August!18 ,!2011

Susan!Kurland Assistant Secretary for Aviation and International Affairs U.S.!Department!of!Transportation 1200!New!Jersey!Ave,!SE Washington,!DC!20590

RE:!!Joint!M otion!of!Air!Canada,!Austrian ,!British!Midland,!Continental,!Lufthansa,! LOT,!SAS,!Swiss,!TAP!and!United,!Docket!DOT

Q OST

Q 2008

Q 0234!

– !Public! Comment!Submission

Dear!Ms.!Kurland,

I!write !on!behalf!of!UNITE!HERE !to!submit!a!public!comment! in !the!scheduled! proceeding!under!Docket!DOT

Q OST

Q 2008

Q 0234!regarding!the!inclusion!of!Brussels! Airlines!in!the!immunized!Star!Alliance!and!A++!joint!venture.

We!are!concerned!about!the!Joint!M otion!and!will!detail!our!issues!below!in!the! following!areas:

• D emonstration!of!public!benefit

• Precedent! for!expansion!of!immunized!group

• Existing!regulatory!concerns

• Lack!of!information!in!the!public!domain



### Demonstration+of+Public+Benefit

In!order!to!grant!antitrust!immunity!to!airlines,!the!law!requires!the!Departm ent!of! Transportation!to!determine!that!the!“exemption!is! required'by !the!public!interest.” 1!! We!believe!the!Brussels!Airlines!case!falls!short.

Regulatory'Background

The!Department!of!Justice!has!voiced!concern!over!the!level!of!proof!airlines!have!

prov ided!that!the!benefits!they!claim!require!immunity.!!In!the!DOJ’s!public! comment!on!the!2009!Star!Alliance!immunity!case,!included!in!this!Docket,!the!DOJ! wrote!“a!grant!of!antitrust!immunity!does!not!turn!on!‘the!subjective!desire!of!the! parties!to!avoid! antitrust!litigation.’” 2 !!The!DOJ!noted!that!airline!alliances!had! realized!consumer!benefits!without!immunity, 3 !and!concluded!that!the!applicants!in! that!case!had!“not!justified!their!extraordinary!immunity!request.” 4!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 1 !DOT!Order!2009

Q 7

Q 10!at!3,!citing!49!U.S.C.! § !41308(b).

2 !DOJ!Comments!on!Show!Cause!Order!in!Docket!DOT

Q OST

Q 2008

Q 0234!at!33.

3 !DOJ!Comments!on!Show!Cau se!Order!in!Docket!DOT

Q OST

Q 2008

Q 0234!at!33

Q 36.

4 !DOJ!Comments!on!Show!Cause!Order!in!Docket!DOT

Q OST

Q 2008

Q 0234!at!43.Other!studies!have!echoed!questions! on!the!necessity!of!antitrust!immunity!to! realize!consumer!benefits.!Volodymyr!Bilotkach!and!Kai!Huscherlrath!concluded,! “The!frequently!postulated!lower!prices!due!to!the!removal!of!double! marginalization!following!antitrust!immunity!are!not!obvious!from! the!theoretical! point!of!view,!and!can!be!realized!in!a!partnership!without!such!immunity.” 5!!
Similarly,!economists!at!the!Department!of!Justice!Economic!Analysis!Group!noted! in!2011,!“data !also!show!that!antitrust!immunity!is!not!reasonably!necessary!for! alliance!participants!to!deliver!pricing!efficiencies!to!connecting!passengers.!This! evidence!does!not!support!broad!regulatory!exemptions!from!the!U.S.!antitrust!laws! for!international!air line!alliances.” 6

Current'Consumer'Environment

Meanwhile,!i n!2011,!travelers!have!already!seen!repeated!airfare!increases .!!The! Los' Angeles'Times !reported!in!April!that!international!travelers!are!likely!to!see!the! biggest!hikes!partly!due!to!less!competition!on!international!routes. 7

Of!particular!concern,!in!May !2011,!the! Ne w'York'Time s' ran !a!story!about!the!clout! of!the!airline!alliances!that!are!receiving!antitrust!immunity,!noting:

But'for'all'the'talk'of'the'benefits'that'alliances'offer'travelers,'there'is'a' continuing'debate'about'the'downside'of'this'trend:'too'much'm arket' concentration,'leading'to'higher'fares.'That'is'particularly'a'concern'across'the' Atlantic,'where'fares'have'risen'disproportionately'as'competition'has'shrunk.

