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ABC Aerolineas, S.A. De C.V. v. United States Department of Transportation

United States Court of Appeals, District of Columbia Circuit

August 14, 2018

ABC AEROLINEAS, S.A. DE C.V., D/B/A INTERJET, PETITIONER
v.
UNITED STATES DEPARTMENT OF TRANSPORTATION, RESPONDENT

          Argued February 26, 2018

          On Petitions for Review of Final Orders of the United States Department of Transportation

          Moffett B. Roller argued the cause and filed the briefs for petitioner.

          Christopher S. Perry, Acting Deputy Assistant General Counsel, U.S. Department of Transportation, argued the cause for respondent. With him on the brief were Robert B. Nicholson and Frances Marshall, Attorneys, U.S. Department of Justice, and Paul M. Geier, Assistant General Counsel.

          Before: Garland, Chief Judge, and Silberman and Sentelle, Senior Circuit Judges.

          OPINION

          GARLAND, CHIEF JUDGE

         As a condition of approving a cooperation agreement between two airlines, the Department of Transportation required those airlines to give competitors 24 pairs of their takeoff and landing slots at Mexico City's Benito Juárez International Airport. The Department did not permit the airlines to give any of those slots to petitioner Interjet, because Interjet already had more than 300 slots at that airport. Interjet challenges the Department's orders implementing this decision, contending that they were arbitrary, capricious, and contrary to law. Because the Department's decision was reasonable and consistent with its statutory mandate, we deny Interjet's petitions for review.

         I

         The Federal Aviation Act, 49 U.S.C. § 40101 et seq., tasks the United States Department of Transportation (DOT) with regulating the economic aspects of commercial air travel. One of its many provisions, 49 U.S.C. § 41309, sets forth requirements for airlines seeking to cooperate with their competitors. Under that provision, the Secretary of Transportation "shall approve" a cooperation agreement "when the Secretary finds it is not adverse to the public interest and is not in violation of this part." Id. § 41309(b). The Secretary may not, however, approve any agreement that "substantially reduces or eliminates competition," unless she makes certain findings not relevant to this case. Id. § 41309(b)(1). If the Secretary approves a cooperation agreement, she may "exempt a person affected by the order from the antitrust laws," as necessary to allow the agreement to operate. Id. § 41308(b).

         The Federal Aviation Act also instructs DOT to consider numerous factors in deciding whether an agreement is in the public interest. Several relate to the importance of competition: The Department must take into account "the availability of a variety of adequate, economic, efficient, and low-priced services"; must "plac[e] maximum reliance on competitive market forces and on actual and potential competition"; and must strive to "avoid[] unreasonable industry concentration, excessive market domination, monopoly powers, and other conditions that would tend to allow at least one air carrier or foreign air carrier unreasonably to increase prices, reduce services, or exclude competition in air transportation." Id. § 40101(a)(4), (6), (10).

         This case arises out of an application for approval of a cooperation agreement filed by Delta Airlines and Aeromexico, Mexico's flag carrier. The airlines sought to "coordinate their respective passenger services on routes between the United States and Mexico." Joint Application for Approval of and Antitrust Immunity for Alliance Agreements 1 (Mar. 31, 2015) (J.A. 4). The airlines explained that, if the Department of Transportation approved the agreement and granted them antitrust immunity, they would implement "metal neutrality," meaning that each airline would treat the other's flights as if they were its own. Id. at 3 (J.A. 6). According to the airlines, such an arrangement would allow them to increase U.S.-Mexico air service. Id. 15-22 (J.A. 18-25).

         Before deciding whether to approve the airlines' application, DOT requested public comments. Six other airlines, four airports, two nonprofits, and one city filed comments concerning the proposed agreement. In addition, the Department requested further information from the applicant airlines, as well as from various Mexican authorities.

         After the public comment period closed, the Department filed an order that tentatively approved the agreement and granted the applicants antitrust immunity. The Department concluded that, with certain conditions, the agreement would be in the public interest and would not substantially reduce or eliminate competition. Order to Show Cause 2 (Nov. 4, 2016) (J.A. 115). As relevant here, it proposed requiring the applicant airlines to divest 24 pairs of their takeoff and landing authorizations ("slots") at Mexico City's Benito Juárez International Airport (MEX), as well as six pairs of slots at New York City's John F. Kennedy International Airport (JFK). Id.[1]The Department explained that the "Joint Applicants control nearly 50% of the MEX slots, the allocation of which is dependent on confusing and often unwritten rules, making it extremely difficult for new entrants to launch competitive service." Id. at 1 (J.A. 114). The divestiture, the Department said, was "necessary to support new entry needed to discipline the coordinated services and planned growth of the joint venture." Id. at 21 (J.A. 134).

         As part of its proposed remedy, DOT stated that it would determine which airlines were eligible for the divested slots. "[B]ecause the aim of the divestitures is to implement new competitive service," DOT determined that only carriers "with a limited presence, or no presence, at the respective airports" would be eligible to receive slots. Id. at 24 (J.A. 137). At MEX, this policy resulted in the exclusion of Interjet, which had 313 slots -- the second most after Aeromexico. At JFK, this policy resulted in the exclusion of JetBlue. Id. at 25 (J.A. 138). Finally, DOT determined ...


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