|EUROPEAN COMMISSION |

Brussels, 5.8.2013

C(2013) 5232 final

In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EC) No 139/2004 concerning non-disclosure of business secrets and other confidential information. The omissions are shown thus […]. Where possible the information omitted has been replaced by ranges of figures or a general description. PUBLIC VERSION

MERGER PROCEDURE

To the notifying parties: |

Dear Sir/Madam,

Subject: Case No COMP/M.6607 – US AIRWAYS/ AMERICAN AIRLINES Commission decision pursuant to Article 6(1)(b) in conjunction with Article 6(2) of Council Regulation No 139/2004 [1]

(1) On 18 June 2013, the European Commission received a notification of a proposed concentration pursuant to Article 4 of the Merger Regulation by which US Airways Group ("US Airways", United States) enters into a full merger within the meaning of Article 3(1)(a) of the Merger Regulation with AMR Corporation ("AMR", United States) (together "the Parties" and "the Transaction"). [2]

1. The Parties

(2) AMR is a holding company whose primary business activity is the operation of a major network air carrier, through its principal subsidiary American Airlines, Inc. ("American Airlines"). It provides scheduled air passenger and air cargo transport services. American Airlines offers scheduled air passenger services on approximately 3 400 flights daily to more than 250 destinations worldwide. American Airlines is a member of the oneworld alliance. In addition, British Airways, American Airlines and Iberia are parties to a joint venture (the "Transatlantic Joint Business" or "TAJB") whereby they have agreed to have common fares, capacity, schedules, sales and marketing, share overall revenues and sell each other's products and services without regard to which party is operating the aircraft, also known as a metal neutral joint venture. [3]

(3) US Airways' primary business activity is the operation of a major network air carrier. It provides scheduled air passenger and air cargo transport and related services, such as the procurement of aviation fuel and insurance. US Airways offers scheduled air passenger services on more than 3 100 flights daily to more than 200 destinations worldwide. US Airways is currently a member of the Star Alliance, which involves cooperation among its members roughly comparable to that of oneworld. US Airways has announced that following the Transaction, it will withdraw from Star Alliance and join the oneworld alliance as well as the Transatlantic Joint Business. [4]

2. Concentration

(4) The Transaction constitutes a concentration within the meaning of Article 3(1)(a) of the Merger Regulation as the whole of US Airways will merge with the whole of AMR. AMR will issue new shares to the current US Airways' equity holders. The combined business will be operated under the brand "American Airlines".

(5) In addition, AMR has been in bankruptcy under Chapter 11 of the US Bankruptcy Code since late 2011. As required under the US Bankruptcy Code, AMR has already sought approval from the Bankruptcy Court of the Parties' Agreement and Plan of Merger. Once the Parties have obtained all necessary regulatory approvals, the Bankruptcy Court is expected to confirm AMR's Reorganisation Plan by way of a Confirmation Order, which will enable AMR to proceed with exiting bankruptcy and to close the Transaction.

3. EU DIMENSION

(6) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million (in 2012 AMR: EUR 19 400 million; US: EUR 10 765 million). Each of them has a Union-wide turnover in excess of EUR 250 million (in 2012 AMR: EUR […] million; US: EUR […] million), but they do not achieve more than two-thirds of their aggregate Union-wide turnover within one and the same Member State [5] . The Transaction therefore has a Union dimension pursuant to Article 1(2) of the Merger Regulation.

4. relevant markets

(7) The activities of American Airlines and US Airways overlap in air passenger transport services where they realise the majority of their total operating revenues. [6] The Parties are also active in air cargo transport. [7] Their remaining ancillary revenues mainly derive from the sale of services related to their fidelity programs, baggage handling fees and change fees. [8] However, the Transaction only gives rise to affected markets as regards air passenger transport services which will be assessed in the Sections that follow.

4.1. O&D approach

(8) The Commission has traditionally defined the relevant market for scheduled passenger air transport services on the basis of the "point of origin/point of destination" (O&D) city-pair approach. [9] Such market definition reflects the demand-side perspective whereby customers consider all possible alternatives of travelling from a city of origin to a city of destination which they do not consider substitutable to a different city-pair. As a result, every combination of a point of origin and a point of destination is considered to be a separate market.

(9) The Parties follow the O&D approach in their notification of the Transaction. They however claim that the market for scheduled passenger air transport services increasingly has a network dimension, in particular for long-haul carriers. [10]

(10) The Commission has in the past taken into consideration the network competition between airlines. This is particularly relevant on the supply-side, as network carriers build their network and decide to fly essentially on routes connecting to their hubs. [11] While some network carriers argued that competition between carriers takes place on the network level, [12] in line with the Commission's notice on market definition [13] and with the Commission's decision practice, the Commission has given pre-eminence to demand-side substitution, whereby it considered that customers still need transportation from one point to another and that competition still takes place on an O&D city-pair basis. [14]

(11) A large majority of respondents to the market investigation have confirmed this approach and its relevance for the purpose of analysing the competitive effects on the overlap routes. [15]

(12) In light of the above, the effects of the Transaction will be assessed on the basis of the city-pair O&D approach.

4.2. Premium vs. non-premium passengers

(13) The Commission has traditionally found that a distinction may be drawn between time sensitive/premium and non-time sensitive/non-premium passengers. [16]

(14) Premium passengers tend to travel for business purposes, require significant flexibility with their tickets (such as cost-free cancellation and modification of the time of departure, etc.) and tend to pay higher prices for this flexibility. Non-premium customers travel predominantly for leisure purposes or to visit friends and relatives, book long time in advance, do not require flexibility with their booking and are generally more price-sensitive.

(15) The Parties do not object to this distinction but submit that the distinction between premium and non-premium is complicated by certain factors including the existence of tickets which grant access to economy seats (standard or "upgraded") but also allow a certain degree of travel flexibility. However, for the purposes of the analysis of the Transaction, it is not necessary to come to a final conclusion as to these mixed tickets as the competitive assessment would be unaffected regardless of the precise delineation of the two categories because the differences in market shares are slight at best.

(16) A large majority of respondents to the market investigation confirmed the Commission's approach of distinguishing between premium and non-premium passengers, acknowledging that the distinction between premium and non-premium passengers was relevant for the assessment of the Transaction. [17]

(17) Some respondents amongst the Parties' competitors nonetheless indicated that the distinction between premium and non-premium passengers has become blurred, and that there is a chain of substitution between these two broad categories rather than a clear-cut distinction. [18]

(18) However, for the assessment of the Transaction, the conclusion on whether premium and non-premium passengers belong to the same market can be left open as the outcome of the Commission's competitive assessment would not change under any alternative market definition.

4.3. Non-stop vs. one-stop flights [19]

(19) The Commission has in previous cases considered that, with respect to long-haul routes (more than 6 hours flight duration), one-stop flights constitute a competitive alternative to non-stop services under certain conditions (for example if they are marketed as connecting flights on the O&D pair in the computer reservation system). [20]

(20) In line with the Commission's precedents, the Parties maintain that one-stop services can in certain circumstances present a competitive alternative to non-stop services. [21]

(21) A majority of respondents to the market investigation indicated that one-stop services could constitute competitive alternatives to non-stop services as identified above. [22]

(22) However, for the assessment of the Transaction, the conclusion on whether or not non-stop/direct and one-stop/indirect flights belong to the same market can be left open as the outcome of the Commission's competitive assessment would not change under any alternative market definition.

4.4. Airport substitutability

(23) The Commission has found in its previous decision practice that flights from and to airports which have sufficiently overlapping catchment areas can be considered as substitutes in the eyes of passengers. Such airport substitution has often been found where several airports are located in the same city. [23]

(24) In the present case, the question of airport substitutability arises for the overlap routes involving one or two of the following cities which are served by two or more airports: Chicago, Dallas, Washington DC, Los Angeles, Miami, New York, San Francisco, Tampa, London and Paris. However, for the purpose of this Transaction, the Commission does not have to reach a definitive conclusion as to whether flights between alternative airports and the same destination are substitutable as the outcome of the Commission's competitive assessment would not change under any alternative market definition [24] .

(25) The Parties also argue that, on the London Heathrow – Philadelphia route, their air passenger transport services are constrained by services between London and Newark airport. The Parties' arguments will be assessed in Section 6.3.2 below.

5. TREATMENT OF PROFIT-SHARING JOINT VENTURES FOR THE ASSESSMENT OF THE TRANSACTION

(26) Prior to assessing the impact of the Transaction on the relevant markets, determined preliminary question must be addressed: the treatment of American Airlines' alliance and the Transatlantic Joint Business partners for the purposes of both the determination of affected markets and the competitive assessment of the Transaction.

(27) American Airlines is a member of the oneworld alliance. American Airlines, British Airways and Iberia are parties to the metal neutral Transatlantic Joint Business, whereby they have agreed to have common fares, capacity, schedules, sales and marketing, share overall revenues and sell each other's products and services without regard to which party is operating the aircraft. [25]

(28) In accordance with previous cases, the assessment of the Transaction will be carried out on the routes operated directly by American Airlines as well as by American Airlines' partners in the Transatlantic Joint Business to the extent that they fall within the scope of the Joint Business Agreement.

(29) In addition, US Airways has announced that following the Transaction, it will withdraw from Star Alliance and join the oneworld alliance as well as the Transatlantic Joint Business. [26]

(30) Similarly, there are two other revenue-sharing joint ventures covering air passenger services on transatlantic routes, namely the Star Alliance A++ Joint Venture of United, Lufthansa and Air Canada (the "A++ JV"), and the profit-sharing transatlantic joint venture between Air France/KLM, Delta Air Lines ("Delta") and Alitalia (the "North Atlantic JV" or the "NAJV"). Their market positions will be analysed as being a single one on all relevant routes.

(31) On 20 June 2013, the Commission approved the acquisition by Delta and Virgin Group Holdings Limited of joint control of Virgin Atlantic Limited ("Virgin"). [27] The U.S. Department of Transportation is currently reviewing Delta and Virgin's application for antitrust immunity relating to their proposed joint venture for their operations on non-stop routes between the US and the UK. [28] This review is expected to be completed during third quarter of 2013, and the implementation of the Delta/Virgin joint venture is anticipated to occur in the first quarter of 2014. However, the evolution of the scope of the North Atlantic JV and of the joint venture arrangements between Delta and Virgin would not affect the Commission's competitive assessment in the present case.

6. Competitive Assessment

(32) The Transaction gives rise to a high number of affected markets. In accordance with the Commission's constant practice in the airline sector, the Commission has not conducted a detailed competitive assessment on the affected markets on which no competition concerns are deemed to arise. For the purpose of this Transaction, this holds true for all affected non-stop/one-stop and one-stop/one-stop overlap routes on which throughout the last four IATA seasons: (i) the Parties' combined market share was below 25%, or (ii) one of the Parties had a market share below 2% or (iii) the total annual traffic was below 30,000 passengers or (iv) the route was below the HHI thresholds of paragraph 20 of the Horizontal Merger Guidelines in all the last four seasons in any passengers segment.

