[Federal Register Volume 79, Number 49 (Thursday, March 13, 2014)]
[Notices]
[Pages 14279-14294]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-05555]


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DEPARTMENT OF JUSTICE

Antitrust Division


United States, et al., v. US Airways Group, Inc., et al.; Public 
Comments and Response on Proposed Final Judgment

    Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C. 
16(b)-(h), the United States hereby publishes below the Response of the 
United States to Public Comments on the proposed Final Judgment in 
United States, et al., v. US Airways Group, Inc., et al., Civil Action 
No. 1:13-CV-1236-CKK (D.D.C. 2013).
    Copies of the 14 Public Comments and the Response of the United 
States to Public Comments are available for inspection at the 
Department of Justice Antitrust Division, 450 Fifth Street NW., Suite 
1010, Washington, DC 20530 (telephone: 202-514-2481); on the Department 
of Justice's Web site at http://www.justice.gov/atr/cases/usairways/index.html; and at the Office of the Clerk of the United States 
District Court for the District of Columbia, 333 Constitution Avenue 
NW., Washington, DC 20001. Copies of any of these materials may also be 
obtained upon request and payment of a copying fee.

 Patricia A. Brink,
Director of Civil Enforcement.

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

    UNITED STATES OF AMERICA, et al. Plaintiffs, v. US AIRWAYS 
GROUP, INC. and AMR CORPORATION DEFENDANTS.

Case No. 1:13-cv-1236 (CKK)

RESPONSE OF PLAINTIFF UNITED STATES TO PUBLIC COMMENTS ON THE PROPOSED 
FINAL JUDGMENT

                            Table of Contents
INTRODUCTION................................................           4
I. Procedural History.......................................           5
II. The Complaint and the Proposed Settlement...............           7
    A. The Complaint........................................           7
    B. The Proposed Final Judgment..........................          10
        1. Terms of the Proposed Final Judgment and Status            10
         of the Divestitures................................
        2. Explanation of the Proposed Final Judgment.......          11
            a. Consumer Benefits from LCC Entry.............          12
            b. The Importance of the Remedy Assets to                 14
             Enhancing LCC Competition......................
III. Standard of Judicial Review............................          19
IV. Public Comments and the United States' Response.........          23
    A. Any Challenge to the Merits of the Complaint Is                25
     Beyond the Scope of Tunney Act Review..................
    B. The Proposed Settlement Will Counteract Competitive            27
     Harm From the Merger by Enhancing LCC Competition......
        1. LCCs Provide Meaningful Competition..............          27
        2. The Remedy Adequately Addresses the Harms Alleged          31
         in the Complaint...................................
    C. The Remedy Does Not Mandate Changes in Service                 36
     Patterns at Reagan National............................

[[Page 14280]]

 
        1. Background on Slot Regulation at Reagan National.          37
        2. Nothing in the Remedy Requires New American to             39
         Discontinue Service to Particular Airports.........
        3. Mandating Service on Any Particular Route Is               43
         Unwarranted........................................
    D. Delta Is Not an Appropriate Divestiture Candidate....          44
    E. Additional Concerns Raised by Commenters.............          49
        1. Airline Consumer Disclosure and Alliance Issues            49
         Are Outside the Scope of This Action...............
        2. The Proposed Final Judgment Precludes New                  50
         American from Reacquiring the Divested Gates at
         LAX; No Modification of the Decree Is Necessary....
        3. The CIS Fully Complies with Tunney Act                     51
         Requirements.......................................
        4. The Remedy Is Not the Result of Political                  54
         Pressure...........................................
        5. Closing of the Merger Prior to Entry of the Final          55
         Judgment Is Consistent with Tunney Act Requirements
CONCLUSION..................................................          56
 

INTRODUCTION

    Pursuant to the requirements of the Antitrust Procedures and 
Penalties Act, 15 U.S.C. Sec.  16(b)-(h) (``APPA'' or ``Tunney Act''), 
the United States hereby files the public comments concerning the 
proposed Final Judgment in this case and the United States' response to 
these comments. For the reasons discussed below, the United States 
continues to believe that the remedy it obtained from Defendants will 
address the competitive harm alleged in this action and is plainly in 
the public interest. Accordingly, the United States proposes no 
modifications to the proposed Final Judgment.
    The remedy is a major victory for American consumers. It will 
enable Low Cost Carriers (``LCCs'') to fly millions of new passengers 
per year to destinations throughout the country. It fully addresses the 
harm that would have resulted from New American's control of nearly 70% 
of the limited takeoff and landing slots at Ronald Reagan Washington 
National Airport (``Reagan National''). It enables LCCs to acquire 
otherwise unobtainable slots and gates at Reagan National (Southwest 
Airlines, JetBlue Airways and Virgin America) and LaGuardia Airport 
(Southwest and Virgin America), and to obtain gates at other busy 
airports around the country such as Los Angeles International Airport, 
Chicago O'Hare International Airport, and Dallas Love Field. And by 
introducing new low-cost capacity and service on numerous routes around 
the country, it enhances the ability of LCCs to thwart industry 
coordination among the legacy carriers. The competitive significance of 
the remedy is reflected in the value being paid for the divested Reagan 
National and LaGuardia slots--over $425 million--which is unprecedented 
in the airline industry and among the most substantial merger remedies 
in any industry.
    The United States has received a total of fourteen comments 
reflecting divergent views.\1\ One suggests that the lawsuit should not 
have been filed in the first place. Others assert that the settlement 
does not go far enough to remedy potential harm from the merger, and 
many raise issues that are outside the scope of an antitrust review. 
After careful consideration of these comments, the United States has 
concluded that nothing in them casts doubt on the very substantial 
public interest that will be achieved by the proposed remedy.
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    \1\ In addition, fifteen individuals sent emails about 
competition concerns relating to the settlement to the United States 
using various channels outside of the designated procedures for 
submitting Tunney Act comments. The United States has reviewed all 
of these emails and none of them raise any issue not already 
addressed in this Response to Comments. Although these emails are 
not formal Tunney Act comments, we are nevertheless publishing them 
in this case but redacting all identifying information about the 
authors. If the Court requests, the United States will provide 
unredacted copies under seal.
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    The United States has published the comments and this response on 
the Antitrust Division Web site and is submitting to the Federal 
Register this response and the Web site address at which the comments 
may be viewed and downloaded, as set forth in the Court's Orders dated 
November 20, 2013 (Docket No. 154) and February 27, 2014 (Docket No. 
158).\2\ Following Federal Register publication, the United States will 
move the Court, pursuant to 15 U.S.C. Sec.  16(b)-(h), to enter the 
proposed Final Judgment.
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    \2\ This Response and all of the public comments may be found on 
the Antitrust Division's Web site at http://www.justice.gov/atr/cases/usairways/index.html.
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I. Procedural History

    On August 13, 2013, the United States, joined by several states and 
the District of Columbia (``Plaintiff States''), filed a Complaint in 
this matter alleging that the proposed merger of US Airways Group, Inc. 
(``US Airways'') and AMR Corporation, the parent of American Airlines, 
Inc., (``American''), creating New American, would violate Section 7 of 
the Clayton Act, 15 U.S.C. Sec.  18.
    In the three months following the filing of the Complaint, 
Plaintiffs and Defendants actively prepared for trial and accomplished 
a substantial amount of pre-trial groundwork, including completion of 
fact discovery. Trial in this matter was scheduled to begin on November 
25, 2013.
    While the parties continued to litigate, they engaged in settlement 
discussions that culminated in a consensual resolution of the matter. 
On November 12, 2013, the United States filed the proposed Final 
Judgment (Docket No. 147-2), a Competitive Impact Statement (``CIS,'' 
Docket No. 148), and an Asset Preservation Order and Stipulation signed 
by the parties consenting to entry of the proposed Final Judgment after 
compliance with the requirements of the APPA (Docket No. 147-1).
    As Defendant AMR Corporation was in bankruptcy, the settlement 
required approval by the bankruptcy court. On November 27, 2013, the 
United States Bankruptcy Court for the Southern District of New York 
entered an order finding that the settlement satisfied the requirements 
for approval under the Bankruptcy Code, granted AMR's motion to 
consummate the merger, and denied a request for a temporary restraining 
order filed by a private plaintiff seeking to enjoin the merger on 
antitrust grounds.\3\ AMR exited bankruptcy protection, and the merger 
closed on December 9, 2013. The Bankruptcy Court has retained 
jurisdiction to continue to hear the private case.\4\
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    \3\ See Order Pursuant to Bankruptcy Rule 9019(a) Approving 
Settlement Between Debtors, US Airways, Inc., and United States 
Department of Justice, In re AMR Corp., (Bankr. S.D.N.Y. 2013), ECF 
No. 11321, available at http://www.amrcaseinfo.com/pdflib/11321_15463.pdf, and accompanying Memorandum, available at http://www.amrcaseinfo.com/pdflib/72_01392.pdf.
    \4\ Fjord v. AMR Corp., (In re AMR Corp.) Adv. Pr. No. 13-01392 
(Bankr. S.D.N.Y.), docket available at http://www.amrcaseinfo.com/adversary_01392.php. (The lead attorney in the private case, Joseph 
Alioto, submitted a Tunney Act comment in this proceeding.)
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    Pursuant to the APPA and this Court's November 20, 2013 Order, the 
United States published the proposed Final Judgment and CIS in the 
Federal Register on November 27, 2013, see 78 Fed. Reg. 71377, and 
caused summaries

[[Page 14281]]

of the terms of the proposed Final Judgment and CIS, together with 
directions for submission of written comments relating to the proposed 
Final Judgment, to be published in the Washington Post, Dallas Morning 
News, and Arizona Republic for seven days, beginning on November 25, 
2013 and ending on December 9, 2013. Defendants filed the statements 
required by 15 U.S.C. Sec.  16(g) on December 9, 2013. The 60-day 
public comment period ended on February 7, 2014. The United States 
received fourteen comments, as described below and attached hereto.

II. The Complaint and the Proposed Settlement

A. The Complaint

    The Complaint alleged that the likely effect of the merger of US 
Airways and American, which would reduce the number of major domestic 
airlines from five to four and the number of ``legacy airlines'' \5\ 
from four to three, would be to lessen competition substantially in the 
sale of scheduled air passenger service in city pair markets throughout 
the United States, and in the market for takeoff and landing 
authorizations (``slots'') at Reagan National.\6\
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    \5\ ``Legacy airlines,'' as used herein, refers to the carriers 
that have operated interstate service since before deregulation and 
rely on nationwide hub-and-spoke networks.
    \6\ Four of the busiest airports in the United States--including 
Reagan National and LaGuardia--are subject to slot limitations 
governed by the FAA. The lack of availability of slots is a 
substantial barrier to entry at those airports, especially for LCCs. 
See Am. Compl. ]] 84-86.
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    One of the United States' concerns was that the merger would make 
it easier for the remaining legacy carriers--New American, United and 
Delta--to cooperate, rather than compete, on price and service. Amended 
Complaint (``Am. Compl.,'' Docket No. 73) ]] 41-81. Such coordinated 
conduct deprives consumers of the benefits of full and vigorous 
competition.\7\
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    \7\ The potential for mergers to increase the likelihood of such 
coordinated interaction among competitors is a central focus of the 
DOJ's merger review. See U.S. Dep't of Justice & Fed. Trade Comm'n, 
Horizontal Merger Guidelines Sec.  7 (Aug. 19, 2010), available at 
http://www.justice.gov/atr/public/guidelines/hmg-2010.html.
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    As explained in the Complaint, the structure of the airline 
industry was already conducive to coordinated behavior among the legacy 
carriers. Id., ]] 41-47. For example, on routes where one legacy 
carrier offers nonstop service, the other legacies generally 
``respect'' (a term used by American) the nonstop carrier's pricing by 
pricing their connecting service at the same level as the nonstop 
carrier--notwithstanding the service disadvantages associated with 
connecting service. US Airways, however, differed from the other legacy 
carriers in that on some routes it offered its ``Advantage Fares'' 
program under which it provided discounts for connecting service 
compared to other carriers' nonstop fares, particularly for last-minute 
travelers. The structure of the New American network reduced its 
incentives to continue the Advantage Fare program. Id., ]] 48-58.
    In addition to the risk of harm from the likely elimination of the 
Advantage Fares program, the Complaint alleged that the merger would 
likely enhance coordinated interaction among the legacy carriers with 
respect to capacity reductions, id., ]] 59-70, and ancillary fees, id., 
]] 71-81. It also alleged potential anticompetitive effects resulting 
from the dominance of the merged airline at Reagan National, where it 
would control 69 percent of the take-off and landing slots, id., ]] 83-
90, and from the elimination of head-to-head competition between US 
Airways and American on numerous nonstop and connecting routes, id., ]] 
38 & 82.
    The Complaint also alleged that if the merger went through, the 
other established legacy carriers--Delta and United--would be unlikely 
to undercut anticompetitive price increases or expand in response to 
capacity reductions by the merged airline as ``those carriers are 
likely to benefit from and participate in such conduct by coordinating 
with the merged firm.'' Id., ] 92. LCCs, such as Southwest, JetBlue, 
Virgin America, and Spirit Airlines, on the other hand, offer 
``important competition on routes they fly,'' but have less extensive 
networks and face barriers to expansion such as a lack of access to 
slots and gate facilities necessary to serve constrained airports. Id., 
]] 3 & 91, 93. For example, although Southwest carries the most 
domestic passengers of any airline, its network is limited compared to 
the legacy carriers with respect to the significant business-oriented 
routes served from Reagan National and LaGuardia.\8\
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    \8\ See, e.g., Motion for Leave to File Amicus Curiae Brief by 
Southwest Airlines Co. (Nov. 7, 2013, Docket No. 142) at 3 (``The 
pro-competitive effect of Southwest's entry and service is 
effective, however, only when Southwest has the ability to enter a 
particular market. While Southwest serves over 90 destinations in 
the United States, it has extremely limited access to Reagan 
National . . . and LaGuardia . . . due to severe entry restrictions. 
Service to those airports is significantly limited by the allocation 
of take-off and landing slots, and Southwest has been able to obtain 
only a very small number of slots at those two airports.'').
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B. The Proposed Final Judgment

