1 Order 2011-11-16 Served: November 14, 2011



### UNITED STATES OF AMERICA
DEPARTMENT OF TRANSPORTATION
OFFICE OF THE SECRETARY WASHINGTON, D.C.

Issued by the Department of Transportation
on the 14 th Day of November, 2011

Joint Application of

AIR CANADA, THE AUSTRIAN GROUP, BRITISH MIDLAND AIRWAYS LIMITED, CONTINENTAL AIRLINES, INC., DEUTSCHE LUFTHANSA AG, POLSKIE LINIE LOTNICZE LOT S.A., SCANDINAVIAN AIRLINES SYSTEM, SWISS INTERNATIONAL AIRLINES LTD., TAP AIR PORTUGAL, and UNITED AIR LINES, INC.

to amend Order 2007-2-16 under 49 U.S.C. §§ 41308 and 41309 so as to approve and confer antitrust immunity Docket DOT-OST-2008-0234

ORDER
I. S UMMARY

By this Order, the Department grants the moti on of Air Canada, Austri an, bmi, Continental, Lufthansa, LOT, SAS, Swiss, TA P, and United (collectively, the “Joint Movants”) to add a new carrier, Brussels Airlines, to an existing immunize d alliance and joint venture. Specifically, we are approving (1) the addition of Brussels Airlines to commercial agreements that were previously approved by the Department in Ju ly 2009, and (2) some new agreements between
Brussels Airlines and the Joint Movants. We ar e also making an expanded grant of immunity to
the Joint Movants to cover the addition of Brussels Airlines.

This is the first alliance case in which the owne rship and control of a party is determinative in the Department’s analysis. Following Luft hansa’s acquisition of a controlling stake in Brussels Airlines in 2009, Brussels Airlines became a close affiliate of Lufthansa. Based on our analysis of the information submitted by the Joint Movants, we have found that Lufthansa’s
control over Brussels Air lines removes Brussels Airlines’ incentive to compete against Lufthansa and its immunized alliance partners. Given the limited presence of Brussels Airlines in North America, and the complementary nature of its ne twork in relation to the other members of the alliance, there will be no substantial reduction in competition associated with granting this motion. Moreover, our decision to grant the mo tion will provide incremental benefits for consumers in a number of markets, particularly in North America-Africa markets. The expanded grant of antitrust immunity will allow Luftha nsa to integrate Brussels Airlines into the2 established and approved cooperation agreements, including the Atlantic Plus-Plus (A++) joint venture agreement. In this regard, the Depart ment finds that the bene fits of the immunized alliance and A++ joint venture, which were di scussed in Order 2009-7-10, will be enhanced by
the addition of Brussels Airlines.

II. B ACKGROUND

In a series of decisions dating back to 1996, we have approved commercial agreements among various members of the Star Alliance fo r transatlantic operations and have granted immunity from the antitrust laws for those ag reements when we found that the applicable statutory standards were met. 1 The members of the immunized alliance engage in close cooperation on internationa l routes in the areas of pricing, planning, revenue management, sales, and distribution. Of the carriers granted antitrus t immunity, three of th e carriers – Air Canada, Lufthansa, and United – are principals in a joint venture called A++, which provides for even closer commercial cooperat ion among its participants. 2

The Motion

On April 21, 2011, the Joint Movants filed a motion in the docket requesting that the Department recognize the participation of Brussels Airlines, an affiliate of Lufthansa, in the alliance agreements and A++ joint venture appr oved by the Department in Order 2009-7-10, and confer expanded antitrust immunity. 3 Brussels Airlines, with its hub at Brussels International Airport, is a medium-sized European carrier serving 68 cities, including 21 cities in Africa, but it does not operate to North America with its own aircraft. 4

The Joint Movants state that on September 15, 2008, Lufthansa signed an agreement to acquire a 45-percent voting equity interest in and sole control of SN Airholdings SA/NA (“SNAH”), the holding company for Brussels Air lines. The Joint Movants claim that, although Lufthansa holds a minority interest in Brussels Airlines, the carrier is under the control of
Lufthansa and Lufthansa directs the strategic decisions and activities of Brussels Airlines. Further, the Joint Movants state that Lufthansa holds options to purchase the remaining shares of SNAH, which Lufthansa may exerci se at its sole discretion. The Joint Movants also support their control arguments with a June 22, 2009, decision of th e European Commission (“the Commission”), which found that following its 45-p ercent equity acquisiti on of SNAH, Lufthansa

1 The Star Alliance consists of 27 active member airlines. Of the Star Alliance carriers, the above-captioned Joint Movants have been granted antitrust immunity.

