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Delta Air Lines, Inc., Societe Air France, Alitalia-Linee Aeree Italiane S.p.A., and Czech Airlines

The proposed alliance between and among Delta, Air France, Alitalia and CSA marks an important step toward bringing enhanced competition and efficiency to the transatlantic and worldwide air transportation marketplace. Antitrust immunized alliances, in combination with the open skies bilateral agreements they necessarily entail, have transformed the level, quality and competitiveness of international air service. Carriers now compete for international passengers on a broad network-to-network basis. There are currently three antitrust immunized alliance networks competing across the Atlantic, and the Delta/Air France/Alitalia/CSA alliance would bring a fourth new immunized alliance competitor to the marketplace.

Approval of the Joint Application is also necessary to achieve the important international policy objective of full open skies between the United States and France. France has announced its willingness to enter into an Open Skies Agreement, and the two Governments are expected to meet in September to initial such an agreement. The proposed Open Skies Agreement would immediately eliminate all remaining restrictions on routes, frequencies and designations. However, France has made clear that Air France’s attainment of U.S. Government approval and antitrust immunity for an alliance with its chosen U.S. partner would be a precondition to implementation of the initialed Open Skies Agreement.

Delta, Air France, Alitalia, and CSA consider their alliance to be of vital strategic importance as they strive to compete with other transatlantic alliances. Indeed, Air France, Alitalia, and CSA consider that entering into an immunized transatlantic alliance with Delta is essential to their long-term competitive viability. The U.S.-Italy, U.S.-Czech Republic and contemplated U.S.-France Open Skies Agreements each specifically allow for this kind of airline alliance, and it is the clear understanding of each of these foreign governments that, by entering into open skies, its national carrier would receive favorable consideration for an immunized alliance with its chosen U.S. partner.

Counsel:  Shaw Pittman, Robert Cohn, 202.663.8060, Silverberg Goldman, Michael Goldman, 202.944.3305, Zuckert Scoutt, Richard Mathias, 202.298.8660, and Mendelsohn O'Keefe, Allan Mendelsohn, 202.775.0680

Counsel:  Zuckert Scoutt, Richard Mathias, 202.298.8660

Counsel:  Mendelsohn O'Keefe, Allan Mendelsohn, 202.775.0680

Delta Air Lines, Inc., Societe Air France, Alitalia-Linee Aeree Italiane S.p.A., and Czech Airlines

Counsel:  Silverberg Goldman, Michael Goldman, 202.944.3305

Delta Air Lines, Inc., Societe Air France, Alitalia-Linee Aeree Italiane S.p.A., and Czech Airlines

Notice announcing the grant of immediate interim access to all documents covered by the Rule 12 Motions to counsel and outside experts for interested parties who file appropriate affidavits with the Department in advance. Moreover, the Department finds it appropriate to grant 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 affidavits with the Department in advance, unless the party filing the motion objects. These actions will make evidentiary materials available for use by interested parties in either of the pending cases. Finally, when the Department has determined that the record of this case is complete, it will announce an appropriate procedural schedule.

By:  Susan McDermott

Delta Air Lines, Inc., Societe Air France, Alitalia-Linee Aeree Italiane S.p.A., and Czech Airlines

Counsel:  Silverberg Goldman, Michael Goldman, 202.944.3305

Delta Air Lines, Inc., Societe Air France, Alitalia-Linee Aeree Italiane S.p.A., and Czech Airlines

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

Delta Air Lines, Inc., Societe Air France, Alitalia-Linee Aeree Italiane S.p.A., and Czech Airlines

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

Delta Air Lines, Inc., Societe Air France, Alitalia-Linee Aeree Italiane S.p.A., and Czech Airlines

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

Delta Air Lines, Inc., Societe Air France, Alitalia-Linee Aeree Italiane S.p.A., and Czech Airlines

Counsel:  Shaw Pittman, Alexander Van der Bellen, 202.663.8382

Delta Air Lines, Inc., Societe Air France, Alitalia-Linee Aeree Italiane S.p.A., and Czech Airlines

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

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

Delta Air Lines, Inc., Societe Air France, Alitalia-Linee Aeree Italiane S.p.A., and Czech Airlines

Although the materials deemed to be relevant might contain certain information considered by the applicants to be commercially sensitive, they nonetheless are relevant to the Department's statutory responsibilities to evaluate the competitive aspects of the proposed alliance and to implement our public interest assessment of the merits of this application. Our standard for including documents in the record is not whether the documents are sensitive, but whether they are relevant to the issues. Clearly, the relevant material must be included in the record of this case.