1. Terms of the Proposed Final Judgment and Status of the Divestitures

    As set forth in the proposed Final Judgment, Defendants are 
required to divest or transfer to purchasers approved by the United 
States, in consultation with the Plaintiff States:
     104 air carrier slots at Reagan National (i.e., all of 
American's pre-merger air carrier slots) and associated gates and other 
ground facilities; \9\
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    \9\ Slots at Reagan National are designated as either ``air 
carrier,'' which may be operated with any size aircraft that meets 
the operational requirements of the airport, or ``commuter,'' which 
must be operated using aircraft with 76 seats or fewer.
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     34 slots at New York LaGuardia International Airport 
(``LaGuardia'') and associated gates and other ground facilities; and
     rights to and interests in two airport gates and 
associated ground facilities at each of the following airports: Chicago 
O'Hare International Airport (``ORD''), Los Angeles International 
Airport (``LAX''), Boston Logan International Airport (``BOS''), Miami 
International Airport (``MIA''), and Dallas Love Field (``DAL'').
    Defendants have completed the divestiture of the 34 LaGuardia slots 
by (1) selling the 10 slots to Southwest that American had been leasing 
to Southwest (see PFJ, Sec.  IV.G.1), (2) selling an additional bundle 
of 12 slots to Southwest, and (3) selling a bundle of 12 slots to 
Virgin America. Defendants are in the process of completing the 
divestiture of the 104 Reagan National slots. They have divested the 16 
slots to JetBlue that American previously had been leasing to JetBlue 
(see PFJ, Sec.  IV.F.1) and have sold an additional 24 slots to 
JetBlue. Defendants have agreed to divest 56 slots to Southwest \10\ 
and eight slots to Virgin America. The parties expect to close the 
Southwest and Virgin America transactions on March 10, 2014 or soon 
thereafter. The United States, in consultation with the Plaintiff 
States, approved the LaGuardia and Reagan National divestitures. The 
acquirers will begin operating the slots later this year. The process 
for the divestiture of the gates at the remaining airports is expected 
to occur in the near future.
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    \10\ Of the 104 air carrier slots being divested, 102 are for 
daily service and the remaining two are allocated for Sunday-only 
service. Southwest is purchasing the bundles of slots containing the 
two ``Sunday-only'' slots. The United States understands that 
Southwest has declined these ``Sunday only'' slots and that they 
will be returned to the Federal Aviation Administration for 
reallocation in consultation with the Department of Justice.
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    In addition to the relief provided by the proposed Final Judgment,

[[Page 14282]]

Defendants reached an agreement with the Plaintiff States to maintain 
service from at least one of New American's hubs to specified airports 
in the Plaintiff States for a period of five years, Supplemental 
Stipulated Order (Docket No. 151), and an agreement with the United 
States Department of Transportation (``DOT'') to use all of its 
commuter slots at Reagan National to serve airports designated as 
medium, small and non-hub airports (i.e., airports accounting for less 
than one percent of annual passenger boardings) for a period of at 
least five years.\11\
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    \11\ The DOT agreement is available at http://www.dot.gov/airconsumer/merger-usairways-amrcorp. The European Commission also 
reviewed the merger. British Airways, which has been given antitrust 
immunity with American for the oneworld alliance, and US Airways are 
the only two nonstop competitors in the Philadelphia-London Heathrow 
market (``PHL-LHR''). The European Commission cleared the merger 
after the parties made commitments to divest a slot pair at slot-
constrained London Heathrow Airport and to offer supportive 
interline and frequent flyer agreements to an entrant into the PHL-
LHR market. See Press Release, European Commission, ``Mergers: 
Commission approves proposed merger between US Airways and American 
Airlines' holding company AMR Corporation, subject to conditions'' 
(Aug. 5, 2013), available at http://europa.eu/rapid/press-release_IP-13-764_en.htm.
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2. Explanation of the Proposed Final Judgment

    The proposed Final Judgment effectively addresses the harm to 
competition that was likely to result from the merger. The LCCs that 
acquire the assets will establish stronger positions at strategically 
important destinations--including top business markets--where it has 
been particularly difficult to obtain access. These assets will provide 
them with the incentive to invest in new capacity and position them to 
offer more meaningful competition system-wide, forcing legacy carriers 
to respond to that increased competition. And, by increasing the scope 
of the LCCs' networks, the divestitures will bring the consumer-
friendly policies of the LCCs to more travelers across the country. For 
example, neither Southwest nor JetBlue currently charges customers a 
first bag fee while all of the legacy carriers charge $25 per bag.
    Strengthened by increased access to capacity-constrained airports, 
the LCCs will be able to fly more people to more places at more 
competitive fares. In this way, although the proposed remedy will not 
create a new independent airline or guarantee the continued existence 
of Advantage Fares on all routes, it will impede the industry's 
evolution toward a tighter oligopoly and deliver benefits to millions 
of consumers that could not be obtained even by enjoining the merger.

a. Consumer Benefits from LCC Entry

    The consumer benefits that flow from LCC entry are well 
established. Previous work by the Department of Justice has shown that 
the presence of an LCC on a nonstop route results in both significant 
price reductions and capacity increases.\12\ An extensive body of 
economic research confirms that LCC entry on a route--whether by 
nonstop or connecting service--reduces fares three times as much as the 
addition of a legacy competitor.\13\
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    \12\ Comments of the U.S. Dep't of Justice, Notice of Petition 
for Waiver of the Terms of the Order Limiting Scheduled Operations 
at LaGuardia Airport, Fed'l Aviation Admin., FAA-2010-0109, March 
24, 2010 at A-2 (finding an ``economically significant impact from 
the presence of an LCC on nonstop route-level prices, ranging from 
21% to 27% average price decreases and a 68% to 118% median increase 
in number of passengers depending on the data examined'').
    \13\ E.g., Jan K. Brueckner et al., Airline Competition and 
Domestic U.S. Airfares: A Comprehensive Reappraisal, 2 Econ. Transp. 
1-17 (2013) (finding that addition of nonstop LCC service reduces 
fares by 12% to 33% while entry of nonstop legacy service reduces 
fares by approximately 4%; similarly, the presence of LCC connecting 
service lowers fares by as much as 12%, while additional legacy 
connecting service lowers fares by typically less than 3%); 
Phillippe Alepin et al., Segmented Competition in Airlines: The 
Changing Roles of Low-Cost and Legacy Carriers in Fare 
Determination, (working paper), available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2212860 (finding that the addition of 
nonstop LCC service on a route reduces fares by approximately 24% 
and the addition of a second nonstop LCC further reduces fares by 
approximately 13%); see also Martin Dresner et al., The Impact of 
Low Cost Carriers on Airport and Route Competition, 30 J. of Transp. 
Econ. & Pol'y 309-328 (1996); Steven A. Morrison, Actual, Adjacent, 
and Potential Competition: Estimating the Full Effect of Southwest 
Airlines, 35 J. of Transp. Econ. & Pol'y 239-256 (2001).
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    These substantial consumer benefits have proved particularly 
meaningful when LCCs are able to gain access to slot-constrained 
airports. For example, in 2010, Southwest acquired 36 slots at Newark 
Liberty International Airport pursuant to a divestiture remedy that 
addressed competition concerns arising from the merger of United 
Airlines and Continental Airlines. Southwest used those slots to enter 
six nonstop routes from Newark (one of which, Newark-BWI, it later 
exited), resulting in substantially lower fares to consumers and 
increased output:

----------------------------------------------------------------------------------------------------------------
                                                                     Year-over-year           Year-over-year
                             Route                                percentage change in     percentage change in
                                                                      average fare         number of passengers
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Newark-St. Louis..............................................                      -27                       66
Newark-Houston................................................                      -15                       53
Newark-Phoenix................................................                      -14                       57
Newark-Chicago................................................                      -11                       35
Newark-Denver.................................................                       -5                       49
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    Passengers flying on these five nonstop routes after Southwest 
began service saved about $75 million annually compared to what they 
would have had to pay prior to Southwest's entry.\14\ In addition, 
Southwest was able to incorporate Newark service into its overall 
domestic network, offering low fares on connections to Newark from over 
sixty cities.\15\ In this way, the creation of only a few nonstop 
routes led to 60 connecting routes. A similar multiplier effect is 
expected with the current divestitures.
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    \14\ USDOT Origin & Destination Survey. Percentage changes in 
average fare and number of passengers are calculated using data from 
the first full quarter after entry by Southwest and, as a baseline, 
data from four quarters before that entry. To determine annual 
consumer savings, the number of passengers flying on each route for 
each of the four quarters following Southwest's entry is multiplied 
by the dollar amount of the corresponding year-to-year fare change 
for that quarter. The annual amount is the sum of the four quarters 
for all of the routes. Data is not reported for the Newark-BWI 
route.
    \15\ USDOT Origin & Destination Survey, CY 2012.
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    Likewise, JetBlue used its limited number of slots at Reagan 
National to drive down fares and increase output on the routes it 
serves. For example, after JetBlue entered the Reagan National to 
Boston route in 2010, average fares dropped by 39 percent year-over-
year and passengers nearly doubled. US Airways estimated that after 
JetBlue's entry, the last-minute fare for round-trip travel between 
Reagan National and Boston--a key business route--dropped by over $700. 
See Am. Compl. ] 88.

[[Page 14283]]

b. The Importance of the Remedy Assets to Enhancing LCC Competition

    The proposed settlement significantly eases some of the most 
intractable barriers to LCC entry and expansion throughout the country. 
First and foremost, the remedy provides unprecedented access to Reagan 
National and LaGuardia, two of the most strategically important--and 
most constrained--airports highly preferred by business passengers. The 
legacy carriers have long dominated these airports and meaningful entry 
by LCCs has been notoriously difficult. At Reagan National, where LCCs 
had only about six percent of the take-offs and landings prior to the 
divestitures, the remedy transfers twelve percent of the slots to LCCs, 
nearly tripling LCC presence there. Likewise, the remedy will extend 
access at LaGuardia, where LCCs hold less than 10 percent of the slots. 
The LCCs that are acquiring the divested slots will be able to offer 
through their use of the divested slots over four million seats per 
year at Reagan National and over 1.5 million seats per year at 
LaGuardia.\16\
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    \16\ Annual seats calculations are based on the number of 
divested daily slots at each airport and the average number of seats 
on the aircraft that the slot acquirers typically use.
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    Indeed, the transfer of Reagan National slots to LCCs will produce 
an immediate benefit to consumers in the form of increased capacity 
because LCCs are likely to use larger planes than US Airways had 
used.\17\ Comparing the average aircraft size operated by US Airways on 
routes it has announced it will exit with the average aircraft size 
operated by Southwest and JetBlue at Reagan National in 2013, the 
number of seats at Reagan National is estimated to increase by over 2 
million per year as a direct result of transferring the slots to LCCs, 
leading to a potential 10% increase in the number of passengers using 
the airport.\18\
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    \17\ A large proportion of US Airways' Reagan National flights 
have in recent years been on small regional jets, even though it had 
sufficient flexibility with its slot portfolio to use larger 
aircraft. Absent the remedy, the merged airline would have had two-
thirds of the flights at Reagan National but only half the airport's 
passengers. Hearing on Airline Industry Consolidation Before the 
Subcomm. on Aviation Operations, Saftey and Security of the S Comm. 
on Commerce, Science and Transportation (June 19, 2013) 113 Cong. 
(statement of W. Douglas Parker, Chairman and CEO, US Airways 
Group).
    \18\ The average aircraft US Airways operated in 2013 on the 16 
routes that it plans to exit had 57.6 seats; Southwest and JetBlue 
operate aircraft with an average of 123.1 seats. Official Airline 
Guide. (The aircraft size on US Airways's current Reagan National-
San Diego service is excluded because that service will simply shift 
to Reagan National-LAX.)
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    And, for the first time ever, an LCC (Southwest) will be able to 
offer a wide array of flight options for nonstop and connecting service 
from Reagan National to points throughout its network, with resulting 
consumer benefits that, given the large number of slots at issue, are 
likely to significantly exceed those that occurred after its entry at 
Newark. Although Southwest has not yet announced which cities it will 
serve with the 56 slots it purchased through the divestitures, it will 
likely have the flexibility to add as many as six to eight new routes 
to its existing seven Reagan National routes.\19\ The addition of each 
new route will create new connecting service to many more points 
throughout the country.\20\
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    \19\ Carriers typically schedule between three (in small 
markets) and 10 (in large markets) daily round trips when 
establishing a new route.
    \20\ If Southwest were to institute nonstop service between 
Reagan National and, for example, Chicago's Midway Airport 
(Southwest's top airport in terms of departures), it would 
simultaneously create convenient one-stop service between Reagan 
National and over 55 additional airports that Southwest serves from 
Midway.
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    Given that New American's slot holdings at Reagan National will 
allow it to continue to serve an extensive list of destinations, nearly 
anywhere Southwest, JetBlue or Virgin America choose to fly with their 
newly-acquired slots will provide direct competition with New 
American.\21\ The remedy also has ensured that JetBlue will retain 
permanent access to the sixteen slots it formerly leased from American. 
JetBlue uses these slots to serve routes on which it competes directly 
with US Airways (and now New American). One of the harms alleged from 
the merger was the likelihood that New American would have cancelled 
the lease to eliminate that competition.\22\
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    \21\ For example, JetBlue has announced that it will add three 
additional routes with twelve of the twenty-four new Reagan National 
slots it has acquired. Two (Charleston, SC and Hartford, CT) will 
add a competitor to routes that would otherwise only be served by 
New American from Reagan National, and the other (Nassau, Bahamas) 
will add LCC service on a route New American has announced it will 
exit. See Press Release, JetBlue, ``JetBlue Adds Three Nonstop 
Destinations for Customers at Ronald Reagan Washington National 
Airport, Offers Introductory One-Way Fares as Low as $30'' (Mar. 6, 
2014), available at http://investor.jetblue.com/phoenix.zhtml?c=131045&p=irol-NewsArticle.
    \22\ See Am. Compl. ]] 87-88.
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    Similarly, gate divestitures at O'Hare, Los Angeles (LAX), Boston, 
Dallas Love Field, and Miami will expand the presence of LCCs at these 
strategically important airports located throughout the country. The 
acquirers will be able to offer increased competition not just on 
nonstop flights to and from these key airports, but also on connecting 
flights nationwide. O'Hare and LAX, two of New American's major hubs, 
are among the most highly congested airports in the country, and 
competitors have historically had difficulties obtaining access to 
gates and other facilities at those airports.\23\ Dallas Love Field is 
much closer to downtown Dallas than American's largest hub at Dallas-
Fort Worth International Airport (``DFW''). Gates at DFW are readily 
available, but Love Field is gate constrained. Although today's 
operations at Love Field are severely restricted under current law,\24\ 
those restrictions are due to expire in October 2014, at which point 
Love Field will have a distinct advantage over DFW in serving business 
customers near downtown Dallas. The divestitures will position the 
acquirer to provide vigorous competition to New American's nonstop and 
connecting service out of DFW. And as there is limited ability to enter 
or expand at Boston, the divestitures will provide relief there 
too.\25\
---------------------------------------------------------------------------