2 The Star carriers’ authority to operate their im munized alliance is derived from the following actions: Docket DOT-OST-2008-0234, Order 2009-7-10 (J uly 10, 2009); Docket DOT-OST-1996-1116, Order 1996-5-27 (May 20, 1996); Docket DOT-OST-1996-1411, Order 1996-11-1 (Nov. 1, 1996); Docket DOT-OST-1998-7828, Order 2001-1-19 (Jan . 26, 2001); Docket DOT-OST-2001-11029, Order 2003-6-39 (June 30, 2003) and Order 2007-9-12 (Sep t. 7, 2007); Docket DOT-OST-2005-22922, Order 2007-2-16 (Feb. 13, 2007); Docket DOT-OST-2008-023 4, Order 2009-7-10 (July 10, 2009). Bmi, Austrian, and Swiss also participate in the joint vent ure as subsidiaries of Lufthansa. Each was acquired by Lufthansa after receiving authority from the Depa rtment to participate in the overall alliance as an independent airline. See Joint Movants’ Response to Clarification Questions at 2 (July 5, 2011).

3 The Joint Movants filed supplemental ma terial in the docket on July 5, 2011.

4 Official Airline Guide scheduling data for September 2011.3 would be able to exercise direct sole control over SNAH. 5 The Joint Movants request that, under these unique circumstances, the Department treat Brussels Airlines as if the carrier were majority-owned by Lufthansa.

In their filing, the Joint Movants argue that inclusion of Brussels Airlines will not reduce competition and that Brussels Airlines’ participati on will generate the same public benefits as the inclusion of the other European airlines controlled by Lufthansa. 6 Specifically, the Joint Movants state that the proposed enhanced coordi nation will enable Brussels Airlines and the Joint Movants to explore improved commercial cooperation, including such activities as joint advertising and marketing programs, joint fares, joint bids for government and corporate travel accounts, revenue sharing, and the coordination of codesharing and operations for the carriers’ international services, thereby avoiding the ineffi ciencies, risks and cost s of coordinating their alliance through a series of bilateral discussions and separate agreements. 7

First, the Joint Movants state that the addi tion of Brussels Airlines will not reduce competition for several reasons. They note that Br ussels Airlines does not currently operate any transatlantic flights, and, alt hough Brussels Airlines markets tran satlantic service via Brussels through codeshares on other Star Alliance airl ine flights, only thr ee percent of its 2009 passengers originated in the United States. 8 The Joint Movants add that because Brussels Airlines currently operates no transatlantic flights itself, new online joint venture service will be created between many points in the U.S. a nd points throughout Europe and Africa, offering enhanced service options for consumers. 9 They further argue that, be cause Brussels and most of the points served by Brussels Airlines are also served by the SkyTeam and Oneworld alliances, Brussels Airlines’ full participation in immunized activities with other St ar Alliance carriers will enhance global competition. 10

Second, the Joint Movants state that public bene fits identified in the Department’s recent grant of antitrust immunity, such as an expanded network with many new cities, expanded nonstop service, and cost efficiencies, will also be achieved by including Brussels Airlines in the alliance and joint venture. 11 They claim that including Brusse ls Airlines will extend the public
benefits to an additional hub at the center of Europe, will add the unique Brussels Airlines network to the immunized route network, and will expand inter-alliance and inter-gateway competition with no adverse impact on competition. 12 The Joint Movants emphasize that

5 Commission Decision at 6, June 22, 2009, Case No. COMP/M.5335 Lufthansa/SN Airholding. The Joint Movants attached a copy of the Commission’s d ecision to their Joint Motion. Joint Motion at 39.

