Before the Department of Transportation Washington, D.C

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PUBLIC VERSION

BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C.

Joint Application of ) ) DELTA AIR LINES, INC. ) and ) LATAM AIRLINES GROUP S.A., D/B/A LATAM AIRLINES ) TAM-LINHAS AEREAS S.A. D/B/A LATAM AIRLINES BRASIL ) LAN PERU, S.A. D/B/A LATAM AIRLINES PERU ) TRANSPORTES AEREOS DEL MERCOSUR S.A., D/B/A TAM ) ) Docket DOT-OST-2020-0105 MERCOSUR ) AEROVIAS DE INTEGRACION REGIONAL, AIRES S.A. D/B/A ) LATAM AIRLINES COLOMBIA ) ) Under 49 U.S.C. §§ 41308 and 41309 ) for Approval of and Antitrust Immunity ) for Alliance Agreements ) ) ) JOINT RESPONSE OF DELTA AIR LINES, INC. AND LATAM TO DOT ORDER 2021-5-15 REQUESTING ADDITIONAL INFORMATION

Communications with respect to this document should be sent to:

Juan Carlos Mencio Peter Carter Vice President, Legal Affairs Executive Vice President LATAM Airlines Group S.A. & Chief Legal Officer Av. Presidente Riesco 5711 DELTA AIR LINES, INC. Las Condes 1030 Delta Boulevard Santiago, Chile Atlanta, Georgia 30320 [email protected]

Helen Warner Alexander Krulic General Counsel, North America Managing Director, Regulatory and LATAM Airlines Group S.A. International Affairs 6500 N.W. 22nd Street Christopher Walker Miami, Florida 33122 Director, Regulatory and International Affairs [email protected] Steven J. Seiden Director, Regulatory Affairs Charles F. Donley II DELTA AIR LINES, INC. Edward W. Sauer 1212 New York Avenue, NW Suite 200 Pillsbury Winthrop Shaw Pittman LLP Washington, DC 20005 1200 17th Street, N.W. Tel. 202-216-0700 Washington, D.C. 20036 [email protected] [email protected] Tel: 202-663-8448 Counsel for LATAM

August 2, 2021 BEFORE THE DEPARTMENT OF TRANSPORTATION WASHINGTON, D.C.

Delta Air Lines, Inc. (“Delta”) and LATAM1 hereby respond to DOT Order

2021-5-15, which requested additional information on the Joint Application filed in this docket on July 8, 2020. Delta and LATAM are eager to implement their Joint

Venture Agreement (“JVA”) and to begin providing customers with enhanced services and a seamless travel experience on U.S./Canada-South America flights.

The Joint Venture (“JV”) has already been cleared by competition authorities in

Brazil, Colombia, Peru, and Uruguay after rigorous regulatory reviews, and is pending in Chile; however, the Joint Applicants still require clearance in the United

States before they can implement the JV and begin to deliver the substantial pro- consumer and pro-competitive benefits that the JVA will generate.

1 LATAM” as used in the responses to the Department’s questions includes LATAM Airlines Group S.A Tam-Linhas Aereas S.A. D/B/A LATAM Airlines Brasil, LATAM Airlines Peru S.A., Transportes Aereos Del Mercosur S.A., D/B/A LATAM Airlines Paraguay and Aerovias De Integracion Regional, Aires S.A. D/B/A LATAM Airlines Colombia.

The Department’s grant of antitrust immunity (“ATI”) to the JVA and related

Alliance Agreements will support the rebuilding of international travel between the

United States and South America following the global health pandemic, as well as support Delta’s and LATAM’s recoveries as they emerge from the greatest economic crisis the airline industry has ever experienced. Indeed, the JV Partners expect that the implementation of the JV will accelerate each airline’s recovery from the pandemic, as the JV will enable new and enhanced service offerings to customers eager to book travel and visit family and friends following months of lockdowns, quarantines, and related government-imposed travel restrictions. To that end, the Joint Applicants urge the Department to expeditiously review the information provided in this response, declare the record complete, establish a procedural schedule, and proceed as quickly as possible to approve the Joint

Application.

Detailed responses to the specific questions in DOT Order 2021-5-15 are provided below. In addition, Delta and LATAM will shortly submit to the

Department, under separate cover, supplemental sets of confidential documents and data responsive to the questions included in DOT Order 2021-5-15

(“Supplemental Productions”). The Supplemental Productions will also be made available to interested parties who file (or have already filed) confidentiality affidavits with the Department. An index of Delta’s Supplemental Production is enclosed to this response at Attachment 1. LATAM will be providing its index under separate cover.

The JV Partners adopt and incorporate by reference the Joint Motion for

Confidential Treatment Under 14 C.F.R. § 302.12 filed in this docket on July 8,

2020, and request that their Supplemental Productions, as well as the information designated as confidential in the public version of this response, receive maximum confidentiality protection under all applicable statutes, rules and regulations, including DOT Rules of Conduct and applicable exemptions from the Freedom of

Information Act.

1. Please provide additional details on alternative scenarios in which you do not receive antitrust immunity. a. FOR DELTA: Please detail how Delta envisions continuing its LATAM partnership should the Joint Applicants not gain approval of or a grant of antitrust immunity for the joint venture. In the response, under the scenario outlined in this question, please discuss the level of codeshare access to be provided to LATAM, inventory access to Delta’s network, extent of frequent flyer partnership, list of city-pairs and frequency with Delta service in the U.S./Canada – South American Region, and how Delta would develop its network in the South American Region market absent ATI. As part of your answers, please provide the available evidence, documents, or quantitative support demonstrating the outcomes and dynamics that you describe (note: document production and analysis in this area is particularly important);

Delta Response: As set forth in more detail below, Delta and LATAM believe there is little more that they can realistically achieve through arms-length cooperation. While such cooperation has generated limited public benefits,2 Delta and LATAM require antitrust immunity (“ATI”) to deliver the substantial additional public benefits that will result from deeper, more comprehensive cooperation that can be realized only through their proposed JV.

2 See, e.g., DAL-DOT-RFI_00000001-00000022.

The JV will enable Delta and LATAM to engage in deeply integrated, metal- neutral commercial activities related to all aspects of their JV operations, including in the areas of network and schedule planning, revenue management, pricing, sales and marketing, customer services, frequent flyer benefits, product development, and joint purchasing. These key benefits to the traveling public would not exist absent a metal-neutral JV. An ATI grant from the Department would, among other benefits, enable capacity growth that the carriers could not achieve independently; allow for increased behind and beyond connecting traffic; facilitate hub and network optimization and aligned revenue management strategies that the parties cannot currently execute absent ATI; and enable the parties to integrate their sales forces to improve product offerings and enhance value for leisure and corporate customers alike. See, e.g., Delta_00000252.

The metal-neutral incentives created by the JV and the resulting level of coordination between the JV Partners will produce the largest consumer benefits of all inter-carrier relationships. Yet these coordinated activities are also what would expose the JV Partners to the potential risk of prohibitively expensive antitrust litigation under U.S. law in the absence of ATI.

The Joint Applicants are confident that the combination of their highly complementary North and South American networks will be overwhelmingly procompetitive and generate substantial public benefits – and therefore that the

JV could withstand scrutiny in virtually any regulatory review. The Delta/LATAM

JV also clearly meets the Department’s public interest standard for approval and is consistent with dozens of decisions that conferred ATI upon similar alliance

arrangements. As a result, the JVA and other Alliance Agreements merit expeditious approval and ATI from the Department.

The consumer benefits that will result from JV implementation are substantial and wide-ranging. The lower fares and enhanced service offerings resulting from the deepened coordination between the JV Partners will stimulate passenger demand and facilitate behind and beyond connecting traffic, which, in turn, will lead to increased capacity – both on existing routes and new routes.

When demand conditions return to normal, these are expected to include:

• At least nine new nonstop U.S.-South America routes incremental to the pre-COVID-19 baseline, including REDACTED

• Additional frequencies or enhanced service (e.g., seasonal to year-round) on at least nine existing nonstop routes.

• An overall increase of U.S.-South America capacity on the combined Delta/LATAM network of approximately 68%.

• Over 7,000 online, metal-neutral city-pairs through enhanced connectivity and route options.

See, e.g., DAL-DOT-RFI_00000084.

Should ATI be denied, the carriers could not deliver these substantial new service benefits, as they are the direct outgrowth of the closely integrated cooperation, access to each other’s networks, and the ability to rely on each other’s point-of-sale marketing and distribution strength made possible by the JV. Indeed, if the Department does not grant ATI to the Delta/LATAM JV, the “counterfactual” scenario would likely entail a significant reduction in the commercial cooperation between the carriers because they have already begun to implement some

codesharing in anticipation of the JV, which is likely unsustainable in the longer term in the absence of the metal neutrality of a fully integrated joint venture. This could include, for example, the unwinding of codesharing on hub-to-hub routes, a continuation of inherently limited arms-length codesharing and, potentially, reductions in service on multiple U.S./Canada-South American Region routes.

At a minimum, the carriers’ cooperation would stagnate and prospective new service offerings would likely be eliminated. Of the nine prospective new nonstop routes listed above, at least eight would be at risk of not materializing (with the potential exception of REDACTED

If the Department were to deny ATI, such flights would no longer be commercially viable without the substantial traffic support generated by Delta’s U.S. hubs. The cancellation of these (and potentially other) flights would have a deleterious ripple effect on the carriers’ respective network expansion goals.

More codeshare segments would likely be terminated and codeshare access curtailed if the JVA was not granted ATI. Moreover, investments to improve passengers’ travel experience through coordination on baggage handling, IT integration, and premium customer handling services for elite customers would likely not be made, thereby reducing potential customer benefits.

As highlighted above, a denial of ATI would jeopardize future network expansion by each of the JV Partners, even acting individually, between the U.S. and South America. The ability of LATAM and Delta to grow their respective U.S.-

South America services is inherently limited. Each carrier is constrained by its

limited presence in and lack of broad access to the other’s home market, and its smaller network compared to American (either alone or with its codeshare partners

Gol, JetBlue, and, prospectively, JetSMART3) in the JV-scope.

A denial of ATI would also adversely impact the JV Partners’ plans for cooperation on loyalty programs. Without the immunized JV, the Delta/LATAM frequent flyer program relationship would remain limited to basic earn/burn, without reciprocal elite benefits. The carriers would reserve that heightened level of cooperation for relationships involving immunized JVs.

Absent ATI, Delta and LATAM will not engage in profit-and-loss sharing on the JV Routes, and without such sharing, their incentives to codeshare or otherwise cooperate in ways that enhance benefits to passengers will be severely curtailed. Instead, they would likely seek just to continue, or even diminish, the limited arms-length codesharing arrangement currently in place.

While commercially and operationally superior to simple interlining, codesharing without closely integrated revenue and inventory-management systems does not produce the rich benefits of a fully integrated and jointly managed commercial cooperation arrangement. Because under arms-length cooperation the carriers do not pool revenues and share profits, they have no incentive to divert traffic from their own flights to those of the other. As with other arms-length codeshare arrangements, absent an ATI-enabled JV, the carriers would be unwilling to grant open access to each other’s networks, resulting in sub-

3 See response to Question 1.d. below for additional details on the recently announced American/JetSMART partnership.

optimal inventory access, fewer and less attractive options for consumers, slower growth of service, less capacity on U.S.-South America routes, and, potentially, higher fares for consumers. In addition, since Delta has a limited amount of flight numbers (a scarce resource), it would, under an arms-length codeshare relationship, lack the incentive to allocate more flight numbers (and may even reduce them) for LATAM-operated flights, as Delta pursues opportunities elsewhere and/or with other immunized alliance partners.

Only Delta is able to offer LATAM the combination of resources necessary to create a JV that can truly compete with other stronger carriers serving U.S.-

South America routes. As the Department is aware, the Chilean Supreme Court was unwilling to consent to LATAM’s proposed joint venture with American with respect to Chile-U.S. traffic. As a result, in 2019, LATAM decided to end its marketing arrangements with American. After carefully assessing the Court’s decision as well as the strengths of the remaining U.S. carriers, LATAM chose to negotiate a JVA with Delta that will bring even greater public benefits without creating any of the potential competitive concerns raised by the Chilean Supreme

Court.4

Since the Chilean Court’s decision, other changes in the competitive landscape have occurred. For example, as discussed in greater detail in the Joint

Applicants’ response to question 1.b. below, American and Gol have now formed

4 Specifically, the Santiago-Miami route gave rise to the concerns expressed by the Court. In contrast, the proposed Delta/LATAM JV raises no such concerns. The networks of LATAM and Delta are highly complementary, with minimal competitive overlap 8

a strategic partnership, including an expansive codeshare agreement and robust

FFP agreement.

United Airlines and Copa continue to operate with an ATI grant from the

Department.5 Additionally, as the Joint Applicants noted in their application, in

November 2018, United, Copa and Avianca announced plans to form a joint venture covering U.S.-South America routes, with the potential to add Azul as well.6 For all of these reasons, neither American nor United is a viable JV partner for LATAM and, in any case, neither of them would provide equivalent opportunities for LATAM to expand its presence in the United States and enhance its ability to compete.

b. FOR DELTA: Please detail the current state of Delta’s relationship with Gol in Brazil and other airlines in the South American Region. In the absence of a proposed relationship with LATAM, how would Delta continue to develop partnerships to expand in the region?

Delta Response: For Delta, one of the commercial consequences of forming a JV with LATAM was the termination of Delta’s codeshare partnership with Gol. On March 28, 2020, Delta ended its codeshare relationship with Gol, removing the display of codeshare connections on Gol for flights operating on or after July 1, 2020. Effective April 1, 2020, Delta SkyMiles mileage earn and redemption for travel on Gol flights was also discontinued. In addition, as part of

5 See DOT Orders 2001-5-1 (granting ATI to Continental/Copa) and 2011-3-14 (transferring the Continental/Copa ATI grant to United). 6 See Tracy Rucinski and Marcelo Rochabrun, United Wants Azul in Latin American Venture with Copa, Avianca (Oct. 25, 2019), https://www.reuters.com/article/us-united-arlns- strategyazul/united-wants-azul-in-latin-american-venture-with-copa-avianca-idUSKBN1X4272. 9

the wind down process, Delta divested its 5% ownership stake in Gol in December

2019.

Delta is committed to the LATAM JV partnership and has not considered any alternative scenarios for partnerships in the absence of a JV relationship with

LATAM. However, for sake of responsiveness, Delta emphasizes that under the counterfactual scenario posed by the Department it would be impracticable for

Delta to revert to arms-length commercial cooperation with Gol due to the recently launched (and rapidly developing) American/Gol partnership.

Indeed, almost immediately after Delta announced the termination of its commercial cooperation with Gol, American and Gol formed a strategic partnership. In February 2020, American and Gol announced the completion of a codeshare agreement “to offer more daily service between South America and the

U.S. than any other airline partnership.”7 According to reports, the agreement gives American’s customers access to 20 new destinations in South America, and to connect seamlessly to 53 Gol flights beyond Rio de Janeiro (GIG), Sao Paulo

(GRU), Brasilia (BSB), Manaus (MAO) and Fortaleza (FOR). The American-Gol codeshare relationship also includes frequent flyer earning and redemption on both airlines. American will continue to have the largest market share in Brazil even after the Delta/LATAM JV is implemented, and its relationship with Gol will continue to provide intense competition to the Delta/LATAM JV.