    \23\ For example, Virgin America originally announced its intent 
to serve O'Hare in 2008, but its plans were delayed over three years 
due to a lack of gate availability. Press Release, Virgin America, 
``Virgin America Breezes Into O'Hare'' (Feb. 17, 2011) (describing 
long-term efforts to obtain gate access), available at http://www.virginamerica.com/press-release/2011/virgin-america-breezes-into-chicago-ohare.html. The comments submitted by Allegiant 
Airlines demonstrate the importance to LCCs of obtaining gates at 
LAX.
    \24\ Under legislation known as the Wright Amendment, airlines 
operating out of Love Field may not operate nonstop service on 
aircraft with more than 56 seats to any points beyond Texas, New 
Mexico, Oklahoma, Kansas, Arkansas, Louisiana, Mississippi, Missouri 
or Alabama.
    \25\ Although access issues at Miami are not as acute as at the 
other airports, the proposed Final Judgment also ensures that a 
carrier seeking to enter or expand at Miami will have access to two 
of the gates and associated ground facilities currently leased by US 
Airways.
---------------------------------------------------------------------------

    Importantly, the consumer benefits of opening access to these key 
constrained airports will extend beyond the passengers directly served 
at those seven airports. Given the importance of the airports to 
business travelers, the LCCs that are acquiring the slots and gates 
will have a more robust product for business and corporate travel. For 
example, as a result of the divestitures, Virgin America--one of only a 
few airlines to start domestic service in recent years--will enter 
LaGuardia, expand at Reagan National, and may expand at other 
constrained airports as the gate divestitures progress. As such, it 
will supplement its West Coast presence with service to major East 
Coast business destinations (and potentially additional destinations 
around the country), thereby establishing greater scope and scale.\26\
---------------------------------------------------------------------------

    \26\ Virgin America has announced its interest in beginning 
service from Love Field to major business destinations throughout 
the country. Press Release, Virgin America, ``Virgin America Plans 
Dallas Expansion: Airline wants to bring more business-friendly, 
low-fare flight competition to Dallas with new flights from Love 
Field,'' available at http://www.virginamerica.com/press-release/2014/virgin-america-plans-dallas-expansion.html.

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[[Page 14284]]

    Moreover, the passenger demand generated in cities where the 
divestitures will occur will enhance the LCCs' incentives to invest in 
new capacity elsewhere. For example, if Southwest were to add nonstop 
service from Reagan National to Nashville, the new source of passengers 
from the major population center of Washington, DC, could support entry 
or expansion on additional routes out of Nashville. At the same time, 
Southwest's marketing position in Nashville would be enhanced because 
the nation's capital is included in the service offerings available in 
Nashville.\27\ That would in turn make it easier for Southwest to 
attract passengers to its other destinations and incentivize Southwest 
to add capacity to meet that demand.
---------------------------------------------------------------------------

    \27\ As Southwest's CEO stated, ``We have a lot of customers 
that love Southwest Airlines . . . and a lot of them want to go to 
Reagan.'' Charisse Jones, ``JetBlue, Southwest Gain Slots at Reagan 
Airport,'' USA Today (Jan. 30, 2014), available at http://usat.ly/1b9U3ah.
---------------------------------------------------------------------------

    Thus, taken together, the divestitures will substantially improve 
the LCCs' network quality and attractiveness to customers, position 
them to offer more meaningful competition system-wide, and enable them 
to grow faster than they otherwise would, both in the depth and breadth 
of their networks.\28\
---------------------------------------------------------------------------

    \28\ We are not suggesting that this remedy eliminates all entry 
barriers faced by LCCs. As alleged in the Complaint, airlines 
(including LCCs) face entry impediments, particularly where the 
origin or destination airport is another airline's hub. Am. Compl. ] 
91. However, LCCs have demonstrated some ability to overcome those 
disadvantages with the help of lower costs, and we expect that the 
network-wide strengthening brought about by the divestitures will, 
over time, help the LCCs overcome some of the other obstacles that 
limit their ability to expand.
---------------------------------------------------------------------------

III. Standard of Judicial Review

    The APPA requires that proposed consent judgments in antitrust 
cases brought by the United States be subject to a sixty-day public 
comment period, after which the court shall determine whether entry of 
the proposed Final Judgment ``is in the public interest.'' 15 U.S.C. 
Sec.  16(e)(1). In making that determination, the court, in accordance 
with the statute as amended in 2004, is required to consider:
    (A) the competitive impact of such judgment, including termination 
of alleged violations, provisions for enforcement and modification, 
duration of relief sought, anticipated effects of alternative remedies 
actually considered, whether its terms are ambiguous, and any other 
competitive considerations bearing upon the adequacy of such judgment 
that the court deems necessary to a determination of whether the 
consent judgment is in the public interest; and
    (B) the impact of entry of such judgment upon competition in the 
relevant market or markets, upon the public generally and individuals 
alleging specific injury from the violations set forth in the complaint 
including consideration of the public benefit, if any, to be derived 
from a determination of the issues at trial.

15 U.S.C. Sec.  16(e)(1). In considering these statutory factors, the 
court's inquiry is necessarily a limited one as the government is 
entitled to ``broad discretion to settle with the defendant within the 
reaches of the public interest.'' United States v. Microsoft Corp., 56 
F.3d 1448, 1461 (D.C. Cir. 1995); see also United States v. SBC 
Commc'ns, Inc., 489 F. Supp. 2d 1 (D.D.C. 2007) (assessing public 
interest standard under the Tunney Act); United States v. InBev N.V./
S.A., 2009-2 Trade Cas. (CCH) ] 76,736, 2009 U.S. Dist. LEXIS 84787, 
No. 08-1965 (JR) at *3 (D.D.C. Aug. 11, 2009) (discussing nature of 
review of consent judgment under the Tunney Act; inquiry is limited to 
``whether the government's determination that the proposed remedies 
will cure the antitrust violations alleged in the complaint was 
reasonable, and whether the mechanisms to enforce the final judgment 
are clear and manageable'').
    Under the APPA a court considers, among other things, the 
relationship between the remedy secured and the specific allegations 
set forth in the Complaint, whether the decree is sufficiently clear, 
whether the enforcement mechanisms are sufficient, and whether the 
decree may positively harm third parties. See Microsoft, 56 F.3d at 
1458-62. With respect to the adequacy of the relief secured by the 
decree, a court may not ``engage in an unrestricted evaluation of what 
relief would best serve the public.'' United States v. BNS, Inc., 858 
F.2d 456, 462 (9th Cir. 1988) (citing United States v. Bechtel Corp., 
648 F.2d 660, 666 (9th Cir. 1981)). Instead,
    [t]he balancing of competing social and political interests 
affected by a proposed antitrust consent decree must be left, in the 
first instance, to the discretion of the Attorney General. The court's 
role in protecting the public interest is one of insuring that the 
government has not breached its duty to the public in consenting to the 
decree. The court is required to determine not whether a particular 
decree is the one that will best serve society, but whether the 
settlement in ``within the reaches of the public interest.'' More 
elaborate requirements might undermine the effectiveness of antitrust 
enforcement by consent decree.

Bechtel, 648 F.2d at 666 (emphasis added) (citations omitted).
    In determining whether a proposed settlement is in the public 
interest, the government is entitled to deference as to its 
``predictions as to the effect of the proposed remedies.'' Microsoft, 
56 F.3d at 1461; see also SBC Commc'ns, 489 F. Supp. 2d at 17 
(explaining that district court ``must accord deference to the 
government's predictions about the efficacy of its remedies''); United 
States v. Archer-Daniels-Midland Co., 272 F. Supp. 2d 1, 6 (D.D.C. 
2003) (noting that the court should grant due respect to the United 
States' ``prediction as to the effect of the proposed remedies, its 
perception of the market structure, and its views of the nature of the 
case''); United States v. Morgan Stanley, 881 F. Supp. 2d 563, 567 
(S.D.N.Y. 2012) (government entitled to deference).
    Courts ``may not require that the remedies perfectly match the 
alleged violations.'' SBC Commc'ns, 489 F. Supp. 2d at 17. Rather, the 
ultimate question is whether ``the remedies [obtained in the decree 
are] so inconsonant with the allegations charged as to fall outside of 
the `reaches of the public interest.' '' Microsoft, 56 F.3d at 1461. 
Accordingly, the United States ``need only provide a factual basis for 
concluding that the settlements are reasonably adequate remedies for 
the alleged harms.'' SBC Commc'ns, 489 F. Supp. 2d at 17. And, a 
``proposed decree must be approved even if it falls short of the remedy 
the court would impose on its own, as long as it falls within the range 
of acceptability or is within the reaches of the public interest.'' 
United States v. Am. Tel. & Tel. Co., 552 F. Supp. 131, 151 (D.D.C. 
1982) (citations and internal quotations omitted); see also United 
States v. Alcan Aluminum Ltd., 605 F. Supp. 619, 622 (W.D. Ky. 1985) 
(approving the consent decree even though the court would have imposed 
a greater remedy).
    In its 2004 amendments to the Tunney Act,\29\ Congress made clear 
its

[[Page 14285]]

intent to preserve the practical benefits of using consent decrees in 
antitrust enforcement, adding the unambiguous instruction that 
``[n]othing in this section shall be construed to require the court to 
conduct an evidentiary hearing or to require the court to permit anyone 
to intervene.'' 15 U.S.C. Sec.  16(e)(2). The procedure for the public-
interest determination is left to the discretion of the court, with the 
recognition that the court's ``scope of review remains sharply 
proscribed by precedent and the nature of the Tunney Act proceedings.'' 
SBC Commc'ns, 489 F. Supp. 2d at 11; see also United States v. Enova 
Corp., 107 F. Supp. 2d 10, 17 (D.D.C. 2000) (``[T]he Tunney Act 
expressly allows the court to make its public interest determination on 
the basis of the competitive impact statement and response to public 
comments alone.'').
---------------------------------------------------------------------------

    \29\ The 2004 amendments substituted ``shall'' for ``may'' in 
directing relevant factors for courts to consider and amended the 
list of factors to focus on competitive considerations and to 
address potentially ambiguous judgment terms. Compare 15 U.S.C. 
Sec.  16(e) (2004), with 15 U.S.C. Sec.  16(e)(1) (2006); see also 
SBC Commc'ns, 489 F. Supp. 2d at 11 (concluding that the 2004 
amendments ``effected minimal changes'' to Tunney Act review).
---------------------------------------------------------------------------

IV. Public Comments and the United States' Response

    The United States received fourteen public comments.\30\ The 
comments have been posted on the Web site of the Antitrust Division 
pursuant to the Court's November 20, 2013 Order. The comments are 
summarized below:
---------------------------------------------------------------------------

    \30\ As discussed, supra n.1, the United States also received 
fifteen individual emails about the merger or settlement that were 
sent using various channels outside of the designated procedures for 
submitting Tunney Act comments.
---------------------------------------------------------------------------

     Delta Air Lines filed comments that argue that the 
Complaint mischaracterizes airline competition and overstates the 
potential harm from the merger. Delta asserts that the legacy airlines 
do not engage in oligopolistic pricing; instead, according to Delta, 
they compete vigorously with one another. Delta also argues that 
divestiture of Reagan National slots exclusively to LCCs would be 
harmful to consumers because LCCs would serve large, leisure-oriented 
markets instead of the small- and medium-sized communities that Delta 
states it would be more likely to serve. Thus, Delta argues that it 
should not be precluded from acquiring Reagan National divestiture 
slots. Delta also makes similar arguments with respect to the two 
American gates at Dallas Love Field, where Delta currently operates 
limited service by sub-leasing one of American's gates. It claims that 
divesting those gates to an LCC would harm Dallas-area passengers by 
depriving them of Delta's network service.
     Senator John D. Rockefeller IV, Senator John Thune, 
Congressman Bill Shuster, and Congressman Nick J. Rahall II submitted a 
joint letter expressing their concerns that ``the proposed Final 
Judgment would negatively impact competition for airline service to 
small communities and rural areas.'' While acknowledging that providing 
additional slots and gates to LCCs is likely to increase competition on 
certain routes, they express concern that existing service to smaller 
communities would not be protected. They urge the DOJ to allow all 
carriers to bid for the divested slots and gates, arguing that LCCs 
would be unlikely to use those assets to serve small communities. 
Senator Thune wrote separately to reiterate the concerns expressed in 
the joint letter, noting that Southwest's recent announcement to cease 
service at the three smaller airports of Jackson, Mississippi; Branson, 
Missouri; and Key West, Florida demonstrates that Southwest and other 
LCCs are not interested in serving smaller markets.
     Six commenters generally oppose the settlement on grounds 
that it fails to remedy harms that were alleged in the Complaint,\31\ 
or additional harms that the commenters foresee from the 
transaction.\32\ These comments urge that the settlement should be 
rejected and the merger enjoined. The commenters generally assert or 
presume that the United States would succeed at trial in obtaining all 
relief sought in its Complaint (e.g., Bellemare Cmts. at 8; Messina/
Alioto Cmts. at 4-5), and take the position that new LCC entry fostered 
by the divestitures will not be significant in comparison to the 
alleged harm and will not remedy the loss of competition in all of the 
city-pair markets that might be affected by the merger. Two commenters 
contend that the settlement violates a ``rule'' that ``anticompetitive 
effects in one market may not be justified by pro-competitive benefits 
in another market.'' AAI Cmts. at 11; Consumers Union Cmts. at 2. In 
addition to challenging the adequacy of the relief, two of the comments 
suggest that the settlement resulted from improper influence (Messina/
Alioto Cmts. at 1-2; FlyersRights.org Cmts. at 1), and one argues that 
the CIS contains insufficient economic analysis (Relpromax Cmts. at 1).
---------------------------------------------------------------------------

