### E DGEWORTH 

### E CONOMICS 

### ’

E MPIRICAL 

### I NVESTIGATION AND 

### A NALYSIS OF 

### E CONOMIC 

### I SSUES 

### R AISED IN


### “R ESTORING 

### O PEN 

### S KIES 

### : T HE 

### N EED TO 

### A DDRESS 

### S UBSIDIZED 

### C OMPETITION FROM 

### S TATE 

### O WNED 

### A IRLINES IN 

### Q ATAR AND THE 

### U.A.E.”

M AY 

### 21 , 2015T ABLE OF C ONTENTS



### I. E XECUTIVE 

### S UMMARY



### ................................ ................................ ................................ ......... 1

II. E XPERTS 

### ’ Q UALIFICATIONS



### ................................ ................................ ................................ .. 3 A. John H. Johnson, IV

................................ ................................ ................................ ....................... 3 B. Michael Kheyfets

................................ ................................ ................................ ........................... 3



### III. A SSIGNMENT



### ................................ ................................ ................................ ........................ 4

IV. A SSESSMENT OF 

### C LAI MS 

### R EGARDING 

### “V ALUE 

### ” OF THE 

### O PEN 

### S KIES 

### A GREEMENTS



### ............ 4

V. A SSESSMENT OF 

### C LAIMS 

### R EGARDING 

### “G ULF CARRIERS TAKING SHARE WITHOUT MEANINGFULLY STIMULA TING DEMAND 

### ”

................................ ................................ .......... 6

VI. A SSESSMENT OF 

### A LLEGATIONS 

### R EGARDING 

### D ISPLACEMENT OF 

### U.S. C ARRIERS



### ............... 13

VII. A SSESSMENT OF 

### H ISTORICAL 

### P UBLISHED 

### F ARE 

### T RENDS ON 

### K EY 

### R OUTES



### ........................ 16 A. Analysis of Published Fares on Key Routes Between the United States and the Indian Subcontinent

................................ ................................ ................................ ................................ 17 B. Benchmarking Etihad’s U.S.

- ISC Published Fares to Those of Carriers on Other International Routes

................................ ................................ ................................ ..................... 20



### VIII. A SSESSMENT OF 

### U.S. C ARRIERS 

### ’ I NTERNATIONAL 

### T RAFFIC 

### P ATTERNS



### ............................. 22

IX. A SSES SMENT OF 

### A LLEGATION THAT 

### C APACITY 

### G ROWTH 

### E XCEEDS 

### G LOBAL 

### GDP G ROWTH



### ................................ ................................ ................................ .......................... 26

X. A SSESSMENT OF 

### A NALYSES IN THE 

### C OMPASS 

### L EXECON 

### R EPORT



### ................................ ....... 30 A

. The Compass Lexecon Report Fails to Establish a Causal Link Between the Analyses it Presents and the Alleged Subsidies

................................ ................................ .............................. 31 B. The Compass Lexecon Report Focuses Only On U.S.

- International Pass enger Traffic, Ignoring Key Evidence

................................ ................................ ................................ ................ 33 C. The Entirety of Analyses in the Compass Lexecon Report are Predicated on a False Notion That Etihad and Other Gulf Carriers Must “Stimulate Demand” in Order to be Allowed to Operate

................................ ................................ ................................ ................................ ......... 35 D. The “Basic Analysis” in the Compass Lexecon Report Has Substantial Problems

..................... 36 E. The Regres sion Analyses in the Compass Lexecon Report Have Substantial Problems

............. 37

### I. E XECUTIVE 

### S UMMARY

1. Th e analyses in this report represent an investigation of specific assertions made in a report entitled “ Restoring Open Skies: The Need to Address Subsidized Competition From State

- Owned Airlines in Qatar and the UAE ,” (“ Open Skies Report”) 1 as well as economic issues closely related to those
assertions

. 2 Our findings are as follows:

• The assertion that Etihad Airways (“Etihad”) disp roportionally benefits from the bilateral Open Skies agreement because there are more Etihad flights than those offered by U.S. carriers between Abu
Dhabi and the U.S. represents an incorrect characterization and analysis of competition in the airline
indu stry.

- The appropriate level of analysis when examining competitive alternatives for passenger air travel
is between origin and destination (“OD”) combinations and not between a carrier’s hub (i.e., Abu Dhabi) and a destination. For example, a passenger who wants to travel from New York City to
Mumbai can travel on Etihad with a connection in Abu Dhabi or

— for example

— on American Airlines/British Airways with a connection in London. Though these two journeys do not

connect in the same location, they do in fact compete for the same customers.

• The assertion that Etihad “ takes passengers ” from U.S. carriers ignores the fact that the overall
volume of travel on these routes has expanded since Etihad began operating on them , and that Etihad
serves routes either not served or potentially underserved by U.S. carriers . It also ignores the competition among (i) Gulf carriers, (ii) U.S. carriers, and (iii) other carriers.

- Between 2009 and 2014, t he total volume of passenger traffic between the U.S. and key regions

s erved by Etihad (such as the Indian Subcontinent (“ISC”) and the Middle East) increased, in some cases substantially

.

- In some instances , the U.S. carriers’ losses in share of passengers were more than offset by the
increase in the ir total number of passeng ers traveling on a certain route. For example, while
members of Immunized Alliances 3 served a smaller share of total U.S. to ISC traffic in 2014 than

1 Restoring Open Skies: The Need to Addres s Subsidized Competition From State

- Owned Airlines in Qatar and the UAE , January 28, 2015. (“ Restoring Open Skies ”)

2 The analyses presented below rely on data that Etihad has provided from third party and proprietary sources. We have had discussions with Etihad business personnel regarding these data.

3 For the purposes of this report, “Immunized Alliances” are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases. See U.S. DOT Compendium of Antitrust Imm unity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014). This includes Delta, Air France

- KLM, Alitalia, Czech, Korean, Virgin Atlantic, United, Air Canada, Brussels, Lufthansa, Swiss, Austrian, SAS, LOT, TAP United, Air

1they did in 2009 (36 vs. 41 percent), they actually served 18 percent ( over 223 ,000 ) more
passengers in 2 014 because of the growth in the overall volume of travel on this route.

• Pricing in the airline industry is complex and it is important that appropriate comparison groups be developed when analyzing prices of multiple carriers on the same OD pair. Based o n our analysis, Etihad’s published economy class fares on routes between the U.S. and the ISC are close to or slightly lower than the median fares published by competing carriers. However, the magnitudes of differences vary across routes, with Etihad bein g above the typical fares published for some routes.

- A analysis benchmarking Etihad’s median revenue per kilometer (“RPK”) on routes between the
U.S. and ISC to fares published by Immunized Carriers on transatlantic routes

— wh ere coordination between U.S. a nd foreign carriers is allowed by way of antitrust immunity conferred by the U.S. government

— in dicates that Immunized Carriers ’ RPK is substantially higher

.

• The assertion that Etihad (together with other Gulf carriers) is adding capacity at a rate greater than
forecasted growth in demand is inconsistent with economic intuition and is predicated on faulty analysis. W hen the analysis is revised to account for a more appropriate proxy for growth in demand
, t he implied growth in demand for air travel services is actually greater than the estimated capacity expansion.

- An analysis of U.S. Department of Transportation data indicates that while Etihad has increased the number of available seats on flights between the U.S. and its hub in Abu Dhabi, its load
factors have remained around 80 percent.

2. Th is report also includes an initial assessment of claims made in a report entitled “ A ssessing the Impact of Subsidized Gulf Carrier Expansion on U.S.

- International Passenger Traffic ,” (“ Compass
Lexecon Report”) 4 as well as of the analyses on which those claims are based . Our initial findings are
that the conclusions reached in the Compass Lexecon Report are based on analyses that (i) have not been
shown to have any causal link to the alleged subsidies, (ii) rely solely on U

. S

. - international passenger traffic and ignore other relevant evid ence, and (iii) are predicated on the notion that in order to compete, new entrants must “stimulate demand” by serving only customers not alre ady served by an incumbent
U.S. carrier . These conclusion s are further based on regression models that are fundamentally flawed.

New Zealand, Asiana United, All Nippon Airways, COPA, American Airlines, Lan Airlines, Lan Peru, British Airways, Iberia, Finnair, Royal Jordanian, Japan Air Lines, Virgin Australia.

4 Darin Lee, Ph.D. and Eric Amel, Ph.D., Assessing the Impact of Subsidized Gulf Carrier Expansion on U. S.

- International Passenger Traffic , May 13, 2015. (“ Compass Lexecon Report ”)

2

### II. E XPERTS 

### ’ Q UALIFICATIONS

A. John H. Johnson, IV
3. I am the President and CEO of Edgeworth Economics, L.L.C. (“Edgeworth”). Edgeworth is a consulting firm that provides clients wi th objective expert economic and financial analysis for complex litigation and public policy debates. Edgeworth’s experts work in a wide range of applied economics and econometrics fields, including antitrust and class certification. Edgeworth has office s in Washington, D.C., San Francisco, CA, and Pasadena, CA. I am also on the Board of Directors of both National Appleseed

— a nonprofit network of 17 public interest justice centers in the United States and
Mexico

— and the Hawaii Appleseed Center for Law an d Economic Justice.

4. I received my B.A. magna cum laude with highest distinction in Economics from the University of Rochester and my Ph.D. in Economics from the Massachusetts Institute of Technology (“MIT”). My areas of specialization at MIT were economet rics

— the application of statistics to economics

— and labor economics. During my career as a professional economist, I have provided economic analysis in a wide range of litigation matters involving class certification, antitrust, labor and employment, dama ges calculation, and statistics. Prior to my employment as an economic consultant, I was an Assistant Professor of Economics and Labor and Industrial Relations at the University of Illinois at Urbana

Champaign, where I taught courses in labor economics. I have also taught as an Affiliated Professor at Georgetown University’s Public Policy Institute, including a course on Antitrust and Public Policy.

5. I have testified and provided consulting on a wide

- range of antitrust matters related to class
certificatio n, liability, and damages. I also have written numerous papers and given many talks on topics related to class certification, scientific standards in litigation, appropriate use of econometrics in litigation, and antitrust damages. I previously was an Ed itor of the Antitrust Law Journal . I submitted an amicus brief to the United States Supreme Court in Comcast vs. Behrend on the role of economic analysis in assessing the appropriateness of antitrust class certification. I have been accepted as an expert in Economics, Econometrics, and Statistics in Federal District Courts.

B. Michael Kheyfets
6. I am a Partner at Edgeworth and a professional economist who provides economic and financial research and analysis for clients in a variety of matters. I received my B.A. degree with magna cum laude and Phi Beta Kappa honors, as well as an M.A. degree in economics from Boston University. As a consulting economist, I have advised a variety of clients in litigation, advisory, and regulatory contexts. I have developed an d analyzed large datasets for complex litigation matters and have employed statistical modeling to calculate damages for antitrust and labor disputes. I have also provided expert advice for

3clients on a range of financial modeling issues outside of litigat ion, including in the areas of energy, telecommunications, a nd commercial real estate

. I am a lso a member of the American Bar Association’s Section of Antitrust Law Economics Committee. In this role, I develop resources to educate members of the legal co mmunity about issues in economics and statistics.



### III. A SSIGNMENT

7. We have been asked by Etihad to review the “ Restoring Open Skies ” Report , 5 which we understand was published by a group called Partnership for Open & Fair Skies on January 28, 2015. We
have also been asked to assess several economic claims made by the authors of this report

— which include, among others, American Airlines, Delta Air Lines
, and United Airlines 6

— as well as to develop empirical analyses to evaluate these claims. Lastly, we have been asked t o conduct an analysis of
historical published fare trends on key Etihad routes.

8. Additionally, w e have been asked to provide our preliminary v iew s on a report published on May 13, 2015 by economists Darin Lee, Ph.D. and Eric Amel, Ph.D. of the consul ting firm Compass Lexecon
, and to assess several economic claims made in that report

. 7



### IV. A SSESSMENT OF 

### C LAIMS 

### R EGARDING 

### “ V ALUE 

### ” OF THE 

### O PEN 

### S KIES 

### A GREEMENTS

9. The Open Skies Report argues that “the Open Skies agreements have conferred enormous benefits on Qata r and the UAE by opening the most lucrative market in the world to their airlines, even though they provide essentially no benefit to U.S. carriers in return.” 8 This is, the authors of the Open
Skies Report claim, because of the “low level of demand for t ravel originating in the two Gulf
countries.” 9

10. The notion that Etihad disproportionally benefits fro m the bilateral agreement becaus e Etihad
offers more flights between Abu Dhabi and the U.S. than U.S. carriers do represents a n incorrect analysis of compet ition in the airline industry. T he appropriate level of analysis when examining competitive

5 See http://www.openandfairskies.com/wp

- content/themes/custom/media/White.Paper.pdf
, Accessed May 20, 2015.

6 See http://www.openandfairskies.com/about

- us/ , Accessed May 20 , 2015.

7 See http://www.openandfairskies.com/wp

- content/uploads/2015/05/CL

- paper

- on

- Gulf

- Carrier

- Traffic

- 1.pdf
, Accessed May 20 , 2015.

8 Restoring Open Skies , p. 3.

9 Ibid

.

4alternatives for passenger air travel is between origin and destination combination s 10 and not between a particular carrier’s hub ( i.e. , Abu Dhabi) and a destinatio n.

11. Exhib it 1 illustrates this issue

. For example, a passenger who wants to travel from New York City to Mumbai has many options. Th at passenger can travel on Etihad with a connection in Abu Dhabi

or on a number o f other carriers, including : 11

• American Airlines/British Airways with a connection in London ;

• Emirates with a connection in Dubai ;

• United / Lufthansa /Swiss Air with a connection in Frankfurt , Munich, or Zurich ;

• Air India with a connection in Delhi ;

• Turkish Ai rlines with a connection in Istanbul ;

• Qatar Airways with a connection in Doha ; or

• Delta / Air France / KLM with a connection in Paris or Amsterdam

. Though none of these journeys connect through the same hub , they do in fact compete for the same

customers , as t he customers are seeking to travel from one city to the other

. It is not , however, relevant for an analysis of competition on this route where the trip connects before proceeding to the final
destination ( e.g. , connecting in Abu Dhabi vs. Istanbul )

.

10 See e.g., Brueckner, Jan, Darin Lee, and Ethan Singer. “City

- Pairs Versus A irport

- Pairs: A Market

- Definition Methodology for the Airline Industry.” Review of Industrial Organization 44.1 (2014): 1

- 25. European Commission and the United States Department of Transportation, Transatlantic Airline Alliances: Competitive Issues and R egulatory Approaches , November 16, 2010. (Available at http://ec.europa.eu/competition/sectors/transport/reports/joint_alliance_report.pdf , Accessed May 20 , 2015)

11 http://www.rome2rio.com/s/New

- York

- JFK/Mumbai

- Airport

- BOM

- India , Accessed May 20 , 2015.

5E XHIB IT 1 I LLUSTRATION OF A PPROPRIATE A NALYSIS OF C OMPETITIVE A LTERNATIVES O N THE JFK

- BOM R OUTE

Source: http://www.rome2rio.com/s/New

- York

- JFK/Mumbai

- Airp ort

- BOM

- India , Accessed May 20 , 2015

.



### V. A SSESSMENT OF 

### C LAIMS 

### R EGARDING 

### “G ULF CARRIERS TAKING SHARE WITHOUT MEANINGFULLY STIMULA TING DEMAND 

### ”

12. The Open Skies Report presents various statistics to purportedly demonstrate that Etihad and the
other Gulf

- based car riers are not “meaningfully stimulating demand.” 12 For example, it contends that “the average daily bookings between the United States and the three Gulf hubs has increased by only 85

passengers per day” from 2008 to 2014. 13 As an initial matter, this calc ulation is simply wrong. For example, in the 12 months b etween March 2009 and February 2010
, there w ere an average of 1 74 daily bookings between the U.S. and Abu Dhabi

. In the 12 months between March 2014 and February 2015, 14
there w ere an average of 574 daily bookings between these destinations . This amounts to an increase of

12 Restoring Open Skies , p. 48.

13 Id , p. 49. (Emphasis in original)

14 Etihad pr ovided us with proprietary third party bookings data through February 2015. As a result

— in order to use the latest available data

— we define the years in our analyses between March and February. Additionally, our analyses indicate that overall demand for air travel declined between 2008 and 2009 as a result of the economic downturn generally referred to as the “Great Recession.” Therefore, in order to distinguish the effects of the recession from those of the changing competitive landscape in the airline industry, we begin our analyses of travel volumes in 2009.

