[Federal Register Volume 68, Number 66 (Monday, April 7, 2003)]
[Notices]
[Pages 16854-16858]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-8288]


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DEPARTMENT OF TRANSPORTATION

Office of the Secretary


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

AGENCY: Office of the Secretary, Department of Transportation.

ACTION: Termination of Review of Joint Venture Agreements.

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SUMMARY: On February 28, Delta Air Lines, Northwest Airlines, and 
Continental Airlines resubmitted their code-share and frequent-flyer 
program reciprocity agreements to the Department for review under 49 
U.S.C. 41720. The implementation of these two agreements would 
constitute a key part of the three airlines' proposed alliance. In 
their resubmission, the airlines accepted three of the six conditions 
that the Department had stated were necessary to avoid a formal 
enforcement proceeding, and they proposed alternative language for the 
other three conditions. The Department has determined that the 
alternative language proposed by the airlines adequately addresses the 
competitive concerns relating to those three conditions. The Department 
is therefore terminating its current review of the agreements. In 
reaching this conclusion, the Department is relying on the terms of the 
agreements, the airlines' representations that they will compete 
independently on capacity and fares, and their formal acceptance of the 
six conditions as modified.

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

SUPPLEMENTARY INFORMATION: On February 28, Delta, Northwest, and 
Continental (``the Alliance Carriers'') resubmitted their code-share 
and frequent-flyer program reciprocity agreements to us for review 
under 49 U.S.C. 41720. These agreements form essential elements of the 
airlines' proposed alliance, which will be a comprehensive marketing 
arrangement that will also include reciprocal access to airport lounges 
and some joint marketing. Their alliance agreement has a ten-year term. 
See 68 FR 3293, 3295, January 23, 2003.
    The Alliance Carriers initially submitted the agreements on August 
23, 2002. After an extensive investigation and analysis, we concluded 
that the agreements as presented raised serious competitive concerns. 
We stated that we would direct our Enforcement Office to begin a formal 
enforcement proceeding to determine whether the alliance would be 
unlawful unless the Alliance Carriers accepted six conditions that 
would address our competitive concerns. 68 FR 3293, January 23, 2003 
(``the January Notice''). The Alliance Carriers at first refused to 
accept our conditions but thereafter consulted with us on possible 
modifications to the language of three of the conditions. On the basis 
of those consultations, they resubmitted their agreements on February 
28, stated that they would accept three of our original six conditions, 
proposed alternative language for the other three conditions, and 
acknowledged our legal authority to impose conditions to prevent unfair 
methods of competition in the airline industry.
    We invited interested persons to submit comments on the proposed 
alternative language. 68 FR 10770, March 6, 2003. We received public 
comments from JetBlue Airways; U.S. Airways; Galileo International, a 
computer reservations system; the Airports Council International-North 
America (``ACI''), which represents local, regional, and state 
governing bodies that own and operate the principal U.S. airports used 
by scheduled service airlines; the Massachusetts Port Authority 
(``Massport''), which operates Boston-Logan International Airport; the 
Montana Department of Transportation; the Memphis-Shelby County Airport 
Authority; and M. Michelle Buchecker. JetBlue, USAirways, Galileo, and 
Ms. Buchecker contend that we should not accept the alternative 
language. Massport asserts that we should require the Alliance Carriers 
to surrender different gates at Boston Logan. ACI expresses concern 
that we may, in the future, take steps that would interfere with the 
airports' right to manage their own affairs. The Montana state agency 
and the Memphis airport authority support the alternative language.
    A group of airlines (``the Non-aligned Carriers'')--AirTran, 
America West, Frontier, JetBlue, Midwest, Southwest, and Spirit--filed 
joint comments that oppose the alternative language and requested 
confidential treatment for their filing.
    After considering the Alliance Carriers' resubmission and the 
comments, we have determined that the alternative conditions adequately 
address our competitive concerns at this time. We are therefore ending 
our review of the agreements. The three airlines have agreed to our 
conditions with some modifications. We believe that these restrictions 
on their behavior should adequately reduce the possibility of anti-
competitive behavior. Each airline has also represented that it will 
continue to compete independently on fares and service levels. Finally, 
the Alliance Carriers have separately agreed to abide by certain 
additional conditions imposed by the Department of Justice under its 
authority to enforce the antitrust laws.
    We recognize that the implementation of the alliance could 
ultimately reduce competition in the airline industry, despite the 
conditions, although we do not expect such a result. We further 
recognize that the Alliance Carriers' actual implementation of the 
alliance may differ from their anticipated behavior. In addition, we 
are fully aware that world events and general economic conditions may 
lead to major changes in the airline industry, which could change the 
alliance's impact on airline competition. We will therefore closely 
monitor the Alliance Carriers' implementation of their agreements to 
ensure that they abide by their representations to us and comply with 
the conditions. Furthermore, in our on-going monitoring of industry 
conditions, we will be watchful for major changes in the level and type 
of competitive behavior in the airline industry. We have the statutory 
authority to undertake a new review of the competitive effects of the 
alliance at any time that we believe that such a review is warranted. 
We will not hesitate to initiate such a review if developments indicate 
that it is necessary.

