BEFORE THE 

U.S. DEPARTMENT OF TRANSPORTATION 

WASHINGTON, D.C. 

__________________________________________ 

 ) 

Joint Application of ) 

 ) 

AMERICAN AIRLINES, INC. ) 

BRITISH AIRWAYS PLC ) 

FINNAIR OYJ ) 

IBERIA LÍNEAS AÉREAS DE ESPAÑA, S.A. ) Docket No. OST-2008-0252 

ROYAL JORDANIAN AIRLINES ) 

 ) 

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

of and antitrust immunity for alliance agreements ) 

__________________________________________ ) 

SUPPLEMENTAL COMMENTS OF THE AMERICAN SOCIETY OF TRAVEL 

AGENTS AND THE INTERACTIVE TRAVEL SERVICES ASSOCIATION

Communications with respect to this document should be directed to: 

Paul Ruden 

Senior Vice President, 

Legal and Industry Affairs. 

American Society of Travel Agents 

1101 King Street 

Alexandria, VA 22314 

Arthur Sackler 

Executive Director 

Interactive Travel Services Association 

1156 15th St., NW 

Ste. 900 

Washington, DC 20005 

Kenneth P. Quinn 

Jennifer E. Trock 

Timothy C. Gerheim 

PILLSBURY WINTHROP 

 SHAW PITTMAN LLP 

2300 N Street NW 

Washington, DC 20037 

Phone: (202) 663-8000 

Fax: (202) 663-8007 

Email: kquinn@pillsburylaw.com 

jennifer.trock@pillsburylaw.com 

timothy.gerheim@pillsburylaw.com 

January 11, 2010
1

BEFORE THE 

U.S. DEPARTMENT OF TRANSPORTATION 

WASHINGTON, D.C. 

__________________________________________ 

 ) 

Joint Application of ) 

 ) 

AMERICAN AIRLINES, INC. ) 

BRITISH AIRWAYS PLC ) 

FINNAIR OYJ ) 

IBERIA LÍNEAS AÉREAS DE ESPAÑA, S.A. ) Docket No. OST-2008-0252 

ROYAL JORDANIAN AIRLINES ) 

 ) 

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

of and antitrust immunity for alliance agreements ) 

__________________________________________ ) 

SUPPLEMENTAL COMMENTS OF THE AMERICAN SOCIETY OF TRAVEL 

AGENTS AND THE INTERACTIVE TRAVEL SERVICES ASSOCIATION

In response to the Department of Transportation’s (“Department”) Order establishing a 

Supplemental Comment Period,1 the American Society of Travel Agents (“ASTA”) and the 

Interactive Travel Services Association (“ITSA”) hereby provide further comments to the 

application of the oneworld carriers (the “Joint Applicants”) for antitrust immunity (“ATI”).2 In 

its comments, the Department of Justice (“DOJ”)3

 indicated that an unrestricted grant of 

immunity “is likely to result in significant competitive harm in six transatlantic markets,”4

 where 

nonstop fares on these “highly concentrated” routes already are “28% higher on average than 

connecting fares,”5

 with the likely result of a further “increase up to 15% under the proposed 

 

1

 Order, Order 2009-12-16, Docket OST-2008-0252 (Dec. 22, 2009). 

2

 Joint Application of American Airlines, British Airways, Finnair, Iberia, Royal Jordanian, OST-2008-0252 (Aug. 

14, 2008) (“Joint Application”). The Joint Applicants are seeking authority to operate a three-way immunized 

joint venture among American, British Airways, and Iberia. 3

 Comments of the Department of Justice, OST-2008-0252 (Dec. 21, 2008) (“DOJ Comments”). 

4

 DOJ Comments at 7. 5

 Id. at 9, 11. 
2

agreements.”6

 A grant of ATI that includes dealings with travel distributors is likely to cause 

significant consumer harm in two important ways: first, by ultimately reducing travel 

distributors’ bargaining power and marginalizing independent distribution through commission 

reductions and withholding inventory, and second by increasing fares paid by consumers as the 

number and effectiveness of independent travel distributors are reduced and consumers’ ability 

to find and compare competing airline service offerings becomes increasingly limited. 