6400 bookings

— or approximately 230 percent

— per day

. 15 What this entire analysis ignores, however, is
that by offering passengers access to destinations beyond their hubs, Etihad and the other Gulf

- based
carriers have served a growing overall demand for travel to and from the United States , particularly on routes that were either unserved or potentially underserved by U.S. carriers and their European partners

. 16

13. For example, a substanti al portion of Etihad’s U

. S

. - based traffic originates (or terminates) on the
ISC . In order to study whether Etihad’s presence on this segment of travel has served growing demand (or responded to “pent

- up demand”)
, we ha ve conducted an analysis of passenger flow on Etihad’s OD pairs

— individually and in aggregate

— that connect the U.S. and ISC. Specifically, we analyzed data
from Marketing Information Data Transfer (“MIDT”) databases 17 to assess the total number of

passengers traveling between the U.S. and des tinations in the ISC

. We calculated total traffic between (i)
the U.S. and key regions served by Etihad, (ii) the U.S. and key countries served by Etihad, and (iii) key OD pairs connecting Etihad’s U.S. gateway locations to the ISC

. 18 Exhibit 2 provides an illustration of
how the overall volume of economy class travel between U.S. and ISC has grown since 200 9 . Similar analyses for additional key routes are attached as Appendix A

.

15 Average daily bookings between the United States and Dubai in these two periods increased from 1,204 to 2,076, an increase of over 870 bookings

— or over 70 percent

— per day.

16 Notably, even today, U

. S

. carriers do not offer direct service to many of the regions Etihad serves. Rather, they partner with carriers from Germany, France, and United Kingdom

— among others

— to service these routes. ( See e.g. , ¶ 11 , supra .) Moreover, the U

. S

. carriers also use the networks of the three Gulf carriers to transport their passengers to these destinations. For example, Qatar Airways is a member of the Oneworld Alliance, in which American Airlines is the U

. S

. partner. Am erican Airlines also has a codeshare agreement with Etihad to serve many of the regions it does not fly to itself.

17 The MIDT system captures passenger bookings, irrespective of whether the passenger actually traveled. We use the marketing carrier for a particular booking for the purposes of our analysis.

18 Our analysis of specific OD pairs focuses on the top two routes by total passenger flow between Etihad’s U

. S

. gateway cities and six destinations in the ISC. These routes include New York to Delhi, Sa n Francisco to Delhi, New York to Mumbai, San Francisco to Mumbai, New York to Islamabad, Washington, DC to Islamabad, New York to Dhaka, Washington, D.C. to Dhaka, New York to Colombo, Los Angeles to Colombo, Chicago to Hyderabad, and New York to Hyderaba d.

7E XHIBIT 2 V OLUME OF T RAVEL B ETWEEN THE U NITED S TATES AND I NDIAN S UB - C ONTINENT B Y C ARRIER G ROUP

E CONOMY C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immu nity Cases

. See footnote 3 , above

. 2 Traffic flows are non

- directional.

3 Indian Sub

- Continent includes Bangladesh, India, Pakistan, and Sri Lanka. Source s :

MIDT ; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).

14. As this exhibit shows, the total volume of annual travel between the U.S. and ISC increased by approximately one million passengers

— or 33 percent

— between 2009 and 2014. Etihad served close to 300,000 more passengers in 2014 than it did in 2009, which represents 10 percent growth r elative to total
volume of travel in 2009

. Similarly, t he Immunized Alliances, which include United, Delta, and
American Airlines

— as well as their European partners 19

— serv ed approximatel y 224,000 more passengers in 2014 than they did in 2009 , or 7 percent growth r elative to total volume of travel in 2009

.
15. Exhibit 3 provides a summary of our analysis, which show s the portion of the overall economy
class growth on the se routes served by each carrier

.

19 See footnote 3 , above, for the full list of carriers that have antitrust

- immune relationships with the U

. S

. carriers.

8E XHIBIT 3 S ERVED S HARE OF O VERALL G ROWTH IN V OLUME OF T RAVEL B ETWEEN U NITED S TATES AND K EY R EGIONS E CONOMY C LASS 2009

– 2014

Notes:

1 This analysis compares total travel volume between March 2014 and February 2015 to the total travel volume between March 2009 and February 2010

. 2 Indian Sub

- Continent includes Bangladesh, India, Pakistan, and Sri Lanka. Other carriers include, among

others, Air India, Cathay Pacific, Jet Airways, Turkish Airlin es, Kuwait Airways, Pakistan International Airlines, Singapore Airlines, Air China, Chi na Southern Airlines, and Saudi Airlines

. Middle East includes Bahrain, Iran, Iraq, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syrian Arab Republic, Yemen, and United Arab Emirates. Other carriers include, among others, Saudi Arabian Airlines , Turkish Airlines, Gulf Air, Kuwait Airways, EgyptAir, Aeroflot, Jet Airways, and Cathay Pacific.

3 Traffic flows are non

- directional

. Numbers may not add up due to roundi ng.
4 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of

Antitrust Immunity Cases. See footnote 3 , above. Sources:

MIDT; U.S. DOT Compendium of Antitrust Im munity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014). 10% 9% 18%

10%

1% 42%

20% 33% 47%

20%

10% 55%

7%

- 1%

- 5% 7% 18%

0%

- 5% 12%

4%

- 5%

- 6%

- 9%

-15% -5% 5% 15% 25% 35% 45% 55% 65% 75%

Indian Sub-Continent Middle East Bangladesh India Pakistan Sri Lanka Etihad Airways Emirates & Qatar Airways Immunized Alliances Other Total Change in

Bookings

+33% Total Change in Bookings

+54% Total Change in Bookings

+64%

Total Change in Bookings

+32% Total Change in Bookings

+22% Total Change in Bookings

+88%

916. Exhibit 4 provides a summary which shows the portion of the overall premium class growth on these routes served by each carrier

.
E XHIBIT 4 S ERVED S HARE OF O VERALL G ROWTH IN V OLUME OF T RAVEL B ETWEEN U NITED S TATES AND K EY R EGIONS P REMIUM C LASS 2009

– 2014

Notes:

1 This analysis compares total travel volume between March 2014 and February 2015 to the total travel volume between March 2009 and February 2010.

2 Indian Sub

- Continent includes Bangladesh, India, Pakistan, and Sri Lanka. Other carriers include, among

others, Air India, Cathay Pacific, Jet Airways, Turkish Airlines, Kuwait Airways, Pakistan International Airlines, Singa pore Airlines, Air China, Chi na Southern Airlines, and Saudi Airlines

. Middle East includes Bahrain, Iran, Iraq, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syrian Arab Republic, Yemen, and United Arab Emirates. Other carriers include, among other s, Saudi Arabian Airlines , Turkish Airlines, Gulf Air, Kuwait Airways, EgyptAir, Aeroflot, Jet Airways, and Cathay Pacific.

3 Traffic flows are non

- directional. Numbers may not add up due to rounding.

4 Immunized alliances are defined in accordance with t he U.S. Department of Transportation Compendium of

Antitrust Immunity Cases. See footnote 3 , above

. Sources:

MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014). 11% 19%

12% 12%

- 5% 61%

36% 51% 102%

36%

13% 100%

15%

6%

- 23% 15% 20%

- 1% 4% 15% 29%

5%

- 14% 21%

-35% -15%

5% 25% 45% 65% 85% 105% 125%

Indian Sub-Continent Middle East Bangladesh India Pakistan Sri Lanka Etihad Airways Emirates & Qatar Airways Immunized Alliances Other Total Change in

Bookings

+65% Total Change in Bookings

+91% Total Change in Bookings +119%

Total Change in Bookings

+69% Total Change in Bookings

+13% Total Change in Bookings +181%

1017. Some notable fin dings from these analyses are : 20

• Economy cabin travel between the U.S. and ISC increased by 33 percent from 2009 to
2014

. Premium cabin travel increased by 65 percent over the same period.

• Economy cabin travel between the U.S. and the Middle East incre ased by 54 percent from 2009 to
2014. Premium cabin travel increased by 91 percent over the same period.

• Members of the Immunized Alliances served 7 percent of the growth in U. S. to ISC traffic r elative to
total volume of travel in 2009 , driven primarily by increases in traffic served to In dia and Pakistan.

• Gulf carriers have served a substantial portion of the growth in volume of traffic between the U.S. and
Sri Lanka

— e.g., Etihad alone served 42 percent of the increase in the overall economy class traffic
volume on this route r elative to 2009 . However, members of the Immunized Alliances have offered
little or no service on these routes

.
18. Exhibit 5 summarize s the growth of the overall volume of ec onomy and premium class travel on key routes betw een the U.S. and ISC

.

20 It is our understanding that much of Etihad’s premium class traffic between U

. S

. and Pakistan is derived from U

. S

. government passengers. The corresponding drops in Etihad traffic and rises in the Immunized Carrier traffic are due to new U

. S

. carrier marketed fares on that route, as we understand that the U

. S

. government requires its pers onnel to use U

. S

. marketed fares if they are available.

11E XHIBIT 5 G ROWTH OF THE O VERALL V OLUME OF T RAVEL ON K EY R OUTES B ETWEEN U NITED S TATES AND I NDIAN S UB - C ONTINENT B Y C ABIN C LASS 2009

– 2014

Notes:

1 This analysis compares travel volumes between March 2014 an d February 2015 to the travel volumes between March 2009 and February 2010.

2 Traf fic flows are non

- directional

. Source: MIDT.

19. Notably, some of the largest growth has been on routes i n which there is little or no participation
from members of Immunized All iances. For example, between 2009 and 2014, (i) economy traffic on the New York to Colombo route grew by 127 percent, while premium traffic grew by 205 percent; (ii) economy traffic on the Los Angeles to Colombo route grew by 70 percent, while premium tra ffic grew by 187 percent; and (iii) economy traffic on the New York to Dhaka route grew by 74 percent, while premium traffic grew by 134 percent. Taken together, these analyses indicate that the claim made in the Open Skies Report that Etihad and other Gu lf

- based carriers “can continue to grow only by capturing 37% 70% 127%

31% 74%

27%

9% 21% 31%

8% 115%

54% 96% 187% 205%

62% 134%

81%

- 10% 46% 113%

76% 78%

- 41%

-75% -25% 25% 75% 125% 175% 225%Percent Change in Overall Volume of Travel

Economy Premium

12market share from other airlines” is unsupported by the facts. 21 Rather, these carriers also can grow and have been growing by serving the expanding overall volume of traffic between the U.S. and ot her
countries.



### VI. A SSESSMENT O F 

### A LLEGATIONS 

### R EGARDING 

### D ISPLACEMENT OF 

### U.S. C ARRIERS

20. In order to evaluate the claim that Gulf carriers “take passengers” 22 from U.S. carriers, we analyzed travel flow data from the MIDT system to assess each carrier’s share of pa ssengers travel ing
between the U.S. and destinations in the ISC

. However, looking solely at changes in shares of total travel
obscure s the fact that in some instances, the U.S. carriers’ losses in share of passengers were offset by
the increase in the ir t otal number of passengers traveling on a certain route. That is, because of growing demand on a particular route, U.S. carriers may be nefit from higher numbers of passengers , even if other
carriers have a relatively larger share of the total traffic. 23

21. Exhibit 6 simultaneously illustrates the change between 2009 and 2014 in the Immunized
Alliances’ total volume of economy class traffic serviced between U.S. and key regions, as well as the change during that period i n the Immunized Alliances’ share of economy class traffic serviced. In this exhibit, circles centered above the horizontal axis represent routes where the Immunized Alliances gained traffic volume between 2009 and 2014; circles centered to the left of the vertical axis represent routes where the Immunized Alliances lost share of traffic volume between 2009 and 2014.

22. For example, a circle representing travel between U.S. and ISC is located in the upper

- left quadrant of Exhibit 6
, indicating that while the Immunized A lliance Member s lost 4.4 percentage points
of the overall volume of economy class traffic on this route between 2009 and 2014 (reducing their share
from 40.7 to 36 .3 percent ), they actually serviced 1 8 percent (or over 223 ,000) more passengers

.
23. Similar analyses for additional key routes between the U.S. and ISC , as well as a summary of the analyse s, is attached as Appendix B

.

21 Restoring Open Skies , p. 11.

22 Restoring Open Skies , p. 2.

23 This claim also fails to take into account external factors that may be responsible for certain carriers choosing to limit or terminate s ervice on certain routes in the region, such as armed conflicts or other security concerns. The assessment of these factors, none of which were addressed in the Open Skies Report, are beyond the scope of our analysis.

13E XHIBIT 6 C HANGES IN I MMUNIZED C ARRIERS ’ S HARE AND V O LUME OF T RAVEL B ETWEEN U NITED S TATES AND K EY R EGIONS E CONOMY C LASS 2009

– 2014

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases. See footnote 3 , above.

2 This analysis compares travel volumes between March 2014 and February 2015 to the travel volumes between

March 20 09 and February 2010.

3 Indian Sub

- Continent includes Bangladesh, India, Pakistan, Sri Lanka, and Nepal.

M iddle East includes Bahrain, Iran, Iraq, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syrian Arab Republic, Yemen, and United Arab Emirates.

4 Traffic flows are non

- directional. The value on the chart represents the differences in traffic volumes between

200 9 and 2014 (negative values indicate a decline in volume). Sources:

MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).

24. Exhibit 7 illustrates a similar analysis of premium class traffic , showing the change between
2009 and 2014 in the Immunized Alliances’ total volume of traffic between U.S. and key regions, as well as the change during that period in the Immunized Alliances’ share of premium class traff ic

. Indian Sub

- Continent +223,737 India +176,629

Middle East

- 14,324

Bangladesh

- 6,093 Sri Lanka

- 38 Pakistan +53,240

-100% -50%

0% 50% 100% 150% 200%

-40% -30% -20% -10% 0% 10% 20%Percentage Change in Volume of Travel Carried

Percentage Point Change in Share of Travel Volume

Lost Share & Gained Bookings Lost Share & Lost Bookings Gained Share & Gained Bookings Gained Share & Lost Bookings

14E XHIBIT 7 C HANGES IN I MMUNIZED C ARRIERS ’ S HARE AND V OLUME OF T RAVEL B ETWEEN U NITED S TATES AND K EY R EGIONS P REMIUM C LASS 2009

– 2014

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transpor tation Compendium of Antitrust Immunity Cases. See footnote 3 , above.

2 This analysis compares travel volumes between March 2014 and February 2015 to the travel volumes between

March 2009 and February 2010.

3 Indian Sub

- Continent includes Bangladesh, India, Pakistan, Sri Lanka, and Nepal.

Middle East includes Bahrain, Iran, Iraq, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syrian Arab Republic, Yemen, and United Arab Emirates.

4 Traffic flows are non

- directional. The value on the chart represents the differences in traffic volumes between

200 9 and 2014 (negative values indicate a decline in volume). Sources:

MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (Ju ly 2014).

25. Some notable fin dings from these analyses are that while the Immunized Alliances : Indian Sub

- Continent 33,805

India 30,051

Middle East

13,825

Bangladesh

- 1,084 Sri Lanka

- 33 Pakistan +4,871

-120% -100% -80% -60% -40% -20%

0% 20% 40% 60% 80% 100%

-40% -30% -20% -10% 0% 10% 20% 30%Percentage Change in Volume of Travel Carried

Percentage Point Change in Share of Travel Volume

Lost Share & Gained Bookings Lost Share & Lost Bookings Gained Share & Gained Bookings Gained Share & Lost Bookings

15• lost 4.4 percentage points of the overall volume of economy class traffic on th e U

. S

. - ISC route between 2009 and 2014 (reducing their share from 40.7 to 36.3 percen t), they actually serviced 1 8 percent (or over 223 ,000) more passengers

.

• lost 12 .5 percentage points of the overall volume of premium class traffic on the U

. S

. - ISC route between 2009 and 2014 (reducing their share from 54 .3 to 4 1.8 percent), they actually serviced 27 percent (or over 33 ,000) more passengers

.

• lost 23.8 percentage points of the overall volume of premium class traffic on the U

. S

. - Middle East route between 2009 and 2014 (reducing their share from 5 6.5 to 3 2.7 percent), they actually serviced
1 0 percent (or over 13 ,000) more passengers

.