(33) The Commission has focused its investigation on the remaining 67 overlap routes which are (i) one non-stop/non-stop overlap on London-Philadelphia (ii) 27 non-stop/one stop overlap routes, and (iii) 39 one-stop/one-stop overlap routes. These routes will be analysed in Sections 6.3, 6.4 and 6.5 below.

6.1. Methodology for calculating market shares

(34) The Commission regularly [29] endorses the use of Marketing Information Data Tapes (MIDT) data as the best available proxy to estimate market shares in the air passenger transport market. The Parties therefore submitted data on market size and market share on the basis of MIDT data for each relevant O&D route.

(35) MIDT data capture the booking of airline tickets made through Global Distribution System (GDS); however MIDT data does not include bookings made directly via the airline web-sites and sales of charter airlines.

(36) The Commission proceeded to a market reconstruction on a number of selected routes where the Parties' market shares were highest by using the Parties' and their competitors' actual passenger numbers on each relevant O&D route. [30]

(37) The market shares calculated on the basis of the market reconstruction are broadly similar to the market shares calculated using MIDT data, confirming the possibility to rely on MIDT data, including for the other routes under review. Therefore in line with previous practice, the competitive assessment of the Transaction will rely only on MIDT data. [31]

(38) Also in line with previous practice [32] , for the assessment of the Transaction, all one-stop flights are taken into account without applying a cut-off at a certain maximal duration of the connection time. The Commission takes the view that the competitive analysis can include all booked one-stop tickets because the low popularity of very long one-stop flights will be reflected in the booking data in that they will only account for a very small part of the relevant market.

6.2. Congestion at relevant airports

(39) The Commission has previously concluded that the lack of slots at congested airports can constitute a barrier to entry on some city pairs. [33] The extent of slot scarcity at a given airport depends on the congestion level of that airport. [34] Amongst the airports where the Parties operate, the Commission will assess the congestion level at two airports, namely London Heathrow and Philadelphia. [35]

(40) London Heathrow is a fully coordinated airport under the EU Slot Regulation (Level 3) [36] , meaning that each business and general aviation movement requires the prior allocation of a slot. At London Heathrow, there are constraints on airline access to slots across the whole operating day on every day of the week across all months of the year. It is therefore not currently possible for an airline to rely on the slot pool at London Heathrow to launch or extend services and each season there is either very limited availability or no availability at all, as explained by the London Heathrow slot coordinator, Airport Coordination Limited ("ACL") [37] . According to ACL, American Airlines held 2.6% and 2.2% of all London Heathrow slots during the Summer 2012 and Winter 2012/13 IATA seasons respectively, while US Airways only held 0.1% and 0.2% [38] . The main slot holders at London Heathrow are British Airways and Iberia, followed by Lufthansa, Aer Lingus and Virgin.

(41) As regards Philadelphia airport, the United States' Federal Aviation Administration ("the FAA") confirmed that Philadelphia is not among the airports for which the FAA currently regulates the allocation of slots, slot exemptions, operating authorizations, or similar capacity allocation mechanisms. [39] In addition, the Philadelphia airport manager confirmed that there are currently no substantial limitations or constraints for airlines to get access to the Philadelphia airport. [40]

6.3. Non-stop/non-stop overlap route: London-Philadelphia

(42) The proposed Transaction gives rise to one non-stop/non-stop overlap on a long-haul route, namely London-Philadelphia. [41]

6.3.1. Structure of the market

(43) Approximately 200,000 passengers travelled on the London-Philadelphia route in 2012, of which 47% travelled on a point-to-point basis. In the Summer 2012 IATA season, a total of 59,420 passengers (among whom 20,775 premium passengers) travelled on that route on a point-to-point basis. In the Winter 2012/13 IATA season, 33,119 passengers (among whom 13,325 premium passengers) travelled on that route. For each of these seasons and within each category of passengers (premium and non-premium), approximately 85% or more of these passengers travelled non-stop.

(44) US Airways operates a daily service between London Heathrow airport and Philadelphia airport and British Airways, American Airlines' partner in the Transatlantic Joint Business operates a twice daily service. These three daily flights are the only non-stop services between London and Philadelphia. During the Summer 2012 and Winter 2012/13 IATA seasons, Virgin sold tickets on US Airways' non-stop service on London-Philadelphia under a code-sharing agreement between the two carriers. This explains why the Parties' market shares on non-stop services do not add up to 100%, in particular as regards non-premium passengers. This code-sharing agreement between US Airways and Virgin was terminated on 11 June 2013 and Virgin no longer sells tickets on US Airways' service. Therefore, as of the Summer 2013 IATA season, only the Parties are offering non-stop services on this route.

(45) In addition to the Parties' non-stop and one-stop services, the members of the A++ JV and the North Atlantic JV also offer one-stop services on this route. The market positions of the Parties and their competitors on this market are as follows:

Table 1: Market shares on London-Philadelphia

- non-stop operations only -

|Summer 2012 |Winter 2012/13 |

|Premium |Non Premium |Total |Premium |Non Premium |Total |

US Airways |[10-20]% |[40-50]% |[30-40]% |[10-20]% |[40-50]% |[30-40]% |

TAJB |[80-90]% |[50-60]% |[60-70]% |[80-90]% |[40-50]% |[60-70]% |

Combined market shares |[90-100]% |[90-100]% |[90-100]% |[90-100]% |[80-90]% |[90-100]% |

Virgin (marketing carrier only) |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[10-20]% |[5-10]% |

Source: The Parties, based on MIDT data (rounding effects)

Table 2: Market shares on London-Philadelphia - non-stop and one-stop operations -

|Summer 2012 |Winter 2012/13 |

|Premium |Non Premium |Total |Premium |Non Premium |Total |

US Airways |[10-20]% |[30-40]% |[30-40]% |[10-20]% |[30-40]% |[30-40]% |

TAJB |[70-80]% |[40-50]% |[50-60]% |[70-80]% |[40-50]% |[50-60]% |

Combined market shares |[90-100]% |[80-90]% |[90-100]% |[90-100]% |[80-90]% |[80-90]% |

A++ JV |[0-5]% |[5-10]% |[5-10]% |[0-5]% |[5-10]% |[0-5]% |

NAJV |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[0-5]% |

Virgin (marketing carrier only) |[0-5]% |[0-5]% |[0-5]% |[0-5]% |[10-20]% |[5-10]% |

Source: The Parties, based on MIDT data (rounding effects)

(46) The Transaction would lead to a reduction in the number of non-stop carriers active on this route from 2 to 1 and would give the merged entity a [90-100]% market share post-Transaction if only non-stop services are considered and market share of at least [80-90]% if one-stop services are also considered. The Transaction would therefore create a dominant position of the merged entity on the London-Philadelphia route. In addition, the Parties are the only non-stop operators on this route, and thus are by definition the closest competitors. [42] Lastly, due to the heavy congestion and the scarcity of slots prevailing at London Heathrow, entry opportunities on the London-Philadelphia route would remain strongly limited post-Transaction. As a consequence, the significant increase in the market power of the merged entity will provide it with the ability and most likely with the incentive to increase prices.

(47) The Parties submit that the Transaction does not raise competition concerns as regards the London-Philadelphia route because (i) the Parties' services will be constrained by operations from and to Newark airport, (ii) the Parties' services will be constrained by one-stop operations on this route and (iii) the Transaction will bring about efficiencies [43] . These arguments will be assessed in turn in Sections 6.3.2 to 6.3.5 below.

6.3.2. Constraint from Newark airport

(48) The Parties claim that transatlantic services to and from Philadelphia airport face a significant constraint from services to and from Newark airport.

(49) While the Parties agree with the Commission's finding in its decision in United/US Airways [44] that Newark airport and Philadelphia airport are not substitutable and do not belong to the same O&D markets, the Parties argue that alternatives which may be outside the relevant market may still exercise a constraint and contribute to disciplining any attempted price increase.

(50) In support of their claim that Philadelphia airport faces a significant constraint from Newark airport, the Parties refer to (i) geographical factors such as the distance and the road and rail connections and (ii) commercial factors such as United Airlines' codeshare with Amtrak, the higher number of frequencies from Newark airport, the increased inter-alliance competition and US Airways' own marketing strategy such as [confidential details on marketing strategy]. The Parties also submitted two economic studies submitted by their outside economist to justify their assertion that they face a significant competition constraint from Newark airport on their operations between London Heathrow and Philadelphia, namely an Economic Analysis of Newark Airport's Constraint on fares on the Philadelphia to London route of 27 June 2013 (the "economic study of 27 June 2013") and Correlations of fares on the Newark to London and Philadelphia to London routes of 1 July 2013 (the "economic study of 1 July 2013). [45]

(51) As noted above in Section 4.1, the Commission traditionally defines the relevant market for scheduled passenger air transport services on the basis of the "point of origin/point of destination" (O&D) city-pair approach. In this case, the relevant market is the London-Philadelphia city pair [46] .

(52) In addition, the Commission has also found that flights from and to airports which have sufficiently overlapping catchment areas can be considered as substitutes in the eyes of passengers and such airport substitution has often been found where several airports are located in the same city. [47] The Commission found in previous decisions that, when it comes to choosing between air transport services to and from different airports, passengers take into account a number of elements like travel time, travel costs, flight times/schedules/frequencies and the quality of service and that ultimately a passenger's choice for one or the other airline service from one or the other airport will be driven by a combination of these elements.

(53) The Commission examined for the purpose of the Transaction whether flights between London Heathrow and Newark airport exert a sufficient competitive constraint on the Parties such that the Parties would not be able to exercise market power post-Transaction on the London Heathrow – Philadelphia route.

(54) In order to correctly capture the competitive constraint that flights from and to two different airports exert on each other it is necessary to consider the specific characteristics of the case at hand. [48]

(55) For the purpose of the assessment of this issue in the present Transaction, the Commission considered both qualitative and quantitative elements which will be described in detail below.

6.3.2.1. Geographical aspects and road and rail connections

(56) The Commission has in previous decisions considered that, for airports which are within 100km or 1 hour from the respective city centre, most passengers would not consider that flying from one airport or the other to the same destination is manifestly inconvenient. However, such benchmark was used by the Commission merely as a "first proxy" [49] for determining whether airports appear prima facie as substitutable and a route-by-route analysis is necessary to capture the specificities of each airport pair.

(57) Newark airport is located less than 140km (by car) from Philadelphia city centre [50] whereas Philadelphia airport is located less than 20km (by car) from Philadelphia city centre. [51] Depending on traffic conditions, Newark airport could be reached in about 90 minutes from Philadelphia city centre [52] whereas Philadelphia airport could be reached in 15 minutes [53] .

