**BEFORE THE**

**DEPARTMENT OF TRANSPORTATION**

**WASHINGTON, D. C.**

---------------------------------------------- : DOT-OST-2010- U.S.-JAPAN ALLIANCE CASE : 0059

:

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

**JOINT REPLY OF AMERICAN AIRLINES, INC. AND JAPAN AIRLINES INTERNATIONAL CO., LTD.** 

Communications with respect to this document should be sent to:

For Japan Airlines :

TSUTOMU ANDO Executive Officer – International Affairs Japan Airlines International Co., Ltd. 4-11, Higashi-shinagawa 2-chome, Shinagawa-ku Tokyo 140-8637, Japan

TORU MIZUNO Vice President – International Affairs Japan Airlines International Co., Ltd. 4-11, Higashi-shinagawa 2-chome, Shinagawa-ku Tokyo 140-8637, Japan

YUKI SAITO Director, Government Affairs Japan Airlines International Co., Ltd. 1330 Connecticut Ave., N.W. Washington, D.C. 20036 For American Airlines:

VIRASB VAHIDI Senior Vice President – Planning American Airlines, Inc. P.O. Box 619616, MD 5634 DFW Airport, Texas 75161

KENJI C. HASHIMOTO Vice President – Strategic Alliances American Airlines, Inc. P.O. Box 619616, MD 5635 DFW Airport, Texas 75261

WILLIAM K. RIS, JR. Senior Vice President – Government Affairs American Airlines, Inc.
1101 17 th Street, N.W. Washington, D.C. 20036WILLIAM KARAS
CAROL GOSAIN Steptoe & Johnson LLP 1330 Connecticut Ave., N.W. Washington, D.C. 20036 (202) 429-6223 wkaras@steptoe.com cgosain@steptoe.com ROBERT A. WIRICK Director, Regulatory Affairs American Airlines, Inc. P.O. Box 619616, MD 5635 DFW Airport, Texas 75261 (817) 963-0394 robert.wirick@aa.com

W. BRUCE WARK Associate General Counsel
JEFFREY A. OGAR Senior Attorney American Airlines, Inc. P.O. Box 619616, MD 5675 DFW Airport, Texas 75261 (817) 967-3458 jeff.ogar@aa.com

CARL B. NELSON, JR. Associate General Counsel American Airlines, Inc.
1101 17 th Street, N.W. Washington, D.C. 20036 (202) 496-5647 carl.nelson@aa.com

July 9, 2010

### BEFORE THE

**DEPARTMENT OF TRANSPORTATION**

**WASHINGTON, D. C.**

------------------------------------------ : DOT-OST-2010- U.S.-JAPAN ALLIANCE CASE : 0059

:

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

**JOINT REPLY OF AMERICAN AIRLINES, INC. AND JAPAN AIRLINES INTERNATIONAL CO., LTD.** 

American Airlines, Inc. and Japan Airlines International

Co., Ltd. hereby jointly reply to the answers filed in this

docket on June 29, 2010 by the Dallas/Ft. Worth International

Airport, the Allied Pilots Association, the City of Houston and

the Greater Houston Partnership, and the Air Line Pilots

Association. No other answers were filed.

American and JAL are seeking approval of and antitrust

immunity for a bilateral alliance agreement and a metal neutral

joint business agreement, as well as existing and future agreements implementing the transactions and arrangements contemplated by the alliance agreement and JBA.

The proposed American/JAL alliance will create metal

neutrality between two of oneworld’s core transpacific members,

American and JAL. The agreements provide for revenue sharing

and closer integration, giving oneworld the ability to offer

### - 2 –

consumers an effective competitive alternative to Star and

SkyTeam in Asia, and will maximize the benefits made possible by

the U.S.-Japan Open Skies Agreement. American and JAL will

implement their alliance agreement immediately upon approval,

and will implement the JBA within 18 months of the Department’s

final order granting antitrust immunity.

**A. PUBLIC SUPPORT FOR THE AMERICAN/JAL PROPOSAL**

In its answer, Dallas/Ft. Worth International Airport

cogently lays out why granting antitrust immunity to American

and JAL is consistent with the public interest:

“The United States has negotiated an Open Skies Agreement with Japan that will come into effect if the AA/JAL and Star ATI applications are approved by DOT and the Japanese authorities. . . . The Open Skies Agreement will also make possible the grant of antitrust immunity for the proposed alliances and as a result create a more vibrant competitive environ- ment on the transpacific routes.