### VII. A SSESSMENT OF 

### H ISTORICAL 

### P UBLISHED 

### F ARE 

### T RENDS ON 

### K EY 

### R OUTES

26. Pricing in the airline industry is highly complex, both because of the (i) varied arrangements that exist among American and European carriers that al low them to jointly operate international flights on certain North Atlantic routes with immunity from applicable antitrust laws, and (ii) carriers’ individual strategic decisions about on which routes to offer service and the manner in which to offer such service (i.e., “online,” codeshare, or bilateral commercial agreement ). 24 For example, our understanding is that in instances in which two carriers have a codeshare or bilateral commercial agreement, the fare for the entire trip (either non

- stop or with co nnections) is likely to be more competitive relative to the fares charged separately by carriers for the individual segments of the trip. In contrast, some carriers may simply publish fares without issuing rules that limit the eligible airlines or routing s (t his is called a non

- restricted industry type fare ) . In these instances, the publishing carrier does not have a codeshare or bilateral commercial agreement with the connecting carrier, and therefore simply “adds on” the connecting carrier’s segment far e, resulting in a less competitive total fare.

27. O ur analysis is limited to those fares on which (i) one carrier serves the entire route (i.e., the “online” carriers), (ii) the carriers that serve the route are party to a codeshare agreement, or (iii) the

ca rriers that serve the route are party to a bilateral commercial agreement. 25 In order to identify the
relevant carriers on each route, we have relied on an analysis of bookings data and discussions with
Etihad’s personnel . Including non

- restricted industr y type fares (i.e., instances where carriers “add on”

24 A Special Prorate Agreement (“SPA”) is an example of a bilateral commercial agreement.

25 Our understanding, based on discussions with Etihad’s pricing personnel, is that by publishing non

- restricted industry type fares for routes on which they do not have a codeshare or interline agreemen ts, carriers affirmatively chose not to offer a fare that is competitive with those published by carriers that do have commercial agreements. As a result, these non

- commercial fares are not included for the purposes of our analysis.

16the connecting carrier’s segment fare) that do not meaningfully compete with those types of traffic would provide an ove rly broad range of fares. 26

A. Analysis of P ublished Fares on Key Routes Between the U nited S tates and the Indian Subcontinent
28. We ha ve developed a series of analys e s which compare Etihad’s published fares between its U.S. gateway cities and key destinations in the ISC to fares published by other carriers on these routes

. For
each of the ke y routes, 27 we have compared Etiha d’s median published economy cabin fare s to the median published economy cabin fare s of each carrier that operates on th at route in one of the three ways
described above (distinguishing between fares offered by members of I mmunized Alliances from those offered by other carriers)

. 28

29. Exhibit 8 presents an illustration of this analysis for published fares on the route between New
York and Delhi

. As this exhibit shows, Etihad’s published fares are at the high end of the range for some parts of the period, and at the low end for others . For example, in the two years since April 2013 , Etihad’s fare on this route has been on average (i) $ 47 (or 3 percent) lower than the route median fare

pu blished by the U.S. and foreign Immunized Alliance members ; and (ii) $194 (or 11 percent) higher than
the route median fare published by non

- immunized carriers

. Similar analyses for each of the 12 key U

. S

. - ISC routes are attached as Appendix C

.

26 It is our understa nding that the authors of the Open Skies Report have not alleged the existence of predatory pricing by Etihad and other Gulf

- based carriers, and we have not performed a predatory pricing analysis to determine whether Etihad priced its services below its av erage variable costs. (Our understanding is that predatory pricing in the airline industry has previously been at issue in United States of America v. AMR Corporation, American Airlines, Inc., and AMR Eagle Holding Company

. See http://www.justice.gov/atr/cases/f8100/8134.htm
, Accessed May 20 , 2015)

27 The 12 key routes include JFK

- DEL, SFO

- DEL, JFK

- BOM, SFO

- BOM, JFK

- ISB, IAD

- ISB, JFK

- DAC, IAD

DAC, JFK

- CMB, LAX

- CMB, ORD

- HYD, and JFK

- HYD.

28 We h ave used bookings volume data from MIDT to identify and exclude from the analysis instances where carriers publish fares on routes they do not generally operate. Additionally, for the purposes of consistency, published Premium Economy fares are not includ ed in our analysis.

17E XHIBIT 8 A NALYSIS OF M EDIAN P UBLISHED E CONOMY C LASS F ARES ON N EW Y ORK C ITY TO D ELHI R OUTE A PRIL 20 13

– M ARCH 2015

Notes:

1 Immunized Alliance members included in this analysis are American , Delta, United , British Airways, KLM, and Luft hansa

. Etihad's fare was on average $47 (or 3%) lower than the median offered by these carriers.

2 Non

- Immunized carriers included in this analysis are Emirates, Qatar Airways, Air India, and Turkish Airways.

Etihad's fare was on average $194 (or 11%) hi gher than the median offered by these carriers

. 3 ATPCO data only contain base fares, which are supplemented by data on taxes and fees from GDS (for each

carrier and route combination) in order to calculate all

- in fares. All fares have been converted to U .S. dollars. Premium Economy fares are not included in the analysis. S ources:

ATPCO and GDS pricing data ; Canadian Foreign Exchange Services.

30. Exhibit 9 presents a summar y of our pricing analyse s across the 12 key U

. S

. - ISC routes

.

18E XHIBIT 9 A NALYSIS OF M EDIAN P UBLISHED E CONOMY C LASS F ARES ON F LIGHTS B ETWEEN K EY U NITED S TATES AND I NDIAN S UB - C ONTINENT D ESTINATIONS A PRIL 2013

– M ARCH 2015

Notes:

1 Immunized alliances are defined in accor dance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases. See footnote 3 , above.

2 Non

- Immunized carriers included in this analysis are Emirates, Qatar Airways, Air India, and Tu rkish Airways.

3 ATPCO data only contain base fares, which are supplemented by data on taxes and fees from GDS (for each

carrier and route combination) in order to calculate all

- in fares . All fares have been converted to U.S. dollars

. Premium Economy far es are not included in the analysis.

4 Immunized Alliance Members did not offer flights on the New York to Dhaka and Los Angeles to Colombo

routes during this period. Source s :

ATPCO and GDS pricing data ; Canadian Foreign Exchange Services.

31. Some notable fi ndings from these analyses are:

• Imm unized Alliance carriers do not offer flights from New York to Dhaka or from Los Angeles to Colombo. On these routes, Etihad’s published fare s are higher than the median s of the fares published by non

- immunized carriers.

• Etihad began operating out of SFO in November 2014. In the five months since then, its published
fares to Mumbai and Delhi have been the lowest relative to non

- immunized carriers on the 12 key

routes , which is not unusual for a new route under development

. 29

29 W e understand this to be the case based on discussions with Etihad. Average of Etihad's Average of Etihad's Average of Price Difference Average of Price Difference Monthly Fares from Median Competitor Monthly Fares from Median Competitor Route On Route 3 Percent Dollars On Route 3 Percent Dollars

[a] [b] [c] [d] [e] [f] [g]

New York to Delhi $2,011 -3% -$47 $1,770 11% $194 San Francisco to Delhi $1,778 -5% -$82 $1,857 -9% -$161 New York to Mumbai $2,031 -7% -$136 $1,707 11% $189 San Francisco to Mumbai $1,841 -8% -$154 $1,873 -10% -$186 New York to Hyderabad $1,891 5% $99 $1,850 7% $140 Chicago to Hyderabad $2,013 -1% -$17 $2,028 -2% -$31 New York to Islamabad $2,024 -7% -$139 $1,833 3% $52 Washington to Islamabad $2,101 -19% -$393 $1,755 -3% -$47 New York to Dhaka

-- -- -- $1,787 5% $100 Washington to Dhaka $2,680 -26% -$704 $1,817 9% $159 New York to Colombo $2,156 -11% -$228 $1,924 0% $4 Los Angeles to Colombo

-- -- -- $1,540 13% $197 Immunized Alliance Members 1 Non-Immunized Carriers 2

19• Etihad’s published fares on the New York to Hyderabad route have been higher than the median published by other carriers, including members of Immunized Alliances

. Its published fares from Chicago to Hyderabad have been essentially the same as both immunized and non

- immunized
carriers.

B. Benchmarking Etihad’s U

. S

. - ISC P ublished Fares to Those of Carriers on Other International Routes
32. We have also been asked by Etihad to develop a n analysis comparing Etihad’s published fares on
routes between the U.S. and ISC , which rely on comparing Etihad’s U.S. to ISC revenu e per kilometer (“RPK”) to RPK on routes where Etihad does not offer service. While

— as noted above

— p ricing in the airline industry is highly complex , we developed th i s benchmarking analys i s to conduct an initial assessment of how pricing may differ betwee n routes where Etihad operates and ones that are not affected by the alleg ations against Etihad and other Gulf carriers.

33. The benchmark ing group includes transatlantic routes operated by the Immunized Alliances (including United, Delta, American, British Ai rways, Lufthansa, and Air France

- KLM). For each of the 12 key U

. S

. - ISC routes, we calculated Etihad’s median published economy class RPK in each month and compared that series to the median published per

- kilometer economy fares of the immunized carriers o n transatlantic routes that originated in the same U.S. gateway.

34. For example, Exhibit 10 shows a comparison of per

- kilometer published fares on Etihad’s f lights
from New York to Delhi and those on transatlantic rou tes originating from New York operated by
members of antitrust

- immunized alliances. Similar analyses for each of the 12 key U

. S

. - ISC routes are
attached as Appendix D

.

20E XHIBIT 10 E TIHAD R EVENUE P ER K ILOMETER ON N EW Y ORK TO D ELHI R OUTE C OMPARED TO I MMUNIZED A LLIANCE M EMBERS ’ R EVENUE P ER K ILOMETER F ROM N EW Y ORK TO F RANKFURT , L ONDON , AND P ARIS A PRIL 20 13

– M ARCH 2015

Notes:

1 ATPCO data only contain base fares, which are supplemented by data on taxes and fees from GDS (for each

ca rrier and route combination) in order to calculate all

- in fares. All fares have been converted to U.S. dollars

. The analysis uses each carrier's median published round trip economy fare for a given route and month. Premium Economy fares are not included in the analysis.

2 Benchmark includes Immunized Alliance members as per the U.S. DOT Compendium of Antitrust Immunity

Cases: Air France, American, British Airways, Delta, KLM, Lufthansa, and United

. Benchmark includes fares published by carriers on the fo llowing routes: NYC

- FRA, NYC

- LON, NYC

- PAR

. 3 There are 7 distinct benchmark carrier

- route pairings.

4 On average, the median benchmark fare per

- kilometer is 70% higher than Etihad's median fare

. S ources:

ATPCO and GDS pricing data ; Canadian Foreign Exchan ge Services.

21Notably, Immunized Alliance Members’ RPK on transatlantic routes where coordination between U.S. and foreign carriers is allowed by way of antitrust immunity conferred by the U.S. government were 69 to 120 percent higher than Etihad’s median R PKs on routes between the U.S. and ISC.



### VIII. A SSESSMENT OF 

### U.S. C ARRIERS 

### ’ I NTERNATIONAL 

### T RAFFIC 

### P ATTERNS

35. Our analysis of pricing on transatlantic routes in the previous section

— together with the fact that price coordination between the respective U.S. and fore ign carriers is allowed by way of antitrust immunity conferred by the relevant antitrust and competition regulators

— suggests that the shorter transatlantic flights may be generally more valuable for the Immunized Alliance members than other (longer) routes in their networks. As a result, because U.S. carriers and their European partners have the option of allocating their resources between these routes and others
, it is instructive to consider how U.S.
carriers allocate their capacity across the ne tworks they serve.

36. By entering into partnerships with flagship European carriers that are immunized from antitrust laws, American Airlines, Delta Air Lines, and United Airlines have structured their businesses in such a way that a substantial portion of th eir international traffic passes through Europe; specifically, through the hub airports of their respective European partners. The result of this arrangement

— in which each U.S. carrier directs substantial traffic through their single respective European h ub

— is that a single transatlantic flight may have passengers who eventually travel to a broad range of final destinations. For example, on an U nited flight from the U.S. to F rankfurt :

• a portion of the passengers will terminate their trip in Frankfurt ; 30

• some may continue to other European destinations ; and

• others still may continue on to Africa, Asia, or the ISC.
This means that there is a scarcity of passenger capacity, and carriers must decide which mix of passengers will most profitably fill a parti cular transatlantic flight. As a result, U.S. passengers looking to travel to the ISC may find a dearth of options available from the U.S. carriers if those carriers can fill their planes with passengers who seek to travel only to the European hub, or con tinue to a destination other
than the ISC.

37. Our analysis of U.S. Department of Transportation data indicates that over the last several years,
U.S. carriers’ load factors (a measure of capacity utilization) on travel between the U.S. and their

30 Similarly, (i) some passengers on a particular Delta flight from the U

. S

. may only be interested in the direct travel to Paris, while others may be connecting to a destination beyond the Air France hub, and (ii) some passengers on a

s ingle A merican Airlines flight from the U

. S

. may only be interested in the direct travel to L ondon , while others may be connecting to a destination beyond the B ritish Airways hub.

22antitrust

- imm unized partners’ hubs have been generally stable. For example, as Exhibit 11 shows, since
200 7 , the combined load factors of Delta, American, and United on these routes remained at approximately 80 percent. This means that there has been high demand for U.S. carriers’ transatlantic services relative to the capacity those carriers have allocated to that segment.

E XHIBIT 11 A GGREGATE L OAD F ACTOR S FOR D ELTA , A MERICAN , AND U NITED A IRLINES B ETWEEN THE U NITED S TATES AND A MSTERDAM , F RANKFURT , L ONDON , AND P ARIS N OVEMBER 200 6

– O CTOBER 2014

Source : U.S. DOT Bureau of Transportation Statistics, Air Carrier Statistics: T

- 100 International Seg ments

. 38. Given the high load factors, it stands to reason that a revenue

- optimizing U.S. carrier would set its fares for travel to the ISC in such a way that the marginal ISC

- bound passenger would only displace a valuable Europe

- bound passenger on a transatlantic route if the fare for the U

. S

. - ISC trip is suffic iently high. As Exhibit 12 shows, approximately 70 percent of the U.S. carriers’ economy and premium class
traffic originating in the U.S. and passing through the hub cities of their European partners terminates

a fter the flight to the hub city. Similarly, approximately 20 percent of U.S. carriers’ economy and premium class traffic originating in the U.S. and passing through the hub cities of their European partners 80% 79% 79% 82% 79% 80% 81% 79%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Nov2006 - Oct2007 Nov2007 - Oct2008 Nov2008 - Oct2009 Nov2009 - Oct2010 Nov2010 - Oct2011 Nov2011 - Oct2012 Nov2012 - Oct2013 Nov2013 - Oct2014Load Factor

23continues to destinations elsewhere in Europe. In fact, of the total traffic U.S. carriers have sen t through
the hub cities of their immunized European partners in the most recent 12 months, only 2 percent of each economy and premium class has been ultimately destined for the ISC.

E XHIBIT 12 D ELTA , A MERICAN , AND U NITED A IRLINES ’ C ONNECTING VS
. P OINT
- TO
- P OINT T RAFFIC ON F LIGHTS F ROM THE U NITED S TATES TO / THROUGH K EY E UROPEAN C ITIES M ARCH 2014

– F EBRUARY 2015

Notes :

1 Key European Cities include London, Paris, Frankfurt, and Am sterdam.

2 Indian Sub

- Continent includes Bangladesh, Bhutan, India, Maldives, Nepal, Sri Lanka, and Pakistan

. Sources :

MIDT ; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).

39. The allocation of U.S. carriers’ c apacity shown in Exhibit 12 is consistent with the discussion above. That is, for U.S. carriers, traffic to the hub cities of their respective European partners is most valuable on an RPK basis, because of their a ntitrust

- immune arrangements, a s well as because those trips are both direct and shorter. The connections to other regions (including the ISC) are relatively less 2%

73% 19% 6% Premium Class

Indian Sub-Continent Point-to-Point Europe Other International 2%

69% 21% 8% Economy Class

24valuable. As a result
, because of the value of direct and intra

- Europe flights, there is li ttle “displacement” of those passengers by those wanting to go from U.S. to the ISC.

