Served: June 6, 2011

1 UNITED STATES OF AMERICA
DEPARTMENT OF TRANSPORTATION
OFFICE OF THE SECRETARY WASHINGTON, D.C.

Joint Application of

AIR CANADA
THE AUSTRIAN GROUP
BRITISH MIDLAND AIRWAYS LTD

CONTINENTAL AIRLINES, INC.

DEUTSCHE LUFTHANSA AG
POLSKIE LINIE LOTNIECZE LOT S.A.

SCANDINAVIAN AIRLINES SYSTEM
SWISS INTERNATIONAL AIR LINES LTD.
TAP AIR PORTUGAL UNITED AIR LINES, INC.

for approval of, and a grant of antitrust immunity for, alliance agreements under 49 U.S.C. §§ 41308 and 41309

Docket DOT-OST-2008-0234

NOTICE

This notice concerns the withdrawal of one “carve out” imposed upon the above-captioned carriers (the “Joint Applicants”) by Order 2009-7-10.

The Joint Applicants are members of an alliance that was approved and granted antitrust immunity in July 2009. The final order in the case, Order 2009-7-10, imposed carve outs in a number of city-pair markets in which competitive concerns were identified. 1 In those carve-out markets, immunity is limited to the coordination of fares and capacity for connecting traffic only, which protects the passengers in the local nonstop market who could, under certain

1 See Order 2009-7-10 at 18-21, Ordering Paragraphs 5, 6, and 7, and Appendix A. The order and the appendix provide for carve outs in the following markets: New York-Geneva, New York-Lisbon, Cleveland-Toronto, Houston-Calgary, Houston-Toronto, New York-Ottawa, Chicago-Toronto, and San Francisco-Toronto. Carve outs in New York-Copenhagen, New York-Stockholm, U.S.-B eijing markets, Washington-Frankfurt, and ChicagoFrankfurt have been previously withdrawn.2 circumstances, be subject to higher prices or reduced quality of service if the airlines were to gain market power through the alliance.

In our final order, we concluded that there could be some potential for adverse consumer consequences if competition were to be eliminated on the New-York Geneva route, among

others. 2 However, we have also “consistently found that where an integrated ‘metal-neutral’ joint venture is present, carve outs inhibit the realization of efficiencies and thereby the consumer benefits resulting from those efficiencies.” 3

On February 3, 2011, the Joint Applicants asked the Department to remove New-York Geneva from the list of carved-out city pairs. 4 They assert that New York-Geneva was carved out from the full benefits of the antitrust immunity gr anted by Order 2009-7-10 because one of the two Star immunized carriers flying the route nonstop, Sw iss International Air Lines, Ltd. (“Swiss”), was not then a party to the A++ metal neutral transatlantic joint venture agreement (“A++”). Subsequent to that order, Swiss has been designate d as a participant in A++. Therefore, pursuant to Ordering Paragraph 8 of Order 2009-7-10, the Joint Applicants have petitioned for removal of this city-pair carve out.

In Appendix A of Order 2009-7-10, we noted that “the Department may review the limitations on antitrust immunity set forth above to determ ine whether they should be discontinued or

modified” 5 in light of several conditions. In partic ular, we allowed for the possible removal of carve outs if “efficiencies to be achieved by the parties from further integration that would be made possible by discontinuation of the limitati ons on immunity [would be] balanced against any potential for harm to competition from such a discontinuation.” 6

Accordingly, the Department concurs that the carve out in this subject market should be withdrawn. In addition to being a wholly owne d subsidiary of the Lufthansa Group, which has ATI with Star, Swiss is also now a member of th e A++ integrated joint venture. Membership in A++ will enable Swiss to achieve additional and significant efficiencies which can be expected to be passed on to consumers as public benefits. Thus, we find the efficiencies of removing the
New York-Geneva carve out from the antitrust i mmunity granted to the Joint Applicants in Order 2009-7-10 will outweigh the potential adverse consumer consequences [2] we previously identified in Order 2009-7-10, [3] and the affected carve out in New York-Geneva will cease to apply immediately. We reserve the right to re-impose the carve out if warranted.

2 See Order 2009-7-10 at 19.

3 See Order 2009-7-10 at 20 (footnote omitted).

4 See Joint Petition filed by Join t Applicants in Docket DOT-OST-2008-0234 (February 3, 2011).

5 See Order 2009-7-10, Appendix A at 3.

6 See Order 2009-7-10, Appendix A at 3. [2] See Order 2009-7-10 at 19. [3] See Order 2009-7-10 at 21-22 (July 9, 2009).3 This notice does not affect any other carve outs. The Joint Applicants have separately petitioned to remove the carve outs in New York-Copenhagen, New York-Stockholm, and U.S.-Beijing; this request was separately addressed on April 13, 2011.

We will serve this notice on interested parties.

By:

SUSAN L. KURLAND Assistant Secretary
for Aviation and International Affairs

Date:

(SEAL)

An electronic version of this document is available at: http://www.regulations.gov