u.s. Department of

Tronsportation

Office of the Secretory

ofTronsportation

November 12, 2013

1200 New Jersey Ave, SE

Washington, DC 20590

Mr. Daniel Magny

Senior Counsel, Air Canada

Air Canada Centre - P.O. Box 7000

Station Airport

Dorval, Quebec H4Y 1J2

Dear Mr. Magny:

I am responding to your letter of June 6, 2013, requesting confirmation and

acknowledgement that Air Canada's existing grant of antitrust immunity includes its

new subsidiary, Air Canada rouge. In your letter, you state that Air Canada rouge is a

wholly owned and controlled subsidiary that is duly authorized to provide foreign air

transportation in the United States-Canada market. You further state that Air Canada

rouge may operate flights on behalf of Air Canada that fall within the geographic scope

of the Air Canada-lufthansa-United Transatlantic Joint Venture, which has been

approved and given a grant of immunity by the U.S. Department of Transportation

("Department). You note that the Department's grant of antitrust immunity to Air

Canada and its partners included majority-owned affiliates that were in existence at the

time the immunity was granted in 2009.

On behalf of the Department, I can confirm that Air Canada's antitrust immunity

includes Air Canada rouge, as the entity exists today. The creation of Air Canada rouge

as a new, wholly-owned and controlled subsidiary, operating with aircraft and assets

sourced from Air Canada, does not represent a significant competitive change from the

arrangements approved by Order 2009-7-10 in July 2009. Unlike an acquisition of a new

airline entity, or a partnership with a minority-owned affiliate, the joining of Air Canada

rouge to the alliance should not necessarily require a new application, motion, or

detailed competitive review.

Through this letter, the Department considers Air Canada rouge to be a covered

affiliate. I am placing a copy of your June 6, 2013 letter, and this response letter, in

Docket DOT-OST-2008-0234 so that interested parties and the traveling public are

apprised of Air Canada rouge's status.

- 1 -
Sincerely,

Todd M. Homan

Director, DOT's Office of Aviation Analysis

cc: Thomas Newton Bolling, Representative of United Airlines

Arthur Mollins, Representative of Lufthansa AG

- 2-
Daniel M.gny

Senior Counsel,

International. AllianCes and Regulatory Affairs

Bnd Managing Attorney

BYEMAlL

Mr. Todd Homan

Director

Office of Aviation Analysis

Department of Transportation

1200 New Jersey Avenue, S.E.

Washington, DC 20590

,Rc: Air Canada rouge

Dear Mr. Homan:

AIR CANADA@

Air Canada Centre

P.O. Box 7000. Station Airpon

Dorvnl, Quebec H4Y 112

Direct: (514) 422-5727

F.esimile: (514) 422.5839

June 6th, 2013

Air Canada, on behalf of the immuni7..cdStar Alliance partners! (the "Star CaITiers"), is writing

to request the Department's confirmation that its newly created wholly owned subsidiary, Air

Canada rouge, is a majority owned affiliate that will be considered by DOT to be covered by the

grant of antitrust immunity under Order 2009-7-10.1 We would appreciate the Department's

confirmation of this letter and acknowledgement that such grant of immunity covers Air Canada

rouge 'consistent with the inclusion of the Star ,Carriers' other majority owned affiliates within

the immunity granted \?ythat Order.

On April 26, 2013, Air Canada rouge applied' for a foreign air carrier permit and related

exemption that would enable it to provide scheduled and charter foreign air transportation of

perSons, property, and mail as provided for in the U.S.-Canada Open Skies Agreement, which

the Department granted on May 22, 2013.3 Air Canada rouge is wholly owned by Air Canada,

which means Air Canada has exclusive authority to control the business plans, decisions, and

activities of Air Canada rouge. Air Canada rouge will operate flights on behalf of Air Canada

The Star Carriers consist of Air Canada, Austrian, Brussels Airlines, LOT,

Lufthansa, SAS, Swiss, TAP and United. Common names arc used for airlines.

2 "Order 2009- 7-10" refers to Order 2009-7 -10 as amended by Orders 2011-11-16

(extending antitrust immunity to Brussels Airlines) and 2012-6-21 (terminating antitrust

immunity with btni).

3 See Docket DOT-OST-2013-0087.

A\lr"'IlI<l~II\...etMC..un v.:l.>.

"""'!l1l"t ov tlCSt"'VlllNlAU.l~otCe Jl,q
pursuant to. a capacity purchase agreement and Air Canada will market and sell such flights ..an.d

perform all key commercial functions. These service will include routes within the geographic

scope of the Air Canada-Lufthansa. Group-United Transatlantic Joint Venture (the "Transatlantic

Joint VentUre"), so these functions will.be encompassed within the Transatlantic Joint Venture.

Aii' Canada itselfhasantitrust iInmunity with the other Star Carriers immunized by Order 2009-

7-10; the same immunity is required for affiliates whose business plans, decisions, and activities

are controlled by Air Canada. The Department's confirmation that Air Canada rouge is a

majority owned .affiliate of Air Canada included within the antitrust immunity granted bl Order

2009-7-10 is, therefore, appropriate and consistent with the terms of that order. The

Department's confirmation will assUre Air Canada that the business plans, decisions, and

activities of Air Canada rouge - all of which Air Canada controls - will be covered by the same

antitrust immunity held by Air Canada that is necessary to achieve these public benefits.

For these reasons, the Star Carriers request the Department's confirmation that the antitrust

immunity granted to Air Canada by Order 2009-7-10 includes its wholly owned subsidiary Air

Canada rouge.

Respectfully submitted,

Daniel Magny

Senior Counsel, International, Alliances

and Regulatory Affairs & Managing Attorney

Air Canada

cc:Thomas Newton Bolling (United)

Arthur Molins (Lufthansa)

4 The Star Carriers also note that two affiliates that already eJdsted and were.wholly

owned by Lufthan.sa when the Department issued Order 2009-7 -10 - Air Dolomitiand

Germanwings - are covered by the grant of antitrust immunity under that order.

I