Background

    The statute requiring our review of the alliance agreements--49 
U.S.C. 41720--requires certain kinds of joint venture agreements among 
major U.S. passenger airlines to be submitted to us at least 30 days 
before they are implemented. The statute does not expressly require the 
parties to obtain our approval before proceeding. We may extend the 
waiting period by 150 days with respect to a code-sharing agreement and 
by 60 days for other types of agreements. At the end of the waiting 
period (either the 30-day period or any extended period established by 
us), the parties may implement their agreement. To prohibit the parties 
from implementing an agreement, we would normally institute a formal 
enforcement proceeding under 49 U.S.C. 41712

[[Page 16855]]

(formerly section 411 of the Federal Aviation Act) to determine whether 
the agreement's implementation would be an unfair or deceptive practice 
or unfair method of competition. We apply section 41712 in light of the 
express direction of the statute that we consider the public policy 
factors set forth in 49 U.S.C. 40101. If we found that the agreement 
would violate section 41712, we could issue an order directing the 
parties to cease and desist from the practices found to be unlawful.
    Last year we reviewed another alliance between major airlines, the 
United/US Airways alliance. We determined to end the waiting period for 
the United/US Airways agreements and take no action at that time to 
prevent the airlines from implementing the agreements. 67 FR 62846, 
October 8, 2002. The information then available to us was not 
sufficient to indicate that an enforcement proceeding under section 
41712 would be warranted, although we expressed concern that the 
alliance could lead to a lessening of competition between the two 
airlines in some markets. We also noted, however, that United and U.S. 
Airways had accepted certain restrictions imposed by the Department of 
Justice under its authority to enforce the antitrust laws. We 
additionally noted the United/US Airways alliance could benefit a 
number of travelers and could increase competition in some markets, as 
long as United and U.S. Airways had strong incentives to continue to 
compete with each other.
    On August 23, 2003, the Alliance Carriers submitted their code-
share and frequent flyer program reciprocity agreements for our review 
under 49 U.S.C. 41720. The proposed alliance would add Delta to the 
existing alliance between Continental and Northwest. We invited the 
public to submit comments on the proposed agreements. To enable 
interested parties to submit more meaningful comments, we required the 
Alliance Carriers to make available unredacted copies of their alliance 
agreements. 67 FR 69804, November 19, 2002.
    After reviewing the comments and other material and conducting an 
extensive informal investigation, we determined that the agreements, if 
implemented as presented by the three airlines, could result in 
significant adverse impacts on airline competition unless the airlines 
accepted six conditions developed by us to limit potential competitive 
harm. Our January Notice explained the basis for this determination. We 
stated that we would direct our Aviation Enforcement Office to 
institute a formal enforcement proceeding regarding the matter if the 
Alliance Carriers chose to implement the agreements without accepting 
those conditions.
    We were aware that the Alliance Carriers represented that each of 
them would independently set its own fares and schedules and that they 
had structured their alliance so that each partner would continue to 
compete independently. Under that structure, the ticket price paid by a 
traveler would go to the operating airline, even if the passenger 
bought the ticket from a marketing airline. Since the marketing airline 
would not share in the ticket revenue, that airline would have an 
incentive to operate its own flights. In addition, they alleged that 
their agreements would not authorize any discussions prohibited by the 
antitrust laws. They would engage in discussions on subjects such as 
flight arrival times, gate locations, and certain other service 
features only in order to provide ``more seamless service.'' They 
asserted that their alliance would benefit consumers by providing on-
line services to travelers in markets that now have no on-line service 