“’Something'changed'in'the'North'Atlantic'that'allowed'prices'to'rise'three' times'faster 'than'they'did'in'any'other'market,”'said'Hubert'Horan,'an'aviation' consultant'who'has'opposed'alliance'antitrust'immunity.'‘That'was'due'to'the' extreme'consolidation'of'the'industry.'There'is'no'other'factor'that'could' explain'it.’ 8

In!January !2011,! USA' Today !wrote!a!for ecast!for!business!travelers!that!also! suggested!a!troubling!trend:

While'airline'mergers'are'often'limited'by'foreign'ownership'laws,'airline' alliances'continue'to'grow.'The'alliances'now'control'over'60%'of'world'airline'!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 5 !Bilokatch,!Volodymyr!and!Kai!Huschelrath.!“Antitrust!Immunity!for!Airline!Alliances.”!Centre!for! European!Economic!Research,!Discussion!P aper!No.!10

Q 080,!at!33.!!Article!also!published!in!Journal! of!Economics,!Law!and!Organization.

6 !Gillepsie,!William!and!Oliver!Richard,!“Antitrust!Immunity!and!International!Airline!Alliances.”! Economic!Analysis!Group,!Antitrust!Division,!U.S.!Department!o f!Justice,!at!20.

7 !Martin,!Hugo.!“Summer!airfares!may!climb!15%!from!a!year!earlier.”!Los!Angeles!Times.!April!17!
2011.!

8 !Stellin,!Susan.!“The!Clout!of!Air!Alliances.”!New!York!Times.!May!2!2011.capacity'with'm ore'than'60'current'and'pending'members'including'25'of'the' world's'30'largest'airlines.'Few'places'remain'where'alliances'don't'reach'and' now'they'are'even'recruiting'LCCs.'While'alliances'help'travelers'maximize' their'miles'with'a'single'carrier'and'simp lify'airfare'discount'negotiations'for' corporate'travel'managers,'the'alliance'oligopoly'will'likely'lead'to'fewer'flight' options'and'higher'airfares'on'many'global'routes. 9

In!November!2010,!the! New'York'Times !had!put!numbers!to!the!trend!in!relation!to! U.S.!to!Europe!travel,!a!central!segment!of!the!airline!immunization:

Fares'between'the'United'States'and'Europe'also'rose'sharply,'especially'for'

economy

Y class'seats.'The'average'one

Y way'fare'in'August'was'$455,'a'rise'of'20' percent'from'a'year'earlier,' while'the'average'premium

Y class'fare'was'$2,087,' an'increase'of'11'percent. 10

In!all!of!these!accounts,!competitive!issues!are!raised!as!a!possible!cause!of! increasing!fares.

Brussels'Airlines' Joint'Motion

The! J oint! Movants !claim!that!inclusion!of!Brussels!Airlines!in!the!immunized!A++! joint!venture!would!benefit!consumers!in!a!variety!of!ways,!including!“efficiency

Q enhancing!integration,”!“reduction!of!double!marginalization,”!“economies!of! density!...!permitting!a!ticket!pri ce!reduction,”!improved!“capacity!allocation! (availability)!at!a! w ider! ranger!of!fares,”!“reduced!waiting!time!for!preferred!flights”! and!more. 11

The! J oint! Movants !base!these!conclusions!on! stat ed!benefits!of!the!initial!A++! immunization!in!2009.!!Yet, !de spite!growing!scholarly!and!popular!skepticism!about! the!benefit!or!necessity!of!antitrust!exemptions,!the! J oint! Movants !do!not!provide! any!proof!that!consumers!have actually 'realized !these !claimed !benefits! u nder!A++!
since !the!initial!grant!of!immunity !two !years!ago

.!!!

If!the !stated !benefits!were!a!true!result!of!the!immunity!grant,!the! J oint! Movants ought!to!be!able!to!demonstrate!them!and!predict!concretely!their!expansion!to! Brussels!Airlines.

Beyond!failing!to!prove!the!consumer!benefits !of !A++! immunity! and!therefore!an! expansion!of! that!immunity ,!the! J oint! Movants !fail!to!demonstrate!that!immunity!is!

necessary !to!provide!supposed!benefits !with!regards!to!Brussels!Airlines

.!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 9 !Grossman,!Ben.!“2011!business!travel!forecast:!Higher!pr ices!and!more!hassles.”!USA!Today.!! January!4,!2011.

10 !Clark,!Nicola.!“Sticker!Shock!for!Travelers!as!Airfares!Climb.”!New!York!Times.!November!8!2008.

