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American Airlines, Inc. and British Airways PLC

Counsel:  American, Carl Nelson, 202.496.5647, carl.nelson@aa.com British Airways, Paul Jasinski, 718.397.4250

Counsel:  American, Carl Nelson, 202.496.5647, carl.nelson@aa.com British Airways, Paul Jasinski, 718.397.4250

Counsel:  American, Carl Nelson, 202.496.5647, carl.nelson@aa.com British Airways, Paul Jasinski, 718.397.4250

Notice affording parties prompt access to the documetns for which confidentiality is requested under conditions agreed to by American Airlines and British Airways and imposed by the Department under similar recent circumstances. The Notice grants immediate interim access to all documents covered by the Rule 12 Motition to Counsel and outside experts for interested parties who file appropriate affidavits with the Department in advance. Moreover, the Notice also grants interim access to any subsequent materials that may be filed in these cases under a Rule 12 Motion to counsel and outside experts for interested parties who file appropriate affidivaits with the Department in advance, unless the party filing the motion object. The actions here will make evidentiary materials availble for use by interested parties in either of the pending cases.

By:  Susan McDermott

Counsel:  Crowell Moring, Thomas Bolling, 202.624.2683, tbolling@crowell.com 

Counsel:  Crowell Moring, Thomas Bolling, 202.624.2683, tbolling@crowell.com 

Revised Summary of the Heathrow and Gatwick Slot Holdings Data that was included with Exhibit JA-20 to the Joint Application of American Airlines and British Airways

Counsel:  Sullivan Cromwell, Thomas Leuba

Counsel:  Sullivan Cromwell, Thomas Leuba

Counsel:  Kenneth Hines

As part of their submission, we note that the Joint Applicants submitted data that they describe as "directional origin and destination data." However, American's submissions are at variance with the information submitted by the airline in the Department's Origin-Destination Survey of Airline Passenger Traffic (O&D Survey). Accordingly, we require American to file an explanation of the methodologies it used that led to these variations, no later than 3 days from the issue date of this notice.

In order to provide all interested parties sufficient time to analyze adequately and comment fully on all material in the public and non-public record, we will require that answers to the application be filed no later than 21 days from the due date for American to submit its methodology clarification, and that replies be filed no later than 7 calendar days after the last day for filing an answer.

By:  Susan McDermott

Counsel:  James Hoffman, Marie Chopra, 202.496.0500, www.jamhoff.com 

Counsel:  Squire, Sanders, Elizabeth Collins, 202.626.6600, ecollins@ssd.com 

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

Counsel:  Crowell Moring, Thomas Bolling, 202.624.2683, tbolling@crowell.com 

Counsel:  Shaw Pittman, Robert Cohn, 202.663.8060, robert.cohn@shawpittman.com 

Counsel:  Northwest Airlines, Tom Stalnaker

Counsel:  Northwest Airlines, Elliott Seiden

Counsel:  Northwest Airlines, Jim Craun

The American/British Airways request for antitrust immunity is so anti-competitive that the Department must not rush to judgment. As the Department of Justice said when American/British Airways applied for the same antitrust immunity before, "If DOJ were reviewing the Alliance under the antitrust laws, we would oppose it" because the alliance would "significantly reduce competition in many U.S.-U.K. city-pairs without producing sufficient efficiencies to outweigh the harm" and "slot divestitures at London Heathrow could "reduce that harm" but "not eliminate it." British Airways and American are again asking the Department to bless their plot to eliminate competition between them in the world's largest intercontinental aviation market, again basing their case on bogus claims that other airlines, including Continental, will be able to acquire slots and facilities freely at London Heathrow to mount substantial operations there and compete effectively with a combined American/British Airways monolith. To compete effectively with British Airways and American operating independently of one another, Continental would require at least 140 weekly competitive and economically viable London Heathrow slots and facilities under an open-skies agreement permitting Continental and other airlines to serve London Heathrow.

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

Counsel:  American Airlines, Otto Grunow

Counsel:  Scott Grant

Counsel:  Emily Saunders

Counsel:  Peter Kenney

Counsel:  O'Melveny Myers, Joel Stephen Burton, 202.383.5300

Counsel:  Continental and Crowell Moring, Bruce Keiner, 202.624.2500

American-British Airways’ proposed alliance is distinctly different from any transatlantic alliance that has ever been presented to the Department. This alliance is not about network expansion, because American already has an immunized transatlantic alliance giving it broad access to Europe and beyond, and, moreover, the Benefits Agreement applies only to local U.S.- London markets. This alliance quite simply is about domination of the largest local O&D international market (U.S.-Heathrow) in the world by that market’s two principal competitors.

