ANSWER OF HUBERT HORAN

IN REPLY TO DOT ORDER 2010.6.12

US.JAPAN ALLIANCE CASE

8 July 2010

DOCKET DOT-OST-2o1 0-0059

Background

On 23 December 2009 United, Continental and All Nippon submitted an application for antitrust

immunityl that in combination with the subsequent ATI application of American Airlines and Japan

Air Lines2 would substantially reduce competition in the US-Japan market and the overall

transpacific market. Airlines applying to the Department of Transportation for antitrust immunity

(ATl) must meet the strict section 41308 "required by the public interest" standard and prove that

immunity "is necessary...to achieve important public benefits" that "cannot be achieved by

reasonably available alternatives that are materially less anticompetitive."3 The burden of proof for

pubf ic benefits rests with the applicantsa, and the Horizontal Merger Guidelines defines the

evidentiary standards that efficiency claims used to meet the public benefits test must meet: "[the

applicantsl must substantiate efficiency claims so that the Agency can verify by reasonable means

the likelihood and magnitude of each asserted efficiency, how and when each would be achieved

(and any costs of doing so) how each would enhance the merged firm's ability and incentive to

compete, and why each would be merger-specific. Efficiency claims will not be considered if they

are vague or speculative or otherwise cannot be verified by reasonable means."s

The public benefits claimed by the two ATI applications rest upon the assertions that immunized

alliance networks can produce more and higher: quality scheduled service than airlines operating

the same capacity without immunity could, that airlines with immunity will offer more aggregate

capacity than they would in the absence of immunity, and despite the direct reduction in the

number of major competitors, the level of competition (when measured at level of individual

markets) will actually increase. Of all the people who are not working on behalf of the ATI

applicants, I am one of the most qualified individuals in the industry to evaluate these claims. Inot

only developed the original Northwest-KlM alliance network (which served as the template for all

subsequent North Atlantic alliance networks) but also managed Northwest's large Tokyo-based

transpacific network. I have been directly involved with a wide range of other international alliance

networks, and am highly familiar with the competitive economics of these networks, and the

industry traffic and financial databases used to manage these networks. I have a demonstrated

longstanding interest in the consumer welfare and industry efficiency issues raised by the

consolidation of intercontinental airline competition, have testified on industry consolidation issues

' DOT-OST-2009-03s0-0001 ' oot-ost-zo1o-0034-ooo1 '49 u.s.c. ss 41308(b), 41309

- American Airlines-British Airways-lberia-Finnair-Royal Jordanian Joint Application For Antitrust lmmunity (the

"Oneworld" case), Show Cause Order 13 February 2010, DOT Docket OST-2008-0252-3390, p.10

s Federal Trade Commission, Department of Justice, Horizontal Merger Guidelines (1997) p.31
Horan, Answer to DOT Order 2070-6-12,8 July 2010 page 2

before Congress on multiple occasions6, and submitted detailed testimony challenging public

benefits and other claims in the "oneworld" ATI case.7

From the standpoint of someone who has managed both transpacific and immunized alliance

networks, it is difficult to believe that the US-Japan ATI applications could generate the legally

required level of public benefits needed for approval. As an example, transpacific traffic patterns

are fundamentally different from transatlantic patterns, with a very small proportion of travel in

the type of markets where integrated alliances might offer special advantages, and a much higher

proportion of travel in the large nonstop markets where reduced competition could directly harm

consumers. Nonetheless, the question of whether a proposed alliance network would (or would

not) generate significant network synergies is a factual question that can be answered using

objective industry traffic and capacity data and well-established industry analytical methodologies.

DOT could not grant antitrust immunity without verifiable objective data demonstrating the

claimed public benefits. The applicants in this case submitted this data subjecto a motion for

confidentia I treatment.

