BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C. Joint Application of Virgin Atlantic Airways, Ltd. Delta Air Lines, Inc. Société Air France Koninkli jke Luchtvaart Maatschappij N.V. Alitalia Compagnia Aerea Italiana S.p.A Under 49 U.S.C. §§ 41308 and 41309 for A pproval of and A ntitrust I mmunity for A lliance A greements ) ) ) ) ) ) ) ) ) ) ) ) ) Docket DOT - OST - 2013 -

JOINT APPLICATION FO R APPROVAL OF AND AN TITRUST IMMUNITY FOR ALLIANCE AGREEME NTS Communications with respect to this document should be sent to: Jill Brady General Counsel and Director of HR and External Affairs VIRGIN ATLANTIC AIRWAYS LTD The Base, Fleming Way Crawley, United Kingdom RH10 9LX, United Kingdom G len Hauenstein Executive Vice President, Network Planning & Revenue Management DELTA AIR LINES, INC. 1030 Delta Boulevard Atlanta, Georgia 30320

Anita M. Mosner Jennifer M. Nowak HOLLAND & KNIGHT LLP 800 17th Street, NW, Suite 1100 Washington, D.C. 20006 Tel. 202

- 419

- 2604 Counsel for VIRGIN ATLANTIC AIRWAYS Ben Hirst Senior Vice President and General Counsel Andrea Fischer Newman Senior Vice President, Government Affairs Alexander Van der Bellen Managing Director, Government Affairs and Associate Ge neral Counsel DELTA AIR LINES, INC. 1212 New York Avenue, NW Suite 200 Washington, DC 20005 Tel. 202

- 842

- 4184

April 8 , 2013Rita Ciccone General Counsel & Vice President Legal and Corporate Affairs ALITALIA

- COMPAGNIA AEREA ITALIANA S.P.A. Piazza Almerico da Schio. Pal RPU 00054 Fiumicino (Roma), Italy Phone +39 06 65635136 ciccone.rita@alitalia.it
Richard D. Mathias ZUCKERT, SCOUTT & RASENBERGER, L.L.P. 888 Seventeenth Street, NW, Suite 600 Washington, DC 20006

- 3309 Tel. 202

- 973

- 7917 Counsel for ALITALIA COMPAGNIA AEREA ITALIANA S.p.A. Laurent Timsit, Vice President

– European and International Affairs SOCIÉTÉ AIR FRANCE 45, rue de Paris F

- 95747, Roissy CDG Cedex Paris, France Nienke Neij Corporate Legal Counsel KLM ROYAL DUTCH AIRLINES P. O. Box 7700, 1117 ZL Schiphol The Netherlands Robert E. Cohn Patrick R. Rizzi HOGAN LOVELLS US LLP 555 Thirteenth Street, NW Washington, DC 20004 Tel. 202

- 637

- 4999/5659 robert.cohn@hoganlovells.com patrick.rizzi@hoganlovells.com Counsel for SOCIÉTÉ AIR FRANCE and KONINKLIJKE LUCHTVAART MAATSCHAPPIJ N.V.Table of Contents I. Introduction

................................ ................................ ................................ .......... 1 II. Executive Summary

................................ ................................ ............................. 3 III. Description of the Agreements

................................ ................................ ........... 11 A. Joint Venture Agreement

................................ ................................ ........ 12 1. Network Working Group

................................ ............................. 15 2. Revenue Management and Pricing Working Group

.................... 16 3. Passenger Working Group

................................ .......................... 17 4. Operations Working Group

................................ ......................... 18 5. Finance Working Group

................................ .............................. 18 B. Coordination Agreement

................................ ................................ ........ 19 C. Implementing Agreements

................................ ................................ ..... 19 IV. The Application Is Consistent with the Department’s Legal Stand ards for Granting Immunity.

................................ ................................ ............................ 20 V. A Grant of Immunity Is Required to Produce Important Public Benefits

.............. 21 A. The Delta/Virgin Atlantic Joint Venture Will Enable the Parties to Provide Substantial Consumer Benefits through New Services and Increased Competition.

................................ ................................ .......... 23 1. An Optimized Joint Schedule Will Improve Competition and Consumer Choice on the Key New York

- and Boston

Heathrow Routes.

................................ ................................ ....... 23 2. The Joint Venture Will Provide Customers with the Benefit of the Expanded Scope of the Two Networks.

............................ 26 3. The JV Parties Plan to Launch New Nonstop Service at Seattle.

................................ ................................ ....................... 28 4. The Joint Venture Creates the Potential for Additional U.S.

- U.K. Flying from Delta Hub Cities.

................................ .............. 29 5. The Joint Venture Will Improve Service Between the U.S. and U.K. Regional Cities.

................................ ............................ 29 6. The Joint Venture Will Enable the JV Parties to Achieve a More Effective Sales Presence on Both Sides of the Atlantic

................................ ................................ ....................... 30 7. Airport Co

- l ocation and Streamlined Service Will Improve the Customer Experience

................................ ........................... 31 B. Expansive Integration Across a Metal

- Neutral North America

- U.K. Network will Create Substantial Consumer Benefits that Cannot Be Achieved without Antitrust Immunity.

................................ ................ 32 C. The Improved Network Enabled by the Joint Venture Will Produce Substantial Quantifiable Consumer Benefits

................................ .......... 33VI. The Proposed Alliance Will Improve Competition and Consumer Choice on U.S.

- U.K. Routes and Will Not Reduce Competition in A ny Relevant Market.

................................ ................................ ................................ .............. 34 A. The Current Competitive Landscape: AA/BA Dominates U.S.

- U.K. Routes

................................ ................................ ................................ ... 35 B. The Proposed Joint Venture Will Enhance Competition

......................... 38 1. United States

- United Kingdom

................................ .................... 39 2. Complementary Routes

................................ .............................. 40 3. Overlap City

- Pairs

................................ ................................ ...... 41 VII. Granting ATI Would Be Consistent with the Letter and Spirit of the EU

U.S. Open Skies Agreement and Settled DOT Precedent.

................................ . 48 VIII. The Joint Applicants Will Not Implement the Alliance Agreements without Antitrust Immunity.

................................ ................................ ............................. 50 IX. The Joint Applicants Need Antitrust Immunity to Bridge the Two Joint Ventures.

................................ ................................ ................................ ........... 50 X. Conclusion

................................ ................................ ................................ ......... 57BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C. Joint Application of Virgin Atlantic Airways, Ltd. Delta Air Lines, Inc. Société Air France Koninkli jke Luchtvaart Maatschappij N.V. Alitalia Compagnia Aerea Italiana S.p.A Under 49 U.S.C. §§ 41308 and 41309 for Approval of and Antitrust Immunity for Alliance Agreements ) ) ) ) ) ) ) ) ) ) ) ) ) Docket DOT - OST - 2013 -

JOINT APPLICATION FO R APPROVAL OF AND ANTITRUST IMMUNI TY FOR ALLIANCE AGREEME NTS 

### I. Introduction Delta and Virgin Atlantic 1 have entered into a comprehensive Joint Venture Agreement 2 to combine their respective passenger services on routes between North America and the United Kingdom. The Jo int Venture 3 will be a more effective competitor on U.S.

- U.K. routes, and in particular on U.S.

- London routes. The Joint Venture sits alongside a recently announced transaction pursuant to which Delta will invest $360 million to acquire the 49% equity sta ke in Virgin Atlantic currently held by Singapore Airlines. 4

1 Common names are used throughout. Delta and Virgin Atlantic are sometimes referred to herein as the “JV Parties.”
2 Hereinafter the “Joint Venture Agreement” or “JVA.”
3 Hereinafter the “Joint Venture” or “JV.”
4 The equity investment is subject to approval by the Department of Justice under the Hart

- Scott

- Rodino Antitrust Improvements Act, 15 U.S.C. § 18a (with respect to the equity investment) and by other co mpetition authorities in relevant jurisdictions, including the European Union.Joint Application Page 2
Delta and Virgin Atlantic, together with Air France, KLM and Alitalia 5 hereby apply for antitrust immunity for the Alliance Agreements (described below) so that Delta and Virgin Atlantic can imp lement their Joint Venture and the Joint Applicants can implement the multilateral Coordination Agreement. Antitrust immunity for the Alliance Agreements is necessary for Delta and Virgin Atlantic to achieve the synergies and public benefits that will flo w from the Joint Venture , and for the Joint Applicants to achieve the public benefits that will flow from the Coordination Agreement. This Joint Application is made pursuant to 49 U.S.C. §§ 41308 and 41309. The Delta/Virgin Atlantic Joint Venture would cr eate a coordinated business and “metal neutrality” between Delta and Virgin Atlantic on routes between North America (U.S., Canada, and Mexico) and the U.K. The Joint Venture will include all nonstop routes operated by Delta and Virgin Atlantic between No rth America and the U.K., as well as behind and beyond connecting flights operated by Delta within North America and by Virgin Atlantic within the U.K. The JVA is accompanied by a number of implementing agreements that provide for codesharing, lounge acce ss, and reciprocal frequent flyer programs (“FFP”), among other things. The Joint Applicants have also executed a five

way Coordination Agreement among Delta, Virgin Atlantic, Air France, KLM and Alitalia to facilitate coordination of the two joint ventur es on North America

- U

. K

. routes. Collectively, these are the Alliance Agreements for which antitrust immunity is sought. 6

5 Hereinafter the “Joint Applicants.” The Joint Applicants request that the grant of antitrust immunity (“ATI”) extend to their majority

- owned corporate affiliates. See 2009 S tar ATI , DOT Order 2009

- 7

- 10, at 27, Ordering Paragraph 1; 2011 Star ATI , DOT Order 2011

- 11

- 16, at 7 & 11, Ordering Paragraph 1 (granting ATI to the “majority

- owned affiliates” of the Joint Applicants).
6 Appendix A contains an abstract of the JVA and the Coordination Agreement. The remaining Alliance Agreements are being filed separately under Rule 12, and an index of those agreements is provided with the JV Parties’ Motion for Confidential Treatment. Appendices B and C contain additional information typ ically furnished to the Department in response to information requests in other antitrust immunity proceedings.Joint Application Page 3
The alliance that would be formed by these agreements (the “Proposed Alliance”) meets the DOT’s standard for granting antitrust imm unity because it will produce significant public benefits, and will not substantially reduce or eliminate competition in any relevant market. 

### II. Executive Summary Delta and Virgin Atlantic seek to form a highly coordinated joint venture for North America

- U.K . service that will enable the JV Parties to compete more effectively on U.S.

- U.K. routes. Delta and Virgin Atlantic respectfully submit that the Proposed Alliance meets the Department’s public interest standard for approval and is consistent with previou s grants of immunity for similar alliance arrangements. Delta’s minority investment in Virgin Atlantic and the accompanying Joint Venture between the JV Parties mark a milestone in aviation relations between the U.S. and Europe: this is the first time a U.S. carrier has taken an equity position of this size in a European airline

. The Open Skies Agreement between the EU and U.S. laid the foundation for European and U.S. carriers to forge closer ties with each other. Delta’s investment in Virgin Atlantic is consistent with both the letter and spirit of the Open Skies Agreement, and the ability to enter into an immunized joint venture with Virgin Atlantic was critical to Delta’s investment decision. The Delta/Virgin Atlantic Joint Venture will deliver impo rtant public benefits, the most critical of which is the creation of a meaningful competitive alternative to the alliance between American Airlines and British Airways (“AA/BA Alliance”) that presently dominates the U.S.

- U.K. market. By joining forces, De lta and Virgin Atlantic will strengthen each other and compete more effectively than either has been able to on its own, or would ever be able to in the absence of the Joint Venture . Specifically:

• Delta and Virgin Atlantic will optimize their joint schedu les to improve service and connections. At New York, Delta and Virgin Atlantic will coordinate schedules,Joint Application Page 4
eliminate “wingtip” flights and create a new high quality, high frequency product that can more effectively compete with the 15 daily New York

- Heathr ow flights operated by the AA/BA Alliance . Delta and Virgin Atlantic will also work to maximize connectivity at New York and other gateways onto Delta’s extensive North American network.

• The transaction enables the introduction of new nonstop service on the Seattle

London Heathrow route. Delta (premerger Northwest) briefly operated Seattle service in the summer of 2008, but the flight was not viable in the face of an aggressive competitiv e response by British Airways. Virgin Atlantic will provide Delta with a London point of sale presence and improved connecting network out of London necessary to make the service a success.

• The Joint Venture will establish each carrier as a nonstop compe titor on important U.S.

- London routes served by the other. By codesharing on Virgin Atlantic ’s flights, Delta will gain a nonstop LHR presence on five important routes including Los Angeles and Miami. Delta also will gain alternative access to important U.K. regional points that Virgin Atlantic serves beyond Heathrow. Virgin Atlantic will be able to offer services to Delta’s U.S. gateways such as Detroit, Atlanta and Minneapolis and beyond Virgin Atlantic’s U.S. gateways on Delta’s North American network

.

• Delta and Virgin Atlantic will create a metal

- neutral codeshare network covering all flights within and between North America and the U.K. The agreed revenue management techniques are designed to ensure full access of each party’s inventory to the other, and will eliminate “double marginalization” markups because both carriers share in the revenue of the entire journey.

• The Joint Venture will promote the development of potential future service on U.K. routes from Delta hubs, such as a second daily Detroit

- LHR flight, additional frequencies on current Virgin Atlantic routes such as Newark

- LHR, and other new services that would not be sustainable in the absence of the Joint Venture.

• The JVA provides for Delta and Virgin Atlantic to have a more effecti ve and efficient joint sales force, increasing their ability to compete more effectively for corporate accounts and agency business. Virgin Atlantic’s strong position for London point of sale traffic will greatly enhance Delta’s penetration into the Londo n business market, and Delta’s strong position in the United States for U.S. point of sale traffic will have the same effect on Virgin Atlantic

.

• The Joint Venture will create new efficiencies that improve the customer experience and lower costs, such as co - locating flights when and where possible. By co

- locating flights at commonly served airports, Delta and Virgin Atlantic can reduce minimum connect times and save an estimated $15 million in annual operating expense.

• Delta and Virgin Atlantic will provi de their passengers with enhanced access to airport lounges, and will permit reciprocal participation and recognition in each carrier’s frequent flyer program.Joint Application Page 5
The network improvements made possible by the Delta/Virgin Atlantic Joint Venture will deliver q uantifiable benefits to consumers. Delta’s Quality of Service Index (“QSI”), coupled with additional modeling, predicts that consumers will enjoy at least $187 million in annual welfare benefits resulting from network

- wide improvements in frequencies, sch eduling, and route

- planning. 7 See discussion at section V(C). The proposed Delta/Virgin Atlantic Joint Venture is different from proposed alliances and joint ventures previously submitted to the Department, which have focused on the combination of large ne tworks. While this Joint Venture creates consumer benefits by linking the Delta and Virgin Atlantic networks, its larger purpose is to create consumer benefits by mounting a competitive response to a dominant firm. At the time of the AA/BA antitrust immu nity application, the DOT foresaw that AA/BA’s large market share, high frequency of service, and other structural advantages would create serious challenges for competitors: [T]he Department is also concerned that the proposed alliance will have diffuse n egative effects in the remaining U.S.

- U.K. overlap markets, as well as U.S.

- U.K. markets generally. The proposed alliance combines the operations of British Airways and American, the two largest competitors in the market as measured by departures. They a re each other’s primary competitors in the U.S.

- U.K. market. Not surprisingly, the proposed alliance causes a share shift in many overlap markets involving London. For example, whereas British Airways is the leading competitor in New York

- London pre

- tran saction, with 34 percent of bookings, post

- transaction it would achieve almost 52 percent of bookings by joining with American. Virgin Atlantic retains its second

- place position in the market, but instead of an eight

- point gap with the first

- place competi tor, it would then face a 26

- point gap. In such circumstances, the Department recognizes that it could be difficult for

7 This figure does not include other consumer benefits not directly related to improvements in the JV Parties’ network offering.Joint Application Page 6
competitors to match the frequency, scheduling, hubbing, and capacity

- share advantages of the oneworld alliance. 8 DOT’s concerns have p roved to be well founded. Now, nearly three years after the DOT approved antitrust immunity for the joint venture between American Airlines and British Airways, 9 the AA/BA Alliance dominates U.S.

- London traffic. AA/BA now operates 59% of U.S.

- LHR capacit y; 10 Virgin Atlantic is a distant second with a 16% share, and Delta is a marginal fourth place competitor with an 8% share. The Delta/Virgin Atlantic Joint Venture will be a more eff ective competitor to the AA/BA A lliance than either airline would be separ ately because it will enable them to address the very hurdles the Department identified. For Delta and Virgin Atlantic, those hurdles are simple and clear: (1) access to LHR with sufficient slots to mount U.S.

- LHR service of sufficient scope and frequency to be a meaningful competitive alternative to AA/BA, particularly for the time

- sensitive business travelers who sustain the profitability of the services; (2) network feed and connectivity to support the economics of a high frequency service; and (3) bran d and marketing presence in both the U.S. and U.K. to counter that of AA/BA. The formation of the Joint Venture will enable the carriers to overcome these barriers and improve their competitive position against AA/BA. Operating separately, Virgin Atlant ic’s and Delta’s frequencies on the key routes of NYC

- LHR and BOS

- LHR lag far behind those of AA/BA. AA/BA dominates the routes with frequency and capacity offerings that exceed those of all other carriers combined

. AA and BA together offer 15 daily NYC

- LHR flights which they tout as “shuttle” service

8 American Ai rlines/British Airways, DOT Show Cause Order 2010

- 2

- 8, at 23.
9 American Airlines/British Airways, DOT Order 2010

- 7

- 8.
10 Based on June 2013 peak day schedule.Joint Application Page 7
with departures staggered every 30 minutes during the prime evening hours. 11 Virgin Atlantic offers six daily NYC

- LHR flights, and Delta offers just three daily flights. 12 Similarly, at Boston, AA/BA currently offers four daily nonstop flights 13 versus one flight each for Delta and Virgin Atlantic. 14 These frequency disparities have a dramatic and disproportionate effect on each carrier’s ability to compete with AA/BA, particularly for
time

- sensitive travelers w ho value the flexibility of a high

- frequency schedule. 15 The Delta/Virgin Atlantic Joint Venture still will offer fewer flights than AA/BA, but together the carriers will operate an improved and well

- timed schedule to more effectively compete with AA/BA. 16 Because of severe slot constraints at Heathrow, neither Delta nor Virgin Atlantic could mount a high

- frequency service of its own. LHR remains one of the world’s most congested airports, with few slots available and even fewer that would be suitable for transatlantic service. As a Heathrow “non

- incumbent , ” Delta was not able to serve Heathrow at all until 2008, and until very recently did not hold a single LHR slot of its

11 Press Release, British Airways, Transatlantic Shuttle Service Created by the Joint Business, (M ar. 17, 2011), available at http://press.ba.com/?p=1688

. 12 United offers five daily flights. Together, Delta, Virgin Atlantic and United offer 14 daily LHR

- NYC frequencies against AA/BA’s 15.
13 There have been six combined AA/BA services in previous summer seasons.
14 Exhibit JA

- 9.
15 The challenge that Delta and Virgin Atlantic face in their attempt to compete against AA/BA is underscored by the disproportionate share of premium traffic captured by AA/BA at New York and Boston. On the New York

- LHR route, AA/BA have 62% of premium nonstop bookings, and 66% of total premium bookings (including behind and beyond passengers). Exhibit JA

- 6. On the Boston

- LHR route, AA/BA have 73% of premium nonstop bo okings, and 79% of total premium bookings including beyond and behind passengers. Exhibit JA

- 8. In each case, AA/BA’s share of premium bookings exceeds their seat share. Id.
16 The announced merger between American Airlines and US Airways will further stren gthen AA/BA’s network of U.S. connections, add to the alliance’s Heathrow slot portfolio and routes, and place AA/BA in an even stronger competitive position against other transatlantic carriers. In particular, the merger will result in the addition of a new nonstop London

- Charlotte service to the AA/BA offering.Joint Application Page 8

own. 17 Delta’s current U.S.

