commerce affected

Commerce Affected

London Is Almost 3 Times Larger Than the Next Largest U.S. – Transatlantic Market, and Is Bigger Than the Next 3 Largest Markets Combined

London (LHR/LGW)Paris (CDG)FrankfurtAmsterdamZurichMunichBrusselsViennaCopenhagen

9,379,7543,378,9412,971,6761,937,3871,153,6981,144,083

866,883489,866420,005

--2.83.24.88.18.2

10.819.122.3

O&D TrafficTimes

LondonLarger

Exhibit NW-1

Source: Based on MIDT: True O&D Bookings – Year Ended April 2001

The U.S. – London (LHR/LGW) Market Is Larger Than the Entire U.S. – Germany Market and the Entire U.S. – France Market

6.8 Million

9.4 Million

4.4 Million

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

U.S. - London U.S. – Germany U.S. - France

Mill

ions

of

Annual Pass

engers

Exhibit NW-2


409 402 378

182 162

692

1,475

0

200

400

600

800

1,000

1,200

1,400

1,600

JFK LAX ORD BOS EWR MIA DFW

The Seven Nonstop Overlap U.S. – London Heathrow (LHR) Markets Represent 60.7% of U.S. – Heathrow Annual Passengers

U.S. – London Heathrow Total Passengers 6,096,9637 Overlap Markets 3,699,495 *Percent of Total 60.7%

U.S. – London Heathrow Total Passengers 6,096,9637 Overlap Markets 3,699,495 *Percent of Total 60.7%

Pass

engers

Per

Year

(00

0)


* DFW – London Service, since DFW does not have nonstop Heathrow service.

*

Exhibit NW-3

The Seven Nonstop Overlap U.S. – London Heathrow* (LHR) Markets Account for Almost $3.9 Billion and Represent 74.7% Total Annual U.S. – Heathrow Revenues Per Year

Revenue P

er

Year

($ M

illio

ns)

179182313

421465

738

1,565

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

JFK LAX ORD EWR BOS MIA DFW

Source: DOT O&D Survey Year End 2000; MIDT: True O&D Bookings Data, Year Ended April 2001

U.S. – Heathrow Revenue ($mil) Total Revenue 5,2037 Overlap Markets 3,886 **Percent of Total 74.7%

U.S. – Heathrow Revenue ($mil) Total Revenue 5,2037 Overlap Markets 3,886 **Percent of Total 74.7%

*

* DFW – London Service, since DFW does not have nonstop Heathrow service.** Individual market revenues do not tie to the 7 overlap market total due to

rounding.

Exhibit NW-4

The Seven Overlap U.S. – Heathrow Markets Are 12 Times Larger Than The Overlap Routes Analyzed in the United (UA)/Lufthansa (LH) Antitrust Immunity Application

0.3 Million

3.7 Million

0.0

1.0

2.0

3.0

4.0

UA/LH

Mill

ions

of

Pass

engers

AA/BA

* Includes DFW – Gatwick Service, since DFW does not have Heathrow service.

*

Exhibit NW-5


The Seven Overlap U.S. – Heathrow Routes Are Twice As Large As the United (UA)/US Airways (US) Nonstop Overlap Routes That Prompted a DOJ Announced Court Challenge

$1.9 Billion

$3.9 Billion

$0.0

$1.0

$2.0

$3.0

$4.0

UA/US **AA/BA *

$ B

illio

ns

* DOT O&D Survey 2000; MIDT: True O&D Bookings Data, Year Ended April 2001** DOJ Press Release, July 27, 2001

Exhibit NW-6

The Seven Overlap U.S. – Heathrow Routes Are Over Ten Times Larger Than the Northwest (NW)/Continental (CO) Routes That Prompted a DOJ Court Challenge

$350 Million

$3.9 Billion

$0.0

$1.0

$2.0

$3.0

$4.0

NW/CO **AA/BA *

$ B

illio

ns

* DOT O&D Survey 2000; MIDT: True O&D Bookings Data, Year Ended April 2001** DOJ Press Release, October 23, 1998

Exhibit NW-7

Heathrow Preference

Based on DOT Data, Different Passenger Mix at LHR versus LGW Results in Average Round Trip Fares Between the U.S. and London That Are 31% Higher at Heathrow Than at Gatwick

$650

$497

$0

$100

$200

$300

$400

$500

$600

$700

London Heathrow

Avera

ge F

are

$

Source: DOT O&D Survey 2000

London Gatwick

Exhibit NW-8

According to British Airways, Its Unit Revenues for London Heathrow (LHR) Services Are 15% Higher Than Unit Revenues at Gatwick (LGW)

“Where does the value come from for the shareholder from this new strategy? On the longhaul side, the value comes from having a higher proportion of our network at Heathrow, where we make of the order of 15% higher unit revenues.”

-- Robert Boyle, British Airways General Manager Network Planning, British Airways Investors Day, Network, page 14.