Counsel:  Shaw Pittman, Robert Cohn, 202.663.8060

Counsel:  Northwest, Russ Wodiska

Counsel:  Northwest, Herschel Wancjer

Counsel:  Northwest, Shannon Moyer

Counsel:  Northwest, Megan Rae Rosia, 202.842.3193

Notice Shortening Answer Period On August 30, 2001, Continental Airlines filed a Motion to Dismiss in this proceeding. Under the Department's regulations (14 CFR 302.11), answers to the motion would normally be due September 12, 2001. By this Notice, it is calling for answers to this Motion to be filed by Noon on Friday, Septtember 7, 2001, to expedite consideration of the motion

By:  Susan McDermott

Until the United States and the United Kingdom Reach Agreement on Open Skies and Access to Heathrow, the Parties are Unable to Evaluate or Comment on the Competitive Effects of the America/BA Applications. This case is unique in scope and significance. The proposed American/British Airways alliance represents the consolidation of the two largest firms in the largest U.S.-foreign country market (the U.S.-U.K. market) and in the largest U.S.-foreign point market (U.S.-Heathrow). At the heart of the anti-competitive effects of the proposed alliance is the inability of new entrants to gain competitive access to Heathrow Airport.

Counsel:  Northwest, Megan Rae Rosia, 202.842.3193 

Northwest Airlines, Inc., hereby moves the Department for an extension of the procedural dates established by the Department's Scheduling Notice of August 27, 2001. Specifically, Northwest requests that the Department amend its Scheduling Notice to provide that answers to the American Airlines/British Airways applications shall be due not less than 120 days from the date of that Notice. Although Northwest supports the relief requested by Continental Airlines in its Motion to Dismiss dated August 30, 2001, if the Department is unwilling to grant either form of relief requested in that Motion, then the Department should at a minimum grant the relief requested herein. In addition, with respect to the approximately 20,000 pages of documents for which the applicants have requested confidential treatment, Northwest asks the Department (a) to direct American and British Airways to make copies of available at multiple locations in Washington and (b) to allow interested parties to make photocopies of those documents at their cost, subject to signing such additional affidavits as may be necessary to provide assurances that the confidentiality of the documents will be protected. Finally, in light of the urgency of the relief requested herein, Northwest asks the Department to process this motion on an expedited basis and require that answers to this motion be due no later than September 10, 2001.

The Department's Scheduling Notice fails to account for the extraordinary nature of this case. The proposed American/British Airways alliance is the largest and most significant alliance that the Department has ever been asked to scrutinize.

Affidavit of Elliott Seiden:

I advised the supervisors in the Docket Section that with some 20,000 pages to examine, and based on my previous day's experience with the laboriously slow process of gathering information contained in the confidential documents by manual note-taking, I and my colleagues would not be able to complete the necessary review in time to assist Northwest in preparing Exhibits and filing Comments with the Department by the September 20, 2001 due date. I stated that the process could be expedited if I were permitted to photocopy particular pages from the confidential documents that I judged to be material and relevant to the issues in the proceeding, and I requested permission to do so.

When Mr. Horn and Mr. Brooks came on the phone, at approximately 10:50 a.m., I explained the dilemma Northwest confronted and requested permission to make copies of particular pages of the confidential documents as needed. I advised them that given the September 20, 2001 deadline for filing comments, I would be unable to (a) complete a full and thorough review of the documents in a timely fashion, perhaps not even before the due date for Comments; (b) organize and analyze the documents for integration into Exhibits and Comments to be submitted by Northwest to the Department on September 20, 2001; and (c) submit particular confidential pages to the Department in support of Northwest's arguments, in conformity with DOT's rules on confidential submissions. I reiterated my request for permission to photocopy some of the confidential documents as needed. I advised Mr. Horn and Mr. Brooks that I was prepared to submit an additional affidavit agreeing to abide by whatever additional security measures the Department might deem to be appropriate, including keeping the documents under lock and key.

Meanwhile, Mr. Tom Boiling, counsel for Continental Airlines, had arrived at the DOT Docket Section at the time that I was talking to Mr. Horn. Mr. Bolling requested access to the confidential documents, but was denied access by the docket clerks who told him that only one party at a time could have access to the documents on a first-come, first-served basis. Mr. Bolling was told that he would have to wait for access to the documents until I was done reviewing them. When it became clear to Mr. Bolling that I planned to review the documents for an extended period of time, Mr. Bolling was told by one of the Docket Clerks that he should return to his office rather than wait, and that she would telephone him when I had completed my review and it became Mr. Bolling's turn to review the documents. Mr. Bolling left the Docket Section rather than wait for an unknown period of time for access to the documents.