40. Etihad ’s network is different . While hundreds of thousands of passengers fly every year between
the U.S. and its hub in Abu Dhabi , Etihad’s passenger flow generally conti nues beyond its domestic hub, primarily to the ISC. As Exhibit 13 shows, while 1 4 percent of Etihad’s economy class traffic between March 2014 and February 2015

— the latest 12 months for which data are currently av ailable

— terminated in Abu Dhabi, 66 percent proceeded beyond its hub to the ISC. Similarly, while 5 0 percent of Etihad’s premium class traffic during this period terminated in Abu Dhabi, an additional 32 percent proceeded beyond to the ISC.

E XHIBIT 13 E TIHAD ’ S C ONNECTING VS
. P OINT
- TO
- P OINT T RAFFIC ON F LIGHTS F ROM THE U NITED S TATES TO / THROUGH A BU D HABI M ARCH 2014

– F EBRUARY 2015

Note: Indian Sub

- Continent includes Bangladesh, India, Maldives, Nepal, Sri Lanka, and Pakistan.
Sourc e: MIDT. 14%

66% 20% Economy Class

50%

32% 18%

Point-to-Point Indian Sub-Continent Other International Premium Class

2541. In summary, the business model U.S. carriers have chosen gives them relatively little incentive to carry international traffic beyond Europe to the ISC (or even beyond the hub cities of their respective European partners). To the contrary, Etihad ’s model focuses on getting U.S. consumers not just to Abu Dhabi (where U.S. carriers choose to not fly directly) but also to the Indian Subcontinent. As a result, by focusing their transatlantic operations on travel to Europe (to the extent that only 2 p ercent of Europe

bound U.S. traffic terminates in the ISC) U.S. carriers have signaled that the portions of their networks beyond Europe are not as valuable to them as those segments and routes on which they have valuable government

- conferred antitrust imm unity and/or competition law exemptions

.



### IX. A SSESSMENT OF 

### A LLEGATION THAT 

### C APACITY 

### G ROWTH 

### E XCEEDS 

### G LOBAL 

### GDP G ROWTH

42. The Open Skies Report states that Etihad and the other Gulf

- based carriers are “adding [...] new capacity at rates that substantially exceed glo bal GDP growth

— which drives growth in demand for air transport services.” 31 As a result, the Open Skies Report claims, “the only way to accomplish this feat is to continue taking passengers from other countries’ carriers.” 32 Putting aside the notion that “ taking passengers from other countries’ carriers” 33 is consistent with precisely the kind of competitive process
that benefits consumers , the analysis presented in Figure 20 of the Open Skies Report relies on inappropriate data and flawed economic reasoning

.
43. As an initial matter, an analysis of U.S. Department of Transportation data indicates that while Etihad has increased the number of available seats on flights between the U.S. and its hub in Abu Dhabi,
its load factors have remained around 80 percent. F or example, as Exhibit 14 shows, while Etihad
increased the annualized number of total seats flown between U.S. and Abu Dhabi from 192,000 in 2009 to 845,000 in 201 4 , the load factor actually increased (and was at or above 80 percent in the intermittent years).

31 Restoring Open Skies , p. 41.

32 Ibid

.
33 Ibid

.

26E XHIBIT 14 E TIHAD ’ S A NNUALIZED C APACITY AND L OAD F ACTOR ON F LIGHTS B ETWEEN THE U NITED S TATES AND A BU D HABI N OVEMBER 200 6

– O CTOBER 2014

Source : U.S. DOT Bureau of Transportation St atistics, Air Carrier Statistics: T

- 100 International Segments.

44. Further, t he forward

- looking analysis of supposedly “excessive expansion” by Etihad and the
other Gulf

- based carriers in the Open Skies Report essentially relies on a comparison of projected g lobal Gross Domestic Product (“GDP”) growth between 2012 and 2020 to the growth rate of capacity for those carriers during the same period. That is, the annual 3 percent growth in global GDP appears to the
authors of the Open Skies Report to be too low to justify the 11 percent annual growth in the capacity of
Gulf

- based carriers

. 34

34 The estimates of capacity growth are from a thesis submitted by a student in MIT’s Master of Science in Transportation program. (Karim Al

- Sayeh, The Rise of the Emerging Middle East Carriers: Outlook and Implications for the Global Airline Industry , Massachusetts Institute of Technology, June 201 4.) We have not independently verified these estimates and do not represent that they are consistent with Etihad’s (or the other Gulf carriers’) own expectations about capacity growth. Rather, they are used here for the purpose of illustrating the underl ying flaws of the analysis presented in the Open Skies Report. 51% 78% 73% 84% 83% 87%

80% 79%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

- 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 900,000

Nov2006 - Oct2007 Nov2007 - Oct2008 Nov2008 - Oct2009 Nov2009 - Oct2010 Nov2010 - Oct2011 Nov2011 - Oct2012 Nov2012 - Oct2013 Nov2013 - Oct2014Capacity (Available Seats)

Capacity Load Factor

2745. This comparison is fatally flawed as a matter of economics for a number of reasons. First, the worldwide measure of GDP provides little information about demand growth in areas where Gulf
carriers’ U

. S

. - based traffic actually goes . I n fact, as discussed above, a substantial portion of Etihad’s
U.S. traffic currently goes to (or from) the ISC and Southeast Asia . As a result, it is the expected growth
demand of these regions

— as opposed to worldwide demand

— that is relevant for such an analysis.

46. Additionally, the analysis presented in the Open Skies Report entirely ignores the economic concept of income elasticity of demand , i.e., the relationship between changes in income and chan ges in the quantity demanded of a particular good , as represented by the formula below

. 35

IIIIIIIIIIII EEEEEEEEEEEE EEEEEE oo DD DD = % CC h aa DD DD % CC h aa IIIIIIIIIIII

47. For example, if a 1 percent increase in income is expected to lead to a 2 percent increase in
demand for air travel , the elasticity of de mand equals 2.0; in this case, the demand for air travel is said to
be elastic . Similarly, if demand for air travel is not particularly sensitive to changes in income (e.g., a 1 percent change in income leads to only a 0.5 percent increase in demand, for an elasticity of 0.5), the
demand is said to be inelastic . As a result, without applying this metric

— which measures customers’ varied preference for different goods

— a direct comparison of GDP growth to capacity expansion has no useful economic meaning.

48. A number of economic studies have analyzed income elasticity of demand for air travel services. For example, a study by the IATA estimated that long

- haul demand elasticities in developing countries

— where Etihad conducts a substantial portion of its business

— were approximately 2.0; 36 i.e., demand for
air travel would increase by 2 percent for every 1 percent increase in national income.

Exhibit 15
, below provides a revised version of the analysis presented in Figure 20 of the Open Skies Report.

35 Nicholson, Walter, and David C. Stapleton. Microeconomic theory: basic principles and extensions , 2002, p. 178.

36 IATA, Air Travel Demand , IATA Economics Briefing No. 9, April 2008, Table 2.

28E XHIBIT 15 R EVISED A NALYSIS OF “GDP VERSUS A IRLINE C APACITY G ROWTH R ATES ” F ROM F IGURE 20 OF THE O PEN S KIES R EPORT

Notes :

1 “Emerging and Developing Asia” is c omposed of 29 countries, including Banglade sh, India, Indonesia,

Malaysia, Nepal , Philippines, Sri Lanka, Thaila nd , and Vietnam.

2 “Implied Growth in Demand for Air Travel” is calculated by multiplying the GDP growth for “Emerging and

Developing Asia” by an income elasticity of demand of 2.0. Sourc e s :

International Monetary Fund, World Economic Outlook Database, October 2014



### . IATA, Air Travel Demand , IATA Economics Briefing No. 9, April 2008

. Restoring Open Skies Report, citing to : Karim Al

- Sayeh, The Rise of the Emerging Middle East Carriers: Outlo ok

and Implications for the Global Airline Industry , Massachusetts Institute of Technology, June 2014.

49. First, as this exhibit shows, the GDP in developing Asian economies (illustrated in the exhibit with an orange line)

— where Etihad and the other Gulf carr iers focus their U

. S

. - based traffic

— is projected to grow at rates more than double those of the worldwide average (represented by the red line)

. Economic growth in individual countries on the ISC such as India, Bangladesh, Sri Lanka, and Pakistan (represe nted in the exhibit by dashed lines) generally have projected growth rates similar to the regional

average. As a result, using the economic growth projections in the relevant region, combined with the 0% 2% 4% 6% 8% 10% 12% 14%

2013 2014 2015 2016 2017 2018 2019Growth Rate

Emerging and Developing Asia Bangladesh India Sri Lanka Pakistan Estimated Growth in Gulf Carriers' Capacity

Estimated Growth in Global GDP

29appropriate elasticity factor of 2.0, the implied grow th in demand for air travel services (represented in the exhibit by the blue line) is actually greater than the Gulf carriers’ estimated capacity expansion.

50. It is important to note that the explanation above is intended to illustrate the flawed and incompl ete analysis presented in the Open Skies R eport , rather than express a definitive view on the “correct” level of expansion . However, even with the revisions presented above, such a simplistic approach may fail to address other factors that may drive strat egic decisions with respect to capacity expansion. For example, one issue the Open Skies Report fails to consider is the possibility of pent

- up demand in the ISC . That is, in addition to expected future growth, capacity expansion may be planned to
addres s the surplus demand that already exists in regions historically underserved by international
carriers. 37 Other factors unrelated to economic growth may be relevant as well. For example, a 2013 report published by the U

. S

. - UAE Business Council identified “geographic centrality of the U.A.E” as “the most compelling” 38 factor for Gulf carriers’ growth. Specifically, the report stated that “Dubai and Abu Dhabi are the new crossroads of the globe, perfectly situated to serve as connecting hubs for traffic
movi ng between North America, South America, Europe and Africa to the west and south on one hand, and on the other the nearby Middle East, India and South Asia, China and the rest of East Asia, Southeast Asia, and Australia and New Zealand.” 39 Additionally, th is report noted “about 60 percent of the world’s population lives within six flying hours of the U.A.E.” 40 Taken together, potential pent

- up demand and the “geographic centrality” of Etihad’s hub illustrate the types of factors ignored by the simplistic

co mparison of capacity growth and global GDP growth presented in the Open Skies Report.



### X. A SSESSMENT OF 

### A NALYSES IN THE 

### C OMPASS 

### L EXECON 

### R EPORT

51. In addition to assessing certain claims in the Open Skies Report, we have also been asked by
Etihad to conduct an in itial review of the analyses and claims presented in the Compass Lexecon Report

.

37 As described above, arrangements between U

. S

. and European carriers provide little incentive to send traffic beyond Europe to the ISC.

38 U.S.

- UAE Business Council, U.S.

- U.A.E. Commercial Aviation: Taking Flight , 2013 (“ Taking Flight Report ”) , p. 3. (Ava ilable at http://usuaebusiness.org/wp

- content/uploads/2013/03/US

- UAE

- aviation

- report_Published.pdf
, Accessed May 20 , 2015)

39 Ibid.

40 Ibid. Notably, th is report was authored by a Dr. Robert Britton, who for 20 years was an employee of American Airlines. ( See http://www.airlearn.net/Rob%20Britton%20CV

- Resume.pdf , Accessed May 20 , 2015) Since the publication of the Open Skies Report, Dr. Britton appears to have cast doubt on his own research of the benefits of the U.S.

- UAE aviation relationship. (See http://www.airlearn.n et/Reconsidering

- Mar2015.pdf , Accessed May 20 , 2015) However, to our knowledge, Dr. Britton has not reversed his position with respect to UAE’s “geographic centrality” as an important growth factor.

30The report present s what i t refer s to as a “basic analysis of passenger booking data,” 41 as well as an “econometric analysis.” 42 At this time, the authors of the report have n ot made public either the data sets or the computer code used for conducting the econometric analyses in their report . As a result, we are currently limited to considering the models it describe s and the results p resent ed

.

A. The Compass Lexecon Report Fails to Establish a Causal Link Between the Analyses it Presents and the Alleged Subsidies
52. The Compass Lexecon Report begin s with the claim that “[c]ompelling evidence has recently emerged that [the Gulf carriers] have been the beneficiaries of over $40 billio n dollars of state subsidies and other unfair advantages over the past decade.” 43 As an initial matter, this appears to be an uncritical acceptance of the “evidence,” as we understand the nature of that evidence is currently under dispute. Nonetheless, th e Compass Lexecon Report’s claims that “U.S. carriers have suffered [traffic losses] as a result of Gulf carriers’ subsidized U.S. expansion .” 44 This is a critical assumption , as it predicates the entirety of the claims in the Compass Lexecon Report . That is, the implication is that the results of their analyses

— which look solely at changes in traffic volumes between various points

— are caused entirely by the alleged subsidies . This “ causal link ” lacks any supporting evidence . For example, the Compass
Lex econ Report fail s to explain how the alleged presence of subsidies has caused U.S. carriers to “suffer
traffic losses.” Rather, it simply points to the alleged “proliferation of subsidized Gulf carrier capacity to
the United States” 45 without explaining wh y the proliferation in and of itself would lead to U.S. carriers losing business.

53. As we have stated above, 46 it is our understanding that the authors of the Open Skies Report have not alleged the existence of predatory pricing by Etihad and other Gulf

- based carriers. Nor has the Compass Lexecon Report provided any analysis of prices. As a result, it has failed to provide any explanation or empirical support as to how the alleged subsidies have caused the results they have found. We discuss below why the a nalyses presented in the Compass Lexecon Report are fundamentally flawed. However, even taking those analyses at face value, none of them provide any explanation as to the
mechanism by which the alleged subsidies affected U.S. carriers’ respective busines ses.

41 Compass Lexecon Report, p. 4.

42 Id. , p. 12.

43 Id. , p . 1.

44 Id. , p. 3. Emphasis added.

45 Ibid.

46 See footnote 26 , supra

.

3154. To the contrary, w e have developed a n initial series of analyses that compare Etihad’s published
fares between its U.S. gateway cities and key destinations in the ISC to fares published by other carriers
on these routes. 47 Based on our analysis, we fo und that Etihad’s published economy class fares on routes
between the U.S. and the ISC are close to or slightly lower than the median fares published by competing carriers. However, it is also the case that the magnitudes of difference vary across routes, with Etihad being above the median fares published for some routes

.
55. The importance of establishing causality when conducting economic analyses of antitrust and competition issues is well

- established, and courts have criticized economists that failed to sh ow how their
models and results tie d to the facts of the case at hand. For example, in Comcast Corp. v. Behrend , the Supreme Court of the United States stated that “ any model supporting a plaintiff’s damages case must be consistent with its liability case , particularly with respect to the alleged anticompetitive effect of the
violation.” 48

56. Similarly, the notion of causality is paramount in e conomic analysis

. For example, as one leading econometrics textbook put it, “the economist’s goal is to infer that on e variable has a causal effect on another variable. Simply finding an association between two or more variables might be suggestive, but unless causality can be established, it is rarely compelling.” 49 Additionally, as prominent econometrician (and Compas s Lexecon affiliate ) Dr. Daniel Rubinfeld explains in the Federal Judicial Center’s Reference
Manual on Scientific Evidence: 50
Causality cannot be inferred by data analysis alone; rather, one must infer that a causal relationship exists on the basis of an underlying causal theory that explains the relationship between the two variables. Even when an appropriate theory has been identified, causality can never be inferred directly. One must also look for empirical evidence that there is a causal relationship. Conversely, the fact that two variables are correlated does not guarantee the existence of a relationship; it could be that the model

— a characterization of the underlying causal theory

— does n ot reflect the correct interplay among the explanatory variables.

47 See Section VII

. A , supra

.
48 Comcast Corp. v. Behre nd , 569 U.S. (2013), citing ABA Section of Antitrust Law, Proving Antitrust Damages: Legal and Economic Issues 57, 62 (2d ed. 2010).