As discussed above, we direct the Joint Applicants to file the described relevant material, and we direct the foreign carrier applicants to file their separate data methodologies, no later than 3 business 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 the submission of the additional requested material, and that replies be filed no later than 7 calendar days after the last day for filing an answer. By this notice, we also direct the Joint Applicants to file 2 additional sets of their confidential exhibits in the docket by no later than Tuesday, September 11. 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

Delta Air Lines, Inc., Societe Air France, Alitalia-Linee Aeree Italiane S.p.A., and Czech Airlines

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

Delta Air Lines, Inc., Societe Air France, Alitalia-Linee Aeree Italiane S.p.A., and Czech Airlines

Counsel:  Silverberg Goldman, Michael Goldman, 202.944.3305

Counsel:  Shaw Pittman, Robert Cohn, 202.663.8060, Silverberg Goldman, Michael Goldman, 202.944.3305, Zuckert Scoutt, Richard Mathias, 202.298.8660, and Mendelsohn O'Keefe, Allan Mendelsohn, 202.775.0680

Delta Air Lines, Inc., Societe Air France, Alitalia-Linee Aeree Italiane S.p.A., and Czech Airlines

Counsel:  Zuckert Scoutt , Richard Mathias, 202.298.8660, rdmathias@zsrlaw.com

Delta Air Lines, Inc., Societe Air France, Alitalia-Linee Aeree Italiane S.p.A., and Czech Airlines

Alitalia hereby submits additional information in response to the Department's Scheduling Notice issued on September 7. 2001, supplementing the Joint Response submitted on September 12 by Alitalia, Czech Airlines, and Delta Air Lines in this proceeding. The O&D traffic data in Exhibit JA-34 was obtained by Alitalia's revenue accounting office by counting one hundred percent of coupons issued by Alitalia as the ticketing carrier or by other airlines for Alitalia services. Northwest's codeshare passengers on Alitalia flights are not included.

Counsel:  Zuckert Scoutt , Richard Mathias, 202.298.8660, rdmathias@zsrlaw.com

Delta Air Lines, Inc., Societe Air France, Alitalia-Linee Aeree Italiane S.p.A., and Czech Airlines

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

The Supplemental Response of Alitalia filed yesterday on September 18 in the abovereferenced docket contains an error. In explaining the methodology used in compiling the traffic data shown in Exhibit JA-34, the Supplemental Response incorrectly stated that Northwest codeshare passengers on Alitalia flights are not included. In fact, such passengers are included.

Counsel:  Zuckert Scoutt , Richard Mathias, 202.298.8660, rdmathias@zsrlaw.com

Delta Air Lines, Inc., Societe Air France, Alitalia-Linee Aeree Italiane S.p.A., and Czech Airlines

Counsel:  American Airlines, Greg A. Sivinski

Counsel:  Silverberg Goldman, Michael Goldman, 202.944.3300

Delta Air Lines, Inc., Societe Air France, Alitalia-Linee Aeree Italiane S.p.A., and Czech Airlines

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

Delta Air Lines, Inc., Societe Air France, Alitalia-Linee Aeree Italiane S.p.A., and Czech Airlines

Counsel:  American Airlines, J. Otto Grunow, 817.931.4426

Delta Air Lines, Inc., Societe Air France, Alitalia-Linee Aeree Italiane S.p.A., and Czech Airlines

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

Delta Air Lines, Inc., Societe Air France, Alitalia-Linee Aeree Italiane S.p.A., and Czech Airlines

Counsel:  ACAA, Edward Faberman, 202.639.7502

The immunized alliance that Delta has proposed with its European partners is comparable in size and scope to the proposed alliance of American and British Airways. Indeed, Delta has made a number of claims that its proposed alliance is superior, which, if credited, would make the case for contemporaneous grant of antitrust immunity to American and British Airways even more compelling in order to ensure vigorous network competition on a level playing field.

