the respective countries

. Recipro cal codesharing will entail seamless interactive inventory availability and favorable special prorate terms, which will eliminate double

- marginalization pricing mark

- ups

.

• Joint sales and marketing Cooperation , which will maximize local point of sales expertise and allow the Parties to present a single sales face to customers.

• Complementary product development and service enhancements.

• Airport co

- location opportunities and joint purchasing strategies. The JCA Parties are presenting the confidential, detailed JCA for the Department’s consideration . Delta and Aeromexico are ready to move quickly and anticipate implementing the JCA promptly after receiving regulatory approvals , with the first joint network plan implemented in 90 days after implementation of the JCA . The JCA provides the Department with certainty that the substantial consumer benefits and efficiencies of the Proposed Alliance will be immediate and proximate to the grant of ATI approval. 7
The Proposed Alliance will be managed by a JCA Steering Committee that will
meet initially four times per year and consist of two senior management representatives of each JCA P arty. The day

- to

- day commercial and integration activities of the JCA will
be mana ged by several of working groups including : (1) network, (2) revenue management, (3) marketing and e

- commerce , (4) sales, (5) finance, and (6 ) operations.

7 In recent years, the Department has required applicants for ATI to demonstrate that they have concrete plans to utilize this authority, and that this authority can yield immediate and substantial benefits. See, e.g. , Delta/Virgin Blue, DOT Order 2011

- 6

- 9. Delta and Aeromexico are well

- prepared to make this showing. Although the carriers only recently agreed to form their JCA, they have prior experience as partners, having maintained an extensive U.S.

- Mexico codeshare arrangement since 1994. Moreover, Delta and Aeromexico have compatible processes and systems. Aeromexico is hosted in a full service GDS and maintains a full suite of systems for handling codesharing and FFP reciprocity, because it cooperates with other major international carriers. The JCA Parties are highly incentivized to move quickly to deliver new services and consumer benefits, and to build their competitive presence in the U.S.

- Mexico marketplace.Joint Application Page 9

1. Network Working Group The Network Working Group will develop and implement the jointly agreed network optimization plan, which will seek to assign the most efficient aircraft from the JCA Parties’ combined fleets to each route. The JCA Parties will move rapidly to realize the substantial public benefits of the joint network plan soon after ATI approval. The network changes will be implemented within 90 days following implementation of the JCA

. This period allows for advance publication and selling of the new schedule and the necessary lead

- time for making operational changes.
2. Revenue Management and Pricing Working Group The Revenue Management and Pricing Working Group will manage the coordinated pricing and revenue management functions of the JCA and the delegation of
respons ibility for implementing the JCA ’s pricing strategies and activities, which is intended to maximize each carrier’s point of sale expertise. The JCA Parties intend to achieve a high degree of integration and cooperation of their respective revenue
manageme nt systems and processes with respect to itineraries over JCA routes and relevant beyond routes in order to maximize profits. The JCA Parties will manage their own flights with respect to revenue management activities; however, the JCA Parties’

revenue ma nagement strategies and policies with respect to such routes will be aligned. Reciprocal codesharing is already supported by the JCA Parties’ GDS platforms, and the JCA Parties are committed to putting additional systems and technology in place to support additional revenue management coordination following implementation of the JCA . Alignment and cooperation of the JCA Parties’ inventory management systems and processes will be accomplished through: (1) harmonization of booking classes, (2)
seamless inter active inventory availability, (3) bid price exchange, (4) married segmentJoint Application Page 10
logic and journey controls, (5 ) if technically and economically feasible, sourcing of each other’s forecasting data input for each JCA Party’s unique origin/destination between the United States and Mexico to feed each other’s revenue management system, and ( 6) harmonization of passenger

- related service methods and procedures to the extent practicable (such as passenger protection and waitlist priorities).
3. Marketing and E - Commerce Working Group The Marketing and E

- Commerce Working Group will be responsible for creating a highly coordinated sales function for the JCA , developing full reciprocity between the JCA Parties’ loyalty programs, e

- commerce functionality, and facilitating rec iprocal access to premium lounges. Under the JCA, the JCA Parties have committed to implement a “metal neutral” sales policy under which each JCA Party will implement sales and distribution programs and policies with respect to JCA routes without preferenc e to its own flights on routes operated by the other JCA Party. Upon implementation of the JCA , the JCA Parties will seek to present a common “face” to the customer using seamless tools, processes and support. The JCA sales teams will coordinate with the J CA pricing teams with respect to establishing discount policies for corporate and agency accounts. The JCA Parties will implement common strategies and tactics for selling JCA products and services and will maintain a coordinated approach to JCA accounts and coordinated sales communications in order to minimize conflict and maximize cooperation of sales
activities. Although Delta and Aeromexico will maintain separate frequent flyer programs, the JCA Parties will implement and maintain full reciprocity betw een their respective loyalty programs. In addition, the JCA Parties will provide reciprocal premium customerJoint Application Page 11
handling services, including priority airport check

- in, baggage handling and excess baggage allowances to elite customers of each JCA Party, as we ll as maintain reciprocal arrangements between their respective airport lounge programs for elite customers.
4. Operations Working Group The Operations Working Group will facilitate seamless passenger connections, baggage transfer, check

- in and harmonization of customer service policies. The JCA Parties agree to coordinate their schedules and operations with respect to JCA routes and related beyond routes in order to maximize connections between the JCA Parties’ flights and to reduce minimum connection times. The JCA Parties will also pursue co

location opportunities at airports where flights are operated on JCA routes at common airports . The JCA Parties will seek to address any customer service “seams” that may exist or arise in such processes and procedures. 5. Finance Working Group The Finance Working Group monitors and reports on JCA financial performance and determines the financial settlement between the Parties. 

### B. Implementing Agreements The JCA will be accompanied by a number of new and updated alliance implementing agreements including a Codeshare Agreement, a Special Prorate Agreement, a Lounge Ag reement, and an FFP Agreement. 

