### 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

ATIapplication

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 meetthe strict

section 41308 "required

by the public

interest"

standard

and prove

that immunity"is necessary...to achieve importantpublic

benefits"

that "cannotbe achieved by reasonably

available

alternatives

that are materially

less anticompetitive."3

The burden

of proof for pubf ic benefitsrests

with the applicantsa,

and the HorizontalMerger Guidelines defines the evidentiary

standards

that efficiency

claims used to meet the public

benefits test must meet: "[the applicantsl

mustsubstantiate

efficiency

claims sothat the Agency

can verifyby reasonable

means the likelihood

and magnitude

of each asserted

efficiency,

how and when each

would be achieved (andany costs

of doing so) how each would enhance

the merged

firm'sability

and incentive

to compete,

and why each

would be merger-specific. Efficiency

claims will not be considered if they
arevague

or speculative

or otherwise

cannotbe verified

by reasonable

means."s

The public

benefits claimed by the two ATIapplications restupon 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 directreduction

in the number of majorcompetitors, 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 mostqualified individuals

in the industry

to evaluate

these claims. I not only developed

the original

Northwest-KlM

alliance network (which

served as the template

for all subsequent

NorthAtlantic

alliance networks)

but also managed

Northwest's

large Tokyo-based transpacific

network.I havebeen 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

welfareand 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" ATIcase.7

From the standpoint

of someone

who has

managed

both transpacific

and immunized

alliance networks,

it isdifficult

to believe

that the US-Japan

ATIapplications

couldgenerate

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 largenonstop markets where reduced

competition

coulddirectly

harm

consumers.

Nonetheless,

the question

of whethera proposed alliance network

would (or would not) generate

significant

network

synergies

isa 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 subject

o a motion for confidentia

I treatment.

On 16 February

2010, I submitted

a confidentiality

affidavit

pursuant

to the Department's

rules under 14CFR

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 motionto 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

motionto 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

docketnumber1l.

On 31 March the Applicants

submitted

a second

motionto 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 20April both DFW Airport and I separately submitted

motions

reaffirming

our confidentiality

affidavits

and asking

the Department

o reject

the Applicants

motion(s)

to strikel3. On 8 June

the Department

issued Order2010-6-12

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 andthe Consolidation of the US Aviation

Market",House

Committee

on Transportation

and Infrastructure,

16June 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

andAll Nippon, as they arethe only parties seeking to prevent

independent

parties from scrutinizing

their public

benefits claims; American

andJAL havenot objected

to any confidentiality

affidavits. to Dor-osr-2009-0350-0018 

### " Dor-osr-2o10-0059-ooo1 t' DOT-OST-2o10-0059-0010. The Applicants

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

asa 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

Ordermakes

the willfully

false claim that the Horan

and DFW

Airport Affidavits

did not complywith the confidentialityrulesin force when their affidavits were filed; the DOTOrder willfully misrepresents longstanding

rules in order to impose

increased

burdens

on non-airline garties that had neverexisted before and cannot be justified by the evidence presented

in this case

DOTOrder 2010-6-12 claims that the basis

for strikingthe Horan and DFW Airport affidavitsisthat 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

consultant

o 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 blatantlyfalse. The "affiants be attorneys" languagein 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 iscounsel

for an interested

partyor an outside

independent

expertproviding services to such a party; (2) the affiantwill use

the information

onlyfor the purpose

of participating in this proceeding;

and (3) the affiantwill disclose such information

onlyto 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 recordmust be licensed attorneys

who serve

ascounsel,

and are therefore held to a specia I professiona

I sta nd ard to ma

intain confidentia

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 Unitedmust 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

actto harmAmerican on the basis

of this data.

The DOT's longstanding

rulefor competing

airlines does not utilizelawyers

because of their special professional

skills, but only because

of their limitednumbers, and because

the possibility

of professional

sanctions

might helpoffset

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

"Theprocedure

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 beyondlegal

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 peoplesubject

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 higherburden(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).

Asthe Answer of DFW Airport pointed

out, the DOT's

rule still leaves

material

commercial

riskin competing

airline situations

because someof the in-house lawyers routinely granted access to confidential

data routinely

participate

in management

discussions

of major networkand competitive decisions,2o

but without this limitedlawyer role, airlines would haveno ability to review

or challenge

their competitors'

antitrust

immunity

claims. This contrived

requirement

for lawyers

iscompletely irrelevant

o 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 arefully 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 itsfailure

to impose

similar safeguards

on its own efforts,

or on its supporter's

efforts. tt Unlikethe

internal, commercial

staffofa 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 datasubject

to a confidentiality

agreement

would be subject

to a civillawsuit

that would instantly

destroy his or her professional

reputation.

