BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C.

--------------------------------------- Joint Application of : : AMERICAN AIRLINES, INC. : : and : : DOT

- OST

- 2011

- QANTAS AIRWAYS LIMITED : : under 49 U.S.C. § 41309 for : approval of Joint Business Agreement : :

---------------------------------------
JOINT APPLICATION OF AMERICAN AIRLINES, INC. AND QANTAS AIRWAYS LIMITED FOR APPROVAL OF JOINT BUSINESS AGREEMENT Communications with respect to this document should be sent to:



### For American Airlines : For Qantas Airways : VIRASB VAHIDI BRETT JOHNSON Senior Vice President

– General Counsel Marketing and Planning ANNA PRITCHARD and Chief Commercial Officer Head of Legal

– Competition American Airlines, Inc. Qantas Airways Limited P.O. Box 619616, MD 5634 203 Coward Street DFW Ai rport, TX 75261 Mascot New South Wales 2020 Australia KENJI C. HASHIMOTO 61 (2) 9691 5515 Vice President

– annapritchard@qantas.com.au Strategic Alliances American Airlines, Inc. P.O. Box 619616, MD 5635 DFW Airport, TX 75261
WILLIAM K. RIS, JR. Senior Vice President

– Government Affairs American Airlines, Inc. 1101 17th Street, NW Washington, DC 20036

### ROBERT A. WIRICK Director, Regulatory Affairs American Airlines, Inc. P.O. Box 619616, MD 5635 DFW Airport, TX 75261 (817) 963

- 0 394 robert.wirick@aa.com
R. BRUCE WARK Associate General Counsel JAMES K. KALEIGH Antitrust Attorney American Airlines, Inc. P.O. Box 619616, MD 5675 DFW Airport, TX 75261 (817) 967

- 3458 james.kaleigh@aa.com
CARL B. NELSON Associate General Counsel American Airlines, Inc. 1101 17th Street, NW Washington, DC 20036 (202) 496

- 5647 carl.nelson@aa.com

June 7, 2011TABLE OF CONTENTS

INTRODUCTION ................................ ........................ 2 I. THE PROPOSED ALLIANCE WILL CREATE SIGNIFICANT PUBLIC BENEFITS .... 4 A. T he JBA’s Stated Objective Is To Create Consumer Benefits
..... 5 B. S pecific Consumer Benefits Arising Out Of The JBA
............. 6 1. I mproved Network A nd Scheduling
............................ 6 2. L ower Fares A nd New Fare Products
. ......................... 8 3. M ore Efficient Corporate Travel Procurement ................ 9 4. F requent Flyer Improvements
............................... 1 0 5. I ncreased Vacation Travel T o Australia
.................... 1 0 II. T HE PROPOSED JBA WILL NOT REDUCE COMPETITION IN ANY MARKET ..... 1 1 A. G lobal
................................ ....................... 1 2 B. U .S.

– South Pacific
................................ ......... 1 3 C. U .S.

- Australia
................................ ............. 1 4 1. V Australia
................................ ............... 1 6 2. D elta
................................ ..................... 16 3. S tar Alliance (United/Air New Zealand)

.................... 17 III. JBA APPROVAL I S NECESSARY FOR T HE JOINT APPLICANTS T O PROCEED . 19 IV. OTHER APPROVAL ISSUES , CONDITIONS , AND INFORMATION ............ 2 1 A. Trans

- Pacific Routes
................................ ......... 2 1 B. Trans

- Pacific Carriers Within The Three Alliances
............ 2 1 C. Codeshare Routes ................................ ............. 2 2 D. Relationship T o one world
................................ ..... 2 2 E. Hub Airports
................................ ................. 2 2 F. Significant Service A nd Equipment Changes
.................... 2 3 G. Impact On Revenue ................................ ............ 2 3 H. U.S. Labor Issues
................................ ............ 2 3 I. Computer Reservations Systems
................................ 2 3 J. Civil Reserve Air Fleet
................................ ...... 2 3 K. Resubmission of Alliance Agreements
.......................... 2 4 CONCLUSION ................................ ......................... 2 4BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C.

--------------- ------------------------ Joint Application of : : AMERICAN AIRLINES, INC. : : and : : DOT

- OST

- 2011

- QANTAS AIRWAYS LIMITED : : under 49 U.S.C. § 41309 for : approval of Joint Business Agreement : :

---------------------------------------
JOINT APPLICATION OF AMERICAN AIRLINES, INC. AND QANTAS AIRWAYS LIMITED FOR APPROVAL OF JOINT BUSINESS AGREEMENT
American Airlines, Inc. (along with its affiliates American Eagle Airlines, Inc. and Executive Airlines, Inc., d/b/a American Eagle) and Qantas Airways Limited (along with its affi l iate Jetstar Airways Pty Limited) (collectively the “Joint Applicants” or “Parties”) apply under 49 U.S.C. § 41309 for approval of a Joint Business Agreement (“JBA”), which is attached as Exhibit 1. The JBA will result in increased integration between the Parties and provide one w orld with the ability to further integrate its network, offering consumers a stronger competitive alternative to the Star and SkyTeam alliances. The Joint Applicants seek to implement the JBA upon receiving Department of Transportation approval.