7 See American Airlines Newsroom, American Airlines and GOL Announce Codeshare Agreement to Offer More Daily Service Between South America and the U.S. than any Other Airline Partnership (Feb. 4, 2020), available at https://news.aa.com/news/news-details/2020/American- Airlines-and-GOL-Announce-Codeshare-Agreement-to-Offer-More-Daily-Service-Between-South- America-and-the-US-than-Any-Other-Airline-Partnership-NET-ALP/default.aspx.

c. FOR LATAM: Please detail how LATAM envisions continuing its Delta partnership should the Joint Applicants not gain approval of or a grant of antitrust immunity for the joint venture. In the response, under the scenario outlined in this subpart, please discuss the level of codeshare access to be provided to Delta, inventory access to LATAM’s network, extent of frequent flyer partnership, list of city-pairs and frequency with LATAM service in the U.S./Canada – South American Region market, and how LATAM would develop its network in the U.S. market absent ATI. As part of your answers, please provide available evidence, documents, or quantitative support demonstrating the outcomes and dynamics that you describe (note: document production and analysis in this area is particularly important);

LATAM Response: Currently, the LATAM and Delta partnership involves a standard bilateral commercial relationship including different kinds of bilateral agreements both for passenger (Special Prorate Agreement, Codeshare

Agreement, Frequent Flyer Agreement and Lounge access) and Cargo traffic

(Interline agreement).

These agreements have made it possible for both Parties to offer increased and improved services to the public as discussed below. However, there is a clear limitation regarding the public benefits that this type of cooperation can bring.

Those benefits are substantially less than the public benefits that would result from

JV cooperation under ATI.

LATAM and Delta have not negotiated what their partnership would be if

ATI were denied. LATAM’s planning is based on an ATI grant and therefore a JV partnership. In fact, the current LATAM-Delta relationship was structured based on the anticipation of a profit-sharing JV. In the absence of ATI, the Parties would not be able to move forward to a profit-sharing arrangement and, as a result, metal neutrality initiatives would not be pursued. In the hypothetical scenario where ATI

is not granted, the Parties would need to reevaluate their partnership. The result would be a relationship that is much narrower than what ATI is likely to produce and even more restricted than today’s limited codesharing, resulting in substantially diminished public benefits.

Importantly, ATI will allow LATAM and Delta to operate as a single firm by coordinating marketing, planning, sales, and operations – all of which is vital to creating the conditions necessary to increase competition in the U.S./Canada-

South American Region. Creation of an effective competitive alternative necessarily requires the combined resources of LATAM and Delta, and the full integration of the two carriers’ commercial and operational structures in the context of an immunized JV. On their own, neither carrier is able to mount an effective competitive challenge to American, which offers far more Latin America service through its Miami superhub than any other U.S. or foreign carrier. In fact, a grant of ATI for the Delta/LATAM JV is necessary if for no other reason than it will enable the two carriers to jointly build out and develop a highly attractive alternative to the single-carrier Latin America service now offered through Miami. Stated simply, this is the only way to create effective competition given current market conditions

– it is not possible for Delta, LATAM or any other carrier to achieve this on its own.

As a result, the Joint Application very likely offers the last opportunity for the

Department to create the conditions that will allow enhanced competition in hundreds of U.S./Canada-South America markets.

The Level of Codeshare Access and Inventory Access to LATAM’s Network to Be Provided to Delta

If ATI were denied, the Parties would not have the same incentive to provide full codeshare access to each other. As a result, the quantity of destinations and frequencies that each Party would be willing to offer under codeshare cooperation will be far more limited. Without the metal-neutral cooperation enabled by ATI, the

Parties’ incentives would shift. Each Party will try to protect its own long-haul revenues while ensuring balanced codeshare access to behind/beyond destinations from each other's gateways.

LATAM and Delta have implemented codesharing in several destinations behind and beyond each of their gateways. These new codeshares offer passengers new options of travel between the U.S./Canada-South American

Region. Currently the codeshare destinations and quantity of frequencies that each company offers is limited. In a JV partnership, the Parties would have a commercial incentive to not limit the behind and beyond codeshare access. To illustrate, in June 2021 LATAM operated from Sao Paulo (Guarulhos) to 36 destinations within Brazil. The Delta codeshare is in place in only 24 of these destinations. Additionally, LATAM operated from Bogotá to 14 destinations within

Colombia while Delta codeshared to only 9 of them. In that same month, Delta codeshared on approximately 60% of LATAM’s flights between Sao Paulo

(Guarulhos) and Rio de Janeiro (156 of a total of 251 flights). There is clearly room to expand the relationship between the Parties if ATI is granted.

In the hypothetical case where ATI is not granted, the level of inventory access that LATAM will offer to Delta will also be more limited. LATAM would provide inventory to Delta only to the extent that doing so generates passengers

for its own flights, especially when domestic or regional LATAM flights are part of the journey. With ATI, the Parties will have incentives to coordinate inventory access to maximize the use of the joint network and leverage the combined number of O&Ds, instead of trying to drive passengers toward their own truncated networks.

Besides the codeshare opportunities and inventory access that each Party would have the incentive to provide to the other, network connectivity would play a fundamental role in determining the level of access each Party has behind/beyond its own gateways. The current cooperation does not allow the

Parties to design a network with coordinated decision-making and schedule planning that results in a well-connected and more efficient operation. That changes dramatically under an immunized JV, which would align the incentives of the Parties to develop better connectivity among their networks. This results in more destinations being provided for passengers and a better product as connections with lower connecting times will be reached. For example, Cuzco

(Peru) is an important leisure destination for U.S. passengers. However, the

Parties do not currently offer attractive service for passengers flying to Cuzco.

Delta’s only flight to Lima arrives at 6:00 pm (Flight number DL 151) local time, while LATAM's last flight departs Lima for Cuzco at 6:05 pm. Thus, the only available connection to Cuzco for Delta’s passengers would be during the following day at 5:50 am or later (a 12-hour layover or longer). Coordinated network decisions will also bring opportunities for better fleet allocation by allowing the JV

carriers to operate certain routes with larger, more efficient aircraft. This cost efficiency will result in lower fares for passengers.

Extent of Frequent Flyer Partnership

The current frequent flyer program cooperation between LATAM and Delta consists of a standard bilateral accrual and redemption agreement with limited bilateral top tier benefits. In the hypothetical scenario where ATI is not granted,

LATAM would not seek any additional top tier benefits. In fact, the current top tier benefits would likely be removed or severely limited. Under a JV partnership, both

Parties would seek to provide a seamless experience for all passengers flying on each other's metal, for example providing the same benefits in each frequent flyer program and better redemption availability through technical or digital development. This could only be achieved under metal-neutral profit-sharing cooperation. It cannot be pursued without the coordinated commercial decisions that ATI makes possible.

With JV cooperation the possibilities to provide a better customer experience resulting from the coordinated metal-neutral initiatives go far beyond what we have already explained. Working toward a seamless customer experience incentivizes the Parties to develop multiple solutions to close gaps in each other's commercial and operational processes and to deliver additional benefits for customers like increasing top tier and enhanced lounge access. The range of possible customer improvements is wide and may include additional frequent flyer benefits, premium customer handling services, IT and digital features integration, revenue/inventory integration and a well-integrated accommodation

process for disrupted passengers. A better-connected network and more integrated operational processes will reduce disruptions for passengers and facilitate better handling of operational contingencies when these events occur. In the hypothetical case of a denial of ATI, the Parties would not have the incentive to invest in and develop a customer experience proposition that goes beyond the regular customer experience that interline and codeshare cooperation brings.

List of city-pairs and frequency with LATAM service in the U.S./Canada – South American Region market, and how LATAM would develop its network in the U.S. market absent ATI

LATAM believes that the Joint Venture will provide significant upside for the network covering the U.S./Canada-South American Region. Pre-pandemic projections (produced by Compass Lexecon and part of the record in this docket) considered new routes and additional frequencies specifically linked to a joint venture partnership. This study showed that a joint venture is key to enhancing the Pan-American network and producing benefits for consumers.

LATAM’s latest projections indicate that LATAM will be operating REDACTED between the U.S./Canada and the South American Region by March 2022, which translates to REDACTED than LATAM operated in the same month of 2019.

Additionally, LATAM expects to be operating approximately REDACTED

at the end of the first quarter of 2022. Therefore, LATAM is confronted with an important challenge to redeploy capacity. The Joint Venture with Delta is a tool to boost network recovery, reach pre-pandemic levels, and enable growth.

If ATI were denied, LATAM would have very limited ability to further develop its U.S. network. Like virtually all foreign carriers serving the United States,

LATAM would need to search for U.S. carriers with whom it could work in serving internal points to/from its gateways. There would be few options. The most important gateway is MIA. Absent ATI, LATAM cannot expect anything approaching the substantial investment that Delta is willing to make at MIA in connection with the JV. The same is true at other gateways that LATAM serves in the United States (e.g., JFK, LAX) which are dominated by U.S. carriers which would not in the absence of ATI have an incentive to work with LATAM. Under this counterfactual, important opportunities to inject competition into the market would be irretrievably lost.

Provided below is an approximation of what LATAM’s network in the United

States might look like in March 2022 on a standalone basis.

REDACTED

d. FOR BOTH PARTIES: The application references the market strength of American Airlines in the U.S./Canada – South American Region. Please discuss, citing examples, internal documents, and/or market analysis, why the Joint Applicants believe they require a JV in order to compete with American Airlines and cannot rely on a traditional arms-length relationship.

Response: American Airlines has an entrenched presence in Latin

America and remains, by a wide margin, the largest and most dominant U.S. carrier in the region. Prior to the COVID-19 pandemic, American operated up to

170 daily flights to 55 destinations in 18 countries in Latin America from nine airports. This includes 20 destinations in South America from four U.S. airports.

By contrast, prior to the pandemic, Delta served just eight destinations in South

America from two U.S. airports.

One of the key benefits of the JV is that it will create a more effective Latin network competitor to American – the dominant carrier in the region, and one that is poised to grow even more dominant as a result of its strategic partnerships. As detailed in the Joint Application, the Delta/LATAM JV will significantly improve

Delta’s ability to compete effectively with American on U.S.-South America routes.

The JVA will enable Delta to leverage one of its core proficiencies – creating consumer benefits through deeply integrated, international airline joint venture partnerships – to compete for the first time on more equal terms with American.

The Delta/LATAM JV will also enhance Delta’s ability to access many new destinations within South America through access to LATAM’s hubs and positions in key South American gateways such as São Paulo, Santiago, Lima, and Bogotá.

In addition, forming a joint venture with LATAM will allow Delta to launch a significant expansion of its services at Miami, providing a direct competitive challenge to American at this key U.S. gateway for South America services.8

Delta has a much smaller presence than American, accounting for only 8% of the U.S.-South America seat share in 2019. In contrast, American – the U.S. carrier with the largest presence in South America – controlled approximately 27% of the seat share in 2019. Delta’s limited presence in South America materially limits its commercial opportunities and service offerings in the region without a

South American partner. The Delta/LATAM metal-neutral JV will enhance competition by enabling Delta to compete for the first time on equal terms with

American for South American travelers. Upon implementation of the JV, the

8 See response to Question 21 below for additional details on Delta’s network plans for Miami.

combined Delta/LATAM seat share on U.S.-South American Region routes

(approximately 27% in 2019) would be comparable to the shares of American

(27%) as well as the combined U.S.-South America seat shares of

United/Avianca/Azul (27%).

Delta’s competitive disadvantage in South America cannot be rectified through arms-length commercial cooperation alone. Leveling the playing field requires Delta and LATAM to be able to share incremental profits and losses to ensure the partners are fully incentivized to achieve shared goals and efficiencies; it requires Delta and LATAM to have aligned incentives to provide more flights and lower fares between the U.S. and South America; it requires joint network and scheduling decisions to optimize the Delta/LATAM competitive offerings against rival carriers and alliances and provide the traveling public with a more attractive and complete network covering the Americas than either carrier could offer on its own; it requires joint sales and marketing cooperation to maximize local point-of- sale strength and allow the JV partners to present a single sales face to customers; it requires complementary product development and service enhancements; and it requires airport co-location and joint purchasing strategies.

Absent deepened, metal-neutral JV cooperation between Delta and

LATAM, the gap between American and its strategic alliance partners, on the one hand, and Delta/LATAM will only widen. As noted above, American has already begun to implement codeshare and FFP agreements with Gol for service to and within Brazil – further strengthening American’s position in key markets in South

America.

American also recently implemented a Northeast Alliance agreement with

JetBlue whose geographic reach extends far beyond the Northeast United States.

Indeed, as part of a coordinated effort to “introduce better travel choices on routes to and from New York (JFK, LGA and EWR) and Boston (BOS)”9 American is leveraging JetBlue’s domestic U.S. network to feed American’s South America flying. In April, JetBlue applied to the Department for exemption authority to provide scheduled service between New York JFK and Buenos Aires, Argentina on a codeshare-only basis with American “pursuant to the JetBlue-American codeshare agreement reviewed and cleared by DOT under 49 U.S.C. § 41720.”10

The following month, American and JetBlue launched new B6*/AA codeshare service from JFK to Latin America and the Caribbean, including new JetBlue-fed

American service from JFK to Cali (CLO), Bogota (BOG) and Medellin (MDE),

Colombia. Additionally, pursuant to the JetBlue codeshare partnership, American began flying three times per week from JFK to Santiago (SCL), with plans to operate daily service on that route beginning in November 2021.11

In addition, just last week, American announced that it will acquire a minority ownership stake in South American ULCC JetSMART to “create the broadest

9 Press Release, American Airlines and JetBlue Begin Growth from New York and Boston with 33 New Routes, Joint Schedules and Codeshare Flights (Feb. 18, 2021), available at https://news.aa.com/news/news-details/2021/American-Airlines-and-JetBlue-Begin-Growth-from- New-York-and-Boston-with-33-New-Routes-Joint-Schedules-and-Codeshare-Flights-NET-ALP- 02/default.aspx. 10 Application of JetBlue Airways Corporation for an Exemption, Docket DOT-OST-2021-0043 (April 14, 2021), at 3. 11 Id.

network and most rewarding customer offering in the Americas.”12 Reportedly, pursuant to the new partnership, American’s customers will be able to earn and redeem AAdvantage miles on JetSMART flights and access JetSMART’s rapidly growing South American network through a codeshare arrangement. American notes that the partnership with JetSMART, combined with American’s other partnerships in Latin America, “would also give American customers access to more low fares and travel options on a network that is twice as big as other alliances.”

American’s partnerships with Gol, JetBlue and JetSMART build on

American’s preexisting strength in South America – widening the gap between

American and its current competition in the region. An ATI-enabled Delta/LATAM

JV would inject much needed competition for air travel between the United States and South America.

Finally, as further detailed below in the response to Question 21, the

Delta/LATAM JV will also produce a competitive benefit that is unique among previous airline joint ventures presented to the Department for approval and ATI.

The JV will enhance competition by enabling Delta to launch a significant expansion of services at Miami supported by LATAM feed from South America, providing a direct competitive challenge to American at this key U.S. gateway for

South America service. Miami is the prized and preeminent hub for U.S.-South

America demand, representing 25% of demand in a region that American has

12 American Airlines Newsroom, American Airlines and JetSMART Sign Letter of Intent to Create the Broadest and Most Rewarding Network in the Americas (July 29, 2021), available at https://news.aa.com/news/news-details/2021/American-Airlines-and-JetSMART-Sign-Letter-of- Intent-to-Create-the-Broadest-and-Most-Rewarding-Network-in-the-Americas/default.aspx

dominated for decades. Delta expects that its expansion in Miami and access to the Miami gateway hub, enabled by the JV with LATAM, will create robust competition that does not currently exist for American at Miami, creating obvious public benefits for the traveling public. Together with LATAM, Delta has the resources and vision to make Miami its hub of the Americas and beyond.