49 Wooldridge, Jeffery M., Introductory Econometrics: A Modern Approach . 4th ed. 2009, p. 12. (Emphasis in original)

50 Fede ral Judicial Center, Reference Manual on Scientific Evidence 432 (3d ed. 2011), p. 310.

32Having failed to establish a causal link between the alleged subsidies and the outcomes of their analyses, the results presented in the Compass Lexecon Report do not support the main claim

. 51

B. The Compass Lexecon Report Focuses Only On U

. S

. - International Passenger Traffic , Ignoring Key Evidence
57. As the title of the Compass Lexecon Report indicates
, it provides an analysis of the impact that the alleged su bsidi es have had “ on international passen ger traffic to/from the United States.” 52 As a result, it fails to paint a complete picture of competition on routes served by Etihad and other Gulf
carriers , as it only looks at a selected sampling of capacity and traffic flow measures, while ignoring all
other information

. In this report, we have conducted analyses of Etihad’s and U.S. carriers’ load
factors
, 53 a s well as an initial analysis of published fares on key U

. S

. - ISC routes

. 54 We have also found that in many instances, while competition may have reduced U.S. carriers’ shares of total traffic, the same
U.S. carriers still served more passengers because the overall volume of travel expanded. 55 However, the Compass Lexecon R eport

— by design

— ignores all of these contradictory data and facts

.
58. Notably, Compass Lexecon economists have previously provided consulting services for U.S. carriers, including advising on the consummated mergers, slot swaps, and similar transactions between (i) Delta Air Lines and Northwest Airlines in 2008, 56 (ii) Delta Airlines and U.S. Airways in 201 1 , 57 and (iii)
U.S. Airways and American Airlines in 2013

. 58 As part of their work in the se matters, Compass Lexecon
economists have described economic frameworks for assessing potential competitive effects in the airline industry, in large part focusing on the benefits or costs of changes in the competitive landscape to

51 Notably, we have published work on the importance of causality in antitrust analysis: “it is the responsibility of a prudent economic expert to connect causally the c omplained

- of actions to the decline in performance of the plaintiff, rather than simply point out their concurrency.” (Johnson, J. H., Michael Kheyfets, and Matthew Milner. “Causality and Damages Estimation in Antitrust Litigation: A Case Study.” Antitrust Report. Issue 1, 2011. Emphasis in original.)

52 Compass Lexecon Report, p. 1.

53 See Sections VIII and IX

. 54 See Sections VIII

. A and Appendix C.

55 See Sections VI and Appendix B.

56 See http:/ /www.compasslexecon.com/highlights/delta

- and

- northwest

- merger/?year=2008 , Accessed on May 20, 2015.

57 See http://www.compas slexecon.com/highlights/seagate

- samsung

- transaction/delta

- air

- lines

- us

- airways

- slot

swap/?year=2011 , Accessed on May 20, 2015.

58 See http://www.compasslexecon.com/highlights/compass

- lexecon

- experts

- provide

- key

- economic

- advice

- and

analyses

- on

- us

- airways

- and

- american

- airlines

- merger/?year=2013 , Accessed on May 20, 2015.

33consumers

. For example, in an analysis of the Delta/US Airways slot swap transaction, Compass
Lexecon : 59

• Complained of the FAA “ focusing on unsubstantiated, theoretica l harms, while ignoring the clear and
well

- documented output expansion and consumer benefits .” ( ¶ 3)

• Highlighted their “ analysis of the competitive effects of the transaction [that] examined the number of airport

- to

- airport routes and passengers immediately affected by the gain or loss of a competitor according to Delta ’ s and U.S. Airways ’ proposed post

- transaction schedules ,” which apparently
showed that “ the net number of passengers benefitting from increased nonstop competition is 4.0
million. ” (¶4)

• Us ed “ results on the relationship between fares and concentration from empirical literature ” to show
that “ fares on routes with a change in non

- stop competition following the transaction would fall, on net, by $44 million annually. ” (¶4)

• Discussed an “ analysis of consumer benefits [which] documented that, according to the parties' proposed post

- transaction schedules, the net seat capacity on arriving and departing flights will increase by 4.4 million annually at LGA and 2.5 million annually at DCA, reflecting th e strongly pro

competitive nature of the transaction. Due to this increased capacity as well as improved service
, more passengers will choose Delta and U.S. Airways after the transaction than before. ” (¶5)

• “E stimated the value to consumers from the capacit y expansions and quality improvements due to the transaction to be $153 million annually .” (¶5)

• Stated that “b ecause increasing competition generally enhances consumer welfare, even if it is rough for the competitors involved , we assume that FAA has in min d a scenario in which Delta or
U.S. Airways drive the smaller carriers out of certain routes and then attempt to increase prices on
those routes. However, FAA provides absolutely no evidence in support of such a scenario. Indeed, it
is difficult to see the economic logic behind the claim. ” (¶25)
These positions are notable because the authors in this matter appear to be taking views inconsistent with
those Compass Lexecon economists took in the Delta/US Airways transaction

. Here, t he Compass
Lexecon has ch aracterized output expansion as having a negative effect on competition, have conducted
no evaluation of consumer benefits or improved service at all, and have not analyzed effects of the alleged
conduct on fares. In fact, the last of the excerpts above a ppears to be the exact opposite of the position
U.S. carriers and their economists have taken in this matter. 60 As Compass Lexecon economists pointed

59 Non

- Confident ial Joint Appendix to Comments of Delta Air Lines, Inc. and U.S. Airways, Inc., March 22, 2010. (Emphasis added) Available at http://www.airlineinfo.com/faapdf2/208.pdf

.
60 Notably, the word “consum er” does not appear at all in the body of the Compass Lexecon Report.

34out in 2010, “it is unusual, to say the least, for a government agency to worry about the deleterious effe cts of increasing competition .” 61

C. The Entirety of Analyses in the Compass Lexecon Report are Predicated on a False Notion That Etihad and Other Gulf Carriers Must “Stimulate Demand” in Order to be Allowed to Operate
59. A key concept introduced and repeated

— but not defined in economic terms

— in the Compass
Lexecon Report is the notion that carriers “stimulate demand.” 62 Before proceed ing with our assessment
of their analyses, it is important to address this notion, as the entirety of their conclusions are predica ted
on the claim that Gulf carriers have not “stimulated” demand

. While the Compass Lexecon Report does not explain this concept, we understand it to mean servicing a customer who would not otherwise be serviced by U.S. carriers

.
60. This definit ion has no b asis in economics . The Compass Lexecon Report fail s to point to any economic or legal doctrine which indicates that a n incumbent is entitled to the customers it serve s and the only way for new entrants to compete “fairly” is to sell their products to cust omers who would not otherwise purchase from the incumbent . The nature of economic competition , as well as U.S. antitrust law, does not guarantee any such entitlement to maintaining a firm’s business forever; rather firms may try to not only grow the size of the markets in whic h they operate, but also try to attract their competitors’ customers through lower pricing and higher quality products.

61. Importantly, U.S. competition laws are concerned with protect ion of competition, not individual competitors

. As t he U.S. Department of Justice has stated: 63
The focus on protecting the competitive process has special significance in distinguishing between lawful and unlawful unilateral conduct. Competition produces injuries; an enterprising firm may negatively affect rivals’ profits or drive them out of business. But competition also benefits consumers by spurring price reductions, better quality, and innovation. Accordingly, mere harm to competitors is not a basis for antitrust liability. “The purpose of the [Sherman] Act,” the Supreme Court instructs, “is not to protect businesses from the working of the market; it is to protect the public from the failure of the market.” Thus, preserving the rough

- and tumble of the marketplace ultimately “promotes the consumer intere sts that the Sherman Act aims to foster.”

61 Ibid. , ¶24. (Emphasis in original)

62 Compass Lexecon Report, p. 2.

63 U.S. Dep't of Justice, Competition and Monopoly: Single

- Firm Conduct Under Section 2 of the Sherman Act (2008), Cha pter 1, Section III.D. (Emphasis added) Available at: http://www.justice.gov/atr/public/reports/236681_chapter1.pdf

35However, the Compass Lexecon Report contains no analysis of competition , but only the alleged effects of competition on the U.S. carriers

. That is, when it claims that its analyses “ demonstrate that subsidized
Gulf carrier expansion to the United States has directly harmed U.S. carriers and their JV partners
, ” 64 that is a finding

— even if it were true

— that is irrelevant to an economic analysis of alleged anticompetitive

acts.

D. The “Basic Analysis” in the Compass Lexeco n Report H as Substantial Problems
62. The “basic analysis” in the Compass Lexecon Report begins with the claim that “Gulf carriers have failed to meaningfully stimulate additional local traffic to/from their hub cities.” 65 First, this analysis does not actuall y present capacity and growth in traffic for Etihad, and it is unclear if the analysis shown ( i.e. , just for Emirates) is intended to be representative of the other Gulf carriers. As we discussed above, bookings between the U.S. and Abu Dhabi have grown s ubstantially in recent years. 66 Further
, as we have also discussed above, it is inappropriate and misleading to compare Etihad’s capacity on flights
between U.S. and Abu Dhabi to the number of passengers that terminate their trip there because Etihad’s

pas senger flow generally continues beyond its domestic hub, primarily to the ISC. For example, as
Exhibit 13 shows, while only 14 percent of Etihad’s economy class traffic between March 2014 and February 2015 termina ted in Abu Dhabi, 66 percent proceeded beyond its hub to the ISC.

63. Notably, the authors of the Compass Lexecon Report have failed to conduct any analysis of load
factors to test whether the apparently vast differences between capacity and bookings on flight s between
the U.S. and Gulf carriers’ hubs has resulted in “excess ” capacity. 67 In fact, as we showed in Exhibit 14
, while Etihad has increase the number of total seats flown between U.S. and Abu Dhabi over the rel evant period , the load factor on this route actually increased

.
64. Potentially recognizing the importance of the “beyond the hub” destinations, the Compass
Lexecon Report purports to conduct an analysis of that travel as well. However, it does not actually

p resent any analysis of the changes in traffic volume traveling from the U.S. to key “beyond” destinations. Rather, it simpl y r estates the claim made in the Open Skies Report that “Gulf carriers have grown their
share of U.S.

- Indian Subcontinent bookings f rom approximately 12% in 2008 to 40% in 2014.” 68 As we
showed in Exhibit 2 , the overall volume of economy class travel between U.S. and ISC has grown

64 Compass Lexecon Report, p. 20.

65 Id. , p. 5.

66 See ¶ 12 , supra.

67 See Compass Lexecon Report, Exhibit 3.

68 Id. , p. 9.

36substantially since 2009. (Analyses in Appendix A show the same pattern for premium class travel and
for individual routes within the ISC.) Further, as Exhibit 6 shows, while the Immunized Alliance
Members lost 4.4 percentage points of the overall volume of economy class traf fic on this route between 2009 and 2014 (reducing their share from 40.7 to 36.3 percent), they actually serviced 18 percent (or over 223,000) more passengers

.

65. T he “basic analysis ” in the Compass Lexecon Report also claim s that “if it were true that Gulf

ca rriers’ services stimulated significant amounts of new traffic [between the U.S. and ISC] one would expect to see faster traffic growth [on those routes] than between [China and South Korea].” 69 However,
the Compass Lexecon Report fail s to explain why “one would expect” that the aggregate of travel
between U.S. and China/South Korea is a meaningful or appropriate benchmark. Additionally, this analysis ignores all other aspects of the competitive landscapes on the respective individual routes

. 70

66. Lastly, the Compass Lexecon Report find s it “unsurprising” that t he Gulf carriers have allegedly

“ failed to meaningfully stimulate additional traffic ” because “ all but a small handful of the destinations served by the Gulf carriers are already served by U.S. carriers and/or their non

- Gulf carrier global alliance partners

. ” 71 That is, they claim, because the Gulf carriers’ respective networks are “ highly
redundant ” and “ largely duplicative

. ” 72 This claim has no economic foundation . In the next section, we
discuss in de tail the assumption made by U.S. carriers (and their economists) that competitors should not operate anywhere where a U.S. carrier already offers service. One key implication of this claim is that any two carriers operating in the same location are “redun dant” and that any new entry of competition is “largely duplicative.”

E. The Regression Analyses in the Compass Lexecon Report Have Substantial Problem s 67. The Compass Lexecon Report purports to “formally test how Gulf carrier expansion to the United
States has affected passenger traffic levels on city

- pairs to/from the United States” by estimating “a series

69 Compass Lexecon Report, p. 10.

70 Notably, as we discuss below, even the regression analyses in the Compass Lexecon Report does not attempt to control f or all other sources of competition beside that from the Gulf carriers. Moreover, even taking this analysis at face value, it indicates that travel between the ISC and Dallas/Ft. Worth, Philadelphia, and Washington grew faster than travel between those U

. S

. cities and China and South Korea. To the extent this analysis serves as basis for Compass Lexecon Report’s conclusions, their own findings indicate that demand for travel to and from those cities was supposedly “stimulated” beyond levels for China and South Korea.

71 Compass Lexecon Report, p. 11. (Emphasis added)

72 Ibid

.

37of passenger traffic regression models.” 73 As we discussed above, at this time, we do not have access to either the data sets or the computer code used in ge nerating the econometric analyses in the Compass
Lexecon Report , and therefore only offer conceptual critiques to the models describe d and the results present ed in the report.

68. As an initial matter, it is important to explain a series of fundamental feature s of the Compass
Lexecon Report regression mod els: Specifically, they:

• Treat all U.S. carriers (and in some variations, the U.S. carriers and their immunized partners) as though they are a single entity . That is, these models have no ability to discern t he competition (if any) between U.S. carriers (and their immunized partners).

• Contain no controls for the presence of any other competitors on any route . That is, to the extent

non

- Gulf

- based carriers compete on the same routes, the effect of those compet itors would be ascribed to Etihad and the other Gulf carriers. For example, Air India and Turkish Air lines, among others, compete substantially for U

. S

. - India traffic, a fact for which the Compass Lexecon models do

not account.

• I nclude “all city

- pairs bet ween the continental United States and destinations in Asia, Africa, Europe, the Middle East and Australasia, with the exception of city

- pairs to and from Milan.” 74 As we have
shown in Exhibit 13
, approximately 80 percent of Etihad’s traffic either terminates in Abu Dhabi or goes to the ISC. This means that the model includes a substantial number of routes (most notably,
between the U.S. and Europe) where Etihad does not materially compete for U.S. traffic

— and
ther efore could not have caused the effects the Compass Lexecon Report purport s to find. 75

• Purport to test how “Gulf carrier expansion to the United States has affected passenger traffic levels on city

- pairs to/from the United States.” 76 However, their model re ports only a single average effect across all city

- pairs . That is

— to the extent the results of the Compass Lexecon regression model provide meaningful information

— if the effect actually exists on one route but not on another, the
model is structured in a way such that it cannot make that distinction. 77

73 Id. , p. 12.

74 Id. , p. 13.

75 The regressions also arbitrarily exclude “city

- pairs to and from Milan” on the basis that “Emirates’ entry between New York City and Milan has resulted in overcapacity on this city

- pair.” ( Compass Lexecon Report, p. 13.) No analysis is presented to substantiate the claim of “overcapacity” on this route, nor is it clear why all other city

- pairs to and from Milan other than New York are excluded.

76 Compass Lexecon Report, p. 12.

77 The Compass Lexecon Report acknowledges this averaging across routes in footnote 29.

3869. There is also a fundamental flaw with the “key independent variable of interest” in the Compass
Lexecon model, which is intended to represent a count of the “ Number of Gulf Carriers Present ” on a particular r oute. 78 In this model, a Gulf carrier i s determined to be “serving” a city

- pair in a given quarter
if it “ had at least a 3% share of bookings in the quarter .” 79 This variable (i.e., there are either zero, one, two, or three Gulf carriers “ present ” on a cit y

- pair in the given quarter) is problematic for a number of

reasons:

• The thresholds (either 3 or 10 percent share of bookings) are arbitrary. The Compass Lexecon Report provides no explanation as to how a carrier with a little as 3 percent of bookings can cause the effects the regression model purports to measure. (Additionally, it provides no explanation as to why a carrier with as little as 3 percent of bookings is treated equally as another carrier with a potentially much larger share.)

• Be cause the Com pass Lexecon regression models do not account for any competiti ve alternatives
other than the Gulf carriers

— nor do they reflect actual evidence on when carriers began operating on a particular route

— the formulation of this variable makes it appear that car riers “enter” and “exit” a particular route when they in fact do not. For example, using the 3 percent threshold for “presence”

on a route described in the Compass Lexecon Report , Etihad appears to le ave and re

- enter the New York City to Delhi route sever al times over the span of 2008 to 2014 , and appears to be “not present”
on the route for approximately half of the time

. However, factual evidence indicates that Etihad has been operating on th is route for the entire period of study, 80 meaning that the “pr esence” of Gulf carriers as defined by the model is contrary to the facts

.
70. The Compass Lexecon regression models purports to test two theories , discussed in turn below.