ASTA and ITSA agree that given this risk of significant competitive harm, any grant of 

immunity to the oneworld applicants should be limited to protect competition. Without taking 

any position on DOJ’s recommended slot divestitures and carve outs, ASTA and ITSA 

respectfully suggest that, particularly in light of DOJ’s extensive empirical analyses concluding 

that broad ATI is likely to preserve and enhance the joint applicants’ market power, that the 

Department carve out from any ATI grant any form of cooperation by the Joint Applicants in 

their dealings with independent travel distributors.7

I. Permitting Competitor Collaboration Over Travel Distribution Is Not Necessary to 

Achieve the Applicants’ Ostensible Consumer Benefits

The Joint Applicants bear the heavy burden of proving that ATI will bring sufficient 

benefits to outweigh the competitive harm that it would cause.8

 The DOJ comments and 

economic analyses seriously call into question whether any grant of ATI is necessary for the 

Joint Applicants to achieve the benefits they claim.9

 

A. The oneworld Alliance Competes Effectively with Other Alliances Without ATI

The Joint Applicants can and do compete effectively against Star and SkyTeam without 

 

6

 Id. at 14 7

 Answer of the American Society of Travel Agents and the Interactive Travel Services Association, OST-2008-

0252 (May 18, 2009) (“ITSA/ASTA Answer”). 

8

 Joint Application to Amend Order 2007-2-16, Show Cause Order, Order 2009-4-5, at 6 (Apr. 7, 2009). 9

 DOJ Comments at 22. 
3

immunity.10 As DOJ found, corporate travel managers are far more concerned about “wellexecuted service to specific cities at convenient times and competitive prices,” not “level playing 

fields,” “metal neutrality,” or “double marginalization.”11 Consumers and travel professionals 

want lower fares and more service to trigger more travel. Simply put, antitrust immunity and 

alliance status largely are not factors in consumer choice—lower fares and more frequencies on 

nonstop flights matter the most.12 

Stated alternatively, immunized alliances compete with both immunized and nonimmunized alliances in a single market; ATI for the Joint Applicants would not increase 

interalliance competition in any real market.13 Because the Joint Applicants’ transatlantic 

service via London is complementary to the other alliances’ and vital to travel agents and their 

customers, its members should be able to provide effective competition without immunized joint 

dealings with travel agents.14 

B. In a Competitive Market Without ATI, Travel Agents Already Provide the 

Applicants’ Claimed Efficiency Benefits

Immunizing the Joint Applicants is not necessary to provide consumers efficient 

coordination between carriers. As DOJ argues, American and British Airways continue to 

increase their coordination without ATI,15 and as ITSA and ASTA previously stated, “even 

without joint dealings with corporate customers, [American and British Airways] should be able 

to provide effective competition to Star and Skyteam.”16 The Joint Applicants utterly fail to 

 

10 Id. at 27. 11 Id. at 28. 12 See id. at 27-28 nn. 81 and 83. 

13 See ITSA/ASTA Answer at 23 (refuting the Joint Applicants’ argument that ATI would improve “transatlantic 

immunized alliance competition”). 

14 Id at 32. 

15 DOJ Comments at 28-29. 16 ITSA/ASTA Answer at 32. 
4

show how efficiency requires immunized joint dealing with travel agents. Travel agents already 

improve efficiency in interline travel by “making the disparate parts of the air transportation 

system work together.”17 Replacing that service with the supposed efficiency improvements 

brought by ATI would not be a net benefit for consumers.18 In addition, the Joint Applicants do 

not make it clear that immunizing joint dealing with travel agents would benefit anyone other 

than the Joint Applicants.19 By contrast, travel distributors “present the public with service 

opportunities that are competitive with any coordinated service that immunized alliances can 

deliver.”20 ATI with travel distributors is not needed to achieve a product competitive with 

SkyTeam and Star.21

In sum, granting the oneworld carriers ATI allowing them to deal collectively with 

independent travel distributors would not provide sufficient benefits to outweigh the 

anticompetitive harm it would cause to both the travel distributors and consumers. 

II. Increasing Joint Applicants’ Market Power Would Increase Transatlantic Fares and

Competitive Harm 

DOJ’s data22 echo ASTA and ITSA’s,23 showing that increasing the Joint Applicants’ 

market power by immunizing the oneworld alliance would increase transatlantic fares, and that 

reducing the number of competitors in a market increases market power. Allowing the Joint 

 

17 ITSA/ASTA Answer at 32. 

18 See id. (“Independent travel agents present the public with service opportunities that are competitive with any 

coordinated service that immunized alliances can deliver.”). 

19 Id. at 33 (citing Joint Applicants’ Answer to ITSA/ASTA’s Motion to Require Additional Documents and Data, 

OST-2008-0252, at 4 (Dec. 3, 2008) (the supposed benefit of ATI for corporate deals is “enabling the alliance to 

identify opportunities to increase revenue by offering deeper discounts in exchange for more of a customer’s 

business”)). 