- LHR services are operated with leased slots from third parties and two “remedy” slots leased from AA/BA, which expire at the end of the commitments period. This is not a solid foundation upon which Delta can mount a serious competitive challenge to AA/BA. Virgin Atlantic’s slot holdings at LHR a re miniscule compared to AA/BA’s

. 18 Even if some slots become available over the next few years, growth through slot acquisitions is a slow and uncertain process. Only by joining forces can Delta and Virgin Atlantic offer a higher frequency service enabling the carriers to mount more effe ctive competition against AA/BA. The Delta/Virgin Atlantic JVA will also improve each carrier’s network connectivity and ability to capture flow traffic, which will support the economics of their transatlantic flights. In the case of Virgin Atlantic, it s transatlantic flights have little feed at either end. Although Virgin Atlantic is the U.K.’s second largest long

- haul carrier, it operates as a point

- to
- point carrier serving international destinations from London. It has no European network to support its operation at LHR and no internal network in the U.K., apart from three recently

- added points. 19 On the U.S. side, Virgin Atlantic lacks a U.S. alliance partner and has limited access to cities beyond its U.S. gateways. 20 The

17 Delta recently purchased a pair of slots from Alitalia.
18 Virgin Atlantic holds around a 3% share of LHR slots, compared to AA/BA’s share of around 55%.
19 Virgin Atlantic attempted to bolster its European and intra

- U.K. feed at Heathrow by purchasing bmi British Midland, which had a substantial LHR slot portfolio. However, IAG, the parent of British Airways and Iberia, was the successful bidder. IAG’s acquisition of bmi locks in British Airways ’ already dominant position at Heathrow and forecloses any real prospect of Virgin Atlantic expanding its network at LHR. Although Virgin Atlantic is launching some short

- haul services from Heathrow to Manchester, and using slots it has received as an EC

- imposed remedy in the bmi deal from Heathrow to Edinburgh and Aberdeen, Virgin Atlantic continues to have a severely under

- developed network for feed traffic behind London as compared to AA/BA.
20 Virgin Atlantic previously had a code share arrangement with Continental. This arrangement terminated when Continental merged with United. Virgin Atlantic also had a codeshare arrangement with US Airways, which is being terminated.Joint Application Page 9

JVA will enable Virgin Atl antic to access these U.S. markets more effectively. For Delta, the Joint Venture will allow Delta to broaden its network by placing its code on key Virgin Atla ntic t ransatlantic flights, such as LAX

- LHR, ORD

- LHR and MIA

- LHR, thus bringing additional nons top LHR service to Delta customers. In addition, Delta will gain additional access to internal U.K. points that are now served by less convenient routings over Paris and Amsterdam. Although these network improvements will not put Delta and Virgin Atlanti c on an equal scale with the powerful hub network that AA/BA operates at LHR, they do offer Delta and Virgin Atlantic the opportunity to compete in broader traffic flows than either carrier could serve without the alliance. The Delta/Virgin Atlantic Joint Venture also will enable each carrier to strengthen its marketing presence in the home country of the other carrier. Delta’s presence and brand recognition in the U.K. is low, which impedes its ability to compete effectively for U.K. point of sale custom ers, particularly for premium customers and corporate accounts for which a strong point of sales presence is especially important, and for sales through direct channels, which are dependent on brand recognition. Joining forces with Virgin Atlantic’s U.K. sales force and partnering with Virgin Atlantic’s iconic brand will immediately boost Delta’s U.K. market presence. Correspondingly, Virgin Atlantic will be able to join forces with Delta’s U.S. sales force, which will give it access to a large corporate customer base that it does not presently have and will improve its ability to capture U.S. point of sale customers, particularly in the time

- sensitive business segment. In short, the Delta/Virgin Atlantic Joint Venture will create a strong new competito r that is better than the sum of its parts. Delta’s and Virgin Atlantic’s respective assets fill in each other's shortcomings: Delta brings a broad North American network and strong marketing presence throughout the U.S.; Virgin Atlantic brings an iconic U.K. brand, sales strength and established customer relationships in London. Delta andJoint Application Page 10
Virgin Atlantic have a combined slot portfolio that enables a closer level of competition against AA/BA’s dominant U.S.

- LHR service offerings. The Delta/Virgin Atlanti c joint product offering will provide customers a new alternative that will be more attractive than Delta’s and Virgin Atlantic’s current standalone offerings. The benefits of the Delta/Virgin Atlantic Joint Venture are further complemented by Delta’s ex isting immunized joint venture with Air France/KLM and Alitalia. Through participation in the two transatlantic joint ventures Delta will be able to offer U.S. customers a complete package of service that includes all the benefits of the existing transatl antic joint venture, together with improved Heathrow service. In addition, because Virgin Atlantic has a very limited intra

- U.K. network, coordination with Air France/KLM will enhance the ability of both joint ventures to compete for transatlantic
passeng ers in U.K. regional markets served via Paris and Amsterdam. The Joint Venture is consistent with the E.U.

- U.S. Open Skies Agreement and U.S. aviation policy, which has long recognized the formation of alliances as an important strategic tool. When paire d with the formation of the Joint Venture, the Delta/Virgin Atlantic equity transaction will help to ensure that the JV Parties produce
merger - like efficiencies from the Joint Venture, while ensuring that British nationals maintain control of Virgin Atlant ic . The DOT has often granted antitrust immunity precisely in order to achieve such efficiencies. The Delta/Virgin Atlantic Joint Venture is a fully negotiated and detailed agreement that will lead to immediate efficiencies and public benefits. Approval of the proposed Delta/Virgin Atlantic Joint Venture and the Alliance Agreements is supported by and consistent with DOT’s decision to grant antitrust immunity to the AA/BA Alliance

. 21 The Delta/Virgin Atlantic Joint Venture, as
well as the other Alliance A greements, will produce important public benefits in the North

21 American Airlines/British Airways, DOT Show Cause Order 2010

- 2

- 8, at 32.Joint Application Page 11

America

- U.K. marketplace. The Delta/Virgin Atlantic Joint Venture is the competitive remedy to DOT’s well founded concerns of potential dominance by AA/BA as expressed when it approved that Al liance

. Delta and Virgin Atlantic require antitrust immunity to deliver the significant public benefits of their Joint Venture, and for Delta to realize the synergies and benefits of the equity stake it is taking in Virgin Atlantic. The JV Parties cannot share profits, pricing and scheduling plans or undertake many of the other joint activities contemplated by the JVA and the Alliance Agreement s in the absence of antitrust immunity. No other Joint Venture has been willing to proceed with its agreements in the absence of immunity from the Department. In addition, as discussed below, the parties to the Delta/Virgin Atlantic Joint Venture, on the one hand, and the parties to the existing Delta/Air France/KLM/Alitalia Joint Venture, on the other hand, require antitrust immunity to coordinate activities in U.K. markets served by both joint ventures. The Joint Applicants respectfully submit that the proposed Alliance Agreements meet the Department’s public interest standard for approval and are consistent with a long line of decisions that conferred antitrust immunity upon similar alliance arrangements. 

### III. Description of the Agreements The JV Parties intend to form a deeply integrated alliance. The Delta / Virgin Atlantic Joint Venture, coupled with the grant of anti trust immunity, will enable the JV Parties to produce new and more effective competition, new service and other consumer benefits, and significant efficiencies

– all objectives for which the DOT has repeatedly granted antitrust immunity. There can be no do ubt that the JV Parties are fully committed to achieving these objectives. Delta has made a substantial investment to acquire a 49% equity stake inJoint Application Page 12
Virgin Atlantic

– the largest ownership permitted under current ownership and control requirements of the E U and U.K. licensing regimes . Delta’s interests clearly lie in a long

term commitment to the success of Virgin Atlantic and the Joint Venture. Delta’s investment in Virgin Atlantic creates an alignment of financial incentives that will ensure that the be nefits of the Joint Venture are realized. The JVA and other Alliance Agreements are consistent with the alliance agreements that the Department has approved and immunized in other recent ATI

cases. 22 The JVA is detailed and provides for a great degree of cooperation, which helps ensure that the immunized Joint Venture will produce substantial consumer benefits. 

### A. Joint Venture Agreement The JVA between Delta and Virgin Atlantic covers all nonstop flights operated by Delta and Virgin Atlantic between North Am erica (U.S., Canada, Mexico) and the U.K., as well as the JV Parties’ behind and beyond flights within North America and the U.K. that connect to the U.S.

- U.K. services. The JVA creates metal neutrality between the two carriers and provides a detailed blu eprint for how the JV Parties will implement and integrate their operations on Joint Venture routes. The Joint Venture is structured to ensure that each carrier is motivated to maximize the profitability of the Joint Venture as a whole. The integrated co mmercial activities contemplated by the JVA create merger
like efficiencies that can be implemented only with antitrust immunity. Integrated commercial activities provided for in the JVA include:

• 50

- 50 sharing of incremental profits and losses generated b y the Joint Venture above a certain baseline, subject to certain adjustments, which

22 See, e.g. , American Airlines/British Airways, DOT Order 2010

- 7

- 8, at 22; SkyTeam II ATI, DOT Order 2008

- 5

- 32, at 4; U.S.

- Japan Alliance Case, DOT Order 2010

- 11

- 10, at 3.Joint Application Page 13
ensures that the JV Parties will be motivated to achieve shared goals and efficiencies.

• Network planning and schedule improvements. Network and capacity decisions relative to the JV Parties’ operations on Joint Venture routes will be planned for and made jointly to optimize the DL/VS competitive offering against rival alliances. This will allow the JV Parties to optimize frequency and capacity and to promote connectivity b etween the JV Parties’ operations.

• Metal neutrality, which ensures that the JV Parties will implement metal neutral sales and distribution policies and programs with respect to service on Joint Venture routes without preference to a JV P arty’s own operated flights.

• Reciprocal code sharing on all Joint Venture and beyond routes within the U.K. and North America. Reciprocal codesharing will entail seamless interactive inventory availability and favorable special prorate terms, which will eliminate double

- mar ginalization pricing mark

- ups.

• Joint sales and marketing coordination, which will maximize local point of sales expertise and allow the Parties to present a single sales face to customers.

• Complementary product development and service enhancements.

• Airpo rt co
- location opportunities and joint purchasing strategies. The JV Parties are presenting a detailed and fully negotiated JVA for the Department’s consideration, with all financial settlement terms agreed in advance. Whereas most recent ATI applicants have presented “framework” agreements with details to be negotiated after the receipt of antitrust immunity, the JV Parties here have made definitive commitments to implement their Joint Venture on the terms and provisions set forth in the JVA once ATI is granted (subject to a limited number of other conditions being satisfied). 23 Delta and Virgin Atlantic are contractually committ ed to implement the Joint Venture within six months after receipt of ATI approval. 24 This provides the Department with certainty that the substantial consumer benefits and

23 This approach was necessary to support Delta’s commitment to acquire a 49% ownership inte rest in Virgin Atlantic.
24 JVA, Art. 2.2.1.Joint Application Page 14
efficiencies of the Delta/Virgin Atlantic Joint Venture will be immediate and proxima te to the grant of ATI approval. 25
The JVA is consistent with other agreements that have been approved by DOT. As the Department stated when it approved the AA/BA/IB J oint V enture: [T] he applicants present for our consideration a detailed and integrated jo int venture agreement. Where applicants seek immunity to combine networks that overlap substantially, it is important for them to demonstrate that their proposed arrangement will lead to efficiency

enhancing integration. As we explained in the SkyTeam an d Star cases, a “metal

- neutral” joint venture allows the joint venture partners to share risks and rewards fairly and it incentivizes them to offer customers the best available products and services, without regard to which partner owns and operates the ai rcraft. 26 The grounds for approval here are even more compelling. There is far less nonstop network overlap than in the AA/BA case, and the 49% equity investment component provides additional incentive for the JV Parties to achieve the envisaged efficienci es. The Joint Venture will be managed by a JV Steering Committee that will meet at least twice per year and consist of two representatives of each JV P arty. The day

- to
- day

25 In recent years, the Department has required applicants for ATI to demonstrate that they have concrete plans to utilize this authority, and that this authority can yield immediate and substantial benefits. See, e.g. , Delta/Virgin Blue, DOT Order 2011

- 6

- 9. Delta and Virgin Atlantic are well

- prepared to make this showing. Although the carriers only recently agreed to form their Joint Venture, they have prior experience as partners, having maintained a U.S.

- LH R codeshare arrangement from 1995 to 1997. Moreover, Delta and Virgin Atlantic have compatible processes and systems. Virgin Atlantic is hosted in a full service GDS and maintains a full suite of systems for handling codesharing and FFP reciprocity, becaus e it cooperates with other major international carriers. The JV Parties will implement schedule improvements in the full IATA traffic season immediately following approval of this application and implementation of the JVA. The fact that Delta will hold 4 9% share interest in Virgin Atlantic is another compelling factor in favor of the carriers’ moving quickly to deliver the synergies of their integration activities. The JV Parties will be incentivized to move quickly to deliver new services and consumer b enefits, and to build their competitive presence in the U.K.

- North America market.
26 American Airlines/British Airways, DOT Show Cause Order 2010

- 2

- 8, at 32.Joint Application Page 15
commercial and integration activities of the Joint Venture will be managed by five working groups: (1) network, (2) revenue management and pricing, (3) passenger (sales, product, marketing, loyalty, brand/advertising), (4) finance, and (5) operations. Each of the working groups is discussed below.
1. Network Working Group The Network Wor king Group will develop and implement the jointly agreed network optimization plan, including optimizing the JV Parties’ LHR and NYC slots and schedules, and assigning the most efficient aircraft from the JV Parties’ combined fleets to each route. Importa ntly, an initial agreed joint network plan that the JV Parties intend to implement following the grant of ATI has already been established, including specifics as to routes, schedule times, and fleet. 27 The JVA provides that :

• The Network Working Group will develop and implement the jointly agreed network optimization plan, including optimizing the JV Parties time of day coverage on the NYC

- LHR route to maximize competition against AA/BA’s 15 daily “shuttle” flights and United’s five well

- timed flights, and improved passenger connections to Delta’s North America network. 28

• The JV Parties intend to open direct Seattle

- Heathrow service, bringing new service and competition to an AA/BA single carrier route. 29

• The JV Parties intend to “[m] aintain or increase their current level of operations on the Joint Venture routes . . .” including the key New York

LHR and Boston

- LHR routes to better compete with AA/BA. 30 Because these network plans have already been specified in the JVA, the JV Parties can move rapidly to realiz e the substantial public benefits of the joint network plan soon after ATI approval. The network changes will be implemented no later than

27 JVA, Art. 5.1.1 & Exhibit D.
28 JVA, Exhibit D.
29 JVA, Exhibit D.
30 JVA, Art. 5.1.2.Joint Application Page 16

the fir st day of the second IATA season following Joint Venture implementation. 31 (This period allows for advance pu blication and selling of the new schedule and the necessary lead

- time for making operational changes).
2. Revenue Management and Pricing Working Group The Revenue Management and Pricing Working Group will manage the coordinated pricing and revenue management functions of the Joint Venture and the delegation of responsibility for implementing the Joint Venture’s pricing strategies and activities, which is intended to maximize each carrier’s point of sale expertise. The JV Parties intend to achieve a high degre e of integration and coordination of their respective inventory management systems and processes with respect to routings over Joint Venture routes and relevant beyond routes in order to maximize profits on a metal

neutral basis. The JV Parties will manag e their own flights with respect to revenue management activities; however, the JV Parties’ revenue management strategies and policies with respect to such routes will be aligned. 32 Reciprocal codesharing is already supported by the JV Parties’ GDS platform s, and the JV Parties are putting additional systems and technology in place to support metal

- neutral inventory management following implementation of the Joint Venture. Alignment and coordination of the JV Parties’ inventory management systems and
proces ses will be accomplished through : ( 1 ) harmonization of booking classes, ( 2 ) seamless interactive inventory availability, ( 3 ) bid price exchange, ( 4 ) married segment logic and journey controls, ( 5 ) if technically and economically feasible, sourcing of each other’s f orecasting data input for each JV P arty’s unique origin/destination between North America and the U.K. to feed each other’s revenue management system, and ( 6 )

31 JVA, Art . 2.2.1.
32 JVA, Art. 6.4.3.1.Joint Application Page 1 7
harmonization of passenger

- related service methods and procedures to the extent practica ble (such as passenger protection and waitlist priorities). 33
3. Passenger Working Group The Passenger Working Group will be responsible for creating a highly coordinated sales function for the Joint Venture, developing full reciprocity between the JV Parties’ loyalty programs, and facilitating reciprocal access to premium lounges, including Virgin Atlantic’s premier Heathrow Clubhouse and Delta’s new JFK SkyClub. Under the Joint Venture Agreement, the JV Parties have committed to implement a “metal neutral” sa les policy under which each JV P arty will implement sales and distribution programs and policies with respect to Joint Venture routes without preference to its own flights on routes operated by the other JV P arty. 34 Upon implementation of the Joint Venture , the JV Parties will seek to present a common “face” to the customer using seamless tools, processes and support. 35 The Joint Venture sales teams will coordinate with the Joint Venture pricing teams with respect to establishing discount policies for corpor ate and agency
accounts. 36 The JV Parties will implement common strategies and tactics for selling Joint Venture products and services and will maintain a coordinated approach to Joint Venture accounts and coordinated sales communications in order to minim ize conflict and maximize coordination of sales activities. 37 Although Delta and Virgin Atlantic will maintain separate frequent flyer programs, the JV Parties will implement and maintain full reciprocity between their respective

33 JVA, Art. 6.4.3.
34 JVA, Art. 6.5.2.
35 Id.
36 JVA, Art. 6.5.3.2.
37 JVA, Art. 6.5.3.3.Joint Application Page 18
loyalty programs. 38 In addi tion, the JV Parties will provide reciprocal premium customer handling services, including priority airport check

- in, baggage handling and excess baggage allowances to elite customers of each JV P arty, as well as maintain reciprocal arrangements between th eir respective airport lounge programs for elite customers. 39
4. Operations Working Group The Operations Working Group will facilitate seamless passenger connections, baggage transfer, check

- in and harmonization of customer service policies. The JV Parties ag ree to coordinate their schedules and operations with respect to Joint Venture routes and related beyond routes in order to ma ximize connections between the JV
P arties’ flights and to reduce minimum connection times. 40 The JV Parties will also
pursue co - lo cation opportunities at airports where flights on Joint Venture routes and beyond routes are operated by both JV P arties. 41 The JV Parties will seek to address any customer service “seams” that may exist or arise in such processes and procedures. 42
5. Finance Working Group The Finance Working Group monitors and reports on Joint Venture financial performance and recommends actions as appropriate. Although the Finance Working

38 JVA, Art. 6.6.
39 Id.
40 JVA, Art. 6.8.
41 JVA, Art. 6.7.
42 JVA, Art. 6.8.Joint Application Page 19
Group is crucial to the management of the immunized Joint Venture, it does not have
pu blic

- facing activities. 43


### B. Coordination Agreement Antitrust immunity for the 5

- way Coordination Agreement is needed to avoid potential immunity gaps between the two joint ventures arising from the coordination activities necessary for the efficient op eration of the two j oint v entures. Delta will be coordinating with Virgin Atlantic on North America

- U.K. routes that involve a nonstop U.S.