and improved access to frequent flyer programs and airport lounges. See 
68 FR 3295.
    As described more fully in the January Notice, we nonetheless had 
several concerns with the alliance's potential impact on airline 
competition. The alliance would create a potential for collusion among 
the three partners; it could enable the Alliance Carriers to take 
advantage of their combined dominant market presence in a number of 
cities in ways that could force unaffiliated airlines to exit the 
markets and deter entry by other airlines; it would establish joint 
marketing efforts that could reduce competition between the partners 
and preclude effective competition from unaffiliated airlines; it could 
lead to a ``hoarding'' of airport facilities; and it could result in 
``screen clutter,'' causing the services of competing carriers to be 
downgraded in the displays offered to travel agents by computer 
reservations systems (``CRSs''). 68 FR 3295-3297. We developed six 
conditions in an attempt to address these concerns. The January Notice 
set forth the text of those conditions. 68 FR 3297-3299.
    The Department of Justice, pursuant to its separate and independent 
authority to enforce the antitrust laws, reviewed the alliance 
agreements and determined that it would not challenge the 
implementation of the agreements under the antitrust laws if the 
Alliance Carriers accepted certain conditions, which the Department of 
Justice concluded were necessary to preserve competition among the 
carriers. The three airlines have accepted those conditions. Under 
those conditions, Delta, Continental, and Northwest will not code-share 
on local traffic on routes where more than one of them offers nonstop 
service, including their hub-to-hub routes (Atlanta-Detroit/Houston, 
for example). For purposes of this restriction, Newark Liberty 
International Airport, John F. Kennedy International Airport, and 
LaGuardia Airport are treated as one point. The bar against code-
sharing, however, does not cover flights between Washington Reagan 
National, LaGuardia, and Boston Logan. The Alliance Carriers also 
agreed to conditions that bar certain pricing conduct that could 
provide a vehicle for price signaling and collusion. Accordingly, each 
party is limited in the extent to which it can set prices on flights 
operated by another airline.\1\ Finally, each Alliance Carrier must 
continue to act independently in establishing the terms and conditions 
of its frequent flyer programs and in bidding on corporate contracts, 
although when consistent with the antitrust laws the Alliance Carriers 
may offer customers the option of a joint bid. These conditions are 
substantially the same as the conditions accepted last year by United 
and U.S. Airways and by Northwest and Continental when they began 
implementing their own alliance five years ago.
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    \1\ Under the pricing condition required by the Department of 
Justice, the marketing carrier's fares must be the same as the 
operating carrier's fares on routes that are not served by the 
marketing airline (the marketing airline is the airline that does 
not operate the flight but nonetheless sells seats under its code). 
On routes served by two or more of the partners with connecting 
service, when one airline is the marketing airline it must sell 
seats on flights operated by the partner airline for the same fares 
it charges for its own flights or for the fares established by the 
operating airline. On routes where one airline offers nonstop 
service and the other airline offers connecting service, the latter 
airline's fares for the nonstop service must be the same as the 
operating carrier's fares.
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    While the Alliance Carriers accepted the Department of Justice 
conditions, they initially stated that they would implement their 
alliance without accepting our conditions. Soon thereafter, however, 
they asked whether we would consider alternatives for three of our six 
conditions and postponed the implementation of their alliance. On the 
basis of consultations with us, they resubmitted the agreements for our 
review with their proposed alternative conditions on February 28. They 
stated that they accepted, without change, our first, fifth, and sixth 
conditions, which involve the alliance's steering committee, CRS 
displays, and the agreements' exclusivity provision. They

