Order 2011-5-8

Served: May 10, 2011 

UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY

WASHINGTON, D.C.

Issued by the Department of Transportation

on the 10th Day of May, 2011

Docket DOT-OST-2009-0155

SHOW CAUSE ORDER

I. SUMMARY

By this Order, the Department tentatively approves the request of Delta Air Lines and 

affiliates of the Virgin Blue Group, together referred to as the “Joint Applicants” or “applicants,” 

to form an alliance and coordinate flights between the United States and Australia. 

Initially, the Department tentatively rejected the request because the applicants did not meet 

the high standard necessary to justify a grant of antitrust immunity. By Order 2010-9-4, issued 

on September 8, 2010, we tentatively determined that the applicants had failed to show that the 

proposed alliance would produce substantial public benefits and that antitrust immunity would be 

required to obtain those benefits. Under those circumstances, we were not convinced that the 

alliance partners had the ability and incentive to pass on the potential benefits of immunized 

cooperation to consumers. 

Order 2010-9-4 focused on two deficiencies in the applicants’ request. First, the Department 

had identified barriers to integration between the applicants that would delay the realization of 

public benefits or, in the worst case, prevent any benefits from being achieved at all. The 

barriers to integration included a planned joint venture with unclear business processes and 

limited scope. Without more certainty in the cooperation plans and a stronger showing of public 

benefits that would be proximate to the grant of immunity, we were not willing to take the 

Joint Application of:

DELTA AIR LINES, INC.

VIRGIN BLUE AIRLINES PTY LTD

VIRGIN BLUE INTERNATIONAL AIRLINES

 PTY LTD D/B/A V AUSTRALIA

PACIFIC BLUE AIRLINES (NZ) LTD

PACIFIC BLUE AIRLINES (AUST) PTY LTD

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

and antitrust immunity for alliance agreements
2

extraordinary step of exempting the applicants from the antitrust laws and forgoing the usual 

benefits of competition. Second, we expressed concern that the conditions in the U.S.-Australia 

market were in a state of flux that made it difficult to analyze the likely effects of the proposed 

alliance.1 Without more and better information about how the proposed alliance would function

in the market, we had reason to believe that a grant of immunity would primarily benefit two 

very new competitors in the market – namely, the applicants – and not, as in past cases, enhance 

competition generally and enable the proposed alliance to achieve efficiencies and deliver 

benefits that would not otherwise be possible.2

To address the concerns expressed in Order 2010-9-4, the applicants made substantial

changes to their alliance plans and provided new information for the record. By doing so, we 

tentatively find that the applicants have effectively submitted a substantially different application 

– one that we tentatively find to meet the high standard necessary to obtain antitrust immunity. 

To address the barriers-to-integration issue, the applicants clarified that the Virgin Blue Group 

will operate with one management structure and a unified reservations system that is compatible 

with Delta’s system and capable of supporting the highly technical joint venture cooperation 

necessary to deliver the consumer benefits associated with a highly integrated, immunized 

alliance.

3

 We tentatively find that the harmonization of the systems and business processes 

enables the applicants to achieve their stated goal of “metal neutrality” in the joint venture,

4

 

which, in turn, will offer consumers a more seamless network on which to travel. 

Moreover, the applicants have expanded the scope of their joint venture to include more 

points beyond the gateway cities. We tentatively find that the expansion and optimization of 

their joint network will make the alliance more competitive and allow it to deliver substantial 

benefits at inception. While the applicants may have always intended to expand and optimize the 

network, a premature grant of antitrust immunity would not have provided the same incentive to 

pass on the benefits of immunized cooperation to consumers, and those benefits might not have 

materialized. With the proposed changes in the alliance arrangements, however, the applicants 

have made every effort to achieve efficiency-enhancing integration at the outset. As a result, we 

tentatively find that they appear to show that a grant of antitrust immunity would enhance 

competition in the near term by improving the overall structure and functioning of their

marketing alliance, to the benefit of consumers. This showing lies at the heart our public 

benefits analysis in antitrust immunity cases.

Lastly, the applicants have submitted market data that reflect more favorable conditions for 

immunized cooperation than those that existed last year. While it is too soon to draw 

conclusions about the structural changes that have occurred, and continue to occur, in the U.S.-

Australia market, the applicants address this issue with a remedy. The applicants have 

 1 Show Cause Order 2010-9-4, pp.10-12 (September 8, 2010). 2 Show Cause Order 2010-9-4, p.12 (September 8, 2010). 3 See Joint Applicants’ Response to Show Cause Order 2010-9-4, pp. 19-20, 24-32 (October 13, 2010). On May 4, 

2011, Virgin Blue and its associate airlines, V Australia and Pacific Blue, were rebranded as Virgin Australia. 

4 “Metal neutrality” is an industry term meaning that the partners in an alliance are indifferent as to which of them 

operates the “metal,” or aircraft, when they market and sell their services on a joint network. Without a metalneutral sales environment, the partners have an economic incentive to book passengers on their own aircraft in order 

to retain a larger share of the revenue for themselves, which may not be in the best interest of the consumer or the 

alliance as a whole.
3

committed on the record to maintain their existing capacity in the market for two years, to 

provide consumers with the assurance of some of the benefits from the cooperation in the 

immediate future. 

In sum, the applicants have substantially revised their application to address the concerns 

expressed by the Department in Order 2010-9-4. Accordingly, we are now proposing to approve 

the revised alliance and make a grant of antitrust immunity, subject to conditions. We direct 

interested parties to show cause why we should not make final the tentative findings and 

conclusions of this Order. Interested parties have 14 calendar days to submit answers, and seven

business days to submit replies. 

II. BACKGROUND

The applicants filed a joint application on July 9, 2009, requesting approval of, and a grant of

antitrust immunity for, commercial alliance agreements related to their service in the U.S.-

Australia market and other behind and beyond points in North America and the South Pacific.

5

 

Following the Department’s initial review of the proposed transaction, we issued Show 

Cause Order 2010-9-4 on September 8, 2010, tentatively denying the joint applicants’ request. 

Our tentative decision was based on the applicants’ failure to show that the proposed alliance 

would deliver sufficient public benefits to justify a grant of antitrust immunity and our 

contention that the application was submitted before the applicants had developed any significant 

commercial relationship. Additionally, the Department tentatively found that a recent structural 

shift in the U.S.-Australia market made it difficult to ascertain whether the alliance would be in 

the public interest. 

After requesting a three-week extension to the original comment period,6 the applicants 

submitted their Response to Order 2010-9-4 on October 13, 2010.7 They focused on the 

Department’s concerns about the applicants’ ability to deliver public benefits, and proposed 

additional changes to their agreements to that effect. On November 19, 2010, the Department 

issued an Interim Order finding that further documentation was necessary to enable to 

Department to evaluate the proposed changes fully and fairly.

8

 

On January 31, 2011, the applicants responded to the Interim Order with additional 

information, as well as a confidential submission of executed copies of a Mutual Capacity 

Coordination Agreement and an amendment to their Joint Venture Framework Agreement.

