BEFORE THE 

DEPARTMENT OF TRANSPORTATION 

WASHINGTON, D.C. 

Joint Application of 

AMERICAN AIRLINES, INC. 

BRITISH AIRWAYS PLC 

FINNAIR OYJ 

IBERIA LINEAS AEREAS DE ESPANA, S.A. 

ROYAL JORDANIAN AIRLINES 

under 49 U.S.C. §§ 41308 and 41309 for 

approval of and antitrust immunity for 

alliance agreement 

Docket DOT-OST-2008-0252 

MOTION FOR LEAVE TO FILE AND REPLY 

OF VIRGIN ATLANTIC AIRWAYS 

Communications with respect to this document should be directed to: 

Jill Brady 

General Counsel 

VIRGIN ATLANTIC AIRWAYS, LTD. 

The Office, Manor Royal 

Crawley, West Sussex RH10 9NU 

United Kingdom 

Anita M. Mosner 

Sophy Chen 

HOLLAND & KNIGHT LLP 

2099 Pennsylvania Avenue NW, Suite 100 

Washington, DC 20006-6801 

Phone: (202)419-2604 

Fax: (202) 955-5564 

Email: anita.mosner@hklaw.com 

Email: sophy.chen@hklaw.com 

Attorneys for 

VIRGIN ATLANTIC AIRWAYS LTD. 

Date: January 20, 2010 
BEFORE THE 

DEPARTMENT OF TRANSPORTATION 

WASHINGTON, D.C. 

Joint Application of 

AMERICAN AIRLINES, INC. 

BRITISH AIRWAYS PLC 

FINNAIR OYJ 

IBERIA LINEAS AEREAS DE ESPANA, S.A. 

ROYAL JORDANIAN AIRLINES 

under 49 U.S.C. §§ 41308 and 41309 for 

approval of and antitrust immunity for 

alliance agreement 

Docket DOT-OST-2008-0252 

MOTION FOR LEAVE TO FILE AND REPLY 

OF VIRGIN ATLANTIC AIRWAYS 

INTRODUCTION AND MOTION 

On December 21, 2009, the U.S. Department of Justice ("DOJ") filed comments 

in this docket which expressed strong concerns about the competitive and consumer 

harm that would result from the approval of the alliance proposed by the Joint 

Applicants. On January 11, 2010, several parties, including the Joint Applicants, filed 

lengthy comments in response to the DOJ submission. Pursuant to Rule 6 of the DOT 

Rules of Practice,1 Virgin Atlantic hereby moves for leave to file this very brief Reply to 

correct certain factual allegations made by the Joint Applicants. 

As Virgin Atlantic will explain below, the Department must not accede to the Joint 

Applicants' demand that DOT approve their anticompetitive alliance because other 

dissimilar alliances already have received such approvals. This case is clearly 

1

 14C.F.R. Part 302. 
distinguishable from the earlier alliance cases2

 that the Department has reviewed. 

(Indeed, the fact that this alliance has foundered twice before serves only to underscore 

that point.) The record in this case is replete with support for the positions taken by the 

DOJ about the lack of access to London Heathrow, and the threat to competition posed 

by the Joint Application is equally well documented. Accordingly, Virgin Atlantic urges 

that the Joint Application be denied. 

DISCUSSION 

• DOT Should Give No Weight to Demands for Regulatory "Parity" 

The Joint Applicants insist that their application must be approved to maintain 

"parity" amongst the global alliances.3 This demand is meritless, and is at odds with the 

statute which authorizes DOT to grant ATI, and which requires DOT to make express 

findings based on the facts of each case before it.4 

Fundamental to any airline alliance review is the question whether the proposed 

alliance will inhibit competition in any relevant market.5 Consumers do not shop for 

"alliances," but instead base their travel decisions on the very specific options available 

to them for each desired destination. Despite this universally accepted standard, the 

Joint Applicants urge DOT to ignore severe threats posed by the loss of competition 

between BA and American on several key U.S.-London Heathrow overlap markets. 

Instead, they urge DOT to approve their request in order to preserve "regulatory parity" 

2

 For example, Air France-KLM and Star operate at less-constrained European hubs, which allow 

them to add both short-haul feed and long-haul trunk capacity and frequencies, oneworld, in 

contrast, absolutely cannot at its hub, London Heathrow. 

3

 See, e.g., Joint Applicants' Answer to the Department of Justice's Motion for Leave and 

Comments (Jan. 11, 2010) ("Joint Answer"), at 1-2. 