- U.K. segment. Delta will also be coordinating with AF/KL/AZ on North America

U.K. routes that involve connections via con tinental Europe, e.g. in Amsterdam or Paris. Overarching antitrust immunity is needed to avoid the “horseshoe” risk that coordination within one set of joint venture partners will be imputed to the other; immunity is also necessary to realize the benefits of coordination between the two joint ventures in U.K. regional markets, where transatlantic service is dominated by AA/BA. Accordingly, the Joint Applicants have entered into a Coordination Agreement (discussed in detail in section IX below) that define s the antitrust immunized cooperation necessary to facilitate the efficient operation of the two joint ventures. 

### C. Implementing Agreements The Joint Venture is accompanied by a number of alliance implementing agreements including a Codeshare Agreement, 44 a Special Prorate Agreement, a Lounge Agreement, and an FFP Agreement.

43 In addition to the five working groups explicitly provided for in the JVA, the JV Parties have agreed to explore ways to cooperate and coordinate their respective cargo activities on Joint Venture routes, which may lead to the creation of a sixth working group covering cargo activities.
44 Although a limited codeshare is possible without immunity, the benefits of that codeshare would be substantially less without the coordinated network planning and metal neutrality that ATI will allow.Joint Application Page 20



### IV. The Application Is Consistent with the Department’s Legal Standards for Granting Immunity. In considering applications for antitrust immunity, the Department engages in a
two
- part ana lysis: a “competitive analysis” and a “public benefits” analysis. 45 Under 49 U.S.C. § 41309(b) the Department will “approve an agreement . . . when the Secretary finds it is not adverse to the public interest and is not in violation of this Part.” If th e Department approves an agreement under 49 U.S.C. § 41309, the Department has the discretion to grant the transaction antitrust immunity under 49 U.S.C. § 41308 “provided that [the Department determines] the exemption is required by the public interest.” 46 “While the public interest determination under both §§ 41309(b) and 41308(b) entails a comparison of anti

- competitive effects and public benefits, the standard in section § 41308(b) . . . is higher.” 47 The Department’s established policy is to approve and grant immunity for inter

carrier agreements if: (1) t he agreements do not eliminate or substantially reduce competition and are not adverse to the public interest; and (2) a grant of immunity is required by the public interest and for the parties to proce ed with the transaction. 48 For the reasons discussed below, the Joint Applicants respectfully submit that the proposed Alliance Agreements meet these criteria.

45 See 2011 Star AT I, DOT Order 2011

- 11

- 16, at 5; American Airlines/British Airways, DOT Order 2010

- 7

- 8, at 7

- 8.
46 2011 Star ATI, DOT Order 2011

- 11

- 16, at 5; see also 49 U.S.C. § 41308.
47 2011 Star ATI, DOT Order 2011

- 11

- 16, at 5; American Airlines/British Airways, DOT Orde r 2010

- 7

- 8, at 8.
48 American Airlines/British Airways, DOT Order 2010

- 7

- 8, at 8.Joint Application Page 21



### V. A Grant of Immunity Is Required to Produce Important Public Benefits

. The Joint Venture will pro duce substantial public benefits by providing enhanced competition for the AA/BA Alliance in the U.S.

- U.K. market, which it today dominate s as a result of its control of slots at LHR and its greater network reach. Delta and Virgin Atlantic will compete mo re effectively by providing new and enhanced services, as described below, each of which in itself provides a substantial public benefit. Taken together, these new services and the competition they bring to the market will produce consumer welfare benefit s in excess of $187 million per year. 49 Antitrust immunity for the Alliance Agreements is necessary to achieve these benefits. Only by joining forces can Delta and Virgin Atlantic mount a viable competitive alternative to AA/BA. Joining forces will allow Delta and Virgin Atlantic to optimize flight schedules, share profits and losses, engage in joint pricing and revenue management in Joint Venture markets, and launch joint sales and marketing initiatives. Further, only by coordinating its activities with the two joint ventures will Delta be able to ensure the efficient operation of each joint venture and therefore the full realization of the competitive benefits to which they give rise. These and other joint activities will allow the JV P arties to achiev e merger - like synergies; but in the absence of immunity these activities would also expose the Joint Applicants to unacceptable antitrust risk.

49 See discussion in Part V (C) and Exhibit JA

- 11.Joint Application Page 22
The Department on numerous occasions 50 has found that integrated airline alliances, such as the Joint Venture p roposed here, produce extensive consumer benefits: “Antitrust immunity is well suited to enable carriers to achieve merger

- like efficiencies and deliver benefits that would not otherwise be possible.” 51 For example, the Department has noted the beneficial impact of immunized alliances on service levels, fares, and costs: “[W]e tentatively find that the following public benefits are likely [from an immunized oneworld alliance]: (1) more options for travelers in numerous transatlantic city pairs, based on the applicants’ ability . . . to achieve fare combinability; (2) lower fares resulting from the reduction in double marginalization on multi

- segment itineraries; (3) volume discounting . . .; (4) expanded access to discounted fares resulting from coordinated inventory; (5) reduced costs through shared sales, marketing, distribution, procurement, . . .” 52 The cooperation between Delta and Virgin Atlantic will generate important efficiencies and public benefits, discussed below.

50 See International Aviation Developments: Transatlantic Deregulation, The Alliance Network Effect , U.S. Department of Trans portation, Office of the Secretary (Oct. 2000), at 5 (“DOT Second Report”), at 2

- 3, 5

- 6, 10; see also , e.g. , SkyTeam II ATI, DOT Order 2008

- 5

- 32; ANA/CO/UA AA/JAL, DOT Order 2010

- 10

- 4; Continental/Star Alliance, DOT Order 2009

- 4

- 5; American Airlines/Britis h Airways, DOT Order 2010

- 2

- 8; Delta/Virgin Australia/Pacific Blue, DOT Order 2011

- 6

- 9; 9

- way Star Alliance ATI, DOT Order 2006

- 12

- 17; American/Lan Airlines/Lan Peru, DOT Order 2005

- 10

- 8; America West/Royal Jordanian, DOT Order 2005

- 1

- 23; American/SN Bruss els, DOT Order 2004

- 4

- 10; United/Asiana, DOT Order 2003

- 5

- 18; American/Swiss, DOT Order 2002

- 11

- 12; American Finnair, DOT Order 2002

- 7

- 39; Delta/Korean, DOT Order 2002

- 6

- 18; United/Bmi, DOT Order 2002

- 4

- 4; Delta/Air France/Alitalia/Czech, DOT Order 2002

- 1

- 6; Continental/COPA, DOT Order 2001

- 5

- 1; United/Austrian, DOT Order 2001

- 1

- 19; American/Lan Chile, DOT Order 1999

- 9

- 9.
51 SkyTeam II ATI, DOT Order 2008

- 4

- 17, at 15.
52 American Airlines/British Airways, DOT Order 2010

- 2

- 8, at 30.Joint Application Page 23



### A. The Delta/Virgin Atla ntic Joint Venture Will Enable the Parties t o Provide Substantial Consumer Benefits through New Services and Increased Competition.
1. An Optimized Joint Schedule Will Improve Competition and Consumer Choice on the Key New York - and Boston Heathrow Routes. On the most important U.S.

- U.K. route, New York

- LHR, Delta and Virgin Atlantic are currently unable to offer sufficient frequencies and convenient departure times to effectively compete against AA/BA’s 15 flights per day. Delta only operate s three flights a day, and Virgin Atlantic operates six flights a day: four at JFK and two at EWR. A similar disparity exists at Boston

- LHR, where AA/BA operates four flights a day compared to one each by Delta and Virgin Atlantic. This disparity in frequencies is particularly sign ificant in the all

- important market for business travelers. Time

- sensitive business travelers value the flexibility afforded by high frequencies and favorable time

- of

- day coverage. In order to offer sustainable service on these routes, a carrier must cap ture its fair share of high value customers (as measured by the carrier’s total share of seat capacity on the route). But corporate accounts have repeatedly told Delta its service frequencies and time

- of

- day coverage on NYC

- LHR are inadequate and have ref used to commit business to Delta proportionate to its seat

- share on the route. 53 Market share data confirms this point, showing that Delta capture s only 7% of premium traffic on the route, well below its 10 % capacity share. 54
The best way Delta can reverse its chronic underperformance against AA/BA at New York and at Boston is to offer more frequencies and better time

- of

- day coverage. Given

53 See Declaration of Chuck Imhoff, Delta Managing Director for New York Sales for Delta Air Lines, at DL00000268

– 275; Letters of Support from Delta Customers to the Departmen t of Justice at DL00000276

- 364; and Letters of Support from Delta Customers to DOT file d contemporaneously in this docket.
54 Exhibit JA

- 6.Joint Application Page 24
the slot constraints at LHR and the other challenges of the market, the only way to accomplish that is for Delta and Virgin Atlantic to join forces. Even after Delta and Virgin Atlantic join forces, the frequencies offered by AA/BA on these routes would still greatly outstrip those offered by Delta and Virgin Atlantic. But by combining forces and spreading their flights out over the course of the day, the two carriers can come closer to effectively competing against AA/BA. For example, Delta and Virgin Atlantic’s London to New York services overlap and conflict with each other. As illustrated in the table below, by tak ing advantage of the larger portfolio of slots they would hold together, Delta and Virgin Atlantic can move overlapping flights to achieve better time

- of

- day coverage and offer a more flexible schedule that has greater utility for customers, particularly f or time sensitive passengers. This will allow Delta and Virgin Atlantic to be much more effective in competing with AA/BA for that segment of the
market.Joint Application Page 26

2. 

### The Joint Ventu re Will Provide Customers with the Benefit of t he Expanded Scope of the Two Networks. In addition to combining and optimizing their service in the key business routes of NYC

- LHR and BOS

- LHR, the Joint Venture wi ll enable Delta and Virgin Atlantic to join their networks to provide customers with more service options and to compete more effectively with AA/BA across the U.S.

- U.K. market as a whole. Delta and Virgin Atlantic will be able to adjust their schedules to enhance connections to Delta’s North American services beyond Virgin Atlantic’s U.S. gateways, which will improve the distribution and penetration of Virgin Atlantic’s product in the U.S. and North American marketplace. In particular, this will enable Vi rgin Atlantic to reach points behind the NYC gateway by connecting to Delta’s hub at JFK. It will also allow Virgin Atlantic to reach points served by Delta behind Virgin Atlantic’s other U.S. gateways. Similarly , Delta will be able to reach points in th e U.K. that will shortly be served by Virgin Atlantic over LHR, which will afford customers more alternatives to the routings Delta presently offers over Paris or Amsterdam in conjunction with Air France and KLM. The Department previously has acknowledge d the benefits that may be realized when carriers enter an immunized relationship that permits joint realignment of schedules. 55 Here, antitrust immunity would allow the JV Parties to realign schedules in order to mount a more effective competitive respons e to AA/BA, which would otherwise retain its dominant position on the Boston

- and New York

- Heathrow routes. Second, the Joint Venture will enable Virgin Atlantic and Delta to place their codes on each other’s transatlantic flights and offer online service to their customers in markets they cannot serve today.

55 2009 Star ATI, DOT Order 2009

- 7

- 10, at 15; American Airlines/British Airways, DOT Order 2010

- 2

- 8, at 2.Joint Application Page 27
By codesharing on Virgin Atlantic flights, Delta will gain a nonstop presence on large and important U.S.

- LHR routes including LAX

- LHR, MIA

- LHR, ORD

- LHR, IAD

LHR and SFO

- LHR. In addition, Delta will b e able to codeshare on Virgin Atlantic’s services from Las Vegas and Orlando to London Gatwick. Acting alone, Delta lacks the necessary LHR slots to enter the routes above on a nonstop basis and so is not a close competitor against the established incumbe nt services, particularly in AA/BA hub markets such as MIA, ORD and LAX. Delta’s past experience on the MIA

- LHR route makes the point: Delta entered the MIA

- LHR route using AA/BA remedy slots, but quickly withdrew following substantial losses in the face of competition against AA/BA supported by its powerful hubs on each end of the route. By codesharing with Virgin Atlantic, Delta’s customers will have access to Virgin Atlantic’s MIA

- LHR offering, which will greatly improve Delta’s competitive position i n Miami. Delta is the second

- largest U.S. carrier behind American, which has a hub at MIA. Delta has a large base of customers in South Florida, and Miami is at the intersection of many international routes flown by other Delta partners including Paris ( Air France), Amsterdam (KLM), Mexico City (Aeromexico), and Brazil (Gol). Los Angeles is another example. Although Delta and its partners fly nonstop from LAX to Tokyo, Sydney, Paris, Amsterdam, and select cities in Latin America, they do not currently of fer service to the U.K. The addition of two nonstop LHR codeshare flights in conjunction with Virgin Atlantic would enhance the appeal of Delta’s commercial offering out of LAX, especially to corporate and agency customers who value a multiplicity of conne ctions to cities that are centers of business activity. ORD, IAD and SFO are hub cities for Delta competitors, where Delta is not viable as a standalone carrier; however, together with Virgin Atlantic, Delta can inject new competition where it is particula rly beneficial.Joint Application Page 28
For its part, by codesharing on Delta’s LHR

- ATL, LHR

- MSP and LHR

- DTW services, Virgin Atlantic will gain online access to important nonstop markets that Virgin Atlantic does not currently serve. In addition, Virgin Atlantic will gain one

- s top access to the vast array of points that Delta serves behind its largest hubs. 56
3. 

### The JV Parties Plan to Launch New Nonstop Service a t Seattle. If the Joint Venture is approved, Delta and Virgin Atlantic intend to launch a new nonstop flight from Seattle to London. This move would create the only nonstop competition against British Airways on this route. Delta recently acquired LHR slots from Alitalia to facilitate this entry. Delta’s predecessor Northwest introduced a SEA

- LHR flight in June 2008, but
t he route performed poorly

– not least because AA/BA doubled its frequencies on this route in response to Northwest’s entry on this route. Northwest ceased service after only six months. At the time, Northwest had no meaningful London point of sale
presen ce. Today, Delta operates a significant array of international flights from SEA, including flights to Paris and Amsterdam in conjunction with its alliance partners, but Delta still would not undertake a new service to LHR because of its weak presence in
L ondon. By joining forces with Virgin Atlantic and capitalizing on its marketing strength in London and the U.K., Delta and Virgin Atlantic believe this new service would be viable and would enable the JV Parties to mount competition to AA/BA on what is no w a monopoly nonstop route.

56 Virgin Atlantic had limited access to U.S. beyond

- gateway points pursuant to its codeshare agr eement with US Airways. In anticipation of the Delta/Virgin Atlantic Joint Venture, Virgin Atlantic has terminated its codeshare relationship with US Airways. However, Virgin Atlantic’s relationship with US Airways was in jeopardy in light of US Airways’ plans to merge with American.Joint Application Page 29

4. 

### The Joint Venture Creates the Potential for Additional U.S. - U.K. Flying from Delta Hub Cities. With an expanded competitive presence and improved London point of sale marketing, Delta would consider additional flying from its hubs to London, subject to the availability of slots. For example, a second daily flight from Delta’s Detroit hub to Heathrow would be a high priority, given the fact that Delta already offers double daily service out of Atlanta (and will soon offer tripl e daily service on that route). Adding a second daily flight at Detroit would improve the competitiveness of the Detroit gateway against Chicago. And, potential future service between Salt Lake City and Heathrow would offer numerous connections to points in the Western United States served by Delta. The inauguration of new services would create significant public benefits. Each new route added by the Joint Venture will create in excess of $150 million in value to the U.S. economy and U.S. aviation inter ests. 57
5. 

### The Joint Venture Will Improve Service Between the U.S. and U.K. Regional Cities. Virgin Atlantic has a strong presence in U.K. regional markets (although not as strong as that commanded by British Airways). Virgin Atlantic this spring will offer connecting flights from regional U.K. cities to London. Virgin Atlantic currently offers several direct flights from regional U.K. cities to the U.S., such as daily service between Manchester and Orlando, and twice a week service between Manchester and L as Vegas, as well as seasonal service between Glasgow and Orlando. (Virgin Atlantic also

57 See, e.g. , Remarks of DOT Under Secretary for Policy, Phoenix Sky Harbor Aviation Symposium 2005 (single new long haul flight produces $158 million in economic activity); Los Angeles Economic Development Corporation Stud y, 2007 (daily transoceanic wide

- body flight generates $623 million in economic output annually, sustains 3,120 direct and indirect jobs with annual wages of $156 million). See http ://globenewswire.com/news

- release/2010/10/06/431064/203195/en/Iberia

- to
Resume

- Air

- Service

- Between

- Los

- Angeles

- and

- Madrid

- New

- Flights

- Expected

- to
Generate

- Hundreds

- of

- Millions

- of

- Dollars

- in

- Annual

- Regional

- Economic

- Activity.html.Joint Application Page 30
serves Orlando and Las Vegas from London Gatwick.) These services, which largely cater to U.K.

- originating tourists, are of great importance to the tourism

- dependent economies of Florida and Nevada. As noted above, Virgin Atlantic is introduc ing additional feeder service from regional U.K. airports in response to the threat posed by British Airway s ’ acquisition of bmi. Virgin Atlantic commence d service from Heathrow to Manchester at the end of March, and, using BA/bmi remedy slots, will offer service from Heathrow to Aberdeen and Edinburgh in April . These services will expand the options for passengers traveling between the U.S. and U.K. regions, and will provide imp ortant feed for U.S.

- LHR services operated by both Virgin Atlantic and Delta. Delta flights will also connect to these cities on a codeshare basis. A marketing presence on both sides of the Atlantic will enhance the likelihood of success for these flight s. 6. 

### The Joint Venture Will Enable the JV Parties to Achieve a More Effective Sales Presence on Both Sides of the Atlantic

. The Joint Venture will allow Delta and Virgin Atlantic to benefit from each other’s strong brand recognition, customer awareness, and overall sales presence on their respective sides of the Atlantic. Currently, Delta suffers from a weak sales presence and brand recognition in the United Kingdom, and Virgin Atlantic’s marketing presence in the U.S. lacks the scale and scope of its far la rger competitors. 58 As a result of the Joint Venture, Delta will gain access to Virgin Atlantic’s strong presence in the U.K., and Virgin Atlantic will represent Delta for its U.K. sales; conversely, Virgin Atlantic will gain access to Delta’s U.S.

- based s ales presence and resources, and Delta will represent

58 This is another area in which the JV Parties are at a competitive disadvantage compared to AA/BA; as a result of their immunized alliance, American Airlines and British Airways each benefit from the strong sales presence of the other in its country of origin.Joint Application Page 31
Virgin Atlantic for its North America sales. This will strengthen the ability of the JV Parties to market their products

– and thereby attract more customers who will enjoy the benefits of the Joint Ve nture’s improved network offering

– in both North America and the U.K. The JV Parties plan to create joint promotional materials and activities to generate customer awareness of the new schedule benefits created by the Joint Venture; the JV Parties will d irect these sales materials and activities with particular focus towards corporate and agency customers, with whom the JV Parties currently suffer a disadvantage against AA/BA. Other joint marketing activities will include advertising, co

- branded promotio nal materials, marketing of joint bonus programs, promotion of credit cards, programs with non

- airline partners such as hotels, and marketing of shared frequent flyer benefits. Joint sales activities will be governed by a shared Code of Conduct that will ensure the JV Parties’ sales strategies are coordinated and optimized to attract Joint Venture customers. 59 The JV Parties will be able to compete more effectively with rival alliances, many of which already have aligned their sales forces and harmonized th eir practices and policies. In particular, coordination of sales forces and activities will help Delta and Virgin Atlantic gain ground in the market for premium transatlantic travel against AA/BA.
7. 