9

 5 Joint Application at 5 (July 9, 2009). In their July 9, 2009 filing, the applicants sought approval of, and antitrust 

immunity for, the following agreements: (i) Bilateral alliance cooperation agreements between Delta, on the one 

hand, and Virgin Blue, V Australia, Pacific Blue Airlines (NZ), and Pacific Blue Airlines (Aust), on the other hand; 

(ii) A multilateral alliance coordination agreement among the Joint Applicants; (iii) A multilateral joint venture 

agreement among the Joint Applicants; and (iv) Any existing and future implementing agreements in furtherance of 

the foregoing agreements and any transaction undertaken pursuant to any of the foregoing agreements.

The 

applicants subsequently placed public versions of these documents in the record on April 15, 

6 Motion for an Extension of Time (September 8, 2010).

7 Joint Applicants’ Response to Show Cause Order 2010-9-4 (October 13, 2010). 8 Interim Order 2010-11-22 at 2 (November 19, 2010). 9 Joint Applicants’ Response to Interim Order 2010-11-22 (January 31, 2011).
4

2011.

10 On April 18, the parties submitted a letter to the record indicating that the Virgin Blue 

Group had updated its reservation system to allow for fully automated codesharing across the 

Delta and Virgin Blue Group networks.11

Through their response to both Order 2010-9-4 and the Department’s Interim Order, the 

applicants presented new information as well as material changes to their joint venture plans.

Specifically, the applicants’ submissions have attempted to address three fundamental concerns

of the Department: that conditions in the U.S.-Australia market were not ripe for a grant of 

immunity; that the applicants did not sufficiently lay out plans to create a robust codesharing 

network; and that barriers to integration among the Virgin Blue carriers would hinder the 

delivery of public benefits. Taken together, these amendments essentially amount to a new 

application for immunity.

To address the Department’s concerns about uncertainty arising from flux in the U.S.-

Australia market, the applicants offered to hold transpacific capacity at current levels for two 

years to address concerns that the market is unstable and not ripe for a grant of antitrust 

immunity. According to the applicants’ Mutual Capacity Commitment Agreement, Delta would 

maintain seven weekly peak-season and six weekly off-peak Boeing 777 departures between the 

contiguous United States and Australia, and V Australia would maintain 14 weekly peak-season 

and 11 weekly off-peak Boeing 777 departures between the two countries. The peak and offpeak schedules will each be run for six months out of the year and Delta and V Australia are 

permitted ten and twenty annual ad hoc cancellations, respectively. 

As another attempt to address current market uncertainty, the applicants provided, in their 

response to our Order 2010-9-4, an additional year of updated passenger and fare data, which 

they claim indicates market stability. In their follow-up response to the Interim Order, the 

applicants submitted confidential internal traffic and fare data, along with confidential Market 

Information Data Tapes (MIDT), through the end of 2010.12 The parties contend that seat 

capacity has been largely constant for the past year and a half and that the market is no longer in 

flux. Additionally, the applicants pointed to stable booking shares since July 2009, following a 

period of shifting shares immediately after Delta and V Australia introduced service.

13 They 

argue that these steady booking shares further show a market where participants would respond 

competitively to the joint venture.

To address the Department’s concerns about the potential lack of a robust codesharing 

network, the applicants modified their Joint Venture Framework Agreement by including 

revenue from third-country points in Canada, Mexico, and New Zealand in their revenue-sharing 

agreement.14

 10 Letter from Alexander Van der Bellen, Managing Director and Associate General Counsel for Delta, to Dorothy 

Beard, Chief of DOT Dockets (April 15, 2011).

 In their response to our Interim Order, the applicants provided an executed copy of 

the amendment to their Joint Venture Framework Agreement. Additionally, the applicants have 

11 Letter from Alexander Van der Bellen, Managing Director and Associate General Counsel for Delta, to Dorothy 

Beard, Chief of DOT Dockets (April 18, 2011).

12 Joint Applicants’ Response to Interim Order 2010-11-22 at 13 (January 31, 2011). 13 Joint Applicants’ Response to Interim Order 2010-11-22 at 15 (January 31, 2011). 14 Letter from Alexander Van der Bellen, Managing Director and Associate General Counsel for Delta, to Dorothy 

Beard, Chief of DOT Dockets (April 15, 2011).
5

secured the foreign regulatory approvals necessary to ensure that the entire scope of the 

immunized joint venture can be implemented promptly.15

The applicants also provided additional information on the management of the Virgin Blue 

Group to address our concerns about potential barriers to integration that would prevent full 

cooperation between the parties. Specifically, the applicants provided clarification on the 

operational structure of the Virgin Blue Group and added that the Delta flights would receive 

“highly preferred, metal neutral access” to Virgin Blue’s domestic Australian and regional 

Tasman Sea markets.16 Furthermore, in response to our concerns that the disparate reservations 

systems of carriers within the Virgin Blue Group would hinder the delivery of consumer 

benefits, the applicants provided the Department with updates on their efforts to move to a 

harmonized system. On April 20, 2011, the applicants notified the Department that the Virgin 

Blue Group had successfully upgraded its reservation system on April 17, 2011, creating 

compatible systems and procedures to support automated codesharing between Delta and all 

carriers of the Virgin Blue Group.17

Numerous individuals and organizations have submitted comments on this matter. The Delta 

Master Executive Council (Delta MEC) of the Air Line Pilots Association (ALPA) submitted 

comments on March 25, 2010 urging the Department to promptly approve the application.

18 

Following our tentative decision and the parties’ response, the Delta MEC submitted additional 

comments on October 22, 2010, arguing that the applicants had sufficiently addressed the 

Department’s concerns in their response.19 Additionally, the Delta MEC contends that the joint 

venture would help to bolster competition in the U.S.-Australia market by allowing Delta to 

compete more effectively with Star and oneworld partners in the market and would not pose any 

harmful effects on competition.

Alaska Airlines and Horizon Air submitted comments on October 22, 2010, arguing in 

support of a grant of immunity for the joint venture on the grounds that their codesharing and 

marketing alliance with Delta would help bolster the public benefits and flow traffic generated 

by the joint venture. 

Two airport authorities – the Port of Seattle and Los Angeles World Airports – submitted 

comments on October 26, 2010 in support of the alliance, arguing that antitrust immunity would 

make the applicants more viable competitors in the U.S.-Australia market, to the benefit of 

consumers in their respective metropolitan areas.20

Hubert Horan submitted comments on Order 2010-9-4 on October 12, 2010, arguing that the 

Department’s findings should be rejected because it failed to accept the applicants’ benefit 

claims at face value and therefore imposed a benefits standard that was different from those used

 15 Joint Applicants’ Response to Interim Order 2010-11-22 at 10-11 (January 31, 2011). 16 Joint Applicants’ Response to Show Cause Order 2010-9-4 at 4 (October 13, 2010). 17 Letter from Alexander Van der Bellen, Managing Director and Associate General Counsel for Delta, to Dorothy 

Beard, Chief of DOT Dockets (April 18, 2011) (updating the successful upgrade to Navitaire New Skies version 

3.3.1).