2. In the application, page 7, footnote 6 and Appendix 2, the Joint Applicants indicate that they are seeking approval of and a grant of antitrust immunity for the “JV Agreements and other Alliance Agreements” that are listed by title. a. Please name and describe the agreements for which you are requesting approval and a grant of antitrust immunity; b. Please also submit any outstanding agreements in your response to this request. c. Please name and describe which agreements, if any, remain to be negotiated and/or that would be submitted as part of the implementation process that occurs after an order granting antitrust immunity (if it is granted).

Response: The Joint Applicants are seeking approval of, and a grant of

ATI for, their Alliance Agreements as listed and described in Appendix 2 of the

Joint Application. As of the date of this response, the following Alliance

Agreements have been finalized and provided to the Department for review, approval, and immunity:

• Trans-American Joint Venture Agreement between Delta and LATAM dated May 7, 2020 • Country-specific JV agreements for Brazil, Chile, Colombia, Peru, and Paraguay • Frequent Flyer Agreement dated February 27, 2020 • Special Prorate Agreement dated March 10, 2020 • Framework Agreement dated September 26, 2019 • Lounge Access Agreement dated August 10, 2020

• Data Security and Processing Agreement dated March 6, 2020 • Codeshare agreements for services to/from Chile, Peru, Colombia, Uruguay, and Brazil

In anticipation of JV implementation, the JV Partners may negotiate additional agreements or amend existing agreements to reflect the arrangements contemplated by the JVA, including codeshare agreement(s). Once any such agreement(s) are finalized, Delta and LATAM will submit them for the

Department’s review, approval, and immunity under the Department’s standard procedures for the submission of such subsidiary implementing agreements.

Upon the Department’s approval and grant of ATI, the Joint Applicants confirm that they accept and will comply with the Department’s standard condition requiring the submission of any future implementing agreements or material amendments or modifications to the Alliance Agreements to the Department for approval. These agreements, together with the JV Agreement, represent the

Alliance Agreements for which approval and ATI is sought.

3. The scope of the agreement includes all nonstop U.S./Canada- South American Region flights as well as connecting behind and beyond flights within the U.S./ Canada and beyond the South American Region gateways (Appendix 2, page 1). Please answer the following: a. What was the rationale for limiting the alliance to U.S./Canada and South American Region countries only and not including other countries in South America or behind the U.S./Canada (trans-oceanic points behind North America)

b. What was the reason for excluding Aeromexico (and Mexico) from this agreement given the immunized alliance between Aeromexico and Delta?

c. How are third-country behind/beyond routes treated with respect to travel to countries not included in the South American Region (e.g., a passenger

that flies on a nonstop route from the U.S./Canada to the South American Region on the proposed JV to connect to a third country in South America that is not part of the South American Region)? i. Is prorated revenue attributed to the third-country behind/beyond segment included in the revenue pooling? ii. Is prorated revenue attributed to the transborder segment of an itinerary destined to a third country included in the revenue pooling?

Response: The scope of the Delta/LATAM JV covers flights between the

United States and Canada, on the one hand, and six countries in South America

(i.e., Brazil, Chile, Colombia, Paraguay, Peru, and Uruguay) on the other hand.

For simplicity, these six countries are collectively referred to herein as the “South

American Region.” Upon implementation of the JV, the JV Partners will share incremental profits and losses relating to their operations on JV routes. The JVA also provides that the JV Partners may mutually agree to expand the scope of joint cooperation to include traffic flows to other routes or geographic regions; however, any such expanded coordination will be subject to receipt of required governmental approvals.

Under the terms of the JVA, the geographic scope of commercial cooperation between Delta and LATAM is limited to U.S./Canada-South American

Region city-pair routings because the carriers have mutually determined that a focus on these routes will maximize the commercial benefits of the JVA for the JV

Partners and will also generate substantial benefits for consumers and the traveling public. Travel to and from South America generates approximately $8 billion in annual air travel revenues from the United States, or approximately 10% of all U.S.-international revenue. South America is also one of the fastest growing

regions for air service to and from the United States. Before the COVID-19 crisis,

South America passenger revenue was growing by an average of 6% per year over the last 10 years and was projected to continue growing above-GDP rates of

2-3%.13

By working together in an integrated, metal-neutral JV with aligned incentives focused on the U.S./Canada-South American Region, Delta and

LATAM will be better positioned to offer a more attractive product and will be able to compete more effectively with American/Gol/JetBlue/JetSMART. This focus on

U.S.-South America markets is designed to provide consumers with a viable competitive alternative to American’s expansive services in the region. As a result, the JV will enhance competition in the U.S./Canada-South American Region market. It will combine the almost entirely complementary Delta and LATAM networks. Of the 20+ nonstop routes flown by Delta and LATAM between the U.S. and South America before the pandemic, Delta and LATAM have just one city-pair overlap (New York City-Sao Paulo), which is a fiercely competitive market and will remain so after the JV is implemented. The market is amply served by United

Airlines and American Airlines, and the Open Skies environment between the U.S. and Brazil encourages new entry. The JV will create a more effective (albeit still smaller) competitor to American, alone, and the American/Gol/JetBlue/JetSMART partnership(s).

While the integrated activities of the JV, as currently structured, are limited in geographic scope to U.S./Canada-South American Region routes, the reciprocal

13 Joint Application, at 15.

codesharing provisions of the JVA nonetheless encourage each carrier to use the other’s network for connecting itineraries to third countries. This will allow LATAM to offer more services beyond LATAM’s U.S. gateways and Delta to offer more services beyond Delta’s South American gateways, with the net effect of improving the distribution and penetration of LATAM’s and Delta’s products between the U.S. and South America.14

Cooperation in Canada is another essential component of the Delta/LATAM

JV. Today, Air Canada is the clear market leader between Canada and South

America – with an approximate 40% share of revenue on these routes. By comparison, Delta’s revenue share is 6% and LATAM’s revenue share is 5%.

Delta’s robust North American network will enable LATAM to be a stronger competitor for Canada-South America traffic flows. See, e.g., Delta 00000183.

Turning to the Department’s question on prorated revenue, from a settlement perspective, the Delta/LATAM JV is similar to all other Delta joint ventures, insofar as REDACTED

Lastly, to address the Department’s question regarding Aeromexico, the

Joint Applicants emphasize that Aeromexico is not a party to the JV. For now,

Delta and LATAM are focused on delivering substantial consumer benefits in the

14 REDACTED

U.S./Canada-South American Region that has traditionally been dominated by

American Airlines. While the JV may expand geographically in the future, Delta and LATAM have no current plans to open discussions with Aeromexico. For now, the JV Parties are focused on delivering substantial consumer benefits to passengers traveling in the U.S./Canada-South America Region scope of the proposed JV and wish to implement their JV as soon as possible to begin delivering these substantial benefits to the traveling and shipping public.

4. For the public record, please identify the proposed duration of your alliance as reflected in the Trans-American Joint Venture Agreement.

Response: The JVA is intended to be an enduring arrangement between

Delta and LATAM that will incentivize the carriers to make significant long-term investments in their systems and operations. Accordingly, the JVA is evergreen with a minimum term of at least 15 years. See JVA § 11.1.

5. The application states in Appendix 2, page 3, that the Joint Applicants “will manage their own flights with respect to revenue management activities; however, the JV Partners’ revenue management strategies and policies with respect to such routes will be aligned.” Please discuss how (including the process and documentation) the Joint Applicants intend to control and manage pricing and seat inventory. Include the following elements as part of the response:

a. How will the Applicants jointly set individual fares? i. Will the parties coordinate pricing or capacity for routes that go beyond the U.S./Canada and the South American Region?

Response: Once implemented, the Delta/LATAM JV will employ a joint pricing team to monitor, assess, and respond to the competitive fare environment.

Pursuant to this collaborative structure, fares and fare rules will be jointly filed on

behalf of both carriers by origin and destination in the U.S./Canada-South

American Region markets. Delta and LATAM will coordinate fare filings through their separate systems. JV fares for U.S./Canada-South American Region O&Ds will be filed in Delta systems and leverage Delta processes (similar to the fare filing systems used in Delta’s other international airline joint ventures). Neither pricing nor capacity will be coordinated outside the contemplated U.S./Canada-South

American Region scope of the JVA.

b. With respect to pricing and revenue management, please explain: i. How the Joint Applicants will coordinate pricing and inventory availability within the JV’s defined geographic scope; ii. How the Joint Applicants will coordinate pricing or capacity for routes that go beyond the U.S./Canada and the South American Region.

Response: Once their JV is implemented and fully activated, Delta and

LATAM will collaborate on U.S./Canada-South American Region pricing activities using the structure and process as described above in response to question No.

5(a). Inventory will be managed jointly by a Delta/LATAM team, each using their own host system. They will optimize seat inventory strategies for various seasons, holidays and special events. On a day-to-day basis, they will coordinate the optimal level of seats available on JV Routes for each fare class by market for all dates within the future booking window. The JV Partners’ inventory teams will maintain separate inventory management systems for the practical implementation of their inventory strategies. Neither pricing nor inventory will be coordinated outside the contemplated U.S./Canada-South American Region scope of the JV.

6. The application discusses how the JVA incentivizes the Joint Applicants to give each other full access to inventory and fully share information (pages 45-47).

Please explain in detail and provide examples explaining how and when the parties intend to implement this, including: the mechanics of how they will open lower fare classes, fare class maps based on revenue values, plans to exchange bid price information, and IT system developments required to enable communication between the Joint Applicants’ revenue and inventory management systems.

Response: The ATI-enabled Delta/LATAM JV will incentivize the JV

Partners to invest in tools and processes to enhance inventory access for both JV

Partners and, ultimately, make more inventory available to consumers. Both JV

Partners will make long-term investments in their respective IT systems to build a

“JV database” which will house both past information about JV tickets that have been flown and future information about tickets that are booked. The JV database will allow the JV Partners to jointly analyze past performance and optimize the level of seats available in any given market on any future date in the booking window. It will also allow them to assess where to adjust their pricing strategy to maximize joint revenues and load factors. The JV also incentivizes the JV Partners to invest in enhancements to their messaging systems to allow for real-time inventory and last seat availability. This gives each JV Partner visibility into the other’s last seat availability in real time, which offers distinct advantages over the more traditional method of closing inventory well before the last seat is sold.

The JV Partners will also implement a revised fare class map. Carriers establish prices by organizing fares into categories known as Reservation Booking

Designators (“RBDs” or “classes”). Codeshare partners, in particular, use RBDs to offer and request seats on each other’s flights. Each carrier then “maps” its

RBDs to the other carrier’s RBDs so that when a codeshare partner requests a

seat for a particular RBD, the carrier can translate that request to a corresponding

RBD on its own flight. The JV-enabled class map that will be implemented by Delta and LATAM upon the Department’s grant of ATI is founded on the principle of metal neutrality, and is deliberately designed to align the JV Partners’ respective

RBDs to the extent possible on a 1-to-1 basis (highest to lowest). Under arms- length cooperation, each carrier tends to steer its partner’s lower fare RBDs to more restrictive RBDs. This has the suboptimal effect of having less inventory available for the partner in lower fare RBDs given the lack of aligned economic incentives. In contrast, under the metal-neutral profit-and-loss sharing

Delta/LATAM JV, the JV Partners’ incentives will be closely aligned, and thus they will grant each other maximum, metal-neutral access.

Contingent upon JV implementation, Delta and LATAM will also begin the necessary investments to implement a highly integrated bid price exchange system that will enhance their ability to offer the lowest fare option to consumers on multiple paths and make it easier for customers to find a path that they would not otherwise see via their preferred booking channel (e.g., a LATAM customer searching on latam.com for a LA* codeshare flight operated by Delta). Without a highly integrated bid price exchange system, Delta/LATAM would have only limited ability to show the best fares to customers on all paths.

7. FOR DELTA: Please compare and contrast how pricing, revenue management and inventory management will function within the proposed JV versus Delta’s existing transatlantic, transpacific, and transborder (U.S.- Mexico) joint ventures. Please highlight similarities between the proposed and existing JVs as well as variations, including fare class mapping or other revenue management procedures used to determine inventory availability for

itineraries involving partner airlines at various levels of commercial cooperation and integration.

a. Please include a detailed pricing, fare class mapping, and seat availability process discussion using Delta’s existing JVs as a reference point;

b. Do current JVs involve bid price exchange? i. How do the arrangements with Delta’s most integrated alliances compare to what Delta envisions with its proposed LATAM JV?

Response: All of Delta’s joint ventures feature similar levels of coordination in the areas of pricing and inventory management. The pricing and inventory systems in the Delta/LATAM JV will therefore operate largely the same as the systems utilized in Delta’s other joint ventures. As noted in the response to question No. 6 above, Delta and LATAM will utilize 1:1 class mapping along with significant investments in their IT systems to implement seamless availability/interactive sell and a JV database.

The carriers’ inventory teams are integrated in all of Delta’s joint ventures, and Delta’s JV with LATAM will follow the same approach. By way of comparison, the Pricing/inventory management and structure of the Delta/LATAM JV is modeled after and largely consistent with the transborder Delta/Aeromexico JV.

The similarities continue in the area of bid price exchange. Just as Delta’s joint ventures with Air France-KLM, Virgin Atlantic, and Aeromexico exchange bid prices in order to offer customers the lowest fare options on multiple paths, Delta and LATAM envision a comprehensive, closely aligned bid price exchange system for their JV. This will have the effect of offering greater access/availability – especially for lower fare classes on the respective JV Partner’s flights.

8. Please provide the following: a. Airports where the Joint Applicants are currently co-located, noting those airports where co-location occurred after the consummation of the existing codeshare partnership between Delta and LATAM; b. Airports where, proximate to a grant of ATI, the Joint Applicants plan to co- locate.

Response: Delta and LATAM are currently co-located at Miami (MIA), New

York (JFK), Orlando (MCO), Bogota (BOG), Mexico City (MEX), Sao Paulo (GRU), and Santiago (SCL). They were co-located at MIA, MCO, BOG, and SCL prior to, but in anticipation of, the implementation of their codeshare partnership and the proposed JVA. They are also co-located at New York (JFK) and Sao Paulo (GRU), and have been so since February and March 2020, respectively, after the carriers began implementing their codeshare partnership. The co-location of Delta and

LATAM at these key hubs allows customers to connect more easily between Delta and LATAM flights.

Future co-location expansion plans include REDACTED

which are currently under evaluation and dependent upon construction completion timelines. If the JV is approved and immunized, Delta and

LATAM will evaluate future co-location plans in the United States and South

America. An immunized metal-neutral JV will further align the carriers’ incentives to invest in these facilities to co-locate and cooperate with respect to their operations at these, and potentially other, key airports in both the U.S. and South

America.

9. Under the Joint Applicants’ current partnership, to what extent is it possible (or if not currently possible, when the Joint Applicants expect to have the

functionality to make it possible):

a. To check in online or at the airport for journeys where both Delta and LATAM operate segments of the trip on an interline basis (no codesharing involved);

b. To check in online or at the airport for journeys where both Delta and LATAM operate segments of the trip but one carrier markets the entire journey (codeshare basis);

c. For the marketing carrier to make seat assignments on flights operated by the partner carrier or vice versa regardless of the distribution or check-in channel.

Response: Delta and LATAM recognize the high value that their customers place on the ability to check in online and to select their seats across carriers on multi-carrier itineraries. In anticipation of the JV, Delta and LATAM have implemented technology that allows their customers to check in online and in their respective mobile apps using a “deep-link” between their platforms, allowing each customer to use his or her preferred channel of choice (e.g., latam.com, delta.com) for a partner itinerary, regardless of whether the segments of the multi-carrier itinerary are connected on an interline or codesharing basis. This functionality, which has already been launched in anticipation of JV implementation, offers the advantage of transferring the customer’s ticket details over to the JV Partner’s website to facilitate check-in.