• “Gulf carriers’ traffic gains on city

- pairs to/from the United States have come at the expense of
U.S. and other carriers.” 81

71. The Compass Lexecon Report claim s that this regression analysis “ clearly demonstrates that Gulf carriers’ subsidized capacity growth to the United States has come at the expense of U.S. and other

78 Compass Lexecon Report, p. 13.

79 Ibid. (An additional sensitivity of this model appears to have also been run where the threshold for “serving” is 10 rather than 3 percent.)

80 Felicity Cousins, Etihad to fly Abu Dhabi

– JKF , Business Traveller. (July 27, 2006), http://www.businesstraveller.com/news/etihad

- to

- fly

- abu

- dhabi

- jfk . Accessed May 20, 2015. Etihad Airways begins India Operations , The Hindu Business Line. (Sep. 29, 2004), http://www.thehindubusinessline.com/2004/09/30/s tories/2004093002970600.htm

.
81 Compass Lexecon Report, p. 13.

39carriers.” 82 In additi on to the conceptual and operational problems with this model, as discussed above, the supposed finding that “ presence of Gulf carriers on a city

- pair has resulted in the diversion of passengers away from non

- Gulf carriers to the Gulf carriers in that city

- pair ” 83 is at best an indication that competition exists

. 84 Additionally, as our analysis in Exhibit 6 indicat es (and is further supplemented by similar analyses in Appendix B ), as traffic between the U.S. and key regions where Etihad operates has grown over time, the numbers of passengers served by U.S. carriers (and their immunized partners) have also grown. The fact that Gulf

- based carriers’ share may have grown faster on some routes is of no

consequence in the absence of any link to any alleged anticompetitive conduct.

• “Gulf carriers have failed to meaningfully stimulate additional traffic above and beyond what would be expected based on changes in the city

- pair’s underlying demand.” 85

72. T his is essentially the sam e model as that previously described , which purports to find that “presence” of Gulf carriers has reduced traffic carried by U.S. carriers and their partners. The problem
with t his model is that it measures an average effect across all routes , including m any between U.S. and Europe (as well as other continents) where Etihad does not compete for traffic . As a result, it i s unable to determine whether, i n fact, Etihad (and other Gulf

- based carriers) have “stimulated” demand on relevant

routes. Moreover, th e Compass Lexecon Report provides no explanation as to why Etihad is responsibl e for “stimulating demand” between the U.S. and the rest of the world on routes where it does not compete

.
73. This model is also predicated on the notion that Etihad (and other G ulf

- based carriers) are only permitted to compete with U.S. carriers and their immunized partners if they “stimulate ” demand “above and beyond” 86 that generated by what the authors characterize as general economic drivers of demand for
international air tra vel ( i.e. , population and income growth). 87 This appears to imply that Gulf carriers

82 Id. , p. 18. (Emphasis added)

83 Id. , pp.14

- 15. (Emphasis in original)

84 In fact, it is likely that this model would have the same findings on any route where U

. S

. carriers have lost passenger s as a result of growth from non

- Gulf

- based carriers. Moreover, to the extent U

. S

. carriers compete with each other, the model is likely to find that “presence” of one U

. S

. carrier “diverts” passengers from the others. Models that yield such “false posit ive” results are highly problematic and have been criticized by courts assessing antitrust and competition issues. ( See e.g. , In Re: Rail Freight Fuel Surcharge Antitrust Litigation , Appeal from the United States District Court for the District of Columbi a (2013))

85 Compass Lexecon Report, p. 13. (Emphasis added)

86 Ibid.

87 Notably, Compass Lexecon ’s own model finds a positive and statistically significant “stimulation from the presence of each Gulf carrier in city

- pairs to/from Gulf carriers’ non

- gateway U .S. cities.” ( Compass Lexecon Report, pp. 21

- 22 and Exhibit 9). That is, even by their definition, Gulf carriers “stimulated” demand for U.S. carriers’ domestic business ( i.e. , transporting passengers from hubs to their final destinations). However, while the

40can operate only on routes U.S. carriers choose not to serve (either by not setting fares sufficiently low for passengers to be able to purchase tickets, or by not serving certain destinations)

. If the demand for international air travel increases as populations grow and become wealthier, air carriers can choose to
service that demand. However, the implication that “fair competition” can only take place when new

entrants solely sell their products to customers who do not want to (or cannot) purchase those products
from the incumbents is unsubstantiated and without merit

.
74. Ultimately, the Compass Lexecon Report concludes that the aggregate of the analyses it presents
lead t o “ one incontrovertible conclusion: Gulf carriers’ subsidized expansion has come almost entirely at the expense of U.S. and other carriers. ” 88 As we have shown in this report, this conclusion is far from

“ incontrovertible.” Rather, it is based on analyses that (i) have not been shown to have any causal link to the alleged subsidies, (ii) rely solely on U.S.

- international passenger traffic and ignore other relevant evidence, (iii) are predicated on the notion that in order to compete, new entrants must “sti mulate demand” by serving only customers not already served by an incumbent . This conclusion is further based on regression models that are fundamentally flawed and, at best, indicate the presence of competition

.

Compass Lexecon Report dismisses this finding, referring to it as “minimal stimulation,” it fails to provide any benchmark for what level of “demand stimulation” should b e considered appropriate.

88 Compass Lexecon Report, p. 22. (Emphasis in original)

41

# A PPENDIX 

# AFIGURE A 1 V OLUME OF T RAVEL B ETWEEN THE U NITED S TATES AND M IDDLE E AST B Y C ARRIER G ROUP E CONOMY C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 Traffic flows are non

- directional

. 3 Middle East includes Bahrain, Iran, Iraq, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syrian Arab Republic, Yemen, and United Ara b Emirates

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).FIGU RE A2 V OLUME OF T RAVEL B ETWEEN THE U NITED S TATES AND B ANGLADESH B Y C ARRIER G ROUP E CONOMY C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 Traffic flows are non

- directional

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).FIGURE A 3 V OLUME OF T RAVEL B ETWEEN THE U NITED S TATES AND I NDIA

B Y C ARRIER G ROUP E CONOMY C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 Traffic flows are non

- directional

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).FIGURE A4 V OLUME OF T RAVEL B ETWEEN THE U NITED S TATES AND P AKISTAN

B Y C ARRIER G ROUP E CONOMY C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 Traffic flows are non

- directional

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).FIGURE A5 V OLUME OF T RAVEL B ETWE EN THE U NITED S TATES AND S RI L ANKA B Y C ARRIER G ROUP E CONOMY C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 Traffic flows are non

- directional

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).FIGURE A6 V OLUME OF T RAVEL B ETWEEN C HICAGO AND H YDERABAD

B Y C ARRIER G ROUP E CONOMY C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 Traffic flows are non

- directional

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).FIGURE A7 V OLUME OF T RAVEL B ETWEEN L OS A NGELES AND C OLOMBO

B Y C ARRIER G ROUP E CONOMY C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 Traffic flows are non

- directional

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).FIGURE A8 V OLUME OF T RAVEL B ETWEEN N EW Y ORK AND C OLOMBO

B Y C ARRIER G ROUP E CONOMY C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 Traffic flows are non

- directional

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).FIGURE A9 V OLUME OF T RAVEL B ETWEEN N EW Y ORK AND D ELHI

B Y C ARRIER G ROUP E CONOMY C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 Traffic flows are non

- directional

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).FIGURE A10 V OLUME OF T RAVEL B ETWEEN N EW Y ORK AND D HAKA

B Y C ARRIER G ROUP E CONOMY C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 Traffic flows are non

- directional

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).FIGURE A11 V OLUME OF T RAVEL B ETWEEN N EW Y ORK AND H YDERABAD

B Y C ARRIER G ROUP E CONOMY C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 Traffic flows are non

- directional

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).FIGURE A12 V OLUME OF T RAVEL B ETWEEN N EW Y ORK AND I SLAMABAD

B Y C ARRIER G ROUP E CONOMY C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 Traffic flows are non

- directional

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).FIGURE A13 V OLUME OF T RAVEL B ETWEEN N EW Y ORK AND M UMBAI

B Y C ARRIER G ROUP E CONOMY C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 Traffic flows are non

- directional

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).FIGURE A14 V OLUME OF T RAVEL B ETWEEN S AN F RANCISCO AND D ELHI

B Y C ARRIER G ROUP E CONOMY C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 Traffic flows are non

- directional

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).FIGURE A15 V OLUME OF T RAVEL B ETWEEN S AN F RANCISCO AND M UMBAI

B Y C ARRIER G ROUP E CONOMY C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 Traffic flows are non

- directional

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).FIGURE A16 V OLUME OF T RAVEL B ETWEEN W ASHINGTON D.C. AND D HAKA

B Y C ARRIER G ROUP E CONOMY C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 Traffic flows are non

- directional

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).FIGURE A17 V OLUME OF T RAVEL B ETWEEN W ASHINGTON D.C. AND I SLAMABAD B Y C ARRIER G ROUP E CONOMY C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 Traffic flows are non

- directional

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).FIGURE A18 V OLUME OF T RAVEL B ETWEEN THE U NITED S TATES AND I NDIAN S UB - C ONTINENT B Y C ARRIER G ROUP P REMIUM C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immun ity Cases.

2 Traffic flows are non

- directional

. 3 Indian Sub

- Continent includes Bangladesh, India, Pakistan, and Sri Lanka

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).FIGURE A19 V OLUME OF T RAVEL B ETWEEN THE U NITED S TATES AND M IDDLE E AST B Y C ARRIER G ROUP P REMIUM C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 Traffic flows are non

- directional

. 3 Middle East includes Bahrain, Iran, Iraq, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syrian Arab Republic, Yemen, and United Ara b Emirates. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Ca ses Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).FIGURE A20 V OLUME OF T RAVEL B ETWEEN THE U NITED S TATES AND B ANGLADESH B Y C ARRIER G ROUP P REMIUM C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 Traffic flows are non

- directional

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).FIGURE A21 V OLUME OF T RAVEL B ETWEEN THE U NITED S TATES AND I NDIA

B Y C ARRIER G ROUP P REMIUM C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 Traffic flows are non

- directional

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).FIGURE A22 V OLUME OF T RAVEL B ETWEEN THE U NITED S TATES AND P AKISTAN

B Y C ARRIER G ROUP P REMIUM C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 Traffic flows are non

- directional

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).FIGURE A2 3 V OLUME OF T RAVEL B ETWEEN THE U NITED S TATES AND S RI L ANKA B Y C ARRIER G ROUP P REMIUM C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 Traffic flows are non

- directional

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).FIGURE A24 V OLUME OF T RAVEL B ETW EEN C HICAGO AND H YDERABAD

B Y C ARRIER G ROUP P REMIUM C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 Traffic flows are non

- directional

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).FIGURE A25 V OLUME OF T RAVEL B ETWEEN L OS A NGELES AND C OLOMBO

B Y C ARRIER G ROUP P REMIUM C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 Traffic flows are non

- directional

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).FIGURE A26 V OLUME OF T RAVEL B ETWEEN N EW Y ORK AND C OLOMBO

B Y C ARRIER G ROUP P REMIUM C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 Traffic flows are non

- directional

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).FIGURE A27 V OLUME OF T RAVEL B ETWEEN N EW Y ORK AND D ELHI

B Y C ARRIER G ROUP P REMIUM C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 Traffic flows are non

- directional

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).FIGURE A28 V OLUME OF T RAVEL B ETWEEN N EW Y ORK AND D HAKA

B Y C ARRIER G ROUP P REMIUM C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 Traffic flows are non

- directional

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).FIGURE A29 V OLUME OF T RAVEL B ETWEEN N EW Y ORK AND H YDERABAD

B Y C ARRIER G ROUP P REMIUM C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 Traffic flows are non

- directional

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).FIGURE A30 V OLUME OF T RAVEL B ETWEEN N EW Y ORK AND I SLAMABAD

B Y C ARRIER G ROUP P REMIUM C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 Traffic flows are non

- directional

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).FIGURE A31 V OLUME OF T RAVEL B ETWEEN N EW Y ORK AND M UMBAI

B Y C ARRIER G ROUP P REMIUM C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 Traffic flows are non

- directional

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).FIGURE A32 V OLUME OF T RAVEL B ETWEEN S AN F RANCISCO AND D ELHI

B Y C ARRIER G ROUP P REMIUM C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 Traffic flows are non

- directional

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).FIGURE A33 V OLUME OF T RAVEL B ETWEEN S AN F RANCISCO AND M UMBAI

B Y C ARRIER G ROUP P REMIUM C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 Traffic flows are non

- directional

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41 308

- 42309 (July 2014).FIGURE A34 V OLUME OF T RAVEL B ETWEEN W ASHINGTON D.C. AND D HAKA

B Y C ARRIER G ROUP P REMIUM C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 Traffic flows are non

- directional

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).FIGURE A35 V OLUME OF T RAVEL B ETWEEN W ASHINGTON D.C. AND I SLAMABAD B Y C ARRIER G ROUP P REMIUM C LASS M ARCH 2009

– F EBRUARY 2015

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 Traffic flows are non

- directional

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).

# A PPENDIX 

# BT ABLE B 1

S UMMARY OF C HANGES IN I MMUNIZED C ARRIERS ’ S HARE AND V OLUME OF T RAVEL

B ETWEEN U NITED S TATES AND K EY R EGIONS

2009

– 2014

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases.

2 This analysis compares travel volumes between March 2014 and February 2015 to the travel volumes between March 2009 and February 2010.

3 Indian Sub

- Continent includes Bangladesh, India, Pakistan, Sri Lanka, and Nepal. Middle East includes Bahrain, Iran, Iraq, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Syrian Arab Republic, Yemen, and United Arab Emirates.

4 Traf fic flows are non

- directional

. Sources: MIDT; U.S. DOT Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).F IGURE B 1 C HANGES IN I MMUNIZED C ARRIERS ’ S HARE AND V OLUME OF T RAVEL B ETWEEN N EW Y ORK AND K EY I NDIAN S UB - C ONTINENT /M IDDLE E ASTERN D ESTINATIONS E CONOMY C LASS 2009

– 2014

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases

.
2 This analysis compares travel volumes between March 2014 and February 2015 to the travel volumes between March 2009 and February 2010

.
3 Traffic flows are non

- d irectional. The value under each destination represents the differences in annual traffic volumes between 2009 and 2014 (negative values indicate a decline in volume).