    \31\ Comments of The American Antitrust Institute (``AAI''), 
joined by AirlinePassengers.org, Association for Airline Passenger 
Rights, Business Travel Coalition, Consumer Travel Alliance, and 
FlyersRights.org (``AAI Cmts.''); Comments of Mr. Daniel Martin 
Bellemare; Comments of Mr. Carl Lundgren on behalf of Relpromax 
Antitrust, Inc. (``Relpromax Cmts.''); Comments of the Consumers 
Union; Comments of Mr. Howard Park.
    \32\ Comments of Mr. Gil D. Messina and Mr. Joseph Alioto 
(``Messina/Alioto Cmts.''). These commenters represent plaintiffs in 
the Fjord v. AMR Corp. lawsuit challenging the merger discussed 
supra n.4 and accompanying text.
---------------------------------------------------------------------------

     The Wayne County, Michigan Airport Authority (``WCAA''), 
operator of Detroit Metropolitan Airport (``DTW''), filed comments 
stating that, ``[f]or the most part, it appears that the proposed 
Settlement promotes [DOJ's] goals'' of fostering airline competition 
and avoiding anti-competitive effects. It expresses concerns, however, 
that the remedy will result in New American eliminating service on the 
Reagan National-DTW route, leaving Delta as the only carrier on that 
route. WCAA expresses its view that it is unlikely that any other 
carrier will provide competing service. WCAA therefore requests that 
the Final Judgment be modified to secure a commitment from New American 
to continue to operate on the route or to mandate that acquirers of the 
divested slots provide service to DTW. WCAA Cmts. at 2-5 & 7. WCAA also 
filed Supplemental Comments stating that New American has announced its 
intention to eliminate service on the Reagan National-DTW route.
     In addition to joining the AAI Comments, the Consumer 
Travel Alliance (``CTA'') and FlyersRights.org each submitted separate 
comments. While noting that the proposed settlement ``is clearly an 
attempt to preserve the same competition and comparison-shopping that 
American consumers should enjoy,'' CTA argues that, if the merger goes 
forward, DOJ should urge DOT to promote airline competition in three 
areas: (1) disclosure of fees for ancillary products and services and 
their distribution through all channels, (2) disclosure of all code-
shares, and (3) more limited grants by DOT of antitrust immunity for 
alliance agreements between US and foreign airlines. CTA Cmts. at 2-4. 
FlyersRights.org argues that the Court should ``require full disclosure 
of settlement negotiations and lobbying and hold an evidentiary hearing 
where passenger groups can be represented as interveners or amicus 
parties.'' FlyerRights.org Cmts. at 2.
     Allegiant Air, LLC (``Allegiant'') is an LCC interested in 
expanding service to LAX, and it hopes to obtain access to the LAX 
divestiture gates. Its comments express concern that even after New 
American relinquishes claims to ``preferential use'' of the divested 
gates, it may operate out of them on a ``common use'' basis, thereby 
limiting LCC access. Allegiant requests that the Final Judgment be 
clarified to make clear that American may not use the divested gates 
even on a ``common use'' basis, and that DOJ work with the LAX airport 
operator to ensure that LCCs have priority access to the gates. 
Allegiant Cmts. at 2-4.

[[Page 14286]]

    As several of the comments raise similar issues, we will address 
the comments in five groupings: (1) whether the Complaint was 
justified; (2) whether the remedy fully resolves the harms alleged in 
the Complaint; (3) the effect of the remedy on service patterns at 
Reagan National; (4) whether Delta is an appropriate divestiture 
candidate; and (5) procedural issues relating to the proposed Final 
Judgment and CIS as well as other miscellaneous concerns. Unless 
otherwise noted, citations to specific comments merely are 
representative of comments on that issue and are not an indication that 
other comments were not considered.

A. Any Challenge to the Merits of the Complaint Is Beyond the Scope of 
Tunney Act Review

    Delta argues that one of the key theories of the United States' 
case is simply wrong: it states that the allegations in the Complaint 
regarding competitive harm from coordination among the legacy carriers 
on capacity, fares and fees are unfounded. Delta asserts that the 
legacy carriers vigorously compete against each other on price and 
product quality, and it points to low margins in the industry as 
evidence that the legacy airlines do not coordinate.\33\ Given its 
claims that the airline industry is highly competitive and that the 
legacy carriers do not coordinate, Delta appears to be arguing that the 
United States' challenge to the American/US Airways merger was 
fundamentally flawed, such that the merger should have been approved 
unconditionally.\34\
---------------------------------------------------------------------------

    \33\ Delta argues that the low rate of return on investment in 
the airline industry relative to other industries over the past ten 
years ``disproves'' that there is a history of coordinated conduct 
among the legacy carriers. Delta Cmts at 12-15. The airline industry 
has suffered at times from poor financial performance (although 
recent record earnings by a number of carriers suggest that this 
history may not reflect current industry conditions). But there is 
no basis in law or economics to conclude that coordinated conduct 
cannot occur in the presence of financial distress. Firms may be 
especially tempted to coordinate when they are facing tough economic 
times. See Carl Shapiro, Competition Policy in Distressed 
Industries, Remarks as Prepared for Delivery to ABA Antitrust 
Symposium: Competition as Public Policy, May 13, 2009, 7-8 available 
at http://www.justice.gov/atr/public/speeches/245857.pdf.
    \34\ See Delta Cmts. at 9 (``The Government's case for blocking 
the transaction between [American] and [US Airways] was predicated 
in significant part on three fallacies about competition in the 
industry.'').
---------------------------------------------------------------------------

    The United States ``need not prove its underlying allegations in a 
Tunney Act proceeding.'' SBC Commc'ns, 489 F. Supp. 2d at 20. Indeed, 
challenges to the validity of the United States' case, or alleging that 
it should not have been brought, are challenges to the initial exercise 
of the United States' prosecutorial discretion and are outside the 
scope of a Tunney Act proceeding. A Tunney Act proceeding is not an 
opportunity for a ``de novo determination of facts and issues,'' but 
rather ``to determine whether the Department of Justice's explanations 
were reasonable under the circumstances'' because ``[t]he balancing of 
competing social and political interests affected by a proposed 
antitrust decree must be left, in the first instance, to the discretion 
of the Attorney General.'' United States v. Western Elec. Co., 993 F.2d 
1572, 1577 (D.C. Cir. 1993) (citations and internal quotation marks 
omitted). Courts consistently have refused to consider ``contentions 
going to the merits of the underlying claims and defenses.'' United 
States v. Bechtel Corp., 648 F.2d 660, 666 (9th Cir. 1981). Thus, 
Delta's challenge to the legitimacy of the United States' underlying 
case is beyond the purview of Tunney Act review.
    Nevertheless, the United States notes in response to this comment 
that the merger raised serious competition issues and that the 
Complaint provides specific allegations of competitive effects arising 
from the transaction, particularly with respect to coordination among 
the legacy carriers (including Delta), that fully justified the filing 
of this action. See infra Sec.  IV.D.

B. The Proposed Settlement Will Counteract Competitive Harm From the 
Merger by Enhancing LCC Competition

    Several commenters maintain that the proposed remedy fails to 
resolve fully the harms alleged in the Complaint.\35\ These commenters 
point to the extensive harm alleged in the Complaint and assert that 
the new LCC entry fostered by the divestitures will not neutralize all 
of the competitive losses in all of the city pair markets that might be 
affected by the merger. The following discussion responds to 
commenters' contentions that LCCs will not offer meaningful competition 
and that the remedy does not perfectly match the allegations of harm.
---------------------------------------------------------------------------

    \35\ See, e.g., AAI Cmts. at 12 (``At bottom, the Department's 
settlement does not adequately remedy the harms alleged in the 
government's complaint.''); Messina/Alioto Cmts. at 7 (``[T]he 
proposed settlement does not address the central concerns raised by 
the DOJ's complaint.'').
---------------------------------------------------------------------------

1. LCCs Provide Meaningful Competition

    Several commenters question the sufficiency of the competition that 
LCCs--and in particular Southwest--will offer as a result of the 
remedy. As a general response to this point, substantial evidence 
supports the conclusion of the United States that LCC competition is 
effective and that providing slots and gates to enable LCCs to expand 
their networks will have a significant pro-competitive effect. See 
supra, Sec.  II.B.
    Delta argues specifically that LCCs are not significant competitors 
for most passengers, especially business passengers. Delta adopts a 
misleading term for LCCs--domestic leisure carriers or ``DLCs''--in an 
attempt to paint an inaccurate picture of LCCs as only serving leisure 
passengers, only serving large cities and dense routes, and only 
providing no-frills service.\36\
---------------------------------------------------------------------------

    \36\ E.g., Delta Cmts. at 21 (``Given the limitations of their 
business model, DLCs simply cannot and do not cater to travelers 
beyond the most price-sensitive consumers seeking travel between 
popular, often densely populated markets. Thus, divestitures to DLCs 
will add little competition for time-sensitive passengers, for 
business passengers, or for passengers traveling from small- to 
medium-sized communities.'') (emphasis in original).
---------------------------------------------------------------------------

    Although LCCs' route networks are not as extensive as those of the 
legacy carriers, it is simply not the case that LCCs single-mindedly 
compete for leisure customers to the exclusion of business passengers, 
or fly high-volume routes to the exclusion of serving smaller 
communities. For example, Southwest, the largest LCC, has reported that 
approximately 35% of its passengers are travelling on business and that 
corporate sales are increasing.\37\ It serves numerous medium and small 
communities, including Rochester, Grand Rapids, and Corpus Christi. 
Moreover, a key part of Southwest's business model is to provide 
frequent flights on its routes, a service attribute highly attractive 
to business passengers. Similarly, JetBlue, although smaller than 
Southwest, also serves small and medium communities--including 
Richmond, Hartford, and Portland, Maine--and provides frequent service 
on the business routes where it flies.\38\ On the Boston-Washington 
route described in the Complaint--a classic business route--JetBlue has 
ten daily frequencies and carries more passengers

[[Page 14287]]

than American, United and Delta combined.\39\
---------------------------------------------------------------------------

    \37\ Southwest Airlines Co., Q3 2013 Earnings Conference Call, 
Corrected Transcript 13 (Oct. 24, 2013). Southwest's Chief Marketing 
Officer recently explained: ``A lot of people view Southwest as a 
leisure carrier because of our low fares, but our DNA is about being 
a business airline.'' Jennifer Rooney, Southwest Airlines CMO Kevin 
Krone Explains What's Behind The New Grown-Up Ads, Forbes.com, Apr. 
22, 2012, available at http://onforb.es/11Fqy7v.
    \38\ For example, JetBlue serves JFK-Buffalo with nine flights 
per day and JFK-Boston with seven flights per day. These routes are 
generally characterized as business, not leisure, markets.
    \39\ While JetBlue was historically oriented to leisure traffic, 
in recent years it has ``increased [its] relevance to the business 
customer, particularly in Boston'' where it is the largest carrier. 
JetBlue Corp., Annual Report (Form 10-K) at 8 (Feb. 20, 2013). 
JetBlue's CEO stated that 20% of its overall customers--and 30% of 
its Boston customers--are business passengers. JetBlue, Q4-2011 
Earnings Conference Call Transcript (Jan. 26, 2012).
---------------------------------------------------------------------------

    It is also not the case that LCCs offer only basic, no-frills 
service that is unattractive to business passengers. In some cases, 
LCCs have actually been at the forefront in adding amenities designed 
to attract business customers. JetBlue's service has proved 
particularly appealing to Boston business travelers.\40\ It recently 
introduced lie-flat seats and other amenities on certain trans-
continental flights to appeal to premium customers.\41\ Virgin America 
also caters to business passengers, billing its flights to corporate 
travel customers as ``your corner office in the sky.'' \42\ Virgin 
America was the first domestic airline to offer fleetwide WiFi, and its 
premium class service has been named the best among domestic airlines 
in an annual poll of business travelers for several years in a row 
(Delta was fifth in the most recent poll).\43\ Southwest and the other 
LCCs have also been upgrading their in-flight amenities to better 
attract business passengers.
---------------------------------------------------------------------------

    \40\ One Boston-based business flyer told the Wall Street 
Journal: ``The word spread pretty quickly around here: [JetBlue] had 
service and nice planes. . . . A lot of people in the business 
community prefer it. The fares are very competitive.'' Susan Carey, 
How JetBlue Cracked Boston, Wall St. J. (Feb. 8, 2012) available at 
http://on.wsj.com/xHdvX4.
    \41\ Press Release, JetBlue, JetBlue Introduces 
MintTM: The Best Coast-to-Coast Premium Service at an 
Unbelievably unPremium Price (Sept. 30, 2013) http://investor.jetblue.com/phoenix.zhtml?c=131045&p=irol-newsArticle&ID=1859952. JetBlue has also upgraded its standard 
product to include in-flight wi-fi and DirecTV. JetBlue was the 
first airline to offer DirecTV free of charge at every seat.
    \42\ See, e.g., Corporate Travel, VirginAmerica.com, http://www.virginamerica.com/corporate-travel.html.
    \43\ The Best Airlines and Hotels for Business Travelers, 
cntraveler.com http://cntrvlr.com/1890tST (Oct. 2013).
---------------------------------------------------------------------------