### IV. The Application Is Consistent with the Department’s Legal Standards for Granting Immunity. In considering applications for antitrust immunity, the Department engages in a
two

- part analysis: a “competitive analysis” and a “public benefits” analysis. 8 Under 49 U.S.C. § 41309(b) the Department will “approve an agreement . . . when the Secretary

8 See 2011 Star A TI, DOT Order 2011

- 11

- 16, at 5; American Airlines/British Airways, DOT Order 2010

- 7

- 8, at 7

- 8.Joint Application Page 12

finds it is not adverse to t he public interest and is not in violation of this Part.” If the Department approves an agreement under 49 U.S.C. § 41309, the Department has the discretion to grant the transaction antitrust immunity under 49 U.S.C. § 41308 “provided that [the Department determines] the exemption is required by the public interest.” 9 “While the public interest determination under both §§ 41309(b) and 41308(b) entails a comparison of anti

- competitive effects and public benefits, the standard in section § 41308(b) . . . is higher.” 10 The Department’s established policy is to approve and grant immunity for inter

carrier agreements if: (1) t he agreements do not eliminate or substantially reduce competition and are not adverse to the public interest; and (2) a grant of immunity is required by the public interest and for the parties to proceed with the transaction. 11 For the reasons discussed below, the Joint Applicants respectfully submit that the proposed Alliance Agreements meet these criteria. 

### V. A Grant of Immunity Is Required to Produce Important Public Benefits

. The Proposed Alliance will produce substantial public benefits by providing
enhanced service and competition in the U.S.

- Mexico transborder market. American and United are the two leading competitors with 25 and 22 pe rcent market shares, whereas Delta and Aeromexico trail as distant 3 rd and 4 th place competitors with 11 and 14 percent shares , respectively . Exhibit JA

- 1

. American and United also enjoy the important structural advantage of large hubs in Texas, giving t hem the ability to

9 2011 Star ATI, DOT Order 2011

- 11

- 16, at 5; see also 49 U.S.C. § 41308.
10 2011 Star ATI, DOT Order 2011

- 11

- 16, at 5; American Airlines/British Airways, DOT Ord er 2010

- 7

- 8, at 8.
11 American Airlines/British Airways, DOT Order 2010

- 7

- 8, at 8.Joint Application Page 13
economically provide broad network coverage into Mexico, serving both large and small
markets and providing greater frequency. A Delta/ Aeromexico JCA creates a third network competitor of roughly equal
size to American and United that will compete more effectively by providing new and
enhanced services. Aeromexico’s hubs at Mexico City, Monterrey and Guadalajara provide broad coverage of interior Mexico, enabling the Proposed Alliance to offer a
transborder network that rivals that of the leading competitors. Working together the JCA Parties will be able to introduce new nonstop services, that would not otherwise be
achievable as two

- stand alone competitors, create a new hub at Los Angeles serving Mexico, increase service on hub

- to

- h ub pipeline routes, and offer greater frequencies on the largest and most important transborder routes : New York

- MEX and Los Angeles

MEX. As a result of the new fully liberal transborder aviation agreement, competition will intensify as new entry will be enabled on routes that are currently restricted. Taken together, these new services and the competition they bring to the market will pr oduce significant consumer welfare benefits. Antitrust immunity for the Alliance Agreements is necessary to achieve thes e benefits. The JCA will allow Delta and Aeromexico to optimize flight schedules, share profits and losses, engage in joint pricing and revenue management in JCA markets, and launch joint sales and marketing initiatives. These and other joint activities will allow
the JCA Parties to achieve integrative efficiencies and expand their joint network ; but in the absence of immunity these activities would expose the Joint Applicants to unacceptable antitrust risk.Joint Application Page 14
The Department has previously found 12 that integrated airline alliances, such as
the JCA proposed here, produce extensive consumer benefits: “Antitrust immunity is well suited to enable carriers to achieve merger

- like efficiencies and deliver benefits that would not otherwise be possible.” 13 For example, the Department has noted the beneficial impact of immunized alliances on service levels, fares, and costs: “[W]e tentatively find that the following public benefits are likely [from an immunized oneworld alliance]: (1) more options for travele rs in numerous transatlantic city pairs, based on the applicants’ ability . . . to achieve fare combinability; (2) lower fares resulting from the reduction in double marginalization on multi

- segment itineraries; (3) volume discounting . . .; (4) expanded a ccess to discounted fares resulting from coordinated inventory; (5) reduced costs through shared sales, marketing, distribution, procurement, . . .” 14 The Proposed Alliance creates even greater opportunity and consumer benefits. Under
a metal neutral J CA t he parties are fully incentivized to flow traffic to one another and capitalize on each other’s strengths to take advantage of new market opportunities. By sharing contribution results, t he parties have the incentive to price jointly. T his is bor n e out by the fact that the parties are obligated to provide better access to each other’s inventory and more favorable prorates when the JCA begins.

12 See International Aviation Developments: Transatlantic Deregulation, The Alliance Network Effect , U.S. Department of Transportation, Office of the Secretary (Oct. 2000), at 5 (“DOT Second Report”), at 2

- 3, 5

- 6, 10; see also , e.g. , SkyTeam II ATI, DOT Order 2008

- 5

- 32; ANA/CO/UA AA/JAL, DOT Order 2010

- 10

- 4; Continental/Star Alliance, DOT Order 2009

- 4

- 5; American Airlines/British Airways, DOT Order 2010

- 2

- 8; Delta/Virgin Austra lia/Pacific Blue, DOT Order 2011

- 6

- 9; 9

- way Star Alliance ATI, DOT Order 2006

- 12

- 17; American/Lan Airlines/Lan Peru, DOT Order 2005

- 10

- 8; America West/Royal Jordanian, DOT Order 2005

- 1

- 23; American/SN Brussels, DOT Order 2004

- 4

- 10; United/Asiana, DOT Order 2003

- 5

- 18; American/Swiss, DOT Order 2002

- 11

- 12; American Finnair, DOT Order 2002

- 7

- 39; Delta/Korean, DOT Order 2002

- 6

- 18; United/Bmi, DOT Order 2002

- 4

- 4; Delta/Air France/Alitalia/Czech, DOT Order 2002

- 1

- 6; Continental/COPA, DOT Order 2001

- 5

- 1; United/Au strian, DOT Order 2001

- 1

- 19; American/Lan Chile, DOT Order 1999

- 9

- 9.
13 SkyTeam II ATI, DOT Order 2008

- 4

- 17, at 15.
14 American Airlines/British Airways, DOT Order 2010

- 2

- 8, at 30.Joint Application Page 15
Because transborder routes can be served with narrowbody aircraft, the JCA
P arties can move even more qui ckly to take advantage of these opportunities than is possible with transoceanic alliances requiring widebody aircraft

. The larger number and gauge types of narrowbody aircraft w ill allow the JCA P arties to quickly increase capacity to match demand. Both carriers operate large hubs with multiple connecting banks, providing the opportunity for increased frequencies on critical network pipeline routes. Additional point

- to

- point services are also possible. And, new schedule efficiencies are created allowin g for increased service and improved aircraft utilization. For all of these reasons, t he cooperation between Delta and Aeromexico will generate important efficiencies and public benefits, discussed below. 