On 16 February 2010, I submitted a confidentiality affidavit pursuant to the Department's rules

under 14 CFR 302.12 so that I could determine whether this data actually supported the stated

public benefits claimss. On24 February, All Nippon Airways, Continental Airlines and United Air

Lines (the "Applicants") filed a motion to strike my confidentiality affidavit, and deny me access to

the data supporting their public benefit claimss. On 2 March I submitted a motion to reaffirm my

original confidentiality affidavit and to deny the Applicants motion to strikelo. On 3 March the

Department consolidated the separate United/Continental/All Nippon and American/Japan Air Lines

antitrust immunity applications into a single case under the current docket number1l. On 31 March

the Applicants submitted a second motion to strike my confidentiality affidavit that also moved to

strike the affidavits of three employees of the Dallas-Fort Worth International Airport ("DFW

Airport")12. On 20 April both DFW Airport and I separately submitted motions reaffirming our

confidentiality affidavits and asking the Departmento reject the Applicants motion(s) to strikel3.

On 8 June the Department issued Order 2010-6-12 granting the Applicants motion(s) to strike my

confidentiality affidavit and the confidentiality affidavits of the three DFW Airport employees. That

Order established that answers, such as this document, were to be submitted no later than 9 July.

o Most recently, "The Anti-Competitive lmpacts of a United-Continental Merger and the Consolidation of the US

Aviation Market", House Committee on Transportation and Infrastructure, 16 June 20L0.

7 "oneworld", id. t oor-osr-zoo9-0350-oo1z

t OOT-OST-ZOO9-0350-0016. The "Applicants" in this motion will strictly refer to United, Continental and All

Nippon, as they are the only parties seeking to prevent independent parties from scrutinizing their public benefits

claims; American and JAL have not objected to any confidentiality affidavits.

to Dor-osr-2009-0350-0018

" Dor-osr-2o10-0059-ooo1

t' DOT-OST-2o10-0059-0010. TheApplicants Motion to Strike falsely claims (pp.3-4) that I am not a party to this

case, and have no legally cognizable interest ("greater than the general interest the public as a whole may have")

in this case, claims rejected by the DOT's subsequent orders.

tt Horan motion DOT-OST-2O10-0059-0012; Answer of Dallas-Ft. Worth International Airport, DOT-OST-2010-0059-

015
Horan, Answer to DOT Order 20t0-6-L2,8 July 2010 page 3

The DOT Order makes the willfully false claim that the Horan and DFW Airport Affidavits did not

comply with the confidentiality rules in force when their affidavits were filed; the DOT Order

willfully misrepresents longstanding rules in order to impose increased burdens on non-airline

garties that had never existed before and cannot be justified by the evidence presented in this case

DOT Order 2010-6-12 claims that the basis for striking the Horan and DFW Airport affidavits is that

they did not comply with the requirements defined in the orders in force at the time the affidavits

were submitted: "As is our standard practice, the Notice set the requirements for access to the

confidential information: that affiants be attorneys, who could be in-house or outside counsel for a

party in the case, or an outside consultanto a party.... In the case of Mr. Horan and the three DFW

employees, we agree with the challengers that the affiants do not comply with the terms of the

Notice."la

This claim is blatantly false. The "affiants be attorneys" language in the Order is contrary to the

language in the December 24th or February 17th Notices and all prior DOT notices, which do not limit

confidential affidavits to members of the bar. The December Orders that were in force at the time

these affidavits were filed used the same language as previous cases and clearly recognized that

"independent experts" and lawyers were separate categories of individuals that would both require

access to confidential data:

"(1) the affiant is counsel for an interested party or an outside independent expert providing

services to such a party; (2) the affiant will use the information only for the purpose of participating

in this proceeding; and (3) the affiant will disclose such information only to other persons who

have filed a valid affidavit"ls

The only basis for the "extra safeguard" of lawyers subject to "professional sanctions" was to limit

the risk that confidential information about commercially sensitive route and scheduling plans

could fall into the hands of the employees at competing airlines making route and scheduling

decisions. DOT explicitly defined the basis for this requirement when it said that the requirement

for supervision by licensed attorneys applied only to the employees of directly competitive airlines,

and not to other categories of interested parties.

