**BEFORE THE**

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

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

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**ANSWER OF AMERICAN AIRLINES, INC. TO OBJECTIONS TO SHOW-CAUSE ORDER 2010-5-7** 

Communications with respect to this document should be sent to:

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

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

May 24, 2010**BEFORE THE**

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

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

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**ANSWER OF AMERICAN AIRLINES, INC. TO OBJECTIONS TO SHOW-CAUSE ORDER 2010-5-7** 

American Airlines, Inc. hereby answers the objections filed on May 17, 2010 to show-cause Order 2010-5-7, May 7, 2010, which tentatively allocated four daily Haneda slot-pairs by awarding one to American to operate nonstop service from New York (JFK); two to Delta to operate from Los Angeles and Detroit; and one to Hawaiian Airlines to operate from Honolulu. Two other applicants, United and Continental, did not receive authority. The Department’s proposed JFK-Haneda award to American should be made final without delay so that we can undertake preparations to begin service this fall for the benefit of the traveling and shipping public. As shown in our application onFebruary 16, 2010, American’s daily B777 service will substantially enhance consumer choice in the New York-Tokyo O&D market, as well as offer convenient on-line connections for behind-gateway cities including Boston, Washington (DCA), Raleigh/Durham, Miami, Orlando, and St. Louis.- 2 -

New York is the second largest O&D market (after Los Angeles) between the U.S. Mainland and Tokyo, with 338,868 annual passenger bookings in 2009. There has been no scheduled service by U.S. or Japanese carriers from the U.S. to Haneda since Narita opened in 1978. With almost 70 million annual passengers, Haneda is the fourth busiest airport in the world, after Atlanta, Chicago, and London Heathrow. The Department is correct to conclude that the second largest Mainland-Tokyo O&D market should receive new service to Haneda, and that American should be the selected carrier. In Order 2010-5-7, the Department found that “the publicinterest favors meeting the need for Haneda service in the second largest overall mainland U.S.-Tokyo O&D market, New York” (p. 10). As between American (JFK) and Continental (Newark), the Department decided that “an award of Haneda rights to American should enhance alliance competition by improving the competitive posture of American and oneworld in the U.S.-Asia market as compared to the SkyTeam and Star alliances” (p. 11). Objections to the show-cause order were filed by United, Hawaiian Airlines, and Continental, and comments were filed by Delta.- 3 - 1. United United’s objections focus on Delta and Hawaiian Airlines. However, in a footnote, United “takes issue” with(but does not object to) the Department’s “asserted” justification for its tentative award to American (p. 1 n. 1). United’s potshot is without merit. Clearly American shouldhave access to Haneda in order to promote balanced interalliance competition among the three global alliances. TheDepartment correctly found that Star and SkyTeam “hold significant positions” in the U.S.-Asia and U.S.-Japan markets, and thus a Haneda award to American “should enhance alliance competition by improving the competitive posture of American and oneworld” (p. 11) As American and JAL showed in their joint application of February 12, 2010 for antitrust immunity (DOT-OST-2010-0034), “between the U.S. and Japan, Delta/Korean is the largest competitor measured by capacity, with 31% of seats in the market. The proposed United/Continental/ANA alliance will account for 31% of U.S.-Japan seats as well. Today, JAL accounts for 24.6% of U.S.-Japan seats, while American operates 8.8%, which means the proposed alliance will bring oneworld into competitive parity with Star and SkyTeam with 33%” (p. 27).- 4 -

Under its reorganization plan announced in April (see www.ar.jal.com/region/en/aboutjal/press/index ), JAL proposes to retire all of its B747-400 aircraft by the end of 2011, to reduce frequencies between JFK and Tokyo, and to terminate service at Kona. Accordingly, oneworld’s comparative ranking with Star and SkyTeam will diminish. The Department’s analysisis clearly correct, and United’s assault-by-footnote on American’s selection should be disregarded.