6 Brussels Airlines was not an affiliate of Lufthan sa at the time the Department issued Orders 2007-2- 16 and 2009-7-10. Therefore, Brussels Airlines was not considered and included within the scope of the Department’s prior approval a nd grant of antitrust immunity.

7 See Joint Motion at 14.

8 See Joint Motion at 9.

9 See Joint Motion at 5.

10 See Joint Motion at 9.

11 See Joint Motion at 3.

12 See Joint Motion at 2.4 Brussels Airlines has an extensive African netw ork, which enhances the overall network of the Joint Movants and the A++ joint venture. 13

The Joint Movants argue that the addition of Brussels Airlines as a participant in the A++ joint venture will expand the carriers’ combined network, create operating efficiencies, enhance the alliance members’ competitiveness, and deliver maximum consumer benefits. 14 The Joint
Movants contend that the benefits will be particularly evident in city-pairs involving travel between the United States and points uni que to Brussels Airlines’ network. 15 They maintain that recognizing Brussels Airlines’ participation in the alliance agreements will enhance fare combinability and result in the elimination of double marginalization for passengers traveling between points throughout the curre nt joint venture network and points served by the Brussels

Airlines network via Brussels. 16 The Joint Movants contend that the economies of density will be expanded, particularly on tr ansatlantic Brussels flights. 17 The Joint Movants claim that the A++ joint venture will continue to foster a co mmercial environment of “metal neutrality” in which the joint venture partners will share co mmon economic incentives to promote the interests

of their alliance over their in dividual corporate interests. 18

Further, the Joint Movants state that they wi ll not move forward with Brussels Airlines’ participation in the alliance agreements without immunity. 19 The Joint Movants note, however, that such circumstances would result in disparat e treatment by Lufthansa of Brussels Airlines

versus the other Lufthansa affiliates. 20

Since the motion was filed, the Department ha s provided access to c onfidential documents, 21 obtained additional evidence to supplement the record, 22 and provided an opportunity for public

comment. 23 During the prescribed comment period, no pleadings in opposition to the motion

were filed. 24 We are proceeding now to an order granting the request.

13 See Joint Motion at 6.

14 See Joint Motion at 10.

15 See Joint Motion at 8.

16 See Joint Motion at 8.

17 See Joint Motion at 8.

18 See Joint Motion at 11.

19 See Joint Motion at 15.

20 See Joint Motion at 15.

21 See Notice (April 29, 2011).

22 See Order 2011-6-15 (June 14, 2011).

23 See Notice (Aug. 2, 2011).

24 On April 28, 2011, American filed a motion requestin g an extension of time to file answers. Because the Department accommodated that request by suspending the procedural schedule, American’s motion
was denied. Additionally, on August 18, 2011, UNITE HERE, a labor group, submitted a letter concerning the Joint Motion to Susan L. Kurland, Assistant Secretary for Aviation & International Affairs, in the docket. UNITE HERE also submitted an additional filing on Se ptember 19, 2011. However, neither the August 18 filing nor the September 19 filing was served on all interested parties in accordance with the Department’s procedural rules. Further, the September 19 document was f iled late without being accompanied by a motion for leave to file late as is required by our rules. Accordingly, these documents are not properly filed pleadings and will not be consid ered as part of the record for decision in this case.5 III. D ECISIONAL STANDARDS

Under 49 U.S.C §§ 41308-41309, we normally engage in a two-step analysis of foreign air transportation agreements submitted for our ap proval. We first determine under § 41309(b) whether the agreements are adverse to the public interest becau se they would substantially reduce or eliminate competition (the “competitive analysis”). If we make that affirmative determination, § 41309 (b)(1)(A) directs us to deci de whether they are nevertheless necessary to meet a serious transportation need or to achieve important public benefits; U.S. foreign policy goals are a key element of these benefits. If we make that finding, and al so find that those public benefits cannot be met or achieved by reasonably available and materially less anticompetitive alternatives, we must approve the agreements pursuant to § 41308(b). Section 41309(c)(2) provides that a party opposing approval has the burde n of showing that the agreement or request would substantially reduce or eliminate competiti on and that less anticompet itive alternatives are available. On the other hand, the party seeking appr oval of the agreement or request must establish the transportation need or public benefits.

