Order 2010

- 11

- 10

Served: November 10 , 2010



### UNITED STATES OF AMERICA

DEPARTMENT OF TRANSPORTATION

OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation

on the 10 th Day of November , 2010

U.S.

- Japan Alliance Case Docket DOT

- OST

- 2010

- 0059

FINAL ORDER

I. S UMMARY

By this order, the Department of Transportation grants approval of

, and antitrust immunity (“ ATI ”) for

, the separate applications of (1) Star Alliance members All Nippon Airways Co., Ltd, 1 Continental Airlines, Inc., 2 and United Air Lines, Inc. (“ N H/CO/UA ” or “ Star ”) 3 and ( 2 ) American Airlines, Inc., and Japan Airlines International Co. Ltd. (“ AA/JL ” or “ oneworld ”).

The decisions in this order are conditioned upon the U.S.

- Japan Open Skies aviation agreement being applied

.

The Star applicants and oneworld applicants (collectively, the “ ATI Applicants ”) 4 have requested a grant of immunity from the U.S. antitrust laws to operate two separate commercial

alliances : for the Star applicants

, a Joint Venture Agreement (“ JVA ”)

, and for the oneworld applicants

, a Joint Business Agreement (“ JBA ”). We have concluded that, overall, each alliance

w ill be procompetitive and is likely to generate substantial public benefits to the traveling and shipping public

.

1 All Nippon Airways Co., Ltd. includes its wholly

- owned subsidiary

, Air Japan Co., Ltd.

2 Continental Airlines, Inc. includes its wholly owned subsidiary, Air Micronesia, Inc. (“AMI”), and AMI’s subsidiary, Continental Micronesia, Inc.

3 In conducting our analysis , we considered United and Continental to be separate en tities. While the carriers’ shareholders approved a merger on September 17, 2010 and the merger closed on October 1, 2010, the Department’s pendente lite exemption (Order 2010

- 8

- 5)

, issued on August 30, 2010, is contingent upon Continental and United

rema ining separate and independently operated corporations pending the Department’s action on the air carriers’ de facto route transfer application.

4 The Department conducted separate analyses of each application. Where findings are specific to an individual application ( NH/CO/UA or AA/JL ), that application is noted. Where findings are relevant to both applications, the

term “ ATI Applicants ” is used. Also, common names of carriers are used: ANA, Continental, United, American, and JAL, respectively.2 II. S UMMARY OF THE R ECORD

T he ATI Applicants filed applications for antitrust immunity in separate dockets

. 5 The Department consolidated the two cases into Docket DOT

- OST

- 2010

- 0059 on March 31, 2010

, noting that joint consideration would be more efficient and expeditious given the similar issues

and common facts of the applications

.

On October 6, 2010, we issued a n “Order to Show Cause” with our proposed decision. The

show

- cause order explained that we had tentatively decided to grant the separate requests for antitrust immunity of the Star applicants and the oneworld applicants, subject to conditions, and provided an opportunity for public comments. 6 The comment period closed on October 27, 2010, and replies were due on November 5, 2010. T he responsive pleadings , which were directed only t o the Star application, are summarized below.

The Air Line Pilots Association, International (“ ALPA ”) filed comments reiterating its concerns about the effect of metal neutrality on flying opportunities for U.S. airline employees. 7

ALPA believes that t hese concerns were not sufficiently addressed by the Star applicants in their initial reply to ALPA 8 or by the Department in our show

- cause order. Furthermore, ALPA argues that if the Department grants final approval to the Star application, and does so w ithout imposing a “flying requirement condition, ” 9 t he Department should require any revised or additional agreements between the Star applicants be submitted for separate approval and also be subject to public comment in a docketed proceeding.

The Associ ation of Flight Attendants

- CWA (“ AFA ”) requests the same conditions as those recommended by ALPA and states its support for ALPA’s response. 10

The Star applicants filed a reply. 11 They express their overall support for the tentative

decision and note that neither ALPA nor AFA has opposed the Department’s tentative decision

. Arguing that ALPA and AFA have not justified their request that the Star application alone be subject to ALPA’s proposed condition, the Star applicants ask us to deny the parties’ requ est.

