Reply of the City of Cleveland
Page 3
BEFORE THE
DEPARTMENT OF TRANSPORTATION
WASHINGTON, D.C.
------
Joint Application of :
:
AMERICAN AIRLINES, INC. :
and : Docket OST-2001-10387
BRITISH AIRWAYS PLC :
:
under 49 USC 41308 and 41309 for approval :
of and antitrust immunity for agreement :
------
------
Joint Application of :
:
AMERICAN AIRLINES, INC. :
and :
BRITISH AIRWAYS PLC : Docket OST-2001-10388
:
under CFR Part 212 for statements of :
authorization (blanket codesharing) and :
under 49 USC 40109 for related exemption :
authority :
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REPLY OF
THE CLEVELAND PARTIES
Communications with respect to this document should be sent to:
Mayor Michael R. White
Cleveland City Hall
601 Lakeside Avenue, Room 202
Cleveland, OH 44114
Dennis E. Eckert, President & CEO
Greater Cleveland Growth Association
Tower City Center
50 Public Square, Suite 200
Cleveland, OH 44113-2291
November 9, 2001
Reply of The Cleveland Parties
Page 3
BEFORE THE
DEPARTMENT OF TRANSPORTATION
WASHINGTON, D.C.
------
Joint Application of :
:
AMERICAN AIRLINES, INC. :
and : Docket OST-2001-10387
BRITISH AIRWAYS PLC :
:
under 49 USC 41308 and 41309 for approval :
of and antitrust immunity for agreement :
------
------
Joint Application of :
:
AMERICAN AIRLINES, INC. :
and :
BRITISH AIRWAYS PLC : Docket OST-2001-10388
:
under CFR Part 212 for statements of :
authorization (blanket codesharing) and :
under 49 USC 40109 for related exemption :
authority :
------
REPLY OF
THE CLEVELAND PARTIES[1]
The answers filed in this proceeding show that the proposed alliance between American Airlines and British Airways would be exceptionally anticompetitive and should be disapproved. If the proposed alliance is approved, however, it would restrict opportunities for development of new U.S.-London routes, including potential Cleveland-London Heathrow service, and prevent the restoration of Cleveland-London Gatwick service, which was temporarily suspended in the aftermath of the September 11 terrorist attacks and is expected to resume as soon as international demand revives. Thus, the Department must ensure the promise of “open skies” is not illusory or preempted by American and British Airways. Cleveland’s continued development as a major hub depends on access to London, and access to London’s preferred Heathrow airport would restore the public benefits of London service much faster than Cleveland-London Gatwick service.
Although the Department has said an open skies agreement with the U.K. is a prerequisite for approval and granting of antitrust immunity to an American/British Airways alliance, Continental’s efforts to secure slots just two years ago for its new Cleveland-London Gatwick service under the current U.S.-U.K. agreement demonstrates that commercially viable, competitive slots at London Gatwick are not available today. After Continental received long-sought Cleveland-London Gatwick authority from the Department, Continental was initially unable to secure acceptable, competitively viable slots for the service.
The record in this proceeding shows that the slot and facility constraints at London’s Heathrow airport are much worse. An open skies agreement without competitive slots and facilities at Heathrow and Gatwick is meaningless, since all other U.K. airports are already open for service to and from the U.S. under the existing agreement. Particularly in light of the way the domestic and world economy has changed since September 11, the Department should deny the pending applications for approval and antitrust immunity. The Cleveland Parties agree with the many commenters that the applications be denied unless U.K. airports are truly open and the possibility exists for other airlines to compete with the huge American/British Airways combination and its unprecedented dominance on U.S.-U.K. routes.
If the Department refuses to dismiss or deny the pending applications for approval and antitrust immunity, however, then Cleveland businesses and travelers must have access to London’s airport of choice, Heathrow. Without question, Cleveland’s hub carrier, Continental, must be able to operate one daily Cleveland-London Heathrow flight at competitive times, using competitive facilities at London Heathrow.
Cleveland was the largest Consolidated Metropolitan Statistical Area without nonstop intercontinental service until 1998, when many years of hard work by Cleveland and Continental culminated in the Department’s award to Continental of Cleveland-London Gatwick authority. Continental’s Cleveland-London Gatwick service has helped establish Cleveland as a major U.S. hub and further demonstrated Cleveland’s remarkable turnaround and growing international prominence. While Cleveland hopes that Continental will resume its Cleveland-London Gatwick service as soon as economic conditions permit, London Gatwick access is not a substitute for London Heathrow access and London Heathrow access would allow Continental to restore London service faster. London Heathrow is the preferred gateway for London passengers, who are willing to pay a premium for such service. (See, e.g., Continental Exhibit 16.) So desirable is London Heathrow that almost 25% of U.S. carrier passengers in London Gatwick gateways chose connecting service to London Heathrow over nonstop London Gatwick service last year. (Continental Exhibit 18.) Access to London Heathrow, which is much closer to the center of London, provides convenient and extensive connections to the rest of Europe and beyond, and is surrounded by business areas. London Heathrow access would provide Cleveland with nonstop Europe service in its largest transatlantic market. With Cleveland-London Heathrow service by Continental, Cleveland would provide a new midwestern hub competing with Chicago, Cincinnati, Pittsburgh and Detroit. Moreover, Cleveland would be a strong competitor with Dallas/Ft. Worth for U.S.-Heathrow connecting traffic.
Local passengers from throughout northeast Ohio and passengers connecting through Continental’s Cleveland hub would benefit from Cleveland-London Heathrow service. Cleveland has strong economic and cultural ties with the U.K., and London is Cleveland’s top origin and destination market. The 19 Fortune 1,000 companies headquartered in Cleveland as well as other Cleveland businesses that export to the U.K. need Continental’s proposed Cleveland-London Heathrow service. After Canada, the U.K. is the largest destination for Cleveland exports. Lack of suitable slots at London Heathrow should not continue to deprive Cleveland businesses and passengers critical London Heathrow access.
Under an “open skies” agreement, slots would be in even greater demand than they are with the limited number of London routes now available, and Cleveland requires service at Heathrow to compete effectively with the American/British Airways and United gateway at Chicago. American and British Airways claim that slots are available for their competitors at both London Gatwick and London Heathrow. Cleveland’s experience shows those claims are false because the key London airports are effectively closed to new entry. If the limited rights granted under the existing agreement cannot be used because no viable slots are available, negotiation of an “open skies” agreement is a meaningless exercise and would in no way provide an antidote to the overwhelming American/British Airways dominance on U.S.-U.K. and U.S.-London and at Heathrow airport.
The Department should not consider approving the American/British Airways alliance until the Department can assure Cleveland and other U.S. communities that sufficient commercially viable, competitive slots and facilities at Heathrow airports are available for U.S. carriers under the current agreement. Any open skies agreement with the U.K. must guarantee Heathrow slots for daily Cleveland-London service and more slots to accommodate traffic growth in the future. Without such guarantees, the American/British Airways alliance must be disapproved.
Respectfully submitted,
/s/ Michael R. White
Mayor Michael R. White
City of Cleveland
/s/ Dennis E. Eckert
Dennis E. Eckert, President
The Greater Cleveland Growth Association
November 9, 2001
Reply of the City of Cleveland
Page 5
CERTIFICATE OF SERVICE
I certify that I have this date served a copy of the foregoing document on counsel for American and British Airways and all persons served with their applications in the above-captioned dockets in accordance with the Department’s Rules of Practice.
/s/ Linda S. Eastman
Linda S. Eastman
November 9, 2001
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[1] The Cleveland Parties are the City of Cleveland and the Greater Cleveland Growth Association.