**BEFORE THE DEPARTMENT OF TRANSPORTATION**  **WASHINGTON, D. C.**

--------------------------------------------- 2010 U.S.-HANEDA COMBINATION SERVICES : DOT-OST-2010- ALLOCATION PROCEEDING : 0018

---------------------------------------------

**REPLY OF AMERICAN AIRLINES, INC.**

Communications with respect to this document should be sent to:

VIRASB VAHIDI WILLIAM K. RIS, JR. Senior Vice President - Senior Vice President - Planning Government Affairs American Airlines, Inc. American Airlines, Inc. P.O. Box 619616, MD 5634 1101 17 th Street, N.W. DFW Airport, Texas 75161 Washington, D.C. 20036

KENJI C. HASHIMOTO CARL B. NELSON, JR. Vice President – Strategic Associate General Counsel Alliances American Airlines, Inc. American Airlines, Inc. 1101 17 th Street, N.W. P.O. Box 619616, MD 5635 Washington, D.C. 20036 DFW Airport, Texas 75261 (202) 496-5647 carl.nelson@aa.com ROBERT A. WIRICK Director, Regulatory American Airlines, Inc. P.O. Box 619616, MD 5635 DFW Airport, Texas 75261 (817) 963-0394 robert.wirick@aa.com

March 8, 2010**BEFORE THE DEPARTMENT OF TRANSPORTATION**  **WASHINGTON, D. C.**

--------------------------------------------- 2010 U.S.-HANEDA COMBINATION SERVICES : DOT-OST-2010- ALLOCATION PROCEEDING : 0018

---------------------------------------------

**REPLY OF AMERICAN AIRLINES, INC.**

American Airlines, Inc., under the Department’s amended Notice of February 12, 2010, hereby replies to the answers submitted on March 1, 2010 by Delta Air Lines, Inc., United Air Lines, Inc., Continental Airlines, Inc., Hawaiian Airlines, Inc., and Continental Micronesia, Inc. American is seeking two of the four daily U.S.-Haneda slot pairs the Department will award. American proposes 247- seat B777 service from New York (JFK) and Los Angeles, the two largest Mainland-Tokyo markets. American’s first priority is New York. Via New York and Los Angeles, American will serve all of the 10 largest Mainland-Tokyo markets, with nonstopflights from the two gateways and roundtrip on-line connections from San Francisco, Chicago, Las Vegas, Seattle, Washington, Boston, Orlando, and Portland (Exhibit AA-105).2

American’s application to serve Haneda from JFK and LAX should be granted ahead of the other requests. There is no public interest justification for giving all four slots to Delta, the world’s largest airline and largest U.S. carrier to Japan, with a 52% market share (Exhibit AA-R-102). Delta operates a substantial hub at Narita with 16 daily departures to U.S. points and 10 daily departures to cities in Asia, and a second Asia hub at Seoul where it enjoys ATI with Korean Air. For service to Haneda from New York, the Department should choose American (JFK) over Continental (EWR). JFK is the preferred airport for international service, and American at JFK has better on-time performance than Continental at Newark. Newark ranks last in on-time performance among the 31reportable airports. Moreover, if United receives SFO authority, American should be selected ahead of Continental to ensure balanced competition among the three global alliances. The Department should not award slots for flightsfrom Haneda to Honolulu (Hawaiian Airlines) or Guam (Continental Micronesia). These markets are well served today, anddo not require departures from Tokyo’s close-in airport. Moreover, Hawaiian Airlines has never operated scheduled service to Tokyo, and has not operated charter flights to Japan for 20 years, casting doubt on its credibility as an applicant here.3

1. **DELTA** Delta’s answer repetitively asserts that it should have all four of the U.S.-Haneda slot pairs so that Delta (and SkyTeam) can compete with the prospective AA/JAL ( **one** world) and UA/CO/ANA (Star) immunized alliances. Indeed, Delta’s 21-page pleading has 20 separate references to JAL, 36 to **one** world, 16 to ANA, and 37 to Star. It has been observed, however, that “mere repetition of arguments . . . is insufficient,” Reliance Steel Products Co. v. National Fire Ins. Co. , 880 F.2d 575, 577(1st Cir. 1989), and that “no amount of pure repetitive assertion can make it so,” United States v. Lynch , 499 F.2d 1011, 1039 (D.C. Cir. 1974) (MacKinnon, C.J., dissenting). Those observations apply to Delta here. American’s potential cooperation with JAL should not preclude our own-metal service to Haneda. In past proceedings, Delta received limited-entry authority to Colombia, France, and Mexico, even though Delta already had access to the identical city-pairs by displaying DL* on Air France (JFK-Lyon), Avianca(JFK-Bogota), and Aeromexico (LAX-Puerto Vallarta). Delta pronounced that “codeshare service is not a substitute for anapplicant’s direct service with its own aircraft.” See American’s answer, March 1, 2010, p. 10-11. Similarly, cooperativeservice to Haneda with JAL as the operating carrier is no substitute for American’s direct service.4