That unscrupulous

consultant

(or DOT staffer) would haveno incentive

to violate

that agreement

unless a directly

competing

airline waswilling

to pay large

sums for the competitively

sensitive

data. There is no evidence

that any US

airline has ever suffered from thistype 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

definedin the December 24th or February

17th Notices or by any prior precedent.

Both the Horan

and DFW

Airport affidavits

fully comply

with the rulethat "the affiant is counsel for an interested

party or an outside

independent

expertproviding

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 pastprecedent

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) wheretherewere demonstrably

greater risks that the confidentiality of sensitive

information

could be violated.

The Order falselyimplies

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 wherethe 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

itsclaim 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. Bothsides

in this case

explicitly

recognized

thatthese confidentiality affidavits

could not be struck underexisting

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

datato directly

competing

airlines) for this rule.21

Had the "nobody

can review

confidential

data underany circumstances without licensed

attorneys"

rule existed before, the Applicants

would have

quotedthe rule and past applications

and the economic evidence

justifying

the rule in their initialmotionto strike. Buttheir 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 modifyor updatelongstanding 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

allowinginterested

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

Order2010-6-12

does significantly

change the existing

rules, but does

sowith 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 testimonydemonstrating 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

aboutthe competitive issues. Mr. Horanhas full access

to this information

to assist

him in providing

meaningful

comments".23

In fact,all of the objective

datathat an outside

independent

industry expert would need

to evaluate

the applicants
core public

benefits claims were filed subject

o a motion for confidentialtreatment. In my response to the applicant's

first attemptto blockmy 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 thisJoint

Application

would meetthe "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 transpacific

ompetition I (p.10)

competition

will become

evenmore

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

trafficaenerated

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 evenbroader range of service

options and putting downward pressure on price

asavailable

seats relative to demand

also increase Given my knowledge

of transpacific

ompetition,

immunized

airline network economics,

and industry databases,

access to the Joint

Applicants'

data subject

o 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

itsstated

claims, but I am fully qualified

to evaluate

that data.

" Order 20L0-6-12

p.3 toHor"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 demandin each

transpacific

origin and destination (O&D) market, current (or base case) data about eachcarriers'

share of traffic and (quality-weighted) capacity

in eachO&D market,current (or base case) data about the seatand ASM capacity offered by eachcarrier on transpacific

operating segments,

and the levelof 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 isavailable

on the publicrecord.

One cannotindependently evaluate

claims that ATIwill create public benefits

due to expanded

service levels without access

to data about before-and-after schedule

capacity,

and the ability

to verify

whetherclaimed

increases

by certain

carriers in certain markets are not beingoffsetby reductions elsewhere.

One cannotindependently evaluate

claims that ATI will create public benefitsby 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 cannotindependently 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 eachO&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

networkcompetitiveness. 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 corepublic

benefits and competitive

claims. lt does not make it marginally

moredifficult

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 couldconfirm

or refutethe 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 Marchisa 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

Theonly 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

harmfrom the disclosure of commercially

sensitive

data. However

the Applicants'

Motions to Strike

made no claim

that they faced the risk that their sensitive

datawould 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 isat risk,

and that our applications do not pose

any otherthreat to the



### " rd.

### Horan,

Answer to DOT Order 2O10-6-L2,8

July 2010 page 8

Applicants.26

The DOT

Orderdoes

not separately

identify anythreatto the Applicants due to disclosure

of confidential

information

or from any other potential cause.

The Applicants'

only stated

justification

for their Motionto 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 obtainsensitive

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

business

ecrets-even

if subject

o a pledge

of confidentiality."28

These claims were totally unsubstantiated, and arewillfully

false. Granting

these affidavits

will not open floodgates of affidavits

from others

with similar

economic

interests.

The number of major hub airports affected

by ATIapplications

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.

Theonly rational

explanation

for the Applicant's

multipleMotions

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,

evenif I (or any other outsideexpert) isfully bound by enforceable confidentiality

affidavits.