4

 Virgin Atlantic notes that United, Continental and ANA have applied for ATI for their proposed 

alliance agreement and transpacific joint venture. See Docket OST-2009-0350. If that alliance 

were approved by DOT, would oneworld concur with an assertion on the part of Delta and JAL 

that approval of their alliance must be approved in the interest of maintaining "parity" between the 

Japanese carriers? Given the public statements made by American thus far (see discussion 

below), Virgin Atlantic would strongly suspect not. 

5

 49 U.S.C. §§ 41308, 41309(b). 
between oneworld and the other global alliances.6

 The Joint Applicants refuse to 

acknowledge that their application is in no way analogous to its predecessors, and are in 

effect urging DOT to ignore the statutory mandate that requires each case to be judged 

on its own merits. 

Given that this Joint Application entails the virtual merger of the two largest 

players in the U.S.-London Heathrow market, with an unprecedented level of route 

overlaps, it is quite understandable why DOJ might be concerned about the ability of 

other carriers to enter into these markets, especially given the severe and persisting 

constraints on access to London Heathrow. 

As Virgin Atlantic has demonstrated, a grant of ATI would eliminate competition 

between the Joint Applicants in a whopping six U.S.-London Heathrow overlap routes, 

and would give the combined carriers a 62% share of all U.S.-London Heathrow 

passengers.7 Contrary to claims made by the Joint Applicants, these overlap markets 

are not at all analogous to overlap markets examined by the DOJ and DOT in prior 

alliance cases. The markets at issue in earlier cases are far smaller than the ones at 

issue here and do not involve airports with the massive infrastructure and slot 

constraints found at London Heathrow. Unlike the European hub airports involved in 

other immunized alliances such as Amsterdam, Frankfurt, Munich and Paris which have 

few or no constraints, Heathrow is full, and BA's own chief executive has repeatedly 

acknowledged that fact.8 

D

 See Note 3. 

7

 See Answer of Virgin Atlantic (May 19, 2009) ("Virgin Atlantic Answer"), at 37. 

8

 See "British Airways Walsh: Heathrow Full, More Slots Eyed," Wall Street Journal (Nov. 13, 

2009), at http://online.wsi.com/article/BT-CO-20091113-709704.htmI (alternatively available at 

http://www.dowiones.de/site/2009/11/british-airwavs-walsh-heathrow-full-more-slots-eved.html). 

Indeed, Mr. Walsh has stated that: "I think it's well recognized that Heathrow is full, and the 

opportunity to acquire additional slots, while not impossible, is difficult." See RBS Report Dated 

November 16, 2009, British Airways Q&A (Transcript of the Q&A session from the BA/lberia 

merger conference call of November 13, 2009), at 2. 
Moreover (and despite the contentions of the Joint Applicants), the unique 

geographic location of London Heathrow makes connecting services an ineffective form 

of possible competitive discipline at Heathrow, and arguments about the discipline that 

connecting services might offer at other airports are unpersuasive here.9 These 

fundamental truths about the U.S.-London Heathrow market remain as troubling today 

as they have proven to be in the other two attempts by the Joint Applicants to secure ATI 

for their alliance activities. 

This deal would bring about the de facto merger of the two largest incumbents in 

the U.S.-London Heathrow market, with the combined entity wielding a degree of market 

power no other airline or alliance could match. As Gerald Arpey, American's CEO, 

recently observed with respect to the proposed Delta/JAL alliance, which would result in 

lower market shares than those at issue here: 

"U]he whole design of open skies and immunity is not to allow the 

dominant carriers to partner and drive the less dominant carriers out of 

the market."10 

Virgin Atlantic could not agree more with this contention, and urges DOT to resist the 

pressure to approve this anticompetitive alliance for reasons not authorized by the 

applicable statute, and solely on the grounds that other less troublesome arrangements 

have received DOT approval. 

• Usable Heathrow Slots Are Both Scarce and Exorbitantly Expensive 

The Joint Applicants assert that access to London Heathrow is no longer 

problematic, and dispute the fact that slots at Heathrow that are usable for transatlantic 

service remain both extremely scarce and exorbitantly expensive. The primary 

9

 Indeed, according to a recent CAA survey, only 2% of U.S.-London Heathrow passengers travel 

on indirect routings via third countries. 