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

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

Given the geographical and institutional advantages that would be conferred on the Delta/Air France/Alitalia/CSA alliance as a result of their hub at CDG, it is critically important that other U.S. carrier alliances be permitted to compete via London's airports and particularly Heathrow. Such competition, to be effective, must involve the same sort of fully integrated services via London Heathrow as the Delta/Air France/ Alitalia/CSA alliance will be able to mount via CDG.

In these circumstances, the Department should consider its approval of the Delta/Air France/Alitalia/CSA request for an immunized alliance in the same time frame as that applied to the alliance proposed by United/bmi/Lufthansa/SAS/Austrian Group. The latter would offer services via Heathrow that would be competitive with those offered by Delta's alliance via CDG. Assuming contemporaneous conclusion of open skies agreements between the U.S. and both France and the U.K., which now appears likely, the Department should endeavor to approve the applications of both alliances for antitrust immunity contemporaneously. Moreover, to guarantee equality of treatment French airport authorities plan to remodel Terminal 1.

Counsel:  Wilmer Cutler, Jeffery Manley, 202.663.6670, jmanley@wilmer.com 

Delta Air Lines, Inc., Societe Air France, Alitalia-Linee Aeree Italiane S.p.A., and Czech Airlines

While American and United do not object to the Joint Application, they suggest that a decision be put off until such time as the Department is in a position to contemporaneously approve the American/British Airways and United/bmi applications. There is no merit to this suggestion. All requirements for immediate approval of the Joint Application are in place. Italy and the Czech Republic are already covered by open skies agreements, and the United States and France are scheduled to meet next week to initial such an agreement.

By contrast, the Department's fundamental predicates of defacto and de jure open skies have not been met with respect to the proposed U.K. alliances. No formal negotiations have been set with the U.K. Indeed, the U.K. Government has yet to even confirm that it is willing to accede to an open skies bilateral agreement, to say nothing of how it will resolve the vexing Heathrow access problems -- which the Department determined must addressed as part of any open skies agreement with the U.K.

Furthermore, the proposed American/British Airways and United/bmi alliances raise new and troubling competitive issues by virtue of (a) the extent of the competitive overlaps in the case of AA/BA, (b) the Heathrow access problems which limit responsive competitive services at that critical hub, and (c) the inability of hubs in Continental Europe to effectively discipline the proposed Heathrow alliances. There are no similar airport access or competition issues raised by the Joint Application (or any other previously-approved alliance).

Counsel:  Shaw Pittman, Alexander Van Der Bellen, 202.663.8060, Silverberg Goldman, Michael Goldman, 202.944.3305, Zuckert Scoutt, Richard Mathias, 202.298.8660, and Mendelsohn O'Keefe, Allan Mendelsohn, 202.775.0680

Delta Air Lines, Inc., Societe Air France, Alitalia-Linee Aeree Italiane S.p.A., and Czech Airlines

We tentatively grant approval of and antitrust immunity for the Alliance Agreements between (1) Delta Air Lines, Inc. and Societe Air France ; (2) Delta and Alitalia-Linee Aeree Italiane-S.p.A ; and (3) Delta and Czech Airlines , including their respective affiliates; and (4) a coordination agreement among these four airlines, under 49 U.S.C. §§ 41308 and 41309, whereby the Joint Applicants will plan and coordinate service over their respective route networks as if there had been an operational merger among the partners.

We have, however, tentatively found it appropriate to condition our approval as explained below. We propose to withhold antitrust immunity with respect to services relating to fares and capacity for particular categories of U.S. point-of-sale local passengers in the Atlanta/ Cincinnati-Paris markets. We propose to direct the Joint Applicants to file all subsidiary and/or subsequent agreements with the Department for prior approval and to resubmit for review their alliance agreements in five years. We also tentatively find it in the public interest to direct each of the foreign partners to report full-itinerary Origin-Destination Survey of Airline Passenger Traffic data ("O&D Survey") for all passenger itineraries that include a United States point (similar to the O&D Survey data already reported by their partner Delta). By this Order, we are providing the Joint Applicants and other interested parties the opportunity to comment on our tentative findings.

