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OST-97-3285

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

OST-97-3285 | December 23, 1997

Joint Application

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• JA-1 The Alliance Agreement
• JA-2 American Airlines Timetable (Will Not be Scanned)
• JA-3 Lan Chile Timetable
• JA-4 American-Lan Chile Overlap City-Pairs
• JA-5 Airlines with International Service at American's Key Airports
• JA-6 Traffic Carried by American in Overlap Markets
• JA-7 Traffic Carried by Lan Chile in Overlap Markets
• JA-8 Total Origin and Destination Traffic for all carriers in Lan Chile's 25 Largest Routes Having a US Endpoint
• JA-9 The American-Lan Chile Alliance Will Create New Online Service in 863 Markets via Miami
• JA-10 The American-Lan Chile Alliance Will Create New Online Service in 1,871 Markets via Dallas/Fort Worth

Joint Motion for Confidential Treatment

Service List

Counsel: American, Carl Nelson, 202-857-4246, carl_nelson@amrcorp.com / Zuckert Scoutt, Charles Simpson, 202-298-8660

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

OST-97-3285 | Posted and Served January 9, 1998

Notice

We will rule on the merits of the Rule 39 Motion by subsequent order. In the meantime, in order to afford interested parties prompt access to the documents under conditions agreed to by American and Lan Chile and imposed by the Department under similar recent circumstances, we will grant immediate interim access to all documents covered by the Rule 39 Motion to counsel and outside experts for interested parties who file appropriate affidavits with the Department in advance. Moreover, we find it appropriate to grant interim access to any subsequent materials flied in this docket under a Rule 39 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.

By:  Charles Hunnicutt

American Airlines, Inc. and Lan Chile (Antitrust Immunity)

OST-97-3285 | January 12, 1998

Re:  Confidentiality Affidavit for United Air Lines

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

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

OST-97-3285 | January 15, 1998

Confidentiality Affidavit for Continental Airlines

Counsel:  Crowell Moring, Lorraine Halloway

American Airlines, Inc. and LAN Chile, S.A. (Antitrust Immunity)

OST-97-3285 | January 20, 1998

Re:  Confidentiality Affidavits for Delta Air Lines

Counsel:  Shaw Pittman, Robert Cohn, 202-663-8060, robert_cohn@shawpittman.com

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

Order 98-1-21 | OST-97-3285 | Issued and Served January 22, 1998

Order

The staff has now finished its preliminary review of the application, including documents for which the Joint Applicants have sought confidential treatment under Rule 39, and finds that the request is deficient in certain respects. Therefore, we direct the Joint Applicants to revise and amend their application, as prescribed below.

By:  Charles Hunnicutt

American Airlines, Inc. and LAN Chile

OST-97-3285 | January 20, 1998

Re: Antitrust Immunity

In response to your telephone call of January 15, 1998 with respect to the confidential documents we submitted in the captioned docket on December 23, 1997, we are enclosing the following:

1. An index that relates each document (by Bates number) to the information request number (as set forth in pp. 44-64 of the joint application); and
2. More legible copies of 380-403 and 420 (and, where necessary for readability, a transcription of the data contained in these documents).

Index of Documents Produced by American Airlines with Immunity Application

Counsel: Carl Nelson, Jr., 202.496.5647

Response of Lan Chile to Order 98-1-21 and Supplemental Submission under Pending Rule 39 Motion

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

American Airlines, Inc. et. al. and the TACA Group (Reciprocal Codesharing Services Proceeding) / American Airlines and Lineas Aereas Nacional Chile, S.A. (Approval of Antitrust Immunity for an Alliance Agreement)

OST-96-1700 | OST-97-3285 | Served January 27, 1998

Notice

We will grant to counsel and outside experts for the interested parties in the American-TACA case immediate interim access to all confidential materials filed in the American-Lan Chile case. However, we will require that these parties file appropriate affidavits in advance with the Department in the American-Lan Chile case (Docket OST-97-3285) and file a copy of such affidavit in the American-TACA docket.

By: Charles Hunnicutt

American Airlines, Inc. and Lan Chile

OST-97-3285 | January 29, 1998

Re: Joint Application for approval of and antitrust immunity for alliance agreement - Confidentiality Affidavits of United Air Lines, Inc.

Pursuant to the Notice issued on January 9, 1998 in the above-referenced proceeding. enclosed you will find an original and twelve (12) copies each of four additional confidentiality affidavits for United Air Lines, Inc.