In the future, assuming the JV is approved and implemented, the JV

Partners plan to make more substantial long-term investments in technology to enable check-in wholly within their customers’ preferred channel of choice (e.g., the customer could stay on latam.com or the LATAM mobile app even if the entire

journey is on Delta, and vice versa). Delta and LATAM customers can also select seats on flights operated by the other carrier on codeshare itineraries. In anticipation of the JV, the JV Partners have arranged to launch a “deep-link” to allow a customer booking in one partner’s website / app to select a seat on the other partner after the ticket has been purchased. For example, after a customer purchases a Delta-marketed codeshare ticket that includes a LATAM-operated

GIG-GRU flight on delta.com, the customer is redirected to latam.com to pay for and select a seat.

In addition, assuming the Delta/LATAM JV is approved and implemented, the JV Partners plan to invest in the technology to allow passengers to book tickets and select seats within their channel of choice (i.e., website or app). To be clear, while the JV Partners have been willing to make some preliminary investments in technology to facilitate online check-in and seat selection on multi-carrier itineraries in anticipation of the approval and implementation of their proposed JV, the longer-term investments not yet made, which are required to create fully seamless customer experiences with respect to seat selection and online check- in, will be substantial. The JV Partners’ willingness to make these substantial long- term investments is dependent upon the approval and implementation of a metal- neutral JV. Without ATI, these substantial consumer-facing benefits will not be fully realized.

10. Table 5 of Appendix 3 to the Trans-American Joint Venture Agreement shows a decline in “Intra-U.S.” and “Other” passengers with the JV versus without.

a. Please explain conceptually, and by means of an example, what these two categories represent.

Response: In preparing Table 5 of Appendix 3 of the Joint Application,

Compass Lexecon used Delta’s Quality of Service Index (QSI) model to calculate consumer benefits on a route-by-route basis.15 Because airlines operate global networks and routes are interconnected, the QSI model is based on a global route network. For purposes of this analysis, a route is defined as a non-directional origin and destination (NDOD) airport pair (e.g. GRU-MIA). In Table 5, the routes are categorized according to the geographic location of the origin and destination airports. The “U.S./Canada – South American Region” category consists of routes with one endpoint in the U.S. or Canada and the other endpoint in the South

American Region (e.g. MIA-GRU). The “Intra-U.S.” category consists of routes with both endpoints in the United States (e.g. JFK-LAX). The “Other” category consists of all other routes (e.g. JFK-EZE).

b. Please explain how a decline in passengers within these two categories “with JV” translates into positive benefits of $64.1 and $55.4 million.

Response: The QSI model predicts that the establishment of a metal- neutral JV between Delta and LATAM will increase the number of passengers carried by Delta and LATAM collectively by more than one million per year.16 This projected net increase in passengers provides compelling evidence that the JV

Partners will offer a combination of lower fares and improved service that together

15 For further details on these calculations, see Appendix 3 to the Application, Section III.E. 16 Economic Analysis, at ¶ 36.

increase the demand for their products and attract passengers away from competing airlines. Stated differently, the QSI model predicts that the overall quality of service provided by the JV Partners will be enhanced as a direct result of the JV, making customers more likely to choose to fly on Delta and/or LATAM.

The Department’s observation regarding the modest decrease in the total number of passengers carried on “Intra-U.S.” and “Other” routes relates to the QSI model’s production of separate estimates for low-yield and high-yield passengers.

Compass Lexecon calculated benefits separately for each type of passenger and then aggregate to the route level.17 Low-yield, typically leisure, passengers have more elastic demand and are less sensitive to quality changes. High-yield, typically business, passengers have more inelastic demand and are more sensitive to quality changes. Changes to the mix of low- and high-yield passengers on a route can result in positive consumer benefits on a particular route even when the total number of passengers on the route declines. This occurs when the positive benefits associated with a small increase in high yield passengers more than offset the negative benefits associated with a greater (in absolute terms) decline in low yield passengers. In Table 5, the total number of Delta and LATAM passengers declines on Intra-U.S. and Other routes, but the combined network is more successful at attracting high-yield passengers so the passenger mix shifts and consumer benefits on these routes are positive despite a slight decrease in the total number of passengers carried.

17 Appendix 3 to the Joint Application, note 55.

11. Please discuss and quantify if possible the required financial investments, IT system investments, acquisitions, aircraft configuration investments, training, and business process changes each party must make to bring the JV to fruition based on the stated goals of Delta and LATAM.

Response: In anticipation of the JV, the JV Partners initially plan to invest several million dollars in IT infrastructure to enhance the customer experience.

Examples of such investments include:

• Revenue management, revenue accounting and operational databases • Free / paid seat solutions to streamline the booking / purchasing of seat • assignments • Streamlined check-in on each JV Partner • Revenue management tools to enable enhanced JV Partner inventory access for customers • Enhanced loyalty benefit system changes to enable the planned elite customer benefits • Lounge access management systems • Other seam / gap closures between their systems (e.g., enabling printing TSA Pre-check on LA boarding passes)

As with any new JV launch, there will be significant training and business process changes both for commercial and operational roles that touch the proposed JV.

Examples of this include new processes for the joint selling teams and new handling procedures in co-located airports.

a. Please describe the mechanism identified in Section 6.7 of the Trans- American Joint Venture Agreement. Please explain in more detail exactly what this mechanism is and to what extent it is necessary to implement and make the proposed function. Is this a tool the Parties are still pursuing? If not, why, and what are the Parties proposing as a replacement? If yes, when do the Parties expect to implement?

Response: The ticket data exchange provisions in Section 6.7 of the JVA describe the JV Database process pursuant to which Delta and LATAM will, upon

ATI-enabled JV implementation – but no sooner – share critical JV scope data for

management and reporting of JV-related cooperative activities, with an emphasis

on data relating to Revenue Management, Sales, and Network Planning. The JV

Partners will also use this JV Database to streamline the accounting settlement of

tickets sold between Delta and LATAM (Passenger Revenue Accounting).

Specific elements of the JV Database will include: REDACTED

Creating a shared JV database that authorized users from Delta and LATAM can

jointly access is key to optimizing JV commercial initiatives. Having common

visibility to various attributes of passenger revenue data, product demand, and

statistics for the entire scope of the JV allows the commercial teams to optimize

collaborative analysis and decision making. Delta has successfully implemented

JV database processes with Aeromexico, Air France/KLM, Virgin Atlantic, and

Korean Air, and it intends to leverage the efficiencies gained from those

experiences and apply them forward to the JV with LATAM. Technical teams at

both Delta and LATAM have begun discussions on the scope of IT development

and the workplan necessary to complete the structure of the JV Database in time

for JV implementation or shortly thereafter.

12. With the significant downturn in air travel following COVID-19, and with many

LATAM affiliates currently subject to reorganization, the Department recognizes that the Joint Applicants’ plans are evolving and seeks further information on the latest available plans.

a. Please provide any updated commercial planning documents, presentations and projections as they relate to the Joint Applicants’ services between the U.S. and South American Region.

Response: Documents responsive to this question are being provided to the Department under separate cover in Delta’s and LATAM’s Supplemental

Productions.

b. Please discuss the extent to which the Joint Applicants’ proposed JV will require financial, technical, and other investments in order to realize public benefits proximate to a grant of antitrust immunity. Given current circumstances of strained finances and LATAM’s reorganization, please discuss the extent to which the Parties would make the required investments proximate to a potential grant of ATI.

Response: The Joint Venture is to be included in LATAM’s restructuring plan promulgated under Chapter 11 of the U.S. Bankruptcy Code. Upon a grant of ATI by the Department, LATAM will implement the Joint Venture as contemplated by the restructuring plan. Investments required to participate in the

Joint Venture, financial and technical, will be taken into account as part of LATAM’s restructuring plan. LATAM therefore does not anticipate any difficulty in making the investments required for the immunized Joint Venture to succeed.

c. FOR DELTA: Please provide the carrier’s five-year, wide-body fleet plan, including projected retirements and deliveries. Please include a discussion on how Delta plans to fund future growth to the South American Region.

Delta Response: Delta’s widebody fleet outlook through 2026 is detailed in the table below. For context, the “Total Committed” counts include all aircraft

currently in Delta’s fleet as well as firm aircraft deliveries and currently approved

retirements. More broadly, Delta’s Fleet and Network teams are aligning on

updated Widebody Target counts to supply expected international growth in the

coming years. REDACTED

REDACTED

d. FOR LATAM: Please provide the carrier’s five-year, wide-body fleet plan, including projected retirements and deliveries by LATAM affiliates. Please include a discussion on how LATAM plans to deploy this fleet to further the LATAM carriers’ growth objectives to the U.S. and Canada. Given LATAM’s recent decision to retire its fleet of A350 aircraft, please explain how the absence of this aircraft type impacts LATAM’s growth and service plans in U.S. and Canadian markets.

LATAM Response: The information below represents the LATAM fleet

plan as a group of airlines, which was built in terms of fleet family. LATAM does

not maintain a fleet plan for each LATAM affiliate.

LATAM’s five-year wide-body passenger fleet plan Figures show the number of planes at December of each year (Updated on May 27, 2021)

REDACTED

Please find below LATAM’s fleet use plan between the U.S. and the South American Region.

Latest wide-body fleet use projection U.S. and South American Region services Figures show the number of estimated planes to be use per month (Updated on March 31, 2021)

REDACTED

e. FOR LATAM: Please discuss the carrier’s timeline and plans for exiting bankruptcy, including the size and shape of LATAM relative to before, its network and strategic plans going forward, any new legal obligations, and its corporate structure.

LATAM Response: LATAM is in the process of finalizing its plan of

reorganization that will permit it to emerge from Chapter 11 and will present this

plan to the bankruptcy court in due course. LATAM’s goal is to exit from

bankruptcy by year-end 2021.

In response to the Department’s specific request for information regarding

the size and scope of LATAM’s operations before and after bankruptcy, LATAM

submits the following information:

● The number of LATAM’s employees decreased by 30% between May 2020 and June 2021 (39,000 vs. 27,000).

● LATAM’s passenger fleet decreased by approximately 10% between May 2020 and June 2021.

● LATAM Airlines Argentina announced its cessation of operations in June 2020.

● In May 2021 LATAM launched a sustainability program targeting carbon neutrality by 2050.

● In May 2021 LATAM operated 26% of pre-pandemic ASK levels. The company increased its operations to 36% of pre-pandemic ASK levels during June 2021. Both figures are well above a low of 7% of pre-pandemic levels reached during May 2020.

● LATAM does not expect any significant changes in its corporate structure or any significant new legal obligations (compared to 2019) as it exits bankruptcy.

13. With respect to Appendix 2, we are interested in the composition of the various working groups that will manage the day-to-day operations of the proposed JV. Specifically, for LATAM, given that it is composed of affiliates from many different countries, will each LATAM affiliate send a representative to participate in the various groups, or will one LATAM affiliate represent each affiliate’s interests? How will potential disputes between different LATAM affiliates be handled, should there be different opinions?

Response: The composition of the working groups that will manage the day-to-day operations of the proposed JV has not yet been defined. LATAM’s governance structure is based currently on the fact that the LATAM affiliates operate as independent airlines, with their own operating authorizations, fleets, employees and management teams, but in a coordinated manner as shown below.

The dotted lines reflect coordination designed to assist the airlines in working together in the JV. Dotted lines reflect coordination.

14. For the countries that have already approved the proposed Joint Venture, please provide English translations of the final government actions approving the alliance, including any conditions imposed by the respective regulating authority for each country.

Response: Information responsive to this question is being provided to the

Department in LATAM’s Supplemental Production.

15. In the application, the parties state that, at Sao Paulo Guarulhos Airport (GRU), “improvements in infrastructure there have increased the capacity of the airport – and Delta has not recently experienced any difficulty in obtaining the slots it needs to operate there.” For these questions, please assume pre- COVID environment, “normal” capacity.

a. Please describe the infrastructure improvements that you are referencing.

b. How much capacity (i.e., operations per hour) have these improvements

added to the airport?

c. What is the slot availability by hour at GRU, particularly in those hours well- timed for North American arrivals and departures?

Response: Sao Paulo Guarulhos International Airport (GRU) is the largest airport in Brazil and the country’s main international gateway, serving Brazil’s commercial center and biggest city. In 2019, the airport broke the 43 million passenger threshold for the first time despite various economic headwinds and social unrest in South America. As the leading airport hub in South America and the primary international airport serving Sao Paulo, GRU is taking actions to become more efficient and attract more airlines and air services. For example,

GRU is building additional aprons and gates to accommodate demand growth and introducing more technology to increase efficiency and throughput.18 Fueled by these and other investments, GRU expects to increase its capacity to an estimated

60 million passengers by 2022.19

Provided below are the recent capacity declarations made by the GRU airport authority:

• Summer 2018: 52 movements per hour • Summer 2019: 55 movements per hour • Summer 2020: 57 movements per hour • Winter 2018: 53 movements per hour • Winter 2019: 57 movements per hour

18 João Pita, GRU Airport Strives to Become the South American Hub, International Airport Review (March 16, 2020), https://www.internationalairportreview.com/article/113498/gru-airport- south-american-hug/. 19 OAG, Brazil’s Guarulhos International Airport to Boost Leadership Position with OAG’s Analyser Suite (Feb. 2, 2015), https://www.oag.com/pressroom/guarulhos-international

These capacity figures represent a more than 20% increase relative to

2015, when the airport could accommodate only 47 movements per hour. The air traffic capacity increase is primarily attributable to the restructuring of airspace near GRU, combined with enhancements in permissible separation of aircraft on approach to the airport – reducing the distance between aircraft from five to three nautical miles. GRU has also been working with airlines to reduce runway occupancy time to enhance overall throughput.20 The improved capacity figures provided above are the product of all these infrastructure enhancements at GRU.

16. FOR LATAM: Please list each wholly-owned or partially-owned affiliate or corporate entity of LATAM Airlines Group S.A. Corporate entity refers to any and all entities including, but not limited to, assets not directly involved in providing passenger air transportation, international business corporations, and companies established for the purposes of an investment vehicle. Separately, please list each wholly-owned or partially-owned affiliate or corporate entity of the remaining LATAM affiliates that are party to the Trans-American Joint Venture Agreement dated May 7, 2020. For each affiliate or entity in the above lists, please provide the approximate holding percentage of LATAM or any of its affiliates or corporate entities.

a. Please provide a diagram or flow chart that shows the relationship between LATAM Airlines and affiliates that are party to the Trans- American Joint Venture Agreement, including the ownership percentages LATAM Airlines or one of its corporate entities has.

LATAM Response: Please refer to the charts below.

20 Kate Douetil, GRU Airport Begins to Increase Movements/Hour Capacity in Runway System, International Airport Review (Oct. 21, 2015), https://www.internationalairportreview.com/news/20863/gru-airport-begins-to-increase- movementshour-capacity-in-runway-system

LATAM Airlines Colombia (IATA Code 4C)

HOLDCO

98.94% Colombia SPA (I & II)

100%

Latam Lan Pax 0.15% 99.84% Airlines Group Group Latam Airlines Colombia Other minority & 0.79% local stakeholders

99%

Inversiones 0.10% Lan S.A

*The flag icon indicates the country where the entity is constituted.

TAM Linhas Aereas S.A. (IATA Code JJ)

TAM Linhas HOLDCO I 100% TAM S.A 36.91% Aereas S.A. SPA

63.09% 99.99% Latam Airlines Group

*The flag icon indicates the country where the entity is constituted.