18 Answer of Delta Master Executive Council (posted March 29, 2010).

19 Answer of Delta Master Executive Council (posted October 26, 2010). 20 DOT-OST-2009-0155-0040 and 0042 (October 26, 2010).
6

in other immunity cases.

21 In supplemental comments addressing the applicants’ response to the 

Show Cause Order, Mr. Horan questioned the methodological accuracy of an economic study 

submitted on behalf of the applicants, as well as the Department’s and other parties’ ability to 

accurately evaluate the study within the timeframe set forth by Order 2010-9-4. 

III. DECISIONAL STANDARDS

Under 49 U.S.C §§ 41308-41309, we engage in a two-step analysis of foreign air 

transportation agreements submitted for our approval. We first determine under § 41309 

whether the agreements are adverse to the public interest because they would substantially 

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

are necessary to meet a serious transportation need or to achieve important public benefits. If we 

make that finding, we approve the agreements, provided that those public benefits cannot be met 

or achieved by reasonably available and materially less anticompetitive alternatives. U.S. 

foreign policy goals may be a key element of these benefits. A party opposing approval has the 

burden of showing that the agreement or request would substantially reduce or eliminate 

competition and that less anticompetitive alternatives are available. On the other hand, the party 

seeking approval of the agreement or request must establish the transportation need or public 

benefits.

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

there are sufficient public benefits to grant immunity under 49 U.S.C. § 41308 (the “public 

benefits analysis”). Under § 41308(b), Congress has given the Department the authority to 

exempt airlines from the antitrust laws to the extent necessary to allow a proposed transaction to 

proceed, provided that the exemption is required by the public interest. While the public interest 

determination under both sections 41309(b) and 41308(b) entails a comparison of anticompetitive effects and public benefits, the standard in section 41308(b) (“required by” rather 

than “not adverse to”) is higher.22 If we determine that the transaction would substantially 

reduce or eliminate competition, yet meets the test for approval under section 41309(b)(1), then 

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

The intended commercial effects of the applicants’ cooperation are similar to those resulting 

from a merger. As part of our overall analysis, we apply the Clayton Act test, which is used to 

predict the competitive effects of a proposed merger.23

 21 Comments on the Show Cause Order, Hubert Horan, October 12, 2010.

 The Clayton Act test requires us to 

consider whether a grant of antitrust immunity is likely to substantially reduce competition and 

facilitate the exercise of market power – that is, to allow the applicants to profitably charge 

supra-competitive prices or reduce service or quality below competitive levels in any relevant 

market. To determine whether an alliance is likely to create or enhance market power, we 

primarily consider whether the alliance would significantly increase market concentration, 

whether the alliance causes potential competitive harm, and whether new entry into the market 

22 See, e.g., Star Alliance, Docket OST-2008-0234, Show Cause Order 2009-4-5 at 18 (April 7, 2009), quoting

Northwest/KLM, Order 93-1-1, at 11 (January 11, 1993). 23 See Acquisition of Northwest/Wings Holdings, Inc., Show Cause Order 92-11-27, at 13 (November 16, 1992); 

SkyTeam II, Show Cause Order 2008-4-17, at 5 (April 9, 2008).
7

would be timely, likely, and sufficient either to deter or to counteract the potential competitive 

harm. 

IV. TENTATIVE DECISION

We are tentatively deciding to approve the application and make a grant of immunity, subject 

to conditions. Our tentative decision is based on two reasons: that the applicants have made 

substantial changes to their alliance plans in recent months and can now meet the high standard 

set out in and explained by Order 2010-9-4, and that new data submitted by the applicants and 

analyzed by the Department suggest that conditions in the U.S.-Australia market are now 

suitable for immunized cooperation. 

First, we are reaching this tentative decision because the applicants have made substantial 

changes to their alliance plans and agreements in response to the tentative decision in Order 

2010-9-4. They have effectively submitted a new application. In addition to the capacity 

commitments, they have expanded the scope of their joint venture, made their business processes 

more compatible and efficient, and clarified how the Virgin Blue Group will be managed. These 

changes allow for a thorough competitive and public benefits analysis, which is summarized and 

presented below.

Second, in Order 2010-9-4, we had expressed concerns that the market was in a state of flux, 

which could prevent the public benefits of the alliance from being realized. As the global 

recession unfolded in 2008, fares and passenger revenue in many intercontinental markets 

declined as passenger demand plummeted. While most intercontinental markets experienced 

reduced capacity to some degree, the U.S.-Australia market encountered a nearly 20 percent 

boost in capacity and two new carriers entered this ultra-long haul market, which had long been a 

nonstop duopoly between United Airlines and Qantas. 

The combination of the global recession and the substantial increase in capacity resulted in 

exceptionally lower fares and passenger revenue in the U.S.-Australia market. Average fares 

between the U.S. and Australia, according to Bureau of Transportation Statistics Origin and 

Destination (O&D) data, plummeted by nearly 50 percent from mid 2008 to mid 2009. Total

O&D revenue in the U.S.-Australia market dropped over 38 percent from second quarter 2008 to 

second quarter 2009.24 In the shifting structure of the U.S.-Australia market, combined with the 

global recession, the Department was uncertain that the market, over the long term, could sustain 

the added capacity. Therefore, a grant of antitrust immunity could have provided the applicants 

with extra incentive and ability to reduce capacity in the market to put upward pressure on fares.

In response to Order 2010-9-4 and 2010-11-22, the applicants pointed to new evidence that 

the increased capacity, due largely to their entry, had remained steady for nearly 18 months. 

Fares and passenger revenue in the market had stabilized and had begun to increase. The new 

data on the record show that, by the second quarter 2010, total O&D revenue in the U.S.-

Australia market had rebounded to levels less than five percent below total revenue during the 

second quarter 2008. Additionally, MIDT and O&D data provided by the applicants through the 

end of 2010 show that passenger and fare levels are continuing to recover and that the long-time 

 24 DOT O&D Survey, 2008, 2009, 1H2010.
8

incumbent carriers – United, Qantas, and Air New Zealand – still command a significant 

premium in the market.25 

The fact that there are concrete signs of robust recovery with the additional capacity suggests 

that this market was ripe for additional competition. In light of the traffic, fare, and capacity 

trends between the U.S. and Australia over the past several quarters, the Department is

tentatively satisfied that the volatility in the market has diminished. To further address this issue, 

the applicants have offered to maintain capacity in the market for at least two years. The 

applicants’ Mutual Capacity Commitment Agreement is intended to eliminate any concern that 

Delta or Virgin Blue Group would reduce their nonstop U.S.-Australia service level as a result of 

antitrust immunity.26

Given the degree of flux that occurred in the market in a relatively short period of time, we 

tentatively believe that these capacity commitments are important to justify a grant of antitrust 

immunity at this time. Therefore, we tentatively determine that the applicants should abide by 

the commitments they have voluntarily made and fly at least the proposed minimum service 

levels. To be clear, we propose to make the capacity commitments a condition of obtaining 

antitrust immunity.