### A. The Delta/ Aeromexico JCA Will Enable the Parties t o Provide Substantial Consumer Benefits through New Services and Increased Competition.
1. The Proposed Alliance Will Provide Consumers With the Benefit of an Expanded Joint Network

. The JCA will enable Delta and Aeromexico to join their networks to provide

c ustomers with more service options and to compete more effectively with the broad networks currently offered by American and United. While Delta and Aeromexico currently codeshare on transborder routes, the network is hampered by the lack of metal
neutral ity and incentives to cooperate. Because Delta and Aeromexico are competitors, neither carrier is willing to offer full network and inventory access to the other. Under the JCA, Delta and Aeromexico will be able to adjust their schedules and inventory a ccess to enhance connections with Delta’s North American services beyond Aeromexico’s U.S. gateways

– improving the distribution and penetration of Aeromexico’s product in the U.S. and North American marketplace. Notably, Delta operates hubs at the critic al JFK and LAX gateways which have substantial service byJoint Application Page 16
AeroMexico. Delta’s other U.S. hubs including Atlanta, Salt Lake City, Detroit, Seattle and Minneapolis provide a platform for future JCA services. Similarly, Delta will be able to reach points i n interior Mexico served by
Aeromexico over its hubs at Mexico City, Monterrey and Guadalajara which are impractical for Delta to serve on its own. For example, it is 1330 miles from Delta’s primary hub at Atlanta to Mexico City. By comparison, it is onl y 763 miles from Houston to Mexico, enabling United to operate a much larger network into Mexico. The creation of a new immunized joint network will afford customers more competitive service
alternatives.
2. Upgauging to Larger and More Efficient Aircraft

. Delta and Aeromexico anticipate that improved schedules and network connectivity will lead to increased traffic flowing across the joint network. Both carriers have a variety of narrowbody aircraft in their fleets and the capability to substantiallyJoint Application Page 17
increase capacity by upgauging to larger aircraft. The following routes have been identifi ed as likely candidates for upg a u ging:

Route Baseline Gauge Future Gauge % Change
SLCPVR 95 150 59% SLCSJD 101 150 49% MIAMTY 76 99 30% SLCGDL 76 99 30% IAHMEX 99 123 25% ATLCUN 149 180 21% MIAMEX 133 160 20% MCOMEX 134 160 20% DTWCUN 153 180 18% LAXMTY 76 88 15% LAXPVR 131 150 15% DTWMEX 126 143 13% ORDMEX 141 160 13% JFKCUN 160 180 13% DTWMTY 80 90 12% LAXMEX 144 160 11% SFOMEX 145 160 11% ATLMEX 124 134 8% LASMEX 150 160 7% ATLPVR 150 160 7% SLCCUN 150 160 7%
Not only will capacity increase across the transborder network, but important efficiency gains will be realized. For example, improved JCA traffic flows enabled by increasing from a smaller A

- 319 to a larger B737

- 8 00 will reduce costs by 12%, and upgauging from a B

- 737

- 800 to B737

- 900 will result in a further effic iency gain of 8%.
Exhibit JA

- 4

. The abundant upgauging opportunities identified above

-- combined with flexibility in the Delta and Aeromexico fleets

-- will lo wer costs, enhancing competition and benefits to consumers.Joint Application Page 18

3. A New JCA Hub at Los Angeles Serving Transborder routes. With over 1,500 ,000 O&D passengers, Los Angeles is the largest U.S.

- Mexico
transborder market. And, with an ethnic population of 5 m illion, it has the largest Mexican population of any city after Mexico City. The traveling public would be well

served by additional transborder service at Los Angeles. Under the JCA, Delta and Aeromexico anticipate forming a cohesive hub at Los Angeles serving the 10 largest West Coast

- Mexico markets. In addition to launching new routes, frequency and gauge on existing routes will be expanded. JA

- 3 . Neither Delta nor Aeromexico acting alone could implement such expansion at Los Angeles. Delta has been growing Los Angeles as a hub, adding 29 new destinations and
83 frequencies over the p ast 5 years:

However, without a partner and local sales presence in Mexico, broad

- based expansion south of the border is not feasible. Mexico point of sale expertise is critical, and, apart from Mexico City and Mexican beach markets, Delta is without this capability. 31 36 40 49 59 60

25 30 35 40 45 50 55 60 65

2010 2011 2012 2013 2014 2015 

### DL LAX Destinations

69 90 96 106 130 152

50 70 90 110 130 150 170

2010 2011 2012 2013 2014 2015 

### DL LAX Daily FrequenciesJoint Application Page 19
Aeromexico brings this important component to the table with a well established and knowledgeable sales force, agency and corporate contr acts. For its part, major transborder expansion at Los Angeles is not feasible for Aeromexico because it lacks network feed to reach important U.S. west coast destinations beyond Los Angeles that are important to the sustainability and success of these fli ghts. Delta’s growing Los Angeles hub provides the essential network feed Aeromexico is lacking. The JCA also creates i mportant scheduling efficiencies through the establishment of a Los Angeles hub. For example, a LAX arrival from the Eastern United S tates at 5pm would typically remain on the ground at Los Angeles until the next day because it is too late to turn the flight back and arrive in the middle of the night. However, such an aircraft is well situated and well timed to provide evening southbou nd service into Mexico, returning the following morning, and resuming a domestic
schedule. 15 In addition, the JCA can use schedule efficiencies to launch transborder routes to Delta hubs with Aeromexico metal during otherwise weak demand hours for domestic
Mexico travel . Exhibit JA

- 5

. Intra

- Mexico demand is strong in the morning and evening hours, but weak in the mid

- day. Transborder flight timings provide ideal connections to Delta hubs, allowing JCA to optimize the potential of beyond connections to the interior U.S. Id. Without the JCA , such service would not be economical for Aeromexico.