10

 "American Airlines, Partners May Increase $1.1 B Offer to JAL," Dallas Morning News (Dec. 17, 

2009), at http://www.dallasnews.eom/shareclcontent/clws/bus/industries/airlines/stories/121709dnbusaaial.9f70d2.html. 
"evidence" cited for their assertion is Virgin Atlantic's recent lease of three slot pairs to 

Aer Lingus.11 

As will be explained below, this short-term transaction is of no probative value 

whatsoever. The lease does not in any way alter the long-term fact that London 

Heathrow is full and will remain so for the foreseeable future. This move was borne of 

economic necessity, as Virgin Atlantic was required to temporarily cut capacity in 

response to the current severe recession. 

Indeed, if slots at London Heathrow were easily obtainable in either the short- or 

long-term (as the Joint Applicants posit in this Docket)12, Virgin Atlantic would simply 

have surrendered those slot pairs to the slot coordinator and sought new ones at a later 

date. Virgin Atlantic leased these slots to Aer Lingus on a short-term basis precisely 

because of their long-term scarcity and Virgin Atlantic's intent to return them to use as 

soon as economic conditions improve. (It is notable that only one of the three daily slot 

pairs at issue is suitable for competitive service on the overlap routes about which DOJ 

has expressed concerns.) This lease has not materially altered Virgin Atlantic's U.S.-

London Heathrow service pattern, as Virgin Atlantic will in Summer 2010 operate only 

one fewer daily London Heathrow-U.S. service than it did in Summer 2009. 

The larger issue, of course, is that Virgin Atlantic's prudent short-term response 

to the recession has no bearing whatever on the fact that there will be no new capacity 

at London Heathrow at any time in the foreseeable future. The implications of the 

Department's decision are of a long-term and enduring nature. Indeed, Willie Walsh 

expressed an interest in buying bmi's slots at London Heathrow not because he desired 

11

 See, e.g., Joint Answer, at 3. 

12

 As explained below, the Joint Applicants have squarely contradicted this claim in other fora. 
to use such slots now, but because of their longer-term strategic value.13

 Once BA and 

AA establish their stranglehold over London Heathrow, they will have an embedded 

advantage that no carrier or combination of carriers will be able to match, with new slots 

and capacity being all but impossible to obtain. Indeed, it was Mr. Walsh who put it best 

when he noted recently that "Heathrow is full."14 

Indeed, the claims in this docket that access to London Heathrow is not 

especially costly or difficult is directly undermined by BA's very recent offer to transfer 

slots at Heathrow to Japan Airlines, so that the carrier might mount a new service 

between London Heathrow and Tokyo's Haneda Airport. This offer is being held out as 

incentive to JAL to remain within the oneworld alliance, with the value of the deal at 

large being placed at approximately $200 million. Regardless of the precise value of the 

slot component of the overall package, this figure speaks volumes about how difficult it is 

to gain access to well-timed Heathrow slots. 

• New Entry on U.S.-London Heathrow Overlap Routes is Highly Unlikely 

The Joint Applicants have attempted to discount the concerns posed by DOJ about 

the loss of competition on the U.S.-London Heathrow overlap routes at issue in this 

case. For example, the Joint Applicants assert that the presence of alliance hubs on 

either or both ends of the route should not be viewed as a barrier to entry for competing 

carriers.15 Yet American blamed its withdrawal from the Miami-Frankfurt market on its 

diminished ability to compete against Lufthansa for connecting traffic once the 

United/Lufthansa alliance was approved, and despite the fact that American operates it 

13

 Commenting on a potential deal to purchase bmi, BA's CEO indicated that BA's interest in bmi 

was driven by its control of slots at Heathrow. "We want its slot positions," Walsh said. "BA Chief 

Still Expects oneworld Immunity To Pass," Travel Weekly (Nov. 9, 2009), at 

http://www.travelweekly.com/Europe/article3 ektid206040.aspx?rbp=1. 

14

 See Note 8. 

15

 See Joint Answer, at 25. 
own hub at Miami.16

 American made a similar claim about its Chicago-Frankfurt service, 

even in light of its hub at Chicago.17 

In addition to the flat contradiction noted above, the Joint Applicants attempt to paper 

over the threat to competition posed by their alliance with half-truths. For example, the 

Joint Applicants assert that Virgin Atlantic is not threatened by combination of American 

and BA in the Miami-London Heathrow market, which would be a hub-to-hub market if 

the alliance were approved.18 The Joint Applicants assert that Virgin's 27% share of the 

local market proves that it is a robust competitor.19 However, the Joint Applicants fail to 

address the fact that the London Heathrow-Miami route is characterized by high levels of 

connecting traffic.20 In a similar vein, the Joint Applicants posit that Delta might 

introduce a Boston-London Heathrow service, conveniently ignoring the fact that Delta 

dropped a Boston-London route just a few years ago. 