"lnterested parties may review confidential documents by utilizing in-house counsel, outside

counsel, and outside independent experts. However, airline employees wishing to access the

confidential record must be licensed attorneys who serve as counsel, and are therefore held to a

specia I professiona I sta nd a rd to ma i nta i n conf identia I ity" 16

The DOT's longstanding rule only mandates lawyer involvement in cases where airlines want access

to their competitor's confidential data. Somebody at United must be able to review the data

supporting American's antitrust immunity claims, despite the risk that United would have the ability

(and huge incentive) to immediately act to harm American on the basis of this data. The DOT's

longstanding rule for competing airlines does not utilize lawyers because of their special

professional skills, but only because of their limited numbers, and because the possibility of

professional sanctions might help offset the incentive to compromise confidentiality in these

d irectly competitive situations:

to Order 20!0-6-12 p.2-3, referring to Order 2OOg-12-22 and 2O1O-2-L7 (December 24th and February 17th)

tt Orde, 2OOg-12-22 p.2 Order 2OtO-2-77 p.2 Previous examples include Order 2008-1t-7p.3 Order 2008-8 -I9, p.2

tt Order 2OO8-1,L-7 p.3. Emphasis added
Horan, Answer to DOT Order 2010-6-72,8 July 2010 page 4

"The procedure in place does not prejudge the abilities of persons with various educational

backgrounds. Rather, it screens out airline personnel who may be involved in commercial decisionmaking and relies upon special professional obligations-above and beyond legal oaths-that

prevent improper disclosure of confidential information. In the case of airline employees, the

procedure requires that they be licensed attorneys who are employed in that capacity and subject

to professional sanctions. These extra safeguards are important where employees of competing

airlines may gain access to highly sensitive commercial information"lT

The DOT's longstanding rules do not mandate lawyer involvement because outside independent

experts require the "extra safeguard" of supervision by people subject to "professional sanctions"-

the risks from granting outside experts access to confidential data are fully mitigated by

enforceable confidentiality affidavits18. Airlines routinely grant non-lawyer outside independent

experts (consultants, accountants, etc) access to commercially sensitive data, and there is no

evidence of any material risks that enforceable confidentiality affidavits do not address 1e. Lawyer

involvement only required to mitigate the special risks in competing airline situations.

The DOT's longstanding rule is based on the logical principle that airlines submitting confidential

data face much greater risks when the employees of competing airlines have access to this data

than when non-airline parties have access, because only competing airlines can take detrimental

actions on the basis of the confidential data about route and schedule plans. Thus the DOT's

longstanding rule logically imposes a higher burden (employees with access to data must be

lawyers; if route/schedule expertise needed independent outsiders must be used) on competing

airlines than on non-airline parties (enforceable confidentiality affidavits required). As the Answer

of DFW Airport pointed out, the DOT's rule still leaves material commercial risk in competing airline

situations because some of the in-house lawyers routinely granted access to confidential data

routinely participate in management discussions of major network and competitive decisions,2o but

without this limited lawyer role, airlines would have no ability to review or challenge their

competitors' antitrust immunity claims. This contrived requirement for lawyers is completely

irrelevanto any non-airline parties in antitrust immunity cases, where no participants have any

ability to act on the basis of sensitive planning data, and where airline risks are fully mitigated by

enforceable confidentiality affidavits. lmposing a new "only non-airline lawyers can review

confidential data" or "non-airline outside experts must be supervised by non-airline lawyers" rule

" ld. P.4-5. Emphasis added

tt DFW Answer, p9-10 documents the inconsistency between the Applicants' demand for burdensome new

attorney requirements and its failure to impose similar safeguards on its own efforts, or on its supporter's efforts.

tt Unlikethe internal, commercial staffof a competingairline, an outside consultant has almost no incentiveto

violate a confidentiality agreement in cases such as these, and enormous incentives not to, similar to the DOT staff

that have access to this data. An unscrupulous aviation consultant (or DOT staffer) that compromised highly

sensitive internal data subject to a confidentiality agreement would be subject to a civil lawsuit that would

instantly destroy his or her professional reputation. That unscrupulous consultant (or DOT staffer) would have no

incentive to violate that agreement unless a directly competing airline was willing to pay large sums for the

competitively sensitive data. There is no evidence that any US airline has ever suffered from this type of abuse.

