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American Airlines, Inc. and Finnair OYJ

OST-02-12063	April 4, 2002	Joint Application of American Airlines and Finnair for Antitrust Immunity	Approval of and Antitrust Immunity for Agreements
		Exhibit JA-1:  Alliance Agreement
		Exhibit JA2-11:  Routes, Markets
		Service List

American and Finnair consider their alliance to be of vital strategic importance as they strive to remain competitive with the other immunized transatlantic alliances. Finnair considers its entry into a transatlantic alliance with American to be essential to its long-term competitive viability under the U.S.-Finland open skies regime. The proposed American/Finnair alliance, as more fully described below, will involve coordination in such areas as codesharing, frequent flyer programs, global route and schedule planning, sales, advertising, and marketing, pricing and yield management, inventory and procurement, revenue allocation, ground handling, airport facilities and support services, cargo services, ticketing, and information technologies and distribu­tion systems.

An immunized alliance between American and Finnair will not substantially reduce competition in the U.S.-Europe market. Finnair's U.S.-Europe annual passenger bookings market share of 0.20%, while United has 10.220, account for a  Delta, 9.150, and American, 7.57% (Exhibit JA-9). Among all U.S.-Europe carriers, Finnair ranks 20th in market share

The proposed American/Finnair alliance will not have an adverse impact on competition in the U.S.-Nordic market (Denmark, Finland, Norway, and Sweden). American does not operate nonstop service to any Nordic country. Apart from Finnair's nonstop New York (JFK)-Helsinki service, the U.S.­Nordic market is served on a nonstop basis exclusively by SAS (Exhibit JA-4), a member of the competing Star Alliance. Indeed, SAS and its immunized Star partners have a 40% share of the U.S.-Nordic market (Exhibit JA-9, p. 2), while American has a 4.5% share, and Finnair has a 3.3% share (id.). An immunized alliance between American and Finnair will provide greater competition between the U.S. and the Nordic region.

Three carriers -­Lufthansa, SAS, and British Airways -- each have U.S.-Finland market shares exceeding 10% (id.). A more detailed analysis of the top 10 U.S.-Finland markets is set forth in Exhibit JA-11. The evidence is clear that U.S. airlines are using their international aviation alliances and partnerships to carry a larger volume of traffic between the U.S. and Finland via European gateways. The opportunities for improved service and competition made possible by the U.S.-Finland open skies agreement will respond effectively to any competitive concerns in the U.S.-Finland market.

Counsel:  American, Carl Nelson, 202.496.5647, carl_nelson@aa.com, Crispin Brenner, John Richardson, 202.371.2258, jricharson@crispinandbrenner.com 

American Airlines, Inc. and Finnair OYJ

American and Finnair are separately submitting confidential information in connection with their captioned joint application for approval of and antitrust immunity for an alliance agreement, which was filed on April 4, 2002. The confidential documents are identified and described in the attached indexes. We request that access to these documents be limited to counsel and outside experts for interested parties.

Counsel:  American, Carl Nelson, 202.496.5647, carl_nelson@aa.com, Crispin Brenner, John Richardson, 202.371.2258, jricharson@crispinandbrenner.com 

American Airlines, Inc. and Finnair OYJ

On April 4, 2002, American Airlines and its affiliates) and Finnair Oyj filed a joint application requesting approval of and antitrust immunity for (1) a cooperative agreement (Exhibit JA-1), and (2) all agreements among the applicants that implement any part of the cooperative agreement or are entered into by the applicants under the cooperative agreement. On April 11, the applicants filed a joint Motion under 14 C.F.R. 302.12 (Rule 12) of our regulations seeking confidential treatment for supporting documents and information. They state that this material is proprietary, commercially sensitive, and confidential in nature which qualifies for being withheld from public disclosure. The applicants ask that access to this material be limited to counsel and outside experts for interested parties. In order to afford interested parties prompt access to the documents under conditions agreed to by the applicants and imposed by the Department under similar recent circumstances, we will grant immediate interim access to all documents covered by the Rule 12 Motion to counsel and outside experts for interested parties who file appropriate affidavits with the Department in advance. Moreover, consistent with earlier determinations, at the Dockets facility, Parties will be permitted to make copies of the exhibits for use by persons who have filed confidentiality affidavits. We also find it appropriate to grant interim access to any subsequent materials that may be filed in this case 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.

By:  Read C. Van de Water

American Airlines, Inc. and Finnair OYJ

Counsel:  United and Wilmer Cutler, Jeffrey Manley, 202.663.6670, jmanley@wilmer.com

American Airlines, Inc. and Finnair OYJ

We have now finished our initial review. We find that the application is now substantially completes We will require that answers to the application be filed no later than 21 calendar days from the issue date of this Notice, and that replies be filed no later than 7 business days after the last day for filing an answer.  

By:  Read Van de Water

American Airlines, Inc. and Finnair OYJ

• Study concerning EWR, ORD and JFK as Finnair gateways

• Analysis of code-share passengers exchanged by American and Finnair

• Revenue attributable to American code-share passengers carried by Finnair in 2000 and 2001

• Finland-U.S. market share study

Counsel:  Crispin Brenner, John Richarson, 202.371.2258, jricharson@crispinandbrenner.com 

American Airlines, Inc. and Finnair OYJ

Counsel:  James Hoffman, Marie Chopra, 202.496.0500, mchopra@jamhoff.com

American Airlines, Inc. and Finnair OYJ

We find that the proposed alliance would provide important public benefits. The proposed arrangement should benefit consumers by offering the traveling public new integrated services and additional competition for existing alliances and single carrier services. We have previously determined that the pro-competitive effects of global alliances are particularly evident in behind- and beyond-markets where integrated alliances with coordinated connections, marketing, and services can offer competition well beyond mere interlining and a multitude of new on-line services. In this case, we note that American's worldwide network provides consumers with service to 229 cities in 47 countries and that Finnair serves 74 cities in 32 countries. The record also indicates that American and Finnair currently serve 11 common airports, only one of which is in the U.S. Thus, the proposed arrangement will benefit consumers by increasing international service options and enhancing competition between airlines, particularly for traffic to or from cities behind and beyond major gateways. Our recent evaluations of international alliances show that they stimulate traffic in these connecting markets and thereby increase competition and service options in the overall international market and increase overall opportunities for the traveling public and the aviation industry.

We find that the Alliance Agreement should not diminish competition in the U.S.-Europe market. During the 12 months ended September 2001, American's nonstop passenger market share was about 8.00%, while Finnair's share is less than half of one percent. The proposed American-Finnair partnership would have had a passenger market share of about 8.40%. The nonstop passenger market share for the oneworld alliance (British Airways-American Airlines-Aer Lingus-Iberia-Trans World-Finnair) was 24.74%. In contrast, Star Alliance partners' (United Air Lines-Lufthansa-SAS-Icelandair-Austrian Airlines-Air New Zealand-Lauda Air-bmi) nonstop passenger market share was 21.64%; Sky Team partners' (Delta Air Lines-Air France-Alitalia-Czech Airlines) had a 17.92% nonstop market share; and Northwest Airlines-KLM had an 8.87% nonstop market share. Although the oneworld alliance has the largest share, it does not dominate the market.

By:  Read Van de Water

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