BEFORE THE U.S. DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C. __________________________________________ ) Application of ) ) Virgin Atlantic Airways, Ltd. ) Delta Air Lines, Inc. ) Société Air France ) Koninklijke Luchtvaart Maatschappij N.V. ) Docket DOT-OST-2013-0068 Alitalia Compagnia Aerea Italiana S.P.A. ) ) Under 49 U.S.C. §§ 41308 and 41309 ) for approval of and antitrust immunity ) for Alliance Agreements ) __________________________________________) MOTION FOR LEAVE TO FILE AND SUR-REPLY OF JETBLUE AIRWAYS CORPORATION Communications with respect to this document should be sent to: Robert C. Land Senior Vice President, Government Affairs and Associate General Counsel Adam L. Schless Director Aircraft Transactions and International Counsel JETBLUE AIRWAYS CORPORATION 1212 New York Avenue, N.W. Suite 1212 Washington, DC 20005 (202) 715-2565 [email protected] [email protected] December 17, 2018 BEFORE THE U.S. DEPARTMENT OF TRANSPORTATION OFFICE OF THE SECRETARY WASHINGTON, D.C. __________________________________________ ) Application of ) ) Virgin Atlantic Airways, Ltd. ) Delta Air Lines, Inc. ) Société Air France ) Koninklijke Luchtvaart Maatschappij N.V. ) Docket DOT-OST-2013-0068 Alitalia Compagnia Aerea Italiana S.P.A. ) ) Under 49 U.S.C. §§ 41308 and 41309 ) for approval of and antitrust immunity ) for Alliance Agreements ) __________________________________________) MOTION FOR LEAVE TO FILE AND SUR-REPLY OF JETBLUE AIRWAYS CORPORATION “Under the Administrative Procedure Act (APA), the Department has a regulatory obligation to consistently apply its precedents and evidentiary standards” in ATI proceedings. -Answer of Delta Air Lines, Inc.” at 22, November 26, 2008.1 JetBlue wholeheartedly agrees with Delta that the APA requires the Department to treat this antitrust immunity (ATI) application in a manner that is consistent with past precedent.2 JetBlue does not, however, agree with the Joint Applicants’ attempts to minimize what is at stake in this proceeding, nor with their request that the Department completely ignore precedent, rush to declare the record substantially complete, and issue a decision granting ATI, all in the absence of a complete and up-to-date evidentiary record. The Joint Applicants self-describe their application 1 Docket DOT-OST-2008-0234. 2 Common names for airlines are used herein. JetBlue hereby moves for leave to file this sur-reply to the Joint Answer of Delta, Air France-KLM and Virgin Atlantic. Good cause exists for the Department to accept JetBlue’s sur-reply in the interest of ensuring that a full and accurate record is established that will allow the Department to properly adjudicate this matter. JetBlue’s request for leave to file and sur-reply is timely filed pursuant 14 C.F.R. § 302.6(d). as an innocuous attempt to close a “small seam”3 between existing grants of ATI that they assert needs further global immunization from the antitrust laws, an action the Department recently characterized as a “discretionary grant of extraordinary relief from the antitrust laws” (emphasis added).4 But the Joint Applicants’ attempts to frame their significant request for global immunity as a piece of cloth with a seam that needs repair wholly fails, and should be rejected. Immunization from the antitrust laws is not an administrative formality. It is a significant and serious matter, particularly where, as here, an unrestricted grant of immunity has long-lasting potential to result in reduced competition and consumer harm. I. DESPITE THEIR ASSERTIONS TO THE CONTRARY, THE JOINT APPLICANTS’ ATI REQUEST RAISES BONA FIDE CONCERNS REGARDING AIRPORT ACCESS CONSTRAINTS AT MAJOR EUROPEAN AIRPORTS The Joint Applicants assert that Delta-Virgin Atlantic together currently control 5% of London Heathrow Airport (LHR) slot holdings and that Air France-KLM control an additional 3% of slot holdings at LHR. If the Department grants ATI, the combined joint venture would, by their own admission, control 8% of LHR slot holdings. But the Department should not be swayed by the Joint Applicants’ attempts to minimize the impact an ATI grant would have on competition at LHR, especially for new entrant carriers, as a grant of immunity would allow Delta and Virgin Atlantic to increase the size of their LHR slot portfolio by a staggering 60% once Air France- KLM’s slots become an integral component of the conglomerate joint venture. Air France and KLM do not operate transatlantic service at LHR on their own metal and would likely face different 3 “Joint Answer to Motion of JetBlue” at 1. 4 DOT Order 2016-11-2 at 27. 