15 These operational efficiency gains are unique to shorter haul transborder operations. In the long haul transatlantic JCA’s there is less scheduling flexibility because a single widebody aircraft typically flies the same rotation each day with ground time that is insufficient to capitalize on new route opportunities.Joint Application Page 20

4. Increased Frequency and Improved Schedule at Los Angeles and New York

. The JCA will increase service and offer an improved schedule in the two largest U.S.

- Mexico City routes

– Los Angeles and New York. The JCA plans to increase
service on the LAX

- MEX route by two frequencies (from six to eight) and on the JFK

MEX route by one (fro m 5 to 6). Through metal neutrality, the JCA provides the carriers with the incentives to offer the best and most attractive overall schedule, rather than each carrier competing in the peak time channel. Schedules will be spread out to create a two hour shuttle service
on LAX

- MEX and optimize time of day coverage on JFK

- MEX:

5. Improve d Service Between the U.S. and Mexico Regional Cities. Some of the fastest growing U.S.

- Mexico markets are smaller Mexican regional
cities

. It is not practical for Delta to serve these markets nonstop from its U.S. hubs. However, Aeromexico serve virtually every city in Mexico from one or more of its three hubs at Mexico City, Monterrey or Guadalajara. The expansion of service by Delta in to these markets through the J CA , and Aeromexico’s improved ability to flow traffic between these cities and the United States, LAX - MEX NYC - MEXJoint Application Page 21
will significantly improve competition and consumer choice in these rapidly developing
markets.
6. More Effective Sales Presence on Both Sides of the Border

. The JCA will allow Delta and Aeromexico to benefit from each other’s brand recognition, customer awareness, and overall sales presence on their respective sides of the border

. Apart from Mexico City and Cancun, Delta suffers from a weak sales presence and recognition in Mexico

. Delta also lacks expertise in dealing with unique distribution channels in Mexico which rely heavily on relationships with local travel agents and other retail ticketing outlets.
As a result of the JCA , Delta will gain access to Aeromexico ’s strong presence in
the Mexico , and conversely, Aeromexico will gain access to Delta’s U.S.

- based sales presence and resources. This presence will strengthen the ability of the JCA Parties to market their products

– and thereby attract more customers who will enjoy the benefits of an improved network offering

– in both the United States and Mexico. The JCA
Parties will be able to compete more effectively with larger rival carriers , and meet the strong and growing competitive challenge of new entrant carriers on transborder routes including Interjet, Volaris and Southwest.
7. Airport Co - location and Streamlined Service Will Improve the Customer Experience

. Delta and Aeromexico will strive to co

- loc ate facilities at commonly served stations wherever possible. The carriers have already implemented colocation at many commonly served airports. However, Delta and Aeromexico continue to operate out of separate terminals at the two most important U.S.

- Me xico gateways: New York and Los Angeles.Joint Application Page 22
The Joint Applicants view making the investment and devoting additi onal facilities to implement co

- l oc ation at JFK and LAX as a top JCA priority. Co

- location will improve the customer experience and reduce minimu m connecting times

.



### B. The JCA’s Substantial Consumer Benefits that Cannot Be Achieved w ithout Antitrust Immunity. As described above, the Proposed Alliance will enable improvements in frequencies, schedules, capacity, available nonstop routes, and behind

- and

- beyond connections. These enhancements mean that the JCA Parties will be able to offer an overall network of flights that is much more attractive and useful to consumers

. As a result of the improvements in quality created by the JCA, Delta and Aeromexico will be able to attract additional passengers. Moreover, the JCA will be able to offer new nonstop service and stimulate demand that would not be possible on a stand alone basis. Taken together the benefits of the JCA network will substantial ly increase service and consumer benefits. Although Delta and Aeromexico already codeshare on U.S.

- Mexico routes , antitrust immunity is necessary to realize the overwhelming majority of consumer benefits that an immunized me tal

- neutral codeshare creates. In a non

- immunized relationship between competing carriers, each carrier is incentivized to take a restrictive approach in sharing its network with its partners. A carrier in such a relationship will
restr ict inventory classes, impose less favorable pror ate terms, and price tickets to maximize profit for itself , rather than across the carriers in the relationship

– all of which results in less traffic flowing across the shared networks and less effective competition
with rival carriers

. This has been the experience of Delta and Aeromexico. By contrast,
in an immunized JCA the carriers have a common incentive to maximize contribution forJoint Application Page 23

the JCA as a whole because they are indifferent as to which carrier operates a given flight. A grant of antitrust immunity would allow Delta and Aeromexico to codeshare on
a metal

- neutral basis. This harmonization of incentives would eliminate double marginalization pricing and other inefficiencies that result from non

- metal neutral
codeshares. In addition, antitrust immunity would allow the JCA Parties to coordinate flight times in order to maximize connectivity across both carriers. As the Department recognized in DOT Order 2009

- 7

- 10: By implementing an economic benefit

- sharing agreement, carr iers within the alliance are motivated to perform alliance

- focused network planning, sales, and management, thereby benefiting a broad range of consumers seeking a better, seamless transportation product. . . . By pooling resources to improve the overall s ervice offering, and by sharing financial gains and losses, we find that the partners are able to harmonize the global network and become indifferent as to which of them collects the revenue or operates the aircraft over a given itinerary. They are thus a ble to focus their efforts on gaining the customer’s business by providing the best available fare, schedule, and routing between two cities. 16 We note that Aeromexico briefly served the Atlanta

- Mexico City route from July
2012 to April 2014

. Aeromexico wa s granted only limited access to Delta’s massive hub feed beyond Atlanta and was not able to carry enough local traffic to make the route sustainable. The story would be much different under an immunized alliance scenario where the partners are indifferen t to the operating carrier and both are motivated to make the flight a success.