In applying for immunity with JAL, American’s goal is to position itself for long-term success in the U.S.-Japan and U.S.-Asia markets against Delta and United/Continental/ANA. For the benefit of its customers, shareholders, pilots, flight attendants, mechanics, and all other employees, American will continue to seek route opportunities to Japan, and to operate transpacific flights in the context of the metal-neutral joint venture. Delta’s view that JAL should be the operating carrier in U.S.-Haneda markets to the exclusion of American is contrary to the general joint venture model, which contemplates that the partners will share equally in opportunities. Delta argues that by obtaining the entire allotment of Haneda slots, it would “maximize consumer benefits” (p. 1), although it does acknowledge that “a request for all four of the available slot pairs at Haneda may appear extraordinary” (p. 3). This last point is one on which the other applicants are in full agreement, although some describe Delta’s ploy a bit differently. See Answers of American, p. 4 (citing Delta’s “extraordinary” bid to gain a monopoly U.S. flag position at Haneda); Continental, pp. 1, 13 (Delta has “greedily applied for” and has “the audacity to seek” every single slot-pair); United, p. 11 (Delta “unabashedly demands” four Haneda slots); Hawaiian, p. 6 (it is “incongruous” that Delta demands four slot pairs after vigorously opposing U.S.-Japan open skies).5

Delta’s request not merely “appear[s] extraordinary,” but is virtually unprecedented in selection cases. When the Department has the opportunity to make multiple awards, it does not surrender everything to one applicant, particularly an applicant such as Delta which is already the largest U.S. carrier to Japan and has two hubs in Asia. If the Department were to accede to Delta’s demand, Delta would achieve a U.S. flag monopoly at Haneda with four slot pairs, while American, United, and Continental would have none. Even if the Haneda-U.S. slots yet to be allocated to JAL and ANA (presumably two each) were attributed to their U.S. partners (a contention which we dispute), Delta would have twice the number of U.S.-Haneda operations (four) as AA/JAL (two) or UA/CO/ANA (two). That would obviously not “promot[e]broad-based alliance competition,” which is how Delta mischaracterizes the result if it runs the table (p. 1). Delta claims there are two precedents for attributing (i) JAL’s Haneda slots to American and (ii) ANA’s Haneda slots to United/Continental: the obsolete Air-21 slot rule at 49 USC 41714(k) and the slot divestiture condition in **one** world showcause Order 2010-2-8 (p. 26). Neither is relevant here.6

The Air-21 provision was intended to prevent codeshare partners operating at slot-constrained airports such as ORD and LGA from posing as “new entrants” by applying for additional slots under their separate corporate names and codes. But these codeshare carriers, such as United Express, were already operating at the restricted airports, in some cases with scores of daily flights. Here, by contrast, Delta wants to prevent American, United, and Continental from operating to Haneda at

all. Nor is the **one** world show-cause order instructive for

Haneda. The **one** world applicants are already operating atHeathrow, and the proposed condition pertains to slot divestitures to non-affiliated carriers. The show-cause order is not aimed at shutting the **one** world applicants out of Heathrow. To the contrary, the issue is quite narrow and deals only with the disposition of divested slots to unrelated parties.Delta’s proposed gateways and priorities are not consistent with the public interest. Seattle, Delta’s first choice for an award, is only the sixth largest Mainland-Japan market, one-fifth the size of Los Angeles, one-fourth the size of New York, and one-third the size of San Francisco, which arethe top three (Exhibit AA-105). Delta’s second choice, Detroit, does not even rank in the top 10 (Exhibit CO-A-100), and is a small fraction the size of New York and Los Angeles.7