'o DFW Answer, p.8. My personal experience confirms the DFW Airport testimony-officials such as the airline

General Counsel and the senior Government Affairs official participated in the senior management discussions of

all major route and network decisions at every airline that I have worked with. lt would be extremely easy for

these officials to convey information from confidential filings to their route and scheduling colleagues, and it is

debatable whether the hypothetical threat of "professional sanctions" would deter this behavior if the confidential

information had significant value.
Horan, Answer to DOT Order 2010-6-12,8 July 2010 page 5

would subvert the logic of the longstanding rule by imposing much higher costs (relative to risks) on

non-airline parties than on competing airline parties.

DOT Order 2010-6-12 does not evaluate the Horan and DFW Airport affidavits on the basis of

longstanding requirements defined in the December 24th or February 17th Notices or by any prior

precedent. Both the Horan and DFW Airport affidavits fully comply with the rule that "the affiant is

counsel for an interested party or an outside independent expert providing services to such a party"

clearfy stated in both the December 24th and Februa ry 17'n Notices and fully comply with

longstanding precedent regarding access to confidential data. The Order is based on the false claim

that the documented rule stated, in effect, that "the affiant is counsel for an interested party or an

outside independent expert providing services to LEGAL COUNSEL for such a party," falsely claiming

that those Notices and past precedent had explicitly imposed some kind of "lawyer involvement"

requirement on all parties to antitrust immunity cases. The Order attempts to nullify the

longstanding precedent establishing that special burdens must be placed on the expert evaluation

of applicant claims only in cases where directly competing airlines could gain access to commercially

sensitive data, and attempts to nullify the longstanding logic whereby greater burdens could only

be placed on parties seeking data in cases (such as directly competing airlines) where there were

demonstrably greater risks that the confidentiality of sensitive information could be violated. The

Order falsely implies that the "extra safeguard" of lawyer involvement was due to risks created by

the presence of outside independent experts, when the record clearly shows that this "extra

safeguard" was strictly limited to cases where the airline employees needed access to their

competitor's sensitive confidential data. The Order strikes the Horan and DFW Airport affidavits on

the basis of new, much more burdensome rules that had never existed before, while falsely claiming

that it is merely enforcing the exact same rules and precedent as before.

The Order cites absolutely no case precedent supporting its claim that the Horan and DFW Airport

affidavits and any similar non-airline affidavits in the future can be struck because they do not have

the same type of lawyer involvement as airline parties, and cities absolutely no evidence that these

"fawyer involvement" rules were in force at the time of the December 24th or February 17th Notices.

Both sides in this case explicitly recognized thatthese confidentiality affidavits could not be struck

under existing rules and precedent. The Answer of DFW Airport has already documented the

longstanding rule (airline employees with access to confidential data must be attorneys) and the

longstanding basis (limit access to sensitive data to directly competing airlines) for this rule.21 Had

the "nobody can review confidential data under any circumstances without licensed attorneys" rule

existed before, the Applicants would have quoted the rule and past applications and the economic

evidence justifying the rule in their initial motion to strike. But their motion explicitly recognized

that the DOT's longstanding requirement for licensed attorneys only applied to "employees of

airlines" and thus their motion asked DOT to create new requirements for non-airlines that had not

existed before.22

The DOT clearly has the right to modify or update longstanding procedural rules in the light of new

evidence, but they did not do that in this case. They could have responded to the Applicants'

request with a formal order proposing a new more rule placing greater burdens on non-airline

parties, and a formal process allowing interested parties to review and comment on the evidence

justifying such a rule, but they did not do so because such evidence does not exist anywhere on this

211d., pp.6-9

22 Applicants Motion DOT-OST-20L0-0059-0L0 p.7
Horan, Answer to DOT Order 20L0-6-12,8 July 2010 page 6

case record, or anywhere else. DOT Order 2010-6-12 does significantly change the existing rules,

but does so with willful disregard of lawful procedure, placing substantial new burdens on nonairline parties wishing to evaluate antitrust immunity applications while falsely claiming that the

more burdensome rules are identical to the previously existing rules. The Order provides absolutely

no evidence demonstrating that the Order was consistent with the longstanding rules, and willfully

ignores written testimony demonstrating that it was not.