• Affidavit of Michael G. Whitaker
• Affidavit of Yvonne L. Ramos
• Affidavit of Johnathon Moss
• Declaration of James M. Lynch

Counsel: Joel Burton for United, 202.637.9170

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

OST-96-1700 | OST-97-3285 | February 5, 1998

Affidavits for Counsel of Continental Airlines (Paul Denis, Lorraine Halloway, Bruce Keiner)

Counsel:  Crowell Moring, Bruce Keiner

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

OST-97-3285 | Posted and Served February 12, 1998

Notice

Joint Applicants must file certain sections of:  AAadvantage Participating Carrier Agreement; LanPass Participating Agreement; Codeshare Agreement dated 9/5/97;  and Special Prorate Agreement

By:  Charles Hunnicutt

Re:  Joint Application

American Airlines, Inc. and Linea Aerea Nacional Chile, S.A., in response to the Department's Notice of February 12, 1998 in the captioned docket, hereby submit three copies of additional confidential materials in sealed envelopes. This submission complies in full with the Department's Notice. American and Lan Chile request that these materials be withheld from public disclosure under 14 CFR 302.39 for the reasons stated in their joint motion of December 23, 1997, which is incorporated herein by reference.

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

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. and the TACA Group / American Airlines, Inc. and LAN Chile

OST-96-1700 | OST-97-3285 | February 27, 1998

Confidentiality Affidavit of Continental Airlines, Inc. - Steven Mirmina

Counsel: Steven Mirmina, 202.624.2500

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

• Affidavit of Marta Wagner
• Affidavit of Robert Mann, Jr.
• Affidavit of David Dean

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 LAN Chile - (for approval of and antitrust immunity for alliance agreement )

OST-97-3285 | March 27, 1998

Motion of American Airlines to Strike Reply of Aerovias de Mexico

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Aeromexico's document is not a legitimate reply at all, but is instead a late-filed objection to the American/Lan Chile application, and displays an extraordinary contempt for the orderly conduct of proceedings before the Department, and for the Department's procedural orders. Aeromexico did not have the courtesy to serve American by hand. Its pleading arrived by mail on the afternoon of March 26, 1998.

Counsel: Carl Nelson, Jr., 202.496.5647

American Airlines, Inc. et al., and The TACA Group Reciprocal Code-Share Services Proceeding / American Airlines, Inc. and Linea Aerea Nacional Chile, S.A.

OST-96-1700 | OST-97-3285 |April 1, 1998

Affidavit for Counsel of Continental Airlines - Michele M. Burris

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

OST-97-3285 | April 2, 1998

Reply of United Air Lines and Motion for Leave to File

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American and Lan Chile are left with no response other than to impugn the motives of their adversaries and to invoke lofty rhetoric about the theoretical benefits of open skies agreements in general. They also cite the benefits consumers have gained from other alliances that have received antitrust immunity from the Department under vastly different market conditions from those that prevail in the U.S.-Chile and broader U.S.-Latin America air travel markets. In order to assure that the record before the Department is complete and accurate, and to respond to the false comparisons and phony rhetoric on which American and Lan Chile base their case for immunity from U.S. antitrust laws, United requests leave to file this response to the Joint Reply filed by American and Lan Chile in this docket.

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

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

OST-97-3285 | April 3, 1998

Opposition of Aeromexico to the Motion of American Airlines to Strike the Reply of Aerovias de Mexico

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American relies on a factual distortion in an effort to support its position. The truth is that Order 98-2-21 directed interested parties to file "comments" by March 13 and "replies" by March 24. See Order at 4. Delta, United and Continental therefore filed timely comments on the application in consideration, and Aeromexico, the Regional Business Partnership (Newark), and American and Lan Chile fled timely replies to those comments. The fact that all three comments express opposition to the proposed alliance, however, did not, as American suggests, dictate that Aeromexico's critical Reply also had to be filed during the comment stage. Moreover, by moving to strike only the reply of Aeromexico, and not the similarly critical reply of the Regional Business Partnership (Newark), American appears to be applying a duel set of standards which should not be countenanced by the Department.

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

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

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

OST-97-3285 | April 14, 1998

Affidavit for Donald Bliss, Patrick Rizzi, David Beddow, Benjamin Bradshaw, Counsel for US Airways

American Airlines, Inc. and British Airways, PLC; American Airlines, Inc. and The TACA Group; American Airlines, Inc. and Linea Aerea Nacional Chile

OST-97-2058 | OST-96-1700 | OST-97-3285 | Dated April 16, 1997 | Docketed April 15, 1998

Re: Joint Applications - Affidavits of Counsel for Trans World Airlines, Inc.