“The grant of ATI to AA/JL will enhance competition among the three global airline alliances – Star, SkyTeam, and oneworld – by offering consumers an effective competitive alternative to Star and SkyTeam in Asia. SkyTeam, through Delta’s “west coast” hub at Narita as well as the immunized Delta/Korean alliance with a hub at Seoul, is dominant in the U.S.-Japan and U.S.-Asia market. Star too has a strong presence, with hubs at Narita and an immunized United/Asiana alliance, and its Asian position will be strengthened by the Star application seeking approval of an immun- ized alliance with Continental and ANA that is being considered in this proceeding. Since one-

### - 3 -

world has no U.S.-carrier connecting hub at Narita and no immunized alliance in Asia, the grant of ATI as proposed in the AA/JAL application is essential if oneworld is to compete effectively with those two alliances and ensure the continued presence of at least three major U.S. airlines in this market” (pp. 1-2).

The American/JAL joint application has received widespread public support, including letters to the Department from:

► **20 U.S. Senators and Representatives**

**► 27 Governors** 

**► 46 Mayors** 

**► 78 airports** 

**► Transport Workers Union** 

**► Numerous chambers of commerce, economic development**  **organizations, and individual businesses**

A list of support letters is attached. These letters

reflect the views of elected officials, airports, labor, and

business that granting ATI to American/JAL will create public

benefits. As expressed by Senator Richard J. Durbin regarding

ATI for American/JAL and United/Continental/ANA:

“The United States has developed Open Skies agree- ments with other nations, opening up new foreign markets to our domestic airlines. These agreements have led to an increasing number of air carriers forming global alliances. DOT should continue its leadership in reviewing these alliances to ensure they benefit consumers, protect workers, promote competition and add to the long-term viability of the U.S. aviation industry.”

### - 4 -

**B. THE ALLIED PILOTS ASSOCIATION**

The Allied Pilots Association (APA), which represents

American’s pilots, does not oppose the joint application, but

requests that “the Department take steps to ensure that the U.S.

carrier participants in metal neutral arrangements perform, at a

minimum, reasonable shares of the flying covered by the arrangement” (p. 2). The APA seeks the following explicit condition:

“Under the JBA, revenues contributed by the nonstop carriage of passengers on routes covered by the JBA are pooled and shared between the parties. The Joint Applicants shall ensure that over any 12 consecutive months, American’s share of the revenues shall not exceed 130 percent of the share of the available seat miles operated by AA on on routes covered by the JBA” (p. 2).

The APA’s proposal mirrors the answer filed by the Air

Line Pilots Association, which represents pilots at United and

Continental. Those carriers are seeking ATI with ANA.

The joint applicants urge the Department to reject the

APA’s condition. Under the JBA, American and JAL each has an

incentive to increase its flying. The regulatory constraint

sought by the APA, involving a specific percentage cap on

American’s share of the revenues during a rolling 12 month

period, is contrary to the deregulated marketplace, and would be

inconsistent with the flexibility that the parties will require

in the conduct of their joint operations.

### - 5 -

In the oneworld ATI docket, DOT-OST-2008-0252, the APA

asked the Department “to deny the Joint Application or, at the

very least, require the Joint Applicants to provide stringent

protections for U.S. labor,” but there the APA did not propose

specific language. In show-cause Order 2010-2-8, February 13,

2010, the Department declined to impose conditions regarding

labor:

“We understand APA’s root concern that the alliance could threaten the jobs of U.S. labor. With the changes we are requiring to the joint venture agreement, we believe the applicants will be in a better position to increase overall capacity and share the growth opportunities. While it is true that the joint venture involves revenue sharing, the joint venture partners must maintain their networks and execute their business plans to remain profitable under the venture. In short, we believe that American, like its partners, has the incentive to increase its flying if possible, which could provide more opportun- ities for its pilots and other labor groups” (p. 34).