While carriers would ordinarily seek antitrust immunity under 49 U.S.C. § 41308 in addition to approval of their agreement under 49 U.S.C. § 41309 , the Joint Applicants ar e not requesting ATI here in light of the existing lack of competit ion between American and Q a ntas2 and the inability of American to operate its own service to the South Pacific (Australia and New Zealand). 1 As the Department recently stated in tentatively approving and immunizing the Delta/Virgin Blue alliance, “when airlines request a grant of immunity, they must be able to demonstrate that their proposed alliance will produce substantial benefits that are not otherwise possible unless their request is granted ” (Order 2011

- 5

- 8, May 10, 2011 (emphasis added)). The JBA between American and Qantas will produce substantial benefits that can lawfully be implemented without ATI. The Joint Applicants nonetheless seek Department approval of the JBA under 49 U.S.C. § 41309, which provides that an air carrier or foreign air carrier may file an agreement which shall be approved “when the Secretary finds it is not adverse to the public interest and is not in violation of this part.” As we will demonstrate, the JBA is in the public interest and merits expedited approval.

INTRODUCTION The Joint Applicants seek approval of a new joint venture that will allow them to compete more effectively with the Star and SkyTeam
all iances for traffic between the U.S. and the South Pacific. Star members United and Air New Zealand have enjoyed the benefits of antitrust immunity since 2001 (Order 2001

- 4

- 2, April 3, 2001). SkyTeam member Delta has entered into a joint venture agreement with Virgin Blue and V Australia 2 (Joint Application, DOT

- OST

- 2009

- 0155,!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1 American currently lacks aircraft to serve the South Pacific. Moreover, under the terms of its labor agreements, American is precluded from operating nonstop services on the stage lengths for U.S.

- South Pacific services. 2 The Virgin Blue Group was started in Australia in 2000. Since that time, it has grown from a single aircraft typ e domestic operation to a3 July 9, 2009). On December 10, 2009, t he Australian Competition and Consumer Commission (ACCC) approved the Delta/Virgin Blue alliance, concluding that the proposed coordination wou ld allow the SkyTeam carriers to compete more vigorously and effectively with other carriers and alliances. On May 10, 2011, by Show Cause Order 2011

- 5

- 8, the Department tentatively approved the Delta/Virgin Blue agreement and granted ATI. Approval of th e American/Qantas JBA will foster inter

- alliance competition and create significant consumer benefits without any reduction of competition in any market. American ceased operating its own U.S. to Australia service in 1992, nearly 20 years ago. American
d oes not operate any service to the South Pacific and as noted above is unable to do so with its current fleet of aircraft and because of labor agreements. 3 Thus, it is unlikely that in the foreseeable future American would be a competitor of Qantas on U.S
. - Australia/New Zealand routes. However, given the risk and cost of defending against private antitrust claims (even if meritless), the Joint Applicants are!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! domestic short

- haul, international medium

- haul, and international long

- haul carrier with 87 aircraft. In May 2011, the Virgin Blue Group was rebranded the Virgin Australia Group. While the Virgin Blue brand is positioned as a do mestic Australian carrier, the focus of the V Australia brand is long

- haul international service working with its U.S. partner Delta. 3 American has six B oeing 777

- 300 aircraft on order with expected delivery dates in 2012 and 2013. While these aircraft have a range of approximately 9,000 miles, they will not be configured or delivered anytime in the immediate future. Nor does any plan exist to use these assets to serve Australia/New Z ealand. The aircraft to be delivered are not yet committed to particular routes, and given that American is currently short on long range aircraft to serve its existing routes, American will be carefully considering where these assets will be deployed and how they will be configured. In any event, the terms of American’s current collective bargaining agreement with the Allied Pilots Association would not p ermit service to Australia/New Zealand. That agreement contains a 14:30 flight time limitation. Acc ording to block times published by Qantas, service from Sydney to Los Angeles has an elapsed time of 14:35 to 15:00 depending on equipment type flown. Service from Sydney to Dallas/Fort Worth has an elapsed time of 15:25.4 understandably cautious about proceeding with the ir joint venture without Departmental approval un der 49 U.S.C. § 41309. Indeed, the JBA requires government approval as a condition precedent to implementation (JBA ¶ 2.1(a)). As we show below, the American/Qantas JBA is in the public interest and the Joint Applicants meet the statutory requirements f or approval under 49 U.S.C. § 41309.

I. THE PROPOSED ALLIANCE WILL CREATE SIGNIFICANT PUBLIC BENEFITS Under 49 U.S.C. § 41309(b), the Department “shall approve [an international alliance agreement] when the Secretary finds it is not adverse to the public interest.” Approval in this case is fully consistent with the public interest because the JBA will enable the Joint Applicants to undertake efficiency

- enhancing coordinated activities , will foster alliance competition, and will generate

consumer benefits. The Joint Applicants have entered into the JBA in order to expand and deepen their coordination, expand and develop their network reach, and enhance their ability to compete with Star and SkyTeam. The JBA is necessary because American’s network at present does not extend to Australia and New Zealand at all, while Qantas’ U.S. presence is limited to Los Angeles and just three other U.S. gateway cities
. 4 Thus, without closer coordination, one world customers would lack the same opportunity for inte grated alliance service between the U.S. and!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 4 Qantas operates 45 round trip flights per week between Aust ralia/New Zealand and the U.S. Of these, 34 are to L os Angeles. Its other U.S. gateways are Dallas/F ort Worth (recently added), New York (via Los Angeles) , and Honolulu (also serviced by Jetstar)
.5 the South Pacific that Star already ha s with United and Air New Zealand, and that SkyTeam will soon have with Delta and V Australia
. A. The JBA’s Stated Objective Is To Create Consumer Benefits
The JBA’s stated objective i s “to maximise consumer benefits and operate cost effective and efficient networks by coordinating [the Parties’] activities and operations in relation to the JB Flights” (JBA ¶ 3.3). These consumer benefits include: “(a) improving schedules, stop

