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OST-00-8355

United Air Lines, Inc., US Airways, Inc., and Allegheny Airlines, Inc. 

Counsel:  Wilmer Cutler, Bruce Rabinovitz, 202.6636960, brabinovitz@wilmer.com and O'Melveny Myers, Joel Burton, 202.383.5300

United Air Lines, Inc., US Airways, Inc., and Allegheny Airlines, Inc. 

On November 17, 2000, United Air Lines, Inc., US Airways, Inc., and Allegheny Airlines, Inc. (collectively, the "Joint Applicants") filed with the Department the above-referenced joint application. Pursuant to 14 C.F.R. § 302.203(a), the Joint Applicants also submitted a Notice informing parties of the filing of the joint application. That Notice inadvertently stated that the due date for filing answers to the joint application is December 15, 2000; in fact, pursuant to 14 C.F.R. § 302.204(a), the due date for answers is December 8, 2000.

Counsel:  Wilmer Cutler, Bruce Rabinovitz, 202.6636960, brabinovitz@wilmer.com

United Air Lines, Inc., US Airways, Inc., and Allegheny Airlines, Inc. 

The CWA's concerns relate to how US Airways Passenger Service Employees will fare after UAL Corporation ("UAL") purchases US Airways and its corporate parent, and derive from, among other things, the failure of the UAL Board of Directors to adopt the First Amendment to the Agreement and Plan of Merger. (This Agreement is attached as Exhibit I to the Joint Application.) The Board of Directors of US Airways Group, Inc. months ago adopted this amendment, which would implement certain merger-related protections negotiated into the US Airways-CWA collective bargaining agreement, including the requirement that UAL honor the provision of the US Airways Passenger Service Employees' collective bargaining agreement that requires US Airways to secure from UAL, "as a prior condition of' the merger, a "guarantee that the employees covered by this Agreement shall be provided seniority integration procedures of Sections 3 and 13 of the Allegheny-Mohawk Labor Protective Provisions...." According to the Joint Application, at 27, "United has stated that it intends to honor all union contracts...," but the UAL Board has inexplicably failed thus far even to consider the amendment.

Counsel:  Katz Ranzman, Daniel Katz, 202.659.4656

The MEC's concerns relate to how US Airways pilots will fare after UAL Corporation ("UAL") purchases US Airways and its corporate parent, and derive from, among other things, the failure of the UAL Board of Directors to adopt the First Amendment to the Agreement and Plan of Merger. (This Agreement is attached as Exhibit I to the Joint Application.) The Board of Directors of US Airways Group, Inc. months ago adopted this amendment, which would implement certain merger-related protections negotiated into the US Airways-ALPA collective bargaining agreement, including the requirement that UAL honor the US Airways pilots' collective bargaining agreement as a condition of the merger. According to the Joint Application, at 27, "United has stated that it intends to honor all union contracts...," but the UAL Board has inexplicably failed thus far even to consider the amendment, which is mandated by the US Airways-ALPA collective bargaining agreement.

Counsel:  Katz Ranzman, Daniel Katz, 202.659.4656

United Air Lines, Inc., US Airways, Inc., and Allegheny Airlines, Inc. 

America West respectfully suggests that the public interest requires the Department to defer consideration of the Joint Application until the Department of Justice has determined whether to challenge the proposed merger of United and US Airways, or to approve it with conditions that might effect the restricted London market. Moreover, if the DOJ approves the merger without requiring divestiture of any London route authority, America West believes it remains incumbent on the Department to request competing applications for some or all of these limited route designations to determine the most pro-competitive allocation of this authority.' The Joint Applicants seek a rush to judgment. Given the restrictive U.S.--U.K. bilateral agreement and the lack of any progress at liberalization, approval of the proposed transfer of these routes would be grossly premature.

Counsel:  Baker Hostetler, Joanne Young, 202.861.1532

American opposes the requested action with respect to the transfer of US Airways' certificates to serve Germany and Canada, and the transfer of Allegheny's certificate to serve Canada, unless the Department reopens the United/Lufthansa and United/Air Canada antitrust immunity dockets and contemporane-ously imposes carve-out conditions' on the following overlap-ping hub-to-hub routes where, as a result of the proposed acquisition, the number of nonstop competitors would in effect be reduced from two to one. Accordingly, if the United/US Airways transaction proceeds, the Department should reopen the United/Lufthansa and United/Air Canada antitrust immunity dockets, and contem-poraneously impose carve-out conditions on the five overlapping hub-to-hub routes named above. The imposition of carve-outs in such circumstances has been the Department's consistent prac-tice. The applicants have made no showing that they should benefit from a different competitive standard in the U.S.--Germany and U.S.-Canada markets.