(58) The Parties argue that, for many people living or working between Philadelphia (including Philadelphia city centre) and Newark, Newark airport would be an alternative. In the Parties' view this would apply even to people living or working in Philadelphia city centre. [54] The Parties explain that their transatlantic air passengers transport services from and to Philadelphia airport would be constrained by services from Newark airport as the overlap in the catchment areas of the two airports covers a densely populated area that generates substantial corporate and leisure traffic.

(59) The Parties have estimated that, by using a catchment area of […] km (around […] miles) around each of Philadelphia airport and Newark airport, the population size in the overlapping catchment area would be approximately […] million people. This would represent, in the Parties' view, more than […]% of the overall population of the Philadelphia airport catchment area. In the economic study of 27 June 2013, the Parties further expand the catchment area of each airport to […] miles. As the economic study of 27 June 2013 also sets out, one additional adjustment to the catchment area analysis is necessary, namely to exclude the passengers which live in the vicinity around each airport, as such passengers are more likely to use that airport’s services and are unlikely to use the other airport’s services. The Parties have assumed the immediate vicinity to be a […] mile radius circle around each airport (i.e. any individual who lives within […] miles of one of the two airports does not consider the other airport a reasonable substitute for long-haul flights). Therefore, on the basis of a […] mile catchment area and excluding the passengers living in the immediate vicinity of the airports (i.e. all passengers within […] miles), the Parties estimate that a population of […] million live in the overlap catchment area. If a catchment area using […] mile radius around each airport is used and the population living within a […] mile radius around each airport from the catchment area overlap is excluded, the Parties estimate that the number of people living in the resulting overlap catchment area decreases to […] million people.

(60) The manager of the Philadelphia airport, the Division of Aviation of the City of Philadelphia, stated during the Commission's market investigation that, in their view, Philadelphia airport has a primary catchment area which extends one hour drive time (60 miles) around Philadelphia airport whereas its secondary catchment area reaches 1 hour and 20 minutes' drive time (approximately 75 miles) around Philadelphia airport. The manager of the Philadelphia airport explained that [55] , based on past experience, Philadelphia airport currently only stands to lose discretionary passengers in the secondary catchment area to Newark airport and not passengers in the primary catchment area.

(61) Based on the views expressed by the manager of the Philadelphia airport, the Commission considers that the Parties' estimation of a […] mile secondary catchment area appears too wide while their estimate of a […] mile primary catchment area appears too narrow. In addition, further adjustments would appear necessary to take account of other factors such as for example the fact that it is likely that not all people living in the resulting overlap catchment area would be interested in transatlantic air passenger transport services. The Commission therefore considers that the Parties' estimates are not reliable and that it cannot draw any conclusions as to whether indeed the number of people living in the overlap catchment area of the two airports is significant for the purpose of the assessment of this Transaction.

(62) The Parties also explain that the area between Philadelphia and Newark is connected by a number of highways and that Virgin Atlantic provides a complimentary chauffeur service for its Upper Class passengers to and from Newark on its twice daily Newark-London Heathrow flight up to 75 miles. In addition, the Parties explained that corporate customers frequently organize their own chauffeur (or taxi) services for transport to and from Newark in addition to the existence of other (shared) means of road transport available such as, for instance, shared shuttle services.

(63) Lastly, the Parties explain that Amtrak [56] and New Jersey Transit rail [57] services conveniently and frequently connect Philadelphia city centre to Newark airport. The Parties also note that United Airlines offers frequent air services between its major hub at Newark airport and London. United Airlines has a codeshare partnership with Amtrak on the Northeast corridor service covering Philadelphia and beyond under a so called "United Airlines Connection Special" service which in the Parties' view clearly demonstrates that United Airlines considers the wider Philadelphia area as part of the Newark catchment area. [58]

(64) Some respondents (corporate customers and travel agents) to the Commission's market investigation consider that the Amtrak and NJ Transit rail connections could represent an important access to Newark airport from Philadelphia and vice versa. However, some corporate customers indicated that it is difficult to book overseas train journeys in the GDS' and that a train journey before/after a long-haul flight is not desired in particular when considering that this would increase the total travel duration (particularly for passengers living closer to Philadelphia). The Commission considers that only for some customers train could be a convenient means to access Newark airport from the Philadelphia catchment area and this is most likely to be the case for non-premium passengers and passengers living closer to Newark airport. Lastly, the Commission notes that Virgin's complementary service is offered only to a certain category of passengers (high yield) and it does not reach Philadelphia city centre.

6.3.2.2. Commercial aspects

(65) The Parties argue that the higher frequency of services at Newark airport to London Heathrow (overall currently ten non-stop services) when compared with Philadelphia – London Heathrow services (overall three non-stop services) adds to Newark airports' attraction as an alternative to Philadelphia airport. In particular, [confidential details on marketing strategy]. The Commission considers that the question of attractiveness of the number of frequencies is relevant only for those passengers who are indifferent between flying from Philadelphia airport or from Newark airport. In this sense, for the passengers for which Newark airport is not an alternative, the higher number of frequencies at Newark is not prone to have any impact on the operations from Philadelphia airport.

(66) In addition, the Parties explain that US Airways put in place specific marketing strategies [confidential details on marketing strategy].

(67) The Commission notes that the evidence submitted by the Parties relates in most part to flights to and from other EU destinations than London. As for the information regarding London, the evidence actually shows that [confidential details on marketing strategy] [59] The Commission considers that this shows that even with [confidential details on marketing strategy], there are additional factors (beyond [confidential details on marketing strategy]) which passengers will consider in their decision to choose a flight to London from Newark or Philadelphia respectively. [Confidential details on marketing strategy].

(68) Lastly, the Parties argue that US Airways' internal documents also show that [confidential details on internal business process and marketing strategy]. However, the evidence submitted by the Parties does not refer to the London-Philadelphia route but to other transatlantic flights such as […], […], […] or […] and the Parties do not explain why such evidence would be relevant for the London-Philadelphia route. In any event, the evidence submitted by the Parties consists in [description of factors assessed] which are not in themselves sufficient to demonstrate that flights from Newark to London do sufficiently constrain flights from Philadelphia to London.

6.3.2.3. Price monitoring of both Parties on the London Heathrow – Philadelphia route

(69) The Commission further investigated whether US Airways and American Airlines (or its partners of the Transatlantic Joint Business) monitor fares on the London-Newark route or if they take into account these fares in their normal course of business, in particular when setting their own fares on the London-Philadelphia route.

(70) US Airways submitted that, when it comes to monitoring prices, capacities and load factors of rivals, it considers [confidential details on internal business process and marketing strategy]. On London Heathrow-Philadelphia, US Airways noted that [confidential details on internal business process and marketing strategy]. [60] However, US Airways explained that [confidential details on internal business process and marketing strategy] [61] .

(71) As regards pricing on the Transatlantic Joint Business' operations on the London Heathrow-Philadelphia route, [confidential details on internal business process and marketing strategy of the Transatlantic Joint Business' members]. As regards price monitoring on the London Heathrow-Philadelphia route, [confidential details on internal business process and marketing strategy of the Transatlantic Joint Business' members] [62] .

(72) The Commission considers that, while US Airways [confidential details on internal business process and marketing strategy], this does not show that US Airways considers London Heathrow-Newark as a particular constraint for its London-Philadelphia operations as [confidential details on internal business process and marketing strategy]. Likewise, the Transatlantic Joint Business [confidential details on internal business process and marketing strategy]. If the Transatlantic Joint Business [confidential details on internal business process and marketing strategy] and if services at Newark airport were indeed constraining services at Philadelphia airport, it would be expected that the Transatlantic Joint Business [Commission's assessment of the Transatlantic Joint Business' internal business process and marketing strategy].

6.3.2.4. Commission's market investigation

(73) The Commission tested with other market participants such as corporate customers, travel agents or the Philadelphia airport the Parties' arguments regarding the constraints exercised by competing non-stop services offered at Newark airport on the pricing of London-Philadelphia services.

(74) The majority of corporate customers who bought tickets for their employees in the last two years (2011 and 2012) on the London-Philadelphia route stated that, if prices of flights on the London-Philadelphia route increased by 5-10% post-Transaction, a significant proportion of their employees who need to travel between London and Philadelphia would not choose a flight between London and Newark airport (instead of Philadelphia airport). [63] In addition, the majority of corporate customers also responded that if their employees need to fly between London and Philadelphia or London and anywhere between Philadelphia and Newark, they do not consider Philadelphia and Newark airports as equivalent. [64]

(75) Travel agents who sold tickets in the last two years (2011 and 2012) on the London-Philadelphia route gave more mixed responses. On the one hand the majority of travel agents considered that a significant proportion of their premium customers would not choose a flight between London and Newark airport if prices of flights on the London-Philadelphia airport route increased by 5-10% post-Transaction. On the other hand when it comes to non-premium customers, their views are split and almost equal numbers of travel agents diverge on whether a significant proportion of their non-premium passengers would choose such a flight between London and Newark airport if prices of flights on the London-Philadelphia route increased by 5-10% post-Transaction.

(76) Lastly, when asked what they would do if the Parties increased their prices on the London-Philadelphia route post-Transaction, only a minority of corporate customers and travel agents replied that they would switch to non-stop flights between London and Newark airport. Of these respondents, almost all corporate customers were located in the overlap catchment area and were already using the two airports alternatively. However, the Parties have been unable to demonstrate that a switch by these marginal customers would be sufficient to defeat any price increase on the London-Philadelphia route post-Transaction. In addition, the majority of the other corporate customers as well as the majority of travel agents would either not switch at all or take a combination of actions (such as not switching at all, switching to one-stop flights and switching to non-stop flights from Newark airport).

(77) The manager of the Philadelphia airport explained that [65] , based on past experience, he does not consider that flights from Newark (to London Heathrow) are an alternative for passengers in the primary catchment area of Philadelphia airport. As to passengers in the secondary catchment area, the manager considers that only under certain circumstances and only for certain categories of passengers (such as for non-premium passengers which are very price sensitive) might flights from Newark to London Heathrow constitute an alternative. In spite of this, Philadelphia airport does its best to attract discretionary passengers in the secondary catchment area, despite the large geographic spread and expense of marketing. The manager also explained that, in the past, Philadelphia airport has lost traffic to Newark due to Newark's plethora of international flights and destinations; however, as of late, Philadelphia airport has narrowed the playing field with its global expansion, and as mentioned, currently only stands to lose discretionary passengers in the secondary catchment area.

6.3.2.5. Economic submissions

(78) As mentioned above, the Parties submitted two studies and a complementary note arguing that the availability of flights between London and Newark constrains the fares on London-Philadelphia flights.