- over choices, frequencies and connection times on the JB Flights and all services operated by the parties which connect with the JB Flights; (b) expanding connecting services at primary gateways leading to more one

- stop online points of service; (c) developing new fare products and promotions, offering a high quality, competitive product for consumers on JB Flights as a result of synergies arising from the parties’ cooperation; (d) improving coordination of use of airport facilities by expanding r eciprocal airport lounge access, developing joint lounges in certain airports, improving facilities within lounges, and streamlined check

- in facilities for passengers on JB Flights; (e) easing airport transfers for connecting passengers on JB Flights; (f ) increasing opportunities for frequent flyers who are members of one party’s frequent flyer program to earn and/or redeem frequent flyer points when travelling on the other party; (g) increasing the international competitiveness of both parties; (h) easing the planning of itineraries through the provision of better information to agen t s; ( i) improving holiday/vacation products; and6 (j) offering a single, cohesive product to corporate clients and consumers of the JB Flights” (JBA ¶ 3.3).
These consu mer benefits will be achieved because the JBA creates joint integration and efficiencies that do not generally follow from standard codesharing or other arm’s

- length arrangements. The need for such coordination to achieve these benefits has been recognize d by the Department in numerous antitrust immunity cases. 5 Here, while the Parties are not seeking ATI, the JBA will enable the Joint Applicants to more closely coordinate and improve their product offerings between the U.S. and the South Pacific. The JB A is also designed to maximize incentives to grow trans

- Pacific traffic by means of services, sales, and marketing initiatives for the benefit of the joint venture as a whole, thereby creating stronger inter

- alliance competition with Star and SkyTeam.
B. S pecific Consumer Benefits Arising Out Of The JBA 1. Improved Network and Scheduling The JBA will allow the Joint Applicants to improve “schedules, stop

- over choices, frequencies and connection times on the JB Services

an d all services operated by the P art ies which connect with the JB Services” (JBA ¶ 3.3(a)). Qantas operates 45 weekly flights between Australia/New Zealand and the U.S. Qantas’ primary U.S. gateway is Los Angeles, where it operates 34 weekly flights to destinations in Australia, 14 nonstop to Sydney, 14 to Melbourne (seven nonstop and seven via Auckland), and six to Brisbane. L os Angeles is a “cornerstone” city for American.!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 5 See , e.g., Star Allianc e , Show Cause Order 2006

- 12

- 17, December 19, 2006, at 18 (“[d]ue to the nature of Star’s commercial arrangements and p lans to integrate new members . . . many of these public benefits are likely to be attributable to a grant of antitrust immunity”).7 At LAX, American and Ame r ican Eagle operate nearly 1,000 weekly flights to 38 destinations in North America. American is focusing its operations at its cornerstone citie s, and the ability to coordinate wit h Qantas will allow American to further expand its service from LAX to other destinations given the benefit of network flow. 6 On May 16, 2011, Qantas launched nonstop service from Sydney to Dallas/Fort Worth (with a stop in Brisbane in the return directio n) four days a week using 307 s eat Boeing 747

- 400ER aircraft. Dallas/For t Worth is American’s largest domestic hub and a cornerstone city. From DFW, American and Ame r ican Eagle operate nearly 700 daily flights to 184 destinations worldwide, including multi ple connections to American’s other cornerstones in Los Angeles, Chicago, Miami, and New York. Qantas’ new DFW

- Australia route is supported by QF* codeshare service (operated by American or American Eagle) beyond DFW to 36 destinations across North Americ a ( the U.S., Canada, and Mexico ) . In total, Qantas will have 105 codeshare routes in North America. Under the existing relationship between American and Qantas, there is no coordination of schedules or capacity. The Department’s approval of the JBA will provide the opportunity for the Joint Applicants to reduce transit tim es for consumers by coordinating of schedules. At the South Pacific end, there are five new AA* codeshare routes from Brisbane and a new American codeshare relationship with Jetstar, 7
f urther expanding American’s network reach with connections to a total of 13 destinations in Australia/New Zealand.!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 6 A merican estimates that 61% of Qantas passengers currently flying into Los Angeles travel to beyond destinations in the U.S., Canada, and Mexico. 7 Wholly

- owned by Qantas, Jetstar is a low

- cost carrier offering domestic service in Australia and internatio nal service focused on leisure destinations.8 Deeper cooperation between American and Qantas under the JBA will also lead to improved demand forecasting, prompt identification of
market opportunities, and enhanced ability for growth through the addition of routes and frequencies. 2. Lower Fares and New Fare Products As the Department is aware, close cooperation of the kind envisioned by the JBA between American/Qantas has been shown to result in lower fares, as well as a more seamless product for consumers. The JBA will enable the development of new fare products and lower fares for consumers travelling between the U.S. and Australia/New Zealand. Through joint initiatives such as simplifying the zonal structure 8 used to determine fares to destinations within the U.S. and creating new “Walkabout” multi

