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OST-1999-5674

Alitalia-Linee Aeree Italiane-S.p.A. and KLM Royal Dutch Airlines and Northwest Airlines, Inc.

This joint application concerns two agreements: a bilateral Alliance Agreement between Alitalia and Northwest, and a trilateral Coordination Agreement between Alitalia, Northwest, and KLM. Each of these agreements builds upon the success of the already approved and immunized bilateral alliance agreement between Northwest and KLM, which will remain in effect The Northwest/Alitalia Alliance Agreement is comparable to the Northwest/KLM agreement in that it provides a contractual framework for cooperation in all of the major functional areas of the airlines' operations, while the Coordination Agreement provides for integration of all three carriers as a single operating entity.

Counsel:  Northwest, Megan Rae Poldy, 202-842-3193 / Zuckert Scoutt, Richard Mathias, 202-298-8660 for Alitalia / KLM, Paul Mifsud, 202-626-6717

The Department probably will not hear from other U.S. carriers in this proceeding, notwithstanding their concerns about the anticompetitive aspects of this application. Some may be willing to trade antitrust immunity for a new route to Italy; none would not like similar scrutiny of their own immunized alliances. Nevertheless, the Department should proceed with the investigation of the need for immunity for both the basic Northwest/KLM and the potential Northwest/KLM Alitalia/Continental alliances. It should also in due course investigate the need for immunity for all other Alliances. As TWA demonstrated in the White Paper submitted to the Department last December, the adverse consequences of immunity in transatlantic

Counsel:  Richard Jahy, Jr., for TWA, 703.684.4422, rfahy@ibm.net

By:  Bradley Mims

ASTA is opposed to the grant of additional antitrust immunity to airlines for marketing alliances and other joint ventures. If these arrangements are as pro-consumer and pro-competitive as the airline partners represent, there should be no need to immunize them from the most fundamental of all consumer protection legislation. The demands of foreign carriers for freedom from antitrust scrutiny of their joint conduct with other airlines and the demands of foreign governments that their national carriers have such protection as a condition for liberalizing bilateral aviation agreements is not an excuse for subverting the laws that Congress passed to protect the competitive process and consumers from the effects of non-competitive behavior.

Counsel:  ASTA, Paul Ruden, 703-739-2792, paulr@astahq.com

TWA hereby petitions for reconsideration of Order 99-5-10 insofar as it fails to require the applicants to submit an analysis of competition between Continental, in which Northwest has the controlling voting interest, and Alitalia, Northwest's proposed partner in antitrust immunity. Specifically, TWA requests that Item D of the information request be amended to add at the end "or where Continental competes with Alitalia."

Counsel:  TWA and Richard Fahy, 202-457-4754, rfahy@ibm.net

TWA's petition for reconsideration of the Department's order in this proceeding is based on two fallacious assertions. Contrary to TWA's assertions, Northwest does not control Continental and the alliance among Alitalia, KLM and Northwest will have no impact upon competition between Continental and Alitalia. Because TWA's petition for reconsideration asking the Department to consider competition between Continental and Alitalia in this proceeding as if those two carriers were part of the same alliance is based on fallacies, it should be denied.

Counsel:  Crowell & Moring LLP, Bruce Keiner, Jr. for Continental

By a Petition for Reconsideration, dated May 25, 1999, TWA requested that Order 99-5­10 be amended to request additional information from the applicants with respect to the impact of the alliance and the grant of antitrust immunity upon competition between Continental, over which Northwest has control, and Alitalia, which code shares with Continental and which would have, if approved, an immunized alliance with Northwest. On June 4, 1999, Continental answered in opposition to TWA's Petition for Reconsideration. TWA hereby request leave to file this Reply as an otherwise unauthorized document for the limited purpose of calling the Department's attention to a statement by Alitalia made on Friday, June 11, 1999. This pleading should be accepted because it will assist the Department in its consideration of this matter, and will not delay the proceeding. According to a Reuters article, Dominico Cernpella, Managing Director of Alitalia told to a shareholders meeting that "we are studying how to introduce Continental, with whom Alitalia has a codesharing agreement, into this three-way alliance and transform its into an even more ambitious accord." A copy of the article is attached. The Alitalia statement obviously substantiates TWA's concern about the role of Continental in the alliance, and the impact of the alliance on competition in the U.S. - Italy market.  

Counsel:  Richard Fahy, Jr. for TWA, 703.684.4422

On May 25, 1999, Trans World Airlines, Inc. filed, a petition for reconsideration of Order 99-510. TWA petitions the Department to require the Joint Applicants to file additional information concerning competition between Continental Airlines, Inc., which has certain business interests with Northwest, and Alitalia, Northwest's proposed partner in this case. On June 4, 1999, Continental filed an answer opposing TWA's petition. Contrary to TWA's assertions, it argues that Northwest does not control Continental and the alliance among Alitalia, KLM and Northwest will have no impact upon competition between Continental and Alitalia. We find that the matters raised by TWA in its petition are relevant to our assessment of the competitive implications that we must address in this case. To enable us to consider the potential impact of this arrangement on the proposed alliance, we direct the Joint Applicants to provide in English (1) a description of whether and if so how Continental's operations will be integrated with those of the proposed alliance; and (2) an analysis of the competitive effect in city-pair markets where Continental competes, or engages or may engage in cooperative arrangements, with Alitalia. When we have determined that the record of this case is complete, we will announce an appropriate procedural schedule for reaching a decision expeditiously. We shall serve a copy of this notice on all persons on the service list in this docket.