The Joint Applicants also misstate the competitive threat in the Chicago-London 

Heathrow market posed by a linkup between American and BA. Virgin Atlantic recently 

downgraded its operation to seasonal service, in part because of the difficulty associated 

with competing with three large hub carriers (American and United with hubs at Chicago, 

and BA with its hub at Heathrow). In the face of this large competitive challenge, the 

Joint Applicants posit that Virgin Atlantic might well restore its service to year-round 

16

 See Written Testimony of R.L. Crandall, Chairman and Chief Executive Office, AMR 

Corporation, before the Senate Judiciary Subcommittee on Antitrust (Mar. 19, 1998), at 2. 

17

 See Answer of American Airlines, Docket OST-1998-3552 (Mar. 11, 1998), at 6. These 

concerns also have been acknowledged by the Government Accountability Office. "Several 

carriers told us that it is unlikely that a new U.S. competitor would attempt nonstop service from 

Miami or Dallas, since no carrier besides American maintains a large enough network from either 

of those airports to provide critical feed traffic." GAO Testimony, T-RCED 98-131, "International 

Aviation Alliances and Their Influence on Airline marketing Practices," Testimony of John H. 

Anderson, Jr. (Mar. 19, 1998), at 13. 

18

 See Joint Answer, at 19. 

19

 Id. 

20 

See Figure 22, Virgin Atlantic Answer, at 56. 
status in order to better compete against BA and American.21

 To the contrary, if 

American and BA were to combine forces, the carriers would have fortress hubs at each 

end of the route, severely exacerbating Virgin Atlantic's existing competitive 

disadvantage. This would make the restoration of year-round service on the route at 

very best a remote prospect, and the complete withdrawal of this service (with its 

attendant threat to competition) a great and growing possibility. 

While the arguments made by the Joint Applicants about competition at Miami, 

Boston and Chicago severely distort the truth, the assertions made about competition in 

New York-London Heathrow markets are beyond credulity. With a combined 65% of 

frequencies in the JFK-London Heathrow market if ATI were granted,22 the Joint 

Applicants assert that they would not have any sort of market power in New York.23 The 

Joint Applicants also make much of the anecdotal new entry in New York-London 

markets, yet fail to meaningfully acknowledge that several of the carriers have gone out 

of business completely24 or operate unattractive or less than daily fifth-freedom services. 

With both New York JFK and London Heathrow now subject to severe slot constraints, 

the prospect any carrier's offering a timely and sufficient competitive response in that 

market is slim indeed. 

CONCLUSION 

What is most notable about this case is the stark dichotomy between what the 

Joint Applicants are saying on the record in this docket versus what they are saying in 

the press and in the marketplace. For example, BA and AA in this case claim that no 

21

 See Joint Answer, at 17-18. 

22

 See Figure 13, Virgin Atlantic Answer, at 41. 

23

 See Joint Answer, at 16. 

24

 MaxJet, Eos and Silverjet have ceased all operations. In fact, American entered the JFKLondon Stansted market in order to compete against Eos, and suspended its own operations 

shortly after Eos failed. 
remedies are required in order to preserve competition,25

 yet in anticipation of an 

alliance between JAL and Delta (an alliance that which would involve lower levels of 

market concentration than would the BA/AA combine), American Airlines' CFO Tom 

Horton stated last month that slot give-ups and route carve-out are insufficient remedies 

for an anticompetitive alliance.26 In fact, Virgin Atlantic notes a recent statement made 

outside of this docket by the CEO of American Airlines. Comparing the prospects of 

antitrust approval for JAL-AA versus a potential JAL-Delta tie-up, Mr. Arpey stated: 

"[T]he JAL-American Airlines team, which does not have overlapping flights, will readily 

receive antitrust immunity. However, there would be 'zero possibility' of a JAL-Delta 

team receiving approval, as the two carriers have more than a combined 60 percent 

share in U.S.-Japan flights."27 If American believes that the levels of market 

concentration on the Delta/JAL alliance are unacceptably high,28 then the Department 

surely must reject the linkup between American and BA, which involves even higher 

levels of market concentration and more route overlaps than those presented by the 

Delta/JAL case. 