17. FOR LATAM: To what degree is each of the LATAM affiliates participating in the proposed JV autonomous from one another and from LATAM Airlines Group S.A. (parent company) with respect to decisions regarding network planning, pricing, revenue management, sales, distribution, customer experience, loyalty, cargo, operations, finance, marketing, and information technology? Please comment on the degree to which the affiliates are independent versus interdependent in each of these areas. How will these arrangements impact LATAM’s ability to manage the day-today operations of the JV with Delta?

LATAM Response: The LATAM affiliates operate as independent airlines with their own economic and operating authorizations, management teams, employees, and fleets. Decisions by LATAM affiliates regarding the areas identified in the Department’s question are coordinated within the larger group of airlines and with LATAM to ensure efficiency, to the extent permitted by law. With respect to the JV, LATAM and the signatory affiliates will coordinate extensively in all JV activities. LATAM anticipates that the size and composition of each affiliate’s representation in each working group will be designed to allow each working group to function efficiently in implementing the JV and in coordinating with Delta.

18. With respect to LATAM affiliate(s) that will not be participating in the proposed JV, please detail what protocols, if any, the Joint Applicants intend to implement to limit sharing of information, coordination, and joint planning that would impact the operations of such affiliate(s).

LATAM Response: This issue has been discussed above in item 17. The affiliates will coordinate fully with LATAM Airlines Group regarding the implementation of the Joint Venture with Delta, to the fullest extent permitted by the law and approvals obtained in each country.

19. The application states that the JV will realize approximately $460 million annual consumer benefits based on pre-pandemic data. Please comment on how the COVID- 19 pandemic impacts the ability to achieve these goals and set the baseline benchmarks to construct a properly functioning joint venture infrastructure.

Response: As the JV Partners recognized in their Joint Application, they are seeking ATI for their JVA at an extraordinary time. The coronavirus (“COVID-

19”) pandemic has had a devastating economic impact on the airline industry.

Strict travel restrictions in virtually all major international markets have precipitated a steep decline in demand for travel – driving an unprecedented revenue impact.

The speed, depth, and potential duration of the demand shock were unlike anything the industry has seen.

While Delta and LATAM are seeing promising ‘green shoots’ in the recovery of international travel, demand for travel between the United States and South

America continues to be depressed by the pandemic and related government- imposed restrictions on travel between the two regions. As of the time of this filing, travel between the U.S. and South America is down more than 50% from 2019 levels. For the quarter ended June 30, 2021, Delta’s overall international passenger revenue was down 74% compared to the June 2019 quarter, with capacity down 55% compared to the June 2019 quarter. Delta’s Latin America passenger revenue was down 54% from June 2019 levels. The reductions in revenue and capacity were a result of continued reduced demand and government travel directives and quarantines significantly limiting or suspending air travel due to the COVID-19 pandemic.

In addition, many countries have implemented international testing requirements, which has slowed demand in the short-term but is expected to enable the long-term recovery of international air travel. Delta and LATAM expect this artificially low demand environment to continue for an extended period – likely spilling into 2022. As a result, Delta is planning for its international capacity to be approximately 50% lower in the September 2021 quarter than the September 2019

quarter. And while the Latin America region has shown the most recovery of the international regions, with improving demand for leisure destinations in the

Caribbean, Mexico and Central America, passenger demand and service levels to

South America – the JV scope region – remains historically low.

As the Joint Applicants noted in their application, this significant reduction in demand has created greater uncertainty on the size and scope of international flying in the near term than has existed in prior cases when similar international airline joint ventures have been presented to the Department for review and approval. It has also created an anomalous situation in which the level of flying that the Joint Applicants are operating today is not reflective of the baseline flying on which the true competitive impact and long-term public benefits of the joint venture should be measured. The key point to reiterate is that no matter what demand conditions prevail, the Delta/LATAM JV will generate substantial public benefits as compared to the relevant counterfactual world in which Delta and

LATAM are limited to arm’s length cooperation.

While the pace of the recovery continues to be uncertain – particularly with respect to international travel – the Joint Applicants are confident that passenger demand will continue to gradually improve this year and that demand recovery on a large scale will occur within the next two to three years. Regardless of the precise timing and trajectory of the recovery, the critical point is that the combination of the highly complementary North and South American networks of

Delta and LATAM will be overwhelmingly procompetitive and generate substantial public benefits that can only be achieved through JV cooperation. As Dr. Keating

establishes in his Economic Analysis, the combination of the Delta and LATAM networks will enhance competition. His conclusion that the joint venture will be overwhelmingly pro-competitive is not sensitive to the specific assumptions in the network plans underlying his analysis, and even if post-pandemic demand does not return to pre-pandemic levels for an extended period of time, the public benefits of the proposed joint venture will far outweigh any potential competitive harm.21

As noted in the Joint Application and above, the relevant counterfactual for analyzing this proposed joint venture is the potential scenario in which there is no

JV between Delta and LATAM and their cooperation is limited to arm’s length cooperation. As Dr. Keating opines, to the extent that the COVID-19 pandemic has any long-lasting effects, those effects would have an impact with or without the proposed joint venture. No matter how long it takes for the industry to recover from the COVID-19 demand shock and return to pre-pandemic service levels, the combined Delta/LATAM JV network will catalyze substantial procompetitive and pro-consumer benefits.22

Dr. Keating also presents evidence demonstrating how the JV Parties will generate substantial public benefits. Specifically, he finds that the JV will result in fare reductions of up to $56 million per year at pre-pandemic traffic levels due to the elimination of double marginalization through JV metal neutrality across the combined networks. Dr. Keating also identifies approximately $460 million in annual consumer benefits at pre-pandemic traffic levels in the form of higher-

21 See “An Economic Analysis of the Joint Venture Between Delta and LATAM” by Dr. Bryan Keating dated July 1, 2020 (hereinafter “Economic Analysis”), attached to the Joint Application as Appendix 3. 22 Id.

quality and lower-cost airline service. Of this amount, approximately half of the value arises from enhanced cooperation (holding schedules fixed) and half of the value arises from expanded service between the U.S. and the South American

Region. Compass Lexecon calculated these expected JV-driven consumer benefits using data that were collected and network plans that were formulated prior to the onset of the pandemic.23

Although there is still substantial uncertainty about the effects of the pandemic on international airline networks, Delta currently expects air travel conditions to return to pre-pandemic baselines within two years (and maybe sooner, depending on the pace of vaccinations in key markets around the globe).

Moreover, although route-level plans are subject to change, the relevant comparison for assessing the economic effects of the proposed joint venture is between a future world with or without the joint venture. To the extent that the

COVID-19 pandemic has any long-lasting effects, those effects would be to networks and schedules both with and without the joint venture. The pre-pandemic data and plans underlying this analysis remain the most reasonable basis on which to make these comparisons. As noted in footnote 49 of Appendix 3, while there is no set timeline for implementation of the envisioned network changes, the

Applicants expect the JV to be fully implemented within 10 years and the post-JV schedules reflect May 2030. Even if post-pandemic demand does not return to pre-pandemic levels for an extended period of time, the conclusion that the

23 Economic Analysis, at 5.

benefits of the proposed joint venture substantially outweigh any potential harms holds.24

As the Department has recognized in previous ATI decisions, immunized metal-neutral joint ventures generate efficiencies and network growth opportunities for airlines that they could not achieve on their own. This is particularly true in the context of a depressed demand environment, such as that caused by the global pandemic. By working together, Delta and LATAM will be able to maintain, sustain, and even expand flying on key international routes to a far greater extent than would have otherwise been possible. They will achieve this through coordinated network decisions and more efficient deployment of a diverse joint fleet tailored to the unique and continuously evolving demand profile of each JV route. The strength of the JV Partners’ hub-to-hub flying in particular (e.g., ATL-SCL, etc.), will allow them to maintain service in key markets, connect flow traffic to beyond points, and mitigate financial losses that would be more severe absent JV coordination. The JV Partners anticipate that these and myriad other advantages of metal-neutral JV cooperation will coalesce to accelerate the airlines’ recovery and enable them to accommodate the surge in international travel demand that is expected to hit the marketplace once government-imposed restrictions are eased.

20. LATAM, prior to the COVID-19 downturn, operated more capacity in the U.S./ Canada – South American Region than Delta, but both carriers are currently operating limited capacity between the U.S. and the South American Region. Please discuss how the provisions of Section 5.3 of the Trans-America Joint Venture Agreement would apply to a return to pre-COVID-19 levels. Could this provision limit LATAM’s ability to add capacity back?

24 Economic Analysis, at 28 fn. 49.

Response: Section 5.3 of the JVA will not limit LATAM’s ability to add capacity back once air travel demand between the U.S. and South America returns to pre-COVID-19 levels. This provision states, among other things, that REDACTED

As the Joint Applicants noted in their application, the JV is expected to increase capacity on the combined Delta/LATAM network by nearly 70% once demand conditions return, with new or expanded nonstop service on several routes relative to the pre-pandemic baseline; and, in any case, significantly expand capacity over what would otherwise be possible with arm’s length cooperation.25

The synergies facilitated by the JV will enable Delta and LATAM to integrate their networks to provide customers with more service options, including new nonstop routes, increased frequencies, greater capacity on hub-to-hub and other routes linking the airlines’ networks, and associated increases in passenger volumes between the U.S. and South America. While Delta and LATAM currently codeshare on certain routes, the network is inherently limited by the lack of metal neutrality and incentives to cooperate. Because Delta and LATAM are competitors, neither carrier is willing to offer full access to the other’s network and inventory.

25 Joint Application, at 11.

Under the JV, however, Delta and LATAM will be able to adjust their schedules and inventory access to enhance connections between their respective comprehensive North American and South American networks. This will allow

LATAM to offer more services beyond LATAM’s U.S. gateways and Delta to offer more services beyond Delta’s South American gateways, with the net effect of improving the distribution and penetration of LATAM’s and Delta’s products between the U.S. and South America. The increase in capacity, combined with the more convenient schedules that will result through both the increase in the number of nonstop options on certain routes and improvements in connection times, will substantially benefit consumers. Based on pre-pandemic assumptions, internal network planning models predict that there would be more than one million additional combined Delta and LATAM passengers on routes between the U.S. and South America on an annual basis with the JV than without the JV. This expansion in output translates to approximately $337 million in annual benefits on

U.S.-South America routes and approximately $460 million in annual consumer benefits overall.

Thus, the JV will generate enormous consumer benefits once demand conditions return to pre-pandemic levels. Chief among the synergies attributable to the JV is LATAM’s ability to more efficiently connect to Delta’s extensive U.S. network, and Delta’s ability to more efficiently connect to LATAM’s expansive

South American network. Delta’s and LATAM’s respective hubs offer multiple pathways between the U.S. and South America. Connecting the Delta and LATAM networks and hub airports will both enable significant growth opportunities and

minimize the prospects of suspended or cancelled routes due to the challenging economic environment. For example, Delta’s hubs at Boston, New York JFK,

Atlanta and Los Angeles will give LATAM extensive access to the entire United

States. Delta’s hub at Los Angeles will give LATAM expanded access to the sixth largest U.S. local market. Delta’s hubs at Boston and New York JFK will provide

LATAM efficient access to the eastern U.S. And Delta’s hub at Atlanta – the world’s largest airline hub – will provide LATAM superior connectivity to the Southeast and interior U.S. Currently LATAM operates only limited service to three of Delta’s hub cities – Boston, New York City and Los Angeles. The JV will result in more comprehensive service to these cities and offer a platform for future JV services at

REDACTED On the other side of the equation, the JV will enable Delta to reach points in interior South America served by LATAM over its hubs and gateways at São Paulo, Santiago, Lima, and Bogotá, which are impractical and/or inefficient for Delta to serve on its own. The creation of a highly integrated Delta/LATAM network, facilitated by the carriers’ highly complementary hub structures, will afford customers thousands of additional flight options and more competitive service alternatives to American, United and their codeshare partners.

The JV Partners expect that the lower fares resulting from their enhanced coordination will stimulate passenger demand, which, in turn, will lead to increased capacity – both on existing routes and new routes. As noted above, when demand conditions return to normal, these benefits are expected to include:

• At least nine new nonstop U.S.-South America routes incremental to the pre-COVID-19 baseline, including REDACTED

• Additional frequencies or enhanced service (i.e., seasonal to year-round) on at least nine existing nonstop routes. • An overall increase of U.S.-South America capacity on the combined Delta/LATAM network of approximately 68%. • Over 7,000 online, metal-neutral city-pairs through enhanced connectivity and route options.

The improved schedules and network connectivity resulting from the JV will lead to increased traffic flowing across the joint network. The structure of the JV will allow Delta and LATAM to internalize the benefits of flow traffic that they create for one another. This internalization will create incentives for the carriers to stimulate more flow traffic via the expansion of capacity that would not be viable without the

JV.

21. The application states that the proposed joint venture will “catalyze Delta’s vision to transform Miami into a new domestic and international hub – introducing robust competition with American…” (Page 27). Indeed, Delta announced service to several new cities from Miami when it first announced its plans to form a JV with LATAM. Delta has since delayed and potentially cancelled the launch of these new routes. Does Delta still intend to invest in Miami as it describes in the application? Please describe Delta’s interest and vision in developing Miami as a hub to challenge American Airlines in the pandemic recovery environment and beyond, both under the scenario in which a joint venture is approved, as well as if it is not approved but the Joint Applicants continue arms-length cooperation.

Response: Delta’s long-term vision for Miami remains intact notwithstanding the impact of the COVID-19 pandemic on air travel. See DAL-

DOT-RFI_00000101-00000103. The commercial opportunity presented by the JV will catalyze Delta’s transformation of MIA into a new U.S.-South America gateway, in direct competition with American. As demand recovers from the COVID-19

impact, Delta plans to add over 20 additional domestic flights to Miami International

Airport (MIA) from hubs and top corporate travel destinations around the U.S., including new service from REDACTED

Delta will also add more daily frequencies connecting Miami with

REDACTED Overall, Delta anticipates that full implementation of the JV will ultimately result in a 33% increase in Delta’s seat capacity at Miami (associated with 57% more Delta flights at Miami) compared to pre-COVID-19 operations. With this expanded network, Delta will offer nonstop service between 10 U.S. cities and Miami, with all flights featuring Delta’s award- winning First Class and Comfort+ products. In addition, Delta’s internal network planning forecasts combined Delta and LATAM seats to increase by approximately

59% at Miami with the implementation of the JV.

Notwithstanding COVID-19’s devastating impact on air travel demand,

Delta has already launched and is currently operating flights to Miami from Salt

Lake City and Raleigh – as those markets have sufficient domestic demand to warrant expansion during this initial phase of pandemic recovery. With travel to

South America still restricted and demand severely depressed, it has not yet been commercially feasible for Delta to launch its planned Tampa-Miami or Orlando-

Miami service – which benefit from South American traffic. See, e.g., DAL-DOT-

RFI_00000057-00000058. Delta still envisions launching these flights as U.S.-

South America demand recovers and the JV launches.

Delta’s additional growth plans in Miami will be enabled both by U.S.-South

America demand returning at scale and by the launch of the JV – as much of the

MIA domestic growth will be powered by the ability to jointly integrate Delta’s and

LATAM’s networks to offer a comprehensive portfolio of service offerings for the

Miami customer, creating a meaningful competitive alternative to American.