[[Page 16856]]

requested changes in the second, third, and fourth conditions, which 
involve airport facilities, limits on code-sharing flights, and joint 
marketing. They requested that we complete our review within 30 days. 
They acknowledged our legal authority under section 41712 to impose 
conditions, but asserted that, in their view, neither our conditions 
nor the conditions required by the Department of Justice were necessary 
to protect competition.
    We invited public comment on the Alliance Carriers' proposed 
alternative language. 68 FR 10770, March 6, 2003. Our notice set forth 
the proposed language. We directed the commenters to discuss only 
whether the Alliance Carriers' three new proposals would adequately 
address the competitive concerns regarding the three corresponding 
conditions, which we explained in our January Notice, and not whether 
the findings and analysis in the January Notice were adequate or 
reasonable. We stated that we would decide whether the Alliance 
Carriers' proposals were acceptable within 30 days. We noted that, if 
we determine that the alternative conditions adequately address our 
concerns, and the Alliance Carriers formally accept them along with the 
other three conditions developed by us, we would not now institute a 
formal enforcement proceeding to determine whether the airlines' 
agreements violate section 41712. However, we would retain our full 
statutory authority to continue to monitor the three airlines' 
implementation of their alliance, and to take enforcement action under 
section 41712 in the future if necessary. We reaffirmed our conclusion 
that, if the alliance were implemented as originally presented to us, 
it would raise serious competitive issues and we would begin a formal 
enforcement proceeding if the Alliance Carriers implemented the 
alliance without conditions satisfactory to us.
    As noted, we received comments from the Non-aligned Carriers, 
JetBlue, U.S. Airways, Galileo, ACI, Massport, the Montana Department 
of Transportation, the Memphis-Shelby County Airport Authority, and M. 
Michelle Buchecker. This notice discusses the arguments presented by 
the public comments. Due to the Non-aligned Carriers' request that 
their comments remain confidential, this notice does not discuss their 
objections. We have nonetheless given careful consideration to the Non-
aligned Carriers' arguments.

Decision

    Congress has given this Department the responsibility to prevent 
unfair methods of competition in the airline industry through section 
41712. Congress directed us, in interpreting and applying section 
41712, to consider the factors set forth in section 40101. Our 
statutory authority is separate and independent from the Department of 
Justice's authority to enforce the antitrust laws. Section 41712 states 
that we should take enforcement action when we find that doing so is in 
the public interest, based on our consideration of the factors set 
forth in section 40101. After considering the comments, we have 
concluded that allowing the Alliance Carriers to go forward with their 
agreements, subject to the six conditions as modified, will best serve 
the public interest at this time. We presently believe that the six 
conditions, as modified with the alternative language, will adequately 
address our competitive concerns with the alliance. Therefore, at this 
time, we do not believe it necessary to institute a formal enforcement 
proceeding to determine whether the alliance will violate section 
41712. We will therefore terminate our current review of the agreements 
under 49 U.S.C. 41720. As stated earlier, however, we will continue to 
monitor the alliance's implementation to see whether the Alliance 
Carriers' future conduct or changes in the airline industry's structure 
and competitive conditions raise competitive concerns requiring further 
review, including potential enforcement action under section 41712.
    If the Alliance Carriers at any future time decide that they will 
no longer comply with the restrictions which they have agreed upon with 
us (which incorporate the restrictions they agreed upon with the 
Justice Department), they will have created a new agreement and must 
submit that new agreement to us under 49 U.S.C. 41720. Implementation 
of any such new agreement must be deferred until the end of the 
statutory waiting period. The same will be true if they materially 
modify the terms of the written agreements submitted to us for review 
on August 23. Under our established interpretation of 49 U.S.C. 41720, 
airlines that significantly modify a joint venture agreement must 
submit the modified agreement to us for review under that statute.
    We do not agree with the commenters who have urged us to extend the 
waiting period under 49 U.S.C. 41720. They contend that we cannot now 
accurately assess the alliance's competitive impact when current world 
events such as war in Iraq and potential changes in the industry's 
structure may substantially change the alliance's potential impact on 
airline competition. While no one can predict with certainty what may 
happen, we do not believe that these events warrant a delay in the 
alliance's implementation. The conditions should mitigate the anti-
competitive effects of the alliance, and we intend to monitor closely 
the alliance's effects on competition in light of future developments. 
We retain our full statutory authority to take enforcement action at 
any time if we have reason to believe that the alliance has a 
significant adverse impact on airline competition, and we will do so.
    Similarly, we are not persuaded that it is necessary to delay the 
implementation of the alliance pending a review of Delta's new low-fare 
operation, Song. According to JetBlue's comments, Delta will launch 
Song this spring, and Song should be operating 36 aircraft by the end 
of the year. JetBlue asserts that Song is designed to ``attack'' low-
fare competitors, implying that such an ``attack'' is not a legitimate 
response to consumer demands and industry competition. We do not 
believe it necessary to block the implementation of the alliance 
pending a more detailed investigation of Delta's plans for Song's 
operations or to exclude Song from the alliance until completion of 
further review. Rather, we will continue to assess the effects of the 
alliance in the light of actual experience. As a general matter, we 
have no reason to block Delta, or any other airline, from restructuring 
its operations to meet competitive challenges from other airlines and 
to satisfy consumer demands for lower fares. Incumbent airlines may 
legitimately respond to competitive actions by others, and Delta is 
entitled to compete fairly for a share of the Northeast-Florida market. 
While JetBlue fears that Song will engage in unlawful conduct, JetBlue 
Comments at 3-4, we cannot assume now that Delta will operate Song 
unlawfully. If, after Song begins operations, JetBlue were to present 
evidence to us indicating that Song may be engaged in unfair methods of 
competition, we would have full authority to consider that evidence 
under section 41712 and determine what action would be appropriate at 
that time.
    In determining whether to end our review of the Alliance Carriers' 
agreements, we considered the commenters' arguments that we should 
require the Alliance Carriers to accept our original conditions without 
modification. As discussed below, however, we presently believe that 
the alternative language proposed by the Alliance Carriers may be 
sufficient to address our competitive concerns.