A. COMPETITIVE ANALYSIS

Under § 41309(b), we must determine whether the alliance agreements submitted by the 

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

competition. In this section, we conduct an analysis of the changes in competition that would 

result from approving the application. We conduct three levels of analysis for relevant 

competitive markets: a broad network level, a country-pair level, and a city-pair level. This is

the first time that we have conducted a market analysis of this transaction. In Order 2010-9-4, 

we assumed arguendo that the alliance would not substantially reduce competition in order to 

focus on the public benefits issues in the case.27

So, proceeding de novo, it should be noted that this transaction differs from recent alliance 

transactions that we have evaluated. While recent alliances in transatlantic and transpacific 

markets involved long-haul markets connecting two major regions with considerable traffic 

flows between them (North America-Europe and North America-Asia), the applicants in this 

case compete in the relatively thin, ultra-long haul U.S.-Australia market, which has relatively 

less traffic and can only be served on a nonstop basis by certain aircraft models, primarily from 

the U.S. West Coast. Additionally, unlike the transatlantic and transpacific markets that have 

long been served by numerous airlines and alliances, the nonstop U.S.-Australia market had 

been, for many years, a duopoly. It is only recently that Delta and V Australia entered the 

market and thereby materially increased the number of competitors and changed the market 

dynamics. 

 25 DOT O&D Survey, 2008, 2009, 1H2010; Applicants’ MIDT confidential data, Motion for Confidential Treatment 

(posted February 1, 2011).

26 Joint Applicants’ Response to Interim Order 2010-11-22 at 2 (January 31, 2011). 27 See Show Cause Order 2010-9-4, pp.10-12 (September 8, 2010).
9

Moreover, this case involves only one overlapping route – Los Angeles-Sydney, which 

will go from four to three competitors. As a result, the application does not raise the same 

complex issues at the city-pair level that we have addressed in recent transatlantic and 

transpacific cases, in which there were a greater number of nonstop overlap routes affecting 

more passengers. 

1. NETWORK LEVEL

The proposed transaction involves a large global airline, Delta, whose network reaches

hundreds of points around the world, and an Australian airline group that primarily serves the 

domestic Australian market and selected international destinations. The core focus of the joint 

venture will be traffic over the Pacific Ocean between the contiguous United States and the 

Australia region.

28 Accordingly, our analysis will focus on evaluating the competitive effects of 

the proposed transactions in this part of the transpacific market. 

As a general matter, historical onboard data suggest that granting antitrust immunity would 

result in relative competitive balance in the contiguous U.S.-Australia/New Zealand market. 

Onboard passenger share data for the calendar year 2010 for nonstop service between the 

contiguous U.S. and Australia/New Zealand indicate that an immunized Delta/V Australia would 

have only a marginally larger market share than United’s standalone share (see Chart 1). The 

two major competitors in the market – the Star Alliance, composed of an immunized United and 

Air New Zealand,29 and oneworld’s Qantas – will still each possess about twice the market 

share, in terms of passengers carried, of Delta and V Australia combined.30 

 28 We exclude Hawaii and other U.S. territories in the Pacific from the analysis because: (1) Delta, United and V 

Australia do not serve the Hawaii-Australia market; (2) Most passengers traveling between Australia/New Zealand 

and North America do not transit through Hawaii, as Hawaii is primarily a destination point; and (3) The substantial 

capacity between Hawaii and North America would inaccurately skew the relevant aspects of the analysis by 

including traffic that does not have a competitive impact on mainland U.S.-Australia flights.

29 See United/Air New Zealand Case, Docket DOT-OST-1999-6680, Final Order 2001-4-2 (April 3, 2001). 30 The Department’s evaluation of the MIDT data submitted by the applicants on a confidential basis supports our 

findings drawn from the T-100 traffic data concerning network-level competition and the prospects for more 

balanced shares vis-à-vis United/Air New Zealand and Qantas. Passengers flying solely on Air Canada from 

Vancouver are not included in the analysis because the DOT does not have access to that onboard data. In addition, 

while there are many passengers traveling between the U.S. and other South Pacific destinations such as Indonesia, 

Fiji, and Tahiti, the vast majority of those passengers do not connect through Australia or New Zealand to reach

these destinations. However, passengers traveling between North America and Australia/New Zealand often visit 

both destinations in either direction and can utilize multiple itinerary options.
10

Chart 1:

Share of Passengers in Contiguous U.S.-Australia/New Zealand Nonstop Market31

As shown in Chart 1, above, after the transaction there would still be three major competitive 

entities on the network level with a significant share of passengers. This indicates a generally 

competitive market. The combination of Delta and V Australia would create a new competitive 

entity carrying about one-fifth of the total passengers. Additionally, United, Air New Zealand,

and Qantas would each have a significant passenger share in the market. 

2. COUNTRY-PAIR LEVEL 

In this particular case, a country-pair evaluation is warranted because the number of 

passengers traveling between the contiguous U.S. and Australia is several times larger than the 

number traveling between the U.S. and New Zealand, or any other South Pacific market. In 

addition, the proposed alliance primarily affects competition in the U.S.-Australia market. While 

neither V Australia nor any other U.S. carrier currently serves the U.S.-New Zealand market, Air 

New Zealand and Qantas service between the U.S. and New Zealand may provide competitive 

discipline in the U.S.-Australia market. Although United and Air New Zealand do have antitrust 

immunity,32 they have not formed a joint venture and are only cooperating in the region as Star 

Alliance codeshare partners. Because of these circumstances, the Department believes it is also 

necessary to examine the contiguous U.S.-Australia market in isolation to determine if there are 

any competitive concerns, as Star’s capacity in this market differs significantly from its capacity 

at the network level when U.S.-New Zealand services are also considered. 

Through an examination of historical onboard traffic in the U.S.-Australia market, we find 

that there is little, if any, reason for competitive concern. Qantas is a relatively stronger 

competitor compared to its position at the network level, as its historical onboard share is nearly 

 31 DOT T100 data for YE4Q2010. 32See United/Air New Zealand Case, Docket DOT-OST-1999-6680, Final Order 2001-4-2 (April 3, 2001). The 

United/Air New Zealand antitrust immunity is subject to carve-outs for time-sensitive travelers in the Los AngelesSydney and Los Angeles-Auckland markets, as both carriers served both markets at the time immunity was granted. 

However, on a nonstop basis, United no longer serves Los Angeles-Auckland and Air New Zealand no longer serves 

Los Angeles-Sydney. 