- sector passes, the Parties will enhance the product offerings available directly to consumers and through travel agents. Under the proposed simplification of zonal pricing, the current six zones will be reduced to three. This refined structure will be easier to manage and communicate to consumers, and is anticipated to drive higher passenger volume with fare reductions for 64% of U.S. destinations as well as expanded stop

- over options at gateway cities. Fare reductions of up to $700 are proposed for some of t he most popular destinations in the U.S. The JBA will also allow the introduction of a “Walkabout Pass” for
passenge rs travelling to the U.S. from Australia/New Zealand on Qantas and connecting to QF* codeshare flights operated by American or American Eagle. Using the Walkabout Pass, a passenger can purchase a single fare that allows for travel across multiple segments without!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 8 Under the zonal structure, an add

- on fare is coupled with the trans

Pacific fare to determine the applicable fare to many interior markets.9 regard to circuitry rather than purchasing individual fares for each sector that is flown. Under the JBA, American and Qantas will also offer U.S. consumers an Australia pass. Through the JBA, the Joint Applicants will have the ability to plan a nd provide preferential availability (increased access to lower fare inventories). This will enhance the zonal pricing structure by ensuring broader availability of discounted fares across a broader travel period. In addition to nonstop flights between the U.S. and the South Pacific , the JBA will enable American and Qantas to develop and promote fare products for multi

- stop itineraries across a range of destinations to meet the needs of passengers in a way not currently facilitated by one world’s multi

- se ctor products. These itineraries could include services between the U.S. and Australia via Asia or Europe. 3. More Efficient Corporate Travel Procurement Corporate customers are increasingly seeking the simplicity and convenience of a single contract w ith maximized alliance

- based discounts. SkyTeam and Star already leverage their extensive immunized relationships to incentivize corporate customers to deal with the member carriers in their respective alliances . The JBA will
enable one world to better provide these benefits to corporate customers and compete on an inter

- alliance basis. The Joint Applicants plan to develop a joint strategy to better serve their corporate customers by drawing on the carriers’ respective experience and per spective. The JBA will enable American and Qantas to develop joint fare products for large corporations as well as10 small

- to

- medium enterprises and provide incentives for the Parties to use their home point

- of

- sale strengths to promote and distribute these products. 4. Frequent Flyer Improvements The JBA provides incentives for the Joint Applicants to expand recognition of each other’s frequent flyers and to offer enhanced products and services that are typically reserved for own

- program members, such as priority boarding, upgrades and more generous baggage
allowances. This will benefit the Parties’ customers and make the loyalty programs of both carriers more competitive. The JBA also provides incentives for the Parties to maximize the respective
stren gths of both membership bases to conduct joint marketing programs, generating more traffic for the joint network. This benefit will not be possible absent the new deeper relationship under the JBA. 5. Increased Vacation Travel to Australia Approximately half a million visitors from the U.S. arrive in Australia each year. This number, however, has remained stagnant for almost a decade and presents the opportunity for potential growth. Coordination between the Parties on flights under the JBA will provid e a new platform for promoting U.S. leisure travel to Australia.
For exa m ple, AAVacations is an award

- winning tour operator that offers complete travel packages as well as hotels, rental cars and activities. While AAVacations has packages to 320 destin ations around the world, historically it has offered little land product in Australia and has not aggressively promoted Australia as a destination.11 In tandem with the JBA coordination on flights, 9 Qantas’ extensive Australian expertise and infrastructure will a llow AAVacations to develop a comprehensive range of Australia/New Zealand vacation offerings and actively market them to U.S. consumers.

II. THE PROPOSED JBA WILL NOT REDUCE COMPETITION IN ANY MARKET The only exception to the requirement of 49 U.S.C. § 41309 that the Department shall approve agreements in the public interest is where the proposed cooperation “substantially reduces or eliminates competition.” Here, the JBA has no potential to reduce or eliminate competition since American does not compete with Qantas. In evaluating alliance applications, the Department uses “the Clayton Act test, which is used to predict the competitive effects of a proposed merger” ( Star Alliance , Show Cause Order 2009

- 4

- 5, April 7, 2009, at 7). This test considers “whether the alliance would significantly increase concentration in relevant markets, whether the alliance raises concerns about potential anticompetitive effects in light of other factors, and whether entry into the market would be timely, likely, and sufficient either to deter or counteract a proposed alliance’s potential for harm” ( Id .). Here, there can be no reduction in competition as a result of the JBA given American’s lack of service to Australia/New Zealand, much less a “substantial” reduction.!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 9 The addition of the new Dallas/Fort Worth service will increase t he opportunities in the U.S. for tourism in Australia.12 Further, the U.S.

- Australia Open Skies Agreement has led to new entry by carriers such as Delta and V Australia and will give consumers on both sides of the Pacific the benefits of integrated
networks and increased capacity. 10
A. Global The addition of a U.S.

- South Pacific joint venture to one world’s network will expand consumer choice and enhance competition in the global marketplace. Star and SkyTeam have had joint ventures operating in the U.S.

- Europ e market for some time, and integrated operations across the North Pacific as well. one world is finally poised to catch up to its two rivals with the American/British Airways/Iberia and American/JAL joint business agreements that the Department approved a nd immunized last year. However, it is important
that the one world global network does not fall behind Star and SkyTeam across the South Pacific, where Star already has a significant network advantage given its immunized alliance with Air New Zealand and SkyTeam has receive d tentative approval and ATI for the Delta/Virgin Blue joint venture. 11 Integration between American and Qantas under the JBA will give consumers more travel options, shorter travel times and reduced fares and will likely accelerate the i ntroduction of new capacity on trans

Pacific routes.!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 10 As a further example, Strategic Airlines recently filed an application requesting that the Department issue a foreign carrier permit to enable Strategic, consistent with the U.S.