[[Page 16857]]

Again, if the conditions prove to be insufficient, adversely affected 
parties may complain to us, and we will have the power to take 
enforcement action at that time.
    Airport Facilities. Our original condition on airport facilities 
would have required the Alliance Carriers to surrender gates at four of 
their hubs as a result of co-location and, if requested by the airport 
operator, to surrender additional gates at their hubs and Boston Logan 
that were used less than six turns each day. The alternative language 
still requires them to give up thirteen gates at four of their hubs, 
and requires Delta to give up thirteen additional gates at Boston Logan 
in 2005. However, rather than establish a usage standard that would 
govern the future conduct of these carriers alone, the alternative 
language would require the carriers to give up gates now at two 
congested airports, Boston Logan and LaGuardia. We believe that the 
alternative language should be sufficient. The requirement that the 
Alliance Carriers surrender specific gates now offers immediate 
benefits over our original proposal, which may have made gates 
available in the future if they were underused and were requested by 
the airport sponsor. It is unlikely that any gates ultimately 
surrendered under the original condition would have been desirable 
gates. We therefore are not persuaded that the alternative language 
should be rejected due to alleged defects in several of the gates to be 
surrendered. We have reviewed the adequacy of the gates at Boston Logan 
and LaGuardia. We understand that the gates are useable for many 
purposes, if not all, and will enable airlines to gain access to these 
two airports, where access has historically been difficult.
    Massport, the airport sponsor of Boston Logan, states that it would 
prefer that Northwest give up two different gates, which could be used 
by wide-body aircraft, unlike the gates that Northwest has chosen to 
surrender. However, no carrier commenter has complained about the 
adequacy of those particular gates. Our principal concern in our review 
of the alliance has been its impact on domestic airline competition. 
The gates to be surrendered by Northwest should be adequate for the 
needs of most domestic airlines, since airlines operate wide-body 
aircraft on relatively few domestic routes.
    ACI does not specifically support or oppose the alternative 
language for the gate access condition or our original gate condition. 
ACI instead expresses its dissatisfaction with the alleged efforts of 
this Department and the Federal Aviation Administration to interfere 
with the airports' asserted right to manage their facilities. ACI fears 
that we may interpret the condition as requiring an airport sponsor to 
relinquish its rights under leases with the Alliance Carriers. ACI's 
concern is unfounded. We are not requiring any airport to take action 
that would surrender its rights under its lease agreements. The 
condition requires gates to be surrendered only if requested by the 
airport sponsor, except for the gates that will be given up by Delta at 
Boston Logan upon its relocation to a new terminal. Presumably the 
airport sponsor will take into account its leasehold interests in 
determining whether to request the gates. Furthermore, giving an 
airport the opportunity to obtain gates that can be used by other 
airlines for new or expanded services should benefit the airport's 
customers and thus the airport sponsor.
    Nonetheless, we do not accept ACI's implicit premise that airport 
sponsors should be able to manage their airports without regard for 
federal interests or their obligations under federal law. The airports 
used by the Alliance Carriers have received substantial grants from the 
FAA. As required by 49 U.S.C. 47107, the airports had to accept 