2. Hawaiian Airlines In its 4-page paper, Hawaiian Airlines argues generally in support of its proposal to operate two daily flights between Honolulu and Haneda. But Hawaiian does not specifically object to American’s JFK-Haneda award, and thus provides no reason for the Department to overturn it.Hawaiian asserts that “a review of the order demonstrates that [Hawaiian’s] second slot pair was not even considered, let alone compared, to [the] choices presented by other applicants” (p. 4). That is not so. As the Department stated, “having only four slot pairs to distribute, we recognize that the proposals that were not selected would generate benefits, but we tentatively conclude that those benefits do not outweigh the competitive and service benefits that we anticipate from our tentative selections” (pp. 11-12).- 5 -

The Department appropriately declined to assign half of the available slots to a single route, particularly Honolulu, which is dominated by Japan-originating leisure passengers and which Hawaiian could have entered at any time by operating to

Narita. 3. Continental Continental’s objections “do not contest the basic awards” (p. 2), but instead take the Department to task for not granting backup authority. The Department’s rationale for not doing so is clearly articulated in the show-cause order: “Should any of the selected carriers not begin its proposed services, we tentatively find that the public interest would be best served by allowing us to award any unused rights on the basis of a fresh record” (p. 12). See also 2007 U.S.-China Frequency Allocation Proceeding , Order 2007-2-10, February 8, 2007, p. 7, denying Continental’s similar objection to the absence of a backup award in that proceeding (“there is no indication that United, as an established carrier in the China market, will not begin its service. If the frequencies awarded to United revert to the Department, we believe we can take timely action to select another carrier”).- 6 -

However, if the Department now accepts Continental’s position on this point and does decide to award backup rights, American would not object, since we have no intention of leaving the JFK-Haneda route unserved, and the issue would be effectively moot.

4. Delta Delta filed comments rather than objections, asking theDepartment to finalize the tentative order as quickly as possible (p. 2). American likewise urges prompt issuance of the final order so that all of the winning applicants can make arrangements to start service in October, including opening a new station at Haneda.

CONCLUSION For the foregoing reasons, the Department should affirm the show-cause order on an expedited basis, and grant one Haneda slot-pair to American to operate daily nonstop service between New York and Haneda, the second largest U.S.- Tokyo O&D market. Respectfully submitted,

___________________________ CARL B. NELSON Associate General Counsel American Airlines, Inc. May 24, 2010**CERTIFICATE OF SERVICE**

I hereby certify that I have this day served the foregoing document by email on the following persons: sascha.vanderbellen@delta.com jhill@dlalaw.com scott.mcclain@delta.com bill@mietuslaw.com sametta.c.barnett@delta.com mgoldman@sgbdc.com kquinn@pillsburywinthrop.com rsilverberg@sgbdc.com bkeiner@crowell.com dhainbach@ggh-airlaw.com mrosia@crowell.com mcmillin@woa.com bruce.rabinovitz@wilmerhale.com eskraft@jamhoff.com jeffrey.manley@united.com dpdean@jamhoff.com bob.kneisley@wnco.com dkirstein@yklaw.com robert.land@jetblue.com jyoung@yklaw.com msinick@ssd.com donna.kooperstein@usdoj.gov cdonley@ssd.com dwight.moore@ustranscom.mil gbleopard@fedex.com jim.ballough@faa.gov dvaughan@kelleydrye.com byerlyjr@state.gov kevin.montgomery@polaraircargo.com recohn@hhlaw.com jrichardson@johnlrichardson.com cjsimpson@zsrlaw.com lhalloway@crowell.com pmurphy@lopmurphy.com efaberman@wileyrein.com lachter@starpower.net mroller@rollerbauer.com anita.mosner@hklaw.com howard.kass@usairways.com rpommer@atlasair.com benjamin.slocum@usairways.com gmurphy@crowell.com sophy.chen@hklaw.com russell.bailey@alpa.org david.heffernan@wilmerhale.com

_______________________________ CARL B. NELSON, JR.

May 24, 2010