### Airport Co - location and Streamlined Service Will Improve the Customer Experience

. Delta and Virgin Atlantic will strive to co

- locate facilities at commonly served stations wherever possible. For example, both carriers serve New York JFK from Terminal 4, which will enable t he carriers to streamline check

- in and transfer operations. Delta has also indicated to the operators of Heathrow Airport its desire to co

- locate with

59 The JV Parties wi ll also engage in coordination

- and efficiency

- enhancing measures such as co

- location of sales offices where practical.Joint Application Page 32
Virgin Atlantic at the same terminal. Co

- location will improve the customer experience and reduce minimum connecting times. The carriers will work together to eliminate duplicative and overlapping facilities wherever possible. Delta has conducted a preliminary analysis and estimates these efficiencies will result in approximately $15 million in annual cost savings at stations across the joint network. 

### B. Expansive Integration Across a Metal - Neut ral North America - U.K. Network W ill Create Substantial Consumer Benefits that Cannot Be Achieved w ithout Antitrust Immunity. Although the JV Parties can begin limited codesharing prior to receiving ATI, antitrust immunity is necessary to realize the overwhelming majority of consumer benefits that an immunized metal

- neutral codeshare creates. In a non

- immunized relationship betw een competing carriers, each carrier is incentivized to take a restrictive approach in sharing its network with its partners. A carrier in such a relationship will frequently restrict inventory classes, impose unfavorable prorate terms, and price tickets to maximize profit for itself rather than across all carriers in the relationship

– all of which results in less traffic flowing across the shared networks and less effective competition with rival alliances. By contrast, in an immunized Joint Venture the carriers have a common incentive to maximize profit for the Joint Venture as a whole because they are indifferent as to which carrier operates a given flight. A grant of antitrust immunity would allow Delta and Virgin Atlantic to codeshare on a metal

- neu tral basis. This harmonization of incentives would eliminate double marginalization pricing and other inefficiencies that result from non

- metal neutral codeshares. In addition, antitrust immunity would allow the JV Parties to coordinate flight times in o rder to maximize connectivity across both carriers. As the Department recognized in DOT Order 2009

- 7

- 10: By implementing an economic benefit

- sharing agreement, carriers within the alliance are motivated to performJoint Application Page 33

alliance

- focused network planning, sales, and management, thereby benefiting a broad range of consumers seeking a better, seamless transportation product. . . . By pooling resources to improve the overall service offering, and by sharing financial gains and losses, we find that the partners are a ble to harmonize the global network and become indifferent as to which of them collects the revenue or operates the aircraft over a given itinerary. They are thus able to focus their efforts on gaining the customer’s business by providing the best availab le fare, schedule, and routing between two cities. 60 This principle is demonstrated by Virgin Atlantic’s own experience. Although Virgin Atlantic does have certain arm’s length codesharing arrangements in place, its ability to penetrate markets beyond its U.S. gateways is somewhat limited. Less than 3% of traffic on Virgin Atlantic’s U.S.

- U.K. flights travels beyond its U.S. gateways. 61 By contrast, 10% of the traffic carried by British Airways travels beyond the U.S. gateways. 62 Although there are a numbe r of factors at play, British Airways’ ability to codeshare on a metal

- neutral basis with American Airlines surely contributes to this disparity. 

### C. The Improved Network Enabled by the Joint Venture Will Produce Substantial Quantifiable Consumer Benefits

. As described above, the Joint Venture will enable improvements in frequencies, schedules, capacity, available nonstop routes, and behind

- and

- beyond connections. Taken together, these enhancements mean that the JV Parties will be able to offer an overall netw ork of flights that is much more attractive and useful to consumers, particularly time

- sensitive business travelers.

60 Continental/Star Alliance, DOT Order 2009

- 7

- 10, at 15.
61 MIDT YE Aug 31, 2012.
62 Id.Joint Application Page 34
Delta’s internal Quality of Service Index (“QSI”) model forecasts the shifts in traffic that are likely to occur once these network change s are in place. 63 The QSI model indicates that, as a result of the improvements in quality created by the JVA, Delta and Virgin Atlantic will be able to attract additional passengers. These predicted increases in passengers reflect the benefits to consumer s arising from the JVA. Additional models used to calculate the consumer value reflected in those traffic shifts indicate that the Joint Venture network would generate over $187 million in annual consumer benefits. 64 The network improvements will bring ben efits to both premium and non

- premium
passengers – time sensitive passengers are expected to enjoy over $176 million in annual consumer benefits, and non

- time sensitive passengers will see over $11 million
in annual benefits. 65


### VI. The Proposed Alliance Will I mprove Competition and Consumer Choice on U.S. - U.K. Routes and Will Not Reduce Competition in A ny Relevant Market. The purpose of the proposed Joint Venture is to allow Delta and Virgin Atlantic to join forces so that they can compete more effectively with the AA/BA Alliance , which today dominate s the U.S.

- U.K. market in general and the NYC

- LHR market in particular.

63 The QSI models take into account various metr ics of quality, including time of day, equipment type, and airport presence. Based on the characteristics of all flights on a given route, QSI predicts the number of local passengers who will fly on each flight. To assess the Joint Venture, Delta compare d announced schedules and routes (in January 2013 to represent the winter schedule and April 2013 to reflect the summer schedule) against expected schedules and routes once the Joint Venture is in place.
64 This figure is a quantification of the benefits to consumers from increased quality compared to Delta’s and Virgin Atlantic’s existing offerings, and does not translate directly into increased revenue for Delta and Virgin Atlantic.
65 Exhibit JA

- 11. Delta’s QSI modeling does not take into account certain other consumer benefits that do not arise directly from the increased attractiveness to consumers of the combined Delta/Virgin Atlantic network offering. For instance, these figures do not account for the reduction in prices arising from the elimination o f double

marginalization that the Joint Venture will bring for itineraries that include both Virgin Atlantic

- and Delta

- operated legs. These and other benefits will bring value to consumers over and above the quality

- related consumer benefits quantified h ere.Joint Application Page 35
The existing networks of Delta and Virgin Atlantic are highly complementary; the two carriers compete on only two nonstop routes, NYC

- LHR and BOS

- LHR. The Joint Venture will increase competition on those two routes by replacing two existing, smaller players with a more effective competitor. And, unlike transactions that strengthen the leading incumbent, in this case, even with the Delta/Virgin Atlantic Joint Venture, AA/BA will continue to have a leading market presence on both routes. 

### A. The Current Competitive Landscape: AA/BA Dominates U.S. - U.K. Routes

. When the Department granted antitrust immunity to American and British Airways in 2010, the Department recognized the risk that AA/BA might dominate its competitors in U.S.

- U.K. markets given the large market share, high frequency of service, and other structural advantages the AA/BA A lliance would have over its competitors. 66 The Department’s con cerns have been realized. AA/BA holds the overwhelming majority of slots and related assets at London’s Heathrow A irport. Most recently, AA/BA expanded its grip over Heathrow through the acquisition by British Airways/IAG of bmi British Midland, includin g bmi’s Heathrow slots and other assets. 67 No single carrier can provide a sustainable and meaningful competitive alternative to AA/BA, which jointly commands a 59% share of the seats on U.S.

- LHR flights and 57% of Heathrow slots. Virgin Atlantic is a dist ant number two competitor in capacity terms, with 16% of the U.S.

- LHR seat share, and is even weaker with respect to slot holdings, with only 3.3% of Heathrow slots. United has 14% of the U.S.

- LHR seat share, and Delta is a marginal fourth place

66 American Airlines/British Airways, DOT Show Cause Order 2010

- 2

- 8, at 23.
67 London is the top U.S. international destination with approximately $6 billion in annual revenue (twice as large as the next

- largest destination, Paris). Heathrow is included in eight of the 10 largest U.S.

- to
- Europe routes, and Heathrow passengers account for 55% of all travelers on the top 25 U.S.

- to
- Europe routes. (Figures derived from Aviation Daily, PlaneStats.com, and industry data.) London also is the top destination for international corporate travel from the U.S. by nearly a factor of three, and the U.S.

- Heathrow corporate sales segment is estimated at nearly $1.5 billion annually.Joint Application Page 36
competitor on U.S.

- LHR routes, with only 8% of seats and a miniscule 0 .3% of Heathrow slots. Given the slot constraints at LHR, there is little ability for other carriers to grow on their own. Stepping back from Heathrow, AA/BA also dominates nonstop U.S.

- U.K. frequencies as a whole. AA/BA has well over twice as many frequencies as the next

closest carrier, United, and over twice as many frequencies as Delta and Virgin Atlant ic combined

. 68

AA/BA’s dominance in daily nonstop frequencies between the U.S. and U.K. translates into an even greater share of premium traffic than its seat capacity relative to other carriers alone would suggest. 69 Because premium ( i.e., business) trave lers are time

- sensitive and prefer airlines that offer a large number of conveniently

- spaced departure times, the premium segment gravitates towards AA/BA on transatlantic flights. Unless and until Virgin Atlantic and Delta can offer frequenci es and fligh t timing that

68 Based on June 2013 peak day schedule.
69 For example, and as discussed in more deta il below, AA/BA dominates the premium segment on the NYC

- LHR route with 63% of such bookings. Exhibit JA

- 6.Joint Application Page 37

rival s AA/BA’s offerings on key transatlantic routes, they will always fail to capture their fair market share (as determined by capacity) of premium traffic. This in turn hobbles Delta ’s and Virgin Atlantic’s overall performance on transatl antic routes, as premium travel drives profitability on these routes. Absent the immunized Joint Venture, AA/BA’s dominance will continue, because strong organic growth at Heathrow by Delta and Virgin Atlantic (or others) is not possible
due to the scarci ty and high cost of slots. 70 AA/BA’s schedule strength on key routes makes it impossible to gain significant customer preference through incremental network additions

– particularly so given that the limited slots that are available are often neither suitab le for transatlantic service nor attractive for travel at peak times of the day. With IAG’s purchase of bmi, Virgin Atlantic’s access to feed traffic is under threat. Without an alliance partner, Virgin Atlantic faces serious challenges to its ability to grow and compete. For its part, the lack of credible scale and service on key business routes undermines Delta’s global product offering and has led to disappointing results on key transatlantic routes that compete with AA/BA. Virgin Atlantic also lacks scale at Heathrow, and lacks the ability to expand either its Heathrow transatlantic routes or its U.S. and North American networks.

70 There are virtually no available Heathrow slots for competitive service on U.S.

- U.K. routes. British Airways historically has not transferred any slot pairs (other than as a result of recent forced divestitures), keeping 55% of Heathrow slots completely out of reach. Even on the rare occasions when slots are available for purchase, they come at high cost.Joint Application Page 38

The proposed Joint Venture is a market

- based solution to AA/BA’s dominance. The proposed Joint Venture

— bolstered by the first major equity investment of its size by a U.S. carrier in a European airline

— will combine Delta ’s and Virgin Atlantic’s current Heathrow slot holdings used on transatlantic routes into a single slot pool, allowing Delta and Virgin Atlantic to use the number and timing of their slots more effectively and more efficiently than either carrier could on its own. In the absence of the immunized Joint Venture, however, and given existing slot constraints, there is no other way for Delta or Virgin Atlantic to build a meaningfully stronger position at Heathrow, or offer a meaningful competitive alternative to AA/BA in the U.S.

- U.K. market. 

### B. The Proposed Joint Venture Will Enhance Competition

. Far from reducing or eliminating competition in any relevant markets, the proposed Joint Venture will enhance competition on the U.S.

- U.K. routes covered by the Joint Venture Agreement. The extensive benefits will include new routings, service that is optimized across time channels, more schedule flexibility for travelers a nd greater connecting options

— in short, a better product for consumers. The proposed Joint Venture will combine the two carriers’ North America

- U.K. operations and resources.Joint Application Page 39
This will benefit consumers by creating a strong, viable competitor to AA/BA, p articularly for time

- sensitive business travelers and corporate customers. United will also remain as a viable competitor on U.S.

- U.K. routes with 14% of the U.S.

- LHR seat share.
1. United States - United Kingdom The United States

- United Kingdom air transport market is among the largest and most important in the world. 17 million passengers traveled nonstop between the two countries last year. 71 As shown in the table above, AA/BA operates the largest share of U.S.

- U.K. services. Delta and Virgin Atlantic comb ined would be in second place, and United would remain a strong number three competitor, with more than twice the U.S.

- U.K. frequencies operated by Delta today. The proposed Joint Venture will not reduce or eliminate competition; rather, it will create more meaningful competition with AA/BA and more o ptions for travelers on U.S.

- U.K. routes. A total of seven carriers currently operate nonstop service between the U.S. and the U.K.: 72

• British Airways, with 304 weekly flights between London (LHR, LCY and LGW) and 18 U.S. gateways (Seattle, San Francisco, L os Angeles, San Diego, Las Vegas, Phoenix, Denver, Dallas/Ft. Worth, Houston, Chicago, Atlanta, Tampa, Orlando, Miami, New York (EWR and JFK), Philadelphia, Baltimore and Washington).

• Virgin Atlantic, with 122 weekly flights between London (LHR and LGW)/Gl asgow/Manchester and 10 U.S. gateways (San Francisco, Los Angeles, Las Vegas, Chicago, Boston, New York (JFK and EWR), Washington, Orlando and Miami).

• American, with 119 weekly flights between London (LHR)/Manchester and seven U.S. gateways (Boston, Chica go, Dallas/Fort Worth, Los Angeles, Miami, New York (JFK) and Raleigh/Durham).

• United, with 175 weekly flights between London (LHR) and six U.S. gateways (San Francisco, Los Angeles, Houston, Chicago, Dulles and

71 DOT T100 data YE July, 2012.
72 OAG sched ules, June, 2013.Joint Application Page 40
New York (EWR)), as well as MAN

- EWR, EDI

- EW R, GLA

- EWR and BFS

EWR.

• Delta, with 118 weekly flights between London (LHR)/Manchester and five U.S. gateways (Minneapolis/St. Paul, Detroit, Atlanta, Boston and New York (JFK)).

• US Airways, with 28 weekly flights between London (LHR and LGW) and two U.S. gateways (Charlotte and Philadelphia). Following the recent announcement of the merger between AA and US Airways, the US Airways transatlantic frequencies will further enhance AA/BA’s dominance on U.S.

- U.K. routes. In particular, the merger will add a ne w nonstop London

- Charlotte service to AA/BA’s already dominant offering. 73

• Kuwait Airways, with three weekly flights between London (LHR) and New York (JFK). Several other carriers offer connecting service options for travel between the U.S. and the U.K., i ncluding Ae r Lingus, via Dublin, Icelandair, via Reykjavik, and Air Canada, via
Toronto.
2. Complementary Routes As discussed above, the Virgin Atlantic and Delta networks are largely complementary. The proposed Joint Venture will ensure that customers of ea ch carrier have access to the flights of the other on a metal

- neutral basis. For both sets of customers, this means access to both new nonstop transatlantic flights and the beyond networks of both carriers. Virgin Atlantic offers many routes that will com plement Delta’s offerings, including leisure service from Gatwick, nonstop services from Manchester, and U.K. regional points where Virgin Atlantic has been awarded remedy slots to compete with a merged BA/bmi. Virgin Atlantic has developed scheduled long

- haul services from London Gatwick and two U.K. regional airports (Glasgow and Manchester) to points in the U.S. that provide valuable links for consumers. Under the proposed alliance, these routes will

73 US Airways has moved its Charlotte

- London service from Gatwick to Heathrow as of March 31.Joint Application Page 41
provide new connecting opportunities for consumers b etween Delta’s U.S. network and Manchester and Glasgow. Virgin Atlantic’s Manchester

- Las Vegas service operates only twice a week, so the combination of these nonstop flights and indirect flights via Delta’s Manchester

- Atlanta route will provide greater r outing and schedule flexibility for consumers. Additionally, Virgin Atlantic’s brand recognition and market presence in the U.K. will enhance Delta’s U.K.

- originating sales for the Manchester

- Atlanta route. Finally, Virgin Atlantic is commenc ing new rout es from Heathrow to Aberdeen, Edinburgh and Manchester this spring on which Delta plans to codeshare, enabling new competitive routings between the U.S. and these cities and multiple points across the
combined Vi rgin Atlantic and Delta network. T hese new r outings will compete strongly against AA/BA, which remains the largest carrier between these three points and the U.S. Likewise, Delta offers many flight options that Virgin Atlantic cannot offer on its own. Most importantly, Virgin Atlantic customers wil l be able to make use of Delta’s network within the United States. This means that travelers from and to the U.K. will be able to travel to numerous points within the U.S. solely on Virgin Atlantic

- coded flights, will not pay for double

- marginalization, a nd will enjoy the benefit of flight schedules that have been optimized for connecting passengers. 3. Overlap City - Pairs There are only two transatlantic city

- pairs on which Delta and Virgin Atlantic offer overlapping nonstop service: New York

- London and Bosto n - London. On both of these key transatlantic routes, the proposed alliance will not reduce competition, but rather will create a viable competitive alternative to AA/BA. On both routes, AA/BA dominates, both in terms of seat share and in capturing the hi ghest proportion of high value passengers ( i.e. , premium, time

- sensitive business passengers and corporate contractJoint Application Page 42
passengers) relative to seat share. These high value passengers are critical to market performance and profitable operations; however, Delt a and Virgin Atlantic each carry a higher proportion of low value customers ( i.e. , coach, leisure and non

- time

- sensitive passengers) than AA/BA. 74 Because premium traffic drives profitability on these routes, carriers typically schedule frequencies with an eye toward capturing the largest possible share of premium time

- sensitive passengers; because aircraft have a fixed number of premium and economy seats, this approach usually results in excess capacity for non

- premium passengers. The need to compete o n frequency ensures a ready supply of non

premium seats, which in turn generates strong competition for non

- time

- sensitive passengers. In particular, AA/BA leverages its advantage in connecting non

- premium passengers (in particular over Heathrow) to suppl ement local traffic and fill capacity. 75 This dynamic ensures that, because the proposed alliance will create competition for time

- sensitive business travelers on New York

- London and Boston

- London, there will be continued competition for non

- time

- sensitive travelers as well. 76 Increased competition for premium passengers will also likely in turn decrease the opportunity cost to AA/BA of selling premium seats to price

- sensitive non

- premium travelers who would otherwise travel in economy seating. AA/BA will th en likely compete more intensely in selling the vacated premium economy seats to non

- premium economy passengers, thereby creating increased capacity and downward pricing pressure for non

- premium sales.

74 Exhibits JA

- 5

- JA

- 8.
75 AA/BA has 68% of behind

- and

- beyond bookings using New York

- London as a trunk route, and 85% of behind

- and

- beyond book ings using Boston

- London as a trunk route, with the vast majority of this comprised of U.K.

