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OST-2000-8577

 http://www.continental.com/
http://www.copaair.com/

Continental Airlines, Inc. and Compania Panamena de Aviacion, S.A.

The Alliance Agreement will increase, rather than substantially reduce or eliminate, competition on U.S.-Central America and U.S.-South America routes. While Continental has expanded service between the U.S. and both Central America and South America in recent years, Continental today offers only 22% of the total U.S.-Central America seats and only 10% of the U.S.-South America seats. Only an immunized alliance will permit Continental, working together with COPA, to compete more effectively in Latin America with American, Delta and United and their partners. Because Continental has extensive operations throughout the United States and COPA has extensive operations throughout Central America and much of the rest of Latin America, there is a high level of potential synergy, with only de minimis city-pair overlap, in the two respective networks. The Agreement will enable the Joint Applicants to become a more competitive force in the U.S.--Latin America marketplace in a way that neither would be able to achieve alone. An immunized Continental/COPA alliance will add new competition on routes within the Latin America region now dominated by American's network of alliances.

American itself controls 32% of total U.S.-Central America seats. With its TACA Group and Iberia partners, American controls 61% of the total U.S.-Central America seats. Neither Continental nor COPA alone can compete effectively on U,S.-Central America routes against the extensive American/TACA Group/Iberia network, which flows traffic over American's Latin American hub at Miami as well as over its Dallas/Fort Worth hub and its New York gateway. Even with their combined seat shares, Continental and COPA together will operate fewer U.S.--Central America seats (27%) than American alone operates today. Continental and COPA together operate only 3.5% of Miami-Central America seats, fewer than American, the TACA Group and Iberia each operate between Miami and Central America. Nonetheless, Continental and COPA together expect to compete with American and its partners, thus enhancing competition on U.S.-Central America, U.S.-South America and U.S.-Caribbean routes and providing the high level of consumer choice contemplated by the U.S.-Panama Open Skies Agreement.

At Miami, Continental will gain more effective access to COPA's Latin America gateway and compete head-to-head against American's Latin America hub operations. American, the TACA Group and Iberia together operate 91% of the seats between Miami and Central America, compared to 6% operated by COPA andContinental. Through the closer cooperation enabled by antitrust immunity, COPAJContinental hope to increase their service between Miami and Central America and at secondary U.S. gateways.

An immunized Continental/COPA alliance will enhance competition in the Latin American region. The Continental/COPA alliance will be a competitor to the United/Varig and Delta/Transbrasil codeshare alliances, as well as American and its Latin American alliance partners, including Lan Chile, the TACA Group and TAM.

Counsel:  Crowell Morning, Bruce Keiner, 202.624.2500, rbkeiner@cromor.com and Robins Kaplan, Harold Mesirow, 202.775.0725, hemesirow@rkmc.com

Continental Airlines, Inc. and Compania Panamena de Aviacion, S.A.

Based on their preliminary review, American and the TACA Group have no objection to the Continental/COPA applica-tion, provided that the American/TACA Group request for anti- trust immunity, submitted on March 17, 2000 in OST-00-7088,is processed and granted on a parallel track. By Order 2000-7-8, July 7, 2000, the Department requested certain additional information American and the TACA Group in OST-00-7088. The applicants expect to submit their response to that order shortly.

We note that the Continental/Copa application was accompanied by a submission of confidential documents that have not yet been made available to interested parties under the Department's affidavit procedures. American and the TACA Group reserve the right to supplement this answer based on their review of these documents, as well as other facts and circum-stances relevant to the Continental/Copa application.

Counsel:  American, Carl Nelson, 202.496.5647, carl_nelson@aa.com, and Squire Sanders, James Dick, 202.626.6780

Continental Airlines, Inc. and Compania Panamena de Aviacion, S.A.

Counsel:  Continental Airlines, David Grizzle and COPA, Pedro Heilbron

Continental Airlines, Inc. and Compania Panamena de Aviacion, S.A.

Over the past decade, the City of Houston and Continental have invested in building one of the nation's premier domestic hubs and international gateways at George Bush Intercontinental Airport (IAH). Their efforts have paid off handsomely-Bush Intercontinental has become the eighth-largest U.S. gateway for international passengers, as well as the second-largest gateway for traffic to Mexico and Central America, and the seventh-largest gateway for traffic to South America. This rapid growth was in no small part due to the strong community of interest shared by Latin America and Houston. The Greater Houston Area is home to the sixth-largest Hispanic community in the U.S., and no fewer than 21 Latin American and Caribbean nations maintain consulates in the City to facilitate the growing business and cultural ties between them and Houston.