In further support of the Delta/LATAM JV partnership, and in anticipation of

JV implementation, Delta in late 2019 announced several network changes that focused on enhancing Delta’s domestic feed to Miami and improving connections to LATAM’s hubs. Delta’s existing MIA markets were retimed to improve connectivity with LATAM. Delta also retimed its service from ATL to BOG, LIM,

SCL, GRU, and GIG to connect to LATAM’s banks. Additionally, prior to the pandemic, Delta had plans to REDACTED

Delta’s planned network expansion at Miami will enhance competition, leading to additional direct nonstop competition on five domestic routes and nine international routes. The expansion is also likely to trigger strong responses from competitors, which will further benefit air travelers on both domestic and international routes. At the core of this growth at MIA will be an enhanced joint corporate sales contracting capability. Delta and LATAM together provide strong coverage of markets that matter most to corporate customers in Miami. Together,

Delta and LATAM will provide MIA corporate customers with nonstop access to 11 of the 12 largest U.S.-South America covering 50% of nonstop demand.

Currently, American dominates these markets, especially with respect to corporate customers, and it will remain a very strong competitor in South America

notwithstanding the Delta/LATAM JV. American’s network is extensive throughout

South America; in fact, 20% of American’s overall international capacity is dedicated to South America, its second largest international region after Europe.

Building on this position of strength, American has formed a codeshare alliance with Gol to replace LATAM for feed to interior Brazil and South America. And just last week, American announced a strategic partnership with JetSMART that, according to American, will allow it to “strengthen and grow its South American network . . . to attract more travelers in more markets” and “give American customers access to more low fares and travel options on a network that is twice as big as other alliances.”26 The Delta/LATAM JV will create a new competitive alternative of comparable size and scope, exerting competitive pressure on

American. This intensified competition will flow directly to the benefit of customers and corporate travelers seeking superior service to major Latin American markets.

Competition at MIA is poised to intensify this fall. In addition to Delta’s planned expansion at MIA, Spirit Airlines recently announced that it will start flying to MIA with a total of 30 routes launching in October and November. Spirit says it will fly to a multitude of domestic and international destinations from MIA, including points in South America like Bogota (BOG), Medellin (MDE), Barranquilla (BAQ), and Cali (CLO).27 While Spirit’s service is likely to be tailored to price-sensitive

26 American Airlines Newsroom, American Airlines and JetSMART Sign Letter of Intent to Create the Broadest and Most Rewarding Network in the Americas (July 29, 2021), available at https://news.aa.com/news/news-details/2021/American-Airlines-and-JetSMART-Sign-Letter-of- Intent-to-Create-the-Broadest-and-Most-Rewarding-Network-in-the-Americas/default.aspx 27 Zach Griff, Spirit to Enter Miami with 30 Routes in Major Competitive Shake-Up, The Points Guy (June 8, 2021), https://thepointsguy.com/news/spirit-airlines-miami/

leisure travelers, it will nonetheless serve as an additional competitive constraint against American and the prospective Delta/LATAM JV. But Spirit’s planned expansion at MIA, while undoubtedly good for competition, is insufficient by itself to constrain American (and its partners) at MIA. American will continue to have a dominant share of corporate (and deep South America) travel at MIA absent the

ATI needed to enable the Delta/LATAM JV. As noted above, one of the core advantages of the JV is that it will spur enhanced joint corporate sales. Delta and

LATAM together provide strong coverage of markets that matter most to corporate customers in Miami.

Additionally, Spirit’s expansion into South America from Miami will be limited in scope to destinations that can be efficiently served with narrowbody aircraft.

American’s dominance in South America extends to long-haul destinations in

Brazil, Uruguay, and Argentina (among others), which can only be served with widebody aircraft – which Delta and LATAM are poised to deploy and to do so more efficiently under the joint fleet planning and network planning contemplated under their JVA. In this vein, the Delta/LATAM JV will remain uniquely equipped to challenge American on Miami-South America routes.

As a result of the pandemic, Delta has had no choice but to temporarily retrench its network to tailor capacity to demand – which has caused a delay of some of Delta’s planned service additions to Miami. However, while the timeframe for developing Miami into Delta’s next hub airport may be uncertain – and will largely depend on the trajectory of the air travel recovery both domestically and internationally – Delta intends to continue to add capacity in Miami to support its

partnership with LATAM and enhance value for the JV. Delta’s vision for Miami has not changed; the pandemic has just pushed out the timing.

Lastly, Delta emphasizes that its capacity expansion plans at Miami are directly and inextricably linked to the LATAM JV; without the JV, Delta would not be making these significant investments in or expanding service to Miami.

22. The Joint Applicants identify several U.S. – South American Region routes where they believe an immunized joint venture will enable new services and additional frequencies (page 43-44). Some of these new services have in the past been served by LATAM, Delta, or both. Please explain how a JV will increase demand on existing routes (where extra frequencies are envisioned), make routes which had since been discontinued now viable, and increase demand to such an extent that the parties would consider creating a new route not ever before served by either party.

Response: Because the Joint Applicants’ networks, and thus the services that they offer to consumers, are largely complementary in the sense that an increase in the reach (i.e., number of destinations) and depth (i.e., number of frequencies) of one network makes the other network more valuable, aligning

Delta’s and LATAM’s economic incentives generates economic efficiencies that benefit consumers. In determining how much to invest in capacity, how to deploy that capacity, and how to set schedules, carriers in a metal-neutral joint venture take into account more completely the effects of their decisions on the quality of the overall network, thus increasing the likelihood that they implement (potentially costly) quality enhancements that benefit consumers, including the introduction of new routes and service expansion on existing routes. A higher quality combined network is more appealing to consumers and will attract additional passengers.

This increase in demand for Delta/LATAM’s enhanced joint network makes 64

additional routes economically viable and increases the demand for service on existing routes.

a. What are your assumptions regarding stimulation of traffic in the market resulting from the JV?

i. How has your experience to date in the U.S./Canada – South American Region market corroborated these assumptions, taking account of Delta’s more than 20 years of experience providing nonstop service in the Atlanta – South American Region, as well as LATAM’s experience in the market?

Response: Delta’s QSI modeling conservatively assumes no demand stimulation, except on routes on which the JV will incentivize new or renewed nonstop service by the JV Partners. These routes are: REDACTED

Of the three routes listed above for which Delta/LATAM would provide the only nonstop service REDACTED Delta has assumed a

2x demand multiplier for the local market. Delta assumed a more modest 0-10% stimulation for the other six nonstop routes, which are already served by other

airlines. And to the extent demand stimulation would occur on any other routes not listed above, the overall JV consumer benefits would be even greater.

In Delta’s experience, launching new service in a previously unserved nonstop O&D route has historically stimulated a significant amount of market demand – thereby justifying the 2x demand multiplier described above. By contrast, launching a new flight in a market already served by a competitor can – and often does – stimulate demand, but it is primarily a share shift tactic that has historically led to lower fares for consumers.

23. With respect to current passenger demand for O&D travel between the U.S./Canada and the South American Region, please provide the Joint Applicants’ estimate of the following (both prior to the pandemic and based on current expectations):

a. The percentage of total U.S./Canada – South American Region origin and destination passengers that fly nonstop versus making a connection;

Response: For the combined Summer 2019 and Winter 2019-2020 seasons, approximately 34% of U.S./Canada-South American Region O&D passengers flew nonstop, with approximately 66% making a connection. For additional details, please see the table below, which is based on OAG and MIDT data.

b. The percentage of Delta’s origin and destination passengers flying between the U.S./Canada and the South American Region that fly

nonstop;

Delta Response: Approximately 20% of Delta’s U.S./Canada-South

American Region passengers are local (i.e., fly nonstop).

c. The percentage of LATAM’s origin and destination passengers flying between the U.S./Canada and the South American Region that fly nonstop.

LATAM Response: Approximately 60% of LATAM’s U.S./Canada-South

American Region passengers are local (i.e., fly nonstop).

24. Please discuss the extent, timeline, and mechanisms by which the carriers will integrate their cargo operations under the proposed JV. In the response, include the extent to which the Parties expect cargo to be a meaningful component of the value of the alliance of the revenue opportunity to both parties between the U.S./Canada and the South American Region, and how do the Parties envision sharing in the growth of this opportunity?

Response: Under the terms of their JVA, Delta and LATAM have agreed to identify opportunities for cooperation and coordination of their respective belly cargo operations on covered JV routes, with a view to identifying potential efficiencies or enhancements in such services. See JVA, § 6.12.

Generally, cargo coordination will occur in parallel to passenger coordination, as belly cargo is dependent upon passenger flight schedules.

Integration between Delta and LATAM in the cargo space will occur where such cooperation provides material customer benefits and creates synergies for both airlines. In locations where both Delta and LATAM have operations, opportunities to co-locate cargo functions (e.g., warehousing) and share handling resources will be considered. Factors to be reviewed would include operational schedules,

handling cost savings and improved performance and efficiencies. Cargo benefits will deliver an estimated value of REDACTED towards the JV based on capacity growth from improved demand through the joint network as well as cost savings created through operational synergies and leveraging joint sourcing. Sharing of the Cargo growth benefit will be REDACTED

, based on the current volume of cargo business of the respective carriers between U.S./Canada and the

South American Region.

25. The Trans-American Joint Venture Agreement has provisions for consensus decision- making, including capacity decisions, as well as cooperation with third-party carriers within the scope of the JV (Appendix 2, page 6). The application states that any imposition that would “eliminate this consensus decision-making process within the JV would jeopardize many of the very significant consumer benefits that the JV is otherwise going to generate” (Appendix 2, page 7). Please identify which specific consumer benefits would be in jeopardy if the Joint Applicants were required to remove consensus decision- making for future third-party codesharing. Include in the response any idiosyncrasies specific to the U.S./Canada – South American Region market that justify such exclusivity clauses within the Joint Venture Agreement. In particular, please explain how these provisions apply to section 8.1.1.2 of the Trans-American Joint Venture Agreement. What are the practical implications of this clause on either airline’s ability to develop or work with new or third- party carriers?

Response: The essence of a joint venture is the combination of the assets of the joint venture partners to create a whole that is greater than the sum of its parts. It involves substantial joint long-term investments and a significant sharing of costs between the joint venture partners. When successful, these joint ventures allow the participating carriers to generate greater revenues and generate

substantial consumer benefits by offering a more competitive service offering than either carrier could offer on its own. But a joint venture is a partnership that is built on trust between the joint venture partners. Like any partnership, the success of a joint venture requires that each partner act in the interest of the joint venture – and not undermine the partnership by diverting revenue from the joint venture or misappropriating the assets of the joint venture to benefit itself and/or third-party free riders at the joint venture’s expense. For this reason, decision-making on issues that may have a direct impact on the viability and success of the JV must be made by consensus.

One of those issues is the extent to which the members of the joint venture will use the assets of the joint venture to place traffic on third-party carriers instead of on their joint venture partner on routes within the scope of the JV. The JVA is generally permissive with respect to third-party cooperation. As discussed in more detail above, the JVA imposes no restrictions at all on third-party codesharing by either carrier with foreign carriers on routes outside the core U.S./Canada-South

American Region scope of the JV. Even within that scope, the JVA contemplates extensive grandfathered third-party cooperation. And, the JVA permits additional third-party cooperation within the U.S./Canada-South American Region scope when it is in the interest of the JV by consensus among the JV Partners. See JVA,

§ 5.4.

These provisions reflect a carefully negotiated balance between the desire for flexibility to engage in potential codeshare cooperation with third parties and the need for each JV Partner to be able to trust that the investments it makes in

the JV will not be misappropriated or diverted from the JV to the benefit of the other

JV Party and/or third-party free riders. The JV will require Delta and LATAM to make substantial long-term investments in order to realize fully its potential and to bring about many of the consumer benefits resulting from the JV. Any condition to eliminate or modify the third-party cooperation provisions would undermine the incentives for the JV Partners to invest in the JV and the scale of that investment, which – in turn – would erode the consumer benefits otherwise generated by the

JV. It would not make any commercial sense for Delta to make investments in the

JV that Delta’s competitors could take advantage of, free-of-charge, through – for example – a new codeshare with LATAM, but without having to make any investment of their own. In addition, it would undermine the core principle of the

JV – the metal-neutral/common bottom line between the JV Partners and their joint interest in maximizing revenues and profits for the JV as a whole.

There is no basis for disturbing this carefully negotiated balance between the JV Partners. The provisions in the JVA have been narrowly tailored to address the principal concerns of the JV Partners and protect their respective investments and commitment to the JV, while allowing for retention of pre-existing third-party relationships with grandfathered carriers as well as all current and future interline arrangements. The JV Partners have agreed to this consensus decision-making process as part of their negotiations. Ultimately, if the JV cannot rely upon the other to act in the interest of the JV and not to misappropriate the assets of the JV to the benefit of third-party free riders, then the JV will fail and the substantial public benefits of the JV derived from metal-neutral cooperation will be lost. Accordingly,

the Department should not condition any ATI approval on changes to, or elimination of, the consensus decision-making provisions concerning third-party cooperation in the JVA.

The Department has specifically asked about any idiosyncrasies of the

U.S./Canada-South American Region market which make issues with respect to so-called “exclusivity” provisions of greater or lesser concern. There are, indeed, unique aspects of the competitive landscape between the U.S. and South America that should allay any concerns about the ability of other airlines to access the market. The competitive landscape for scheduled air travel between the

U.S./Canada and the South America Region countries is robust and fertile for growth – attributable to the largely Open Skies environment and strong economic and cultural ties among these countries. With the liberalized U.S.-Latin America aviation trade environment, virtually all U.S. carriers and South American carriers have the opportunity and flexibility to enter the South American Region routes that are within JV scope, either on a nonstop or connecting basis. Consequently, competition in this market is intense.

As the Joint Applicants noted in their application, routes between the U.S. and South America are served by numerous air carriers. Prior to the COVID-19 crisis, 14 airlines operated scheduled nonstop service between points in the U.S. and South America, including five U.S. airlines (American, Delta, JetBlue, United, and Spirit), and nine South American airline brands (LATAM, Aerolineas

Argentinas, Avianca, Avior, Azul, Boliviana de Aviacion, Gol, TAME Ecuador and

VivaColombia). Several of these carriers – including JetBlue, Spirit, Gol, TAME

Ecuador, and VivaColombia – operated their U.S.-South America services exclusively with narrow-body aircraft (e.g., Airbus A320s and Boeing 737s), reflecting the relatively low barriers to entry as compared to trans-oceanic long haul markets where narrow-body service is not possible. In addition, Copa drives significant connecting traffic via its Central American hub in Panama City, Panama.

The most likely proponents of forced third party cooperation in this case, based on past behavior in ATI dockets, are Alaska and JetBlue. Any such complaints in this case would be unconvincing. Alaska and JetBlue are both parties to codeshare agreements with American Airlines – the dominant carrier in

South America. Should Alaska and JetBlue seek access to any market in South

America, they need only contact their alliance partner, American, and tap into their existing codeshare and other alliance agreements to get such access. They could also build on the relationship that American has developed with Gol – and is developing with JetSMART – to add even more unique destinations and routing flexibility to their codeshare network.

Indeed, it would be highly disingenuous for Alaska or JetBlue to raise such concerns in this case given their cozy relationship with American and, in JetBlue’s case, the ability to grow its South America service independently. JetBlue serves over 25 destinations in the Caribbean and Central America and seven destinations in South America, including Bogota, Cartagena, Medellin, Guayaquil, Quito,

Georgetown, and Lima.

26. The Joint Applicants state that, in the event of approval and grant of ATI, a “durational limit would effectively eliminate many of the key benefits for travelers that would otherwise have resulted from the JV” (Appendix 2, page

8). Please answer the following:

a. In a scenario in which the JV is approved for a durational limit of five years, which key consumer benefits do the Joint Applicants believe would be effectively eliminated and why?

b. In a scenario in which the JV is approved for a durational limit of ten years, which key consumer benefits do the Joint Applicants believe would be effectively eliminated and why?