25

 See, e.g., Joint Answer, at 8-10. 

26

 See "Tom Horton Argues American's Case in the Tug of War for Japan Airlines," Dallas 

Morning News (Dec. 2, 2009), at http://aviationbloq.dallasnews.com/archives/2009/12/tomhorton-arques-americans-ca.html. 

27

 "Investment, open skies make oneworld JAL's home: Arpey," Japan Times (Dec. 17, 2009), at 

http://search.iapantimes.co.ip/cgi-bin/nb20091217a1.html. 

28

 Virgin Atlantic takes no position on the Delta/JAL alliance. 
For the reasons set forth in DOJ's comments and elsewhere in the record, Virgin 

Atlantic respectfully urges the Department to deny the application. In the alternative, 

Virgin Atlantic requests that the Department impose the remedies recommended by both 

Virgin Atlantic and the DOJ. 

Respectfully submitted, 

M. Mosner 

Sophy Chen 

HOLLAND & KNIGHT LLP 

2099 Pennsylvania Avenue NW, Suite 100 

Washington, DC 20006-6801 

Phone:(202)419-2604 

Fax: (202) 955-5564 

Email: anita.mosner@hklaw.com 

Email: sophy.chen@hklaw.com 

Attorneys for 

VIRGIN ATLANTIC AIRWAYS LTD. 

10 
CERTIFICATE OF SERVICE 

I hereby certify that I have this date served the foregoing document on the persons 

identified below by causing a copy to be sent by electronic mail. 

anbird@fedex.com 

andrew.forman@cwt.com 

aserranzana@geclaw.com 

benjamin.slocum@usairways.com 

bill@mietuslaw.com 

bkeiner@crowell.com 

blabow@omm.com 

bob.kneisley@wnco.com 

bruce.rabinovitz@wilmerhale.com 

byerlyjr@state.gov 

carl.nelson@aa.com 

cdonley@ssd.com 

cgosain@steptoe.com 

cjsimpson@zsrlaw.com 

cwilson@omm.com 

david.heffernan@wilmerhale.com 

dfisher@kelleydrye.com 

dhainbach@ggh-airlaw.com 

diarmuid.ryan@hammonds.com 

dkirstein@yklaw.com 

donna.kooperstein@usdoj.gov 

dvaughan@kelleydrye.com 

dwight.moore@ustranscom.mil 

ebailey@wileyrein.com 

efaberman@wileyrein.com 

gmurphy@crowell.com 

howard_kass@usairways.com 

james.garzia@apgnet.com 

jashetaylor@gibsondunn.com 

jeff.ogar@aa.com 

jeffrey.manley@united.com 

jennifer.trock@pillsburylaw.com 

jhill@dlalaw.com 

jill.ptacek@usdoj.gov 

jim.ballough@faa.gov 

jrichardson@johnlrichardson.com 

julie.oettinger@united.com 

jyoung@yklaw.com 

karine.faden@freshfields.com 

kevin.montgomery@polaraircargo.com 

konstantinos.adamantopoulos@hammonds.com 

kquinn@pillsburylaw.com 

lachter@starpower.net 

leslie.abbott@wnco.com 

lhalloway@crowell.com 

libowd@sullcrom.com 

mamaila@airfrance.fr 

mchopra@jamhoff.com 

mcmillin@woa.com 

mgerchick@gerchickmurphy.com 

mgoldman@sgbdc.com 

mholland@condonlaw.com 

mroller@rollerbauer.com 

mrosia@crowell.com 

msinick@ssd.com 

npeterson@wileyrein.com 

paul.jasinski@ba.com 

paul.yde@freshfields.com 

peter.irvine@dot.gov 

pmurphy@gerchickmurphy.com 

pmurphy@lopmurphy.com 

prrizzi@hhlaw.com 

pruden@asta.org 

rbkeiner@crowell.com 

rclayman@geclaw.com 

recohn@hhlaw.com 

rick.rule@cwt.com 

robert.land@jetblue.com 

rsilverberg@sgbdc.com 

russell.bailey@alpa.org 

sametta.c.barnett@delta.com 

sami.sarelius@finnair.fi 

sascha.vanderbellen@delta.com 

scott.mcclain@delta.com 

sllunsford@fedex.com 

thomas.bolling@coair.com 

tmuris@omm.com 

todd.homan@dot.gov 

wkaras@steptoe.com 

Sophy Chen 

January 20, 2010 

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