If, however, we do not find the agreements to be adverse to the publ ic interest, § 41309(b) directs us to approve them. In that event, we next decide whether th ere are sufficient public benefits to grant immunity under 49 U.S.C. § 41308(b) (the “public benefits analysis”). In that subsection, Congress has given the De partment the authority to exempt airlines from the antitrust laws to the extent necessary to allow a propos ed transaction to proceed, provided that the exemption is required by the public interest. While the publ ic interest determination under both §§ 41309(b) and 41308(b) entails a comparison of an ti-competitive effects and public benefits, the standard in § 41308(b) (“required by” ra ther than “not adverse to”) is higher. 25

The intended commercial effects of the Join t Movants’ cooperation are similar to those resulting from a merger. As part of our overall analysis, we appl y the Clayton Act test, which is used to predict the competitiv e effects of a proposed merger. 26 The Clayton Ac t test requires us to consider whether a grant of antitrust immuni ty is likely to substantially reduce competition and facilitate the exercise of market power – th at is, to allow the Joint Movants to profitably charge supra-competitive prices or reduce service or quality below competitive levels in any
relevant market. To determine whether an allian ce is likely to create or enhance market power, we primarily consider whether th e alliance would significantly increase market concentration, whether the alliance causes potential competitive harm, and whether new entry into the market would be timely, likely, and sufficient either to deter or to counteract the potential competitive
harm.

IV. A NALYSIS

In this matter, the overarching issue is wh ether the addition of a new carrier, Brussels Airlines, to an existing immunized alliance an d joint venture would be pro-competitive and beneficial to the traveling public. The Joint Movants ask the Department to treat Brussels
Airlines as a subsidia ry of an existing party, Lufthansa, and thus to “recognize” Brussels

25 See, e.g., Star Alliance Case, Docket DOT-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)

. 26 See Acquisition of Northwest/Wings Holdings, Inc ., Show Cause Order 92-11-27, at 13 (November 16, 1992); SkyTeam II Case, Show Cause Order 2008-4-17, at 5 (April 9, 2008).6 Airlines’ participation in the alliance and joint venture as covered by previous grants of antitrust immunity. 27

The Department’s policy requires holders of ant itrust immunity to demonstrate on the record
that the addition of new carriers to the alliance, including affiliates, meets all applicable statutory and policy standards. The Joint Movants do not dispute this policy. They have, therefore,
submitted a substantial amount of information regarding Brussels Airlines’ participation in the

alliance in the Joint Motion and their res ponse to the Department ’s evidence request. 28

The extent of Brussels Airlines’ affiliation with Lufthansa is relevant to – and in this case determinative in – the competitive analysis th at is required by 49 U. S.C. § 41309. Economic theory assumes that affiliates that are at least majority-owned or controlled by a parent corporation will not compete vigorously with the pa rent corporation (or the parent corporation’s immunized partners) because their incentive to co mpete and earn profits is tied to the strategic management of the parent corporation. For th is reason, we have been willing to extend our grants of immunity to certain wholly-owned, ma jority-owned, or controlled affiliates when the requests were made at the time of the initial application, there was no substantial reduction in competition associated with the addition of the affiliate, 29 and sufficient public benefits were likely.

The Joint Motion presents a unique situation in our case history. Brussels Airlines became an affiliate of Lufthansa after the members of Star Alliance last petitioned the Department for antitrust immunity in 2008 and was not, th erefore, considered in that proceeding. 30 However,
Lufthansa’s interest in Brussels Airlines is now a minority interest . Crucially, however,
Lufthansa claims to control the commercial decisi ons of Brussels Airlines. If true, Lufthansa’s claim would provide a sound basis for the Department to treat Brussels Airlines like a subsidiary or majority-owned and controlled affiliate in the course of its competitive and public benefits

assessment.