11 !Docket!DOT

Q OST

Q 2008

Q 0234

Q 0313!at!7

Q 8.The! J oint! Movants !note,!“if!immunity!were!not!granted,!it!would!be!h ighly!inefficient! for!Lufthansa”!and!claim!that!without!immunity!they!would!face!“intolerably!high! risk!of!antitrust!litigation”!and!“legal!compliance!complexities.” 12 !!We!do!not!believe! that!these!are!valid!reasons!to! claim!an!entitlement!to! exempt ion !from !our!antitrust! laws. !!In!fact,!the!reasoning!is!entirely!circular:!that!antitrust!immunity!is!necessary! because!protection!from!antitrust!compliance!is!necessary.!!

Furthermore,! though!Brussels!Airlines!would!offer!only!connecting!service!for!U.S.! passengers,!the! J oint! Movants !to!do!nothing!to!dismiss!the!previously!noted!finding! by!the!economists!at!the!Department!of!Justice!Economic!Analysis!Group!that!“data! also!show!that!antit rust!immunity!is!not!reasonably!necessary!for!alliance! participants!to!deliver!pricing!efficiencies!to!connecting!passengers.” 13



### Precedent+ for Expansion of +Immunized+Group

We!believe!the!inclusion!of!Brussels!Airlines!in!the!immunized!A++!joint!venture!

se ts!problematic!precedents!for!the!expansion!of!antitrust!immunity!grants.

Expansion'of'Hub

Y to

Y Hub'Service

Since!Order

Q 2009

Q 7

Q 10!was!issued!granting!immunity!to!the!A++!joint!venture,!the! European! scope!of!the!venture!has!significantly!expanded.!!Initiall y,!Frankfurt!was! the!only!European!hub! with!service!dominated !by!one!of!the!A++!partners.!!With!the! additions!of!SWISS!and!Austrian!Airlines,!Zurich !(ZRH) !and!Vienna !(VIE) respectively !join!that! immunized!hub! list.!!Brussels!Airlines!would!make !Brussels! (B RU)!the!fourth!addition!in!just!two!ye a rs.

Volodymyr!Bilotkach!and!Kai!Huscherlrath’s!recent!studies!for!the!Centre!for! European!Economic!Research!show!that!immunization!has!notable!effects!on!air! travel!networks.!!For!example,!they!find!that!antitrust!im munity!leads!to!decreases! in!the!passenger!volumes!and!frequency!of!service!for!non

Q alliance!carriers!to!newly! immunized!hubs. 14!!

In! its 2009 !comments ,!the!Department!of!Justice !also !raised! concern !the!possible!
anti

Q competitive!effects!of!immunizing!airline!partners!with!hubs!at!both!ends!of! certain!city

Q pairs. 15!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 12 Joint!Movants !Response!to!Request!for!More!Information,!July!5 ,!2011,!in! in !Docket!DOT

Q OST

Q 2008

Q 0234!at!7.

13 !Gillepsie,!William!and!Oliver!Richard,!“Antitrust!Immunity!and!International!Airline!Alliances.”! Economic!Analysis!Group,!Antitrust!Division,!U.S.!Department!of!Justice,!at!20.

14 !Bilokatch,!Volodymyr!and!Kai!H uschelrath.!“Airline!Alliances,!Antitrust!Immunity!and!Market! Foreclosure.”!Centre!for!European!Economic!Research,!Discussion!Paper!No.!10

Q 083,!at!23,24.

15 DOJ!Comments!on!Show!Cause!Order!in!Docket!DOT

Q OST

Q 2008

Q 0234!a t!17

Q 18,!25

Q 26.!Th e!Brussels! application !alone !seeks!immunization!that!would!add!three!such!hub

Q to

Q hub!pairs:!Washington/Dulles!to!Brussels,!Chicago!to !Brussels!and!Newark!to! Brussels.!!The!immunized!partners!would!face!no!non

Q stop!competitors!on!the! Dulles!

– !Brussels!route,!and!only!one!non

Q stop!competitor!on!the!Chicago!

– !Brussels! route,!while!holding!the!dominant!hub!presence!at!both!ends. 16

We!belie ve!the!Department!of!Transportation!must!analyze!the!collective! competitive!impact!of!the!expansion!of!hubs!within!the!A++!network!(Zurich,!Vienna! and!Brussels)!in!considering!this!application!and!potential!carve

Q outs.!

Ownership

B ecause!Lufthansa!still!owns! less!than!a!majority !of!Brussels!Airlines, 17 !yet!requests! the!“same!treatment”!for!Brussels!as!given!to!“majority

Q owned!affiliates”!under! Order!2009

Q 7

Q 10, 18 !a!notable!precedent!would!be!set!in!this!case!for!the!expansion! of!immuni zed!joint!ventures!under!clauses!regarding!controlled! or!affiliate! entities.!!