16 Continental/Star Alliance, DOT Order 2009

- 7

- 10, at 15.Joint Application Page 24



### VI. U.S. - Canada Experience Confirms The Compelling Benefits of Transborder Joint Alliances

. Experience with the liberalized transborder agreement with Canada in the mid

1990’s was characterized by rapid capacity growth due to close proximity and removal of restrictions on high demand transborder routes (similar to U.S./Mexico today). Shorter distances facilitate quick growth with less expensive narrowbody aircraft. Transborder services increased by 43 percent in the first two years of the agreement.

This was followed by a second major surge in capacity by the JCA partners. The following chart shows transborder capacity from the grant of full immunity to the United/Air Canada JCA in October, 2012 through the end of 2014. United/Air Canada
transborder growth was nearly double the rate of the rest of t he industry

-- and is dramatically higher than UA/ CO/AC’s systemwide narrowbody capacity, which was essentially flat: 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4Mar-94May-94Jul-94Sep-94Nov-94Jan-95Mar-95May-95Jul-95Sep-95Nov-95Jan-96Mar-96May-96Jul-96Sep-96Nov-96Jan-97 U.S.
- Canada (ASMs in Billions)



### 27% 43%  Op  Joint Application Page 25

This experience in the U.S.

- Canada transborder market

– the most closely analogous market to Mexico

– strongly supports the Joint Applicants’ projections that approval of an immunized transborder alliance between Delta and Aeromexico will lead to capacity growth and service expansion.



### VII. The Proposed Alliance Will Improve Competition and Consumer Choice on U.S. - Mexico Routes and Will Not Reduce Competition in A ny Relevant Market. The Proposed Alliance will enable Delta and Aeromexico to form a more attractive joint network to compete more effectively with American, United and rapidly expanding new entrant carriers serving transborder routes . The existing networks of Delta and
Aeromexico are highly complementary; the two carriers compete on only two nonstop
routes , JFK

- MEX and LAX

- GDL

. Robust nonstop and one

- stop competition already exists on these routes and will continue to intensify once the liberalized transbo rder bilateral aviation agreement is implemented

.Joint Application Page 26



### A. The Proposed JCA Will Enhance Competition

. Far from reducing or eliminating competition in any relevant markets, the proposed JCA will enhance competition on the U.S.

- Mexico routes. The extensive benefits will include new routings, service that is optimized across time channels, more schedule flexibility for travelers and greater connecting options

— in short, a better product for consumers.

1. United States - Mexico Mexico is the second largest international market from the U.S. (behind Canada) and is by far the largest U.S. international market without a liberal aviation agreement

. Exhibit JA

- 6

. More than 25 million passengers traveled nonstop between the two
countries last year. Id

. As shown in the following table the U.S.

- Mexico marketplace is served by numerous U.S. and Mexico carriers, including new entrants, each with competitively significant market shares:

Whereas today Delta and Aeromexico trail American and United as distant third and fourth place competitors, under the Proposed Alliance there would be three network carriers of roughly equal size, plus three strong and growing new entrants. 25% 22%
14% 11% 8% 6% 4% 3% 2% 2% 0% 5% 10% 15% 20% 25% 30% 

### U.S. - Mexico Seat ShareJoint Application Page 27

2. Overlap City - Pairs There are only two transborde r city

- pairs on which Delta and Aeromexico offer overlapping nonstop service: New York

- Mexico City and Los Angeles

- Guadalajara . On both of these routes, the proposed alliance will not reduce competition, but will enable improved service, more attractive s chedules , and enable new entry consequent with entry into force of the new bilateral aviation agreement. With only two Aeromexico

- Delta overlapping nonstop routes there are far fewer overlaps than were involved in other alliances for which ATI was grante d. For example, the oneworld carriers had eight nonstop overlapping routes when the Department granted oneworld antitrust immunity. 2010 oneworld ATI , DOT Order 2010

- 2

- 8, at 21 (Table 5) (DFW/BOS/ORD/MIA/LAX/NYC

- London, MIA

- Madrid, NYC

- Paris). The Star Alliance carriers had six nonstop overlapping routes when the Department granted ANA, United, and Continental antitrust immunity, and the oneworld Alli ance carriers had three nonstop overlapping routes when the Department granted American and Japan Airlines antitrust immunity. 2010 U.S.

- Japan Alliance Case , DOT 2010

- 10

- 4, at 9 (Table 3) (Star: WAS, CHI, SFO, HNL, NYC, LAX; oneworld: CHI, NYC, LAX).

N o. of Overlapping Nonstop City - Pair Routes DOT Order

2010 oneworld ATI 8 2010

- 2

- 8
2010 U.S.

- Japan Alliance (UA/ANA

- Star) 6 2010

- 10

- 4

2010 U.S.

- Japan Alliance (AA/JAL

- oneworld) 3 2010

- 10

- 4

Aeromexico

- Delta 2Joint Application Page 28



### a. New York - Mexico City New York

- Mexico City is highly competitive with four carriers offering nine daily nonstop flights. Moreover, Interjet has just published schedules doubling its service from one flight to two:

Airline Daily Flights
InterJet 2x
Aeromexico 4x
Delta 1x
United 2x

Under a new liberal aviation agreement American is almost certain to enter the J F K

- MEX route. New entry will also be enabled by Mexican carriers, notably Volaris, because both Mexican designations are fully occupied by Aeromexico and Interjet

. In addition to existing and new nonstop competition on the route one stop services provide an effective competitive constraint with approximately 20 percent of New York City

- Mexico City passengers utilizing a connecting option. Consequently, t he proposed JCA will not allow Delta and Aeromexico to “impose and sustain supra competitive prices or reduce service levels below competitive
levels.” 17 The immunized JCA is not likely to result in price increases. Rather, given the increased competition and capacity on the route, consumers are likely to benefit

.