Exhibit NW-9

Virtually No U.S. – London Traffic Connects Over Other European Gateways

Source: MIDT: True O&D Bookings – Year Ended April 2001

London Gatwick

London Heathrow

Frankfurt

Paris (CDG)

Brussels

Amsterdam

Zurich

Munich

Vienna

Copenhagen

3,412,635

5,967,119

2,971,676

3,378,941

866,883

1,937,387

1,153,698

1,144,083

489,866

420,005

0%

3%

10%

11%

17%

17%

21%

40%

65%

66%

O&D Passengers

Percent ConnectingOver Other

European PointU.S.-European Point

Exhibit NW-10

Connecting Service to London Heathrow (LHR) via Other European Gateways Imposes a Substantial Time Penalty on U.S. – Heathrow Passengers

Connections to London HeathrowNew York

(JFK)New York

(EWR)Boston (BOS)

Chicago (ORD)

Miami (MIA)

Los Angeles (LAX)

6:40 6:40 6:25 7:30 8:30 10:15Via Amsterdam AMS Connect Time 9:40 9:35 9:15 10:10 11:00 15:55

Hours More Than NS 3:00 2:55 2:50 2:40 2:30 5:40% Increase 45% 44% 44% 36% 29% 55%

Via Brussels BRU Connect Time 10:55 10:50 10:15 11:50 14:10 18:40Hours More Than NS 4:15 4:10 3:50 4:20 5:40 8:25% Increase 64% 63% 60% 58% 67% 82%

Via Paris CDG Connect Time 9:15 8:55 9:00 10:15 11:00 13:10Hours More Than NS 2:35 2:15 2:35 2:45 2:30 2:55% Increase 39% 34% 40% 37% 29% 28%

Via Frankfurt FRA Connect Time 10:25 10:00 10:05 11:15 11:20 13:10Hours More Than NS 3:45 3:20 3:40 3:45 2:50 2:55% Increase 56% 50% 57% 50% 33% 28%

Via Zurich ZRH Connect Time 10:15 10:45 9:55 12:00 13:35 14:00Hours More Than NS 3:35 4:05 3:30 4:30 5:05 3:45% Increase 54% 61% 55% 60% 60% 37%

Via Munich MUC Connect Time 12:25 10:15 13:25 12:40 13:15 15:45Hours More Than NS 5:45 3:35 7:00 5:10 4:45 5:30% Increase 86% 54% 109% 69% 56% 54%

Via Vienna VIE Connect Time 12:35 12:35 14:05 13:20 16:55 13:10Hours More Than NS 5:55 5:55 7:40 5:50 8:25 2:55% Increase 89% 89% 119% 78% 99% 28%

Via Copenhagen CPH Connect Time 10:35 10:50 13:05 11:45 15:35 17:45Hours More Than NS 3:55 4:10 6:40 4:15 7:05 7:30% Increase 59% 63% 104% 57% 83% 73%

Nonstop (NS) to London Heathrow

*

*

*

*

**

*

* Connection times had to be manually constructed – each trip required three stops

Source: Official Airline Guide, September 2001

Exhibit NW-11

Market Power

2,0401,800

3,327

0

1,000

2,000

3,000

4,000

HH

I In

dex o

f Fr

eq

uen

cies

240 HHI points overhighly concentrated

threshold


threshold

Increase of 1,287 HHI points – 12 times the

DOJ 100 point threshold



Highly Concentrated ThresholdAfter Merger AA/BA Control 53.5%

of the Weekly Frequencies (W.F.) in the U.S. – London (LHR/LGW) Market

U.S. - London (LHR/LGW)Frequencies

The Overall U.S. – London (LHR/LGW) Market Is Already Highly Concentrated. The AA/BA Alliance Would Produce an Increase in Concentration 12 Times Greater Than the DOJ Threshold for the Presumption of Market Power

DOJ Definition of Highly Concentrated Market

Pre-Merger Concentration

Post-Merger Concentration

Source: Official Airline Guide – September 2001

231 (W.F.) 409 (W.F.)

125 (W.F.)

Total Weekly Frequencies = 765

Exhibit NW-12

2,659

1,800

4,388

0

1,000

2,000

3,000

4,000

5,000

HH

I In

dex o

f Fr

eq

uen

cies


threshold


threshold





Highly Concentrated Threshold

After Merger AA/BA Control 61.0% of the Weekly Frequencies (W.F.) in the U.S. – London Heathrow (LHR) Market

U.S. - London Heathrow (LHR)Frequencies

The Overall U.S. – London Heathrow (LHR) Market Is Already Highly Concentrated. The AA/BA Alliance Would Produce an Increase in Concentration 17 Times Greater Than the DOJ Threshold for the Presumption of Market Power




112 (W.F.)305 (W.F.)

83 (W.F.)

Total Weekly Frequencies = 500Source: Official Airline Guide – September 2001

Exhibit NW-13

2,691

1,800

4,831

0

1,000

2,000

3,000

4,000

5,000

6,000

HH

I In

dex o

f Fr

eq

uen

cies


threshold


threshold






After Merger AA/BA Control 66.7% of

the Weekly Frequencies (W.F.) in the New York (JFK) – London (LHR/LGW)

Market

New York (JFK) - London (LHR/LGW)Frequencies

The New York (JFK) – London (LHR/LGW) Market Is Already Highly Concentrated. The AA/BA Alliance Would Produce an Increase in Concentration 21 Times Greater Than the DOJ Threshold for the Presumption of Market Power




31 (W.F.)

104 (W.F.)21(W.F.)


Exhibit NW-14

2,581

1,800

4,662

0

1,000

2,000

3,000

4,000

5,000

HH

I In

dex o

f Fr

eq

uen

cies


threshold


threshold






After Merger AA/BA Control 65.1% of the Weekly Frequencies (W.F.) in the New York (JFK) – London Heathrow (LHR)

Market

New York (JFK) - London Heathrow (LHR)Frequencies

The New York (JFK) – London Heathrow (LHR) Market Is Already Highly Concentrated. The AA/BA Alliance Would Produce an Increase in Concentration 20 Times Greater Than the DOJ Threshold for the Presumption of Market Power




97 (W.F.)21(W.F.)