- Australia Open Skies Agreement , to operate service between Australia and the U.S. (Application for Foreign Air Carrier Permit and Exemption, DOT

- OST

- 2011

- 0106, June 3, 2011). 11 In fact, Delta and Virgin Blue cited increased competition from Qantas’

“ one world partnership with American” as a reason why those two carriers had formed their joint venture and were seeking antitrust immunity (Joint Application, DOT

- OST

- 2009

- 0155, July 9, 2009, at 31).13 Together, the Joint Applicants will account for a very small percentage of the global network market, and one world as a whole is the smallest of the three global alliances. Approval of the JBA will not result in any reduction in global competition.
B. U.S. - South Pacific The proposed alliance will enhance competition and expand consumer choice for air transportation services between the U.S. and the South Pacific. Australia and New Zealand are at the core of this region, and travel to the two countries has become highly competitive as a result of open skies agreements between the U.S. and both Australia and New Zealand. The proposed alliance will have zero impact on booking shares, as American opera tes no service to the South Pacific. 12 Moreover, there would be three strong competitors from the U.S. to the South Pacific : United/Air New Zealand, Delta/V Australia and American/Qantas. In these circumstances, it is clear that the JBA will not reduce U .S.

- South Pacific competition.!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 12 In theory, American could route Australia/New Zealand passengers on its ow n flights from the U.S. to Honolulu or Tokyo in order to earn a higher prorate payment, but the time penalty associated with connecting in HNL or NRT renders such service non

- competitive with the nonstops offered by Qantas, United, Air New Zealand, Delta and V Australia.14 U.S. - SOUTH PACIFIC BOOKINGS AND SHARES (MIDT Unadjusted, 2009 - 2010) CARRIER 20 09 20 10 PAX BOOKINGS % PAX BOOKINGS % Qantas 565,270 41% 575,502 37% United 271,526 20% 285,771 18% Air N ew Zealand 252,275 18% 258,414 16% V Australia 97,678 7% 192,573 12% Delta 45,848 3% 98,536 6% Hawaiian Airlines 39,414 3% 53,257 3% Air Pacific 20,224 1% 22,212 1% Other 76,191 6% 87,397 6% TOTAL 1,368,426 1,573,662

Note: V Australia and Delta did not operate U.S.

- South Pacific service prior to 2009.

C. U.S. - Australia
U.S.

- Australia traffic is more competitive now than ever before.
Trans

- Pacific travel between the U.S. and Australia generally involves nonstop flight segments of over 7,500 miles and requires specialized long

- range aircraft. Due to the distances involved, there are only a few city pairs that support nonstop service. However, market share data and route capacity information 13 demonstrates the inc reasing levels of competition on those city pairs where such service is available:!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 13 See Exhibit 2.15 U.S. - AUSTRALIA BOOKINGS AND SHARES (MIDT Unadjusted, 2009 - 2010) CARRIER 20 09 201 0 PAX BOOKINGS % PAX BOOKINGS % Qantas 490,048 46% 506,726 40% United 259,820 24% 276,386 22% V Australia 91,345 9% 175,979 14% Delta 45,574 4% 97,894 8% Air N ew Zealand 68,618 6% 62,007 5% Hawaiian Airlines 39,318 4% 53,189 4% Other 70,645 7% 85,900 7% TOTAL 1,065,368 1,258,081

Note: V Australia and Delta did not operate U.S.

- South Pacific service prior to 2009. Booking and share data from 2007

- 2010 has been provided in the Qantas Airways/American Airlines Joint Business Agreement, Applications for Authorization, Submission to the ACCC, May 11, 2011 , at 53 (available at h ttp://www.accc.gov.au/content/index.phtml/itemId/987619/fromItemId/278039/di splay/application ).
American accounted for only 2.5% of the 1,258,081 passenger bookings between the U.S. and Australia in 2010. American does not operate its own service to Aust ralia (or New Zealand), but is a marketing codeshare participant with limited sales presence and recognition. Further, over the past four years, Qantas’ market share has diminished in all U.S.

- Australia city pairs as a result of increased competition. 14 T his trend can be expected to continue in light of the Delta/Virgin Blue joint venture.!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 14 Data provided by Qantas indicates that Qantas’ booking share has steadily declined from 57% in each successive year since 2007. See Qantas16 1. V Australia V Australia’s operations between Australia and the U.S. were progressively rolled out through 2009. In February 2009, V Australia commenced operations on the Sydney to Los Angeles route and no w offers daily service with 361

- seat Boeing 777

- 300ER aircraft. In April 2009, V Australia launched three flights a week from Brisbane to Los Angeles. In November 2009, these routes were supplemented with
Melbourn e to Los Angeles two times a week, increasing to three times a week in December 2010. In total, V Australia now has 13 flights per week between Australia and the U.S. It has four Boeing 777

- 300ERs in its fleet and three more scheduled for future delivery
. In less than two years of full operation, V Australia has become the third largest carrier between the U.S. and Australia by passenger bookings, with a 14% share in 2010. This rapid expansion of market share demonstrates the degree of penetration availa ble to a new entrant on the trans

- Pacific. At the end of 2010, V Australia represented 17% of nonstop seat capacity between Sydney and Los Angeles, 24% of capacity between Melbourne and Los Angeles and 33% of capacity between Brisbane and Los Angeles. Se e Exhib it 2. More recent 2011 data suggest even further increases in V Australia’s capacity. 15
2. D e lta When Delta’s joint venture with Virgin Blue proceeds, the combined entity will be the second largest U.S.