At approximately 10:45 AM, Mr. Robert DeHaan, counsel for Northwest Airlines, and Mr. Ken Hines, a legal assistant for counsel to Northwest Airlines joined me at the Docket Section to assist in the document search. We were initially told by the docket clerks that only one person could examine the documents at a time. However, when Mr. DeHaan and Mr. Hines explained that they represented the same party that I represented, they were permitted to join me in a four-foot by six-foot cubicle made available by DOT for parties to review the American Airlines/British Airways confidential documents. Since the cubicle only had minimal desk space for a maximum of two people, Mr. Hines was forced to write on his lap. When Mr. Hines requested that he be allowed to take some of the documents to one of the tables in the public space of the DOT Docket Section, this request was denied. Mr. Hines was told that the confidential documents had to be shielded from public view. Mr. Hines was required to remain in the crowded cubicle, where he had to write without table or desk space.

Mr. DeHaan, Mr. Hines and I reviewed the documents for the rest of the day, taking notes by hand and by computer keyboard. We continued this process, without break, until the Docket Section closed its offices at 5:OOPM, whereupon we were requested to leave.

Mr. Bolling, Counsel for Continental, was unable to secure access to the documents for the entire day in light of the continuous examination of the documents by me and my colleagues in behalf of Northwest.

Counsel:  Northwest, Megan Rae Rosia, 202.842.3193 

Counsel:  Shaw Pittman, Alexander Van der Bellen, 202.663.8382

We agree with Northwest that the issues it raises should be addressed expeditiously, and by this Notice, we are calling for answers to this Motion to be filed by Monday, September 10, 2001.

By this notice, we also direct American Airlines and British Airways to file 2 additional sets of their confidential exhibits in the docket by no later than Monday, September 10. Moreover, at the Dockets facility, Parties will be permitted to make copies of the exhibits for use by persons who have filed confidentiality affidavits.

By:  Susan McDermott

By:  Virgin Atlantic Airways, Hugh Ford and Pierre Binetter

Counsel:  Northwest, Megan Rae Rosia, 202.842.3193  

Counsel:  Zuckert Scoutt, Jol Silversmith, 202.973.7918 

By:  Virgin Atlantic Airways, Hugh Ford 

The Government of the United Kingdom has made no secret of the fact that it will not enter into an open skies agreement without assurances that U.K. carriers will be given effective access to the U.S. domestic market. As this access will only be available through immunized alliances with U.S. carriers, given existing statutory restrictions prohibiting cabotage and foreign ownership and control of U.S. carriers, it is clear that just as the Government of the Netherlands would not enter into an open skies agreement with the U.S. in 1992 absent assurances regarding anti-trust immunity for Northwest and KLM, the U.K. Government will not do so without assurances that U.K. carriers will get antitrust immunity with their chosen U.S. partners. Accordingly, dismissal of the AA/BA immunity application would ensure that no U.S. -U.K. open skies agreement will be obtained. Contrary to Northwest's allegations, and as demonstrated by the prompt launch of the European Commission's investigation, there is no basis for concern that the pending European Court of Justice (ECJ) case may delay the Commission's review of the AA/BA alliance. Indeed it would be improper for the European Commission's Competition Directorate to delay examination of competition effects of the alliance because of the pending ECJ proceedings.

The positions of Continental and Northwest are disingenuous. Grant of the relief they request would slam the door on any possibility of successful open skies negotiations and ensure continuation of the status quo for the foreseeable flature.' While the Department has consistently demonstrated that it will not grant immunity absent an effective open skies agreement, the prospects for that are greater now than ever before. The opponents' objective can only be to delay substantive consideration of the merits of the application, and to postpone the day when their own transatlantic partnerships face full and unfettered alliance competition in the U.S. -U.K., Europe, and beyond markets.

Counsel:  American, Carl Nelson, 202.496.5647, carl.nelson@aa.com British Airways, Paul Jasinski, 718.397.4250

Counsel:  Croweell Moring, Bruce Keiner, 202.624.2615, rbkeiner@crowell.com 

If approved, the American Airlines/British Airways alliance would significantly impact the aviation industry both internationally and domestically. It essential that all of those who will be impacted by the American Airlines/British Airways alliance have the opportunity to thoroughly review the proposal and provide the Department with meaningful comments. For these reasons, ACAA concurs with Northwest that "[w]hat may have been an appropriate answer period in other cases is wholly inappropriate in this case." Before the Department takes steps to provide " assurances that U.K. carriers will be given effective access to the U.S. domestic market," it should first ensure that all U.S. carriers and communities have "effective access to the U.S domestic market." Today, such access does not exist.

Counsel:  ACA, Edward Faberman, 202.639.7502  

Counsel:  Continental and Crowell Moring, Bruce Keiner, 202.624.2500

Counsel: Delta and Sahw Pittman, Robert Cohn

Continental contends that "the skies throughout the U.K. are already open except for flights" to Heathrow and Gatwick.' Continental is wrong. Although other U.K. airports may be open for U.S.-flag third- and fourth-freedom services, they are effectively closed to U.S.-flag fifth-freedom services. All U.S. carriers need access to the fifth-freedom markets beyond the United Kingdom to compete effectively in the global marketplace. Those fifth-freedom markets are legally and economically equivalent to the sixth-freedom services British carriers are currently able to provide between points beyond the United Kingdom and the United States. Otherwise, U.S. carriers will be relegated to providing only point-to-point U.S.-U.K. service and to relying on foreign air carriers to provide service beyond the United Kingdom.