If!the!Department!determines!that!some!grant!of!immunity!is!necessary,!we!suggest! that!it!not!take!effect!until!Lufthansa!officially!purchases!the!remaining!shares!of! Brussels! Airlines

.

Inter

Y Alliance'Dynamics

Additionally,!part!of!the!justification!the! J oint! Movants !give!for!their!immunity! request!suggests!another!dangerous!prece de nt!for!antitrust!exemptions.!!In!their! response!to!the!Department!of!Transportation’s!Request!for!More!Information,!the! J oint! Movants !note!that!immunity!would!make!them!more!competitive!with!other! alliances,!particularly!SkyTeam. 19!!
However,!they!do!not!s uggest!that!any!new!service!would!be!launched;!they!only! suggest!that!existing!service!would!become!part!of!the!immunized!joint!venture.!!It! should!not!be!the!Department!of!Transportation’s!prerogative!to!use!antitrust! immunity!to!improve!the!market!positi on!of!any!one!alliance!in!relation!to!others.!! Indeed,!we!believe!the!Department!ought!to!be!weary!of!encouraging!a!cycle!of! continued!consolidation!based!on!repeating!this!logic.!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 16 Source:!BRU!airport!timetables.!There!are!direct!flights!from!BRU!to!ORD,!ATL,!IAD,!PHL,!EWR!and! JFK.!United!is!the!only!carrier!flying!nonstop!from!IAD!to!Brussels,!and!the!ORD

Q BRU!route!has!only! United!and!American.!BRU!is!a!hub!for!Brussels!Airlines,!wh ich!controls!over!30%!of!the!flights!there! (See! “Brussels!Airlines!Puts!Star!Alliance!in!the

Q Driving!Seat!in!Belgium.”!Airlines!and!Destinations.! 11!January!2010. ).!!ORD!and!IAD!are!hubs!for!United,!EWR!is!a!hub!for!Continental.

17 !Lufthansa!owns!45%!of!Bru ssels!Airlines.! Joint!Movants !Response!to!Request!for!More! Information,!July!5,!2011,!in!Docket!DOT

Q OST

Q 2008

Q 0234!at!Exhibit!B.

18 DOT!Order!2009

Q 7

Q 10!at!2,!see!text!and!also!Footnote!4.

19 Joint!Movants !Response!to!Request!for!More!Information,!July!5,!2011,!in!Docket!DOT

Q OST

Q 2008

Q 0234!at!3,!6.

### Existing+Regulatory+Concerns

In!June !2011,!Bloomberg!reported!that,!“ Deuts che!Lufthansa!AG!(LHA) ’s! competitors!made!no!attempt!to!take!over!routes!the!carrier!ceded!in!return!for! European!Union!antitrust!approval!to!buy!part!of!Brussels!Airlines!NV,!EU! regulators!said.”!!While!the!EU!is!not!takin g!further!action!at!this!time,! Bloomberg! reported!the! EU Competition Commissioner !noted! that!travel!agents!or!others!could! file!a!complaint!“if!there!are!serious!concerns!about!a!breach!of!competition!law.” 20!! The!United!States!should!withhold!inclusion!of!the!four!r outes! ceded!by!Lufthansa! in! any!grant!of!antitrust!immunity!for!Brussels!Airlines.!!
Additionally,!t hree!of!the!airlines!involved!in!this!request!for!antitrust !immunity! expansion!are!currently!subjects!of!antitrust!probes!the!European!Commission! launched!in!February!2011 !related!to!specific!routes

. 21 !!One!of!the!routes!under! scrutiny!overseas!

– !Brussels!to!Lisbon!

– !is!included!in!the! Brussels !application. 22!! This !route!should!not!be!included!in!any!U.S.

Q immunized!group!until!the!European! Commission!makes!a!determination!in!that!case.