Airline/Group

Delta

V Australia

40.2%

Air New Zealand

Qantas

Continguous U.S.-Australia/New Zealand

6.7%

20.8%

14.1%

18.1%

39.0%

20.8%

40.2%

United
11

half of all U.S.-Australia passengers in 2010. United carries nearly a quarter of the traffic, while 

Delta and V Australia combined carry just over a quarter of the onboard passengers (See Chart 

2). 

Chart 2:

Share of Passengers in Contiguous U.S.-Australia Nonstop Market33

As shown in Chart 2, after the transaction, the immunized Delta/V Australia joint venture 

would carry approximately 28 percent of onboard passengers in this market. While it would 

surpass United in terms of onboard passengers carried, it would still have a relatively equitable 

share with the Star carrier. The market would ultimately have three competitors, with United 

and Delta/V Australia each separately carrying about a quarter of the contiguous U.S.-Australia 

passengers, and Qantas carrying about half of the onboard passengers. We tentatively find that 

the three competitive entities will have sufficient size and scope to ensure robust competition in 

the market. 

3. CITY-PAIR LEVEL 

Overlapping city-pair markets provide the greatest potential for competitive harm because a 

grant of immunity effectively eliminates a competitor from the market, potentially giving one 

airline or alliance the ability to raise fares to supra-competitive levels. The Department must 

determine, in this case, whether immunity would give the applicants the ability to sustainably 

increase prices or decrease capacity in the overlap market. In addition to T-100 traffic data, the 

Department analyzed other data sources to gain a more complete view of this city-pair market

and verified the claims made by the applicants in their public filings.34

The proposed joint venture would affect competition in one nonstop city-pair market, Los 

Angeles-Sydney. After the transaction, the number of competitors in the market would be 

reduced from four to three carriers, which is a shift we tentatively find would not substantially 

reduce competition under the circumstances. Even though Delta/V Australia combined would 

 33 DOT T100 data for YE4Q2010. 34 In addition to T-100 traffic data, the Department analyzed internal fare data and MIDT data submitted by the 

carriers, on a confidential basis, in response to our Interim Order. These data corroborate our findings from our 

review of publicly available data outlined in this section.

Airline/Group

Delta

V Australia

United

Air New Zealand

Contiguous U.S.-Australia

9.0%

28.3%

19.2%

24.6%

24.6% -

Qantas 47.2% 47.2%
12

have just over one-third of the onboard market and surpass United’s share, Qantas would still 

have the largest presence in the market (see Chart 3). Additionally, by carrying more than 20 

percent of passengers in the market, each of the competitive entities would have a sufficient 

stake in the market to impart competitive discipline on the others.

Chart 3:

Share of Passengers in Los Angeles-Sydney Nonstop Market35

An immunized Delta/V Australia would therefore face significant competition from the Star 

and oneworld incumbents, and would likewise impart increased competitive discipline on its 

rivals. Each of the carriers in this market has proven, through its high quality of service and 

commitment to the market, that it has the ability and incentive to provide robust competition over 

the long term. The Department tentatively finds that approving the application would not lead to 

a significant loss in competition.

4. SUMMARY OF COMPETITIVE ANALYSIS

As explained above, we tentatively find that the proposed transaction is unlikely to have any 

significant deleterious effect on competition in the U.S.-Australia market. Three carrier groups, 

each with its own alliance, in a long-haul market, are likely to continue to operate in a 

competitive environment that benefits the traveling and shipping public. Where it does occur, 

the loss of competition from four to three carriers will not cause a substantial reduction in 

competition.

Additionally, we tentatively believe that a grant of antitrust immunity would likely improve 

the quality of competition, providing further benefits to passengers in the market. Approving the 

application would create a stronger competitive force that would put additional competitive 

pressure on incumbents to deliver new and improved consumer benefits. In summary, we 

tentatively see no basis upon which the applicants could, as a result of this transaction, impose 

and sustain supra-competitive fares or reduce service levels below competitive levels. These 

factors support the tentative conclusion that the proposed alliance is not adverse to the public 

interest and should therefore be approved under § 41309.

 35 DOT T100 data for YE4Q2010.

Airline/Group Los Angeles-Sydney

Delta 16.5%

36.9%

V Australia 20.4%

Qantas 39.9% 39.9%

United 23.3%

23.3%

Air New Zealand -
13

B. PUBLIC BENEFITS ANALYSIS

Having tentatively approved the alliance under § 41309, we must now determine whether it 

is appropriate to make a grant of antitrust immunity under § 41308. As we have stated in past 

cases, we are only willing to grant immunity if the parties to agreements would not otherwise go 

forward without it, and if we find that the public interest requires that we grant antitrust 

immunity. Our public interest examination focuses on the public benefits that will be created by 

the proposed alliance and the extent to which a grant of antitrust immunity is required to realize 

those benefits. 

Generally speaking, a grant of antitrust immunity may enable airlines to achieve merger-like 

synergies, boost capacity, and deliver lower prices for some itineraries. These benefits are 

possible because immunity may align economic incentives affecting separate carriers and allow 

for the cooperating carriers to increase economies of density. The extent to which consumers

obtain these benefits depends on the competitive nature of the markets affected by immunity, as 

well as other specific facts and circumstances, including the carriers’ individual abilities to 

deliver the benefits to passengers.

In the competitive analysis above, we tentatively determined that a grant of immunity would 

not significantly diminish competition on the network, country-pair, or city-pair level. These 

tentative findings indicate that market dynamics would give the joint venture ample incentive to 

pass benefits from their cooperation along to passengers. We must, therefore, determine here the 

nature and extent of the benefits to be provided to consumers, as well as the individual ability 

and economic incentive of the applicants to deliver those benefits under their revised agreements.

Our September 8, 2010 Show Cause Order identified barriers to integration – specifically the 

separate management of V Australia (relative to the other Virgin Blue carriers) and 

incompatibilities between the two reservation systems – that would prevent the joint venture 

from delivering optimal schedules and pricing on a seamless network. Since the issuance of the

initial Show Cause Order, the parties have clarified that all the Virgin Blue Group carriers are 

taking steps to operate under one management structure, which will better facilitate the seamless 

connections and network benefits that were described in the initial application.36 In addition, 

they have made the technical changes necessary to harmonize their reservations systems to 

ensure that they can market and operate a joint network.37 While we were originally concerned 

with potential barriers within the Virgin Blue Group that could prevent a seamless network, we 

are tentatively convinced by the new evidence in the record that V Australia has the incentive 

and ability to provide complete access to the Virgin Blue network for Delta customers.38

Additionally, the applicants have expanded the scope of their revenue cooperation, including 

connecting markets in Canada, Mexico, and New Zealand, under their revenue-sharing 

arrangement. We tentatively find that this change will encourage each of the applicants to boost 

 36 Joint Applicants’ Response to Show Cause Order 2010-9-4 at 19-20 (October 13, 2010). 37 Joint Applicants’ Response to Show Cause Order 2010-9-4 at 30-32 (October 13, 2010); Joint Applicants’ 

Response to Interim Order 2010-11-22 at 2 (January 31, 2011). 38 Joint Applicants’ Response to Show Cause Order 2010-9-4 at 4 (October 13, 2010).
14

capacity and improve service, providing consumers with a broader seamless network that will 

make the alliance more competitive for traffic flows between North America and the Australia 

region. 