(79) The economic study of 27 June 2013 argues that, due to the high density of population living in the Newark and Philadelphia catchment overlap area; the convenient transportation options between Newark and the Philadelphia area; the more frequent flights between London Heathrow and Newark relative to London Heathrow and Philadelphia; and the airline's limited ability to price discriminate among passengers based on different locations make Newark a good substitute for the majority of potential flyers from the Philadelphia. The study argues that a price increase on the London-Philadelphia route would be unprofitable as large number of passengers would switch to fly from the Newark airport. The Parties claim that, evaluating a service between London and Newark/Philadelphia combined, the Transaction would be a four-to-three instead of a two-to-one. They cite a recent economic paper that finds only small price effects from this type of mergers (Brueckner et al (2013)). [66]

(80) A number of the points described in the economic study of 27 June 2013 have already been addressed in the Sections above. The Commission notes that some customers may consider flights from Newark airport or Philadelphia airport as substitutable for flying to and from the same transatlantic destination. However, this does not mean that the London-Newark flights can sufficiently constrain the fares on the London-Philadelphia flights. A hypothetical monopolist (and in this case an actual one at the Philadelphia airport) could still be able to raise prices of its London-Philadelphia flights by 5 to 10% if the lost profit from the customers who switched to flights operated by another airline between Newark and London Heathrow is lower than the increase in profits on those customers who remained. As mentioned, the Parties have not quantified the diversion from Philadelphia to the competitors in Newark due to a price increase.

(81) Even if the proposed Transaction would be four-to-three, one would expect price effects due to the increased market power of the Parties if there are no compensating efficiencies. The paper cited by the Parties, Bruckner et al. (2013) looks at domestic US airfares. Bruckner et al. (2013) find that most forms of legacy-carrier competition have weak effects on average fares on the domestic US routes. According to the paper's results, most hypothetical combinations of legacy carriers (including the American Airlines and US Airways merger) would result on a very modest domestic average fare increase. This result, as the paper points out, is mainly due to the small amount of domestic overlap between networks which dilutes the average effect. However, the fare increases could be rather large on the overlap routes. The majority of the ex-post evaluation literature of airline mergers, summarized by e.g. Kwoka (2013) [67] , finds that actual airlines mergers resulted in significant price increases. Furthermore, the Commission has also conducted its own analysis and concluded that exit events in the past on the London-Philadelphia route have led to non-negligible increases in relative fares. This analysis is described in Section 6.3.5 below.

(82) The second economic study of 1 July 2013 presents a correlation analysis [68] using monthly revenue and passenger data for the period May 2010 and April 2013. The study argues that average fares on the London-Philadelphia and London-Newark routes are moving very closely and this indicates that these flights are indeed close substitutes. The study computes correlations of average fares (aggregating the data for the Transatlantic Joint Business and US Airways at a non-directional level), controlling for cabin class and for the existence of corporate customers, and partial correlations of average fares, additionally controlling for fuel costs. [69] Partial correlations, which are more appropriate for this type of analysis, show that [results of Parties' economic study based on confidential data] [70] followed by [results of Parties' economic study based on confidential data]. [Results of Parties' economic study based on confidential data].

(83) The Commission reviewed the Parties' correlation study and identified a number of problems with the analysis that cast doubts on any inference that the Parties want to draw from it. In addition to potential issues related to non-stationarity of some of the series [71] , as pointed out in the economic study, the main problem is that the correlation results indicate very high correlation of O&D fares on a significant number of London-US East Coast routes. Furthermore, the difference between the correlations levels of fares from London-Newark and London-Philadelphia and London-Boston and London-Philadelphia (as submitted by the Parties) is not statistically significantly. The Commission has also run the analysis segmenting by cabin class and carrier and found even higher correlations than the Parties. The Commission found that the correlations of the Transatlantic Joint Business' fares between London and Philadelphia and London and Boston, New York JFK and Chicago are all high and often higher (although in most cases the difference is not statistically significant) than the correlation between London and Philadelphia and London and Newark. The Commission considers that it is highly unlikely that for O&D passengers the relevant market would include all these airports. The correlation is more likely to be driven by some unobserved common factor than by airport substitutability. As a result, the Commission notes that this study does not provide meaningful evidence on the potential constraints imposed by London-Newark on the London-Philadelphia route. [72]

(84) To address the issues raised by the Commission, in particular at the State of Play meeting of 9 July 2013, the Parties submitted another note on 22 July 2013. The note argues that "[confidential quote from note]" and similarly "[confidential quote from note]" given the small sample. Finally, the Parties argue that their "[confidential quote from note]."

(85) The Commission notes that statistically insignificant results cannot be relied upon to draw conclusions. As mentioned in the Best Practice guidelines for submission of economic evidence [73] "[W]here econometric analyses are to be conducted, the sample needs to be of sufficient size for meaningful inference." Based on the Parties' correlation results, it is not clear how the Newark-London Heathrow fares would constrain the Philadelphia-London Heathrow fares to a significantly (both statistical and economic sense) higher extent than e.g. the New York JFK-London Heathrow fares or the Boston-London Heathrow fares, while the two latter routes are not considered to be a constraint at all on the Philadelphia-London Heathrow route. Finally, the Commission notes that given that the substitution between premium and non-premium passengers are typically found to be relatively low, stacking premium and non-premium prices together to produce a summary correlation coefficient would bias the results.

6.3.2.6. Conclusion on constraint from Newark airport

(86) On the basis of all the qualitative and quantitative evidence which the Commission had on the file and as described above, the Commission concludes that, post-Transaction, the Parties most likely will not be sufficiently constrained in particular in terms of fare setting on their operations between London Heathrow and Philadelphia airport by their competitors' operations between London Heathrow and Newark airport.

6.3.3. Competition from one-stop services

(87) The Parties argue that the wide range of competitive one-stop services available for passengers traveling between London and Philadelphia provide a further constraint on pricing for Philadelphia to London services, particularly in respect of non-premium passengers. In the Parties' view, the relatively small number of passengers that currently use one-stop services reflects the fact that prices for non-stop services (including services between London and Newark) are competitive and give passengers no incentive to shift.

(88) The Parties themselves provide one-stop services on that route, US Airways from London Gatwick via Charlotte and the Transatlantic Joint Business from London Heathrow via Chicago, Miami and Dallas. The Parties' main one-stop competitors on this route are the A++ JV and the North Atlantic JV, each with an overall market share below [0-5]% in both seasons and below [0-5]% as regards premium passengers only. Thus, even adding one-stop services to non-stop ones, the Parties' combined market share on this route remain above [80-90]%, reaching [90-100]% on the premium segment, for each of the Summer 2012 and Winter 2012/13 IATA seasons.

(89) As regards the London-Philadelphia route, only a small proportion of passengers, 8% overall and 3% of premium passengers, used one-stop services to travel on this route in 2012. Respondents to the market investigation have also largely confirmed that they do not consider that one-stop services are a suitable alternative to non-stop services on the London-Philadelphia route, due to the increase in total travel time, and that they would not switch to one-stop services should prices increase on this route. [74]

6.3.4. Efficiencies

(90) The Parties put forward an analysis claiming that the Transaction will give rise to substantial efficiencies that will benefit present and future passengers using the London-Philadelphia services. These efficiencies would stem from both reduction in schedule delays (in-market efficiencies) and reductions of double marginalization for connecting passengers (out-of market efficiencies). The Parties argue that, in light of the significant constraints on London-Philadelphia services, the existence of important efficiency benefits underscores the conclusion that the Transaction should not impact effective competition on this route.

(91) As set out in paragraph 84 of the Guidelines on the assessment of horizontal mergers [75] , it is highly unlikely that a concentration leading to a market position approaching that of a monopoly can be declared compatible with the internal market on the ground that efficiency gains would be sufficient to counteract its potential anti-competitive effects. Furthermore, the Parties' study relies, for instance, on a number of assumptions concerning the increase in passenger number resulting from the Transaction. Some of these assumptions are questionable, thus undermining the verifiability of these proposed efficiencies [76] .

(92) Therefore and given the near monopoly on the London-Philadelphia route, the Commission considers that any sufficient pass-on of alleged efficiencies to consumers most likely would not take place.

6.3.5. Effects analysis

(93) The Commission has conducted a price concentration analysis in order to understand the effect on fares from entry and exit events in the London-Philadelphia route. The Commission observed that the partial exit event by US Airways on September 2009 from London Gatwick-Philadelphia, which reduced the overall number of frequencies on London-Philadelphia from 4 to 3 (i.e. 2 from the Transatlantic Joint Business on London Heathrow-Philadelphia and 1 from US Airways on London Heathrow-Philadelphia), had a statistically significant effect of […]% on the fares of the Transatlantic Joint Business on London Heathrow-Philadelphia for non-premium passengers relative to non-premium fares of the Transatlantic Joint Business on the other routes. [77] The exit and entry events available have only enabled the Commission to assess the effect from reduction on frequencies and not the effect from the reduction in the number of competitors. However, even if the number of frequencies were to be maintained after the Transaction, the increased market power of the Parties would still likely allow them to increase the fares. [78] The Commission therefore concludes that the Transaction could have a non-negligible effect on fares on the London-Philadelphia route.

(94) The Parties' note submitted on 22 July 2013 argues that the effects identified by the Commission could not be considered as a proxy for the effect of the Transaction given that the price increase resulted from a decrease in capacity while the Transaction [confidential details on future plans of the Transatlantic Joint Business on the London-Philadelphia route]. Moreover, the Parties' note of 22 July 2013 claims that due to data limitations, the Commission's analysis was only able to observe the effect of the exit on British Airways' fares and not on the average fares of all carriers operating on the Philadelphia-London route.

(95) The Commission agrees that the estimated effect may not be a perfect proxy for the merger's effect, as discussed above. However, the price increase due to the decrease in capacity on the Philadelphia-London Gatwick route indicates that the Newark-London Heathrow services are not able to constrain the prices on the Philadelphia-London Heathrow route. As a consequence, any increase in the market power of the Parties (the Transaction would lead to a quasi-monopoly on the route) will give the merged entity the ability and the incentive to increase prices [79] .. Finally, drawing an inference based on the effect on British Airways' average fares is appropriate since, as the Parties observed in their correlation analysis, prices of competing products should be highly correlated and therefore a similar effect could be expected on the other carriers operating on the route.

6.3.6. Conclusion

(96) In light of the above and of the other available evidence, the Commission considers that the Transaction raises serious doubts as to its compatibility with the internal market on the premium segment and on the non-premium segment, and therefore also on the market encompassing all passengers, with respect to the London-Philadelphia route.

6.4. Non-stop/one-stop overlap routes

6.4.1. Introduction

(97) The proposed Transaction gives rise to non-stop/one-stop horizontal overlaps on 27 long-haul routes which the Commission will assess and which result from US Airways and American Airlines offering either non-stop or one-stop services (the "27 non-stop/one-stop overlap routes"). These are: Barcelona-Miami, Dublin-Chicago, Frankfurt-Dallas, Frankfurt-Philadelphia, London-Atlanta, London-Charlotte, London-Dallas, London-Denver, London-Las Vegas, London-Miami, London-Orlando, London-Phoenix, London-Raleigh, London-San Diego, London-Seattle, London-Tampa, Madrid-Boston, Madrid-Chicago, Madrid-Los Angeles, Madrid-Miami, Madrid-New York, Manchester-New York, Paris-Dallas, Paris-Miami, Paris-Philadelphia, Rome-Chicago and Rome-Philadelphia.

