ost972982

OST-97-2982

Linea Aerea Nacional Chile, S.A. - Lan Chile (Exemption, US-Chile)

OST-97-2982 | October 7, 1997

Application for an Exemption

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Requests authority to provide scheduled foreign air transportation between points in Chile and the US coterminal points Chicago, Houston, Orlando and San Juan, via intermediate points. Also requests authority to provide scheduled service on a codeshare basis between points in Chile and the US points Washington/Baltimore, Atlanta, Boston, Dallas, Philadelphia and Denver. Will codeshare with American Airlines.

Lan Chile currently provides scheduled service between Chile and Miami, New York and Los Angeles via various intermediate points.

Answers are due by October 22, 1997

Service List

Counsel: Zuckert Scoutt, Charles Simpson, 202-298-8660

Linea Aerea Nacional Chile, S.A. - Lan Chile / American Airlines, Inc. and Linea Aerea Nacional Chile, S.A. - Lan Chile (Exemption and Statements of Authorization, US-Chile)

OST-97-2982 | Undocketed | October 22, 1997

Consolidated Answer of Continental Airlines

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To further extend American's domination of its U.S.-Latin America empire and pre-empt alliances between its foreign competitors and U.S. airlines with smaller presences in that region, American seeks authority to code-share with its chief competitor on U.S.-Chile routes, Lan Chile, and has announced that the two carriers will seek antitrust immunity for their anticompetitive alliance. Unless the Department wants to give American control of over 84% of all U.S.-Chile nonstop seats and foreclose the possibility of meaningful competition between the U.S. and Chile, the Department must deny the American and Lan Chile (collectively the "Joint Applicants") requests for code-share authority. The proposed American/Lan Chile alliance shows that American's drive to assure its perpetual domination of U.S.- Latin America routes is gaining momentum and may soon snuff out all competition. Failure to deny immediately the clearly anticompetitive American/Lan Chile applications will encourage American to continue its destructive pattern, economically disadvantaging U.S. carriers and consumers alike. Inaction by the Department risks convincing the few potential foreign code-share partners left in the region that they have no alternative but to join American's growing U.S.-Latin America juggernaut, pre-empting procompetitive alliances while the applications remain pending. If the Department does not deny the American/Lan Chile applications outright, it should require American to provide full information concerning its relationship with Lan Chile and the interrelationship of the American/Lan Chile alliance with other American alliances before taking any further action.

Counsel: Continental and Crowell Moring, Bruce Keiner, 202-624-2500

Answer of Delta Air Lines (Also OST-96-1700)

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The Department must give careful consideration to the potential anticompetitive impact of this arrangement, particularly considering that Chile maintains an extremely restrictive bilateral regime that excludes potential U.S.Chile competitors, such as Delta, from freely sewing Chile. Furthermore, the American/Lan Chile Alliance must be evaluated in the context of American's numerous interrelated alliances that combine virtually all the dominant carriers sewing U.S.-Latin American routes.

Counsel: Delta and Shaw Pittman, Robert Cohn, 202-663-8060

Answer of The Government of Puerto Rico

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The Government of Puerto Rico hopes the Department will expeditiously grant LanChile's exemption request.Under a recent amendment to the route annex of the U.S.-Chile aviation agreement, airlines of Chile have the bilateral right to operate between Chile and San Juan, nonstop, via intermediate points and beyond to points in third countries. Chilean airlines also have the right to coterminalize San Juan and the other bilaterally authorized U.S. gateways.