In the initial Show Cause Order, we expressed concerns that the applicants’ new and limited 

commercial relationship would jeopardize their ability to deliver consumer benefits within a 

reasonable period of time.39 As stated in the initial Show Cause Order, it is our policy to ensure 

that applicants for antitrust immunity are in a position to deliver substantial consumer benefits at 

the time the immunity is requested.40 The policy is necessary to maximize the incentives of the 

carriers to develop and realize the efficiencies of close cooperation and to pass along those 

efficiencies to consumers in the form of increased capacity, lower prices, or improved quality of 

service. 

Since our tentative decision, the parties have developed the systems and capabilities to better 

facilitate the joint network that they propose in their application. These efforts, undertaken over 

many months, are likely to produce substantial public benefits in terms of new online 

connections and a broader network, and these benefits will now be available in close proximity 

to the grant of antitrust immunity. We tentatively believe it is likely that passengers in the 

broader North America-Australia regional markets will benefit from seamless travel between 

more points and a greater portfolio of destinations on a single carrier group. 

The same factors that allow the parties to deliver a more seamless network also position them 

to provide many consumers with better access to lower fares by allowing customers to build 

itineraries using the lowest fares available. The carriers’ revenue-sharing model encourages 

them to set prices more accurately based on customer demand, rather than each imposing their 

own markups on different route segments.41 Additionally, the carriers may achieve cost 

synergies – arising from joint purchasing and other economies of scale – that could be passed 

along to consumers in a competitive marketplace.

Better access to lower fares is a consumer benefit that would not have been achieved under 

the applicants’ original alliance proposal. Incompatibilities in booking systems, at least initially, 

would have made it more difficult for customers to access more preferred pricing, and less and 

weaker cooperation on behind/beyond routes would have limited the incentive to remove 

multiple markups and to establish more seamless pricing. With the applicants’ more developed 

commercial relationship and changes to their agreements, however, we tentatively find that these 

fare benefits are likely to accrue to consumers with a grant of immunity.

In their original application, the applicants also stated that a key benefit of their joint venture 

would be stronger inter-alliance competition with Star and oneworld in the U.S.-Australia 

market.42

 39 Show Cause Order 2010-9-4 at 5-6 (September 8, 2010).

 While we do consider stronger inter-alliance competition as a potential public benefit, 

40 Show Cause Order 2010-9-4 at 2 (September 8, 2010); Show Cause Order 2005-12-12 at 34 (December 22, 2005). 41 This refers to the elimination of double marginalization, which occurs when two producers in a supply chain each 

charge a separate markup and thus impose a negative externality on the other entity’s demand. A joint revenue 

model that is disciplined by adequate competition incentivizes the firms to eliminate these double markups, 

potentially lowering prices for the consumer.

42 Joint Application for Approval of and Antitrust Immunity for Alliance Agreements, at 15-16 (July 9, 2009).
15

this notion is predicated on the idea that a newly immunized competitor would provide viable 

competition with its rivals. Under the original scope and structure of the alliance, there were 

insufficient commercial links to ensure that the joint venture would be a more effective 

competitor than the existing sum of its parts. Thus, a grant of antitrust immunity under those 

circumstances would likely not have bolstered inter-alliance competition as much as it will with 

the revised joint venture agreement.

With additional evidence and substantial changes in the commercial arrangements, we are

now tentatively satisfied that an immunized Delta and Virgin Blue Group would represent a 

stronger competitive force that would increase competition in the U.S.-Australia market, with 

fare benefits for the consumer. Additionally, stronger inter-alliance competition may give rise to 

quality of service improvements. As Delta and V Australia jointly compete against the members 

of Star and oneworld in the market, they will have the incentive to harmonize their products to 

the extent possible and provide a better customer experience.

Based on our review of the applicants’ amendments to their agreements as well as additional 

evidence, we tentatively find that the proposed joint venture would lead to substantial public 

benefits – and that those potential benefits are sufficient to justify a grant of immunity. We also 

tentatively find that a grant of antitrust immunity is required by the public interest and that the 

benefits from the proposed alliance could not be realized absent a grant of immunity.

In their original application filed July 9, 2009, the applicants stated that they would “not 

proceed with the joint activities contemplated by the Alliance Agreements without a grant of 

immunity from the threat of costly and burdensome private antitrust litigation.” 43 While we 

were not convinced by this argument under the original application, we are now tentatively 

convinced, in light of the significantly deeper integration proposed by the applicants, that they 

would not proceed absent a grant of antitrust immunity. We tentatively conclude that a grant of 

immunity is, therefore, required to realize the full public benefits from the proposed alliance 

agreements.

V. TENTATIVE CONCLUSION

The factors analyzed above outline the rationale for our tentative approval of Delta and 

Virgin Blue’s modified application to form an immunized alliance. As mentioned in the 

introduction, the Department is charged with ensuring that a proposed immunized alliance is able 

to generate substantial public benefits not otherwise obtainable. That has been made possible by 

the applicants’ decision to submit a substantially revised application, with changes to their 

alliance agreements as well as new evidence and commitments specifically designed to address 

the concerns expressed in the September 10, 2010 show-cause order. 

Based upon the revisions to the application, we are able to sufficiently evaluate the 

competitive impact of the joint venture and the likely public benefits. We tentatively find that 

the applicants meet the high standard necessary to obtain antitrust immunity. Therefore, we 

tentatively conclude that the alliance should be approved and that immunity should be granted.

 43 See Joint Application at p. 29 (July 9, 2009). 
16

VI. TENTATIVE CONDITIONS

In this section, we summarize and explain the tentative conditions and remedies to be applied 

to our grant of immunity to the applicants. 

A. IMPLEMENTATION OF THE JOINT VENTURE

We tentatively find that it is in the public interest to require the applicants to implement their 

joint venture within 18 months or lose the antitrust immunity. The purpose of this condition is to 

ensure that the public benefits of the alliance are realized in a prompt fashion. We therefore 

tentatively require that the applicants submit evidence that their joint venture has been 

implemented in order to retain the antitrust immunity. If, within 18 months of the issuance of a 

final order, an applicant has not submitted (1) verified statements attesting to the full 

implementation of its joint venture and (2) a copy of its executed agreement, the antitrust 

immunity granted to an applicants’ proposed alliance will automatically expire.