(98) On 23 of the 27 non-stop/one-stop overlap routes [80] , American Airlines (or one of its Transatlantic Joint Business partners) offers non-stop services whereas US Airways offers one-stop services. On the remaining 4 routes, US Airways offers non-stop services whereas American Airlines offers one-stop services. [81]

(99) For the purposes of this Transaction, the Commission will assess the competitive effects as follow: first, the closeness of competition between the Parties on the relevant routes will be analysed (Section 6.4.2.1). Then, the Commission will look at the 12 routes on which, in addition to the non-stop services of one of the Parties, there is another competitor providing non-stop services (Section 6.4.2.2) and lastly, the Commission will assess the remaining 15 routes on which one of the Parties is the only non-stop operator while the other party and the remaining competitors offer one-stop services (Section 6.4.2.3).

(100) For the reasons explained below, the Commission considers that the overlaps between the Parties' non-stop and one-stop services do not give rise to serious doubts as to the compatibility of the Transaction with the internal market. Moreover, if non-stop and one-stop flights were to be considered as two separate markets there would be either no overlap between the Parties or there would be only a one-stop/one-stop overlap.

6.4.2. Competitive assessment

6.4.2.1. Closeness of competition between the Parties' non-stop and one-stop services

(101) The Commission will, prior to the assessment of the 27 non-stop/one-stop overlap routes, assess the closeness of competition between the Parties depending if US Airways provides non-stop services and American Airlines one-stop services, or vice versa, if American Airlines provides non-stop and US Airways one-stop services.

(102) The concept of "closeness of competition" may play an important role in better understanding the competitive constraint exerted by different competitors on each other in differentiated markets such as airline markets. [82] It is therefore relevant to assess whether the Parties' non-stop and one-stop services would be considered as close substitutes on the 27 non-stop/one-stop overlap routes.

(103) According to the Parties, one-stop flights could be a substitute for non-stop flights under certain conditions such as if there is a possibility to book the flight in Global Distribution Systems (“GDS”) and depending on the daily frequency and on the increase in travel time. [83] Moreover, the Parties support the conclusions drawn in the Commission's decision practice [84] that some passengers prefer one-stop flights to non-stop flights despite an increase in travel time, concluding that all one-stop flights on a US-EU city pair reflected in booking data could be considered substitutes of non-stop flights on the same route. [85]

(104) The Parties claim that their closest competitors on the transatlantic routes are the other "metal neutral" joint ventures: the A++ JV and the North Atlantic JV. [86] The Parties submit that these two joint ventures and the Transatlantic Joint Business have comparable network coverage and compete intensively on the transatlantic routes. In addition, the Parties also claim that the recent integration of Virgin Atlantic and Delta will strengthen their position on the transatlantic routes by integrating Virgin Atlantic's substantial Heathrow-based services into their new joint venture. [87]

(105) When asked which criteria would make passengers choose a non-stop flight over a one-stop flight, competitors [88] identified most often the total travel duration, the schedules and the frequencies. Corporate customers [89] also indicated that they would chose a non-stop flight over a one-stop flight by considering the travel duration, the schedules and whether the flight is covered by a corporate agreement. Furthermore, travel agents [90] indicated that their customers would choose a non-stop flight over a one-stop flight by taking into consideration travel duration, schedules and price as the most important factors.

(106) On the other hand, when asked which criteria would make passengers choose a one-stop flight over a non-stop flight, corporate customers indicated the price difference, schedules and total travel duration, whereas travel agents indicated that for their customers the most important factor is the price weighted by the total travel duration and the schedules. [91] Overall, the majority of respondents to the market investigation generally consider that price is the biggest factor that would lead a passenger to choose a one-stop flight over a non-stop flight followed by a lack of significant difference in travelling time and convenience of schedules.

(107) The majority of respondents to the Commission's market investigation consider that one-stop services could constitute competitive alternatives to non-stop services on the transatlantic route where the Parties activities overlap. [92] Furthermore, a majority of corporate customers and travel agents that responded to the market investigation indicated that premium passengers will always or most often prefer a non-stop flight over the on-stop alternatives, whereas non-premium passengers will prefer the one-stop service if the price is lower or only under certain circumstances. Therefore, in general, non-stop flight appears to be more attractive than the one-stop flight and the Parties' are not each other's closest competitors on the routes on which there is another non-stop operator on the route.

(108) During its market investigation, the Commission enquired for more than half of the 27 non-stop/one-stop overlap routes [93] , whom corporate customers and travel agents see as the closest competitor of each of US Airways and American Airlines. On the routes on which American Airlines (or one of its Transatlantic Joint Business partners) operates the non-stop service and US Airways operates the one-stop service, a majority of corporate customers as well as travel agents did not rank US Airways as American Airlines' closest competitor for either premium or non-premium passengers. [94] In the same manner, a majority of corporate customers as well as travel agents did not rank American Airlines as the closest competitor for either premium or non-premium passengers on the routes where US Airways offers the non-stop service and American Airlines (or one of its Transatlantic Joint Business partners) offers the one-stop service. [95] In the majority of cases, other metal joint ventures (A++ JV, North Atlantic JV) are identified as American Airlines' or US Airways' closest competitor. Even on the routes on which no non-stop competing services are available and where American Airlines is the only non-stop operator and US Airways is offering a one-stop service, respondents identified other one-stop carriers as closer to American Airlines than US Airways and vice versa [96] .

(109) Some respondents and in particular travel agents noted that many airlines operate on these routes and it is difficult to determine the closest competitor from a customer perspective as price, schedule, convenience, on-board amenities, frequency, seasonality, frequent flyer program, alliance affiliation, etc. would all be contributing factors and would vary by customer. [97]

(110) In the light of the above and of the other available evidence, the Commission considers that US Airways and American Airlines do not appear to be close competitors on the non-stop/one stop overlap routes [98] .

6.4.2.2. Non-stop/one-stop overlap routes with competition from other non-stop services

(111) On 12 of the 27 non-stop/one-stop routes, the Parties will continue to face competition from other non-stop and one-stop operators.

(112) These 12 routes are: (1) Dublin-Chicago [99] , (2) Frankfurt-Dallas, (3) Frankfurt-Philadelphia, (4) London-Atlanta, (5) London-Las Vegas, (6) London-Miami, (7) London-Orlando, (8) Madrid-New York, (9) Manchester-New York, (10) Paris-Miami, (11) Paris-Philadelphia, [100] and (12) Rome-Chicago [101] .

(113) On 10 of these 12 routes American Airlines (or one of its Transatlantic Joint Business partners) offers non-stop services, whereas US Airways offers one-stop services. On the remaining two routes (Frankfurt-Philadelphia and Paris-Philadelphia), US Airways offers non-stop services whereas American Airlines (or one of its partners in the Transatlantic Joint Business) offers one-stop services.

(114) Other competitors, such as the members of the A++JV, North Atlantic JV, Virgin or Aer Lingus also offer non-stop and/or one-stop services on these routes.

(115) Table 3 below sets out the Parties' combined market shares and their major competitors' share on these routes in the last two IATA seasons:

Table 3: 12 non-stop/one-stop with competition from other non-stop services

Route |Total pax |IATA season |Passenger segmentation |US Airways |TAJB |Parties |A++ JV |NAJV |

Frankfurt-Dallas |40,483 |Summer 2012 |premium |[0-5]% |[60-70]% |[60-70]% |[30-40]% |[0-5]% |

| | |non premium |[10-20]% |[30-40]% |[40-50]% |[40-50]% |[5-10]% |

| |Winter 2012/13 |premium |[0-5]% |[30-40]% |[30-40]% |[60-70]% |[0-5]% |

| | |non premium |[5-10]% |[40-50]% |[40-50]% |[40-50]% |[5-10]% |

Frankfurt-Philadelphia |43,894 |Summer 2012 |premium |[60-70]% |[0-5]% |[70-80]% |[20-30]% |[0-5]% |

| | |non premium |[60-70]% |[0-5]% |[60-70]% |[30-40]% |[0-5]% |

| |Winter 2012/13 |premium |[60-70]% |[0-5]% |[60-70]% |[30-40]% |[0-5]% |

| | |non premium |[50-60]% |[0-5]% |[50-60]% |[30-40]% |[0-5]% |

Manchester-New York |168,979 |Summer 2012 |premium |[0-5]% |[50-60]% |[50-60]% |[30-40]% |[5-10]% |

| | |non premium |[0-5]% |[50-60]% |[50-60]% |[30-40]% |[5-10]% |

| |Winter 2012/13 |premium |[0-5]% |[50-60]% |[50-60]% |[30-40]% |[0-5]% |

| | |non premium |[0-5]% |[50-60]% |[50-60]% |[30-40]% |[5-10]% |

Rome-Chicago |63,455 |Summer 2012 |premium |[0-5]% |[30-40]% |[30-40]% |[30-40]% |[20-30]% |

| | |non premium |[0-5]% |[30-40]% |[30-40]% |[20-30]% |[30-40]% |

| |Winter 2012/13 |premium |[0-5]% |[10-20]% |[20-30]% |[50-60]% |[10-20]% |

| | |non premium |[5-10]% |[20-30]% |[20-30]% |[40-50]% |[20-30]% |

Route |Total pax |IATA season |Passenger segmentation |US Airways |TAJB |Parties |NAJV |A++ JV |

Madrid-New York |265,224 |Summer 2012 |premium |[0-5]% |[50-60]% |[50-60]% |[10-20]% |[10-20]% |

| | |non premium |[0-5]% |[40-50]% |[40-50]% |[10-20]% |[10-20]% |

| |Winter 2012/13 |premium |[0-5]% |[60-70]% |[60-70]% |[10-20]% |[10-20]% |

| | |non premium |[0-5]% |[50-60]% |[50-60]% |[10-20]% |[10-20]% |

Paris-Miami |158,195 |Summer 2012 |premium |[0-5]% |[30-40]% |[30-40]% |[50-60]% |[5-10]% Corsair in Summer 2012. Corsair in Summer 2012. |

| | |non premium |[5-10]% |[30-40]% |[30-40]% |[20-30]% |[20-30]% |

| |Winter 2012/13 |premium |[0-5]% |[40-50]% |[40-50]% |[40-50]% |[5-10]% |

| | |non premium |[5-10]% |[40-50]% |[50-60]% |[20-30]% |[10-20]% |

Paris - Philadelphia |42,903 |Summer 2012 |premium |[50-60]% |[5-10]% |[60-70]% |[30-40]% |[0-5]% |

| | |non premium |[50-60]% |[5-10]% |[60-70]% |[30-40]% |[5-10]% |

| |Winter 2012/13 |premium |[70-80]% |[5-10]% |[80-90]% |[10-20]% |[0-5]% |

| | |non premium |[70-80]% |[5-10]% |[80-90]% |[5-10]% |[5-10]% |

London-Atlanta |116,349 |Summer 2012 |premium |[0-5]% |[50-60]% |[50-60]% |[40-50]% |[0-5]% |

| | |non premium |[0-5]% |[20-30]% |[20-30]% |[60-70]% |[5-10]% |

| |Winter 2012/13 |premium |[0-5]% |[50-60]% |[50-60]% |[40-50]% |[0-5]% |

| | |non premium |[0-5]% |[20-30]% |[20-30]% |[60-70]% |[5-10]% |

Route |Total pax |IATA season |Passenger segmentation |US Airways |TAJB |Parties |Virgin |NAJV |