Without access

to the data described

earlier, I haveno way of knowing whether

their public

benefit claims are legitimate
or not, and have

no way to evaluate

whether

their request

for antitrust

immunitymeets

the "required

by the public

interest"

standard

established

by section

41308(b).

TheApplicants'

Motions demand

that the DOT

violateits longstanding rules in orderto arbitrarily extend"lawyer

only" regulations

designed

to address

clearly defined competitive

risks to a new setof situations where those risks

do not exist.

These demands

do not reduce

confidentiality

risks in anyway;

their only purpose

is to make it much more difficult for airports,

consumer

groups, unions and other independent

parties to scrutinize

airline claims..

Theassumption

that the Applicants'

Motions

are strictly

intended

to suppress

legitimate

scrutiny of their data issupported by the Applicants'

actions in response

to the DFW

Airport affidavits.

The Applicants'

strenuously

objected

to those

affidavits

despite acknowledging

that therewas zero risk of competitiveharm.The Applicants refused written requests

wherebythe Airport employees agreed not to evenlook 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

a new "bright-line"

rule banning

all non-airline review of data supporting

ATIclaims

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 DOTOrder 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 needof parties providing

the information

to protect

business

confidential datafrom unnecessary and unwarranted

disclosure,

on the other." However the decision

in the DOT Order does not follow thesereasonable criteria, and makes

no attempt

to evaluate

competing claims. Thedecision

"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 cannotbe presented without access

to the Applicant's

data. Thedecision

doesnot 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 rulethat imposes muchgreater

burdens on non-airline

parties wishing to express

their view that had ever existed before, burdens

that directly

violate all pastcase

precedent,

and have no basis

in the Code of Federal

Regulations.
Absolutely

nothing in Order

2010-5-12

can bejustified

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 isabsolutely no evidence

on the
case record that access

would lead

to "unnecessary

and unwarranted

disclosure."

Theclaimin 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

muchgreater

risk(executives that participate

in major networkdecisions 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 DOTmight find satisfactory, because we cannotreduce

the confidentiality

risk belowzero.

The DOT

Orderestablishes

a standard

that is impossible

to meet,because

it hasno 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 isa willfully

false characterization

of the reasoning

behind the DOT's

Order, whichwould be bettersummarized 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 Order2010-6-12 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 wasavailable

on the publicrecord

and a decision that makes

it prohibitively

expensive

to obtainthe actual

confidential

information.

The DFW Airport haslegitimate interests

in information

about issues

affecting

transpacific

service and competition

at DFW. The DOTresponded

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 DFWand whose data is of no interest to the airport, to block DFW from reviewingdata 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 actuallyinterested in "balancing"

the competing interests of airline confidentiality and legitimatescrutiny of critical

antitrust immunity claims, it would have evaluated the costs

and risks of alternate

waysof protectingconfidential 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 thiscase,

it would have

openly explored

compromise

options that might have

provided

someof the critical

data while mitigating the biggest risks, but DOT refused

to even consider

the DFWproposal

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 liketo dramatically reduce competition

via antitrust

immunity

to collude

on pricing, capacity

and service,

and the interests

of consumers,

business,

airportsand 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).

Order2010-6-12

does not merely

indicate the DOT's

total support

for airlines

wishing to reduce competition

via ATIand their total unwillingness to support

the public's

interest in ensuring that public

benefit claims of ATIapplicants

arefully documented and verifiable.

Order 2010-6-12 demonstrates

that DOT is willing to protectATI claims from independent

scrutiny by falsely

claiming threats to confidentiality

that do not existand had not even been claimed on the case

record, by falsely claiming

that the data in question isavailable

on the public

record, by falsely

claiming

that its ruling

was based

on Orders

currently

in forceand past

precedent,

by falsely

claiming

that it had weighed

tradeoffs

between

the competing

claimants,

by its willingness

to arbitrarily

nullifyall of the economic

and risk mitigation

logicbehind

all prior rulings,

and by its promulgation of a ruling that is not supportedby any factual evidence oi past precedent

whatsoever.

For the reasons

outlined

above, the Department

should

I formally

withdraw Order2010-6-12, and formallyreaffirm 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' Motionsto 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 havehad if our original affidavits

had beengranted

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 copyof the foregoing wasserved

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 oward_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 uin n@pi I lsbu 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 hn@kel

I eyd 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