    Moreover, while Delta minimizes the competitive significance of 
LCCs in its comments, it has acknowledged in other settings the 
significant competitive effect that LCCs exert, stating in its most 
recent annual report that carriers such as Southwest, JetBlue, Spirit 
and Allegiant ``have placed significant competitive pressure on us in 
the United States and on other network carriers in the domestic 
market.'' Delta Air Lines, Inc., Annual Report (Form 10-K) 17 (Feb. 21, 
2014). The other legacy carriers likewise attest to the significance of 
LCC competition.\44\
---------------------------------------------------------------------------

    \44\ See American Airlines Group, Inc., Annual Report (Form 10-
K) 26 (Feb. 27, 2014) (``Low-cost carriers have a profound impact on 
industry revenues. . . . [LCCs] are expected to continue to increase 
their market share through growth and, potentially, consolidation, 
and could continue to have an impact on our overall performance.''); 
United Continental Holdings, Inc., Annual Report (Form 10-K) 19 
(Feb. 25, 2013) (``The increased market presence of low-cost 
carriers, which engage in substantial price discounting, has 
diminished the ability of large network carriers to achieve 
sustained profitability on domestic and international routes.''); US 
Airways Group, Inc., Annual Report (Form 10-K) 10 (Feb. 20, 2013) 
(``[R]ecent years have seen the growth of low-fare, low-cost 
competitors in many of the markets in which we operate. These 
competitors include Southwest, JetBlue, Allegiant, Frontier, Virgin 
America and Spirit. These low cost carriers generally have lower 
cost structures than US Airways.'').
---------------------------------------------------------------------------

    AAI questions the competitive significance and long-term impact of 
Southwest's entry on fares and service. However, the actual examples of 
the effects of LCC entry at slot-constrained airports discussed above 
(supra Sec.  II.B.2.a) provide compelling evidence of the importance of 
LCC competition. While AAI casts doubt on the long-term impact of 
Southwest's entry on the Newark routes,\45\ the average fare for the 
five Newark routes over the three years since Southwest's entry has 
decreased compared to pre-entry levels and has decreased 17% relative 
to changes in national average fares during this period.\46\ In other 
words, relative to the trend in nationwide air fares, consumers in 
those five Newark routes have enjoyed significantly lower fares since 
Southwest's entry. Moreover, Southwest has grown at the destination 
cities served out of Newark, demonstrating the additional 
procompetitive impact that can arise from opening slot-constrained 
airports to LCCs.\47\
---------------------------------------------------------------------------

    \45\ AAI Cmts. at 8 & n.15. AAI further states that ``[r]ecent 
empirical studies suggest that the `Southwest effect' has 
significantly petered out.'' Id. at 8 & n.16. AAI fails to note that 
the principal study it cites, Michael D. Wittman & William S. 
Swelbar, Evolving Trends of U.S. Domestic Airfares: The Impacts of 
Competition, Consolidation and Low-Cost Carriers (MIT Int'l Ctr. For 
Air Transp., Report No. ICAT-2013-07, Aug. 2013), found that ``the 
presence of an LCC like Southwest, JetBlue, Allegiant, or Spirit is 
associated with a decrease in average one-way fare of between $15-
$36,'' with the 2012 ``Southwest effect'' constituting a $17 average 
decrease in fares. Wittman at 20. Moreover, the true consumer 
savings is even greater as the study did not account for the fact 
that Southwest does not charge baggage fees.
    \46\ The national airline ticket price is calculated using DOT 
data, available at http://www.rita.dot.gov/bts/airfares/national/table. Newark market fare changes are calculated from USDOT Origin & 
Destination Survey.
    \47\ AAI dismisses this possibility by suggesting that it has 
not occurred at the six cities in which Southwest began to serve 
from Newark with slots it acquired in connection with the United-
Continental merger. AAI Cmts. at 8 n.17. However, AAI incorrectly 
relies on departures by all airlines from these airports rather than 
focusing on Southwest. In the three years since its entry into these 
airports from Newark, Southwest has increased seats at these 
airports by over 10%. (Seat changes are calculated from the Official 
Airline Guide.)
---------------------------------------------------------------------------

2. The Remedy Adequately Addresses the Harms Alleged in the Complaint

    Some commenters argue that the remedy is not in the public interest 
in that it does not match the harms alleged in the Complaint. In 
particular, they emphasize that the remedy does not provide for the 
continuation of US Airways's Advantage Fare program or address each 
city-pair route in which American and US Airways provided competing 
service.\48\ As the United States acknowledged in the CIS, the proposed 
remedy does not purport to replicate the precise form of competition 
that will be lost as a result of the merger. Rather, it requires the 
divestiture of significant assets at key airports to LCCs, a 
divestiture that will result in the expansion of LCC competition across 
the nation and the delivery of substantial consumer benefits.
---------------------------------------------------------------------------

    \48\ AAI argues that the settlement violates an ``out-of-market 
benefits rule'' and that ``anticompetitive benefits in one market 
[cannot] be justified by precompetitive consequences in another.'' 
The ``rule'' that AAI points to relates to how a court can find a 
Section 7 violation based on likely anticompetitive effects in one 
market, notwithstanding evidence of likely benefits in other 
markets. As explained above, however, the United States' concerns 
with this transaction were broad in nature. There is no ``rule'' 
precluding a settlement that reasonably resolves broad competitive 
issues even if it does not completely eliminate the possibility of 
harm in some markets. Indeed, the Department has made clear that it 
has prosecutorial discretion in considering out-of-market pro-
competitive benefits, see U.S. Dept. of Justice & Fed. Trade 
Comm'n., Horizontal Merger Guidelines 30 n.14 (2010), available at 
www.justice.gov/atr/public/guidelines/hmg-2010.html.
---------------------------------------------------------------------------

    These procompetitive benefits compare favorably with--and in some 
ways exceed--those afforded by preserving competition between US 
Airways and American. For example, the benefits of LCC entry and 
expansion enabled by the remedy will extend to a larger number of 
passengers and deliver a greater overall benefit to consumers as 
compared to the Advantage Fare program. The Advantage Fare program is 
targeted at a narrow segment of passengers, namely, price-sensitive 
business passengers who purchase less than fourteen days prior to 
departure and are willing to take connecting instead of nonstop 
service. As the Complaint noted, approximately 2.5 million roundtrip 
passengers purchased Advantage Fare tickets in 2012, representing about 
four percent of the approximately 62.5 million roundtrip passengers who 
traveled on the routes

[[Page 14288]]

where Advantage Fares were offered that year.\49\
---------------------------------------------------------------------------

    \49\ Am. Compl. ] 58 & US DOT Origin & Destination Survey.
---------------------------------------------------------------------------

    By comparison, we expect Southwest, JetBlue and Virgin America to 
offer over four million seats per year--enough capacity for two million 
roundtrip passengers--at Reagan National through their use of the 
divested slots (which, as discussed above, is over two million more 
seats than US Airways and American would likely have offered absent the 
remedy). Similarly, we expect the acquirers of the LaGuardia slots to 
offer over 1.5 million seats per year--750,000 roundtrips--through 
their use of the divested slots at that airport, and millions of 
additional passengers will benefit from the new LCC service resulting 
from the airport gate divestitures. All of the passengers served by 
LCCs as a result of the divestitures will benefit from lower fares, not 
just the last-minute shoppers that were the primary focus of US 
Airways's Advantage Fare program. Benefits will also extend to 
passengers flying on legacy carriers on routes where the remedy injects 
new LCC competition because the legacy carriers will likely lower their 
prices in response to the new competition.\50\
---------------------------------------------------------------------------

    \50\ See Kerry M. Tan, Incumbent Response to Entry by Low-Cost 
Carriers in the U.S. Airline Industry, working paper (May 20, 2013), 
http://ssrn.com/abstract=2006471; see also supra n.13 (listing 
studies).
---------------------------------------------------------------------------

    Another source of harm alleged in the Complaint was the loss of 
head-to-head competition between US Airways and American on city-pair 
routes throughout the country. As set forth in the Complaint and 
Appendix A, American and US Airways provided competing service on 
seventeen nonstop routes and hundreds of connecting routes. Although 
the remedy will not replicate the competition lost in each of these 
routes, it will allow LCCs to launch more than seventeen new nonstop 
routes and enter and expand service on connecting routes across the 
country, almost all of which will be in competition with New American. 
Travelers flying on these routes will likely benefit from substantial 
savings because LCC competition typically has a much larger effect on 
fares than legacy competition.\51\ While we do not know at this point 
the specific routes the LCCs will enter using the divestiture assets 
(and therefore cannot quantify likely effects), we can be confident 
that the head-to-head competition the LCCs will provide will 
substantially benefit millions of consumers nationwide.
---------------------------------------------------------------------------

    \51\ As described above, LCC entry on a route--whether by 
nonstop or connecting service--can have as much as three times the 
benefit on fares as that of entry by legacy carriers. See supra n.13 
and accompanying text.
---------------------------------------------------------------------------

    Despite these benefits, some commenters challenge the adequacy of 
the proposed remedy because it does not eliminate the possibility of 
harm on every route, pointing in particular to the fact that the United 
States cited high concentration levels in approximately 1,000 city pair 
markets in Appendix A of its Complaint. See, e.g., AAI Cmts. at 4. It 
is well established, however, that courts ``must accord deference to 
the government's predictions about the efficacy of its remedies, and 
may not require that the remedies perfectly match the alleged 
violation.'' SBC Commc'ns, 489 F. Supp. 2d at 17. As described above, 
the United States' primary concerns with this transaction were broad in 
nature and the proposed remedy reasonably addresses those broad 
competitive issues even if it does not seek to precisely match harm on 
a route-by-route basis.\52\
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    \52\ Route-specific remedies are simply not feasible in this 
case nor would they be desirable. Unlike in some other industries, 
slot and other airport facilities necessary to serve air 
transportation markets are generally not dedicated to a specific 
market, but can be redeployed in different city-pair markets that 
originate or terminate at the same airport. For example, a slot that 
is currently used to serve Reagan National-Nashville could 
alternatively be used to serve Reagan National-Hartford. Thus, it is 
not possible to divest a route or a set of routes to a competing 
carrier. The government could, in theory, impose behavioral rules 
focused on protecting consumers in particular markets--e.g., setting 
a cap on fares charged by New American, mandating that the merged 
carrier employ an ``Advantage Fares'' type pricing program, or 
requiring a buyer of divested gates to serve a particular route. But 
those types of behavioral remedies would be exceedingly difficult to 
craft, entail a high degree of risk of unintended consequences, 
entangle the government and the Court in market operations, and 
raise practical problems such as the need for ongoing government 
monitoring and enforcement. Even a full-stop injunction of the 
merger would not have guaranteed continued competition between the 
merging airlines on specific routes, nor would it have afforded the 
opportunity to obtain much of the relief that was made possible by 
the settlement.
---------------------------------------------------------------------------

    Such comments also ignore the fact that there has been no finding 
of liability in this case. Market concentration statistics are a 
``useful indicator'' of the likely competitive effects of the 
transaction, Am. Cmpl. ] 37, and can be used to establish a presumption 
that a transaction is unlawful under Section 7 of the Clayton Act. 
However, even if the United States were successful in establishing this 
presumption, Defendants would have sought to rebut it by arguing that 
the cited market concentration statistics (high HHIs) are not 
indicative of competitive harm on all 1,000 routes, especially those 
that already enjoy some LCC service or where one of the merging parties 
had a relatively small share. Def. AMR Corp.'s Answer (Docket No. 80) 
at 2-3. In essence, the significance of these market concentration 
statistics would have been highly disputed at trial. While the United 
States believes it would have prevailed on these issues at trial, the 
settlement avoids the risk and uncertainty of further litigation for 
all involved--factors that are appropriate for this Court to consider 
when evaluating whether a proposed remedy is in the public interest. 
See SBC Commc'ns, 489 F. Supp. 2d at 15 (``room must be made for the 
government to grant concessions in the negotiation process for 
settlements'').
    The proposed remedy secures substantial benefits for millions of 
American consumers and advances competition in ways that would not have 
been possible even if the United States had prevailed at trial. SBC 
Commc'ns, 489 F. Supp. 2d at 23 (``Success at trial was surely not 
assured, so pursuit of that alternative may have resulted in no remedy 
at all. While a trial may have created an even greater evidentiary 
record, that benefit may not outweigh the possible loss of the 
settlement remedies.''). Thus, giving deference to the government's 
assessment, the proposed settlement is well within ``the reaches of the 
public interest.''