Delta’s third choice, Los Angeles, clearly merits Haneda service, but the Department should select American, not Delta, in light of American’s stronger connecting presence and other factors set forth in our answer, p. 12. Delta’s fourth choice is Honolulu, which Delta now concedes to Hawaiian Airlines (p. 3 n. 2). Delta’s Haneda application should be denied. With approval of antitrust immunity for American/JAL and United/ Continental/ANA, Delta will continue to command a strong position in Japan and Asia. On February 9, 2010, after JAL announced its decision to remain in **one** world, Delta publicly responded by stating that: “Delta is well-positioned as the No. 1 carrier between the U.S. and Asia. Customers can con- tinue to count on Delta for unmatched access to Japan, with nonstop service between 10 U.S. desti- nations and Tokyo. With recently announced plans to invest $1 billion in our product, Delta remains committed to providing a leading option for travel across the Pacific. Delta’s competitive Pacific presence, along with our trans-Atlantic joint ven- ture with Air France/KLM and leading position in global markets, will continue to allow Delta and our SkyTeam partners to meet demand worldwide.”Delta does not need special assistance from the Department to compete in the U.S.-Japan market by being awarded a U.S.-flag monopoly at Haneda. The three global alliances are competitively balanced as measured by U.S.-Japan O&D marketshare (Exhibit AA-R-116), and can only remain so with an evenhanded distribution of Haneda slots.8

2. **UNITED** United requests one slot pair to operate between San Francisco and Haneda. United’s SFO proposal should not be selected at the expense of American’s application to serve Haneda from New York and Los Angeles. New York and Los Angeles are the two largest O&D markets to Tokyo from the Mainland, and each exceeds San Francisco by a substantial margin, New York by 64%, and Los Angeles by 88% (Exhibit AA-105). As a U.S.-Japan incumbent, United, like Delta, has long enjoyed unlimited authority to serve between the two countries, as well as a hub at Narita with Fifth Freedom rights to beyond points in Asia. Like Delta, United has a base at Narita with aircraft and employees dedicated to intra-Asia operations. And like Delta, United has antitrust immunity with a Korean carrier, in United’s case Asiana, thus giving United hubs at both Narita and Seoul. In addition to displaying UA* on ANA and Asiana,United engages in non-immunized codesharing in U.S.-Asia markets on Star partners Air China, Shanghai Airlines, and Thai International. United also has two U.S. partners in the Star alliance, Continental and US Airways. Star is unique in having multiple U.S. carrier members. As detailed in our answer (p. 12), both Continental and US Airways display their codes on United and Asiana, and US Airways displays its code on ANA and9

Singapore Airlines. United and Continental are jointly seeking ATI with ANA. Star’s multi-carrier access to Japan and Asia should not be extended by an award of San Francisco-Haneda authority to United to the exclusion of American and **one** world at JFK and Los Angeles.

3. **CONTINENTAL** Continental proposes daily service between Newark and Haneda. American’s New York (JFK)-Haneda application should be ranked first, particularly given JFK’s preferred position as aninternational gateway, and JFK’s superiority over Newark in ontime performance, as we showed in our answer. For most business travelers in Manhattan, JFK is more convenient than Newark. As we explained in the 2005/2006 U.S.- China Air Services Case and Designations (DOT-OST-2004-19077), JFK is the preferred airport by a wide margin for internationalservice to and from the New York metropolitan area. See American’s Brief, November 22, 2004, p. 21 and cited exhibits. Just as JFK is more convenient than Newark, Haneda is the closest airport to central Tokyo and is more convenient than Narita. Ground transportation between Haneda and central Tokyo takes about 30 minutes, compared to about an hour and 30 minutes for Narita. The public interest would be best served by linking the two most convenient airports, JFK and Haneda, with nonstop service.10

Moreover, JFK has better overall on-time performance than Newark, and American at JFK has better on-time performance than Continental at Newark. Indeed, among the 31 reportable airports, Newark ranked last in on-time performance in 2009.

See Exhibits AA-R-109, AA-R-110, AA-R-111. American’s superior on-time performance at JFK is significant not only because customers benefit from more reliable service (including fewer missed connections), but also because of the 2200 – 0700 operating window at Haneda for flights to and from the U.S. In these circumstances, the applicant and the airport with the better on-time record should be favored.In its answer, Continental claims more roundtrip online connections for behind cities via Newark than American would offer via JFK (Exhibit CO-R-155). But Continental’s array of connections cannot be accepted at face value. As shown in Exhibit AA-R-112, 21 of Continental’s connecting cities had fewer than five Tokyo passenger bookings per day in each direction in CY 2009. Of the remaining 15 cities, four would have roundtrip connections on American via JFK (Boston, Washington, Raleigh/Durham, and Miami), and two of those cities (Washington and Boston, the 7 th and 8 th largest U.S.-Tokyo markets) would have shorter elapsed times on American than on Continental (Exhibit AA-R-113).11