4 Lahore and Islamabad are not shown. Immunized Carriers served 15,317 more passengers between New York and Lahore in 2014 than 2009, constituting an increase of 3,200 percent; they served 8,169 more pas sengers between New York and Islamabad in 2014 than 2009, constituting an increase of 1,400 percent. The corresponding increases in shares of overall travel were 19 and 25 percentage points, respectively.
Sources: MIDT; U.S. Department of Transportation Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).F IG URE B 2 C HANGES IN I MMUNIZED C ARRIERS ’ S HARE AND V OLUME OF T RAVEL B ETWEEN N EW Y ORK AND K EY I NDIAN S UB - C ONTINENT /M IDDLE E ASTERN D ESTINATIONS P REMIUM C LASS 2009

– 2014

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases

.
2 This analysis compares travel volumes between March 2014 and February 2015 to the travel volumes betwe en March 2009 and February 2010

.
3 Traffic flows are non

- directional. The value under each destination represents the differences in ann ual traffic volumes between 2009 and 2014 (negative values indicate a decline in volume).
Sources: MIDT; U.S. Department of Transportation Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).T ABLE B 2

S UMMARY OF C HANGES IN I MMUNIZED C ARRIERS ’ S HARE AND V OLUME OF T RAVEL B ETWEEN N EW Y ORK AND K EY I NDIAN S UB - C ONTINENT /M IDDLE E ASTERN D ESTINATIONS 200 9

– 2014

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases

.
2 This analysis compares travel volumes between March 2014 and February 2015 to the travel volumes betwe en March 2009 and February 2010

.
3 Traffic flows are non

- d irectional.
Sources: MIDT; U.S. Department of Transportation Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).F IGURE B 3 C HANGES IN I MMUNIZED C ARRIERS ’ S HARE AND V OLUME OF T RAVEL B ETWEEN C HICAGO AND K EY I NDIAN S UB - C ONTINENT /M IDDLE E ASTERN D ESTINATIONS E CONOMY C LASS 2009

– 2014

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases

.
2 This analysis compares travel volumes between March 2014 and February 2015 to the travel volumes betwe en March 2009 and February 2010

.
3 Traffic flows are non

- directional. The value under each destination represents the differences in ann ual traffic volumes between 2009 and 2014 (negative values indicate a decline in volume).
Sources: MIDT; U.S. Department of Transportation Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).F IGURE B 4 C HANGES IN I MMUNIZED C ARRIERS ’ S HARE AND V OLUME OF T RAVEL B ETWEEN C HICAGO AND K EY I NDIAN S UB - C ONTINENT /M IDDLE E ASTERN D ESTINATIONS P REMIUM C LASS 2009

– 2014

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases

.
2 This analysis compares travel volumes between March 2014 and February 2015 to the travel volumes betwe en March 2009 and February 2010

.
3 Traffic flows are non

- directional. The value under each destination represents the differences in ann ual traffic volumes between 2009 and 2014 (negative values indicate a decline in volume).
Sources: MIDT; U.S. Department of Transportation Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).T ABLE B 3

S UMMARY OF C HANGES IN I MMUNIZED C ARRIERS ’ S HARE AND V OLUME OF T RAVEL B ETWEEN C HICAGO AND K EY I NDIAN S UB - C ONTINENT /M IDDLE E ASTERN D ESTINATIONS 2009

– 2014

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases

.
2 This analysis compares travel volumes between March 2014 and February 2015 to the travel volumes betwe en March 2009 and February 2010

.
3 Traffic flows are non

- directional.
Sources: MIDT; U.S. Department of Transportation Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).F IGURE B 5 C HANGES IN I MMUNIZED C ARRIERS ’ S HARE AND V OLUME OF T RAVEL B ETWEEN D ALLAS AND K EY I NDIAN S UB - C ONTINENT /M IDDLE E ASTERN D ESTINATIONS E CONOMY C LASS 2009

– 2014

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases

.
2 This analysis compares travel volumes between March 2014 and February 2015 to the travel volumes betwe en March 2009 and Febru ary 2010

.
3 Traffic flows are non

- directional. The value under each destination represents the differences in ann ual traffic volumes between 2009 and 2014 (negative values indicate a decline in volume).
Sources: MIDT; U.S. Department of Transportation Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).F IGURE B 6 C HANGES IN I MMUNIZED C ARRIERS ’ S HARE AND V OLUME OF T RAVEL B ETWEEN D ALLAS AND K EY I NDIAN S UB - C ONTINENT /M IDDLE E ASTERN D ESTINATIONS P REMIUM C LASS 2009

– 2014

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases

.
2 This analysis compares travel volumes between March 2014 and February 2015 to the travel volumes betwe en March 2009 and February 2010

.
3 Traffic flows are non

- directional. The value under each destination represents the differences in ann ual traffic volumes between 2009 and 2014 (negative values indicate a decline in volume).
Sources: MIDT; U.S. Department of Transportation Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).T ABLE B 4

S UMMARY OF C HANGES IN I MMUNIZED C ARRIERS ’ S HARE AND V OLUME OF T RAVEL B ETWEEN D ALLAS AND K EY I NDIAN S UB - C ONTINENT /M IDDLE E ASTERN D ESTINATIONS 2009

– 2014

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases

.
2 This analysis compares travel volumes between March 2014 and February 2015 to the travel volumes betwe en March 2009 and February 2010

.
3 Traffic flows are non

- directional.
Sources: MIDT; U.S. Department of Transportation Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).F IGURE B 7 C HANGES IN I MMUNIZED C ARRIERS ’ S HARE AND V OLUME OF T RAVEL B ETWEEN L OS A NGELES AND K EY I NDIAN S UB - C ONTINENT /M IDDLE E ASTERN D ESTINATIONS E CONOMY C LASS 2009

– 2014

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases

.
2 This analysis compares travel volumes between March 2014 and February 2015 to the travel volumes betwe en March 2009 and February 2010

.
3 Traffic flows are non

- directional. The val ue under each destination represents the differences in annual traffic volumes between 2009 and 2014 (negative values indicate a decline in volume).
Sources: MIDT; U.S. Department of Transportation Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).F IGURE B 8 C HANGES IN I MMUNIZED C ARRIERS ’ S HARE AND V OLUME OF T RAVEL B ETWEEN L OS A NGELES AND K EY I NDIAN S UB - C ONTINENT /M IDDLE E ASTERN D ESTINATIONS P REMIUM C LASS 2009

– 2014

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases

.
2 This analysis compares travel volumes between March 2014 and February 2015 to the travel volumes betwe en March 2009 and February 2010

.
3 Traffic flows are non

- directional. The value under each destination represents the differences in annual traffic volumes between 2009 and 2014 (negative values indicate a decline in volume).
Sources: MIDT; U.S. Department of Transportation Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).T ABLE B 5

S UMMARY OF C HANGES IN I MMUNIZED C ARRIERS ’ S HARE AND V OLUME OF T RAVEL B ETWEEN L OS A NGELES AND K EY I NDIAN S UB - C ONTINENT /M IDDLE E ASTERN D ESTINATIONS 2009

– 2014

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases

.
2 This analysis compares travel volumes between March 2014 and February 2015 to the travel volumes betwe en March 2009 and Febru ary 2010

.
3 Traffic flows are non

- directional.
Sources: MIDT; U.S. Department of Transportation Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).F IGURE B 9 C HANGES IN I MMUNIZED C ARRIERS ’ S HARE AND V OLUME OF T RAVEL B ETWEEN S AN F RANCISCO AND K EY I NDIAN S UB - C ONTINENT /M IDDLE E ASTERN D ESTINATIONS E CONOMY C LASS 2009

– 2014

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases

.
2 This analysis compares travel volumes between March 2014 and February 2015 to the travel volumes betwe en March 2009 and February 2010

.
3 Traffic flows are non

- directional. The value under each destination represents the differences in annual traffic volumes be tween 2009 and 2014 (negative values indicate a decline in volume).
Sources: MIDT; U.S. Department of Transportation Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).F IGURE B 10 C HANGES IN I MMUNIZED C ARRIERS ’ S HARE AND V OLUME OF T RAVEL B ETWEEN S AN F RANCISCO AND K EY I NDIAN S UB - C ONTINENT /M IDDLE E ASTERN D ESTINATIONS P REMIUM C LASS 2009

– 2014

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases

.
2 This analysis compares travel volumes between March 2014 and February 2015 to the travel volumes betwe en March 2009 and February 2010

.
3 Traffic flows are non

- directional. The value under each destination represents the differences in an nual traffic volumes between 2009 and 2014 (negative values indicate a decline in volume).
Sources: MIDT; U.S. Department of Transportation Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).T ABLE B 6

S UMMARY OF C HANGES IN I MMUNIZED C ARRIERS ’ S HARE AND V OLUME OF T RAVEL B ETWEEN S AN F RANCISCO AND K EY I NDIAN S UB - C ONTINENT /M IDDLE E ASTERN D ESTINATIONS 2009

– 2014

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases

.
2 This analysis compares travel volumes between March 2014 and February 2015 to the travel volumes betwe en March 2009 and February 2010

.
3 Traffic flows are non

- directional.
Sources: MIDT; U.S. Department of Transportation Compe ndium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).F IGURE B 11 C HANGES IN I MMUNIZED C ARRIERS ’ S HARE AND V OLUME OF T RAVEL B ETWEEN W ASHINGTON D.C. AND K EY I NDIAN S UB - C ONTINENT /M IDDLE E ASTERN D ESTINATIONS E CONOMY C LASS 2009

– 2014

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases

.
2 This analysis compares travel volumes between March 2014 and February 2015 to the travel volumes betwe en March 2009 and February 2010

.
3 Traffic flows are non

- directional. The value under each destination represents the differences in annual traffic volumes between 2009 and 2014 (negative values indicate a decline in volume).
Sources: MIDT; U.S. Department of Transportation Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).F IGURE B 12 C HANGES IN I MMUNIZED C ARRIERS ’ S HARE AND V OLUME OF T RAVEL B ETWEEN W ASHINGTON D.C. AND K EY I NDIAN S UB - C ONTINENT /M IDDLE E ASTERN D ESTINATIONS P REMIUM C LASS 2009

– 2014

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases

.
2 This analysis compares travel volumes between March 2014 and February 2015 to the travel volumes betwe en March 2009 and February 2010

.
3 Traffic flows are non

- directional. The value under each destination represents the differences in annual traffic volumes between 2009 and 2014 (negative values indicate a decline in volume).
Sources: MIDT; U.S. Department of Transportation Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).T ABLE B 7

S UMMARY OF C HANGES IN I MMUNIZED C ARRIERS ’ S HARE AND V OLUME OF T RAVEL B ETWEEN W ASHINGTON D.C. AND K EY I NDIAN S UB - C ONTINENT /M IDDLE E ASTERN D ESTINATIONS 2009

– 2014

Notes:

1 Immunized alliances are defined in accordance with the U.S. Department of Transportation Compendium of Antitrust Immunity Cases

.
2 This analysis compares travel volumes between March 2014 and February 2015 to the travel volumes betwe en March 2009 and February 2010

.
3 Traffic flows are non

- directional.
Sources: MIDT; U.S. Department of Transportation Compendium of Antitrust Immunity Cases Pursuant to 49 U.S.C §§ 41308

- 42309 (July 2014).

# A PPENDIX 

# CF IGURE C 1 A NALYSIS OF M EDIAN P UBLISHED E CONOMY C LASS F ARES ON C HICAGO TO H YDERABAD R OUTE A PRIL 2013

– M ARCH 2015

Notes:

1 Immunized Alliance Members in this chart indicates the range of fares published b y American, British Airways,

and Lufthansa. Etihad's fare was on average $17 (or 1%) less than the median offered by these carriers.

2 Non

- Immunized Carriers in this chart indicated the range of fares published by Emirates, Qatar Airways, and Air

India. Etihad's fare was on average $31 (or 2%) less than the median offered by these carriers.

3 ATPCO data only contain base fares, which are supplemented by d ata on taxes and fees from GDS (for eac h

carrier and route combination) in order to calculate all

- in fares. All fares have been converted to US dollars. Premium Economy fares are not included in the analysis. Sources:

ATPCO and GDS pricing data; Canadian Foreign Exchange Services.F IGURE C 2 A NALYSIS OF M EDIAN P UBLISHED E CONOMY C LASS F ARES ON N EW Y ORK C ITY TO M UMBAI R OUTE A PRIL 2013

– M ARCH 2015

Notes:

1 Immunized Alliance Members in this chart indicates the range of fares published b y Delta, American, United, British Airways and Lufthansa. Etihad's fare was on average $136 (or 7%) less than the median offered by these carriers.

2 Non

- Immunized Carriers in this chart indicated the range of fares published by Emirates, Qatar Airways, Air

India, and Turkish Airways. Etihad's fare was on average $189 (or 11%) more than the median offered by these carriers.

3 ATPCO data only contain base fares, which are supplemented by d ata on taxes and fees from GDS (for each

carrier and route combination) in order to calculate all

- in far es. All fares have been converted to US dollars. Premium Economy fares are not included in the analysis. Sources:

ATPCO and GDS pricing data; Canadian Foreign Exchange Services.F IGURE C3 A NALYSIS OF M EDIAN P UBLISHED E CONOMY C LASS F ARES ON N EW Y ORK C ITY TO H YDERABAD R OUTE A PRIL 2013

– M ARCH 2015

Notes:

1 Immunized Alliance Members in this chart indicates the range of fares published b y American, United, British Airways, and Lufthansa. Etihad's fare was on average $99 (or 5%) more than the median offered by these carriers.

2 Non

- Immunized Carriers in this chart indicated the range of fares published by Emirates, Qatar Airways, and Air

India. Etihad's fare was on average $140 (or 7%) more than the median offered by these carriers.

3 ATPCO data only contain base fares, which are supplemented by d ata on taxes and fees from GDS (for each

carrier and route combination) in order to calculate all

- in fares. All fares have been converted to US dollars. Premium Economy fares are not included in the analysis. Sources:

ATPCO and GDS pricing data; Canadian Foreign Exchange Services.F IGURE C 4 A NALYSIS OF M EDIAN P UBLISHED E CONOMY C LASS F ARES ON N EW Y ORK C ITY TO I SLAMABAD R OUTE A PRIL 2013

– M ARCH 2015

Notes:

1 Immunized Alliance Members in this chart indicates the range of fares published b y American and United. Etihad's fare was on average $139 (or 7%) less than the median offered by these carriers.

2 Non

- Immunized Carriers in this chart indicated the range of fares published by Emirates, Qatar Airways, and

Turkish Airways. Etihad's fare was on average $52 (or 3%) more than the median offered by these carriers.

3 ATPCO data only contain base fares, which are supplemented by d ata on taxes and fees from GDS (for each

carrier and route combination) in order to calculate all

- in fares. All fares have been converted to US dollars. Premium Economy fares are not included in the analysis. Sources:

ATPCO and GDS pricing data; Canadian Foreign Exchange Services.F IGURE C 5 A NALYSIS OF M EDIAN P UBLISHED E CONOMY C LASS F ARES ON N EW Y ORK C ITY TO D HAKA R OUTE A PRIL 2013

– M ARCH 2015

Notes:

1 Non

- Immunized Carriers in this chart indicated the range of fares published by Emirates, Qatar Airways and Turkish Airways. Etihad's fare was on average $100 (or 5%) more than the median offered by these carriers.

2 ATPCO data only contain base fares, which are supplemented by d ata on taxes and fees from GDS (for each

carrier and route combination) in order to calculate all

- in fares. All fares have been converted to US dollars. Premium Economy fares are not included in the analysis. Sources:

ATPCO and GDS pricing data; Canadian Foreign Exchange Services

.F IGURE C 6 A NALYSIS OF M EDIAN P UBLISHED E CONOMY C LASS F ARES ON N EW Y ORK C ITY TO C OLOMBO A PRIL 2013

– M ARCH 2015

Notes:

1 Immunized Alliance Members in this chart indicates the range of fares published b y American and United. Etihad's fare was on average $228 (or 11%) less than the median offered by these carriers.

2 Non

- Immunized Carriers in this chart indicated the range of fares publis hed by Air India, Emirates, and Qatar

Airways. Etihad's fare was on average $4 (or 0 %) more than the median offe red by these carriers.

3 ATPCO data only contain base fares, which are supplemented by d ata on taxes and fees from GDS (for each

carrier and route combination) in order to calculate all

- in fares. All fares have been converted to US dollars. Premi um Economy fares are not included in the analysis. Sources:

ATPCO and GDS pricing data; Canadian Foreign Exchange Services.F IGURE C 7 A NALYSIS OF M EDIAN P UBLISHED E CONOMY C LASS F ARES ON S AN F RANCISCO TO D ELHI R OUTE A PRIL 2013

– M ARCH 2015

Notes:

1 Immunized Alliance Members in this chart indicates the range of fares published b y Delta, American, United, British Airways, KLM, and Lufthansa. Etihad's fare was on average $82 (or 5%) less than the median offered by these carriers.

2 Non

- Immunized Carriers in this chart indicated the range of fares published by Emirates and Air India. Etihad's

fare was on average $161 (or 9%) less than the median offered by these carriers.

3 ATPCO data only contain base fares, which are supplemented by d ata on taxes and fees from GDS (for each

carrier and route combination) in order to calculate all

- in fares. All fares have been converted to US dollars. Premium Economy fares are not included in the analysis. Sources:

ATPCO and GDS pricing da ta; Canadian Foreign Exchange Services.F IGURE C 8 A NALYSIS OF M EDIAN P UBLISHED E CONOMY C LASS F ARES ON S AN F RANCISCO TO M UMBAI R OUTE A PRIL 2013

– M ARCH 2015

Notes:

1 Immunized Alliance Members in this chart indicates the range of fares published b y Delta, United, British Airways, KLM, and Lufthansa. Etihad's fare was on average $154 (or 8%) less than the median offered by these carriers.

2 Non

- Immunized Carriers in this chart indicated the range of fares published by Emirates and Air India. Etihad's

fare was on average $186 (or 10%) less than the median offered by these carriers.