The DOT Order is based on willfully false claims about data on the public record.

The DOT Order claims that I do not require access to the applicant's confidential data because "The

public record contains ample and detailed information about the competitive issues. Mr. Horan has

full access to this information to assist him in providing meaningful comments".23 Infact, all of the

objective data that an outside independent industry expert would need to evaluate the applicants

core public benefits claims were filed subjecto a motion for confidentialtreatment. In my response

to the applicant's first attempt to block my independent scrutiny of their data, I outlined the

specific applicant claims that could not be evaluated without access to the confidential data.

Quoting verbatim from that March filing2a:

I have concerns, as to whether approval of this Joint Application would meet the "required by the

public interest" standard established by section 41308(b). The Joint Application raised a number of

arguments that I find problematic, for example:

I (p.8) the integration of those (UA/CO/NH) networks will expand the services available to

consumers with no meaningful risk to competition

t (p.8) The grant of antitrust immunity will strengthen US-Japan and transpacificompetition

I (p.10) competition will become even more vigorous as the quantity and quality of services

available increases substantially

I (p.18) more seats across the Pacific will be needed to accommodate the larger volumes of

connecting traffic aenerated by the Joint Applicants' expanded network

I 1p.23) antitrust immunity...will enable Continental and United to significantly expand their

immunized online network

t (p. 23) the combination of ANA's intra-Japan and intra-Asia network with the international and

US behind gateway networks of Continental and United also will increase competitive service

options for consumers

I (p.29) the addition of ANA to the Continental/United international immunized alliance will not

result in a substantial reduction in competition in any relevant geographical market

I (p.30) nonstop services of all carriers are likely to increase providing consumers an even broader

range of service options and putting downward pressure on price as available seats relative to

demand also increase

Given my knowledge of transpacificompetition, immunized airline network economics, and industry

databases, access to the Joint Applicants' data subjecto a motion for confidential treatment would

allow me to readily evaluate the veracity of these public interest claims, which are straightforward

factual questions. I do not know whether Joint Applicant's data supports its stated claims, but I am

fully qualified to evaluate that data.

" Order 20L0-6-12 p.3

to Hor"n Motion DOT-OST-2009-0350-018 o.1
Horan, Answer to DOT Order 20I0-6-L2,8 July 2010 pageT

It is impossible to evaluate any of the quoted applicant claims without objective data about market

demand in each transpacific origin and destination (O&D) market, current (or base case) data about

each carriers' share of traffic and (quality-weighted) capacity in each O&D market, current (or base

case) data about the seat and ASM capacity offered by each carrier on transpacific operating

segments, and the level of capacity the applicants propose to offer if they are granted antitrust

immunity. All of this data is subject (quite reasonably) to a motion for confidential treatment; none

of it is available on the public record. One cannot independently evaluate claims that ATI will create

public benefits due to expanded service levels without access to data about before-and-after

schedule capacity, and the ability to verify whether claimed increases by certain carriers in certain

markets are not being offset by reductions elsewhere. One cannot independently evaluate claims

that ATI will create public benefits by putting downward pressure on prices without access to the

data required to verify whether the proposed capacity increases are substantial enough to have

such an effect, or the data required to calculate the size of the markets that would receive the

claimed benefit. One cannot independently evaluate claims that ATI will create public benefits by

actually increasing competition (despite the sizeable reduction in the number of actual competitors)

without access to the data showing the before-and-after levels of competition in each O&D market,

and the data allowing to calculate the aggregate average competitive impacts in major market

groupings (such as the overall US-Japan market). As noted above and in previous filings2s I have

directly managed both large Tokyo-based transpacific networks and large immunized alliance

networks, and I am fully familiar with the standard industry databases and methodologies used to

evaluate network competitiveness. But it is impossible to evaluate these claims if limited to data

available on the public record. The DOT's Order striking my confidentiality affidavit makes it

impossible for me to evaluate these core public benefits and competitive claims. lt does not make it

marginally more difficult for me to evaluate these claims, it does not make it impossible to evaluate

one ortwo of the issues of concern, it makes it completely impossible to evaluate any of the claims

quoted above. No outside independent industry expert could confirm or refute the applicants'

claims without access to the data filed subject to a motion for confidential treatment. The DOT's

assertion that the "public record contains ample and detailed information...to assist him in providing

meaningful comments" on the issues that I raised in March is a willfully false claim.