specific assurances in order to obtain those federal funds. Those 
assurances require among other things that the airport be available for 
public use on reasonable terms and conditions. 49 U.S.C. 47107(a)(1). 
Airports therefore have an obligation to make gates available for 
airlines that wish to begin service (or expand service) and are 
otherwise unable to obtain the facilities needed to operate those 
services. See FAA/OST Task Force Study, U.S. Department of 
Transportation, Airport Business Practices and Their Impact on Airline 
Competition (October 1999) at 13-26. We will continue to review airport 
facilities issues in connection with our review, under federal law, of 
airport competition plans, and will investigate complaints about 
``hoarding'' of gates pursuant to our authority under section 41712.
    ACI additionally asked us to clarify the alternative language's 
proviso that an Alliance Carrier need not surrender a gate ``if it will 
be required to continue to pay rentals, charges or any other lease 
obligations related thereto.'' ACI contends that we should explicitly 
state that this language does not exempt the airline's compliance with 
the lease obligations accruing before the surrender of the gates. ACI 
Comments at 5-6. However, ACI has misread the condition, which is only 
intended to define when an Alliance Carrier must surrender a gate, not 
to define the extent of its obligations under its lease with the 
airport sponsor.
    Code-sharing Limitations. In an effort to ensure that the Alliance 
Carriers fulfilled their promises of consumer benefits due to new on-
line service in many markets, we required that at least one-fourth of 
each marketing carrier's code-share flights must be to or from airports 
that the airline and its regional affiliates either did not directly 
serve or served with no more than three daily roundtrips as of August 
2002. We also required that an additional thirty-five percent of the 
code-share flights must either meet that requirement or be to or from 
small hub and non-hub airports. The condition limited the total number 
of code-share flights between Delta and Continental and between Delta 
and Northwest to 2,600 (but does not affect the existing code-sharing 
between Continental and Northwest). We committed ourselves to reviewing 
these restrictions after the first year. We believed these restrictions 
were necessary to ensure that the Alliance Carriers implemented their 
representations that the alliance would provide consumer benefits by 
creating on-line service in a number of new markets. 68 FR 3298.
    The alternative language allows the Alliance Carriers to code-share 
on an additional 2,600 flights in the second year, subject to the 
requirement that thirty percent of these additional code-share flights 
must be flights in new markets or to small hub or non-hub airports. If 
the Alliance Carriers wish to add additional code-share flights after 
the second year, they must give us 180 days advance notice and provide 
any information requested by us on the additional code-share services. 
68 FR 10771.
    We believe that the alternative language will continue to ensure 
that the Alliance Carriers use their code-sharing to extend their 
networks, as they publicly stated was their intent. As under our 
original condition, they may use a large share of their code-share 
flights for larger markets where they compete with other airlines. The 
alternative language will also establish an upper limit on the number 
of additional code-share flights in the second year of the alliance. 
While the Alliance Carriers may expand code-sharing to significantly 
more markets in the second year, we retain our statutory authority to 
review the competitive impact of any such expansion. If at any time, we 
believe the effects of the alliance are anti-competitive, we may

[[Page 16858]]