Counsel:  American, Carl Nelson, 202.496.5647, carl.nelson@aa.com 

United, often described as a 900-pound gorilla at the time airlines were being deregulated, has now become a two-ton gorilla and is applying jointly with US Airways and Allegheny to transfer international routes as part of a transaction in which the combined United will become a three-ton gorilla. Although the primary responsibility for evaluating domestic airline mergers now rests with the Department of Justice, which is continuing to review the proposed United/US Airways merger, Congress has nonetheless insisted that the Secretary certify, as part of any route transfer approval, that the transfer is “consistent with the public interest” based on an analysis of the effects of the transfer on, among other things, “competition in the domestic airline industry.” The Department should not take this responsibility lightly, as the joint applicants suggest, since the Congressional directive reflects serious Congressional concerns. Continental urges the Department to conclude that the proposed international route transfer will have an adverse impact on competition in the domestic airline industry and should be disapproved, at least until significant steps have been taken to ameliorate the serious adverse impacts on competition flowing from the proposed transaction.

Counsel:  Crowell Moring, Bruce Keiner, 202.624.2500

This is a unique merger since it would represent the first time in recent history that a merged U.S. airline would become larger than any of its rivals. The consequences of this merger must be carefully evaluated by the Department. If the merger of United and US Airways is allowed to go forward, it would have a profound effect on competition in the domestic airline industry. The merger would significantly change the existing competitive balance among the U.S. network carriers. This dramatic change in the competitive equilibrium of the U.S. airline industry would create powerful incentives for other airlines to pursue similar acquisitions in order to preserve industry balance and the robust competition that currently exists among major network carriers.

Counsel:  Shaw Pittman, Robert Cohn 202.663.8060

United Air Lines, Inc., US Airways, Inc., and Allegheny Airlines, Inc.

Counsel:  Bredhoff Kasiser, Jeffrey Freund

United Air Lines, Inc. and US Airways, Inc. and Allegheny Airlines, Inc.

The few answers filed in response to the joint application do not argue for the outright rejection of the certificate transfer. On the contrary, the answers essentially ignore that issue, focusing instead on each particular respondent's private economic self-interest or on ancillary issues, such as antitrust immunity. America West, in its answer, opposes transfer of US Airways' London authority to United, but wholly fails to show that such a draconian remedy is either supported by established Department precedent or consistent with the public interest. America West also fails to recognize that two of the three U.S.-London routes for which US Airways holds authority may not be switched to another U.S. city and, in any event, America West fails to put forward any specific proposal of an alternative use for any of US Airways' U.S.-London authority.

As the joint applicants demonstrate below, neither America West nor any other party has met the heavy burden of rebutting the Department's established presumption against intervening to impede implementation of a market-based transaction such as the de facto certificate transfer at issue in this case., The joint applicants clearly have established that the proposed transfer is consistent with the public interest and Departmental policies and precedents. Therefore, the Department should promptly approve the joint application once the DOJ has cleared the acquisition by UAL of US Airways Group.

Counsel:  Wilmer Cutler, Bruce Rabinovitz, 202.663.6960, brabinovitz@wilmer.com and O'Melveny Myers, Joel Stephen Burton, 202.383.5300

Counsel:  Wilmer Cutler, Jeffery Manley, 202.663.6670, jmanley@wilmer.com

United Air Lines, Inc., US Airways, Inc., and Allegheny Airlines, Inc.

By:  Gladys Jimenz

United Air Lines, Inc., US Airways, Inc. and Allegheny Airlines, Inc.

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

American Airlines, Inc.; Continental Airlines, Inc. and Transbrasil S/A Linhas Aereas and Interbrasil Star; Continental Airlines, Inc.; Continental Airlines, Inc. and Hawaiian Airlines, Inc.; American Airlines, Inc.; Iberia Lineas Aereas de Espana, S.A., Air Nostrum, and Aviaco; United Parcel Service; United Air Lines, Inc., US Airways, Inc. and Allegheny Airlines, Inc.; United Air Lines, Inc., US Airways, Inc. and Allegheny Airlines, Inc.; America West Airlines, Inc.; Delta Air Lines, Inc.