- behind traffic connecting over Heathrow.
76 In addition, as discussed further below, United’s nonstop service on New York

London will continue to discipline fares in that market.Joint Application Page 43



### a. New York - London New York

- London is the largest transatlantic route. There are four daily nonstop competitors. 77 AA/BA dominates the route with 53% of total capacity, Virgin Atlantic is a distant second with 23% of capacity, United/Star has 12% and Delta is fourth with only 10% of capacity 78

– one - fifth the size of AA/BA. 79 AA/BA is also the leader in frequencies. AA/BA flies 15 daily flights

— 54% of the nonstop frequencies

— and departures are staggered every 30 minutes during the prime evening hours. By contrast, Virgin Atlantic has six daily nonstop fr equencies, United has five and Delta has just three. Neither Delta nor Virgin Atlantic can offer competing scale, frequencies or networks on its own. Although AA/BA would remain by far the largest carrier on the route and continue to hold a large frequen cy advantage even if the reques ted immunity were granted, the Proposed A lliance would better position Delta and Virgin Atlantic to mount a more robust competitive challenge to AA/BA on this critical route. If premium bookings are isolated, AA/BA’s dominanc e is even starker. AA/BA’s
shuttle

- like service captures the majority of the high

- value business segment

– 62% of all premium nonstop bookings on the route go to AA/BA, well above AA/BA’s share of capacity. Virgin Atlantic again is a distant second, accou nting for 23% of premium nonstop bookings. Delta currently is not an effective competitor for premium nonstop passengers. Delta has only 7% of premium bookings , 30% less than its share of overall

77 Kuwait Airways also serves the JFK

- LHR route on a less

- than

- daily basis.
78 Although United/Star has only a 2% advantage over Delta in capacity terms, United/Star offers superior frequencies and time of day coverage. United/Star offers fiv e daily well

- spaced flights out of EWR to LHR (departing at 9:00, 17:50, 19:05, 20:55, and 21:40), as opposed to Delta’s three closely “bunched” departures out of JFK (departing at 18:30, 19:30, and 21:00). See Summer 2013 OAG schedules.
79 Based on Summer 2012 data.Joint Application Page 44
capacity on the route. The following chart illustrates th e extent to which Delta is underperforming on premium traffic relative to its overall share of capacity on NYC

- LHR:

Delta’s relative disadvantage in premium bookings on NYC

- LHR is explained by insufficient frequency. Delta’s three daily JFK

- LHR flights are not sufficient to appeal to time

- sensitive business passengers, who demand schedule flexibility. Because of this, Delta is unable to enter into preferred contracts for New York

- London flights, 80 and its ability to compete effectiv ely against the AA/BA oneworld A lliance and the United/Star
A lliance (which offers five NYC

- LON flights to Delta’s three) is diminished, especially with respect to London

- centric business. 81 Notably, based on MIDT data, although Delta has 10% of time

- sensitive bookings on New Y ork

- London for North America point

- of

- sale traffic, it has only 5% for international point

- of

- sale traffic. This position is exacerbated

80 See Declaration of Chuck Imhoff, Delta Managing Director for New York Sales for Delta Air Lines, at DL00000268

- 275; Letters of Support from Delta Customer s to the Department of Justice at DL00000276

- 364; and Letters of Support from Delta Cust omers to DOT filed contemporaneously in this docket.
81 United’s Newark hub is the largest in the New York region, and its relative competitive position in the NYC

- LON market is stronger than its 12% share of capacity would suggest. See n. 78 supra

.Joint Application Page 45

when direct sales are factored in: 46% of Delta’s North American sales on this route are direct, whereas only 8% of in ternational sales are made through direct channels. Together, Delta and Virgin Atlantic can offer an attractive schedule to business customers. The proposed Joint Venture gives the two carriers otherwise unattainable scale and a schedule that makes both carriers more attractive to customers, particularly to time

- sensitive business customers. The Joint Venture will combine the JV Parties’ current frequencies for a total of nine daily frequencies on the NYC

- LHR route. The JV Parties will optimize frequenc ies across time channels to provide nearly hourly service at peak times. The Delta/Virgin Atlantic Joint Venture will provide the necessary service into Heathrow, enabling the Joint Venture to better compete for corporate contracts that historically have been closed due to a lack of frequencies, and integrated sales forces will provide point

- of

- sale expertise. The Joint Venture will increase the number of viable competitors for the crucial time

- sensitive business segment, introducing price competition o n routes dominated by AA/BA and ensuring that AA/BA will have to compete harder for this high

- value traffic. The proposed Joint Venture will not allow Delta and Virgin Atlantic to “impose and sustain supra competitive prices or reduce service levels below co mpetitive levels.” 82 AA/BA will remain the largest carriers on the market, clearly preventing the JV Parties from being able to raise price s . United and the Star Alliance, supported by a large hub at Newark, will remain a significant competitor in the market able to impose discipline to prevent price increases above competitive levels. The immunized Joint Venture is not likely to result in p rice increases. Rather, given the increased competition for premium passengers, the high demand for time

- sensitive business frequencies, and

82 SkyTeam II ATI , DOT Order 2008

- 4

- 17, at 12.Joint Application Page 46
the resulting excess capacity for economy passengers, competition for all passengers will remain strong as carrier s fight to maintain load factors. 

### b. Boston - London The situation for the Boston

- London route parallels that for New York

- London: AA/BA is the dominant player, and pooling and optimizing frequencies will allow Delta and Virgin Atlantic to mount a more effect ive competitive response to the market leader. 83 Delta and Virgin Atlantic did not overlap on this route until March 2011, when Delta entered using two AA/BA remedy slot pairs. Delta started with two daily frequencies but was forced to reduce its service t o one daily frequency to mitigate losses, and returned the second slot pair to British Airways. Currently, AA/BA controls 71% of capacity on the route and 73% of premium nonstop bookings. 84 By contrast, Delta and Virgin Atlantic have only 12% and 15% of c apacity, and only 8% and 19% of premium bookings, respectively. Similar to New York

- London, whereas Delta has 14% of time

- sensitive bookings on Boston

- London for North America point

- of

- sale traffic, it has only 5% for international point

- of

- sale traffic. Indeed, Delta has further downgauged its capacity on this route by more than 30 daily seats (by changing from B

- 767

- 400 to B

767

- 300 aircraft) in response to weak market conditions. AA/BA will operate four daily frequencies this summer. 85 Currently, the JV Parties each have one daily frequency, both of which occupy the same time channel in the

83 See Exhibits JA

- 7

– JA

- 9.
84 Based on Summer 2012 data.
85 AA/BA recently published schedule changes for Boston, replacing three daily AA 757 narrowbody flights with a single new British Airways 747 flight. AA/BA maintains excellent schedule coverage in all time channels with a modest overall capacity reduction of 210 daily seats, but (due to the enhanced configuration of BA’s 747) an increase in premium capacity of 30 daily seats despite the reduction in frequencies.Joint Application Page 47
eastbound direction. The proposed Joint Venture will maintain the JV Parties’ two frequencies but align them across time channels to better compete with AA/BA’s four frequencies, improving competition and providing a better product for travelers. Combining operations with Virgin Atlantic will allow Delta to maintain a presence on the route, will create a more viable competitor to AA/BA for Boston

- based business travel ers and corporate contracts, and will improve timing for leisure travelers. As on the New York

- London route, the P roposed A lliance will not allow Delta and Virgin Atlantic to “impose and sustain supra competitive prices or reduce service levels below compe titive levels” 86 because AA/BA will remain the dominant carrier on the route. In addition, as in New York

- London, the proposed Joint Venture is incentivized to maintain frequencies to compete for more profitable business passengers, which will in
turn ensu re there is continued capacity for economy passengers. Additionally, the Department previously has recognized the competitive discipline resulting from connecting services operated by other alliances and carriers. In approving the expanded nine

- way immun ity for the Star Alliance, the Department stated that “[f]or the large majority of travelers, the carriers offering U.S.

- Switzerland connecting services, such as the European members of SkyTeam and oneworld, should discipline the fares and service offered by the nonstop carriers.” 87 There is a wide variety of one

- stop options for leisure travelers at Boston, including New York, Toronto, Montreal, Reykjavik and Dublin, among others. One

- stop services account for 8% of bookings on this route, with United (an d its Star partners) holding a 6% share. Finally, there is one Heathrow slot pair, designated for LHR

- BOS service, available from the AA/BA remedy slots to support potential new entry by a third competitor.

86 SkyTeam II ATI, DOT Order 2008

- 4

- 17, at 12.
87 9

- way Star Alliance ATI, DOT Order 2006

- 12

- 17, at 12.Joint Application Page 48



### VII. Granting ATI Would Be Consistent with the Letter and Spirit of the EU - U.S. Open Skies Agreement and Settled DOT Precedent. The Federal Transportation Code requires the Department to “strengthen[] the competitive position of air carriers to ensure at least equality with foreign air carriers, including th e attainment of the opportunity for air carriers to maintain and increase their profitability in foreign air transportation.” 88 Permitting Delta and Virgin Atlantic to coordinate and cooperate under a grant of antitrust immunity from the Department will

cr eate a balanced competitive landscap e by making the P roposed A lliance well

positioned to better compete against oneworld on key U.S.

- U.K. routes. The existence of an open skies agreement between the United States and the homeland of each applicant has long been a public interest factor that is a prerequisite to approval of an ATI application. 89 The successful conclusion of the EU

- U.S. Open Skies Agreement satisfies this requirement with respect to each of the Joint Applicants. DOT has conferred ATI upon t he Alliance between American, British Airways, Iberia et. al. on the basis of this Agreement. The same considerations that weighed in favor of immunity for AA/BA apply here. 90 DOT has long supported the formation of international airline alliances as an
im portant step towards the further liberalization and integration of the international air transport market. In a 1999 study of airline alliances, DOT expressly recognized and endorsed the emergence of alliances and joint ventures as a valuable surrogate fo r airline mergers and other forms of consolidation: 91

88 49 U.S.C. § 40101(e)(1).
89 American Airlines/SN Brussels, DOT Order 2004

- 4

- 10, at 1; American Airlines/British Airways, DOT Order 2010

- 7

- 8, at 15.
90 American Airlines/British Airways, DOT Order 2010

- 7

- 8.
91 Office of the Secretary, U.S. Department of Transportation, International Developments: Global Deregulation Takes Off (December 1999), at 4.Joint Application Page 49
The airline industry, in response to consumer demand, sees the enormous growth potential for the over

- regulated and under

- served international market, and individual airlines are trying to position thems elves to participate in that growth. The resulting development of large strategic alliances, together with code sharing and other marketing arrangements is changing the structure of the airline industry and is generating new pressures to overcome the limi tations of restrictive bilateral agreements. They have provided a way for carriers to mitigate the limitations of bilateral agreements, ownership restrictions, and licensing and control regulation. Delta’s decision to take a 49% equity stake in Virgin Atl antic supports prompt approval of antitrust immunity. Delta’s equity investment, existing as it would alongside the Joint Venture for the operation of the North America

- U.K. business, would incentivize the JV Parties to realize the benefits of the Joint V enture. In prior ATI decisions, the DOT has found that a grant of antitrust immunity would permit the JV Parties to produce
merger - like efficiencies. “Generally speaking, a grant of antitrust immunity may enable airlines to achieve merger

- like synergies, boost capacity, and deliver lower prices for some itineraries.” 92 The emphasis and support U.S. and European officials have attached to the formation of airline alliances support approval of antitrust immunity for the Delta/Virgin Atlantic Joint Venture. Immunity would also be consistent with prior DOT decisions. 93

92 Delta/Virgin Australia/Pacific Blue, DOT Order 2011

- 5

- 8, at 13.
93 Indeed, a decision to deny ATI on the facts here, and in the wake of longstanding preced ent would be at odds with the course of dealing between the EU and U.S. As DOT observed in its Order to Show Cause in the KLM/Northwest antitrust immunity case: We believe that the Netherlands would consider it to be inconsistent with the Open Skies spiri t if we denied the applicants’ request, unless we had substantial grounds for taking such action ( e.g. , because the proposal would substantially reduce competition in several markets without any offsetting benefits). DOT Show Cause Order 92

- 11

- 27, at 17 (November 20, 1992).Joint Application Page 50



### VIII. The Joint Applicants Will Not Imp lement the Alliance Agreements w ithout Antitrust Immunity. The Joint Venture Agreement expressly provides for coordinated scheduling, yield management, inventory allocation, and pricing, joint purchasing, joint decision

making on new routes, and revenue sharing

– and these are precisely the aspects of the Joint Venture arrangement that will produce the largest consumer benefits. To proceed with joint activities ab sent antitrust immunity would involve obvious antitrust risk and regulatory and legal uncertainty. 94 In other cases, the Department itself has acknowledged that the cooperation and coordination benefits from such agreements cannot be attained without immun ity. 95 The Joint Applicants also consider it necessary that the requested antitrust immunity encompass the five

- way Coordination Agreement between Delta, Virgin Atlantic, Air France, KLM, and Alitalia. As DOT has observed, when a proposed alliance involves multiple parties, this may raise the level of antitrust risk. 96 The Joint Applicants are unwilling to assume this risk. 

### IX. The Joint Applicants Need Antitrust Immunity to Bridge the Two Joint Ventures. Antitrust immunity for the 5

- way Coordination Agreement i s needed to avoid potential immunity gaps between the two joint ventures and to allow for coordination

94 Airlines have had to defend themselves in multiple lawsuits driven by plaintiffs’ counsel involving antitrust claims, regardless of the lack of merit. See , e.g. , In re Northwest Airlines Corp. Antitrust Litig. , 208 F.R.D. 174 (E.D. Mich. 2002), review denied , 310 F.3d 953 (6th Cir. 2002), cert. denied , 539 U.S. 904 (2003); In re Airline Ticket Commission Antitrust Litig. , 268 F.3d 619 (8th Cir. 2001). The risk of antitrust litigation remains a significant concern.
95 See, e.g. , Ameri can Airlines/British Airways, DOT Show Cause Order 2010

- 2

- 3, at 30 (listing expected public benefits and stating that “A grant of antitrust immunity is, we tentatively find, necessary to achieve most of these benefits”).
96 “The specific terms of the 4

- way JV, with its emphasis on a common bottom line, create a greater risk of antitrust litigation.” SkyTeam II ATI, DOT Order 2008

- 4

- 17, at 14.Joint Application Page 51
activities necessary for the efficient operation of the two joint ventures . Delta will be coordinating with Virgin Atlantic on North America

- U.K. routes that involve a nonstop U.S.

- U.K. segment. Delta will also be coordinating with AF/KL/AZ on North America

U.K. routes that involve connections at Amsterdam and Paris. Coordination between the
two joint venture s will support the realization of additional consumer benefits, particularly for transatlantic passengers to and from U.K. regional cities where service is dominated by AA/BA. Accordingly, the Joint Applicants have entered into a Coordination Agreement whereby the Joint Applicants envision potentia l 5

- way coordination of the following activities:
(a) coordination of pricing with respect to city pair routings between points in the U.K. and points in North America; (b) coordination of inventory management systems and processes with respect to city pair rout ings between points in the U.K. and points in North America; (c) coordination of exit

- North America and exit

- U.K. surcharges and fees, and coordination of pricing with respect to ancillary products and services; (d) coordination of network and capacity decisions with respect to operations of the Parties on city pair routings between points in the U.K. and points in North America; (e) joint or coordinated sales and marketing initiatives and activities, including joint contracting with corporate and agency accounts, coordination with respect to corporate discounts and agency commissions and incentives, and establishment of delegated sale s responsibility based on home market representation; (f) joint purchasing opportunities, including with respect to ground handling services, distribution arrangements and other third party arrangements; and (g) joint or coordinated advertising and promotion pro grams. As specified above, the core coordination between the two JV’s will be in city pair routings between points in the U.K. and points in North America. However, there are certain coordination activities (such as the setting of ancillary fees, and co rporate and agency sales programs) that are by their nature broader in geographic scope. The JointJoint Application Page 52
Applicants believe antitrust immunity that covers the identified coordination activities is necessary to permit the two joint ventures to function side

- by

- side without creating antitrust risk for the existing Delta/Air France/KLM/Alitalia (“DL/AF/KL/AZ”) joint
venture. 97 The Delta/Virgin Atlantic Joint Venture is complementary to the existing
transatlantic joint venture. Because AF/KL/AZ have a limited presence in the U.K. generally, and at London in particular , Virgin Atlantic is better able to support Delta’s U.S.

- U.K. services against the larger and stronger AA/BA A lliance. Among the members of the DL/AF/KL/AZ joint venture, only Delta ser ves the U.S.

- U.K. nonstop market. 98 As shown by the following table, 94% of U.S.

- U.K. traffic flies nonstop or via a U.K. gateway; only 3.4% of U.S.

- U.K. traffic travels via an AF/KL/AZ hub: U.S.

- U.K. Traffic Mix Nonstop 89.2% Connecting in LHR 4.9% Connecting in AMS 2.5% Connecting in CDG 0.9% Connecting in FCO 0.0% Other EU Connections 2.5% Total 100.0% (MIDT YE December, 2012) By forming a Joint Venture with Virgin Atlantic, Delta will enjoy a stronger U.K. presence, increased frequency on key U.S.

- U.K. business routes, and a reinforced local sales force with deep established relationships for London point of sale corporate and

97 Virgin Atlantic is evaluating the possibility of entering into the SkyTeam Allian ce. However, the Joint Venture at issue is a bilateral arrangement between Delta and Virgin Atlantic; Virgin Atlantic’s ultimate SkyTeam decision will have no bearing on the ability of Delta and Virgin Atlantic to deliver the substantial public benefits id entified in the application.
98 Air France operated a LAX

- LHR services for a period of six months, but withdrew the service in the face of heavy losses. Financial Times, Air France to drop Heathrow

- LA service (Oct. 9, 2008).Joint Application Page 53
agency business. The Delta/Virgin Atlantic Joint Venture provides Delta the platform it needs to develop a more co mpetitive U.S.

- U.K. network. Coordinatio n between the two joint venture s would support the realization of additional consumer benefits on North America

- U.K. routes. Transatlantic service to and from U.K. regional cities is dominated by AA/BA, which is the only true hub operator at LHR. While Virgin Atlantic is receiving a handful of slots to start service on three intra

U

. K

. routes, Virgin Atlantic does not have and cannot develop LHR as a hub to offer comprehensive coverage of U.K. regional cities. Coor dination with Air France and KLM would help to alleviate this probl em. Air France and KLM serve 13 U.K. regional cities with 70 daily flights from AMS and CDG. 99 While the number of transatlantic passengers originating in these cities is small relative to U.S.

- LHR, they are nonetheless important to offering a comprehensive North America

- U.K. product to compete with AA/BA. For example, companies with London headquarters often have branch offices in regional cities, which can be better served through coordi nation of the Delta/Virgin Atlantic and DL/AF/KL/AZ joint ventures. The Delta/Virgin Atlantic Joint Venture and the DL/AF/KL/AZ joint venture will exist in parallel. Delta will maintain separate settlement and governance relationships with each joint vent ure. The overlap between the joint v entures is limited because of the nature of U.S.

- U.K. traffic flows discussed above, and the fact that Virgin Atlantic does not serve any point in continental Europe. The scope of the Delta/Virgin Atlantic Joint
Ventur e includes all of North America (United States/Canada/Mexico) to the U.K. Delta will codeshare on Virgin Atlantic’s North America services to and from the U.K., as well as Virgin Atlantic’s regional services within the U.K.; however, there are no plans for

99 Exhibit JA

- 10.Joint Application Page 54
Delta to codeshare on Virgin Atlantic’s long haul services to points east and south of London. Delta and Virgin Atlantic have decided to focus their Joint Venture on North America

- U.K. traffic flows, which serves the carriers’ commercial objective in forming an alliance centered on Heathrow as well as the public interest. First, the public interest is best served by using limited Heathrow capacity to accommodate the demand of North America

- U.K. O&D passengers, rather than to accommodate the needs of c onnecting passengers who may well be indifferent to their transfer point. Second, the potential Delta connections to Virgin Atlantic long

- haul points beyond the U.K. are limited and of poor quality relative to existing Delta connecting options via Amsterd am , Paris or Rome

. Virgin Atlantic serves only 10 points beyond the U.K. , 100 including Delhi, Mumbai, Tokyo, Shanghai, Hong Kong, and select points in Africa. However, Delta already serves Tokyo, Shanghai, Hong Kong and Africa on a direct or nonstop basis with its own aircraft

– making a lengthy and circuitous connection via London relatively unattractive. Virgin Atlantic’s long

- haul services east and south of London are timed primarily to meet the needs of the large and important London local market. 101 For example, a Washington to Delhi customer traveling on Virgin Atlantic would arrive at LHR at 6:55 a.m. , and would depart for Delhi at 9 :50 p.m. nearly 14 hours later. There is no same

- day connection at all in the westbound direction. 102 By contrast, the DL/KLM/AF/AZ joint venture service via Amsterdam arrives at 7:45 a.m. , and makes an onward connection to Delhi at noon.