Below, in response to the Joint Motion, we will examine the reque st to add Brussels Airlines to the immunized alliance and joint venture. We will begin by focusing on Lufthansa’s relationship with Brussels Airlines and continue by conducting the competitive and public benefits assessments that are necessary to evaluate an immunity request.

We note that the Commission has already examin ed the competitive effects of the LufthansaBrussels Airlines relationship, and implicitly, Brussels Airlines’ participation in A++. In June 2009, the Commission published a deci sion declaring Lufthansa’s ac quisition of a minority stake in Brussels Airlines to be compatible with the European common market, subject to certain

27 See Joint Motion at 1-2.

28 See Joint Motion (April 21, 2011); Joint Movants’ Respon se to Clarification Questions (July 5, 2011).

29 See, e.g., Delta-Alitalia-Air France-Czech Case, Docket DOT-OST-2001-10429, Order 2002-1-6 (January 22, 2002)
See also Star Case, Docket DOT-OST-2008-0234, Order 2009-7-10 at ordering pa ragraph 1 (July 10, 2009).

30 Although Lufthansa signed the agreement to purchase Brussels Airlines in September 2008, the parties did not close the transaction until after the Commission decision in June 2009.7 remedies. The Commission stated that Lufthans a would exercise “direct sole control” of

Brussels Airlines. 31

Ownership and Control

As noted above, the Department has allowed certain majority-owned affiliates of alliance partners to enjoy the benefits of antitrust immunity when the stra tegic decisions of the majorityowned affiliates are solely di rected by the alliance partner. 32 Under such circumstances, the alliance partner, as the commercial decision-make r, considers the operations of all its majorityowned affiliates when making strategic decision s for each carrier, such as those pertaining to markets, pricing, revenue and capacity manage ment, and codesharing. Also, in approving alliance agreements and granting antitrust immunit y, the Department evaluates requests with full disclosure of each alliance partner’s affiliates, an d interested parties are able to examine both the majority-owned affiliate’s relationship with the alliance partner and, therefore, the entire scope of strategic decision-making within the alliance.

Unlike past cases in which alliance members sought to extend antitrus t immunity to their majority-owned affiliates, in this case Lufthans a has acquired a minority equity interest in the holding company for Brussels Airlines, SNAH. B ecause Brussels Airlines is not a majorityowned affiliate of Lufthansa, the Department must consider Lufthansa’s ability to control the strategic and commercial decisions of Brussels Airlines, as well as Lufthansa’s motivation to
exercise such control.

As stated previously, Lufthansa holds 45-per cent of the voting interest in SNAH, and is SNAH’s single largest shareholder. Vexair Lim ited (“Vexair”) is the s econd largest shareholder, with a 16.4 percent voting interest. 33 The remaining 38.6 percent of the company is held by 30 other independent shareholders , only one of which holds an e quity interest greater than 5 percent. 34 Generally, when a concentration of equity exists and the remaining shareholders are diverse unrelated entities, such as in this case, the remaining shareholders are unable, as a practical matter, to exercise control over the co mpany through voting rights . Even if the 30 other shareholders decided to vote collectively in a ma nner contrary to the Lufthansa vote, they would still be in the minority without also receiving a supporting vote from Vexair. Likewise, Vexair, would need the support of the vast majority of the 30 other shareholders to pass a measure contrary to the Lufthansa vote. Thus, although it is theoreti cally possible, with enormous coordination efforts, for the other shareholders to vote contrary to Lufthansa, such occurrence is not likely.

To address the possibility of a contrary majo rity vote as posited above, Lufthansa was given veto rights over all strategic business decisi ons, such as approval of the budget or major

31 Commission Decision at 6, June 22, 2009, Case No. COMP/M.5335 Lufthansa/SN Airholding. The Joint Movants attached a copy of the Commission’s d ecision to their Joint Motion. Joint Motion at 39.

32 See, e.g., Delta-Alitalia-Air France-Czech Case, Docket DOT-OST-2001-10429, Order 2002-1-6 (January 22, 2002)
See also Star Case, Docket DOT-OST-2008-0234, Order 2009-7-10 at ordering pa ragraph 1 (July 10, 2009).