31 (W.F.)


Exhibit NW-15

2,323

1,800

3,980

0

1,000

2,000

3,000

4,000

5,000

HH

I In

dex o

f Fr

eq

uen

cies


threshold


threshold






After Merger AA/BA Control 59.0% of the Weekly Frequencies (W.F.) in the New York (JFK/EWR) – London (LHR/LGW)

Market

New York (JFK/EWR) - London (LHR/LGW)Frequencies

The New York (JFK/EWR) – London (LHR/LGW) Market Is Already Highly Concentrated. The AA/BA Alliance Would Produce an Increase in Concentration 16 Times Greater Than the DOJ Threshold for the Presumption of Market Power




125 (W.F.)42

(W.F.)


45 (W.F.)


Exhibit NW-16

2,596

1,800

4,593

0

1,000

2,000

3,000

4,000

5,000

HH

I In

dex o

f Fr

eq

uen

cies


threshold


threshold

Increase of 1,997 HHI points – almost 20 times the


Increase of 1,997 HHI points – almost 20 times the



After Merger AA/BA Control 64.1% of the Weekly Frequencies (W.F.) in the

New York (JFK/EWR) – London Heathrow (LHR) Market

New York (JFK/EWR) - London Heathrow (LHR)Frequencies

The New York (JFK/EWR) – London Heathrow (LHR) Market Is Already Highly Concentrated. The AA/BA Alliance Would Produce an Increase in Concentration Almost 20 Times Greater Than the DOJ Threshold for the Presumption of Market Power




118 (W.F.)28

(W.F.)


38 (W.F.)


Exhibit NW-17

2,500

1,800

4,375

0

1,000

2,000

3,000

4,000

5,000

HH

I In

dex o

f Fr

eq

uen

cies


threshold


threshold







Boston (BOS) – London (LHR/LGW) Market

Boston (BOS) - London (LHR/LGW)Frequencies

The Boston (BOS) – London (LHR/LGW) Market Is Already Highly Concentrated. The AA/BA Alliance Would Produce an Increase in Concentration 18 Times Greater Than the DOJ Threshold for the Presumption of Market Power




35 (W.F.)14 (W.F.)


7 (W.F.)


Exhibit NW-18

3,889

1,800

7,222

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

HH

I In

dex o

f Fr

eq

uen

cies

2,089 HHI points overhighly concentrated

threshold


threshold






After Merger AA/BA Control 83.3% of the Weekly Frequencies (W.F.) in the Boston (BOS) – London Heathrow (LHR)

Market

Boston (BOS) - London Heathrow (LHR)Frequencies

The Boston (BOS) – London Heathrow (LHR) Market Is Already Highly Concentrated. The AA/BA Alliance Would Produce an Increase in Concentration 33 Times Greater Than the DOJ Threshold for the Presumption of Market Power




Other U.S.

16.7%

AA/BA83.3%

35 (W.F.)


7 (W.F.)


Exhibit NW-19

3,000

1,800

4,531

0

1,000

2,000

3,000

4,000

5,000

HH

I In

dex o

f Fr

eq

uen

cies


threshold


threshold







Chicago (ORD) – London Heathrow (LHR) Market

Chicago (ORD) - London Heathrow (LHR)Frequencies

The Chicago (ORD) – London Heathrow (LHR) Market Is Already Highly Concentrated. The AA/BA Alliance Would Produce an Increase in Concentration 15 Times Greater Than the DOJ Threshold for the Presumption of Market Power




AA/BA61.3%

Other U.S.

26.3%

Other Foreign12.5%

49 (W.F.)


21 (W.F.)

10(W.F.)


Exhibit NW-20

3,750

1,800

6,250

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

HH

I In

dex o

f Fr

eq

uen

cies


threshold


threshold







Miami (MIA) – London (LHR/LGW) Market

Miami (MIA) - London (LHR/LGW)Frequencies

The Miami (MIA) – London (LHR/LGW) Market Is Already Highly Concentrated. The AA/BA Alliance Would Produce an Increase in Concentration 25 Times Greater Than the DOJ Threshold for the Presumption of Market Power




21 (W.F.)


7 (W.F.)


Exhibit NW-21

5,556

1,800

10,000

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

HH

I In

dex o

f Fr

eq

uen

cies


threshold


threshold






After Merger AA/BA Control 100% of the Weekly Frequencies (W.F.) in the Miami (MIA) – London Heathrow (LHR)

Market

Miami (MIA) - London Heathrow (LHR)Frequencies

The Miami (MIA) – London Heathrow (LHR) Market Is Already Highly Concentrated. The AA/BA Alliance Would Produce an Increase in Concentration 44 Times Greater Than the DOJ Threshold for the Presumption of Market Power




21 (W.F.)


Exhibit NW-22

5,556

1,800

10,000

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

HH

I In

dex o

f Fr

eq

uen

cies


threshold


threshold






After Merger AA/BA Control 100% of the Weekly Frequencies (W.F.) in the

Dallas/Ft. Worth (DFW) – London Gatwick (LGW) Market

Dallas/Ft. Worth (DFW) - London Gatwick (LGW)* Frequencies

The Dallas/Ft. Worth (DFW) – London Gatwick (LGW) Market Is Already Highly Concentrated. The AA/BA Alliance Would Produce an Increase in Concentration 44 Times Greater Than the DOJ Threshold for the Presumption of Market Power




* London Gatwick is used because Bermuda 2 restricts nonstop service to Gatwick

21 (W.F.)