Pursuant to Order 97-342, enclosed for filing are the original and eight copies of a confidentialiyv affidavit of Kathleen A. Soled in the Arnerican/BA proceeding. In addition. pursuant to Order 98-3-31, enclosed are the originals and eight copies of confidentiality affidavits of Kathleen A. Soled, Richard J. Fahy, Jr., and Daniel S. Klein in the AA/TACA and AN/Lan Chile proceedings.

• Affidavit of Kathleen A. Soled - in Docket OST-97-2058
• Affidavit of Kathleen A. Soled - in Dockets OST-96-1700 & OST-97-3285
• Affidavit of Richard J. Fahy - in Dockets OST-96-1700 & OST-97-3285
• Affidavit of  Daniel S. Klein - in Dockets OST-96-1700 & OST-97-3285

Counsel: Richard Fahy for TWA

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

• Affidavit of Robert Mann, David Dean, Marta Wagner, Edgar James for ALPA - American and TACA
• Affidavit of Robert Mann, David Dean, Marta Wagner, Edgar James for ALPA - American and Lan Chile

Counsel:  James Hoffman, Marta Wagner, 202-496-0500

American Airlines, Inc. and The TACA Group Reciprocal Code-Share Services Proceeding / American Air Lines, Inc. and Linea Aerea Nacional Chile, S.A.

OST-96-1700 | OST-97-3285 | April 28, 1998

• Affidavit of Jerry Anker for ALPA
• Affidavit of Russell Bailey for ALPA

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

OST-97-3285 | OST-97-2982 | May 15, 1998

Re:  Confidentiality Affidavits of Roger Fones, Donna Kooperstein, Robert Young, Michael Billiel, William Gillespie and Megan Betts of the US Department of Justice

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

OST-97-3285 | OST-97-2982 | Undocketed | May 20, 1998

Confidentiality Affidavit for Judith Conti of James & Hoffman for ALPA

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

OST-97-3285 | OST-97-2982 | May 27, 1998

Re:  Confidentiality Affidavit for Jeffrey Jacobs, Bernard Joseph, Richard Sauer, Darryl Libow of Sullivan & Cromwell for British Airways

American Airlines, Inc. and Linea Aerea Nacional Chile, S.A. (LAN Chile) - (Approval of and Antitrust Immunity for Alliance Agreement)

OST-97-3285 | OST-97-2982 | May 29, 1998

Confidentiality Affidavit of Mark McCall - (Counsel for British Airways, Plc)

American Airlines, Inc. and Lineas Aerea Nacional Chile (LAN Chile) (Antitrust Immunity) / LAN Chile (Exemption)

OST-97-3285 | OST-97-2982 | May 29, 1998

Confidentiality Affidavit for James Blaney, Counsel for British Airways

Confidentiality Affidavit for Paul Jasinski, Counsel for British Airways

American Airlines, Inc. and Lan Chile, S.A. - Lan Chile

Order 99-4-17 OST-97-3285	Issued and Served April 22, 1999	Order to Show Cause Captured PDF Scanned Version	Antitrust Immunity for Alliance Agreement	HTML - with Appendix A
		Appendix A:  Conditions Governing the Antitrust Immunity for the Alliance Agreement

We tentatively find that our action in this matter will advance important public benefits. Final approval would permit the two airlines to operate more efficiently, and provide enhanced service options to the U.S. traveling and shipping public. With our proposed limitations, our actions in this matter will be consistent with our policy of facilitating our international aviation policy toward more open-skies relationships, and of encouraging competition among emerging multinational airline networks, where those networks may lead to lower costs and enhanced service for U.S. and international consumers. We are aware that the trend toward expanding international airline networks is an inevitable response to the underlying network economics of the airline industry. We also recognize that our action here will allow our airlines to continue to be significant players in the globalization of the airline industry.

By:  A. Bradley Mims

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

The record in this proceeding is stale. The last pleadings were filed over a year ago, and significant new developments which affect the bases for the Department's evaluation of antitrust immunity for American and Lan Chile are occurring even now. American has now acquired its interest in Aerolineas Argentinas -- the only other major foreign carrier headquartered in the Southern Cone -- and, the Argentina "open skies" forecast when American's investment was permitted have failed to materialize. In fact, the Argentine skies remain closed to new entry as the U.S. and Argentina continue to negotiate over what may prove to be no more than extremely modest new opportunities for U.S. carriers. Until the Department knows the extent (if any) to which Argentine skies will open, it should not proceed with further consideration of immunity for an alliance involving the same U.S. airline which already owns and appears to control Aerolineas Argentinas and seeks to integrate its operations with the only other major airline headquartered in the Southern Cone free from the normal constraints of the antitrust laws.