Counsel: Verner Liipfert, John Merrigan

Answer of United Air Lines

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United Air Lines, Inc., ("United") answers in opposition to the above-captioned applications of American Airlines, Inc. ("American") and Linea Aerea Nacional Chile, S.A. ("LAN-Chile"). By their applications, American and LAN-Chile seek authority to offer code-share services on flights they operate between their U.S. and Chilean gateways and beyond those gateways to interior points in the U.S. and Chile. Aside from references to the U.S./Chile bilateral agreement, there is no discussion in the American/LAN-Chile applications of any public benefits that would result from their proposed code-share service. Indeed, there are no such benefits given the anticompetitive impact that would result from the proposed cooperation. Most of the nonstop codeshare service would be operated between Santiago and Miami and most of LAN-Chile's connections to U.S. points would operate from that gateway. This code share would serve to limit competition by solidifying American's dominance of the U.S.-Central/South America market via Miami and should not be approved

Exhibit UA-1 - American Airlines Has a Lion's Share of the US-Latin America Market
Exhibit UA-2 - American Airlines Controls the US-South America Market
Exhibit UA-3 - American Airlines Controls the Miami-South America Market
Exhibit UA-4 - American Airlines Service Network from Miami to South America
Exhibit UA-5 - American Airlines Controls the US-Chile Market
Exhibit UA-6 - Miami Accounts for More than One-Half of US-Santiago Passenger Traffic
Exhibit UA-7 - AA Latin America/Caribbean Code-Share Partners at Miami

Counsel: United and Ginsburg Feldman, Joel Burton

American Airlines, Inc. and Lan Chile

OST-97-2982 | October 28, 1997

Re: Errata Sheet Correcting Consolidated Answer of Continental Airlines

Page 1, Line 6: 84% should read 81%

Counsel: Crowell Moring, Bruce Keiner, 202-624-2500

Linea Aerea Nacional Chile, S.A. (Exemption, US-Chile)

OST-97-2982 | October 28, 1997

Supplement No. 1 to the Application

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Submits this supplement to the application for an exemption filed in this Docket on October 7, 1997. In that Application, Lan Chile requested, among other things, authority to provide scheduled foreign air transportation of persons, property, and mail between points in Chile and the U.S. coterminal points Chicago, Houston, Orlando, and San Juan, via intermediate points. Lan Chile submits this supplement (i) to advise the Department of its intention to commence twice weekly service on December 26, 1997 between Santiago, Chile and Orlando, Florida, via the coterminal point Miami, Florida, and (ii) to request that the Department grant, on an expedited basis, exemption authority to provide scheduled service between Santiago, Chile and Orlando, Florida. As stated above, such authority is included in the authority requested in the Application.

Counsel: Zuckert Scoutt, Charles Simpson, 202-298-8660

Lineas Aereas Nacional Chile, S.A. - Lan Chile and American Airlines, Inc. (Exemption and Statements of Authorization, US-Chile)

OST-97-2982 | Undocketed | October 31, 1997

Motion for Leave to File and Reply of American Airlines

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Attachment 1: Continental Press Release Announcing Expansion of Latin America Service, 10/23/97
Attachment 2: Delta Press Release to Host 22 Airlines for Summit, 10/2/97
Attachment 3: United Press Release Announcing Global Network Expands to South America, 10/22/97

Counsel: American, Carl Nelson, 202-496-5647

Consolidated Reply of Lan Chile

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The Department must grant Lan Chile's applications and reject any suggestion that action on the applications should be delayed pending an investigation of relationships that have nothing to do with Lan Chile. Lan Chile wants to initiate its planned codeshare services with American at the earliest possible date, as allowed by the existing U.S.-Chile bilateral agreement. Any action other than the timely approval of Lan Chile's applications would place the United States in an untenable position under the bilateral agreement and could seriously jeopardize the prospects for an effective open-skies agreement with Chile.

Attachment: United Press Release Announcing Global Network Expands to South America, 10/22/97

Counsel: Zuckert Scoutt, Charles Simpson, 202-298-8660

Linea Aerea Nacional Chile, S.A. - Lan Chile (Notice of Action Taken)

OST-97-2982 | Posted November 4, 1997

Notice of Action

Exemption from 49 U.S.C. 41301 to conduct scheduled foreign air transportation of persons, property and mail between Santiago, Chile, and Orlando, Florida, and to coterminalize Orlando operations with Lan Chile's existing Department authority (see Order 87-8-55) to conduct operations between a point or points in Chile and Miami, Florida.