Exhibit NW-23

2,188

1,800

2,813

0

1,000

2,000

3,000

4,000

HH

I In

dex o

f Fr

eq

uen

cies


threshold


threshold

Increase of 625 HHI points –

6 times the DOJ 100 point threshold



Highly Concentrated Threshold After Merger AA/BA Control 37.5% of the Weekly Frequencies (W.F.) in the

Los Angeles (LAX) – London Heathrow (LHR) Market

Los Angeles (LAX) - London Heathrow (LHR)Frequencies

The Los Angeles (LAX) – London Heathrow (LHR) Market Is Already Highly Concentrated. The AA/BA Alliance Would Produce an Increase in Concentration 6 Times Greater Than the DOJ Threshold for the Presumption of Market Power




AA/BA37.5%

Other U.S.

25.0%

Other Foreign37.5%

21 (W.F.)


21 (W.F.)

14 (W.F.)


Exhibit NW-24

Heathrow Slots

New Entrant Heathrow Carriers Will Be Unable to Obtain Slots

First Obstacle: Slot Trades and Purchases may be Banned by the EU

“The draft [EU] Regulation . . . will have the effect of preventing carriers from obtaining slots from incumbent carriers except through the total or partial take-over of the carrier.”

-- ACL Response at 3. “The European Commission has published a proposal to amend EU Regulation 95/93 which currently governs slot allocation. . . BAA has significant concerns about several key elements of the draft new regulation.

• The amendment of the ‘new entrant’ provision which would reduce the opportunities for

new US carriers to benefit from this form of priority at Heathrow;

• The prevention of certain forms of slot trading which currently take place, making it more difficult for airlines to set up new services”

-- BAA Paper on Issues & Principles at 8.

Second Obstacle: Even if Slot Trading were legal, there are no slots to be had

“In ACL's professional judgment, the opportunities to accommodate new entrant US carriers from the allocation of pool slots in the first two seasons are extremely limited.”

“It may be possible to accommodate up to one daily service at timings similar to Continental's daylight Newark-Gatwick service, with arrivals in the late evening and departures mid-afternoon the next day.”

“There is also scope to offer 1-2 morning rotations (ie, pairs of arrival and departure slots) of [sic] on some days of the week, principally the weekends. However, in ACL's experience new entrant US carriers are unlikely to be willing to operate on a less than daily basis.”

“In general, it is ACL's observation that there is a general unwillingness on the part of incumbent Heathrow carriers to divest of slots and the market is illiquid.”

-- ACL Response at 5.

Exhibit NW-25

“It is important to understand, however, that a slot is not just about an allocation of a time on a runway. In order to operate that runway slot (either arrivals or departures) an airline must also be allocated capacity within a given terminal building (Heathrow has four terminals and Gatwick has two terminals). Furthermore, at Heathrow, the coordinator must ensure that the combination of airline schedules does not exceed the declared aircraft parking capacity. An airline will not be granted a slot unless it can operate within the terminal and aircraft parking capacity constraints.”


“Increasingly, in addition to the ongoing impact of the runway constraint, the aircraft parking stand constraint is affecting airlines’ ability to add new services. The effect of liberalisation at Heathrow will be an increase in the proportion of long-haul services and therefore an increase in the proportion of services with larger aircraft. Unless there are enough large stands available in the peak periods to cope with this change in aircraft size, new services will either not be able to operate or will have to operate with smaller, less appropriate, aircraft.”


“Heathrow’s schedules are co-ordinated according to three formal constraints: runway, terminal capacity and stand capacity. Aside from runway capacity, aircraft stands are currently the most restraining factor, particularly for wide-bodied aircraft. Terminal capacity is based on the capacities on all facilities involved in processing passengers and / or baggage. The following are the major constricting factors within the terminal operation:

Check-in desks (See response to Q13)SecurityImmigrationBaggage ReclaimArrivals Concourse”

-- Response from BAA plc at 6.

“It is conceivable that some new entrant airlines may receive a slot, from the pool, from inter-alliance transfers or through trading but the BAA would be unable to quickly provide the range and quality of facilities that an airline might need.”

-- ACL Response at 9.

Even If a New Entrant Heathrow Carrier Could Obtain a “Runway Slot,” It Would Face Severe Obstacles in Obtaining a Suitable “Stand” at Which to Load and Unload Its Passengers

Exhibit NW-26

“To convert slots currently being used for narrow-bodied aircraft to wide-bodied, all airport facilities used in the passenger and baggage processes would need to be considered. The chosen terminal of operation for the wide-body slots will also have an impact. If the wide-bodied slots are to be operated in the same terminal as the narrow-body service was being operated, then the need for additional capacity will be less than that if the slots are operated in a different terminal. The main areas requiring consideration are:

“Stand availability – This is dependent on the terminal of operation for the new wide-body service. Terminals 1 and 2 only have a limited number of pier-served stands suitable for use by wide-bodied aircraft of 777 or equivalent size. Terminal 3 does have some spare capacity for larger aircraft, but the cumulative total stand demand during the peak is already approaching capacity at peak hours of the day. Stand capacity at Terminal 4 [where KLM operates] is a major constraint and is already at or close to maximum levels for the larger aircraft categories (B777 / 747) for peak morning hours. Additional wide-bodied aircraft (B777 / 747) could only be managed in if other services relocated to another terminal.”

-- Response from BAA plc at 4.