- Australia carrier as measured by booking sha re serving U.S.

- Aust ralia . Delta/V Australia!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! Airways/American Airlines Joint Business Agreement, Applications for Authoriza tion, Submission to the ACCC, May 11, 2011 , at 53
. 15 See Qantas Airways/American Airlines Joint Business Agreement, Applications for Authorization, Submission to the ACCC, May 11, 2011 , at 64
.17 will hold a combined capacity share between Los Angeles and Sydney of around 40%. See Exhibit 2. Delta began nonstop service between Los Angeles and Sydney in July 2009 and currently operates seven flights a w eek using Boeing
777

- 200LR aircraft. In less than two years since its entry, Delta now
accounts for 8% of all passenger booking s between the U.S. and Australia. In April 2011 Delta represented 8% of seat capacity on nonstop flights between the mainland U.S. and Australia including 15% of capacity on nonstop flights between Los Angeles and Sydney. See Exhibit 2. 3. Star Alliance (United/Air New Zealand) United has been operating South Pacific service for 25 years. United operates 14 weekly flights between the U.S. and Australia consisting of daily flights to Sydney from both Los Angeles and San Francisco. United is the second largest carrier by passenger bookings
on U.S.

- Australia routes with a 22% share in 2010. United has maintained this share over the past three years despite the entry of V Australia and Delta. United’s Vice President for the Pacific has said that “We know how to hold our own and we are certainly going to fight for our position in the Australian market... we are going to hold ou r shares in this market, make no mistake about that” ( The Australian, “Battle over the Pacific Hots Up

- United vows to fight as V Australia starts LA Flights,” 2/27/2009)

. At the end of 2010, United accounted for 31% of seat capacity on nonstop flights between the mainland U.S. and Australia including 63% of capacity on nonstop flights between San Francisco and Sydney and 36% of capacity between Los Angeles and Sydney. See Exhibit 2.18 United’s key competitive strength is the connections it provides to

cu stomers traveling beyond Los Angeles and San Francisco throughout United’s extensive domestic U.S. network. United has more domestic flights from each of Los Angeles and San Francisco than any other carrier. United’s network expande d substantially with t he Continental merger in the fourth quarter of 2010. The combined company has 10 hubs, including hubs in the four largest cities in the U.S. With this extensive footprint, United/Continental possesses a leading domestic and international network, with ma rketing by a powerful single sales
force. United/Continental is already building a stronger presence in the South Pacific with Continental’s proposed introduction of daily Boeing 787 service from its Houston hub to Auc kland in 2012. The new route will b enefit from connecting traffic at both ends, including throughout North America, Europe, and Australia. United has also recently retrofitted its lo ng haul Boeing 747

- 400 fleet by install ing lie

- flat business class sea ts and increasing the num ber of seats in the economy cabin. United and Air New Zealand are members of the Star Allia n ce.
U n ited codeshares on Air New Zealand’s flights between Auckland and Sydney, Brisbane and Melbourne, and on Air New Zealand’s trans

- Pacific flights to Los Angeles and San Fran cisco . Via Auckland, Air New Zealand accounts for 5% of passenger bookings between Australia and the U.S. It operates 18 weekly flights between New Zealand and the mainland United States, with 12 nonstop flights be tween Auckland and Los Angeles (plus one flight via the Cook Islands ) and five nonstop flights between Auckland and San Francisco. Air New Zealand is able19 to provide unlimited direct service by combining rights established
under the U.S.

- New Zealand, U.S.

- Australia, and Australia

- New Zeala nd open skies agreements. Even though Qantas is the largest Australian carrier, its 40%
share of the U.S.

- Australia market is far less than the 70% share that

was held by United/Air New Zealand when that alliance was approved in 2001 (Order 2001

- 3

- 4, March 2, 2001, at 12). Moreover, in that case there was an actual reduction in the number of competitors. 16 Here, Qantas and American do not compete on U.S.

- Australia/New Zealand
routes . This lack of competition, coupled with the new competition introduc ed by U.S.

- Australia open skies, guarantees that the JBA will not result in any competitive harm on routes between the U.S. and this region.

III. JBA APPROVAL IS NECESSARY FOR THE JOINT APPLICANTS TO PROCEED The JBA expressly requires approval from the D epartment, as well as authorization from competition regulators in Australia and New Zealand, as a condition precedent to implementation (JBA ¶ 2.1(a)). As to why American and Qantas, with no overlapping operations, would need Department approval of the JBA to proceed, one need look no further than the class action antitrust bar for the answer. Case reporters abound with meritless class action antitrust claims filed against airlines. While most of these claims are dismissed on summary judgment, the airl ines are still forced to spend millions of dollars in legal fees defending themselves. As a recent example, the United/Continental merger, which has been cleared by the U.S.!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 16 At the time their alliance was approved, United and Air New Zealand both operated Los Angeles