5 The NH/CO/UA Application was filed on December 23, 2009, in Docket DOT

- OST

- 2009

- 0350; the AA/JL Application was filed on February 12, 2010, in Docket D OT

- OST

- 2010

- 0034.

6 See Order 2010

- 10

- 4 (October 6, 2010).

7 [Public] Answer of the Air Line Pilots Association, International (“ALPA”) (October 27, 2010); See Letter to Dorothy Beard, Chief of DOT Dockets, from Russell Bailey, Senior Attorney for ALPA ( October 27, 2010).

8 Joint Reply of All Nippon Airways Co., Ltd., Continental Airlines, Inc., and United Air Lines, Inc. (July 9, 2010).

9 See [Public] Answer of the Air Line Pilots Association, International (October 27, 2010), at 5.

10 Answer of the As sociation of Flight Attendants

- CWA (“AFA”) (October 27, 2010).

11 Reply of All Nippon Airways Co., Ltd., Continental Airlines, Inc., and United Air Lines, Inc. (October 29, 2010).3 III. D ECISION

The request s for which our tentative decisions are made final are for grant s of antitrust immunity covering a series of alliance agreements for NH/CO/UA ( the “ Star ATI Alliance Agreements ”) 12 and AA/JL (the “ oneworld ATI Alliance Agreements ”)

, 13 respectively

.

As explained in the Show Cause Order, u nder 49 U.S.C §§ 41308

- 41309, we normally engage in a two

- step analysis of foreign air transportation agreements submitted for our approval. 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 § 41308(b) (“required by” rather than “not adverse to”) is higher. 14

The intended commercial effects of the ATI A pplicants ’ respective joint ventu re agreements are similar to those resulting from a merger. As part of our overall analysis , we apply the Clayton Act test, which is used to predict the competitive effects of a proposed merger. 15

We have decided to approve (1) the Star application and (2) the oneworld application, permitting the ATI Applicants to implement their separate alliances, s ubject to conditions. In arriving at our decision, we have applied the relevant legal and policy standards to the facts of each case and have considered the views expressed by commenting parties. There is no opposition to our basic tentative decision to approve the applications. ALPA and AFA, however, asked that we modify

one of our standard conditions.

In this regard, t he Department already uses a process through which members of an immunized

alliance must s ubmit to the Department, for prior approval

, any subsequent subsidiary

agreements . We find that this process, which has worked well since its formulation, 16 is adequate to allow us to address their concerns properly if circumstances merit. ALPA and AFA have not convinced us that the Star applicants should be held to a different reporting and review standard or that the Department’s review process is not sufficient in th e case of the Star applicants.

Against this background, we are today making our findings and conclusions final.

A CCORDINGLY :

1. We approve and grant antitrust immunity to the ATI Alliance A greements between (1) All Nippon Airways Co., Ltd, Continental Airlines, Inc., and United Air Lines,

12 Star ATI Alliance Agreements are the business agreements listed on page 1 of Exhibit JA

- 1 of the Joint Application of ANA, Continental and United for Antitrust Immunity (December 23, 2009).

13 o neworld ATI Alliance Agreements are the business agreements discussed on page 1 of the Joint Application of American and JAL for Antitrust Immunity (February 12, 2010).

14 See, e.g., Star Alliance, Docket OST

- 2008

- 0234, Show Cause Order 2009

- 4

- 5

, at 18 (April 7, 2009), quoting Northwest/KLM, Order 93

- 1

- 1, at 11 (January 11, 1993)

. 15 See Acquisition of Northwest/Wings Holdings, Inc., Show Cause Order 92

- 11

- 27, at 13 (November 16, 1992); SkyTeam II, Show Cause Order 2008

- 4

- 17, at 5 (April 9, 2008).

16 See

, e.g. , Or der 96

- 5

- 27 (United and Lufthansa, May 21, 1996), at 18; Order 97

- 9

- 21 (United and Air Canada, September 19, 1997), at 18; and Order 2009

- 7

- 10 (United and Continental, Air Canada, Austrian, bmi, Lufthansa, LOT, SAS, Swiss, and TAP), at 27.4 Inc.

, and (2) American Airlines, Inc., and Japan Airlines International Co. Ltd., 17
insofar as such agreements relate to foreign air transportation. Our a pproval and grant of immunity are subject to the condition that the U.S.