There Are Virtually No Additional Stands Available at Heathrow That Are Suitable for Wide Body Operations

Exhibit NW-27

Stand availability - See Exhibit NW-27

1.“Check-in desks – Additional desks would be required for a longer period of time to convert slots from use by narrow-bodied aircraft to wide-bodied aircraft on long haul routes. For example, if the aircraft type changed from a BAE146 to a B777-200, the check-in desk requirement would increase from two to seven (including two premium desks) and would need to be open for four hours instead of three. Seven additional desks would be required if the new transatlantic carrier operated in a different terminal. An airline receiving a slot does not gain rights to specific check-in desks; these must be negotiated with the handler or airport operator.”

2.“Baggage Belt Capacity – For departures and connections baggage, delivery and sortation systems are allocated in conjunction with check-in desks and, as with check-in desks, would be required for longer periods if being used for a wide-bodied aircraft.”

3.“Baggage Handling Equipment and Make-up Area – Narrow-bodied aircraft are traditionally ‘loose loaded’ and therefore require less equipment to facilitate their baggage handling. Wide-bodied aircraft are generally loaded using containers and require additional equipment and storage facilities. Any handling agent at Heathrow handling new transatlantic services will require additional equipment as these services will be operating during peak hours, and also additional space within the baggage hall and storage area, both of which are currently already a concern in all terminals.”

4.“Gaterooms – Gaterooms are allocated in conjunction with stands so are appropriately sized for the respective stand size. The majority of gaterooms in Terminals 1 and 2, which service predominantly short haul operations, are not sufficiently sized to facilitate wider bodied aircraft and will hence be an added restriction.”

5.“Immigration – A change to wide-bodied aircraft will require increased staffing by Immigration Officers, and possibly additional desks depending on the number of services arriving simultaneously. The provision of Immigration Officers is the responsibility of the UK Immigration Service.”

6.“Baggage Reclaim – Capacity assessments of baggage reclaim areas are dependent on the number of bags per passenger, and the percentage of transfer passengers for a given terminal. Hence if the mix of traffic was changed, the length of individual belts may not be sufficient to manage a wide bodied transatlantic service (particularly in Terminals 1 and 2), and additional belts may be required to service an increased number of operations in a specific terminal.”

7.“Arrival Concourse Space – The arrivals concourses in Heathrow’s four terminals are already operating at capacity at peak hours and so new services will cause added congestion, particularly if the slots have previously been operated in a different terminal.”

-- Response from BAA plc at 4-5.

Even If Runway Slots and Stands Were Available for New Entrant Wide Body Operations, the Scarcity of SEVEN Other Essential Heathrow Facilities and the Unlikelihood of Assembling All Seven at the Same Time and Same Terminal Make New Entry at Heathrow a Practical Impossibility

Exhibit NW-28

“Growth Prospects” “BAA expects only a few additional slots to be created at Heathrow, a small amount of which are expected in the hours that transatlantic flights are currently being operated. In addition, the new slots are likely to be departure slots and are unlikely to have accompanying arrival slots which would be required to make new services viable. . . The substantial majority of these increases have been in off-peak periods.”

-- Response from BAA plc at 8. “[U]ntil Heathrow’s Terminal 5 is approved, built and opened, [Autumn 2007 at the earliest] there is relatively little that can be done to relieve the aircraft parking and terminal capacity constraints.”


Frozen Entry Conditions at Heathrow Are Likely to Persist for at Least the Next Six Years

Exhibit NW-29

To Be Commercially Viable in the U.S. – London Market, U.S. Carriers Require Access to Slots Within Specified Time Windows

010002000300040005000600070008000900100011001200130014001500160017001800190020002100220023002400

Commercially Viable Arrival SlotsCommercially Viable Departure Slots

Source: Official Airline Guide – July 2001

88.2% of slots usedby non-Heathrow U.S. carriers fall inside discrete Arrival and Departure windows

05:00-10:59

10:00-15:59

Exhibit NW-30

After the Merger, American Airlines/British Airways Would Control 41.5% of Heathrow’s Commercially Viable Slots

1,875 Slots 1,399

Slots

98 Slots

Total Commercially Viable Slots = 3,372(Arrivals 05:00 – 10:59; Departures 10:00 –

15:59)

Source: Exhibit NW-30; Airport Coordination Limited – April 2001

Exhibit NW-31

London Heathrow’s (LHR) Commercially Viable Slots are Already Highly Concentrated. The AA/BA Alliance Would Produce an Increase in Concentration 2 Times Greater Than the DOJ Threshold for the Presumption of Market Power

1,9981,800

2,203

0

1,000

2,000

3,000

4,000H

HI In

dex o

f C

om

merc

ially

Via

ble

Slo

ts


threshold


threshold






London Heathrow (LHR) Commercially Viable SlotsArrivals (05:00-10:59) and Departures (10:00-15:59) – Summer 2001

DOJ Definition of Highly Concentrated

Market


Post-Merger Concentration(AA/BA only)Source: Airport Coordination Limited – April 2001

Exhibit NW-32

After Both Alliances, American Airlines/British Airways and United Airlines/British Midland Would Control 58.2% of Heathrow’s Commercially Viable Slots

Total Commercially Viable Slots = 3,372


1,399Slots 563

Slots

1,325Slots

85 Slots

Commercially Viable Heathrow Slots

for Services to the United States

Commercially Viable Heathrow Slots

for Services to the United States

AA/BA

UA/BD

Source: Airport Coordination Limited – April 2001

Exhibit NW-33

American Airlines, British Airways, and United Already Control 83.4% of All U.S. – Heathrow Weekly Frequencies (W.F.)