C. The Remedy Does Not Mandate Changes in Service Patterns at Reagan 
National

    Several commenters expressed concerns that service patterns at 
Reagan National could change as a result of the slot divestitures.\53\ 
New American has announced its intention to drop service from Reagan 
National to certain destinations,\54\ and the purchasers of the slots 
have not yet announced all of the new routes they intend to fly. Slots 
are generally not designated for use in specific markets, and thus the 
acquirers may make different choices about where to fly than US Airways 
and American have made in the past. The United States was aware of the 
potential impact on existing service when crafting the remedy and took 
steps to ensure that the divestitures would not preclude New American 
from using its approximately 500 remaining slots to continue to serve 
any market it currently serves. While there may be some changes in 
service at Reagan National in the immediate

[[Page 14289]]

aftermath of the divestitures, on balance, the competitive landscape at 
the airport will be greatly improved as LCCs acquire the resources they 
need to compete effectively across a broad range of routes.\55\ As 
discussed above, the effect of the divestitures will be a significant 
net increase in the number of seats operated at Reagan National.
---------------------------------------------------------------------------

    \53\ See Delta Cmts. at 6-7; Rockefeller et al. Cmts. at 1; WCAA 
Cmts. at 2.
    \54\ Press Release, American Airlines, American Airlines to 
Implement Network Changes as a Result of DOJ-Mandated Slot 
Divestitures (Jan. 15, 2014), available at http://hub.aa.com/en/nr/pressrelease/american-airlines-to-implement-network-changes-as-a-result-of-doj-mandated-slot-divestitures.
    \55\ The fact that a nonstop flight from Reagan National to a 
particular city may be discontinued does not mean that passengers 
from that city are unable to fly to Washington. As New American 
stated in its press release announcing the nonstop routes it had 
decided to cut, ``[c]ustomers in these communities will still have 
access to DCA, which remains a key hub for American, through 
connecting flights from one or more of the airline's other eight 
hubs.'' Id.
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1. Background on Slot Regulation at Reagan National

    In order to appreciate the competitive implications of the Reagan 
National slots divestitures, it is important to understand the federal 
regulation at the airport. Demand for access to Reagan National has 
exceeded its capacity since before the airline industry was 
deregulated. The FAA promulgated the first set of slot rules in 1969 in 
order to manage the problem. The rule, known as the High Density Rule 
(``HDR'') limited the number of landing and take-off slots available at 
Reagan National and other congested airports.\56\ Since 1969, the FAA 
and Congress have periodically revised the number of takeoffs and 
landings permitted at the airports and made various changes to the slot 
rules. Reagan National is also subject to a federally-imposed 1,250-
mile ``perimeter rule'' limiting the distance of nonstop flights to and 
from the airport.
---------------------------------------------------------------------------

    \56\ High Density Traffic Airports, 14 C.F.R. Sec.  93.121-133. 
Under the HDR, the FAA allocated slots to airlines based on their 
existing operating schedules at the airports. Subject to the FAA's 
``use or lose'' regulations and other conditions, the carriers were 
essentially granted access to the slots in perpetuity, and had 
permission to buy, sell, and trade them. The rules divided slots 
into two categories: ``air carrier'' slots useable by any type of 
aircraft, and ``commuter'' slots that are restricted to smaller 
aircraft. The airports governed by the rule at the time were 
LaGuardia, John F. Kennedy International, Newark Liberty 
International, O'Hare and Reagan National. Although LaGuardia, JFK, 
and Newark are still subject to slot controls, Reagan National is 
the only airport governed by the HDR today.
---------------------------------------------------------------------------

    Many airlines consider flights to this airport to be a valuable 
part of the service they offer to travelers. Yet, for decades, carriers 
wishing to enter or expand at Reagan National have had problems 
obtaining slots. After the FAA's initial allocation, a carrier wishing 
to begin or expand service at Reagan National could theoretically buy 
or lease slots from an airline that already owned them, but slots have 
been offered for sale or trade infrequently. In April 2000, Congress 
enacted the Wendell H. Ford Aviation Investment and Reform Act for the 
21st Century (``AIR-21'') which directed DOT to grant a limited number 
of ``exemptions'' to the Reagan National slots rules in an attempt to 
address these access problems, among other goals.\57\ The Act created a 
limited number of exemptions for flights beyond the 1,250-mile 
perimeter limit and for destinations within the perimeter.\58\ Unlike 
slots, exemptions are granted to airlines for service on a particular 
route, and the grantee airline generally cannot transfer an exemption 
to another airline.\59\ Although exemptions have provided modest 
improvements to the access problems that smaller carriers face at the 
airport, the scarcity of slots is still a substantial barrier to entry.
---------------------------------------------------------------------------

    \57\ Wendell H. Ford Aviation Investment and Reform Act for the 
21st Century, 49 U.S.C. Sec.  41718, Pub. L. No. 106-181, 114 Stat. 
61, 112-115 (2000). Through AIR-21, Congress established criteria 
for DOT to use when granting ``within-perimeter'' exemptions that 
reflect a balance of competition and other goals: ``[T]he Secretary 
shall develop criteria for distributing slot exemptions for flights 
within the perimeter to such airports under this paragraph in a 
manner that promotes air transportation: (1) by new entrant air 
carriers and limited incumbent air carriers; (2) to communities 
without existing nonstop air transportation to Ronald Reagan 
Washington National Airport; (3) to small communities; (4) that will 
provide competitive nonstop air transportation on a monopoly nonstop 
route to Ronald Reagan Washington National Airport; or (5) that will 
produce the maximum competitive benefits, including low fares.'' 49 
U.S.C. Sec.  41718(b).
    \58\ Many of the ``outside perimeter'' exemptions were granted 
to legacy carriers.
    \59\ 49 U.S.C. Sec.  41714(j). Two subsequent federal statutes, 
enacted in 2003 and 2012, expanded the number of exemptions at DCA. 
Vision 100-Century of Aviation Reauthorization Act (Vision 100), 
Pub. L. No. 108-176 Sec.  425, 117 Stat. 2490, 2555 (2003) and the 
FAA Modernization and Reform Act of 2012, Pub. L. No. 112-95 Sec.  
414, 126 Stat. 11, 90 (2012).
---------------------------------------------------------------------------

    A major slots transaction substantially changed the distribution of 
slot holdings at Reagan National in 2011. Pursuant to the ``US Airways-
Delta Slots Swap,'' Delta traded 84 slots (almost half of its Reagan 
National slot holdings at the time) to US Airways in exchange for slots 
at LaGuardia. DOT approved the transaction subject to, among other 
remedies, the parties divesting 16 Reagan National slots to carriers 
who held less than 5 percent of the slots at the airport, a group that 
consisted exclusively of LCCs.\60\ Delta divested 16 of its remaining 
slots to satisfy DOT's requirement.
---------------------------------------------------------------------------

    \60\ Petition for Waiver of the Terms of the Order Limiting 
Scheduled Operations at LaGuardia Airport, 76 Fed. Reg. 63,702, 
63,703 (October 13, 2011). The transaction required DOT review 
because the rules governing LaGuardia prohibit permanent transfers 
of slots without a waiver from DOT.
---------------------------------------------------------------------------

    Despite the efforts of Congress and DOT to ease access to Reagan 
National, over 90 percent of the authorizations to take-off and land at 
the airport remained in the hands of legacy carriers prior to this 
merger remedy.\61\ The Reagan National slot divestitures pursuant to 
the proposed Final Judgment resulted in the transfer of an 
unprecedented 12 percent of the slots at the airport from legacy 
carriers to low-cost carriers. As the LCCs begin to provide service 
using the newly-acquired slots, the competitive landscape at Reagan 
National will change significantly and benefit consumers in Washington, 
DC and across the nation.
---------------------------------------------------------------------------

    \61\ A total of 808 daily slots and 64 daily exemptions have 
been allocated to commercial airlines. New American would have held 
69 percent of the slots post-merger, but as a result of the remedy, 
its share will drop to 57 percent, which is comparable to US 
Airways' pre-merger holdings. Delta holds 13 percent, and United 
holds 9 percent. Post-divestitures, Southwest will hold 9 percent, 
JetBlue will hold 7 percent, and Virgin America will hold 1 percent. 
Other carriers at the airport include Air Canada, Alaska Airlines, 
Frontier Airlines, and Sun Country Airlines, all with less than 2 
percent. (Shares are based on July 2013 FAA slot holdings and 
exemption data and do not reflect changes in slot holdings as the 
result of Republic's recent sale of Frontier, which may prompt the 
reallocation of a small number of slots.)
---------------------------------------------------------------------------

2. Nothing in the Remedy Requires New American to Discontinue Service 
to Particular Airports

    Three commenters suggest that the proposed settlement will 
negatively impact third parties. Members of Congress and Delta, on the 
one hand, assert that service from Reagan National to certain small 
communities currently served by US Airways will be eliminated as a 
result of the divestitures.\62\ The operator of the Detroit Airport, on 
the other hand, asserts that the large city of Detroit will lose a 
competitor on the Reagan National-Detroit route, partly as a result of 
measures that were taken to protect small communities. The United 
States recognizes that the Court should consider the impact of the 
settlement on third parties. Microsoft, 56 F.3d at 1462 (``And, 
certainly, if third parties contend that they would be positively 
injured by the decree, a district judge might well hesitate before 
assuming that the decree is appropriate.''). Here, however, the 
settlement itself does not mandate that New American eliminate service 
on any particular route, and in fact it ensures that New American will 
retain enormous flexibility to determine which

[[Page 14290]]

routes it will serve with its remaining slots.
---------------------------------------------------------------------------

    \62\ Notably, none of the small communities allegedly affected 
by the remedy filed comments, and several of them are located in 
states that separately settled with the defendants.
---------------------------------------------------------------------------

    The proposed Final Judgment intentionally does not call for the 
divestiture of any of US Airways's or American's ``commuter'' slots (a 
total of about 150), which are particularly well-suited for service to 
small communities given that they are limited to smaller-sized 
aircraft. Instead, it calls only for divestiture of ``air carrier'' 
slots. This distinction was made to increase the likelihood that New 
American's service to small and medium communities would be maintained. 
Defendants' agreement with DOT, see supra n.11 and accompanying text, 
also is designed to preserve service to small communities by requiring 
New American to use its commuter slots at Reagan National to serve 
medium and small airports.\63\
---------------------------------------------------------------------------

    \63\ Even in cases where third parties have property or contract 
rights in the particular assets being divested, courts have approved 
settlements where the decree contains ``provisions designed to 
protect against undue harm.'' See United States v. Pearson plc, 55 
F. Supp. 2d 43, 46-47 (D.D.C. 1999) (finding decree requiring 
divestiture of certain textbook lines to be in public interest 
notwithstanding claim by impacted author that his forthcoming book 
would be negatively affected by divestiture). Although the 
communities served from Reagan National do not have a property or 
contract right to the slots that airlines use to provide such 
service, the government has nevertheless structured the relief to 
guard against potential undue disruptions to small communities.
---------------------------------------------------------------------------

    Moreover, New American will remain the largest holder of slots at 
Reagan National, with over 50 percent of the total number at the 
airport. Other than the commitments it has made to DOT with respect to 
commuter slots, it will maintain complete flexibility to deploy its 
slots in any way it sees fit.\64\ It will not be obligated to eliminate 
service on any route. US Airways and Delta made this very point when 
responding to DOT's concerns in connection with the US Airways-Delta 
Slots Swap. DOT was concerned that as Delta and US Airways gave up 
slots at Reagan National and LaGuardia, respectively, they would 
eliminate service on particular routes where they competed against each 
other. US Airways and Delta explained:
---------------------------------------------------------------------------

    \64\ It also seems likely that New American has sufficient 
capacity to complete the divestitures and maintain service to most, 
if not all, of the cities it currently serves simply by using its 
slots more efficiently, e.g., by using larger aircraft and reducing 
frequency on some of its routes. US Airways, in particular, has a 
history of flying high-frequency, low-load factor, and often low-
capacity aircraft carrying a high percentage of connecting 
passengers on a number of its Reagan National routes.
---------------------------------------------------------------------------

    Here, . . . Delta and US Airways are selling only some of their DCA 
and LGA slots to each other and each will continue to be independent 
competitors and retain substantial slots at both airports. The slots 
each retains (and those each is selling) are not tied to any particular 
city-pair. How the carriers decide to schedule their remaining slots is 
completely within each carrier's unilateral discretion, and nothing in 
this transaction obligates Delta or US Airways to stop competing on any 
route.\65\
---------------------------------------------------------------------------

    \65\ Comments of Delta Air Lines, Inc. and US Airways, Inc. at 
31, Federal Aviation Administration Notice of a Petition for Waiver 
of the Terms of the Order Limiting Scheduled Operations at LaGuardia 
Airport (2010) (Docket No. FAA-2010-0109), available at http://www.regulations.gov/#!documentDetail;D=FAA-2010-010.
---------------------------------------------------------------------------

    In short, New American would be making a business decision as to 
which routes it serves. An inherent feature of the airline industry, 
and independent of any changes in slot holdings, is that airlines 
reassess how to deploy their assets and enter and exit routes as they 
seek to take advantage of profit opportunities. For example, in early 
2013, US Airways stopped providing nonstop service between Reagan 
National and Bentonville, Arkansas (XNA), a market it had entered only 
five months earlier. Going back in time, US Airways exited a number of 
markets it formerly served from Reagan National--e.g., Cleveland (CLE), 
Houston (IAH), Chicago (ORD), and Atlanta (ATL)--despite not having 
given up a single slot.\66\
---------------------------------------------------------------------------

    \66\ US Airways exited Cleveland in November 2005, Houston in 
February 2006, O'Hare in July 2006, and Atlanta in October 2008. 
Delta's route choices at Reagan National have been even more fluid. 
It has eliminated service to cities such as Ft. Lauderdale (FLL), 
Birmingham (BHM), Milwaukee (MKE), Lansing (LAN), Melbourne (MLB), 
Baton Rouge (BTR), Raleigh/Durham (RDU), and Huntsville (HSV)--none 
of which was prompted by the loss of slots. In March 2012, Delta 
even chose to return a pair of exemptions that it had been granted 
specifically for service on the Reagan National-Jackson, Mississippi 
(JAN) route, rather than continuing to fly the route.
---------------------------------------------------------------------------

    It is not surprising that New American would make some changes to 
its service patterns as a result of the merger, and indeed it has 
announced that it will make some adjustments at Reagan National. It 
recently announced that it would no longer operate ``year-round, daily 
nonstop service to 17 destinations from DCA'' including large cities 
such as San Diego, Minneapolis, and Detroit, and small communities such 
as Jacksonville (NC) and Fort Walton Beach.\67\ US Airways had added 
its Reagan National service to nearly all of these cities within the 
last two years. But none of these cities were guaranteed nonstop US 
Airways service in perpetuity. As time progressed, US Airways may well 
have chosen to shift out of additional markets independently of the 
merger.\68\
---------------------------------------------------------------------------