In the air express/cargo context, fifth-freedom rights enable carriers to provide more efficient and higher quality service because they can exercise single-entity control with full accountability to their customers. Without unrestricted access to fifth-freedom markets, FedEx will continue to be unable to offer U.S. shippers and exporters the most efficient access to beyond-U.K. markets. FedEx's primary U.K air gateway is located at Stansted Airport, but its limited opportunity to provide service between Stansted and points beyond the U.K. has severely restricted its ability to provide its services efficiently.

Therefore, consistent with its stated policy goals, the Department must seek the opening of all U.S.-U.K. routes and beyond - not just those preferred by combination carriers.

Counsel:  Fedex, Nancy Sparks, 901.434.9289, nssparks@fedex.com 

The Houston Parties support Continental and Northwest's motions. The motions should be granted, on the grounds that: (1) a necessary predicate for the applications - a U.S.-U.K. Open Skies agreement that guarantees new entrants meaningful access to London Heathrow - does not now exist and appears unlikely to be obtained in the near future, and (2) the volume of materials submitted and issues raised by the applicants requires detailed and thorough scrutiny, which cannot be accomplished in the timeframe established by the Department's August 27, 2001 procedural notice.

Counsel:  Leftwich Penn, Nicholas Penn, 202.434.9100, nspenn@ldpllc.com 

A central issue in this proceeding is whether a grant of antitrust immunity to the American-BA alliance will result in reduced competition in any relevant market. The Joint Applicants have submitted a lengthy exhibit (Exhibit JA-8) attempting to establish with respect to each of the overlap routes that competition will not be reduced. This exhibit, however, is virtually worthless because it aggregates the data for same-city airports, including London Heathrow and London Gatwick, and thus masks the competitive effect of the alliance on the London Heathrow routes.

Another central issue that the Department will have to resolve in this proceeding is whether there are public interest benefits resulting from a grant of antitrust immunity that may outweigh the anticompetitive harms. The Joint Applicants argue that the alliance will produce improved consumer service and increased competition by allowing American to serve new markets in Europe and beyond by making connections with BA at London. To evaluate the public benefit of American's ability to serve these markets, the Department needs to know what new connecting markets will be opened up to American as a result of the proposed alliance. This information is not evident from the Joint Applicants' submission.

Counsel:  Northwest, Megan Rae Rosia, 202.842.3193

Counsel:  Crowell Moring, Thomas Bolling, 202.624.2683, tbolling@crowell.com 

Counsel:  Northwest, Megan Rae Rosia, 202.842.3193

Under these circumstances, the Department and the airline and airport stakeholders affected by an American/British Airways alliance must focus their efforts on accomplishing enhanced airline and airport security, attempting to regain economic viability and planning operational recoveries in a hostile environment.  The necessity to focus on recovery is already preventing airline officials from analyzing information which had been made available prior to last week, and projections based on that information are no longer meaningful.  Neither the applicants, other interested parties nor the Department can now forecast the context in which the American/British Airways alliance must be considered.  The Department must give the applicants ample time to provide the information requested by Northwest and give other interested parties ample time to analyze that information in light of the harsh new realities facing airlines and airports.  Given these uncertainties, this is not the time to be establishing dates for answers to the American/British Airways applications any earlier than 120 days from submission of the data requested by Northwest.

Counsel:  Crowell Morning, Bruce Keiner, 202.624.2500, rbkeiner@crowell.com 

We have decided to extend the date for the filing of answers to the subject application to October 19, 2001, and to extend the date for the filing of replies to the answers to October 26, 2001. We have also decided to deny the motions of Continental and Northwest in all other respects.

As noted, the existence of an open skies agreement is one necessary precondition for considering the approval and grant of immunity to airline alliances such as the one at issue in this proceeding. It is our intention to reach such an arrangement with the U.K. before we make our tentative decision in this case. In this regard, as Continental notes, we have scheduled talks with the U.K. We have already received assurances from representatives of the U.K. that the U.K. also intends to reach full agreement on a new open-skies accord before a tentative decision in this case. Therefore, any analysis of the impact of the proposed alliance on competition should presume the existence of an U.S.-U.K. open skies agreement that contains all of the essential elements of our Model Open-Skies agreements, including those elements enumerated by FedEx.

By:  Susan McDermott

By:  Joshua Chessman

By:  Northwest, Megan Rae Rosia, 202.842.3193

Attached is a series of questions concerning access to slots and facilities at London airports, for which your answers will be extremely helpful as we process the application of American Airlines and British Airways for immunity from the U.S. antitrust laws. We would greatly appreciate it if we could receive your responses by September 28. Both these questions and your responses will be filed in the docket of this case and served by the Department of Transportation on all parties to the case.

