Weekly Cabinet Report for

Week of November 5, 2001

Read C. Van de Water

Assistant Secretary for Aviation

And International Affairs

The Secretary

WEEK OF NOVEMBER 5

American Airlines/British Airways (AA/BA) Antitrust Immunity:The Senate Commerce Committee has tentatively scheduled a hearing on November 6 on the “State of the Airline Industry,” which would include a discussion on the pending antitrust alliances. The Senate Judiciary Committee has tentatively scheduled a hearing on this case (as well as other pending antitrust alliances) for November 7. On October 12, the Department issued a notice extending the date for answers to the AA/BA application to November 2 and the date for replies to November 9.

OUTLOOK FOR NEXT FOUR WEEKS

Antitrust Immunity Issues: The Department staff is drafting a Show-Cause Order that tentatively grants antitrust immunity to the Delta Air Lines-Air France-Alitalia-Czech Airlines alliance. If finalized, the action will permit the partners maximum flexibility in coordinating their operations and enhancing the service options available to consumers. The tentative decision results from the open-skies agreements with France, Italy, and the Czech Republic. The tentative authority would provide the partners with immunity from U.S. antitrust laws to the extent necessary to enable them to plan and coordinate pricing and services over their respective route systems. Each airline will continue to be independent companies and will retain their separate corporate and national identities.

The tentative grant of immunity is subject to a condition requiring the partners to withdraw from fare coordination sponsored by the International Air Transport Association (IATA). The grant is subject to data reporting requirements, and the partners must resubmit their agreements for review within five years. The tentative decision does not allow the partners to adopt a common name or brand.

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Finally, the tentative grant of immunity does not extend to the coordination of certain activities by the partners with respect to unrestricted coach/business/first class fares for U.S.-point-of-sale passengers flying nonstop in the Atlanta/Cincinnati-Paris markets.

Airline Compensation: Applications for the second round of payments to compensate air carriers for losses due to the terrorist attacks are due on November 13. Compensation payments will be made to air carriers as applications are processed throughout the week of November 19 - 23

RESULTS OF RECENT ACTIVITIES:

OECD Cargo Liberalization Group: DOT participated in an experts group meeting October 29-30, in Paris, to continue work drafting a model multilateral air cargo liberalization agreement.

Sri Lanka: Aviation negotiations between the United States and Sri Lanka aimed at concluding an open-skies aviation accord were held October 30-November 1, in Washington. Sri Lanka indicated that it would like to have transitional provisions in the areas of airline ground handling, pricing, and passenger charter rights. The negotiations focused on these issues.

United Kingdom: In government-only talks held in London on October 22 to discuss negotiation of an open-skies agreement between the two countries, both countries explained their positions clearly. In addition, although the U.K. preference is to conclude an open-skies agreement close in time to the Department’s tentative decision in the AA/BA antitrust immunity case, they are considering a U..S. proposal to “delink” the issues in timing and conclude an open-skies agreement earlier. Talks were also held with the UK and EU competition authorities about the pending alliance application of American Airlines/British Airways for antitrust immunity.

Airline Compensation: The final rule outlining the procedures for compensation of air carriers under the Air Transportation Safety and System Stabilization Act (Public Law 107-42) was published in the Federal Register on Monday, October 29.

Airline Loan Guarantee Program: During the week of Oct. 29 – Nov. 2, the Department of the Treasury was expected to publish the application form enabling air carriers seeking to file for approval under the $10 billion loan guarantee program established by the Air Transportation Safety and System Stabilization Act.

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Airport Congestion and Delay: During the week of October 29th, the Department issued a Federal Regulation Notice indefinitely suspending the closing date for comments requested on market-based actions to relieve airport congestion and delay.