33 See Joint Movants’ Response (July 5, 2011), Exhibit B.

34 One shareholder holds a voting interest of 6.36 percent.8 investments; and appointment of senior mana gement requires Lufthansa’s affirmative vote. 35 We find that these rights clearly place Lufthans a in a position to exercise control over vital decisions pertaining to the operatio ns of Brussels Airlines.

Additionally, Lufthansa holds options to purch ase the remaining 55 percent of the voting stock from the other SNAH shareholders, whic h Lufthansa may exercise at its discretion. 36 Thus, Lufthansa has the ability to become SNAH’s majority shareholder, or to make Brussels Airlines a wholly-owned affiliate., These righ ts further solidify its existing control over the
carrier.

We accordingly find that Lufthansa has the abi lity to control the strategic and commercial
decisions of Brussels Airlines , and thus Lufthansa has substa ntially the same ability and
incentive to treat Brussels Airlines like its other affiliates in the context of its international
services.

Competitive Analysis

Under § 41309(b), we must determine whet her the amended and expanded alliance agreements submitted by the Joint Movants are adve rse to the public interest because they would substantially reduce or eliminate competition. The Joint Movants already have effective authority to implement a number of bilateral and mu ltilateral cooperation agreements, including the A++ agreement. 37 They are now requesting an expande d grant of antitrust immunity to cover Brussels Airlines’ participation in the A++ agreement, as well as two new bilateral cooperation agreements and an amended coordination agreement. 38

We have reviewed the record in this case and fi nd that the addition of Brussels Airlines to the immunized Star network will not meaningfu lly reduce competition in affected markets, especially since, from the perspective of U.S. consumers, Brussels Airl ines does not operate to
the United States with its own aircraft. We also find and agree with the Joint Movants that the
addition of Brussels Airlines will not substantia lly reduce competition, and that it represents an “end-to-end” combination that will enhance competition. 39 Moreover, we find that the addition of Brussels Airlines to the alliance agreemen ts and the A++ joint venture, will enable the
immunized carriers within Star A lliance to be more competitive with SkyTeam on services to Africa, and that their services between North America and Brussels will be more competitive. 40 In fact, we find that Lufthans a’s acquisition of a controlling stake in 2009 removed Brussels Airlines’ ability and incentive to compete agai nst Lufthansa or the other members of the immunized alliance. There is, therefore, no reduction in potential competition either.

35 See Joint Motion at 4, footnote 7.

36 See Joint Motion at 4, footnote 7.

37 See Order 2009-7-10 at 27, footnote 114.

38 See Joint Motion at 10-13 and Exhibit JM-1. The new agreements include (1) bilateral cooperation agreements between Brussels Airlines and United/ Continental, facilitating cooperation such as code sharing and frequent flyer program participation, and (2) an amended agreem ent addressing coordination among the Joint Movants to include Brussels Airlines.

39 See Joint Motion at 5-6, 15.

40 See Joint Movants’ Response at 2 (July 5, 2011).9 Our review also indicates that the addition of Brussels Airlines to the immunized Star Alliance group will allow the alliance to serve four additional points in Europe and 12 additional points in Africa on an immunized basis. 41 With Brussels Airlines’ developed African network,
the immunized Star Alliance will become more competitive with the market leader, SkyTeam, for traffic flows to Africa from Europe and Nort h America. According to scheduling data, the immunized Star Alliance will serve 58 points in Africa, while the immunized SkyTeam alliance will serve 85 points. 42

In summary, we see no potential for the Joint Movants, as a result of this transaction, to impose and sustain supra-competitive fares or to reduce service levels below current competitive levels. These factors support th e conclusion that the proposed al liance expansion is not adverse to the public interest and shoul d therefore be approved under § 41309.

Public Benefits

Having approved the alliance under § 4130 9, we must now determine whether it is appropriate to make a grant of antitrust immunity under § 41308. As we have stated in past cases, we are only willing to grant immunity if the parties to the alliance agreements would not otherwise go forward without it, and if we find th at the public interest requires that we grant antitrust immunity. Our public in terest examination focuses on the public benefits that will be created by the proposed alliance an d the extent to which a grant of antitrust immunity is required
to realize those benefits.