By:  Susan McDermott

Alternatively, the motion should be denied for lack of merit.' Northwest requests additional production of airport specific traffic data (requests 1, 2, and 3), airport specific fare and revenue data (requests 2, 3, and 4), and information on the applicants' plans to alter routes and schedules (requests 5, 6, 7, and 8). The requested information is already available to Northwest, or has already been provided by the applicants, or is not necessary for the Department's full and thorough review of the captioned applications.

For example, additional airport specific traffic data is available to Northwest from the same vendors from which the applicants obtained the data supporting their submission. If Northwest's case depends on further airport specific data, it can obtain such data from commercial sources and use that as rebuttal material in its answer on the merits.

As for the additional fare and revenue data Northwest has requested, the applicants have already provided far more such information than has ever been required in comparable applications. Such data was provided following consultations with the Department's staff, and represents the outer limit of what is reasonably available or necessary.

Counsel:  American, Carl Nelson, 202.496.5647, carl.nelson@aa.com and British Airways, Paul Jasinski, 718.397.4250

American and British Airways have provided only aggregated U.S. -London traffic and fare data, contending that Gatwick and Heathrow are substitutes for one another and are in the same market. This contention is not supported by longstanding industry experience, and is contradicted even by British Airways' own recent public pronouncements indicating that Heathrow commands a 15 percent fare premium over comparable Gatwick service.

The break down of traffic and fare data by the individual London airports, as requested by Northwest, is essential for the Department and other carriers to evaluate the competitive implications of the proposed alliance. The aggregated U.S.-London data supplied by the Joint Applicants is useless for this purpose because it obfuscates the critical differences in fares and traffic levels between the London airports, which goes to the very heart of this proceeding. The shared dominance of U.S.-London Heathrow routes by American and British Airways, combined with Heathrow's unique and unprecedented access constraints, make it essential for the Department to require the Joint Applicants to provide more detailed information on U.S.-London fares and traffic by airport.

Counsel:  Shaw Pittman, Alexander Van der Bellen, 202.663.8060

Counsel:  FedEx, Nancy Sparks, 202.756.2461, nssparks@fedex.com 

The Applicants submitted data in their joint application that seem to reflect an assumption that all London airports constitute a single market, such that a dominant presence at one airport will not give them market power over the "London market" as a whole. However, both NW, CO, and Delta argue that many travelers do not consider LHR and LGW as substitutes for each other and that an airline with a dominant presence at one airport may therefore have market power in at least some relevant markets at that airport. Accordingly, they argue that the Department should analyze each London airport as a discrete unit, rather than analyze all three London airports in the aggregate.

While we do not here address the merits of this question, we agree with NW that there must be sufficient data in the record of this proceeding to address them. NW requests data that are essential to our analysis of this issue. Although some data are already available through existing sources, in the interest of establishing an easily comprehensible record of this proceeding, we believe that the Applicants are best positioned to compile this data and provide them to the Department. Submission of the data should not be burdensome on the Applicants, and they have not argued that it would be. Moreover, our Notice finding the application complete specifically stated that additional data might be required. Therefore, we grant NW's motion with respect to items 1-5 and 7.

The information described in items 5-8 is crucial to making a reasonable forecast of the public benefits that would result from the Applicants' proposed alliance. The Applicants must use their best efforts to provide the information described in items 5-8 of NW's motion, as limited in time by this order, or a reasonable forecast of their route plansand slot usage. If they cannot provide any information on one or more of these items, they should explain why they are unable to do so. To the extent that schedules are tentative or not final, the information provided should be so qualified.

Finally, we acknowledge that the burdens imposed on airline management and employees by the tragic events of September I I and their aftermath may make more difficult their efforts to prepare their arguments and analyses in this proceeding. However, while we are sympathetic to the demands placed on the resources of the parties, we strongly believe that we must move forward with the public's business as required by the exigencies of this case, and that the schedule we recently announced will give the parties an adequate opportunity to present their case in this proceeding.

Therefore, we are requiring the Applicants to file these data in the docket within 3 business days of the date of service of this order. We believe that this time frame does not necessitate an extension of the date for answers, which was recently extended to October 19.

By:  Susan McDermott

American Airlines, Inc. and British Airways Plc hereby jointly respond to Order 2001-9-15, September 24, 2001, by which the Department required the submission of additional evidentiary material. We are attaching eight copies of our response to items 1 through 4 in sealed envelopes labeled "Confidential Treatment Requested Under 14 CFR 302.12; Access Is Limited To Counsel Or Outside Experts Who Have Filed Proper Confidentiality Affidavits." Our response to items 5 through 8 will be submitted separately. Our response consists of highly sensitive traffic and revenue data and projections of future services. Such infor-mation is entitled to confidential treatment under 14 CFR
302.12 for all the reasons set forth in the initial joint motion for confidentiality submitted by American and British Airways on August 10, 2001, which we incorporate herein by reference. Accordingly, we move that our submission be withheld from public disclosure and made available only to qualified affidavit holders, consistent with the Department's notice of August 21, 2001 and Order 2001-9-12, September 17, 2001.