Response: The Joint Applicants incorporate by reference Appendix 2 of the Joint Application (at page 7) for a discussion on why the Department should not impose any limit on the duration of the ATI grant. Limiting the duration of the

ATI grant for the JV would place Delta and LATAM at a competitive disadvantage against other ATI-enabled alliances, undermine the pro-consumer benefits made possible by the JV, and erode the incentives of the JV Partners to make longer- term investments in the JV given the uncertainty created by a limited term of ATI.

The Joint Applicants further note that it would be speculative and impracticable to attempt to define with precision the consumer benefits that would be eliminated in a scenario where the JV is approved for a durational limit of five years, ten years, or any other interval. As a general principle, all consumer benefits resulting from the JV would be jeopardized by a time limit of 5 or 10 years.

Any such limit(s) would erode the incentives of Delta and LATAM to make the necessary investments to ensure that their metal-neutral JV is positioned to deliver maximum benefits to the traveling public and would otherwise reduce the stability of the carriers’ relationship.

27. For each country in the South American Region, please provide an explanation of the country-specific laws, regulations, and practices with respect to foreign ownership and control of local carriers.

LATAM Response: The requested information for Chile, Brazil, Colombia,

Paraguay, Peru and Uruguay is provided below.

Chile

Over the last 50 years, Chile has promoted foreign investment in almost all the Industries within the country. In 1974, the Law Nr.600 “Statute of Foreign

Investment” was published, ensuring a non-discriminatory treat to foreign investors and also creating the Foreign Investment Committee. This law was replaced in

2015 by Law 20.848, which introduced some changes for Tax exemptions, but neither of those Laws established restrictions for the amount of foreign capital.

Furthermore, there are no restrictions regarding foreign ownership in the aeronautical regulation of the country.

Brazil

In March 2016, the Brazilian government approved the “Medida Provisional

Nr. 714”, which raised the limit of foreign ownership in Brazilian airlines from 20% to 49%. Thereafter, in December 2018 the “Medida Provisional Nr. 863” was approved and adopted as Law Nr. 13842, which eliminated limits on foreign ownership of Brazilian airlines.

In accordance with these laws, Article 181 of the Brazilian Aeronautic Code provides that airline operating licenses will be awarded to persons or entities with their main place of business in Brazil and incorporated under local Brazilian laws and regulations without regard to the airline’s ownership or control.

Colombia

There are no limitations on foreign ownership or control of Colombian airlines.

Paraguay

There are no limitations on foreign ownership or control of Paraguayan airlines.

Perú

According to Law 27261 (Civil Aviation Law), Peruvian airlines must meet the following requirements to provide domestic transportation:

1. The company must be established in Peru, 2. More than half of the directors or executives in control of the company must be nationals or residents of Peru. 3. 30% of the capital must be owned by Peruvian nationals.

Uruguay

Uruguayan airlines must have head offices in Uruguay with management and control also in the country. If the owner is an individual, this person must be a Uruguayan citizen, but if it is a company with its equity represented by shares, the majority of these shares must be nominative and be owned by Uruguayan citizens domiciled in Uruguay or be owned by other Uruguayan companies with nominative shares. As a consequence, a Uruguayan airline can be owned by foreigners through an Uruguayan company with nominative shares.

28. For each country in the South American Region, please list and describe any local laws, regulations, or policies that limit or preclude LATAM in any way from engaging in any aspects of the proposed Joint Venture.

Response: The Parties have obtained or are seeking antitrust immunity and aeronautical authorizations where required in the South American Region.

Notifications have been presented in Brazil (Conselho Administrativo de Defesa

Econômica (CADE)), Colombia (Aeronáutica Civil (Aerocivil)), Peru (Dirección

General de Aeronáutica Civil (DGAC)), and Uruguay (Dirección Nacional de

Aviación Civil e Infraestructura Aeronáutica (Dinacia) and Comisión de Promoción y Defensa de la Competencia). Currently, the Joint Venture is under review of the national prosecutor for competition affairs of Chile (Fiscalía Nacional Económica

(FNE)), and needs the consent of the Chilean Tribunal de Defensa de la Libre

Competencia (TDLC).

Authorizations for the Joint Venture have been granted by CADE (Brazil),

Aerocivil (Colombia), DGAC Peru and the Comisión de Promoción y Defensa de la Competencia (Uruguay) (please see the answer to Item 14). Additionally,

Dinacia (Uruguay) did not issue a disapproval order within the fixed term provided by law. This is equivalent to approval under Uruguayan law.

In the South American Region, LATAM understands no other laws, regulations, or policies limit or preclude LATAM in any way from engaging in any aspects of the proposed Joint Venture. As a result, the Parties are not considering other notifications or filings in the South American Region.

29. Please describe the process behind the completion of the document referenced in Attachment 1 to Schedule C of the Trans-American Joint Venture Agreement. Where are the Parties in the completion of this document, what steps do they have to take to complete it, and do the Parties expect completion of this document prior to a potential grant of ATI? If not, why not, and how much time after a potential grant of ATI do the parties expect to need to finalize and

execute this agreement?

Response: There are a number of steps Delta and LATAM will take to

establish an initial set of Reference Period results, validate the values prior to the

first cash settlement, and periodically update the values over the lifetime of the

JVA. REDACTED

Specific details on the Reference Period process are provided below: REDACTED

REDACTED

30. Please provide a worked example illustrating how calculations flow under the financial settlement provisions in Schedule C of the Trans-American Joint Venture Agreement.

Response: Please refer to Delta’s Supplemental Document Production No.

5 (i.e., Delta_00003024) for a working example responsive to this question.

31. Using the rubric of the proposed Joint Venture, what cooperation, if any, do you plan to leverage each carrier’s sustainability goals to further enhance the benefits of the JV, for example, by sharing best practices or engaging in efficiency and sustainable aviation fuel initiatives to mitigate contribution to climate change? Do you have any specific sustainability goals for the joint venture and, if so, how and when will you go about achieving them?

Response: Sustainability is a key priority for both Delta and LATAM, as

demonstrated by the carriers’ respective industry-leading sustainability goals. The

JV Partners expect that the JV will help them meet and exceed their sustainability

goals through JV-incentivized knowledge sharing of climate change trends as well

as joint decarbonization and waste minimization efforts. These joint efforts would

help elevate the carriers’ individual carbon neutral and waste goals and could also

incentivize them to set enhanced waste reduction targets. For both Delta and

LATAM, the strategy will focus on using all the tools available to the carriers in

order to address climate change both immediately and in the long term. In the

short term, the most readily available tool is carbon offsets. Purchasing credits

and investing in projects such as those that prevent deforestation will have an immediate impact, while the carriers continue to work in parallel on scaling up sustainable aviation fuel (SAF) supply at cost competitive prices.

A JV would also afford Delta and LATAM the unique opportunity to work together and co-invest in the same offset projects in order to protect areas such as the Amazon rainforest in Brazil. A Delta/LATAM JV partnership would facilitate opportunities to collaborate on SAF supply in the United States and South America in order to send a market signal that more SAF is needed as a core component of our sector’s decarbonization strategy. This would align with Delta’s current goal of having 10% of its fuel as SAF by the end of 2030.

The JV would also incentivize the carriers to knowledge share on aviation industry trends related to sustainability and climate change. For example, LATAM is actively involved in several projects in Latin America aimed at preventing deforestation. With Delta’s active engagement and support – as incentivized through JV cooperation – LATAM’s efforts in this area would be strengthened. The carriers would also be incentivized to closely collaborate on and improve the sustainability initiatives, stakeholder engagement and coalition building efforts that are already underway.

In anticipation of JV cooperation, the Joint Applicants convened a meeting in March 2021 to share updates about each other’s sustainability journey, exchange best practices, and discuss possible areas of collaboration as the JV develops. See DAL-DOT-RFI_00000055-00000056.

Additional details on Delta’s and LATAM’s sustainability initiatives are set forth below.

Delta

Delta has a goal of carbon neutrality from March 2020 forward. Delta is currently focusing its sustainability efforts on carbon reduction and removal, stakeholder engagement, and coalition building. In the short term, Delta intends to achieve carbon neutrality by directly reducing emissions through fleet and operational efficiencies and addressing remaining emissions through carbon offset project investments geared toward maintaining, protecting and expanding forests.

Delta’s vision is zero-impact aviation: air travel that does not damage the environment directly or indirectly via greenhouse gas emissions, noise, waste generation or other environmental impacts. Achieving this ambitious goal will require significant capital investment, support from government partners, close collaboration with joint ventures partners (e.g., AFKL, Korean Air, Aeromexico and, prospectively, LATAM), research and development from manufacturers and evolution of some of the world’s largest industries.

As Delta works to solve its largest impact on the environment (i.e., carbon dioxide emissions) it plans to invest in innovative solutions, like carbon capture and storage and sustainable aviation fuels (SAF). SAF and other advanced technologies are not available on a large enough scale to meet today’s industry demands. The market is so underdeveloped that all SAF produced in 2020 would only power Delta’s fleet for one day pre-COVID. This is why investments, guided by a strong long-term vision, are so critical.

As noted above, Delta’s holistic environmental sustainability plan remains focused on three areas: (1) carbon reduction and removal; (2) stakeholder engagement; and (3) coalition building. Details on these initiatives are provided below.

Carbon Reduction and Removal

In 2020, Delta retired more than 200 older aircraft. The new aircraft replacing those planes are 25% more fuel efficient per seat mile than the aircraft they replace. Due to those fleet decisions and reduced passenger loads during

COVID-19, Delta’s fleet was nearly 6% more fuel efficient per available seat mile in 2020 than in 2019, saving 117 million gallons of fuel. That is equal to the emissions from annual electricity consumption of almost 200,000 households, or roughly all households in the city of Atlanta.

Delta is also investing in the acceleration of three promising advancements critical to a cleaner future of commercial aviation. While these technologies are nascent and still very expensive today, Delta believes they have great potential and will contribute toward zero-impact aviation.

• SAF is an alternative to fossil fuel and can reduce emissions by up to 80% percent during its full lifecycle. Examples include biofuels and synthetic fuels. Delta’s medium-term goal is to replace 10 percent of its jet fuel refined from fossil fuel with SAF by the end of 2030. Delta has agreed to purchase a future supply of 70 million gallons of sustainable aviation fuel per year, including 10 million beginning in 2024 from Gevo and 60 million beginning in 2025 from Northwest Advanced Bio-Fuels, representing a projected 1.7% of Delta’s total annual fuel consumption, adjusted for 2019 flying levels.

• Carbon capture and storage technology need to progress to serve the expected demand for carbon dioxide removal from the atmosphere, especially for hard-to-abate sectors like aviation. In the meantime,

technologies like direct air capture have the potential to scale. Captured carbon can also be used to create fuels.

• Innovations in propulsion, post-combustion emission controls, electric power delivery and fuel cells would substantially address emissions but are far from commercial aviation applications. Beyond aircraft changes, significant investments in infrastructure, like clean energy and hydrogen fuel generation, would also be required for commercially viable solutions. Although these technologies are still in the early stages of development and are not expected to enter service anytime soon, Delta is evaluating partnerships to accelerate and support their advancement.

In the near-term, Delta will invest in verified carbon offsets to achieve carbon neutrality and ensure forests are maintained, protected and expanded.

In addition to exploring investments in SAF and research and development for new technologies, Delta plans to spend more than $30 million to address 13 million metric tons of carbon dioxide emissions from March 1 to Dec. 31, 2020 through an offset portfolio. That is equal to the carbon sequestered by 17 million acres of U.S. forests in one year, enough to cover the state of West Virginia. A carbon offset is a verified, quantifiable emissions reduction as a result of an investment in a project designed to avoid, reduce or remove carbon dioxide from the atmosphere.

Delta’s goal is to have an offset portfolio that includes:

• Carbon Avoidance Projects: Deforestation contributes 10 to 15 percent of carbon emissions globally. These projects prevent deforestation to ensure that some of the world’s largest forests remain intact and continue to absorb and store carbon dioxide. Many of these projects are REDD+ (Reducing Emissions from Deforestation and forest Degradation) projects backed by a United Nations framework that aims to curb climate change.

• Carbon Reduction Projects: Investing in converting from emissions- intensive energy sources, like coal, to sources like wind and solar serves as a foundation for reducing emissions.

• Carbon Removal Projects: This refers to nature-based solutions such as afforestation and reforestation, where additional trees are planted or areas are restored in an effort to absorb additional carbon dioxide from the atmosphere.

Graphical depictions of Delta’s carbon neutrality plan and other steps Delta is taking to protect the environment are provided in Figures 1 and 2 below.

Figure 1

Figure 2

Stakeholder Engagement

Delta seeks to engage investors, customers and employees on this journey toward zero-impact aviation. To ensure all stakeholders see the results of their engagement, Delta is making transparency the cornerstone of its approach – which it intends to demonstrate through best-in-class reporting, collaboration across industries and fund management.

Delta has executed industry-leading SAF agreements with numerous corporate customers and travel management companies – including Nike, Deloitte,

Corporate Travel Management (CTM), Takeda, BCD Travel, CWT, among others

– to take collective action for the greater good of our planet and support a future of more sustainable business travel.

Coalition Building

As one company alone cannot solve this challenge, partnerships are critical.

To broaden the availability of alternative fuels and carbon capture technology,

Delta aims to build coalitions with suppliers and other industry participants – including LATAM – to drive down the cost and increase the consumption and production of these transformative technologies.

LATAM

LATAM recently announced a goal of achieving carbon neutrality by 2050 in addition to zero waste-to-landfill by 2027 and protecting iconic ecosystems in

South America. LATAM’s sustainability strategy includes four pillars of work: environmental management, climate change, circular economy and shared value.

Provided below are additional details on LATAM’s sustainability priorities, which were designed collaboratively with experts and environmental organizations from across the region.

• Environmental Management: LATAM will implement a transparent and auditable system that will allow it to take into account environmental variables in all the group’s processes.

• Climate Change: LATAM will work to reduce its emissions through sustainable fuels and new aviation technologies that are expected to be available beginning in 2035. Through the development of a portfolio of conservation projects and other initiatives, LATAM will contribute to offset 50% of its domestic emissions by 2030, establishing a path to be carbon neutral by 2050. LATAM will intervene in iconic ecosystems of South America, such as the Amazon, the Chaco, the Llanos of Orinoco, the Atlantic forest, and El Cerrado, among others.

• Circular Economy: LATAM is committed to promoting a culture of elimination, reduction, reuse and recycling throughout the operation, with a goal of generating zero waste to landfill by 2027.

• Shared Value: LATAM will expand its capacity to transport cargo and people for health programs, natural disasters and environmental care.28

32. For any carrier that is a party to the Trans-American Joint Venture Agreement, please provide relevant section(s) of any active collective bargaining agreement(s) that has provisions that apply, could apply, or limit the joint venture. Provide in full any agreement or amendment(s) to agreement that were made with labor organizations, or that you expect to be made, resulting from the proposed JV, codeshare relationship between the Joint Applicants, or Delta’s financial interest in LATAM. For any LATAM documents, please ensure documents are translated into English.

Delta Response: As previously noted, the Delta/LATAM JV will improve

Delta’s (and LATAM’s) ability to compete with American U.S./Canada-South

American Region routes. Relative to current arm’s-length cooperation, the JV will unlock significantly more growth opportunities for Delta, including stronger links between Delta’s and LATAM’s hubs, new trunks to build additional connecting passenger volume, full-time channel coverage, new nonstop service to top corporate markets, and increased capacity and improved products.