3 ATPCO data only contain base fares, which are supplemented by d ata on taxes and fees from GDS (for each

carrier and route combination) in order to calculate all

- in fares. All fares have been converted to US dollars. Premium Economy fares are not included in the analysis. Sources:

ATPCO and GDS pricing data; Canadian Foreign Exchange Services.F IGURE C 9 A NALYSIS OF M EDIAN P UBLISHED E CONOMY C LASS F ARES ON L OS A NGELES TO C OLOMBO A PRIL 2013

– M ARCH 2015

Notes:

1 Non

- Immunized Carriers in this chart indicated the range of fares published by Emirates and Turkish Airways. Etihad's fare was on average $197 ( or 13%) higher than the median offered by these carriers.

2 ATPCO data only contain base fares, which are supplemented by d ata on taxes and fees from GDS (for each

carrier and route combination) in order to calculate all

- in fares. All fares have been converted to US dollars. Premium Economy fares are not included in the analysis. Sources:

ATPCO and GDS pricing data; Canadian Foreign Exchange Services.F IGURE C 10 A NALYSIS OF M EDIAN P UBLISHED E CONOMY C LASS F ARES ON W ASHINGTON D.C TO I SLAMABAD R OUTE A PRIL 2013

– M ARCH 2015

Notes:

1 Immunized Alliance Members in this chart indicates the range of fares published b y American and United. Etihad's fare was on average $393 (or 19%) less than the median offered by these carriers.

2 Non

- Immunized Carriers in this chart indicated the range of fares published by Qatar Airways and Turkish

Airways. Etihad's fare was on average $47 (or 3%) less than the median offered by these carriers.

3 ATPCO data only contain base fares, which are supplemented by d ata on taxes and fees from GDS (for each

carrier and route combination) in order to calculate all

- in fares. All fares have been converted to US dollars. Premium Economy fares are not included in the analysis. Sources:

ATPCO and GDS p ricing data; Canadian Foreign Exchange Services.F IGURE C 11 A NALYSIS OF M EDIAN P UBLISHED E CONOMY C LASS F ARES ON W ASHINGTON D.C. TO D HAKA R OUTE A PRIL 2013

– M ARCH 2015

Notes:

1 Immunized Alliance Members in this chart indicates the range of fares published b y American and United. Etihad's fare was on average $704 (or 26%) less than the median offered by these carriers.

2 Non

- Immunized Carriers in this chart indicated the range of fares published by Emirates, Qatar Airways, and

Turkish Airways. Etihad's fare was on average $159 (or 9%) more than the median offered by these carriers.

3 ATPCO data only contain base fares, which are supplemented by d ata on taxes and fees from GDS (for each

carrier and route combination) in order to calculate all

- in fares. All fares have been converted to US dollars. Premium Economy fares are not included in the analysis. Sources:

ATP CO and GDS pricing data; Canadian Foreign Exchange Services.

# A PPENDIX 

# DF IGURE D1 E TIHAD R EVENUE P ER K ILOMETER ON C HICAGO TO H YDERABAD R OUTE C OMPARED TO I MMUNIZED A LLIANCE M EMBERS ’ R EVENUE S P ER K ILOMETER F ROM C HICAGO TO K EY I MMUNIZED E UROPEAN D ESTINATIONS A PRIL 20 13

– M ARCH 2015

Notes:

1 ATPCO data only contain base fares, which are supplemented by d ata on taxes and fees from GDS (for each

carrier and route combination) in order to calculate all

- in fares. All fares have been converted to US dollars

. The analysis uses each carrier's median published round trip economy fare for a given route and month. Premium Economy fares are not included in the analysis.

2 Benchmark includes Immunized Alliance members as per the U.S. DOT Compendium of Antitrust Immunity

Cases: Air France, American, British Airways, Delta, KLM, Lufthansa, and United

. Benchmark includes fares published by c arriers on the following routes: CHI

- FRA, CHI

- LON, CHI

- PAR

. 3 There are 7 distinct benchmark carrier

- route pairings.

4 On average, the median benchmark fare per

- kilometer is 80% higher than Etihad’s median fare. Sources:

ATPCO and GDS pricing data ; www.gcmap.com

.F IGURE D 2 E TIHAD R EVENUE P ER K ILOMETER ON N EW Y ORK TO M UMBAI R OUTE C OMPARED TO I MMUNIZED A LLIANCE M EMBERS ’ R EVENUE S P ER K ILOMETER F ROM N EW Y ORK TO K EY I MMUNIZED E UROPEAN D ESTINATIONS A PRIL 20 13

– M ARCH 2015

Notes:

1 ATPCO data only contain base fares, which are supplemented by d ata on taxes and fees from GDS (for each

carrier and route combination) in order to calculate all

- in fares. All fares have been converted to US dollars

. The analysis uses each carrier's median published round trip economy fare for a given route and month. Premium Economy fares are not included in the analysis.

2 Benchmark includes Immunized Alliance m embers as per the U.S. DOT Compendium of Antitrust Immunity

Cases: Air France, American, British Airways, Delta, KLM, Lufthansa, and United

. Benchmark includes fares published by carriers o n the following routes: NYC

- FRA, NYC

- LON, NYC

- PAR

. 3 There are 7 distinct benchmark carrier

- route pairings.

4 On average, the median benchmark fare per

- kilometer is 88% higher than Etihad’s median fare. Sources:

ATPCO and GDS pricing data; www.gcmap.com.F IGURE D 3 E TIHAD R EVENUE P ER K ILOMETER ON N EW Y ORK TO C OLOMBO R OUTE C OMPARED TO I MMUNIZED A LLIANCE M EMBERS ’ R EVENUE S P ER K ILOMETER F ROM N EW Y ORK TO K EY I MMUNIZED E UROPEAN D ESTINATIONS A PRIL 20 13

– M ARCH 2015

Notes:

1 ATPCO data only contain base fares, which are supplemented by d ata on taxes and fees from GDS (for each

carrier and route combination) in order to calculate all

- in fares. All fares have been converted to US dollars

. The analysis uses each carri er's median published round trip economy fare for a given route and month. Premium Economy fares are not included in the analysis.

2 Benchmark includes Immunized Alliance members as per the U.S. DOT Compendium of Antitrust Immunity

Cases: Air France, American, British Airways, Delta, KLM, Lufthansa, and United

. Benchmark includes fares published by c arriers on the following routes: NYC

- FRA, NYC

- LON, NYC

- PAR

. 3 There are 7 distinct benchmark carrier

- route pairings.

4 On average, the median benchmark f are per

- kilometer is 108% higher than Etihad’s median fare. Sources:

ATPCO and GDS pricing data; www.gcmap.com.F IGURE D 4 E TIHAD R EVENUE P ER K ILOMETER ON N EW Y ORK TO D HAKA R OUTE C OMPARED TO I MMUNIZED A LLIANCE M EMBERS ’ R EVENUE S P ER K ILOMETER F ROM N EW Y ORK TO K EY I MMUNIZED E UROPEAN D ESTINATIONS A PRIL 20 13

– M ARCH 2015

Notes:

1 ATPCO data only contain base fares, which are supplemented by d ata on taxes and fees from GDS (for each

carrier and route combination) in order to calculate all

- in fares. All fares have been converted to US dollars

. The analysis uses each carrier's median published round trip economy fare for a given route and month. Premium Economy fares are not included in the analysis.

2 Benchmark includes Immunized Alliance members as per the U.S. DOT Compendium of Antitrust Immunity

Cases: Air France, American, British Airways, Delta, KLM, Lufthansa, and United

. Benchmark includes fares published by c arriers on the following routes: NYC

- FRA, NYC

- LON, NYC

- PAR

. 3 There are 7 distinc t benchmark carrier

- route pairings.

4 On average, the median benchmark fare per

- kilometer is 94% higher than Etihad’s median fare. Sources:

ATPCO and GDS pricing data; www.gcmap.com.F IGURE D 5 E TIHAD R EVENUE P ER K ILOMETER ON N EW Y ORK TO H YDERABAD R OUTE C OMPARED TO I MMUNIZED A LLIANCE M EMBERS ’ R EVENUE S P ER K ILOMETER F ROM N EW Y ORK TO K EY I MMUNIZED E UROPEAN D ESTINATIONS A PRIL 20 13

– M ARCH 2015

Notes:

1 ATPCO data only contain base fares, which are supplemented by d ata on taxes and fees from GDS (for each

carrier and route combination) in order to calculate all

- in fares. All fares have been converted to US dollars

. The analysis uses each carri er's median published round trip economy fare for a given route and month. Premium Economy fares are not included in the analysis.

2 Benchmark includes Immunized Alliance members as per the U.S. DOT Compendium of Antitrust Immunity

Cases: Air France, Amer ican, British Airways, Delta, KLM, Lufthansa, and United

. Benchmark includes fares published by c arriers on the following routes: NYC

- FRA, NYC

- LON, NYC

- PAR

. 3 There are 7 distinct benchmark carrier

- route pairings.

4 On average, the median benchmark fare per

- kilometer is 87% higher than Etihad’s median fare. Sources:

ATPCO and GDS pricing data ; www.gcmap.com.F IGURE D 6 E TIHAD R EVENUE P ER K ILOMETER ON N EW Y ORK TO I SLAMABAD R OUTE C OMPARED TO I MMUNIZED A LLIANCE M EMBERS ’ R EVENUE S P ER K ILOMETER F ROM N EW Y ORK TO K EY I MMUNIZED E UROPEAN D ESTINATIONS A PRIL 20 13

– M ARCH 2015

Notes:

1 ATPCO data only contain base fares, which are supplemented by d ata on taxes and fees from GDS (for each

carrier and route combination) in order to calculate all

- in fares. All fares have been converted to US dollars

. The analysis uses each carrier's median published round trip economy fare for a given route and month. Premium Economy fares are not included in the analysis.

2 Benchmark includes Immunized Alliance members as per the U.S. DOT Compendium of Antitrust Immunity

Cases: Air France, American, British Airways, Delta, KLM, Lufthansa, and United

. Benchmark includes fares published by carrier s on the following routes: NYC

- FRA, NYC

- LON, NYC

- PAR

. 3 There are 7 dist inct benchmark carrier

- route pairings.

4 On average, the median benchmark fare per

- kilometer is 69% higher than Etihad’s median fare. Sources:

ATPCO and GDS pricing data ; www.gcmap.com.F IGURE D 7 E TIHAD R EVENUE P ER K ILOMETER ON W ASHINGTON D.C. TO D HAKA R OUTE C OMPARED TO I MMUNIZED A LLIANCE M EMBERS ’ R EVENUE S P ER K ILOMETER F ROM W ASHINGTON D.C. TO K EY I MMUNIZED E UROPEAN D ESTINATIONS A PRIL 20 13

– M ARCH 2015

Notes:

1 ATPCO data only contain base fares, which are supplemented by d ata on taxes and fees from GDS (for each

carrier and route combination) in order to calculate all

- in fares. All fares have been converted to US dollars

. The analysis uses each carri er's median published round trip economy fare for a given route and month. Premium Economy fares are not included in the analysis.

2 Benchmark includes Immunized Alliance members as per the U.S. DOT Compendium of Antitrust Immunity

Cases: American, Britis h Airways, Lufthansa, and United

. Benchmark includes fares published by c arriers on the following routes: WAS

- FRA, WAS

- LON

. 3 There are 4 distinct benchmark carrier

- route pairings.

4 On average, the median benchmark fare per

- kilometer is 82% higher than Etihad’s median fare. Sources:

ATPCO and GDS pricing data; www.gcmap.comF IGURE D 8 E TIHAD R EVENUE P ER K ILOMETER ON W ASHINGTON D.C. TO I SLAMABAD R OUTE

C OMPARED TO I MMUNIZED A LLIANCE M EMBERS ’ R EVENUE S P ER K ILOMETER F ROM W ASHINGTON D.C. TO K EY I MMUNIZED E UROPEAN D ESTINATIONS A PRIL 20 13

– M ARCH 2015

Notes:

1 ATPCO data only contain base fares, which are supplemented by d ata on taxes and fees from GDS (for each

carrier and route combination) in order to calculate all

- in fares. All fares have been converted to US dollars

. The analysis uses each carrier's median published round trip economy fare for a given route and month. Premium Economy fares are not included in the analysis.

2 Benchmark includes Immunized Alliance members as per the U.S. DOT Compendium of Antitrust Immunity

Cases: American, British Airways, Lufthansa, and United

. Benchmark includes fares published by c arriers on the following routes: WAS

- FRA, WAS

- LON

. 3 There are 4 distinct benchmark carrier

- route pairings.

4 On average, the median benchmark fare per

- kilometer is 85% higher than Etihad’s median fare. Sources:

ATPCO and GDS pricing data ; www.gcmap.com.F IGURE D 9 E TIHAD R EVENUE P ER K ILOMETER ON L OS A NGELES TO C OLOMBO R OUTE C OMPARED TO I MMUNIZED A LLIANCE M EMBERS ’ R EVENUE S P ER K ILOMETER

F ROM A TLANTA OR D ALLAS TO K EY I MMUNIZED E UROPEAN D ESTINATIONS A PRIL 20 13

– M ARCH 2015

Notes:

1 ATPCO data only contain base fares, which are supplemented by d ata on taxes and fees from GDS (for each

carrier and route combination) in order to calculate all

- in fares. All fares have been converted to US dollars

. The analysis uses each carrier's median published round trip economy fare for a given route and month. Premium Economy fares are not included in the analysis.

2 Benchmark includes Immunized Alliance members as per the U.S. DOT Compendium of Antitrust Immunity

Cases: Air France, Americ an, British Airways, Delta, and KLM. Benchmark includes fares published by c arriers on the following routes: ATL

- AMS, ATL

- PAR, DFW

- LON

. 3 There are 8 distinct benchmark carrier

- route pairings.

4 On average, the median benchmark fare per

- kilometer is 120% higher than Etihad’s median fare. Sources:

ATPCO and GDS pricing data ; www.gcmap.com.F IGURE D1 0 E TIHAD R EVENUE P ER K ILOMETER ON S AN F RANCISCO TO M UMBAI R OUTE C OMPARED TO I MMUNIZED A LLIANCE M EMBERS ’ R EVENUE S P ER K ILOMETER

F ROM A TLANTA OR D ALLAS TO K EY I MMUNIZED E UROPEAN D ESTINATIONS A PRIL 20 13

– M ARCH 2015

Notes:

1 ATPCO data only contain base fares, which are supplemented by d ata on taxes and fees from GDS (for each

carrier and route combination) in order to calculate all

- in fares. All fares have been converted to US dollars

. The analysis uses each carrier's median published round trip economy fare for a given route and month. Premium Economy fares are not included in the analysis.

2 Benchmark includes Immunized Alliance members as per the U.S. DOT Compendium of Antitrust Immunity

Cases: Air France, Americ an, British Airways, Delta, and KLM. Benchmark includes fares published by c arriers on the following routes: ATL

- AMS , ATL

- PAR, DFW

- LON

. 3 There are 8 distinct benchmark carrie r

- route pairings.

4 On average, the median benchmark fare per

- kilometer is 91% higher than Etihad’s median fare. Sources:

ATPCO and GDS pricing data; www.gcmap.com.F IGURE D 11 E TIHAD R EVENUE P ER K ILOMETER ON S AN F RANCISCO TO D ELHI R OUTE C OMPARED TO I MMUNIZED A LLIANCE M EMBERS ’ R EVENUE S P ER K ILOMETER

F ROM A TLANTA OR D ALLAS TO K EY I MMUNIZED E UROPEAN D ESTINATIONS A PRIL 20 13

– M ARCH 2015

Notes:

1 ATPCO data only contain base fares, which are supplemented by d ata on taxes and fees from GDS (for each

carrier and route combination) in order to calculate all

- in fares. All fares have been converted to US dollars

. The analysis uses each carri er's median published round trip economy fare for a given route and month. Premium Economy fares are not included in the analysis.

2 Benchmark includes Immunized Alliance members as per the U.S. DOT Compendium of Antitrust Immunity

Cases: Air France, Amer ican, British Airways, Delta, and KLM. Benchmark includes fares published by c arriers on the following routes: ATL

- AMS , ATL

- PAR, DFW

- LON

. 3 There are 8 distinct benchmark carrier

- route pairings.

4 On average, the median benchmark fare per

- kilometer is 75% higher than Etihad’s median fare. Sources:

ATPCO and GDS pricing data ; www.gcmap.com.