By:  Read Van de Water

Delta Air Lines, Inc., Societe Air France, Alitalia-Linee Aeree Italiane S.p.A., and Czech Airlines

The history of the grants of antitrust immunity for airline alliances since the Northwest-KLM approval reveals that the central idea behind the extraordinary act of 
immunizing almost complete commercial collaboration among major competitors is that, all things considered, the public will be better off with fewer competitors providing more integrated services than would be possible through a set of bilaterally reached agreements providing for joint operations in particular markets. Scant if any attention seems to have been paid to some of the negative effects of giving large airlines the freedom to conspire and agree upon such matters as commissions to be paid to third parties for selling their services.

The goal of the Department's approvals appears to be to achieve that which the Federal Aviation Act forbids, namely, the merger of a foreign and domestic airline in such manner that the foreign air carrier would inevitably be deemed in "control" of a U.S. domestic airline. The series of immunizations beginning with Northwest-KLM have permitted de facto mergers, whereby the airline parties act as if they are merged but retain their separate legal and national identities.
The net effect of the entire series of immunizations is that the major airlines of the world have been permitted to choose up sides, as it were, to self-select which airlines they want to continue to "compete" with and which not. For as surely as the sun will rise, the agreements in this proceeding will effectively end competition between those carriers and leave them merged in practice if not in name. The same has been true for others that DOT has immunized.

Counsel:  ASTA, Paul Ruden, 703-739-6854, paulr@astaq.com 

On December 21, 2001, the Department issued a Show Cause Order tentatively approving the proposed alliance and request for antitrust immunity.  In doing so, the Department dismissed ACAA’s request that domestic competition issues be addressed stating:

As to the domestic competition issues, we will not address them in this proceeding.  The Department is currently dealing with these concerns in other proceedings, and we find that the issues raised by the ACAA are more appropriately considered in these other fora.

ACAA finds this statement is puzzling.  Exactly in what other fora are these issues being addressed?  Some issues pertaining to entry into domestic markets were to be considered in the following proceedings: FAA-01-9854 “Notice of Alternative Policy Options for Managing Capacity at LaGuardia Airport”, and OST-01-9849 “Market Based Actions to Relieve Airport Congestion and Delay”.  Both of these proceedings have been suspended indefinitely.  Moreover, neither proceeding dealt with opening up Reagan National Airport.  Under the Department’s “suspended” Policy Options for Managing LaGuardia Airport, some new entrants were limited to two roundtrips and no new entrant can operate more than 10 roundtrips, although the high density regulations have no such restrictions.  That certainly doesn’t address this issue.

Counsel:  ACAA, Edward Faberman, 202.639.7502

Delta Air Lines, Inc., Societe Air France, Alitalia-Linee Aeree Italiane-S.p.A. and Czech Airlines

Only ASTA and ACAA filed answers in response to the Show Cause Order. Neither of these answers disputed the thorough and well-reasoned factual, policy and legal findings set forth in the Department’s Order. Instead, the answers of these two associations focus on extraneous issues and seek to promote the agendas of their constituents, which are unrelated to the subject matter of this proceeding. Since no party has raised a substantive objection to the Show Cause Order, the Department should proceed immediately with the issuance of a Final Order, by no later than January 18, 2002. This will permit the rapid entry into force of the historic new U.S.-France open skies agreement, as well as securing the important consumer benefits that the Department has recognized the alliance will provide.