- Auckland, with booking shares of 28% and 40% respectively (Order 2001

- 3

- 4, at 12).20 Department of Justice, has been subjected to meritless antitrust litigation ( See , e.g., Joel Rosenblatt, Continenta l CEO Smisek Defends Proposed United Merger In Lawsuit On Tie

- Up, Bloomberg, August 31, 2010). Indeed, last month the Federal District C ourt for the Northern District of California considered claims of illegal coordination among carriers operating international flights between the U.S. and Asia/Oceania. The alleged unlawful conduct in this case, In re Trans

Pacific Passenger Air Transport Antitrust Litigation, included coordination arising out of the existence of a codesha re agreement (Memorandum and Order Granting In Part and Denying In Part Motions to Dismiss, Case No. C07

- 05634, N.D. Cal. May 9, 2011). The plaintiff’s complaint charged that “ Defendants’ participation in various code

sharing agreements and professional a lliances ‘reinforce and facilitate the conspiracy’” ( Id . at 17), and that “many of the
Defendants and non

- defendant co

- conspirators are participants in a multitude of independe nt code

- sharing arrangements. . . . These code

sharing agreements blur the line between partner and competitor” ( Id .). As demonstrated by this recent decision, the potential risk of antitrust litigation simply from participation in a lawful codeshare agreement is a real threat. Even if the claims are meritless, the cost of defendin g against such suits is high. Approval of the JBA, even without antitrust immunity, would help dissuade groundless litigation. Accordingly, the Department should approve the American/Qantas JBA under 49 U.S.C. § 41309.21 IV. OTHER APPROVAL ISSUES, CONDITIONS , AND INFORMATION The Joint Applicants hereby provide the following additional information.
A. Trans - Pacific Routes
The trans

- Pacific routes flown to the U.S. by Qantas are identified in Exhibit 3. Qantas anticipates that it will continue servi ng these routes after the JBA is approved. Qantas will continue to adjust its schedules depending on market conditions and competitive opportunities.
B. Trans - Pacific Carriers Within The Three Alliances
Star has four trans

- P acific members. Air New Zealan d has ATI with United and operates a hub in Auckland. United and ANA both operate a Narita hub and have ATI with the ot h er . Asiana has ATI with Uni ted and operates a hub in Seoul
. Continental , now merged with United , also operates a hub in Guam. SkyTeam has two trans

- Pacific members
. Delta operates a hub at Narita and Korean Airlines, which has ATI with Delta , operates a hub in Seoul . Delta also has proposed a joint venture, tentatively approved by Order 2011

- 5

- 8, with V Australia, which operate s a hub with Virgin Blue in Sydney. In addition, China Eastern will become a SkyTeam member on June 21, 2 0 11.

one worl d has four trans

- Pacific members, including : Qantas (which operates a hub in Sydney), the American/JAL joint venture (which has hubs in Tokyo at Narit a and Haneda and ATI), and Cathay Pacific/Dragon Air (which operates a hub in Hong Kong).22 C. Codeshare Routes The current international codeshare agreements of the Joint Applicants are listed in Exhibit 4.
D. Relationship To one world The p roposed American/Qantas JBA includes two of one world’s
trans

- Pacific members and will primarily affect South Pacific markets. Although the American/Qantas joint venture will be an integral part of

one world, it will not significantly influe nce operations o f other

one world members, none of which operate competing U.S.

- Australia

serv i ce. one worl d will therefore be well positioned to coordinate and optimize U.S.

- Australia/New Zealand service to the benefit of its member carriers and their passengers.

one world ’ s current members are American, British Airways, Cathay
Pac i fic, Finnair, Iberia, Japan Airlines, LAN, Malev, Mexicana, 17 Qantas, and Royal Jordanian. American has separate antitrust immunity with British Airways, Iberia, Finnair and Royal Jordanian (Orde r 2010

- 7

- 8, July 20, 2010), with LAN/LAN Peru (Order 2005

- 10

- 8, October 13, 2005), and with Japan Airlines (Order 2010

- 11

- 10, November 10, 2010). It is also possible that American, JAL, and Qantas could seek to merge their joint ventures into a single ag reement.
E. Hub Airports American operates hubs at Dallas/Fort Worth, Chicago O’Hare, and Miami, which along with Los Angel es and New York are cornerstone cities. Qantas operates a hub at Sydney.!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 17 Mexicana has ceased operations as a result of its adverse financial position.23 F. Significant Se r vice And Equipment Changes American an d Qantas have not finalized any schedule changes to be made after the JBA is approved and implemented. They may adjust their schedules in the future depending on market conditions and opportunities presented by the competitive environment.
G. Impact On Re venue The JBA is an integral element of each carrier’s global network ambitions. American and Qantas anticipate that the development and expansion of their joint venture will generate additional traffic and revenue, enhance operating efficiencies, and hav e a positive impact on system profitability.
H. U.S. Labor Issues American believes that the transaction raises no significant labor issues. American and Qantas will remain independent. No significant impact on unionized employees is anticipated under the JBA. The applicants believe that the long

- term impact of the transaction will be positive for all existing employees for new job creation.
I. Computer Reservations Systems Consistent with Department precedent, the Joint Applicants request that approva l of the JBA encompass the presentation and sale of their services in computer reservations systems and the operation of their internal reservations systems.
J. Civil Reserve Air Fleet
The JBA between American and Qantas will have no impact on American’s CRAF commitments.24 K. Resubmi s sion Of Alliance Agreements The Joint Applicants will accept the Department’s general condition requiring the carriers “to resubmit for review their Alliance Agreements five years from the data of issuance of the final
order” (Order 2002