- Japan Open Skies aviation agreement is applied. Subject to the other conditions described in the ordering paragraphs below, the approval and grant of antitrust immunity shall remain in effect indefinitely, subject to Ordering Paragraph 7, provided that the ATI

A pplicants :

a. Submit for prior approval subsequent subsidiary agreements implementing their

most recent Alliance A greements ; 18

b. Resubmit the oneworld and Star ATI Alliance Agreements before five years from the date of issuance of the final order in this case; and

c. Obtain prior approval if they choose to operate or hold out service under a common name or use common brands;

2. We direct the oneworld applicants and the Star applicants to file with the Director of the Office of Aviation Analysis the following as evidence of implementation:

a. For the oneworld applicants , a verified statement(s) in Docket OST

- 2010

- 0059 attesting that the Joint Business Agreement has been execute d and implemented pursuant to the terms described in the Joint Application, Exhibit JA

- 2 (Joint Business Agreement), and a complete and unredacted copy of the most recent American/Japan Airlines Joint Business Agreement and any appendices ; and

b. For the St ar applicants , a verified statement(s) in Docket OST

- 2010

- 0059 attesting that the Joint Venture Agreement has been executed and implemented pursuant to the terms described in the Joint Application, Exhibit JA

- 1 (Joint applicants ’ Alliance Agreements), and a complete and unredacted copy of the

most recent ANA

- Continental

- United Transpacific Joint Venture Agreement and

any appendices ;

We determine that, unless the ATI A pplicants make the filings described in this ordering paragraph within eighteen months of the issuance of a final order in this case, the authority herein shall expire and the grant of antitrust immunity shall be automatically withdrawn from the non

- compliant ATI A pplicants ;

17 The Alliance A greements shall mean the Star ATI Alliance Agreements ( the business agreements listed on page

1 of Exhibit JA

- 1 of the Joint Application of ANA, Continental and United for Antitru st Immunity (December 23, 2009)) and the o neworld ATI Alliance Agreements ( the business agreements discussed on page 1 of the Joint Application of American and JAL for Antitrust Immunity (February 12, 2010) ).

18 Regarding this requirement, we do not expect the ATI Applicants to provide the Department with minor

technical understa ndings that are necessary to implement fully their day

- to

- day operations but that have no additional substantive significance. We do, however, expect and direct them to provide the Department with all unredacted contractual instruments that implement or m aterially alter, modify, or amend the cooperation agreements, joint ventures, or confidentiality/antitrust guidelines. All documents shall be submitted to the Director, Office of Aviation Analysis.5 3. We direct the ATI A pplicants to submit annual progress reports to the Office of Aviation Analysis, beginning one year from the date of issuance of this order, and continuing each year thereafter while their respective ATI Alliance Agreements are effective; 19

4. We direct All Nippon Airways Co., Ltd., Continental Airlines, Inc., United Air Lines, Inc., American Airlines, Inc., and Japan Airlines International Co. Ltd. to withdraw, or to remain withdrawn, from participation in any International Air Transport

Associ ation tariff coordination activities that discuss any proposed through fares, rates, or charges applicable between the United States and any countries whose airlines have been or are subsequently granted antitrust immunity, or renewal thereof, to participa te in similar alliance activities with a U.S. airline(s);

5. We delegate to the Director, Office of International Aviation, the authority to

determine the applicability of the directive set forth in Ordering Paragraph 4 as to specific prices, markets, and t ariff coordination activities, consistent with the scope and purpose of the condition, as previously described;

6. We direct All Nippon Airways Co., Ltd., Continental Airlines, Inc., United Air Lines, Inc., American Airlines, Inc., and Japan Airlines Intern ational Co. Ltd. to begin or to continue to report full

- itinerary Origin

- Destination Survey of Airline Passenger Traffic for all passenger itineraries that include a U.S. point;

7. We determine that we may amend, modify, or revoke this authority at any time without hearing; and

8. We will serve this Order on all parties on the service list in this docket.

By:



### S USAN 

### L. K URLAND Assistant Secretary for Aviation

and International Affairs

(SEAL)

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

19 We expect the ATI Applicants to deliver the progress r eport by the close of business on the anniversary date of

this order . If that date falls on a weekend or federal holiday, the ATI Applicants may deliver the report by the close of business on the following business day.