100 OAG Sche dules, June, 2013.
101 Neither Virgin Atlantic nor AF/KL/AZ are significant competitors for North American flow traffic to Virgin Atlantic’s beyond

- London destinations. The current combined AF/KL/AZ market share for North American traffic to the East of London points served by Virgin Atlantic is 2.7%. Virgin Atlantic’s share of North America traffic to these points is 0.8%. MIDT YE 2012.
102 Feb. 2013 Delta Online Flight Schedules, available at http://www.delta.com/ schedules/travel/reservations/flight sched/index.jsp.Joint Application Page 55

Same

- day service in the westbound direction is available with a 6:15 layover in Amsterdam. 103 For these reasons, Delta can maximize the se rvice and public benefits of the two Joint Ventures by relying primarily on the Delta/Virgin Atlantic Joint Venture to serve
North America

- U.K. traffic, and continuing to rely on the DL/AF/KL/AZ joint venture to serve continental Europe and flow markets be yond the European hub gateways. The new Delta/Virgin Atlantic J oint V enture, in combination with the DL/AF/KL/AZ joint venture, will enable the Joint Applicants to offer U.S. customers a more complete package of service that includes all the benefits of t he existing alliance, together with enhanced service offerings to London and the U

. K. In order to maximize the public benefits generated by the two joint ventures, and to avoid harmful and unnecessary antitrust risk, it is critical for the Joint Applicants to have over

- arching immunity to bridge the coordination activities described above. 104 ATI is needed to avoid the “horseshoe” immunity gap for cross

- alliance coordination through Delta, particularly given that Virgin Atlantic and AF/KL overlap on certain U.K. regional markets. An illustration of this antitrust risk is provided by the following diagram:

103 Id.
104 DOT precedent allows separate and distinct commercial relationships within a broad immunized alliance group. An important example is DOT’s decision to approve Continental’s addition to the nine

- membe r Star immunized alliance group, when Continental had established a joint venture relationship with only four Star members, and had little or no bilateral cooperation with the other carriers. By Order 2009

- 7

- 10, DOT granted “approval of alliance agreement s that add Continental to the existing alliance involving Air Canada, Austrian, bmi, LOT, Lufthansa, SAS, Swiss, TAP, and United .

. . and, within that broader alliance , approval of an integrated joint venture agreement called Atlantic Plus

- Plus (“A++”) in volving Air Canada, Continental, Lufthansa, and United.” Order, at 1 (emphasis added).Joint Application Page 56

Delta currently leads pricing of U.S. point of sale itineraries for connections to Aberdeen via Amsterdam on KL M on behalf of the DL/AF/KL/AZ j oint v entu re; going forward Delta also plans to lead pricing of U.S. point of sale itineraries to Aberdeen via LHR on Virgin Atlantic on behalf of the Delta/Virgin Atlantic Joint Venture. Without antitrust immunity to bridge the gap between the two joint ventures, all parties would be exposed to the risk of possible liability under Section 1 of the Sherman Act under the theory that there was a non

- immunized agreement between the members of the two joint ventures on Detroit

- Aberdeen pricing. Moreover, realistically it cannot be mitigated by use of firewalls or other restraints on information flows because, in this example, the pricing for both joint ventures is being set within the same company. The loss of competition that would result from a grant of immunity to co ver these limited overlap markets in the U.K. is not material. First, and most importantly, AA/BA has substantially more one

- stop service in these markets than Delta/Virgin Atlantic will have and will serve as the main competitive constraint on pricing. Second, Lufthansa and other European carriers can and do serve the market

. In addition to antitrust immunity to cover coordination between the two joint ventures within the U.S.

- U.K. markets themselves, the Joint Applicants also need immunity to support the development of corporate discount programs and agency dealsJoint Application Page 57
that involve the transatlantic services of both joint ventures. Corporate discounts and agency commissions 105 are typically offered on a global basis, and in orde r to compete most effectively against AA/BA for corporate and agency customers the Joint Applicants need to be able to offer a single, comprehensive package of services to their customers including both transatlantic joint ventures. 

### X. Conclusion Approval of and antitrust immunity for the Alliance Agreements is in the public interest and will create important consumer benefits estimated to exceed $187 million per year. The Delta/Virgin Atlantic Joint Venture enables both carriers to overcome their respective weaknesses: Delta will gain access to Virgin Atlantic’s LHR slot portfolio and London sales presence; Virgin Atlantic will gain access to Delta’s large network and distribution strength in North America. On the important NYC

- LHR and BOS

- LHR routes, the t ransaction benefits consumers by enabling the JV Parties to combine frequencies and retime flights, creating a new and more effective competitor to the dominant AA/BA A lliance. The Joint Venture would also enable new direct service from Seattle to LHR. I n the U.K., Delta will have the opportunity to connect passengers to Virgin Atlantic ’s budding U.K. network, and additional benefits would be enabled by coordination with the other Joint Applicants, particularly on North America

- U.K. regional
routes that a re served via Amsterdam and Paris. Antitrust immunity is essential to the full realization of the consumer benefits and procompetitive effects of the J oint V enture.

105 The Joint Applicants note that agency commissions have been the subject of numerous antitrust lawsuits against air carriers. See , In re Travel Agency Commission Anti trust Litigation , 898 F. Supp. 685 (D. Minn 1995); Hall v. United Air Lines, Inc. , 298 F. Supp. 2d 652 (E.D. N.C. 2003), aff’d , 2004

- 2 Trade Cases P 74,637 (4th Cir. 2004); In Re Travel Agent Commission Antitrust Litigation , 583 F.3d 896 (6th Cir. 2009).Joint Application Page 58
WHEREFORE, the Joint Applicants respectfully request that the Department approve,
and grant antitrust immunity for, the Alliance Agreements pursuant to 49 U.S.C. §§ 41308 and 41309. Respectfully submitted,

______________________________ Anita M. Mosner Jennifer M. Nowak Holland & Knight LLP Counsel for VIRGIN ATLANTIC AIRWAYS

Rita Ciccone General Counsel & Vice President Legal and Corporate Affairs ALITALIA

- COMPAGNIA AEREA ITALIANA ________________________________ Ben Hirst General Counsel Andrea Fischer Newman, Senior Vice President, Government Affairs Alexander Van der Bellen, Managing Director, Government Affairs and Associate General Counsel DELTA AIR LINES, INC.

______________________________ Robert E. Cohn Patrick R. Rizzi Hogan Lovells US LLP Counsel for SOC IÉTÉ AIR FRANCE and KLM ROYAL DUTCH AIRLINES

## JA - 

# The Partnership with Delta Provides Virgin Atlantic with a US Domestic Network, Improving Competition and Consumer Choice

4/8/2013 PRIVILEGED AND CONFIDENTIAL GLA MAN

MIA MCO BOS EWR/JFK IAD
LAX LAS SFO ORD LHR/LGW



## 3

## JA - 

# New York - London Capacity and Premium Passenger Shares

4/8/2013 PRIVILEGED AND CONFIDENTIAL Source: OAG and MIDT YE Oct 2012

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

AA+BA (oneworld) DL VS OtherShare of Capacity/Bookings (%)

Capacity Nonstop Premium Passengers Total Premium Passengers Including Behind

- Beyond Passengers.


## 6

## JA - 

# Boston - London Capacity and Premium Passenger Shares

4/8/2013 PRIVILEGED AND CONFIDENTIAL Source: OAG and MIDT YE Oct 2012



## 8 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

AA+BA (oneworld) DL VS OtherShare of Capacity/Bookings (%)

Capacity Nonstop Premium Passengers Total Premium Passengers Including Behind

- Beyond Passengers.

## JA - 

# The JV Creates a New and Competitive Alternative to AA/BA’s High Frequency Offering at NYC and BOS

4/8/2013 PRIVILEGED AND CONFIDENTIAL 

## NYC - LHR Daily Flights by Carrier JFK and EWR to LHR Daily Flights
– June 2013 BOS - LHR Daily Flights
– June 2013

1 1 4 

## BOS - LHR Daily Flights by Carrier

9 3 5 6 15

## JA - 

# Air France/KLM Regional U.K. Flying

4/8/2013 PRIVILEGED AND CONFIDENTIAL 

## 10 Air France/KLM serve 13 U.K. Regional Cities with 70 Daily Flights from their AMS and CDG Hubs

Mktg Al Orig Dest City Name Avg Daily Departures Seats/Week Avg Seats/Dep AF CDG ABZ Aberdeen 3 1,540 77 AF CDG BHX Birmingham 3 2,583 123 AF CDG BRS Bristol 1 576 96 AF CDG EDI Edinburgh 4 2,660 95 AF CDG MAN Manchester 3 3,570 170 AF CDG NCL Newcastle 3 1,805 95 KL AMS ABZ Aberdeen 5 4,118 118 KL AMS BHX Birmingham 5 4,657 133 KL AMS BRS Bristol 4 2,400 89 KL AMS CWL Cardiff 3 1,600 80 KL AMS EDI Edinburgh 6 5,482 137 KL AMS GLA Glasgow 5 4,158 119 KL AMS HUY Humberside 3 1,600 80 KL AMS LBA Leeds/Bradford 4 2,080 80 KL AMS MAN Manchester 6 6,460 154 KL AMS MME Durham 3 1,600 80 KL AMS MSE Manston 2 1,120 80 KL AMS NCL Newcastle 5 3,802 109 KL AMS NWI Norwich 4 2,080 80
TOTAL 70 53,891 110
Source: June OAG Data

## JA - 

# The JV Provides Significant Consumer Benefit

4/8/2013 PRIVILEGED AND CONFIDENTIAL 

## 11 O&D Survey Data Omitted. Will be made available by Delta to U.S. carriers upon request.Appendix A Page 1



### Appendix A ALLIANCE AGREEMENTS

Joint Venture Abstract

Joint Venture Scope 

### • Scheduled service on non

- stop routes between the U

. K

. , on the one hand, and the United States, Canada or Mexico (“North America”), on the other hand (the “JV Routes”), and related beyond routes to the extent provided in the JV Agreement

Joint Venture Management 

### • JV Steering Committee consisting of two representatives of each party meeting at least twice per year



### • Working groups that meet at least two times per year to oversee 1) network, 2) revenue management and pricing, 3) passenger (sales, product, marketing, l oyalty, brand/advertising), 4) finance and 5) operations



### • Codes of conduct for each working group to be developed and approved by the Steering Committee



### • Consensus decision

- making for network and capacity decisions relative to the JV Routes with certain limi ted exceptions



### • Equitable allocation of future Joint Venture capacity growth taking into account aircraft availability and the optimal economic outcome for the Joint Venture
Financial Settlement 

### • 50/50 sharing of incremental Joint Venture profits/losses (trunk routes and beyond) subject to adjustments for incremental profits over certain amounts

Exclusivity 

### • Delta to be VAA’s exclusive North American airline partner except for certain grandfathered carriers and any SkyTeam member airline



### • VAA to be Delta’s exclusive U

. K

. airline partner except for any SkyTeam member airline

Note: An index of the JVA implementing agreements is provided in the Delta/Virgin Atlantic Motion for Confidential Treatment.

### Execution Copy

COORDINATION AGREEMENT

This COORDINATION AGREEME NT (the “ Agreement ”) is entered into as of this 8 th 

### day of April , 2013 by and among:
ALITALIA

– COMPAGNIA AEREA ITALIANA S.P.A., a corporation formed under the laws of Italy, capital stock Euro 668,355,344.00 fully paid up, with its principal place of business at Piazza Almerico da Schio Pal RPU 00054 Fiumicino (RM) Italy, Tax Code, V.A.T. Code and Rome Company Register number 02500880121

– REA of Rome 1225709, ( hereinafter “ Al italia ”); DELTA AIR LINES, INC., a corporation formed under the laws of Delaware with its principal place of business at 1030 Delta Boulevard, Atlanta, Georgia 30354, U.S.A. (hereinafter “ Delta ”); KONINKLIJKE LUCHTVAART MAATSCHAPPIJ N.V., a corporation formed under the laws of The Netherlands with its principal place of business at Amsterdamseweg 55, 1182 GP Amstelveen, The Netherlands (hereinafter “ KLM ”); SOCIETE AIR FRANCE, a corporation formed under the laws of France with its principal place of business at 45 rue de Paris, 95747 Roissy CDG Cedex, France (hereinafter “ Air France ”); and VIRGIN ATLANTIC AIRWAYS LIMITED, a company registered in England with registered number 1600117, whose registe red office is at The Office Manor Royal, Crawley, West Sussex, RH10 9NU, England, (hereinafter “ Virgin ”). In this Agreement, Delta, Air France, KLM, Alitalia, and Virgin may each be individually referred to as a “ Party ” and may collectively be referred t o as the “ Parties ”. Recitals The Governments of the United States and the European Union have entered into a comprehensive “Open Skies” Air Transport Agreement to facilitate the expansion of international air transportation opportunities; The Parties wish to take advantage of the commercial opportunities presented by the Open Skies agreements by filing this Agreement for approval and grant of antitrust immunity by the U.S. Department of Transportation (the “ DOT ”) pursuant to 49 U.S.C. §§ 41308 and 41309 ( “ US Antitrust Immunity ”) ; Delta, on the one hand, and Air France, KLM and Alitalia (collectively, the “ European Party ”), on the other hand, are parties to a transatlantic joint venture agreement ( as amended or modified from time to time, the “ TATL JV Agree ment ”), pursuant to which Delta and the- 2

- 

### European Party operate a highly integrated, metal

- neutral joint venture on the terms and conditions set forth therein (the “ TATL Joint Venture ”) with respect to the parties’ scheduled passenger and combination passe nger/cargo operations on certain routes, including all routes between Europe and North America and related beyond routes to the extent set forth in the TATL JV Agreement (the “ TATL Joint Venture Routes ”) , and certain other alliance agreements ( collectively, the “ TATL Alliance Agreements ”) ; The DOT has approved and granted US A ntitrust I mmunity , subject to certain conditions, with respect to the TATL Alliance Agreements and the activities contemplated under such agreements ; Delta has entered into a Transaction Agreement dated as of December 11, 2012 (the

“ Transaction Agreement ”) among Delta, Virgin Atlantic Limited, the indirect parent company of Virgin (“ VAL ”), Singapore Airlines Limited (“ Singapore ”) and Bluebottle Investments (UK) Limited (the “ Virgin Group Shareholder ,” and, together with Singapore, the “ VAL Shareholders ” ) , pursuant to which, among other things, Singapore agreed to sell and transfer to Delta, and Delta agreed to purchase from Singapore, shares of capital stock of VAL held by Si ngapore, which comprise 49% of the outstanding capital stock of VAL; In connection with the execution and delivery of the Transaction Agreement, Delta and Virgin entered into (i) a Joint Venture Agreement dated as of December 11, 2012 ( as amended or modifi ed from time to time, the “ DL
- VS JV Agreement ”) establishing a highly integrated, metal

- neutral joint venture (the “ DL
- VS Joint Venture ”) with respect to the parties’ scheduled passenger and combination passenger/cargo operations on nonstop routes between the U K and North America and , to the extent set forth in the DL

- VS JV Agreement, related beyond routes to points within the UK and North America on the terms and conditions set forth therein (collectively, the “ DL
- VS Joint Venture Routes ”), subject to receipt of all required governmental and competition authority approvals including US A ntitrust I mmunity , and (ii) the Implementing Agreements (as defined in the DL

- VS JV Agreement, and together with the DL

VS JV Agreement, collectively, the “ DL
- VS Alliance Agreements ”) ; While there is minimal overlap between the UK

- North America city pair routings operated by Delta and Virgin pursuant to the DL

- VS Joint Venture and the UK

- North America city pair routings operated by Delta and the European Party pursuant to the TATL Joint Venture, Delta will be a member of both Joint Ventures and will be involved in coordinating commercial activities such as pricing, revenue management and joint sales activities on behalf of both Joint Ventures. Accordingly , the Parties will seek US A ntitrust Immunity with respect to the activities contemplated under this Agreement in order to permit the efficient operation of the two Joint Ventures ; and The Parties therefore desire to enter into this Agreement to establis h the framework for coordination of the commercial activities that may be implemented between the DL

- VS Joint Ven ture and the TATL Joint Venture and between and among the Parties , as set forth herein.- 3

- 

### NOW, THEREFORE , in consideration of the premises and the mutual covenants and agreements herein contained, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows : ARTICLE 1. EFFECTIVENESS 1.1 This Agreement shall become effective as of the date of this Agreement, provided that , notwithstanding anything set forth herein, the cooperation and other activities contemplated by Articles 3 and 4 hereof are subject to and conditioned upon receipt of all required governmental or competition authority approvals including US Antitrust Immunity and each Party’s satisfactory assessment of any proposed coordination under Article 101 of the Treaty of the Functioning of the European Union. In addition, a ll aspects of the coordination and commercial cooperation activities contemplated hereunder, including th ose areas outlined in Articles 3 and 4 , shall be subject to the prior review and written approv al of the Parties engaged in such activities

. ARTICLE 2. SCOPE OF THIS AGREEMENT ; CONFLICT
2 .1 The DL

- VS Allianc e Agreement s set forth the commercial cooperation activities that will be implemented by Delta and Virgin in connection with implementation of the DL

- VS Joint Venture.
2 .2 The TATL Alliance Agreement s set forth the commercial cooperation activities current ly engaged in between and among Delta, Air France, KLM and Alitalia on behalf of the TATL Joint Venture

. 2 .3 Notwithstanding anything set forth in this Agreement, the Parties agree that the DL

- VS Alliance Agreement s shall govern the obligations of Delta and Virgin with respect to the DL

- VS JV and the TATL Alliance Agreements shall govern the obligations of Delta, Air France, Alitalia and KLM with respect to the TATL JV

. Nothing in this Agreement shall terminate, sup ersede or in any way amend, modify or replace any provision contained in the DL

- VS Alliance Agreements or the TATL Alliance Agreements

. Solely as between Delta and Virgin, i n the event of any conflict between the provisions of this Agreement and the provi sions of the DL

VS Alliance Agreements , the DL

- VS Alliance Agreements shall prevail. Solely as between Delta, Air France, KLM and Alitalia, i n the event of any conflict between the provisions of this Agreement and the provisions of the TATL Alliance Agree ments, the TATL Alliance Agreements shall prevail. ARTICLE 3
. COOPERATION IN PASSENGER PROGRAMS 3 .1 Subject to Article 1.1, the Parties may coordinate the following activities (collectively, the “ Passenger Programs ”), the terms of such coordination to be developed and implemented as mutually agreed by the Parties :- 4

- 

### (a) coordination of pricing with respect to city pair routings between points in the UK and points in North America ; (b) coordination of inventory management systems and processes with respect to city pair routings between points in the UK and points in North America ; (c) coordination of exit

- North America and exit

- UK surcharges and fees, and coordination of pricing with respect to ancillary products and services ; (d) coordination o f network and capacity decisions with respect to operations of the Parties on city pair routings between points in the UK and points in North America ; (e) joint or coordinated sales and marketing initiatives and activities , including joint contracting with corp orate and agency accounts , coordination with respect to corporate discounts and ag ency commissions and incentives , and establishment of delegated sales responsibility based on home market representation; (f) joint purchasing opportunities, including with res pect to ground handling services, distribution arrangements and other third party arrangements; and (g) joint or coordinated advertising and promotion programs.
ARTICLE 4
. COOPERATION IN CARGO PROGRAMS
4 .1 Subject to Article 1.1, the Parties may engage in cooperative programs and coordinated activities related to their cargo air transportation products and services with respect to routes between the UK and North America , including joint cargo sales, blocked space arrangements, coopera tion in cargo marketing programs and cargo joint venture arrangements (collectively, the “ Cargo Programs ”) , the terms of such coordination to be developed and implemented as mutually agreed by the Parties

