[Federal Register Volume 67, Number 170 (Tuesday, September 3, 2002)]
[Notices]
[Pages 56340-56341]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-22504]


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DEPARTMENT OF TRANSPORTATION

Office of the Secretary


Review under 49 U.S.C. 41720 of Delta/Northwest/Continental 
Agreements

AGENCY: Office of the Secretary, Department of Transportation.

ACTION: Notice requesting comments.

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SUMMARY: Delta Air Lines, Northwest Airlines, and Continental Airlines 
have submitted code-sharing and frequent-flyer program reciprocity 
agreements to the Department for review under 49 U.S.C. 41720. That 
statute requires such agreements between major U.S. passenger airlines 
to be submitted to the Department at least thirty days before the 
agreements' proposed effective date but does not require Department 
approval for the agreements. The statute authorizes the Department to 
extend the waiting period for these agreements at the end of the 
thirty-day period. The Department is inviting interested persons to 
submit comments that would assist the Department in determining whether 
it should extend the waiting period or take other action on the 
agreements.

DATES: Any comments should be submitted by September 10, 2002.

ADDRESSES: Comments must be filed with Randall Bennett, Director, 
Office of Aviation Analysis, Room 6401, U.S. Department of 
Transportation, 400 7th St. SW., Washington, DC 20590. Late filed 
comments will be considered to the extent possible. To facilitate 
consideration of comments, each commenter should file three copies of 
its comments.

FOR FURTHER INFORMATION CONTACT: Thomas Ray, Office of the General 
Counsel, 400 Seventh St. SW., Washington, DC 20590, (202) 366-4731.

SUPPLEMENTARY INFORMATION: On August 23, Delta, Northwest, and 
Continental submitted code-sharing and frequent-flyer program 
reciprocity agreements to us for review under 49 U.S.C. 41720. That 
statute requires certain kinds of joint venture agreements among major 
U.S. passenger airlines to be submitted to the Department at least 
thirty days before they can be implemented. This requirement currently 
covers code-sharing agreements, long-term wet leases involving a 
substantial number of aircraft, and agreements concerning frequent 
flyer programs. By publishing a notice in the Federal Register, we may 
extend the waiting period by 150 days with respect to a code-sharing 
agreement and by sixty days for other types of agreements. At the end 
of the waiting period (either the thirty-day period or any extended 
period established by us), the parties are free to implement their 
agreement. The statute does not require the parties to obtain our 
approval before they implement an agreement. We normally could not 
block two airlines from implementing an agreement unless we issued an 
order under 49 U.S.C. 41712 (formerly section 411 of the Federal 
Aviation Act) in a formal enforcement proceeding that determined that 
the agreement's implementation would be an unfair or deceptive practice 
or unfair method of competition that would violate that section.
    We have informally reviewed all agreements submitted under 49 
U.S.C. 41720 in earlier years. In each case, the airline parties to the 
agreement filed the agreement directly with the Department staff that 
reviews them, and we did not establish a docketed proceeding for any 
such agreement. In reviewing each agreement, we focused on whether it 
would reduce competition. As noted, we would usually base any 
determination that an agreement was unlawful on a finding that the 
agreement was unlawful under 49 U.S.C. 41712 as an unfair method of 
competition, that is, that the agreement violated the antitrust laws or 
antitrust principles. See United Air Lines v. CAB, 766 F.2d 1101 (7th 
Cir. 1985). Our review is analogous to the review of major mergers and 
acquisitions conducted by the Justice Department and the Federal Trade 
Commission under the Hart-Scott-Rodino Act, 15 U.S.C. 18a, since we are 
considering whether we should institute a formal proceeding for 
determining whether an agreement would violate section 41712.
    In our review, we consult the Justice Department, which is 
responsible for enforcing the antitrust laws in the airline industry 
and may file suit and seek injunctive relief against the parties to an 
airline agreement, whether or not the agreement is subject to 49 U.S.C. 
41720. We seek to avoid duplicative proceedings by this Department and 
the Justice Department.
    Delta, Northwest, and Continental submitted their joint venture 
agreements one month after United and U.S. Airways submitted code-share 
and frequent-flyer program reciprocity agreements for review under 49 
U.S.C. 41720. We have been conducting an informal review of the United/
US Airways agreements. However, due to the public interest in the 
matter, we gave interested persons an opportunity to submit comments on 
the United/US Airways agreements. We thought that the views of outside 
parties could assist us in determining whether to extend the waiting 
period and whether their agreements present serious issues under 
section 41712. 67 FR 50745 (August 5, 2002). The comments are public. 
67 FR 52770 (August 13, 2002).
    We will follow the same informal review process being used for the 
United/US Airways agreements and provide the same opportunity for 
public comments. Since the statute requires us to decide within thirty 
days of filing whether to extend the waiting period, we request that 
any comments be filed by September 10. Delta, Northwest, and 
Continental have prepared a redacted copy of their agreements that will 
be available for review and copying in room PL-401 of the Nassif 
Building, located in the northeast corner on the Plaza level, 400 7th 
St. SW., Washington, DC. We are making the copy available there, even 
though this case is not docketed, because it is readily accessible to 
the public and has a copying machine for public use.
    The comments will be most helpful if they focus on the key issue in 
our review of the agreements under 49 U.S.C. 41720: whether the three 
airlines' implementation of the agreements may result in a significant 
reduction of competition in any market and therefore constitute an 
unfair method of

[[Page 56341]]

competition that would violate 49 U.S.C. 41712. Code-sharing and 
frequent-flyer program reciprocity agreements between major domestic 
airlines do not constitute a merger and, in contrast to the immunized 
alliances between U.S. and foreign airlines, are not normally intended 
to lead to a substantial integration of the partners' operations. Such 
agreements, however, would likely reduce competition if their terms or 
the resulting relationship among the airline partners would create the 
potential for collusion on price and service levels in markets where 
the airlines compete, or if the agreements and the airlines' 
relationship could otherwise significantly reduce competition, for 
example, by unreasonably restricting each airline's ability to set its 
own fares and service levels.

    Issued in Washington, DC, on August 28, 2002.
Read C. Van de Water,
Assistant Secretary for Aviation and International Affairs.
[FR Doc. 02-22504 Filed 8-30-02; 8:45 am]
BILLING CODE 4910-62-P