OST-97-2058 / American and BA / Joint Reply of AA-BA to TWA / June 4, 1997
Joint Application of
AMERICAN AIRLINES, INC. and BRITISH AIRWAYS PLC
under 49 USC 41308 and 41309 for approval of and antitrust immunity for alliance agreement
JOINT ANSWER OF AMERICAN AIRLINES, INC. AND BRITISH
AIRWAYS PLC TO MOTION OF TRANS WORLD AIRLINES, INC. FOR
MODIFICATION AND CLARIFICATION OF ORDER 97-5-13
American Airlines, Inc. and British Airways Plc hereby jointly answer the motion submitted by
Trans World Airlines, Inc. on May 23, 1997 for modification and clarification of Order 97-5-13, May 16, 1997. That order requires the joint applicants to submit substantial additional evidence and data in support of their application for antitrust immunity. TWA's motion to expand even further the requirements imposed by Order 97-5-13 should be denied.
At the outset, we note that the American/British Airways joint application, which has been pending since January 10, 1997, has been subject to extraordinary and unprecedented demands for supporting information. The volume and scope of the materials the joint applicants have already provided to the Department far exceed what other applicants in immunity proceedings have ever had to produce.
o On November 26, 1996, prior to the submission of the joint application, the Department provided American and British Airways with a 31-item request for documents and evidence that went well beyond any other request that the Department has made in an immunity proceeding.
o The joint application, as submitted in January, was accompanied by thousands of pages of documents produced by American and British Airways in response to the Department's November request. Based on American's recollection of the minimal number of documents submitted by United/Lufthansa in OST-96-1116, by United/SAS in OST-96-1411 and OST-96-1646, and by Delta/Swissair/Sabena/Austrian in OST-95-618, we believe that American and British Airways were required to produce at least 10 times the amount of material that these other applicants submitted to the Department, even though the proposed American/British Airways arrangement is smaller in scope than other alliances the Department has immunized using highly expedited procedures. /1
1/ By almost every measure, the United/Lufthansa/SAS alliance, covering 55,000 worldwide city-pairs, is larger than American/British Airways, with 36,000. United/Lufthansa/SAS has greater annual revenues, operates more jet equipment, flies more revenue passenger miles, and enplanes more passengers than American and British Airways combined. Moreover, AA/BA would have only a 42% share of slots at London Heathrow, far below the percentage of slots controlled by UA/LH/SK at Frankfurt (63%) and at Copenhagen (63~), and that controlled by NW/KL at Amsterdam (59%). Indeed, British Airways has the smallest share of all major European carriers of operations at their principal cities.
o By
Order 97-3-42, March 27, 1997, the Department required the joint applicants to list and describe publicly each of the documents that they had filed under a claim for in camera treatment. In other proceedings, the Department has reviewed such documents on an ex parse basis, without requiring any such public listing and description by the applicants.
o By
Order 97-5-13 -- the subject of TWA's motion -the Department made a 19-item request for additional information, including, in item 1, a requirement that the parties update their January document submission in its entirety. No applicants in other immunity proceedings have been subjected to such a order.
o Despite the effort that American and British Airways made in their January joint application to respond in full to the Department's November request, there is still no scheduling order for answers on the merits. In Northwest/KLM (Docket 48342), answers were required 21 days after the application was filed; in United/Lufthansa, 34 days; and in Delta/Swissair/Sabena/Austrian, 66 days. As of today, the American/British Airways application has been pending for 145 days without answers on the merits.
Given the manifestly disparate treatment that the Department has accorded to American and British Airways, TWA's demand for still more material, and its request that the Department make an a priori determination that much of this new evidence, including detailed traffic analyses, cannot be accorded confidential treatment, is particularly troubling.
Two months ago, in
Order 97-3-34, March 21, 1997, the Department denied various motions to dismiss or defer the American/British Airways application, and said that it would be processed. Nonetheless, as noted above, the Department has not yet issued a scheduling order, and is continuing to require the joint applicants to furnish data far beyond what has been required of others. TWA, by its motion, is now urging the Department to expand the unparalleled burdens on the joint applicants even more.
The Department should deny TWA's motion. Specifically, the Department should not rule on the confidentiality of additional data in advance of its submission. The Department should not require the distribution of confidential information on floppy disks. And the Department should not add more city-pairs to the immensely burdensome item 19 (simulated CRS displays).
1. Confidentiality. At this point, the joint applicants have not yet determined, for each of the 19 items specified in
Order 97-5-13, which particular documents or data will be submitted publicly, which will be submitted on a confidential basis, and which will be submitted subject to a claim of in camera treatment. TWA's assertion that the Department should make an a priori determination of confidentiality, as to material that has not been submitted (or indeed even internally assembled by the applicants), should be rejected. The Department has not followed such a procedure in other immunity proceedings, and should not do so here.
2. Floppy disks. TWA's request that the applicants provide to "other parties" copies of floppy disks of certain data, even if such information is determined to be confidential, is entirely unprecedented, and should be denied. Under well-established Rule 39 confidentiality procedures that the Department has used in every other such proceeding it has conducted, interested parties may review confidential materials at the Department, or in some cases at the offices of the applicants, and may take notes. But applicants have never been required to hand over copies of confidential materials to competitors -- either on paper or on disks. The Department should not treat American and British Airways differently in this regard than it has treated applicants in other proceedings.
3. Simulated CRS displays. The Department should not adopt TWA's request to add "all overlap city-pairs" to item 19 (simulated CRS displays). Item 19 is already enormously burdensome, as it requires the applicants to prepare simulations of CRS displays for 26 U.S.-Europe markets, in each direction, for four CRS systems (SABRE, Apollo, Worldspan, and SystemOne/Amadeus), using both U.S. and European rules, showing the first six screens, at three different times of the day, and before and after AA/BA code-sharing. This constitutes a total of 14.976 simulated CRS screens. No applicants, in any immunity or other DOT proceeding, have ever been subjected to such an extraordinary demand. American and British Airways are presently assessing the feasibility and cost of meeting this requirement. Clearly, TWA's attempt to increase the already immense burden on the joint applicants by adding more city-pairs to item 19 should be denied.
CONCLUSION
The Department should not expand
Order 97-5-13 to impose additional evidentiary burdens on American and British Airways, as TWA has urged. The joint applicants have already been subjected to unprecedented informational requirements. The Department should promptly process their application, pending since January, by issuing a scheduling order calling for answers on the merits.
Respectfully submitted,
Mark McCall of Sullivan Cromwell for British Airways
Carl Nelson of American
June 4, 1997