Counsel:  Continental and Crowell Moring, Bruce Keiner, 202-624-2615

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

Continental's effort to link the American/Lan Chile proceeding to speculation concerning the course of on-going negotiations between the United States and Argentina should be rejected out-of-hand. This is a shopworn tactic that Continental has utilized in prior proceedings in an effort to delay the implementation of cooperative arrangements between American and other carriers that the Department has found to be in the public interest. For example, in opposing the American/TACA arrangement, Continental cited the American/Lan Chile proposal as a basis for delay.

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

It is demonstrably absurd to suggest that the Department needs to avoid a "rush" to judgment in this case. It is now over 18 months since Lan Chile and American filed codeshare-related applications with the Department. It is now over 18 months since the United States and Chile initialed an open skies agreement that will, once implemented, open the U.S.-Chile market to all U.S. carriers without restriction. It is now over 16 months since Lan Chile and American filed their joint application for approval and antitrust immunity. During that time, the U.S. Government conducted an exhaustive investigation and review of the joint application and the proposed joint operations. The Department's Order to Show Cause reflects the Government's lengthy analysis and concludes correctly that the Lan Chile-American applications should be granted.

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

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

By this submission, Aeromexico wishes to express and illustrate its serious concern that granting antitrust immunity to American Airlines and Linea Aerea Nacional Chile in the manner suggested by the Order is likely to result in greatly diminished competition in the critical U.S.-Latin America and intra-Latin America markets. While no doubt creating valuable business opportunities for American, LanChile and their other alliance partners, the resulting sharp reduction in competition will foster a dangerous opportunity for these carriers to control traffic, pricing and other critical variables in these increasingly important markets.

Counsel:  Aeromexico and Manatt Phelps

Would-be monopolist American will be the winning bidder for a Lan Chile alliance if the Department's tentative decision is confirmed, but the Department should not rap the auctioneer's gavel. The "sound commercial criteria" and "free, competitive process" envisioned by the Department has been subverted by the commercial fact that American and Lan Chile joined together will be able to achieve monopoly power to maximize their own profits to the detriment of the public interest and competition. The American/Lan Chile combination is the result of American's successful plan to lure Lan Chile into an alliance based solely on maximizing profits to both companies through the elimination of competition.

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

Because of the unique and unprecedented regional dominance enjoyed by American in Latin America, the DOT's strategy of establishing open skies beachheads, which it successfully applied to promote liberalization in Europe, will not work in this region. American and LAN Chile decided that their combined strength warrants opening the door to the possibility of additional competition.  The Department's analysis of the competitive consequences of the American-LAN Chile alliance is flawed. It overlooks the unique market structure characteristics of U.S.-Chile and the Southern Cone region. An open skies agreement will not result in increased opportunities for other U.S. carriers. Instead, approval of the American-LAN Chile antitrust immunized alliance, coupled with open skies, will merely strengthen the already dominant position of American and LAN Chile and foreclose network expanding opportunities for other U. S. carriers. The Show Cause Order should be reversed and the joint application for grant of an immunized alliance should be denied.

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

The Department’s decision to approve the American/TACA alliance precluded the development of a second viable network in Miami-Central America markets to compete with American, even though there are open skies agreements in place in the region. Without an effective network competitor in these city pairs, American has been able to raise its Miami-Central America prices to the detriment of local passengers in these markets. Unless the Department intends to repeat this Central America experience in Chile, it must not approve the American/Lan Chile alliance.

Counsel:  United and Kirkland Ellis, Bruce Rabinovitz, 202-879-5116

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

Counsel:  IATA, David O'Connor, 202-293-9292

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

As they have done in prior pleadings, United, Delta, and Continental each takes the extraordinary and self-serving position of asking the Department to reject the American/Lan Chile alliance in order to facilitate each of them in obtaining an alliance of their own with Lan Chile.' As Lan Chile has previously explained, prior to entering into an alliance with American, Lan Chile held discussions with each of United, Delta, and Continental. Lan Chile concluded that an alliance with American is the best fit, and will provide the greatest benefits to its passengers. Now, these purportedly free market-oriented companies propose government intervention as a means of achieving a goal (i.e., an alliance with Lan Chile) that each has failed to attain in the marketplace

Counsel:  American, Carl Nelson, 202-496-5647 / Zuckert Scoutt, Charles Simpson, 202-298-8660