. ARTICLE 5
. SERVICE MARKS
5 .1 For purposes of this Agreement, “ Service Marks ” shall mean the name, logos, promotions, designs, artworks or other symbols or devices describing or identifying a Party whether or not previously registered as trademarks or service marks in any jurisdiction.
5 .2 The Service Marks of each Party are and shall remain the property of such Party. Each Party shall each retain the right to change its Service Marks at any time during the term of this Agreement in its sole discretion. During the term of this Agreement or any Party’s participation in this Agreement, a Party may authorize another Party to use its Service Marks in advertising and in promoting sales and joint marketing programs under this Agreement; provided , however , that all such uses shall be subject to th e prior written approval by the owner of the Service Mark. For the avoidance of doubt, any right of one Party to use another Party’s Service Marks pursuant to any such authorization shall be non
- exclusive,
non
- assignable, and non

- transferable. Upon the t ermination of this Agreement or withdrawal by a Party from this Agreement, for any reason, each Party shall immediately cease using the other Parties’ or the- 5

- 

### withdrawing Party’s Service Marks in any manner whatsoever, except to the extent explicitly permit ted under this Agreement or any other relevant agreement between the Parties. For the avoidance of doubt, nothing in this Agreement shall be deemed to be a grant by any Party of any license or other interest in any of its Service Marks.
5 .3 No Party shall sell or license the Service Marks of any other Party without the prior written consent of such other Party.
5 .4 Each Party represents and warrants to the other Parties that its Service Marks do not infringe upon the trademarks, trade names , service marks, similar rights or rights therein of any third party.
ARTICLE 6. GOVERNMENTAL AND REGULATORY APPROVALS 6.1 In carrying out this Agreement, the Parties will comply with all necessary governmental laws, regulations, and requirements, including, but not limited to, applicable competition laws. 6.2 Subject to Article 2.3 , t he Parties shall take all necessary steps, in cooperation with each other, to obtain all required governmental and competition authority approvals, including without limitation US Antitrust Immunity , in order to carry out the terms of this Agreement. 6.3 In the event that any governmental agency or regulatory body having jurisdiction over the subject matter hereof shall require any material condition or limitation to this Agreement, the Parties shall negotiate in good faith to make such amendments to this Agreement as shall be necessary to achieve the purposes and objectives of this Agreement. If (i) any such condition or limitation, in the reasonable judgment of a Pa rty, is fundamental to the intent of that Party and the operation of this Agreement (which shall include any such condition or limitation that a Party is not obligated to accept or agree to under the provisions of the DL

- VS JV Agreement or the TATL JV Agre ement, as the case may be) , and (ii) the Parties, acting in accordance with this Article 6.3, are unable to agree upon a suitable replacement provision within thirty (30) days of receiving notice thereof from such Party, then such Party shall have the righ t to withdraw from this Agreement upon a further thirty (30) days’ advance written notice to the other Parties, which action shall not effect a termination of this Agreement so long as two or more Parties remain as parties to this Agreement. 6.4 In the ev ent that any necessary government al or competition authority approval is withdrawn, any governmental order is issued, or there is any change in applicable orders, statutes, laws or regulations governing the activities contemplated by this Agreement, in eac h case which would materially affect the rights, benefits, and/or obligations of the Parties hereto, the Parties shall comply therewith, and shall not be liable to each other for failure to fulfill any obligations under this Agreement that may be inconsist ent with such changes, orders, statutes, laws or regulations. In such circumstance, the Parties shall negotiate in good faith to make such- 6

- 

### amendments to this Agreement as may be necessary and sufficient to achieve the purposes and objectives of this Agree ment. If (i) any such change in governmental or competition authority approvals, orders, statutes, laws or regulations, in the reasonable judgment of a Party, would have a material adverse effect on the operation of this Agreement, and (ii) the Parties, a cting in accordance with this Article 6.4, are unable to agree upon a suitable replacement provision within thirty (30) days of receiving notice thereof from such Party, then such Party shall have the right to withdraw from this Agreement upon a further th irty (30) days’ advance written notice to the other Parties, which action shall not effect a termination of this Agreement so long as two or more Parties remain as parties to this Agreement. ARTICLE 7. SEVERABILITY 7.1 If any non

- material provision contai ned in this Agreement shall be held to be invalid or unenforceable in any respect in any jurisdiction, such invalidity or unenforceability shall not affect the other provisions hereof which can be given effect without the invalid provision, and, to this en d, the provisions of this Agreement are intended to be and shall be deemed severable. 7.2 The Parties shall negotiate in good faith to reach agreement for the replace ment of such invalid or unenforceable provision with a valid and enforceable provision hav ing, to the maximum extent possible, the same economic or practical effect. 7.3 If (i) in the reasonable judgment of a Party any provision or provisions held to be invalid and unenforceable is or are fundamental to the intent of such Party and the operati on of this Agreement, and (ii) the Parties, acting in accordance with Article 7.2, are unable to agree upon a suitable replacement provision within thirty (30) days of receiving notice thereof from such Party, then such Party shall have the right to withdr aw from this Agreement upon a further thirty (30) days’ advance written notice to the other Parties, which action shall not effect a termination of this Agreement so long as two or more Parties remain as parties to this Agreement. ARTICLE 8. APPLICABLE LAW 8.1 This Agreement shall in all respects be governed by and interpreted in accordance with the laws of the State of New York (without regard to principles of conflicts of law), including all matters of construction, validity, and performance applicable to contracts made and to be performed therein. ARTICLE 9
. TERMINATION 9 .1 Subject to Article 1.1, t his Agreement shall remain in effect with respect to each Party until such Party withdraws from the Agreement or unless this Agreement is earlier terminated in accordance with the provisions hereof. The withdrawal of a Party from this Agreement shall not effect a termination of this Agreement so long as Vi rgin and at least one of Air France, KLM or Alitalia remain as parties to this Agreement. Notwithstanding the- 7

- 

### foregoing, unless the Parties agree otherwise, this Agreement shall terminate immediately upon the termination of the DL

- VS Joint Venture or the TATL Joint Venture.
9 .2 In the event of a withdrawal of a Party from this Agreement or a termination of this Agreement, each Party agrees to fulfill all obligations which accrued hereunder prior to the termination becoming effective.
9 .3 NO PARTY WILL B E LIABLE TO ANY OTHER PARTY FOR ANY CONSEQUENTIAL, PUNITIVE, SPECIAL OR EXEMPLARY DAMAGES, INCLUDING LOST PROSPECTIVE ECONOMIC ADVANTAGE, LOST REVENUE, LOST PROFITS, ANTICIPATED SAVINGS OR GOODWILL ARISING FROM ANY PERFORMANCE OR FAILURE TO PERFORM UNDER THI S AGREEMENT, OR ANY TERMINATION OF THIS AGREEMENT EVEN IF SUCH PARTY KNEW OR SHOULD HAVE KNOWN OF THE EXISTENCE OF SUCH DAMAGES AND WHETHER BASED ON CONTRACT, TORT, WARRANTY CLAIMS OR OTHERWISE IN CONNECTION WITH THIS AGREEMENT , AND EACH PARTY HEREBY RELEA SES AND WAIVES ANY CLAIMS AGAINST EACH OTHER PARTY REGARDING SUCH DAMAGES. ACCORDINGLY, A PARTY MAY RECOVER ONLY ACTUAL, DIRECT AND IDENTIFIABLE DAMAGES WITH RESPECT TO SUCH MATTERS. ARTICLE 1 0 . FORCE MAJEURE
1 0 .1 No Party shall be liable with respect to any failure to perform its obligations under this Agreement to the extent such failure is due to reasons beyond its reasonable control, including, but not limited to, governmental interference, direction or restrict ion, war or civil commotion, terrorist attacks, strikes, lock

- out, labor disputes, public enemy, blockade, insurrections, riots, acts of nature, accidents to the aircraft in the course of operating, involuntary aircraft grounding or mandatory downtime impo sed by a governmental authority, epidemics or quarantine restrictions (collectively, “ Force Majeure ”).
1 0 .2 In any such case, the obligation of the affected Party to perform such obligations will be suspended or limited to the extent circumstances permit performance (except for the obligation to pay any amounts due and payable to the other Party or Parties that became due and payable prior to the date of the Force Majeure) until such circumstances shall have ceased, and no Party shall be held to pay any da mage or cost of whatever kind (except for any accrued rights and liabilities) in respect of such affected obligations.
1 0 .3 If a Party is affected by Force Majeure, it shall immediately notify, in writing, the other Parties of the nature and extent of the circumstances in question, and in such case the Parties shall discuss and agree on the action to be taken. ARTICLE 1 1 . CERTIFICATION, REGISTRATION FEES
1 1 .1 All certification, filing, and registration fees or duties which may be assessed in connection w ith this Agreement under the national law of a Party to this Agreement are payable by that Party.- 8

- 

### ARTICLE 1 2 . NOTICES
1 2 .1 Unless otherwise expressly set forth in this Agreement, all notices, reports, and other communications required or permitted hereun der or thereunder to be given to or made upon a Party hereto shall be in writing, and shall be considered as properly given if addressed as provided below and either (a) delivered in person; (b) sent by an express courier delivery service which provides si gned acknowledgment of receipt; or (c) transmitted by facsimile (upon receipt by sender thereof of evidence that a complete transmission of such copy was made to the recipient thereof) and, if sent by facsimile, confirmed by (i) telephone call contemporane ously made to the individual designated as the one to receive such notice, or (ii) dispatching a hard copy of such notice by mail (postage prepaid), or (iii) either of the methods set forth in (a) or (b) effective upon receipt. For the purposes of notice, the addresses of the Parties shall be as set forth below; provided , however , a Party shall have the right to change its address for notice to any other location or person by giving at least five (5) days prior written notice to the other Parties in the manner set forth in this Article 12.1

. For Delta : Delta Air Lines, Inc. 1030 Delta Boulevard Department 945 Atlanta, GA 30320, USA Attention: Executive Vice President

– Marketing, Network Planning and Revenue Management Phone: 404

- 715

- 1601 Fax: 404

- 77315

- 2087
W ith a copy to: Delta Air Lines, Inc. 1030 Delta Boulevard Department 981 Atlanta, GA 30320, USA Attention: Senior Vice President & General Counsel Phone: 404

- 715

- 2387 Fax: 404

- 715

- 2233 For Virgin : Virgin Atlantic Airways Limited The Base, Fleming Way, Crawley, RH10 9LX, UK Attention: Chief Commercial Officer Phone: +441293747031 Fax: +441293747094- 9

- 

### With a copy to: Virgin Atlantic Airways Limited The Base, Fleming Way, Crawley, RH10 9LX, UK Attention: General Counsel Phone: +44 (0)1293 747185 Fax: +44 (0)1293 444126
For Alitalia : Alitalia

- Compagnia Aerea Italiana S.p.A Piazza Almerico da Schio RPU Building

– 00054 Fiumicino (Rome) , Italy Attention: Paolo Amato Deputy General Manager Corporate Fax: +39.06.65635146 With a copy to: Alitalia Compagnia Aerea Italiana S.P.A Piazza Almerico da Schio. RPU Building

- 00054 Fiumicino (Rome), Italy Attention to : Rita Ciccone General Counsel & Vice President Legal and Corporate Affairs Fax +39 06 65635139
For KLM : KLM Royal Dutch Airlines Attention: Mr. Pieter Elbers Managing Director & Chief Operating Officer Fax: +31206488082 With a copy to: KLM Royal Dutch Airlines Legal Services

– AMS/DJ Attention: Mrs. Barbara van Koppen Company Se cretary & General Counsel Fax: +31206488096- 10

- 

### For Air France : International Affairs & Alliances (DD.SI) 45, rue de Paris F

- 95747 Roissy CDG Cedex France Attention: Mr. Dominique Patry VP International Affairs & Alliances Fax: +331 4156 5969 With a copy to:
Société Air France Legal Department (DB.AJ) 45, rue de Paris F

- 95747 Roissy CDG Cedex France Attention: Mr. Jean

- Marc Bardy

– General Counsel Fax: +331 4156 6719
ARTICLE 1 3 . MISCELLANEOUS
1 3 .1 Waiver No failure to exercise and no delay in exercising, on the part of a Party, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, p owers, and privileges herein provided are cumulative and not exclusive of any rights, remedies, powers, and privileges provided by law. The failure of a Party to insist upon a strict performance of any of the terms or provisions of this Agreement, or to e xercise any option, right or remedy herein contained, shall not be construed as a waiver or as a relinquishment for the future of such term, provision, option, right or remedy, but the same shall continue and remain in full force and effect. No waiver by a Party of any term or provision of this Agreement shall be deemed to have been made unless expressed in writing and signed by such Party.
1 3 .2 Assignment No Party hereto shall assign, transfer or permit the assignment or transfer of this Agreement withou t the prior written consent of the other Parties. Any purported assignment or transfer without such consent shall be null and void and of no force or effect.- 11

- 

### 1 3 .3 Public Announcements The Parties intend to coordinate all permitted public announcements, p ress releases, and other information provided to the media regarding this Agreement, and each Party agrees to use reasonable efforts to review any such materials with the other Parties before distributing those materials to media representatives or any oth er person. 1 3 .4 Expenses Each of the Parties hereto shall bear its own lawyers’, accountants’ and other fees, costs, and expenses incurred in connection with the negotiation, execution, and performance of this Agreement and any of the transactions contemplated hereby or thereby.
1 3 .5 Independent Contractor Each of the Parties hereto is an independent contractor. Nothing in this Agreement is intended or shall be construed to create or establish any agency relationship (except to the extent a Party is expressly in writing designated to serve as agent for another Party), partnership, joint venture or fiduciary relationship between or among the Parties. No Party hereto or any of its affiliates has any authority to act for or to incur any obligations o n behalf of or in the name of any other Party hereto or any of its affiliates. Each of the Parties will remain an entirely separate corporate entity and, unless otherwise expressly provided herein or in another agreement, will retain independent decision

- making and managerial authority regarding all matters.
1 3 .6 Indemnification Subject to Article 9 .3, each Party agrees to indemnify each of the other Parties, its directors, officers, agents, and employees (collectively, the “ Indemnified Parties ”) against, and agrees to protect, save, and keep harmless each thereof from, any and all liabilities, obligations, losses, damages, penalties, fines, claims, actions, suits, out

- of

- pocket costs, expenses, and disbursements (including reasonable legal fees and expense s) of whatsoever kind and nature (collectively the “ Claims ”), imposed on, incurred by or asserted against the Indemnified Parties relating to or arising out of any breach by such Party of this Agreement, provided that, in no event shall the indemnifying Pa rty be required to indemnify another Party against any liabilities, obligations, losses, damages, penalties, fines, claims, actions, suits, out

- of

- pocket costs, expenses or disbursements to the extent that such liabilities, obligations, losses, damages, pe nalties, fines, claims, actions, suits, out

- of

- pocket costs, expenses or disbursements arise out of or are attributable to the gross negligence or willful misconduct of such Party (or a director, officer, agent or employee thereof).
1 3 .8 Successors and As signs This Agreement shall be binding upon and shall inure to the benefit of the Parties and their successors and permitted assigns.- 12

- 

### 1 3 .9 Sovereign Immunity All Parties acknowledge that the transactions contemplated by this Agreement may involve commercia l activity carried on throughout the world. To the extent that a Party hereto or any of its property is or becomes entitled at any time to any immunity, on the grounds of sovereignty or otherwise, from any legal action, suit, arbitration proceeding or oth er proceeding, from set

- off or counterclaim, from the jurisdiction of any court of competent jurisdiction, from service of process, from attachment prior to judgment or after judgment, from attachment in aid of execution or levy or execution resulting from a decree or judgment, from judgment or from jurisdiction, that Party for itself and its property does hereby irrevocably and unconditionally waive all rights to, and agrees not to plead or claim, any such immunity with respect to its obligations, liabilit ies or any other matter arising out of or in connection with this Agreement or the subject matter hereof. Such agreement shall be irrevocable and not subject to withdrawal in any and all jurisdictions, including under the Foreign Sovereign Immunities Act of 1976 of the United States of America.
1 3 .10 No Third

- Party Beneficiary All rights, remedies, and obligations of the Parties hereunder shall accrue and apply solely to such Parties and their successors and assigns, and there is no intent to benefit any t hird parties.
1 3 .11 Further Assurances Each Party will cooperate fully with the other Parties, and shall do and perform such further acts and execute and deliver such further instruments and documents at such Party’s expense, as may be required by applicab le law or regulations, or as may be reasonably requested by any other Party to carry out and effectuate the purposes of this Agreement
1 3 .12 Other (a) Unless otherwise specified in this Agreement, all references in this Agreement to “herein”, “hereof”, “ hereto”, “hereby”, and “hereunder” shall be deemed references to this Agreement as a whole and not to any particular article, section, subsection, paragraph, sentence or clause of this Agreement. Unless otherwise specified in this Agreement, references he rein to “including” or “include” shall mean “including without limitation” or “include without limitation”, respectively. References herein to the termination of this Agreement (or words of similar import) shall mean the termination of this Agreement by e xercise of termination rights. (b) The captions appearing in this Agreement have been inserted as a matter of convenience and in no way define, limit or enlarge the scope of this Agreement or any of the provisions hereof. (c) This Agreement is the produc t of negotiations between the Parties and shall be construed as if jointly prepared and drafted by them, and no provision hereof shall be- 13

- 

### construed for or against any Party by reason of ambiguity in language, rules of construction against the drafting Part y or similar doctrine. (d) This Agreement may be executed by any of the Parties hereto on any number of separate counterparts, and all such counterparts taken together shall be deemed to constitute one and the same instrument. Execution may be effected b y delivery of facsimiles of signature pages (and the Parties shall follow such delivery by prompt delivery of originals of such pages). (e) This Agreement, together with the DL

- VS Alliance Agreement s , the TATL Alliance Agreement s , and any commercial cooperation agreements entered into between or among the Parties after the date hereof with respect to the commercial cooperation activities contemplated under Articles 3 or 4, constitute the entire agreement by or among the Parties hereto with respect to antitrust immunized activities between the DL

- VS Joint Venture and the TATL Joint Venture and between and among the P arties. For the avoidance of doubt, this Agreement does not terminate, supersede or in any way amend, modify or replace (i) th e agreements previously entered between Delta and Virgin with respect to the DL

- VS Joint Venture and (ii) the agreements previously entered into by and among Air France, Delta, KLM and Alitalia with respect to the TATL Joint Venture, which govern their pre viously approved antitrust immunized alliance.
1 3 .13 Survival The provisions of Articles 8, 11, 12 and 13 shall survive the termination of this Agreement as necessary in order to permit the Parties to satisfy any obligations hereunder following such termi nation. (The remainder of this page is intentionally left blank.)- 14

- 

### IN WITNESS WHEREOF, the Parties have caused this Coordination Agreement among Air France, Delta, KLM, Alitalia, and Virgin to be duly executed and delivered by their proper and duly authori zed officers as of the day and year first set forth above: ALITALIA COMPAGNIA A EREA DELTA AIR LINES, INC

. ITALIANA S.P.A.

By: /s/ Giancarlo Schisano By : /s/ Wayne Aaron Name: Giancarlo Schisano Name: Wayne Aaron Title : Deputy General Manager Business Title: SVP, Alliances & Partner Development
Date: April 8 , 2013 Date: April 8 , 2013

KONINKLIJKE LUCHTVAA RT SOCIÉTÉ AIR FRANCE MAATSCHAPPIJ N.V.