AA/BA+UA = 83.4%


Exhibit NW-34

London Heathrow’s (LHR) Commercially Viable Slots are Already Highly Concentrated. Simultaneous Creation of an AA/BA Alliance and a UA/BD Alliance Would Produce a Greater Increase in Concentration – Almost 3 Times Greater Than the DOJ Threshold for the Presumption of Market Power – Than an AA/BA Alliance Alone

1,9981,800

2,283

0

1,000

2,000

3,000

4,000H

HI In

dex o

f C

om

merc

ially

Via

ble

Slo

ts


threshold


threshold


Almost 3 times the DOJ 100 point threshold


Almost 3 times the DOJ 100 point threshold


London Heathrow (LHR) Commercially Viable SlotsArrivals (05:00-10:59) and Departures (10:00-15:59) – Summer 2001

DOJ Definition of Highly Concentrated

Market



(AA/BA + UA/BD)Source: Airport Coordination Limited – April 2001

Exhibit NW-35

KLM Cannot and Will Not Make Any of Its Heathrow Slots Available to Northwest Airlines

“2. . . . KLM wishes to make it clear from the outset, that the idea of a transfer of KLM-slots to Northwest, once Northwest has been given access to Heathrow, is an academic option only.”

“3. First, it is highly debatable whether a legally acceptable ‘modus’ can be found under which such a transfer could be justified.”

“4. In addition, any slot divestiture by KLM in favour of its partner Northwest would compromise directly and immediately KLM’s competitive position in the UK market vis-à-vis British Airways and other carriers at Heathrow; it would, furthermore, strengthen the relative position of the BA-AA alliance in its home market, thus causing an effect that is opposite to what would be envisaged by slot divestiture in the first place.”

“5. It is KLM’s opinion, therefore, that any access given to additional or -- in the case of an Open Skies agreement between the UK and the US -- to all US carriers must be accompanied by the making available of slots to these carriers without the rights of carriers from other EU or third countries being affected.”

Exhibit NW-36

Even If KLM Were Willing and Able to Provide Northwest With Heathrow Slots, It Does Not Possess Sufficient Commercially Viable Slots, Stands and Terminal Areas to Fund Even One Daily Round Trip

17

33

21

12

0

3849

21

49

0

10

20

30

40

50

60

70

80

90

100

Total Commercially Viable KLM Slots

42

98

29

Slots Used for Amsterdam

Hub

Slots Used for Eindhoven and Rotterdam


Not available to NW because:

•Slots are an essential part of KLM’s Hub Operation

•Use stands too small for NW wide body aircraft

Not available to NW because:

•Slots are an essential part of KLM’s Hub Operation

•Use stands too small for NW wide body aircraft

• All slots are used by Turboprops*

• All slots fly into Terminal 4

• There are no large aircraft stands available at commercially viable times at terminal 4

*one slot on Sunday uses an A737-300

• All slots are used by Turboprops*

• All slots fly into Terminal 4

• There are no large aircraft stands available at commercially viable times at terminal 4

*one slot on Sunday uses an A737-300

DeparturesArrivals

71

NWA Requireme

nt for 7 Daily

Round Trips

Eindhoven andRotterdam Slots With Stands and

Terminal Space

ThereforeIt is not possible for NW

to obtain any commercially viable slots

ThereforeIt is not possible for NW

to obtain any commercially viable slots

Com

merc

ially

Via

ble

S

lots

Exhibit NW-37

The Vast Majority of Commercially Viable Heathrow Slots – 77.9% – Are Under the Control of Airlines and Airline Groups That Will Be Unable or Unwilling to Make Them Available to Non-Incumbent U.S. Air Carriers



1,399Slots

563Slots

745Slots

386 Slots

194

Slot

s


Oneworld

STAR

Non-Oneworld or STAR

85 Slots Virgin

Only 745 Commercially Viable Slots – 22.1% of the Total – Are Even Theoretically Available for New Entrant U.S. Carriers

Exhibit NW-38

014141432 17

528

745

126

0

100

200

300

400

500

600

700

800

Although 745 Weekly Slots Are Theoretically Available for Acquisition by New Entrant U.S. Airlines, After Oneworld, Star and Virgin Are Removed, Realistically There Are NO Weekly Slots Available for Acquisition by Any U.S. Carrier

Slots used by Narrow Body Jets, RJs, and

Turboprops

Carriers Do Not Possess Enough Slots

for Even 1 Daily Round

Trip per Week


Theoretical Commercially Viable Slots -

BEFORE Practical

Reductions*

KLM (Amsterdam

)

Air India (Bombay -

12JFK – 14ORD – 6)

BWIA (Port of Spain,

Trinidad)

Emirates Air

(Dubai)

Aeroflot (Moscow)

Theoretical Commercially Viable Slots

-AFTER Realistic

Reductions

It is Impossible for a U.S. Carrier to Compete with AA/BA Without

Access to London Heathrow

It is Impossible for a U.S. Carrier to Compete with AA/BA Without

Access to London Heathrow

AvailableNot Available

Slots NOT Available for

Acquisition – Used for Hub Service and Essential

Routings

Slots NOT Available for

Acquisition – Used for Hub Service and Essential

Routings

Slots NOT Available for Viable

Transatlantic Operation –

Carriers Do Not Possess Enough Slots for Even 1 Daily Round Trip

per Week

Slots NOT Available for Viable

Transatlantic Operation –

Carriers Do Not Possess Enough Slots for Even 1 Daily Round Trip

per Week

Slots NOT Available for Transatlantic Service – Slots and Facilities are Used for Narrow Body Jets, RJs, and

Turboprops

Slots NOT Available for Transatlantic Service – Slots and Facilities are Used for Narrow Body Jets, RJs, and

Turboprops

* Exhibit NW-38

Exhibit NW-39

Public Benefits – Connectivity

London Heathrow Has Limited Utility as a Connecting Facility. To Fund High Frequency Point-to-Point Service, British Airways Has Deleted Large Numbers of Cities from Its Heathrow Network

“. . . [W]e have had a renewed focus on serving the big business markets . . . There is a cost for that which is that we have to get the slots from somewhere and . . . about 15 shorthaul destinations have been dropped from the Heathrow network.”