By:  Bradley Mims

In response to items A, B, and C of the Department's information request contained in Order 99-5-10, the Joint Applicants are separately submitting certain proprietary and sensitive corporate documents and information to the Department accompanied by a Motion for Confidential Treatment of those documents pursuant to Rule 39 of the Department's Rules of Practice. The Joint Applicants have prepared indices relating to their respective confidential documents, which are attached hereto.

Counsel:  Northwest, Megan Rae Poldy, 202-842-3193 / Zuckert Scoutt, Richard Mathias, 202-298-8660 for Alitalia / KLM, Paul Mifsud, 202-626-6717

As an initial matter, we find that the record of this case is now substantially complete, and we will establish procedural deadlines at this time. However, we will defer action on the Joint Applicant’s request for confidential treatment. We note that answers to the confidentiality request are due July 26, 1999. Therefore, we will defer our determination on this matter, pending expiration of our regulatory comment period.  In the meantime, in order to afford interested parties prompt access to the documents under conditions agreed to by the Joint Applicants 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 filed 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:  Bradley Mims

Counsel:  Crowell Moring

Counsel:  Kirkland Ellis

Counsel:  Richard Fahy for TWA

Counsel:  Kirkland Ellis, Jeffrey Manley, 202-879-5161

Counsel:  Guerrieri Edmond, Robert Clayman, 202.624.7400

By:  Ronald Wilder

Counsel:  Baptiste Wilder, Roland P. Wilder, Jr. 

Counsel:  Guerrieri Edmond, Joseph Gurerrieri, Jr. 

Counsel:  Guerrieri Edmond, Joseph Gurerrieri, Jr. 

The IAM has failed to make any showing that a delay in this proceeding is necessary to protect its interests. The requested delay would jeopardize the prospect of achieving open skies in time to introduce new services to the travelling public during the winter 1999/2000 season beginning on October 31. The Joint Applicants urge that the procedural schedule be maintained for all parties, including the IAM. However, the Joint Applicants would not oppose an IAM motion for leave to file additional comments if such motion and comments were filed by August 13.  On the other hand, by postponing the coming of open skies, the requested delay threatens clear harm to the interests of the travelling public and of the airlines that plan to inaugurate new and improved services to Italy this winter season. Expedition in this proceeding is essential if the United States and Italy are to achieve an effective open skies agreement in time for new services to commence in the upcoming winter season beginning on October 31. Given the lead time required by airlines to assign aircraft and crews to new services and to market these services to passengers and shippers, this proceeding must be expedited on an urgent basis. A two week delay at the outset would jeopardize the prospect of concluding this proceeding and bringing the benefits of open skies to the public in a timely manner.

Counsel:  Northwest, Megan Rae Poldy, 202-842-3193 / Zuckert Scoutt, Richard Mathias, 202-298-8660 for Alitalia / KLM, Paul Mifsud, 202-626-6717

Counsel:  Carmen R. Parcelli Guerrieri, Edmond & Clayman

By:  Douglas Kelley, Senior Attorney for Continental

We find it appropriate and in the public interest to grant the IAM's request. We also expect all other interested parties to file their responsive pleadings consistent with our Notice dated July 19, 1999, i.e., answers must be filed no later than August 93 and replies by August 18.  We are pleased to note that the IAM and Alitalia are taking steps now to attempt to resolve their labor-related issues. The JAM has stated that it expects to file comments only if the negotiations do not resolve the differences between it and Alitalia.

By:  Bradley Mims

American Airlines, Inc., in response to the Department's scheduling notice of July 19, 1999, hereby answers the captioned joint application of Alitalia, KLM, and Northwest Airlines, submitted on May 11, 1999, for approval of and antitrust immunity for agreements. American is this day applying for a certificate of public convenience and necessity to engage in foreign air transportation of persons, property, and mail between a point or points in the United States, directly and via intermediate points, and a point or points in Italy, and beyond, subject to a standard condition governing such open-skies rights. In the event that the Department determines to grant antitrust immunity to Alitalia/KLM/Northwest, it should contemporaneously grant American's application for unrestricted U.S.-Italy authority. The open-skies agreement between the United States and Italy, initialed on November 11, 1998, will be signed when Alitalia is granted antitrust immunity with its chosen U.S. carrier partner. In order to maximize competitive opportunities under the new agreement, U.S. carriers should have full freedom of entry coincident with any grant of immunity to Alitalia/KLM/Northwest.