We also note that none of the Department’s grants of

antitrust immunity, beginning with Northwest/KLM in 1993 and

continuing to the present, has imposed labor conditions. In the

two most recent final ATI orders, SkyTeam 2, Order 2009-6-26,

June 26, 2009, and Star 2, Order 2009-7-10, July 10, 2009, there

were no labor conditions, and none was sought.

### - 6 -

Indeed, in SkyTeam 2, several labor groups, including the

Northwest Master Executive Council of the Air Line Pilots

Association, filed in support of ATI without requesting labor

conditions. It would be fundamentally unfair for the Department

to impose labor conditions on American/JAL in this docket given

that the Department has not done so in any of the more than two

dozen ATI proceedings since 1993.

**CONCLUSION**

American and JAL have presented the Department with one

of the most pro-competitive proposed alliances in the history of

ATI proceedings. Approval of the joint application will bring

into force the new U.S.-Japan open skies agreement initialed

last December, will link two complementary networks, and will

give oneworld its first truly integrated transpacific hub

network to compete with Star and SkyTeam. No party disputed

these benefits. Accordingly, American and JAL request that the

Department move promptly to approve the proposed alliance and

grant antitrust immunity under 49 USC 41308 and 41309.

# LIST OF LETTERS SUPPORTING

**AMERICAN/JAPAN AIRLINES ATI**U.S. Senator Richard J. Durbin Illinois

U.S. Senator Charles E. Schumer New York

U.S. Senator Kirsten E. Gillebrand New York

U. S. Representative Gregory W. Meeks New York

U. S. Representative Michael E. McMahon New York

U. S. Representative Joseph Crowley New York

U. S. Representative Yvette D. Clarke New York

U. S. Representative Timothy H. Bishop New York

U. S. Representative Edolphus Towns New York

U. S. Representative Charles R. Rangel New York

U. S. Representative John J. Hall New York

U. S. Representative Nita M. Lowey New York

U. S. Representative Carolyn B. Maloney New York

U. S. Representative Michael A. Arcuri New York

U. S. Representative Gary L. Ackerman New York

U. S. Representative Eliot L. Engel New York

U. S. Representative Steve Israel New York

U. S. Representative William L. Owens New York

U. S. Representative Daniel B. Maffei New York

U. S. Representative Anthony D. Weiner New York

Governor Mike Beebe Little Rock AR
Governor Arnold Schwarzenegger Sacramento CA
Governor Jack A. Markell Dover DE
Governor Linda Lingle Honolulu HI
Governor Chester J. Culver Des Moines IA
Governor C. L. "Butch" Otter Boise ID
Governor Mark Parkinson Topeka KS

Governor Steven L. Beshear Frankfort KY Governor Bobby Jindal Baton Rouge LA
Governor Jeremiah W. (Jay) Nixon Jefferson City MO Governor Haley Barbour Jackson MS Governor Beverly Eaves Perdue Raleigh NC
Governor John Hoeven Bismarck ND
Governor Bill Richardson Santa Fe NM
Governor Jim Gibbons Las Vegas NV
Governor David A. Paterson Albany NY
Governor Ted Strickkland Columbus OH
Governor Brad Henry Oklahoma City OK
Governor Edward G. Rendell Harrisburg PA
Governor Donald L. Carcieri Providence RI
Governor Mark Sanford Columbia SC

Governor M. Michael Rounds Pierre SD
Governor Rick Perry Austin TX
Governor James H. Douglas Montpelier VT
Governor Jim Doyle Madison WIGovernor Joe Manchin III Charleston WV

Governor Dave Freudenthal Cheyenne WY

Lt. Gov. Lee Fisher Columbus OH

Lt. Gov. David Dewhurst Austin TX

ST Senator Glenn Coffee OK

ST Rep Chris Benge OK
ST Rep Joe Straus TX
ST Rep Richard Thompson WV

Mayor Samuel L. Jones Mobile AL Mayor Todd Strange Montgomery AL Mayor Bob McCaslin Bentonville AR Mayor Mark Stodola Little Rock AR Mayor Horace G. Shipp Texarkana AR Mayor Ashley Swearengin Fresno CA Mayor Helene Schneider Santa Barbara CA Mayor Mike Anderson Fort Walton Beach FL Mayor Carlos Alvarez Miami