Counsel:  American, Carl Nelson, 202.496.5647, carl.nelson@aa.com British Airways, Paul Jasinski, 718.397.4250

Continental petitions the Department to reconsider Order 2001-9-12 and, on reconsideration, to defer for at least 180 days consideration of the American/British Airways applications for antitrust immunity and codeshare authority or dismiss them. The Department’s decision to expedite consideration of the American/British Airways applications ignores the drastic, widespread impact of the tragic events of September 11 and concludes erroneously that negotiating an “open skies” agreement with the U.K. is more important than the critical efforts of the airlines and the Department to ensure the continuing viability of the U.S. air transportation network.

Will reductions in U.S.-London flights by Continental, Virgin Atlantic and other carriers resulting from the precipitous declines in passenger traffic enhance the dominance of American and British Airways permanently? Will the suspensions of numerous transatlantic flights become permanent? Will airline alliances become unstable in the face of declining traffic and revenues? Indeed, which airlines will still be around to compete at all with American and British Airways, assuming both of those companies survive intact? Even if slots were available for purchase at London Heathrow, what airlines could afford them now? Until the uncertain future of the air transportation industry, particularly on U.S.-London and other transatlantic routes, becomes at least somewhat clearer, the Department should not be rushing to judgment on an American/British Airways alliance or negotiating a new agreement with the U.K.

Counsel:  Crowell Morning, Bruce Kiener, 202.624.2615

Counsel:  Silverberg Goldman, Michael Goldman, 202.944.3300

Counsel:  Shaw Pittman, Alexander Van der Bellen, 202.663.8382, sascha.vanderbellen@shawpittman.com 

American Airlines, Inc. and British Airways Plc hereby jointly move for leave to file one day late this further response to Order 2001-9-15, September 24, 2001, by which the Department required the submission of additional evidentiary material. On September 27, 2001, we submitted our response to items 1 through 4 on a confidential basis, but were unable to complete our response to items 5 through 8 in the three-day time period set by Order 2001-9-15. Accordingly, we request leave to file our further response one day late. We are attaching eight copies of our response to items 5 through 8 in sealed envelopes labeled "Confidential Treatment Requested Under 14 CFR 302.12; Access Is Limited To Counsel Or Outside Experts Who Have Filed Proper Confidentiali-ty Affidavits." Our response consists of highly sensitive traffic and revenue data and projections of future services. Such infor-mation is entitled to confidential treatment under 14 CFR 302.12 for all the reasons set forth in the initial joint motion for confidentiality submitted by American and British Airways on August 10, 2001, which we incorporate herein by reference. Accordingly, we move that our submission be withheld from public disclosure and made available only to qualified affidavit holders, consistent with the Department's notice of August 21, 2001 and Order 2001-9-12, September 17, 2001.

Counsel:  American, Carl Nelson, 202.496.5647, carl.nelson@aa.com British Airways, Paul Jasinski, 718.397.4250

On September 27, 2001, Continental Airlines filed a Petition for Reconsideration of Order 2001-9-12 in this proceeding. Under the Department's regulations (14 CFR 302.14), answers to the Petition would normally be due within ten days. By this Notice, we are calling for answers to this Petition to be filed by Thursday, October 4, 2001, to expedite consideration of the petition.

By:  Read Van de Water

By:  Wilmer Cutler, Jeffrey Manley, 202.663.6670, jmanley@wilmer.com 

Counsel:  Lufthansa, Sheila Ceston

The petition attempts to revive a request for delay that the Department has denied twice before, and should be dismissed as violating the Department's ban on successive petitions. Alternatively, the petition should be denied for lack of merit. Section 302.14 (c) of the Department's regulations provides that successive petitions "will not be entertained." Continental is now on its fourth request for interminable delay of this proceeding.' The petition does not include any new arguments not previously considered and rejected by the Department in Orders 2001-9-12, on September 17, 2001 and 2001-9-15 on September 24, 2001. This latest attempt to delay should not be entertained.

Counsel:  American, Carl Nelson, 202.496.5647, carl.nelson@aa.com and British Airways, Paul Jasinski, 718.397.4250

The tragic events of September 11 have affected civic parties, such as the City of Houston, as well as air carriers. In addition to the direct consequences for the Houston Airport System, the indirect consequences reach across the economy and citizens of the Greater Houston area. Under these circumstances, the current timeframe for the review of the AA/BA applications will not ensure that the Department will receive the most complete and most accurate input from interested parties, such as the Houston Parties and other civic entities from across the United States.