20 Id at 32. 21 Id. 22 DOJ Comments at 14-15. Increasing concentration in an already concentrated market is especially harmful. 

Reducing the number of market participants from four to three increases fares by 6.6%, and reducing them further 

from three to two further increases fares by 15%. See also ITSA/ASTA Answer at 18-19 (transatlantic air travel is 

a concentrated market). 

23 ITSA/ASTA Answer at 19. Increasing market concentration as a result of DOT’s granting ATI has resulted in 

market power and higher fares. 
5

Applicants to deal with travel agents as an immunized bloc wielding market power would harm 

travel distributors, and ultimately consumers, by reducing travel distributors’ bargaining power, 

giving the alliance the ability to marginalize independent distribution through commission 

reductions and withholding inventory.24 

ITSA and ASTA agree with DOJ that the Joint Applicants would enjoy particularly 

strong market power in transatlantic travel to London and especially Heathrow,25 a particularly 

important market for business travelers, who are major travel agent customers.26 This increased 

market power would allow the alliance to demand more favorable terms, delivery of more traffic 

to its system, and lower commissions.27 In addition to the anticompetitive harm to independent 

travel distributors, reducing the number and effectiveness of travel agents would also increase 

fares for consumers by reducing their ability to find and compare competing airline service 

offerings.28 The Department should carve distributors out from any grant of immunity to limit 

the demonstrated fare increases that would result. 

III. ATI Would Not Provide Reduced Double Marginalization Benefits Claimed by Joint 

Applicants

ITSA and ASTA support DOJ’s conclusion that the requested ATI would not provide the 

benefit of reduced double marginalization that the Joint Applicants rely upon.29 The DOJ’s new 

independent study concludes that double marginalization is no longer a problem in airline 

alliances, regardless of ATI.30 That study improves upon older studies cited by the Joint 

 

24 Id. at 5. 

25 DOJ Comments at 18-22. DOJ also provides additional evidence that the difficulty of slot acquisition at 

Heathrow limits entry which could otherwise discipline oneworld’s market power. 

26 See id. at 18-19 (relative to other London airports, many travel managers prefer to contract with a carrier that 

serves Heathrow). 27 ITSA/ASTA Answer at 17. 

28 Id. at 29-30. 

29 DOJ Comments at 26-27. 30 Id. (citing DOJ’s Appendix A. “Our evidence, which shows that immunized alliance fares are higher than non-
6

Applicants by using more recent data.31 DOJ concludes from more recent alliance conduct that 

“airlines participating in alliances – whether immunized or not – have learned to manage their 

inventories and pricing activities to provide more competitive fares when forming a connection 

with another airline.”32 

Sophisticated alliance coordination, regardless of ATI, eliminates double marginalization. 

In particular, immunizing the Joint Applicants in their dealings with travel agents would provide 

no benefit. In the absence of ATI travel agents “can produce for consumers the same or higher 

quality of service as immunized joint venturers” at competitive prices.33 Immunized alliances 

cannot offer the promised fare reduction over what travel agents provide in a competitive market; 

the supposed benefit related to double marginalization does not exist. 

WHEREFORE, given their failure to meet the burden of showing benefits outweigh 

harm, ASTA and ITSA respectfully request that the Department exclude any form of cooperation 

or coordination among the Joint Applicants regarding the distribution of air travel through any 

independent travel distributor, in any grant of ATI to the Joint Applicants. 

 immunized ones, does not support the parties’ claims on immunity grants and double marginalization.” DOJ 

Comments, Appendix A at 4.) 

31 Id. at 26. (DOJ cites and refutes previous studies, including one cited by the Joint Applicants to suggest that ATI 

allows fare reductions that are impossible without coordination allowed by immunity. Joint Application at 32 n. 

15.) 

32 Id. 33 ITSA/ASTA Answer at 9 n. 18 (citing several studies finding that travel agents reduce transaction costs and thereby 

reduce fares, as well as giving consumers more flexibility and control in selecting travel). 
7

 Respectfully submitted, 

Kenneth P. Quinn 

Jennifer E. Trock 

Timothy C. Gerheim 

PILLSBURY WINTHROP 

 SHAW PITTMAN LLP 

2300 N Street, N.W. 

Washington, D.C. 20037 

Tel: (202) 663-8000 

Fax: (202) 663-8007 

E-mail: kquinn@pillsburylaw.com 

jennifer.trock@pillsburylaw.com 

timothy.gerheim@pillsburylaw.com 

Counsel for ITSA and ASTA 

January 11, 2010