REDACTED

28 Press Release, LATAM Group Announces That It Will Be Zero Waste to Landfill by 2027 and Carbon Neutral by 2050 (May 5, 2021), LATAM Group announces that it will be zero waste to landfill by 2027 and carbon neutral by 2050 | LATAM Airlines Group SA.

REDACTED

LATAM Response: LATAM does not have collective bargaining agreements that apply, could apply, or limit the joint venture. LATAM does not have nor is it planning to enter into agreements with labor organizations as a consequence of the relationship with Delta.

a. Sections 4.8.1.1 and 4.8.1.2 of Schedule C to the Trans-American Joint Venture Agreement describe certain caps as part of the financial settlement mechanism. Please explain how these caps work and explain the rationale for these items and how they impact the financial settlement.

Response: Unit cost caps are a mechanism for settlement risk mitigation, placing limits on the escalation of each Party’s controllable unit cost relative to the

baseline. Controllable costs are the JV production cost categories where each

Party’s internal cost management is largely independent, and excludes cost of sales, fuel, and aircraft ownership (costs with an aligned JV valuation or common market price). REDACTED

The cap on JV labor costs referenced in REDACTED

REDACTED

33. Please provide all documents not yet produced in the record reflecting, discussing, or addressing commercial relationships or financial arrangements between Delta and LATAM, including but not limited to:

a. Delta’s investment, equity, ownership, or involvement in the governance of LATAM;

b. Financing for Delta’s $1.9 billion investment in LATAM, and update on current status of this 20% investment;

c. Aircraft purchases or transfers, or the cancellation of such arrangements;

d. Other loan, purchase, service, financial assistance, or other agreements between Delta and LATAM.

Response: Documents responsive to this question, including a set of

documents produced by LATAM in connection with its petition for relief under

Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy

Court for the Southern District of New York (Case No. 20-11254), are being

provided to the Department in LATAM’s Supplemental Production.

34. Please provide all documents reflecting, discussing, or addressing commercial relationships or financial arrangements between LATAM and any foreign carrier(s) in which Delta holds an equity stake or with which it maintains an immunized alliance, including but not limited to:

a. LATAM joint ventures, codeshares, alliances, investments, loans, service or purchase agreements, and/or other relationships or arrangements with Aeromexico, Air France, KLM, Virgin Atlantic, Korean Air, and/or China Eastern; and

Response: LATAM is not a party to any of the major airline alliances. The

agreements between LATAM and Aeromexico are being provided to the

Department in LATAM’s Supplemental Production. LATAM has no other agreements that fall within the scope of this item.

b. Anticipated effects or benefits of such relationships or arrangements for Delta or the proposed JV.

Response: These arrangements are not part of the JV and to LATAM’s knowledge they will not affect the JV.

35. Please provide all documents reflecting, discussing, or addressing actual or anticipated effects of the LATAM bankruptcy and reorganization on commercial matters including, but not limited to:

a. LATAM’s fleet, network, service offerings, capacity, production costs (including labor costs), and post-petition financial obligations and liabilities;

LATAM Response: Documents responsive to this question are being provided to the Department in LATAM’s Supplemental Production.

b. Post-petition commercial relationships or financial arrangements between LATAM and Delta (see, e.g., Question 29, above); and

LATAM Response: Information responsive to this question is included in the response to Question 29.

c. Post-petition commercial relationships or financial arrangements between LATAM and other foreign carriers in which Delta holds an equity stake or with which it maintains an immunized alliance (see, e.g., Question 30, above).

LATAM Response: Information responsive to this question is included in the response to Question 34.a.

36. Please provide a supplementary production in the categories identified in Appendix 4 of the Joint Application, including but not limited to:

a. New or updated business, network, fleet, JV, and other planning documents created or finalized after those reflected in Delta’s July 10, 2020 production, including the Joint Applicants’ reduction and anticipated reintroduction of services and/or capacity in the proposed JV and codeshare markets;

b. Documents reflecting, discussing, or addressing the Joint Applicants’ implementation and utilization of Delta and LATAM’s recently-granted codesharing authorities; and

c. Documents reflecting, discussing, or addressing any implementation and utilization of recently-granted codesharing authorities between LATAM and Aeromexico.

Response: Documents responsive to this question are being provided to the Department under separate cover in Delta’s and LATAM’s Supplemental

Productions.

37. Please describe in detail the use to date of the recently-granted reciprocal Delta-LATAM and LATAM-Aeromexico codesharing authorities, including the number of passenger seats sold by each carrier on flights operated by the other carrier (identified by codeshare route), as well as any associated prorated revenues and commissions.

Response: Information related to Delta-LATAM codesharing is being provided to the Department under separate cover in Delta’s Supplemental

Production. See DAL-DOT-RFI_00000167. LATAM does not currently codeshare with Aeromexico on U.S. routes and therefore does not have information responsive to this question.

38. Please provide, separately and confidentially, each applicant’s respective detailed, itemized unit production costs for service offerings between the US and Latin America, including labor and crew costs. 91

Response: Information responsive to this question is being provided to the

Department under separate cover in Delta’s Supplemental Production. See DAL-

DOT-RFI_00000166.

39. Please identify and describe in detail the anticipated effects of the JV on the absolute and relative amount of flying performed by Delta and LATAM between the U.S. and Latin America, comparing 2019 and current levels of flying.

Response: Please refer to the response to Question 20 above.

40. Please provide traffic data as follows:

*********************

Response: Please refer to the data submissions previously filed with the

Department on a confidential basis.

WHEREFORE, the Joint Applicants respectfully request that the

Department declare the record complete and proceed expeditiously to approve and grant ATI for the JVA and related Alliance Agreements pursuant to 49 U.S.C.

§§ 41308 and 41309.

Respectfully submitted,

______Charles F. Donley II Steven J. Seiden Edward W. Sauer Director – Regulatory Affairs

Counsel for LATAM DELTA AIR LINES, INC.

CERTIFICATION

Pursuant to Title 18 United States Code Section 1001 and Order 2021-5- 15, I, Peter Carter, Executive Vice President and Chief Legal Officer, Delta Air Lines, Inc., as an authorized representative of Delta Air Lines, Inc., certify that to the best of my knowledge and belief the information relating to Delta Air Lines, Inc. in the Joint Applicants’ Response to the Department’s Request for Additional Information in Docket DOT-OST-2020-0105 is complete and accurate. I understand that an individual who is found to have violated the provisions of 18 U.S.C. Section 1001 shall be fined or imprisoned for not more than five years, or both.

______Peter Carter Executive Vice President and Chief Legal Officer

DELTA AIR LINES, INC.

Dated: August 2, 2021

DocuSign Envelope ID: 8DA9B800-ED5B-4EE8-B226-4649E13CA52E

CERTIFICATION

Pursuant to Title 18 United States Code Section 1001 and Order 2021-5-15, I, Juan Carlos Mencio, Vice President, Legal Affairs LATAM Airlines Group S.A., as an authorized representative of LATAM, certify that to the best of my knowledge and belief the information relating to LATAM in the Joint Applicants’ Response to the Department’s Request for Additional Information in Docket DOT-OST-2020-0105 is complete and accurate. I understand that an individual who is found to have violated the provisions of 18 U.S.C. Section 1001 shall be fined or imprisoned for not more than five years, or both.

______Juan Carlos Mencio Vice President, Legal Affairs LATAM Airlines Group S.A.

Dated: August 2, 2021

DELTA AIR LINES, INC. ATTACHMENT 1 SUPPLEMENTAL PRODUCTION INDEX

Bates Number Custodians Date Subject/File Name Specification DAL-DOT-RFI_00000001 Delta Air Lines 6/16/2021 DL LA JV Progress and Plan Update RFI 1; RFI 12; RFI 36 DAL-DOT-RFI_00000023 Delta Air Lines 3/25/2021 DL LA Corporate Contracting RFI 1; RFI 12; RFI 36 DAL-DOT-RFI_00000027 Delta Air Lines 6/16/2021 LATAM Benchmarking RFI 1; RFI 12; RFI 36 DAL-DOT-RFI_00000045 Delta Air Lines 5/27/2021 LATAM DLC Update RFI 1; RFI 12; RFI 36 DAL-DOT-RFI_00000051 Delta Air Lines 4/30/2021 LATAM Partnership Update RFI 1; RFI 12; RFI 36 DAL-DOT-RFI_00000055 Delta Air Lines 3/24/2021 Sustainability Touchpoint RFI 1; RFI 36 DAL-DOT-RFI_00000057 Delta Air Lines 4/18/2021 LATAM 5-year plan RFI 1; RFI 12; RFI 21; RFI 36 DAL-DOT-RFI_00000059 Delta Air Lines 6/1/2021 ATL frequency adds RFI 1; RFI 12; RFI 36 DAL-DOT-RFI_00000060 Delta Air Lines 6/16/2021 Connectivity Analysis RFI 1; RFI 12; RFI 36 DAL-DOT-RFI_00000062 Delta Air Lines 5/25/2021 BOG Hub Structure RFI 1; RFI 12; RFI 36 DAL-DOT-RFI_00000066 Delta Air Lines 6/2/2021 DL-LA Connectivity Matrix RFI 1; RFI 12; RFI 36 DAL-DOT-RFI_00000069 Delta Air Lines 5/20/2021 DL-LA Flown Pax and Revenue Trends RFI 1; RFI 12; RFI 36 DAL-DOT-RFI_00000076 Delta Air Lines 6/16/2021 DL-LATAM JV Vision RFI 1; RFI 12; RFI 21; RFI 36 DAL-DOT-RFI_00000080 Delta Air Lines 6/16/2021 DL-LA Cross-metal connectivity RFI 1; RFI 36 DAL-DOT-RFI_00000081 Delta Air Lines 6/16/2021 LA BOG bank structure RFI 36 DAL-DOT-RFI_00000083 Delta Air Lines 6/9/2021 Delta/LATAM Vision RFI 1; RFI 12; RFI 21; RFI 36 DAL-DOT-RFI_00000099 Delta Air Lines 6/16/2021 S21 South America connectivity update RFI 36 DAL-DOT-RFI_00000100 Delta Air Lines 6/16/2021 US to SAMR top markets and next best RFI 1; RFI 36 DAL-DOT-RFI_00000101 Delta Air Lines 10/21/2020 Delta and LATAM Strategy for MIA RFI 1; RFI 12; RFI 21; RFI 36 DAL-DOT-RFI_00000104 Delta Air Lines 6/16/2021 MIA Network Plan RFI 1; RFI 12; RFI 21; RFI 36 DAL-DOT-RFI_00000112 Delta Air Lines 6/16/2021 LATAM Post ATI Opportunities RFI 1; RFI 12; RFI 36 DAL-DOT-RFI_00000118 Delta Air Lines 4/22/2021 DL/LA JV Implementation Update RFI 1; RFI 12; RFI 36 DAL-DOT-RFI_00000120 Delta Air Lines 4/7/2021 DL/LA JV Implementation Update RFI 1; RFI 12; RFI 36 DAL-DOT-RFI_00000122 Delta Air Lines 6/2/2021 DL/LA JV Implementation Update RFI 1; RFI 12; RFI 36 DAL-DOT-RFI_00000124 Delta Air Lines 3/24/2021 DL/LA JV Implementation Update RFI 1; RFI 12; RFI 36 DAL-DOT-RFI_00000126 Delta Air Lines 5/19/2021 DL/LA JV Implementation Update RFI 1; RFI 12; RFI 36 DAL-DOT-RFI_00000128 Delta Air Lines 5/5/2021 DL/LA JV Implementation Update RFI 1; RFI 12; RFI 36 DAL-DOT-RFI_00000131 Delta Air Lines 3/11/2021 DL/LA JV Implementation Update RFI 1; RFI 12; RFI 36 DAL-DOT-RFI_00000133 Delta Air Lines 12/18/2020 DL/LA JV Implementation Update RFI 1; RFI 12; RFI 36 DAL-DOT-RFI_00000136 Delta Air Lines 11/20/2020 DL/LA JV Implementation Update RFI 1; RFI 12; RFI 36 DAL-DOT-RFI_00000138 Delta Air Lines 11/6/2020 DL/LA JV Implementation Update RFI 1; RFI 12; RFI 36 DAL-DOT-RFI_00000140 Delta Air Lines 8/14/2020 DL/LA JV Implementation Update RFI 1; RFI 12; RFI 36 DAL-DOT-RFI_00000143 Delta Air Lines 8/21/2020 DL/LA JV Implementation Update RFI 1; RFI 12; RFI 36 DAL-DOT-RFI_00000146 Delta Air Lines 8/28/2020 DL/LA JV Implementation Update RFI 1; RFI 12; RFI 36 DELTA AIR LINES, INC. ATTACHMENT 1 SUPPLEMENTAL PRODUCTION INDEX

DAL-DOT-RFI_00000149 Delta Air Lines 7/17/2020 DL/LA JV Implementation Update RFI 1; RFI 12; RFI 21; RFI 36 DAL-DOT-RFI_00000152 Delta Air Lines 7/26/2020 DL/LA JV Implementation Update RFI 1; RFI 12; RFI 21; RFI 36 DAL-DOT-RFI_00000155 Delta Air Lines 8/2/2020 DL/LA JV Implementation Update RFI 1; RFI 12; RFI 21; RFI 36 DAL-DOT-RFI_00000158 Delta Air Lines 10/10/2020 DL/LA JV Implementation Update RFI 1; RFI 12; RFI 36 DAL-DOT-RFI_00000160 Delta Air Lines 9/11/2020 DL/LA JV Implementation Update RFI 1; RFI 12; RFI 36 DAL-DOT-RFI_00000163 Delta Air Lines 9/25/2020 DL/LA JV Implementation Update RFI 1; RFI 12; RFI 36 DAL-DOT-RFI_00000166 Delta Air Lines 6/16/2021 JV Production Costs RFI 38 DAL-DOT-RFI_00000167 Delta Air Lines 6/16/2021 Feb 2020 to May 2021 Codeshare data RFI 37

CERTIFICATE OF SERVICE

A copy of the foregoing Response has been served this 2nd day of August, 2021, upon the following persons via email:

Air Carrier Name Email Address

Alaska David Heffernan [email protected] Allegiant Aaron Goerlich [email protected] American Robert Wirick [email protected] Amerijet Indyara Andion [email protected] Amerijet Sharlee Edwards [email protected] Atlas Naveen Rao [email protected] Federal Express Anne Bechdolt [email protected] Federal Express Brian Hedberg [email protected] Federal Express Sandra Lunsford [email protected] Frontier Howard Diamond [email protected] Hawaiian Parker Erkmann [email protected] JetBlue Robert Land [email protected] JetBlue Reese Davidson reese.davidson@jetblue.com JetBlue Evelyn Sahr [email protected] JetBlue Drew Derco [email protected] Kalitta Air Mark Atwood [email protected] National Airlines Malcolm Benge [email protected] National Airlines John Richardson [email protected] Polar Air Cargo Kevin Montgomery [email protected] Southwest Leslie Abbott [email protected] Spirit Airlines David Kirstein [email protected] Spirit Airlines Joanne Young [email protected] Sun Country Eric Levenhagen [email protected] United Dan Weiss [email protected] United Steve Morrissey [email protected] United Amna Arshad [email protected] UPS Anita Mosner [email protected]

Todd Homan [email protected] Peter Irvine [email protected] Jason Horner [email protected] Fahad Ahmad [email protected] Robert Finamore [email protected] Brett Kruger [email protected] Katherine Celeste [email protected] Caroline Laise [email protected] John Duncan [email protected] David Williams [email protected] Evin Isaacson [email protected] Info [email protected]