Counsel:  Leftwich Douglas, Rebecca Taylor 202.434.9100, rltaylor@ldpllc.com 

Northwest Airlines, Inc. (“Northwest”) hereby answers in support of the Petition of Continental Airlines, Inc. (“Continental”) for reconsideration of the Department’s decision in Order 2001-9-12 in the above-captioned proceedings.  In that decision, the Department granted a slight extension of the procedural dates in order to provide interested persons with sufficient time to analyze and comment on the extensive material in the record.  However, the Department denied the motions of Continental and Northwest, supported by Delta Air Lines, Inc. to extend the answer date by 120 days or to dismiss the proceedings.

Counsel:  Northwest, Megan Rae Rosia, 202.842.3193

By:  British Airport Authority, Alan Cruickshank

Counsel:  Crowell Moring, Lorraine Halloway, 202.624.2538, lbhalloway@crowell.com 

Counsel:  Crowell Moring, Thomas Newton Bolling, 202.624.2683, tbolling@crowell.com  

On August 10, 2001, American Airlines and British Airways filed a joint application with the Department for approval of and antitrust immunity for an alliance agreement between them. On September 17, 2001, the Department issued Order 2001-9-12, extending the answer period to October 19 and the deadline for replies to October 26, 2001. On September 19, 2001, the Department asked BAA, plc, the airport authority, and Airports Coordination Ltd, the slot coordinator, for certain information for the record. This material was placed in the docket on October 4, 2001. For the parties to have adequate time to include their comments on this submission in their answers, we are by this Notice extending the deadline for Answers to Friday, November 2, 2001, and the reply deadline will be November 9, 2001.

By:  Read Van De Water

On 4 October 2001, ACL and BAA responded to your questions of 19 September regarding access to slots and facilities at London airports in support of your inquiries into the application for anti-trust immunity of BA and AA. It has come to my attention whilst producing related data for the UK Office of Fair Trading that there were some errors and inconsistencies in the data previously provided by ACL.  I would thus like to correct these errors. The errors and inconsistencies were as follows:

• There was a typographical error in the Gatwick Winter 2001/02 capacity (Attachment 2)
• This typographical error also affected the slot pool data (Attachment 1), as this is calculated by subtracting the slots allocated as 'grandfather rights from the capacity available.
• There was inconsistent treatment of slots that failed under the 'use it or lose it, rule but were the subject of dialog with the airline concerned during the 2-3 week period between the calculation of historic rights and the submission of slot requests for the next season. Airlines have an opportunity to challenge the coordinator's calculation of historic rights or submit extenuating circumstances for the non-utilisation of slots during this period. To ensure like-for-like comparison of these data provided for Heathrow and Gatwick in each of the three seasons, I have revised the tables of Attachment 7 to show all slots that failed under the 'use it or lose it' rule on a consistent basis.
• Similarly, there was inconsistent treatment of slots that are temporarily 'blocked' at certain stages in the 3-week initial coordination process (ie, between the submission of slot requests by airlines and the date coordinators provide initial feedback). This is merely an administrative tool, analogous to 'reminder notes' for the coordinator. I have applied a consistent treatment of these 'slots' in the corrected version of the slot pool data (Attachment 1).

I should stress that these errors and inconsistencies principally affected the data provided for Gatwick in the winter seasons and in off-peak hours. They do not materially affect the overall picture of slot availability at the critical transatlantic times, or ACL's view of likelihood of new airlines obtaining commercially feasible slots for transatlantic operations.

By:  Airport Coordination Limited, James Cole

By:  Air France, J.M. Barthelemy, 011.331.4156.5970

Counsel:  Silverberg Goldman, Robert Silverberg

Continental has now attempted to turn Mr. Smith's sensitive approach to the tragedy to its advantage. Whether intentionally or inadvertently, Continental has misrepresented Mr. Smith's and FedEx Express's position in this proceeding. Continental has been advised of its error, but it declined a request to correct its pleading. FedEx Express is a participant in this proceeding, and it takes positions in this proceeding exclusively through its counsel. Its position in this case is clear and unambiguous and is set forth in its September 10 answer in this docket. FedEx Express moves to strike the portions of Continental's petition for reconsideration' that misrepresent Mr. Smith's remarks. The citation to an industry newsletter report of the remarks takes those remarks out of context, and it is hearsay.

Counsel:  FedEx, Nancy Sparks, 901.434.8579, nssparks@fedex.com 

We recognize that the impact of recent events may legitimately enter into the evidentiary analysis of the effects of this alliance, an essential predicate to acting on the Joint Applicants" requests. We are not at this point convinced, however, that these effects have been so imponderable that no reasoned analysis of the issues relevant here remains possible. The commercial aviation industry has always been fluid, complex, and unpredictable. Forecasting, as we have often observed in the context of carrier selection cases, has always been an inexact process, carrying the risk of unforeseen factors and events. Moreover, all carriers are striving to return to as normal an operating environment as is possible since September 11. To the extent that they believe that the competitive landscape has changed, the parties may address the nature and consequences of those changes in their answers and replies.