17 SkyTeam II ATI , DOT Order 2008

- 4

- 17, at 12.Joint Application Page 29



### b. Los Angeles - Guadalajara Los Angeles

- Guadalajara is also highly competitive with five carries offering eight daily nonstop flights:

Airline Daily Flights
American 1x
Aeromexico 2x
Alaska 1x
Delta 2x
Volaris 2x

And, as with New York, the liberal transborder agreement will allow for new entry and competition. Similarly, approximately 20 percent of passengers cho o se a connecting alternative. Therefore, the proposed JCA will not allow Delta and
Aeromexico to “impose and sustain supra compe titive prices or reduce service levels below competitive levels” 18



### B. Substantial New Entry Will Be Enabled. Importantly, under the new bilateral agreement, entry constraints on New York

Mexico City and Los Angeles Mexico City will be removed triggering pot ential new entry by carriers including American, JetBlue, Interjet and Volaris. Interjet has 70 new aircraft on order, and Volaris 75, making them formidable transborder competitors. Competition on dense routes such as Los Angeles and New York will incre ase, creating new options for consumers.

18 SkyTeam II ATI, DOT Order 2008

- 4

- 17, at 12.Joint Application Page 30



### VIII. Granting ATI is Consistent With Mexico’s Expectations in Entering Into a Liberalized Transborder Agreement

. Entry into force of the newly initialed transborder agreement will create new opportunities for air carri ers and produce enormous benefits for travelers and shippers and the U.S. and Mexican economies. One of the key concerns voiced by the Mexican side was the ability of Aeromexico to enter into a n immunized arrangement with a U.S. carrier. Following the demise of Mexicana, Aeromexico is Mexico’s only remaining
network carrier . Competition on transborder routes will intensify with the elimination of designation limitations, facilitating new entry by Mexican LCCs as well as major U.S.
carriers. By forming a partnership with Delta, Aeromexico can tap into additional traffic flows, grow its network, and become a more effective and durable competitor. The Joint Applicants understand that the approval of antitrust immunity is a n important consideration weighing on Mexico’s decision to initial and ratify the agreement. The existence of liberalized agreement s with the United States has long been a public interest factor that is a prerequisite to approval of an ATI application. The Joint Applicants submit that the fully liberalized transborder agreement meets this requirement. The United States entered into a similar open transborder agreement with Canada, and, under the auspices of that agreement the Department granted antitrus t immunity to both the United/Air Canada and American/Canadian immunized alliances. Order 97

- 9

- 21; Order 96

- 7

- 21. In addition, DOT has long supported the formation of international airline alliances as an important step towards the further liberalization and integration of the international air transport market. In a 1999 study of airline alliances, DOT expresslyJoint Application Page 31
recognized and e ndorsed the emergence of immunized alliances as a valuable surrogate for airline mergers and other forms of consolidation: 19 The airline industry, in response to consumer demand, sees the enormous growth potential for the over

- regulated and under

- served international market, and individual airlines are trying to position themselves to participate in that growth. The resulting development of large strategic alliances, together with code sharing and other marketing arrangements is changing the structure of the airline industry and is generating new pressures to overcome the limitations of restrictive bilateral agreements. They have provided a way for carriers to mitigate the limitations of bilateral agreements, ownership restrictions, and licensing and con trol regulation. In prior ATI decisions, the DOT has found that a grant of antitrust immunity would permit the JCA Parties to produce significant efficiencies . “Generally speaking, a grant of antitrust immunity may enable airlines to achieve merger

- like s ynergies, boost capacity, and deliver lower prices for some itineraries.” 20 Delta and Aeromexico have evidenced firm plans to do the same. The emphasis and support U.S. and Mexican officials have attached to the formation of airline alliances support appr oval of antitrust immunity for the Delta/ Aeromexico JCA . Immunity would also be consistent with prior DOT decisions. 21

19 Office of the Secretary, U.S. Department of Transportation, International Developments: Global Deregulati on Takes Off (December 1999), at 4.
20 Delta/Virgin Australia/Pacific Blue, DOT Order 2011

- 5

- 8, at 13.
21 As DOT observed in its Order to Show Cause in the KLM/Northwest antitrust immunity case: We believe that the Netherlands would consider it to be inconsistent with the Open Skies spirit if we denied the applicants’ request, unless we had substantial grounds for taking such action ( e.g. , because the proposal would substantially reduce competition in several markets without any offsetting benefits). DOT Show Cause Order 92

- 11

- 27, at 17 (November 20, 1992).Joint Application Page 32



### IX. The Joint Applicants Will Not Imp lement the Alliance Agreements w ithout Antitrust Immunity. The J CA expressly provides for coordinated sc heduling, yield management, inventory allocation, and pricing, joint purchasing, joint decision

- making on new routes, and revenue sharing

– and these are precisely the aspects of the JCA arrangement that will produce the largest consumer benefits. To proc eed with such joint activities absent antitrust immunity would involve prohibitive antitrust risk and regulatory and legal uncertainty. 22 In other cases, the Department has acknowledged that the consumer and competition benefits from such agreements cannot be attained without immunity. 23


### X. Mexico Has Established Procedures for Antitrust Approval of Airline Alliances

. In Mexico, antitrust matters are governed by (i) Article 28 of the Political Constitution of the United Mexican States ( Constitución Política de los Estados Unidos
Mexicanos ); (ii) the Federal Law of Economic Competition ( Ley Federal de Competencia Económica ; the “Current Competition Law ”); and (iii) the Regulatory Provisions to the Competition Law ( Disposiciones Regulatorias de la Ley Federal de Competencia Económica ); and the Federa; Criminal Code (Codigo Pelal Federal).
T he FECC is an autonomous constitutional body with jurisdiction over competition issues in all areas and industries other than broadcasting and telecom
sectors. FECC is charg e d with enforcing the Competition Law, and in doing so, preventing and investigating monopolies , illicit concentrations, barriers to competition,

22 Airlines have had to defend themselves in multiple lawsuits driven by plaintiffs’ counsel involving antitrust claims, regardless of the lack of merit. See , e.g. , In re Northwest Airlines Corp. A ntitrust Litig. , 208 F.R.D. 174 (E.D. Mich. 2002), review denied , 310 F.3d 953 (6th Cir. 2002), cert. denied , 539 U.S. 904 (2003); In re Airline Ticket Commission Antitrust Litig. , 268 F.3d 619 (8th Cir. 2001). The risk of antitrust litigation remains a s ignificant concern.
23 See, e.g. , American Airlines/British Airways, DOT Show Cause Order 2010

