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OST-00-7828

United Air Lines, Inc., Austrian Airlines, Osterreichische Luftverkehr AG, Lauda Air Luftfahrt AG, Deutsche Lufthansa, A.G., and Scandinavian Airlines System

For purposes of this application, the term "Alliance Expansion Agreement" shall include the following: (1) the Alliance Expansion Agreement by and between Austrian Airlines and United Air Lines, Inc. entered into on July 1, 2000, attached as Exhibit JA-1; (2) the Austrian Airlines/United Marketing Cooperation Agreement entered into on January 11, 2000, and Amendment No. I to that Agreement, incorporating Lauda and Tyrolean, dated August 1, 2000, attached as Exhibit JA-2; (3) the Austrian Airlines/United Airlines Code Share and Regulatory Cooperation Agreement entered into on January 11, 2000, attached as Exhibit JA-3 and filed with the Department on January 18, 2000 (Docket OST-00-6803), and Amendment No. I to that Agreement, incorporating Lauda and Tyrolean, dated April 27, 2000 (which was filed with the Department on August 7, 2000 (Docket OST-00-7751)); (4) any implementing agreements in furtherance of the foregoing agreements; and (5) any transaction undertaken pursuant to the foregoing agreements.

Counsel:  Wilmer Cutler, Bruce Rabinovitz, 202.663.6960, brabinovitz@wilmer.com and Silverberg Goldman, Michael Goldman, 202.944.3305

Counsel:  Wilmer Cutler, Bruce Rabinovitz, 202.663.6960, brabinovitz@wilmer.com 

Counsel:  Silverberg Goldman, Michael Goldman, 202.944.3305

Counsel:  Silverberg Goldman, Michael Goldman, 202.944.3305

Counsel:  Wilmer Cutler, Bruce Rabinovitz, 202.663.6960, brabinovitz@wilmer.com 

United Air Lines, Inc., Austrian Airlines, Osterreichische Luftverkehr AG, Lauda Air Luftfahrt AG, Deutsche Lufthansa, A.G., and Scandinavian Airlines System

Notice granting immediate interim access to to all documents covered by the Rule 12 Motions to counsel and outside experts for interested parties who file appropriate affidavits with the Department in advance. Moreover, we find it appropriate to grant intrim access to any subsequent materials filed in this docket under Rule 12 Motion to counsel and outside experts for interested parties who file appropriate affidavits with the Department in advance, unless the party filing the motion objects. Finally, we will require that answers to the application be filed no later thatn 21 days from the service date of this nottice, and that replies be filed no later than 7 business days after the last day for filing an answer

By:  Francisco Sanchez 

United Air Lines, Inc., Austrian Airlines, Osterreichische Luftverkehrs AG, Lauda Air Luftfahrt AG, Deutsche Lufthansa, A.G., and Scandinavian Airlines System

We find that the Alliance Agreements should not substantially reduce competition in the U.S.-Europe market. During the 12 months ended March 2000, the data show that the U.S. -Europe nonstop passenger market share for the United-Lufthansa-SAS immunized alliance was 17.8 percent. The proposed alliance nonstop passenger market share (including Austrian, 0.7 percent; and Lauda 0.2 percent) was 18.7 percent. In contrast, the American- Swissair- Sabena immunized alliance had a 13.4 percent nonstop passenger market share; and the Northwest-KLM-Alitalia immunized alliance had an 11. 5 percent nonstop passenger market share. British Airways had a 13.6 percent nonstop passenger market share.

We have determined that the U.S.-Europe market is highly competitive. Eight U.S. airlines provide scheduled passenger service in this market from their hubs, either individually or in conjunction with an existing alliance. Among these U.S. airlines, Delta Air Lines (8.9 percent), Continental Airlines (6.1 percent), US Airways (2.6 percent), and Trans World Airlines (1.4 percent) had a combined nonstop passenger market share of 19 percent. The U.S.-Europe market is also served by more than thirty other foreign airlines, principally from hubs in their homelands.

Another competitive issue concerns ownership interests that the Joint Applicants have in competing CRSs. Except SAS, the Joint Applicants have ownership and marketing ties with Amadeus and Galileo, competing CRS firms. Therefore, as with the Delta Air Lines-Austrian Sabena-Swissair arrangement (See Order 96-5-26 at 31-32) and the American Airlines-Sabena-Swissair arrangement (See Order 2000-4-22 at 18), the proposed integration of marketing operations of the Joint Applicants presents a risk that CRS competition may be reduced. In view of these factors, we find that any grant of antitrust immunity for the Alliance Agreements should exclude the Joint Applicants' CRS interests and operations. We note that the Joint Applicants recognize that immunity will not extend to the Joint Applicants' management of any interest they may have in individual CRSs.

By:  Susan McDermott

United Air Lines, Inc., Austrian Airlines, Osterreichische Luftverkehrs AG, Lauda Air Luftfahrt AG, Deutsche Lufthansa, A.G., and Scandinavian Airlines System

By:  Susan McDermott

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