### Lack+of+Information+in+Public+Domain

DOT!Order!2009

Q 7

Q 10,!included!in!this!docket,!directed!the! J oint! Movants !to!submit! annual!rep orts!to!the!Department!of!Transportation!Office!of!Aviation!Analysis. 23

The!reports!were!described!in!the!Order:

V.'ANNUAL'REPORTING

In'the'tentative'decision,'we'tentatively'found'that'additional'reporting'is' necessary'to'monitor'commercial'development s'and'ensu re'that'public'benefits' are'being'realized.'No'party'has'objected'to'these'reporting'requirem e nts.' ITSA/ASTA'has'suggested'that'we'augment'the'requirements'to'address'sales' and'distribution'issues,'as'well'as'compliance'with'antitrust'protocols.' We' agree'with'this'suggestion.'The'Department'intends'that'additional'reporting' should'cover'all'core'airline'activities'undertaken'to'achieve'the'full'range'of' public'benefits,'which'includes'cooperation'in'sales'and'distribution'and'joint' negotiations'wi th'travel'agents,'as'well'as'efforts'to'preserve'competition,' which'include'antitrust'compliance.'All'interested'parties'had'the'opportunity'!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 20 !White,!Aoife.!“Lufthansa!Competitors!Made!No!Bids!for!Brussels!Slots,!EU!Says.”!Bloomberg.!20! June!2011.

21 !“Antitrust:!Commission!probes!certain!co

Q operation!ag reements!between!Lufthansa!and!Turkish! Airlines!and!between!Brussels!Airlines!and!TAP!Air!Portugal.”!European!Commission!Press!Release! IP/11/147. !!11!February!2011.

22 DOT

Q OST

Q 2008

Q 0234

Q 0313!at !281.

23 DOT!Order!2009

Q 7

Q 10!at !29,!point!10

.to'reply'to'ITSA/ASTA’s'suggestions,'and'there'were'no'further'comments'on' this'issue.

Therefore,'we'make'final' our'tentative'finding'that'the'airlines'should'submit' annual'reports.'The'reports'should'focus'on'the'progress'made'by'the' applicants'towards'achieving'their'stated'goals'for'operating'an'alliance'with' antitrust'immunity,'the'specific'actions'they'have'tak en'to'implement'each'of' their'alliance'agreements'(including'especially'joint'venture'agreements),'the' present'or'future'planned'cooperation'among'the'alliance'partners'in'all'core' airline'functions,'and'a'discussion'of'the'public'benefits'that'are'being'r ealized' by'the'immunized'alliance. 24

Related!to!our!concern!about!the!demonstration!of!public!benefit!in!the!Brussels! Airlines!application,!we!are!concerned!that!information!from!the!2010!submission! of!this!report!is!not!included!in!the!public!docket.!!

In!May!2011,!UNITE!HERE!submitted!a!request!under!the!Freedom!of!Information! Act!to!the!Department!of!Transportation!to!release!the!2010!report! that!should!have! been!submitted!by !the!immunized!group.! 25 !The!Department!denied!the!request!in! full 26 !and!an!appe al!is!pending. 27

In!order!for!public!entities!to!make!more!informed!analysis!of!the!impact!of! antitrust!immunity!granted!to!the! J oint! Movants ,!including!an!understanding!of! any! public!benefits!actually!realized,!we!believe!these!reports!must!be!made!public ly! available!in!the!future!and!that!any!Final!Order!in!this!matter!should!reflect!this! change.!!We!also!ask!that!the!2010!report!be!released!immediately!and!that!the! schedule!on!this! Joint!Motion be! extended!accordingly!to!allow!for!a nalysis!prior!to!

any!e xpansion!of!antitrust!immunity!to!Brussels!Airlines. !!We!believe!that!the!

pres ent!public!comment!process!is!fatally!flawed !because key!information!about!the! effects!of!imm u nity! has !been!withheld!from!the!public

.!!



### Conclusion

We!are!concerned!that!the! J o int! Movants !have!not!proven!the!public!benefits!that! would!come!from!an!expansion!of!the!A++!immunization,!nor!have!they!justified!the! necessity!of!an!immunity!grant.!!Meanwhile,!the!proposed!growth!of!the!immunized! joint!venture!sets!a!potentially!problem atic!precedent!for!future!requests.!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! 24 DOT!Order! 2009

Q 7

Q 10!at 26.

25 !DOT!FOIA!File!Number!FY

Q 2011

Q 138

26 !Determination!from! DOT!FOIA!Officer! Kathy!Ray!in!letter !from!the!Office!of!the!Secretary!of! Transportation !dated!31!May!2011.

27 !Appeal!submitted !by!UNITE!HERE !to!Rosalind! A.! Knapp!in!a!letter!dated!27!J une!2011.If!immunity!is!granted!nonetheless,!we!request!the!Department!of!T ransportation! consider!certain! route!carve outs. !!We!also!request!the!release!of!annual!reports! submitted!by!the! J oint! Movants ,!retroactively!and!in!t he!future.

We !hope !that!the!Department!will!address!our!concerns!when!making!a!final!order! on!this!matter.

Sincerely,

Kyle!Schafer
UNITE!HERE 55!W.!Van!Buren Chicago,!IL!60660