London-Las Vegas |283,692 |Summer 2012 |premium |[0-5]% |[60-70]% |[60-70]% |[30-40]% |[0-5]% |

| | |non premium |[0-5]% |[10-20]% |[10-20]% |[60-70]% |[5-10]% |

| |Winter 2012/13 |premium |[0-5]% |[60-70]% |[60-70]% |[20-30]% |[5-10]% |

| | |non premium |[0-5]% |[20-30]% |[20-30]% |[60-70]% |[0-5]% |

London-Miami |271,108 |Summer 2012 |premium |[0-5]% |[70-80]% |[70-80]% |[10-20]% |[0-5]% |

| | |non premium |[0-5]% |[40-50]% |[40-50]% |[30-40]% |[10-20]% |

| |Winter 2012/13 |premium |[0-5]% |[70-80]% |[70-80]% |[20-30]% |[0-5]% |

| | |non premium |[5-10]% |[40-50]% |[50-60]% |[30-40]% |[5-10]% |

London-Orlando |352,696 |Summer 2012 |premium |[0-5]% |[50-60]% |[50-60]% |[30-40]% |[5-10]% |

| | |non premium |[5-10]% |[10-20]% |[20-30]% |[50-60]% |[10-20]% |

| |Winter 2012/13 |premium |[0-5]% |[40-50]% |[40-50]% |[40-50]% |[0-5]% |

| | |non premium |[0-5]% |[10-20]% |[10-20]% |[60-70]% |[10-20]% |

Route |Total pax |IATA season |Passenger segmentation |US Airways |TAJB |Parties |Aer Lingus |A++ JV |

Dublin-Chicago |69,054 |Summer 2012 |premium |[0-5]% |[30-40]% |[30-40]% |[40-50]% |[10-20]% |

| | |non premium |[5-10]% |[20-30]% |[30-40]% |[40-50]% |[10-20]% |

| |Winter 2012/13 |premium |[0-5]% |[5-10]% |[10-20]% |[60-70]% |[10-20]% |

| | |non premium |[5-10]% |[10-20]% |[20-30]% |[50-60]% |[10-20]% |

Source: Form CO, Annex 12 based on MIDT (rounding effects)

(116) On all these 12 routes other significant operators such as the members of the A++ JV, the members of the North Atlantic JV, Virgin or other competitors such as Aer Lingus will continue to significantly constrain the Parties post-Transaction with their non-stop services operated from their respective hubs in Europe or the United States. In addition, these and other carriers offer also one-stop services on these routes.

(117) Furthermore, as mentioned above in Section 6.4.2.1, the Parties are not close competitors on any of these routes as other non-stop operators will continue to be active post-Transaction.

(118) Lastly, the Commission notes that the replies to the market investigation did not reveal any substantiated competition concerns with respect to these 12 routes.

(119) On Frankfurt-Dallas, Frankfurt-Philadelphia, Manchester-New York and Rome-Chicago, the Parties' combined market shares range between [20-30]% and [70-80]% depending on the season and passenger segment. However, the increment brought about by the Transaction is never higher than [0-5]% on most of these routes and passenger segments and the Parties will continue to face a significant competitive constraint from the non-stop services of the A++ JV. Indeed, in both the premium and the non-premium segments, the A++ JV had a significant market share. In addition, the Parties will be further constrained by one stop services offered by the members of the A++ JV, the North Atlantic JV, Virgin or Aer Lingus. The passengers segments on which the increment will be above [0-5]% are (i) the non-premium segment of Frankfurt-Dallas in Summer Season 2012 and Winter 2012/13, on which the increment was [10-20]% and [5-10]% respectively, however the combined market shares remain below [50-60]% and the largest competitors' market share was around [40-50]% and (ii) the non-premium segment of Rome-Chicago in Winter 2012/13, on which the increment was [5-10]%, however the combined market share was below [30-40]% while the largest competitors' market share was around [40-50]%.

(120) On Madrid-New York, Paris-Miami, Paris-Philadelphia and London-Atlanta, the Parties' combined market shares range between [20-30]% and [80-90]% depending on the season and the passenger segment. However the increment brought about by the Transaction is never higher than [0-5]% on most of these routes and passenger segments and the Parties will continue to face a significant competitive constraint from the non-stop services of the North Atlantic JV. Indeed, in both the premium and the non-premium segments, the North Atlantic JV had a significant market share. In addition, the Parties will be further constrained by one-stop services offered by the members of the North Atlantic JV, the A++ JV [103] or TAP. On the Paris-Miami route, the increment was [5-10]% and [5-10]% on the non-premium segment in Summer 2012 and Winter 2012/13 respectively. The combined market shares were [30-40]% and [50-60]% respectively, however the largest competitors' market share was [20-30]% and [20-30]% respectively and the other competitors' share was [20-30]% and [10-20]% respectively. On Paris-Philadelphia, on the non-premium segment the increment was [5-10]% while on the premium segment the increment was [5-10]% in both the Summer 2012 and Winter 2012/13 IATA seasons. However 75% of the passengers on this route travel in the Summer season when the combined market shares of the Parties are below [60-70]% while the North Atlantic JV has market shares of above [30-40]%. In Winter, US Airways is the only non-stop operator, while American Airlines and the other carriers operate one-stop services. The North Atlantic JV managed to achieve a market share of between [5-10]% and [10-20]% and in addition the A++ JV managed to achieve a market share of between [0-5]% and [5-10]% during the Winter season.

(121) On London-Las Vegas, London-Miami and London-Orlando, the Parties' combined market shares range between [10-20]% and [70-80]% depending on the season and the passenger segment. However, the increment brought about by the Transaction is never higher than [5-10]% and the Parties will continue to face a significant competitive constraint from Virgin. In both the premium and the non-premium segments, Virgin had a significant market share with their non-stop services. In addition, other carriers such as the members of the A++ JV also offer one-stop services on these routes.

(122) Lastly, on Dublin-Chicago, the Parties' combined market shares range between [10-20]% and [30-40]% depending on the season and the passenger segment. Moreover, the increment brought about by the Transaction is [0-5]% on the premium segment and [5-10]% on the non-premium segment and the Parties will continue to face a significant competitive constraint from Aer Lingus. Indeed, in both the premium and the non-premium segments, Aer Lingus had a significant market share with their non-stop services. In addition, other carriers such as the members of the A++ JV also offer one-stop services on this route.

(123) The Commission considers that the Transaction does not raise serious doubts as to its compatibility with the internal market on the premium segment and on the non-premium segment on these 12 routes. Therefore, it does not raise serious doubts with respect to the "all-passengers" market on these routes.

(124) Considering all the above and the other available evidence, the Transaction does not raise serious doubts as to its compatibility with the internal market on the following routes: (1) Dublin-Chicago, (2) Frankfurt-Dallas, (3) Frankfurt-Philadelphia, (4) London-Atlanta, (5) London-Las Vegas, (6) London-Miami, (7) London-Orlando, (8) Madrid-New York, (9) Manchester-New York, (10) Paris-Miami, (11) Paris-Philadelphia and (12) Rome-Chicago, under any possible market definition.

6.4.2.3. Non-stop/one-stop with competition from other one-stop services

Introduction

(125) On further 15 of the 27 non-stop/one-stop overlap routes, the Parties will continue to face competition from other one-stop operators.

(126) These 15 routes are: (1) Barcelona-Miami, (2) London-Charlotte, (3) London-Dallas, (4) London-Denver, (5) London-Phoenix, (6) London-Seattle, (7) London-Raleigh, (8) London-San Diego, (9) London-Tampa, (10) Madrid-Boston, (11) Madrid-Chicago, (12) Madrid-Los Angeles, (13) Madrid-Miami, (14) Paris-Dallas, and (15) Rome-Philadelphia.

(127) On 13 of these 15 routes, American Airlines (or one of its partners in the Transatlantic Joint Business) offers non-stop services whereas US Airways offers one-stop routes. On the remaining two routes out of the 15 routes (London-Charlotte and Rome-Philadelphia), US Airways offers non-stop services whereas American Airlines (or one of its partners in the Transatlantic Joint Business) offers one-stop services.

(128) On all these routes the A++ JV and the North Atlantic JV offer one-stop services via their hubs in Europe or North America and in addition other carriers also offer one-stop services.

(129) Table 4 below sets out the Parties' combined market shares and their major competitors' share on these routes in the last two IATA seasons:

Table 4: 15 non-stop/one-stop with competition from other one-stop services

Route |Total pax |IATA season |Passenger segmentation |US Airways |TAJB |Parties |A++ JV |NAJV |