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

Contrary to The Joint Applicant's claim, an open skies agreement with Chile would not result in any significant increase in direct services by other U.S. carriers to Chile. Instead, it would enable American and Lan Chile to enhance their domination by allowing them to increase significantly their combined frequencies, which would make it virtually impossible for Delta and other U.S. carriers to compete effectively against the increased dominance of the American-Lan Chile alliance. In conclusion, in light of the likelihood that American, Lan Chile and Aerolineas Argentinas plan to join forces to establish a Southern Cone alliance, if the Department does not disapprove the American-Lan Chile alliance outright for the reasons set forth in Delta's objections, then at the very least it should defer consideration of the alliance pending conclusion of bilateral negotiations with Argentina.

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

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

Counsel:  Kirkland Ellis, Bruce Rabinovitz, 202.879.5116, bruce_rabinovitz@kirkland.com

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

We make final our tentative findings that the Alliance Agreement at issue should be approved and its parties given antitrust immunity, subject to (1) the provision that the antitrust immunity will not cover any activities of American, LAN Chile, and their respective subsidiaries, as owners or marketers of SABRE and Amadeus Chile computer reservations systems; (2) the Joint Applicants' withdrawal from IATA functions as described below; and (3) the provisions described in Appendix A. We will require American and LAN Chile to resubmit their Alliance Agreement to the Department for review three years from the date of the issuance of this order. If the Joint Applicants choose to operate under a single name or common brand, they will have to obtain prior approval from the Department before implementing the change. We also direct the Joint Applicants to file all subsidiary and subsequent agreements(s) with the Department for prior approval. 12 We will also reexamine the impact of the proposed alliance on the Miami-Santiago market in eighteen months.

In addition, we are finalizing our determinations (1) directing American and LAN Chile, as a condition on the grant of antitrust immunity, to withdraw from all IATA tariff coordination activities relating to through prices between the United States and Chile, and/or between the United States and any other countries whose designated airlines participate in similar agreements with U.S. airlines that have been or subsequently are granted antitrust immunity or renewal thereof by the Department; (2) directing American and LAN Chile to report full-itinerary O&D Survey data for all passenger itineraries that contain a United States point (similar to the O&D Survey data already reported by American); and (3) directing American and LAN Chile to eliminate any provision which would implement the "Exclusivity Clause" under their Alliance Agreement.

By:  Bradley Mims

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

United demonstrated in its pleadings in this case that antitrust immunity for the American/LAN Chile alliance must be disapproved because of the foreclosure of competition this alliance would cause at the Miami gateway. As a result of the elimination of competition between the dominant competitors in the Miami-Chile market, United also demonstrated that approval of this alliance would contribute to a proliferation of such alliances formed by American and aimed at preserving its dominant position in Latin America through its fortress Miami hub. Other foreign carriers in Latin America will inevitably choose to cooperate with their principal competitor and enjoy monopoly profits at Miami rather than join with other U. S. carriers to challenge American's Latin American dominance at Miami.

Counsel:  Kirkland Ellis, Jeffery Manley, 202.879.5161, jeffery_manley@kirkland.com

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

It is probably an understatement to say that any action other than the denial of United's petition could undermine the United States' highly successful open skies policy, Any favorable action on the petition - or even the prolonged possibility of such action - could send a message to the Chilean government, as well as to airlines and governments throughout Latin America, that the United States is not prepared to stand behind its core international aviation policy - a policy that it long has championed in the region.' For this reason, American and Lan Chile urge the Department to deny United's petition immediately, in advance of Secretary Slater's visit to Chile.

Counsel:  American, Carl Nelson, 202.496.5647 and Zuckert Scoutt, Charles Simpson, 202.298.8660

American Airlines, Inc. and Linea Aerea Nacional Chile, S.A. (Lan Chile) and Alaska Airlines, Inc.

Counsel:  American, Carl Nelson, 202.496.5647 and Zuckert Scoutt, Charles Simpson, 202.298.8660

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

On October 4, 1999, United Air Lines, Inc. filed a petition for reconsideration of Order 99-9-9. Upon reconsideration, we affirm our determinations in that order approving and granting immunity to the Alliance Agreement between American Airlines, Inc. and Linea Aerea Nacional Chile, S.A.  Our determinations in this matter will be effective upon implementation of the open-skies provisions of the agreement between Chile and the United States, insofar as it relates to foreign air transportation, subject to certain limits and conditions as indicated therein.

By:  Bradley Mims

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