-- Robert Boyle, British Airways General Manager Network Planning, Investment Community Presentation, page 7.

Exhibit NW-40

Even Though Heathrow Has Limited and Shrinking Utility As a Connecting Facility, U.S. Passengers Who Can Access Points Beyond London at Heathrow Outnumber U.S. Passengers Who Can Access Points Beyond London at Gatwick by 74 Percent

16.2 Million

28.2 Million

0

5

10

15

20

25

30

U.S. – Gatwick Beyond

U.S. – Heathrow Beyond

Mill

ions

of

Ann

ual Pass

engers

Source: Official Airline Guide, September 1-7, 2001; MIDT: True O&D Bookings – Year Ended April 2001

Nonstop

Service to 57

Beyond cities

Nonstop

Service to 45

Beyond Cities

Exhibit NW-41

British Airways Actually Serves 27 Fewer Cities from Heathrow With Its Own Aircraft Today Than Six Years Ago, and Six Fewer Cities Than a Year Ago

1995 - 2001 2000 - 2001

OsloMilan (MXP)Abu DhabiDetroitCalcuttaMadrasIslamabad

AmmanBeirutBilbaoBremenBasilCaracasCologneDamascusDhahranBuenos AiresOsloRio de JaneiroGothenburgHanoverHarareInvernessJerseyOsaba

Kuala LumpurSt. PetersburgLusakaLuxembourgLyonNairobiNagoyaNewquayPortoParis (ORY)PlymouthPisaSeoulTehranTurinVenice

Calcutta BilbaoCologneJerseyKuala LumpurParis (ORY)TehranVenice

7 Points Added

34 Points Dropped

1 Point Added 7 Points Dropped

Source: Official Airline Guide, September 1-7, 1995, 2000, and 2001

Exhibit NW-42

British Airways Has Implemented Commercial Strategies to Discourage Transfer Passengers Because British Airways Does Not Want Passengers to Use Heathrow Airport as a Transfer Station to Its European Network

“Direct traffic has a 25 point higher direct margin than transfer.”

“Our focus is mainly on reducing our exposure, first and foremost, to the traffic in which we and the industry are performing worst, and that is the transfer business.”

“More dramatically, what has happened to the transfer business. You can see very deep reductions in low yielding transfer business and increases again in middle yielding and higher yielding fare categories.”

-- David Spurlock, British Airways Director of Strategy, British Airways Investors Day, pages 5-6, 14.

Exhibit NW-43

British Airways Has Adjusted Its Schedule to Discourage Transfer Traffic from Using Heathrow Airport

“In terms of shorthaul, there are big benefits around freeing shorthaul from the need to structure itself to feed the longhaul operation. It allows us to tailor the shorthaul operation to the needs of shorthaul and, therefore, to have a better chance of making money.”

-- Robert Boyle, British Airways General Manager Network Planning, British Airways Investors Day, Network, page 15.

Exhibit NW-44

American and Its Current Code Share Partners Already Can Create Pervasive “On-line” Access to Europe, Africa, and the Middle East

Los Angeles

New York (JFK,LGA,EWR)

Boston

Miami

Chicago (ORD)

Dallas/Ft. Worth

Stockholm

Belfast

Bologna/Rimini

Brussels

BudapestParis

Copenhagen

Dublin/Shannon/Cork

Düsseldorf/Stuttgart

Dubai

Edinburgh

Rome

Frankfurt/Prague

Glasgow

Geneva

Hamburg

Helsinki

Istanbul/Thessaloniki

Johannesburg

Cologne

Milan/Verona

LisbonMadrid

ManchesterBirmingham

Munich

Naples

Nice/Genoa

Oslo

Bucharest

Hannover/Berlin

Amsterdam

Venice

Vienna

Warsaw

Zurich

Abidjan

Lanzarote

Izmir

Malaga

Alicante Athens

Abu Dhabi

Belgrade

Banghazi Beirut

Bergen

Cairo

Chania

Conakry

Casablanca

Cantania

Dakar

Douala

Enontekio

Bilbao/San Sebastian/Santander

Lagos/Faro/Sevilla

Kinshasa

Fuerteventura

Gothenburg

GranadaIraklion

Ibiza

Ivalo

Jeddah

JoensuuTamper

e

KajaaniKuusamoKemi/Tornio

Kiev

Kokkola

Kittila

KuopioVaasa

Larnaka

La Coruna/Asturias/Santiago De Compostela

St. Petersburg

Almeria

Gran Canaria

Jyvaskyla/Lappeenranta

Menorca

Muscat

Mariehamn

Malta

Murmansk

Lyon/Marseille

Nairobi Yaounde

Barcelona/Oporto

Ouagadougou

Oulu

Pafos

LondonBristolPlymouth

Pristina/Skopje

Rhodes

Riga/Tallinn

Riyadh

Rovaniemi

Moscow

Tehran

Tripoli Tel Aviv

Malabo

Tenerife

Turku

TanglerTunis

Toulouse

SofiaValladolid

Vilnius

128 points in Europe, Africa and the Middle East128 points in Europe, Africa and the Middle East