OST-97-2081 - American Airlines, Inc., filed January 17, 1997. Exemption authority to operate scheduled combination services between the United States and several cities in Colombia under a code-sharing arrangement with Aerovias Nacionales de Colombia (AVIANCA). By letter dated March 2, 200 1, American withdrew the exemption application.

OST-01-9950 Continental Airlines, Inc., filed June 18, 2001. Exemption authority to operate scheduled combination services between the United States and several cities in Brazil, Argentina, and Canada under a code-sharing arrangement with Transbrasil S/A Linhas Aereas and Interbrasil Star. The City of Houston and the Greater Houston Partnership and United Air Lines filed pleadings. By letter dated August 17, 2001, Continental withdrew the exemption application.

OST-96-1648 Continental Airlines, Inc., filed October 18, 200 1. Renew for five years certificate authority (Route 733) authorizing scheduled combination services between the United States and the United Kingdom, excluding London's Heathrow and Gatwick airports. On October 23, 200 1, Continental withdrew the application because its certificate authority for Route 733 had in fact been granted for an indefinite duration.

OST-01-10705 Continental Airlines, Inc. and Hawaiian Airlines, Inc. filed September 25, 2001. Allocation of U.S.-France same-country code-share opportunity to display Continental's designator code on Hawaiian's flights between Honolulu and Papeete, Tahiti. On September 27, 2001, Continental and Hawaiian withdrew their joint application.

OST-97-2965 / OST-98-3626 / OST-98-3640 United Air Lines, Inc., filed May 20, 1998. Petition for review of staff action and request that the Department reverse the award of code-share authority to American Airlines and Iberia Lineas Aereas de Espana to the extent that it permitted code-share service between Madrid and Rome (See Notice of Action dated April 30, 1998, in Dockets OST-97-2965 and 98-3626, and Order 98-12-6). United stated that American's proposed service in this market was not consistent with the aviation agreement between the United States and Italy. American and Iberia filed a response. Subsequent to the petition, the United States and Italy signed an open-skies agreement, and U.S. carrier service, including American's service at issue here, is now covered by this more liberal arrangement. United's petition, therefore, is now moot.

OST-00-7633 United Parcel Service Co., filed July 12, 2000. Allocation of five (5) one-way weekly Russia overflight frequencies transiting Tashkent in order to operate freighter service over a Cologne, Germany - Mumbai, India - Singapore - Taipei, Taiwan routing. On July 21, 2000, UPS withdrew the application.

OST-00-8355/OST-00-8356 United Air Lines, Inc.; US Airways, Inc.; and Allegheny Airlines, Inc., filed November 17, 2000. Joint application for (a) approval of a transfer of the international certificate authority held by US Airways and Allegheny to United; and (b) an interim exemption to facilitate the transfer, pending final consummation of the merger of United, US Airways and Allegheny. Continental Airlines, Delta Air Lines, America West Airlines, American Airlines, the Communications Workers of America/AFL-CIO/CLC, and the US Airways Master Executive Council of the Air Line Pilots Association filed answers. On July 27, 2001, the Joint Applicants announced the termination of their merger agreement, and on July 30, 2001, the Joint Applicants filed ajoint motion to withdraw the applications. We grant the motion.

OST-00-7880 America West Airlines, Inc., filed August 31, 2000. Renew statement of authorization to code share with Eva Airways Corporation. On October 30, 1998, the Department granted the application of America West to display EVA's designator code on America West's domestic flights for the carriage of EVA's transpacific traffic (undocketed). The Department granted the application for an indefinite duration, subject to attached conditions. In these circumstances, the renewal application is moot.

OST-97-2803 Delta Air Lines, Inc., filed July 21, 1999. Renew authorization to provide third- country code-share service to Egypt. By Order 2000-10-14, the Department determined that Delta's authorization was available for allocation since Delta proposed to change its code-share partner from Swissair to Air France. Subsequently, by Order 2000-11-2, we selected Delta and Air France for the available authorization (Docket OST-2000-6982). Against this background, Delta's application to renew its authorization in Docket OST-97-2803 is now moot.

By:  Paul Gretch

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