The Joint Movants argue that making a grant of antitrust immunity to include Brussels Airlines will produce all of the same benefits that the Depa rtment previously recognized in 2009, when it approved the A++ joint venture. 43 The Joint Movants go on to state that including Brussels Airlines will expand the alliance and joint venture ne tworks by adding thousands of new online city-pairs involving a U.S. point, enhance competition, produce cost efficiencies, and strengthen the financial position of Brussels Airlines as well as that of the Joint Movants. 44 The Joint Movants believe that a grant of immunity will bring all of the benefits of the A++ joint venture, recognized by the Departme nt in an earlier orde r, to Brussels and th e other points in the

Brussels Airlines network. 45

Our benefits assessment for this transacti on is unusual because the new carrier seeking antitrust immunity, Brussels Airlin es, does not operate to the United States with its own aircraft. However “indirect” the benefits may appear under these unique circumstances, we agree with the Joint Movants that the addition of Brussels Airlines will enhance the benefits of the existing Star immunized alliance and the A++ joint venture, which are focused on improving transatlantic services. The evidence suggests that the Brussels Ai rlines network will increase traffic flows

41 Official Airline Guide scheduling data for Se ptember 2011. The points in Europe are Stockholm (BMA), Bristol (BRS), Lamezia-Terme (SUF), and St rasbourg (SXB). The points in Africa are Abidjian (ABJ), Agadir (AGA), Banjul (BJL), Bujumbura (BJM), Conakry (CKY), Cotonou (COO), Entebbe (EBB), Kinshasa (FIH), Kigali (KGL), Lome ( LFW), Ouagadougou (OUA), and Monrovia (ROB).

42 Official Airline Guide scheduling data for September 2011.

43 See Joint Motion at 2-3 (April 21, 2011).

44 See Joint Motion at 5 (April 21, 2011). See also Joint Movants’ Response at 3 (July 5, 2011).

45 See Joint Motion at 12 (April 21, 2011).10 over the Brussels hub and create new options for travelers on the immunized Star network, which will have a compounding effect on the economies of density, scale, and scope that we recognized

as beneficial to the trav eling public in Order 2009-7-10. 46 We find, therefore, that the
incremental benefits are substantial e nough to justify a gran t of immunity.

Further, we find that the incremental benefits of adding Brussels Air lines are likely to be passed on to consumers in a timely fashion – that is, the benefits will be proximate to our grant of antitrust immunity. 47 The likelihood that benefits ar e passed on to consumers, and the timeliness in which that occurs, are important factors in our assessment of whether a proposed alliance meets the high standard necessary to obtain antitrust immunity. In some past cases, the Department has expressed concern when the deta ils of proposed cooperati on were not negotiated or explained on the record in sufficient detail to support the applicants’ as sertions that consumers

will benefit from the alliance. 48 Here, however, the Joint Movants make the necessary showing because the Lufthansa-Brussels Airlines acquisiti on has taken place, providing certainty as to the partners’ strategic plans, and the Joint Movants have decided to add Brussels Airlines to an alliance and joint venture, bu ilding on an arrangement that has already been developed, approved, and implemented.

Finally, we find that a grant of immunity is required by the public interest in this case. In addition to the legal uncertainty that would exist if we did not grant the Joint Movants’ request – the Joint Movants indicate they will not go forward with the alliance absent immunity 49 – we are persuaded by the argument that adding Brussels Airlines is necessary to ensure “metal neutrality” among the A++ partners, including the Lufthansa- controlled airlines. In Order 2009-7-10, we analyzed the A++ agreement and dete rmined that the arrangement was adequately structured to encourage the participating carriers to set aside their parochial commercial interests in favor of selling the joint netw ork and offering the customer the most desirable itinerary at the best price, regardless of which carrier w ould use its “metal” to operate the service. 50 Such a “metal-neutral” arrangement requires carriers to jointly plan their services and balance the economic benefits they receive from the venture.