(1) Barcelona - Miami |56 916 |Summer 2012 |premium |[0-5]% |[70-80]% |[80-90]% |[5-10]% |[10-20]% |

| | |non premium |[5-10]% |[60-70]% |[70-80]% |[0-5]% |[10-20]% |

| |Winter 2012/13 |premium |[0-5]% |[80-90]% |[80-90]% |[10-20]% |[0-5]% |

| | |non premium |[0-5]% |[80-90]% |[80-90]% |[5-10]% |[5-10]% |

(2) London - Charlotte |39 661 |Summer 2012 |premium |[70-80]% |[10-20]% |[80-90]% |[5-10]% |[0-5]% |

| | |non premium |[70-80]% |[5-10]% |[70-80]% |[10-20]% |[5-10]% |

| |Winter 2012/13 |premium |[60-70]% |[10-20]% |[80-90]% |[5-10]% |[0-5]% |

| | |non premium |[70-80]% |[0-5]% |[80-90]% |[10-20]% |[5-10]% |

(3) London - Dallas |92 261 |Summer 2012 |premium |[0-5]% |[90-100]% |[90-100]% |[0-5]% |[0-5]% |

| | |non premium |[0-5]% |[70-80]% |[70-80]% |[10-20]% |[5-10]% |

| |Winter 2012/13 |premium |[0-5]% |[90-100]% |[90-100]% |[0-5]% |[0-5]% |

| | |non premium |[5-10]% |[70-80]% |[80-90]% |[10-20]% |[5-10]% |

(4) London - Denver |67 986 |Summer 2012 |premium |[0-5]% |[70-80]% |[70-80]% |[10-20]% |[0-5]% |

| | |non premium |[5-10]% |[50-60]% |[50-60]% |[20-30]% |[5-10]% |

| |Winter 2012/13 |premium |[0-5]% |[80-90]% |[80-90]% |[10-20]% |[0-5]% |

| | |non premium |[5-10]% |[50-60]% |[60-70]% |[20-30]% |[5-10]% |

(5) London - Phoenix |50 003 |Summer 2012 |premium |[0-5]% |[80-90]% |[80-90]% |[0-5]% |[5-10]% |

| | |non premium |[10-20]% |[50-60]% |[70-80]% |[10-20]% |[10-20]% |

| |Winter 2012/13 |premium |[0-5]% |[80-90]% |[90-100]% |[5-10]% |[0-5]% |

| | |non premium |[10-20]% |[60-70]% |[70-80]% |[10-20]% |[5-10]% |

(6) London - Raleigh |45 685 |Summer 2012 |premium |[0-5]% |[80-90]% |[80-90]% |[0-5]% |[5-10]% |

| | |non premium |[5-10]% |[60-70% |[70-80]% |[10-20]% |[10-20]% |

| |Winter 2012/13 |premium |[0-5]% |[80-90]% |[80-90$% |[5-10]% |[5-10]% |

| | |non premium |[5-10]% |[70-80]% |[70-80]% |[10-20]% |[5-10]% |

(7) London - San Diego |60 400 |Summer 2012 |premium |[0-5]% |[80-90]% |[80-90]% |[5-10]% |[0-5]% |

| | |non premium |[0-5]% |[60-70]% |[70-80]% |[10-20]% |[5-10]% |

| |Winter 2012/13 |premium |[0-5]% |[80-90]% |[80-90]% |[5-10]% |[0-5]% |

| | |non premium |[5-10]% |[70-80]% |[70-80]% |[10-20]% |[5-10]% |

(8) London - Seattle |89 772 |Summer 2012 |premium |[0-5]% |[80-90]% |[80-90]% |[5-10]% |[10-20]% |

| | |non premium |[0-5]% |[40-50]% |[40-50]% |[20-30]% |[10-20]% |

| |Winter 2012/13 |premium |[0-5]% |[80-90]% |[80-90]% |[5-10]% |[10-20]% |

| | |non premium |[0-5]% |[60-70]% |[60-70]% |[10-20]% |[10-20]% |

(9) London - Tampa |62 175 |Summer 2012 |premium |[0-5]% |[80-90]% |[80-90]% |[5-10]% |[5-10]% |

| | |non premium |[5-10]% |[60-70]% |[60-70]% |[10-20]% |[10-20]% |

| |Winter 2012/13 |premium |[0-5]% |[80-90]% |[80-90]% |[0-5]% |[10-20]% |

| | |non premium |[5-10]% |[60-70]% |[60-70]% |[10-20]% |[10-20]% |

(10) Madrid - Boston |41 136 |Summer 2012 |premium |[0-5]% |[70-80]% |[80-90]% |[10-20]% |[5-10]% |

| | |non premium |[5-10]% |[70-80]% |[70-80]% |[5-10]% |[10-20]% |

| |Winter 2012/13 |premium |[0-5]% |[70-80]% |[80-90]% |[10-20]% |[5-10]% |

| | |non premium |[5-10]% |[70-80]% |[80-90]% |[5-10]% |[5-10]% |

(11) Madrid - Chicago |38 665 |Summer 2012 |premium |[0-5]% |[70-80]% |[70-80]% |[20-30]% |[0-5]% |

| | |non premium |[5-10]% |[60-70]% |[70-80]% |[10-20]% |[10-20]% |

| |Winter 2012/13 |premium |[0-5]% |[70-80]% |[70-80]% |[20-30]% |[0-5]% |

| | |non premium |[5-10]% |[70-80]% |[70-80]% |[10-20]% |[5-10]% |

(12) Madrid - Los Angeles |55 402 |Summer 2012 |premium |[0-5]% |[60-70]% |[60-70]% |[10-20]% |[10-20]% |

| | |non premium |[10-20]% |[50-60]% |[70-80]% |[10-20]% |[10-20]% |

| |Winter 2012/13 |premium |[5-10]% |[60-70]% |[60-70]% |[10-20]% |[10-20]% |

| | |non premium |[10-20]% |[50-60]% |[60-70]% |[10-20]% |[10-20]% |

(13) Madrid - Miami |91 241 |Summer 2012 |premium |[0-5]% |[90-100]% |[90-100]% |[0-5]% |[0-5]% |

| | |non premium |[10-20]% |[70-80]% |[80-90]% |[0-5]% |[5-10]% |

| |Winter 2012/13 |premium |[0-5]% |[90-100]% |[90-100]% |[0-5]% |[0-5]% |

| | |non premium |[5-10]% |[80-90]% |[80-90]% |[0-5]% |[5-10]% |

(14) Paris - Dallas |34 779 |Summer 2012 |premium |[0-5]% |[60-70]% |[70-80]% |[5-10]% |[20-30]% |

| | |non premium |[0-5]% |[60-70]% |[70-80]% |[10-20]% |[10-20]% |

| |Winter 2012/13 |premium |[0-5]% |[70-80]% |[70-80]% |[0-5]% |[20-30]% |

| | |non premium |[0-5]% |[70-80]% |[70-80]% |[5-10]% |[10-20]% |

(15) Rome-Philadelphia |38 710 |Summer 2012 |premium |[80-90]% |[5-10]% |[90-100]% |[0-5]% |[0-5]% |

| | |non premium |[70-80]% |[5-10]% |[80-90]% |[5-10]% |[5-10]% |

| |Winter 2012/13 |premium |[80-90]% |[0-5]% |[90-100]% |[0-5]% |[0-5]% |

| | |non premium |[70-80]% |[5-10]% |[80-90]% |[5-10]% |[5-10]% |

(130) The market shares achieved by US Airways as a one-stop competitor on these routes stay generally significantly below the market shares of either the A++ JV or the North Atlantic JV or both which shows that US Airways was not the major one-stop operator on these routes. The Transaction does therefore not eliminate an important competitive force on these routes.

(131) In addition, as mentioned above in Section 6.4.2.1, the Parties do not appear to be close competitors on any of these routes [104] .

(132) Lastly, the Commission notes that the replies to the Commission's market investigation did not reveal any sufficiently substantiated competition concerns with respect to these 15 routes.

Barcelona-Miami, London-Dallas, London-San Diego, London-Seattle, Paris-Dallas, London-Denver, London-Raleigh, London-Tampa, Madrid-Boston, Madrid-Chicago and Rome-Philadelphia

(133) On Barcelona-Miami, London-Dallas, London-San Diego, London-Seattle, Paris-Dallas, London-Denver, London-Raleigh, London-Tampa, Madrid-Boston, Madrid-Chicago and Rome-Philadelphia, the increment brought about by the Transaction is not higher than [5-10]%. The Parties will continue to face a significant competitive constraint from other one-stop operators such as the members of the A++ JV and the North Atlantic JV. On all these routes, except for Rome-Philadelphia, the highest market share of one of the remaining one-stop competitors is considerably higher than the increment brought by the Transaction (often more than twice as high as the increment). Even on Rome-Philadelphia, the remaining competitors managed to achieve market shares similar to, or higher than, the increment in particular on the non-premium segment which represents 90% of the total passengers travelling on the Rome-Philadelphia route. The Transaction does therefore not eliminate an important competitive force on these routes.

London–Charlotte

(134) On the segment for premium passengers on the London-Charlotte route, US Airways had a market share of [70-80]% and [60-70]% in Summer 2012 and Winter 2012/13 respectively while the Transatlantic Joint Business had a market share of [10-20]% and [10-20]% respectively. On the segment for non-premium passengers on the London-Charlotte route, US Airways had a market share of [70-80]% in Summer 2012 and of [70-80]% in Winter 2012/13 while the Transatlantic Joint Business had a market share of [5-10]% and [0-5]% respectively. Post Transaction, the Parties would reach a combined market share of up to [80-90]%.

(135) London-Charlotte was the only route on which the majority of respondents to the market investigation considered that one-stop services of American Airlines and of members of the Transatlantic Joint Business are the closest competitor of US Airways' non-stop services. However, members of the A++ JV and the North Atlantic JV offer one-stop services with a comparable or even shorter duration than the flights of the Transatlantic Joint Business on this route and with similar departing times. In addition, the A++ JV and the North Atlantic JV together offer a higher number of one-stop services than the Transatlantic Joint Business. In view of these similarities in the one-stop services, it does not appear that the one-stop services of the Transatlantic Joint Business are a closer substitute to the non-stop services of US Airways than the one-stop services of the A++ JV and the North Atlantic JV.

(136) Moreover, the increment brought about by the Transaction is limited on the non-premium segment, which represents around 80% of the total passengers on the London-Charlotte route. There are numerous one-stop alternatives on this route, particularly those offered by the members of the A++ JV and the North Atlantic JV. During the IATA Winter 2012/13 Season, members of the A++ JV offered one-stop services through their hubs in Washington, Newark and Toronto, while the North Atlantic JV operated one-stop services through Atlanta, New York and Detroit and they managed to achieve market shares of between [0-5]% and [5-10]% on the premium segment and between [5-10]% and [10-20]% on the non-premium segment. The route is also served on a one-stop basis by Virgin Atlantic. Due to the announced codeshare agreements between Delta and Virgin Atlantic on the London–New York and New York–Charlotte routes, implemented on 3 July 2013, Delta customers have gained an additional six daily frequencies between London and New York [105] , which could possibly connect with Delta's services between New York and Charlotte [106] . Therefore, the Transatlantic Joint Business is not uniquely positioned to capture one-stop passengers and the Parties will continue to face a significant competitive constraint from A++ JV and the North Atlantic JV on the London Charlotte route.

London-Phoenix

(137) On the segment for premium passengers on the London-Phoenix route, the Transatlantic Joint Business had a market share of around [80-90]% in Summer 2012 and Winter 2012/13 while US Airways had a market share of [0-5]% in both these seasons. On the segment for non-premium passengers on the London-Phoenix route, the Transatlantic Joint Business had a market share of [50-60]% in Summer 2012 and [60-70]% in Winter 2012/13 while US Airways had a market share of [10-20]% and [10-20]% respectively. Post-Transaction, the Parties would reach a combined market share of up to [90-100]%.