- 11

- 12, at 18).
CONCLUSION The American/Qantas JBA is in the public interest and will not result in any reduction or elimination of competition. Because American does not provide its own service to Australia/New Zealand there can be no anticom petitive effect from the JBA. 18 The increased integration between the Parties will allow one world to provide a stronger competitive alternative to the Star and SkyTeam alliances and deliver other substantial benefits to consumers. Accordingly, the Joint A pplicants respectfully request expedited approval of their proposed JBA.!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 18 Indeed, it is for this reason that the Joint Applicants do not seek antitrust immunity

– the JBA could lawfully be implemented without a grant of immunity. But, given the risk and cost of defending against private antitrust claims, the Parties seek the De partment’s app roval of the JBA under 49 U.S.C. § 41309
.PUBLIC VERSION 

# EXHIBIT 1PUBLIC VERSION 

# EXHIBIT 2PUBLIC VERSION

EXHIBIT 2: ROUTE CAPACITY DATA

DECEMBER 2010 City Pair Carrier Frequency* Seats** Seat Share LAX - SYD Qantas 14 22,506 35% United 14 23,188 36% V Australia 7 10,830 17% Delta 7 8,070 12% TOTAL 42 64,594 LAX - MEL Qantas 7 11,749 76% United V Australia 2 3,610 24% Delta TOTAL 9 15,359 LAX - BNE Qantas 6 10,233 67% United V Australia 3 5,054 33% Delta TOTAL 9 15,287 SFO - SYD Qantas 4 6,822 37% United 7 11,594 63% V Australia Delta TOTAL 11 18,416

Notes for Exhibit 2 : * Weekly each way. ** Total monthly each way. Source: OAG data.PUBLIC VERSION

DECEMBER 2009 City Pair Carrier Frequency* Seats** Seat Share LAX - SYD Qantas 14 24,397 44% United 7 11,594 21% V Australia 7 11,191 20% Delta 7 8,339 15% TOTAL 35 55,521 LAX - MEL Qantas 7 12,388 79% United V Australia 2 3,249 21% Delta TOTAL 9 15,637 LAX - BNE Qantas 6 9,475 67% United V Australia 3 4,693 33% Delta TOTAL 9 14,168 SFO - SYD Qantas 4 6,443 36% United 7 11,594 64% V Australia Delta TOTAL 11 18,037PUBLIC VERSION

DECEMBER 2008 City Pair Carrier Frequency* Seats** Seat Share LAX - SYD Qantas 16 26,506 70% United 7 11,594 30% V Australia Delta TOTAL 23 38,100 LAX - MEL Qantas 7 12,246 66% United 4 6,358 34% V Australia Delta TOTAL 11 18,604 LAX - BNE Qantas 6 9,854 100% United V Australia Delta TOTAL 6 9,854 SFO - SYD Qantas 5 8,338 43% United 7 11,220 57% V Australia Delta TOTAL 12 19,558 TOTAL Qantas 34 56,944 66% United 18 29,172 34% V Australia Delta TOTAL 52 86,116PUBLIC VERSION

DECEMBER 2007 City Pair Carrier Frequency* Seats** Seat Share LAX - SYD Qantas 16 26,530 65% United 9 14,212 35% V Australia Delta TOTAL 25 40,742 LAX - MEL Qantas 7 11,749 100% United V Australia Delta TOTAL 7 11,749 LAX - BNE Qantas 5 8,717 100% United V Australia Delta TOTAL 5 8,717 SFO - SYD Qantas 5 8,717 43% United 7 11,594 57% V Australia Delta TOTAL 12 20,311 TOTAL Qantas 33 55, 713 68% United 16 25,806 32% V Australia Delta TOTAL 49 81,519PUBLIC VERSION 

# EXHI B IT 3

QANTAS TRANS - PACIFIC ROUTES T O U.S
.

Brisbane – Los Angeles Brisbane – Dallas/Fort Worth Sydney – Los Angeles Sydney – New York (JFK) Sydney – Dallas/Fort Worth Sydney – Honolulu Melbourne – Los Angeles Auckland – Los AngelesPUBLIC VERSION 

# EXHIBIT 4

### International Codeshare Agreements of Joint Applicants

Air Berlin AB Air Caledonie SB Air Nostrum YW Air France AF British Airways BA Air Niugini PX Cathay Pacific CX Air Pacific FJ Etihad Airways EY Air Tahiti Nui TN EVA Airways BR Air Vanuatu NF Finnair AY Alaska Airlines AS Iberia IB American Airlines AA JAL Express JC Asiana Airlines OZ Japan Airlines JL British Airways BA Jet Airways India 9W Cathay Pacific CX Jetconnect QF* China Eastern MU Jetstar Airways JQ EVA Airways BR Kingfisher IT Finnair AY LAN Airlines LA Horizon Air QX LAN Argentina 4M Iberia IB LAN Express LU Japan Airlines JL LAN Peru LP Jet Airways India 9W MALEV Hungarian Airlines MA Jetconnect QF* Niki Airlines HG Jetstar Airways JQ Qantas Airways QF Kenya Airways KQ Royal Jordanian RJ LAN Airlines LA GOL Airlines G3 MALEV Hungarian Airlines MA WestJet WS South African Airways SA Vietnam Airlines VN Qantas (QF) American Airlines (AA)