We also cannot accept Continental's proposition that negotiating Open Skies with the United Kingdom is somehow inconsistent with efforts to maintain the integrity of our air transportation network. On the contrary, we understand the need for de lure Open Skies to translate into de facto competitive benefits to both consumers and industry. We are aware of the burden on the parties of continuing with regulatory proceedings in the present difficult circumstances, and we have tried to reduce that burden by extending procedural dates. However, the responsibilities of government continue. We are committed to carrying on the business of government, and this includes processing applications for antitrust immunity. We will not ignore recent circumstances in so doing, as the statute charges us with determining whether the alliance will be anticompetitive, and we retain the power to impose any and all appropriate conditions, should we decide to approve it. As noted above, parties will have the opportunity to address these issues in their answers and replies. We have been continuously monitoring airline operations and encourage parties to present their own forecasts and analysis of the post-September 11 environment in their answers and replies in this proceeding.

By:  Read Van de Water

By:  ATA, David Stempler

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

Counsel:  Northwest, Megan Rae Rosia, 202.842.3193

We have evolved into a system where competition is between hubs, not just for international service but domestic service as well. If you were to examine fares by fare class adjusting for mileage, you would discover that on average, fares are the same at almost all hubs. There are exceptions to this rule in the under 400-mile range, but on average, fares by fare class are indistinguishable by hub or by airline. This generalization holds true for both direct and connecting flights.  

Some observers note that business fares into London Heathrow are higher than at other airports in the London area, and they mistakenly conclude that this constitutes a monopoly. Slightly higher fares between the U.S. and London Heathrow are to be expected as the airport is capacity constrained. The monopoly powers are on the part of the government, not the airline. Notwithstanding the current limitations on service at Reagan National Airport (DCA), the London situation is not unlike that at DCA. Restricting traffic into and out of Reagan National has produced some of the higher fares that are in the domestic airline industry, when fares by fare class are adjusted on a mileage basis. This is a natural result of reducing supply. Water or buildings bound Reagan National on all sides, and there is little hope that its capacity will ever increase significantly. However, more slots have been made available for longer-haul traffic and the introduction of a limited number of low-fare carriers, just like slots can be made available to new entrants to London Heathrow.

The combined 39 percent market share of American Airlines and British Airways at London Heathrow pales in comparison to other alliances at their European hubs, or at domestic hubs like Detroit, Atlanta or Houston. The DOT is correct in pursuing an open skies agreement with the U.K. to grant all U.S. carriers access to London Heathrow, but beyond that, the fixation about slots, facilities and market share are simply distractions that seek to delay the process.  

The right for all U.S. airlines to serve London Heathrow is an important and laudable policy goal of the DOT. Furthermore, the American Airlines/British Airways alliance would bring a vigorous new competitor to the transatlantic marketplace. Failure to approve this alliance would deny passengers the benefits of more transatlantic competition. But perhaps more importantly, it would ignore lessons learned during the past five years on the benefits of alliances.

By:  Darryl Jenkins, George Washington University

These two highly interrelated matters should be reviewed and resolved by the Department in the course of a single proceeding, in order to ensure that the Department fully considers all of the evidence relevant to both proposed alliances, and to avoid the needless re-argument and reconsideration of common issues by interested parties and the Department itself that will necessarily occur if the two proposed alliances are considered separately. Moreover, as with the proposed American-BA alliance, the Department should not act on the proposed United-bmi alliance until an open skies agreement with the United Kingdom is signed. Prior action by the Department with respect to either proposal would be premature and unwarranted. Alternatively, if the Department does not formally consolidate the proceedings, the Department should consider both alliance proposals in one decision and authorize the parties to use the confidential portion of the evidence in each proceeding in presenting arguments in the other proceeding. While not seeking postponement of the answer and reply dates in the American-BA proceeding, Northwest requests that, under either alternative, the Department authorize the parties in the American-BA alliance proceeding to file supplemental Answers  based on any relevant evidence in the documents submitted by United-bmi and their Star Alliance partners on October 18, 19, and 22 and to which the parties do not yet have access.

Counsel:  Northwest, Megan Rae Rosia, 202.842.3193

Counsel:  Boros Garofalo, Don Hainbach, 202.822.9070, dhainbach@bgairlaw.com 

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

Counsel:  ASTA, Paul Ruden, 703.739.6854, paul3@astahq.com 

Counsel:  Squire, Sanders, Marshall Sinick, 202.626.6600

By:  Janusz Ordover, 203.966.3788, janusz.ordover@nyu.edu and Milena Nouy-Mrax, 415.732.9500, milenan@aesconsulting.com 

By:  Jan Brueckner, 217.333.4557, jbrueckn@uiuc.edu