Exhibit NW-45

With London’s Limited Utility as a Transfer City, the AA/BA Code Share Plan Provides Virtually No Additional Network Access to Europe, Africa and the Middle East Beyond That Which American Airlines Already Has With Its Existing Code Share Partners

44

61

17

0

10

20

30

40

50

60

70

Total foreign points where AA/BA plan

to code share*

Number of proposed AA/BA code share

points already served by AA and 5

European code share partners

New cities made available to AA’s

U.S. passengers as a result of BA code

share

The AA/BA Alliance Would Create New Online Service to Only 17 Small Cities, Mostly in Africa

and the Middle East

The AA/BA Alliance Would Create New Online Service to Only 17 Small Cities, Mostly in Africa

and the Middle East* Code Share cities listed in Docket OST 2001-10388

Source: Official Airline Guide – September 2001 and O&D Survey Year End 2000

Num

ber

of

Poin

ts

Exhibit NW-46

The AA/BA Code Share Plan Provides Virtually No Additional Network Access to Europe, Africa and the Middle East Beyond That Which American Airlines Already Has With Its Existing Code Share Partners

* Code Share cities listed in Docket OST 2001-10388

17 New On-Line Cities Produce Only 45,110 Additional Annual O&D

Passengers

17 New On-Line Cities Produce Only 45,110 Additional Annual O&D

Passengers

Source: Official Airline Guide – September 2001; O&D Survey ,Year End 2000

98.3%

1.7%

Exhibit NW-47

The 527 O&D City Pair Markets That Are Transaction Specific to the AA/BA Alliance Are Very Small, Producing Only 45,110 Passengers Per Year, an Average of Less Than 0.1 Passenger Per Day Each Way (PDEW) to the 17 Unique BA Points

0.25

0.20

0.33

0.46

0.27

0

0.1

0.2

0.3

0.4

0.5

Minneapolis Norfolk Cleveland NewOrleans

Pittsburgh

PD

EW

To A

ll 1

7 B

A C

itie

s C

om

bin

ed

The O&D Average Per New Online U.S. Point Is Below 0.5 PDEW for the Largest U.S. Cities to the

17 BA Transaction Specific Points Combined

The O&D Average Per New Online U.S. Point Is Below 0.5 PDEW for the Largest U.S. Cities to the

17 BA Transaction Specific Points Combined

Source: DOT O&D Survey Year End 2000

Exhibit NW-48

On a Hypothetical Total Network to Total Network Basis, American Airlines Passengers Would Have Much Broader Access to Europe, Africa, and the Middle East on Its Existing Code Share Partners Than They Would Have on British Airways

BA117AA

113

0

40

80

120

160

AA – BA

SR/SN/IB/

FY/EI

154AA

113

0

40

80

120

160

AA – SR/SN/IB/FY/EI

Source: Official Airline Guide – September 1-7, 2001

Total Number Cities Operated in U.S., Europe, Africa, and Middle East

AA Points Only

BA Points Only

AA Points Only

SR/SN/IB/FY/EI Unduplicated

points

Exhibit NW-49

American’s Hypothetical Total Network Access With Its Existing Code Share Partners Is Greater Than a Hypothetical American/British Airways Combined Network

37.3 Million39 Million

0

5

10

15

20

25

30

35

40

45

AA/BAAA – SR /SN/IB/FY/EI

Mill

ions

of

Ann

ual Pass

engers

Source: MIDT: True O&D Bookings – Year Ended April 2001

Exhibit NW-50

Compared to Existing Major Immunized Alliances, AA/BA Provides Virtually No Additional Market Access to Europe, Africa and the Middle East

NW/KL

UA/LH

AA/BA

• Increases online PDEW by 13,631*• Adds additional 9,816 new online O&D

points**• 21.1% of Total U.S. – E.U./Africa/Middle

East passengers


points**• 21.1% of Total U.S. – E.U./Africa/Middle

East passengers

• Increases online PDEW by 232*• Adds additional 1,508 new online O&D

points**• 0.1% of Total U.S. – E.U./Africa/Middle East

passengers

• Increases online PDEW by 232*• Adds additional 1,508 new online O&D


passengers



passengers



passengers

Additional market access relative to NW/KL PDEW

Source: MIDT: True O&D Bookings, Year Ended April 2001

** New O&D not previously served by either carrier using its own aircraft and/or code sharing with existing partners.

* New PDEW carried by Alliance not previously carried by either partner unilaterally.

Note: Excludes O&D markets that generated less than 11 bookings per year.

Exhibit NW-51

American Airlines’ Commercial Relationships, Many of Which Occur Outside of the Oneworld Brand, Already Make American Airlines the Anchor of the Second Largest Airline Group in the World – Counting British Airways, It Is the World’s Largest

188,796,613

303,597,034305,415,422

222,373,472

0

50,000,000

100,000,000

150,000,000

200,000,000

250,000,000

300,000,000

350,000,000

400,000,000

Oneworldand Other AA Code Share Partners *

Star and Other UA

Code Share Partners

Tota

l A

nnu

al

Pass

engers

Sky TeamAnd Other DL Code

Share Partners

Northwest and KLM and Their

Other Code Share Partners

BA Portion

267,154,724

Source: International Air Transport Association (IATA) Year 2000

* Assumes SR/SN is part of American Airlines for all of 2000.

Exhibit NW-52

commerce affected

Documents

heathrow markets

heathrow routes

heathrow revenues

nonstop heathrow service

true od bookings year

london heathrow lhr

heathrow preferencebased

overlap markets