The rest of the connecting cities claimed by Continental via EWR presently have shorter roundtrip elapsed times to Tokyo (Narita) on existing flights operated by Delta via ATL, United via IAD or ORD, or American via ORD. The time advantage of existing service ranges up to 11 hours roundtrip (Exhibit AA-R-117). Assuming that Haneda is about an hour closer to central Tokyo than Narita, connecting passengers would not benefit from Continental’s Haneda service if the time saved on ground transportation between Haneda and the city center is eclipsed by additional hours of elapsed time spent in the air and at the connecting gateway. Continental portrays itself as a small carrier in theU.S.-Japan market, with the fewest Mainland gateways, frequencies, departures, and passengers (Exhibits CO-A-117, 118, 119,and 120). But Continental does not need Haneda slots to increase its footprint in Japan. Since the 1998 MOU, Continental has had ample opportunity to expand its U.S.-Japan presence, but has not done so with the exception of adding the CO* code to transpacific flights operated by United and other Star partners.12

The Department should also consider Continental’s pending joint application with United for antitrust immunity with ANA. It would be unfair for United and Continental (and Star) to receive two of the four Haneda slot-pairs but for American (and **one** world) to be left out. If United is selected for San Francisco, Continental should not be selected at the expense of American’s application and balanced inter-alliance competition. See **one** world show-cause Order 2010-2-8, pp. 14, 28; Exhibit AA-R-116.

4. **HAWAIIAN** Hawaiian’s answer rivals Delta’s in repetition. Justas Delta seizes on the ATI applications by American and Continental/United, Hawaiian seizes on the theme that unlike other applicants, it does not already serve Japan. Thus, Hawaiian is a “new entrant” (p. 1) offering a “new option” (p. 2); “all of the other applicants” serve Tokyo (p. 2); Hawaiian is the sole“have not” among the applicants (pp. 3, 4); it “does not presently serve Tokyo” and “does not offer any U.S.-Tokyo service” (p. 4); Hawaiian will not experience diversion from existingJapan service (pp. 1, 16, 17, 18); Hawaiian is the only applicant “with no service to Japan” (p. 11); it has “no operations or investment at Narita” (p. 12); Hawaiian operates “no service to Tokyo from Honolulu” (p. 25); it is “a new entrant” (p. 26); it offers “a new option” (p. 27), etc.13

Hawaiian’s on-going failure to serve Japan is not a factor in its favor. To the contrary, Hawaiian’s failure is a demerit that all but extinguishes its credibility. As its filings demonstrate, Hawaiian has the time and resources to prepare hundreds of pages of route case exhibits to argue that it would provide significant public benefits if only it could serve Tokyo. But Hawaiian has not used the opportunities ithas had to enter the Japan market since the 1998 MOU substantially expanded U.S. routes and frequencies. There is nothing to stop Hawaiian from serving Tokyo today, as it does not require Haneda slots to do so. Hawaiian briefly served Honolulu-Fukuoka 20 years ago before selling the route to Northwest, and secured Maui-Tokyo authority 10 years ago but never started. Hawaiian could also be providing charter service to Japan, but admits in its answer that it has not done that for some 20 years (p. 26). Operations to Japan have not been a priority for Hawaiian, which has instead chosen to serve Australia, the Philippines, Tahiti, and America Samoa (p. 26). The Department should not credit Hawaiian’s contention that it is a “have not” deserving special treatment simply because, unlike all of the applicants, it has failed to take advantage of longstanding opportunities provided by the 1998 MOU to fly to Japan.14

**6. CONTINENTAL MICRONESIA** Continental Micronesia should not be awarded a Haneda slot-pair to serve Guam. Like Honolulu, the Guam market is highly concentrated with Japan-originating leisure passengers. These passengers are well served with existing scheduled and charter flights. If there is a need for additional Japan-Guam service, Continental Micronesia can provide it by adding to the 60 weekly scheduled frequencies it currently operates to Guamfrom Tokyo (Narita), Osaka, Nagoya, Sapporo, Fukuoka, Hiroshima, Niigata, Okayama, and Sendai (Exhibit AA-R-114). Continental Micronesia does not require Haneda slots to expand its Japan-Guam service.

**CONCLUSION**The Department should promptly conclude this proceeding by awarding two daily slot pairs to American to serveHaneda from New York and Los Angeles, the two largest MainlandTokyo markets. From these gateways, American will provideroundtrip on-line Haneda service in the 10 largest MainlandTokyo markets. Selection of American will benefit U.S.-Japan passengers and allow American to achieve a stronger competitive position for itself and for **one** world versus incumbent airlines and their alliance partners.15

Respectfully submitted,

CARL B. NELSON, JR. Associate General Counsel American Airlines, Inc. March 8, 2010

# THE THREE GLOBAL ALLIANCES ARE COMPETITIVELY BALANCED

AS MEASURED BY U.S.