The DOT Order strikes the confidentiality affidavits even though the Applicants' Motion to Strike

contains absolutely no claims or evidence that would iustifv striking the affidavits, and the

Applicants' only interest is in preventing any knowledgeable independent industry experts from

reviewinq the legitimacy of their public benefit claims

The only legitimate basis for an airline demand to strike the confidentiality affidavit of a legitimate

party to an ATI case would be the risk of financial or competitive harm from the disclosure of

commercially sensitive data. However the Applicants' Motions to Strike made no claim that they

faced the risk that their sensitive data would be compromised if DOT granted the Horan or DFW

Airport affidavits, and made no claim that they would be harmed in any other way. Both my March

filing and the Answer of the DFW Airport point out that no one has claimed that any of the

Applicants' confidential data is at risk, and that our applications do not pose any other threat to the

" rd.
Horan, Answer to DOT Order 2O10-6-L2,8 July 2010 page 8

Applicants.26 The DOT Order does not separately identify any threat to the Applicants due to

disclosure of confidential information or from any other potential cause.

The Applicants' only stated justification for their Motion to Strike was that the DOT would be

harmed because granting the affidavits "would erode and potentially even evisceratethe

Department's longstanding confidentiality protections...[and] could undermine the Department's

ability to obtain sensitive commercial information and other confidential materials from parties in

future proceedings"2T and overwhelm DOT by "expanding exponentially the number of persons

eligible to review highly confidential businessecrets-even if subjecto a pledge of

confidentiality."28 These claims were totally unsubstantiated, and are willfully false. Granting these

affidavits will not open floodgates of affidavits from others with similar economic interests. The

number of major hub airports affected by ATI applications is limited, as is the number of

independent industry experts with experience managing both transpacific hubs and large

immunized alliance networks. The DOT's Order did not claim that granting these affidavits would

render its review process unmanageable, because it would not.

The only rational explanation for the Applicant's multiple Motions to Strike is that they do not any

independent expert to be able to evaluate the data supporting their public benefit claims, and in

particular they do not want someone with my detailed knowledge of transpacific network

competition and immunized alliance economics to be able to evaluate their data, even if I (or any

other outside expert) is fully bound by enforceable confidentiality affidavits. Without access to the

data described earlier, I have no way of knowing whether their public benefit claims are legitimate

or not, and have no way to evaluate whether their request for antitrust immunity meets the

"required by the public interest" standard established by section 41308(b). The Applicants' Motions

demand that the DOT violate its longstanding rules in order to arbitrarily extend "lawyer only"

regulations designed to address clearly defined competitive risks to a new set of situations where

those risks do not exist. These demands do not reduce confidentiality risks in any way; their only

purpose is to make it much more difficult for airports, consumer groups, unions and other

independent parties to scrutinize airline claims..

The assumption that the Applicants' Motions are strictly intended to suppress legitimate scrutiny of

their data is supported by the Applicants' actions in response to the DFW Airport affidavits. The

Applicants' strenuously objected to those affidavits despite acknowledging that there was zero risk

of competitive harm. The Applicants refused written requests whereby the Airport employees

agreed not to even look at the Applicants' data, continuing to demand that their Affidavits be

struck. The only possible explanation is the Applicants' knew that they could not block scrutiny from

independent experts unless the DOT established anew "bright-line" rule banning all non-airline

review of data supporting ATI claims unless conducted by a member of the bar. Any willingness to

accept reasonable offers from the DFW Airport would have undermined the Applicants' demand for

a "bright-line" rule applicable to each and every non-airline party.