However, U.S.-Latin America air traffic continues to be dominated by American Airlines, which offers services from its Miami mega-hub and other gateways, as well as through its alliances with TACA and other carriers. Moreover, American's dominant position in Latin America might be further entrenched if the Department approves the pending application for the approval and immunization of American's alliance with TACA (Docket OST-2000-7088), as well as if American succeeds in purchasing the assets of Trans World Airlines, which has been an emerging competitor in the Caribbean.

In contrast, the approval and immunization of the Continental/CO PA alliance by the Department would only enhance competition in the U.S.-Latin America market. One of the benefits would be improved links between Continental's Houston hub and COPA's Panama City hub. Such services would expand the options available to the U.S. public, especially from the long underserved central and western regions of the United States, by linking the Continental and COPA networks end-to-end. Indeed, the Department long has recognized that new services at Houston can offer "intergateway competition with Miami, the traditionally dominant U.S. gateway." Order 96-4-48, at 5-6. Moreover, even though Continental is the only U.S. carrier to which has invested in developing a comprehensive new network of services in Latin America to compete with American, Continental's network has minimal overlap with COPA's network, and a closer alliance clearly would serve the public interest by ensuring vigorous continent--wide competition.

Counsel:  Zuckert Scoutt, Jol Silversmith, 202.298.8660, jasilversmith@zsrlaw

Continental Airlines, Inc. and Compania Panamena de Aviacion, S.A.

In sharp contrast to Continental/COPA, the American/TACA Group application for antitrust immunity and renewal and amendment of their codeshare authority is neither complete nor unopposed. The Department has required American and the TACA Group to provide additional information to the Department “in light of the issues that have been raised” about their application for antitrust immunity, but American and the TACA Group have not complied with the Department’s order. Under these circumstances, the Continental/COPA application is already on a faster track and should not be delayed for consideration with the incomplete American/TACA Group application.

Unlike the Continental/COPA application, the American/TACA Group application is, at a minimum, highly controversial. The Department has already said the conditions imposed on the American/TACA Group codeshare authority, which American and the TACA Group now want removed, were necessary because “the market concentration, potential future barriers to entry, overall dominance and size of [American and the TACA Group] if not restricted in operation in the Miami-Central America overlap markets would likely have an anti-competitive impact.” Mere codesharing between American and the TACA Group raised significant competition concerns. Their request for removal of the conditions imposed on their codesharing to ameliorate those concerns and for antitrust immunity to conduct joint operations on routes they currently dominate raise significant new concerns which have already led the Department to require additional information American and the TACA Group have so far failed to provide.

Counsel:  Crowell Morning, Bruce Keiner, 202.624.2500, rbkeiner@cromor.com and Robins Kaplan, Harold Mesirow, 202.775.0725, hemesirow@rkmc.com

Continental Airlines, Inc. and Compania Panamena de Aviacion, S.A.

We direct interested parties to file comments in Docket OST-2000-8577 no later than 21 days from the date that the supplemental information provided for in ordering paragraph I is filed in Docket OST-2000-8577, and replies shall be filed no later than 7 business days after the last day for filing answers

By:  Susan McDermott

Continental Airlines, Inc. and Compania Panamena de Aviacion, S.A.

Counsel:  Crowell Morning, Bruce Keiner, 202.624.2500, rbkeiner@cromor.com and Robins Kaplan, Charles Hunnicutt, 202.775.0725

Continental Airlines, Inc. and Compania Panamena de Aviacion, S.A.

By:  Notary Public, Ora Biles

Continental Airlines, Inc. and Compania Panamena de Aviacion, S.A.

Counsel:  American, Carl Nelson, 202-496-5647, carl_nelson@aa.com 

Continental Airlines, Inc. and Compania Panamena de Aviacion, S.A.

The Continental/COPA application should be processed and granted on a parallel track with the American/TACA Group application for antitrust immunity submitted on March 17, 2000 in OST-00-7088. On February 28, 2001, American and the TACA Group submitted all information that the Department has required in OST-00-7088, and the American/TACA Group application is ripe for an immediate order establishing procedural dates.

The Continental and COPA market share between the U.S. and Central America has grown significantly, from 23% in 1998 to 26% in 2000 (CRS passenger bookings). This three-point growth rate has come largely at the expense of American and TACA, which experienced a decline in U.S.-Central America market share from 62% to 56% over the same period.

Counsel:  American, Carl Nelson, 202-496-5647, carl_nelson@aa.com and Squire Sanders, Robert Papkin, 202.626.6601, rpapkin@ssd.com

Continental Airlines, Inc. and Compania Panamena de Aviacion, S.A.