2 financial incentives, in the context of the new joint venture, to transfer their slots to Delta and Virgin Atlantic.5 The Joint Applicants willfully ignore, or deem wholly unimportant, that the Department currently has no mechanism in this proceeding to examine how LHR slot dynamics exist today and have changed since previous ATI grants. This is particularly important given the drastic changes in the marketplace that JetBlue previously described in its November 27, 2018 motion, and can only be remedied by a thorough and fulsome production of a complete and up-to-date evidentiary record. In an attempt to distract from the fact that an ATI grant would increase Delta and Virgin Atlantic’s slot holdings, the Joint Applicants assert that IAG has increased the percentage of slots they control at LHR from 45% in 2010 to over 60% today. When oneworld carriers sought ATI in 2008 while controlling 45% of LHR slots, both the Department and European Commission had significant enough competition concerns to impose a slot remedy in order to protect competition in the market and to guard against consumer harm.6 A decade later, any further increase in slot concentration at LHR, by the Joint Applicants or by IAG, further exacerbates these prima facie competition concerns and should be reviewed and remedied in the same fashion. JetBlue fully supports a comprehensive Departmental review of the oneworld joint venture when the current joint Department-European Commission slot-remedies expire in 2020.7 5 The parties also make no mention of what percentage of the transatlantic United States-Europe market is or would be controlled by the conglomerate mega-joint venture. An ATI grant would further increase concentration in the broad transatlantic United States-Europe market, which is almost 90% controlled by three tri-oligopolistic immunized alliances. 6 See DOT Orders 2010-2-8 and 2010-7-8. 7 JetBlue notes that American recently indicated that it does not oppose periodic review of ATI grants. In the ongoing American-Qantas ATI proceeding, American stated earlier this month that it “would not oppose a Department review 3 However, it is the Joint Applicants, not the oneworld carriers, that are seeking expanded ATI in this proceeding, and the actions of the oneworld carriers since their ATI grant does not obviate the need for the Department to examine the competitive impact of this ATI request on the marketplace given present circumstances. Nonetheless, JetBlue agrees that oneworld’s slot holdings are relevant and should be examined in the context of this ATI proceeding. The Joint Applicants’ assertion about the increase in slot concentration at LHR from 45% in 2010 to over 60% today, with now nearly 10% of slots controlled by the Joint Applicants themselves, is relevant and is precisely the reason why the Department must build a complete evidentiary record in this proceeding. Such an action would allow the Department to establish a meaningful real time snapshot of the competitive environment that exists today, and to properly evaluate how the proposed ATI grant would impact competition, consumers and new entrant carriers. This record can and should examine the slot and commercial changes that have occurred since the Department last performed a competitive analysis and granted immunity, and examine how past slot remedies at LHR have been used so that the Department can reach a determination as to whether the original purpose of those slot remedies has been achieved or frustrated.8 The Joint Applicants also conspicuously fail to mention the percentage of slots they control at Paris Charles de Gaulle Airport (CDG) and Amsterdam Airport Schiphol (AMS). This information is particularly relevant in this ATI proceeding as AMS, like LHR, is a completely of the Proposed JBA after five years…any review of ATI by the Department should be no sooner than five years after implementation…the Parties would not be opposed to such a review, assuming the Department applied the requirement fairly across all future grants of ATI and not only for the Proposed JBA.” See “Joint Reply of American Airlines, Inc. and Qantas Airways Limited”, December 4, 2018, Docket DOT-OST-2018-0030. 8 The 2013 ATI grant to Delta and Virgin Atlantic expressly stated that previous slot remedies were a major factor in the Department’s competitive analysis. See DOT Orders 2013-8-21 and 2013-9-14. 4 saturated airport with no new slots available.9 Should the Department issue an evidence request, JetBlue urges it to request specific information regarding slot holdings at AMS and CDG, in addition to LHR, London Gatwick Airport (LGW) and any other European airport potentially impacted by an ATI grant in this proceeding. II. NEW ISSUES HAVE ARISEN THAT WARRANT THE DEPARTMENT’S CONSIDERATION AND FURTHER SUPPORT THE NEED FOR A COMPLETE EVIDENTIARY RECORD IN THIS PROCEEDING There are additional reasons for the Department to proceed with caution in this proceeding, which very recently presented themselves and have the potential to further affect the competitive landscape at LHR. First, British carrier Flybe, itself the recipient of competition remedy slots at LHR, has indicated that it is seeking to sell itself to either Virgin Atlantic or IAG. In addition to remedy slots at LHR, Flybe also holds significant slot holdings at CDG and AMS. Flybe’s acquisition, by either IAG or Virgin Atlantic, would have significant effects on competition at slot- controlled airports like LHR and AMS where no new slots are available, and further deter the introduction of competitive services from new entrant carriers.