- 2

- 3, at 30 (listing expected public benefits and stating that “A grant of antitrust immunity is, we tentatively find, necessary to achieve most of these benefits” ).Joint Application Page 33

and monopolistic practices which purpose or effect is to diminish or hinder free competition in the Mexican te rritory

. Last year Mexico’s Federal Economic Competition Commission ( “ Commission or FECC ” ) was requested to issue an opinion with respect to : (i) the possibility that the Mexican airlines enter into strategic alliances with foreign airlines; and (ii) the existence of a mechanism provided in the Federal Law of Economic Competition (herein, FLEC) in which those alliances could be analyzed and, if appropriate, approved by the Commission. On November 27, 2014 FECC issued its opinion ( No. CFEC

- 275

- 2014 ) concluding that
airline JCA s would be evaluated as “concentrations” under Mexican competition law. More specifically: a) An alliance between airlines

- in relation to its nature and special characteristics

is a concentration that meets the thresholds provided in article 6 1 of the FLEC. b) The concentration must be notified to the Commission independently if it meets the thresholds that are mentioned in the Sections I to III of the article 86 of the FLEC. c) The notified concentration could be authorized, not authorized or condi tioned, depending on the risks that implies, based on each case, to the competition process and free competition.
Notification of a concentration would be required prior to implementing the Proposed Alliance

. The FECC generally has 60 business days to review the notification and issue its resolution on the concentration submitted for its analysis. This term is counted from the date on which FECC has a complete file with the information th at it requires for the analysis, including ad ditional information that it may request 15 business days after the basic filing information is complete.Joint Application Page 34



### XI. S lots at Mexico City Mexico City is a s lot c oordinated a irport , and, while Aeromexico is the largest operator, Aeromexico’s share of slots at MEX is lower than at other congested airports
where h ub operators have received antitrust immunity:

Mexico maintains a public registry of slots, which are held by a diverse array of operators: http://www.aicm.com.mx/negocios/slots/actualizacion

- de

- slots

- durante

- la

temporada

- de

- invierno

- 2014

- 2015?periodo=0&fechaini=2015

- 02

- 15 71% 56% 56% 46% 46% 3%

2%

FRA LHR LHR Mexico City Mexico City

BA includes all IAG carriers plus American Airlines. Lufthansa includes all Lufthansa Group carriers and United. Top Carrie 

## + +Joint Application Page 35
Existing Mexican regulations provide for buy/sell/trade , requiring, essentially that the transferring carrier have used th e slots for a year and that both carriers are current on their airport and navigation charges: Regulation of the Airports Act Article 98. Landing and takeoff slots assigned to the carriers can be exchanged or transferred with other carriers, provided that both are current in the payment of the services indicated in article 96 of this regulation; timetable in question has been used for at least one year by the original carrier and notify the airport manager of operation, specifying the timetable concerned. The airport administrator may withdraw landing and takeoff schedules assigned to the air carriers when they exchange them or transferred in violation of the preceding paragraph or have debts due in the payment of the services referred to in article 96 of t his regulation, and must notify the carrier 90 days in advance. It is expected that within the next year IATA World Slot Guidelines will be adopted at MEX, providing additional consistency and uniformity with other slot coordinated airports around the wor ld. Finally, efforts are underway to construct a new, expanded airport within the next four years serving Mexico City which will alleviate current capacity issues

.



### XII. Conclusion

Approval of and antitrust immunity for the Alliance Agreements is in the public interest and will create important consumer benefits , including the introduction of new U.S.

- Mexico services, the establishment of a west coast JCA hub at LAX, improved schedules on JFK

- MEX and LAX

- MEX, and upgauging on numerous routes. Antitrust
i mmunity is essential to the full realization of the consumer benefits and procompetitive effects of the JCA

.Joint Application Page 36
WHEREFORE, the Joint Applicants respectfully request that the Department approve, and grant antitrust immunity for, the Alliance Agreements pursu ant to 49 U.S.C. §§
41308 and 41309. Respectfully submitted,

_____________________________ Robert E. Cohn Patrick R. Rizzi Hogan Lovells US LLP Counsel for AEROVIAS DE MEXICO, S.A. DE C.V _ _______________________________ Alexander Van der Bellen, Managing Director, Government Regulatory and International Affairs and Associate General Counsel DELTA AIR LINES, INC.

# Joint Application for Antitrust Immunity Exhibits

March 31, 2015

# American and United Dominate US - Mexico Service

3% 25% Transborder Market Share 

## Delta and Aeromexico are distant 3 rd 

## and 4 th 

## competitors in the US - Mexico market

25% 22%

14% 11%

AA UA AM DL

Full

- Year 2014 OAG Scheduled Seat Share as of March 11, 2015

JA

- 1JA

- 2 

# Under an ATI Joint Venture, Aeromexico and Delta Can Offer A More Expansive Network for Consumers

232 X 47 = 10,904 DL U.S. Points AM Mexico Points Transborder City Pairs Individually, Delta and Aeromexico serve fewer U.S.

- Mexico city pairs than rival network carriers With a combined ATI Joint Venture,

Delta and Aeromexico can offer a more attractive network to customers

0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 10,000 11,000U.S.-Mexico CityPairs



## AM DL AA/US UA DL+AMLAX SAN SEA

PHX MSP

ORD DTW

ATL

MSY

MID MEX MLM PVR SJD ZCL MTY AUS DFW

AGU QRO 

# Joint Venture Creates Value Through Expanded Transborder Network And Strategic Market Growth JV provides growth opportunities in heavily contested markets

• JV enabled service and competitive benefits will allow Aeromexico/Delta to launch up to 14 new transborder routes over next five years, in addition to capacity increases in currently restricted markets

• Network expansion allows JV to capture growing demand with 39 new daily departures and creates 2,500 new online connections between U.S./Canada and Mexican points on the JV network Probable New JV Transborder Markets (subject to review post ATI)

JA

- 3

# Joint Venture Enables Upgauging T hat Will Accommodate Increased Demand and Reduce Unit Costs

JA

- 4 

## Potential Transborder Routes to be Upgauged (Subject to review post ATI) Example Unit Cost Reductions From Upgauges • Joint Venture will create stronger traffic flows, creating incentive for Delta and AeroMexico to upgauge transborder routes to higher capacity, lower unit cost aircraft types