According to the Joint Movants, the A++ c ooperation could, in theory, continue without Brussels Airlines, but the partne rs would be incentivi zed to keep traffic on the joint venture network, even if a better or more convenient op tion involved Brussels Airlines. We agree. Excluding Brussels Airlines w ould reduce the overall benefits of the A++ join t venture and introduce inefficiencies within the alliance give n that some of Lufthansa’s other similarly situated affiliates, such as bmi, Austrian, and Swiss, are full memb ers of the alliance.

In sum, we find that an expa nded grant of immunity, to includ e Brussels Airlines, is required by the public interest.

46 See Order 2009-7-10 at 12-16 (July 10, 2009).

47 See Delta/Virgin Australia Ca se, Docket DOT-OST-2009-0155, Order 2010-9-4 (Sept. 8, 2010) (describing the Department’s pu blic benefits standard).

48 See, e.g., Delta/Virgin Australia Case, Docket DOT-O ST-2009-0155, Order 2010-9-4 (Sept. 8, 2010).

49 See Joint Motion at 15 (April 21, 2011).

50 See Order 2009-7-10 at 15 (July 10, 2009).11 V. D ECISION

For the reasons stated above, we determine that the Joint Movants’ re quest to add Brussels Airlines to their alliance will be pro-competitive and beneficial to the traveling public. We therefore decide to approve the alliance agreements submitted by the Joint Movants, which include Brussels Airlines as a party, and we confer antitrust immunity to the carriers to implement those agreements.

A CCORDINGLY :

1. We amend Order 2009-7-10 by striking Orderi ng Paragraph 1 and replacing it with the following text, including the foot note (new text bolded and underlined):

We approve and grant antitrust immunity to the Alliance Agreements between and among Air Canada, The Austrian Group, British Midland Airways, Ltd., Brussels Airlines NV/SA, Continental Airlines, Inc., Deutsche Lufthansa AG, Polskie Linie Lotnicze LOT S.A., S candinavian Airlines System, Swiss International Air Lines Ltd., TAP Air Port ugal, and United Air Lines, Inc., and the majority-owned affiliates of the aforementioned carriers in so far as such agreements relate to foreign air transportation; 51

2. We amend Order 2009-7-10 by striking Orderi ng Paragraph 11 and replacing it with the following text (new text bolded and underlined):

We direct Air Canada, The Austrian Group, British Midland Airways, Ltd., Brussels Airlines NV/SA, Continental Airlines, Inc., Deutsche Lufthansa AG, Polskie Linie Lotnicze LOT S.A., S candinavian Airlines System, Swiss International Air Lines Ltd., TAP Air Port ugal, and United Air Lines, Inc. to withdraw, or to remain withdrawn, from participation in any International Air Transport Association tari ff coordination activities that discuss any proposed through fares, rates, or charges appli cable between the United States and any
countries whose airlines have been or are subsequently granted antitrust immunity, or renewal thereof, to particip ate in similar allian ce activities with a U.S. airline(s);

3. We amend Order 2009-7-10 by striking Orderi ng Paragraph 13 and replacing it with the following text, including the foot note (new text bolded and underlined):

We direct Air Canada, Austri an, British Midland Airways, Ltd., Brussels Airlines NV/SA, Deutsche Lufthansa, Polskie Li nie Lotnicze LOT, Scandinavian Airlines System, Swiss, and TAP Air Portug al to continue to report full-itinerary

51 Alliance Agreements shall mean those agreements re ferred to on page 2, Footnote 2, and Exhibit JA1, of the Joint Application filed on July 23, 2008 , as well as those agreements referred to in Exhibit JM-1 of the Joint Motion filed on April 21, 2011. Effective immediately, the Department considers the term “Joint Applicants,” as used in the orders in Docket DOT-OST-2008-0234 to include
Brussels Airlines

.12 Origin-Destination Survey of Airline Passenger Traffic for all passenger itineraries that include a U.S. point; 52

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

By:

SUSAN L. KURLAND Assistant Secretary for Aviation
and International Affairs

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

52 We treat the foreign airlines’ O&D data as conf idential, do not allow U.S. airlines any access to the data, and do not allow foreign airlines any access to U. S. airline O&D Survey data. We use these data only for internal analytical purposes.