– JAPAN O&D MARKET SHARE DOT

- OST

- 2010

- 0018 Exhibit AA

- R

- 116 Page 1 of 1

Source: MIDT Y2009 

### oneworld SkyTeam StarDOT-OST-2010-0018 Exhibit AA-R-117 Page 1 of 2



## AT LEAST 11 OF THE CONNECTING CITIES CLAIMED BY CONTINENTAL AT NEWARK HAVE SHORTER ROUNDTRIP ELAPSED TIMES ON EXISTING SERVICE TO NARITA, ECLIPSING ANY TIME SAVED ON THE GROUND BETWEEN HANEDA AND CENTRAL TOKYO

Continental Existing Svc To/From Haneda To/From Narita Time Saved Via EWR Via Via Narita

Atlanta Westbound 20:25 ATL/DL 12:00 Eastbound 17:39 14:35 Roundtrip 38:04 26:35 11:29

Baltimore Westbound 19:07 ORD/UA 16:00 Eastbound 16:27 15:58 Roundtrip 35:34 31:58 3:36

Charlotte Westbound 17:25 IAD/UA 16:27 Eastbound 17:40 16:15 Roundtrip 35:05 32:42 2:23

Cincinnati Westbound 18:10 ORD/AA 14:40 Eastbound 18:52 16:00 Roundtrip 37:02 30:40 6:22

Cleveland Westbound 17:15 ORD/UA 16:02 Eastbound 18:47 15:54 Roundtrip 36:02 31:56 4:06

Columbus Westbound 19:09 ORD/AA 14:55 Eastbound 17:55 16:10 Roundtrip 37:04 31:05 5:59

Norfolk Westbound 18:08 IAD/UA 15:33 Eastbound 16:53 16:10 Roundtrip 35:01 31:43 3:18DOT-OST-2010-0018 Exhibit AA-R-117 Page 2 of 2



## AT LEAST 11 OF THE CONNECTING CITIES CLAIMED BY CONTINENTAL AT NEWARK HAVE SHORTER ROUNDTRIP ELAPSED TIMES ON EXISTING SERVICE TO NARITA, ECLIPSING ANY TIME SAVED ON THE GROUND BETWEEN HANEDA AND CENTRAL TOKYO

Orlando Westbound 18:05 IAD/UA 16:05 Eastbound 17:15 17:20 Roundtrip 35:20 33:25 1:55 Philadelphia Westbound 18:20 IAD/UA 15:43 Eastbound 16:07 16:18 Roundtrip 34:27 32:03 2:22 Pittsburgh Westbound 19:18 IAD/UA 15:45 Eastbound 17:48 16:15 Roundtrip 37:06 32:00 5:06 Tampa Westbound 21:05 ATL/DL 16:28 Eastbound 20:18 17:35 Roundtrip 41:23 34:03 7:20

SOURCE: Exhibits CO-122, CO-123, CO-A-155; OAG February 2010. Note: Exhibit CO-A-155 claims Buffalo as a roundtrip connection but CO-123 does not show service in the eastbound directionCERTIFICATE OF SERVICE

I hereby certify that I have this day served the foregoing document by email on the following persons:

sascha.vanderbellen@delta.com scott.mcclain@delta.com sametta.c.barnett@delta.com kquinn@pillsburywinthrop.com bkeiner@crowell.com mrosia@crowell.com bruce.rabinovitz@wilmerhale.com jeffrey.manley@united.com bob.kneisley@wnco.com robert.land@jetblue.com msinick@ssd.com cdonley@ssd.com anbird@fedex.com dvaughan@kelleydrye.com kevin.montgomery@polaraircargo.com jrichardson@johnlrichardson.com lhalloway@crowell.com efaberman@wileyrein.com mroller@rollerbauer.com howard.kass@usairways.com benjamin.slocum@usairways.com sophy.chen@hklaw.com david.heffernan@wilmerhale.com

March 8, 2010 jhill@dlalaw.com bill@mietuslaw.com mgoldman@sgbdc.com rsilverberg@sgbdc.com dhainbach@ggh-airlaw.com mcmillin@woa.com eskraft@jamhoff.com dpdean@jamhoff.com dkirstein@yklaw.com jyoung@yklaw.com donna.kooperstein@usdoj.gov dwight.moore@ustranscom.mil jim.ballough@faa.gov byerlyjr@state.gov recohn@hhlaw.com cjsimpson@zsrlaw.com pmurphy@lopmurphy.com lachter@starpower.net anita.mosner@hklaw.com rpommer@atlasair.com gmurphy@crowell.com russell.bailey@alpa.org wkaras@steptoe.com cgosain@steptoe.com