institute a proceeding under section 41712. In addition, the Alliance 
Carriers are required to give us 180 days notice before code-sharing on 
additional flights after the second year of their alliance. That will 
enable us to conduct a thorough review of the impact on competition of 
the first two years of the alliance, and of any proposed expansion of 
code-share operations, and to take action if necessary. Finally, the 
restrictions imposed separately by the Department of Justice will 
prevent the Alliance Carriers from code-sharing in markets where two or 
more of the partners offer nonstop service. Again, we will closely 
monitor the competitive impact of the Alliance Carriers' implementation 
of their code-sharing agreement and will consider whether additional 
limits should be placed on that activity.
    Joint Marketing Restrictions. We have also determined to accept the 
Alliance Carriers' alternative language on joint marketing. Although it 
will give them greater ability to make joint offers to corporations and 
travel agencies than under our original condition, their ability to 
make joint offers will remain subject to substantial restrictions. In 
their agreement with the Justice Department, they acknowledge that they 
may not make joint offers where doing so would violate the antitrust 
laws. Our condition, with the Alliance Carriers' alternative language, 
gives each corporation and travel agency the right to request separate 
offers from each of the Alliance Carriers and allows the airline 
partners to make a joint bid only if the corporation or travel agency 
has made a written request for a joint offer. The Alliance Carriers may 
not make a joint bid for domestic travel, or for domestic travel linked 
with international travel, to a corporation or travel agency that has 
its headquarters or a principal place of business in specified cities 
where the Alliance Carriers' joint market share exceeds fifty percent, 
except that they may submit a joint bid to such a corporation or travel 
agency for travel originating from cities other than the principal 
place of business or headquarters city. No joint bid may make the 
discounted corporate fares or travel agency commissions dependent on 
the satisfaction of minimum booking requirements in specific domestic 
O&D markets offered by one partner, unless the corporation or travel 
agency has stated in writing that it desires such an offer in order to 
compare it with a competitive bid from one of the other seven largest 
carriers or from another airline alliance.
    Some commenters suggest that the requirement of a written request 
from the corporation or travel agency may be ineffective, because the 
Alliance Carriers may put pressure on corporations and travel agencies 
to request a joint bid. See, e.g., Galileo Comments at 2. However, we 
believe the requirement may still have its intended effect. Any such 
conduct by the Alliance Carriers would violate the condition, and 
potentially section 41712. We believe that there is a significant 
likelihood that some corporations and travel agencies subjected to 
unlawful pressure will report it to us, and we encourage them to do so. 
We would take very seriously any such reports. The requirement that any 
joint offer be preceded by a request from the corporation or travel 
agency should therefore be effective. As with the other conditions, 
however, we will monitor the effectiveness of the limitations on joint 
marketing and take further action if necessary.
    One objection to the alternative language reflects a 
misunderstanding of its restrictions. As noted, the prohibition against 
joint bids to corporations or travel agencies that have their 
headquarters or a principal place of business in the cities listed in 
Exhibit A allows joint bids for travel originating from cities other 
than their principal place of business or headquarters city. Some 
commenters have assumed that this exception would allow the Alliance 
Carriers to make a joint bid for the return trips of a corporation's 
personnel located at the headquarters or principal place of business, 
even if the bid may not cover their outbound trips. Any such 
interpretation would be wrong. The Joint Carriers could not make a 
joint bid to a company headquartered in Atlanta for the travel of the 
headquarters personnel, but they could make a joint bid for travel 
originating at such a company's facility in California, assuming such a 
bid would comply with the antitrust laws. That bid, however, could only 
cover the travel of employees and contractors located at the California 
facility, not those located in Atlanta. The joint bid thus could not 
cover travel from California to Atlanta by personnel located in 
Atlanta. The Alliance Carriers accordingly cannot evade the restriction 
by treating trips by headquarters personnel from the field to 
headquarters as travel originating in another city, since the travel of 
such personnel originated in the headquarters city.

Conclusion

    In sum, after thorough consideration of all comments, we are not 
persuaded that we should postpone the completion of our review of the 
agreements or that we should reject the alternative language. Subject 
to our conditions, the agreements should not unreasonably restrict each 
partner's incentives and ability to compete independently or be likely 
to result in collusion on fares or service levels. However, given our 
strong concern that the agreements not lead to unfair methods of 
competition, we intend to monitor their implementation closely. If and 
when the airlines' implementation of their joint venture appears to be 
having an adverse impact on competition, we will consider taking action 
under section 41712. Furthermore, as stated above, if at any point the 
Alliance Carriers decide that they will no longer comply with the 
restrictions to which they have agreed, they will have created a new 
agreement which must be submitted to us under 49 U.S.C. 41720 and whose 
implementation must be delayed until the end of a new waiting period.
    Our review will be deemed terminated when we receive from the 
Alliance Carriers a signed written acceptance, in a form satisfactory 
to us, of the six conditions, including the proposed alternative 
language as discussed in this Notice.

    Issued in Washington, DC on March 31, 2003.
Read C. Van de Water,
Assistant Secretary for Aviation and International Affairs.
[FR Doc. 03-8288 Filed 4-4-03; 8:45 am]
BILLING CODE 4910-62-P