'u ld. p.1; DFW Answer p.2-3

27 Applicants' Motion, DOT-OST-2009-0350-016 p.3

28 Applicants' Motion, DOT-OST-2010-0059-010 p.2
Horan, Answer to DOT Order 2010-6-12,8 July 2010 page 9

The DOT Order strikes the confidentiality affidavits based on the willfullv false claim that it has

"balanced" the competing interests of access to information and the need to protect the applicants

from potential risk or harm

The DOT Order states that "These criteria reflect our policy that access to confidential information

in a proceeding must balance, inter alia, the interest of commenting parties in the outcome of the

proceeding and their need to have the information available to allow presentation of their views,

on one hand, with the need of parties providing the information to protect business confidential

data from unnecessary and unwarranted disclosure, on the other." However the decision in the DOT

Order does not follow these reasonable criteria, and makes no attempt to evaluate competing

claims. The decision "balances" the Applicants'/Horan/DFW Airport competing interests by granting

the Applicants 100% of their request without any evidence of potential harm, while granting 0o/o of

the access to data needed to document our views despite substantial evidence that our views

cannot be presented without access to the Applicant's data. The decision does not find a "balance"

these competing interests by compromising between slightly inconsistent findings from past cases

that slightly favored one competing interest or the other, but establishes a totally new rule that

imposes much greater burdens on non-airline parties wishing to express their view that had ever

existed before, burdens that directly violate all past case precedent, and have no basis in the Code

of Federal Regulations.

Absolutely nothing in Order 2010-5-12 can be justified by any concern for the confidentiality of

United/Continental/All Nippon data. The Applicants make no claim that granting these affidavits

would lead to detrimentalviolations of confidentiality, and there is absolutely no evidence on the

case record that access would lead to "unnecessary and unwarranted disclosure." The claim in the

DOT Order that "ln balancing the interests at stake, there must be a presumption in favor of

confidentiality" is willfully false in that context. The Order finds that even a zero risk of harmful

disclosure by non-airline parties is intolerable, even though it accepts much greater risk (executives

that participate in major network decisions can review their competitor's confidential network

plans) in airline cases. lt would be impossible for DFW Airport or myself to present evidence shifting

the balance that the DOT might find satisfactory, because we cannot reduce the confidentiality risk

below zero. The DOT Order establishes a standard that is impossible to meet, because it has no

actual interest in "balancing competing interests"-its only interest is in rejecting the confidentiality

affidavits. Since there are no claims and no evidence on the record showing any risks to

confidentiality, the DOT Order cannot strike the affidavits by claiming that "ln balancing the

interests at stake, there must be a presumption in favor of confidentiality"2e. This is a willfully false

characterization of the reasoning behind the DOT's Order, which would be better summarized by

the claim that "ln balancing the interests at stake, there must be a presumption in favor of

protecting airline antitrust immunity claims from any independent scrutiny."

Absolutely nothing in Order 2010-6-12 demonstrates any concern forthe information needs of nonairline parties with legitimate interests in antitrust immunity cases. As discussed above, I had

provided a detailed explanation of my specific information needs in March. The DOT responded

with the dishonest claim that this information was available on the public record and a decision

that makes it prohibitively expensive to obtain the actual confidential information. The DFW

Airport has legitimate interests in information about issues affecting transpacific service and

competition at DFW. The DOT responded with a ruling that allows carriers who do not provide

2e order p.3
Horan, Answer to DOT Order 2010-6-12,8 July 2010 page L0

transpacific service at DFW and whose data is of no interest to the airport, to block DFW from

reviewing data about other airlines who have not objected to the airport's data request. In both

cases, the DOT has ruled that individuals capable of expertly reviewing the data critical to ATI claims

should be blocked from reviewing it, but it would be permissible if lawyers who are professionally

unqualified to comment on airline competitive economics were to review it.

lf the DOT was actually interested in "balancing" the competing interests of airline confidentiality

and legitimate scrutiny of critical antitrust immunity claims, it would have evaluated the costs and

risks of alternate ways of protecting confidential data, but it did not consider any data related to

these tradeoffs whatsoever. lf the DOT was actually interested in "balancing" the competing

interests in this case, it would have openly explored compromise options that might have provided

some of the critical data while mitigating the biggest risks, but DOT refused to even consider the

DFW proposal to only have access to Oneworld carrier data.