B. CAPACITY COMMITMENTS

We tentatively find that a two-year capacity commitment, as detailed in this Show Cause 

Order, is necessary to ensure robust public benefits in a market that has recently experienced 

severe flux in fares and capacity. These commitments are memorialized in the Amended and 

Restated Capacity Commitments Agreements submitted April 15, 2011.44 Delta’s annual 

capacity commitment will be met if the airline operates at least 656 annual transpacific segments 

(U.S. mainland to points in Australia) and Virgin Blue’s capacity commitment will be met if the 

carrier operates at least 1260 annual transpacific segments (Australia to points in the U.S. 

mainland). The applicants will certify their annual compliance, and provide adequate data and 

explanation to the Department, within 30 days of the 12-month and 24-month anniversary dates 

of the Department’s Final Order. 

C. ANNUAL REPORTING

The competitive issues associated with the proposed alliance are novel. We tentatively find 

that it is necessary for the applicants to report to the Department concerning commercial 

developments in their alliance and the degree to which the public benefits envisioned in the 

application are being realized. As we have in recent decisions, we are proposing annual 

reports.45 The reports should focus on progress made toward achieving the alliance’s stated 

goals, specific actions taken to implement each of the alliance agreements (including especially 

joint venture agreements), present or future planned cooperation among the alliance partners in 

all core airline functions, and a discussion of the public benefits that are being realized.

 44 Letter from Alexander Van der Bellen, Managing Director and Associate General Counsel for Delta, to Dorothy 

Beard, Chief of DOT Dockets (April 15, 2011).

45See Star Final Order 2009-7-10, at 26 (July 10, 2009); oneworld Final Order 2010-7-8, at 15 (July 20, 2010) 
17

D. O&D SURVEY DATA REPORTING

For many years, we have required foreign carriers to submit traffic data as a condition of 

obtaining immunity from U.S. antitrust laws. Those carriers participate in the Department’s 

Origin-Destination Survey of Airline Passenger Traffic (“O&D Survey”), which requires U.S. 

carriers to submit traffic data in markets they serve singularly or jointly with foreign airlines. 

Without foreign carrier participation in this effort, we would receive no detailed market 

information for passengers traveling to or from the United States when their entire trip is on 

foreign airlines, except for T-100 data for nonstop and single-plane markets.46 The absence of 

such foreign carrier data severely handicaps our ability to evaluate the competitive effects of 

alliances. 

As in previous cases,47 we have tentatively decided to require the Virgin Blue Group to 

report full-itinerary O&D Survey information for all passenger itineraries that include a United 

States point. This duty encompasses all traffic to third countries in which the itinerary includes a 

U.S. point and is a new requirement for the Virgin Blue Group. 

To prevent this reporting requirement from unfairly harming the foreign applicants’

competitive positions, we tentatively decide to grant confidentiality to the O&D Survey reports 

and special reports on codeshare passengers. Currently, we grant confidential treatment to all 

international Origin-Destination data. We will provide confidential treatment for these data 

because of the potentially damaging competitive impact on U.S. airlines and the potential 

adverse effect upon the public interest that would result from unilateral disclosure of these 

data.48 

Our regulation, 14 C.F.R. Part 241, section 19-7(d)(1), provides for disclosure of 

international O&D Survey data to air carriers directly participating in and contributing to the 

O&D Survey. While we have tentatively found it appropriate to direct the foreign carrier 

applicants in this proceeding to provide certain limited O&D Survey data, they are not air 

carriers within the meaning of Part 241. The regulation, 14 C.F.R. Part 241, Section 03, defines 

an air carrier as “[a]ny citizen of the United States who undertakes, whether directly or indirectly 

or by a lease or any other arrangement, to engage in air transportation.” The Virgin Blue Group 

would have no access to the data filed by U.S. air carriers. Therefore, we will keep submissions 

confidential while maintaining the current restriction on access to U.S. air carrier O&D Survey 

data by foreign air carriers. 

E. WITHDRAWAL FROM IATA TARIFF COORDINATION

 46 Data covering the operations of foreign airlines that are similar to the information collected in the O&D Survey 

are generally not available to the Department, to U.S. airlines, or to other U.S. interests.

47 See Star Final Order 2009-7-10, at 29-30 (July 10, 2009); oneworld Final Order 2010-7-8, at 24 (July 20, 2010). 48 We treat the foreign airlines’ O&D data as confidential, do not allow U.S. airlines any access to the data, and do 

not allow foreign airlines any access to U.S. airline O&D Survey data. We use these data only for internal analytical 

purposes. 
18

As we have found in earlier decisions, it is contrary to the public interest to permit 

immunized alliances to participate in certain price-related coordination that is already immunized 

within IATA tariff coordination. We therefore tentatively decide to condition our grant of 

antitrust immunity by requiring the applicants to withdraw, or to remain withdrawn, from 

participation in any IATA tariff activities that affect or discuss any proposed through fares, rates 

or charges applicable between the United States and any countries whose airline(s) have been or 

are subsequently granted antitrust immunity by the Department for participation in similar 

alliances. Such countries include the homelands of the applicants.

49 We tentatively find that this 

condition is in the public interest for the same reasons stated in previous orders.50 We note, 

however, that the Department has specifically revoked antitrust immunity for tariff coordination 

in the U.S.-Australia market.51

F. CRS ISSUES

Consistent with recent decisions, we are tentatively deciding not to propose any conditions 

regarding the management of Computer Reservations Systems (“CRSs”).52 Any coordination 

between the applicants concerning the operation of separate businesses, such as CRSs, would not 

be transactions specifically approved or necessarily contemplated by our orders in this 

proceeding. While the applicants, individually or collectively, may maintain an interest in a 

CRS, the grant of immunity in this Order thus does not extend to their management of those 

interests.53 On the other hand, the applicants’ alliance relationships will likely require the 

coordination of the presentation and sale of the airlines’ own services in the CRSs and each 

airline’s operation of its internal reservations systems. Those activities will necessarily be 

covered by a grant of antitrust immunity.

G. OPERATION UNDER A COMMON NAME

Because implementation of the applicants’ respective joint business agreements could raise 

important consumer issues and “holding out” questions, if Delta and the Virgin Blue Group

choose to operate under a common name or use “common brands,” they must seek separate 

 49 This condition currently applies to prices in markets that are subject to our prior antitrust immunity orders. Those 

markets are U.S.-Netherlands, U.S.-Germany (Order 96-5-27 at 17), U.S.-Denmark/ Norway/ Sweden (Order 96-11-

1 at 23), U.S.-Austria (Order 2001-1-19 at 16), U.S.-Chile (Order 99-9-9 at 21), U.S.-Iceland (Order 2000-10-13 at 

16), U.S.-Panama (Order 2001-5-1 at 11), U.S.-New Zealand (Order 2001-4-2 at 3), U.S.-Czech Republic/ France/ 

Italy (Order 2002-1-6 at 7), U.S.-Republic of Korea (Order 2002-6-18 at 14; Order 2003-5-18 at 12), U.S.-Finland 

(Order 2002-7-39 at 10), U.S.-Belgium (Order 2004-4-10 at 12), U.S.-Jordan (Order 2005-1-23 at 13), U.S.-Peru 

(Order 2005-10-8), U.S.-Poland/ Portugal/ Switzerland/ Canada (Order 2007-2-6), U.S.-United Kingdom (Order 