Continental and COPA submitted the documents normally required by the Department on December 23, 2000, and the Department concluded on February 6, 2001, that the Continental/COPA submissions were virtually complete. Continental and COPA completed their submissions three days later by providing a complete copy of their Alliance Agreement, which had been provided in redacted form almost three years previously. In sharp contrast, the Department requested additional documents from American and the TACA Group on July 7, 2000, but they did not comply until February 28, 2001, the eve of the date answers to the Continental/COPA application were due, in an apparent attempt to delay action on the Continental/COPA application. The tardy submission of voluminous documents by American and the TACA Group will of necessity delay action on their application, but it should not delay action on the Continental/COPA application, for which documents were submitted on a timely basis. The Department has not even established procedural dates for further consideration of the American/TACA Group application. As American and the TACA Group concede, the Continental/COPA procedural schedule has been completed. Moreover, the American/TACA Group request for antitrust immunity, removal of the Miami-Central America blocked-space condition on their current codeshare arrangement and new blanket codeshare authority raises controversial issues already addressed by other parties who will require time to consider the documents only recently submitted by American and the TACA Group.

Under these divergent circumstances, the Department should proceed immediately to approve the Continental/COPA application for antitrust immunity since the application is complete, non-controversial and unopposed. The Department should consider the American/TACA Group on its own separate track and its own merits. Continental and COPA require antitrust immunity for their end-to-end alliance to compete effectively with American and the TACA Group today, whether the antitrust immunity American and the TACA Group seek is granted or not.

Counsel:  Continental and Crowell Moring, Bruce Keiner

Continental Airlines, Inc. and Compania Panamena de Aviacion, S.A.

Continental and COPA have applied for approval of and antitrust immunity for an Alliance Agreement under 49 U.S.C. §§ 41308 and 41309, whereby they will plan and coordinate service over their respective route networks as if there had been an operational merger between the partners. We find that the Alliance Agreement should be approved and granted antitrust immunity, to the extent provided below. Our examination of their proposal leads us to find that the proposed alliance will enhance competition overall and allow the airlines to provide better service and enable them to operate more efficiently. We also find that it is unlikely that the Alliance Agreement - subject to the conditions included here - will substantially reduce competition in any relevant market. Finally, our actions here will allow the Joint Applicants to maximize fully the various pro-competitive and pro-consumer benefits associated with integrated alliances that we foresaw resulting from the fundamental liberalization of air services under the U.S.-Panarna open-skies accord.

We find that the Alliance Agreement should not diminish competition in the U.S.-Central America market. In terms of passengers transported, Continental's nonstop passenger market share was about 18 percent. The proposed alliance (including COPA, at 0.7 percent) would have a nonstop passenger market share of 18.7 percent. In contrast, American Airlines and its regional partners TACA Intemational-LACSA-Aviateca-NICA) had a nonstop passenger market share of about 29.4 percent; Mexicana had a nonstop passenger market share of about 15 percent; and Aeromexico had a nonstop passenger market share of about 11.7 percent. Additionally, the nonstop passenger market shares for Alaska Airlines was 5.7 percent; for Delta Air Lines, 5.1 percent; for United and its immunized partner Lufthansa, 3.4 percent; for America West, 2 percent; for Iberia Air Lines, 1.8 percent; for Aero California, 1.7 percent; and for Northwest, 1.2 percent.

In the U.S.-Panama market, American Airlines is the major scheduled airline. American's nonstop passenger market share was about 35 percent. In addition, American and its Oneworld alliance partner, Iberia (about 7 percent), together have 42 percent of the market. In contrast, Continental's nonstop passenger market share was about 24 percent. The proposed alliance (including COPA, at about 17 percent) would have a nonstop passenger market share of about 41 percent. Delta Air Lines had a nonstop passenger market share of about 10 percent. Additionally, the nonstop passenger market shares for EVA Airways was about 3.5 percent; for Aero Lloyd, about 1.9 percent; and for Aero Continental, about 1.4 percent.

We have decided to grant the Joint Applicants request for antitrust immunity to coordinate their CRS and internal reservations system. Our evaluation of this request indicates that neither Continental nor COPA has an ownership interest in any CRS system. Accordingly, we find that there is no need to impose conditions or otherwise limit immunity with respect to Continental COPA CRS operations.

By:  Susan McDermott

OST-2000-8577 - U.S.- South America; Central America; Caribbean

May 5, 2006

Notice of Additional Codeshare Service

This is to notify the Department, pursuant to condition (b) of Statement of Authorization 98-65, that Continental and COPA intend to begin codeshare service on the following route segments 30 days from the date of this notice or immediately upon receipt of any necessary foreign approvals later than 30 days from the date of this notice:

Route Segments		Operating Carrier
Panama City	Santiago, DR	CO* on COPA
Panama City	Caracas, Venezuela	CO* on COPA
Panama City	Maracaibo, Venezuela	CO* on COPA

Counsel: Crowell & Moring, Bruce Keiner, 202-624-2615, rbkeiner@crowell.com

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