OST-00-6725 / OST-00-6728 / American and Aer Lingus / Reply of Continental Airlines / March 16, 2000

Application of

under 49 USC 40109 for an exemption (New York-Shannon/Dublin; codesharing with Aer Lingus)

Application of

for a Statement of Authorization under 14 C.F.R. Part 212 for code-share services with American Airlines, Inc. (Boston, Chicago, Los Angeles, New York-Shannon/Dublin)

American /1 and Aer Lingus have applied for extrabilateral codeshare authority between the U.S. and Ireland, and both Northwest and United have submitted answers arguing that such authority should not be granted unless they are permitted to codeshare with their alliance partners on flights serving Dublin. Like Northwest and United, Continental seeks to offer U.S.-Ireland codeshare services, and Continental does not oppose the American and Aer Lingus requests so long as the Irish government is willing to show comparable flexibility in granting extrabilateral authority to U.S. airlines. Since the requested authority

1/ Common names are used for airlines.

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would facilitate American's efforts to dominate U.S.-Europe routes by adding U.S.-Ireland codesharing to its attempt to implement its highly anticompetitive agreements with British Airways and to blanket Europe with codeshare service, the Department should weigh carefully the alleged benefits of the proposed American/Aer Lingus codeshare arrangement and Ireland's flexibility on grants of extrabilateral authority in deciding whether to permit the codesharing for which extrabilateral authority has been sought.

Continental replies to the Northwest and United answers as follows:

1. Since Aer Lingus and American are requesting extrabilateral authority, the Irish government should be equally flexible in approving requests by U.S. airlines for extrabilateral authority, including, for instance, allowing same-country codesharing by U.S. airlines, as Northwest has suggested. American has applied for extrabilateral authority not only with Aer Lingus but also with Cathay Pacific, /2 enlisting codeshare partners in countries without bilateral aviation agreements with the U.S. expressly permitting codeshare service as well as in countries, such as the U.K., which retain highly-restrictive agreements. If the U.S. government is receptive to extrabilateral codesharing between Aer Lingus and American, the Irish government should be willing to ensure reciprocity for U.S. airlines by accommodating their requests for extrabilateral authority to offer public benefits comparable to those claimed by Aer Lingus and American and by allowing them to compete with American and Aer Lingus through extrabilateral means such as same-country codesharing. /3

2. American has attempted to dominate airline routes around the world by combining forces with airlines dominating their home markets, particularly on routes where American itself dominates U.S.-flag service. Thus, U.S. airlines require, at the very least, same-country codeshare authority to compete with American and its partners on these routes,

3/ When the Department approved codesharing between Aer Lingus and Delta, it noted with favor Continental's institution of service and its codesharing with World Airways. (See Order 96-4-19 at 3)

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particularly where suitable foreign partners are scarce. American has joined forces with the Grupo TACA carriers throughout Central America, where American dominates the critical Miami gateway. Similarly, American secured antitrust immunity with Lan Chile, acquired an interest in Aerolineas Argentinas and had sought to codeshare with both carriers so American, Lan Chile and Aerolineas could continue to dominate service between the U.S. and the Southern Cone of South America.

As United has pointed out, American is tying together its alliances in Europe with British Airways, Sabena, Swissair and Iberia to cover hubs throughout Europe, and it now seeks to add Aer Lingus to its European alliances. American has already applied for authority with British Airways and six of their affiliates to codeshare on nine U.S.-U.K. sectors and 75 beyond-gateway sectors /4 in the wake of the Department's dismissal of their application for antitrust immunity because of the U.K.'s refusal to expand opportunities for U.S. carriers at London Heathrow. The American/British Airways codeshare proposal would have a severe anticompetitive impact between the U.S. and the most important airport in Europe, London Heathrow, giving American a dominant position in offering codeshare service beyond the U.K. to points throughout Europe, where American has established codeshare alliances blanketing Europe with other major European airlines. Thus, American has secured approval for codeshare alliances with Swissair /5 and Sabena, /6 and sought antitrust immunity with them /7 as well as codesharing with Iberia and LOT Polish Airlines. As a result, American's proposed codeshare alliance with British Airways and its alliances with

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other major European carriers would give American a position of dominance between the U.S. and points throughout Europe.

3. Although American's codeshare alliance with Aer Lingus is anomalous because American currently provides no U.S.-Ireland service whatever, the Department must evaluate American's Aer Lingus proposal in the context of American's attempt to dominate U.S.-Europe air transportation and weigh the adverse impact of American's expanding dominance against the alleged benefits of the Aer Lingus/American codeshare proposal. In doing so, the Department must consider reasonable accommodations by Ireland required for U.S. airlines seeking the ability to compete with the American/Aer Lingus service, including authority to provide same-country codeshare service.

For the foregoing reasons, Continental does not oppose the American/Aer Lingus application to codeshare between the U.S. and Ireland so long as the Irish government shows flexibility in approving requests by U.S. airlines for comparable extrabilateral authority, including, in particular, same-country codeshare authority.

Respectfully submitted,

CONTINENTAL AIRLINES, INC.

By:

Hershel Kamen

Staff Vice President, International & Regulatory Affairs

March 16, 2000