By: /s/ E. Varwijk By: /s/ A. Nouschi Name: E. Varwijk Name: A. Nouschi Title: Managing Director Title: VP Alliances
Date: April 8 , 2013 Date: April 8 , 2013

VIRGIN ATLANTIC AIRWAYS LIMITED

By: /s/ Tim Livett Name: Tim Livett Title: Chief Financial Officer
Date: April 8 , 2013Appendix B Page 1


### Appendix B ADDITIONAL DOCUMENTS AND INFORMATION To expedite the Department’s consideration of this Joint Application, the Joint Applicants are providing the Department with additional information and documents typically requested by the Department for purposes of evaluating applications for antitrust immunity.
A. Document Production Delta and Virgin Atlantic are concurrently submitting internal corporate documents relating to the investment transaction and Joint Venture Agreement. Delta and Virgin Atlantic conducted a thorough search of their corporate records in connection with the Hart

- Scott Rodino (HSR) Notification of Delta’s equity investment in Virgin Atlantic to the U.S. Department of Justice. The HSR 4(c) and 4 (d) documents include all studies, surveys, analyses and reports which wer e prepared by or for any officer(s) or director(s) for the purpose of evaluating or analyzing the Delta/Virgin Atlantic investment transaction and Joint Venture Agreement with respect to market shares, competition, competitors, markets, potential for sales growth or expansion into product or geographic markets. Delta and Virgin Atlantic are producing the HSR 4(c) and 4 (d) documents in their entirety to assist the Department in its review and approval of the antitrust immunity application. These documents contain confidential proprietary information, and are being furnished pursuant to the Department’s Rule 12 procedures. Exhibits A, B, and C to the Joint Motion for Confidential Treatment contain complete index es of the confidential document production.Appendix B Page 2 B. Transatlantic Routes and Services The proposed North America

- U.K. services of Delta and Virgin Atlantic that would be operated under the Joint Venture are provided at Exhibit D of the Joint Venture Agreement. Although Delta and Virgin Atlantic are acti vely considering the launch of SEA

- LHR service if this Application is approved, the JV Parties have no other immediate plans to make service or equipment changes as a result of receiving immunity for the Delta/Virgin Atlantic Joint Venture and other Allian ce Agreements. C. Codeshare Partners Delta’s codeshare partners are provided at: www.delta.com/content/www/en_US/traveling

- with

- us/where

- we - fly/flight

- partners.html Virgin Atlantic codeshare routes and partners are provided at: www.virgin

- atlantic.com/us/e n/travel

- information/our

- partner
- airlines.html
E. Alliances Virgin Atlantic is not a member of a major global alliance. Virgin Atlantic is evaluating the possibility of entering into the SkyTeam A lliance. However, the Joint Venture at issue is a bilateral arrangement between Delta and Virgin Atlantic; Virgin Atlantic’s ultimate SkyTeam decision will have no bearing on the ability of Delta and Virgin Atlantic to deliver the substantial public benefits identified in the application. Delta is a founding memb er of SkyTeam. SkyTeam currently has 19 member airlines. 106 Delta, together with SkyTeam members Air France, KLM, and Alitalia, operate an immunized transatlantic joint venture, and also have immunity with Czech Airlines (“CSA”). 107 Except as described in this application, there will be no changes in the relations between Delta and Virgin Atlantic and other SkyTeam members as a result of a grant of antitrust immunity in this proceeding.

106 www.skyteam.com/en/About

- us/Our

- members/
107 See DOT Order 2008

- 5

- 32, amended by DOT Order 2009

- 6

- 26.Appendix B Page 3 F. Other Antitrust - Immunized Relationships Virgin Atlantic is not a party t o any antitrust

- immunized relationship. Delta, Air France, KLM, Alitalia, CSA, and Korean Air have antitrust immunity which they have held since 2002. 108 Korean Air and CSA are not part of this application. Delta also has antitrust immunity with Virgin Austr alia , Virgin Australia International Airlines Pty. Ltd. , Virgin Australia Airlines (SE Asia) Pty. Ltd., and Virgin Australia Airlines (NZ) Pty. Ltd.

. 109 None of the Virgin Australia carriers are part of this Joint Application. G. Exchange of Equity or Owners hip Interests In addition to the Joint Venture , as explained above, Delta will purchase a 49% equity stake in Virgin Atlantic.
H. Hub Airports for Delta Numerous U.S. and foreign passenger airlines operate scheduled service at the U.S. airports where Delt a has a hub ( i.e. , Atlanta, Cincinnati, Detroit, Memphis, Minneapolis/St. Paul, New York

- JFK, New York

- LGA, and Salt Lake City). The Joint Applicants request that the Department take official notice of published schedules for these hubs, pursuant to Rule 2 4 of the Department’s rules of practice.
I. Competitive Access to London - LHR and Related Facilities. Information about such access is discussed in Appendix C, Response to Interrogatory No. 6. J. Labor Issues The transaction and resulting immunized Delta/Vi rgin Atlantic Joint Venture and cooperation/coordination with the other Joint Applicants raises no significant labor issues. Indeed, the Joint Applicants believe that the long

- term impact of the transaction

108 See DOT Order 2002

- 6

- 18.
109 See DOT Order 2011

- 6

- 9.Appendix B Page 4 will be positive for all existing employees, and no significant impact on unionized employees is anticipated under the Delta/Virgin Atlantic Joint Venture Agreement or other Alliance Agreements.
K. Civil Reserve Air Fleet Commitments Granting this Joint Application for antitrust immunity will have no imp act on Delta’s CRAF commitments.
L. Global Distribution Systems The grant of antitrust immunity here should also cover the coordination of (1) the presentation and sale of the Joint Applicants’ airline services in GDS s and (2) the operations of their respective international reservations systems. In this regard, the Department has previously determined to extend antitrust immunity to GDS activities. 110 Given the lack of bargaining po wer that carriers have with GDS s, the extension of antitrust immunity to cover GDS dealing would be beneficial. The Joint Applicants recognize, however, that the immunity will not extend to the Joint Applicants ’ management of any interest they may now, or in the fu ture, have in individual GDS s. 111
M. Duration of Approval and Immunity
The Joint Applicants request that the Department approve, and grant antitrust immunity for, the Alliance Agreements for a period of at least five years, subject to review of the Alliance Agreements in five years.
N. Conditions
In addition to the CRS

- related condition above, the Joint Applicants will accept the standard conditions that the Department has attached to previous grants of antitrust immunity relating to: (a) non

- participation in certain IATA

- related tariff coordination activities; (b) O &D survey data reporting requirements; (c) operation under a common

110 See DOT Order 1993

- 1

- 11, at 15

- 16.
111 See DOT Order 1998

- 10

- 20, at 18.Appendix B Page 5 brand or common name; and (d) the submission for prior review of subsequent subsidiary agreements implementing the Alliance Agreements. 112

112 See, e.g., DOT Orders 2002

- 1

- 6, 2011

- 6

- 9.Appendix C Page 1 

### Appendix C RESPONSES TO DOT’S PRIOR ATI INTERROGATORIES
**1. Please provide your analysis of the traffic and revenue effects of the**  **Joint Venture/Alliance on the Joint Applicants**  **and other airlines. Ident**  **ify the extent to which the traffic and revenue for the Joint Venture/Alliance will be stimulated versus diverted from other**  **carriers/alliances. Describe the methodology and disclose all assumptions (including assumptions about competitive responses)**  **and d ata sources used to produce estimates.**  As addres sed more completely in Part V (C ) above, internal Delta projections show that the Joint Venture will enable the JV Parties to implement network enhancements that will produce over $187 million in consumer be nefits and attract approximately twenty

- five thousand additional passengers per year to the Joint Venture carriers. 113
Delta estimates that the Joint Venture will produce substantial “Network Synergies” and “Sales Synergies”. 114 “Network Synergies” account for revenue captured from the enhanced value to consumers of the routes, frequencies and capacity that will be offered by the Delta/Virgin Atlantic Joint Venture , as compared to the carriers’ current offerings. Delta’s network planning team calculated these approximate synergies using methods that Delta employs in the ordinary course for network optimization. “Sales Synergies” account for closure in existing market share and fare gaps (through attracting more high

- value time sen sitive passengers) for both carriers. Delta estimated these synergies using two databases: PRISM (a database that covers corporate sales) and MIDT. Both types of synergy are likely to translate into increased revenue for Delta and Virgin Atlantic

.

113 See Part V(C ) supra ; Exhibit JA

- 11.
114 Attachment 4(c)

- 6 to Delta’s Hart

- Scott Rodino Notification Form, pgs. 2

- 5.Appendix C Page 2 **2. Expla**  **in what changes You would make to Your transatlantic capacity after the DOT decision on the Joint Application is made.**  By partnering with Virgin Atlantic, Delta will be able to expand its participation in the U.S.

- LHR and U.S.

- U.K. marketplace. Both JV Par ties have committed under the agreed Joint Venture network plan to maintain all of their existing U.S.

- U.K. flights. No changes are contemplated to Delta’s existing transatlantic capacity outside the U.K. as a result of approval of this alliance. Potential Joint Venture

- enabled services that may be approved (subject to slot availability) include new nonstop service between Seattle and London Heathrow. If the alliance is not approved, Delta will not launch Seattle service. Additional potential Joint Venture

- enabled services (subject to the availability of slots) include additional flights from Delta hubs to LHR and select U.K. cities, and new routes between LHR and select U

. S

. non - hub cities and additional frequencies on existing routes . Delta is also likely to

re - introduce the capacity (over 30 daily seats) withdrawn from its LHR

- NYC and LHR

BOS services in the Winter 2012 schedule with approval of its Joint Venture plans.
**3. Describe the sources of, and estimate the value of, any cost savings**  **that You will b e able to achieve only if You were granted ATI (i.e.,**  **that could not be achieved without ATI).** With antitrust immunity, Delta and Virgin Atlantic will enjoy substantial efficiencies and cost savings from expanded and deeper integration which, in turn, can be passed on to consumers. For exampl e, joint procurement activities would enable the carrier s to negotiate for better, lower

- priced contracts with suppliers. 115 Similarly, greater harmonization of in

- flight and airport products, joint marketing, production and

115 These activities may include (i) volume/bulk purchasing, common specifications for goods/services, join t bidding, joint negotiations with suppliers, the use of standardized co ntracts for goods/services, and the establishment of a joint procurement group, and (ii) diverse areas of supply

- and

- demand such as general goods/services, maintenance services, field station support, catering services, ground equipment acquisition and sales, fuel, information technology, and cargo services.Appendix C Page 3 distribution efforts, and frequent flyer programs will drive costs lower as well. Increased connecting traffic flows, joint pricing, inventory/revenue management, IT systems harmonization, joint and shared facilities and operations, and integrated adm inistrative functions will yield additional substantial cost reductions and savings. Cooperation between Delta and Virgin Atlantic will facilitate efficiencies through reductions in station costs at commonly served airports. The carriers will be able to w ork together to eliminate staff and facilities redundancies. Delta has conducted a preliminary analysis and estimates these efficiencies will result in approximately $15 million in annual cost savings at stations across the joint network. Based on other ex periences and reports regarding other alliances, Delta and Virgin Atlantic roughly estimate that the following cost savings might be anticipated. These benefits will be realized incrementally, over time, as the carriers integrate their networks, operations , revenue management systems, and distribution channels.

Source of Cost Efficiencies Estimate of Cost Efficiencies Sales, marketing and distribution 25

- 50% Pricing and Fare Filing 25

- 50% Revenue Management 25

- 50% IT Systems Harmonization/Integration 10

- 30% Joint/Shared Airport Operations and Facilities 20

- 40%
Inter

- Carrier Communication and Decision Making 10

- 30%

**4. Explain specifically what consumer benefits that will result from the**  **Alliance/Joint Venture cannot be achieved without antitrust immunity. For each type of consumer benefit noted, please describe**  **how the Joint Applicants**  **are currently cooperating in that, and how**  **that cooperation would change if You were granted ATI.** See Discussion in Joint Application, Part V.Appendix C Page 4 **5. Please discuss the anticipated effects of the Alliance/Joint Venture**  **on your interline agreements and level of interline traffic with carriers**  **that are not part of the Alliance/Joint Venture.** Approval of immunity for the Delta / Virgin Atlantic Joint Venture is not expected to have a material effect on the terms of interline agreements or level of interline traffic carried by Delta or Virgin Atlant ic, as each carrier maintains interline agreements with a host of non

- SkyTeam and non

- Alliance carriers. Other than Virgin Atlantic’s recent termination of its codeshare arrangement with US Airways (discussed above), neither Delta nor Virgin Atlantic has any plans to change those agreements on the basis of the grant of antitrust immunity in this proceeding.
**6. Describe the extent to which airport facilities, including gates and**  **slots, are available to U.S. -**  **flag carriers that want to begin or increase servi**  **ce to the countries affected by the Joint Venture/Alliance.**  LHR is constrained both in terms of slots and facilities, making it difficult for U.S. carriers to expand. Delta, a Heathrow non

- incumbent prior to U.S.

- EU O pen S kies, has faced great challenges in developing a meaningful presence in the U.S.

- LHR marketplace. All of Delta’s LHR flights are currently operated with slots leased from other carriers, and Delta only recently acquired two slot pairs, which it will use in 2014, either for growth, or leas e slot replacement, depending on the outcome of this application. AA/BA currently operates 59% of U.S.

- LHR capacity, Virgin Atlantic has a 16% share, and Delta has an 8% share. This Joint Venture advances the public interest and enables Virgin Atlantic and Delta to overcome limitations on their organic growth at LHR and become a more viable competitor to the AA/BA A lliance. Apart from LHR (and to a more limited extent, LGW) , slots and facilities are generally available at other U.K. airports for carriers wa nting to begin or increase service.Appendix C Page 5 **7. Describe (i) the current state of cooperation between and among the**  **JV Parties for passenger and cargo traffic, and (ii) how and to what**  **extent cargo will be included in the Joint Venture/Alliance.** Delta and Virgin At lantic have concluded a number of alliance implementing agreements including a reciprocal codeshare agreement, a reciprocal lounge access agreement, and a reciprocal frequent flyer agreement. In anticipation of immunity, Delta and Virgin Atlantic are movin g forward with these arm’s

- length agreements, which do not require ATI to implement. However, the most important benefits and efficiencies of the integrated Joint Venture , discussed above, can only be implemented after ATI approval. Delta and Virgin Atlan tic have agreed to explore, through the Cargo Working Group, ways in which they can grow their joint business in cargo programs.
**8. Explain what relation the**  **Joint Applicants will have with any other**  **partner carrier that offers Atlantic services (e.g., Del ta’s ATI with Air**  **France and the European members of SkyTeam).** See Discussion in Joint Application, Part IX.
**9. DOT Data Request**  Information responsive to the following DOT data requests is being furnished to the Office of Aviation Analysis pursuant to Rule 12 : A. MIDT Traffic Data 116 Using MIDT data for the most recent 12

- month period available provide directional net passenger bookings for all itineraries that touch the U.S. and have a gateway that touches Europe, Africa, the Middle East, or India. Additionally include bookings for any itinerary that touches the United Kingdom to anywhere in the world. Include the following data elements: Field 1: Trip Originating Airport Field 2: Booked Point of Sale Country Code Field 3: Airport Path and Ma rketing Carrier Designator String by Leg

116 The Joint Applicants have no objection to the Department’s public use of MIDT data in summary form in its decision, but the Joi nt Applicants are constrained from publishing the full content of the MIDT database purchased from a commercial vendor.Appendix C Page 6 Example: An Atlanta

– London

– Johannesburg directional trip with segments marketed by DL, VS respectively would be reported as “ATL DL LHR VS JNB”. Use a “//” to represent the marketing carrier on any ARNK (Arriv al Not Known) segments. Field 4: Volume of Net Bookings Include an explanation of the trip break methodology used to create directional trips from itinerary data. B. Origin Destination Fare Data For all itineraries that Delta and V irgin Atlantic participate in, provide all itineraries that touch the U.S. and have a gateway that touches Europe, Africa, the Middle East, or India. Additionally include any itinerary that touches the United Kingdom to anywhere in the world. The Departmen t prefers the O&D data represent an internal 100% census of itineraries meeting the above criteria, however suitable alternatives will be considered if proposed. Data should be submitted on a quarterly basis for the most recent year ended period for which data is available. Provide all information for any itinerary that was begun during the periods described above irrespective of when the full itinerary was completed. Provide the itinerary in an origin

- destination (by direction of travel) format, referred t o as “market directional.” Provide the number of (1) passengers, (2) market fare, (3) purchase class, (4) period, (5) airport sequence, (6) operating carrier code sequence, (7) change in operating carrier flag, (8) ticketing/marketing carrier code sequenc e, (9) change in ticketing/marketing carrier flag, (10) origin, (11) destination, (12) number of market coupons, (13) sequence number of each market directional that makes a full itinerary, (14) total distance flown (all kilometers converted to miles), (15 ) distance between the origin and destination (all kilometers converted to miles), (16) unique itinerary identifier, (17) one

- way/round

trip itinerary identifier, (18) reporting carrier, and a (19) full itinerary online identifier. Fares must include all t axes, fees, and applicable surcharges (particularly any fuel surcharges paid). Provide the passenger counts summarized by the unique combination of period, flight sequence, ticketing/marketing carrier sequence, operating carrier sequence, reporting carrier , directional market fare, one

- way/round

- trip itinerary identifier, full itinerary online identifier, and purchase class value. For itineraries that include a segment provided by ground transportation, note the ground segment as ‘

— ’ in the **tkcarriergroup** a nd **opcarriergroup** variables. Provide a description of the methodologies used to determine market directional trip breaks within itineraries and the prorate for assigning the market directional fare from the full itinerary fare. DOT proposes using the indus try standard “four hour rule” for intra

- North American travel and the “24

- hour rule” for all other travel to determine market directional trip breaks. DOT prefers the use of the square root of the miles methodologyAppendix C Page 7 for market directional fare proration. Sq uare root of the miles methodology distributes the itinerary revenue by dividing the itinerary fare by the square root of the number of miles distance between airports in the itinerary. To the extent the applicants prefer to use alternative methodologies f or determining market directional trip breaks or prorates, they are required to provide appropriate methodological descriptions and validation. The purchase class values should provide detail that allows for the evaluation of a given itinerary’s level of s ervice purchased. The classes should be broken down by both Restricted and Unrestricted fares sold in First Class, Business Class, Premium Economy, and Economy cabins. DOT is open to alternative mappings and levels of detail that the applicants may suggest . If multiple purchase classes are assigned to different segments in a market directional provide the most premium class assigned from any of the segments in the market directional. Figure 1 provides a detailed listing of the variables required (meta data) and Figure 2 provides a sample of the final format. The minimum combination of variables that make each row unique (composite primary key for the dataset) is highlighted in yellow. Provide the data electronically as a comma separated value (CSV) or other delimited text file format. If a format other then CSV is selected provide the meta

- data detail necessary to allow for the loading of the data into a relational database environment.CERTIFICATE OF SERVICE A copy of the foregoing Joint Application has been served this 8 th day of April , 2013, upon the following:

francis.heil@aa.com robert.wirick@aa.com howard.kass@usairways.com benjamin.slocum@usairways.com thomas.bolling@united.com dan.weiss@united.com todd.homan@dot.gov peter.irvine@dot.gov reese.davidson@dot.gov bob.goldner@dot.gov paul.gretch@dot.gov esta.rosenberg@dot.gov urskr@state.gov Ishiwata.K@portseattle.org joe.cambron@wcaa.us brubinst@panynj.gov louis.miller@atlanta

- airport.com steve.luben@atlanta

- airport.com info@airlineinfo.com