    \67\ American Airlines to Implement Network Changes as a Result 
of DOJ-mandated Slot Divestitures, PR Newswire, Jan. 15, 2014, 
available at http://hub.aa.com/en/nr/pressrelease/american-airlines-to-implement-network-changes-as-a-result-of-doj-mandated-slot-divestitures. The complete list includes Augusta, GA (AGS); Detroit, 
MI (DTW); Fayetteville, NC (FAY); Fort Walton Beach, FL (VPS); 
Islip, NY (ISP); Jacksonville, NC (OAJ); Little Rock, AR (LIT); 
Minneapolis, MN (MSP); Montreal, Canada (YUL); Myrtle Beach, SC 
(MYR); Nassau, Bahamas (NAS); Omaha, NE (OMA); Pensacola, FL (PNS); 
San Diego, CA (SAN); Savannah, GA (SAV); Tallahassee, FL (TLH); and 
Wilmington, NC (ILM).
    \68\ And despite New American's claim that the changes were ``a 
result of DOJ-mandated divestitures,'' some changes were clearly 
independent of the divestitures--e.g., there is no possible 
connection between the settlement and New American's decision to 
exit Reagan National-San Diego, which was made possible through an 
``out of perimeter'' slot exemption that New American will continue 
to hold and use for additional service to LAX. The remedy did not 
require divestiture of any exemptions, such as those needed to 
provide service to LAX or San Diego. New American chose on its own 
to stop serving San Diego in favor of increasing service to LAX.
---------------------------------------------------------------------------

3. Mandating Service on Any Particular Route Is Unwarranted

    Wayne County Airport Authority (``WCAA'') expressed its concern 
that, following the divestitures, New American will eliminate service 
on the Reagan National-Detroit route, leaving Delta as the only carrier 
on the route. WCAA asserted that it is unlikely that any other carrier 
will replace that lost competition, and that the settlement should be 
revised to ensure that a second carrier commits to serving the 
market.\69\ As explained above, the settlement itself does not require 
New American to eliminate its existing service on any route, including 
Reagan National-Detroit. Any modification that would restrict how 
airlines use their assets would be likely to inhibit, not promote, 
competition. One of the benefits of the proposed remedy is that LCCs 
will, for the first time, have a meaningful ability to shift slots to 
serve different routes as market conditions change. For example, if 
prices increase on the Reagan National-Detroit route following New 
American's exit, Southwest and JetBlue will now have sufficient slot 
resources such that they could consider entering the market in the 
future, even if they decide not to serve that route as an initial 
matter. Such flexibility would be lost if slot holders were locked in 
to serving particular routes.
---------------------------------------------------------------------------

    \69\ WCAA Cmts. at 5-7. Some may argue that the United States 
should similarly preserve service to the other markets New American 
has announced it will exit. Such a result, however, would raise the 
same significant concerns with mandating service discussed above, 
see supra, n.52.

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[[Page 14291]]

D. Delta Is Not an Appropriate Divestiture Candidate

    Delta, while first arguing that the government's theory of 
liability was flawed (supra Sec.  IV.A), asserts that it should be 
entitled to acquire a significant portion of the remedy assets, namely 
slots at Reagan National and the two gates at Dallas Love Field. 
Section IV.N. of the proposed Final Judgment requires that the assets 
be divested to an acquirer or acquirers who in the judgment and sole 
discretion of the United States ``will remedy the competitive harm 
alleged in the Complaint.'' In response to Delta's request to acquire 
assets, the United States considered all the facts and circumstances in 
determining whether Delta should be considered an appropriate 
divestiture candidate. The United States concluded that divesting 
assets to Delta would fail to address the harm arising from the merger 
and would be inconsistent with the goals that the remedy seeks to 
achieve.
    In cases involving allegations of coordinated effects arising from 
a proposed merger, divestiture assets should not be acquired by firms 
that are part of the oligopoly. As the Antitrust Division's Policy 
Guide to Merger Remedies explains:
    If the concern is one of coordinated effects among a small set of 
post-merger competitors, divestiture to any firm in that set would 
itself raise competitive issues. In that situation, the Division likely 
would approve divestiture only to a firm outside that set. [FN: Indeed, 
if harmful coordination is a concern because the merger is removing a 
uniquely positioned maverick, the divestiture likely would have to be 
to a firm with maverick-like interests and incentives.] \70\
---------------------------------------------------------------------------

    \70\ U.S. Dep't of Justice, Antitrust Div., Antitrust Division 
Policy Guide to Merger Remedies 28 (2011) [hereinafter Remedies 
Guide]; see also id. at 31 (``However, this concern is adequately 
and more directly addressed by applying the fundamental test that 
the proposed purchaser must not itself raise competitive 
concerns.''). The same concepts appeared in the Antitrust Division's 
2004 Policy Guide to Merger Remedies. See generally Phillip E. 
Areeda and Herbert Hovenkamp, Antitrust Law: An Analysis of 
Antitrust Principles and Their Application ] 990d (3rd ed. 2011 and 
Supp. 2013) (discussing Remedies Guide).
---------------------------------------------------------------------------

    The Complaint describes oligopoly behavior by the legacy carriers 
(including Delta), such as examples of legacy carriers ``respecting'' 
the nonstop prices of cooperating legacies but undercutting the nonstop 
fares of US Airways in response to its Advantage Fares program and 
tactics used to deter aggressive discounting and prevent fare wars.\71\ 
Delta's Comments ignore these specific allegations of coordinated 
behavior.
---------------------------------------------------------------------------

    \71\ Am. Compl. ]] 48-54 (describing legacy carriers' response 
to the Advantage Fares program) & ] 43 (describing ``cross-market 
initiatives'' between Delta and US Airways).
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    The allegations of coordination among the legacy carriers fully 
justify the United States' discretionary decision to direct that the 
divestiture assets be sold to firms that are unlikely to follow 
industry consensus, in this case the LCCs. The goal of the divestiture 
remedy is to enhance the ability of the LCCs to frustrate coordination 
among the legacy carriers. Allowing Delta to acquire divestiture assets 
would undermine the effectiveness of the remedy to accomplish this goal 
and, given Delta's status as the second largest slot holder at Reagan 
National, would exacerbate the slot concentration issues at that 
airport.\72\
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    \72\ See Remedies Guide, supra note 70, at 28 (``[I]f the 
concern is that the merger will enhance an already dominant firm's 
ability unilaterally to exercise market power, divestiture to 
another large competitor in the market is not likely to be 
acceptable, although divestiture to a fringe incumbent might.'').
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    Delta further claims that an LCC-only divestiture of slots would be 
``harmful to competition'' as Delta would be more likely than LCCs to 
serve small- and medium-sized communities, including those communities 
that New American is exiting. Delta Cmts. at 24-30. Delta's argument 
ignores the substantial benefits of LCC competition, especially with 
respect to entry at slot-constrained airports long dominated by legacy 
carriers (see supra Sec.  II.B.2.a). It also ignores the fact that LCCs 
routinely serve small- and medium-sized communities; indeed, JetBlue 
has already announced schedules for half of the twelve roundtrip 
flights it will serve from Reagan National with its divested slots and 
five of these six new flights will be to small- or medium-sized 
communities, either to replace service that New American is exiting or 
in competition with New American.\73\ Southwest is likely to serve many 
more such cities when it announces its schedule at Reagan National. 
Finally, Delta fails to note that none of the proposed markets it 
claims it would serve with the additional forty-four slots it requests 
(i.e., over 40% of the total number of Reagan National slots being 
divested) corresponds to routes New American is exiting.\74\
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    \73\ JetBlue will provide two flights a day to Charleston, SC 
(small community, competing against New American), two to Hartford, 
CT (medium community, competing against New American), and one to 
Nassau, Bahamas (small community, New American is exiting). The 
other flight announced so far will be to Tampa, Florida. JetBlue 
expects to announce the remaining six flights later this year. Press 
Release, JetBlue, ``JetBlue Adds Three Nonstop Destinations for 
Customers at Ronald Reagan Washington National Airport, Offers 
Introductory One-Way Fares as Low as $30'' (Mar. 6, 2014), available 
at http://investor.jetblue.com/phoenix.zhtml?c=131045&p=irol-NewsArticle.
    \74\ Compare Delta Cmts. at 29 (listing proposed routes to 
serve) with supra n.67 (listing cities American has announced it 
will discontinue service from Reagan National).
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    With respect to the divestiture of the Love Field gates, Delta 
argues that ``no reasonable justification'' exists to favor LCCs over 
Delta.\75\ Delta Cmts. at 30-34. But the point of the Love Field 
divestiture is for an LCC to offer service at the airport that even 
Delta recognizes is ``poised to become a highly attractive option for 
business travelers from across the nation who will be drawn by its 
proximity to the Dallas city center.'' Id. at 31. The acquirer of the 
gates will be able to offer a compelling product to sought-after 
business passengers who otherwise would favor New American's service 
out of its hub at DFW. Obtaining access to Love Field will 
significantly enhance the acquirer's ability to meaningfully compete 
against New American, thereby furthering the overall goals of the 
remedy. See supra Sec.  II.B.2.b. In contrast, Delta, given its overall 
size and scope as well as its presence at DFW, can and does challenge 
New American for the business of corporate customers flying to and from 
the Dallas area.
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    \75\ Historically, the Wright Amendment restricted service from 
Love Field to destinations in certain nearby states. In 2006, 
Congress enacted the Wright Amendment Reform Act of 2006, under 
which the perimeter restrictions will be removed effective October 
13, 2014. However, that statute also ratified and effectuated an 
agreement among American, Southwest and Dallas-Ft. Worth area 
authorities that capped the number of gates at Love Field to twenty. 
See The ``Five Party Agreement,'' (July 11, 2006) reproduced in S. 
Rep. No. 109-317, at 4-15 (2006)). Southwest leases 16 of the Love 
Field gates and American and United lease two each.
---------------------------------------------------------------------------

    Delta also asserts that it is the only airline that can offer 
business travelers at Love Field a network of domestic and 
international destinations, but Delta's network offerings are not 
unique at Love Field. United Airlines, which has access to two gates at 
Love Field, offers a network of locations substantially similar to 
Delta's. Delta also argues that only it offers a ``premium product'' 
that includes amenities such as a first-class cabin and ``Wi-Fi-
enabled'' aircraft, but it ignores the fact, as discussed above (supra 
Sec.  IV.B.1), that many LCCs offer, and were frequently pioneers in 
offering, products and amenities that appeal to business travelers.\76\
---------------------------------------------------------------------------

    \76\ Delta also argues that it should obtain the Love Field 
gates to prevent Southwest, which currently operates 16 of the 20 
gates at Love Field, from becoming even more dominant at the 
airport. As discussed in the CIS, providing a LCC with the 
opportunity to differentiate itself from the large hub carrier in 
Dallas should increase its competitive vigor and ability to grow. 
CIS at 9-10. Delta incorrectly assumes that restricting eligible 
bidders for the American gate interests would result in acquisition 
by Southwest. At least one other LCC has expressed significant 
interest. Press Release, Virgin America, ``Virgin America Plans 
Dallas Expansion: Airline wants to bring more business-friendly, 
low-fare flight competition to Dallas with new flights from Love 
Field,'' available at http://www.virginamerica.com/press-release/2014/virgin-america-plans-dallas-expansion.html. The United States 
will take all competitive factors into account when determining 
which acquirer to approve.

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[[Page 14292]]

    Finally, Delta's claim that it will be improperly evicted due to 
the divestiture is similarly unavailing. Delta currently operates one 
gate under a sub-lease from American that is terminable on thirty-days' 
notice. (Another airline, Seaport, sub-leases the other American gate.) 
But for the remedy, New American was likely to terminate the subleases 
and operate the gates itself,\77\ an outcome that Delta surely 
recognizes given the competitive value of the gates once the Wright 
Amendment restrictions expire in October of this year. Delta, 
therefore, never had a contractual (or other) right or expectation that 
it would be able to remain at the American gate. The divestiture does 
not change this fact.
---------------------------------------------------------------------------

    \77\ See Terry Maxon, The New American Airlines would have liked 
to have used the Dallas Love Field gates, The Dallas Morning News 
Airline Biz Blog (Jan. 28, 2014, 6:10 PM), http://aviationblog.dallasnews.com/2014/01/the-new-american-airlines-would-have-liked-to-have-used-the-dallas-love-field-gates.html/?nclick_check=1.
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    In the end, the thrust of Delta's position is that its private 
interests in obtaining divestiture assets should trump the remedial 
goals of the proposed Final Judgment.\78\ Yet, no third party has a 
right to demand that the Government exercise its discretion in 
approving divestiture buyers to better serve the private interests of 
that third party. While a court may inquire into the impact of the 
settlement on third parties, it ``should not reject an otherwise 
adequate remedy simply because a third party claims it could be better 
treated.'' Microsoft, 56 F.3d at 1461 n.9.
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    \78\ It is in Delta's interests to restrain the growth of LCCs, 
as the more LCCs grow, the more likely it is that they will expand 
offerings that compete with Delta. For example, as LCCs obtain more 
slots at Reagan National, the more likely it will be that they will 
initiate service on the highly-profitable ``hub routes'' that Delta 
currently serves (such as Reagan National to Minneapolis or 
Detroit). Such a result could significantly reduce fares and 
profits, as occurred when JetBlue was able to compete against 
USAirways on its Reagan National-Boston route, see Am. Compl. ] 88. 
The fewer slots that are available to low-cost competitors, the less 
likely it will be that a LCC will have sufficient slots to challenge 
Delta in any of its lucrative Reagan National routes. The same 
concept applies at Love Field, where the divestiture may allow an 
LCC to offer highly competitive service to business passengers that 
otherwise may have chosen Delta's service from DFW.
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E. Additional Concerns Raised by Commenters

1. Airline Consumer Disclosure and Alliance Issues Are Outside the 
Scope of This Action

    The Consumer Travel Alliance (``CTA'') recognizes that the PFJ 
contains ``some good first steps'' to prevent harm from the merger, but 
argues that the competitiveness of the airline industry is undermined 
by the failure of the Department of Transportation to take action in 
several areas: ``while DOJ is attempting to address the loss of airline 
competition through settlement regarding this merger, the DOT 
diminishes competition by not requiring truthful disclosure of airfares 
and ancillary fees, deception created by code-sharing and the de facto 
mergers spawned by DOT's liberal allowance of antitrust immunity.'' CTA 
Cmts. at 2. It urges that the Department of Justice advocate to DOT 
that it take action in these areas to increase disclosure requirements 
and reduce the breadth of airline alliances. Similarly, Mr. Bellemare's 
Comments appear to suggest that the Court should enjoin the proposed 
merger so that the United States could seek the repeal of the 
``regulatory barrier'' to entry posed by slot restrictions at Reagan 
National and other airports. Bellemare Cmts. at 16.
    As CTA appears to recognize, the problems it describes and the 
remedies it proposes exist independently from this transaction, and are 
outside the scope of the Tunney Act proceedings in this action. The 
same is true of the entry constraints posed by the need to allocate the 
limited resource of runway and airspace capacity at Reagan National and 
the New York airports. With respect to the latter issue, the proposed 
Final Judgment explicitly addresses the transaction's impact on slot 
holdings and entry at slot-controlled airports. We note, moreover, that 
the Department of Justice does regularly consult with DOT on a formal 
and informal basis to preserve and advance airline competition.