The critical conflict of interests here is not between DFW Airport and myself on the one hand and

United, Continental and All Nippon on the other. The critical conflict here is between the interests

of airlines who would like to dramatically reduce competition via antitrust immunity to collude on

pricing, capacity and service, and the interests of consumers, business, airports and communities

that depend on healthy, dynamic airline competition, and do not want competition reduced by ATI

grants unless there is independently verifiable evidence of public benefits, as required by section

41308(b). Order 2010-6-12 does not merely indicate the DOT's total support for airlines wishing to

reduce competition via ATI and their total unwillingness to support the public's interest in ensuring

that public benefit claims of ATI applicants are fully documented and verifiable. Order 2010-6-12

demonstrates that DOT is willing to protect ATI claims from independent scrutiny by falsely claiming

threats to confidentiality that do not exist and had not even been claimed on the case record, by

falsely claiming that the data in question is available on the public record, by falsely claiming that

its ruling was based on Orders currently in force and past precedent, by falsely claiming that it had

weighed tradeoffs between the competing claimants, by its willingness to arbitrarily nullify all of

the economic and risk mitigation logic behind all prior rulings, and by its promulgation of a ruling

that is not supported by any factual evidence oi past precedent whatsoever.

For the reasons outlined above, the Department should

I formally withdraw Order 2010-6-12, and formally reaffirm that rules limiting access to

confidential data in ATI cases to members of the bar only apply to competing airlines, and

that all of the standards in force at the time of December Notice remains unchanged

I grant the confidentiality affidavits filed in February by myself and the DFW Airport employees

and deny the Applicants' Motions to Strike

I delay the publication of a procedural schedule until both the DFW Airport employees are

ensured the opportunity to review the Applicants' data, on a basis fully comparable to the

opportunity we would have had if our original affidavits had been granted four months ago.

'il^^lil %ru--

Hubert Horan

8 July 2010
Horan, Answer to DOT Order 20L0-6-I2,8 July 2010

CERTIFICATE OFSERVICE

A copy of the foregoing was served on 8 July, upon the following persons via email:

page L1

carl. nelson@aa.com

robert.wirick@aa.com

jeff rey.oga r@aa.com

thomas.bol I ing@coa ir.com

hkamen@coair.com

sacha.vanderbel ln@delta.com

jeff .morgan@delta.com

scott.mcclai n@delta.com

nssparks@fedex.com

anbird@fedex.com

robert. la nd@jetbl ue.com

kevi n. montgome ry@po la ra i rca rgo.com

jeffrey.man ley@u n ited.com

j u I ie.oettinger@un ited.com

benjami n.slocum@usairways.com

h owa rd_kass@usa i rways.com

bob.kneisley@wnco.com

Russel l. Bai ley@a I pa.org

David.Semanchi k@alpa.org

don na. kooperstei n@usd oj. gov

j i I l. ptacek@usdoj. gov

todd.homan@dot.gov

peter. irvine@dot.gov

jim.ballough@faa.gov

john.allen@faa.gov

byerlyjr@state.gov

mike.orr@airli nei nfo.com

rbkeiner@crowell.com

gmurphy@crowell.com

lhal loway@crowel l.com

mrosia@crowell.com

jhill@dowlohnes.com

kq u in n@pi Ilsbu rywi nthrop.com

recohn@hhlaw.com

prrizzi@hhlaw.com

sophy.chen@hklaw.com

an ita.moser@hklaw.com

ejames@jamhoff.com

dpdean@jamhoff.com

eskraft@jamhoff .com

pmu rphy@lopmu rphy.com

cshapiro@sg bdc.com

mgoldman@sgbdc.com

rsi lverberg@sg bdc.com

dva u g h n@kel Ieyd rye.com

esauer@ssd.com

wkaras@steptoe.com

cgosain@steptoe.com

bruce.rabinovitz@wi lmerha le.com

david. heffernan@wi lmerha le.com

cjsimpson@zsrlaw.com

dmendersbee@zsrlaw.com

mlbenge@zsrlaw.com

m ike.orr@airli nei nfo.com

ubert Horan

8 July 2010