Counsel: Charles Simpson, 202-298-8660

Linea Aerea Nacional Chile, S.A. - Lan Chile / American Airlines, Inc. and Lan Chile (US-Chile Service)

OST-97-2982 | November 12, 1997

Consolidated Response of United Air Lines

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The Investigation United Is Urging Is Fully Consistent With Previous Investigations Of Code-Share Relationships In Similar Circumstances. In its Consolidated Answer, United urged that the Department investigate the American/LAN-Chile alliance for the same reasons that have led to the investigations of other alliances formed by American in the Latin America/Caribbean region which that carrier dominates from its Miami hub. What United is urging is an independent investigation that will concentrate on the impact this proposed alliance will have on competition in the U.S.-Chile and U.S.-South America markets, particularly at the Miami gateway where nonstop services to this region are concentrated. Such an investigation would include issues comparable to those issues which the Department decided to investigate in the cases of the alliances American formed with the TACA Group of carriers as well as with ALM Antillean Airlines and BWIA.

Counsel: United and Ginsburg Feldman, Joel Burton

American Airlines, Inc. and Linea Aerea Nacional Chile, S.A. - Lan Chile

Order 98-2-21 | OST-97-3285 | OST-97-2982 | Undocketed | Issued and Served February 20, 1998

Order Consolidating Proceedings and Establishing Procedural Schedule

By this order, we consolidate into Docket OST-97-3285 the Linea Aerea Nacional Chile, S.A. ("Lan Chile") application for an exemption filed in Docket OST-97-2982, and the undocketed joint application filed by American Airlines, Inc. ("American") and Lan Chile for a statement of authorization to conduct code-share services. We also establish procedural dates in Docket OST97-3285 for the filing of responsive pleadings. Finally, we are providing to counsel and outside experts for interested parties in this proceeding interim access to the confidential information filed in the American-TACA Group case (Docket OST-96-1700), subject to certain affidavit procedures and requirements.

By: Charles Hunnicutt

American Airlines, Inc. et. al., and LAN Chile, S.A. / Approval of and Antitrust Immunity for Alliance Agreement | LAN Chile / Exemption | American Airlines, Inc. et. al., and LAN Chile, S.A. / Reciprocal Codeshare Services

OST-97-3285 | OST-97-2982 | Undocketed | March 9, 1998

Confidentiality Affidavits of Allied Pilots Association

American Airlines, Inc. and Linea Aerea Nacional Chile, S.A. (Antitrust Immunity)

OST-97-3285 | OST-97-2982 | Undocketed | March 13, 1998

Consolidated Answer of Continental Airlines

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Failure to deny swiftly antitrust immunity for the alliance between American and its chief competitor on U.S.-Chile routes would confirm to the few remaining unaligned Latin American airlines that they must join the expanding American empire or be crushed by it, teach foreign countries that the U.S. will pay for nominal open skies with approval of, and antitrust immunity for, anticompetitive alliances that perpetuate the restrictive status quo and advise U.S. airlines attempting to compete with the American juggernaut in Latin America that the Department will allow American and its allies to drive them out of the market.

Counsel: Continental and Crowell Moring, Bruce Keiner, 202-624-2500

Comments of Delta Air Lines

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The evidence of record overwhelmingly establishes that the proposed alliance is anticompetitive and anti-consumer, lacks countervailing public interest benefits, and should be denied. Grant of the application would further entrench American's position as the dominant carrier to Chile, in particular, and Latin American, in general, and would foreclose significant competitive challenge to American through a code-sharing arrangement between Lan Chile and another U. S. carrier.