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

Since September 3, 1993, Alitalia has continued its lock-out and has evidenced, at best, a sporadic interest in resuming negotiations. In May 1999, shortly after the filing of the Application at issue, Northwest offered to assist the parties in resolving their dispute and in reaching a collective bargaining agreement. As a result of Northwest's intervention, negotiations were scheduled for July 6, 1999. At that meeting, the IAM made a proposal to settle all outstanding issues. In response, Alitalia's representative informed the IAM that they would need an extended period of time to study the proposal.

Counsel:  Guerrieri Edmond, Robert Clayman, 202.624.7400

Counsel:  Zuckert Scoutt, Richard Mathias, 202.298.8660

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

Counsel:  Northwest, Megan Poldy, 202.842.3193; KLM, Paul Mifsud, 202.626.6717 and Zuckert Scoutt, Richard Mathias, 202.298.8660

In their Reply to the IAM's Answer, the joint applicants fail to address the allegations made by the Department of Justice in its lawsuit against Northwest and Continental. Nor do they describe any of the effects Northwest's relationship with Continental will have upon the proposed alliance or competition. In addition, the joint applicants grossly mischaracterize the service they and Continental currently provide between the United States and Italy. Based upon the record these parties have proffered, the Department lacks the information necessary to properly and adequately assess the impact the proposed alliance will have upon competition and the public interest.

Counsel:  Guerrieri Edmond, Robert Clayman, 202.624.7400

The International Association of Machinists and Aerospace Workers, AFL-CIO hereby withdraws its opposition to the joint applicants, request for authorization to engage in code share services and withdraws all pleadings filed in the above captioned matter.

Counsel:  Guerrieri Edmond, Robert Clayman, 202.624.7400

By this order, we tentatively grant approval of and antitrust immunity for (1) a Commercial Cooperation & Integration Agreement between Northwest Airlines, Inc. and Alitalia Linee Aeree Italiane-S.p.A.; and (2) an Alliance Coordination Agreement2 among Northwest, Alitalia, and KLM Royal Dutch Airlines, and their respective subsidiaries, collectively referred to herein as the "Alliance Agreements," under 49 U.S.C. §§ 41308 and 41309. Our action here is subject to the various terms, conditions, provisions and limitations imposed by the Department of Transportation in Order 93-1-11, dated January 11, 1993. If made final, we will direct the Joint Applicants to resubmit their Alliance Agreements no later than January 11, 2003 and if the Joint Applicants choose to operate under a common name or brand, they will have to obtain advance approval from the Department before implementing the arrangement.

By:  Bradley Mims

On November 30, 1999, the Department issued an Order to Show Cause, Order 99-11-20. We tentatively determined, subject to certain conditions and limitations, to grant approval of and antitrust immunity for the Alliance Agreements. We also tentatively directed the Joint Applicants to resubmit their Alliance Agreements no later than January 11, 2003. We also tentatively determined that if the Joint Applicants choose to operate under a common name or brand, they will have to comply with our relevant procedures before implementing the change.

We also tentatively directed the Joint Applicants to withdraw from all International Air Transport Association ("IATA") tariff conference activities relating to through fares, rates or charges between the United States and Italy, as well as between the United States and the homeland of any other foreign carrier granted antitrust immunity or renewal thereof, by the Department for participation in similar alliance activities with a U.S. carrier; and file all subsidiary and/or subsequent agreement(s) with the Department for prior approval. We also tentatively directed Alitalia to report full-itinerary Origin-Destination Survey of Airline Passenger Traffic for all passenger itineraries that contain a United States point (similar to the O&D Survey data already reported by Northwest).

By:  Bradley Mims

Order 2007-5-16
OST-1995-618 - Delta, Swiss, Sabena and Austrian - Antitrust Immunity
OST-1995-792 - American and Canadian - Antitrust Immunity - US-Canada
OST-1999-5674 - Alitalia, KLM and Northwest - Antitrust Immunity - U.S.- Italy
OST-1999-6528 - American, Swiss and Sabena - Approval and Antitrust Immunity for Agreements
OST-2000-6791 - Malaysia and Northwest - Antitrust Immunity - U.S.- Malaysia
OST-2001-10387 - American and British Airways - Approval of and Antitrust Immunity for Agreement
OST-2002-12688 - American and Swiss - Approval of and Antitrust Immunity for Alliance Agreement
OST-2002-13002 - Aloha and Hawaiian - Antitrust Immunity for Agreement
OST-2004-18613 - America West and Royal Jordanian - Approval of and Antitrust Immunity for Commercial Cooperation Agreement

Issued and Served May 24, 2007

Order Terminating Proceedings

The Department has identified several antitrust immunity proceedings as moot or inactive. In
each proceeding, applicants have terminated the alliance agreements for which they sought a
grant of immunity. Therefore, where a grant of immunity was made, it is no longer effective. It
is in the public interest for administrative management to terminate these proceedings and close
the corresponding dockets.

By: Andrew Steinberg

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