‐ Dade County FL Mayor Michael C. Wiggins Pensacola FL Mayor John R. Marks III Tallahassee FL Mayor Otis S. Johnson Savannah GA Mayor Roy D. Buol Dubuque IA Mayor Richard M. Daley Chicago IL Mayor John Thodos East Moline IL Mayor Jim Ardis Peoria IL Mayor Timothy J. Davlin Springfield IL Mayor Jonathan Weinzapfel Evansville IN Mayor Lorenz "Lo" Walker Bossier City LA Mayor James E. Mayo Monroe LA Mayor Thomas M. Menino Boston MA Mayor Ardell F. Brede Rochester MN Mayor Anthony G. Chavonne Fayetteville NC Mayor Dennis R. Walaker Fargo ND Mayor Phillip S. Burch Artesia NM Mayor David Coss Santa Fe NM Mayor Byron W. Brown Buffalo NY Mayor Stephanie A. Miner Syracuse NY Mayor Dewey F. Bartlett, Jr. Tulsa OK Mayor Donald R. Mull Alcoa TN Mayor Dennis Phillips Kingsport TN Mayor Jane Myron Johnson City TN Mayor Norm Archibald Abilene TX Mayor D. Mark Conlee Bryan TX Mayor Ben White College Station TX Mayor Joe Adame Corpus Christi TXMayor Thomas C. Leppert Dallas TX Mayor Mary Lib Saleh Euless TX Mayor Mike Moncrief Fort Worth TX Mayor Raul G. Salinas Laredo TX Mayor Tom Martin Lubbock TX Mayor Alvin New San Angelo TX Mayor Stephen A. Mayo Texarkana TX Mayor Lanham Lyne Wichita Falls TX Mayor Paul D. Fraim Norfolk VA Mayor Richard L. Kaysen Cheyenne WY

President City Council Georgia Adams Broyles Cheyenne WY County Boar d County o f Marquette Boar d Marquette MI County Executive Allegheny County Executive Pittsburgh PA County Nashville & Davidson County Nashville TN City Manager City of Waco City Manager's Office Waco TX County Commission Kanawha County Commission Charleston WV

Airport Northwest Arkansas Regional Airport Bentonville AR Airport Fort Smith Regional Airport Fort Smith AR Airport Little Rock National Airport Little Rock AR Airport Texarkana Regional Airport Texarkana AR

‐ TX Airport Fresno Yosemite International Airport Fresno CA Airport Palm Springs International Airport Palm Springs CA Airport San Francisco International Airport San Francisco CA Airport Colorado Springs Airport Colorado Springs CO Airport Denver International Airport Denver CO Airport Grand Junction Regional Airport Grand Junction CO Airport Jacksonville Aviation Authority Jacksonville FL Airport Miami International Airport Miami FL Airport Pensacola Gulf Coast Regional Airport Pensacola FL Airport Sarasota Bradenton Intl Airport Sarasota FL Airport Savannah Hilton Head Intl Airport Savannah GA Airport Central Illinois Regional Airport Bloomington IL Airport Metropolitan Airport Authority Moline IL Airport Metropolitan Airport Authority of Peoria Peoria IL Airport University of Illinois ‐ Willard Airport Savoy IL Airport Abraham Lincoln Capital Airport Springfield IL Airport Evansville Regional Airport Evansville IN Airport Fort Wayne

‐ Allen County Airport Authority Fort Wayne IN Airport Manhattan Regional Airport Manhattan KS Airport Blue Grass Airport Lexington KY Airport Louisville Regional Airport Authority Louisville KY Airport Alexandria International Airport Alexandria LA Airport Baton Rouge Metropolitan Airport Baton Rouge LA Airport Lafayette Regional Airport Lafayette LA Airport Lake Charles Regional Airport Lake Charles LAAirport Monroe Regional Airport Monroe LA Airport Shreveport Airport Authority Shreveport LA Airport Kent County Department of Aeronautics Grand Rapids MI Airport Rochester International Airport Rochester MN Airport Springfield

‐ Branson National Airport Springfield MO Airport Lambert St. Louis International Airport St. Louis MO Airport Gulfport

‐ Biloxi International Airport Gulfport MS Airport Fayetteville Regional Airport Fayetteville NC Airport Asheville Regional Airport Fletcher NC Airport Piedmont Triad Airport Authority Greensboro NC Airport Raleigh