2. The Proposed Final Judgment Precludes New American from Reacquiring 
the Divested Gates at LAX; No Modification of the Decree Is Necessary

    Allegiant, an LCC, submitted a comment on the divestiture of gates 
at Los Angeles International Airport (``LAX''). Allegiant believes that 
New American intends to attempt to gain access to the gates identified 
in the proposed Final Judgment (31A and 31B) under the airport's common 
use procedures,\79\ and that this would result in the gates not being 
available for use by LCCs as intended by the proposed Final 
Judgment.\80\ Allegiant requests that the Final Judgment be modified to 
make clear that the prohibition on re-acquisition of divested assets 
(Section XII) applies to use of gates on a common use basis. Allegiant 
further submits that the United States should work with the relevant 
airport authority, Los Angeles World Airports (``LAWA''), to ensure 
that the gates be available to LCCs.
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    \79\ Airport gates leased to a particular carrier on a 
preferential use basis allow the leasing carrier to use the gate 
subject to the airport authority's ability to provide access to 
another airline if the gate is not being used by the lessor. The 
airport authority often controls some ``common use'' gates and 
allocates them to carriers on a per-use basis.
    \80\ Allegiant's concern about this issue, which other LCCs have 
also raised with the Department of Justice, demonstrates that there 
is unmet demand for gates at LAX and that Delta's claim to the 
contrary, Delta Cmts. at 31 n.50, is false.
---------------------------------------------------------------------------

    As Allegiant correctly states, the purpose of the requirement that 
Defendants divest two gates at LAX and the four other key airports is 
to provide access to LCCs in order to allow them to expand their 
networks. The intent of the decree is that there be two gates available 
for LCC use beyond what would have existed but for the divestiture. The 
gate divestiture can be accomplished either by Defendants sub-leasing 
the gates to one or more LCCs on the same terms as Defendants lease the 
gates or by Defendants turning the gates back to the airport ``to 
enable the Acquirer to lease them from the airport operator.'' Section 
IV.H. The decree also prohibits Defendants from re-acquiring ``any 
interest'' in the divested assets. Section XII.
    The divestiture process with respect to the key airport gates--
including those at LAX--has not yet begun.\81\ Nevertheless, the United 
States has been in communication with LAWA concerning the issues raised 
by the terms of the proposed Final Judgment.\82\ The United States 
believes that the existing language in the proposed Final Judgment 
prohibiting Defendants from taking any action to impede the

[[Page 14293]]

divestiture or re-acquiring ``any interest'' in the divested assets is 
sufficient to prevent New American from using the airport's procedures 
to block LCC access to the two gates. Accordingly, it is not necessary 
to modify the proposed Final Judgment.
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    \81\ Prior to the settlement agreement between the United States 
and Defendants, US Airways was in the process of moving to Terminal 
3 at LAX where the two gates subject to the decree are located. It 
was originally intended that US Airways would occupy the gates under 
a preferential use lease, but due to the settlement that lease has 
not been executed and the two gates subject to the divestiture are 
common use gates controlled by the airport.
    \82\ Until the divestiture process is completed, the two gates 
may be used by New American or any other carrier granted access 
under the airport's common use rules.
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3. The CIS Fully Complies with Tunney Act Requirements

    Relpromax argues that the Competitive Impact Statement (``CIS'') is 
deficient and requests that the Court require the United States to 
rewrite the CIS and resubmit it for public comment. Relpromax faults 
the CIS for failing ``to provide substantive economic analysis.'' 
Relpromax Cmts. at 13. Although couched in terms of an alleged failure 
by the United States to comply with the Tunney Act, Relpromax's 
objections are in fact largely an objection to the proposed Final 
Judgment itself. The CIS fully complies with the Tunney Act 
requirements.
    Congress enacted the Tunney Act, among other reasons, ``to 
encourage additional comment and response by providing more adequate 
notice [concerning a proposed consent judgment] to the public.'' S. 
Rep. No. 93-298 at 5 (1973); H.R. Rep. No. 93-1463 at 7 (1974), 
reprinted in 1974 U.S.C.C.A.N. 6535, 6538. The CIS is the primary means 
by which Congress sought to provide more adequate notice to the public. 
The Tunney Act requires that the CIS ``recite'':
    (1) the nature and purpose of the proceeding;
    (2) a description of the practices or events giving rise to the 
alleged violations of the antitrust laws;
    (3) an explanation of the proposal for a consent judgment, 
including an explanation of any unusual circumstances giving rise to 
such proposal or any provision contained therein, relief to be obtained 
thereby, and the anticipated effects on competition of such relief;
    (4) the remedies available to potential private plaintiffs damaged 
by the alleged violation in the event that such proposal for a consent 
judgment is entered in such proceeding;
    (5) a description of the procedures available for modification of 
such proposal; and
    (6) a description and evaluation of alternatives to such proposal 
actually considered by the United States.

15 U.S.C. Sec.  16(b).
    There is no dispute that the CIS satisfies the requirements of the 
Tunney Act with respect to items 1, 2, 4 and 5 listed above. Relpromax 
asserts that the CIS fails to adequately address item 3 (explanation of 
the proposed judgment) because it lacks sufficient economic 
analysis.\83\ Relpromax provides its own economic analysis, arguing 
that it shows that the proposed decree is inadequate.\84\ Relpromax's 
comments about the adequacy of the CIS are thus in fact complaints 
about the substance of the proposed Final Judgment. It is clear from 
the detailed substantive comments filed here (including those of 
Relpromax) that the CIS contains sufficient explanation to allow the 
public to understand the provisions of the decree and submit meaningful 
comments.
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    \83\ Relpromax seems to suggest that a CIS should include a 
level of analysis similar to that contained in a Regulatory Impact 
Analysis (``RIA'') required by Executive Orders 13563 and 12866 when 
a federal regulatory agency is considering a significant rule. 
Relpromax Cmts. at 15. RIAs must contain detailed cost-benefit 
analyses as well as a discussion of a number of specified possible 
alternatives to a proposed regulation. See Office of Mgmt. & Budget, 
Exec. Office of the President, OMB Circular A-4, Regulatory Analysis 
(2003). This is far beyond what is required in a CIS.
    \84\ Relpromax purports to quantify harm from the merger and 
benefits from the proposed remedy. Relpromax Cmts. at 2-9. However, 
most of its estimates consists merely of ``round number figures'' 
for harms the author was ``unable to calculate.'' Id. at 4. 
Moreover, Relpromax's methodology grossly understates the likely 
benefits of the proposed remedy. In particular, it assumes that any 
LCC entry and expansion that results from improved access to 
congested airports will merely serve to partially offset price 
increases resulting from lost competition between the merging 
parties. On the contrary, in markets where the proposed remedy 
facilitates LCC entry and expansion, consumers are likely to enjoy 
substantial net benefits.
---------------------------------------------------------------------------

    Relpromax also complains that the CIS does not meet the Tunney Act 
requirements because the description of alternatives to the decree 
considered by the United States (item 6 above) discusses only 
continuing to litigate the case through trial. Relpromax argues that 
because the statute refers to ``alternatives'' in the plural the United 
States is required to describe multiple alternatives. Relpromax Cmts. 
at 10-11. The statute only requires that the CIS describe alternatives 
the United States ``actually considered.'' 15 U.S.C. Sec.  16(b). In 
this case the United States did not consider alternatives other than 
continuing the litigation, and therefore the CIS meets the requirements 
of the Tunney Act.

4. The Remedy Is Not the Result of Political Pressure

    Certain commenters argue that that the settlement is not in the 
public interest because--according to them--the settlement resulted 
from lobbying by the airlines and political pressure directed toward 
the United States. Messina/Alioto Cmts. at 1; FlyerRights.org Cmts. at 
1. Any allegations that the settlement is the result of improper 
lobbying or political pressure are both unsubstantiated and meritless. 
The settlement resulted from good faith negotiations between the 
Antitrust Division and Plaintiff States, on the one hand, and 
Defendants, on the other. It reflects substantial relief that addresses 
the competitive harm alleged in the Complaint. In short, there is no 
basis to allege that the settlement results from any impropriety.\85\
---------------------------------------------------------------------------

    \85\ The Messina/Alioto comments also wrongly suggest that the 
representatives of consumers, unlike the airlines, did not have 
access to federal officials. Messina/Alioto Cmts. at 1-2. In fact, 
as some of the other commenters can attest, the Department of 
Justice had meetings and conversations with affected parties 
throughout the entire investigation and litigation process. The 
United States took the views of consumers into account when crafting 
the proposed relief. The United States was not, of course, at 
liberty to share the details of sensitive settlement negotiations 
with third parties.
---------------------------------------------------------------------------

    The commenters' mere speculation of bad faith or malfeasance is 
insufficient to justify rejection of a proposed consent decree. See 
United States v. Associated Milk Producers, 394 F. Supp. 29, 39-40 
(W.D. Mo. 1975), aff'd, 534 F.2d 113 (8th Cir. 1976) (finding that 
lobbying activities by the defendant--even ones that are ``intensive 
and gross''--were insufficient to reject proposed decree or require 
further evidentiary hearing). Moreover, one commenter's request for a 
``full disclosure of the papers leading up to the settlement,'' 
FlyerRights.org Cmts. at 1, should be rejected as the commenter offers 
no reason to doubt the sufficiency of Defendants' compliance with the 
Tunney Act's disclosure requirements, 15 U.S.C. Sec.  16(g), and no 
basis to otherwise justify a fishing expedition. See Associated Milk 
Producers, 394 F. Supp. at 38-40.

5. Closing of the Merger Prior to Entry of the Final Judgment Is 
Consistent with Tunney Act Requirements

    Two commenters suggest that allowing Defendants to consummate the 
merger prior to entry of the Final Judgment was inconsistent with the 
Tunney Act and not appropriate. AAI Cmts. at 1 n.1; Relpromax Cmts. at 
12-13. It is common practice to close a transaction prior to completion 
of the Tunney Act process. Nothing in the Tunney Act prevents the 
parties from closing and courts have long acknowledged and accepted 
this practice. See, e.g., United States v. InBev N.V./S.A., 2009-2 
Trade Cas. (CCH) ] 76,736 at 8 (D.D.C. 2009) (``consistent with 
asserted Department of Justice policy . . . the merger was allowed to 
close . . . while approval of the proposed Final Judgment [was]

[[Page 14294]]

pending''); United States v. SBC Commc'ns, Inc., 489 F. Supp. 2d 1, 8 
(D.D.C. 2007) (noting that the transaction closed over a year prior to 
entry of the Final Judgment ``in keeping with [DOJ's] standard practice 
that neither stipulations nor pending proposed final judgments prohibit 
the closing of the mergers''); United States v. Pearson plc, 55 F. 
Supp. 2d 43, 44-45 (D.D.C. 1999) (observing that the transaction was 
consummated and divestitures completed prior to the public interest 
determination under the Tunney Act).\86\ Of course, the United States 
retains the right to withdraw its consent to the decree or the 
settlement could be rejected by the Court. Defendants, by choosing to 
close prior to entry of the Final Judgment, have accepted the risk of 
undoing the merger should it be necessary.
---------------------------------------------------------------------------

    \86\ The Bankruptcy Court hearing the AMR case specifically 
rejected as ``based on a faulty assumption'' the private plaintiff's 
argument that the Tunney Act bars consummation of a merger pending 
entry of a proposed Final Judgment. Memorandum of Decision and Order 
at 22-23, In re AMR Corp. & Fjord v. AMR Corp., (Bankr. S.D.N.Y. 
Nov. 27, 2013) (11-15463 & Adv. Pr. No. 13-01392), available at 
http://www.amrcaseinfo.com/pdflib/72_01392.pdf. The Bankruptcy 
Court denied plaintiff's request to enjoin the closing of the 
merger. Id.
---------------------------------------------------------------------------

CONCLUSION

    After reviewing the public comments, the United States continues to 
believe that the proposed Final Judgment, as drafted, provides an 
effective and appropriate remedy for the antitrust violation alleged in 
the Complaint and is therefore in the public interest. Upon publication 
of this Response to Comments in the Federal Register, the United States 
will file a certification that all of the requirements of the APPA have 
been satisfied, and will file a motion with this Court to enter the 
proposed Final Judgment. The United States submits that a hearing is 
not necessary.

Dated: March 10, 2014.

Respectfully submitted,

Michael D. Billiel (DC Bar No. 394377)

U.S. Department of Justice, Antitrust Division, 450 Fifth Street 
NW., Suite 8000, Washington, DC 20530, Telephone: (202) 307-6666, 
Facsimile: (202) 307-5802, Email: [email protected]

[FR Doc. 2014-05555 Filed 3-12-14; 8:45 am]
BILLING CODE 4410-11-P