Exhibit DL-1: American Currently Operates 75% of the US-Flag Chile Nonstop Frequencies
Exhibit DL-2: American Currently Operates 67% of the US Flag Chile Nonstop Seats
Exhibit DL-3: American and Lan Chile Combined Currently Carry Nearly 70% of US-Santiago Passengers
Exhibit DL-4: American and Lan Chile Combined Currently Operate 88% of US-Chile Passengers
Exhibit DL-5: American and Lan Chile Combined Currently Operate 81% of US-Chile Nonstop Seats
Exhibit DL-6: American Airlines Serves All of the Commercially Significant Points in Latin America
Exhibit DL-7: 97% of US-Chile O&D Traffic is to or From Santiago

Counsel: Delta and Shaw Pittman, Robert Cohn, 202-663-8060

Comments of United Air Lines

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The alliance proposed between American and Lan Chile, no less than the alliance proposed between American and the TACA carriers, poses substantial risks to competition that cannot be offset by bringing into force an open skies agreement with Chile. Rather than promote competition, the grant of American's and Lan Chile's joint application for immunity from U.S. antitrust laws would: further entrench American as the dominant carrier in U.S.-Chile and U.S.-Latin America air travel markets; enable American to increase its dominant position at the strategic Miami gateway, which is used by more than 62% of all U.S.-Latin America air travelers; preclude United (and other U.S. carriers) from entering into an alliance agreement with Lan Chile that would facilitate the expansion of United's Latin America route network, and thereby enhance inter-network competition between United and American at Miami and throughout Latin America to the benefit of consumers; and significantly increase the pressure on the Department to approve other alliances between American and major Latin American carriers, effectively excluding other U.S. carriers from having an opportunity to develop alliance relationships with these carriers that would provide them cost-efficient means to extend their on-line networks into Central and South American markets, and thereby to initiate much broader network-to-network competition with American throughout Latin America.

Exhibit UA-1: American Operates More Service to Latin America than All of its US Competitors Combined
Exhibit UA-2: American and Lan Chile Will Dominate the US-Chile Market
Exhibit UA-3: American Controls the Dominant US-Gateway to Latin Ameircan
Exhibit UA-4: Miami is the Dominant US Gateway for US-Chile Passengers
Exhibit UA-5: Miami Accounts for More that One-Half of US-Santiago Passenger Traffic
Exhibit UA-6: American Airlines is the Dominant US Carrier at Miami by Any Measure
Exhibit UA-7: American Does Not Need the Codeshare Support of Six Other Central American Carriers

Counsel: United and Ginsburg Feldman, Joel Burton, 202-637-9130

Confidentiality Affidavit for Edgar James - James & Hoffman, Counsel to ALPA

American Airlines, Inc. and Linea Aerea Nacional Chile, S.A. - Lan Chile (Antitrust Immunity)

OST-97-3285 | OST-97-2982 | Undocketed | March 24, 1998

Joint Reply of American and Lan Chile

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The opposing carriers are engaged in a cynical effort, supported by speculative doomsday rhetoric and little more, to invoke DOT assistance and force Lan Chile to do business with them instead of with American. Their motivations are transparent, and their arguments amount to a manifesto for selective government intervention into the free market process.

Counsel: American, Carl Nelson, 202-496-5647, carl_nelson@amrcorp.com / Zuckert Scoutt, Charles Simpson, 202-298-8660 for Lan Chile

Reply of Aeromexico

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The two carriers claim that this agreement will allow them to capture the synergies of their respective route networks, establish a seamless air transport system through network coordination. achieve competitive economies of scale, and greatly enhance their competitiveness vis-a-vis other alliances. American Airlines and Lan Chile further claim that these benefits are expected to result in lower costs, enabling them to serve more efficiently thousands of city-pairs and provide the public with greater service options at a lower cost. The centerpiece of the proposed American-Lan Chile alliance is the request for antitrust immunity. This immunity would allow them to operate outside the scope of U.S. antitrust laws by being able to engage in joint pricing, joint marketing, joint sales campaigns and joint commission programs, without legal repercussion should these efforts prove anticompetitive or otherwise not in the public interest.