Counsel:  Shaw Pittman, Robert Cohn, 202.663.8060, Silverberg Goldman, Michael Goldman, 202.944.3305, Zuckert Scoutt, Richard Mathias, 202.298.8660, and Mendelsohn O'Keefe, Allan Mendelsohn, 202.775.0680

Delta Air Lines, Inc., Societe Air France, Alitalia-Linee Aeree Italiane S.p.A., and Czech Airlines

By Order 2001-12-18, we tentatively found that the proposed arrangement should be approved and granted antitrust immunity. We carefully examined the impact of the proposed business arrangement on competition in all relevant markets. The U.S.-Czech Republic, U.S.-France, and U.S.-Italy markets are the subjects of open-skies agreements that have eliminated, or in the case of France will eliminate, all regulatory barriers to entry. We tentatively found that these agreements should promote increased service by L? S. airlines. We also noted that nothing in the record indicated other doing-business problems, such as the unavailability of airport facilities at Milan, Paris, Prague, or Rome.  We tentatively determined that a substantial amount of competitive nonstop or code-share service exists in the U.S.-France/Italy markets, and that the proposed alliance will not eliminate any nonstop competition in the U.S.-Czech Republic market.  We tentatively found, considering the open-entry nature of the U.S.-Czech Republic/France/ Italy markets in open-skies regimes, that the likelihood of competitive discipline afforded by potential competing hubs and existing competition from nonstop, one-stop, and connecting services should provide competitive discipline for each of these transatlantic markets, if the partners should charge supra-competitive fares or lower service below competitive levels, except as to certain time-sensitive passengers in the Atlanta/Cincinnati-Paris markets. The opposing parties have contested none of our tentative findings, and we therefore adopt each of them here. 

We are unwilling to grant ASTA's request that travel agencies be granted immunity so that they can jointly respond to the alliance partners' efforts to develop a joint marketing program when that injures travel agencies. We are granting antitrust immunity to the alliance because we have found that the alliance, subject to the conditions imposed by this order, will not substantially reduce competition in any market. ASTA has not attempted to show that we erred in making this finding. The alliance partners, like the partners in any joint venture, may well wish to develop joint marketing strategies to further their common venture. ASTA has not attempted to show that any of the alliances approved by us have led to joint decisions on matters such as travel agency commission rates that would violate the antitrust laws. In these circumstances, we see no basis for granting the relief sought by ASTA.

We are also not granting the requests of the ACAA that we take action in this proceeding to promote competition in domestic airline markets. This proceeding concerns the applicants' request for approval and antitrust immunity for an alliance agreement that will enable them to coordinate their services in international markets. Neither LaGuardia nor Washington Reagan National is a gateway for intercontinental service, and none of the Czech Republic, French, and Italian airlines that are forming the alliance with Delta serve either airport.

We have been investigating the complaints of anti-competitive behavior submitted by ACAA members, and no action need be taken in this proceeding on that issue. Finally, we are aware of the low-fare airlines' requests for changes to our rules on airline computer reservations systems (CRSs). We are working to complete our pending CRS rulemaking and are considering ACAA's proposals in that rulemaking.

Neither party has provided sufficient bases for the Department to delay finalizing its tentative decisions in these matters. In these circumstances, we make final our tentative findings in Order 2001-12-18, and we grant approval and antitrust immunity to the proposed Alliance Agreements, subject to the limits and conditions imposed below and specified in Appendix A to this Order.

By:  Read Van de Water

Delta Air Lines, Inc., Societe Air France, Alitalia-Linee Aeree Italiane S.p.A., and Czech Airlines

* In Order 2002-1-6, on page 6, ordering paragraph 1 is amended to read:

1.         We approve and grant antitrust immunity to the Alliance Agreements between and among Delta Air Lines, Inc., Societe Air France, Alitalia-Linee Aeree Italiane-S.p.A., and Czech Airlines, and their wholly-owned affiliates (with respect to Societe Air France and its wholly­owned affiliates, effective upon signature of the open-skies provisions of the agreement between France and the United States), in so far as the Alliance Agreements relate to foreign air transportation, and subject to the provisions that the antitrust immunity will not cover any activities of the Joint Applicants as owners or marketers of Amadeus, Galileo, and Worldspan computer reservation systems businesses, and subject to the limits and conditions imposed in the Atlanta/Cincinnati-Paris markets as indicated in Appendix A;

By:  Read Van de Water

Delta Air Lines, Inc., Korean Air Lines Co., Ltd., Societe Air France, Alitalia-Linee Aeree Italiane-S.p.A. and Czech Airlines

Counsel:  Wilmer Cutler, Jeffrey Manley, 202-663-6670, jmanley@wilmer.com 

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