(138) However, the increment brought about by the Transaction is limited on the premium segment and while on the non-premium segment the increment was higher, the other competitors on the route, the A++ JV and the North Atlantic JV managed to achieve comparable if not higher market shares than US Airways. The A++ and North Atlantic JVs can be regarded as comparable to US Airways. The North Atlantic JV offers one-stop flights through its hubs in Minneapolis, Detroit and Atlanta, while the A++ JV offers one-stop services connecting in Houston, Newark, Washington and Chicago. Furthermore, Virgin also offers one-stop services from London and as a consequence of a codeshare agreement between Delta and Virgin Atlantic on London–New York and New York–Phoenix, [107] there will be additional six daily frequencies between London and New York [108] and an increased number of passengers could possibly be able to connect with Delta's service between New York and Phoenix. Therefore, the Transatlantic Joint Business is not uniquely positioned to capture one-stop passengers and the Parties will continue to face a significant competitive constraint from A++ JV and the North Atlantic JV on the London Phoenix route.

Madrid-Los Angeles

(139) On the segment for premium passengers on the Madrid-Los Angeles route, the Transatlantic Joint Business had a market share of around [60-70]% in Summer 2012 and Winter 2012/13, while US Airways had a market share of around [5-10]%. On the segment for non-premium passengers on the Madrid-Los Angeles route, the Transatlantic Joint Business had a market share of [50-60]% in Summer 2012 and Winter 2012/13 while US Airways had a market share of [10-20]% and [10-20]% respectively. Post-Transaction the Parties would reach a combined market share of up to [70-80]%.

(140) However, the increment brought about by the Transaction is limited on the premium segment and while on the non-premium segment the increment was higher, the Parties will continue to face a significant competitive constraint from other one-stop operators such as the members of the A++ JV and the North Atlantic JV who offer such services through their hubs in Europe and North America. The A++ JV and the North Atlantic JV have a comparable presence to US Airways' presence on this route. In addition, the A++ JV and the North Atlantic JV had more frequencies than US Airways on this route. Lastly, Virgin Atlantic and Air New Zealand also offer one-stop services on this route.

Madrid-Miami

(141) On the segment for premium passengers on the Madrid-Miami route, the Transatlantic Joint Business had a market share of [90-100]% in Summer 2012 and Winter 2012/13 while US Airways had a market share of [0-5]%. On the segment for non-premium passengers on the Madrid-Miami route, the Transatlantic Joint Business had a market share of [70-80]% in Summer 2012 and of [80-90]% in Winter 2012/13 while US Airways had a market share of [10-20]% and [5-10]% respectively. Post Transaction, the Parties would reach a combined market share of up to [90-100]%.

(142) However, the increment brought about by the Transaction is minimal on the premium segment and while on the non-premium segment the increment was higher during the Summer 2012, there are multiple carriers on the route offering one-stop services that are an alternative to the Transatlantic Joint Business' non-stop services and US Airways' one-stop services. In addition, the North Atlantic JV offers significantly more frequencies than US Airways on this route (four average daily frequencies compared with two for US Airways) with a wider choice of departing times and a shorter or comparable duration than US Airways [109] . TAP also offers a service with shorter or comparable travel times than US Airways in both directions. As such, US Airways is not uniquely positioned to capture one-stop passengers nor does it offer a unique or superior constraint to the Transatlantic Joint Business' non-stop services.

(143) Lastly, the Transatlantic Joint Business is subject to commitments under the Commission's Transatlantic Joint Business decision [110] on the Madrid-Miami route which are designed to foster entry on this route [111] .

Conclusion

(144) The Commission considers that the Transaction does not raise serious doubts as to its compatibility with the internal market on the premium segment and on the non-premium segment on these 15 routes. Therefore, the Commission considers that the Transaction does not raise serious doubts with respect to the "all-passengers" market on these routes.

(145) Considering all the above and the other available evidence, the Transaction does not raise serious doubts as to its compatibility with the internal market on the following routes 15 non-stop/one-stop overlap routes: (1) Barcelona-Miami, (2) London-Charlotte, (3) London-Dallas, (4) London-Denver, (5) London-Phoenix, (6) London-Seattle, (7) London-Raleigh, (8) London-San Diego, (9) London-Tampa, (10) Madrid-Boston, (11) Madrid-Chicago, (12) Madrid-Los Angeles, (13) Madrid-Miami, (14) Paris-Dallas and (15) Rome-Philadelphia, under any possible market definition.

6.4.2.4. Conclusion

(146) In light of the above and of the other available evidence, the Commission considers that the Transaction does not raise any serious doubts as to its compatibility with the internal market under any possible market definition on any of the 27 non-stop/one-stop overlap routes: Barcelona-Miami, Dublin-Chicago, Frankfurt-Dallas, Frankfurt-Philadelphia, London-Atlanta, London-Charlotte, London-Dallas, London-Denver, London-Las Vegas, London-Miami, London-Orlando, London-Phoenix, London-Raleigh, London-San Diego, London-Seattle, London-Tampa, Madrid-Boston, Madrid-Chicago, Madrid-Los Angeles, Madrid-Miami, Madrid-New York, Manchester-New York, Paris-Dallas, Paris-Miami, Paris-Philadelphia, Rome-Chicago and Rome-Philadelphia.

6.5. One-stop/one-stop overlap routes

(147) The Transaction gives rise to numerous affected transatlantic routes on which both US Airways and the members of the Transatlantic Joint Business provide one-stop services [112] . These routes were analysed with respect to the market position of the Parties and the market share increment brought about by the Transaction. In addition, the presence and position of competitors and the number of passengers on each route were assessed.

(148) On all of these routes, depending on the route, the Parties face two or more well-established competitors, such the A++ JV, the North Atlantic JV, Virgin, Aer Lingus, Condor Flug, XL Airways, Air Europa and Air Berlin. These competitors will continue to be an important constraint on the Parties post-Transaction, both in the premium and in the non-premium segment. In addition, on half of these routes [113] , the Parties' services competed with the services of one or sometimes two non-stop competitors in any of the Summer 2012 and Winter 2012/13 IATA seasons and the Parties' combined market share is lower, sometimes significantly, than the one of the non-stop competitor.

(149) On three of the one-stop/one-stop overlap routes, the Parties' combined market shares are rather high (above [50-60]% in any segment in any of the past four IATA seasons) and the increment due to US Airways' one-stop service is non-negligible (more than [10-20]%). These are Madrid-San Francisco, Manchester-Los Angeles and Manchester-Miami. These routes are all thin routes (approximately 40,000 passengers per year or less) where at least two alternative one-stop flights are offered by competitors in addition to those of the Parties. On Madrid-San Francisco, the A++ JV and the North Atlantic JV also offer one-stop services. On Manchester-Miami, the A++ JV and the North Atlantic JV, as well as Flybe and TAP, also offer one-stop services On Manchester-Los Angeles, the A++ JV and the North Atlantic JV, as well as Air New Zealand, also offer one-stop services.

(150) In addition, the replies to the market investigation did not reveal any substantiated competition concerns with respect to the identified one-stop/one-stop overlaps.

(151) In light of all the above and the other available evidence, the Commission considers that the Transaction does not raise serious doubts as to its compatibility with the internal market on the identified one-stop/one-stop overlaps under any possible market definition.

6.6. Overall conclusion air transport of passengers

(152) In light of the above and of the other available evidence, the Commission considers that the Transaction raises serious doubts as to its compatibility with the internal market with respect to the London-Philadelphia route and that it does not raise any serious doubts as to its compatibility with the internal market on the 27 non-stop/one-stop overlap routes and on the 39 one-stop/one-stop overlap routes under any possible market definition.

7. Remedies

7.1. Commitments submitted by the Parties

(153) In order to address the serious doubts raised by the Transaction on the London (Heathrow)-Philadelphia route, the Parties submitted commitments on 16 July 2013. After a first examination by the Commission, the Parties submitted revised commitments on 17 July 2013 (the "Commitments of 17 July"). On 18 July 2013, the Commission launched a market test in order to gather the opinion of market participants. Following the market test, an improved version of the commitments was submitted by the Parties on 25 July 2013 (the "final Commitments"). As will be shown below, the Commission considers these final Commitments suitable to entirely remove the serious doubts identified.

(154) The final Commitments aim at reducing the barriers to entry and facilitating entry for a prospective entrant on the London (Heathrow)-Philadelphia route. Specifically, the Parties undertake to make available slots to allow the operation of 1 daily frequency on the London Heathrow-Philadelphia airport route. Moreover, the final Commitments attempt to make the Slot Commitment very attractive by allowing the new entrant to enter into a Special Prorate Agreement ("SPA") with the Parties, British Airways or Iberia (the "SPA Commitments"), a fare combinability agreement, and have access to the Parties' frequent flyer programmes.

(155) The main aspects of the final Commitments are summarised below.

7.1.1. The Slot Commitment

7.1.1.1. Slot release on the route with competition concerns

(156) Under the final Commitments, the Parties undertake to make available slots to allow a prospective entrant to operate one (1) daily frequency (i.e. up to seven (7) frequencies per week) on the Airport Pair (the "Slots"). The Airport Pair is defined as the London Heathrow-Philadelphia airport pair. Slots are defined in the final Commitments as the permission given to the prospective entrant to use the full range of airport infrastructure at London Heathrow (and as necessary at Philadelphia airport) that is necessary to operate and air service at the airport on a specific date and time for the purpose of landing or take-off in accordance with the EU Slot Regulation.

7.1.1.2. Conditions pertaining to the slots

(157) The Parties undertake to make Slots available within sixty (60) minutes either side of the time requested by the prospective entrant. However, the Parties may refuse to offer arrival slots before 06:20 (local time) and if a prospective entrant requests such slots, the Parties may offer a slot between 06:20 and 07:20.

(158) A prospective entrant shall be eligible to obtain Slots from the Parties pursuant to the final Commitments only if it can demonstrate that it has exhausted all reasonable efforts to obtain the necessary slots to operate on the Airport Pair through the normal workings of the general slot allocation procedure. The prospective entrant shall be deemed not to have exhausted all reasonable efforts to obtain necessary slots if, inter alia: (a) slots at London Heathrow (or Philadelphia airport if applicable) were available within 60 minutes but such slots were net accepted by the prospective entrant, (b) slots at London Heathrow (or Philadelphia airport if applicable) were obtained to operate on the route of concern outside 60 minutes and the prospective entrant did not give the Parties the opportunity to exchange those slots for slots under the final Commitments within 60 minutes or (c) the prospective entrant has not exhausted its own slot portfolio at London Heathrow (or Philadelphia if applicable).

(159) During the first six consecutive IATA seasons (the "Utilization Period"), the prospective entrant will not be entitled to transfer, assign, sell, swap or charge the Slots under the final Commitments (except for changes within 60 minutes and in agreement with the slot coordinator).

7.1.1.3. Grandfathering rights

(160) As a general rule, the Slots obtained by a prospective entrant under the final Commitments must be used to provide a non-stop scheduled passenger air transport service operated on the London Heathrow – Philadelphia airport pair and cannot be used on another city pair unless the prospective entrant has operated such service during the Utilization Period (six consecutive IATA seasons) [114] . Once the Utilization Period has elapsed, the prospective entrant will