Appendix 1: US Foreign Direct Investment in Latin America
Appendix 2: Latin America as a Distinct Regional Market: Competitive Service Options, Latin America v Europe
Appendix 3: Potential Domination of Key US-Chile City-Pair Markets by American and Lan Chile
Appendix 4: American Airlines: Building an Uncostestable Network in Latin America
Appendix 5: Domination of Key Latin American City-Pair Markets by the American Group of Airlines

Counsel: Aeromexico and Manatt Phelps, Irwin Altschuler, 202-463-4300 and Verner Liipfert, William Evans, 202-371-6000

Consolidated Reply of Regional Business Partnership - Newark

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The Regional Business Partnership urges the Department to halt American's preemptive Latin American strategy, heed the clear message of the Department of Justice that overlapping code-share alliances wreak havoc on competition without countervailing benefits and deny the American/Lan Chile requests for code-share authority and antitrust immunity to preserve viable competition by alternative U.S. gateways and additional carriers on U.S.-South America routes.

By: Samuel Crane, 973-242-6237

American Airlines, Inc. and Linea Aerea Nacional Chile, S.A. - Lan Chile (Antitrust Immunity)

OST-97-3285 | OST-97-2982 | Undocketed | April 7, 1998

Answer of Continental Airlines to Motion, Consolidated Surreply and Motion for Leave to File an Unauthorized Document Out of Time

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The Joint Applicants' pie-in-the sky description of open skies and their attempt to cast Continental, Delta and United as villains do not withstand scrutiny. While American and Lan Chile continue to advance the absurd argument that a de facto merger of the two carriers controlling 70% of the U.S.-Chile seats is in the public interest, American's Chairman and CEO is showing exactly why an American/Lan Chile combination is bad for consumers and bad for competition.

Counsel: Continental and Crowell Moring, Bruce Keiner, 202-624-2500

American Airlines, Inc. and Linea Aerea Nacional Chile, S.A.-Lan Chile (Antitrust Immunity)

OST-97-3285 | OST-97-2982 | Undocketed | April 9, 1998

Motion for Leave to File and Response of American Airlines to United and Continental

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United and Continental have offered no legitimate basis for the Department to accept their unauthorized pleadings. As they have done so frequently in other proceedings, United and Continental have merely reheated the same rhetoric they served up in their initial comments, without providing anything new. Continental's document is particularly offensive to orderly administrative procedures. Continental devotes a good portion of its paper to a phony "surreply" to Newark and to Aeromexico. Newark, of course, is a Continental proxy that filed a "consolidated reply" on March 24, 1998, when it should have submitted an objection on March 13, 1998, as provided by the Department's order. And Aeromexico, as we noted in our motion of March 27, 1998 to strike, is a codeshare ally of both United and Delta, and also submitted transparently late objections under the guise of a "reply." It is clearly an abuse of process for opposing parties to submit a series of unauthorized pleadings, and then continue the charade by "responding" to one another.

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

American Airlines, Inc. and Linea Aerea Nacional Chile, S.A.-Lan Chile (Antitrust Immunity)

OST-97-3285 | OST-97-2982 | Undocketed | April 10, 1998

Answer of Lan Chile to Motion for Leave to File

It is a disservice to the applicants and to the Department Staff to have to review and consider repetitive pleadings from parties whose true objectives are not to "complete the record" but, rather, to create delay. Lan Chile requests the Department to reject all of the unauthorized pleadings filed to date, advise the parties that it will accept no future unauthorized pleadings, and devote its efforts to the prompt approval of the pending applications.

Counsel: Zuckert Scoutt, Charles Simpson, 202-298-8660

Ameircan Airlines, Inc. and Linea Aerea Nacional Chile, S.A. - Lan Chile / American Airlines, Inc. and The TACA Group Reciprocal Codeshare Proceeding

OST-97-3285 | OST-97-2982 | Undocketed | OST-96-1700 | April 23, 1998

Re: Confidentiality Affidavits