## - 12%
A319 737

- 800

737

- 800 737

- 900

737

- 900 757

- 200 

## - 8%

- 3% Route Baseline Gauge Future Gauge % Change SLCPVR 95 150 59% SLCSJD 101 150 49% MIAMTY 76 99 30% SLCGDL 76 99 30% IAHMEX 99 123 25% ATLCUN 149 180 21% MIAMEX 133 160 20% MCOMEX 134 160 20% DTWCUN 153 180 18% LAXMTY 76 88 15% LAXPVR 131 150 15% DTWMEX 126 143 13% ORDMEX 141 160 13% JFKCUN 160 180 13% DTWMTY 80 90 12% LAXMEX 144 160 11% SFOMEX 145 160 11% ATLMEX 124 134 8% LASMEX 150 160 7% ATLPVR 150 160 7% SLCCUN 150 160 7%

# Joint Venture Creates Scheduling Efficiencies
– Allowing Incremental Flights That Would be Uneconomical Without JV

• Joint Venture can leverage schedule efficiencies to launch transborder routes during weak demand hours for domestic Mexico travel to Delta hubs with AeroMexico metal

• Transborder flight timings provide ideal connections to Delta hubs, allowing JV to leverage full potential of beyond connections. Without the JV, such service would be not be economical for AM 

## Domestic Mexico time of day p reference c reates d emand g ap in middle of day

JV allows AeroMexico to utilize a ircraft on Transborder during s oft d emand p eriods in Domestic Mexico network 0000 0100 0200 0300 0400 0500 0600 0700 0800 0900 1000 1100 1200 1300 1400 1500 1600 1700 1800 1900 2000 2100 2200 2300 

## Domestic Mexico Demand by Time of Day

Demand Gap in Middle of Day



### MEX 0815 AGU 0915 AGU 1015 LAX 1145 High Demand in Domestic Mexico Low Demand in Domestic Mexico 

### LAX 1300 AGU 1815 Low Demand in Domestic Mexico 

### AGU 1915 MEX 2015 High Demand in Domestic Mexico Ideal times to connect to Delta LA Hub

JA

- 5

# U.S. - Mexico Transborder Market Is Poised For Growth

JA

- 6 

### 29.7 25.3

16.2

9.2 9.1 9.0 7.6 7.0 7.0 6.1
Canada Mexico UK China+HK Japan Germany France Brazil Dominican Republic Italy 

## Top 10 U.S. to Foreign Country Markets by Passenger Volume

The U.S. is Mexico’s top foreign market 

## • Mexico is the second largest U.S. international market by passenger traffic

• U.S.

- Mexico market is poised for growth

– Mexico’s GDP is projected to expand at 4% annually over the next five years

– Of U.S. Hispanic population, Mexican Hispanic population is ~65%, and has nearly tripled since 1990Passengers/DayEach Way(000)

Full

- year 2014 Delta enhanced demand data

# Summary of JV Agreement

Key Terms Details JV Scope • Scheduled service on all nonstop routes between the U.S. and Mexico (excl. cargo - only flights and private charters)

• Parties to engage in commercial cooperation on all beyond points within Mexico and the U.S. Exclusivity • Aeromexico and Delta will be exclusive partners in U.S./Mexico market with certain existing relationships grandfathered Network Governance • Capacity governance b y mutual consent with equitable share of growth by each carrier

• Limited unilateral capacity flexibility in four beach markets (CUN, CZM, PVR, SJD) and limited other markets Commercial Cooperation • Full coordination of Revenue Management, Marketing, Sales and Distribution activities with delegated and/or co

- located staff

• Aligned technologies to facilitate “metal

- neutrality”

• Full codesharing on all transborder routes and beyond points within U.S. and Mexico

• Expanded co

- handling / co

- location opportunities

• Full reciprocal FFP benefits

• Coordinated Cargo activities Financial Settlement • 50/50 sharing of incremental profits above 2015 baseline period which includes 20% of the beyond revenues connecting to/from a transborder market within North America and Central America

• FFP economics shared in JV subject to 2015 baseline Management • Six Working Groups (Network, Revenue Management , Customer, Operations, Sales and Finance) meeting at least four times per year initially

• Executive Steering Committee meetings at least four times per year initially

• Codes of conduct to be established and approved by Steering Committee Timing • JV established no later than 30 days after all regulatory approvals have been received with first joint network plan implemented within 90 days Term • 15 year minimum term, auto

- renewal, three

- year notice periodCERTIFICATE OF SERVICE A copy of the foregoing Application has been served this 31st day of March, 2015, upon the following persons via email:

Air Carrier Name Email Address
Alaska Airlines David Heffernan dheffernan@cozen.com Alaska Airlines Jeremy Ross jeremy.ross@alaskaair.com American Howard Kass howard.kass@aa.com American Robert Wirick robert.wirick@aa.com Frontier Mark Atwood matwood@cozen.com Frontier Steve Lachter stephen.lachter@lachterlaw.com Hawaiian/JetBlue Jonathan Hill jhill@cooley.com Hawaiian/JetBlue Parker Erkmann perkmann@cooley.com JetBlue Robert Land robert.land@jetblue.com Republic Bob Cohn robert.cohn@hoganlovells.com Republic Pat Rizzi patrick.rizzi@hoganlovells.com Southwest/AirTran Bob Kneisle y bob.kneisley@wnco.com Southwest/AirTran Leslie Abbott leslie.abbott@wnco.com Spirit Airlines David Kirstein dkirstein@yklaw.com Spirit Airlines Joanne Young jyoung@yklaw.com Sun Country John Fredericksen john.fredericksen@suncountry.com Sun C ountry Thomas Ting thomas.ting@suncountry.com United Dan Weiss dan.weiss@united.com United Thomas Bolling thomas.bolling@united.com Virgin America Barbara Russell barbara.russell@virginamerica.com Brian Hedberg brian.hedberg@dot.gov Robert Finamore robert.finamore@dot.gov Brett Kruger brett.kruger@dot.gov Reese Davidson reese.davidson@dot.gov Info info@airlineinfo.com