‐ Durham Airport Authority Raleigh

‐ Durham NC Airport Municipal Airport Authority Fargo ND Airport Omaha Airport Authority Omaha NE Airport Roswell International Air Center Roswell NM Airport Santa Fe NM Aviation Division Santa Fe NM Airport Reno

‐ Tahoe Airport Authority Reno NV Airport Albany County Airport Authority Albany NY Airport Buffalo Niagara International Airport Buffalo NY Airport Syracuse Hancock International Airport Syracuse NY Airport Cincinnati/Northern Kentucky Intl Airport Cincinnati OH Airport Columbus Regional Airport Authority Columbus OH Airport Toledo

‐ Lucas County Port Authority Toledo OH Airport Dayton International Airport Vandalia OH Airport Lawton

‐ Ft. Sill Regional Airport Lawton OK Airport Tulsa International Airport Tulsa OK Airport Wilkes

‐ Barre/Scranton International Airport Avoca PA Airport Pittsburgh International Airport Pittsburgh PA Airport Charleston County Aviation Authority Charleston SC Airport Columbia Metropolitan Airport Columbia SC Airport GSP International Airport Greenville SC Airport Sioux Falls Regional Airport Authority Sioux Falls SD Airport Tri

‐ Cities Regional Airport Blountville TN Airport Chattanooga Metropolitan Airport Authority Chattanooga TN Airport Metropolitan Knoxville Airport Authority Knoxville TN Airport Metropolitan Nashville Airport Authority Nashville TN Airport City of Austin Aviation Department Austin TX Airport Corpus Christi International Airport Corpus Christi TX Airport Dallas/Ft. Worth International Airport Dallas/Fort Worth TX Airport City of Killeen Aviation Services Killeen TX Airport East Texas Regional Airport Longview TX Airport San Angelo Regional Airport San Angelo TX Airport Waco Regional Airport Waco TX Airport Wichita Falls Department of Aviation Wichita Falls TX Airport Norfolk Airport Authority Norfolk VA Airport Austin Straubel International Airport Green Bay WI Airport La Crosse Municipal Airport La Crosse WI Airport Dane County Regional Airport Madison WIAirport General Mitchell International Airport Milwaukee WI Airport Central Wisconsin Airport Mosinee WI

Union Transport Workers Union New York NY

Chamber Mobile Area Chamber of Commerce Mobile AL
Chamber Bentonville Bella Vista Chamber of Commerce Bentonville AR
Chamber Grand Junction Area Chamber Grand Junction CO
Chamber Pensacola Chamber of Commerce Pensacola FL Chamber Dubuque Area Chamber of Commerce Dubuque IA Chamber Chicagoland Chamber of Commerce Chicago IL
Chamber Pekin Area Chamber of Commerce Pekin IL
Chamber Rochester Area Chamber of Commerce Rochester MN
Chamber Missouri Chamber of Commerce and Industry Jefferson City MO Chamber Springfield Area Chamber of Commerce Springfield MO
Chamber Johnson City Chamber of Commerce Johnson City TN Chamber Kingsport Area Chamber of Commerce Kingsport TN
Chamber North San Antonio Chamber of Commerce San Antonio TX

Econ Dev The Beacon Council Miami FL
Econ Dev Illinois Manufacturers' Association Oak Brook IL

Econ Dev Greater Bossier Economic Development Bossier City LA

Econ Dev Missouri Economic Development Board Springfield MO

Econ Dev Greater Jamaica Development Corporation Jamaica NY

Econ Dev Association for a Better New York New York NY

Econ Dev Partnership for New York City New York NY

Econ Dev Charleston Area Alliance Charleston WV

Econ Dev Cheyenne Area Convention & Visitors Bureau Cheyenne WY

Econ Dev Cheyenne LEADS Cheyenne WY

Business Dubuque Bank and Trust Dubuque IA Business Honkamp Krueger & Company Dubuque IA
Business Premier Bank Dubuque IA
Business AEP

‐ SWEPCO Shreveport LA
Business The Business Council New York NY
Business York College, The City University of New York Jamaica NY

Travel Travel Leaders Memphis TN**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 john.allen@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.

July 9, 2010