2007-9-12), U.S.-Finland/Jordan/Spain (Order 2010-7-8), and U.S.-Japan (Order 2010-10-4). Also, by letter dated 

May 8, 1996, Northwest and KLM indicated their willingness to limit voluntarily their participation in IATA 

(Dockets DOT-OST-96-1116 and DOT-OST-95-618). 50 See oneworld, Docket DOT-OST-2008-0252, Final Order 2010-7-8 (July 20, 2010). 51 See IATA Proceeding, Docket DOT-OST-2006-25307, Order 2007-3-23 (March 30, 2007). 52 See oneworld, Docket DOT-OST-2008-0252, Final Order 2010-7-8, at 15 (July 20, 2010). 53 While any antitrust immunity granted in this proceeding would not cover the activities of any system in which one 

of the applicants has an interest, we do, of course, have the authority under 49 U.S.C. § 41712 to prohibit any system 

operating in the United States from engaging in unfair or deceptive practices or unfair methods of competition. 429 

F.3d 1113 (D.C. Cir. 2005). We also have the authority to take action against conduct by a foreign system or a 

foreign airline that unreasonably discriminates against a U.S. system. 49 U.S.C. § 41310(g).
19

approval from the Department prior to such operations. For example, it is Department policy to 

consider the use of a single air carrier designator code by two or more airlines to be unfair and 

deceptive, unless the airlines give reasonable and timely notice to passengers of the actual 

operator of the aircraft.54

ACCORDINGLY:

1. We direct all interested persons to show cause why we should not issue an order 

making final the tentative findings and conclusions discussed herein. Objections or 

comments to our tentative findings and conclusions shall be due no later than 14 

calendar days from the service date of this Order, and answers to objections or 

comments shall be due no later than 7 calendar days thereafter.

2. We tentatively approve and grant antitrust immunity to the Alliance Agreements55

between and among Delta Air Lines, Inc. (including its direct and indirect wholly 

owned subsidiaries), Virgin Blue Airlines Pty Ltd, Virgin Blue International Airlines 

Pty Ltd d/b/a V Australia, Pacific Blue Airlines (NZ) Ltd, and Pacific Blue Airlines 

(Aust) Pty Ltd (all parties together referred to as the “Joint Applicants”), insofar as 

such agreements relate to foreign air transportation. Subject to the other terms and 

conditions described in the ordering paragraphs below, the approval and grant of 

antitrust immunity shall remain in effect indefinitely, subject to Ordering Paragraph 

10, provided that the Joint Applicants: 

a. Submit for prior approval subsequent subsidiary agreements implementing their 

Alliance Agreements;

56

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

this Order; and

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

common name or use common brands.

3. We tentatively determine that, as a condition of obtaining the authority proposed to be 

granted by a final order, that the Joint Applicants must operate at least their existing 

capacity in the U.S.-Australia market, as defined and measured by paragraph 4 of the 

 54 See 14 C.F.R. § 399.82. 55 The Alliance Agreements shall mean those agreements referred to on page 2, footnote 3 of the Joint Application, 

submitted on July 9, 2009, and identified by name in the Index of Joint Agreements submitted along with the 

confidential version of the application. See also Letter from Alexander van der Bellen, Counsel for Delta, to 

Dorothy Beard, Chief of DOT Dockets (April 15, 2011) (placing certain agreements on the public record).

56 Regarding this requirement, we do not expect the applicants to provide the Department with minor technical 

understandings that are necessary to implement fully their day-to-day operations but that have no additional 

substantive significance. We do, however, expect and direct them to provide the Department with unredacted copies 

of all contractual instruments that implement or materially alter, modify, or amend the cooperation agreements, joint 

ventures, or confidentiality/antitrust guidelines. All documents shall be submitted to the Director of the Office of 

Aviation Analysis.
20

Amended and Restated Mutual Capacity Commitment Agreement dated April 15, 

2011, for a period of at least two years from the date of issuance of a final order in 

this case.57

4. We tentatively direct the Joint Applicants to file the following evidence within 10 

days of the date on which they execute and implement their Joint Venture Agreement: 

a. Verified statement(s) attesting that the Joint Venture Agreement has been 

executed and implemented, submitted in Docket DOT-OST-2009-0155; and

b. A copy of the complete executed Joint Venture Agreement with appendices, 

submitted to the Director of the Office of Aviation Analysis.

We tentatively determine that, unless the Joint Applicants make the filings described 

in this Ordering Paragraph within eighteen months of the issuance of a final order, the 

authority granted will expire and the grant of antitrust immunity will no longer be 

effective.

5. We tentatively direct the Joint Applicants to submit annual progress reports beginning 

one year from the date of issuance of this Order, and continuing each year thereafter 

while their respective Alliance Agreements are effective.

58

6. We tentatively direct the Joint Applicants to withdraw, or to remain withdrawn, from 

participation in any International Air Transport Association tariff coordination 

activities that discuss any proposed through fares, rates, or charges applicable 

between the United States and any countries whose airlines have been or are 

subsequently granted antitrust immunity, or renewal thereof, to participate in similar 

alliance activities with a U.S. airline(s).

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

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

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

with the scope and purpose of the condition, as previously described.

8. We tentatively direct Virgin Blue Airlines Pty Ltd, Virgin Blue International Airlines 

Pty Ltd d/b/a V Australia, Pacific Blue Airlines (NZ) Ltd, and Pacific Blue Airlines 

 57 During the term of the Amended and Restated Mutual Capacity Commitment Agreement, we expect the Joint 

Applicants to provide a full accounting of their compliance with the capacity commitments as part of the annual 

progress reports described in Ordering Paragraph 5. As explained in Section VI of this Order, we further request 

that the Joint Applicants provide the Office of Aviation Analysis with an informal update on status of compliance 

within 30 days of the sixth and eighteen month anniversary date of issuance of a final order in this case. 58 We expect the Joint Applicants to deliver the progress report to the Director of the Office of Aviation Analysis by 

the close of business on the anniversary date of this order. If that date falls on a weekend or federal holiday, the 

Joint Applicants may deliver the report by the close of business on the following business day.
21

(Aust) Pty Ltd to report full-itinerary Origin-Destination Survey of Airline Passenger 

Traffic on a quarterly basis for all passenger itineraries that include a U.S. point.59

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

date.

10. We tentatively determine that we may amend, modify, or revoke this authority at any 

time without hearing.

11. We will serve this Order on all parties on the service list in this docket. 

By:

SUSAN L. KURLAND

Assistant Secretary for Aviation

and International Affairs

(SEAL)

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

 59 We expect applicants to report the O&D data beginning with the first full quarter following the date of the 

issuance of a final order. Detailed instructions are available from the Department’s Office of Airline Information at 

the Bureau of Transportation Statistics. We treat the foreign airlines’ O&D data as confidential, do not allow U.S. 

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

use these data only for internal analytical purposes.